UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE
14A-6(E)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-12
OLD MUTUAL/CLAYMORE LONG-SHORT FUND
(Name of Registrant As Specified in its Agreement and Declaration of Trust)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee Required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
PRELIMINARY PROXY STATEMENT - SUBJECT TO COMPLETION
[CLAYMORE LOGO]
OLD MUTUAL/CLAYMORE LONG-SHORT FUND
2455 CORPORATE WEST DRIVE
LISLE, ILLINOIS 60532
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 19, 2010
Notice is hereby given to the holders of common shares of beneficial
interest, par value $0.01 per share ("Shares"), of Old Mutual/Claymore
Long-Short Fund (the "Fund") that the annual meeting of shareholders of the Fund
(the "Annual Meeting") will be held at the offices of the Fund, 2455 Corporate
West Drive, Lisle, Illinois 60532, on Monday, July 19, 2010, at 11:30 a.m.,
Central time. Effective as of the close of business on Monday, June 21, 2010,
the Fund's name will change to "Guggenheim Enhanced Equity Income Fund."
The Annual Meeting is being held for the following purposes:
1. To approve an investment sub-advisory agreement among the Fund,
Claymore Advisors, LLC and Guggenheim Partners Asset Management, LLC.
2. To elect two Trustees as Class II Trustees to serve until the Fund's
2013 annual meeting of shareholders or until their respective
successors shall have been elected and qualified.
3. To transact such other business as may properly come before the Annual
Meeting or any adjournments or postponements thereof.
THIS IS A VERY IMPORTANT ANNUAL MEETING OF THE FUND. THE BOARD OF
TRUSTEES (THE "BOARD") OF THE FUND, INCLUDING ALL OF THE INDEPENDENT TRUSTEES,
RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF THE NEW SUB-ADVISORY AGREEMENT.
IN ADDITION, THE BOARD OF TRUSTEES (THE "BOARD") OF THE FUND, INCLUDING THE
INDEPENDENT TRUSTEES, UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR ALL" OF THE
NOMINEES FOR THE BOARD OF TRUSTEES LISTED IN THE ACCOMPANYING PROXY STATEMENT.
The Board has fixed the close of business on May 14, 2010 as the record
date (the "Record Date") for the determination of shareholders entitled to
notice of, and to vote at, the Annual Meeting. We urge you to mark, sign, date,
and mail the enclosed proxy in the postage-paid envelope provided or vote your
proxy via telephone or the Internet so you will be represented at the Annual
Meeting.
By order of the Board of Trustees,
/s/ J. Thomas Futrell
J. Thomas Futrell
Chief Executive Officer
Lisle, Illinois
June [ ], 2010
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING IN PERSON
OR BY PROXY. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE VOTE
YOUR PROXY BY TELEPHONE, INTERNET OR MAIL. IF VOTING YOUR PROXY BY MAIL PLEASE
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING POSTAGE-PAID
ENVELOPE. IF YOU ATTEND THE ANNUAL MEETING AND WISH TO VOTE IN PERSON, YOU WILL
BE ABLE TO DO SO AND YOUR VOTE AT THE ANNUAL MEETING WILL REVOKE ANY PROXY YOU
MAY HAVE SUBMITTED. MERELY ATTENDING THE ANNUAL MEETING, HOWEVER, WILL NOT
REVOKE ANY PREVIOUSLY SUBMITTED PROXY. YOUR VOTE IS EXTREMELY IMPORTANT. NO
MATTER HOW MANY OR HOW FEW SHARES YOU OWN, PLEASE SEND IN YOUR PROXY CARD (OR
VOTE YOUR PROXY BY TELEPHONE OR THROUGH THE INTERNET PURSUANT TO THE
INSTRUCTIONS CONTAINED ON THE PROXY CARD) TODAY.
(This page has been left blank intentionally)
OLD MUTUAL/CLAYMORE LONG-SHORT FUND
----------------------
PROXY STATEMENT
----------------------
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 19, 2010
This proxy statement ("Proxy Statement") is furnished to the holders of
common shares of beneficial interest, par value $0.01 per share ("Shares"), of
Old Mutual/Claymore Long-Short Fund (the "Fund") in connection with the
solicitation by the Board of Trustees of the Fund (the "Board") of proxies to be
voted at the annual meeting of shareholders of the Fund to be held on Monday,
July 19, 2010, and any adjournment or postponement thereof (the "Annual
Meeting"). The Annual Meeting will be held at the offices of the Fund, 2455
Corporate West Drive, Lisle, Illinois 60532 on July 19, 2010, at 11:30 a.m.,
Central time. Effective as of the close of business on Monday, June 21, 2010,
the Fund's name will change to "Guggenheim Enhanced Equity Income Fund."
This Proxy Statement gives you information you need to vote on the
matters listed on the accompanying Notice of Annual Meeting of Shareholders
("Notice of Annual Meeting"). Much of the information in this Proxy Statement is
required under rules of the Securities and Exchange Commission ("SEC").
You may contact the Fund's proxy information line at (866) 416-0552
with any questions about the Proxy Statement or with questions about how to
cast your vote.
THE FUND WILL FURNISH, WITHOUT CHARGE, A COPY OF THE FUND'S MOST RECENT
ANNUAL REPORT AND SEMI-ANNUAL REPORT TO SHAREHOLDERS TO ANY SHAREHOLDER UPON
REQUEST. REQUESTS SHOULD BE DIRECTED TO CLAYMORE SECURITIES, INC., 2455
CORPORATE WEST DRIVE, LISLE, ILLINOIS 60532, (866) 882-0688.
The Notice of Annual Meeting, this Proxy Statement and the enclosed
proxy card are first being sent to the Fund's shareholders on or about June [ ],
2010.
O WHY IS A SHAREHOLDER MEETING BEING HELD?
The Fund's Shares are listed on the New York Stock Exchange (the
"NYSE"), under the ticker symbol "OLA", which requires the Fund to hold
an annual meeting of shareholders to elect Trustees each fiscal year.
In addition, shareholders are being asked to approve an investment
sub-advisory agreement among the Fund, Claymore Advisors, LLC
("Claymore" or the "Adviser") and Guggenheim Partners Asset Management,
LLC ("GPAM" or the "Sub-Adviser").
O WHAT PROPOSALS WILL BE VOTED ON AT THE ANNUAL MEETING?
Shareholders of the Fund are being asked to vote on the following
proposals at the Annual Meeting:
1. To approve an investment sub-advisory agreement among the
Fund, the Adviser and GPAM.
2. To elect two Trustees as Class II Trustees (Mr. Steven D.
Cosler and Mr. Robert M. Hamje are the nominees) to serve
until the Fund's 2013 annual meeting of shareholders or until
their respective successors shall have been elected and
qualified.
1
O WHY ARE SHAREHOLDERS BEING ASKED TO APPROVE A NEW INVESTMENT
SUB-ADVISORY AGREEMENT?
After considering various strategic alternatives for the Fund, on April
20, 2010 the Board approved the termination of the investment
sub-advisory agreement (the "Analytic Sub-Advisory Agreement") among
the Fund, the Adviser and Analytic Investors, LLC ("Analytic"), and the
Adviser provided notice to Analytic of such termination, effective as
of June 21, 2010 or such earlier date as the Fund, the Adviser and
Analytic may agree. The Board approved an interim investment
sub-advisory agreement among the Fund, the Adviser and GPAM (the
"Interim Sub-Advisory Agreement"), to be entered into and become
effective upon the termination of the Analytic Sub-Advisory Agreement.
Pursuant to the Rule 15a-4 under the Investment Company Act of 1940, as
amended (the "1940 Act"), GPAM may act as investment sub-adviser
pursuant to the Interim Sub-Advisory Agreement for up to 150 days from
the termination of the Analytic Sub-Advisory Agreement, pending
shareholder approval of a new sub-advisory agreement among the Fund,
Claymore and GPAM (the "New Sub-Advisory Agreement"). In order for GPAM
to continue to act as investment sub-adviser to the Fund beyond such
interim period, the New Sub-Advisory Agreement must be approved by
shareholders of the Fund.
In connection with the retention of GPAM as investment sub-adviser, the
name of the Fund will change to "Guggenheim Enhanced Equity Income
Fund" effective on or about June 22, 2010. At such time, the Fund's
NYSE ticker symbol will change to "GPM" and the Fund's CUSIP will also
change.
O WHO IS GPAM?
GPAM, a wholly-owned subsidiary of Guggenheim Partners, LLC
("Guggenheim"), is an investment manager specializing in innovative
investment strategies that aim to add alpha relative to benchmarks in
both up and down markets. GPAM's investment philosophy is predicated
upon the belief that thorough research and independent thought are
rewarded with performance that has the potential to outperform
benchmark indexes with both lower volatility and lower correlation of
returns over time as compared to such benchmark indexes. GPAM manages
more than $29 billion in investments for a mix of individuals, family
offices, endowments, foundations, insurance companies and other
institutions. Claymore is also a wholly-owned subsidiary of Guggenheim
and is an affiliate of GPAM.
Guggenheim is a diversified financial services firm with wealth
management, capital markets, investment management and proprietary
investing businesses, whose clients are a mix of individuals, family
offices, endowments, foundations, insurance companies and other
institutions that have entrusted Guggenheim with the supervision of
more than $100 billion of assets.
O HOW WILL GPAM MANAGE THE FUND'S PORTFOLIO?
Pursuant to the Interim Sub-Advisory Agreement, GPAM will be
responsible for the management of the Fund's portfolio, subject to the
supervision of the Adviser and the Board. The Fund will continue to
seek its primary investment objective of seeking a high level of
current income and gains with a secondary objective of long-term
capital appreciation. While the Fund currently seeks to achieve its
investment objective through a long-short strategy and an opportunistic
covered call writing strategy, GPAM will manage the Fund utilizing a
covered call strategy developed by GPAM to seek to utilize efficiencies
from the tax characteristics of the Fund's portfolio. As of June 22,
2010, selling securities short will no longer be a principal investment
strategy of the Fund.
GPAM's covered call strategy will seek to follow a dynamic rules-based
methodology to obtain broadly diversified exposure to the equity
markets, either through investments that replicate the economic
characteristics of broadly diversified exposure to the equity markets,
including exchange-traded funds or other investment funds that track
equity market indices, or through investments in individual common
stocks along with other securities and instruments. The Fund will have
the ability to write call options on indices and/or securities which
will typically be at- or out-of-the money. GPAM's strategy typically
targets one-month options, although options of any strike price or
maturity may be utilized. The Fund
2
will seek to earn income and gains through both dividends paid by on
securities owned by the Fund and cash premiums received from selling
options. Although the Fund will receive premiums from the options
written, by writing a covered call option, the Fund forgoes any
potential increase in value of the underlying securities above the
strike price specified in an option contract through the expiration
date of the option. To the extent GPAM's strategy seeks to achieve
broad equity exposure through a portfolio of common stocks, the Fund
would hold a diversified portfolio of stocks, whereas to the extent
GPAM's equity exposure strategy is implemented through investment in
broad-based equity exchange-traded funds and other investment funds or
instruments, the Fund's portfolio may comprise fewer holdings. In
current market conditions, GPAM initially expects to seek to obtain
exposure to equity markets by investing primarily in a portfolio of
exchange-traded funds.
In connection with the implementation of GPAM's strategy, the Fund
intends to utilize financial leverage. The goal of the use of financial
leverage would be to enhance shareholder value, consistent with the
Fund's investment objective, and provide superior risk-adjusted
returns. The Fund may utilize financial leverage up to the limits
imposed by the 1940 Act. The Fund's use of financial leverage is
intended to be flexible in nature and will be monitored and adjusted,
as appropriate, by Claymore and GPAM. Under current market conditions,
the Fund initially intends to utilize financial leverage in an amount
not to exceed 30% of the Fund's total assets (including the proceeds of
such financial leverage) at the time utilized. The Fund expects to
employ financial leverage through the issuance of senior securities
represented by indebtedness, including through bank borrowing by the
Fund or issuance by the Fund of notes, commercial paper or other forms
of debt.
In addition, the Fund may engage in certain derivatives transactions
that have characteristics similar to such senior securities. To the
extent the terms of such transactions obligate the Fund to make
payments, the Fund will "segregate" liquid securities or cash in a
separate account with the custodian of the Fund to collateralize the
positions in an amount at least equal to the current value of the
amount then payable by the Fund under the terms of such transactions.
As a result of such segregation or cover, the Fund does not intend to
treat its obligations under such transactions as senior securities
representing indebtedness for purposes of the 1940 Act, in accordance
with releases and interpretive letters issued by the Securities and
Exchange Commission (the "SEC"), or include such transactions in
calculating the aggregate amount of the Fund's financial leverage.
The Fund may use a variety of derivative instruments (including both
long and short positions) for hedging or risk management purposes or as
part of its investment strategies, including options and futures
contracts, options on futures contracts, forward contracts and swap
agreements. The Fund may also purchase and sell forward contracts on
foreign currencies. The Fund also may use derivatives to gain exposure
to equity and other securities in which the Fund may invest. Generally,
derivatives are financial contracts whose value depends upon, or is
derived from, the value of any underlying asset, reference rate or
index, and may relate to, among others, individual securities, interest
rates, currencies and related indexes. The Fund's use of derivative
instruments involves risks different from, or possibly greater than,
the risks associated with investment directly in securities and other
more traditional investments.
In addition to the change in the Fund's investment strategy discussed
above, the Fund adopted the following non-fundamental investment
policy. Under normal market conditions, the Fund will invest at least
80% of its net assets, plus the amount of any borrowings for investment
purposes, in equity securities. If this policy is changed, the Fund
will provide shareholders at least 60 days' notice before
implementation of the change. Investments in exchange-traded funds and
other investment funds which invest primarily in equity securities and
in other instruments that provide exposure to equity markets will be
included as investments in equity securities for the purpose of this
policy.
O WHO WILL BE RESPONSIBLE FOR THE MANAGEMENT OF THE FUND'S PORTFOLIO?
The portfolio management personnel of the Sub-Adviser who will be
primarily responsible for the day-to-day management of the Fund's
portfolio are: Robert Daviduk, Managing Director and Senior Portfolio
3
Manager of the Sub-Adviser; Jayson Flowers, Managing Director of the
Sub-Adviser; Jamal Pesaran, Portfolio Sector Manager of the
Sub-Adviser; Farhan Sharaff, Assistant Chief Investment Officer,
Equities of the Sub-Adviser; and Scott Minerd, Chief Investment Officer
of the Sub-Adviser.
O IS THERE ANY CHANGE IN THE TOTAL MANAGEMENT FEES PAID BY THE FUND?
Yes. The investment advisory fee rate paid by the Fund will be reduced.
The Fund previously paid to the Adviser an investment advisory fee at
an annual rate equal to 1.00% of the average daily value of the Fund's
"total managed assets" (as defined in the investment advisory
agreement). Effective April 20, 2010, the Adviser and the Fund
contractually agreed to a permanent 0.10% reduction in the advisory
fee, such that the Fund pays to the Adviser an investment advisory fee
at an annual rate equal to 0.90% of the average daily value of the
Fund's "total managed assets." In addition, the Adviser and the Fund
contractually agreed that commencing as of the date of the Interim
Sub-Advisory Agreement and continuing during the term of the Interim
Sub-Advisory Agreement and New Sub-Advisory Agreement and for so long
as the investment sub-adviser of the Fund shall be an affiliated person
of the Adviser, the Adviser shall waive an additional 0.10% of the
advisory fee, such that the Fund will pay to the Adviser an investment
advisory fee at an annual rate equal to 0.80% of the average daily
value of the Fund's "total managed assets."
The Adviser pays the investment sub-advisory fee out of the advisory
fee received by the Adviser. The Adviser previously paid to Analytic a
sub-advisory fee equal to 0.50% of the Fund's "total managed assets."
Pursuant to the Interim Sub-Advisory Agreement and the New Sub-Advisory
Agreement, the Adviser will pay to GPAM a sub-advisory fee equal to
0.40% of the Fund's "total managed assets."
O WHAT WILL HAPPEN IF SHAREHOLDERS DO NOT APPROVE THE NEW SUB-ADVISORY
AGREEMENT?
If shareholders do not approve the New Sub-Advisory Agreement, the
Interim Sub-Advisory Agreement will terminate at the end of the 150 day
interim period and the Board will consider what action to take on
behalf of the Fund.
O WILL YOUR VOTE MAKE A DIFFERENCE?
YES! Your vote is important and could make a difference in the
governance of the Fund, no matter HOW many Shares you own.
O WHO IS ASKING FOR YOUR VOTE?
The enclosed proxy is solicited by the Board for use at the Annual
Meeting to be held on Monday, July 19, 2010, and, if the Annual Meeting
is adjourned or postponed, at any later meetings, for the purposes
stated in the Notice of Annual Meeting.
O HOW DOES THE BOARD RECOMMEND THAT SHAREHOLDERS VOTE ON THE PROPOSALS?
With respect to Proposal 1, the Board, including all of the Independent
Trustees, recommends that you vote "FOR" the proposal to approve the
New Sub-Advisory Agreement pursuant to Proposal 1.
With respect to Proposal 2, the Board, including the Independent
Trustees, unanimously recommends that you vote "FOR ALL" of the
nominees for the Board (Mr. Steven D. Cosler and Mr. Robert M. Hamje).
O WHO IS ELIGIBLE TO VOTE?
Shareholders of record of the Fund at the close of business on May 14,
2010 (the "Record Date") are entitled to be present and to vote at the
Annual Meeting or any adjournment or postponement thereof. Shareholders
will be entitled to one vote on each matter to be voted for each Share
of the Fund held and a
4
fractional vote with respect to fractional Shares, with no cumulative
voting.
O HOW DO YOU VOTE YOUR SHARES?
Whether or not you plan to attend the Annual Meeting, we urge you to
complete, sign, date, and return the enclosed proxy card in the
postage-paid envelope provided or vote your proxy via telephone or the
Internet so your Shares will be represented at the Annual Meeting.
Information regarding how to vote your proxy via telephone or the
Internet is included on the enclosed proxy card. The required control
number for Internet and telephone voting is printed on the enclosed
proxy card. The control number is used to match proxy cards with
shareholders' respective accounts and to ensure that, if multiple proxy
cards are executed, Shares are voted in accordance with the proxy card
bearing the latest date. If you wish to attend the Annual Meeting and
vote in person, you will be able to do so. You may contact the Fund's
proxy information line at (866) 416-0552 to obtain directions to the
site of the Annual Meeting.
All Shares represented by properly executed proxies received prior to
the Annual Meeting will be voted at the Annual Meeting in accordance
with the instructions marked thereon or otherwise as provided therein.
IF YOU SIGN THE PROXY CARD, BUT DON'T FILL IN A VOTE, YOUR SHARES WILL
BE VOTED IN ACCORDANCE WITH THE BOARD'S RECOMMENDATION. If any other
business is brought before the Annual Meeting, your Shares will be
voted at the proxies' discretion.
Shareholders who execute proxy cards or vote their proxies via
telephone or the Internet may revoke them at any time before they are
voted by filing with the Secretary of the Fund a written notice of
revocation, by delivering (including via telephone or the Internet) a
duly executed proxy bearing a later date or by attending the Annual
Meeting and voting in person. Merely attending the Annual Meeting,
however, will not revoke any previously submitted proxy.
Broker-dealer firms holding Shares in "street name" for the benefit of
their customers and clients will request the instructions of such
customers and clients on how to vote their Shares on the Proposals.
Under current interpretations of the New York Stock Exchange (the
"NYSE"), broker-dealers that are members of the NYSE and that have not
received instructions from a customer may not vote such customer's
Shares on Proposal 1. Broker-dealers who are not members of the NYSE
may be subject to other rules, which may or may not permit them to vote
your shares without instruction. Therefore, you are encouraged to
contact your broker and record your voting instructions.
You may contact the Fund's proxy information line at (866) 416-0552
with any questions about the Proxy Statement or with questions about
how to cast your vote.
O WHAT VOTE IS REQUIRED TO APPROVE THE PROPOSALS?
With respect to Proposal 1, the New Sub-Advisory Agreement must be
approved by a vote of a majority of the outstanding voting securities
of the Fund. The "vote of the majority of the outstanding voting
securities" is defined in the 1940 Act as the lesser of the vote of (i)
67% or more of the outstanding voting securities of the Fund entitled
to vote thereon present at the Annual Meeting or represented by proxy
if holders of more than 50% of the Fund's outstanding voting securities
are present or represented by proxy; or (ii) more than 50% of the
outstanding voting securities of the Fund entitled to vote thereon.
With respect to Proposal 2, the affirmative vote of a plurality of the
Shares voted is necessary to elect a Trustee nominee.
O HOW MANY SHARES OF THE FUND WERE OUTSTANDING AS OF THE RECORD DATE?
At the close of business on the Record Date, the Fund had 19,005,240
Shares outstanding.
5
PROPOSAL 1: APPROVAL OF NEW SUB-ADVISORY AGREEMENT
INTRODUCTION
Following the deliberations and considerations described below, on
April 20, 2010 the Board approved the termination of the Analytic Sub-Advisory
Agreement and the Adviser provided notice to Analytic of such termination,
effective as of June 21, 2010 or such earlier date as the Fund, the Adviser and
Analytic may agree. The Board approved the Interim Investment Sub-Advisory
Agreement among the Fund, the Adviser and GPAM, to be entered into and become
effective upon the termination of the Analytic Sub-Advisory Agreement. Pursuant
to the Interim Sub-Advisory Agreement, GPAM will serve as the Fund's investment
sub-advisor on an interim basis and will be responsible for the day-to-day
management of the Fund. Pursuant to Rule 15a-4 under the 1940 Act, GPAM may act
as investment sub-adviser pursuant to the Interim Sub-Advisory Agreement for up
to 150 days from the termination of the Analytic Sub-Advisory Agreement, pending
shareholder approval of the New Sub-Advisory Agreement among the Fund, Claymore
and GPAM. Therefore, in order for GPAM to continue to act as investment
sub-adviser to the Fund beyond such interim period, the New Sub-Advisory
Agreement must be approved by shareholders of the Fund.
In connection with the retention of GPAM as investment sub-adviser, the
name of the Fund will change to "Guggenheim Enhanced Equity Income Fund"
effective on or about June 22, 2010. At such time, the Fund's NYSE ticker symbol
will change to "GPM" and the Fund's CUSIP will also change.
ABOUT GPAM
GPAM, a wholly-owned subsidiary of Guggenheim Partners, LLC
("Guggenheim"), is an investment manager specializing in innovative investment
strategies that aim to add alpha relative to benchmarks in both up and down
markets. GPAM's investment philosophy is predicated upon the belief that
thorough research and independent thought are rewarded with performance that has
the potential to outperform benchmark indexes with both lower volatility and
lower correlation of returns over time as compared to such benchmark indexes.
GPAM manages more than $29 billion in investments for a mix of individuals,
family offices, endowments, foundations, insurance companies and other
institutions. Claymore is also a wholly-owned subsidiary of Guggenheim and is an
affiliate of GPAM.
Guggenheim is a diversified financial services firm with wealth
management, capital markets, investment management and proprietary investing
businesses, whose clients are a mix of individuals, family offices, endowments,
foundations, insurance companies and other institutions that have entrusted
Guggenheim with the supervision of more than $100 billion of assets.
INVESTMENT STRATEGY
Pursuant to the Interim Sub-Advisory Agreement, GPAM will be
responsible for the management of the Fund's portfolio, subject to the
supervision of the Adviser and the Board. The Fund will continue to seek its
primary investment objective of seeking a high level of current income and gains
with a secondary objective of long-term capital appreciation. While the Fund
currently seeks to achieve its investment objective through a long-short
strategy and an opportunistic covered call writing strategy, GPAM will manage
the Fund utilizing a covered call strategy developed by GPAM to seek to utilize
efficiencies from the tax characteristics of the Fund's portfolio. As of June
22, 2010, selling securities short will no longer be a principal investment
strategy of the Fund.
GPAM's covered call strategy will seek to follow a dynamic rules-based
methodology to obtain broadly diversified exposure to the equity markets, either
through investments that replicate the economic characteristics of broadly
diversified exposure to the equity markets, including exchange-traded funds or
other investment funds that track equity market indices, or through investments
in individual common stocks along with other securities and instruments. The
Fund will have the ability to write call options on indices and/or securities
which will typically be at- or out-of-the money. GPAM's strategy typically
targets one-month options, although options of any strike price or maturity may
be utilized. The Fund will seek to earn income and gains through both dividends
paid by on securities owned by the Fund and cash premiums received from selling
options. Although the Fund will receive premiums from the options written, by
writing a covered call option, the Fund forgoes any potential increase in value
of the underlying
6
securities above the strike price specified in an option contract through the
expiration date of the option. To the extent GPAM's strategy seeks to achieve
broad equity exposure through a portfolio of common stocks, the Fund would hold
a diversified portfolio of stocks, whereas to the extent GPAM's equity exposure
strategy is implemented through investment in broad-based equity exchange-traded
funds and other investment funds or instruments, the Fund's portfolio may
comprise fewer holdings. In current market conditions, GPAM initially expects to
seek to obtain exposure to equity markets by investing primarily in a portfolio
of exchange-traded funds.
In connection with the implementation of GPAM's strategy, the Fund
intends to utilize financial leverage. The goal of the use of financial leverage
would be to enhance shareholder value, consistent with the Fund's investment
objective, and provide superior risk-adjusted returns. The Fund may utilize
financial leverage up to the limits imposed by the 1940 Act. The Fund's use of
financial leverage is intended to be flexible in nature and will be monitored
and adjusted, as appropriate, by Claymore and GPAM. Under current market
conditions, the Fund initially intends to utilize financial leverage in an
amount not to exceed 30% of the Fund's total assets (including the proceeds of
such financial leverage) at the time utilized. The Fund expects to employ
financial leverage through the issuance of senior securities represented by
indebtedness, including through bank borrowing by the Fund or issuance by the
Fund of notes, commercial paper or other forms of debt.
In addition, the Fund may engage in certain derivatives transactions
that have characteristics similar to such senior securities. To the extent the
terms of such transactions obligate the Fund to make payments, the Fund will
"segregate" liquid securities or cash in a separate account with the custodian
of the Fund to collateralize the positions in an amount at least equal to the
current value of the amount then payable by the Fund under the terms of such
transactions. As a result of such segregation or cover, the Fund does not intend
to treat its obligations under such transactions as senior securities
representing indebtedness for purposes of the 1940 Act, in accordance with
releases and interpretive letters issued by the Securities and Exchange
Commission (the "SEC"), or include such transactions in calculating the
aggregate amount of the Fund's financial leverage.
The Fund may use a variety of derivative instruments (including both
long and short positions) for hedging or risk management purposes or as part of
its investment strategies, including options and futures contracts, options on
futures contracts, forward contracts and swap agreements. The Fund may also
purchase and sell forward contracts on foreign currencies. The Fund also may use
derivatives to gain exposure to equity and other securities in which the Fund
may invest. Generally, derivatives are financial contracts whose value depends
upon, or is derived from, the value of any underlying asset, reference rate or
index, and may relate to, among others, individual securities, interest rates,
currencies and related indexes. The Fund's use of derivative instruments
involves risks different from, or possibly greater than, the risks associated
with investment directly in securities and other more traditional investments.
In addition to the change in the Fund's investment strategy discussed
above, the Fund adopted the following non-fundamental investment policy. Under
normal market conditions, the Fund will invest at least 80% of its net assets,
plus the amount of any borrowings for investment purposes, in equity securities.
If this policy is changed, the Fund will provide shareholders at least 60 days'
notice before implementation of the change. Investments in exchange-traded funds
and other investment funds which invest primarily in equity securities and in
other instruments that provide exposure to equity markets will be included as
investments in equity securities for the purpose of this policy.
MANAGEMENT OF THE FUND
The portfolio management personnel of the Sub-Adviser who will be
primarily responsible for the day-to-day management of the Fund's portfolio are:
Robert Daviduk, Managing Director and Senior Portfolio Manager of the
Sub-Adviser; Jayson Flowers, Managing Director of the Sub-Adviser; Jamal
Pesaran, Portfolio Sector Manager of the Sub-Adviser; Farhan Sharaff, Assistant
Chief Investment Officer, Equities of the Sub-Adviser; and Scott Minerd, Chief
Investment Officer of the Sub-Adviser. Robert Daviduk will serve as the lead
portfolio manager of the Fund. The portfolio management personnel primarily
responsible for the day-to-day management of the Fund's portfolio are supported
by a team of equity analysts and risk managers.
Robert Daviduk. Bob Daviduk is a Managing Director and Senior Portfolio
Manager in the fixed-income group at Guggenheim and has over 25 years of
portfolio management experience. He is a member of the Portfolio
7
Construction Group and is the lead portfolio manager for several client
portfolios. Prior to joining Guggenheim in 2006, Mr. Daviduk was a Partner and
COO at Global Fixed-Income Partners, LLC (2005-2006), a money manager and hedge
fund. At Wells Capital Management (2002-2005), Mr. Daviduk was a Managing
Director and headed several investment teams responsible for the management of
$25 billion of fixed income assets across a full range of durations, asset
classes and credit qualities. Before that, Mr. Daviduk was a Senior Vice
President at Banc of America Capital Management, where he headed the firm's
structured product investments effort and earlier in his tenure he served as a
portfolio generalist responsible for managing numerous portfolios with
significant allocations to corporate and cross-over credits. Mr. Daviduk managed
the Nation's Short -Term Bond Fund, which was ranked in the top 10% of all funds
in its peer group. He also has managed municipal, high-yield, investment-grade
and non-dollar securities at Brown Brothers Harriman & Co. Mr. Daviduk earned
his MBA in Finance and International Business from New York University in 1992,
where he graduated first in his class, and earned his BS in Business
Administration and Accounting from Bucknell University in 1984.
Jayson Flowers. Mr. Flowers joined the Sub-Adviser in 2001, and serves
as the Managing Director of GPAM, heading Guggenheim's Equity and Derivative
Strategies. Mr. Flowers has more than 15 years experience in the financial
markets with concentration in risk management and trading across various sectors
of the capital structure. His investment experience ranges in expertise from
structured product investments and asset backed securities, to trading U.S.
Government agencies, foreign sovereign debt, commodities, indexed futures,
derivative and global equity arbitrage. Prior to working for the Sub-Adviser,
Mr. Flowers was a co-founder and partner of Adventure Capital, a boutique
venture capital and merchant banking company. Previously Mr. Flowers was at
Credit Suisse First Boston, Dominick & Dominick Inc, and Coopers & Lybrand. Mr.
Flowers holds a BA in Economics from Union College.
Jamal Pesaran. Mr. Pesaran is a Portfolio Sector Manager covering
equity and equity derivatives strategies. Prior to joining the Sub-Adviser, he
was with Lehman Brothers (2005-2007) and then HSBC Securities (2007-2008) in
equity derivatives sales covering hedge fund clients for the US and Pacific Rim
markets. Mr. Pesaran was an options market-maker and portfolio manager from
1996-2004 notably with Goldman Sachs' Hull Trading Group (1998-2001) and UBS
Investment Bank (2002-2004) in London and Frankfurt, respectively. Mr. Pesaran
holds his MBA from UCLA Anderson Graduate School of Business and a Bachelor of
Science degree in Economics from Bristol University (U.K.). Mr. Pesaran joined
Guggenheim in 2008.
Farhan Sharaff. Mr. Sharaff is the Assistant Chief Investment Officer,
Equities of GPAM. Mr.Sharaff has more than 20 years of experience in investment
research and investment management. Prior to joining the Sub-Adviser in June of
2009, he was a Partner and Chief Investment Officer at MJX Capital Advisors ( ),
a wealth management firm focused on providing advice and investment management
for its clients, especially in the traditional and alternative asset classes.
Prior to that, Mr. Sharaff served as the global Chief Investment Officer at
CIGNA Corporation ( ), Zurich Scudder Investments ( ) and Citigroup ( ). In all
of the above engagements, Mr. Sharaff was responsible for research, investment
management, product development and investment risk management. He was also a
member of the business management teams at Citigroup and Zurich Scudder. Mr.
Sharaff has a Bachelor of Science in Electrical Engineering from the University
of Aston (U.K.) and an MBA in Finance from the Manchester Business School
(U.K.). In addition, Mr. Sharaff sits on boards for CITIC Capital Asset
Management, Clarfeld Financial Advisors, and Transparent Value Trust.
Scott Minerd. Since 2001, Mr. Minerd has served as Chief Investment
Officer of the Sub-Adviser, guiding the investment strategies of the sector
portfolio managers. He was formerly a Managing Director with Credit Suisse First
Boston in charge of trading and risk management for the Fixed Income Credit
Trading Group. In this position, he was responsible for the corporate bond,
preferred stock, money markets, U.S. government agency and sovereign debt,
derivatives securities, structured debt and interest-rate swaps trading business
units. Previously, Mr. Minerd was Morgan Stanley's London-based European Capital
Markets Products Trading and Risk Manager responsible for Eurobonds, Euro-MTNs,
domestic European Bonds, FRNs, derivative securities and money market products
in 12 European currencies and Asian markets. Mr. Minerd has also held capital
markets positions with Merrill Lynch and Continental Bank and was a Certified
Public Accountant working for Price Waterhouse. Mr. Minerd holds a BS degree in
Economics from the Wharton School, University of Pennsylvania and has completed
graduate work at both the University of Chicago Graduate School of Business and
the Wharton School, University of Pennsylvania.
ANALYTIC SUB-ADVISORY AGREEMENT
8
Analytic previously served as the Fund's investment sub-adviser
pursuant to the Analytic Sub-Advisory Agreement. The Analytic Sub-Advisory
Agreement was most recently approved by the Board on September 29, 2009 and by
shareholders of the Fund on February 18, 2010.
On April 20, 2010 the Board approved the termination of the Analytic
Sub-Advisory Agreement and the Adviser provided notice to Analytic of such
termination, effective as of June 21, 2010 or such earlier date as the Fund, the
Adviser and Analytic may agree.
INTERIM SUB-ADVISORY AGREEMENT
Rule 15a-4 under the 1940 Act permits the Board (including a majority
of the Independent Trustees) to approve and enter into the Interim Sub-Advisory
Agreement pursuant to which GPAM may serve as investment sub-adviser to the Fund
for up to 150 days from the termination of the Analytic Sub-Advisory Agreement,
pending receipt of shareholder approval of the New Sub-Advisory Agreement.
Based upon the considerations described below under "--Board
Considerations," the Board, including the Independent Trustees, approved the
Interim Sub-Advisory Agreement on April 20, 2010. The Interim Sub-Advisory
Agreement will be entered into and become effective upon the termination of the
Analytic Sub-Advisory Agreement.
The compensation paid to GPAM under the Interim Sub-Advisory Agreement is less
than the compensation that would have been paid under the Analytic Sub-Advisory
Agreement.
There are no material differences between the terms of the Interim
Sub-Advisory Agreement and the terms of the New Sub-Advisory Agreement, except
that the Interim Sub-Advisory Agreement terminates upon the earlier of (i) the
150th day following the termination of the Analytic Sub-Advisory Agreement or
(ii) the effectiveness of the New Sub-Advisory Agreement.
NEW SUB-ADVISORY AGREEMENT
It is proposed that the Fund, the Adviser and GPAM enter into the New
Sub-Advisory Agreement, to become effective upon the date of shareholder
approval. Under Section 15(a) of the 1940 Act, the New Sub-Advisory Agreement
requires the approval of (i) the Board, including a majority of the Trustees who
are not "interested persons" of any party to the New Sub-Advisory Agreement, and
(ii) the shareholders of the Fund. Based upon the considerations described below
under "--Board Considerations," the Board, including all of the Independent
Trustees, approved the New Sub-Advisory Agreement on April 20, 2010.
Except as noted below, the terms of the New Sub-Advisory Agreement are
substantially similar to the terms of the Analytic Sub-Advisory Agreement. A
copy of the New Sub-Advisory Agreement is attached hereto as Appendix B and the
description of the New Sub-Advisory Agreement is qualified in its entirety by
reference to Appendix B.
Under the New Sub-Advisory Agreement, pursuant to the oversight and
supervision of the Adviser and the direction and control of the Board, GPAM will
perform certain of the day-to-day operations of the Fund which may include one
or more of the following services at the request of the Adviser: (i) managing
the investment and reinvestment of the Fund's assets in accordance with the
investment policies of the Fund; (ii) arranging for the purchase and sale of
securities and other assets for the Fund; (iii) providing investment research
and credit analysis concerning the Fund's assets; (iv) placing orders for
purchases and sales of the Fund's assets; (v) maintaining the books and records
as are required to support Fund investment operations; (vi) monitoring on a
daily basis the investment activities and portfolio holdings relating to the
Fund; and (vii) voting proxies relating to the Fund's portfolio securities in
accordance with GPAM's proxy voting policies and procedures. At the request of
the Adviser, GPAM will also, subject to the oversight and supervision of the
Adviser and the direction and control of the Board, consult with the Adviser as
to the overall management of the Fund's assets and the investment policies and
practices of the Fund. The nature of the services to be performed by GPAM
pursuant to the New Sub-Advisory Agreement are expected to be substantially
similar to the services performed by Analytic under the Analytic Sub-Advisory
Agreement.
9
The initial term of the New Sub-Advisory Agreement will be a period of
one year, upon approval by shareholders. The New Sub-Advisory Agreement shall
continue from year to year after the initial term if approved annually (i) by
the Board or the holders of a majority of the outstanding voting securities of
the Fund and (ii) by a majority of the Trustees who are not "interested persons"
of any party to the New Sub-Advisory Agreement, by vote cast in person at a
meeting called for the purpose of voting on such approval. These provisions of
the New Sub-Advisory Agreement are substantially similar to the corresponding
provisions of the Analytic Sub-Advisory Agreement.
The New Sub-Advisory Agreement provides that GPAM will not be liable
for any error of judgment or mistake of law or for any loss suffered by GPAM,
the Adviser or by the Fund (including, without limitation, by reason of the
purchase, sale or retention of any investments for the Fund) in connection with
the performance of GPAM's obligations under this Agreement, except a loss
resulting from GPAM's breach of fiduciary duty with respect to GPAM's receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or from
reckless disregard by it of its duties under the New Sub-Advisory Agreement.
These provisions of the New Sub-Advisory Agreement are substantially similar to
the corresponding provisions of the Analytic Sub-Advisory Agreement.
The New Sub-Advisory Agreement provides that pursuant to a Trademark
Sub-License Agreement between the Adviser and GPAM, GPAM has consented to the
use by the Fund of the name or identifying word "Guggenheim" in the name of the
Fund. Analytic had granted a similar consent in the Analytic Sub-Advisory
Agreement.
The New Sub-Advisory Agreement may be terminated by the Fund upon 60
days' notice to the Sub-Adviser provided that the termination is directed or
approved by (i) the vote of a majority of the Board then in office or (ii) the
vote of the holders of a majority of the voting securities of the Fund then
outstanding and entitled to vote. The New Sub-Advisory Agreement may also be
terminated by the Sub-Adviser upon 60 days' written notice to the Fund, and will
terminate automatically upon any termination of the investment advisory
agreement between the Fund and the Adviser. These provisions of the New
Sub-Advisory Agreement are substantially similar to the corresponding provisions
of the Analytic Sub-Advisory Agreement. Unlike the Analytic Sub-Advisory
Agreement, the New Sub-Advisory Agreement will also terminate upon termination
of the investment advisory agreement among the Fund and the Adviser.
SUB-ADVISORY FEE
The investment advisory fee rate paid by the Fund is lower as a result
of the Board's approval of the Interim Sub-Advisory Agreement and New
Sub-Advisory Agreement. The Fund previously paid to the Adviser an investment
advisory fee at an annual rate equal to 1.00% of the average daily value of the
Fund's "total managed assets" (as defined below). Effective April 20, 2010, the
Adviser and the Fund contractually agreed to a permanent 0.10% reduction in the
advisory fee, such that the Fund pays to the Adviser an investment advisory fee
at an annual rate equal to 0.90% of the average daily value of the Fund's "total
managed assets." In addition, the Adviser and the Fund contractually agreed that
commencing as of the date of the Interim Sub-Advisory Agreement and continuing
during the term of the Interim Sub-Advisory Agreement and New Sub-Advisory
Agreement and for so long as the investment sub-adviser of the Fund shall be an
affiliated person of the Adviser, the Adviser shall waive an additional 0.10% of
the advisory fee, such that the Fund will pay to the Adviser an investment
advisory fee at an annual rate equal to 0.80% of the average daily value of the
Fund's "total managed assets."
The Adviser pays the investment sub-advisory fee out of the advisory
fee received by the Adviser. The Adviser previously paid to Analytic a
sub-advisory fee equal to 0.50% of the Fund's "total managed assets." Pursuant
to the Interim Sub-Advisory Agreement and the New Sub-Advisory Agreement, the
Adviser will pay to GPAM a sub-advisory fee equal to 0.40% of the Fund's "total
managed assets."
"Total managed assets" is defined as (i) the net assets of the Fund
(including assets attributable to any preferred shares that may be outstanding)
plus (ii) any additional total assets of the Fund attributable to borrowings of
money, the use of reverse repurchase agreements or dollar rolls or the issuance
of debt securities (together "external borrowings"), without deducting
liabilities representing external borrowings.
10
ADDITIONAL INFORMATION REGARDING GPAM
Chief Executive Officer. The Chief Executive Officer of GPAM is Scott
Minerd, 100 Wilshire Boulevard, Suite 500, Santa Monica, California 90401.
Other Funds Advised by GPAM. As of the Record Date, GPAM acted as
investment sub-adviser with respect to one other registered investment company
having similar investment objectives as the Fund.
FUND MANAGED ASSETS SUB-ADVISORY FEE
Claymore/Guggenheim Strategic
Opportunities Fund ("GOF") $231 million(1) 0.50%
(1) As of May 28, 2010.
Relationships with the Fund. No officer or Trustee of the Fund is an
officer, employee, director, general partner or shareholder of GPAM or has any
material direct or indirect interest in GPAM or any other person controlling,
controlled by or under common control with GPAM. Officers of the Fund, as
disclosed herein under "Proposal 2: Election of Trustees--Executive Officers"
are employees or officers of the Adviser, an affiliate of GPAM.
No Trustee of the Fund had any material interest, direct or indirect,
in any material transactions since January 1, 2009, or in any material proposed
transactions, to which GPAM, or any affiliated person of GPAM, was or is to be a
party.
During the fiscal year ended December 31, 2009, the Fund paid the
following fees to the Adviser, an affiliate of GPAM:
Advisory fees: $1,775,699 (of which $887,849.50 was paid to Analytic as
sub-advisory fees)
Administration fees: $48,832
The Fund will continue to pay advisory fees and administration fees to
the Adviser following the effectiveness of the Interim Sub-Advisory Agreement
and New Sub-Advisory Agreement.
During the fiscal year ended December 31, 2009 the Fund paid no
commissions to brokers affiliated with GPAM.
BOARD CONSIDERATIONS
Selection of GPAM. In light of the Fund's underperformance relative to
applicable benchmarks, following the October 2009 quarterly Board meeting the
Board instructed Fund management to consider and evaluate various strategic
alternatives for the Fund and to recommend to the Board a course of action to be
considered. Among the alternatives examined by Fund management were liquidating
and terminating the Fund, merging the Fund into another fund, continuing the
Fund in its current format with the consideration of a tender offer and/or
temporary fee waiver, and retaining a new investment adviser and/or sub-adviser.
In evaluating the strategic alternatives presented by Fund management, factors
considered by the Board over the course of a series of formal and informal
meetings included the Fund's underperformance, the maintenance of the Fund's
dividend, the level of investment risk and the utilization of the Fund's capital
loss carryforward. Fund management had various discussions with the Board and/or
the Board's Nominating and Governance Committee (sometimes referred to as the
"Committee" and consisting solely of the Independent Trustees) regarding the
strategic alternatives and responded to requests from the Committee and counsel
to the Independent Trustees for additional information. Over the course of the
evaluation process, the Board received and considered information and proposals
from the Adviser, Analytic, Old Mutual Capital ("OmCap"), a subsidiary of
Analytic's parent company, Old Mutual (US) Holdings Inc., and from GPAM.
At a meeting held on January 20, 2010, each of the Adviser, OmCap and
Analytic presented to the Board its
11
respective proposal related to strategic alternatives for the Fund. The Board
considered the presentations of each of the Adviser, OmCap and Analytic, and
discussed the presentations both in executive session and with representatives
of each of the Adviser, OmCap and Analytic. Following that meeting, the
Committee requested that each of the Adviser and OmCap prepare and present
proposals regarding the ongoing management of the Fund, including
recommendations for changes in investment strategy desirable to manage an equity
fund that generates income, proposed managers to be considered as investment
sub-advisers and information on the selection process for recommending proposed
managers. The Committee considered the presentations of each of the Adviser and
OmCap at a meeting held on March 24, 2010, discussing the presentations both in
executive session and with representatives of each of the Adviser and OmCap.
The Adviser provided to the Committee an analysis of three potential
equity income investment strategies, which included long/short, 130/30 and
covered call strategies. The Adviser also described its systematic screening
process of the universe of potential managers. After reviewing Zephyr,
Morningstar/Fundamental Data, eVestment Alliance and Bloomberg to establish the
universe of potential managers, the Adviser commissioned its affiliate, Asset
Consulting Group, to utilize its proprietary database to further screen
potential managers. The Adviser then eliminated sector-specific strategies,
narrowly-focused strategies and strategies with poor historic performance. The
Adviser evaluated each remaining manager's performance with an emphasis placed
on attractive risk-adjusted returns and identified a preliminary list of
managers on which to perform additional analysis and ascertain their ability and
willingness to serve as investment sub-adviser to the Fund. The Adviser's
additional analysis considered performance and volatility metrics, experience,
capabilities and fees. Based on this analysis, the Adviser generated a list of
potential managers and a recommended manager in each category of long/short,
130/30 and covered call strategy.
OmCap provided the Board with information about its organization and
resources, its personnel and its ability to serve as investment adviser to the
Fund. In its presentation OmCap stated its belief that the Fund's investment
objective and current strategy should be maintained and offered a proposed
management fee reduction combined with elimination of the administrative
services contract for an overall reduction in operating expenses. OmCap's
proposal also noted enhanced after-market coverage and proposed a reduction of
the Fund's dividend to utilize the Fund's capital loss carryforward. OmCap
discussed its experience in overseeing sub-advisers. OmCap provided information
regarding its screening process and a number of potential 130/30 managers
considered pursuant to its screening process. OmCap discussed with the Board the
due diligence process that it would conduct with respect to such managers if it
were to be appointed as the Fund's investment adviser.
In light of the combined goals of improving the Fund's performance,
maintaining the Fund's dividend, potentially stabilizing and growing the Fund's
net asset value and allowing effective utilization of the Fund's capital loss
carryforward and based upon its evaluation of the Adviser's and OmCap's
presentations, the Committee determined by a majority vote not to recommend
replacement of the investment adviser. Thereafter, the Adviser further analyzed
the three potential investment strategies presented and subsequently recommended
to the Board that the Fund be managed using GPAM's covered call strategy and
that GPAM be retained as the Fund's new investment sub-adviser. The Committee
requested additional information regarding the proposed sub-advisory
arrangements with GPAM, including GPAM's portfolio management personnel, the
proposed fee structure and the proposed transition plan for the appointment of
GPAM, including costs associated with the transition and the allocation of such
costs. The Committee requested that additional information regarding the
Adviser's due diligence review and selection of GPAM be provided in light of
GPAM's affiliation with the Adviser.
The Committee met on April 7, 2010 and April 14, 2010 and the Board met
on April 19-20, 2010 to review the additional materials provided by the Adviser
and GPAM. The Board noted that each of GPAM and the Adviser is a wholly-owned
subsidiary of Guggenheim, a diversified financial services firm with wealth
management, capital markets, investment management and proprietary investing
businesses. The Board also considered the fact that the total management fees
paid by the Fund will be lower if the New Sub-Advisory Agreement with GPAM is
approved.
Board Approval of Interim Sub-Advisory Agreement and New Sub-Advisory
Agreement. On April 20, 2010, the Board, including the Independent Trustees,
considered the approval of the Interim Sub-Advisory Agreement and the New
Sub-Advisory Agreement. The Board's consideration included a unanimous
recommendation from the Committee that it was in the best interests of the Fund
to approve the termination of the Analytic Sub-Advisory Agreement and to approve
the Interim Sub-Advisory Agreement and the New Sub-Advisory Agreement with GPAM.
12
As part of its review and recommendation process, the Committee was represented
by independent legal counsel. The Board and the Committee reviewed materials
received from the Adviser, GPAM and independent legal counsel in connection with
the January 20-21, 2010, April 19-20, 2010 Board meetings and information
received by the Committee at meetings held on March 24, 2010, April 7, 2010 and
April 14, 2010.
During its meetings the Board considered various strategic alternatives
for the Fund in light of the Fund's underperformance relative to applicable
benchmarks. Among the alternatives considered but not selected by the Board were
liquidation and termination of the Fund, continuation of the Fund with the
implementation of a tender offer, implementation of a temporary fee waiver,
merger into another fund, and termination of the current investment adviser and
appointment of a new investment adviser.
The Board determined that it was in the best interests of the Fund to
terminate the Analytic Sub-Advisory Agreement and to approve the Interim
Sub-Advisory Agreement and the New Sub-Advisory Agreement with GPAM. In reaching
the conclusion to approve the Interim Sub-Advisory Agreement and the New
Sub-Advisory Agreement with GPAM, no single factor was determinative in the
Board's analysis, but rather the Board considered a variety of factors,
including the following.
With respect to the nature, extent and quality of services to be
provided by GPAM, the Board considered the qualifications, experience and skills
of GPAM's portfolio management and other key personnel. The Board considered
GPAM's ability to seek to achieve the Fund's investment objective of seeking a
high level of current income and gains with a secondary objective of long-term
capital appreciation, and noted information provided by the Adviser regarding
GPAM's performance relative to the performance of other advisers and funds
employing a covered call strategy. The Board considered the close collaboration
between the Adviser and GPAM, an affiliate of the Adviser, in re-examining the
Fund's investment strategy to allow the effective utilization of the capital
loss carryforward, maintenance of the dividend and the potential to stabilize
and grow the Fund's net asset value. The Board also considered that the Adviser
and GPAM intended that the Fund employ leverage, likely with a credit facility.
In evaluating investment performance, the Board reviewed information
provided by the Adviser including the return of GPAM's covered call strategy,
over the one, three and five year periods ended March 31, 2010 compared to the
returns of other open-end and closed-end covered call funds and the return of
the S&P 500 Index and the CBOE S&P 500 BuyWrite Index for the same periods.
The Board reviewed the sub-advisory fee proposed to be paid by the
Adviser to GPAM and compared it to the fees charged by GPAM to other accounts
with investment strategies comparable to the strategy proposed for the Fund. The
Board considered that the Adviser had proposed to contractually lower the
advisory fee by .10% and to lower the advisory fee by an additional .10%, as
long as an affiliate of the Adviser served as sub-adviser to the Fund, for a net
fee on managed assets of .80%.
With respect to the costs of services to be provided and profits to be
realized by GPAM from its relationship with the Fund, the Board reviewed
information regarding the projected revenues GPAM expects to receive under the
Sub-Advisory Agreement and estimated direct and indirect allocated expenses of
GPAM in providing services under the Sub-Advisory Agreement.
The Board considered that the Adviser had agreed that it, and not the
shareholders' would bear the expenses of seeking shareholder approval of the
change in sub-adviser.
The Board reviewed the extent to which economies of scale with respect
to the sub-advisory services provided to the Fund would be realized as the Fund
grows and whether fee levels reflect a reasonable sharing of such economies of
scale for the benefit of Fund investors. Given the size of the Fund and the
relatively fixed nature of closed-end fund assets, the Committee did not
anticipate significant economies of scale.
The Board considered other benefits to be derived by GPAM from its
relationship with the Fund. The Board noted GPAM's statement that it does not
enter into soft dollar arrangements and that it is not aware of any other
benefits from its relationship with the Fund other than it is an affiliate of
the Adviser.
13
Overall Conclusions. Based upon all of the information considered and
the conclusions reached, the Board determined that the terms of each of the
Interim Sub-Advisory Agreement and Sub-Advisory Agreement is fair and reasonable
and that the approval of each of the Interim Sub-Advisory Agreement and
Sub-Advisory Agreement is in the best interests of the Fund, taking into
consideration the costs of services to be provided and profit realized,
economies of scale and other benefits to GPAM.
SHAREHOLDER APPROVAL
The New Sub-Advisory Agreement must be approved by a vote of a majority
of the outstanding voting securities of the Fund. The "vote of a majority of the
outstanding voting securities" is defined in the 1940 Act as the lesser of the
vote of (i) 67% or more of the outstanding voting securities of the Fund
entitled to vote thereon present at the Annual Meeting or represented by proxy,
provided that the holders of more than 50% of the outstanding voting securities
of the Fund are present or represented by proxy; or (ii) more than 50% of the
outstanding voting securities of the Fund entitled to vote thereon. Abstentions
will have the same effect as votes against Proposal 1. "Broker non-votes" (i.e.
Shares held by brokers or nominees as to which (i) instructions have not been
received from the beneficial owner or the persons entitled to vote and (ii) the
broker does not have discretionary voting power on a particular matter) will
have the same effect as votes against Proposal 1.
BOARD RECOMMENDATION
The Board, including all of the Independent Trustees, recommends that
you vote "FOR" the approval of the New Sub-Advisory Agreement.
14
PROPOSAL 2: ELECTION OF TRUSTEES
The Fund's Shares are listed on the NYSE, which requires the Fund to
hold an annual meeting of shareholders to elect Trustees each fiscal year.
Shareholders of the Fund are being asked to elect two Trustee as Class II
Trustees (Mr. Steven D. Cosler and Mr. Robert M. Hamje are the nominees) to
serve until the Fund's 2013 annual meeting of shareholders or until their
respective successors shall have been elected and qualified.
COMPOSITION OF THE BOARD OF TRUSTEES
The Trustees of the Fund are classified into three classes: Class I
Trustees, Class II Trustees and Class III Trustees.
CLASS I TRUSTEES
-Mr. Matthew J. Appelstein and Mr. Randall C. Barnes are the Class I
Trustees. The term of the Class I Trustees of the Fund will continue
until the Fund's 2012 annual meeting of shareholders or until successors
shall have been elected and qualified.
CLASS II TRUSTEES
-Mr. Steven D. Cosler and Mr. Robert M. Hamje are the Class II Trustees.
Mr. Cosler and Mr. Hamje are standing for election at the Annual
Meeting. If elected, the term of the Class II Trustees will continue
until the Fund's 2013 annual meeting of shareholders or until successors
shall have been elected and qualified.
CLASS III TRUSTEES
-Mr. L. Kent Moore, Mr. Ronald A. Nyberg and Mr. Ronald E. Toupin, Jr.
are the Class III Trustees. The term of the Class I Trustees of the Fund
will continue until the Fund's 2011 annual meeting of shareholders or
until successors shall have been elected and qualified.
Generally, the Trustees of only one class are elected at each annual
meeting of shareholders, so that the regular term of only one class of Trustees
will expire annually and any particular Trustee stands for election only once in
each three year period. Each trustee nominee elected at the annual meeting as a
Class II Trustee of the Fund will hold office until the Fund's 2013 annual
meeting of shareholders or until his successor shall have been elected and
qualified. The other Trustees of the Fund will continue to serve under their
current terms as described above. Unless authority is withheld, it is the
intention of the persons named in the proxy to vote the proxy "FOR ALL" the
election of the trustee nominees named above. Each trustee nominee nominated by
the Board has indicated that he has consented to serve as a Trustee if elected
at the Annual Meeting. If a designated trustee nominee declines or otherwise
becomes unavailable for election, however, the proxy confers discretionary power
on the persons named therein to vote in favor of a substitute nominee or
nominees.
TRUSTEES
Certain information concerning the Trustees and officers of the Fund is
set forth in the tables below. The "interested" Trustees (as defined in Section
2(a)(19) of the 1940 Act) are indicated below. Independent Trustees are those
who are not interested persons of the Fund, the Fund's investment adviser,
Claymore Advisors, LLC ("Claymore" or the "Adviser"), or the Fund's sub-adviser,
and comply with the definition of "independent" (as defined in Rule 10A-3 under
the Securities Exchange Act of 1934, as amended) (the "Independent Trustees").
The Fund is part of a fund complex (referred to herein as the "Fund
Complex") that consists of U.S. registered investment companies advised or
serviced by the Adviser or its affiliates. As of the date of this Proxy
Statement, the Fund Complex is composed of [14] closed-end funds, including the
Fund, and [34] exchange-traded funds. The Fund Complex is overseen by multiple
boards of trustees.
15
NUMBER OF
TERM OF PORTFOLIOS IN
POSITION OFFICE(2) AND FUND COMPLEX OTHER
NAME, ADDRESS(1) HELD WITH LENGTH OF TIME PRINCIPAL OCCUPATION DURING THE OVERSEEN BY DIRECTORSHIPS
AND AGE FUND SERVED PAST FIVE YEARS TRUSTEE HELD BY TRUSTEE
INDEPENDENT TRUSTEES:
Randall C. Barnes Trustee Trustee since Private Investor. Formerly, [44] None.
Year of birth: 1951 2005 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.
Steven D. Cosler(3) Trustee Trustee since Formerly, President (2001-2005), 2 Director, Cydex
Year of birth: 1955 2005 Chief Executive Officer and Pharmaceuticals,
Director (2002-2005), Chief Inc.
Operating Officer (2000-2002) (2005-present),
and Executive Vice President CCS Medical
(1997-2001) of Priority (2006-2010),
Healthcare Corporation. Access Mediquip
(2006-present),
SXC Health
Solutions
(2007-present),
CareCentrix
(2008-present),
Healthplan
Holdings
(2008-present)
Robert M. Hamje(3) Trustee Trustee since Formerly, President and Chief 2 Trustee, funds
Year of birth: 1942 2004 Investment Officer of TRW in the Old
Investment Management Company Mutual Advisor
(1990-2003). fund complex
(2004 -
present).
L. Kent Moore Trustee Trustee since Owner, Eagle River Ventures, LLC 2 Trustee, funds
Year of birth: 1955 2004 (1999-present). Previously, in the Old
Partner at WillSource Enterprise Mutual Advisor
(2005-2006), Managing Director fund complex
High Sierra Energy L.P. (___-present),
(2004-2005), Portfolio Manager American
and Vice President of Janus Midstream
Capital Corp. (2000-2002) and Partners, LLC
Senior Analyst/Portfolio Manager (2009-present)
of Marsico Capital Management
(1997-1999). Director American
Midstream Partners, LLC
(2009-present).
Ronald A. Nyberg Trustee Trustee since Partner of Nyberg & Cassioppi, [46] None.
Year of birth: 1953 2004 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).
Ronald E. Toupin, Trustee Trustee since Retired. Formerly, Vice [43] None.
Jr. 2004 President, Manager and Portfolio
Year of birth: 1958 Manager of Nuveen Asset
Management (1998-1999),
Vice President of Nuveen
Investment Advisor
Corporation (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 & Company,
Inc. (1982-1999).
16
INTERESTED TRUSTEES:
Matthew J. Trustee since Executive Vice President, head 2 Trustee, funds
Appelstein+ 2005 of Sales and Marketing, Old in the Old
Year of birth: 1961 Mutual Asset Management Mutual Advisor
(2003-present). fund complex.
------------------
+ "Interested person" of the Fund as defined in the 1940 Act. Mr.
Appelstein is an interested person of the Fund because he is an officer
of Old Mutual Asset Management, the parent company of Analytic.
(1) The business address of each Trustee of the Fund is 2455 Corporate West
Drive, Lisle, Illinois 60532, unless otherwise noted.
(2) Each Trustee is generally expected to serve a three year term
concurrent with the class of Trustees for which he serves.
(3) Nominee for election as a Trustee at the Annual Meeting.
TRUSTEE QUALIFICATIONS
The Trustees were selected to serve and continue on the Board based
upon their skills, experience, judgment, analytical ability, diligence, ability
to work effectively with other Trustees, availability and commitment to attend
meetings and perform the responsibilities of a Trustee and, for each Independent
Trustee, a demonstrated willingness to take an independent and questioning view
of management.
The following is a summary of the experience, qualifications,
attributes and skills of each Trustee that support the conclusion, as of the
date of this proxy statement, that each Trustee should serve as a Trustee in
light of the Fund's business and structure. References to the qualifications,
attributes and skills of Trustees are pursuant to requirements of the SEC, do
not constitute holding out of the Board or any Trustee as having any special
expertise and shall not impose any greater responsibility or liability on any
such person or on the Board by reason thereof.
Matthew J. Appelstein. Mr. Appelstein has served as a Trustee of the
Fund and another fund in the Claymore Fund Complex since 2005. Through his
service as a Trustee of the Fund, his service on other public company boards,
including other investment company boards, his experience as Executive Vice
President of Old Mutual Asset Management, an investment services company, and
his prior experience, including Senior Vice President of Fidelity Management
Trust Company, also an investment services company, Mr. Appelstein is
experienced in financial, investment, technology and regulatory matters.
Randall C. Barnes. Mr. Barnes has served as a Trustee of the Fund and
other funds in the Claymore fund complex since 2003. Mr. Barnes also serves on
the board of certain Claymore sponsored Canadian funds. Through his service as a
Trustee of the Fund and as chairman of the Audit Committee, employment
experience as President of Pizza Hut International and as Treasurer of PepsiCo,
Inc., and his personal investment experience, Mr. Barnes is experienced in
financial, accounting, regulatory and investment matters.
Steven D. Cosler. Mr. Cosler has served as a Trustee of the Fund and
another fund in the Claymore Fund Complex since 2005. Through his service as a
Trustee of the Fund, his service on other public and private company boards, and
his prior experience, including President and Chief Executive Officer of
Priority Healthcare Corporation, Mr. Cosler is experienced in financial,
investment and regulatory matters.
Robert M. Hamje. Mr. Hamje has served as a Trustee of the Fund and
another fund in the Claymore Fund Complex since 2004. Through his service as a
Trustee of the Fund, his service on other public company boards, including funds
in another investment company complex, and his prior experience, including
President and Chief
17
Investment Officer of TRW Investment Management Company, Mr.
Hamje is experienced in financial, investment and regulatory matters.
L. Kent Moore. Mr. Moore has served as a Trustee of the Fund and
another fund in the Claymore Fund Complex since 2004. Through his service as a
Trustee of the Fund and funds in another investment company complex and his
experience as an analyst, portfolio manager and principal at both Janus Capital
and Marsico Capital Management, Mr. Moore is experienced in financial,
investment and regulatory matters.
Ronald A. Nyberg. Mr. Nyberg has served as a Trustee of the Fund and
other funds in the Claymore Fund Complex since 2003. Through his service as a
Trustee of the Fund and as chairman of the Nominating & Governance Committee,
his professional training and experience as an attorney and partner of a law
firm, Nyberg & Cassioppi LLC, and his prior employment experience, including
Executive Vice President and General Counsel of Van Kampen Investments, an asset
management firm, Mr. Nyberg is experienced in financial, regulatory and
governance matters.
Ronald E. Toupin, Jr. Mr. Toupin has served as a Trustee of the Fund
and other funds in the Claymore Fund Complex since 2003. Through his service as
a Trustee of the Fund and as chairman of the Board, and his professional
training and employment experience, including Vice President and Portfolio
Manager for Nuveen Asset Management, an asset management firm, Mr. Toupin is
experienced in financial, regulatory and investment matters.
Each Trustee also now has considerable familiarity with the Fund, the
Adviser, and other service providers, and their operations, as well as the
special regulatory requirements governing regulated investment companies and the
special responsibilities of investment company trustees as a result of his
substantial prior service as a Trustee of the Fund.
EXECUTIVE OFFICERS
The following information relates to the executive officers of the Fund
who are not Trustees. The Fund's officers receive no compensation from the Fund
but may also be officers or employees of the Adviser, the Sub-Adviser or
affiliates of the Adviser or the Sub-Adviser and may receive compensation in
such capacities.
TERM OF OFFICE(2)
NAME, ADDRESS(1) AND LENGTH OF TIME PRINCIPAL OCCUPATION DURING
AND AGE TITLE SERVED THE PAST FIVE YEARS
---------------- ----- ------------------ -------------------
J. Thomas Futrell Chief Since 2008 Senior Managing Director, Chief Investment Officer
Year of birth: 1955 Executive (2008-present) of Claymore Advisors, LLC and Claymore
Officer 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 and Corporate
Year of birth: 1959 Officer 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 Since 2004 Senior Managing Director of Claymore Advisors, LLC and
Year of birth: 1964 Financial Claymore Securities, Inc. (2005- present). Formerly,
Officer, Chief Financial Officer (2005-2006) Claymore Group Inc.
Chief Managing Director of Claymore Advisors, LLC and Claymore
Accounting Securities, Inc. (2003-2005). Previously, Treasurer of
Officer and Henderson Global Funds and Operations Manager for
Treasurer 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).
18
TERM OF OFFICE(2)
NAME, ADDRESS(1) AND LENGTH OF TIME PRINCIPAL OCCUPATION DURING
AND AGE TITLE SERVED THE PAST FIVE YEARS
---------------- ----- ------------------ -------------------
Bruce Saxon Chief Since 2006 Vice President - Fund Compliance Officer of Claymore
Year of birth: 1957 Compliance Securities, Inc. (2006-present). Chief Compliance
Officer Officer of certain funds in the Fund Complex. Chief
Compliance Officer/Assistant Secretary of Harris
Investment Management, Inc. (2003-2006).
Director-Compliance of Harrisdirect LLC (1999-2003).
Mark E. Mathiasen Secretary Since 2008 Vice President; Assistant General Counsel of Claymore
Year of birth: 1978 Group, Inc. (2007-present). Secretary of certain funds
in the Fund Complex. Previously, Law Clerk, Idaho State
Courts (2003-2006).
Elizabeth H. Hudson Assistant Since 2009 Assistant General Counsel of Claymore Group Inc.
Year of birth: 1980 Secretary (2009-present). Assistant Secretary of certain funds in
the Fund Complex. Previously, associate at Bell, Boyd &
Lloyd LLP (nka K&L Gates LLP) (2007-2008). J.D.,
Northwestern University (2004-2007).
James Howley Assistant Since 2007 Vice President, Fund Administration of Claymore
Year of birth: 1972 Treasurer Securities, Inc. (2004-present). Assistant Treasurer of
certain funds in the Fund Complex. Previously, Manager,
Mutual Fund Administration of Van Kampen Investments,
Inc. (1996-2004).
Donald P. Swade Assistant Since 2008 Vice President, Fund Administration (2006-present) of
Year of birth: 1972 Treasurer 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.
Mark J. Furjanic Assistant Since 2008 Vice President, Fund Administration-Tax (2005-present)
Year of birth: 1959 Treasurer 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
Melissa J. Nguyen Assistant Since 2006 Vice President, Assistant General Counsel of Claymore
Year of birth: 1978 Secretary Group, Inc. (2005-present). Secretary of certain funds
in the Fund Complex. Formerly, Associate, Vedder Price
P.C. (2003-2005).
(1) The business address of each officer of the Fund is 2455 Corporate West
Drive, Lisle, Illinois 60532, unless otherwise noted.
(2) Officers serve at the pleasure of the Board and until his or her
successor is appointed and qualified or until his or her earlier
resignation or removal.
BOARD LEADERSHIP STRUCTURE
The primary responsibility of the Board is to represent the interests
of the Fund and to provide oversight of the management of the Fund. The Fund's
day-to-day operations are managed by the Adviser, the Sub-Adviser and other
service providers who have been approved by the Board. The Board is currently
comprised of seven Trustees, six of whom (including the chairperson) are
Independent Trustees and one of whom is classified as an interested person of
the Fund ("Interested Trustee"). Generally, the Board acts by majority vote of
all the Trustees, including a
19
majority vote of the Independent Trustees if required by applicable law.
The Board has appointed an Independent Trustee as chairperson, who
presides at Board meetings and who is responsible for, among other things,
participating in the planning of Board meetings, setting the tone of Board
meetings and seeking to encourage open dialogue and independent inquiry among
the trustees and management. The Board has established two standing committees
(as described below) and has delegated certain responsibilities to those
committees, each of which is comprised solely of Independent Trustees. The Board
and its committees meet periodically throughout the year to oversee the Fund's
activities, review contractual arrangements with service providers, review the
Fund's financial statements, oversee compliance with regulatory requirements,
and review performance. The Independent Trustees are represented by independent
legal counsel at Board and committee meetings. The Board has determined that
this leadership structure, including an Independent Trustee as chairperson, a
supermajority of Independent Trustees and committee membership limited to
Independent Trustees, is appropriate in light of the characteristics and
circumstances of the Fund.
BOARD COMMITTEES
The Trustees have determined that the efficient conduct of the Trustees'
affairs makes it desirable to delegate responsibility for certain specific
matters to committees of the Board. The committees meet as often as necessary,
either in conjunction with regular meetings of the Board or otherwise. The
committees of the Board are the Audit Committee and the Nominating and
Governance Committee.
Audit Committee. The Board has an Audit Committee, which is composed of
Randall C. Barnes, Steven D. Cosler, Robert M. Hamje, L. Kent Moore, Ronald A.
Nyberg and Ronald E. Toupin, Jr., each of whom is an Independent Trustee as
defined above and is "independent" as defined by NYSE listing standards. Mr.
Barnes serves as chairperson of the Audit Committee.
The Audit Committee is charged with selecting an independent registered
public accounting firm for the Fund and reviewing accounting matters with the
Fund's independent registered public accounting firm. Each member of the Audit
Committee is an Independent Trustee as defined above and also meets the
additional independence requirements for audit committee members as defined by
NYSE listing standards.
The Audit Committee is governed by a written charter, the most recent
version of which was approved by the Board on April 20, 2010 (the "Audit
Committee Charter"). In accordance with proxy rules promulgated by the SEC, a
fund's audit committee charter is required to be filed at least once every three
years as an exhibit to a fund's proxy statement. The Fund's Audit Committee
Charter is attached as Appendix A hereto.
The Audit Committee presents the following report on behalf of the
Fund:
The Audit Committee has performed the following functions: (i) the
Audit Committee reviewed and discussed the audited financial statements
of the Fund with management of the Fund, (ii) the Audit Committee
discussed with the Fund's independent registered public accounting firm
the matters required to be discussed by the Statement on Auditing
Standards No. 61, (iii) the Audit Committee received the written
disclosures and the letter from the Fund's independent registered
public accounting firm required by Independence Standards Board
Standard No. 1 and has discussed with the Fund's independent registered
public accounting firm the independence of the Fund's independent
registered public accounting firm and (iv) the Audit Committee
recommended to the Board of Trustees of the Fund that the financial
statements be included in the Fund's Annual Report for the past fiscal
year.
Nominating and Governance Committee. The Board has a Nominating and
Governance Committee, which is composed of Randall C. Barnes, Steven D. Cosler,
Robert M. Hamje, L. Kent Moore, Ronald A. Nyberg and Ronald E. Toupin, Jr., each
of whom is an Independent Trustee as defined above and is "independent" as
defined by NYSE listing standards. Mr. Nyberg serves as chairperson of the
Nominating and Governance Committee.
The Nominating and Governance Committee is governed by a written
charter, the most recent version of
20
which was approved by the Board on April 16, 2009 (the "Nominating and
Governance Committee Charter"). In accordance with proxy rules promulgated by
the SEC, a fund's nominating committee charter is required to be filed at least
once every three years as an exhibit to a fund's proxy statement. The Fund's
Nominating and Governance Committee Charter was attached as Appendix A to the
Fund's 2009 proxy statement.
The Nominating and Governance Committee (i) evaluates and recommends
all candidates for election or appointment as members of the Board and
recommends the appointment of members and chairs of each committee of the Board,
(ii) reviews policy matters affecting the operation of the Board and committees
of the Board, (iii) periodically evaluates the effectiveness of the Board and
committees of the Board and (iv) oversees the contract review process, including
review of the Fund's advisory agreements and other contracts with affiliated
service providers. In considering Trustee nominee candidates, the Nominating and
Governance Committee requires that Trustee candidates have a college degree or
equivalent business experience and may take into account a wide variety of
factors in considering Trustee candidates, including (but not limited to)
availability and commitment of a candidate to attend meetings and perform the
responsibilities of a Trustee, relevant experience, educational background,
financial expertise, the candidate's ability, judgment and expertise and overall
diversity of the Board's composition. The Nominating and Governance Committee
may consider candidates recommended by various sources, including (but not
limited to) such Fund's Trustees, officers, investment advisers and
shareholders. The Nominating and Governance Committee will not nominate a person
for election to the Board as a Trustee after such person has reached the age of
seventy-two (72), unless such person is an "interested person" of such Fund as
defined in the 1940 Act. The Nominating and Governance Committee may, but is not
required to, retain a third party search firm to identify potential candidates.
A Trustee candidate must (i) be prepared to submit written answers to a
questionnaire seeking professional and personal information that will assist the
Nominating and Governance Committee to evaluate the candidate and to determine,
among other matters, whether the candidate would qualify as a Trustee who is not
an "interested person" of the Fund as such term is defined under the 1940 Act;
(ii) be prepared to submit character references and agree to appropriate
background checks; and (iii) be prepared to meet with one or more members of the
Nominating and Governance Committee at a time and location convenient to those
Nominating and Governance Committee members in order to discuss the nominee's
qualifications.
The Nominating and Governance Committee will consider Trustee
candidates recommended by the Fund's shareholders. The Nominating and Governance
Committee will consider and evaluate Trustee nominee candidates properly
submitted by shareholders on the same basis as it considers and evaluates
candidates recommended by other sources.
In considering Trustee nominee candidates, the Nominating and
Governance Committee takes into account a wide variety of factors, including the
overall diversity of the Board's composition. The Nominating and Governance
Committee believes the Board generally benefits from diversity of background,
experience and views among its members, and considers this a factor in
evaluating the composition of the Board, but has not adopted any specific policy
in this regard.
To have a candidate considered by the Nominating and Governance
Committee, a shareholder must submit the recommendation in writing and must
include the information required by the "Procedures for Shareholders to Submit
Nominee Candidates" that are set forth as Appendix B to the Nominating and
Governance Committee Charter, which was attached as Appendix A to the Fund's
2009 proxy statement. Shareholder recommendations must be sent to the Fund's
Secretary, c/o Claymore Advisors, LLC, 2455 Corporate West Drive, Lisle,
Illinois 60532.
The nominees for election at the Annual Meeting currently serve as
Trustees and were unanimously nominated by the Board of Trustees and the
Nominating and Governance Committee.
BOARD'S ROLE IN RISK OVERSIGHT
Consistent with its responsibility for oversight of the Fund, the
Board, among other things, oversees risk management of the Fund's investment
program and business affairs directly and through the committee structure it has
established. The Board has established the Audit Committee and the Nominating
and Governance Committee to assist in its oversight functions, including its
oversight of the risks the Fund faces. Each committee reports its activities to
21
the Board on a regular basis. Risks to the Fund include, among others,
investment risk, credit risk, liquidity risk, valuation risk and operational
risk, as well as the overall business risk relating to the Fund. The Board has
adopted, and periodically reviews, policies, procedures and controls designed to
address these different types of risks. Under the Board's supervision, the
officers of the Fund, the Adviser, the Sub-Adviser and other service providers
to the Fund also have implemented a variety of processes, procedures and
controls to address various risks. In addition, as part of the Board's periodic
review of the Fund's advisory, sub-advisory and other service provider
agreements, the Board may consider risk management aspects of the service
providers' operations and the functions for which they are responsible.
The Board requires officers of the Fund to report to the full Board on
a variety of matters at regular and special meetings of the Board and its
committees, as applicable, including matters relating to risk management. The
Audit Committee also receives reports from the Fund's independent registered
public accounting firm on internal control and financial reporting matters. On
at least a quarterly basis, the Board meets with the Fund's Chief Compliance
Officer, including separate meetings with the Independent Trustees in executive
session, to discuss compliance matters and, on at least an annual basis,
receives a report from the Chief Compliance Officer regarding the effectiveness
of the Fund's compliance program. The Board, with the assistance of Fund
management, reviews investment policies and risks in connection with its review
of the Fund's performance. In addition, the Board receives reports from the
Adviser and Sub-Adviser on the investments and securities trading of the Fund.
With respect to valuation, the Board oversees a pricing committee comprised of
Fund officers and Adviser personnel and has approved Fair Valuation procedures
applicable to valuing the Fund's securities, which the Board and the Audit
Committee periodically review. The Board also requires the Adviser to report to
the Board on other matters relating to risk management on a regular and
as-needed basis.
SHAREHOLDER COMMUNICATIONS
Shareholders and other interested parties may contact the Board or any
Trustee by mail. To communicate with the Board or any Trustee, correspondence
should be addressed to the Board of Trustees or the Trustee with whom you wish
to communicate by either name or title. All such correspondence should be sent
c/o the Fund's Secretary, c/o Claymore Advisors, LLC, 2455 Corporate West Drive,
Lisle, Illinois 60532.
TRUSTEE BENEFICIAL OWNERSHIP OF SECURITIES
As of May 14, 2010, each Trustee beneficially owned equity securities
of the Fund and other funds in the Fund Complex overseen by the Trustee in the
dollar range amounts as specified below:
AGGREGATE DOLLAR RANGE OF
DOLLAR RANGE OF EQUITY EQUITY SECURITIES OVERSEEN BY
NAME OF TRUSTEE SECURITIES IN THE FUND TRUSTEE IN THE FUND COMPLEX
--------------- ---------------------- -----------------------------
Independent Trustees:
Randall C. Barnes Over $100,000 Over $100,000
Steven D. Cosler None $10,001-$50,000
Robert M. Hamje None $10,001-$50,000
L. Kent Moore None Over $100,000
Ronald A. Nyberg $1-$10,000 Over $100,000
Ronald E. Toupin, Jr. None None
Interested Trustees:
Matthew Appelstein None None
As of May 14, 2010, each Trustee and the Trustees and officers of the
Fund as a group owned less than 1% of the outstanding Shares of the Fund.
22
BOARD MEETINGS
During the Fund's fiscal year ended December 31, 2009, the Board held 6
meetings, the Audit Committee held 3 meetings and the Nominating and Governance
Committee held 5 meetings.
Each Trustee attended at least 75% of the meetings of the Board (and
any committee thereof on which he serves) held during the Fund's fiscal year
ended December 31, 2009. It is the Fund's policy to encourage Trustees to attend
annual meetings of shareholders.
TRUSTEE COMPENSATION
The Fund pays an annual retainer and fee per meeting attended to each
Trustee who is not affiliated with the Adviser, a Sub-Adviser or their
respective affiliates and pays an additional annual fee to the chairman of the
Board and the chairman of any committee of the Board. The following table
provides information regarding the compensation of the Fund's Trustees for the
Fund's fiscal year ended December 31, 2009. The Fund does not accrue or pay
retirement or pension benefits to Trustees as of the date of this proxy
statement.
COMPENSATION TOTAL COMPENSATION
NAME OF TRUSTEE(1) FROM THE FUND FROM THE FUND COMPLEX
----------------- ------------- ---------------------
Randall C. Barnes $26,000 $251,750
Steven D. Cosler $24,000 $48,000
Robert M. Hamje $23,000 $47,000
L. Kent Moore $24,500 $50,000
Ronald A. Nyberg $26,000 $357,875
Ronald E. Toupin, Jr. $29,000 $301,375
-----------
(1) Trustees not eligible for compensation are not included in the above
table.
SHAREHOLDER APPROVAL
The affirmative vote of a plurality of the Shares voted is necessary to
elect a Trustee of the Fund. The holders of the Shares will have equal voting
rights (i.e. one vote per Share). Votes withheld and "broker non-votes" (i.e.
Shares held by brokers or nominees as to which (i) instructions have not been
received from the beneficial owner or the persons entitled to vote and (ii) the
broker does not have discretionary voting power on a particular matter) will
have no effect on the outcome of the vote on the proposal.
BOARD RECOMMENDATION
The Board, including the Independent Trustees, unanimously recommends
that you vote "FOR ALL" of the nominees for the Board of Trustees (Mr. Steven D.
Cosler and Mr. Robert M. Hamje).
23
ADDITIONAL INFORMATION
FURTHER INFORMATION ABOUT VOTING AND THE ANNUAL MEETING
Thirty percent (30%) of the Shares of the Fund entitled to vote on the
proposal must be present in person or by proxy to have a quorum for the Fund to
conduct business at the Annual Meeting. Votes withheld and broker non-votes will
be counted as Shares present at the Annual Meeting for quorum purposes.
The Board has fixed the close of business on May 14, 2010 as the Record
Date for the determination of shareholders of the Fund entitled to notice of,
and to vote at, the Annual Meeting. Shareholders of the Fund as of the close of
business on the Record Date will be entitled to one vote on each matter to be
voted on by the Fund for each Share held and a fractional vote with respect to
fractional Shares with no cumulative voting rights.
Whether or not you plan to attend the Annual Meeting, we urge you to
complete, sign, date, and return the enclosed proxy card in the postage-paid
envelope provided or vote your proxy via telephone or the Internet so your
Shares will be represented at the Annual Meeting. Information regarding how to
vote your proxy via telephone or the Internet is included on the enclosed proxy
card. The required control number for Internet and telephone voting is printed
on the enclosed proxy card. The control number is used to match proxy cards with
shareholders' respective accounts and to ensure that, if multiple proxy cards
are executed, Shares are voted in accordance with the proxy card bearing the
latest date. If you wish to attend the Annual Meeting and vote in person, you
will be able to do so. You may contact the Fund's proxy information line at
(866) 416-0552 to obtain directions to the site of the Annual Meeting.
All Shares represented by properly executed proxies received prior to
the Annual Meeting will be voted at the Annual Meeting in accordance with the
instructions marked thereon or otherwise as provided therein. IF YOU SIGN THE
PROXY CARD, BUT DON'T FILL IN A VOTE, YOUR SHARES WILL BE VOTED IN ACCORDANCE
WITH THE BOARD'S RECOMMENDATION. If any other business is brought before the
Annual Meeting, your Shares will be voted at the proxies' discretion.
Shareholders who execute proxy cards or vote proxies via telephone or
the Internet may revoke them at any time before they are voted by filing with
the Secretary of the Fund a written notice of revocation, by delivering
(including via telephone or the Internet) a duly executed proxy bearing a later
date or by attending the Annual Meeting and voting in person. Merely attending
the Annual Meeting, however, will not revoke any previously submitted proxy.
Broker-dealer firms holding Shares in "street name" for the benefit of
their customers and clients will request the instructions of such customers and
clients on how to vote their Shares on the Proposals. Under current
interpretations of the New York Stock Exchange (the "NYSE"), broker-dealers that
are members of the NYSE and that have not received instructions from a customer
may not vote such customer's Shares on Proposal 1. Broker-dealers who are not
members of the NYSE may be subject to other rules, which may or may not permit
them to vote your shares without instruction. Therefore, you are encouraged to
contact your broker and record your voting instructions.
You may contact the Fund's proxy information line at (866) 416-0552
with any questions about the Proxy Statement or with questions about how to
cast your vote.
ADVISER
Claymore Advisors, LLC, located at 2455 Corporate West Drive, Lisle,
Illinois 60532, acts as the Fund's investment adviser. As of March 31, 2010,
Claymore entities have provided supervision, management and/or servicing on
approximately $15.9 billion in assets through closed-end funds, unit investment
trusts and exchange-traded funds. Claymore Advisors, LLC is a wholly-owned
subsidiary of Guggenheim Partners, LLC, a global, diversified financial services
firm with more than $100 billion in assets under supervision. Guggenheim,
through its affiliates, provides investment management, investment advisory,
insurance, investment banking, and capital markets services. The firm is
headquartered in Chicago and New York with a global network of offices
throughout the United States, Europe, and Asia.
ADMINISTRATOR
Claymore Advisors, LLC, located at 2455 Corporate West Drive, Lisle,
Illinois 60532, serves as the Fund's administrator.
24
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young LLP ("E&Y") has been selected as the independent
registered public accounting firm for the Fund by the Audit Committee of the
Fund and approved by a majority of the Fund's Board, including a majority of the
Independent Trustees, to audit the accounts of the Fund for and during the
Fund's current fiscal year. The Fund does not know of any direct or indirect
financial interest of E&Y in the Fund.
Representatives of E&Y will be available to attend the Annual Meeting,
will have the opportunity to make a statement if they desire to do so and will
be available to answer questions if necessary.
AUDIT FEES
The aggregate fees billed to the Fund by E&Y for professional services
rendered for the audit of the Fund's annual financial statements for the Fund's
fiscal year ended December 31, 2009 were approximately $41,500 and for the
Fund's fiscal year ended December 31, 2008 were approximately $41,500.
AUDIT-RELATED FEES
The aggregate fees billed by E&Y and approved by the Audit Committee of
the Fund for assurance and related services reasonably related to the
performance of the audit of the Fund's annual financial statements (such fees
relate to services rendered, and out of pocket expenses incurred, in connection
with the Fund's registration statements, comfort letters and consents) for the
Fund's fiscal year ended December 31, 2009 were $0 and for the Fund's fiscal
year ended December 31, 2008 were $0. E&Y did not perform any other assurance
and related services that were required to be approved by the Fund's Audit
Committee for such periods.
TAX FEES
The aggregate fees billed by E&Y and approved by the Audit Committee of
the Fund for professional services rendered for tax compliance, tax advice, and
tax planning (such fees relate to tax services provided by E&Y in connection
with the Fund's excise tax calculations and review of the Fund's tax returns)
for the Fund's fiscal year ended December 31, 2009 were approximately $6,000 and
for the Fund's fiscal year ended December 31, 2008 were approximately $6,000.
E&Y did not perform any other tax compliance or tax planning services or render
any tax advice that were required to be approved by the Fund's Audit Committee
for such periods.
ALL OTHER FEES
Other than those services described above, E&Y did not perform any
other services on behalf of the Fund for the Fund's fiscal year ended December
31, 2009 and for the Fund's fiscal year ended December 31, 2008.
AGGREGATE NON-AUDIT FEES
The aggregate non-audit fees billed by E&Y for services rendered to the
Fund, the Adviser and any entity controlling, controlled by or under common
control with the Adviser that provides ongoing services to the Fund (not
including a sub-adviser whose primary role is portfolio management and is
sub-contracted with or overseen by another investment adviser) that directly
related to the operations and financial reporting of the Fund for the Fund's
fiscal year ended December 31, 2009 were approximately $6,000 and for the Fund's
fiscal year ended December 31, 2008 were approximately $6,000.
AUDIT COMMITTEE'S PRE-APPROVAL POLICIES AND PROCEDURES
As noted above, the Audit Committee is governed by the Audit Committee
Charter, which is attached as Appendix A hereto, which includes Pre-Approval
Policies and Procedures in Section IV of such Charter. Specifically,
25
sections IV.C.2 and IV.C.3 of the Audit Committee Charter contain the
Pre-Approval Policies and Procedures and such sections are included below.
IV.C.2. Pre-approve any engagement of the independent auditors to
provide any non-prohibited services to the Trust, including
the fees and other compensation to be paid to the independent
auditors (unless an exception is available under Rule 2-01 of
Regulation S-X).
(a) The Chairman or any member of the Audit Committee may
grant the pre-approval of services to the Fund for
non-prohibited services up to $10,000. All such
delegated pre-approvals shall be presented to the
Audit Committee no later than the next Audit
Committee meeting.
IV.C.3. Pre-approve any engagement of the independent auditors,
including the fees and other compensation to be paid to the
independent auditors, to provide any nonaudit services to the
Adviser (or any "control affiliate" of the Adviser providing
ongoing services to the Trust), if the engagement relates
directly to the operations and financial reporting of the
Trust (unless an exception is available under Rule 2-01 of
Regulation S-X).
(a) The Chairman or any member of the Audit Committee may
grant the pre-approval for non-audit services to the
Adviser up to $10,000. All such delegated
pre-approvals shall be presented to the Audit
Committee no later than the next Audit Committee
meeting.
The Audit Committee has pre-approved all audit and non-audit services
provided by E&Y to the Fund, and all non-audit services provided by E&Y to the
Adviser, or any entity controlling, controlled by, or under common control with
the Adviser that provides ongoing services to the Fund that are related to the
operations of the Fund for the fiscal years ended December 31, 2009 and December
31, 2008.
None of the services described above for the Fund's fiscal years ended
December 31, 2009 and December 31, 2008 were approved by the Audit Committee
pursuant to the pre-approval exception under Rule 2-01(c)(7)(i)(C) of Regulation
S-X promulgated by the SEC.
PRINCIPAL SHAREHOLDERS
As of the Record Date, to the knowledge of the Fund, no person
beneficially owned more than 5% of the voting securities of any class of
securities of the Fund, except as listed below:
SHAREHOLDER NAME AND ADDRESS CLASS OF SHARES SHARE HOLDINGS PERCENTAGE OWNED
---------------------------- --------------- -------------- ----------------
First Trust Portfolios, L.P.
First Trust Advisors L.P. common shares 1,901,049 10%(1)
The Charger Corporation
120 East Liberty Drive, Suite 400
Wheaton, Illinois 60187
(1) Based on information obtained from a Form 13G/A filed with the
SEC on February 28, 2010.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and Section 30(h) of the 1940 Act require the Fund's officers
and Trustees, certain officers of the Fund's investment adviser, affiliated
persons of the Fund's investment adviser, and persons who beneficially own more
than ten percent of the Fund's Shares to file certain reports of ownership
("Section 16 filings") with the SEC and the New York Stock Exchange. Based upon
the Fund's review of the copies of such forms effecting the Section 16 filings
received by it, the Fund believes that for the Fund's fiscal year ended December
31, 2009, all filings applicable to such persons were completed and filed in a
timely manner, except as follows: a Form 4 relating to the disposition of shares
by Randall C.
26
Barnes was inadvertently filed late.
PRIVACY PRINCIPLES OF THE FUND
The Fund is committed to maintaining the privacy of shareholders and to
safeguarding their non-public personal information. The following information is
provided to help you understand what personal information the Fund collects, how
the Fund protects that information and why, in certain cases, the Fund may share
information with select other parties.
Generally, the Fund does not receive any non-public personal
information relating to its shareholders, although certain non-public personal
information of its shareholders may become available to the Fund. The Fund does
not disclose any non-public personal information about its shareholders or
former shareholders to anyone, except as permitted by law or as is necessary in
order to service shareholder accounts (for example, to a transfer agent or third
party administrator).
The Fund restricts access to non-public personal information about its
shareholders to employees of the Adviser 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.
DEADLINE FOR SHAREHOLDER PROPOSALS
The Fund's Amended and Restated By-Laws (the "By-Laws") require
compliance with certain procedures for a shareholder to properly make a
nomination for election as a Trustee or to propose other business for the Fund.
If a shareholder who is entitled to do so under the Fund's By-Laws wishes to
nominate a person or persons for election as a Trustee or propose other business
for the Fund, that shareholder must provide a written notice to the Secretary of
the Fund at the Fund's principal executive offices.
The notice must set forth: (a) as to each person whom the shareholder
proposes to nominate for election as a Trustee (i) all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of Trustees in an election contest, or is otherwise required, in each
case pursuant to and in accordance with Regulation 14A under the Exchange Act
and (ii) such person's written consent to being named as a nominee and to
serving as a Trustee if elected; (b) as to any other business that the
shareholder proposes to bring before the meeting, a brief description of the
business desired to be brought before the meeting, the text of the proposal or
business (including the text of any resolutions proposed for consideration), the
reasons for conducting such business at the meeting and any material interest in
such business of such shareholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (c) as to the shareholder giving the notice and
the beneficial owner, if any, on whose behalf the nomination or proposal is made
(i) the name and address of such shareholder, as they appear on the Fund's
books, and of such beneficial owner, (ii) the class or series and number of
Shares which are owned beneficially and of record by such shareholder and such
beneficial owner, (iii) a description of any agreement, arrangement or
understanding with respect to the nomination or proposal between or among such
shareholder and such beneficial owner, any of their respective affiliates or
associates, and any others acting in concert with any of the foregoing, (iv) a
description of any agreement, arrangement or understanding (including any
derivative or short positions, profit interests, options, warrants, stock
appreciation or similar rights, hedging transactions, and borrowed or loaned
Shares) that has been entered into as of the date of the shareholder's notice
by, or on behalf of, such shareholder and such beneficial owners, the effect or
intent of which is to mitigate loss to, manage risk or benefit of share price
changes for, or increase or decrease the voting power of, such shareholder or
such beneficial owner, with respect to Shares of the Fund, (v) a representation
that the shareholder is a holder of record of Shares of the Fund entitled to
vote at such meeting and intends to appear in person or by proxy at the meeting
to propose such business or nomination, and (vi) a representation whether the
shareholder or the beneficial owner, if any, intends or is part of a group which
intends (a) to deliver a proxy statement and/or form of proxy to holders of at
least the percentage of the Fund's outstanding Shares required to approve or
adopt the proposal or elect the nominee and/or (b) otherwise to solicit proxies
from shareholders in support of such proposal or nomination. The Fund may
require any proposed nominee to furnish such other information as it may
reasonably require to determine the eligibility of such proposed nominee to
serve as a Trustee of the Fund.
27
To be timely, the notice must be delivered to the Secretary of the Fund
at the Fund's principal executive offices not later than the close of business
on the ninetieth (90th) day, nor earlier than the close of business on the one
hundred twentieth (120th) day, prior to the first anniversary of the preceding
year's annual meeting (provided, however, that in the event that the date of the
annual meeting is more than thirty (30) days before or more than seventy (70)
days after such anniversary date, notice by the shareholder must be so delivered
not earlier than the close of business on the one hundred twentieth (120th) day
prior to such annual meeting and not later than the close of business on the
later of the ninetieth (90th) day prior to such annual meeting or the tenth
(10th) day following the day on which public announcement of the date of such
meeting is first made by the Fund).
The foregoing description of the procedures for a shareholder properly
to make a nomination for election as a Trustee or to propose other business for
the Fund is only a summary and is not complete. A copy of the Fund's By-Laws,
which includes the provisions regarding the requirements for shareholder
nominations and proposals, may be obtained by writing to the Secretary of the
Fund at 2455 Corporate West Drive, Lisle, Illinois 60532. Any shareholder
considering making a nomination or other proposal should carefully review and
comply with those provisions of the Fund's By-Laws.
Shareholder proposals intended for inclusion in the Fund's proxy
statement in connection with such annual meeting of shareholders pursuant to
Rule 14a-8 under the Exchange Act must be received by the Fund at the Fund's
principal executive offices by [ ], 2011. Proposals made outside of Rule 14a-8
under the Exchange Act must be submitted, in accordance with the notice
requirements of the Fund's By-Laws, not earlier than the close of business on
[ ], 2011 nor later than the close of business on [ ], 2011 (which is also the
date after which shareholder nominations and proposals made outside of Rule
14a-8 under the Exchange Act would not be considered "timely" within the meaning
of Rule 14a-4(c) under the Exchange Act).
EXPENSES OF PROXY SOLICITATION
The cost of soliciting proxies will be borne by the Fund, except that
costs related to Proposal 1 will be borne by Claymore. Certain officers of the
Fund and certain officers and employees of Claymore or its affiliates (none of
whom will receive additional compensation therefore), may solicit proxies by
telephone, mail, e-mail and personal interviews. Brokerage houses, banks and
other fiduciaries may be requested to forward proxy solicitation material to
their principals to obtain authorization for the execution of proxies, and will
be reimbursed by the Fund for such out-of-pocket expenses. The Fund has retained
The Altman Group, Inc. ("The Altman Group") as its proxy solicitor and will pay
a project management fee as well as fees charged on a per call basis and certain
other expenses. Management of the Fund estimates that the fees payable to The
Altman Group will be approximately $[ ] (of which approximately $[ ] will be
borne by the Fund).
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL
MEETING TO BE HELD ON JULY 19, 2010
This Proxy Statement is available on the Internet at
www.proxyonline.com/docs/ola.pdf.
OTHER MATTERS
The management of the Fund knows of no other matters which are to be
brought before the Annual Meeting. However, if any other matters not now known
properly come before the Annual Meeting, it is the intention of the persons
named in the enclosed form of proxy to vote such proxy in accordance with their
judgment on such matters.
In the event a quorum is present at the Annual Meeting but sufficient
votes to approve any of the Proposals are not received, proxies (including
broker non-votes) would vote in favor of one or more adjournments of the Annual
Meeting with respect to such Proposal(s) to permit further solicitation of
proxies, provided they determine that such an adjournment and additional
solicitation is reasonable and in the interest of shareholders based on a
consideration of all relevant factors, including the nature of the relevant
proposal, the percentage of votes then cast, the percentage of negative votes
then cast, the nature of the proposed solicitation activities and the nature of
the reasons for such further solicitation.
Very truly yours,
28
/s/ J. Thomas Futrell
J. THOMAS FUTRELL
CHIEF EXECUTIVE OFFICER
June [ ], 2010
29
APPENDIX A
CLAYMORE FUNDS
AUDIT COMMITTEE CHARTER
I. PURPOSE
The Audit Committee is a committee of the Board of the Trust (see
Appendix A for a list of funds that have approved this Audit Committee Charter).
Its primary function is to assist the Board in fulfilling certain of its
responsibilities. This Charter sets forth the duties and responsibilities of the
Audit Committee.
The Audit Committee serves as an independent and objective party to
monitor the Trust's accounting policies, financial reporting and internal
control system, as well as the work of the independent auditors. The Audit
Committee assists Board oversight of (1) the integrity of the Trust's financial
statements; (2) the Trust's compliance with legal and regulatory requirements;
(3) the independent auditors' qualifications and independence; and (4) the
performance of the Trust's independent auditors. The Audit Committee also serves
to provide an open avenue of communication among the independent auditors, Trust
management, the personnel responsible for internal audit functions (if any) and
the Board.
o Trust management has the primary responsibility to establish
and maintain systems for accounting, reporting and internal control.
o The independent auditors have the primary responsibility to
plan and implement a proper audit, including consideration of the
Trust's accounting, reporting and internal control practices.
The Audit Committee may have additional functions and responsibilities
as deemed appropriate by the Board and the Audit Committee.
Although the Audit Committee has the responsibilities and powers set
forth in this Charter, it is not the duty of the Audit Committee to plan or
conduct audits or to determine that the Trust's financial statements are
complete and accurate and have been prepared in accordance with generally
accepted accounting principles.
II. COMPOSITION
The Audit Committee shall be comprised of three or more board members
as determined by the Board, each of whom shall be an independent board member,
and free from any relationship that, in the opinion of the Board, would
interfere with the exercise of his or her independent judgment as a member of
the Audit Committee. For purposes of the Audit Committee, a board member is
independent if:
o he or she is not an "interested person" of the Trust as that
term is defined in the Investment Company Act of 1940; and
o he or she does not accept, directly or indirectly, any
consulting, advisory, or other compensatory fee from the Trust (except
in the capacity as a Board or committee member).
Each member of the Audit Committee shall be financially literate, as
such qualification is interpreted by the Board in its business judgment (or must
become financially literate within a reasonable time after his or her
appointment to the Audit Committee). The Audit Committee will review the
qualifications of its members and determine whether any of its members qualify
as an "audit committee financial expert" as defined in Form N-CSR. The Audit
Committee will submit such determination to the Board for its final
determination.
A-1
The members and Chairman of the Audit Committee shall be elected by the
Board annually and serve until their successors shall be duly elected and
qualified.
No member of the Audit Committee shall serve on the audit committee of
more than three public companies with shares registered under the Securities
Exchange Act of 1934, as amended, unless the Board determines that such
simultaneous service would not impair the ability of the Audit Committee member
to serve effectively on the Audit Committee. For purposes of counting an Audit
Committee member's audit committee service, service on the Trust's Audit
Committee, together with other audit committees within the Claymore fund
complex, shall count as one public company.
III. MEETINGS
The Audit Committee shall meet two times annually, or more frequently
as circumstances dictate. Special meetings (including telephone meetings) may be
called by the Chairman or a majority of the members of the Audit Committee upon
reasonable notice to the other members of the Audit Committee.
As part of its job to foster open communication, the Audit Committee
shall meet annually with senior Trust management responsible for accounting and
financial reporting and the independent auditors in separate executive sessions
to discuss any matters that the Audit Committee, or any of such other persons,
believes should be discussed privately.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall:
A. Charter
Review this Charter, annually, and recommend changes, if any,
to the Board.
B. Internal Controls
1. Review, annually, with Trust management and the independent
auditors:
(a) the organizational structure, reporting
relationship, adequacy of resources and qualifications of the
senior Trust management personnel responsible for accounting
and financial reporting; and
(b) their separate evaluation of the adequacy and
effectiveness of the Trust's system of internal controls,
including those of the Trust's service providers.
2. Review, with Trust management and the independent auditors:
(a) the Trust's plan related to the Trust's systems
for accounting, reporting and internal controls;
(b) the responsibilities, resources and staffing with
respect to the activities in IV.B.2.(a) above; and
(c) any significant audit findings or recommendations
related to the Trust's systems for accounting, reporting and
internal controls and Trust management's response.
3. Monitor procedures for the receipt, retention and treatment
of complaints received by the Trust and/or the Audit Committee
regarding accounting, internal accounting controls or auditing matters
and the confidential, anonymous submission by officers and trustees of
the Trust or employees of the Adviser,
A-2
underwriter and any provider of accounting-related services to the
Trust of concerns regarding questionable accounting or auditing
matters.
4. Review, annually, with Trust management and the independent
auditors, policies for valuation of Trust portfolio securities, and the
frequency and magnitude of pricing errors.
C. Independent Auditors
1. Approve, and recommend to the Board, the appointment,
retention or termination of the independent auditors, and approve the
fees and other compensation to be paid to the independent auditors.
Such selection shall be pursuant to a written engagement letter
approved by the Audit Committee.
2. Pre-approve any engagement of the independent auditors to
provide any non-prohibited services to the Trust, including the fees
and other compensation to be paid to the independent auditors (unless
an exception is available under Rule 2-01 of Regulation S-X).
(a) The Chairman or any member of the Audit Committee
may grant the pre-approval of services to the Fund for
non-prohibited services up to $10,000. All such delegated
pre-approvals shall be presented to the Audit Committee no
later than the next Audit Committee meeting.
3. Pre-approve any engagement of the independent auditors,
including the fees and other compensation to be paid to the independent
auditors, to provide any non-audit services to the Adviser (or any
"control affiliate" of the Adviser providing ongoing services to the
Trust), if the engagement relates directly to the operations and
financial reporting of the Trust (unless an exception is available
under Rule 2-01 of Regulation S-X).
(a) The Chairman or any member of the Audit Committee
may grant the pre-approval for non-audit services to the
Adviser up to $10,000. All such delegated pre-approvals shall
be presented to the Audit Committee no later than the next
Audit Committee meeting.
4. On an annual basis, request, receive in writing and review
a report by the independent auditors describing:
(a) the independent auditors' internal
quality-control procedures;
(b) any material issues raised by the most recent
internal quality-control review, or peer review, of the
independent auditors, or by any inquiry or investigations by
governmental or professional authorities, within the preceding
five years, respecting one or more independent audits carried
out by the independent auditors, and any steps taken to deal
with any such issues; and
(c) all relationships between the independent
auditors and the Trust, so as to assess the auditors'
independence, including identification of all relationships
the independent auditors have with the Trust and all
significant relationships the independent auditors have with
the Adviser (and any "control affiliate" of the Adviser) and
any material service provider to the Trust (including, but not
limited to, disclosures regarding the independent auditors'
independence required by Public Company Accounting Oversight
Board Rule 3526 and compliance with the applicable
independence provisions of Rule 2-01 of Regulation S-X).
In assessing the auditors' independence, the Audit
Committee shall take into account the opinions of
Trust management. The Committee will present its
conclusions with respect to the independent auditors
to the Board, and recommend that the Board take
appropriate action, if any, in response to the
independent auditors' report to satisfy itself of the
independent auditors' independence.
A-3
5. On an annual basis, review and evaluate the lead audit
partner (such review to include consideration of whether, in addition
to the regular rotation of the lead audit partner as required by law,
in order to assure continuing auditor independence, there should be
regular consideration of rotation of the firm serving as independent
auditors).
6. On an annual basis, meet with the independent auditors and
Trust management to review the arrangements for and scope of the
proposed audit for the current year and the audit procedures to be
utilized.
7. Review the management letter prepared by the independent
auditors and Trust management's response.
D. Financial Reporting Processes
1. If the Trust is a listed closed-end investment company,
(a) Review with Trust management and the independent
auditors, (i) the Trust's audited financial statements and
recommend to the Board, if appropriate, that the audited
financial statements be included in the Trust's annual report
to shareholders required by Section 30(e) of the Investment
Company Act of 1940 and Rule 30d-1 thereunder and (ii)
narrative disclosure analogous to the "Management's Discussion
of Fund Performance," if any is included in such annual report
to shareholders.
(b) Review with Trust management and the independent
auditors the Trust's semi-annual financial statements and
narrative disclosure analogous to the "Management's Discussion
of Fund Performance," if any is included in such semi-annual
report to shareholders.
(c) Review the Trust's policy and procedures with
respect to declaring dividends and issuing dividend
announcements and related press releases, as well as financial
information and dividend guidance provided to analysts and
rating agencies.
2. Review with Trust management and the independent
auditors the matters that auditing professional standards
require to be communicated to the Audit Committee, including,
but not limited to, the matters required to be discussed by
Statement on Auditing Standards No. 114, including:
o the independent auditors' judgments about
the quality, and not just the acceptability, of the
Trust's accounting principles as applied in its
financial reporting;
o the process used by Trust management in
formulating estimates and the independent auditors'
conclusions regarding the reasonableness of those
estimates;
o all significant adjustments arising from
the audit, whether or not recorded by the Trust;
o when the independent auditors are aware
that Trust management has consulted with other
accountants about significant accounting and auditing
matters, the independent auditors' views about the
subject of the consultation;
o any disagreements with Trust management
regarding accounting or reporting matters;
o any difficulties encountered in the course
of the audit, including any restrictions on the scope
of the independent auditors' activities or on access
to requested information; and
A-4
o significant deficiencies in the design or
operation of internal controls.
3. The independent auditors shall report, within 90 days prior
to the filing of the Trust's annual financial statements with the SEC,
to the Audit Committee:
(a) all critical accounting policies and practices to
be used;
(b) all alternative treatments of financial
information within GAAP for policies and practices related to
material items that have been discussed with Trust management,
the ramifications of the use of such alternative disclosures
and treatments, and the treatment preferred by the independent
auditor;
(c) other material written communications between the
independent auditors and Trust management including, but not
limited to, any management letter or schedule of unadjusted
differences; and
(d) all non-audit services provided to an entity in
the "investment company complex" as defined in paragraph
(f)(14) of Rule 2-01 of Regulation S-X that were not
pre-approved by the Audit Committee.
4. Review, annually, with Trust management and the independent
auditors, the Trust's "disclosure controls and procedures" and the
Trust's "internal control over financial reporting" as defined in Rule
30a-3(c) and (d) under the Investment Company Act of 1940.
5. Review with Trust management and the independent auditors a
report by Trust management covering any Form N-CSR and Form N-Q filed,
and any required certification of such filing, along with the results
of Trust management's most recent evaluation of the Trust's "disclosure
controls and procedures" and "internal control over financial
reporting."
E. Process Improvements
Review with the independent auditors and Trust management
significant changes or improvements in accounting and auditing
processes that have been implemented.
F. Legal and Compliance
1. Review any legal or regulatory matters that arise that
could have a material impact on the Trust's financial statements.
2. Review policies and procedures with respect to financial
statement risk assessment and risk management, including the steps
Trust management has taken to monitor and control such risk exposures.
3. Establish clear hiring policies for the Trust with respect
to employees or former employees of the independent auditors.
G. Other Responsibilities
1. Review, annually, the performance of the Audit Committee.
2. If the Trust is a closed-end investment company, prepare
the report required by Item 407(d)(3)(i) of Regulation S-K for
inclusion in the Trust's proxy statement if the proxy statement relates
to the election of Board members of the Trust.
A-5
3. Investigate any other matter brought to its attention
within the scope of its duties, and have the authority in its
discretion to retain legal, accounting or other experts or consultants
to advise the Audit Committee, at the expense of the Trust, if, in the
Committee's judgment, that is appropriate.
4. Perform any other activities consistent with this Charter,
the Trust's Charter, By-Laws and governing law, as the Audit Committee
or the Board deems necessary or appropriate.
5. Maintain minutes of Committee meetings; report its
significant activities to the Board; and make such recommendations to
the Board as the Audit Committee may deem necessary or appropriate.
V. FUNDING
The Audit Committee shall receive appropriate funding, as determined by
the Audit Committee, for payment of (i) compensation to the independent auditors
for approved audit or non-audit services for the Trust; (ii) compensation to any
legal, accounting or other experts or consultants retained by the Audit
Committee pursuant to Section IV.G.3 above and (iii) ordinary administrative
expenses of the Audit Committee that are necessary or appropriate in carrying
out its duties.
A-6
BACKGROUND AND DEFINITIONS
FOR
AUDIT COMMITTEE CHARTER
The following is supplemental information regarding the Audit Committee
Charter designed to provide the Audit Committee background information and
definitions to assist the Committee in fulfilling its responsibilities under the
Charter.
I. COMPOSITION
An "audit committee financial expert" of a company is defined as a
person who has all of the following attributes: (1) an understanding of
generally accepted accounting principles ("GAAP") and financial statements; (2)
the ability to assess the general application of GAAP in connection with the
accounting for estimates, accruals and reserves; (3) experience preparing,
auditing, analyzing or evaluating financial statements that present a breadth
and level of complexity of accounting issues that are generally comparable to
the breadth and complexity of issues that can reasonably be expected to be
raised by the company's financial statements, or experience actively supervising
one or more persons engaged in such activities; (4) an understanding of internal
controls and procedures for financial reporting; and (5) an understanding of
audit committee functions. An audit committee financial expert must have
acquired such attributes through any one or more of the following: (1) education
and experience as a principal financial officer, principal accounting officer,
controller, public accountant or auditor or experience in one or more positions
that involve the performance of similar functions (or active supervision of such
persons); or (2) experience overseeing or assessing the performance of companies
or public accountants with respect to the preparation, auditing or evaluation of
financial statements; or (3) other relevant experience.
If the Trust is listed on the New York Stock Exchange, at least one
member of the Audit Committee must have accounting or related financial
management expertise, as the Board interprets such qualification in its business
judgment.
II. RESPONSIBILITIES AND DUTIES
A. Pre-Approval Not Required
Under Section 10A(h)(i)(1)(B) of the Securities Exchange Act of 1934
and Rule 2-01 under Regulation S-X (Section (c)(7)), pre-approval of non-audit
services for the Trust pursuant to Section IV.C. 2 is not required, if:
1. the aggregate amount of all non-audit services provided to
the Trust is no more than 5% of the total fees paid by the Trust to the
independent auditors during the fiscal year in which the non-audit
services are provided;
2. the services were not recognized by Trust management at the
time of the engagement as non-audit services; and
3. such services are promptly brought to the attention of the
Audit Committee by Trust management and the Audit Committee approves
them (which may be by delegation) prior to the completion of the audit.
Under Section 10A(h)(i)(1)(B) of the Securities Exchange Act of 1934
and Rule 2-01 under Regulation S-X (Section (c)(7)), pre-approval of non-audit
services for the Adviser (or any affiliate of the Adviser providing ongoing
services to the Trust) pursuant to Section IV.C.3 is not required, if:
1. the aggregate amount of all non-audit services provided is
no more than 5% of the total fees paid to the Trust's independent
auditors by the Trust, the Adviser and any "control affiliate" of the
Adviser providing ongoing services to the Trust during the fiscal year
in which the non-audit services are provided;
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2. the services were not recognized by Trust management at the
time of the engagement as non-audit services; and
3. such services are promptly brought to the attention of the
Audit Committee by Trust management and the Audit Committee approves
them (which may be by delegation) prior to the completion of the audit.
B. Control Affiliate
As used in Section IV.C.3, "control affiliate" means any entity
controlling, controlled by, or under common control with the Adviser.
C. Prohibited Non-Audit Services
Under Section 10A(g) of the Securities Exchange Act of 1934 and Rule
2-01 under Regulation S-X (Section (c)(4)), an auditor is not independent if, at
any point during the audit and professional engagement period, the auditor
provides certain non-audit services to an audit client. As referred to in
Section IV.C.2, these prohibited non-audit services would include:
1. bookkeeping or other services related to the
accounting records or financial statements of the
Trust;
2. financial information systems design and
implementation;
3. appraisal or valuation services, fairness opinions,
or contribution-in-kind reports;
4. actuarial services;
5. internal audit outsourcing services;
6. management functions or human resources;
7. broker or dealer, investment adviser, or investment
banking services;
8. legal services and expert services unrelated to the
audit; and
9. any other services that the Public Company Accounting
Oversight Board determines are impermissible.
D. Other Definitions
"Investment company complex" includes: (1) an investment company and
its investment adviser or sponsor; (2) any entity controlled by or controlling
an investment adviser or sponsor in (1) above, or any entity under common
control with any investment adviser or sponsor in (1) above if the entity: (A)
is an investment adviser or sponsor or (B) is engaged in the business of
providing administrative, custodian, underwriter, or transfer agent services to
any investment company, investment adviser, or sponsor; and (3) an investment
company or entity that would be an investment company but for the exclusions
provided by Section 3(c) of the 1940 Act that has an investment adviser or
sponsor included in (1) and (2) above. Investment adviser does not include a
subadviser whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser. Sponsor is an entity that
establishes a unit investment trust.
"Disclosure controls and procedures" means controls and other
procedures of a registered management investment company that are designed to
ensure that information required to be disclosed by the investment company
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on Form N-CSR and Form N-Q is recorded, processed, summarized and reported,
within the time periods specified in the SEC's rules and forms. Disclosure
controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by an investment
company in the reports that it files or submits on Form N-CSR and Form N-Q is
accumulated and communicated to the investment company's management, including
its principal executive officer or officers and principal financial officer or
officers, or person performing similar functions, as appropriate to allow timely
decisions regarding required disclosure.
"Internal control over financial reporting" is a process designed by,
or under the supervision of, the Trust's principal executive and principal
financial officers, or persons performing similar functions, and effected by the
Trust's Board, management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with GAAP and includes
those policies and procedures that:
1. Pertain to the maintenance of records that in reasonable
detail accurately and fairly reflect the transactions and dispositions
of the assets of the Trust;
2. Provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in
accordance with GAAP, and that receipts and expenditures of the Trust
are being made only in accordance with authorization of management and
directors of the Trust; and
3. Provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the
Trust's assets that could have a material effect on the financial
statements.
The report to be prepared by the Audit committee to be included in the
annual proxy statement is governed by Item 407(d)(3)(i) of Regulation S-K, which
requires each proxy statement relating to a shareholder meeting at which
directors are to be elected to include a report, followed by the name of each
Audit Committee member, stating whether: (1) the Committee has reviewed and
discussed the audited financial statements with management, (2) the Committee
has discussed with the independent auditors the matters required to be discussed
by SAS 114, (3) the Committee has received the written disclosures and the
letter from the independent auditors required by Public Company Accounting
Oversight Board Rule 3526, and has discussed with the independent auditors their
independence, and (4) based on the review and discussions referred to in
paragraphs (1) through (3), the Audit Committee recommended to the Board that
the audited financial statements be included in the Trust's annual report to
shareholders required by Section 30(e) of the Investment Company Act of 1940 and
Rule 30d-1 thereunder.
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APPENDIX B
FORM OF NEW SUB-ADVISORY AGREEMENT
THIS INVESTMENT SUB-ADVISORY AGREEMENT (the "Agreement"), dated as of
[o], 2010, among Guggenheim Enhanced Equity Income Fund, a Massachusetts
business trust (the "Trust"), Claymore Advisors, LLC, a Delaware limited
liability company (the "Adviser"), and Guggenheim Partners Asset Management,
LLC, a Delaware limited liability company (the "Sub-Adviser").
WHEREAS, the Adviser has agreed to furnish investment management and
advisory services to the Trust, a closed-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940 Act")
with respect to the trust assets;
WHEREAS, the investment advisory agreement between the Adviser and the
Trust (such agreement or the most recent successor agreement between such
parties relating to advisory services to the Trust is referred to herein as the
"Investment Advisory Agreement") contemplates that the Adviser may sub-contract
investment advisory services with respect to the Trust to a sub-adviser(s)
pursuant to a sub-advisory agreement(s) agreeable to the Trust and approved in
accordance with the provisions of the 1940 Act;
WHEREAS, the Adviser wishes to retain the Sub-Adviser to provide
certain sub-advisory services;
WHEREAS, the Sub-Adviser is a registered Adviser under the Investment
Advisers Act of 1940, as amended (the "Advisers Act"); and
WHEREAS, this Agreement has been approved in accordance with the
provisions of the 1940 Act, and the Sub-Adviser is willing to furnish such
services upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, it is agreed by and between the parties hereto as
follows:
1. APPOINTMENT. The Adviser hereby appoints the Sub-Adviser to act as a
sub-adviser with respect to the Trust as set forth in this Agreement and the
Sub-Adviser accepts such appointment and agrees to render the services herein
set forth for the compensation herein provided.
2. SERVICES OF THE SUB-ADVISER. Subject to the succeeding provisions of
this section, the oversight and supervision of the Adviser and the direction and
control of the Trust's Board of Trustees, the Sub-Adviser will perform certain
of the day-to-day operations of the Trust which may include one or more of the
following services at the request of the Adviser: (i) managing the investment
and reinvestment of the assets of the trust in accordance with the investment
policies of the Trust; (ii) arranging, subject to the provisions of paragraph 3
hereof, for the purchase and sale of securities and other assets for the Trust;
(iii) providing investment research and credit analysis concerning the assets of
the trust; (iv) placing orders for purchases and sales of assets of the trust;
(v) maintaining the books and records as are required to support Trust
investment operations; (vi) monitoring on a daily basis the investment
activities and portfolio holdings relating to the Trust; and (vii) voting
proxies relating to the Trust's portfolio securities in accordance with the
proxy voting policies and procedures of the Sub-Adviser. At the request of the
Adviser, the Sub-Adviser will also, subject to the oversight and supervision of
the Adviser and the direction and control of the Trust's Board of Trustees,
consult with the Adviser as to the overall management of the assets of the trust
and the investment policies and practices of the Trust, including (but not
limited to) the use by the Trust of financial leverage and elements (e.g., form,
amount and costs) relating to such financial leverage and the utilization by the
Trust of any interest rate or other hedging or risk management transactions in
connection therewith, and will perform any of the services described in the
Investment Advisory Agreement. In addition, the Sub-Adviser will keep the Trust
and the Adviser informed of developments materially affecting the Trust and
shall, upon request, furnish to the Trust all information relevant to such
developments. The Sub-Adviser will periodically communicate to the Adviser, at
such times as the Adviser may direct, information concerning the purchase and
sale of securities for the Trust, including: (i) the name of the issuer, (ii)
the amount of the purchase or sale, (iii) the name of the broker or
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dealer, if any, through which the purchase or sale is effected, (iv) the CUSIP
number of the instrument, if any, and (v) such other information as the Adviser
may reasonably require for purposes of fulfilling its obligations to the Trust
under the Investment Advisory Agreement. The Sub-Adviser will provide the
services rendered by it under this Agreement in accordance with the Trust's
investment objective, policies and restrictions (as currently in effect and as
they may be amended or supplemented from time to time) as stated in the Trust's
Prospectus filed with the Securities and Exchange Commission (the "SEC") as part
of the Trust's Registration Statement on Form N-2 and the resolutions of the
Trust's Board of Trustees. The Trust shall maintain its books and records, and
the Sub-Adviser shall have no responsibility with respect thereto, other than
its obligations under the 1940 Act, the Advisers Act or other applicable law. In
addition, the Sub-Adviser may, to the extent permitted by the 1940 Act, the
Advisers Act and other applicable law, aggregate purchase and sale orders being
made simultaneously for other accounts managed by the Sub-Adviser or its
affiliates and allocate the securities so purchased or sold, as well as expenses
incurred in the transaction, among the Trust and other accounts in an equitable
manner.
3. COVENANTS. In the performance of its duties under this
Agreement, the Sub-Adviser:
(a) shall at all times comply and act in accordance with: (i) the
provisions of the 1940 Act and the Advisers Act and all applicable Rules and
Regulations of the SEC thereunder; (ii) any other applicable provision of law;
(iii) the provisions of the Agreement and Declaration of Trust and By-Laws of
the Trust, as such documents are amended from time to time; (iv) the investment
objectives, policies and restrictions of the Trust as set forth in the Trust's
Prospectus filed with the SEC as part of the Trust's Registration Statement on
Form N-2; and (v) any policies, determinations and/or resolutions of the Board
of Trustees of the Trust or the Adviser;
(b) will place orders either directly with the issuer or with any
broker or dealer. Subject to the other provisions of this paragraph, in placing
orders with brokers and dealers, the Sub-Adviser will obtain the best price and
the most favorable execution of its orders. In placing orders, the Sub-Adviser
will consider the experience and skill of the firm's securities traders as well
as the firm's financial responsibility and administrative efficiency. Consistent
with this obligation, the Sub-Adviser may select brokers on the basis of the
research, statistical and pricing services they provide to the Trust and other
clients of the Adviser or the Sub-Adviser, as the case may be. Information and
research received from such brokers will be in addition to, and not in lieu of,
the services required to be performed by the Sub-Adviser hereunder. A commission
paid to such brokers may be higher than that which another qualified broker
would have charged for effecting the same transaction, provided that the
Sub-Adviser determines in good faith that such commission is reasonable in terms
either of the transaction or the overall responsibility of the Adviser and the
Sub-Adviser to the Trust and their other clients and that the total commissions
paid by the Trust will be reasonable in relation to the benefits to the Trust
over the long-term. In no instance, however, will the Trust's securities be
purchased from or sold to the Adviser, the Sub-Adviser or any affiliated person
thereof, except to the extent permitted by the SEC or by applicable law;
(c) maintain books and records with respect to the Trust's securities
transactions and render to the Adviser and the Trust's Board of Trustees such
periodic and special reports as they may reasonably request; and
(d) treat confidentially and as proprietary information of the Trust
all non-public records and other information relative to the Trust, and the
Trust's prior, current or potential shareholders, and will not use such records
and information for any purpose other than performance of its responsibilities
and duties hereunder.
4. SERVICES NOT EXCLUSIVE. Nothing in this Agreement shall prevent the
Sub-Adviser or any officer, employee or other affiliate thereof from acting as
investment adviser for any other person, firm or corporation, or from engaging
in any other lawful activity, and shall not in any way limit or restrict the
Sub-Adviser or any of its officers, employees or agents from buying, selling or
trading any securities for their own accounts or for the accounts of others for
whom it or they may be acting; provided, however, that any of the foregoing
activities are consistent with applicable law and the Sub-Adviser's fiduciary
obligations to the Trust.
5. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Sub-Adviser hereby agrees that all records which it
maintains for the Trust are the property of the Trust and further agrees to
surrender promptly to the Trust any such records upon the Trust's request. The
Sub-Adviser
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further agrees to preserve for the periods prescribed by Rule 31a-2 under the
1940 Act the records required to be maintained by Rule 31a-1 under the 1940 Act.
6. AGENCY CROSS TRANSACTIONS. From time to time, the Sub-Adviser or
brokers or dealers affiliated with the Sub-Adviser may find themselves in a
position to buy for certain of their brokerage clients (each an "Account")
securities which the Sub-Adviser's investment advisory clients wish to sell, and
to sell for certain of their brokerage clients securities which advisory clients
wish to buy. Where one of the parties is an advisory client, the Sub-Adviser or
the affiliated broker or dealer cannot participate in this type of transaction
(known as a cross transaction) on behalf of an advisory client and retain
commissions from both parties to the transaction without the advisory client's
consent. This is because in a situation where a Sub-Adviser is making the
investment decision (as opposed to a brokerage client who makes his own
investment decisions), and the Sub-Adviser or an affiliate is receiving
commissions from one or both sides of the transaction, there is a potential
conflicting division of loyalties and responsibilities on the Sub-Adviser's part
regarding the advisory client. The SEC has adopted a rule under the Advisers Act
which permits an investment adviser or its affiliates to participate on behalf
of an Account in agency cross transactions if the advisory client has given
written consent in advance. By execution of this Agreement, the Trust authorizes
the Sub-Adviser or its affiliates to participate in agency cross transactions
involving an Account, consistent with any policies and procedures that may be
adopted by the Board of Trustees of the Trust, and this Agreement shall
constitute executed, written consent of the Trust for the Sub-Adviser engaging
in agency cross transactions. The Trust may revoke its consent at any time by
written notice to the Sub-Adviser.
7. EXPENSES. During the term of this Agreement, the Sub-Adviser will
bear all costs and expenses of its employees and any overhead incurred by the
Sub-Adviser in connection with their duties hereunder and shall bear the costs
of any salaries or trustees, fees of any officers or trustees of the Trust who
are affiliated persons (as defined in the 1940 Act) of the Sub-Adviser. The
Sub-Adviser shall not be responsible for any expenses of the Adviser or the
Trust not specifically set forth in this Section 8 or otherwise in any written
agreement between the Sub-Adviser and the Trust or the Adviser, as the case may
be.
8. COMPENSATION.
(a) The Adviser agrees to pay to the Sub-Adviser and the Sub-Adviser
agrees to accept as full compensation for all services rendered hereunder by the
Sub-Adviser as such, a monthly fee (the "Sub-Advisory Fee") in arrears at the
annual rate equal to 0.40% of the average daily value of the Trust's total
managed assets. "Total managed assets" means (i) the net assets of the Trust
(including assets attributable to any preferred shares that may be outstanding)
plus (ii) any additional total assets of the Trust attributable to borrowings of
money, the use of reverse repurchase agreements or dollar rolls or the issuance
of debt securities (together "external borrowings"), without deducting
liabilities representing external borrowings. The liquidation preference of any
preferred shares of the Trust, if any, constituting financial leverage shall not
be considered a liability of the Trust. For any period less than a month during
which this Agreement is in effect, the Investment Sub-Advisory Fee shall be
prorated according to the proportion which such period bears to a full month of
28, 29, 30 or 31 days, as the case may be.
(b) For purposes of this Agreement, the total assets of the Trust shall
be calculated pursuant to the procedures adopted by resolutions of the Trustees
of the Trust for calculating the value of the Trust's assets or delegating such
calculations to third parties.
9. CERTAIN INFORMATION. The Sub-Adviser shall promptly notify the
Adviser in writing of the occurrence of any of the following events: (a) the
Sub-Adviser failing to be registered as an investment adviser under the Advisers
Act, (b) the Sub-Adviser having been served or otherwise have notice of any
action, suit, proceeding, inquiry or investigation, at law or in equity, before
or by any court, public board or body, involving the affairs of the Trust, (c)
the occurrence of any change in control of the Sub-Adviser or any parent of the
Sub-Adviser within the meaning of the 1940 Act, or (d) the occurrence of any
material adverse change in the business or financial position of the
Sub-Adviser.
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10. LIMITATION ON LIABILITY.
(a) The Sub-Adviser will not be liable for any error of judgment or
mistake of law or for any loss suffered by the Adviser or by the Trust (or their
respective agents) in connection with the performance of this Agreement, except
a loss resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or from
reckless disregard by it of its duties under this Agreement.
(b) The Trust may, but shall not be required to, make advance payments
to the Sub-Adviser in connection with the expenses of the Sub-Adviser in
defending any action with respect to which damages or equitable relief might be
sought against the Sub-Adviser under this Section (which payments shall be
reimbursed to the Trust by the Sub-Adviser as provided below) if the Trust
receives (i) a written affirmation of the Sub-Adviser's good faith belief that
the standard of conduct necessary for the limitation of liability in this
Section has been met and (ii) a written undertaking to reimburse the Trust
whether or not the Sub-Adviser shall be deemed to have liability under this
Section, such reimbursement to be due upon (1) a final decision on the merits by
a court or other body before whom the proceeding was brought as to whether or
not the Sub-Adviser is liable under this Section or (2) in the absence of such a
decision, upon the request of the Sub-Adviser for reimbursement by a majority
vote of a quorum consisting of trustees of the Trust 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"). In addition, at
least one of the following conditions must be met: (A) the Sub-Adviser shall
provide a security for such Sub-Adviser undertaking, (B) the Trust shall be
insured against losses arising by reason of any lawful advance, or (C) a
majority of a quorum of the Disinterested Non-Party Trustees of the Trust or an
independent legal counsel in a written opinion, shall determine, based on a
review of readily available facts (as opposed to a full trial-type inquiry),
that there is a reasonable belief that the Sub-Adviser ultimately will be found
not to be liable under this Section.
11. DURATION AND TERMINATION. This Agreement shall become effective as
of the date hereof and shall continue (unless terminated automatically as set
forth below) in effect for a period of one year. Thereafter, if not terminated,
this Agreement shall continue in effect with respect to the Trust for successive
periods of 12 months, provided such continuance is specifically approved at
least annually by both (a) the vote of a majority of the Trust's Board of
Trustees or a vote of a majority of the outstanding voting securities of the
Trust at the time outstanding and entitled to vote and (b) by the vote of a
majority of the Trustees, who are not parties to this Agreement or interested
persons (as such term is defined in the 1940 Act) of any such party, cast in
person at a meeting called for the purpose of voting on such approval.
Notwithstanding the foregoing, this Agreement may be terminated by the Trust,
without the payment of any penalty, upon giving the Sub-Adviser 60 days' notice
(which notice may be waived by the Sub-Adviser), provided that such termination
by the Trust shall be directed or approved by the vote of a majority of the
Trustees of the Trust in office at the time or by the vote of the holders of a
majority of the voting securities of the Trust at the time outstanding and
entitled to vote, or by the Sub-Adviser on 60 days' written notice (which notice
may be waived by the Trust), and will terminate automatically upon any
termination of the Investment Advisory Agreement between the Trust and the
Adviser. This Agreement will also immediately terminate in the event of its
assignment. (As used in this Agreement, the terms "majority of the outstanding
voting securities," "interested person" and "assignment" shall have the same
meanings of such terms in the 1940 Act.)
12. NOTICES. Any notice under this Agreement shall be in writing to the
other party at such address as the other party may designate from time to time
for the receipt of such notice and shall be deemed to be received on the earlier
of the date actually received or on the fourth day after the postmark if such
notice is mailed first class postage prepaid.
13. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. Any amendment of this Agreement shall be
subject to the 1940 Act.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts for contracts to
be performed entirely therein without reference to choice of law principles
thereof and in accordance with the applicable provisions of the 1940 Act.
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15. USE OF THE NAME "GUGGENHEIM." Pursuant to a Trademark Sublicense
Agreement dated [o] between the Adviser and the Sub-Adviser, the Sub-Adviser has
consented to the use by the Trust of the name or identifying word "Guggenheim"
in the name of the Trust.
16. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or other wise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding on, and shall inure to the
benefit of the parties hereto and their respective successors.
17. COUNTERPARTS. This Agreement may be executed in counterparts by the
parties hereto, each of which shall constitute an original counterpart, and all
of which, together, shall constitute one Agreement.
A copy of the Agreement and Declaration of Trust of the Trust is on
file with the Secretary of State of The Commonwealth of Massachusetts, and
notice is hereby given that this instrument is executed on behalf of an officer
of the Trust as an officer and not individually and that the obligations of this
instrument are not binding upon any of the Trustees, officers or shareholders
individually but are binding only upon the assets and property of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their duly authorized officers designated below as of the day and
year first above written.
CLAYMORE ADVISORS, LLC
By:
-------------------------------
Name:
Title:
GUGGENHEIM PARTNERS ASSET
MANAGEMENT, LLC
By:
-------------------------------
Name:
Title:
GUGGENHEIM ENHANCED EQUITY INCOME FUND
By:
-------------------------------
Name:
Title:
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FORM OF PROXY CARD
PROXY TABULATOR
[ADDRESS]
TO VOTE BY INTERNET
1) Read the Proxy Statement and have the proxy
card below at hand.
2) Got to the website [ ]
3) Follow the instructions provided on the
website.
TO VOTE BY TELEPHONE
1) Read the Proxy Statement and have the proxy
card below at hand.
2) Call [ ]
3) Follow the instructions.
TO VOTE BY MAIL
1) Read the Proxy Statement
2) Check the appropriate boxes on the proxy
card below.
3) Sign and date the proxy card.
4) Return the proxy card in the envelope
provided.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: CLAYM1
KEEP THIS PORTION FOR YOUR RECORDS DETACH
AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
OLD MUTUAL/CLAYMORE LONG SHORT FUND
FOR AGAINST
1. To approve an investment sub-advisory agreement among the
Fund, Claymore Advisors, LLC and Guggenheim Partners Asset Management, LLC. [ ] [ ]
2. To elect two Trustees as Class II Trustees to serve until the Fund's FOR ALL WITHHOLD ALL FOR ALL EXCEPT
2013 annual meeting of shareholders or until their respective
successors shall have been elected and qualified. [ ] [ ] [ ]
Nominee:
(1) Steven D. Cosler
(2) Robert M. Hamje
To withhold authority to vote for any individual nominee(s), mark "For All
Except" and write the name(s) of the nominee(s) on the line below.
-----------------------------------------------
3. To transact such other business as may properly come before the Annual
Meeting or any adjournments or postponements thereof.
PLEASE COMPLETE, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE.
Please sign here exactly as your name appears in the records of the
Fund and date. If the shares are held jointly, each holder should sign. When
signing as an attorney, executor, administrator, trustee, guardian, officer of a
corporation or other entity or in any other representative capacity, please give
the full title under signature(s).
Signature [PLEASE SIGN WITHIN BOX] Date
Signature (Joint Owners) Date
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SPECIAL
MEETING: The Proxy Statement is available at [ ].
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SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
OLD MUTUAL/CLAYMORE LONG-SHORT FUND
ANNUAL MEETING OF SHAREHOLDERS
JULY 19, 2010
The annual meeting of shareholders of Old Mutual/Claymore Long-Short Fund (the
"Fund") (effective as of June 21, 2010, the Fund's name will change to
Guggenheim Enhanced Equity Income Fund) will be held at the offices of the Fund,
2455 Corporate West Drive, Lisle, Illinois, 60532, on Monday, July 19, 2009 at
11:30 A.M., Central Time (the "Annual Meeting"). The undersigned hereby appoints
each of Mark E. Mathiasen and Kevin M. Robinson, or their respective designees,
with full power of substitution and revocation, as proxies to represent and to
vote all shares of the undersigned at the Annual Meeting and all adjournments
thereof, with all powers the undersigned would possess if personally present,
upon the matters specified on the reverse side.
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS
INDICATED AS TO THE PROPOSAL, THE PROXIES SHALL VOTE FOR SUCH PROPOSAL. THE
PROXIES MAY VOTE AT THEIR DISCRETION ON ANY OTHER MATTER THAT MAY PROPERLY COME
BEFORE THE ANNUAL MEETING.
PLEASE SIGN AND DATE ON THE REVERSE SIDE.
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