As filed with the Securities and Exchange Commission on September 3, 2008
SECURITIES ACT FILE NO. 333-134551
INVESTMENT COMPANY ACT FILE NO. 811-21906
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
Pre-Effective Amendment No. | |
Post Effective Amendment No. 62 |X|
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
Amendment No. 65 |X|
(Check appropriate box or boxes)
|
CLAYMORE EXCHANGE-TRADED FUND TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
2455 CORPORATE WEST DRIVE
LISLE, ILLINOIS 60532
(Address of Principal Executive
Offices)
(630) 505-3700
Registrant's Telephone Number
KEVIN ROBINSON, ESQ.
CLAYMORE ADVISORS, LLC
2455 CORPORATE WEST DRIVE
LISLE, ILLINOIS 60532
(Name and Address of Agent for Service)
Copy to:
STUART M. STRAUSS, ESQ.
CLIFFORD CHANCE US LLP
31 WEST 52ND STREET
NEW YORK, NEW YORK 10019
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
____X____ IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (B) OF RULE 485.
_________ ON [DATE] PURSUANT TO PARAGRAPH (B) OF RULE 485.
_________ 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(1) OF RULE 485.
_________ ON [DATE] PURSUANT TO PARAGRAPH (A) OF RULE 485.
_________ 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(2) OF RULE 485.
_________ ON [DATE] PURSUANT TO PARAGRAPH (A) OF RULE 485.
Logo: CLAYMORE(SM)
PROSPECTUS
RYJ Claymore/Raymond James
SB-1 Equity ETF
ETF EXCHANGE-TRADED FUNDS
Claymore Exchange-Traded Fund Trust
SEPTEMBER 4, 2008
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
TABLE OF CONTENTS
PAGE
Introduction--Claymore Exchange-Traded Fund Trust 3
Who Should Invest 3
Tax-Advantaged Product Structure 4
Claymore/Raymond James SB-1 Equity ETF 5
Secondary Investment Strategies 15
Additional Risk Considerations 16
Investment Advisory Services 17
Purchase and Redemption of Shares 19
How To Buy and Sell Shares 20
Frequent Purchases and Redemptions 24
Fund Service Providers 24
Index Provider 24
Disclaimers 25
Federal Income Taxation 26
Other Information 28
Financial Highlights 29
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No dealer, salesperson or any other person has been authorized to give any
information or to make any representations, other than those contained in this
Prospectus, in connection with the offer contained in this Prospectus and, if
given or made, such other information or representations must not be relied upon
as having been authorized by the Fund, Claymore Advisors, LLC, the Fund's
investment adviser (the "Investment Adviser"), or the Fund's distributor,
Claymore Securities, Inc. This Prospectus does not constitute an offer by the
Fund or by the Fund's distributor to sell or a solicitation of an offer to buy
any of the securities offered hereby in any jurisdiction to any person to whom
it is unlawful for the Fund to make such an offer in such jurisdiction.
Introduction--Claymore Exchange-
Traded Fund Trust
The Claymore Exchange-Traded Fund Trust (the "Trust") is an investment company
currently consisting of 20 separate exchange-traded "index funds." The
investment objective of each of the funds is to replicate as closely as
possible, before fees and expenses, the performance of a specified market index.
Claymore Advisors, LLC is the investment adviser for the funds (the "Investment
Adviser").
This prospectus relates to one fund of the Trust, Claymore/Raymond James SB-1
Equity ETF (the "Fund").
The Fund's shares (the "Shares"), are listed and traded on the NYSE Arca, Inc.
(the "NYSE Arca"). The Fund's Shares will trade at market prices that may differ
to some degree from the net asset value ("NAV") of the Shares. Unlike
conventional mutual funds, the Fund issues and redeems Shares on a continuous
basis, at NAV, only in large specified blocks of 50,000 Shares, each of which is
called a "Creation Unit." Creation Units are issued and redeemed principally
in-kind for securities included in a specified index. EXCEPT WHEN AGGREGATED IN
CREATION UNITS, SHARES ARE NOT REDEEMABLE SECURITIES OF THE FUND.
Who Should Invest
The Fund is designed for investors who seek a "passive" approach for investing
in a portfolio of equity securities of companies in a specified index. The Fund
may be suitable for long-term investment in the market represented by a
specified index and may also be used as an asset allocation tool or as a
speculative trading instrument.
PROSPECTUS | 3
Tax-Advantaged Product Structure
Unlike interests in many conventional mutual funds, the Shares are traded
throughout the day on a national securities exchange, whereas mutual fund
interests are typically only bought and sold at closing net asset values. The
Shares have been designed to be tradable in the secondary market on a national
securities exchange on an intra-day basis, and to be created and redeemed
principally in-kind in Creation Units at each day's next calculated NAV. These
arrangements are designed to protect ongoing shareholders from adverse effects
on the Fund's portfolio that could arise from frequent cash creation and
redemption transactions. In a conventional mutual fund, redemptions can have an
adverse tax impact on taxable shareholders because of the mutual fund's need to
sell portfolio securities to obtain cash to meet fund redemptions. These sales
may generate taxable gains for the shareholders of the mutual fund, whereas the
Shares' in-kind redemption mechanism generally will not lead to a tax event for
the Fund or its ongoing shareholders.
4 | CLAYMORE EXCHANGE-TRADED FUND TRUST
Claymore/Raymond James
SB-1 Equity ETF
Investment Objective
The Fund seeks investment results that correspond generally to the performance,
before the Fund's fees and expenses, of an equity index called the Raymond James
SB-1 Equity Index (the "SB-1 Equity Index" or the "Index"). The Fund's
investment objective is not fundamental and may be changed by the Board of
Trustees without shareholder approval.
Primary Investment Strategies
The Fund, using a "passive" or "indexing" investment approach, will seek to
replicate, before fees and expenses, the performance of the SB-1 Equity Index.
The SB-1 Equity Index is composed of all equity securities rated Strong Buy 1
("SB-1") by Raymond James & Associates, Inc. ("Raymond James & Associates"), an
affiliate of Raymond James Research Services, LLC ("Raymond James" or the "Index
Provider"), as of each rebalance and reconstitution date. Index constituents
include equity securities of all market capitalizations, as defined by the Index
Provider, that trade on a U.S. securities exchange, including common stocks,
American depositary receipts ("ADRs"), real-estate investment trusts ("REITs")
and master limited partnerships ("MLPs"). The number of securities in the Index
may vary depending on the number of equity securities rated SB-1 by Raymond
James & Associates. The Index is currently expected to consist of between 100
and 200 securities and, as of April 30, 2008, the market capitalization range of
Index constituents was $40 million to $187 billion. Under normal conditions, the
Fund will invest at least 80% of its assets in equity securities. The Fund will
also normally invest at least 80% of its total assets in securities that
comprise the Index and investments that have economic characteristics that are
substantially identical to the economic characteristics of the component
securities that comprise the Index. The Fund has adopted a policy that requires
the Fund to provide shareholders with at least 60 days notice prior to any
material change in this policy or the Index. The Board of Trustees of the Trust
may change the Fund's investment strategy and other policies without shareholder
approval, except as otherwise indicated.
The Investment Adviser seeks a correlation over time of 0.95 or better between
the Fund's performance and the performance of the total return of the Index less
any expenses or distributions. A figure of 1.00 would represent perfect
correlation.
The Fund generally will invest in all of the securities comprising the Index in
proportion to their weightings in the Index. However, under various
circumstances, it may not be possible or practicable to purchase all of the
securities in the Index in those weightings. In those circumstances, the Fund
may purchase a sample of the securities in the Index in proportions expected by
the Investment Adviser to replicate generally the performance of the Index as a
whole. There may also be instances in which the Investment Adviser may choose to
overweight another security in the Index, purchase (or sell) securities not in
the Index which the Investment Adviser believes are appropriate to substitute
for one or more Index components, or utilize various combinations of other
available investment techniques, in seeking to accurately track the Index. In
addition, from time to time securities are added to or removed from the Index.
The Fund may sell securities that are
PROSPECTUS | 5
represented in the Index or purchase securities that are not yet represented in
the Index in anticipation of their removal from or addition to the Index.
Index Methodology
The SB-1 Equity Index is composed of all equity securities rated SB-1 by Raymond
James & Associates as of each rebalance and reconstitution date, with the
relative weighting of each constituent determined according to a modified
equal-weighting methodology, as described below. The number of securities rated
SB-1 may be modified on any day as a result of upgrades and/or downgrades of
securities' ratings by Raymond James & Associates analysts; however, the Index
will be reconstituted and rebalanced twice per calendar month.
There are currently four rating categories used by Raymond James & Associates
analysts, with SB-1 being the highest rating. A rating of SB-1 indicates
generally that the Raymond James & Associates analyst assigning the rating
expects the stock to achieve total return targets over the next six months and
to outperform the S&P 500 over that period. In the case of certain
higher-yielding or more conservative equities, a rating of SB-1 indicates that
the Raymond James & Associates analyst assigning the rating expects such
equities to achieve total return targets over the next 12 months. The ratings
assigned by Raymond James & Associates analysts represent such analysts'
judgments given available public facts and information and are not intended as
guarantees of investment performance of rated securities or of the Index.
Raymond James & Associates Equity Research Department currently includes more
than 45 equity analysts and publishes research on approximately 700 companies.
Securities rated by Raymond James & Associates analysts include equity
securities of U.S. issuers and U.S. dollar-denominated equity securities of
foreign issuers, in each case that are traded on U.S. securities exchanges. As
of April 30, 2008, 138 securities received a rating of SB-1 from Raymond James &
Associates analysts. The number of securities rated SB-1 may be modified on any
day as a result of upgrades and/or downgrades of securities' ratings by Raymond
James & Associates analysts.
Index Construction
1. Index constituents will include all securities rated SB-1 by a Raymond
James & Associates analyst as defined above.
2. The Index will seek to include each SB-1 rated security in equal
dollar-weighted percentages relative to the total value of the entire Index
of SB-1 rated securities ("Equal Portfolio Weight"). Using the following
method, in instances in which there is comparatively little trading volume
in a SB-1 rated security, the Index will limit its weighting in that
constituent. Upon initial selection and on each rebalancing and
reconstitution day, the Index will calculate for each SB-1 rated security
the average product of the closing price multiplied by the trading volume
for such stock for the 60 trading days prior to the rebalancing and
reconstitution day to provide the "Average Price-Volume Amount." For any
Index constituent that the Average Price-Volume Amount is less than
$1,000,000 per day, that security's weight will be reduced to a proportion
of the Equal Portfolio Weight equal to the ratio of its Average
Price-Volume Amount over $1,000,000 (the "Liquidity Cap"). To the extent
that the Index's weighting in a security is
6 | CLAYMORE EXCHANGE-TRADED FUND TRUST
limited as a result of the Liquidity Cap, the difference between the equal
weight position and the capped position will be reallocated equally among
all other Index constituents.
3. At each Index rebalancing and reconstitution, all Index constituents that
are no longer rated SB-1 on the date of the rebalancing and reconstitution
will be removed from the Index and all securities rated SB-1 on the date of
the rebalancing and reconstitution that are not currently part of the Index
will be added.
4. In the event a constituent is downgraded by Raymond James & Associates and
is no longer rated SB-1 subsequent to adding the security as an Index
constituent, such constituent will remain a part of the Index until the
next rebalancing and reconstitution date following such downgrade. In the
event a security is upgraded by Raymond James & Associates to a rating of
SB-1 between rebalancing and reconstitution dates, the constituent will be
added to the Index at the next rebalance and reconstitution date.
5. The Index will be rebalanced and reconstituted twice per calendar month.
Primary Investment Risks
Investors should consider the following risk factors and special considerations
associated with investing in the Fund, which may cause you to lose money.
Investment Risk. An investment in the Fund is subject to investment risk,
including the possible loss of the entire principal amount that you invest.
Equity Risk. A principal risk of investing in the Fund is equity risk, which is
the risk that the value of the securities held by the Fund will fall due to
general market and economic conditions, perceptions regarding the industries in
which the issuers of securities held by the Fund participate, or factors
relating to specific companies in which the Fund invests. For example, an
adverse event, such as an unfavorable earnings report, may depress the value of
equity securities of an issuer held by the Fund; the price of common stock of an
issuer may be particularly sensitive to general movements in the stock market;
or a drop in the stock market may depress the price of most or all of the common
stocks and other equity securities held by the Fund. In addition, common stock
of an issuer in the Fund's portfolio may decline in price if the issuer fails to
make anticipated dividend payments because, among other reasons, the issuer of
the security experiences a decline in its financial condition. Common stock is
subordinated to preferred stocks, bonds and other debt instruments in a
company's capital structure, in terms of priority to corporate income, and
therefore will be subject to greater dividend risk than preferred stocks or debt
instruments of such issuers. In addition, while broad market measures of common
stocks have historically generated higher average returns than fixed income
securities, common stocks have also experienced significantly more volatility in
those returns.
Foreign Investment Risk. The Fund's investments in non-U.S. issuers, although
limited to ADRs, may involve unique risks compared to investing in securities of
U.S. issuers, including, among others, greater market volatility than U.S.
securities and less complete financial information than for U.S. issuers. In
addition, adverse political, economic or social developments could undermine the
value of the Fund's investments or prevent the Fund from realizing the full
value of its investments. Financial reporting standards for companies based in
foreign markets differ from those in the United States. Finally, the value of
the currency of the country in which the Fund has invested could decline
relative to the value of the U.S. dollar, which may affect the value of the
investment to U.S. investors. In
PROSPECTUS | 7
addition, the underlying issuers of certain depositary receipts, particularly
unsponsored or unregistered depositary receipts, are under no obligation to
distribute shareholder communications to the holders of such receipts, or to
pass through to them any voting rights with respect to the deposited securities.
Emerging market countries are countries that major international financial
institutions, such as the World Bank, generally consider to be less economically
mature than developed nations. Emerging market countries can include every
nation in the world except the United States, Canada, Japan, Australia, New
Zealand and most countries located in Western Europe. Investing in foreign
countries, particularly emerging market countries, entails the risk that news
and events unique to a country or region will affect those markets and their
issuers. Countries with emerging markets may have relatively unstable
governments, may present the risks of nationalization of businesses,
restrictions on foreign ownership and prohibitions on the repatriation of
assets. The economies of emerging markets countries also may be based on only a
few industries, making them more vulnerable to changes in local or global trade
conditions and more sensitive to debt burdens or inflation rates. Local
securities markets may trade a small number of securities and may be unable to
respond effectively to increases in trading volume, potentially making prompt
liquidation of holdings difficult or impossible at times.
Small and Medium-Sized Company Risk. Investing in securities of small and
medium-sized companies involves greater risk than is customarily associated with
investing in more established companies. These companies' stocks may be more
volatile and less liquid than those of more established companies. These stocks
may have returns that vary, sometimes significantly, from the overall stock
market.
Micro-Cap Company Risk. Micro-cap stocks involve substantially greater risks of
loss and price fluctuations because their earnings and revenues tend to be less
predictable (and some companies may be experiencing significant losses), and
their share prices tend to be more volatile and their markets less liquid than
companies with larger market capitalizations. Micro-cap companies may be newly
formed or in the early stages of development, with limited product lines,
markets or financial resources and may lack management depth. In addition, there
may be less public information available about these companies. The shares of
micro-cap companies tend to trade less frequently than those of larger, more
established companies, which can adversely affect the pricing of these
securities and the future ability to sell these securities. Also, it may take a
long time before the Fund realizes a gain, if any, on an investment in a
micro-cap company.
Sector Concentration Risk. At any given time, the Fund may invest a substantial
portion of its assets in the securities of issuers in any single sector of the
economy and may invest up to 25% of its total assets in securities of issuers in
one particular industry, and may invest more than 25% of its total assets in
securities of issuers in one particular industry in the event that the
composition of the issuers of securities rated SB-1 on a rebalancing day results
in such an industry concentration in the Index. If the Fund's investments are
focused in a specific industry or sector, the Fund will be subject to more
risks, including those risks associated with investment in such industry or
sector, than if it were broadly diversified over numerous industries and sectors
of the economy.
REIT Risk. Investments in securities of real estate companies involve risks.
These risks include, among others, adverse changes in national, state or local
real estate conditions; obsolescence of properties; changes in the availability,
cost and terms of mortgage funds;
8 | CLAYMORE EXCHANGE-TRADED FUND TRUST
and the impact of changes in environmental laws. In addition, a REIT that fails
to comply with federal tax requirements affecting REITs may be subject to
federal income taxation, or the federal tax requirement that a REIT distribute
substantially all of its net income to its shareholders may result in a REIT
having insufficient capital for future expenditures. The value of a REIT can
depend on the structure of and cash flow generated by the REIT. In addition,
like mutual funds, REITs have expenses, including advisory and administration
fees, that are paid their shareholders. As a result, you will absorb duplicate
levels of fees when the Fund invests in REITs. In addition, REITs are subject to
certain provisions under federal tax law. The failure of a company to qualify as
a REIT could have adverse consequences for the Fund, including significantly
reducing return to the Fund on its investment in such company.
MLP Risk. Investments in securities of MLPs involve risks that differ from an
investment in common stock. Holders of the units of MLPs have more limited
control and limited rights to vote on matters affecting the partnership. There
are also certain tax risks associated with an investment in units of MLPs. In
addition, conflicts of interest may exist between common unit holders,
subordinated unit holders and the general partner of a MLP, including a conflict
arising as a result of incentive distribution payments.
Risks Relating To Raymond James & Associates Equity Securities Ratings. The Fund
will seek to construct and maintain a portfolio consisting of the equity
securities rated SB-1 by Raymond James & Associates analysts. Changes in the
ratings methodologies or in the scope of equity research by Raymond James &
Associates may have an adverse effect on the ability of the Fund to pursue its
investment strategy.
o There are currently four rating categories used by Raymond James &
Associates analysts, with SB-1 being the highest rating. There is no
assurance that Raymond James & Associates will continue to use a rating
system substantially similar to that currently used by it, or that its
highest rating of equity securities will continue to be referenced
as"Strong Buy 1."
o There are no assurances that Raymond James & Associates will continue to
provide equity research to the degree currently provided by it, or that it
will continue to provide research services at all. Raymond James &
Associates may decrease (i) the number of equity analysts that it employs;
(ii) the number of covered industries, or (iii) the number of covered
issuers within an industry.
o In the event that an analyst leaves Raymond James & Associates, all
securities covered by that analyst are placed "under review." Any such
securities included in the Index would be removed during the next
rebalancing period, despite the fact that expectations regarding such
security's performance may be unchanged. Following such review, another
Raymond James & Associates analyst could subsequently rate such security
SB-1; in which event such security would be included in the Index during
the next rebalancing period, which would increase portfolio turnover.
o Raymond James & Associates may have published, and in the future may
publish, research reports on one or more of the issuers of equity
securities rated SB-1. This research is modified from time to time without
notice and may express opinions or provide recommendations that are
inconsistent with purchasing or holding such equity securities,
notwithstanding the maintenance by Raymond James & Associates of an SB-1
rating on such securities.
PROSPECTUS | 9
o Activities by Raymond James & Associates in other areas of its business,
such as underwriting and advisory engagements, may prevent the equity
analysts from publishing or updating research on the companies that are the
subject of such engagements. Management, legal or compliance personnel of
Raymond James & Associates may determine to suspend or restrict research
coverage on certain companies from time to time or at any time. The Fund
would continue to hold securities that are and continue to be rated SB-1
during the period of such research restrictions, notwithstanding that such
securities could be downgraded upon the termination of such restrictions
and the publication of current research reports.
o Federal and state securities laws and rules and regulations of the SEC and
of other regulatory agencies may prevent an analyst from timely
communicating to investors a change in sentiment pertaining to a covered
security.
Portfolio Turnover Risk. The Fund may engage in active and frequent trading of
its portfolio securities in connection with the rebalancing of the Index, and
therefore the Fund's investments, every two weeks. For example, the Predecessor
Fund, as defined below (which rebalanced its portfolio approximately every two
weeks), had a portfolio turnover rate of 166% for its fiscal year ended August
31, 2007. A portfolio turnover rate of 200%, for example, is equivalent to the
Fund buying and selling all of its securities two times during the course of the
year. A high portfolio turnover rate (such as 100% or more) could result in high
brokerage costs. While a high portfolio turnover rate can result in an increase
in taxable capital gains distributions to the Fund's shareholders, the Fund will
seek to utilize the creation and redemption in kind mechanism to minimize
capital gains to the extent possible.
Non-Correlation Risk. The Fund's return may not match the return of the Index
for a number of reasons. For example, the Fund incurs a number of operating
expenses not applicable to the Index, and incurs costs in buying and selling
securities, especially when rebalancing the Fund's securities holdings to
reflect changes in the composition of the Index. Since the Index constituents
may vary twice per calendar month, the Fund's costs associated with rebalancing
may be greater than those incurred by other exchange-traded funds that track
indices whose composition changes less frequently.
The Fund may not be fully invested at times, either as a result of cash flows
into the Fund or reserves of cash held by the Fund to meet redemptions and
expenses. If the Fund utilizes a sampling approach or futures or other
derivative positions, its return may not correlate as well with the return on
the Index, as would be the case if it purchased all of the stocks in the Index
with the same weightings as the Index.
Replication Management Risk. Unlike many investment companies, the Fund is not
"actively" managed. Therefore, it would not necessarily sell a stock because the
stock's issuer was in financial trouble unless that stock is removed from the
Index.
Issuer-Specific Changes. The value of an individual security or particular type
of security can be more volatile than the market as a whole and can perform
differently from the value of the market as a whole. The value of securities of
smaller issuers can be more volatile than that of larger issuers.
Non-Diversified Fund Risk. The Fund is considered non-diversified and can invest
a greater portion of assets in securities of individual issuers than a
diversified fund. As a result, changes in the market value of a single
investment could cause greater fluctuations in share price than would occur in a
diversified fund.
10 | CLAYMORE EXCHANGE-TRADED FUND TRUST
Fund Performance
Shares of the Fund have not previously been offered to the public. On September
3, 2008, the Fund acquired the assets and adopted the financial and performance
history of the Claymore/Raymond James SB-1 Equity Fund (the "Predecessor Fund").
Therefore, the returns provided below relate exclusively to the Predecessor
Fund. The investment goals, strategies and policies of the Fund are
substantially similar to those of the Predecessor Fund.
The performance information provided for the Fund for the period prior to
September 3, 2008, is based upon the NAV performance history (not market price)
of the Predecessor Fund and reflects the operating expenses of the Predecessor
Fund. The chart and table below illustrate annual calendar year returns for the
calendar year ended December 31, 2007 as well as average annual Fund and Index
returns for the one-year and since inception periods ended December 31, 2007.
This information is intended to help you assess the variability of Fund returns
and the potential rewards and risks of an investment in the Fund. The
information also shows how the Fund's performance compares with the returns of a
broad measure of market performance.
Returns before taxes do not reflect the effects of any income or capital gains
taxes. All after-tax returns are calculated using the historical highest
individual federal marginal income tax rates and do not reflect the impact of
any state or local tax. Returns after taxes on distributions reflect the taxed
return on the payment of dividends and capital gains. Returns after taxes on
distributions and sale of shares assume you sold your shares at period end, and,
therefore, are also adjusted for any capital gains or losses incurred. Returns
for the market index do not include expenses, which are deducted from Fund
returns, or taxes.
Your own actual after-tax returns will depend on your tax situation and may
differ from what is shown here. After-tax returns are not relevant to investors
who hold Shares of the Fund in tax-deferred accounts such as individual
retirement accounts (IRAs) or employee-sponsored retirement plans.
Bar Chart:
Calendar Year Total Return as of 12/31
2007(1) 6.29%
1. The Predecessor Fund commenced operations on May 19, 2006. The Fund's
year-to-date return on NAV for the period from 12/31/07 to 6/30/08 was
-7.25%.
During the calendar year ended December 31, 2007, the Fund's highest and lowest
calendar quarter returns were 8.00% and -2.92%, respectively, for the quarters
ended 6/30/07 and 12/31/07. The Fund's past performance (before and after taxes)
is not necessarily an indication of how the Fund will perform in the future.
PROSPECTUS | 11
AVERAGE ANNUAL TOTAL RETURNS FOR THE SINCE
PERIOD ENDED DECEMBER 31, 2007 1 YEAR INCEPTION(1)
--------------------------------------------------------------------------------
Returns Before Taxes 6.29% 7.27%
After Taxes on Distribution 3.41% 5.33%
After Taxes on Distribution and Sale of Shares 4.42% 5.17%
Standard &Poor's 500(R)(2) 5.46% 11.62%
S&P 400 Mid-Cap Index(3) 7.93% 8.83%
--------------------------------------------------------------------------------
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1. The inception date of the Predecessor Fund was May 19, 2006.
2. The S&P 500(R) Index is generally considered representative of the U.S.
large-cap stock market.
3. The S&P 400 MidCap Index is a market-capitalization weighted index designed
to represent U.S. companies of $1.5 billion to $5 billion capitalization
range and is a widely-used measure of mid-size company U.S. stock market
performance.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund. Investors purchasing Shares in the secondary market will not
pay the shareholder fees shown below, but may be subject to costs (including
customary brokerage commissions) charged by their broker.
SHAREHOLDER FEES (paid directly by Authorized Participants)
Sales charges (loads) None
--------------------------------------------------------------------------------
Standard creation/redemption transaction fee per order(1) $1,000
--------------------------------------------------------------------------------
Maximum additional creation/redemption transaction fee per order(1) $4,000
--------------------------------------------------------------------------------
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ANNUAL FUND OPERATING EXPENSES(2) (expenses that are deducted from Fund assets)
Management Fees(3) 0.75%
--------------------------------------------------------------------------------
Distribution and service (12b-1) fees(4) --%
--------------------------------------------------------------------------------
Other expenses(5) 0.00%
--------------------------------------------------------------------------------
Total annual Fund operating expenses 0.75%
--------------------------------------------------------------------------------
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1. Purchasers of Creation Units and parties redeeming Creation Units must pay
a standard creation or redemption transaction fee of $1,000. If a Creation
Unit is purchased or redeemed outside the usual process through the
National Securities Clearing Corporation or for cash, a variable fee of up
to four times the standard creation or redemption transaction fee may be
charged. See the following discussion of "Creation Transaction Fees and
Redemption Transaction Fees."
2. Expressed as a percentage of average net assets.
3. The management fee of the Predecessor Fund was 0.85% of average daily
managed assets for the Predecessor Fund's fiscal year ended August 31,
2007.
4. The Fund has adopted a Distribution and Service (12b-1) Plan pursuant to
which the Fund may bear a 12b-1 fee not to exceed 0.25% per annum of the
Fund's average daily net assets. However, no such fee is currently paid by
the Fund.
5. The Trust's Investment Advisory Agreement provides that the Adviser will
pay all expenses of the Fund, except for the fee payments under the
Investment Advisory Agreement, distribution fees, if any, brokerage
expenses, taxes, interest, litigation expenses and other extraordinary
expenses.
12 | CLAYMORE EXCHANGE-TRADED FUND TRUST
Example
The following example is intended to help you compare the cost of investing in
the Fund with the costs of investing in other funds. This example does not take
into account brokerage commissions that you pay when purchasing or selling
Shares of the Fund.
The example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same each year. Although your actual costs
may be higher or lower, based on these assumptions your costs would be:
One Year Three Years Five Years Ten Years
--------------------------------------------------------------------------------
$77 $240 $417 $930
--------------------------------------------------------------------------------
|
PROSPECTUS | 13
Creation Transaction Fees and Redemption
Transaction Fees
The Fund issues and redeems Shares at NAV only in large blocks of 50,000 Shares
(each block of 50,000 Shares called a "Creation Unit") or multiples thereof. As
a practical matter, only broker-dealers or large institutional investors with
creation and redemption agreements and called Authorized Participants ("APs")
can purchase or redeem these Creation Units. Purchasers of Creation Units at NAV
must pay a standard Creation Transaction Fee of $1,000 per transaction (assuming
101-200 securities in each Creation Unit). An AP who holds Creation Units and
wishes to redeem at NAV would also pay a standard Redemption Fee of $1,000 per
transaction (assuming 101-200 securities in each Creation Unit. See "How to Buy
and Sell Shares" later in this Prospectus). APs who hold Creation Units in
inventory will also pay the Annual Fund Operating Expenses described in the
table above. Assuming an investment in a Creation Unit of $1,250,000 and a 5%
return each year, and assuming that the Fund's gross operating expenses remain
the same, the total costs would be $10,574, $30,961, $53,117 and $117,291 if the
Creation Unit is redeemed after one year, three years, five years and 10 years,
respectively.
If a Creation Unit is purchased or redeemed outside the usual process through
the National Securities Clearing Corporation or for cash, a variable fee of up
to four times the standard Creation or Redemption Transaction Fee may be charged
to the AP making the transaction.
The creation fee, redemption fee and variable fee are not expenses of the Fund
and do not impact the Fund's expense ratio.
14 | CLAYMORE EXCHANGE-TRADED FUND TRUST
Secondary Investment Strategies
As a primary investment strategy, the Fund will at all times invest at least 80%
of its total assets in component securities that comprise the Index and
investments that have economic characteristics that are substantially identical
to the economic characteristics of the component securities that comprise the
Index. As secondary investment strategies, the Fund may invest its remaining
assets in money market instruments, including repurchase agreements or other
funds which invest exclusively in money market instruments, convertible
securities, structured notes (notes on which the amount of principal repayment
and interest payments are based on the movement of one or more specified
factors, such as the movement of a particular stock or stock index) and in
options, swaps and futures contracts. Options, swaps and futures contracts (and
convertible securities and structured notes) may be used by the Fund in seeking
performance that corresponds to its respective Index, and in managing cash
flows. The Fund will not invest in money market instruments as part of a
temporary defensive strategy to protect against potential stock market declines.
The Investment Adviser anticipates that it may take approximately three business
days (i.e., each day the NYSE Arca is open) for additions and deletions to the
Fund's Index to be reflected in the portfolio composition of the Fund.
The Fund may borrow money from a bank up to a limit of 10% of the value of its
assets, but only for temporary or emergency purposes.
The Fund may lend its portfolio securities to brokers, dealers and other
financial institutions desiring to borrow securities to complete transactions
and for other purposes. In connection with such loans, the Fund receives liquid
collateral equal to at least 102% of the value of the portfolio securities being
lent. This collateral is marked to market on a daily basis.
The policies described herein constitute non-fundamental policies that may be
changed by the Board of Trustees without shareholder approval. Certain other
fundamental policies of the Fund are set forth in the Statement of Additional
Information under "Investment Restrictions."
PROSPECTUS | 15
Additional Risk Considerations
In addition to the risks described previously, there are certain other risks
related to investing in the Fund.
Trading Issues. Trading in Shares on the NYSE Arca may be halted due to market
conditions or for reasons that, in the view of the NYSE Arca, make trading in
Shares inadvisable. In addition, trading in Shares on the NYSE Arca is subject
to trading halts caused by extraordinary market volatility pursuant to the NYSE
Arca "circuit breaker" rules. There can be no assurance that the requirements of
the NYSE Arca necessary to maintain the listing of the Fund will continue to be
met or will remain unchanged.
Fluctuation of Net Asset Value. The NAV of the Fund's Shares will generally
fluctuate with changes in the market value of the Fund's holdings. The market
prices of the Shares will generally fluctuate in accordance with changes in NAV
as well as the relative supply of and demand for the Shares on the NYSE Arca.
The Investment Adviser cannot predict whether the Shares will trade below, at or
above their NAV. Price differences may be due, in large part, to the fact that
supply and demand forces at work in the secondary trading market for the Shares
will be closely related to, but not identical to, the same forces influencing
the prices of the stocks of the Index trading individually or in the aggregate
at any point in time.
However, given that the Shares can be purchased and redeemed in Creation Units
(unlike shares of many closed-end funds, which frequently trade at appreciable
discounts from, and sometimes premiums to, their NAV), the Investment Adviser
believes that large discounts or premiums to the NAV of the Shares should not be
sustained.
Securities Lending. Although the Fund will receive collateral in connection with
all loans of its securities holdings, the Fund would be exposed to a risk of
loss should a borrower default on its obligation to return the borrowed
securities (e.g., the loaned securities may have appreciated beyond the value of
the collateral held by the Fund). In addition, the Fund will bear the risk of
loss of any cash collateral that it invests.
Leverage. To the extent that the Fund borrows money, it may be leveraged.
Leveraging generally exaggerates the effect on NAV of any increase or decrease
in the market value of the Fund's portfolio securities.
These risks are described further in the Statement of Additional Information.
16 | CLAYMORE EXCHANGE-TRADED FUND TRUST
Investment Advisory Services
Investment Adviser
Claymore Advisors, LLC, a wholly-owned subsidiary of Claymore Group Inc., acts
as the Fund's investment adviser pursuant to an advisory agreement with the Fund
(the "Advisory Agreement"). The Investment Adviser is a Delaware limited
liability company with its principal offices located at 2455 Corporate West
Drive, Lisle, Illinois 60532. As of June 30, 2008, Claymore entities have
provided supervision, management, servicing or distribution on approximately
$18.4 billion in assets. Claymore currently offers exchange-traded funds, unit
investment trusts and closed-end funds. Pursuant to the Advisory Agreement, the
Investment Adviser manages the investment and reinvestment of the Fund's assets
and administers the affairs of the Fund to the extent requested by the Board of
Trustees. The Investment Adviser also acts as investment adviser to closed-end
and open-end management investment companies.
Pursuant to the Advisory Agreement, the Fund pays the Investment Adviser a
unitary management fee for the services and facilities it provides payable on a
monthly basis at the annual rate of 0.75% of the Fund's average daily net
assets.
Out of the unitary management fee, the Adviser pays substantially all expenses
of the Fund, including the cost of transfer agency, custody, fund
administration, legal, audit and other services, except for the fee payments
under the Investment Advisory Agreement, distribution fees, if any, brokerage
expenses, taxes, interest, litigation expenses and other extraordinary expenses.
The Adviser's unitary management fee is designed to pay the Fund's expenses and
to compensate the Adviser for providing services for the Fund.
Approval of Advisory Agreement
A discussion regarding the basis for the Board of Trustees' approval of the
Advisory Agreement will be available in the Fund's semi-annual report to
shareholders to be dated February 28, 2009.
PROSPECTUS | 17
Portfolio Management
The portfolio manager who is currently responsible for the day-to-day management
of the Fund's portfolio is Chuck Craig, CFA. Mr. Craig has managed the Fund's
portfolio since its inception and also managed the portfolio of the Predecessor
Fund since its inception on May 19, 2006. Mr. Craig is a Managing Director,
Portfolio Management and Supervision, of the Investment Adviser and Claymore
Securities, Inc. and joined Claymore Securities, Inc. in May of 2003. Mr. Craig
received a M.S. in Financial Markets from the Center for Law and Financial
Markets at the Illinois Institute of Technology. He also earned a B.S. in
Finance from Northern Illinois University.
The Statement of Additional Information provides additional information about
the portfolio manager's compensation structure, other accounts managed by the
portfolio manager and the portfolio manager's ownership of securities of the
funds he manages.
18 | CLAYMORE EXCHANGE-TRADED FUND TRUST
Purchase and Redemption of Shares
General
The Shares will be issued or redeemed by the Fund at net asset value per Share
only in Creation Unit size. See "Creations, Redemptions and Transaction Fees."
Most investors will buy and sell Shares of the Fund in secondary market
transactions through brokers. Shares of the Fund will be listed for trading on
the secondary market on the NYSE Arca. Shares can be bought and sold throughout
the trading day like other publicly traded shares. There is no minimum
investment. Although Shares are generally purchased and sold in "round lots" of
100 Shares, brokerage firms typically permit investors to purchase or sell
Shares in smaller "odd lots," at no per-share price differential. When buying or
selling Shares through a broker, you will incur customary brokerage commissions
and charges, and you may pay some or all of the spread between the bid and the
offered price in the secondary market on each leg of a round trip (purchase and
sale) transaction. The Fund will trade on the NYSE Arca at prices that may
differ to varying degrees from the daily NAV of the Shares. Given that the
Fund's Shares can be issued and redeemed in Creation Units, the Investment
Adviser believes that large discounts and premiums to NAV should not be
sustained for long. The Fund will trade under the NYSE Arca symbol set forth in
the chart below, subject to notice of issuance.
NAME OF FUND NYSE ARCA TICKER SYMBOL
--------------------------------------------------------------------------------
Claymore/Raymond James SB-1 Equity ETF RYJ
--------------------------------------------------------------------------------
|
Share prices are reported in dollars and cents per Share.
Investors may acquire Shares directly from the Fund, and shareholders may tender
their Shares for redemption directly to the Fund, only in Creation Units of
50,000 Shares, as discussed in the "Creations, Redemptions and Transaction Fees"
section, which follows.
Book Entry
Shares are held in book-entry form, which means that no stock certificates are
issued. The Depository Trust Company ("DTC") or its nominee is the record owner
of all outstanding Shares of the Fund and is recognized as the owner of all
Shares for all purposes.
Investors owning Shares are beneficial owners as shown on the records of DTC or
its participants. DTC serves as the securities depository for all Shares.
Participants in DTC include securities brokers and dealers, banks, trust
companies, clearing corporations and other institutions that directly or
indirectly maintain a custodial relationship with DTC. As a beneficial owner of
Shares, you are not entitled to receive physical delivery of stock certificates
or to have Shares registered in your name, and you are not considered a
registered owner of Shares. Therefore, to exercise any right as an owner of
Shares, you must rely upon the procedures of DTC and its participants. These
procedures are the same as those that apply to any other stocks that you may
hold in book entry or "street name" form.
PROSPECTUS | 19
How to Buy and Sell Shares
Pricing Fund Shares
The trading price of the Fund's shares on the NYSE Arca may differ from the
Fund's daily net asset value and can be affected by market forces of supply and
demand, economic conditions and other factors.
The NYSE Arca intends to disseminate the approximate value of Shares of the Fund
every fifteen seconds. This approximate value should not be viewed as a
"real-time" update of the NAV per Share of the Fund because the approximate
value may not be calculated in the same manner as the NAV, which is computed
once a day, generally at the end of the business day. The Fund is not involved
in, or responsible for, the calculation or dissemination of the approximate
value and the Fund does not make any warranty as to its accuracy.
The net asset value per Share of the Fund is determined once daily as of the
close of the NYSE, usually 4:00 p.m. Eastern time, each day the NYSE is open for
trading. NAV per Share is determined by dividing the value of the Fund's
portfolio securities, cash and other assets (including accrued interest), less
all liabilities (including accrued expenses), by the total number of shares
outstanding.
Equity securities are valued at the last reported sale price on the principal
exchange or on the principal OTC market on which such securities are traded, as
of the close of regular trading on the NYSE on the day the securities are being
valued or, if there are no sales, at the mean of the most recent bid and asked
prices. Equity securities that are traded primarily on the NASDAQ Stock Market
are valued at the NASDAQ Official Closing Price. Debt securities are valued at
the mean between the last available bid and asked prices for such securities or,
if such prices are not available, at prices for securities of comparable
maturity, quality, and type. Securities for which market quotations are not
readily available, including restricted securities, are valued by a method that
the Trustees believe accurately reflects fair value. Securities will be valued
at fair value when market quotations are not readily available or are deemed
unreliable, such as when a security's value or meaningful portion of a Fund's
portfolio is believed to have been materially affected by a significant event.
Such events may include a natural disaster, an economic event like a bankruptcy
filing, a trading halt in a security, an unscheduled early market close or a
substantial fluctuation in domestic and foreign markets that has occurred
between the close of the principal exchange and the NYSE. In such a case, the
value for a security is likely to be different from the last quoted market
price. In addition, due to the subjective and variable nature of fair market
value pricing, it is possible that the value determined for a particular asset
may be materially different from the value realized upon such asset's sale.
20 | CLAYMORE EXCHANGE-TRADED FUND TRUST
Creation Units
Investors such as market makers, large investors and institutions who wish to
deal in Creation Units directly with the Fund must have entered into an
authorized participant agreement with the distributor and the transfer agent, or
purchase through a dealer that has entered into such an agreement. Set forth
below is a brief description of the procedures applicable to purchase and
redemption of Creation Units. For more detailed information, see "Creation and
Redemption of Creation Unit Aggregations" in the Statement of Additional
Information.
How to Buy Shares
In order to purchase Creation Units of the Fund, an investor must generally
deposit a designated portfolio of equity securities constituting a substantial
replication, or a representation, of the stocks included in the Index (the
"Deposit Securities") and generally make a small cash payment referred to as the
"Cash Component." For those Authorized Participants that are not eligible for
trading a Deposit Security, custom orders are available. The list of the names
and the numbers of shares of the Deposit Securities is made available by the
Fund's custodian through the facilities of the National Securities Clearing
Corporation, commonly referred to as NSCC, immediately prior to the opening of
business each day of the NYSE Arca. The Cash Component represents the difference
between the net asset value of a Creation Unit and the market value of the
Deposit Securities. In the case of custom orders, cash-in-lieu may be added to
the Cash Component to replace any Deposit Securities that the Authorized
Participant may not be eligible to trade.
Orders must be placed in proper form by or through either (i) a "Participating
Party" i.e., a broker-dealer or other participant in the Clearing Process of the
Continuous Net Settlement System of the NSCC (the "Clearing Process") or (ii) a
participant of The Depository Trust Company ("DTC Participant") that has entered
into an agreement with the Trust, the distributor and the transfer agent, with
respect to purchases and redemptions of Creation Units (collectively,
"Authorized Participant" or "AP"). All standard orders must be placed for one or
more whole Creation Units of Shares of the Fund and must be received by the
distributor in proper form no later than the close of regular trading on the
NYSE Arca (ordinarily 4:00 p.m. Eastern time) ("Closing Time") in order to
receive that day's closing NAV per Share. In the case of custom orders, as
further described in the Statement of Additional Information, the order must be
received by the distributor no later than one hour prior to Closing Time in
order to receive that day's closing NAV per Share. A custom order may be placed
by an Authorized Participant in the event that the Trust permits or requires the
substitution of an amount of cash to be added to the Cash Component to replace
any Deposit Security which may not be available in sufficient quantity for
delivery or which may not be eligible for trading by such Authorized Participant
or the investor for which it is acting or any other relevant reason. See
"Creation and Redemption of Creation Unit Aggregations" in the Statement of
Additional Information.
A fixed creation transaction fee of $1,000 per transaction (assuming 101-200
stocks in each Creation Unit) (the "Creation Transaction Fee") is applicable to
each transaction regardless of the number of Creation Units purchased in the
transaction. An additional charge of up to four times the Creation Transaction
Fee may be imposed with respect to transactions effected outside of the Clearing
Process (through a DTC Participant) or to the extent that cash is used in lieu
of securities to purchase Creation Units. See "Creation and Redemption
PROSPECTUS | 21
of Creation Unit Aggregations" in the Statement of Additional Information. The
price for each Creation Unit will equal the daily NAV per Share times the number
of Shares in a Creation Unit plus the fees described above and, if applicable,
any transfer taxes.
Shares of the Fund may be issued in advance of receipt of all Deposit Securities
subject to various conditions, including a requirement to maintain on deposit
with the Trust cash at least equal to 115% of the market value of the missing
Deposit Securities. Any such transaction effected must be effected outside the
Clearing Process. See "Creation and Redemption of Creation Unit Aggregations" in
the Statement of Additional Information.
Legal Restrictions on Transactions in Certain Stocks
An investor subject to a legal restriction with respect to a particular stock
required to be deposited in connection with the purchase of a Creation Unit may,
at the Fund's discretion, be permitted to deposit an equivalent amount of cash
in substitution for any stock which would otherwise be included in the Deposit
Securities applicable to the purchase of a Creation Unit. For more details, see
"Creation and Redemption of Creation Unit Aggregations" in the Statement of
Additional Information.
Redemption of Shares
Shares may be redeemed only in Creation Units at their NAV and only on a day the
NYSE Arca is open for business. The Fund's custodian makes available immediately
prior to the opening of business each day of the NYSE Arca, through the
facilities of the NSCC, the list of the names and the numbers of shares of the
Fund's portfolio securities that will be applicable that day to redemption
requests in proper form ("Fund Securities"). Fund Securities received on
redemption may not be identical to Deposit Securities which are applicable to
purchases of Creation Units. Unless cash redemptions are available or specified
for the Fund, the redemption proceeds consist of the Fund Securities, plus cash
in an amount equal to the difference between the NAV of Shares being redeemed as
next determined after receipt by the transfer agent of a redemption request in
proper form, and the value of the Fund Securities (the "Cash Redemption
Amount"), less the applicable redemption fee and, if applicable, any transfer
taxes. Should the Fund Securities have a value greater than the NAV of Shares
being redeemed, a compensating cash payment to the Trust equal to the
differential, plus the applicable redemption fee and, if applicable, any
transfer taxes will be required to be arranged for by or on behalf of the
redeeming shareholder. For more details, see "Creation and Redemption of
Creation Unit Aggregations" in the Statement of Additional Information.
An order to redeem Creation Units of the Fund may only be effected by or through
an Authorized Participant. An order to redeem must be placed for one or more
whole Creation Units and must be received by the transfer agent in proper form
no later than the close of regular trading on the NYSE Arca (normally 4:00 p.m.
Eastern time) in order to receive that day's closing NAV per Share. In the case
of custom orders, as further described in the Statement of Additional
Information, the order must be received by the transfer agent no later than 3:00
p.m. Eastern time.
A fixed redemption transaction fee of $1,000 per transaction (assuming 101-200
stocks in each Creation Unit) (the "Redemption Transaction Fee") is applicable
to each redemption transaction regardless of the number of Creation Units
redeemed in the transaction. An
22 | CLAYMORE EXCHANGE-TRADED FUND TRUST
additional charge of up to four times the Redemption Transaction Fee may be
charged to approximate additional expenses incurred by the Trust with respect to
redemptions effected outside of the Clearing Process or to the extent that
redemptions are for cash. The Fund reserves the right to effect redemptions in
cash. A shareholder may request a cash redemption in lieu of securities,
however, the Fund may, in its discretion, reject any such request. See "Creation
and Redemption of Creation Unit Aggregations" in the Statement of Additional
Information.
Distributions
Dividends and Capital Gains. Fund shareholders are entitled to their share of
the Fund's income and net realized gains on its investments. The Fund pays out
substantially all of its net earnings to its shareholders as "distributions."
The Fund typically earns income dividends from stocks and interest from debt
securities. These amounts, net of expenses, are passed along to Fund
shareholders as "income dividend distributions." The Fund realizes capital gains
or losses whenever it sells securities. Net long-term capital gains are
distributed to shareholders as "capital gain distributions."
Income dividends, if any, are distributed to shareholders annually. Net capital
gains are distributed at least annually. Dividends may be declared and paid more
frequently to improve Index tracking or to comply with the distribution
requirements of the Internal Revenue Code of 1986, as amended. Some portion of
each distribution may result in a return of capital. Fund shareholders will be
notified regarding the portion of the distribution that represents a return of
capital.
Distributions in cash may be reinvested automatically in additional whole Shares
only if the broker through which the Shares were purchased makes such option
available.
Distribution Plan and Service Plan
The Board of Trustees of the Trust has adopted a distribution and services plan
(the "Plan") pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Fund
is authorized to pay distribution fees in connection with the sale and
distribution of its shares and pay service fees in connection with the provision
of ongoing services to shareholders of each class and the maintenance of
shareholder accounts in an amount up to 0.25% of its average daily net assets
each year.
No 12b-1 fees are currently paid by the Fund, and there are no current plans to
impose these fees. However, in the event 12b-1 fees are charged in the future,
because these fees are paid out of the Fund's assets on an ongoing basis, these
fees will increase the cost of your investment in the Fund. By purchasing shares
subject to distribution fees and service fees, you may pay more over time than
you would by purchasing shares with other types of sales charge arrangements.
Long-term shareholders may pay more than the economic equivalent of the maximum
front-end sales charge permitted by the rules of the NASD. The net income
attributable to the Shares will be reduced by the amount of distribution fees
and service fees and other expenses of the Fund.
PROSPECTUS | 23
Frequent Purchases and Redemptions
The Fund imposes no restrictions on the frequency of purchases and redemptions.
The Board of Trustees evaluated the risks of market timing activities by the
Fund's shareholders when they considered that no restriction or policy was
necessary. The Board considered that, unlike traditional mutual funds, the Fund
issues and redeems its shares at NAV for a basket of securities intended to
mirror the Fund's portfolio, plus a small amount of cash, and the Fund's Shares
may be purchased and sold on the exchange at prevailing market prices. Given
this structure, the Board determined that it is unlikely that (a) market timing
would be attempted by the Fund's shareholders or (b) any attempts to market time
the Fund by its shareholders would result in negative impact to the Fund or its
shareholders.
Fund Service Providers
Claymore Advisors, LLC is the administrator of the Fund.
The Bank of New York Mellon is the custodian and fund accounting and transfer
agent for the Fund.
Clifford Chance US LLP serves as legal counsel to the Fund.
Ernst & Young LLP serves as the Fund's independent registered public accounting
firm. The independent registered public accounting firm is responsible for
auditing the annual financial statements of the Fund.
Index Provider
Raymond James is the Index Provider for the Claymore/Raymond James SB-1 Equity
ETF. Raymond James is not affiliated with the Trust, the Investment Adviser or
the distributor. The Investment Adviser has entered into a license agreement
with Raymond James to use the Index. The Fund is entitled to use the Index
pursuant to a sub-licensing arrangement with the Investment Adviser.
24 | CLAYMORE EXCHANGE-TRADED FUND TRUST
Disclaimers
The Claymore/Raymond James SB-1 Equity ETF and its Shares are not sponsored,
endorsed, sold or promoted by Raymond James. Raymond James makes no
representation or warranty, express or implied, to the shareholders of the Fund
or any member of the public regarding the advisability of investing in
securities generally or in the Fund particularly or the ability of any data
supplied by Raymond James to track general stock market performance. Raymond
James' only relationship to the Investment Adviser is the licensing of certain
trademarks and trade names of Raymond James and of the data supplied by Raymond
James, which is determined, composed and calculated by Raymond James without
regard to the Fund or its Shares. Raymond James has no obligation to take the
needs of the Investment Adviser or the shareholders of the Fund into
consideration in determining, composing or calculating the data supplied by
Raymond James. Raymond James is not responsible for and has not participated in
the determination of the price of the Shares of the Fund or the timing of the
issuance or sale of such Shares. Raymond James has no obligation or liability in
connection with the administration, marketing or trading of the Fund or its
Shares.
The Investment Adviser does not guarantee the accuracy and/or the completeness
of the Index or any data included therein, and the Investment Adviser shall have
no liability for any errors, omissions or interruptions therein. The Investment
Adviser makes no warranty, express or implied, as to results to be obtained by
the Fund, owners of the Shares of the Fund or any other person or entity from
the use of the Index or any data included therein. The Investment Adviser makes
no express or implied warranties, and expressly disclaims all warranties of
merchantability or fitness for a particular purpose or use with respect to the
Index or any data included therein. Without limiting any of the foregoing, in no
event shall the Investment Adviser have any liability for any special, punitive,
direct, indirect or consequential damages (including lost profits) arising out
of matters relating to the use of the Index even if notified of the possibility
of such damages.
PROSPECTUS | 25
Federal Income Taxation
As with any investment, you should consider how your investment in Shares will
be taxed. The tax information in this Prospectus is provided as general
information. You should consult your own tax professional about the tax
consequences of an investment in Shares.
Unless your investment in Shares is made through a tax-exempt entity or
tax-deferred retirement account, such as an IRA plan, you need to be aware of
the possible tax consequences when:
o The Fund makes distributions,
o You sell your Shares listed on the NYSE Arca, and
o You purchase or redeem Creation Units.
Taxes on Distributions
Dividends from net investment income, if any, are declared and paid annually.
The Fund may also pay a special distribution at the end of the calendar year to
comply with federal tax requirements. In general, your distributions are subject
to federal income tax when they are paid, whether you take them in cash or
reinvest them in the Fund. Dividends paid out of the Fund's income and net
short-term gains, if any, are taxable as ordinary income. Distributions of net
long-term capital gains, if any, in excess of net short-term capital losses are
taxable as long-term capital gains, regardless of how long you have held the
Shares.
Long-term capital gains of non-corporate taxpayers are generally taxed at a
maximum rate of 15% for taxable years beginning before January 1, 2011. In
addition, for these taxable years some ordinary dividends declared and paid by
the Fund to non-corporate shareholders may qualify for taxation at the lower
reduced tax rates applicable to long-term capital gains, provided that holding
period and other requirements are met by the Fund and the shareholder. Without
future Congressional action, the maximum rate of long-term capital gain will
return to 20% in 2011, and all dividends will be taxed at ordinary income rates.
Distributions in excess of the Fund's current and accumulated earnings and
profits are treated as a tax-free return of capital to the extent of your basis
in the Shares, and as capital gain thereafter. A distribution will reduce the
Fund's net asset value per Share and may be taxable to you as ordinary income or
capital gain even though, from an investment standpoint, the distribution may
constitute a return of capital.
If you are not a citizen or permanent resident of the United States, the Fund's
ordinary income dividends (which include distribution of net short-term capital
gains) will generally be subject to a 30% U.S. withholding tax, unless a lower
treaty rate applies or unless such income is effectively connected with a U.S.
trade or business carried on through a permanent establishment in the United
States. Prospective investors are urged to consult their tax advisors regarding
the specific tax consequences described above.
Dividends and interest received by the Fund may give rise to withholding and
other taxes imposed by foreign countries. Tax conventions between certain
countries and the United States may reduce or eliminate such taxes.
26 | CLAYMORE EXCHANGE-TRADED FUND TRUST
By law, the Fund must withhold a percentage of your distributions and proceeds
if you have not provided a taxpayer identification number or social security
number. The backup withholding rate for individuals is currently 28%.
Taxes on Exchange-Listed Shares Sales
Currently, any capital gain or loss realized upon a sale of Shares is generally
treated as long-term capital gain or loss if the Shares have been held for more
than one year and as short-term capital gain or loss if the Shares have been
held for one year or less. The ability to deduct capital losses may be limited.
Taxes on Purchase and Redemption of Creation Units
An authorized purchaser who exchanges equity securities for Creation Units
generally will recognize a gain or a loss. The gain or loss will be equal to the
difference between the market value of the Creation Units at the time and the
exchanger's aggregate basis in the securities surrendered and the Cash Component
paid. A person who exchanges Creation Units for equity securities will generally
recognize a gain or loss equal to the difference between the exchanger's basis
in the Creation Units and the aggregate market value of the securities received
and the Cash Redemption Amount. The Internal Revenue Service, however, may
assert that a loss realized upon an exchange of securities for Creation Units
cannot be deducted currently under the rules governing "wash sales" on the basis
that there has been no significant change in economic position. Persons
exchanging securities should consult their own tax advisor with respect to
whether the wash sale rules apply and when a loss might be deductible.
Under current federal income tax laws, any capital gain or loss realized upon
redemption of Creation Units is generally treated as long-term capital gain or
loss if the Shares have been held for more than one year and as a short-term
capital gain or loss if the Shares have been held for one year or less.
If you purchase or redeem Creation Units, you will be sent a confirmation
statement showing how many Shares you purchased or sold and at what price.
The foregoing discussion summarizes some of the possible consequences under
current federal tax law of an investment in the Fund. It is not a substitute for
personal tax advice. You may also be subject to state and local taxation on Fund
distributions and sales of Fund Shares. You are advised to consult your personal
tax advisor about the potential tax consequences of an investment in Fund Shares
under all applicable tax laws.
PROSPECTUS | 27
Other Information
For purposes of the Investment Company Act of 1940, as amended ("1940 Act"), the
Fund is treated as a registered investment company. Section 12(d)(1) of the 1940
Act restricts investments by investment companies in the securities of other
investment companies, including shares of the Fund. Registered investment
companies are permitted to invest in the Fund beyond the limits set forth in
Section 12(d)(1) subject to certain terms and conditions set forth in an SEC
exemptive order issued to the Trust, including that such investment companies
enter into an agreement with the Fund.
Disclosure of Portfolio Holdings
A description of the Trust's policies and procedures with respect to the
disclosure of the Fund's portfolio securities is available in the Fund's
Statement of Additional Information.
28 | CLAYMORE EXCHANGE-TRADED FUND TRUST
Financial Highlights
On September 3, 2008, the Fund acquired the assets and adopted the financial and
performance history of the Predecessor Fund. The investment goals, strategies
and policies of the Fund are substantially similar to those of the Predecessor
Fund.
The financial highlights table is intended to help you understand the Fund's
financial performance for the life of the Fund. Certain information reflects
financial results for a single Share of the Fund. The total returns represent
the rate that an investor would have earned (or lost) on an investment in the
Fund (assuming reinvestment of all dividends and distributions). The information
for the periods indicated below has been derived from financial statements
audited by Ernst &Young LLP (except with respect to information for the six
months ended February 29, 2008, which is unaudited), whose report, along with
the Fund's financial statements, are included in the Annual Report to
Shareholders of the Predecessor Fund for the year ended August 31, 2007 and are
incorporated by reference in the SAI, which are available upon request.
PROSPECTUS | 29
Claymore/Raymond James SB-1 Equity ETF
FOR THE
PERIOD
FOR THE FOR THE MAY 19,
SIX MONTHS ENDED YEAR 2006*
FEBRUARY 29, ENDED THROUGH
PER SHARE OPERATING PERFORMANCE FOR A 2008 AUGUST 31, AUGUST 31,
COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD (UNAUDITED) 2007 2006
---------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 21.67 $ 19.15 $ 19.10(b)
---------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment loss(a) (0.03) (0.05) (0.00)(c)
Net realized and unrealized gain (loss) on investments (2.27) 2.68 0.09
---------------------------------------------------------------------------------------------------
Total from investment operations (2.30) 2.63 0.09
---------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM
AND IN EXCESS OF NET REALIZED GAIN (1.84) (0.11) -
---------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 17.53 $ 21.67 $ 19.15
---------------------------------------------------------------------------------------------------
MARKET VALUE, END OF PERIOD $ 15.82 $ 19.27 $ 17.50
---------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN(d)
Net asset value (11.45)% 13.78% 0.26%
Market value (9.28)% 10.77% (12.50)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $194,969 $240,998 $212,982
Ratio of net expenses to average net assets 1.08%(e) 1.09% 1.12%(e)
Ratio of net investment loss to average net assets (0.25)%(e) (0.06)% (0.06)%(e)
Portfolio turnover rate 68% 166% 41%
|
* Commencement of investment operations.
(a) Based on average shares outstanding during the period.
(b) Before deduction of offering expenses charged to capital.
(c) Amount is less than $0.01.
(d) 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.
(e) Annualized.
30 | CLAYMORE EXCHANGE-TRADED FUND TRUST
For More Information
EXISTING SHAREHOLDERS OR PROSPECTIVE INVESTORS
o Call your broker
o www.claymore.com
DEALERS
o www.claymore.com
o Distributor Telephone: (888) 949-3837
INVESTMENT ADVISER
Claymore Advisors, LLC
2455 Corporate West Drive
Lisle, Illinois 60532
DISTRIBUTOR
Claymore Securities, Inc.
2455 Corporate West Drive
Lisle, Illinois 60532
CUSTODIAN
The Bank of New York Mellon
101 Barclay Street
New York, New York 10286
TRANSFER AGENT
The Bank of New York Mellon
101 Barclay Street
New York, New York 10286
LEGAL COUNSEL
Clifford Chance US LLP
31 West 52nd Street
New York, New York 10019
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
Ernst & Young LLP
233 South Wacker Drive
Chicago, Illinois 60606
A Statement of Additional Information dated September 4, 2008, which contains
more details about the Fund, is incorporated by reference in its entirety into
this Prospectus, which means that it is legally part of this Prospectus.
You will find additional information about the Fund in its annual and
semi-annual reports to shareholders, when available. The annual report will
explain the market conditions and investment strategies affecting the Fund's
performance during its last fiscal year.
You can ask questions or obtain a free copy of the Fund's shareholder reports or
the Statement of Additional Information by calling 1-888-949-3837. Free copies
of the Fund's shareholder reports and the Statement of Additional Information
are available from our website at www.claymore.com.
Information about the Fund, including its reports and the Statement of
Additional Information, has been filed with the SEC. It can be reviewed and
copied at the SEC's Public Reference Room in Washington, DC or on the EDGAR
database on the SEC's internet site (http://www.sec.gov). Information on the
operation of the SEC's Public Reference Room may be obtained by calling the SEC
at (202) 551-8090. You can also request copies of these materials, upon payment
of a duplicating fee, by electronic request at the SEC's e-mail address
(publicinfo@sec.gov) or by writing the Public Reference section of the SEC, 100
F Street NE, Room 1580, Washington, DC 20549.
PROSPECTUS
Distributor
Claymore Securities, Inc.
2455 Corporate West Drive
Lisle, Illinois 60532
September 4, 2008
Investment Company Act File No. 811-21906
Logo: CLAYMORE(SM)
INVESTMENT COMPANY ACT FILE NO. 811-21906
CLAYMORE EXCHANGE-TRADED FUND TRUST
STATEMENT OF ADDITIONAL INFORMATION
DATED SEPTEMBER 4, 2008
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the Prospectus dated September 4, 2008 for the
Claymore/Raymond James SB-1 Equity ETF, a series of the Claymore Exchange-Traded
Fund Trust (the "Trust"), as it may be revised from time to time. Capitalized
terms used herein that are not defined have the same meaning as in the
Prospectus, unless otherwise noted. A copy of the Prospectus may be obtained
without charge by writing to the Trust's Distributor, Claymore Securities, Inc.,
or by calling toll free 1-888-949-3837.
TABLE OF CONTENTS
Page
GENERAL DESCRIPTION OF THE TRUST AND THE FUND..............................1
EXCHANGE LISTING AND TRADING...............................................2
INVESTMENT RESTRICTIONS AND POLICIES.......................................3
INVESTMENT POLICIES AND RISKS..............................................4
GENERAL CONSIDERATIONS AND RISKS...........................................8
MANAGEMENT.................................................................9
BROKERAGE TRANSACTIONS....................................................17
ADDITIONAL INFORMATION CONCERNING THE TRUST...............................18
CREATION AND REDEMPTION OF CREATION UNIT AGGREGATIONS.....................21
TAXES.....................................................................31
FEDERAL TAX TREATMENT OF FUTURES AND OPTIONS CONTRACTS....................33
DETERMINATION OF NAV......................................................33
DIVIDENDS AND DISTRIBUTIONS...............................................34
MISCELLANEOUS INFORMATION.................................................34
FINANCIAL STATEMENTS......................................................34
|
GENERAL DESCRIPTION OF THE TRUST AND THE FUND
The Trust was organized as a Delaware statutory trust on May 24, 2006
and is authorized to have multiple series or portfolios. The Trust is an
open-end management investment company, registered
under the Investment Company Act of 1940, as amended (the "1940 Act"). The Trust
currently consists of 20 investment portfolios. This Statement of Additional
Information relates to the following investment portfolio: the Claymore/Raymond
James SB-1 Equity ETF (the "Fund"). The shares of the Fund are referred to
herein as "Shares" or "Fund Shares."
The Fund is managed by Claymore Advisors, LLC ("Claymore Advisors" or the
"Investment Adviser").
The Fund offers and issues Shares at net asset value ("NAV") only in
aggregations of a specified number of Shares (each a "Creation Unit" or a
"Creation Unit Aggregation"), generally in exchange for a basket of equity
securities included in the Underlying Index (the "Deposit Securities"), together
with the deposit of a specified cash payment (the "Cash Component"). The Fund
anticipates that its Shares will be listed on the New York Stock Exchange Arca,
Inc. (the "NYSE Arca"). Fund Shares will trade on the NYSE Arca at market prices
that may be below, at or above NAV. Shares are redeemable only in Creation Unit
Aggregations and, generally, in exchange for portfolio securities and a
specified cash payment. Creation Units are aggregations of 50,000 Shares. In the
event of the liquidation of the Fund, the Trust may lower the number of Shares
in a Creation Unit.
The Trust reserves the right to offer a "cash" option for creations and
redemptions of Fund Shares. Fund Shares may be issued in advance of receipt of
Deposit Securities subject to various conditions including a requirement to
maintain on deposit with the Trust cash at least equal to 115% of the market
value of the missing Deposit Securities. See the "Creation and Redemption of
Creation Unit Aggregations" section. In each instance of such cash creations or
redemptions, transaction fees may be imposed that will be higher than the
transaction fees associated with in-kind creations or redemptions. In all cases,
such fees will be limited in accordance with the requirements of the Securities
and Exchange Commission (the "SEC") applicable to management investment
companies offering redeemable securities.
EXCHANGE LISTING AND TRADING
There can be no assurance that the requirements of the NYSE Arca necessary
to maintain the listing of Shares of the Fund will continue to be met. The NYSE
Arca may, but is not required to, remove the Shares of the Fund from listing if
(i) following the initial 12-month period beginning at the commencement of
trading of the Fund, there are fewer than 50 beneficial owners of the Shares of
the Fund for 30 or more consecutive trading days; (ii) the value of the
Underlying Index is no longer calculated or available; or (iii) such other event
shall occur or condition exist that, in the opinion of the NYSE Arca, makes
further dealings on the NYSE Arca inadvisable. The NYSE Arca will remove the
Shares of the Fund from listing and trading upon termination of the Fund.
As in the case of other stocks traded on the NYSE Arca, broker's
commissions on transactions will be based on negotiated commission rates at
customary levels.
The Trust reserves the right to adjust the price levels of the Shares in
the future to help maintain convenient trading ranges for investors. Any
adjustments would be accomplished through stock splits or reverse stock splits,
which would have no effect on the net assets of the Fund.
2
INVESTMENT RESTRICTIONS AND POLICIES
INVESTMENT OBJECTIVE
The investment objective of the Claymore/Raymond James SB-1 Equity ETF is
to provide investment results that correspond generally to the performance
(before the Fund's fees and expenses) of an equity index called "Raymond James
SB-1 Equity Index" (the "SB-1 Index" or the "Underlying Index").
INVESTMENT RESTRICTIONS
The Board of Trustees of the Trust (the "Board" or the "Trustees") has
adopted as fundamental policies the Fund's investment restrictions, numbered (1)
through (7) below. The Fund, as a fundamental policy, may not:
(1) Invest 25% or more of the value of its total assets in securities of
issuers in any one industry or group of industries, except to the extent that
the Underlying Index that the Fund replicates concentrates in an industry or
group of industries. This restriction does not apply to obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities.
(2) Borrow money, except that the Fund may (i) borrow money from banks for
temporary or emergency purposes (but not for leverage or the purchase of
investments) up to 10% of its total assets and (ii) make other investments or
engage in other transactions permissible under the 1940 Act that may involve a
borrowing, provided that the combination of (i) and (ii) shall not exceed 33
1/3% of the value of the Fund's total assets (including the amount borrowed),
less the Fund's liabilities (other than borrowings).
(3) Act as an underwriter of another issuer's securities, except to the
extent that the Fund may be deemed to be an underwriter within the meaning of
the Securities Act of 1933 in connection with the purchase and sale of portfolio
securities.
(4) Make loans to other persons, except through (i) the purchase of debt
securities permissible under the Fund's investment policies, (ii) repurchase
agreements or (iii) the lending of portfolio securities, provided that no such
loan of portfolio securities may be made by the Fund if, as a result, the
aggregate of such loans would exceed 33 1/3% of the value of the Fund's total
assets.
(5) Purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
Fund (i) from purchasing or selling options, futures contracts or other
derivative instruments, or (ii) from investing in securities or other
instruments backed by physical commodities).
(6) Purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prohibit the Fund from
purchasing or selling securities or other instruments backed by real estate or
of issuers engaged in real estate activities).
(7) Issue senior securities, except as permitted under the 1940 Act.
Except for restriction (2), if a percentage restriction is adhered to at
the time of investment, a later increase in percentage resulting from a change
in market value of the investment or the total assets, or the sale of a security
out of the portfolio, will not constitute a violation of that restriction.
3
The foregoing fundamental investment policies cannot be changed as to the
Fund without approval by holders of a "majority of the Fund's outstanding voting
shares." As defined in the 1940 Act, this means the vote of (i) 67% or more of
the Fund's shares present at a meeting, if the holders of more than 50% of the
Fund's shares are present or represented by proxy, or (ii) more than 50% of the
Fund's shares, whichever is less.
In addition to the foregoing fundamental investment policies, the Fund is
also subject to the following non-fundamental restrictions and policies, which
may be changed by the Board of Trustees. The Fund may not:
(1) Sell securities short, unless the Fund owns or has the right to obtain
securities equivalent in kind and amount to the securities sold short at no
added cost, and provided that transactions in options, futures contracts,
options on futures contracts or other derivative instruments are not deemed to
constitute selling securities short.
(2) Purchase securities on margin, except that the Fund may obtain such
short-term credits as are necessary for the clearance of transactions; and
provided that margin deposits in connection with futures contracts, options on
futures contracts or other derivative instruments shall not constitute
purchasing securities on margin.
(3) Purchase securities of open-end or closed-end investment companies
except in compliance with the 1940 Act.
(4) Invest in direct interests in oil, gas or other mineral exploration
programs or leases; however, the Fund may invest in the securities of issuers
that engage in these activities.
(5) Invest in illiquid securities if, as a result of such investment, more
than 15% of the Fund's net assets would be invested in illiquid securities.
The investment objective of the Fund is a non-fundamental policy that can
be changed by the Board of Trustees without approval by shareholders.
INVESTMENT POLICIES AND RISKS
Loans of Portfolio Securities. The Fund may lend its investment securities
to approved borrowers. Any gain or loss on the market price of the securities
loaned that might occur during the term of the loan would be for the account of
the Fund. These loans cannot exceed 33 1/3% of the Fund's total assets.
Approved borrowers are brokers, dealers, domestic and foreign banks, or
other financial institutions that meet credit or other requirements as
established by, and subject to the review of, the Trust's Board, so long as the
terms, the structure and the aggregate amount of such loans are not inconsistent
with the 1940 Act and the rules and regulations thereunder or interpretations of
the SEC, which require that (a) the borrowers pledge and maintain with the Fund
collateral consisting of cash, an irrevocable letter of credit issued by a bank,
or securities issued or guaranteed by the U.S. Government having a value at all
times of not less than 102% of the value of the securities loaned (on a
"mark-to-market" basis); (b) the loan be made subject to termination by the Fund
at any time; and (c) the Fund receives reasonable interest on the loan. From
time to time, the Fund may return a part of the interest earned from the
investment of collateral received from securities loaned to the borrower and/or
a third party that is unaffiliated with the Fund and that is acting as a finder.
4
Repurchase Agreements. The Fund may enter into repurchase agreements, which
are agreements pursuant to which securities are acquired by the Fund from a
third party with the understanding that they will be repurchased by the seller
at a fixed price on an agreed date. These agreements may be made with respect to
any of the portfolio securities in which the Fund is authorized to invest.
Repurchase agreements may be characterized as loans secured by the underlying
securities. The Fund may enter into repurchase agreements with (i) member banks
of the Federal Reserve System having total assets in excess of $500 million and
(ii) securities dealers ("Qualified Institutions"). The Investment Adviser will
monitor the continued creditworthiness of Qualified Institutions.
The use of repurchase agreements involves certain risks. For example, if
the seller of securities under a repurchase agreement defaults on its obligation
to repurchase the underlying securities, as a result of its bankruptcy or
otherwise, the Fund will seek to dispose of such securities, which action could
involve costs or delays. If the seller becomes insolvent and subject to
liquidation or reorganization under applicable bankruptcy or other laws, the
Fund's ability to dispose of the underlying securities may be restricted.
Finally, it is possible that the Fund may not be able to substantiate its
interest in the underlying securities. To minimize this risk, the securities
underlying the repurchase agreement will be held by the custodian at all times
in an amount at least equal to the repurchase price, including accrued interest.
If the seller fails to repurchase the securities, the Fund may suffer a loss to
the extent proceeds from the sale of the underlying securities are less than the
repurchase price.
The resale price reflects the purchase price plus an agreed upon market
rate of interest. The collateral is marked to market daily.
Reverse Repurchase Agreements. The Fund may enter into reverse repurchase
agreements, which involve the sale of securities with an agreement to repurchase
the securities at an agreed-upon price, date and interest payment and have the
characteristics of borrowing. The securities purchased with the funds obtained
from the agreement and securities collateralizing the agreement will have
maturity dates no later than the repayment date. Generally the effect of such
transactions is that the Fund can recover all or most of the cash invested in
the portfolio securities involved during the term of the reverse repurchase
agreement, while in many cases the Fund is able to keep some of the interest
income associated with those securities. Such transactions are only advantageous
if the Fund has an opportunity to earn a greater rate of return on the cash
derived from these transactions than the interest cost of obtaining the same
amount of cash. Opportunities to realize earnings from the use of the proceeds
equal to or greater than the interest required to be paid may not always be
available and the Fund intends to use the reverse repurchase technique only when
the Investment Adviser believes it will be advantageous to the Fund. The use of
reverse repurchase agreements may exaggerate any interim increase or decrease in
the value of the Fund's assets. The custodian bank will maintain a separate
account for the Fund with securities having a value equal to or greater than
such commitments. Under the 1940 Act, reverse repurchase agreements are
considered loans.
Money Market Instruments. The Fund may invest a portion of its assets in
high-quality money market instruments on an ongoing basis to provide liquidity.
The instruments in which the Fund may invest include: (i) short-term obligations
issued by the U.S. Government; (ii) negotiable certificates of deposit ("CDs"),
fixed time deposits and bankers' acceptances of U.S. and foreign banks and
similar institutions; (iii) commercial paper rated at the date of purchase
"Prime-1" by Moody's Investors Service, Inc. or "A-1+" or "A-1" by Standard &
Poor's or, if unrated, of comparable quality as determined by the Investment
Adviser; (iv) repurchase agreements; and (v) money market mutual funds. CDs are
short-term negotiable obligations of commercial banks. Time deposits are
non-negotiable deposits maintained in banking institutions for specified periods
of time at stated interest rates. Banker's acceptances are time drafts drawn on
commercial banks by borrowers, usually in connection with international
transactions.
5
Investment Companies. The Fund may invest in the securities of other
investment companies (including money market funds). Under the 1940 Act, the
Fund's investment in investment companies is limited to, subject to certain
exceptions, (i) 3% of the total outstanding voting stock of any one investment
company, (ii) 5% of the Fund's total assets with respect to any one investment
company and (iii) 10% of the Fund's total assets of investment companies in the
aggregate.
Real Estate Investment Trusts ("REITs"). The Fund may invest in the
securities of real estate investment trusts to the extent allowed by law, which
pool investors' funds for investments primarily in commercial real estate
properties. Investment in REITs may be the most practical available means for
the Fund to invest in the real estate industry. As a shareholder in a REIT, the
Fund would bear its ratable share of the REIT's expenses, including its advisory
and administration fees. At the same time, the Fund would continue to pay its
own investment advisory fees and other expenses, as a result of which the Fund
and its shareholders in effect will be absorbing duplicate levels of fees with
respect to investments in REITs.
Illiquid Securities. The Fund may invest up to an aggregate amount of 15%
of its net assets in illiquid securities. Illiquid securities include securities
subject to contractual or other restrictions on resale and other instruments
that lack readily available markets.
Futures and Options. The Fund may utilize exchange-traded futures and
options contracts and swap agreements.
Futures contracts generally provide for the future sale by one party and
purchase by another party of a specified commodity at a specified future time
and at a specified price. Stock index futures contracts are settled daily with a
payment by one party to the other of a cash amount based on the difference
between the level of the stock index specified in the contract from one day to
the next. Futures contracts are standardized as to maturity date and underlying
instrument and are traded on futures exchanges.
Futures traders are required to make a good faith margin deposit in cash or
U.S. government securities with a broker or custodian to initiate and maintain
open positions in futures contracts. A margin deposit is intended to assure
completion of the contract (delivery or acceptance of the underlying commodity
or payment of the cash settlement amount) if it is not terminated prior to the
specified delivery date. Brokers may establish deposit requirements which are
higher than the exchange minimums. Futures contracts are customarily purchased
and sold on margin deposits which may range upward from less than 5% of the
value of the contract being traded.
After a futures contract position is opened, the value of the contract is
marked to market daily. If the futures contract price changes to the extent that
the margin on deposit does not satisfy margin requirements, payment of
additional "variation" margin will be required. Conversely, change in the
contract value may reduce the required margin, resulting in a repayment of
excess margin to the contract holder. Variation margin payments are made to and
from the futures broker for as long as the contract remains open. In such case,
the Fund would expect to earn interest income on its margin deposits. Closing
out an open futures position is done by taking an opposite position ("buying" a
contract which has previously been "sold," or "selling" a contract previously
"purchased") in an identical contract to terminate the position. Brokerage
commissions are incurred when a futures contract position is opened or closed.
The Fund may use exchange-traded futures and options, together with
positions in cash and money market instruments, to simulate full investment in
its Underlying Index. Under such circumstances, the Investment Adviser may seek
to utilize other instruments that it believes to be correlated to the underlying
index components or a subset of the components.
6
An option on a futures contract, as contrasted with the direct investment
in such a contract, gives the purchaser the right, in return for the premium
paid, to assume a position in the underlying futures contract at a specified
exercise price at any time prior to the expiration date of the option. Upon
exercise of an option, the delivery of the futures position by the writer of the
option to the holder of the option will be accompanied by delivery of the
accumulated balance in the writer's futures margin account that represents the
amount by which the market price of the futures contract exceeds (in the case of
a call) or is less than (in the case of a put) the exercise price of the option
on the futures contract. The potential for loss related to the purchase of an
option on a futures contract is limited to the premium paid for the option plus
transaction costs. Because the value of the option is fixed at the point of
purchase, there are no daily cash payments by the purchaser to reflect changes
in the value of the underlying contract; however, the value of the option
changes daily and that change would be reflected in the NAV of the Fund. The
potential for loss related to writing call options on equity securities or
indices is unlimited. The potential for loss related to writing put options is
limited only by the aggregate strike price of the put option less the premium
received.
The Fund may purchase and write put and call options on futures contracts
that are traded on a U.S. exchange as a hedge against changes in value of its
portfolio securities, or in anticipation of the purchase of securities, and may
enter into closing transactions with respect to such options to terminate
existing positions. There is no guarantee that such closing transactions can be
effected.
Restrictions on the Use of Futures Contracts and Options on Futures
Contracts. In connection with its management of the Trust, the Investment
Adviser has claimed such an exclusion from registration as a commodity pool
operator under the Commodity Exchange Act (the "CEA"). Therefore, it is not
subject to the registration and regulatory requirements of the CEA. Therefore,
there are no limitations on the extent to which the Fund may engage in
non-hedging transactions involving futures and options thereon, except as set
forth in the Fund's Prospectus and this Statement of Additional Information.
The Commodity Futures Trading Commission has eliminated limitations on
futures trading by certain regulated entities, including registered investment
companies, and consequently registered investment companies may engage in
unlimited futures transactions and options thereon provided that the investment
adviser to the company claims an exclusion from regulation as a commodity pool
operator.
Swap Agreements. Swap agreements are contracts between parties in which one
party agrees to make periodic payments to the other party (the "Counterparty")
based on the change in market value or level of a specified rate, index or
asset. In return, the Counterparty agrees to make periodic payments to the first
party based on the return of a different specified rate, index or asset. Swap
agreements will usually be done on a net basis, the Fund receiving or paying
only the net amount of the two payments. The net amount of the excess, if any,
of the Fund's obligations over its entitlements with respect to each swap is
accrued on a daily basis and an amount of cash or highly liquid securities
having an aggregate value at least equal to the accrued excess is maintained in
an account at the Trust's custodian bank.
The use of interest-rate and index swaps is a highly specialized activity
that involves investment techniques and risks different from those associated
with ordinary portfolio security transactions. These transactions generally do
not involve the delivery of securities or other underlying assets or principal.
The use of swap agreements involves certain risks. For example, if the
Counterparty under a swap agreement defaults on its obligation to make payments
due from it, as a result of its bankruptcy or otherwise, the Fund may lose such
payments altogether, or collect only a portion thereof, which collection could
involve costs or delays.
7
GENERAL CONSIDERATIONS AND RISKS
A discussion of the risks associated with an investment in the Fund is
contained in the Prospectus in the "Principal Risks of Investing in the Fund"
and "Additional Risks" sections. The discussion below supplements, and should be
read in conjunction with, these sections of the Prospectus.
An investment in the Fund should be made with an understanding that the
value of the Fund's portfolio securities may fluctuate in accordance with
changes in the financial condition of the issuers of the portfolio securities,
the value of common stocks in general and other factors that affect the market.
An investment in the Fund should also be made with an understanding of
the risks inherent in an investment in equity securities, including the risk
that the financial condition of issuers may become impaired or that the general
condition of the stock market may deteriorate (either of which may cause a
decrease in the value of the portfolio securities and thus in the value of Fund
Shares). Common stocks are susceptible to general stock market fluctuations and
to volatile increases and decreases in value as market confidence and
perceptions of their issuers' change. These investor perceptions are based on
various and unpredictable factors, including expectations regarding government,
economic, monetary and fiscal policies, inflation and interest rates, economic
expansion or contraction, and global or regional political, economic or banking
crises.
Holders of common stocks incur more risk than holders of preferred
stocks and debt obligations because common stockholders, as owners of the
issuer, have generally inferior rights to receive payments from the issuer in
comparison with the rights of creditors, or holders of debt obligations or
preferred stocks. Further, unlike debt securities which typically have a stated
principal amount payable at maturity (whose value, however, is subject to market
fluctuations prior thereto), or preferred stocks, which typically have a
liquidation preference and which may have stated optional or mandatory
redemption provisions, common stocks have neither a fixed principal amount nor a
maturity.
The existence of a liquid trading market for certain securities may
depend on whether dealers will make a market in such securities. There can be no
assurance that a market will be made or maintained or that any such market will
be or remain liquid. The price at which securities may be sold and the value of
the Fund's Shares will be adversely affected if trading markets for the Fund's
portfolio securities are limited or absent, or if bid/ask spreads are wide.
Risks of Futures and Options Transactions. There are several risks
accompanying the utilization of futures contracts and options on futures
contracts. First, while the Fund plans to utilize futures contracts only if an
active market exists for such contracts, there is no guarantee that a liquid
market will exist for the contract at a specified time.
Furthermore, because, by definition, futures contracts project price
levels in the future and not current levels of valuation, market circumstances
may result in a discrepancy between the price of the stock index future and the
movement in the Underlying Index. In the event of adverse price movements, the
Fund would continue to be required to make daily cash payments to maintain its
required margin. In such situations, if the Fund has insufficient cash, it may
have to sell portfolio securities to meet daily margin requirements at a time
when it may be disadvantageous to do so. In addition, the Fund may be required
to deliver the instruments underlying futures contracts it has sold.
The risk of loss in trading futures contracts or uncovered call options
in some strategies (e.g., selling uncovered stock index futures contracts) is
potentially unlimited. The Fund does not plan to use futures and options
contracts in this way. The risk of a futures position may still be large as
traditionally measured due to the low margin deposits required. In many cases, a
relatively small price movement in a
8
futures contract may result in immediate and substantial loss or gain to the
investor relative to the size of a required margin deposit. The Fund, however,
intends to utilize futures and options contracts in a manner designed to limit
its risk exposure to levels comparable to direct investment in stocks.
Utilization of futures and options on futures by the Fund involves the
risk of imperfect or even negative correlation to the Underlying Index if the
index underlying the futures contract differs from the Underlying Index. There
is also the risk of loss by the Fund of margin deposits in the event of
bankruptcy of a broker with whom the Fund has an open position in the futures
contract or option; however, this risk is substantially minimized because (a) of
the regulatory requirement that the broker has to "segregate" customer funds
from its corporate funds, and (b) in the case of regulated exchanges in the
United States, the clearing corporation stands behind the broker to make good
losses in such a situation. The purchase of put or call options could be based
upon predictions by the Investment Adviser as to anticipated trends, which
predictions could prove to be incorrect and a part or all of the premium paid
therefore could be lost.
Because the futures market imposes less burdensome margin requirements
than the securities market, an increased amount of participation by speculators
in the futures market could result in price fluctuations. Certain financial
futures exchanges limit the amount of fluctuation permitted in futures contract
prices during a single trading day. The daily limit establishes the maximum
amount by which the price of a futures contract may vary either up or down from
the previous day's settlement price at the end of a trading session. Once the
daily limit has been reached in a particular type of contract, no trades may be
made on that day at a price beyond that limit. It is possible that futures
contract prices could move to the daily limit for several consecutive trading
days with little or no trading, thereby preventing prompt liquidation of futures
positions and subjecting the Fund to substantial losses. In the event of adverse
price movements, the Fund would be required to make daily cash payments of
variation margin.
Although the Fund intends to enter into futures contracts only if there
is an active market for such contracts, there is no assurance that an active
market will exist for the contracts at any particular time.
Risks of Swap Agreements. The risk of loss with respect to swaps
generally is limited to the net amount of payments that the Fund is
contractually obligated to make. Swap agreements are also subject to the risk
that the swap counterparty will default on its obligations. If such a default
were to occur, the Fund will have contractual remedies pursuant to the
agreements related to the transaction. However, such remedies may be subject to
bankruptcy and insolvency laws which could affect the Fund's rights as a
creditor -- (e.g., the Fund may not receive the net amount of payments that it
contractually is entitled to receive). The Fund, however, intends to utilize
swaps in a manner designed to limit its risk exposure to levels comparable to
direct investments in stocks.
MANAGEMENT
Trustees and Officers
The general supervision of the duties performed by the Investment
Adviser for the Fund under the Investment Advisory Agreement is the
responsibility of the Board of Trustees. The Trust currently has four Trustees.
Three Trustees have no affiliation or business connection with the Investment
Adviser or any of its affiliated persons and do not own any stock or other
securities issued by the Investment Adviser. These are the "non-interested" or
"independent" Trustees ("Independent Trustees"). The other Trustee (the
"Management Trustee") is affiliated with the Investment Adviser.
The Independent Trustees of the Trust, their term of office and length
of time served, their principal business occupations during the past five years,
the number of portfolios in the Fund Complex
9
(defined below) overseen by each Independent Trustee, and other directorships,
if any, held by the Trustee are shown below. The Fund Complex includes all open
and closed-end funds (including all of their portfolios) advised by the
Investment Adviser and any funds that have an investment adviser that is an
affiliated person of the Investment Adviser. As of the date of this SAI, the
Fund Complex consists of the Trust's 20 portfolios, 11 separate portfolios of
Claymore Exchange-Traded Fund Trust 2 and 15 closed-end management investment
companies.
10
NUMBER OF
PORTFOLIOS IN
POSITION(S) TERM OF OFFICE FUND COMPLEX OTHER
NAME, ADDRESS AND AGE OF HELD WITH AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN BY DIRECTORSHIPS
INDEPENDENT TRUSTEES* TRUST TIME SERVED** DURING PAST 5 YEARS TRUSTEES HELD BY TRUSTEES
Randall C. Barnes Trustee Since 2006 Private Investor, 41 None.
Year of Birth: 1951 Formerly, Senior Vice
President, Treasurer
(1993-1997), President,
Pizza Hut International
(1991-1993) and Senior
Vice President,
Strategic Planning and
New Business Development
(1987-1990) of PepsiCo,
Inc. (1987-1997).
Ronald E. Toupin, Jr. Trustee Since 2006 Retired. Formerly Vice 41 None.
Year of Birth: 1958 President, Manager and
Portfolio Manager of
Nuveen Asset Management
(1998-1999), Vice
President of Nuveen
Investment Advisory
Corporation
(1993-1999), Vice
President and
Manager of Nuveen
Unit Investment
Trusts (1991-1999),
and Assistant Vice
President and
Portfolio Manager of
Nuveen Unit
Investment Trusts
(1988-1999), each of
John Nuveen &
Company, Inc.
(1982-1999).
Ronald A. Nyberg Trustee Since 2006 Partner of Nyberg & 44 None.
Year of Birth: 1953 Cassioppi, LLC, a law
firm specializing in
Corporate Law, Estate
Planning and Business
Transactions
(2000-present).
Formerly, Executive Vice
President, General
Counsel, and Corporate
Secretary of Van Kampen
Investments (1982-1999).
|
* The business address of each Trustee is c/o Claymore Advisors, LLC, 2455
Corporate West Drive, Lisle, Illinois 60532.
** This is the period for which the Trustee began serving the Trust. Each
Trustee serves an indefinite term, until his successor is elected.
The Trustee who is affiliated with the Investment Adviser or affiliates
of the Investment Adviser and executive officers of the Trust, their term of
office and length of time served, their principal business occupations during
the past five years, the number of portfolios in the Fund Complex overseen by
the Management Trustee and the other directorships, if any, held by the Trustee,
are shown below.
11
NUMBER OF
PORTFOLIOS IN
POSITION(S) TERM OF OFFICE FUND COMPLEX OTHER
NAME, ADDRESS AND AGE OF HELD WITH AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN BY DIRECTORSHIPS
INTERESTED TRUSTEES* TRUST TIME SERVED** DURING PAST 5 YEARS TRUSTEES HELD BY TRUSTEES
---------------------------------------------------------------------------------------------------------------------
Nicholas Dalmaso*** Trustee Trustee Attorney. Formerly, Senior 44 None.
Year of birth: 1965 since 2006 Managing Director and
Chief Administrative
Officer (2007-2008) and
General Counsel
(2001-2007) of Claymore
Advisors, LLC and
Claymore Securities,
Inc. and President and
Secretary of Claymore
Investments, Inc.
(2004-2008). Formerly,
Assistant General
Counsel, John Nuveen
and Company (1999-2001).
Formerly Vice President
and Associate General
Counsel of Van Kampen
Investments (1992-1999).
|
* The business address of each Trustee is c/o Claymore Advisors, LLC, 2455
Corporate West Drive, Lisle, Illinois 60532.
** This is the period for which the Trustee began serving the Trust. Each
Trustee serves an indefinite term, until his successor is elected.
*** Mr. Dalmaso is an interested person of the Trust because of his former
position as an officer of the Investment Adviser and certain of its
affiliates.
NAME, ADDRESS AND AGE OF POSITION(S) HELD LENGTH OF TIME
EXECUTIVE OFFICERS WITH TRUST SERVED* PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
J. Thomas Futrell Chief Executive Since 2008 Senior Managing Director, Chief Investment
Year of birth: 1955 Officer Officer (2008-present) of Claymore Advisors,
LLC and Claymore Securities, Inc.; Chief
Executive Officer of certain funds in the
Fund Complex. Formerly, Managing Director in
charge of Research (2000-2007) for Nuveen
Asset Management.
Kevin M. Robinson Chief Legal Since 2008 Senior Managing Director, General Counsel
Year of birth: 1959 Officer and Corporate Secretary (2007-present) of
Claymore Advisors, LLC and Claymore
Securities, Inc.; Chief Legal Officer of
certain funds in the Fund Complex. Formerly,
Associate General Counsel (2000- 2007) of
NYSE Euronext, Inc. Formerly, Archipelago
Holdings, Inc. Senior Managing Director and
Associate General Counsel (1997-2000) of ABN
Amro Inc. Formerly, Senior Counsel in the
Enforcement Division (1989-1997) of the U.S.
Securities and Exchange Commission.
Steven M. Hill Chief Financial Since 2006 Senior Managing Director (2005-present) and
Year of birth: 1964 Officer, Chief Chief Financial Officer (2005-2006), Managing
Accounting Director (2003-2005) of Claymore Advisors, LLC
Officer and and Claymore Securities, Inc.; Chief Financial
Treasurer Officer, Chief Accounting Officer and
Treasurer of certain funds in the Fund
Complex. Formerly, Treasurer of Henderson
Global Funds and Operations Manager for
Henderson Global Investors (NA) 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).
Bruce Saxon Chief Since 2006 Vice President - Fund Compliance Officer of
Year of birth: 1957 Compliance Claymore Securities, Inc. (2006-present).
Officer Chief Compliance Officer of certain funds in
the Fund Complex. Formerly, Chief Compliance
Officer/Assistant Secretary of Harris
Investment Management, Inc. (2003-2006).
Director-Compliance of Harrisdirect LLC
(1999-2003).
Melissa J. Nguyen Secretary Since 2006 Vice President and Assistant General Counsel of
12
|
Year of birth: 1978 Claymore Securities, Inc. (2005-present).
Secretary of certain funds in the Fund
Complex. Formerly, Associate, Vedder, Price,
Kaufman & Kammholz, P.C. (2003-2005).
William H. Belden III Vice President Since 2006 Managing Director of Claymore Securities, Inc.
Year of birth: 1965 (2005-present). Formerly, Vice President of
Product Management at Northern Trust Global
Investments (1999-2005); Vice President of
Stein Roe & Farnham (1995-1999).
James Howley Assistant Since 2006 Vice President, Fund Administration of
Year of birth: 1972 Treasurer Claymore Securities, Inc. (2004-present).
Formerly, Manager, Mutual Fund Administration
of Van Kampen Investments, Inc.
Mark J. Furjanic Assistant Since 2008 Vice President, Fund Administration-Tax
Year of birth: 1959 Treasurer (2005-present) of Claymore Advisors, LLC and
Claymore Securities, Inc.; Assistant
Treasurer of certain funds in the Fund
Complex. Formerly, Senior Manager
(1999-2005) for Ernst & Young LLP.
Donald P. Swade Assistant Since 2008 Vice President, Fund Administration
Year of birth: 1972 Treasurer (2006-present) of Claymore Advisors, LLC and
Claymore Securities, Inc.; Assistant
Treasurer of certain funds in the Fund
Complex. Formerly, Manager-Mutual Fund
Financial Administration (2003-2006) for
Morgan Stanley/Van Kampen Investments.
Chuck Craig Vice President Since 2006 Managing Director (2006-present), Vice
Year of birth: 1967 President (2003-2006) of Claymore Securities,
Inc. Formerly, Assistant Vice President,
First Trust Portfolios, L.P. (1999-2003);
Analyst, PMA Securities, Inc. (1996-1999).
Mark E. Mathiasen Assistant Since 2008 Assistant Vice President; Assistant General
Year of birth: 1978 Secretary Counsel of Claymore Securities, Inc.
(2007-present). Secretary of certain funds in
the Fund Complex. Previously, Law Clerk,
Idaho State Courts (2003-2006).
Matt Patterson Assistant Since 2006 Vice President and Assistant General Counsel
Year of birth: 1971 Secretary of Claymore Securities, Inc. (2006-present).
Secretary of certain funds in the Fund
Complex. Previously, Securities Counsel,
Caterpillar Inc. (2004-2006); Associate,
Skadden, Arps, Slate, Meagher & Flom LLP
(2002-2004).
|
* The business address of each Trustee is c/o Claymore Advisors, LLC, 2455
Corporate West Drive, Lisle, Illinois 60532.
** This is the period for which the Trustee/Officer began serving the Trust.
Each Officer serves an indefinite term, until his successor is elected.
For each Trustee, the dollar range of equity securities beneficially
owned by the Trustee in the Trust and in all registered investment companies
overseen by the Trustee is shown below.
AGGREGATE DOLLAR RANGE OF
EQUITY SECURITIES IN ALL
DOLLAR RANGE OF EQUITY REGISTERED INVESTMENT
SECURITIES IN THE COMPANIES OVERSEEN BY
CLAYMORE/RAYMOND JAMES SB-1 TRUSTEE IN FAMILY OF
EQUITY ETF INVESTMENT COMPANIES
NAME OF TRUSTEE (AS OF DECEMBER 31, 2007) (AS OF DECEMBER 31, 2007)
----------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
Randall C. Barnes None over $100,000
Ronald A. Nyberg None over $100,000
Ronald E. Toupin, Jr. None None
INTERESTED TRUSTEE
Nicholas Dalmaso None None
|
As to each Independent Trustee and his immediate family members, no
person owned beneficially or of record securities in an investment adviser or
principal underwriter of the Fund, or a person (other than a registered
investment company) directly or indirectly controlling, controlled by or under
common control with an investment adviser or principal underwriter of the Fund.
Messrs. Barnes, Nyberg and Toupin who are not "interested persons" of
the Trust, as defined in the 1940 Act, serve on the Trust's Nominating and
Governance Committee. The Nominating and
13
Governance Committee is responsible for recommending qualified candidates to the
Board in the event that a position is vacated or created. The Nominating and
Governance Committee would consider recommendations by shareholders if a vacancy
were to exist. Such recommendations should be forwarded to the Secretary of the
Trust. The Trust does not have a standing compensation committee.
Messrs. Barnes, Nyberg and Toupin who are not "interested persons" of
the Trust, as defined in the 1940 Act, serve on the Trust's Audit Committee. The
Audit Committee is generally responsible for reviewing and evaluating issues
related to the accounting and financial reporting policies and internal controls
of the Trust and, as appropriate, the internal controls of certain service
providers, overseeing the quality and objectivity of the Trust's financial
statements and the audit thereof and acting as a liason between the Board of
Trustees and the Trust's independent registered public accounting firm.
Remuneration of Trustees and Officers
The Trust, together with Claymore Exchange-Traded Fund Trust 2, pays
each Independent Trustee a fee of $25,000 per year plus $1,000 per Board or
committee meeting participated in, together with each Trustee's actual
out-of-pocket expenses relating to attendance at such meetings. Officers who are
employed by the Investment Adviser receive no compensation or expense
reimbursements from the Trust.
The table below shows the estimated compensation that is contemplated
to be paid to Trustees for the Fund's fiscal year ended August 31, 2008,
assuming a full fiscal year of operations for the fiscal year ended August 31,
2008:
PENSION OR RETIREMENT
AGGREGATE COMPENSATION BENEFITS ACCRUED AS PART OF TOTAL COMPENSATION PAID
NAME OF TRUSTEE FROM TRUST FUND EXPENSES FROM FUND COMPLEX
--------------- ---------------------- --------------------------- -----------------------
INDEPENDENT TRUSTEES
Randall C. Barnes $ N/A $
Ronald A. Nyberg $ N/A $
Ronald E. Toupin, Jr. $ N/A $
INTERESTED TRUSTEE
Nicholas Dalmaso N/A N/A N/A
|
The officers and Trustees of the Trust, in the aggregate, own less than
1% of the shares of the Fund.
As of the date hereof, no person owned 5% or more of the outstanding
shares of the Fund.
Investment Adviser. The Investment Adviser manages the investment and
reinvestment of the Fund's assets and administers the affairs of the Fund to the
extent requested by the Board of Trustees.
Portfolio Manager. Chuck Craig, Managing Director, Portfolio Management
and Supervision, of Claymore, serves as portfolio manager for the Fund and is
responsible for the day-to-day management of the Fund's portfolio.
Other Accounts Managed by the Portfolio Manager. As of July 31, 2008,
Mr. Craig managed 3 registered investment companies (2 such registered
investment companies consisting of a total of 29 separate series) with a total
of approximately $2.17 billion in assets; no pooled investment vehicles other
than registered investment companies; and no other accounts.
14
Although the funds in the Trust that are managed by Mr. Craig may have
different investment strategies, each has a portfolio objective of replicating
its underlying index. The Investment Adviser does not believe that management of
the different funds of the Trust presents a material conflict of interest for
the portfolio manager or the Investment Adviser.
Portfolio Manager Compensation. The portfolio manager's compensation
consists of the following elements:
Base salary: The portfolio manager is paid a fixed base salary by the
Investment Adviser which is set at a level determined to be appropriate based
upon the individual's experience and responsibilities.
The portfolio manager is eligible for a discretionary annual bonus.
There is no policy regarding, or agreement with, the portfolio manager to
receive bonuses or any other compensation in connection with the performance of
any of the accounts managed by the portfolio manager. The portfolio manager also
participates in benefit plans and programs generally available to all employees
of the Investment Adviser.
Securities Ownership of the Portfolio Manager. The portfolio manager
does not own shares of the Fund. As of July 31, 2008, the portfolio manager
owned between $1-10,000 in shares of the Predecessor Fund (as defined below).
Investment Advisory Agreement. Pursuant to an Investment Advisory
Agreement between the Investment Adviser and the Trust, the Investment Adviser
is responsible for all expenses of the Fund, including the cost of transfer
agency, custody, fund administration, legal, audit and other services, except
interest expenses, distribution fees or expenses, brokerage expenses, taxes, and
extraordinary expenses not incurred in the ordinary course of the Fund's
business. For the Investment Adviser's services to the Fund, the Fund has agreed
to pay an annual management fee equal to a percentage of its average daily net
assets set forth in the chart below.
-------------------------------------------------------------------------- -------------------------------------------
FUND FEE
-------------------------------------------------------------------------- -------------------------------------------
Claymore/Raymond James SB-1 Equity ETF 0.75% of average daily net assets
-------------------------------------------------------------------------- -------------------------------------------
|
Under the Investment Advisory Agreement, the Investment Adviser will
not be liable for any error of judgment or mistake of law or for any loss
suffered by the Fund in connection with the performance of the Investment
Advisory Agreement, except a loss resulting from willful misfeasance, bad faith
or gross negligence on the part of the Investment Adviser in the performance of
its duties or from reckless disregard of its duties and obligations thereunder.
The Investment Advisory Agreement continues until May 27, 2010, and thereafter
only if approved annually by the Board, including a majority of the Independent
Trustees. The Agreement terminates automatically upon assignment and is
terminable at any time without penalty as to the Fund by the Board, including a
majority of the Independent Trustees, or by vote of the holders of a majority of
the Fund's outstanding voting securities on 60 days written notice to the
Investment Adviser, or by the Investment Adviser on 60 days written notice to
the Fund.
Claymore Advisors is located at 2455 Corporate West Drive, Lisle,
Illinois 60532.
Administrator. Claymore Advisors also serves as the Trust's
administrator. Pursuant to an administration agreement, Claymore Advisors
provides certain administrative, bookkeeping and accounting services to the
Trust. For the services, the Trust pays Claymore Advisors a fee, accrued daily
and paid monthly by the Investment Adviser from the management fee.
15
Custodian and Transfer Agent. The Bank of New York Mellon ("BNY"),
located at 101 Barclay Street, New York, New York 10286, also serves as
custodian for the Fund pursuant to a Custodian Agreement. As custodian, BNY
holds the Fund's assets, calculates the net asset value of Shares and calculates
net income and realized capital gains or losses. BNY also serves as transfer
agent of the Fund pursuant to a Transfer Agency Agreement. As compensation for
the foregoing services, BNY receives certain out-of-pocket costs, transaction
fees and asset based fees which are accrued daily and paid monthly by the
Investment Adviser from the management fee.
Distributor. Claymore Securities, Inc. ("Claymore") is the distributor
of the Fund's Shares (in such capacity, the "Distributor"). Its principal
address is 2455 Corporate West Drive, Lisle, Illinois 60532. The Distributor has
entered into a Distribution Agreement with the Trust pursuant to which it
distributes Fund Shares. Shares are continuously offered for sale by the Fund
through the Distributor only in Creation Unit Aggregations, as described in the
Prospectus and below under the heading "Creation and Redemption of Creation
Units."
12b-1 Plan. The Trust has adopted a Distribution and Service Plan
pursuant to Rule 12b-1 under the 1940 Act (the "Plan") pursuant to which the
Fund may reimburse the Distributor up to a maximum annual rate of the percentage
of its average daily net assets as set forth in the chart below.
-------------------------------------------------------------------------- -------------------------------------------
FUND FEE
-------------------------------------------------------------------------- -------------------------------------------
Claymore/Raymond James SB-1 Equity ETF 0.25% of average daily net assets
-------------------------------------------------------------------------- -------------------------------------------
|
Under the Plan and as required by Rule 12b-1, the Trustees will receive
and review after the end of each calendar quarter a written report provided by
the Distributor of the amounts expended under the Plan and the purpose for which
such expenditures were made.
The Plan was adopted in order to permit the implementation of the
Fund's method of distribution. However, no such fee is currently charged to the
Fund, and there are no plans in place to impose such a fee.
Aggregations. Fund Shares in less than Creation Unit Aggregations are
not distributed by the Distributor. The Distributor will deliver the Prospectus
and, upon request, this SAI to persons purchasing Creation Unit Aggregations and
will maintain records of both orders placed with it and confirmations of
acceptance furnished by it. The Distributor is a broker-dealer registered under
the Securities Exchange Act of 1934 (the "Exchange Act") and a member of the
Financial Industry Regulatory Authority ("FINRA").
The Distribution Agreement for the Fund provides that it may be
terminated as to the Fund at any time, without the payment of any penalty, on at
least 60 days written notice by the Trust to the Distributor (i) by vote of a
majority of the Independent Trustees or (ii) by vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of the Fund. The
Distribution Agreement will terminate automatically in the event of its
assignment (as defined in the 1940 Act).
The Distributor may also enter into agreements with securities dealers
("Soliciting Dealers") who will solicit purchases of Creation Unit Aggregations
of Fund Shares. Such Soliciting Dealers may also be Participating Parties (as
defined in "Procedures for Creation of Creation Unit Aggregations" below) and
DTC Participants (as defined in "DTC Acts as Securities Depository" below).
16
Index Provider. Set forth below is a list of the Fund and the
Underlying Index upon which it is based. The Raymond James SB-1 Equity Index is
compiled by Raymond James Research Services, LLC ("Raymond James" or the "Index
Provider").
------------------------------------------------------------ ---------------------------------------------------------
FUND UNDERLYING INDEX
------------------------------------------------------------ ---------------------------------------------------------
Claymore/Raymond James SB-1 Equity ETF Raymond James SB-1 Equity Index
------------------------------------------------------------ ---------------------------------------------------------
|
Raymond James is not affiliated with the Fund or with the Investment
Adviser. The Fund is entitled to use its respective Underlying Index pursuant to
a sub-licensing arrangement with the Investment Adviser, which in turn has a
licensing agreement with the applicable Index Provider. The Fund reimburses the
Investment Adviser for the licensing fee payable to the applicable Index
Provider.
The only relationships that Raymond James has with the Investment
Adviser or Distributor of the Fund in connection with the Fund is that Raymond
James has licensed certain of its intellectual property, including the
determination of the component stocks of the Underlying Index and the name of
the Underlying Index. The Underlying Index is selected and calculated without
regard to the Investment Adviser, Distributor or owners of the Fund. Raymond
James has no obligation to take the specific needs of the Investment Adviser,
Distributor or owners of the Fund into consideration in the determination and
calculation of the Underlying Indices. Raymond James is not responsible for and
has not participated in the determination of pricing or the timing of the
issuance or sale of the Shares of the Fund or in the determination or
calculation of the net asset value of the Fund. Raymond James has no obligation
or liability in connection with the administration, marketing or trading of the
Fund.
RAYMOND JAMES SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR
INTERRUPTIONS RELATED TO THE FUND OR UNDERLYING INDICES. RAYMOND JAMES MAKES NO
WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE INVESTMENT
ADVISER, DISTRIBUTOR OR OWNERS OF THE FUND, OR ANY OTHER PERSON OR ENTITY, FROM
THE USE OF THE UNDERLYING INDICES OR ANY DATA INCLUDED THEREIN. RAYMOND JAMES
MAKES NO WARRANTY, EXPRESS OR IMPLIED, AND EXPRESSLY DISCLAIM ALL WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, WITH RESPECT TO THE
FUND OR TO UNDERLYING INDICES OR TO ANY DATA INCLUDED THEREIN. WITHOUT LIMITING
ANY OF THE FOREGOING, IN NO EVENT SHALL RAYMOND JAMES HAVE ANY LIABILITY FOR ANY
SPECIAL, PUNITIVE, INDIRECT OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS) IN
CONNECTION WITH THE FUND, THE UNDERLYING INDICES, EVEN IF RAYMOND JAMES IS
NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
BROKERAGE TRANSACTIONS
The policy of the Trust regarding purchases and sales of securities is
that primary consideration will be given to obtaining the most favorable prices
and efficient executions of transactions. Consistent with this policy, when
securities transactions are effected on a stock exchange, the Trust's policy is
to pay commissions that are considered fair and reasonable without necessarily
determining that the lowest possible commissions are paid in all circumstances.
In seeking to determine the reasonableness of brokerage commissions paid in any
transaction, the Investment Adviser relies upon its experience and knowledge
regarding commissions generally charged by various brokers. The sale of Fund
Shares by a broker-dealer is not a factor in the selection of broker-dealers.
17
In seeking to implement the Trust's policies, the Investment Adviser
effects transactions with those brokers and dealers that the Investment Adviser
believes provide the most favorable prices and are capable of providing
efficient executions. The Investment Adviser and its affiliates do not currently
participate in soft dollar transactions.
The Investment Adviser assumes general supervision over placing orders
on behalf of the Fund for the purchase or sale of portfolio securities. If
purchases or sales of portfolio securities by the Fund and one or more other
investment companies or clients supervised by the Investment Adviser are
considered at or about the same time, transactions in such securities are
allocated among the Fund, the several investment companies and clients in a
manner deemed equitable to all by the Investment Adviser. In some cases, this
procedure could have a detrimental effect on the price or volume of the security
as far as the Fund are concerned. However, in other cases, it is possible that
the ability to participate in volume transactions and to negotiate lower
brokerage commissions will be beneficial to the Fund. The primary consideration
is prompt execution of orders at the most favorable net price.
ADDITIONAL INFORMATION CONCERNING THE TRUST
The Trust is an open-end management investment company registered under
the 1940 Act. The Trust was organized as a Delaware statutory trust on May 24,
2006.
The Trust is authorized to issue an unlimited number of shares in one
or more series or "funds." The Trust currently is comprised of twenty funds. The
Board of Trustees of the Trust has the right to establish additional series in
the future, to determine the preferences, voting powers, rights and privileges
thereof and to modify such preferences, voting powers, rights and privileges
without shareholder approval.
Each Share issued by the Fund has a pro rata interest in the assets of
the Fund. Fund Shares have no preemptive, exchange, subscription or conversion
rights and are freely transferable. Each Share is entitled to participate
equally in dividends and distributions declared by the Board with respect to the
Fund, and in the net distributable assets of the Fund on liquidation.
Each Share has one vote with respect to matters upon which a
shareholder vote is required consistent with the requirements of the 1940 Act
and the rules promulgated thereunder. Shares of all funds, including the Fund,
of the Trust vote together as a single class except as otherwise required by the
1940 Act, or if the matter being voted on affects only a particular fund, and,
if a matter affects a particular fund differently from other funds, the shares
of that fund will vote separately on such matter.
The Declaration of Trust may, except in limited circumstances, be
amended or supplemented by the Trustees without shareholder vote. The holders of
Fund shares are required to disclose information on direct or indirect ownership
of Fund shares as may be required to comply with various laws applicable to the
Fund, and ownership of Fund shares may be disclosed by the Fund if so required
by law or regulation.
The Trust is not required and does not intend to hold annual meetings
of shareholders. Shareholders owning more than 51% of the outstanding shares of
the Trust have the right to call a special meeting to remove one or more
Trustees or for any other purpose.
The Trust does not have information concerning the beneficial ownership
of Shares held by DTC Participants (as defined below).
18
Shareholders may make inquiries by writing to the Trust, c/o the
Distributor, 2455 Corporate West Drive, Lisle, Illinois 60532.
Control Persons. No single person beneficially owns 25% or more of the
Fund's voting securities.
Book Entry Only System. The following information supplements and
should be read in conjunction with the section in the Prospectus entitled "Book
Entry."
DTC Acts as Securities Depository for Fund Shares. Shares of the Fund
are represented by securities registered in the name of DTC or its nominee and
deposited with, or on behalf of, DTC.
DTC, a limited-purpose trust company, was created to hold securities of
its participants (the "DTC Participants") and to facilitate the clearance and
settlement of securities transactions among the DTC Participants in such
securities through electronic book-entry changes in accounts of the DTC
Participants, thereby eliminating the need for physical movement of securities
certificates. DTC Participants include securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations, some of
whom (and/or their representatives) own DTC. More specifically, DTC is owned by
a number of its DTC Participants and by the New York Stock Exchange ("NYSE"),
the American Stock Exchange and FINRA. Access to the DTC system is also
available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a DTC Participant,
either directly or indirectly (the "Indirect Participants").
Beneficial ownership of Shares is limited to DTC Participants, Indirect
Participants and persons holding interests through DTC Participants and Indirect
Participants. Ownership of beneficial interests in Shares (owners of such
beneficial interests are referred to herein as "Beneficial Owners") is shown on,
and the transfer of ownership is effected only through, records maintained by
DTC (with respect to DTC Participants) and on the records of DTC Participants
(with respect to Indirect Participants and Beneficial Owners that are not DTC
Participants). Beneficial Owners will receive from or through the DTC
Participant a written confirmation relating to their purchase and sale of
Shares.
Conveyance of all notices, statements and other communications to
Beneficial Owners is effected as follows. Pursuant to the Depositary Agreement
between the Trust and DTC, DTC is required to make available to the Trust upon
request and for a fee to be charged to the Trust a listing of the Shares of the
Fund held by each DTC Participant. The Trust shall inquire of each such DTC
Participant as to the number of Beneficial Owners holding Shares, directly or
indirectly, through such DTC Participant. The Trust shall provide each such DTC
Participant with copies of such notice, statement or other communication, in
such form, number and at such place as such DTC Participant may reasonably
request, in order that such notice, statement or communication may be
transmitted by such DTC Participant, directly or indirectly, to such Beneficial
Owners. In addition, the Trust shall pay to each such DTC Participant a fair and
reasonable amount as reimbursement for the expenses attendant to such
transmittal, all subject to applicable statutory and regulatory requirements.
Fund distributions shall be made to DTC or its nominee, Cede & Co., as
the registered holder of all Fund Shares. DTC or its nominee, upon receipt of
any such distributions, shall immediately credit DTC Participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
Shares of the Fund as shown on the records of DTC or its nominee. Payments by
DTC Participants to Indirect Participants and Beneficial Owners of Shares held
through such DTC Participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts of
customers in bearer form or registered in a "street name," and will be the
responsibility of such DTC Participants.
19
The Trust has no responsibility or liability for any aspect of the
records relating to or notices to Beneficial Owners, or payments made on account
of beneficial ownership interests in such Shares, or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests, or for any other aspect of the relationship between DTC and the DTC
Participants or the relationship between such DTC Participants and the Indirect
Participants and Beneficial Owners owning through such DTC Participants.
DTC may decide to discontinue providing its service with respect to
Shares at any time by giving reasonable notice to the Trust and discharging its
responsibilities with respect thereto under applicable law. Under such
circumstances, the Trust shall take action to find a replacement for DTC to
perform its functions at a comparable cost.
Proxy Voting. The Board of Trustees of the Trust has delegated
responsibility for decisions regarding proxy voting for securities held by the
Fund to the Investment Adviser. The Investment Adviser engages a third-party
proxy service, such as Institutional Shareholder Services or a similar service,
to vote all proxies on behalf of the Fund. The Investment Adviser periodically
renews the proxy voting results to ensure that proxies are voted in accordance
with the service's guidelines and that proxies are voted in a timely fashion. To
avoid any conflicts of interest, the Investment Adviser does not have authority
to override the recommendations of the third party service provider, except upon
the written authorization of the client directing the Investment Adviser to vote
in a specific manner. All overrides shall be approved by the Chief Compliance
Officer.
To the extent that the third party service provider seeks the
Investment Adviser's direction on how to vote on any particular matter, the
Chief Compliance Officer and Chief Financial Officer shall determine whether any
potential conflict of interest is present. If a potential conflict of interest
is present, the Investment Adviser shall seek instructions from clients on how
to vote that particular item.
The Trust is required to disclose annually the Fund's complete proxy
voting record on Form N-PX covering the period July 1 through June 30 and file
it with the SEC no later than August 31. Form N-PX for the Fund also will be
available at no charge upon request by calling 1-800-345-7999 or by writing to
Claymore Exchange-Traded Fund Trust at 2455 Corporate West Drive, Lisle, IL
60532. The Fund's Form N-PX will also be available on the SEC's website at
www.sec.gov.
Quarterly Portfolio Schedule. The Trust is required to disclose, after
its first and third fiscal quarters, the complete schedule of the Fund's
portfolio holdings with the SEC on Form N-Q. The Trust will also disclose a
complete schedule of the Fund's portfolio holdings with the SEC on Form N-CSR
after its second and fourth quarters. Form N-Q and Form N-CSR for the Fund will
be available on the SEC's website at http://www.sec.gov. The Fund's Form N-Q and
Form N-CSR may also be reviewed and copied at the SEC's Public Reference Room in
Washington, D.C. and information on the operation of the Public Reference Room
may be obtained by calling 1-202-551-8090. The Fund's Form N-Q and Form N-CSR
will be available without charge, upon request, by calling 1-800-345-7999 or by
writing to Claymore Exchange-Traded Fund Trust at 2455 Corporate West Drive,
Lisle, IL 60532.
Portfolio Holdings Policy. The Trust has adopted a policy regarding the
disclosure of information about the Trust's portfolio holdings. The Fund and its
service providers may not receive compensation or any other consideration (which
includes any agreement to maintain assets in the Fund or in other investment
companies or accounts managed by the Investment Adviser or any affiliated person
of the Investment Adviser) in connection with the disclosure of portfolio
holdings information of the Fund. The Trust's Policy is implemented and overseen
by the Chief Compliance Officer of the Fund, subject to the oversight of the
Board of Trustees. Periodic reports regarding these procedures will be provided
to the Board of Trustees of the Trust. The Board of Trustees of the Trust must
approve all material amendments
20
to this policy. The Fund's complete portfolio holdings are publicly disseminated
each day the Fund is open for business through financial reporting and news
services, including publicly accessible Internet web sites. In addition, a
basket composition file, which includes the security names and share quantities
to deliver in exchange for Fund shares, together with estimates and actual cash
components, is publicly disseminated daily prior to the opening of the NYSE Arca
via the National Securities Clearing Corporation (NSCC). The basket represents
one Creation Unit of the Fund. The Trust, the Investment Adviser and Claymore
will not disseminate non-public information concerning the Trust.
Codes of Ethics. Pursuant to Rule 17j-1 under the 1940 Act, the Board
of Trustees has adopted a Code of Ethics for the Trust and approved Codes of
Ethics adopted by the Investment Adviser and the Distributor (collectively the
"Codes"). The Codes are intended to ensure that the interests of shareholders
and other clients are placed ahead of any personal interest, that no undue
personal benefit is obtained from the person's employment activities and that
actual and potential conflicts of interest are avoided.
The Codes apply to the personal investing activities of Trustees and
officers of the Trust, the Investment Adviser and the Distributor ("Access
Persons"). Rule 17j-1 and the Codes are designed to prevent unlawful practices
in connection with the purchase or sale of securities by Access Persons. Under
the Codes, Access Persons are permitted to engage in personal securities
transactions, but are required to report their personal securities transactions
for monitoring purposes. The Codes permit personnel subject to the Codes to
invest in securities subject to certain limitations, including securities that
may be purchased or held by the Fund. In addition, Access Persons are required
to obtain approval before investing in initial public offerings or private
placements. The Codes are on file with the SEC, and are available to the public.
CREATION AND REDEMPTION OF CREATION UNIT AGGREGATIONS
Creation. The Trust issues and sells Shares of the Fund only in
Creation Unit Aggregations on a continuous basis through the Distributor,
without a sales load, at its NAV next determined after receipt, on any Business
Day (as defined below), of an order in proper form.
A "Business Day" is any day on which the NYSE is open for business. As
of the date of this SAI, the NYSE observes the following holidays: New Year's
Day, Martin Luther King, Jr. Day, Washington's Birthday, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Deposit of Securities and Deposit or Delivery of Cash. The
consideration for purchase of Creation Unit Aggregations of the Fund generally
consists of the in-kind deposit of a designated portfolio of equity securities
-- the "Deposit Securities" -- per each Creation Unit Aggregation constituting a
substantial replication of the stocks included in the Underlying Index ("Fund
Securities") and an amount of cash -- the "Cash Component" -- computed as
described below. Together, the Deposit Securities and the Cash Component
constitute the "Fund Deposit," which represents the minimum initial and
subsequent investment amount for a Creation Unit Aggregation of the Fund.
The Cash Component is sometimes also referred to as the Balancing
Amount. The Cash Component serves the function of compensating for any
differences between the NAV per Creation Unit Aggregation and the Deposit Amount
(as defined below). The Cash Component is an amount equal to the difference
between the NAV of the Fund Shares (per Creation Unit Aggregation) and the
"Deposit Amount" -- an amount equal to the market value of the Deposit
Securities. If the Cash Component is a positive number (i.e., the NAV per
Creation Unit Aggregation exceeds the Deposit Amount), the creator will deliver
the Cash Component. If the Cash Component is a negative number (i.e., the NAV
per
21
Creation Unit Aggregation is less than the Deposit Amount), the creator will
receive the Cash Component.
The Custodian, through the National Securities Clearing Corporation
("NSCC") (discussed below), makes available on each Business Day, prior to the
opening of business on the NYSE Arca (currently 9:30 a.m., Eastern time), the
list of the names and the required number of shares of each Deposit Security to
be included in the current Fund Deposit (based on information at the end of the
previous Business Day) for the Fund.
Such Fund Deposit is applicable, subject to any adjustments as
described below, in order to effect creations of Creation Unit Aggregations of
the Fund until such time as the next-announced composition of the Deposit
Securities is made available.
The identity and number of shares of the Deposit Securities required
for a Fund Deposit for the Fund changes as rebalancing adjustments and corporate
action events are reflected within the Fund from time to time by the Investment
Adviser with a view to the investment objective of the Fund. The composition of
the Deposit Securities may also change in response to adjustments to the
weighting or composition of the Component Stocks of the Underlying Index. In
addition, the Trust reserves the right to permit or require the substitution of
an amount of cash -- i.e., a "cash in lieu" amount -- to be added to the Cash
Component to replace any Deposit Security that may not be available in
sufficient quantity for delivery or that may not be eligible for transfer
through the systems of DTC or the Clearing Process (discussed below), or which
might not be eligible for trading by an Authorized Participant (as defined
below) or the investor for which it is acting or other relevant reason.
Brokerage commissions incurred in connection with the acquisition of Deposit
Securities not eligible for transfer through the systems of DTC and hence not
eligible for transfer through the Clearing Process (discussed below) will be at
the expense of the Fund and will affect the value of all Shares; but the
Investment Adviser, subject to the approval of the Board of Trustees, may adjust
the transaction fee within the parameters described above to protect ongoing
shareholders. The adjustments described above will reflect changes known to the
Investment Adviser on the date of announcement to be in effect by the time of
delivery of the Fund Deposit, in the composition of the Underlying Index or
resulting from certain corporate actions.
In addition to the list of names and numbers of securities constituting
the current Deposit Securities of a Fund Deposit, the Custodian, through the
NSCC, also makes available on each Business Day, the estimated Cash Component,
effective through and including the previous Business Day, per outstanding
Creation Unit Aggregation of the Fund.
Procedures for Creation of Creation Unit Aggregations. To be eligible
to place orders with the Distributor and to create a Creation Unit Aggregation
of the Fund, an entity must be (i) a "Participating Party," i.e., a
broker-dealer or other participant in the clearing process through the
Continuous Net Settlement System of the NSCC (the "Clearing Process"), a
clearing agency that is registered with the SEC; or (ii) a DTC Participant (see
the Book Entry Only System section), and, in each case, must have executed an
agreement with the Distributor, with respect to creations and redemptions of
Creation Unit Aggregations ("Participant Agreement") (discussed below). A
Participating Party and DTC Participant are collectively referred to as an
"Authorized Participant." Investors should contact the Distributor for the names
of Authorized Participants that have signed a Participant Agreement. All Fund
Shares, however created, will be entered on the records of DTC in the name of
Cede & Co. for the account of a DTC Participant.
All orders to create Creation Unit Aggregations, whether through the
Clearing Process (through a Participating Party) or outside the Clearing Process
(through a DTC Participant), must be received by the Distributor no later than
the closing time of the regular trading session on the NYSE Arca ("Closing
22
Time") (ordinarily 4:00 p.m., Eastern time) in each case on the date such order
is placed in order for creation of Creation Unit Aggregations to be effected
based on the NAV of Shares of the Fund as next determined on such date after
receipt of the order in proper form. In the case of custom orders, the order
must be received by the Distributor no later than 3:00 p.m. Eastern time on the
trade date. A custom order may be placed by an Authorized Participant in the
event that the Trust permits or requires the substitution of an amount of cash
to be added to the Cash Component to replace any Deposit Security which may not
be available in sufficient quantity for delivery or which may not be eligible
for trading by such Authorized Participant or the investor for which it is
acting or other relevant reason. The date on which an order to create Creation
Unit Aggregations (or an order to redeem Creation Unit Aggregations, as
discussed below) is placed is referred to as the "Transmittal Date." Orders must
be transmitted by an Authorized Participant by telephone or other transmission
method acceptable to the Distributor pursuant to procedures set forth in the
Participant Agreement, as described below (see the "Placement of Creation Orders
Using Clearing Process" and the "Placement of Creation Orders Outside Clearing
Process" sections). Severe economic or market disruptions or changes, or
telephone or other communication failure may impede the ability to reach the
Distributor or an Authorized Participant.
All orders from investors who are not Authorized Participants to create
Creation Unit Aggregations shall be placed with an Authorized Participant, as
applicable, in the form required by such Authorized Participant. In addition,
the Authorized Participant may request the investor to make certain
representations or enter into agreements with respect to the order, e.g., to
provide for payments of cash, when required. Investors should be aware that
their particular broker may not have executed a Participant Agreement and that,
therefore, orders to create Creation Unit Aggregations of the Fund have to be
placed by the investor's broker through an Authorized Participant that has
executed a Participant Agreement. In such cases there may be additional charges
to such investor. At any given time, there may be only a limited number of
broker-dealers that have executed a Participant Agreement. Those placing orders
for Creation Unit Aggregations through the Clearing Process should afford
sufficient time to permit proper submission of the order to the Distributor
prior to the Closing Time on the Transmittal Date. Orders for Creation Unit
Aggregations that are effected outside the Clearing Process are likely to
require transmittal by the DTC Participant earlier on the Transmittal Date than
orders effected using the Clearing Process. Those persons placing orders outside
the Clearing Process should ascertain the deadlines applicable to DTC and the
Federal Reserve Bank wire system by contacting the operations department of the
broker or depository institution effectuating such transfer of Deposit
Securities and Cash Component.
Placement of Creation Orders Using Clearing Process. The Clearing
Process is the process of creating or redeeming Creation Unit Aggregations
through the Continuous Net Settlement System of the NSCC. Fund Deposits made
through the Clearing Process must be delivered through a Participating Party
that has executed a Participant Agreement. The Participant Agreement authorizes
the Distributor to transmit through the Custodian to NSCC, on behalf of the
Participating Party, such trade instructions as are necessary to effect the
Participating Party's creation order. Pursuant to such trade instructions to
NSCC, the Participating Party agrees to deliver the requisite Deposit Securities
and the Cash Component to the Trust, together with such additional information
as may be required by the Distributor. An order to create Creation Unit
Aggregations through the Clearing Process is deemed received by the Distributor
on the Transmittal Date if (i) such order is received by the Distributor not
later than the Closing Time on such Transmittal Date and (ii) all other
procedures set forth in the Participant Agreement are properly followed.
Placement of Creation Orders Outside Clearing Process. Fund Deposits
made outside the Clearing Process must be delivered through a DTC Participant
that has executed a Participant Agreement pre-approved by the Investment Adviser
and the Distributor. A DTC Participant who wishes to place an order creating
Creation Unit Aggregations to be effected outside the Clearing Process does not
need to be a Participating Party, but such orders must state that the DTC
Participant is not using the Clearing Process
23
and that the creation of Creation Unit Aggregations will instead be effected
through a transfer of securities and cash directly through DTC. The Fund Deposit
transfer must be ordered by the DTC Participant on the Transmittal Date in a
timely fashion so as to ensure the delivery of the requisite number of Deposit
Securities through DTC to the account of the Fund by no later than 11:00 a.m.,
Eastern time, of the next Business Day immediately following the Transmittal
Date.
All questions as to the number of Deposit Securities to be delivered,
and the validity, form and eligibility (including time of receipt) for the
deposit of any tendered securities, will be determined by the Trust, whose
determination shall be final and binding. The amount of cash equal to the Cash
Component must be transferred directly to the Custodian through the Federal
Reserve Bank wire transfer system in a timely manner so as to be received by the
Custodian no later than 2:00 p.m., Eastern time, on the next Business Day
immediately following such Transmittal Date. An order to create Creation Unit
Aggregations outside the Clearing Process is deemed received by the Distributor
on the Transmittal Date if (i) such order is received by the Distributor not
later than the Closing Time on such Transmittal Date; and (ii) all other
procedures set forth in the Participant Agreement are properly followed.
However, if the Custodian does not receive both the required Deposit Securities
and the Cash Component by 11:00 a.m. and 2:00 p.m., respectively, on the next
Business Day immediately following the Transmittal Date, such order will be
canceled. Upon written notice to the Distributor, such canceled order may be
resubmitted the following Business Day using a Fund Deposit as newly constituted
to reflect the then current Deposit Securities and Cash Component. The delivery
of Creation Unit Aggregations so created will occur no later than the third
(3rd) Business Day following the day on which the purchase order is deemed
received by the Distributor.
Additional transaction fees may be imposed with respect to transactions
effected outside the Clearing Process (through a DTC participant) and in the
limited circumstances in which any cash can be used in lieu of Deposit
Securities to create Creation Units. (See Creation Transaction Fee section
below).
Creation Unit Aggregations may be created in advance of receipt by the
Trust of all or a portion of the applicable Deposit Securities as described
below. In these circumstances, the initial deposit will have a value greater
than the NAV of the Fund Shares on the date the order is placed in proper form
since, in addition to available Deposit Securities, cash must be deposited in an
amount equal to the sum of (i) the Cash Component, plus (ii) 115% of the market
value of the undelivered Deposit Securities (the "Additional Cash Deposit"). The
order shall be deemed to be received on the Business Day on which the order is
placed provided that the order is placed in proper form prior to 4:00 p.m.,
Eastern time, on such date, and federal funds in the appropriate amount are
deposited with the Custodian by 11:00 a.m., Eastern time, the following Business
Day. If the order is not placed in proper form by 4:00 p.m. or federal funds in
the appropriate amount are not received by 11:00 a.m. the next Business Day,
then the order may be deemed to be canceled and the Authorized Participant shall
be liable to the Fund for losses, if any, resulting therefrom. An additional
amount of cash shall be required to be deposited with the Trust, pending
delivery of the missing Deposit Securities to the extent necessary to maintain
the Additional Cash Deposit with the Trust in an amount at least equal to 115%
of the daily marked to market value of the missing Deposit Securities. To the
extent that missing Deposit Securities are not received by 1:00 p.m., Eastern
time, on the third Business Day following the day on which the purchase order is
deemed received by the Distributor or in the event a marked-to-market payment is
not made within one Business Day following notification by the Distributor that
such a payment is required, the Trust may use the cash on deposit to purchase
the missing Deposit Securities. Authorized Participants will be liable to the
Trust and the Fund for the costs incurred by the Trust in connection with any
such purchases. These costs will be deemed to include the amount by which the
actual purchase price of the Deposit Securities exceeds the market value of such
Deposit Securities on the day the purchase order was deemed received by the
Distributor plus the brokerage and related transaction costs associated with
such purchases. The Trust will return any unused portion of the Additional Cash
Deposit once all of the missing Deposit
24
Securities have been properly received by the Custodian or purchased by the
Trust and deposited into the Trust. In addition, a transaction fee, as listed
below, will be charged in all cases. The delivery of Creation Unit Aggregations
so created will occur no later than the third Business Day following the day on
which the purchase order is deemed received by the Distributor.
Acceptance of Orders for Creation Unit Aggregations. The Trust reserves
the absolute right to reject a creation order transmitted to it by the
Distributor in respect of the Fund if: (i) the order is not in proper form; (ii)
the investor(s), upon obtaining the Fund Shares ordered, would own 80% or more
of the currently outstanding shares of any Fund; (iii) the Deposit Securities
delivered are not as disseminated for that date by the Custodian, as described
above; (iv) acceptance of the Deposit Securities would have certain adverse tax
consequences to the Fund; (v) acceptance of the Fund Deposit would, in the
opinion of counsel, be unlawful; (vi) acceptance of the Fund Deposit would
otherwise, in the discretion of the Trust or the Investment Adviser, have an
adverse effect on the Trust or the rights of beneficial owners; or (vii) in the
event that circumstances outside the control of the Trust, the Custodian, the
Distributor and the Investment Adviser make it for all practical purposes
impossible to process creation orders. Examples of such circumstances include
acts of God; public service or utility problems such as fires, floods, extreme
weather conditions and power outages resulting in telephone, telecopy and
computer failures; market conditions or activities causing trading halts;
systems failures involving computer or other information systems affecting the
Trust, the Investment Adviser, the Distributor, DTC, NSCC, the Custodian or
sub-custodian or any other participant in the creation process, and similar
extraordinary events. The Distributor shall notify a prospective creator of a
Creation Unit and/or the Authorized Participant acting on behalf of such
prospective creator of its rejection of the order of such person. The Trust, the
Custodian, any sub-custodian and the Distributor are under no duty, however, to
give notification of any defects or irregularities in the delivery of Fund
Deposits nor shall any of them incur any liability for the failure to give any
such notification.
All questions as to the number of shares of each security in the
Deposit Securities and the validity, form, eligibility, and acceptance for
deposit of any securities to be delivered shall be determined by the Trust, and
the Trust's determination shall be final and binding.
Creation Transaction Fee. Investors will be required to pay a fixed
creation transaction fee, described below, payable to Claymore regardless of the
number of creations made each day. An additional charge of up to four times the
fixed transaction fee (expressed as a percentage of the value of the Deposit
Securities) may be imposed for (i) creations effected outside the Clearing
Process; and (ii) cash creations (to offset the Trust's brokerage and other
transaction costs associated with using cash to purchase the requisite Deposit
Securities). Investors are responsible for the costs of transferring the
securities constituting the Deposit Securities to the account of the Trust.
The Standard Creation/Redemption Transaction Fee for the Fund will be
$1,000. The Maximum Creation/Redemption Transaction Fee for the Fund will be
$4,000.
Redemption of Fund Shares in Creation Units Aggregations. Fund Shares
may be redeemed only in Creation Unit Aggregations at its NAV next determined
after receipt of a redemption request in proper form by the Fund through the
Transfer Agent and only on a Business Day. The Fund will not redeem Shares in
amounts less than Creation Unit Aggregations. Beneficial owners must accumulate
enough Shares in the secondary market to constitute a Creation Unit Aggregation
in order to have such Shares redeemed by the Trust. There can be no assurance,
however, that there will be sufficient liquidity in the public trading market at
any time to permit assembly of a Creation Unit Aggregation. Investors should
expect to incur brokerage and other costs in connection with assembling a
sufficient number of Fund Shares to constitute a redeemable Creation Unit
Aggregation.
25
With respect to the Fund, the Custodian, through the NSCC, makes
available prior to the opening of business on the NYSE Arca (currently 9:30
a.m., Eastern time) on each Business Day, the identity of the Fund Securities
that will be applicable (subject to possible amendment or correction) to
redemption requests received in proper form (as described below) on that day.
Fund Securities received on redemption may not be identical to Deposit
Securities that are applicable to creations of Creation Unit Aggregations.
Unless cash redemptions are available or specified for the Fund, the
redemption proceeds for a Creation Unit Aggregation generally consist of Fund
Securities -- as announced on the Business Day of the request for redemption
received in proper form -- plus or minus cash in an amount equal to the
difference between the NAV of the Fund Shares being redeemed, as next determined
after a receipt of a request in proper form, and the value of the Fund
Securities (the "Cash Redemption Amount"), less a redemption transaction fee as
listed below. In the event that the Fund Securities have a value greater than
the NAV of the Fund Shares, a compensating cash payment equal to the difference
is required to be made by or through an Authorized Participant by the redeeming
shareholder.
The right of redemption may be suspended or the date of payment
postponed (i) for any period during which the NYSE is closed (other than
customary weekend and holiday closings); (ii) for any period during which
trading on the NYSE is suspended or restricted; (iii) for any period during
which an emergency exists as a result of which disposal of the Shares of the
Fund or determination of the Fund's NAV is not reasonably practicable; or (iv)
in such other circumstances as is permitted by the SEC.
Redemption Transaction Fee. A redemption transaction fee is imposed to
offset transfer and other transaction costs that may be incurred by the Fund. An
additional variable charge for cash redemptions (when cash redemptions are
available or specified) for the Fund may be imposed. Investors will also bear
the costs of transferring the Fund Securities from the Trust to their account or
on their order. Investors who use the services of a broker or other such
intermediary in addition to an Authorized Participant to effect a redemption of
a Creation Unit Aggregation may be charged an additional fee of up to four times
the fixed transaction fee for such services. The redemption transaction fees for
the Fund are the same as the creation fees set forth above.
Placement of Redemption Orders Using Clearing Process. Orders to redeem
Creation Unit Aggregations through the Clearing Process must be delivered
through a Participating Party that has executed the Participant Agreement. An
order to redeem Creation Unit Aggregations using the Clearing Process is deemed
received by the Trust on the Transmittal Date if (i) such order is received by
the Transfer Agent not later than 4:00 p.m., Eastern time, on such Transmittal
Date, and (ii) all other procedures set forth in the Participant Agreement are
properly followed; such order will be effected based on the NAV of the relevant
Fund as next determined. An order to redeem Creation Unit Aggregations using the
Clearing Process made in proper form but received by the Trust after 4:00 p.m.,
Eastern time, will be deemed received on the next Business Day immediately
following the Transmittal Date and will be effected at the NAV next determined
on such next Business Day. The requisite Fund Securities and the Cash Redemption
Amount will be transferred by the third NSCC Business Day following the date on
which such request for redemption is deemed received.
Placement of Redemption Orders Outside Clearing Process. Orders to
redeem Creation Unit Aggregations outside the Clearing Process must be delivered
through a DTC Participant that has executed the Participant Agreement. A DTC
Participant who wishes to place an order for redemption of Creation Unit
Aggregations to be effected outside the Clearing Process does not need to be a
Participating Party, but such orders must state that the DTC Participant is not
using the Clearing Process and that redemption of Creation Unit Aggregations
will instead be effected through transfer of Fund Shares directly through DTC.
An order to redeem Creation Unit Aggregations outside the Clearing Process is
deemed received
26
by the Trust on the Transmittal Date if (i) such order is received by the
Transfer Agent not later than 4:00 p.m., Eastern time on such Transmittal Date;
(ii) such order is accompanied or followed by the requisite number of Shares of
the Fund, which delivery must be made through DTC to the Custodian no later than
11:00 a.m., Eastern time (for the Fund Shares), on the next Business Day
immediately following such Transmittal Date (the "DTC Cut-Off-Time") and 2:00
p.m., Eastern Time for any Cash Component, if any owed to the Fund; and (iii)
all other procedures set forth in the Participant Agreement are properly
followed. After the Trust has deemed an order for redemption outside the
Clearing Process received, the Trust will initiate procedures to transfer the
requisite Fund Securities which are expected to be delivered within three
Business Days and the Cash Redemption Amount, if any owed to the redeeming
Beneficial Owner to the Authorized Participant on behalf of the redeeming
Beneficial Owner by the third Business Day following the Transmittal Date on
which such redemption order is deemed received by the Trust.
The calculation of the value of the Fund Securities and the Cash
Redemption Amount to be delivered/received upon redemption will be made by the
Custodian according to the procedures set forth under Determination of NAV
computed on the Business Day on which a redemption order is deemed received by
the Trust. Therefore, if a redemption order in proper form is submitted to the
Transfer Agent by a DTC Participant not later than Closing Time on the
Transmittal Date, and the requisite number of Shares of the Fund are delivered
to the Custodian prior to the DTC Cut-Off-Time, then the value of the Fund
Securities and the Cash Redemption Amount to be delivered/received will be
determined by the Custodian on such Transmittal Date. If, however, either (i)
the requisite number of Shares of the relevant Fund are not delivered by the DTC
Cut-Off-Time, as described above, or (ii) the redemption order is not submitted
in proper form, then the redemption order will not be deemed received as of the
Transmittal Date. In such case, the value of the Fund Securities and the Cash
Redemption Amount to be delivered/received will be computed on the Business Day
following the Transmittal Date provided that the Fund Shares of the relevant
Fund are delivered through DTC to the Custodian by 11:00 a.m. the following
Business Day pursuant to a properly submitted redemption order.
If it is not possible to effect deliveries of the Fund Securities, the
Trust may in its discretion exercise its option to redeem such Fund Shares in
cash, and the redeeming Beneficial Owner will be required to receive its
redemption proceeds in cash. In addition, an investor may request a redemption
in cash that the Fund may, in its sole discretion, permit. In either case, the
investor will receive a cash payment equal to the NAV of its Fund Shares based
on the NAV of Shares of the relevant Fund next determined after the redemption
request is received in proper form (minus a redemption transaction fee and
additional charge for requested cash redemptions specified above, to offset the
Fund's brokerage and other transaction costs associated with the disposition of
Fund Securities). The Fund may also, in its sole discretion, upon request of a
shareholder, provide such redeemer a portfolio of securities that differs from
the exact composition of the Fund Securities, or cash in lieu of some securities
added to the Cash Component, but in no event will the total value of the
securities delivered and the cash transmitted differ from the NAV. Redemptions
of Fund Shares for Fund Securities will be subject to compliance with applicable
federal and state securities laws and the Fund (whether or not it otherwise
permits cash redemptions) reserves the right to redeem Creation Unit
Aggregations for cash to the extent that the Trust could not lawfully deliver
specific Fund Securities upon redemptions or could not do so without first
registering the Fund Securities under such laws. An Authorized Participant or an
investor for which it is acting subject to a legal restriction with respect to a
particular stock included in the Fund Securities applicable to the redemption of
a Creation Unit Aggregation may be paid an equivalent amount of cash. The
Authorized Participant may request the redeeming Beneficial Owner of the Fund
Shares to complete an order form or to enter into agreements with respect to
such matters as compensating cash payment, beneficial ownership of shares or
delivery instructions.
27
The chart below describes in further detail the placement of redemption
orders outside the clearing process.
28
TRANSMITTAL DATE NEXT BUSINESS DAY SECOND BUSINESS THIRD BUSINESS DAY
(T) (T+1) DAY (T+2) (T+3)
----------------------------------------------------------------------------------------------------------------------
CREATION THROUGH NSCC
----------------------------------------------------------------------------------------------------------------------
STANDARD ORDERS 4:00 p.m. (ET) No action. No action. Creation Unit
Aggregations will be
Order must be delivered.
received by the
Distributor.
----------------------------------------------------------------------------------------------------------------------
CUSTOM ORDERS 3:00 p.m. (ET) No action. No action. Creation Unit
Aggregations will be
Order must be delivered.
received by the
Distributor.
Orders received after
3:00 p.m. (ET) will
be treated as
standard orders.
----------------------------------------------------------------------------------------------------------------------
CREATION OUTSIDE NSCC
----------------------------------------------------------------------------------------------------------------------
STANDARD ORDERS 4:00 p.m. (ET) 11:00 a.m. (ET) No action. Creation Unit
Aggregations will be
Order in proper form Deposit Securities delivered.
must be received by must be received by
the Distributor. the Fund's account
through DTC.
2:00 p.m. (ET)
Cash Component must be
received by the
Custodian.
----------------------------------------------------------------------------------------------------------------------
STANDARD ORDERS CREATED IN 4:00 p.m. (ET) 11:00 a.m. (ET) No action. 1:00 p.m. (ET)
ADVANCE OF RECEIPT BY THE
TRUST OF ALL OR A PORTION Order in proper form Available Deposit Missing Deposit
OF THE DEPOSIT SECURITIES must be received by Securities. Securities are due
the Distributor. to the Trust or the
Cash in an amount Trust may use cash
equal to the sum of on deposit to
(i) the Cash purchase missing
Component, plus (ii) Deposit Securities.
115% of the market
value of the Creation Unit
undelivered Deposit Aggregations will be
Securities. delivered.
----------------------------------------------------------------------------------------------------------------------
CUSTOM ORDERS 3:00 p.m. (ET) 11:00 a.m. (ET) No action. Creation Unit
Aggregations will be
Order in proper form Deposit Securities delivered.
must be received by must be received by
the Distributor. the Fund's account
through DTC.
Orders received after
3:00 p.m. (ET) will 2:00 p.m. (ET)
be treated as
standard orders. Cash Component must be
received by the Orders
Custodian.
29
|
TRANSMITTAL DATE NEXT BUSINESS DAY SECOND BUSINESS THIRD BUSINESS DAY
(T) (T+1) DAY (T+2) (T+3)
----------------------------------------------------------------------------------------------------------------------
REDEMPTION THROUGH NSCC
----------------------------------------------------------------------------------------------------------------------
STANDARD ORDERS 4:00 p.m. (ET) No action. No action. Fund Securities and
Cash Redemption
Order must be Amount will be
received by the transferred.
Transfer Agent.
Orders received after
4:00 p.m. (ET) will be
deemed received on the
next business day (T+1).
----------------------------------------------------------------------------------------------------------------------
CUSTOM ORDERS 3:00 p.m. (ET) No action. No action. Fund Securities and
Cash Redemption
Order must be Amount will be
received by the transferred.
Transfer Agent.
Orders received after
3:00 p.m. (ET) will
be treated as
standard orders.
----------------------------------------------------------------------------------------------------------------------
REDEMPTION OUTSIDE OF NSCC
----------------------------------------------------------------------------------------------------------------------
STANDARD ORDERS 4:00 p.m. (ET) 11:00 a.m. (ET) No action. Fund Securities and
Cash Redemption
Order must be Fund Shares must be Amount is delivered
received by the delivered through DTC to the redeeming
Transfer Agent. to the Custodian. beneficial owner.
Orders received after 2:00 p.m. (ET)
4:00 p.m. (ET) will
be deemed received on Cash Component, if
the next business day any, is due.
(T+1).
*If the order is not in
proper form or the Fund
Shares are not delivered,
then the order will not be
deemed received as of T.
----------------------------------------------------------------------------------------------------------------------
CUSTOM ORDERS 3:00 p.m. (ET) 11:00 a.m. (ET) No action. Fund Securities and
Cash Redemption
Order must be Fund Shares must be Amount is delivered
received by the delivered through DTC to the redeeming
Transfer Agent. to the Custodian. beneficial owner.
Orders received after 2:00 p.m. (ET)
3:00 p.m. (ET) will
be treated as Cash Component, if
standard orders. any, is due.
*If the order is not in
proper form or the Fund
Shares are not delivered,
then the order will not be
deemed received as of T.
----------------------------------------------------------------------------------------------------------------------
|
30
TAXES
The Fund intends to qualify for and to elect to be treated as a
separate regulated investment company (a "RIC") under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). As a RIC, the Fund will
not be subject to U.S. federal income tax on the portion of its taxable
investment income and capital gains that it distributes to its shareholders. To
qualify for treatment as a RIC, a company must annually distribute at least 90%
of its net investment company taxable income (which includes dividends, interest
and net Short-term capital gains) and meet several other requirements relating
to the nature of its income and the diversification of its assets. If the Fund
fails to qualify for any taxable year as a RIC, all of its taxable income will
be subject to tax at regular corporate income tax rates without any deduction
for distributions to shareholders, and such distributions generally will be
taxable to shareholders as ordinary dividends to the extent of the Fund's
current and accumulated earnings and profits.
The Fund is treated as a separate corporation for federal income tax
purposes. The Fund therefore is considered to be a separate entity in
determining its treatment under the rules for RICs described herein and in the
Prospectus. Losses in one fund do not offset gains in another fund and the
requirements (other than certain organizational requirements) to qualify for RIC
status are determined at the Fund level rather than at the Trust level.
The Fund will be subject to a 4% excise tax on certain undistributed
income if it does not distribute to its shareholders in each calendar year at
least 98% of its ordinary income for the calendar year plus 98% of its net
capital gains for twelve months ended October 31 of such year. The Fund intends
to declare and distribute dividends and distributions in the amounts and at the
times necessary to avoid the application of this 4% excise tax.
As a result of tax requirements, the Trust on behalf of the Fund has
the right to reject an order to purchase Shares if the purchaser (or group of
purchasers) would, upon obtaining the Shares so ordered, own 80% or more of the
outstanding Shares of the Fund and if, pursuant to section 351 of the Code, the
Fund would have a basis in the Deposit Securities different from the market
value of such securities on the date of deposit. The Trust also has the right to
require information necessary to determine beneficial Share ownership for
purposes of the 80% determination.
The Fund may make investments that are subject to special federal
income tax rules, such as investments in repurchase agreements, money market
instruments, convertible securities, structured notes, and non-U.S. corporations
classified as "passive foreign investment companies." Those special tax rules
can, among other things, affect the timing of income or gain, the treatment of
income as capital or ordinary and the treatment of capital gain or loss as
long-term or short-term. The application of these special rules would therefore
also affect the character of distributions made by the Fund. The Fund may need
to borrow money or dispose of some of its investments earlier than anticipated
in order to meet its distribution requirements.
Distributions from the Fund's net investment income, including net
short-term capital gains, if any, and distributions of income from securities
lending, are taxable as ordinary income. Distributions reinvested in additional
Shares of the Fund through the means of a dividend reinvestment service will be
taxable dividends to Shareholders acquiring such additional Shares to the same
extent as if such dividends had been received in cash. Distributions of net
long-term capital gains, if any, in excess of net short-term capital losses are
taxable as long-term capital gains, regardless of how long shareholders have
held the Shares.
Dividends declared by the Fund in October, November or December and
paid to shareholders of record of such months during the following January may
be treated as having been received by such shareholders in the year the
distributions were declared.
Long-term capital gains tax of non-corporate taxpayers are generally
taxed at a maximum rate of 15% for taxable years beginning before January 1,
2011. Thereafter, without further congressional action, that rate will return to
20%.In addition, some ordinary dividends declared and paid by the Fund to
non-corporate shareholders may qualify for taxation at the lower reduced tax
rates applicable to long-term capital gains, provided that holding period and
other requirements are met by the Fund and the shareholder. The Fund will report
to shareholders annually the amounts of dividends received from ordinary income,
the amount of distributions received from capital gains and the portion of
dividends which may qualify for the dividends received deduction. In addition,
the Fund will report the
31
amount of dividends to non-corporate shareholders eligible for taxation at the
lower reduced tax rates applicable to long-term capital gains.
If, for any calendar year, the total distributions made exceed the
Fund's current and accumulated earnings and profits, the excess will, for
federal income tax purposes, be treated as a tax free return of capital to each
shareholder up to the amount of the shareholder's basis in his or her shares,
and thereafter as gain from the sale of shares. The amount treated as a tax free
return of capital will reduce the shareholder's adjusted basis in his or her
shares, thereby increasing his or her potential gain or reducing his or her
potential loss on the subsequent sale of his or her shares.
The sale, exchange or redemption of Shares may give rise to a gain or
loss. In general, any gain or loss realized upon a taxable disposition of Shares
will be treated as long-term capital gain or loss if the Shares have been held
for more than one year. Otherwise, the gain or loss on the taxable disposition
of Shares will be treated as short-term capital gain or loss. A loss realized on
a sale or exchange of Shares of the Fund may be disallowed if other
substantially identical Shares are acquired (whether through the automatic
reinvestment of dividends or otherwise) within a sixty-one (61) day period
beginning thirty (30) days before and ending thirty (30) days after the date
that the Shares are disposed of. In such a case, the basis of the Shares
acquired must be adjusted to reflect the disallowed loss. Any loss upon the sale
or exchange of Shares held for six (6) months or less is treated as long-term
capital loss to the extent of any capital gain dividends received by the
shareholders. Distribution of ordinary income and capital gains may also be
subject to state and local taxes.
Distributions of ordinary income paid to shareholders who are
nonresident aliens or foreign entities that are not effectively connected to the
conduct of a trade or business within the United States will generally be
subject to a 30% United States withholding tax unless a reduced rate of
withholding or a withholding exemption is provided under applicable treaty law.
However, shareholders who are nonresident aliens or foreign entities will
generally not be subject to United States withholding or income tax on gains
realized on the sale of Shares or on dividends from capital gains unless (i)
such gain or capital gain dividend is effectively connected with the conduct of
a trade or business within the United States or (ii) in the case of an
non-corporate shareholder, the shareholder is present in the United States for a
period or periods aggregating 183 days or more during the year of the sale or
capital gain dividend and certain other conditions are met. Gains on the sale of
Share and dividends that are effectively connected with the conduct of a trade
or business within the United States will generally be subject to United States
federal net income taxation at regular income tax rates. Nonresident
shareholders are urged to consult their own tax advisors concerning the
applicability of the United States withholding tax.
Some shareholders may be subject to a withholding tax on distributions
of ordinary income, capital gains and any cash received on redemption of
Creation Units ("backup withholding"). Generally, shareholders subject to backup
withholding will be those for whom no certified taxpayer identification number
is on file with the Fund or who, to the Fund's knowledge, have furnished an
incorrect number. When establishing an account, an investor must certify under
penalty of perjury that such number is correct and that such investor is not
otherwise subject to backup withholding.
32
Dividends and interest received by the Fund may give rise to
withholding and other taxes imposed by foreign countries. Tax conventions
between certain countries and the United States may reduce or eliminate such
taxes.
The foregoing discussion is a summary only and is not intended as a
substitute for careful tax planning. Purchasers of Shares should consult their
own tax advisors as to the tax consequences of investing in such Shares,
including under federal, state, local and other tax laws. Finally, the foregoing
discussion is based on applicable provisions of the Code, regulations, judicial
authority and administrative interpretations in effect on the date hereof.
Changes in applicable authority could materially affect the conclusions
discussed above, and such changes often occur.
FEDERAL TAX TREATMENT OF FUTURES AND OPTIONS CONTRACTS
The Fund is required for federal income tax purposes to mark to market
and recognize as income for each taxable year its net unrealized gains and
losses on certain futures contracts as of the end of the year as well as those
actually realized during the year. Gain or loss from futures and options
contracts on broad-based indices required to be marked to market will be 60%
long-term and 40% short-term capital gain or loss. Application of this rule may
alter the timing and character of distributions to shareholders. The Fund may be
required to defer the recognition of losses on futures contracts, options
contracts and swaps to the extent of any unrecognized gains on offsetting
positions held by the Fund.
In order for the Fund to continue to qualify for federal income tax
treatment as a RIC, at least 90% of its gross income for a taxable year must be
derived from qualifying income, i.e., dividends, interest, income derived from
loans or securities, gains from the sale of securities or of foreign currencies
or other income derived with respect to the Fund's business of investing in
securities (including net income derived from an interest in certain "qualified
publicly traded partnerships"). It is anticipated that any net gain realized
from the closing out of futures or options contracts will be considered gain
from the sale of securities or derived with respect to the Fund's business of
investing in securities and therefore will be qualifying income for purposes of
the 90% gross income requirement.
The Fund distributes to shareholders at least annually any net capital
gains which have been recognized for federal income tax purposes, including
unrealized gains at the end of the Fund's fiscal year on futures or options
transactions. Such distributions are combined with distributions of capital
gains realized on the Fund's other investments and shareholders are advised on
the nature of the distributions.
DETERMINATION OF NAV
The following information supplements and should be read in conjunction
with the section in the Prospectus entitled "Net Asset Value."
The NAV per Share of the Fund is computed by dividing the value of the
net assets of the Fund (i.e., the value of its total assets less total
liabilities) by the total number of Shares of the Fund outstanding, rounded to
the nearest cent. Expenses and fees, including without limitation, the
management and administration fees, are accrued daily and taken into account for
purposes of determining NAV. The NAV per Share is calculated by the Custodian
and determined as of the close of the regular trading session on the NYSE
(ordinarily 4:00 p.m., Eastern time) on each day that such exchange is open.
33
In computing the Fund's NAV, the Fund's securities holdings traded on a
national securities exchange are valued based on their last sale price. Price
information on listed securities is taken from the exchange where the security
is primarily traded. Securities regularly traded in an over-the-counter market
are valued at the latest quoted sale price in such market or in the case of the
NASDAQ, at the NASDAQ official closing price. Other portfolio securities and
assets for which market quotations are not readily available are valued based on
fair value as determined in good faith in accordance with procedures adopted by
the Board.
DIVIDENDS AND DISTRIBUTIONS
The following information supplements and should be read in conjunction
with the section in the Prospectus entitled "Dividends, Distributions and
Taxes."
General Policies. Dividends from net investment income, if any, are
declared and paid annually. Distributions of net realized securities gains, if
any, generally are declared and paid once a year, but the Trust may make
distributions on a more frequent basis. The Trust reserves the right to declare
special distributions if, in its reasonable discretion, such action is necessary
or advisable to preserve the status of the Fund as a RIC or to avoid imposition
of income or excise taxes on undistributed income.
Dividends and other distributions on Fund Shares are distributed, as
described below, on a pro rata basis to Beneficial Owners of such Shares.
Dividend payments are made through DTC Participants and Indirect Participants to
Beneficial Owners then of record with proceeds received from the Fund.
Dividend Reinvestment Service. No reinvestment service is provided by
the Trust. Broker-dealers may make available the DTC book-entry Dividend
Reinvestment Service for use by Beneficial Owners of the Fund for reinvestment
of their dividend distributions. Beneficial Owners should contact their broker
to determine the availability and costs of the service and the details of
participation therein. Brokers may require Beneficial Owners to adhere to
specific procedures and timetables.
MISCELLANEOUS INFORMATION
Counsel. Clifford Chance US LLP, 31 West 52nd Street, New York, NY
10019, is counsel to the Trust.
Independent Registered Public Accounting Firm. Ernst & Young LLP, 233
South Wacker Drive, Chicago, Illinois 60606, serves as the Fund's independent
registered public accounting firm. They audit the Fund's financial statements
and perform other related audit services.
FINANCIAL STATEMENTS
You may request a copy of the Trust's Annual Report at no charge by
calling 1-888-949-3837 during normal business hours.
On September 3, 2008, the Fund acquired the assets and adopted the
financial and performance history of the Claymore/Raymond James SB-1 Equity Fund
(the "Predecessor Fund"). The audited financial statements and notes thereto for
the Fund, contained in the Annual Report to Shareholders of the Predecessor Fund
for the period ended August 31, 2007, are incorporated by reference into this
Statement of Additional Information and have been audited by Ernst & Young LLP,
independent registered public accounting firm, whose report also appears in the
Annual Report and is also incorporated by reference herein. No other parts of
the Annual Report are incorporated by reference herein. The unaudited financial
statements and notes thereto for the Fund, contained in the Semi-Annual Report
to Shareholders of the Predecessor Fund for the six months ended February 29,
2008, are incorporated by reference into the Statement of Additional
Information. Each of the Annual Report and the Semi-Annual Report is attached to
this Statement of Additional Information.
34
Annual Claymore/Raymond James |
Report | RYJ
SB-1 Equity Fund |
August 31, 2007
[GRAPHIC]
RAYMOND JAMES(R) [LOGO]
CLAYMORE(R)
|
www.claymore.com
... your road to the LATEST,
|
most up-to-date INFORMATION about the
Claymore/Raymond James SB-1 Equity Fund
[GRAPHIC]
The shareholder report you are reading right now is just the beginning of the
story. Online at www.claymore.com/ryj, you will find:
o Daily, weekly and monthly data on share prices, distributions and more
o Portfolio overviews and performance analyses
o Announcements, press releases, special notices and tax characteristics
Raymond James 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 way we are working to keep you
better informed about your investment in the Fund.
2 | Annual Report | August 31, 2007
RYJ | Claymore/Raymond James SB-1 Equity Fund
Dear Shareholder |
We are pleased to submit the annual shareholder report for the Claymore/Raymond
James SB-1 Equity Fund (the "Fund"). This report covers performance for the
Fund's fiscal year ended August 31, 2007. As you may know, the Fund's investment
objective is to provide capital appreciation to shareholders. Claymore Advisors,
LLC is the Investment Adviser to the Fund; the Fund's Sub-Adviser is Raymond
James & Associates, Inc. ("Raymond James"). The Fund seeks to achieve that
objective by investing substantially all of its net assets in the equity
securities that are rated, at the time of purchase, a Strong Buy 1 ("SB-1") by
analysts employed by Raymond James.
Raymond James & Associates, Inc. is a wholly-owned subsidiary of Raymond James
Financial, Inc., a Florida-based holding company whose subsidiaries are engaged
in various financial services businesses including brokerage, trading,
investment banking, asset management and financial planning services. The firm's
research department supports the company's institutional and retail sales
efforts and publishes research on approximately 600 companies.
This Fund provides investors with direct access to Raymond James's professional
equity research through a retail product. While there are no guarantees of
success, we have confidence in the stock research methodologies employed by
Raymond James analysts and are optimistic about the Fund's long-term prospects.
All Fund returns cited - whether based on net asset value ("NAV") or market
price - assume the reinvestment of all distributions. For the 12-month period
ended August 31, 2007, the Fund provided a total return based on market value of
10.77%. This represents a closing market price of $19.27 on August 31, 2007,
versus $17.50 on August 31, 2006. On an NAV basis, the Fund generated a total
return of 13.78%. This represents a NAV of $21.67 on August 31, 2007, versus
$19.15 on August 31, 2006. The Fund's market price at August 31, 2007,
represented a discount to NAV of 11.1%; as of August 31, 2006, the discount was
8.6%.
We believe that the Fund's market price discount to NAV represents an
opportunity as common shares of the Fund continue to be available in the market
at prices below the value of the securities in the underlying portfolio.
Additionally, when shares trade at a discount to NAV, the Dividend Reinvestment
Plan ("DRIP") takes advantage of the discount by reinvesting distributions 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' dividends 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
compounding returns over time. Shareholders have the opportunity to reinvest
their dividends from the Fund through the DRIP, which is described in detail on
page 21 of this report.
Annual Report | August 31, 2007 | 3
RYJ | Claymore/Raymond James SB-1 Equity Fund | Dear Shareholder continued
The Fund paid a year-end dividend of $0.11 per share on December 29, 2006. This
cash distribution, which is taxable under the Internal Revenue Code, was
categorized as a short-term capital gain arising from gains upon the sale of
securities held for one year or less.
To learn more about the Fund's performance and investment strategy, we encourage
you to read the Questions & Answers section of the report, which begins on page
5. You will find information about what impacted the performance of the Fund
during the 2007 fiscal year and the Investment Adviser's and Sub-Adviser's views
on the market environment.
We appreciate your investment and look forward to serving your investment needs
in the future. For the most up-to-date information on your investment, please
visit the Fund's website at www.claymore.com/ryj.
Sincerely,
/s/ Nicholas Dalmaso
Nicholas Dalmaso
Claymore/Raymond James SB-1 Equity Fund
|
4 | Annual Report | August 31, 2007
RYJ | Claymore/Raymond James SB-1 Equity Fund
Questions & Answers |
Chuck R. Craig, CFA, Portfolio Manager
Chuck Craig joined Claymore Securities, Inc., an affiliate of Claymore Advisors,
LLC (either entity separately, or both entities together, "Claymore") in May
2003, and is a Managing Director, Portfolio Management and Supervision. Mr.
Craig is also a Portfolio Manager for Claymore's line of exchange-traded funds.
Additionally, he is involved in the screening, selection and development of the
firm's unit investment trusts and new products. Prior to joining Claymore, Mr.
Craig spent four years with First Trust Portfolios L.P. (formerly Nike
Securities) as an equity research analyst and portfolio manager within the
Equity Strategy Research Group. He has a total of 10 years of investment
industry experience and is a CFA charterholder. He received an M.S. degree in
Financial Markets at the Illinois Institute of Technology and a B.S. in Finance
from Northern Illinois University. Mr. Craig served for eight years in the U.S.
Air Force, including six years at the White House Communications Agency serving
three U.S. Presidents and their staffs.
Claymore Advisors, LLC is the Investment Adviser of the Claymore/Raymond James
SB-1 Equity Fund (the "Fund"). As Investment Adviser, Claymore manages the
investment and reinvestment of the Fund's assets and day-to-day activities of
the Fund as delegated by the Fund's Trustees. Below, Mr. Craig discusses the
Fund's performance for the 12-month period ended August 31, 2007.
Before we discuss performance, will you first remind us of the Fund's investment
objective and how the Fund was designed to seek that objective?
Claymore/Raymond James SB-1 Equity Fund is the only retail product that provides
investors with direct access to Raymond James's professional equity selection of
SB-1 securities. The Fund's investment objective is to provide capital
appreciation to investors. The Fund seeks to achieve that objective by investing
substantially all of its net assets in the equity securities that are rated, at
the time of purchase, a Strong Buy 1 ("SB-1") by analysts employed by Raymond
James & Associates, Inc. ("Raymond James"), the Fund's Sub-Adviser. There are
currently four ratings categories used by Raymond James (Strong Buy, Outperform,
Market Perform or Underperform), with SB-1 being the highest rating. A security
that is ranked a SB-1 is expected by the research analysts to achieve total
return targets and to outperform the S&P 500 Index over the next six months. For
higher-yielding equities, such as real estate investment trusts ("REITs") and
certain master limited partnerships ("MLPs"), the analyst anticipates the stock
to achieve total return targets over the next 12 months. Of course there is no
guarantee that the stocks rated SB-1 will produce positive returns.
Please tell us about the equity market environment during the fiscal year ended
August 31, 2007.
Economic reports were mixed during the 12 months ended August 31, 2007, but have
been generally supportive of continued moderate growth in the U.S. economy. The
corporate sector remained in relatively strong financial condition, and most
international economies continued to expand. A correction in the housing market,
driven in part by issues in the sub-prime mortgage sector, created concern that
this weakness may spill over to the broader economy. Recent employment reports
indicate that the labor market may be weakening. To date, however, both consumer
spending and corporate investment have remained fairly strong.
The fiscal year ended August 31, 2007 was generally positive for the U.S. equity
market, and nearly all major indices produced gains. Most international equity
markets outperformed the U.S. market as represented by the S&P 500. Emerging
markets were particularly strong. After a long period of market leadership by
small-cap stocks, large-cap stocks, which are generally considered less risky,
provided stronger returns during the 12-month period ended August 31, 2007. The
closed-end fund market enjoyed favorable demand for most of the fiscal reporting
period. In June, however, the market began to weaken considerably. We believe
the weakness is attributable to investor's concerns about the possible weakening
of the U.S. economy as well as concerns about the impact of the sub-prime
mortgage sector and other credit related fears.
How did the Fund perform?
All Fund returns cited - whether based on net asset value ("NAV") or market
price - assume the reinvestment of all distributions. The Fund provided a
positive market price total return of 10.77% for the fiscal year ended August
31, 2007. The Fund also gained on a NAV basis, generating a total return of
13.78% for the fiscal year ended August 31, 2007. For NAV performance comparison
purposes, the S&P 500 Index returned 15.13% for the same time period. The S&P
500 is generally considered representative of the U.S. large-cap stock market.
The Fund's positions in energy, information technology and industrials sectors
were the most significant contributors to the Fund's absolute performance. The
only sector that posted declines during the period was the Fund's financials
sector. Compared to the S&P 500, the Fund's positions in information technology
and consumer discretionary stocks trailed the index.
Annual Report | August 31, 2007 | 5
RYJ | Claymore/Raymond James SB-1 Equity Fund | Questions & Answers continued
Will you tell us more about Raymond James's research and ranking system?
Raymond James's research department supports the company's institutional and
retail sales efforts and publishes research on more than 600 companies. The
firm's Equity Research Team is comprised of more than 40 fundamental equity
analysts. The analysts examine each company's balance sheets, operations, sales,
earnings history, growth potential and management among other firm-specific
data. The analysts cover eight primary market sectors including communications,
consumer, energy, financial services, health care, industrial services, real
estate and technology. The work of the fundamental analysts is complemented by
technical and economic analysts, and is supported by nearly 60 research
associates and other support staff.
The ratings assigned by Raymond James analysts represent such analysts'
judgments given available facts and public information and are not intended as
guarantees of investment performance of rated securities or of the Fund. The
Raymond James Stock-Rating Guide serves as a guideline for the firm's equity
research analysts and is in no way indicative of the future performance of any
individual stock, industry sector or the Claymore/Raymond James SB-1 Equity
Fund.
How is the portfolio constructed and how is it maintained to represent the
Sub-Adviser's Strong Buy 1 picks?
The Fund employs a modified equal-weighting methodology, meaning the Fund seeks
to invest an equal percentage of the Fund's total assets in each SB-1 security,
within the constraints of the underlying securities. Occasionally, some of the
securities may exhibit relatively low liquidity. In those cases, the Fund may
take an initial position that is less than an equal weight in order to mitigate
the risk of adversely affecting the prices of the less liquid security. At
rebalancing, the Fund seeks to bring portfolio securities to an equal weight.
While SB-1 ratings can potentially change every business day, we rebalance and
reconstitute the portfolio approximately every two weeks or twice monthly. We do
so in an effort to reduce turnover and transaction costs for the Fund. At the
time of reconstitution and rebalancing, we sell securities that are no longer
ranked SB-1, add securities not currently in the portfolio that have been
upgraded to an SB-1 ranking and adjust the portfolio in accordance with our
modified equal-weighting methodology.
Will you tell us about the types of portfolio securities held in the Fund?
On August 31, 2007, the Fund's largest sector positions were in information
technology (27% of long-term investments), consumer discretionary (16.4% of
long-term investments) and energy (14.9% of long-term investments). The
portfolio held common stocks (93.1% of net assets) and MLPs (6.8% of net
assets).
Small-capitalization companies represented approximately 59% of total
investments, while mid-cap companies represented 17% and large-cap companies
represented 23% of total investments. Cash and other investments represented the
remaining 1%. It is important to remember that the Fund is rebalanced twice each
month and these sector allocations and security types can and do change.
What are some factors that influenced performance during the period?
Although portfolio securities are selected based on Raymond James rankings and
not by virtue of their market capitalization, industry or sector, some of these
factors did influence the Fund's performance.
The Fund was helped by its overweight position in telecommunication services,
which significantly outperformed the return of the S&P 500 telecommunication
services sector. The Fund was also helped by its underweight position in health
care which also outperformed the return of the S&P 500 health care sector. The
Fund's financial sector declined during the period while the S&P 500 financial
sector posted modest gains. The Fund's allocation to small-cap companies also
detracted from performance as their returns were generally lower than the
large-cap oriented S&P 500 during the period.
Please tell us about the securities that helped and hurt Fund performance?
The single largest gainer in the Fund was Nuance Communications, Inc. (0.9% of
long-term investments). Nuance is a leading provider of speech and imaging
solutions such as speech recognizers, call steering and products that convert
text into speech. During the fourth quarter, the company entered into agreements
with customers such as Bank of America and XM Satellite Radio. The company's
first quarter profits beat analysts' estimates, which further supported gains.
Additionally, Nuance successfully acquired two companies that are expected to
further Nuance's expertise in the search capabilities and embedded software
technology for mobile communications devices. Copa Holdings, S.A. was another
strong performer. Copa is a Panama-based passenger and cargo airline company
that operates Copa Airlines and AeroRepublica subsidiaries and has code share
arrangements with Continental Airlines. Performance during the period was
largely attributable to the company's record earnings in the third quarter of
2006, analyst coverage initiations and new strategic alliances. As of August 31,
2007, Copa was no longer held in the portfolio.
6 | Annual Report | August 31, 2007
RYJ | Claymore/Raymond James SB-1 Equity Fund | Questions & Answers continued
Mercantile Bank Corporation, a regional bank based in Michigan, declined
considerably in the period and was the single largest detractor from
performance. The bank, which derived most of its income from spread lending vs.
fee-based income struggled in the flat yield curve environment. Mercantile was
no longer held in the Fund as of August 31, 2007. Oklahoma-based Bronco Drilling
Company, Inc. also posted material losses during the period after announcing
declining earnings. Bronco was no longer held in the Fund as of August 31, 2007.
Please tell us about the Fund's distributions?
The Fund's investment objective is to provide capital appreciation. The Fund
intends to pay substantially all of its net investment income, if any, to common
shareholders through annual distributions. In addition, the Fund intends to
distribute any realized net long-term capital gains to common shareholders as
long-term capital gain dividends at least annually. To the extent that the Fund
realizes net investment income, including short-term capital gains, on a more
frequent basis, the Fund may make more frequent distributions to its common
shareholders. The Fund provided a year-end distribution of $0.11 per common
share on December 29, 2006.
Do you have any other comments for Fund shareholders?
We're pleased with the continued improvement in the Fund's NAV and market
performance during the annual fiscal period ended August 31, 2007. On August 31,
2007 the Fund's market share price closed at $19.27 vs. $17.50 a year earlier on
August 31, 2006. The Fund's NAV also improved considerably -- $21.67 at the
close of this fiscal year vs. $19.15 on August 31, 2006. We're especially
pleased with the improvement in the Fund's market value, which occurred during a
particularly weak period for the closed-end fund market. While the Fund's share
price retreated somewhat during the sell-off, it has regained some of the value
lost in the mid-summer decline.
The closed-end fund marketplace has experienced such sell-offs in the past as
investors react based on market momentum rather than considering relative
strength or weakness in the underlying securities in the closed-end fund itself.
Times like these can challenge the resolve of investors. When considering
performance, we encourage investors to take a long-term view. Investment
performance changes on a daily basis and the true test of a Fund's success is
whether it can stand the test of time. While the Fund is currently trading at a
discount to its NAV, the steady gain in both share price and NAV has been
positive for shareholders.
While there are no guarantees of success, we have confidence in the stock
research methodologies employed by Raymond James analysts. The market price of a
Fund is, of course, independent of its NAV. With that said, we hope that as the
Fund's NAV continues to improve, its market price will improve as well. Bear in
mind, the Fund has an automatic open-end conversion feature that seeks to
address discounts to the net asset value that are sometimes associated with
closed-end funds.
The Fund's Agreement and Declaration of Trust provides that (beginning after 18
months of operations from the inception date of May 19, 2006) if the Fund's
Common Shares close on the New York Stock Exchange ("NYSE") for 75 consecutive
trading days at a price greater than a 10% discount from NAV, the Fund will
commence the process necessary to convert into an open-end investment company.
Although the Fund is required to convene a special shareholder meeting at which
the Fund's shareholders can vote to maintain the Fund's status as a closed-end
fund, there can be no assurance that such a vote would be obtained. In such
event, the Fund would convert automatically to an open-end fund and would no
longer be listed on the NYSE. The Fund's shares would be purchased and redeemed
by the Fund at NAV and the Fund could be required to commence a continuous
offering of its shares upon the conversion to an open-end fund.
Annual Report | August 31, 2007 | 7
RYJ | Claymore/Raymond James SB-1 Equity Fund | Questions & Answers continued
RYJ Risks and Other Considerations
The Fund is a diversified, closed-end management investment company with a
limited history of operations and a limited history of public trading. An
investment in the Fund is subject to investment risk, including the possible
loss of the entire principal amount invested. An investment in the common shares
of the Fund represents an indirect investment in the securities and other
instruments owned by the Fund. The value of those securities and other
instruments may fluctuate, sometimes rapidly and unpredictably, and will affect
the value of the common shares.
The Fund's common shares may trade at a discount or a premium in relation to net
asset value. At any point in time, the common shares may be worth less than the
original investment, including the reinvestment of Fund dividends and/or
distributions. An investment in the common shares of the Fund is intended for
long-term investors and should not be considered a complete investment program.
Each common shareholder should take into account the Fund's investment objective
as well as the common shareholder's other investments when considering an
investment in the Fund. There can be no assurance that the Fund will achieve its
investment objective.
A principal risk of investing in the Fund is equity risk, which is the risk that
the value of the securities held by the Fund will fall due to general market and
economic conditions, perceptions regarding the industries in which the issuers
of securities held by the Fund participate or factors relating to specific
companies in which the Fund invests. An adverse event, such as an unfavorable
earnings report, a research downgrade, including one issued by the Sub-Adviser,
may depress the value of common stock of an issuer held by the Fund.
The Fund may invest in securities of issuers that have comparatively smaller
capitalizations relative to issuers whose securities are included in major
benchmark indices, which present unique investment risks. Equity securities of
smaller capitalization companies generally are less liquid than those of larger
companies.
Investments in securities of non-U.S. issuers involve special risks not
presented by investments in securities of U.S. issuers, including: (i) there may
be less publicly available information about non-U.S. issuers or markets due to
less rigorous disclosure or accounting standards or regulatory practices; (ii)
many non-U.S. markets are smaller, less liquid and more volatile than the U.S.
market; and (iii) potential adverse effects of fluctuations in currency exchange
rates or controls on the value of the Fund's investments.
Investing in REITs makes the Fund more susceptible to risks associated with the
ownership of real estate and with the real estate industry in general. These
risks can include fluctuations in the value of underlying properties; defaults
by borrowers or tenants; market saturation; changes in general and local
economic conditions; decreases in market rates for rents, increases in
competition, property taxes, capital expenditures, or operating expenses; and
other economic, political or regulatory occurrences affecting the real estate
industry.
MLP Risk. An investment in MLP units involves risk that differs from a similar
investment in equity securities, such as common stock, of a corporation. Holders
of MLP units have rights typically afforded to limited partners in a limited
partnership. As compared to common shareholders of a corporation, holders of MLP
units have more limited control and limited rights to vote on matters affecting
the partnership. There are certain tax risks associated with an investment in
MLP units. Additionally, conflicts of interest may exist between common unit
holders and the general partner of an MLP; for example a conflict may arise as a
result of incentive distribution payments. The Fund will not invest more than
25% of its assets in MLPs.
The Fund is subject to management risk because it is an actively-managed
investment portfolio. The Investment Adviser will apply investment techniques
and risk analysis in making investment decisions for the Fund, but there can be
no guarantee that these will produce the desired results. There can be no
assurance that the Sub-Adviser will be successful in its analysis of stocks
upgraded to or downgraded from "SB-1"status. There are no assurances that
Raymond James will continue to provide equity research to the degree currently
provided by it, or that it will continue to provide research services at all.
Raymond James may decrease (i) the number of equity analysts that it employs,
(ii) the number of industries, or (iii) the number of issuers within an
industry, that such analysts cover. Please refer to the prospectus for
additional risks and considerations.
An investment in the Fund is subject to certain risks and other considerations,
including, but not limited to: Not a Complete Investment Program; Investment and
Market Risk; Equity Risk; Small-Capitalization Risk; Industry and Sector Risk;
Non-U.S. Securities Risk; REIT Risk; MLP Risk; Other Investment Company Risk;
Risks Relating to Raymond James Equity Securities Ratings; Risks Associated with
Other Business Activities of Raymond James; Investment Strategy Risk; Market
Discount Risk; Portfolio Turnover Risk; Strategic Transactions Risk; and Current
Developments Risk.
Investors should carefully consider the investment objective and policies, risk
considerations, charges and ongoing expenses of the Fund before investing.
8 | Annual Report | August 31, 2007
RYJ | Claymore/Raymond James SB-1 Equity Fund
Fund Summary | As of August 31, 2007 (unaudited)
Fund Statistics
--------------------------------------------------------------------------------
Share Price $ 19.27
Common Share Net Asset Value $ 21.67
Premium/Discount to NAV -11.08%
Net Assets ($000) $240,998
--------------------------------------------------------------------------------
Total Returns
--------------------------------------------------------------------------------
(Inception 5/19/06) Market NAV
--------------------------------------------------------------------------------
One Year 10.77% 13.78%
--------------------------------------------------------------------------------
Since Inception - average annual -2.40% 10.80%
--------------------------------------------------------------------------------
|
Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
www.claymore.com. The investment return and principal value of an investment
will fluctuate with changes in market conditions and other factors so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
% of Long-Term
Portfolio Breakdown* Investment
--------------------------------------------------------------------------------
Consumer Discretionary 16.4%
Energy 14.9%
Industrials 12.5%
Financials 11.4%
Semiconductors 9.0%
Health Care 8.9%
Communications Equipment 7.8%
Software & Services 7.1%
Telecommunication Services 7.1%
Electronic Equipment & Instruments 2.6%
Consumer Staples 0.9%
Utilities 0.9%
Computers & Peripherals 0.5%
--------------------------------------------------------------------------------
* Represents broad sectors and not specific industries.
% of Long-Term
Top Ten Holdings Investments
--------------------------------------------------------------------------------
JA Solar Holdings Co. Ltd. ADR (Cayman Islands) 1.0%
Home Depot, Inc. 1.0%
California Pizza Kitchen, Inc. 0.9%
National Oilwell Varco, Inc. 0.9%
Anadigics, Inc. 0.9%
Ryanair Holdings PLC ADR (Ireland) 0.9%
VeriFone Holdings, Inc. 0.9%
Cisco Systems, Inc. 0.9%
Ethan Allen Interiors, Inc. 0.9%
Cameron International Corp. 0.9%
--------------------------------------------------------------------------------
|
Portfolio breakdown and holdings are subject to change daily. For more current
information, please visit www.claymore.com. The above summaries are provided for
informational purposes only and should not be viewed as recommendations. Past
performance does not guarantee future results.
Share Price & NAV Performance
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Share Price NAV
8/31/06 17.50 19.15
17.50 19.27
17.52 19.39
17.20 18.97
17.10 18.86
17.01 18.82
16.95 18.76
17.26 19.13
17.34 19.3
17.41 19.14
17.51 19.17
17.54 19.23
17.48 19.13
17.56 19.21
17.48 19.16
17.50 18.97
17.54 19.18
17.52 19.33
17.62 19.4
17.59 19.4
17.59 19.35
17.64 19.11
17.63 19
17.84 19.3
17.89 19.53
17.84 19.45
17.92 19.49
17.98 19.65
17.89 19.49
18.07 19.83
17.97 19.9
18.17 20.09
18.14 19.91
18.08 19.81
18.15 19.95
18.16 19.82
18.23 19.87
18.11 20
18.34 20.1
18.20 20.22
18.01 20.03
18.00 20.01
17.88 20
17.90 19.7
17.73 19.61
17.61 19.79
17.91 19.99
18.02 20.02
17.94 20.12
17.90 20.01
17.83 20.02
17.80 20.06
18.02 20.25
18.22 20.4
18.09 20.29
17.94 20.25
17.95 20.27
17.97 20.37
18.20 20.39
18.25 20.37
18.00 20.05
18.12 20.16
18.31 20.45
18.59 20.54
18.63 20.47
18.60 20.62
18.74 20.64
18.82 20.67
18.65 20.57
18.71 20.54
18.57 20.5
18.52 20.38
18.38 20.41
18.55 20.59
18.48 20.52
18.50 20.25
18.49 20.25
18.38 20.24
18.31 20.2
18.37 19.99
18.45 20.04
18.38 20.21
18.40 20.18
18.44 20.02
18.56 19.85
18.45 19.82
18.35 19.66
18.26 19.69
18.21 19.66
18.09 19.67
18.15 19.75
18.12 19.97
18.00 19.88
17.91 19.88
17.83 19.68
17.85 19.91
17.87 19.83
17.95 20.03
18.10 20.18
17.99 19.91
18.00 19.99
18.00 19.98
18.07 20.16
18.26 20.35
18.36 20.48
18.37 20.56
18.38 20.54
18.41 20.59
18.41 20.7
18.51 20.76
18.47 20.63
18.37 20.47
18.39 20.55
18.46 20.65
18.41 20.64
18.40 20.67
18.47 20.78
18.43 20.85
18.43 20.91
18.44 20.88
18.42 20.87
17.98 20.21
18.15 20.3
18.07 20.26
17.87 20.02
17.57 19.68
17.79 20.03
17.76 20.01
17.83 20.12
17.81 20.13
17.88 20.16
17.59 19.74
17.67 19.8
17.76 19.88
17.64 19.81
17.79 20.03
17.87 20.22
18.14 20.57
18.15 20.58
18.18 20.67
18.20 20.69
18.09 20.53
17.96 20.44
18.03 20.52
18.05 20.51
18.12 20.6
18.24 20.75
18.25 20.76
18.33 20.86
18.39 20.85
18.45 20.98
18.43 20.8
18.64 21.01
18.84 21.08
18.98 21.28
18.98 21.24
18.86 21.18
18.80 21.07
18.91 21.27
18.95 21.26
19.02 21.33
19.17 21.55
19.27 21.58
19.25 21.51
19.08 21.24
19.04 21.27
19.28 21.64
19.40 21.69
19.41 21.71
19.40 21.68
19.34 21.68
19.43 21.81
19.25 21.5
19.34 21.73
19.27 21.64
19.21 21.47
19.27 21.6
19.32 21.66
19.46 21.84
19.57 22.01
19.65 22.07
19.64 22.03
19.35 21.67
19.45 21.84
19.57 22.03
19.79 22.24
19.93 22.34
20.01 22.47
20.13 22.63
20.06 22.54
19.89 22.26
19.60 21.85
19.73 22.01
19.72 22.08
19.50 21.84
19.74 22.15
19.85 22.33
20.10 22.54
20.10 22.51
20.10 22.54
19.96 22.26
20.02 22.39
19.88 22.21
19.78 22.02
19.70 21.9
19.93 22.23
19.97 22.2
19.93 22.15
20.04 22.37
20.10 22.48
20.14 22.56
20.25 22.66
20.39 22.74
20.22 22.45
20.30 22.47
20.50 22.77
20.52 22.78
20.31 22.58
20.34 22.49
20.17 22.43
20.28 22.57
19.94 22.29
20.00 22.19
19.52 21.69
19.57 21.77
19.12 21.24
19.00 20.89
18.96 21.08
18.87 21.01
18.93 21.06
19.00 21.24
18.52 20.64
18.72 20.72
18.96 21.02
19.20 21.46
18.88 21.12
18.92 21.21
18.96 21.2
18.64 20.74
18.18 20.36
18.04 20.41
18.80 21.01
18.88 21.07
18.98 21.11
19.15 21.45
19.06 21.28
19.22 21.56
19.09 21.42
18.81 20.93
19.01 21.4
19.03 21.35
8/31/07 19.27 21.67
|
Holdings by Capitalization*
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Asset Class
--------------------------------------------------------------------------------
Small-cap 59%
Large-cap 23%
Mid-cap 17%
Cash and Other Investments 1%
--------------------------------------------------------------------------------
* As a percentage of total investments.
% of Total
Asset Allocation Net Assets
--------------------------------------------------------------------------------
Common Stocks 93.1%
Master Limited Partnerships 6.8%
Short-Term Investments 0.2%
Liabilities in excess of Other Assets -0.1%
--------------------------------------------------------------------------------
100.0%
--------------------------------------------------------------------------------
Annual Report | August 31, 2007 | 9
|
RYJ | Claymore/Raymond James SB-1 Equity Fund
Portfolio of Investments | August 31, 2007
Number
of Shares Description Value
--------------------------------------------------------------------------------
Long-Term Investments - 99.9%
Common Stocks - 93.1%
Communications Equipment - 7.8%
120,100 ADC Telecommunications, Inc. (a) $ 2,197,830
1,220,800 Avanex Corp. (a) 2,099,776
69,800 Cisco Systems, Inc. (a) 2,228,016
80,200 EMS Technologies, Inc. (a) 1,968,108
35,700 Harris Corp. 2,171,631
208,100 KVH Industries, Inc. (a) 1,999,841
126,300 Motorola, Inc. 2,140,785
238,800 Orbcomm, Inc. (a) 1,931,892
358,500 Sonus Networks, Inc. (a) 2,072,130
--------------------------------------------------------------------------------
18,810,009
--------------------------------------------------------------------------------
Computers & Peripherals - 0.5%
1,000,500 Concurrent Computer Corp. (a) 1,360,680
--------------------------------------------------------------------------------
Consumer Discretionary - 16.3%
111,700 California Pizza Kitchen, Inc. (a) 2,284,265
46,000 Carnival Corp. (Panama) 2,097,140
83,200 Cheesecake Factory (The) (a) 2,074,176
102,800 Culp, Inc. (a) 1,048,560
49,800 Darden Restaurants, Inc. 2,071,680
66,100 Ethan Allen Interiors, Inc. 2,220,960
61,000 Home Depot, Inc. 2,336,910
216,600 La-Z-Boy, Inc. 2,088,024
117,100 Lithia Motors, Inc. - Class A 2,097,261
71,100 Lowe's Cos., Inc. 2,208,366
93,900 Marvel Entertainment, Inc. (a) 2,122,140
127,700 O'Charleys, Inc. 2,078,956
59,600 O'Reilly Automotive, Inc. (a) 2,118,184
331,500 Pier 1 Imports, Inc. 2,048,670
43,300 Polaris Industries, Inc. 2,067,575
123,200 Stanley Furniture Co., Inc. 2,123,968
34,900 Starwood Hotels & Resorts Worldwide, Inc. 2,133,088
92,300 Urban Outfitters, Inc. (a) 2,113,670
21,500 Whirlpool Corp. 2,072,815
--------------------------------------------------------------------------------
39,406,408
--------------------------------------------------------------------------------
Consumer Staples - 0.9%
57,700 CVS Caremark Corp. 2,182,214
--------------------------------------------------------------------------------
Electronic Equipment & Instruments - 2.6%
109,300 Ingram Micro, Inc. - Class A (a) 2,146,652
124,000 L-1 Identity Solutions, Inc. (a) 2,039,800
53,500 Tech Data Corp. (a) 2,085,965
--------------------------------------------------------------------------------
6,272,417
--------------------------------------------------------------------------------
Number
of Shares Description Value
--------------------------------------------------------------------------------
Energy - 9.0%
26,100 Baker Hughes, Inc. $ 2,188,746
27,100 Cameron International Corp. (a) 2,215,967
30,800 GlobalSantaFe Corp. (Cayman Islands) 2,174,172
38,700 Grant Prideco, Inc. (a) 2,140,110
60,000 InterOil Corp. (Canada) (a) 2,127,000
37,600 Lufkin Industries, Inc. 2,138,312
17,800 National Oilwell Varco, Inc. (a) 2,278,400
42,400 Noble Corp. (Cayman Islands) 2,080,144
22,700 Schlumberger Ltd. (Netherland Antilles) 2,190,550
20,500 Transocean, Inc. (Cayman Islands) 2,154,345
--------------------------------------------------------------------------------
21,687,746
--------------------------------------------------------------------------------
Financials - 11.4%
37,500 Allstate Corp. (The) 2,053,125
26,100 American Physicians Service Group, Inc. 478,935
87,600 BioMed Realty Trust, Inc. - REIT 2,135,688
183,439 Cardinal Financial Corp. 1,709,651
41,000 Chubb Corp. 2,096,330
117,000 CoBiz Financial, Inc. 2,136,420
51,000 Corporate Office Properties Trust - REIT 2,196,570
54,700 Digital Realty Trust, Inc. - REIT 2,133,300
104,100 First State Bancorporation 2,010,171
74,000 HCC Insurance Holdings, Inc. 2,043,140
33,900 Lincoln National Corp. 2,063,832
45,500 Nexity Financial Corp. (a) 375,375
71,600 Pinnacle Financial Partners, Inc. (a) 2,047,760
37,300 Reinsurance Group of America, Inc. 2,025,763
18,800 SL Green Realty Corp. - REIT 2,096,388
--------------------------------------------------------------------------------
27,602,448
--------------------------------------------------------------------------------
Health Care - 8.9%
90,100 Allscripts Healthcare Solutions, Inc. (a) 2,037,161
56,200 Amedisys, Inc. (a) 2,123,236
109,500 Bradley Pharmaceuticals, Inc. (a) 2,141,820
37,700 DaVita, Inc. (a) 2,168,504
92,500 Eclipsys Corp. (a) 2,135,825
148,800 HLTH Corp. (a) 2,199,264
34,300 Johnson & Johnson 2,119,397
85,600 Pfizer, Inc. 2,126,304
58,700 Psychiatric Solutions, Inc. (a) 2,163,682
40,400 Universal Health Services, Inc. - Class B 2,133,120
--------------------------------------------------------------------------------
21,348,313
--------------------------------------------------------------------------------
Industrials - 12.5%
119,100 Argon ST, Inc. (a) 2,152,137
43,500 Con-Way, Inc. (a) 2,108,880
50,700 EDO Corp. 2,182,128
39,500 Harsco Corp. 2,198,175
136,300 Heartland Express, Inc. 2,122,191
|
See notes to financial statements.
10 | Annual Report | August 31, 2007
RYJ | Claymore/Raymond James SB-1 Equity Fund | Portfolio of Investments
continued
Number
of Shares Description Value
--------------------------------------------------------------------------------
Industrials (continued)
73,200 Herman Miller, Inc. $ 2,124,264
65,874 JA Solar Holdings Co. Ltd. ADR (Cayman Islands) (a) 2,415,600
73,200 JB Hunt Transport Services, Inc. 2,105,964
113,500 Knoll, Inc. 2,157,635
47,800 Landstar System, Inc. 2,055,878
178,300 PGT, Inc. (a) 1,857,886
69,850 Republic Services, Inc. 2,171,637
54,000 Ryanair Holdings PLC ADR (Ireland) (a) 2,255,580
85,500 Walter Industries, Inc. 2,161,440
--------------------------------------------------------------------------------
30,069,395
--------------------------------------------------------------------------------
Semiconductors - 9.0%
90,900 Altera Corp. 2,164,329
137,200 Anadigics, Inc. (a) 2,258,312
73,100 Diodes, Inc. (a) 2,215,661
85,900 Intel Corp. 2,211,925
192,700 Micron Technology, Inc. (a) 2,206,415
79,700 National Semiconductor Corp. 2,097,704
42,300 Nvidia Corp. (a) 2,164,068
345,600 RF Micro Devices, Inc. (a) 2,056,320
267,700 Skyworks Solutions, Inc. (a) 2,112,153
61,300 Texas Instruments, Inc. 2,098,912
--------------------------------------------------------------------------------
21,585,799
--------------------------------------------------------------------------------
Software & Services - 7.1%
61,200 Amdocs Ltd. (Guernsey) (a) 2,160,360
686,700 Art Technology Group, Inc. (a) 2,135,637
45,300 Automatic Data Processing, Inc. 2,072,022
58,700 Citrix Systems, Inc. (a) 2,133,745
55,700 Global Payments, Inc. 2,199,036
105,200 Interactive Intelligence, Inc. (a) 2,056,660
110,800 Nuance Communications, Inc. (a) 2,083,040
60,900 VeriFone Holdings, Inc. (a) 2,250,864
--------------------------------------------------------------------------------
17,091,364
--------------------------------------------------------------------------------
Telecommunications - 7.1%
53,900 American Tower Corp. - Class A (a) 2,135,518
55,700 Cbeyond, Inc. (a) 2,164,502
228,200 Centennial Communications Corp. (a) 2,145,080
57,700 Crown Castle International Corp. (a) 2,121,052
26,900 NII Holdings, Inc. (a) 2,129,942
79,500 NTELOS Holdings Corp. 2,129,010
173,300 PAETEC Holding Corp. (a) 2,067,469
65,900 SBA Communications Corp. - Class A (a) 2,146,363
--------------------------------------------------------------------------------
17,038,936
--------------------------------------------------------------------------------
Total Common Stocks - 93.1%
(Cost $210,403,548) 224,455,729
--------------------------------------------------------------------------------
Number
of Shares Description Value
--------------------------------------------------------------------------------
Master Limited Partnerships - 6.8%
Energy - 5.9%
57,000 Energy Transfer Equity, L.P. $ 2,094,750
39,200 Energy Transfer Partners, L.P. 2,039,968
69,600 Enterprise Products Partners, L.P. 2,053,896
64,100 Inergy, L.P. 2,087,737
74,300 Magellan Midstream Holdings, L.P. 2,103,433
62,500 Teekay LNG Partners, L.P. (Marshall Islands) 2,185,625
58,300 Teekay Offshore Partners, L.P. (Marshall Islands) 1,717,518
--------------------------------------------------------------------------------
14,282,927
--------------------------------------------------------------------------------
Utilities - 0.9%
45,700 Suburban Propane Partners, L.P. 2,130,991
--------------------------------------------------------------------------------
Total Master Limited Partnerships
(Cost $13,388,711) 16,413,918
--------------------------------------------------------------------------------
Total Long-Term Investments - 99.9%
(Cost $223,792,259) 240,869,647
--------------------------------------------------------------------------------
Principal
Amount Value
--------------------------------------------------------------------------------
Short-Term Investments - 0.2%
U.S. Government and Agency Securities - 0.2%
$ 360,000 Federal Home Loan Bank Discount Note, maturing
9/4/07, yielding 4.10%
(Cost $359,877) 360,000
--------------------------------------------------------------------------------
Total Investments - 100.1%
(Cost $224,152,136) 241,229,647
Liabilities in excess of Other Assets - (0.1%) (232,097)
--------------------------------------------------------------------------------
Net Assets - 100.0% $ 240,997,550
================================================================================
|
ADR - American Depositary Receipt
L.P. - Limited Partnership
REIT - Real Estate Investment Trust
(a) Non-income producing security.
See notes to financial statements.
Annual Report | August 31, 2007 | 11
RYJ | Claymore/Raymond James SB-1 Equity Fund
Statement of Assets and Liabilities | August 31, 2007
Assets
Investments in securities, at value (cost $224,152,136) $ 241,229,647
Cash 231,462
Receivable for securities sold 1,765,073
Dividends receivable 185,456
Other assets 11,786
------------------------------------------------------------------------------------------------------------
Total assets 243,423,424
------------------------------------------------------------------------------------------------------------
Liabilities
Payable for securities purchased 2,144,684
Advisory fee payable 169,107
Administration fee payable 5,253
Accrued expenses and other liabilities 106,830
------------------------------------------------------------------------------------------------------------
Total liabilities 2,425,874
------------------------------------------------------------------------------------------------------------
Net Assets $ 240,997,550
============================================================================================================
Composition of Net Assets
Common stock, $.01 par value per share; unlimited number of shares
authorized, 11,122,822 shares issued and outstanding $ 111,228
Additional paid-in capital 211,744,333
Accumulated net unrealized appreciation on investments 17,077,511
Accumulated net realized gain on investments 11,928,253
Accumulated net investment income 136,225
------------------------------------------------------------------------------------------------------------
Net Assets $ 240,997,550
============================================================================================================
Net Asset Value
(based on 11,122,822 common shares outstanding) $ 21.67
============================================================================================================
|
See notes to financial statements.
12 | Annual Report | August 31, 2007
RYJ | Claymore/Raymond James SB-1 Equity Fund
Statement of Operations | For the Year Ended August 31, 2007
Investment Income
Dividends (net of return of capital distributions
received of $880,790) $ 1,921,636
Interest 17,572
------------------------------------------------------------------------------------------------------------
Total income $ 1,939,208
------------------------------------------------------------------------------------------------------------
Expenses
Advisory fee 1,957,356
Professional fees 141,540
Trustees' fees and expenses 74,639
Printing expenses 69,205
Fund accounting 68,319
Administration fee 61,055
Custodian fee 51,839
Transfer agent fee 30,880
Insurance 25,559
NYSE listing 22,059
Miscellaneous 4,276
------------------------------------------------------------------------------------------------------------
Total expenses 2,506,727
------------------------------------------------------------------------------------------------------------
Net investment loss (567,519)
------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain on Investments
Net realized gain on investments 14,886,062
Net change in unrealized appreciation on investments 14,920,272
------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 29,806,334
------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $ 29,238,815
============================================================================================================
|
See notes to financial statements.
Annual Report | August 31, 2007 | 13
RYJ | Claymore/Raymond James SB-1 Equity Fund
Statement of Changes in Net Assets |
For the Period
For the May 19, 2006*
Year Ended through
August 31, 2007 August 31, 2006
-------------------------------------------------------------------------------------------------------------
Increase in Net Assets Resulting from Operations
Net investment loss $ (567,519) $ (36,812)
Net realized gain (loss) on investments 14,886,062 (1,231,962)
Net increase from payment from affiliate -- 92,583
Net change in unrealized appreciation on investments 14,920,272 2,157,239
-------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 29,238,815 981,048
-------------------------------------------------------------------------------------------------------------
Distributions to Common Shareholders
From net realized gain (1,223,510) --
-------------------------------------------------------------------------------------------------------------
Capital Share Transactions
Proceeds from the issuance of common shares -- 212,345,816
Common share offering costs charged to paid-in capital -- (444,703)
-------------------------------------------------------------------------------------------------------------
Total increase in net assets applicable to common shareholders -- 211,901,113
-------------------------------------------------------------------------------------------------------------
Total increase in net assets 28,015,305 212,882,161
Net Assets
Beginning of period 212,982,245 100,084
-------------------------------------------------------------------------------------------------------------
End of period (including accumulated undistributed net investment
income of $136,225 and $98,564, respectively) $ 240,997,550 $ 212,982,245
=============================================================================================================
|
* Commencement of investment operations.
See notes to financial statements.
14 | Annual Report | August 31, 2007
RYJ | Claymore/Raymond James SB-1 Equity Fund
Statement of Financial Highlights |
For the Period
For the May 19, 2006*
Per share operating performance Year Ended through
for a common share outstanding throughout the periods August 31, 2007 August 31, 2006
-----------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 19.15 $ 19.10(b)
-----------------------------------------------------------------------------------------------------
Income from investment operations
Net investment loss (a) (0.05) (0.00)(c)
Net realized and unrealized gain on investments 2.68 0.09
-----------------------------------------------------------------------------------------------------
Total from investment operations 2.63 0.09
-----------------------------------------------------------------------------------------------------
Common shares' offering expenses charged to paid-in capital -- (0.04)
-----------------------------------------------------------------------------------------------------
Distributions to common shareholders from net realized gain (0.11) --
-----------------------------------------------------------------------------------------------------
Net asset value, end of period $ 21.67 $ 19.15
=====================================================================================================
Market value, end of period $ 19.27 $ 17.50
=====================================================================================================
Total investment return(d)
Net asset value 13.78% 0.26%
Market value 10.77% (12.50)%
Ratios and supplemental data
Net assets, end of period (thousands) $ 240,998 $ 212,982
Ratio of net expenses to average net assets 1.09% 1.12%(e)
Ratio of net investment loss to average net assets (0.06)% (0.06)%(e)
Portfolio turnover rate 166% 41%
|
* Commencement of investment operations.
(a) Based on average shares outstanding during the period.
(b) Before deduction of offering expenses charged to capital.
(c) Amount is less than $0.01.
(d) 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.
(e) Annualized.
See notes to financial statements.
Annual Report | August 31, 2007 | 15
RYJ | Claymore/Raymond James SB-1 Equity Fund
Notes to Financial Statements | August 31, 2007
Note 1 - Organization:
Claymore/Raymond James SB-1 Equity Fund (the "Fund") was organized as a Delaware
statutory trust on March 7, 2006. The Fund is registered as a diversified,
closed-end management investment company under the Investment Company Act of
1940, as amended (the "1940 Act").
The Fund's investment objective is to provide capital appreciation. There can be
no assurance that the Fund will achieve its investment objective. Under normal
market conditions, the Fund will invest substantially all of its net assets in
equity securities that are rated, at the time of purchase, Strong Buy 1 ("SB-1")
by analysts employed by Raymond James & Associates, Inc. ("Raymond James"). For
purposes of the Fund's investment policies, in the event a security is
downgraded by Raymond James and is no longer rated SB-1 subsequent to the
purchase of such security by the Fund, such security will be considered by the
Fund to be rated SB-1 until the next semi-monthly rebalancing and reconstitution
date following such downgrade. For as long as the word "SB-1" is in the name of
the Fund, the Fund will invest at least 80% of its net assets, plus the amount
of any borrowings for investment purposes, in equity securities rated SB-1. The
Fund's investment objective is considered fundamental and may not be changed
without the approval of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Fund.
The Fund's Declaration of Trust provides that (beginning after 18 months from
the date of the Prospectus) if the Fund's Common Shares close on the NYSE for 75
consecutive trading days at a price that is a 10% or greater discount from the
net asset value of the Fund's Common Shares, the Fund will commence promptly the
process necessary to convert the Fund into an open-end investment company. The
Fund's Declaration of Trust provides that in such event a special meeting of
shareholders of the Fund would be convened and that the Fund would automatically
be converted to an open-end fund unless a majority of the outstanding voting
securities of the Fund affirmatively vote to maintain the Fund's status as a
closed-end fund.
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 the significant accounting policies followed by
the Fund.
(a) Valuation of Investments
The Fund values equity securities at the last reported sale price on the
principal exchange or in the principal OTC market in which such securities are
traded, as of the close of regular trading on the NYSE on the day the securities
are being valued or, if there are no sales, at the mean between the last
available bid and asked prices on that day. Securities traded on NASDAQ are
valued at the NASDAQ Official Closing Price. Debt securities are valued at the
last available bid price for such securities or, if such prices are not
available, at prices for securities of comparable maturity, quality and type.
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 maturities of 60 days or less at
time of purchase are valued at amortized cost, which approximates market value.
(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 net of applicable withholding taxes on the ex-dividend date
and interest income is recorded on an accrual basis. Discounts or premiums on
debt securities purchased are accreted or amortized to interest income over the
lives of the respective securities using the effective interest method.
The Fund records the character of dividends received from MLPs based on
estimates made at the time such distributions are received. These estimates are
based upon a historical review of information available from each MLP and other
industry sources. The Fund's characterization of the estimates may subsequently
be revised based on information received from MLPs after their tax reporting
periods conclude.
(c) Distributions
The Fund intends to pay substantially all of its net investment income to Common
Shareholders at least annually. In addition, the Fund intends to distribute any
capital gains to Common Shareholders at least annually. To the extent that the
Fund realizes net investment income, including short-term capital gains, on a
more frequent basis, the Fund may make more frequent distributions to its Common
Shareholders.
Note 3 - Investment Advisory Agreement, Sub-Advisory Agreement and Other
Agreements:
Pursuant to an Investment Advisory Agreement (the "Agreement") between the Fund
and Claymore Advisors, LLC (the "Adviser"), the Adviser provides a continuous
investment program for the Fund's portfolio; executes recommendations for the
purchase and sale of securities; furnishes offices, necessary facilities and
equipment; provides administrative services to the Fund; oversees the activities
of Raymond James (the Fund's "Sub-Adviser"); provides personnel, including
certain officers required for its administrative management; and pays the
compensation of all officers and Trustees of the Fund who are its affiliates.
As compensation for its services, the Fund pays the Investment Adviser a fee,
payable monthly, in an annual amount equal to 0.85% of the Fund's average daily
Managed Assets. "Managed Assets" of the Fund means the total assets of the Fund,
including the assets attributable to the proceeds from any borrowings or other
forms of financial leverage, minus liabilities, other than liabilities related
to any financial leverage.
Pursuant to a Sub-Advisory Agreement between the Fund, the Adviser, and the
Sub-Adviser, the Sub-Adviser, under the supervision of the Adviser and Fund's
Board of Trustees, provides investment research, including the determination and
dissemination of the securities rated SB-1 by Raymond James; may provide certain
facilities and personnel, including certain officers required for its
administrative management; and pays the compensation of all officers and
Trustees of the Fund who are its affiliates. As compensation for its services,
the Adviser pays the Sub-Adviser a fee, payable monthly, in an annual amount
equal to 0.35% of the Fund's average daily Managed Assets.
Under a separate Fund Administration agreement, the Adviser provides fund
administration services to the Fund. As compensation for services performed
under the Administration Agreement, the Adviser receives an administration fee
payable monthly at the annual rate set forth below as a percentage of the
average daily net assets of the fund. For the year ended August 31, 2007, the
Fund recognized expenses of approximately $61,000 for these services.
Net 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%
16 | Annual Report | August 31, 2007
|
RYJ | Claymore/Raymond James SB-1 Equity Fund | Notes to Financial Statements
continued
The Bank of New York Mellon ("BNY") acts as the Fund's accounting agent,
custodian and transfer agent. As accounting agent, BNY is responsible for
maintaining the books and records of the Fund's securities and cash. As
custodian, BNY is responsible for the custody of the Fund's assets. As transfer
agent, BNY is responsible for performing transfer agency services for the Fund.
Certain officers and trustees of the Fund are also officers and directors of the
Adviser. The Fund does not compensate its officers or trustees who are officers
or directors of the Adviser.
Claymore Advisors, LLC reimbursed the Fund $92,583 representing the net
detriment to the Fund as a result of a trading error that occurred in June 2006.
This reimbursement is shown on the Statement of Changes in Net Assets as a "Net
increase from payment from affiliate."
Note 4 - Federal Income Taxes:
The Fund intends 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 intends not to be
subject to U.S. federal excise tax.
At August 31, 2007 the following reclassifications were made to the capital
accounts of the Fund, to reflect permanent book/tax differences and income and
gains available for distributions under income tax regulations, which are
primarily due to the differences between book and tax treatment of investments
in real estate investment trusts, investments in partnerships and net investment
losses. Net investment income, net realized gains and net assets were not
affected by these changes.
Undistributed Accumulated
Net Investment Net Realized
Income/(Loss) Gain/(Loss) Paid in Capital
--------------------------------------------------------------------------------
$605,180 ($603,698) ($1,482)
|
Information on the components of investments as of August 31, 2007 is as
follows:
Net Tax Undistributed Undistributed
Unrealized Ordinary Long-Term Gains/
Cost of Gross Tax Gross Tax Appreciation Income/ Accumulated
Investments for Unrealized Unrealized on Accumulated Capital and
Tax Purposes Appreciation Depreciation Investments Ordinary Loss Other Loss
-------------------------------------------------------------------------------------------------
$ 228,172,062 $ 23,273,037 $ (10,215,452) $ 13,057,585 $ 12,368,525 $ 3,715,879
|
The differences between book basis and tax basis unrealized
appreciation/(depreciation) is attributable to the tax deferral of losses on
wash sales and tax adjustments related to master limited partnerships and real
estate investment trusts.
The tax character of distributions paid during the period ended August 31, 2007
was $1,223,510 of ordinary income.
Note 5 - Investments in Securities:
For the year ended August 31, 2007, the cost of purchases and proceeds from
sales of investments, other than short-term securities, were $380,360,726 and
$381,284,056, respectively.
Note 6 - Capital:
Common Shares
In connection with its organization process, the Fund sold 5,240 shares of
beneficial interest to Claymore Securities, Inc., an affiliate of the Adviser,
for consideration of $100,084. The Fund has an unlimited amount of common
shares, $0.01 par value, authorized and 11,122,822 issued and outstanding. Of
this amount, the Fund issued 10,000,000 shares of common stock in its initial
public offering and issued, pursuant to an over-allotment option to the
underwriters, an additional 400,000 shares on May 26, 2006, 400,000 shares on
June 15, 2006 and 317,582 shares on June 23, 2006. All of these shares were
issued at $19.10 per share after deducting the sales load.
Offering expenses of $444,703, or $0.04 per share, in connection with the
issuance of common shares have been borne by the Fund and were charged to
paid-in capital. The Adviser and Sub-Adviser have agreed to pay all of the
organizational costs and offering expenses (other than sales load) in excess of
$0.04 per common share.
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 require
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 - Accounting Pronouncements:
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. Adoption of
FIN 48 is required for fiscal years beginning after December 15, 2006.
Management has evaluated the implications of FIN 48 and has determined it does
not have any impact on the financial statements as of August 31, 2007.
On September 15, 2006, the FASB released Statement of Financial Accounting
Standards No. 157, "Fair Value Measurements" ("FAS 157") which provides enhanced
guidance for measuring fair value. The standard requires companies to provide
expanded information about the assets and liabilities measured at fair value and
the potential effect of these fair valuations on an entity's financial
performance. The standard does not expand the use of fair value in any new
circumstances, but provides clarification on acceptable fair valuation methods
and applications. Adoption of FAS 157 is required for fiscal years beginning
after November 15, 2007. At this time, management is evaluating the implications
of FAS 157 and its impact in the financial statements has not yet been
determined.
Annual Report | August 31, 2007 | 17
RYJ | Claymore/Raymond James SB-1 Equity Fund
Report of Independent Registered Public Accounting Firm |
To the Shareholders and Board of Trustees of
Claymore/Raymond James SB-1 Equity Fund
We have audited the accompanying statement of assets and liabilities of
Claymore/Raymond James SB-1 Equity Fund (the "Fund"), including the portfolio of
investments, as of August 31, 2007, and the related statement of operations for
the year then ended, the statements of changes in net assets and financial
highlights for the year then ended and for the period from May 19, 2006
(commencement of investment operations) through August 31, 2006. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. Our
audits included consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the
Fund's internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements and financial
highlights, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
Our procedures included confirmation of securities owned as of August 31, 2007,
by correspondence with the custodian and brokers or by other appropriate
auditing procedures where replies from brokers were not received. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Claymore/Raymond James SB-1 Equity Fund at August 31, 2007, and the results of
its operations for the year then ended, the changes in its net assets and
financial highlights for the year then ended and for the period from May 19,
2006 (commencement of investment operations) through August 31, 2006, in
conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
October 18, 2007
|
18 | Annual Report | August 31, 2007
RYJ | Claymore/Raymond James SB-1 Equity Fund
Supplemental Information | (unaudited)
Federal Income Tax Information
Qualified dividend income of as much as $1,742,190 was received to the Fund
through August 31, 2007. The Fund intends to designate the maximum amount of
dividends that qualify for the reduced tax rate pursuant to the Jobs and Growth
Tax Relief Reconciliation Act of 2003.
For corporate shareholders, $1,724,094 of investment income qualifies for the
dividends-received deduction.
In January 2008, you will be advised on IRS Form 1099 DIV or substitute 1099 DIV
as to the federal tax status of the distributions received by you in the
calendar year 2007.
Results of Shareholder Votes
The Annual Meeting of Shareholders of the Fund was held on July 18, 2007. Common
shareholders voted on the election of Class I Trustees.
With regard to the election of the following Trustees by common and preferred
shareholders of the Fund:
# of Shares In Favor # of Shares Withheld
--------------------------------------------------------------------------------
Randall C. Barnes 10,257,959 58,375
Nicholas Dalmaso 10,127,884 188,450
|
The other Trustees of the Fund whose terms did not expire in 2007 are Ronald A.
Nyberg and Ronald E. Toupin, Jr
Trustees
The Trustees of the Claymore/Raymond James SB-1 Equity Fund and their principal
occupations during the past five years:
Name, Address*, Year Term of Office** Principal Occupation During Number of Portfolios
of 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:
------------------------------------------------------------------------------------------------------------------------------------
Randall C. Barnes Since 2006 Formerly, Senior Vice President & 45 None.
Year of Birth: 1951 Treasurer (1993-1997), President, Pizza
Trustee Hut International (1991-1993) and Senior
Vice President, Strategic Planning and
New Business Development (1987-1990) of
PepsiCo, Inc. (1987-1997).
------------------------------------------------------------------------------------------------------------------------------------
Ronald A. Nyberg Since 2006 Partner of Nyberg & Cassioppi, LLC, a law 48 None.
Year of birth: 1953 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).
------------------------------------------------------------------------------------------------------------------------------------
Ronald E. Toupin, Jr. Since 2006 Formerly, Vice President, Manager and 45 None.
Year of birth: 1958 Portfolio Manager of Nuveen Asset
Trustee Management (1998-1999), Vice President of
Nuveen Investment Advisory Corp.
(1992-1999), Vice President and Manager
of Nuveen Unit Investment Trusts
(1991-1999), and Assistant Vice President
and Portfolio Manager of Nuveen Unit
Investment Trusts (1988-1999), each of
John Nuveen & Co., Inc. (1982-1999).
------------------------------------------------------------------------------------------------------------------------------------
Interested Trustees:
------------------------------------------------------------------------------------------------------------------------------------
Nicholas Dalmaso+ Since 2006 Senior Managing Director and Chief 48 None.
Year of birth: 1965 Administrative Officer of Claymore
Trustee and Chief Legal Advisors, LLC and Claymore Securities,
and Executive Officer Inc. (2001-present). General Counsel of
Claymore Advisors, LLC and Claymore
Securities, Inc. (2001-2007). Formerly,
Assistant General Counsel, John Nuveen
and Co., Inc. (1999-2001). Former Vice
President and Associate General Counsel
of Van Kampen Investments, Inc.
(1992-1999).
------------------------------------------------------------------------------------------------------------------------------------
|
* Address for all Trustees unless otherwise noted: 2455 Corporate West
Drive, Lisle, IL 60532
** After a Trustee's initial term, each Trustee is expected to serve a
two-year term concurrent with the class of Trustees for which he serves:
-Messrs. Barnes and Dalmaso, as Class I Trustees, are expected to stand
for re-election at the Fund's 2009 annual meeting of shareholders.
-Messrs. Nyberg and Toupin, as Class II Trustees, are expected to stand
for re-election at the Fund's 2008 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.
+ Mr. Dalmaso 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
Claymore Advisors, LLC, the Fund's Investment Adviser.
Annual Report | August 31, 2007 | 19
RYJ | Claymore/Raymond James SB-1 Equity Fund | Supplemental Information
(unaudited) continued
Officers
The officers of the Claymore/Raymond James SB-1 Equity Fund and their principal
occupations during the past five years:
Name, Address*, Year of Birth and Term of Office** and Principal Occupation During the Past Five Years
Position(s) held with Registrant Length of Time Served and Other Affiliations
------------------------------------------------------------------------------------------------------------------------------------
Officers:
------------------------------------------------------------------------------------------------------------------------------------
Steven M. Hill Since 2006 Senior Managing Director of Claymore Advisors, LLC and Claymore
Year of birth: 1964 Securities, Inc. (2005-present). Formerly, Chief Financial Officer
Chief Financial Officer, (2005-2006) of Claymore Group Inc. Managing Director of Claymore
Chief Accounting Officer Advisors, LLC and Claymore Securities, Inc. (2003-2005). Formerly,
and Treasurer Treasurer of Henderson Global Funds and Operations Manager of Henderson
Global Investors (NA) Inc. (2002-2003); Managing Director, FrontPoint
Partners LLC (2001-2002); Vice President, Nuveen Investments
(1999-2001).
------------------------------------------------------------------------------------------------------------------------------------
Melissa J. Nguyen Since 2006 Vice President, Assistant General Counsel of Claymore Securities, Inc.
Year of birth: 1978 (2005-present). Formerly, Associate, Vedder, Price, Kaufman & Kammholz,
Secretary P.C. (2003-2005).
------------------------------------------------------------------------------------------------------------------------------------
Bruce Saxon Since 2006 Vice President, Fund Compliance Officer of Claymore Advisors, LLC
Year of birth: 1957 (2006-present). Formerly, Chief Compliance Officer/Assistant Secretary
Chief Compliance Officer of Harris Investment Management, Inc. (2003-2006). Director-Compliance
of Harrisdirect LLC (1999-2003).
------------------------------------------------------------------------------------------------------------------------------------
Jim Howley Since 2006 Vice President, Fund Administration of Claymore Advisors, LLC
Year of birth: 1972 (2004-present). Formerly, Manager, Mutual Fund Administration of Van
Assistant Treasurer Kampen Investments, Inc. (1996-2004).
------------------------------------------------------------------------------------------------------------------------------------
Mark E. Mathiasen Since 2007 Assistant Vice President, Attorney of Claymore Securities, Inc.
Year of Birth: 1978 (2007-present). Formerly, Law Clerk for the Idaho State Courts
Assistant Secretary (2003-2007).
------------------------------------------------------------------------------------------------------------------------------------
Matthew J. Patterson Since 2006 Vice President, Assistant General Counsel of Claymore Securities, Inc.
Year of Birth: 1971 (2006-present). Formerly, Chief Compliance Officer and Clerk, The
Assistant Secretary Preferred Group of Mutual Funds (2005-2006); Chief Compliance Officer
and Secretary, Caterpillar Investment Management Ltd (2005-2006);
Securities Counsel, Caterpillar Inc. (2004-2006); Associate, Skadden,
Arps, Slate, Meagher & Flom LLP (2002-2004).
------------------------------------------------------------------------------------------------------------------------------------
|
* Address for all Officers: 2455 Corporate West Drive, Lisle, IL 60532
** 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.
20 | Annual Report | August 31, 2007
RYJ | Claymore/Raymond James SB-1 Equity Fund
Dividend Reinvestment Plan | (unaudited)
Unless the registered owner of common shares elects to receive cash by
contacting the Plan Administrator, all dividends declared on common shares of
the Fund will be automatically reinvested by The Bank of New York Mellon (the
"Plan Administrator"), 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, The Bank of New York Mellon, P.O. Box 463, East Syracuse,
New York 13057-0463; Attention: Shareholder Services Department, Phone Number:
(866) 488-3559.
Annual Report | August 31, 2007 | 21
RYJ | Claymore/Raymond James SB-1 Equity Fund
Fund Information |
Board of Trustees
Randall C. Barnes
Nicholas Dalmaso*
Ronald A. Nyberg
Ronald E. Toupin, Jr.
* Trustee is an "interested person" of the Fund as defined in the Investment
Company Act of 1940, as amended.
Officers
Steven M. Hill
Chief Financial Officer,
Chief Accounting Officer and Treasurer
Melissa J. Nguyen
Secretary
Bruce Saxon
Chief Compliance Officer
Jim Howley
Assistant Treasurer
Mark E. Mathiasen
Assistant Secretary
Matthew J. Patterson
Assistant Secretary
Investment Adviser and Administrator
Claymore Advisors, LLC
Lisle, Illinois
Investment Sub-Adviser
Raymond James & Associates, Inc.
St. Petersburg, Florida
Accounting Agent, Custodian and Transfer Agent
The Bank of New York Mellon
NewYork, NewYork
Legal Counsel
Skadden, Arps, Slate,
Meagher & Flom LLP
Chicago, Illinois
Independent Registered Public Accounting Firm
Ernst & Young LLP
Chicago, Illinois
Privacy Principles of Claymore/Raymond James SB-1 Equity Fund for Shareholders
The Fund is committed to maintaining the privacy of its shareholders and to
safeguarding its non-public personal information. The following information is
provided to help you understand what personal information the Fund collects, how
we protect that information and why, in certain cases, we 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 the
shareholders to Claymore Advisors, LLC employees 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 Claymore/Raymond James SB-1 Equity 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 Custodian and Transfer Agent The Bank of New York Mellon, 111
Sanders Creek Parkway, East Syracuse, New York 13057 (800) 701-8178
This report is sent to shareholders of Claymore/Raymond James SB-1 Equity 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) 889-3830.
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) 889-3830
or by accessing the Fund's Form N-PX on the Commission's website at
http://www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission 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
http://www.sec.gov or by visiting the Fund's website at
http://www.claymore.com/ryj. The Fund's Form N-Q may also be viewed and copied
at the Commission's Public Reference Room in Washington, DC; information on the
operation of the Public Reference Room may be obtained by calling (800)
SEC-0330.
In August 2007, the Fund submitted a CEO annual certification to the 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.
22 | Annual Report | August 31, 2007
RYJ | Claymore/Raymond James SB-1 Equity Fund
About the Fund Manager |
About the Fund's Sub-Adviser and Portfolio Manager
Claymore/Raymond James SB-1 Equity Fund is sub-advised by Raymond James &
Associates, Inc. ("Raymond James") and managed by Claymore Advisors, LLC
("Claymore"). The Fund invests substantially all of its net assets in the equity
securities that are rated, at the time of purchase, "Strong Buy 1" by Raymond
James analysts.
Raymond James & Associates, Inc.
Raymond James & Associates, Inc. is a wholly-owned subsidiary of Raymond James
Financial, Inc., a Florida-based holding company whose subsidiaries are engaged
in various financial services businesses including brokerage, trading,
investment banking, asset management and financial planning services. The firm
provides investment research, including the determination and dissemination of
securities rated SB-1 by Raymond James analysts. The firm's research department
supports the company's institutional and retail sales efforts and publishes
research on approximately 600 companies.
Overview of Raymond James Equity Research
A variety of factors go into the research process used by Raymond James analysts
including an assessment of industry dynamics, interviews of company executives,
analysis of competition and information as available from suppliers,
distributors, major customers and other independent sources. Each stock in the
Raymond James coverage universe is assigned a rating of Strong Buy, Outperform,
Market Perform or Underperform. Raymond James prizes analyst independence,
objectivity, thorough analysis and integrity, believing that value-added
analysis and independent judgment are critical elements in the quest for
superior investment performance. Raymond James equity analysts strive to
anticipate both positive and negative information and to respond accordingly
with timely changes in ratings, earnings estimates and price targets.
Claymore Advisors, LLC
The Fund is managed by Chuck Craig, who serves as Portfolio Manager of the Fund.
Claymore provides a continuous investment program for the Fund's portfolio and
executes the purchase and sale of securities on behalf of the Fund. Chuck Craig,
CFA, joined Claymore in May 2003. In addition to his role as Portfolio Manager
of the Fund and other funds managed by Claymore, Mr. Craig is involved in the
research, selection and development of new products for Claymore.
Annual Report | August 31, 2007 | 23
Claymore Securities, Inc.
2455 Corporate West Drive RYJ
Lisle, IL 60532 LISTED
Member FINRA/SIPC NYSE(R)
NOT FDIC-INSURED | NOT BANK- GUARANTEED | MAY LOSE VALUE
RYJ-AR-0807
|
SEMIANNUAL
REPORT
February 29, 2008
(unaudited)
|
Claymore/Raymond James |RYJ
SB-1 Equity Fund |
|
|
RAYMOND JAMES
Logo: Claymore(R)
www.claymore.com
... YOUR ROAD TO THE LATEST,
MOST UP-TO-DATE INFORMATION ABOUT THE
CLAYMORE/RAYMOND JAMES SB-1 EQUITY FUND
The shareholder report you are reading right now is just the beginning of the
story. Online at WWW.CLAYMORE.COM/RYJ, you will find:
o Daily, weekly and monthly data on share prices, distributions and more
o Portfolio overviews and performance analyses
o Announcements, press releases, special notices and tax characteristics
Raymond James 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 way we are working
to keep you better informed about your investment in the Fund.
2 SemiAnnual Report | February 29, 2008
RYJ | Claymore/Raymond James SB-1 Equity Fund
Dear SHAREHOLDER |
We are pleased to submit the semi-annual shareholder report for the
Claymore/Raymond James SB-1 Equity Fund (the "Fund"). This report covers
performance for the Fund's semi-annual period ended February 29, 2008. As you
may know, the Fund's investment objective is to provide capital appreciation to
shareholders. Claymore Advisors, LLC is the Investment Adviser to the Fund; the
Fund's Sub-Adviser is Raymond James & Associates, Inc. ("Raymond James"). The
Fund seeks to achieve that objective by investing substantially all of its net
assets in the equity securities that are rated, at the time of purchase, "Strong
Buy 1" by Raymond James analysts.
Raymond James & Associates, Inc. is a wholly-owned subsidiary of Raymond James
Financial, Inc., a Florida-based holding company whose subsidiaries are engaged
in various financial services businesses including brokerage, trading,
investment banking, asset management and financial planning services. The firm's
research department supports the company's institutional and retail sales
efforts and publishes research on more than 600 companies.
This Fund provides investors with direct access to Raymond James' professional
equity research through a retail product. While there are no guarantees of
success, we have confidence in the stock research methodologies employed by
Raymond James analysts and are optimistic about the Fund's long-term prospects.
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 February 29, 2008, the Fund's return was negative, but in line with market
trends. The Fund's total return based on market value was -9.28%, which
represents a closing market price of $15.82 on February 29, 2008, versus $19.27
on August 31, 2007. On an NAV basis, the Fund generated a total return of
-11.45%. This represents an NAV of $17.53 on February 29, 2008, versus $21.67 on
August 31, 2007. The Fund's market price on February 29, 2008, represented a
market price discount to NAV of 9.75%; as of August 31, 2007, the discount was
11.08%. We believe that the Fund's market price discount to NAV represents an
opportunity, as common shares of the Fund continue to be available in the market
at prices below the value of the securities in the underlying portfolio.
When shares trade at a discount to NAV, the Dividend Reinvestment Plan ("DRIP")
takes advantage of the discount by reinvesting distributions 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 to NAV, the DRIP
reinvests participants' dividends 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 compounding returns over time.
Shareholders have the opportunity to reinvest their dividends from the Fund
through the DRIP, which is described in detail on page 20 of this report.
SemiAnnual Report | February 29, 2008 3
RYJ | Claymore/Raymond James SB-1 Equity Fund | DEAR SHAREHOLDER continued
The Fund paid an annual dividend of $1.84 per common share on December 31, 2007.
For tax purposes, approximately $1.51 of this distribution was classified as
ordinary income with the remaining $0.33 representing realized long-term capital
gains. A substantial portion of this ordinary income relates to realized
short-term capital gains. The Fund re-balances frequently as new securities are
added as the SB-1 or others are removed. As a result, a significant portion of
any realized gain/loss would likely relate to securities held for one-year or
less. Any short-term capital gain distributed by the Fund would be taxed as
ordinary income.
To learn more about the Fund's performance and investment strategy, we encourage
you to read the Questions & Answers section of the report, which begins on page
5. You will find information about what impacted the performance of the Fund
during the first half of the 2008 fiscal year and the Investment Adviser's views
on the market environment.
We appreciate your investment and look forward to serving your investment needs
in the future. For the most up-to-date information on your investment, please
visit the Fund's website at www.claymore.com/ryj.
Sincerely,
/s/ Nicholas Dalmaso
Nicholas Dalmaso
Claymore/Raymond James SB-1 Equity Fund
|
4 SemiAnnual Report | February 29, 2008
RYJ | Claymore/Raymond James SB-1 Equity Fund
QUESTIONS & ANSWERS |
CHUCK R. CRAIG, CFA, PORTFOLIO MANAGER
Chuck Craig joined Claymore Securities, Inc., an affiliate of Claymore Advisors,
LLC (either entity separately, or both entities together, "Claymore") in May
2003, and is a Managing Director, Portfolio Management and Supervision. Mr.
Craig is also a Portfolio Manager for Claymore's line of exchange-traded funds.
Additionally, he is involved in the screening, selection and development of the
firm's unit investment trusts and new products. Prior to joining Claymore, Mr.
Craig spent four years with First Trust Portfolios L.P. (formerly Nike
Securities) as an equity research analyst and portfolio manager within the
Equity Strategy Research Group. He has more than 10 years of investment industry
experience and is a CFA charterholder. He received an M.S. degree in Financial
Markets at the Illinois Institute of Technology and a B.S. in Finance from
Northern Illinois University. Mr. Craig served for eight years in the U.S. Air
Force, including six years at the White House Communications Agency serving
three U.S. presidents and their staffs.
Claymore Advisors, LLC is the Investment Adviser of the Claymore/Raymond James
SB-1 Equity Fund (the "Fund"). As Investment Adviser, Claymore manages the
investment and reinvestment of the Fund's assets and day-to-day activities of
the Fund as delegated by the Fund's Trustees. Below, Mr. Craig discusses the
Fund's performance for the six-month period ended February 29, 2008.
BEFORE WE DISCUSS PERFORMANCE, WILL YOU REMIND US OF THE FUND'S INVESTMENT
OBJECTIVE AND HOW THE FUND WAS DESIGNED TO SEEK THAT OBJECTIVE?
Claymore/Raymond James SB-1 Equity Fund is the only retail product that provides
investors with direct access to Raymond James & Associates, Inc.'s ("Raymond
James", the Fund's Sub-Adviser), professional equity selection of Strong Buy 1
("SB-1") securities. The Fund's investment objective is to provide capital
appreciation to investors. The Fund seeks to achieve that objective by investing
substantially all of its net assets in the equity securities that are rated, at
the time of purchase, a "Strong Buy 1" by Raymond James analysts. There are
currently four ratings categories used by Raymond James (Strong Buy, Outperform,
Market Perform or Underperform), with SB-1 being the highest rating. A rating of
SB-1 indicates generally that the Raymond James analyst assigning the rating
expects the stock to achieve certain total return targets over the next six
months and to outperform the S&P 500 Index over that period. For certain
higher-yielding equities, such as real estate investment trusts ("REITs") and
certain master limited partnerships ("MLPs"), the analyst anticipates the stock
to achieve certain total return targets over the next 12 months. Of course there
is no guarantee that the stocks rated SB-1 will produce positive returns. The
SB-1 ratings assigned by Raymond James analysts are not intended as guarantees
of investment performance of those rated securities or of the Fund, nor are the
SB-1 ratings an expectation or prediction of the performance of the Fund.
PLEASE TELL US ABOUT THE ECONOMIC AND MARKET ENVIRONMENT DURING THE SIX MONTHS
ENDED FEBRUARY 29, 2008.
The six-month period from August 31, 2007, through February 29, 2008, was a
period of considerable economic uncertainty and significant turmoil throughout
the capital markets. In the last few months of 2007, what began as a correction
in the U.S. housing market accelerated into a crisis in the sub-prime mortgage
market with profound implications for the entire economy. By early 2008, there
had been pronounced changes in attitudes toward risk in financial markets, as
demonstrated by wider credit spreads, severe dislocation in short-term credit
markets, overall tightening of financial conditions and an increasingly volatile
equity market. The Federal Reserve Board reduced interest rates five times
between September 2007 and January 2008, striving to strike a balance between
providing liquidity to financial markets and keeping inflation at a moderate
level. Even with this stimulus, recent trends in employment, consumer spending
and other indicators have led many economists to forecast that the U.S. will
experience a recession during 2008.
In this challenging economic environment, most U.S. equity indices posted
negative returns. Large-cap stocks performed better than small-cap stocks, as
investors demonstrated a preference for investments considered to be less risky.
Seven of the 10 sectors within the S&P 500 Index had negative returns; only the
energy, materials and consumer staples sectors posted positive returns. The
weakest sector was financials, followed by the telecommunication services and
consumer discretionary sectors.
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 months ended
February 29, 2008, the Fund's returns were negative, in line with market trends.
For this six-month period, the Fund's total return based on market price was
-9.28%; return on an NAV basis was -11.45%. For NAV performance comparison
purposes, the S&P 500 Index ("S&P 500" or the "Index") returned -8.79% for the
same time period. The S&P 500 is generally considered representative of the U.S.
large-cap stock market.Additionally, the S&P 400 MidCap Index returned
SemiAnnual Report | February 29, 2008 5
RYJ | Claymore/Raymond James SB-1 Equity Fund | QUESTIONS & ANSWERS continued
-8.05%. The S&P 400 MidCap Index is a market-capitalization weighted index
designed to represent U.S. companies of $1.5 billion to $5 billion
capitalization range and is a widely used measure of mid-size company U.S. stock
market performance.
On February 29, 2008, the Fund's closing market price was $15.82, and the NAV's
closing price was $17.53, reflecting a market price discount to NAV of 9.75%. On
August 31, 2007, the Fund's market price closed at $19.27 and its NAV was
$21.67, reflecting a market price discount to NAV of 11.08%.
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 market price 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.
WILL YOU TELL US MORE ABOUT RAYMOND JAMES' RESEARCH AND RANKING SYSTEM?
Raymond James' research department supports the company's institutional and
retail sales efforts and publishes research on more than 600 companies. The
firm's Equity Research Team is composed of more than 40 fundamental equity
analysts. The analysts examine each company's balance sheets, operations, sales,
earnings history, growth potential and management among other firm-specific
data. The analysts cover eight primary market sectors including communications,
consumer, energy, financial services, health care, industrial services, real
estate and technology. The work of the fundamental analysts is complemented by
technical and economic analysts, and is supported by nearly 60 research
associates and support staff.
The ratings assigned by Raymond James analysts represent such analysts'
judgments given available facts and public information and are not intended to
be guarantees of investment performance of rated securities or of the Fund. The
Raymond James Stock-Rating Guide serves as a guideline for the firm's equity
research analysts and is in no way indicative of the future performance of any
individual stock, industry sector or the Claymore/Raymond James SB-1 Equity
Fund.
HOW IS THE PORTFOLIO CONSTRUCTED AND HOW IS IT MAINTAINED TO REPRESENT THE
SUB-ADVISER'S STRONG BUY 1 PICKS?
The Fund employs a modified equal-weighting methodology, meaning the Fund seeks
to invest an equal percentage of the Fund's total assets in each SB-1 security,
within the constraints of the underlying securities. Occasionally, some of the
securities may exhibit relatively low liquidity. In those cases, the Fund may
take an initial position that is less than an equal weight in order to mitigate
the risk of adversely affecting the price of the less liquid security. At
rebalancing, the Fund seeks to bring portfolio securities to an equal weight.
While SB-1 ratings can potentially change every business day, we rebalance and
reconstitute the portfolio approximately every two weeks or twice monthly. We do
so in an effort to reduce turnover and transaction costs for the Fund. At the
time of reconstitution and rebalancing, we sell securities that are no longer
ranked SB-1, add securities not currently in the portfolio that have been
upgraded to an SB-1 ranking and adjust the portfolio in accordance with our
modified equal-weighting methodology.
WHAT ARE THE PORTFOLIO'S CURRENT AREAS OF EMPHASIS?
On February 29, 2008, the Fund's largest sector positions were in energy (18.8%
of total investments), health care (14.5% of total investments) and consumer
discretionary (12.1% of total investments). The portfolio held mainly common
stocks (91.8% of total investments) and MLPs (8.1% of total investments).
At the end of the period, small-capitalization companies represented
approximately 61% of total investments; mid-cap companies represented 18%; and
large-cap companies represented 20% of total investments. Cash and other
investments represented the remaining 1%. It is important to remember that the
Fund is rebalanced twice each month and these sector allocations and security
types can and do change.
WHAT ARE SOME FACTORS THAT INFLUENCED PERFORMANCE DURING THE PERIOD?
Although portfolio securities are selected based on Raymond James' rankings and
not by virtue of their market capitalization, industry or sector, some of these
factors did influence the Fund's performance.
6 SemiAnnual Report | February 29, 2008
RYJ | Claymore/Raymond James SB-1 Equity Fund | QUESTIONS & ANSWERS continued
The Fund's performance was helped by its underweight relative to the S&P 500 in
the financials sector, which was the worst performing sector in the Index. Stock
selection in the financials sector also contributed to performance, as the
portfolio did not hold some of the stocks that experienced very sharp declines.
Also positive was an overweight position relative to the Index in the energy
sector, which performed well. The Fund's overweight position in the information
technology sector, as well as stock selection in this sector, detracted from
performance. An underweight in the consumer staples sector detracted from
performance relative to the Index, although stock selection in this sector
contributed to performance.
WHAT WERE SOME OF THE SECURITIES THAT HELPED AND HURT THE FUND'S PERFORMANCE?
One of the top performing holdings was CONSOL Energy, Inc. (not held in the
portfolio at period end), which produces energy from coal and gas, serving the
electric power generation industry in the United States; this company's earnings
benefited from robust global demand for coal. Also positive was a position in
Walter Industries, Inc. (not held in the portfolio at period end), a diversified
industrial company with positions in natural resources and home construction.
Walter reported earnings well above analysts' estimates for the fourth quarter
of 2007. Another contributor was ICON plc (not held in the portfolio at period
end), a contract research organization based in Ireland that provides outsourced
development services on a global basis to the pharmaceutical, biotechnology and
medical device industries. ICON continued to expand, both organically and
through strategic acquisitions.
A position in Avanex Corporation (0.8% of total investments), which manufactures
and markets fiber optic-based products known as photonic processors, detracted
from performance. Avanex recently issued revenue and earnings forecasts for 2008
that were below analysts' prior estimates. Also negative was a position in PGT,
Inc. (0.1% of total investments), a manufacturer and supplier of residential
impact-resistant windows and doors; PGT's revenue and earnings have been hurt by
the weakness in residential construction, necessitating significant layoffs.
Another position that detracted from performance was NII Holdings, Inc. (0.8% of
total investments), which provides digital wireless communication services to
business customers in Latin American markets. This stock weakened despite strong
earnings reports and management's positive outlook for 2008.
PLEASE TELL US ABOUT THE FUND'S DISTRIBUTIONS?
The Fund's investment objective is to provide capital appreciation. The Fund
intends to pay substantially all of its net investment income to common
shareholders through annual distributions. In addition, the Fund intends to
distribute any net long-term capital gains to common shareholders as long-term
capital gain dividends at least annually. To the extent that the Fund realizes
net investment income, including short-term capital gains, on a more frequent
basis, the Fund may make more frequent distributions to its common shareholders.
On December 31, 2007, the Fund made a distribution of $1.84 per share. For tax
purposes, approximately $1.51 of this distribution was classified as ordinary
income with the remaining $0.33 representing realized long-term capital gains. A
substantial portion of this ordinary income relates to realized short-term
capital gains. The Fund re-balances frequently as new securities are added as
the SB-1 or others are removed. As a result, a significant portion of any
realized gain/loss would likely relate to securities held for one-year or less.
Any short-term capital gain distributed by the Fund would be taxed as ordinary
income.
DO YOU HAVE ANY OTHER COMMENTS FOR SHAREHOLDERS?
While the Fund's NAV return was negative over the past six months, NAV return
has been positive for the period since the Fund's inception date of May 19,
2006. There are of course no guarantees of success, but we have confidence in
the stock research methodologies employed by Raymond James analysts. The last
few months have been a challenging time for all equity investors, including
investors in closed-end funds, many of which currently sell at discounts to NAV.
The closed-end fund marketplace has experienced such sell-offs in the past, as
investors react based on market momentum rather than considering relative
strength or weakness in the underlying securities in the closed-end fund itself.
When considering performance, we encourage investors to take a long-term view.
Investment performance changes on a daily basis and the true test of a Fund's
success is whether it can stand the test of time. The market price of a Fund is,
of course, independent of its NAV. With that said, we hope that both the Fund's
NAV and its market price will improve in the future. Bear in mind, the Fund has
an automatic open-end conversion feature that seeks to address market price
discounts to the net asset value that are sometimes associated with closed-end
funds.
SemiAnnual Report | February 29, 2008 7
RYJ | Claymore/Raymond James SB-1 Equity Fund | QUESTIONS & ANSWERS continued
The Fund's Agreement and Declaration of Trust provides that (beginning after 18
months of operations from the inception date of May 19, 2006) if the Fund's
Common Shares close on the New York Stock Exchange ("NYSE") for 75 consecutive
trading days at a price that is a 10 % or greater discount from the NAV of the
Fund's common shares, the Fund will commence the process necessary to convert
the Fund into an open-end investment company. Although the Fund is required to
convene a special shareholder meeting at which the Fund's shareholders can vote
to maintain the Fund's status as a closed-end fund, there can be no assurance
that such a vote would be obtained. If such a vote is not obtained, the Fund
would convert automatically to an open-end fund and would no longer be listed on
the NYSE. The Fund's shares would be purchased and redeemed by the Fund at NAV
and the Fund could be required to commence a continuous offering of its shares
upon the conversion to an open-end fund.
RYJ RISKS AND OTHER CONSIDERATIONS
The Fund is a diversified, closed-end management investment company with a
limited history of operations and a limited history of public trading. An
investment in the Fund is subject to investment risk, including the possible
loss of the entire principal amount invested. An investment in the common shares
of the Fund represents an indirect investment in the securities and other
instruments owned by the Fund. The value of those securities and other
instruments may fluctuate, sometimes rapidly and unpredictably, and will affect
the value of the common shares.
The Fund's common shares may trade at a discount or a premium in relation to net
asset value. At any point in time, the common shares may be worth less than the
original investment, including the reinvestment of Fund dividends and/or
distributions. An investment in the common shares of the Fund is intended for
long-term investors and should not be considered a complete investment program.
Each common shareholder should take into account the Fund's investment objective
as well as the common shareholder's other investments when considering an
investment in the Fund. There can be no assurance that the Fund will achieve its
investment objective.
A principal risk of investing in the Fund is equity risk, which is the risk that
the value of the securities held by the Fund will fall due to general market and
economic conditions, perceptions regarding the industries in which the issuers
of securities held by the Fund participate or factors relating to specific
companies in which the Fund invests. An adverse event, such as an unfavorable
earnings report, a research downgrade, including one issued by the Sub-Adviser,
may depress the value of common stock of an issuer held by the Fund.
The Fund may invest in securities of issuers that have comparatively smaller
capitalizations relative to issuers whose securities are included in major
benchmark indices, which present unique investment risks. Equity securities of
smaller capitalization companies generally are less liquid than those of larger
companies.
Investments in securities of non-U.S. issuers involve special risks not
presented by investments in securities of U.S. issuers, including: (i) there may
be less publicly available information about non-U.S. issuers or markets due to
less rigorous disclosure or accounting standards or regulatory practices; (ii)
many non-U.S. markets are smaller, less liquid and more volatile than the U.S.
market; and (iii) potential adverse effects of fluctuations in currency exchange
rates or controls on the value of the Fund's investments.
Investing in REITs makes the Fund more susceptible to risks associated with the
ownership of real estate and with the real estate industry in general. These
risks can include fluctuations in the value of underlying properties; defaults
by borrowers or tenants; market saturation; changes in general and local
economic conditions; decreases in market rates for rents, increases in
competition, property taxes, capital expenditures, or operating expenses; and
other economic, political or regulatory occurrences affecting the real estate
industry.
An investment in MLP units involves risk that differs from a similar investment
in equity securities, such as common stock, of a corporation. Holders of MLP
units have rights typically afforded to limited partners in a limited
partnership. As compared to common shareholders of a corporation, holders of MLP
units have more limited control and limited rights to vote on matters affecting
the partnership. There are certain tax risks associated with an investment in
MLP units. Additionally, conflicts of interest may exist between common unit
holders and the general partner of an MLP; for example a conflict may arise as a
result of incentive distribution payments. The Fund will not invest more than
25% of its assets in MLPs.
The Fund is subject to management risk because it is an actively-managed
investment portfolio. The Investment Adviser will apply investment techniques
and risk analysis in making investment decisions for the Fund, but there can be
no guarantee that these will produce the desired results. There can be no
assurance that the Sub-Adviser will be successful in its analysis of stocks
upgraded to or downgraded from "SB-1"status. There are no assurances that
Raymond James will continue to provide equity research to the degree currently
provided by it, or that it will continue to provide research services at all.
Raymond James may decrease (i) the number of equity analysts that it employs,
(ii) the number of industries, or (iii) the number of issuers within an
industry, that such analysts cover.
An investment in the Fund is subject to certain risks and other considerations,
including, but not limited to: Industry and Sector Risk; Other Investment
Company Risk; Risks Relating to Raymond James Equity Securities Ratings; Risks
Associated with Other Business Activities of Raymond James; Investment Strategy
Risk; Market Discount Risk; Portfolio Turnover Risk; Strategic Transactions
Risk; and Current Developments Risk.
Investors should carefully consider the investment objective and policies, risk
considerations, charges and ongoing expenses of the Fund before investing.
8 SemiAnnual Report | February 29, 2008
RYJ | Claymore/Raymond James SB-1 Equity Fund
Fund SUMMARY | AS OF FEBRUARY 29, 2008 (unaudited)
FUND STATISTICS
Share Price $15.82
Common Share Net Asset Value $17.53
Premium/Discount to NAV -9.75%
Net Assets ($000) $194,969
--------------------------------------------------------------------------------
TOTAL RETURNS
--------------------------------------------------------------------------------
(Inception 5/19/06) Market NAV
--------------------------------------------------------------------------------
Six Month -9.28% -11.45%
One Year -3.68% -5.47%
Since Inception -
average annual -6.97% 0.57%
--------------------------------------------------------------------------------
|
Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
www.claymore.com. The investment return and principal value of an investment
will fluctuate with changes in market conditions and other factors so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
% OF TOTAL
PORTFOLIO BREAKDOWN* INVESTMENTS
--------------------------------------------------------------------------------
Energy 18.8%
Health Care 14.5%
Consumer Discretionary 12.1%
Industrials 11.2%
Financials 9.5%
Semiconductors 8.0%
Communications Equipment 6.8%
Telecommunications 6.6%
Software & Services 4.9%
Electronic Equipment & Instruments 4.8%
Consumer Staples 0.8%
Utilities 0.8%
Materials 0.8%
Computers & Peripherals 0.3%
Exchange Traded Funds 0.1%
--------------------------------------------------------------------------------
* Represents broad sectors and not specific industries.
% OF TOTAL
TOP TEN HOLDINGS INVESTMENTS
--------------------------------------------------------------------------------
Leap Wireless International, Inc. 1.0%
NTELOS Holdings Corp. 0.9%
Kendle International Inc. 0.9%
Continental Resources, Inc. 0.9%
Cogent, Inc. 0.9%
EMS Technologies, Inc. 0.9%
Stanley Furniture Co., Inc. 0.9%
MetroPCS Communications, Inc. 0.9%
Akamai Technologies, Inc. 0.9%
Whiting Petroleum Corp. 0.9%
--------------------------------------------------------------------------------
|
Sectors and holdings are subject to change daily. For more current information,
please visit www.claymore.com. The above summaries are provided for
informational purposes only and should not be viewed as recommendations. Past
performance does not guarantee future results.
Line Chart:
Share Price & NAV Performance
2/28/2007 15.68 17.52
15.57 17.4
15.9 17.76
16.07 17.91
15.9 17.73
16.19 18.06
16.57 18.45
16.45 18.29
15.96 17.74
15.8 17.5
15.97 17.73
15.94 17.69
16.15 17.84
16.16 17.93
16.46 18.27
16.12 17.9
16.13 17.79
16.15 17.81
16.26 17.98
15.97 17.62
15.97 17.64
16.25 17.97
16.42 18.19
16.42 18.19
16.34 17.96
2/29/2008 15.82 17.53
|
Pie Chart:
Holdings by Capitalization*
Asset Class
Small-cap 61%
Large-cap 20%
Mid-cap 18%
Cash and Other
Investments 1%
|
* As a percentage of total investments.
% OF TOTAL
ASSET ALLOCATION NET ASSETS
--------------------------------------------------------------------------------
Common Stocks 91.8%
Master Limited Partnerships 8.1%
Exchange Traded Funds 0.1%
Other Assets in excess of Liabilities 0.0%
--------------------------------------------------------------------------------
100.0%
--------------------------------------------------------------------------------
SemiAnnual Report | February 29, 2008 9
|
RYJ | Claymore/Raymond James SB-1 Equity Fund
Portfolio of INVESTMENTS | FEBRUARY 29, 2008 (unaudited)
NUMBER
OF SHARES DESCRIPTION VALUE
----------------------------------------------------------------
TOTAL INVESTMENTS - 100.0%
Common Stocks - 91.8%
Communications Equipment - 6.8%
115,500 ADC Telecommunications, Inc. (a) $1,578,885
1,976,900 Avanex Corp. (a) 1,603,266
60,100 EMS Technologies, Inc. (a) 1,730,279
29,500 Harris Corp. 1,440,485
122,200 JDS Uniphase Corp. (a) 1,606,930
81,900 KVH Industries, Inc. (a) 710,892
138,800 Motorola, Inc. 1,383,836
42,900 Nokia Corp. - ADR (Finland) 1,544,829
281,091 Orbcomm, Inc. (a) 1,602,219
----------------------------------------------------------------
13,201,621
----------------------------------------------------------------
COMPUTERS & PERIPHERALS - 0.3%
720,900 Concurrent Computer Corp. (a) 576,720
----------------------------------------------------------------
CONSUMER DISCRETIONARY - 12.1%
13,700 Autozone, Inc. (a) 1,576,596
35,700 Best Buy Co., Inc. 1,535,457
37,500 Carnival Corp. (Panama) 1,475,625
53,700 Culp, Inc. (a) 392,010
62,100 Dollar Tree, Inc. (a) 1,666,143
57,100 Ethan Allen Interiors, Inc. 1,555,404
56,300 Home Depot, Inc. 1,494,765
66,700 Lowe's Cos., Inc. 1,598,799
60,500 Marvel Entertainment, Inc. (a) 1,521,575
56,700 O'Reilly Automotive, Inc. (a) 1,528,632
308,000 Pier 1 Imports, Inc. (a) 1,613,920
37,600 Polaris Industries, Inc. 1,435,568
41,500 Royal Caribbean Cruises Ltd. (Liberia) 1,452,915
128,900 Stanley Furniture Co., Inc. 1,696,324
53,200 Urban Outfitters, Inc. (a) 1,531,096
17,800 WhirlPool Corp. 1,501,786
----------------------------------------------------------------
23,576,615
----------------------------------------------------------------
CONSUMER STAPLES - 0.8%
38,500 CVS Caremark Corp. 1,554,630
----------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 4.8%
46,200 Avnet, Inc. (a) 1,557,402
175,700 Cogent, Inc. (a) 1,757,000
96,200 Ingram Micro, Inc. - Class A (a) 1,468,974
86,100 Insight Enterprises, Inc. (a) 1,509,333
125,400 L-1 Identity Solutions, Inc. (a) 1,499,784
47,700 Tech Data Corp. (a) 1,590,795
----------------------------------------------------------------
9,383,288
----------------------------------------------------------------
NUMBER
OF SHARES DESCRIPTION VALUE
----------------------------------------------------------------
ENERGY - 11.5%
14,200 Apache Corp. $1,628,882
36,500 Cameron International Corp. (a) 1,550,520
63,100 Continental Resources, Inc. (a) 1,771,848
67,300 Delta Petroleum Corp. (a) 1,612,508
13,300 Diamond Offshore Drilling, Inc. 1,607,039
125,500 Harvest Natural Resources, Inc. (a) 1,538,630
68,700 InterOil Corp. (Canada) (a) 1,499,034
27,700 Lufkin Industries, Inc. 1,583,332
24,400 National Oilwell Varco, Inc. (a) 1,520,120
32,300 Noble Corp. (Cayman Islands) 1,587,545
21,500 Occidental Petroleum Corp. 1,663,455
18,600 Schlumberger Ltd. (Netherland Antilles) 1,607,970
11,415 Transocean, Inc. (Cayman Islands) 1,603,922
27,600 Whiting Petroleum Corp. (a) 1,689,672
----------------------------------------------------------------
22,464,477
----------------------------------------------------------------
FINANCIALS - 9.5%
33,700 Allstate Corp. (The) 1,608,501
30,861 American Physicians Service Group, Inc. 583,273
42,000 Argo Group International Holdings Ltd.
(Bermuda) (a) 1,571,640
134,239 Cardinal Financial Corp. 1,067,200
30,400 Chubb Corp. 1,547,360
117,800 CoBiz Financial, Inc. 1,447,762
169,148 First Bancorp (Puerto Rico) 1,529,098
120,100 First State Bancorporation 1,426,788
66,100 HCC Insurance Holdings, Inc. 1,590,366
89,500 New York Community Bancorp, Inc. 1,461,535
17,200 Nexity Financial Corp. (a) 130,376
68,100 Pinnacle Financial Partners, Inc. (a) 1,562,214
139,000 Popular, Inc. (Puerto Rico) 1,534,560
28,000 Reinsurance Group of America, Inc. 1,531,880
----------------------------------------------------------------
18,592,553
----------------------------------------------------------------
HEALTH CARE - 14.5%
34,400 Amedisys, Inc. (a) 1,471,632
26,100 Cardinal Health, Inc. 1,543,554
34,300 Cerner Corp. (a) 1,490,335
78,000 Eclipsys Corp. (a) 1,665,300
38,500 Forest Laboratories, Inc. (a) 1,531,145
137,900 HLTH Corp. (a) 1,632,736
67,071 IMS Health, Inc. 1,509,768
24,900 Johnson & Johnson 1,542,804
39,910 Kendle International Inc. (a) 1,788,367
273,800 NovaMed, Inc. (a) 1,097,938
122,300 Noven Pharmaceuticals, Inc. (a) 1,658,388
70,100 Pfizer, Inc. 1,561,828
35,200 Pharmaceutical Product Development, Inc. 1,586,464
100,808 Phase Forward, Inc. (a) 1,605,871
|
See notes to financial statements.
10 SemiAnnual Report | February 29, 2008
RYJ | Claymore/Raymond James SB-1 Equity Fund | PORTFOLIO OF INVESTMENTS
(unauditd) continued
NUMBER
OF SHARES DESCRIPTION VALUE
----------------------------------------------------------------
HEALTH CARE (CONTINUED)
54,400 Psychiatric Solutions, Inc. (a) $1,538,976
74,100 Schering-Plough Corp. 1,607,970
31,500 Universal Health Services, Inc. - Class B 1,682,730
37,900 Wyeth 1,653,198
----------------------------------------------------------------
28,169,004
----------------------------------------------------------------
INDUSTRIALS - 11.2%
100,400 Argon ST, Inc. (a) 1,631,500
158,500 Casella Waste Systems, Inc. - Class A (a) 1,567,565
33,300 Con-Way, Inc. 1,508,823
27,200 Harsco Corp. 1,536,528
110,900 Heartland Express, Inc. 1,550,382
51,400 Herman Miller, Inc. 1,533,262
91,800 Interface, Inc. - Class A 1,538,568
95,022 JA Solar Holdings Co. Ltd. - ADR
(Cayman Islands) (a) 1,357,864
118,400 Knoll, Inc. 1,667,072
33,500 Landstar System, Inc. 1,553,730
39,510 PGT, Inc. (a) 134,334
50,850 Republic Services, Inc. 1,552,451
52,700 Ryanair Holdings PLC - ADR (Ireland) (a) 1,506,166
22,800 Sunpower Corp. - Class A (a) 1,498,416
52,900 Waste Connections, Inc. (a) 1,606,044
----------------------------------------------------------------
21,742,705
----------------------------------------------------------------
MATERIALS - 0.8%
42,700 Scotts Miracle-Gro Co. (The) - Class A 1,519,693
----------------------------------------------------------------
SEMICONDUCTORS - 8.0%
90,200 Altera Corp. 1,543,322
66,800 Diodes, Inc. (a) 1,507,676
79,600 Intel Corp. 1,588,020
209,200 Micron Technology, Inc. (a) 1,573,184
70,650 Nvidia Corp. (a) 1,511,204
483,700 RF Micro Devices, Inc. (a) 1,523,655
188,300 Skyworks Solutions, Inc. (a) 1,555,358
52,000 Texas Instruments, Inc. 1,557,920
52,400 Trina Solar Ltd. - ADR
(Cayman Islands) (a) 1,664,748
72,500 Xilinx, Inc. 1,621,100
----------------------------------------------------------------
15,646,187
----------------------------------------------------------------
SOFTWARE & SERVICES - 4.9%
48,100 Akamai Technologies, Inc. (a) 1,691,196
416,500 Art Technology Group, Inc. (a) 1,407,770
38,800 Automatic Data Processing, Inc. 1,550,060
109,000 Interactive Intelligence, Inc. (a) 1,554,340
30,800 NCI, Inc. - Class A (a) 545,776
92,500 Nuance Communications, Inc. (a) 1,521,625
129,600 Switch & Data Facilities Co., Inc. (a) 1,354,320
----------------------------------------------------------------
9,625,087
----------------------------------------------------------------
NUMBER
OF SHARES DESCRIPTION VALUE
----------------------------------------------------------------
TELECOMMUNICATIONS - 6.6%
288,300 Centennial Communications Corp. (a) $1,519,341
36,400 Embarq Corp. 1,526,616
43,500 Leap Wireless International, Inc. (a) 1,860,060
106,300 MetroPCS Communications, Inc. (a) 1,695,485
37,900 NII Holdings, Inc. (a) 1,505,767
83,925 NTELOS Holdings Corp. 1,790,120
189,360 PAETEC Holding Corp. (a) 1,461,859
49,100 SBA Communications Corp. - Class A (a) 1,524,555
----------------------------------------------------------------
12,883,803
----------------------------------------------------------------
TOTAL COMMON STOCKS - 91.8%
(Cost $188,063,138) 178,936,383
----------------------------------------------------------------
MASTER LIMITED PARTNERSHIPS - 8.1%
ENERGY - 7.3%
48,300 Energy Transfer Equity L.P. 1,606,458
32,500 Energy Transfer Partners L.P. 1,557,400
51,300 Enterprise Products Partners L.P. 1,588,761
54,400 Inergy L.P. 1,589,024
61,000 Magellan Midstream Holdings L.P. 1,568,920
65,900 Targa Resources Partners L.P. 1,597,416
50,900 Teekay LNG Partners L.P.
(Marshall Islands) 1,529,545
62,079 Teekay Offshore Partners L.P.
(Marshall Islands) 1,572,461
43,800 Williams Partners L.P. 1,626,294
----------------------------------------------------------------
14,236,279
----------------------------------------------------------------
UTILITIES - 0.8%
37,500 Suburban Propane Partners L.P. 1,539,750
----------------------------------------------------------------
TOTAL MASTER LIMITED PARTNERSHIPS - 8.1%
(Cost $13,727,826) 15,776,029
----------------------------------------------------------------
EXCHANGE TRADED FUNDS - 0.1%
1,300 Midcap SPDR Trust Series 1
(Cost $186,630) 187,525
----------------------------------------------------------------
TOTAL INVESTMENTS - 100.0%
(Cost $201,977,594) 194,899,937
Other Assets in excess
of Liabilities - 0.0% 69,361
----------------------------------------------------------------
NET ASSETS - 100.0% $194,969,298
================================================================
|
ADR - American Depositary Receipts
L.P. - Limited Partnership
(a) Non-income producing security.
Securities are classified by sectors that represent broad groupings of related
industries.
See notes to financial statements.
SemiAnnual Report | February 29, 2008 11
RYJ | Claymore/Raymond James SB-1 Equity Fund
Statement of ASSETS AND LIABILITIES | FEBRUARY 29, 2008 (unaudited)
ASSETS
Investments in securities, at value (cost $201,977,594) $194,899,937
Cash 181,036
Receivable for securities sold 803,163
Dividends receivable 143,067
Other assets 1,753
---------------------------------------------------------------------------------------------------------------
Total assets 196,028,956
---------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for securities purchased 801,292
Advisory fee payable 134,081
Administration fee payable 4,334
Accrued expenses and other liabilities 119,951
---------------------------------------------------------------------------------------------------------------
Total liabilities 1,059,658
---------------------------------------------------------------------------------------------------------------
NET ASSETS $194,969,298
===============================================================================================================
COMPOSITION OF NET ASSETS
Common stock, $.01 par value per share; unlimited number of shares authorized,
11,122,822 shares issued and outstanding $ 111,228
Additional paid-in capital 211,744,333
Accumulated net unrealized depreciation on investments (7,077,657)
Accumulated net realized loss on investments (9,663,287)
Accumulated net investment loss (145,319)
---------------------------------------------------------------------------------------------------------------
Net Assets $194,969,298
===============================================================================================================
NET ASSET VALUE (based on 11,122,822 common shares outstanding) $ 17.53
===============================================================================================================
|
See notes to financial statements.
12 SemiAnnual Report | February 29, 2008
RYJ | Claymore/Raymond James SB-1 Equity Fund
Statement of OPERATIONS | FOR THE SIX MONTHS ENDED FEBRUARY 29, 2008 (unaudited)
INVESTMENT INCOME
Dividends (net of return of capital distributions received of $470,715) $ 922,528
Interest 8,031
---------------------------------------------------------------------------------------------------------------
Total income $ 930,559
---------------------------------------------------------------------------------------------------------------
EXPENSES
Advisory fee 955,840
Professional fees 67,389
Printing expenses 36,371
Fund accounting 33,436
Trustees' fees and expenses 30,491
Administration fee 29,915
Custodian fee 24,413
NYSE listing 10,556
Insurance 10,003
Transfer agent fee 9,328
Miscellaneous 4,361
---------------------------------------------------------------------------------------------------------------
Total expenses 1,212,103
---------------------------------------------------------------------------------------------------------------
Net investment loss (281,544)
---------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss on investments (1,131,186)
Net change in unrealized depreciation on investments (24,149,529)
---------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS (25,280,715)
---------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(25,562,259)
===============================================================================================================
|
See notes to financial statements.
SemiAnnual Report | February 29, 2008 13
RYJ | Claymore/Raymond James SB-1 Equity Fund
Statement of CHANGES IN NET ASSETS |
FOR THE
SIX MONTHS ENDED FOR THE
FEBRUARY 29, 2008 YEAR ENDED
(UNAUDITED) AUGUST 31, 2007
----------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
Net investment loss $ (281,544) $ (567,519)
Net realized gain (loss) on investments (1,131,186) 14,886,062
Net change in unrealized appreciation (depreciation) on investments (24,149,529) 14,920,272
----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations (25,562,259) 29,238,815
----------------------------------------------------------------------------------------------------------------
Distributions to Common Shareholders
From and in excess of net realized gain (20,465,993) (1,223,510)
----------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (46,028,252) 28,015,305
NET ASSETS
Beginning of period 240,997,550 212,982,245
----------------------------------------------------------------------------------------------------------------
End of period (including accumulated undistributed net investment
income (loss) of ($145,319) and $136,225, respectively) $194,969,298 $240,997,550
================================================================================================================
|
See notes to financial statements.
14 SemiAnnual Report | February 29, 2008
RYJ | Claymore/Raymond James SB-1 Equity Fund
Statement of FINANCIAL HIGHLIGHTS |
FOR THE FOR THE PERIOD
SIX MONTHS ENDED FOR THE MAY 19, 2006*
PER SHARE OPERATING PERFORMANCE FEBRUARY 29, 2008 YEAR ENDED THROUGH
FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD (UNAUDITED) AUGUST 31, 2007 AUGUST 31, 2006
------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 21.67 $ 19.15 $ 19.10(b)
------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment loss(a) (0.03) (0.05) (0.00)(c)
Net realized and unrealized gain (loss) on investments (2.27) 2.68 0.09
------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (2.30) 2.63 0.09
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM AND IN EXCESS OF NET REALIZED GAIN (1.84) (0.11) -
------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 17.53 $ 21.67 $ 19.15
------------------------------------------------------------------------------------------------------------------------------------
MARKET VALUE, END OF PERIOD $ 15.82 $ 19.27 $ 17.50
------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN(d)
Net asset value (11.45)% 13.78% 0.26%
Market value (9.28)% 10.77% (12.50)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $194,969 $240,998 $212,982
Ratio of net expenses to average net assets 1.08%(e) 1.09% 1.12%(e)
Ratio of net investment loss to average net assets (0.25)%(e) (0.06)% (0.06)%(e)
Portfolio turnover rate 68% 166% 41%
|
* Commencement of investment operations.
(a) Based on average shares outstanding during the period.
(b) Before deduction of offering expenses charged to capital.
(c) Amount is less than $0.01.
(d) 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.
(e) Annualized.
See notes to financial statements.
SemiAnnual Report | February 29, 2008 15
RYJ | Claymore/Raymond James SB-1 Equity Fund
Notes to FINANCIAL STATEMENTS | FEBRUARY 29, 2008 (unaudited)
Note 1 - ORGANIZATION:
Claymore/Raymond James SB-1 Equity Fund (the "Fund") was organized as a Delaware
statutory trust on March 7, 2006. The Fund is registered as a diversified,
closed-end management investment company under the Investment Company Act of
1940, as amended (the "Act").
The Fund's investment objective is to provide capital appreciation. There can be
no assurance that the Fund will achieve its investment objective. Under normal
market conditions, the Fund will invest substantially all of its net assets in
equity securities that are rated, at the time of purchase, Strong Buy 1 ("SB-1")
by analysts employed by Raymond James & Associates, Inc. ("Raymond James"). For
purposes of the Fund's investment policies, in the event a security is
downgraded by Raymond James and is no longer rated SB-1 subsequent to the
purchase of such security by the Fund, such security will be considered by the
Fund to be rated SB-1 until the next semi-monthly rebalancing and reconstitution
date following such downgrade. For as long as the word "SB-1" is in the name of
the Fund, the Fund will invest at least 80% of its net assets, plus the amount
of any borrowings for investment purposes, in equity securities rated SB-1. The
Fund's investment objective is considered fundamental and may not be changed
without the approval of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Fund.
The Fund's Declaration of Trust provides that (beginning after 18 months from
the date of the Prospectus) if the Fund's Common Shares close on the New York
Stock Exchange ("NYSE") for 75 consecutive trading days at a price that is a 10%
or greater discount from the net asset value of the Fund's Common Shares, the
Fund will commence promptly the process necessary to convert the Fund into an
open-end investment company. The Fund's Declaration of Trust provides that in
such event a special meeting of shareholders of the Fund would be convened and
that the Fund would automatically be converted to an open-end fund unless a
majority of the outstanding voting securities of the Fund affirmatively vote to
maintain the Fund's status as a closed-end fund.
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 the significant accounting policies followed by
the Fund.
(a) Valuation of Investments
The Fund values equity securities at the last reported sale price on the
principal exchange or in the principal OTC market in which such securities are
traded, as of the close of regular trading on the NYSE on the day the securities
are being valued or, if there are no sales, at the mean between the last
available bid and asked prices on that day. Securities traded on NASDAQ are
valued at the NASDAQ Official Closing Price. Debt securities are valued at the
last available bid price for such securities or, if such prices are not
available, at prices for securities of comparable maturity, quality and type.
For those securities where quotations or prices are not available, valuations
are determined in accordance with procedures established in goodfaith by the
Board of Trustees. Short-term securities with maturities of 60 days or less at
time of purchase are valued at amortized cost, which approximates market value.
(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 net of applicable withholding taxes on the ex-dividend date
and interest income is recorded on an accrual basis. Discounts or premiums on
debt securities purchased are accreted or amortized to interest income over the
lives of the respective securities using the effective interest method.
The Fund records the character of dividends received from MLPs based on
estimates made at the time such distributions are received. These estimates are
based upon a historical review of information available from each MLP and other
industry sources. The Fund's characterization of the estimates may subsequently
be revised based on information received from MLPs after their tax reporting
periods conclude.
(c) Distributions
The Fund intends to pay substantially all of its net investment income to Common
Shareholders at least annually. In addition, the Fund intends to distribute any
capital gains to Common Shareholders at least annually. To the extent that the
Fund realizes net investment income, including short-term capital gains, on a
more frequent basis, the Fund may make more frequent distributions to its Common
Shareholders.
Note 3 - INVESTMENT ADVISORY AGREEMENT, SUB-ADVISORY AGREEMENT AND
OTHER AGREEMENTS:
Pursuant to an Investment Advisory Agreement (the "Agreement") between the Fund
and Claymore Advisors, LLC (the "Adviser"), the Adviser provides a continuous
investment program for the Fund's portfolio; executes recommendations for the
purchase and sale of securities; furnishes offices, necessary facilities and
equipment; provides administrative services to the Fund; oversees the activities
of Raymond James (the Fund's "Sub-Adviser"); provides personnel, including
certain officers required for its administrative management; and pays the
compensation of all officers and Trustees of the Fund who are its affiliates.
As compensation for its services, the Fund pays the Adviser a fee, payable
monthly, in an annual amount equal to 0.85% of the Fund's average daily Managed
Assets. "Managed Assets" of the Fund means the total assets of the Fund,
including the assets attributable to the proceeds from any borrowings or other
forms of financial leverage, minus liabilities, other than liabilities related
to any financial leverage.
Pursuant to a Sub-Advisory Agreement between the Fund, the Adviser, and the
Sub-Adviser, the Sub-Adviser, under the supervision of the Adviser and Fund's
Board of Trustees, provides investment research, including the determination and
dissemination of the securities rated SB-1 by Raymond James; may provide certain
facilities and personnel, including certain officers required for its
administrative management; and pays the compensation of all officers and
Trustees of the Fund who are its affiliates. As compensation for its services,
the Adviser pays the Sub-Adviser a fee, payable monthly, in an annual amount
equal to 0.35% of the Fund's average daily Managed Assets.
Under a separate Fund Administration agreement, the Adviser provides fund
administration services to the Fund. As compensation for services performed
under the Administration Agreement, the Adviser receives an administration fee
payable monthly at the annual rate set forth below as a percentage of the
average daily net assets of the fund. For the six months ended February 29,
2008, the Fund recognized expenses of approximately $29,900 for these services.
l6 SemiAnnual Report | February 29, 2008
RYJ | Claymore/Raymond James SB-1 Equity Fund | NOTES TO FINANCIAL STATEMENTS
(unaudited) continued
NET 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%
----------------------------------------------------------------
|
The Bank of New York Mellon ("BNY") acts as the Fund's accounting agent,
custodian and transfer agent. As accounting agent, BNY is responsible for
maintaining the books and records of the Fund's securities and cash. As
custodian, BNY is responsible for the custody of the Fund's assets. As transfer
agent, BNY is responsible for performing transfer agency services for the Fund.
Certain officers and trustees of the Fund are also officers and directors of the
Adviser. The Fund does not compensate its officers or trustees who are officers
or directors of the Adviser.
Note 4 - FEDERAL INCOME TAXES:
The Fund intends 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 intends not to be
subject to U.S. federal excise tax.
Information on the components of investments as of February 29, 2008 is as
follows:
NET TAX
COST OF UNREALIZED
INVESTMENTS GROSS TAX GROSS TAX DEPRECIATION
FOR UNREALIZED UNREALIZED ON
TAX PURPOSES APPRECIATION DEPRECIATION INVESTMENTS
-------------------------------------------------------------------
$206,009,431 $11,476,354 ($22,585,848) ($11,109,494)
|
The differences between book basis and tax basis unrealized appreciation/
(depreciation) is attributable to the tax deferral of losses on wash sales and
tax adjustments related to master limited partnerships and real estate
investment trusts.
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 February 29, 2008.
The 2006 and 2007 tax years are still subject to examination by major
jurisdictions.
The tax character of distributions paid during the period ended August 31, 2007
was $1,223,510 of ordinary income.
Note 5 - INVESTMENTS IN SECURITIES:
For the six months ended February 29, 2008, the cost of purchases and proceeds
from sales of investments, other than short-term securities, were $152,962,960
and $172,445,999, respectively.
Note 6 - CAPITAL:
COMMON SHARES
The Fund has an unlimited amount of common shares, $0.01 par value, authorized
and 11,122,822 issued and outstanding. In connection with the Fund's dividend
reinvestment plan, the Fund did not issue any shares during the years ended
August 31, 2007 and 2006.
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 require
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 - ACCOUNTING PRONOUNCEMENTS:
In September, 2006, the FASB issued Statement of Financial Accounting Standards
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 is effective for financial statements issued for
fiscal years beginning after November 15, 2007 and interim periods within those
fiscal years. As of February 29, 2008, the Fund does not believe the adoption of
FAS 157 will impact the amounts reported in the financial statements, however,
additional disclosure will be required about the inputs used to develop
measurements of fair value and the effect of certain of the measurements
reported in the statement of operations for a fiscal period.
SemiAnnual Report | February 29, 2008 17
Supplemental INFORMATION | (unaudited)
TRUSTEES
The Trustees of the Claymore/Raymond James SB-1 Equity Fund and their principal
occupations during the past five years:
NAME, ADDRESS*, YEAR TERM OF OFFICE** PRINCIPAL OCCUPATION DURING NUMBER OF PORTFOLIOS
OF 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:
------------------------------------------------------------------------------------------------------------------------------------
Randall C. Barnes Since 2006 Investor (2001-present). Formerly, Senior 40 None.
Year of Birth: 1951 Vice President and Treasurer (1993-1997),
Trustee President, Pizza Hut International
(1991-1993) and Senior Vice President,
Strategic Planning and New Business
Development (1987-1990) of PepsiCo, Inc.
(1987-1997).
------------------------------------------------------------------------------------------------------------------------------------
Ronald A. Nyberg Since 2006 Partner of Nyberg & Cassioppi, LLC, a law 43 None.
Year of birth: 1953 firm specializing in corporate law, estate
Trustee planning and business transactions
(2000-present). Formerly, Executive Vice
President, General Counsel and Corporate
Secretary of Van Kampen Investments
(1982-1999).
------------------------------------------------------------------------------------------------------------------------------------
Ronald E. Toupin, Jr. Since 2006 Formerly, Vice President, Manager and 40 None.
Year of birth: 1958 Portfolio Manager of Nuveen Asset Management
Trustee (1998-1999), Vice President of Nuveen
Investment Advisory Corp. (1992-1999), Vice
President and Manager of Nuveen Unit
Investment Trusts (1991-1999), and Assistant
Vice President and Portfolio Manager of
Nuveen Unit Investment Trusts (1988-1999),
each of John Nuveen & Co., Inc. (1982-1999).
INTERESTED TRUSTEES:
------------------------------------------------------------------------------------------------------------------------------------
Nicholas Dalmaso+ Since 2006 Senior Managing Director and Chief 43 None.
Year of birth: 1965 Administrative Officer of Claymore Advisors,
Trustee and Chief Legal LLC and Claymore Securities, Inc.
and Executive Officer (2007-present). Formerly, Senior Managing
Director and General Counsel of Claymore
Group Inc., Claymore Advisors, LLC and
Claymore Securities, Inc. (2001-2007).
Assistant General Counsel, John Nuveen and
Co., Inc. (1999-2001). Former Vice President
and Associate General Counsel of Van Kampen
Investments, Inc. (1992-1999).
------------------------------------------------------------------------------------------------------------------------------------
|
* Address for all Trustees unless otherwise noted: 2455 Corporate West Drive,
Lisle, IL 60532
** After a Trustee's initial term, each Trustee is expected to serve a
two-year term concurrent with the class of Trustees for which he serves:
-Messrs. Nyberg and Toupin, as Class II Trustees, are expected to stand for
re-election at the Fund's 2008 annual meeting of shareholders.
-Messrs. Barnes and Dalmaso, as Class I Trustees, are expected to stand for
re-election at the Fund's 2009 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.
+ Mr. Dalmaso 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 Claymore
Advisors, LLC, the Fund's Investment Adviser.
18 SemiAnnual Report | February 29, 2008
RYJ | Claymore/Raymond James SB-1 Equity Fund | SUPPLEMENTAL INFORMATION
(unaudited) continued
OFFICERS
The officers of the Claymore/Raymond James SB-1 Equity Fund and their principal
occupations during the past five years:
NAME, ADDRESS*, YEAR OF BIRTH AND TERM OF OFFICE** AND PRINCIPAL OCCUPATION DURING THE PAST FIVE YEARS
POSITION(S) HELD WITH REGISTRANT LENGTH OF TIME SERVED AND OTHER AFFILIATIONS
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS:
------------------------------------------------------------------------------------------------------------------------------------
Steven M. Hill Since 2006 Senior Managing Director of Claymore Advisors, LLC and Claymore
Year of birth: 1964 Securities, Inc. (2005-present); Formerly, Chief Financial Officer of
Chief Financial Officer, Claymore Group, Inc. (2005-2006); Managing Director of Claymore
Chief Accounting Officer Advisors, LLC and Claymore Securities, Inc. (2003-2005); Treasurer of
and Treasurer Henderson Global Funds and Operations Manager for Henderson Global
Investors (NA) Inc., (2002-2003); Managing Director, FrontPoint
Partners LLC (2001-2002.
------------------------------------------------------------------------------------------------------------------------------------
Melissa J. Nguyen Since 2006 Vice President and Assistant General Counsel of Claymore Group, Inc.
Year of birth: 1978 (2005-present). Secretary of certain funds in the Fund Complex;
Secretary Formerly, Associate, Vedder, Price, Kaufman & Kammholz, P.C.
(2003-2005).
------------------------------------------------------------------------------------------------------------------------------------
Bruce Saxon Since 2006 Vice President, Fund Compliance Officer of Claymore Group, Inc.
Year of birth: 1957 (2006-present). Formerly, Chief Compliance Officer/Assistant Secretary
Chief Compliance of Harris Investment Management, Inc. (2003-2006). Director-Compliance
Officer of Harrisdirect LLC (1999-2003).
------------------------------------------------------------------------------------------------------------------------------------
James Howley Since 2006 Vice President, Fund Administration of Claymore Advisors, LLC
Year of birth: 1972 (2004-present). Formerly, Manager, Mutual Fund Administration of Van
Assistant Treasurer Kampen Investments, Inc. (1996-2004).
------------------------------------------------------------------------------------------------------------------------------------
|
* Address for all Officers: 2455 Corporate West Drive, Lisle, IL 60532
** 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 | February 29, 2008 19
RYJ | Claymore/Raymond James SB-1 Equity Fund
Dividend Reinvestment Plan | (unaudited)
Unless the registered owner of common shares elects to receive cash by
contacting the Plan Administrator, all dividends declared on common shares of
the Fund will be automatically reinvested by The Bank of New York Mellon (the
"Plan Administrator"), 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, The Bank of New York Mellon, P.O. Box 463, East Syracuse,
New York 13057-0463; Attention: Shareholder Services Department, Phone Number:
(866) 488-3559.
20 SemiAnnual Report | February 29, 2008
RYJ | Claymore/Raymond James SB-1 Equity Fund
Fund Information |
BOARD OF TRUSTEES
Randall C. Barnes
Nicholas Dalmaso*
Ronald A. Nyberg
Ronald E. Toupin, Jr.
* Trustee is an "interested person" of the Fund as defined in the Investment
Company Act of 1940, as amended.
OFFICERS
Steven M. Hill
Chief Financial Officer,
Chief Accounting Officer and Treasurer
Melissa J. Nguyen
Secretary
Bruce Saxon
Chief Compliance Officer
James Howley
Assistant Treasurer
INVESTMENT ADVISER
AND ADMINISTRATOR
Claymore Advisors, LLC
Lisle, Illinois
INVESTMENT SUB-ADVISER
Raymond James & Associates, Inc.
St. Petersburg, Florida
ACCOUNTING AGENT,
CUSTODIAN AND TRANSFER AGENT
The Bank of New York Mellon
New York, New York
LEGAL COUNSEL
Skadden, Arps, Slate,
Meagher & Flom LLP
Chicago, Illinois
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Ernst & Young LLP
Chicago, Illinois
PRIVACY PRINCIPLES OF CLAYMORE/RAYMOND JAMES SB-1 EQUITY FUND FOR SHAREHOLDERS
The Fund is committed to maintaining the privacy of its shareholders and to
safeguarding its non-public personal information. The following information is
provided to help you understand what personal information the Fund collects, how
we protect that information and why, in certain cases, we 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 the
shareholders to Claymore Advisors, LLC employees 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 CLAYMORE/RAYMOND JAMES SB-1 EQUITY 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 Custodian and Transfer Agent:
The Bank of New York Mellon, 111 Sanders Creek Parkway, East Syracuse,
New York 13057 (800) 701-8178
This report is sent to shareholders of Claymore/Raymond James SB-1 Equity 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) 889-3830 or on the Securities and Exchange Commission's website at
http://www.sec.gov.
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) 889-3830
or by accessing the Fund's Form N-PX on the Commission's website at
http://www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission 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
http://www.sec.gov. The Fund's Form N-Q may also be viewed and copied at the
Commission'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 by visiting the SEC website at http://www.sec.gov.
In August 2007, the Fund submitted a CEO annual certification to the 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.
SemiAnnual Report | February 29, 2008 21
RYJ | Claymore/Raymond James SB-1 Equity Fund
ABOUT THE FUND'S SUB-ADVISER AND PORTFOLIO MANAGER
Claymore/Raymond James SB-1 Equity Fund is sub-advised by Raymond James &
Associates, Inc. ("Raymond James") and managed by Claymore Advisors, LLC
("Claymore"). The Fund invests substantially all of its net assets in the equity
securities that are rated, at the time of purchase, "Strong Buy 1" by Raymond
James analysts.
RAYMOND JAMES & ASSOCIATES, INC.
Raymond James & Associates, Inc. is a wholly-owned subsidiary of Raymond James
Financial, Inc., a Florida-based holding company whose subsidiaries are engaged
in various financial services businesses including brokerage, trading,
investment banking, asset management and financial planning services. The firm
provides investment research, including the determination and dissemination of
securities rated SB-1 by Raymond James analysts. The firm's research department
supports the company's institutional and retail sales efforts and publishes
research on approximately 600 companies.
OVERVIEW OF RAYMOND JAMES EQUITY RESEARCH
A variety of factors go into the research process used by Raymond James analysts
including an assessment of industry dynamics, interviews of company executives,
analysis of competition and information as available from suppliers,
distributors, major customers and other independent sources. Each stock in the
Raymond James coverage universe is assigned a rating of Strong Buy, Outperform,
Market Perform or Underperform.
Raymond James prizes analyst independence, objectivity, thorough analysis and
integrity, believing that value-added analysis and independent judgment are
critical elements in the quest for superior investment performance. Raymond
James equity analysts strive to anticipate both positive and negative
information and to respond accordingly with timely changes in ratings, earnings
estimates and price targets.
CLAYMORE ADVISORS, LLC
The Fund is managed by Chuck Craig, who serves as Portfolio Manager of the Fund.
Claymore provides a continuous investment program for the Fund's portfolio and
executes the purchase and sale of securities on behalf of the Fund. Chuck Craig,
CFA, joined Claymore in May 2003. In addition to his role as Portfolio Manager
of the Fund and other funds managed by Claymore, Mr. Craig is involved in the
research, selection and development of new products for Claymore.
22 SemiAnnual Report | February 29, 2008
This Page Intentionally Left Blank
CLAYMORE SECURITIES, INC.
2455 Corporate West Drive
Lisle, IL 60532
Member FINRA/SIPC
NOT FDIC-INSURED | NOT BANK-GUARANTEED | MAY LOSE VALUE
RYJ
LISTED
NYSE
RYJ-SAR-0208
PART C: OTHER INFORMATION
ITEM 23. EXHIBITS:
(a)(1) Certificate of Trust.*
(a)(2) Amended and Restated Agreement and Declaration of Trust.**
(b) Bylaws of the Trust.**
(c) Not applicable.
(d)(1) Investment Advisory Agreement between the Trust and Claymore Advisors,
LLC.**
(d)(2) Expense Reimbursement Agreement between the Trust and Claymore
Advisors, LLC.****
(d)(3) Investment Subadvisory Agreement between Claymore Advisors, LLC and
Mellon Capital Management Corporation******
(e)(1) Distribution Agreement between the Trust and Claymore
Securities, Inc.**
(e)(2) Form of Participant Agreement.**
(f) Not applicable.
(g) Form of Custody Agreement between the Trust and The Bank of New
York.**
(h)(1) Administration Agreement between the Trust and Claymore Advisors,
LLC.**
(h)(2) Form of Transfer Agency Services Agreement between the Trust and The
Bank of New York.**
(h)(3) Form of Fund Accounting Agreement between the Trust and The Bank of New
York.***
(h)(4) Form of Sub-License Agreement between the Trust and Claymore Advisors,
LLC.***
(i) Opinion and consent of Clifford Chance US LLP.**
(j) Consent of Ernst & Young LLP, independent registered public accounting
firm.*****
(k) Not applicable.
(l) Not applicable.
(m) Distribution and Service Plan.****
(n) Not applicable.
(o) Not applicable
(p) Code of Ethics of the Trust and the Adviser.******
(q) Powers of attorney.********
* Previously filed as an exhibit to the Trust's Registration Statement on
Form N-1A (File Nos. 333-134551; 811-21906), filed with the Securities
and Exchange Commission on May 26, 2006.
** Previously filed as an exhibit to Pre-Effective Amendment No. 1 to the
Trust's Registration Statement on Form N-1A (File Nos. 333-134551;
811-21906), filed with the Securities and Exchange Commission on
September 15, 2006.
*** Previously filed as an exhibit to Post-Effective Amendment No. 2 to the
Trust's Registration Statement on Form N-1A (File Nos. 333-134551;
811-21906), filed with the Securities and Exchange Commission on
December 12, 2006.
**** Previously filed as an exhibit to Post-Effective Amendment No. 41 to
the Trust's Registration Statement on Form N-1A (File Nos. 333-134551;
811-219061, filed with the Securities and Exchange Commission on
December 31, 2007.
***** Filed herewith.
****** Previously filed as an exhibit to Post-Effective Amendment No. 47 to
the Trust's Registration Statement on Form N-1A (File Nos. 333-134551;
811-21906, filed with the Securities and Exchange Commission on
February 7, 2008.
******* Previously filed as an exhibit to Post-Effective Amendment No. 55 to
the Trust's Registration Statement on form N-1A (file Nos. 333-134551,
811-21906), filed with the Securities and Exchange Commision on June 2,
2008.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Immediately prior to the contemplated public offering of each Fund's
Shares, the following persons may be deemed individually to control a Fund or
the Trust:
Claymore Securities, Inc. will be the only shareholder immediately
prior to the contemplated public offering of each Fund.
ITEM 25. INDEMNIFICATION
Pursuant to Article VI of the Registrant's Agreement and Declaration of
Trust, the Trust has agreed to indemnify each person who at any time serves as a
Trustee or officer of the Trust (each such person being an "indemnitee") against
any liabilities and expenses, including amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and reasonable counsel fees
reasonably incurred by such indemnitee in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or criminal,
before any court or administrative or investigative body in which he may be or
may have been involved as a party or otherwise or with which he may be or may
have been threatened, while acting in any capacity set forth therein by reason
of his having acted in any such capacity, except with respect to any matter as
to which he shall not have acted in good faith in the reasonable belief that his
action was in the best interest of the Trust or, in the case of any criminal
proceeding, as to which he shall have had reasonable cause to believe that the
conduct was unlawful, provided, however, that no indemnitee shall be indemnified
hereunder against any liability to any person or any expense of such indemnitee
arising by reason of (i) willful misfeasance, (ii) bad faith, (iii) gross
negligence, or (iv) reckless disregard of the duties involved in the conduct of
his position (the conduct referred to in such clauses (i) through (iv) being
sometimes referred to herein as "disabling conduct"). Notwithstanding the
foregoing, with respect to any action, suit or other proceeding voluntarily
prosecuted by any indemnitee as plaintiff, indemnification shall be mandatory
only if the prosecution of such action, suit or other proceeding by such
indemnitee (1) was authorized by a majority of the Trustees or (2) was
instituted by the indemnitee to enforce his or her rights to indemnification
hereunder in a case in which the indemnitee is found to be entitled to such
indemnification. The rights to indemnification set forth in the Declaration of
Trust shall continue as to a person who has ceased to be a Trustee or officer of
the Trust and shall inure to the benefit of his or her heirs, executors and
personal and legal representatives. No amendment or restatement of the
Declaration of Trust or repeal of any of its provisions shall limit or eliminate
any of the benefits provided to any person who at any time is or was a Trustee
or officer of the Trust or otherwise entitled to indemnification hereunder in
respect of any act or omission that occurred prior to such amendment,
restatement or repeal.
Notwithstanding the foregoing, no indemnification shall be made
hereunder unless there has been a determination (i) by a final decision on the
merits by a court or other body of competent jurisdiction before whom the issue
of entitlement to indemnification hereunder was brought that such indemnitee is
entitled to indemnification hereunder or, (ii) in the absence of such a
decision, by (1) a majority vote of a quorum of those Trustees who are neither
"interested persons" of the Trust (as defined in Section 2(a)(19) of the 1940
Act) nor parties to the proceeding ("Disinterested Non-Party Trustees"), that
the indemnitee is entitled to indemnification hereunder, or (2) if such quorum
is not obtainable or even if obtainable, if such majority so directs,
independent legal counsel in a written opinion concludes that the indemnitee
should be entitled to indemnification hereunder.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT MANAGER
See "Management" in the Statement of Additional Information.
Information as to the directors and officers of the Adviser is included in its
Form ADV filed with the SEC and is incorporated herein by reference thereto.
ITEM 27. PRINCIPAL UNDERWRITERS
(a) Claymore Securities, Inc, is the Trust's principal
underwriter.
(b) The following is a list of the executive officers, directors
and partners of Claymore Securities, Inc.:
NAME AND PRINCIPAL
BUSINESS ADDRESS(1) POSITIONS AND OFFICES WITH UNDERWRITER
------------------- --------------------------------------
David C. Hooten Chief Executive Officer
Kevin M. Robinson Senior Managing Director, General Counsel and
Corporate Secretary
Michael J. Rigert Vice Chairman
Anthony J. DiLeonardi Vice Chairman
Bruce Albelda Senior Managing Director, Chief Financial
Officer
Anne S. Kochevar Senior Managing Director, Chief Compliance
Officer
Steven M. Hill Senior Managing Director
Christian Magoon President
J. Thomas Futrell Chief Investment Officer
Dominick Cogliandro Chief Operating Officer
----------------------
|
(1) The principal business address for all listed persons is 2455 Corporate
West Drive, Lisle, Illinois 60532.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
The accounts, books and other documents of the Registrant required to
be maintained by Section 31(a) of the Investment Company Act of 1940, as
amended, and the rules promulgated thereunder, are maintained in part at the
office of Claymore Advisors, LLC at 2455 Corporate West Drive, Lisle, Illinois
60532, and in part at the offices of the Transfer Agent at 101 Barclay Street,
New York, New York 10286.
ITEM 29. MANAGEMENT SERVICES
Not applicable.
ITEM 30. UNDERTAKINGS
Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Lisle and State of Illinois on the 3rd day of
September, 2008.
CLAYMORE EXCHANGE-TRADED FUND TRUST
By: /s/ J. Thomas Futrell
--------------------------------
J. Thomas Futrell
Chief Executive Officer
|
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
SIGNATURES TITLE DATE
* Trustee September 3, 2008
-------------------------------
Randall C. Barnes
* Trustee September 3, 2008
-------------------------------
Ronald A. Nyberg
* Trustee September 3, 2008
-------------------------------
Ronald E. Toupin, Jr.
* Trustee September 3, 2008
-------------------------------
Nicholas Dalmaso
Treasurer, Chief Financial September 3, 2008
/s/ Steven M. Hill Officer and Chief
------------------------------- Accounting Officer
Steven M. Hill
*/s/ Kevin M. Robinson September 3, 2008
-------------------------------
Kevin M. Robinson
|
Attorney-In-Fact, pursuant to power of attorney
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