UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21309
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Advent Claymore Convertible Securities and Income Fund
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(Exact name of registrant as specified in charter)
1065 Avenue of the Americas, New York, NY 10018
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(Address of principal executive offices) (Zip code)
Robert White, Treasurer
1065 Avenue of the Americas, New York, NY 10018
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(Name and address of agent for service)
Registrant's telephone number, including area code: (212) 479-0675
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Date of fiscal year end: October 31
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Date of reporting period: October 31, 2008
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The registrant's annual report transmitted to shareholders pursuant to Rule
30e-1 under the Investment Company Act of 1940 is as follows:
ANNUAL
REPORT
October 31, 2008
ADVENT CLAYMORE CONVERTIBLE
SECURITIES AND INCOME FUND
AVK
PHOTO: A suspension bridge as scene from below.
Logo: Advent Capital Management
Logo: CLAYMORE(SM)
WWW.CLAYMORE.COM/AVK
... YOUR BRIDGE TO THE LATEST,
MOST UP-TO-DATE INFORMATION ABOUT THE
ADVENT CLAYMORE CONVERTIBLE SECURITIES AND INCOME FUND
PHOTO: A suspension bridge as scene from below.
AVK Advent Claymore
LISTED Convertible Securities
NYSE(R) and Income Fund
Logo: Advent Capital Management
Logo: CLAYMORE(SM)
There can be no assurance the Fund will achieve its investment objective.
The value of the Fund will fluctuate with the value of the Underlying
securities. Historically, closed-end funds often trade at a discount to
their net asset value.
NOT FDIC INSURED o NOT BANK-GUARANTEED o MAY LOSE VALUE
The shareholder report you are reading right now is just the beginning
of the story. Online at WWW.CLAYMORE.COM/AVK, you will find:
o Daily, weekly and monthly data on share prices,
net asset values, dividends and more
o Portfolio overviews and performance analyses
o Announcements, press releases and special notices
o Fund and adviser contact information
Advent Capital Management and Claymore are continually updating and expanding
shareholder information services on the Fund's website, in an ongoing effort to
provide you with the most current information about how your Fund's assets are
managed, and the results of our efforts. It is just one more small way we are
working to keep you better informed about your investment in the Fund.
2 | Annual Report | October 31, 2008
AVK | Advent Claymore Convertible Securities and Income Fund
Dear SHAREHOLDER|
Photo: Tracy V. Maitland
Tracy V. Maitland
President and Chief Executive Officer
We thank you for your investment in the Advent Claymore Convertible Securities
and Income Fund (the "Fund"). This report covers the Fund's performance for the
fiscal year ended October 31, 2008.
The Fund's investment objective is to provide total return through a combination
of capital appreciation and current income. Under normal market conditions, the
Fund will invest at least 80% of its managed assets in a diversified portfolio
of convertible securities and non-convertible income securities. Under normal
market conditions, the Fund will invest at least 60% of its managed assets in
convertible securities and up to 40% in lower grade, non-convertible income
securities. Convertible securities represented 73.7% of the portfolio as of
October 31, 2008.
All Fund returns cited--whether based on net asset value ("NAV") or market
price--assume the reinvestment of all distributions. For the 12-month period
ending October 31, 2008, the Fund provided a total return based on market price
of -41.96% and a return of -51.06% based on NAV. As of October 31, 2008, the
Fund's market price of $13.11 represented a premium of 4.71% to NAV of $12.52.
The Fund currently implements its leverage strategy primarily through issuance
of Auction Market Preferred Shares ("AMPS") and additionally through total
return swaps on bank loans. The broad auction-rate preferred securities market
remains essentially frozen. The auctions for nearly all auction-rate preferred
shares, including AMPS such as those issued by the Fund, are failing. We believe
that this increase in failed auctions is simply a liquidity issue. Investors
need to be aware that a failed auction is not a default, nor does it require the
redemption of a fund's auction-rate preferred shares. Provisions in the offering
documents of the Fund's AMPS provide a mechanism to set a maximum rate in the
event of a failed auction, and, thus, investors will continue to be entitled to
receive payment for holding these AMPS. This maximum rate is determined based
upon a multiple of or a spread to LIBOR--whichever is greater.
The Fund has six series of AMPS, three that auction each week and three that
auction every 28 days. The auctions for the Fund's AMPS have failed since
mid-February 2008, as have auctions of most AMPS. The established maximum rates
during this period were based on a spread of 125 basis points over the
applicable LIBOR rates, with the maximum rates ranging from 3.27% to 5.94%. From
mid-October 2008 and into November, LIBOR declined dramatically. As a result,
recent maximum rates have been below 2.50%. Subsequent to the reporting period
on December 1, 2008, the Fund announced a redemption of $13 million of its AMPS.
These redemptions are scheduled to take place between December 23, 2008 and
January 14, 2009. We will continue to evaluate the benefits and impacts of
leverage on the Fund, as well as explore other methods of utilizing leverage.
On December 1, 2008, the Fund declared its December monthly dividend of $0.0939
per share, reflecting a reduction of $0.0779 per share from the previous monthly
distribution rate of $0.1718 per share, which was maintained throughout the
Fund's fiscal year ended October 31, 2008. The Fund's management believes that
reducing the distribution is a necessary step to enhance our ability to maintain
and potentially grow the Fund's net asset value--which should benefit the Fund's
shareholders over time. This reduced dividend represents an annualized
distribution rate of 8.59% based upon the closing market price of $13.11 on
October 31, 2008.
Annual Report | October 31, 2008 | 3
AVK | Advent Claymore Convertible Securities and Income Fund | DEAR SHAREHOLDER
continued
There is no guarantee of any future distributions or that the current returns
and distribution rate will be maintained.
We encourage shareholders to consider the opportunity to reinvest their
distributions from the Fund through the Dividend Reinvestment Plan ("DRIP"),
which is described in detail on page 27 of this report. When shares trade at a
discount to NAV, the DRIP takes advantage of the discount by reinvesting the
monthly dividend distribution in common shares of the Fund purchased in the
market at a price less than NAV. Conversely, when the market price of the Fund's
common shares is at a premium above NAV, the DRIP reinvests participants'
dividends in newly-issued common shares at NAV, subject to an IRS limitation
that the purchase price cannot be more than 5% below the market price per share.
The DRIP provides a cost-effective means to accumulate additional shares and
enjoy the benefits of compounding returns over time. The DRIP plan effectively
provides an income-averaging technique, which causes shareholders to accumulate
a larger number of Fund shares when the share price is depressed rather than
when the price is higher.
The following Questions & Answers section provides more information about the
factors that affected the Fund's performance during the past twelve months.
We are honored that you have chosen the Advent Claymore Convertible Securities
and Income Fund as part of your investment portfolio. For the most up-to-date
information on your investment, please visit the Fund's website at
www.claymore.com/avk.
Sincerely,
/s/ Tracy V. Maitland
Tracy V. Maitland
President and Chief Executive Officer of the Advent Claymore Convertible
Securities and Income Fund
December 2, 2008
4 | Annual Report | October 31, 2008
AVK | Advent Claymore Convertible Securities and Income Fund | QUESTIONS
& ANSWERS
QUESTIONS & ANSWERS|
Advent Claymore Convertible Securities and Income Fund (the "Fund") is managed
by a team of seasoned professionals at Advent Capital Management, LLC,
("Advent"), led by Tracy V. Maitland, Advent's President and Chief Investment
Officer. In the following interview, Mr. Maitland discusses the convertible
securities and high-yield markets and the performance of the Fund during its
fiscal year ended October 31, 2008.
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WILL YOU REMIND US OF THIS FUND'S OBJECTIVES AND HOW YOU SEEK TO ACHIEVE THEM?
The Fund's investment objective is to provide total return through a combination
of capital appreciation and current income. Under normal market conditions, the
Fund will invest at least 80% of its managed assets in a diversified portfolio
of convertible securities and non-convertible income securities. Under normal
market conditions, the Fund will invest at least 60% of its managed assets in
convertible securities and may invest up to 40% in lower grade, non-convertible
income securities. Historically, convertible securities have generally provided
returns similar to equity returns with lower risk. This is possible because a
significant portion of the return of convertible securities generally comes from
yield. Moreover, movement in the price of the convertible security tends to be
more sensitive to appreciation of the underlying stock than to setbacks in the
price of the stock.
More than half of the convertible market and a large portion of the Fund's
convertible investments are in securities issued by growth
companies--particularly companies within the healthcare, financial and
technology sectors. Growth companies generally issue convertible bonds or
convertible preferred stocks as a means of raising capital to build their
businesses. Convertibles represent something of a compromise between equity and
debt as a way to raise capital for growth; convertibles generally have a lower
interest rate than straight bonds, but entail less dilution than issuing common
stock. Financial companies, while not presently considered growth companies,
also issue a fair amount of convertible securities--typically convertible
preferreds with more attractive yields and higher credit ratings. By offering
preferreds, companies can raise capital while helping to keep their credit
ratings higher than if they offered bonds. This is because issuing bonds would
increase the proportion of debt on an issuing company's balance sheet, making a
downgrade in credit rating more likely, while preferred stock is classified as
equity. Credit ratings are especially important to financial companies, since a
lower credit rating generally results in higher borrowing costs.
The Fund's flexibility to shift between convertibles and high-yield bonds helps
provide diversification on an asset, sector and security level. Among the
attractions of convertible securities are that they generally offer a yield
advantage over common stocks; they have tended to move up in tandem with
equities in strong markets; and the yield advantage has historically provided
inherent downside protection in weaker markets.
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PLEASE TELL US ABOUT THE ECONOMIC AND MARKET ENVIRONMENT OVER THE LAST 12
MONTHS.
In the mid-year report for this Fund, we described the six-month period ended
April 30, 2008, as a time of economic uncertainty and turmoil in capital
markets. Since that time, there has been pronounced further deterioration in the
economy and in equity and debt markets throughout the world.
The U.S. economy, as measured by real gross domestic product, contracted in the
third quarter of 2008, and most economists are now predicting several quarters
of negative real growth. Unemployment has risen sharply; consumer spending has
dropped; and business investment has weakened as even those firms in healthy
financial condition have become reluctant to expand in an environment of
heightened uncertainty and tighter credit.
The present crisis originated with the end of a housing boom fueled by
excessively easy credit. As the prices of houses fell, losses on mortgage-based
securities mounted, eroding the capital of financial institutions and initiating
a vicious cycle of deleveraging. The process began in late 2007 as a correction
in the sub-prime mortgage market, but it has intensified markedly, with profound
implications for the entire U.S. economy and related effects on global markets
and economies. In fact, many foreign economies, especially those that depend on
exports for growth, have weakened more than the U.S.
Credit markets have become so intolerant of risk that they are essentially
frozen. In an effort to alleviate the financial crisis, the U.S. government has
taken unprecedented actions, including instituting temporary insurance on money
market funds, expanding access by financial institutions to the Federal Reserve
(the "Fed"), and investing directly in some financial institutions. Some large
financial firms have been allowed to fail, while others were rescued, and
takeovers of troubled financial firms have been arranged. Other central banks
have also taken robust action to support banking systems and stimulate economic
growth.
In this very difficult environment, markets have been extremely volatile, and
essentially all asset classes except U.S. Treasury securities have had negative
returns. The Standard & Poor's 500 Index(1), which is generally regarded as a
good indicator of the broad stock market, returned -36.10% for the 12-month
period ended October 31, 2008. World equity markets performed even worse: the
MSCI World Index(2), which measures performance of world equity markets,
returned -41.51% during the same time period.
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1 Standard and Poor's 500 Index is a capitalization-weighted index of 500
stocks. The index is designed to measure performance of the broad domestic
economy through changes in the aggregate market value of 500 stocks
representing all major industries
2 MSCI World Index is a free float-adjusted market capitalization index that
measures global developed market equity performance of the developed market
country indices of Europe, Australasia, the Far East, the U.S. and Canada.
Annual Report | October 31, 2008 | 5
AVK | Advent Claymore Convertible Securities and Income Fund | QUESTIONS &
ANSWERS continued
Convertible securities, which in the past have been less volatile than straight
equities, performed almost as poorly: the return of the Merrill Lynch All U. S.
Convertibles Index(3) was -35.42% for the same time period. A major reason for
negative performance was selling by hedge funds, which had made leveraged
investments in convertibles while shorting the underlying common stocks. Unable
to get the financing they had used in the past, hedge funds had to sell
convertibles into a market with little demand, and prices dropped precipitously.
In the bond market, we have seen unprecedented spreads between yields of
investment grade and high-yield corporate bonds and U.S. Treasury securities,
which are considered not to carry credit risk. In this disastrous market, the
only bonds with positive returns were those with little or no credit risk: the
Lehman 10-20 Year U.S. Treasury Index(4) returned 4.13%. The Lehman Brothers
Aggregate Bond Index(5), which measures return of the high-quality U.S. bond
market as a whole, returned 0.30%, but the return of the Merrill Lynch High
Yield Master II Index(6), which measures performance of the high-yield bond
market, was -25.40%. All Index returns are for the 12-month period ended October
31, 2008.
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HOW DID THE FUND PERFORM IN THIS ENVIRONMENT?
All Fund returns cited--whether based on net asset value ("NAV") or market
price--assume the reinvestment of all distributions. For the 12-month period
ending October 31, 2008, the Fund provided a total return based on market price
of -41.96% and a return of -51.06% based on NAV. As of October 31, 2008, the
Fund's market price of $13.11 represented a premium of 4.71% to NAV of $12.52. A
year earlier, at October 31, 2007, the Fund's closing market price was $25.15
and NAV was $28.23. The market value of the Fund's shares fluctuates from time
to time, and it may be higher or lower than the Fund's NAV.
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WHAT WERE THE MAJOR INVESTMENT DECISIONS THAT AFFECTED THE FUND'S PERFORMANCE?
In recent months convertibles have experienced the greatest setback in recorded
history. Records don't exist for the period of the market crash of the late
1920s and early 1930s, but today's conditions have been much worse than in the
worst periods of the 1970s and 1980s. In a severe bear market, convertibles
barely outperformed equities. So the Fund's 73.7% position in convertibles was
an impediment to performance.
Many convertibles, even those with short maturities, have been trading at higher
yields than the straight bonds of the same companies. This is an anomaly that
apparently reflects forced selling of convertibles by hedge funds and in our
opinion suggests superior returns from convertibles in the future.
Within the convertibles portion of the portfolio, a significant position in the
health care industry helped performance. The relative strength in health care
was more than offset by large exposure to the financial sector, which had been a
good source of relatively high income and equity appreciation potential for the
Fund over the years. Indeed, health care and financials typically are the two
largest sectors in the Fund.
While health care investments did relatively well, the definition of relatively
good performance in the second half of the Fund's fiscal year was a small
loss--rather than a strong gain. Our largest healthcare investment is in Teva
Pharmaceutical Finance LLC (3.6% of long-term investments), the world's largest
generic drug company; we swapped out of the 1.75% convertible bond for the 0.25%
"C" series convertible bond, which offered potential downside protection without
sacrificing upside potential. We raised Teva to the largest position in the Fund
on October 31. We also did relatively well with our investment in Watson
Pharmaceuticals, Inc. (1.6% of long-term investments), another generic drug
company, which declined only modestly during the market rout. We began to reduce
our position in Watson, however, because the convertible appeared to no longer
offer sufficient appreciation potential.
Unfortunately, financial stocks were hard hit, especially in the second half of
the Fund's fiscal year. We accumulated a small position in Lehman Brothers
Holdings Inc. (no securities were held in portfolio at period end) as the firm
appeared to be turning around--and consequently we were caught in the bankruptcy
filing, which drove the price of the Lehman convertible to pennies on the
dollar. We also suffered further losses in our reduced position in XL Capital
Ltd. (0.3% of long-term investments), a reinsurance company that appeared to be
turning around under new management, but continued to fall into disfavor in the
market.
We sold our small positions in Federal National Mortgage Association ("Fannie
Mae") and Federal Home Loan Mortgage Corporation ("Freddie Mac") before the
convertible preferreds of these two entities became essentially worthless. (No
securities of these entities were held in the portfolio at period end.) The lack
of protection for the preferreds in the government rescues of these two
companies was reflected in lower prices of other
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3 The Merrill Lynch All U.S. Convertibles Index (VXA0) is comprised of
approximately 500 issues of convertible bonds and preferred stock of all
qualities.
4 The Lehman 10-20 Year U.S. Treasury Index is comprised of securities in the
Treasury Index (i.e., public obligations of the U.S. Treasury) with a
maturity from 10 up to (but not including) 20 years.
5 The Lehman Brothers Aggregate Bond Index covers the U.S.
dollar-denominated, investment-grade, fixed rate, taxable bond market of
SEC-registered securities. The Index includes bonds from the Treasury,
government-related, corporate, mortgage-backed securities (agency
fixed-rate and hybrid ARM passthroughs), asset-backed securities and
collateralized mortgage-backed securities sectors. U.S. Agency Hybrid
Adjustable Rate Mortgage (ARM) securities were added to the U.S. Aggregate
Index on April 1, 2007.
6 The Merrill Lynch High Yield Master II Index is a commonly used benchmark
index for high yield corporate bonds. It is a measure of the broad high
yield market.
These indices are unmanaged and it is not possible to invest directly in any
index.
6 | Annual Report | October 31, 2008
AVK | Advent Claymore Convertible Securities and Income Fund | QUESTIONS &
ANSWERS continued
convertible preferreds--particularly convertible preferreds in the financial
sector--which are a major investment of the Fund.
All was not woe in the financial sector, however. We began accumulating
convertible bonds of Merrill Lynch & Co., Inc. (1.1% of long-term investments)
in mid-July. The September 14 announcement that Merrill Lynch would be acquired
by Bank of America Corporation (1.6% of long-term investments) caused these
preferreds to move up, helping to add to performance.
The Fund also made a modest profit on Boston Private Financial Holdings, Inc.
(0.5% of long-term investments) as the market began to recognize that the
convertible bonds--puttable July 15, 2009--are highly likely to prove "money
good" and as the company announced that it had bought back some of the
convertibles.
Our allocation to high-yield bonds was also a negative impact as credit spreads
widened dramatically, though not quite so negative as convertibles. Since
high-yield bonds are more difficult to hedge than convertibles, they are less
appealing to hedge funds, thus have not felt the extreme selling pressure
experienced by convertibles. Over this period, the Fund was underweight high
yield relative to its history. At inception, approximately 40% of the Fund's
assets were invested in high-yield bonds; high-yield bonds represented 10.4% of
total investments as of October 31, 2007, and 11.4% as of October 31, 2008. The
Fund would have faired better over this period with a greater weight in
high-yield bonds.
The Fund has also had some exposure to leveraged bank loans, which were under
pressure. Like convertibles, bank loans were widely held by hedge funds, often
with considerable leverage. And, like convertibles, they have been subject to
forced selling as hedge funds have found it necessary to raise cash. We believe
that the current prices of some bank loans still in the portfolio are
attractive, and such holdings are likely to perform better as different types of
investment entities begin to identify investment opportunities in these
instruments.
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HOW HAS THE FUND'S LEVERAGE STRATEGY AFFECTED PERFORMANCE?
The Fund utilizes leverage (borrowing) as part of its investment strategy. The
purpose of leverage is to finance the purchase of additional securities that
provide increased income and potentially greater appreciation potential to
common shareholders than could be achieved from a portfolio that is not
leveraged. The Fund currently implements its leverage strategy primarily through
the issuance of Auction Market Preferred Shares ("AMPS").
Through the fiscal year ended October 31, 2008, the Fund's AMPS leverage was
maintained at a constant level of $275 million. We were conservative in not
maximizing leverage at times when the Fund's NAV was much higher than it is now.
In retrospect, this was a wise move because the recent setback has caused the
Fund's leverage to increase as a percentage of asset value.
The broad auction-rate preferred securities market remains essentially frozen.
The auctions for nearly all auction-rate preferred shares, including AMPS such
as those issued by the Fund, are failing. We believe that this increase in
failed auctions is simply a liquidity issue. Investors need to be aware that a
failed auction is not a default, nor does it require the redemption of a fund's
auction-rate preferred shares. Provisions in the offering documents of the
Fund's AMPS provide a mechanism to set a maximum rate in the event of a failed
auction, and, thus, investors will continue to be entitled to receive payment
for holding these AMPS. This maximum rate is determined based upon a multiple of
or a spread to LIBOR--whichever is greater.
The Fund has six series of AMPS, three that auction each week and three that
auction every 28 days. The auctions for the Fund's AMPS have failed since
mid-February 2008, as have auctions of most AMPS. The established maximum rates
during this period were based on a spread of 125 basis points over the
applicable LIBOR rates, with the maximum rates ranging from 3.27% to 5.94%. From
mid-October and into November, LIBOR declined dramatically. As a result, recent
maximum rates have been below 2.50%. We will continue to evaluate the benefits
and impacts of leverage on the Fund, as well as exploring other methods of
utilizing leverage. On December 1, 2008, the Fund announced a partial at-par
redemption of its outstanding AMPS, liquidation preference $25,000 per share.
The Fund will redeem $13 million of its outstanding AMPS. The redemption price
will be equal to the liquidation preference per share, plus accumulated but
unpaid dividends as of the applicable redemption date. See the Fund's website
for redemption schedule.
Subsequent to the reporting period, on December 1, 2008, the Fund announced a
partial redemption of its AMPS. The Fund will redeem $13 million of its
outstanding AMPS between December 23, 2008 and January 14, 2009. The redemption
price will be equal to the liquidation preference per share, plus accumulated
but unpaid dividends as of the redemption date.
There is no guarantee that the Fund's leverage strategy will be successful, and
the Fund's use of leverage may cause the Fund's NAV and market price of common
shares to be more volatile. During the recent market volatility, leverage has
been a handicap. Leverage adds value only when the return on securities
purchased exceeds the cost of leverage.
We believe that it seems more likely that leverage will again add to
performance, given the current relatively low rates on AMPS--and the relatively
low prices and high yields on our investments. Although the use of Financial
Leverage by the Fund may create an opportunity for increased return for the
common shares, it also results in additional risks and can magnify the effect of
any losses. If the income and gains earned on securities purchased with the
Financial Leverage proceeds are greater than the cost of the Financial Leverage,
the common shares' return will be greater
Annual Report | October 31, 2008 | 7
AVK | Advent Claymore Convertible Securities and Income Fund | QUESTIONS &
ANSWERS continued
than if Financial Leverage had not been used. Conversely, if the income or gains
from the securities purchased with the Financial Leverage proceeds are less than
the cost of the Financial Leverage, the return of the common shares will be less
than if Financial Leverage had not been used. There is no assurance that a
Financial Leveraging strategy will be successful.
--------------------------------------------------------------------------------
WHAT IS YOUR CURRENT OUTLOOK FOR THE MARKETS AND THE FUND?
It is always disappointing to report a negative return, as nearly all funds have
in the recent market setback. As difficult as the market has been over the last
year, we believe that current market conditions provide many attractive
opportunities for this Fund, which has the ability to invest at a time when many
other investors are forced to sell holdings regardless of value.
A major advantage of investing in convertible securities is the feature of
asymmetry in the convertible market: convertibles tend to capture more of the
upside in a positive market than they lost on the downside in a negative market.
This feature makes convertibles very attractive to hedge funds, which, as
mentioned above, have invested heavily in these securities, providing a huge
source of liquidity in this market for the past few years. However, in recent
months, with many hedge funds in trouble, forced selling has put significant
pressure on the market for convertibles.
The positive aftermath of the disappointing performance in the recent
convertible market is that, we believe, the upside potential from convertibles
is now greater. Yields are higher, most issues are trading at discounts from
par, and conversion premiums are reasonable. We feel confident that over time
our diligence in security selection will continue to help the Fund's performance
both by providing favorable returns in rising markets and by providing
protection against down markets. Our two key asset classes--convertibles and
high-yield securities--historically have had much lower volatility and downside
risk than common stocks. Our proprietary credit analysis is intended to enable
us to invest in companies with what we believe are stable-to-improving
fundamentals and to avoid deteriorating situations that could be especially
dangerous during weak economic environments. Over time, convertible securities
have historically provided equity-like returns at lower risk by capturing much
of the appreciation of common stocks, while yielding more than equities and
experiencing less price deterioration during market corrections.
================================================================================
The conversion premium reflects the market price of a convertible relative to
the market value of the common shares into which the convertible security can be
converted. For example, a bond trading at a par value of $1,000 that is
convertible into 20 shares trading at $40 would have a conversion premium of 25%
over its conversion value of $800. The lower the conversion premium, the more
upside there is for convertible investors. If the stock performs poorly, the
convertible normally provides downside protection based on its yield and its
fixed-income value.
================================================================================
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AVK RISKS AND OTHER CONSIDERATIONS
The views expressed in this report reflect those of the Portfolio Managers only
through the report period as stated on the cover. These views are subject to
change at any time, based on market and other conditions and should not be
construed as a recommendation of any kind. The material may also contain
forward-looking statements that involve risk and uncertainty, and there is no
guarantee they will come to pass. There can be no assurance that the Fund will
achieve its investment objectives. The value of the Fund will fluctuate with the
value of the underlying securities. Historically, closed-end funds often trade
at a discount to their net asset value. The Fund is subject to investment risk,
including the possible loss of the entire amount that you invest. Past
performance does not guarantee future results.
CONVERTIBLE SECURITIES. The Fund is not limited in the percentage of its assets
that may be invested in convertible securities. Convertible securities generally
offer lower interest or dividend yields than non-convertible securities of
similar quality. The market values of convertible securities tend to decline as
interest rates increase and, conversely, to increase as interest rates decline.
However, the convertible security's market value tends to reflect the market
price of the common stock of the issuing company when that stock price is
greater than the convertible's "conversion price, " which is the predetermined
price at which the convertible security could be exchanged for the associated
stock.
SYNTHETIC CONVERTIBLE SECURITIES. The value of a synthetic convertible security
will respond differently to market fluctuations than a convertible security
because a synthetic convertible security is composed of two or more separate
securities, each with its own market value. In addition, if the value of the
underlying common stock or the level of the index involved in the convertible
component falls below the exercise price of the warrant or option, the warrant
or option may lose all value.
LOWER GRADE SECURITIES. The Fund may invest an unlimited amount in lower grade
securities. Investing in lower grade securities (commonly known as "junk bonds")
involves additional risks, including credit risk. Credit risk is the risk that
one or more securities in the Fund's portfolio will decline in price, or fail to
pay interest or principal when due, because the issuer of the security
experiences a decline in its financial status.
LEVERAGE RISK. Certain risks are associated with the leveraging of common stock.
Both the net asset value and the market value of shares of common stock may be
subject to higher volatility and a decline in value.
INTEREST RATE RISK. In addition to the risks discussed above, convertible
securities and non-convertible income securities are subject to certain risks,
including:
o if interest rates go up, the value of convertible securities and
nonconvertible income securities in the Fund's portfolio generally will decline;
o during periods of declining interest rates, the issuer of a security may
exercise its option to prepay principal earlier than scheduled, forcing the Fund
to reinvest in lower yielding securities. This is known as call or prepayment
risk. Lower grade securities have call features that allow the issuer to
repurchase the security prior to its stated maturity. An issuer may redeem a
lower grade security if the issuer can refinance the security at a lower cost
due to declining interest rates or an improvement in the credit standing of the
issuer; and
8 | Annual Report | October 31, 2008
AVK | Advent Claymore Convertible Securities and Income Fund | QUESTIONS &
ANSWERS continued
o during periods of rising interest rates, the average life of certain types of
securities may be extended because of slower than expected principal payments.
This may lock in a below market interest rate, increase the security's duration
(the estimated period until the security is paid in full) and reduce the value
of the security. This is known as extension risk.
ILLIQUID INVESTMENTS. The Fund may invest without limit in illiquid securities.
The Fund may also invest without limit in Rule 144A Securities. Although many of
the Rule 144A Securities in which the Fund invests may be, in the view of the
Investment Manager, liquid, if qualified institutional buyers are unwilling to
purchase these Rule 144A Securities, they may become illiquid. Illiquid
securities may be difficult to dispose of at a fair price at the times when the
Fund believes it is desirable to do so. The market price of illiquid securities
generally is more volatile than that of more liquid securities, which may
adversely affect the price that the Fund pays for or recovers upon the sale of
illiquid securities.
FOREIGN SECURITIES AND EMERGING MARKETS RISK. Investing in non-U.S. issuers may
involve unique risks, such as currency, political, economic and market risk. In
addition, investing in emerging markets entails additional risk including, but
not limited to (1) news and events unique to a country or region (2) smaller
market size, resulting in lack of liquidity and price volatility (3) certain
national policies which may restrict the Fund's investment opportunities.
STRATEGIC TRANSACTIONS. The Fund may use various other investment management
techniques that also involve certain risks and special considerations, including
engaging in hedging and risk management transactions, including interest rate
and foreign currency transactions, options, futures, swaps, caps, floors, and
collars and other derivatives transactions.
AUCTION MARKET PREFERRED SHARES (AMPS) RISK. The AMPS are redeemable, in whole
or in part, at the option of the Fund on any dividend payment date for the AMPS,
and are subject to mandatory redemption in certain circumstances. The AMPS are
not listed on an exchange. You may buy or sell AMPS only through an order placed
at an auction with or through a broker-dealer that has entered into an agreement
with the auction agent and the Fund or in a secondary market maintained by
certain broker dealers. These broker-dealers are not required to maintain this
market, and it may not provide you with liquidity.
In addition to the risks described above, the Fund is also subject to:
Management Risk, Market Disruption Risk and Anti-Takeover Provisions. Please see
www.claymore.com/avk for a more detailed discussion about Fund risks and
considerations.
Annual Report | October 31, 2008 | 9
AVK | Advent Claymore Convertible Securities and Income Fund
Fund SUMMARY|AS OF OCTOBER 31, 2008 (unaudited)
FUND STATISTICS
-----------------------------------------------------------
Share Price $13.11
Common Share Net Asset Value $12.52
Premium/Discount to NAV 4.71%
Net Assets Applicable to Common Shares ($000) $295,101
-----------------------------------------------------------
TOTAL RETURNS
-----------------------------------------------------------
(INCEPTION 4/30/03) MARKET NAV
-----------------------------------------------------------
One Year -41.96% -51.06%
Three Year - average annual -8.96% -13.31%
Five Year - average annual -2.93% -5.16%
Since Inception - average annual -2.07% -2.51%
-----------------------------------------------------------
% OF LONG-TERM
TOP TEN INDUSTRIES INVESTMENTS
----------------------------------------------------------------------
Pharmaceuticals 12.0%
Banks 11.8%
Telecommunications 8.1%
Oil & Gas and Oil & Gas Services 7.6%
Health Care Products and Healthcare Services 7.1%
Biotechnology 6.9%
Diversified Financial Services 5.8%
Insurance 5.0%
Electric, Electronics and Electrical Components and Equipment 4.2%
Mining 3.8%
----------------------------------------------------------------------
% OF LONG-TERM
TOP TEN ISSUERS INVESTMENTS
----------------------------------------------------------------------
Teva Pharmaceutical Finance LLC 3.6%
Transocean, Inc. 3.5%
New York Community Capital Trust V 3.3%
Medtronic, Inc. 2.9%
Prudential Financial, Inc. 2.3%
SLM Corp. 2.3%
Intel Corp. 2.2%
Schering-Plough Corp. 2.2%
Mylan, Inc. 2.1%
Genzyme Corp. 2.1%
----------------------------------------------------------------------
Past performance does not guarantee future results. All portfolio data is
subject to change daily. For more current information, please visit
www.claymore.com. The above summaries are provided for informational purposes
only and should not be viewed as recommendations.
SHARE PRICE & NAV PERFORMANCE
Line chart:
Share
Price NAV
11/1/07 25.03 27.84
24.92 27.89
24.71 27.89
24.62 28.11
24.25 27.64
24.25 27.66
23.82 27.50
23.67 27.19
23.51 27.31
23.48 27.30
23.49 27.02
23.40 26.90
23.25 26.42
23.05 26.26
22.65 26.04
22.79 26.23
22.58 26.00
22.40 26.07
23.00 26.56
22.90 26.71
23.50 26.97
23.62 26.84
23.79 26.67
23.90 26.84
24.08 27.09
23.91 27.21
23.99 27.26
23.84 26.75
23.50 26.62
23.40 26.49
23.21 26.23
22.71 25.93
22.50 25.96
22.46 26.00
22.50 25.99
22.45 26.19
23.25 26.34
23.25 26.34
22.92 26.14
22.69 26.19
23.25 26.16
23.17 26.08
23.63 26.04
23.60 25.62
23.18 25.56
22.76 25.38
22.90 25.37
23.34 25.58
23.08 25.48
23.15 25.55
23.25 25.22
22.95 25.02
22.59 24.51
22.13 24.27
21.95 24.04
22.02 24.18
22.33 24.51
22.51 24.39
22.89 24.62
23.04 24.83
23.31 24.86
23.39 25.13
23.74 25.46
23.94 25.35
23.35 24.77
23.21 24.68
23.00 24.74
22.85 24.67
23.04 24.79
23.25 24.88
23.10 24.91
22.27 24.74
22.13 24.76
22.23 24.87
22.38 24.94
22.62 24.77
22.50 24.81
22.78 25.05
22.91 25.25
23.07 25.22
23.00 25.10
22.60 24.68
22.80 24.61
22.44 24.48
22.49 24.59
22.30 24.10
22.30 23.91
21.85 23.46
21.95 23.81
21.49 23.55
21.40 23.60
21.03 23.41
20.24 22.88
20.76 23.44
20.48 23.06
20.61 23.28
20.83 23.61
20.99 23.78
21.23 23.76
21.32 23.72
21.43 23.55
21.25 23.51
21.69 23.98
21.80 24.06
21.96 24.16
22.09 24.31
22.33 24.44
22.32 24.43
22.20 24.34
22.29 24.33
22.12 24.01
22.01 23.93
22.26 23.97
22.23 24.38
22.08 24.39
22.10 24.57
22.45 24.64
22.41 24.48
22.86 24.51
22.92 24.57
23.11 24.73
23.30 24.78
23.44 24.72
23.44 24.75
5/1/08 23.40 24.93
23.59 25.13
23.50 25.11
23.53 25.20
23.29 24.96
23.52 25.04
23.53 24.95
23.68 25.02
23.50 24.91
23.70 24.97
23.85 25.24
23.87 25.42
23.90 25.46
23.89 25.31
23.75 25.06
23.89 25.02
23.85 24.77
23.77 24.83
23.58 24.89
23.88 24.92
23.89 25.04
24.05 24.90
24.17 24.84
23.94 24.76
24.08 25.11
23.57 24.73
23.52 24.69
23.25 24.68
22.59 24.26
22.44 24.24
22.61 24.48
22.84 24.59
22.83 24.56
22.84 24.48
22.73 24.51
22.72 24.17
22.48 24.12
22.43 23.93
22.57 24.05
22.42 23.61
22.29 23.60
22.24 23.52
22.14 23.43
21.99 23.17
21.52 22.95
21.15 22.69
21.29 22.91
21.04 22.74
20.88 22.65
20.47 22.33
20.01 22.20
19.25 21.96
20.03 22.11
20.47 22.24
20.14 22.30
20.22 22.43
20.19 22.50
20.39 22.48
20.19 21.98
19.99 22.08
19.85 21.83
20.17 22.11
20.15 22.33
19.99 22.19
20.20 22.04
20.04 21.75
20.01 21.93
19.95 22.03
19.79 21.82
19.96 22.02
19.92 22.09
19.76 21.90
19.54 21.74
19.50 21.90
19.39 21.90
19.28 21.69
18.99 21.54
18.93 21.65
18.91 21.69
19.09 21.84
18.70 21.54
18.76 21.66
19.07 21.87
19.52 22.10
19.58 21.99
19.51 21.79
19.38 21.72
18.89 21.27
18.78 21.36
18.89 21.53
18.56 20.75
18.28 20.84
17.92 20.73
18.34 20.94
17.96 20.10
17.42 20.14
16.77 19.24
16.47 19.75
17.77 20.27
17.59 19.87
17.25 19.56
16.66 19.38
17.30 19.34
17.50 18.87
16.65 17.59
15.97 18.01
15.80 17.78
15.39 16.79
15.19 16.72
13.57 15.76
13.23 15.05
11.85 14.51
10.35 13.61
8.91 12.72
10.72 13.66
11.56 14.15
10.66 13.00
10.86 12.93
11.70 12.90
11.94 13.16
11.46 12.96
10.47 12.33
10.80 11.86
10.22 11.58
10.88 11.17
11.20 11.52
11.43 11.91
12.39 12.23
10/31/08 13.11 12.52
MONTHLY DIVIDENDS PER SHARE
Bar chart:
Nov 07 0.1718
Dec* 0.2993
Jan 08 0.1718
Feb 0.1718
Mar 0.1718
Apr 0.1718
May 0.1718
June 0.1718
July 0.1718
Aug 0.1718
Sep 0.1718
Oct 0.1718
Nov 0.1718
Dec 08 0.0939
* Includes long-term capital gains distribution of $0.1275.
PORTFOLIO COMPOSITION (% of Total Investments)
Pie chart:
ASSET CLASS
--------------------------------------------
Convertible Securities 73.7%
High Yield Securities 11.4%
Short-Term Investment 13.6%
Term Loans 1.3%
--------------------------------------------
10 | Annual Report | October 31, 2008
AVK | Advent Claymore Convertible Securities and Income Fund
Portfolio of INVESTMENTS|OCTOBER 31, 2008
NUMBER
OF SHARES VALUE
-------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS - 163.3%
CONVERTIBLE PREFERRED STOCKS - 52.4%
ADVERTISING - 1.2%
335,800 Interpublic Group Cos., Elf Special Financing Ltd.,
3.169%, 2009 (Cayman Islands) (a)(b) $ 3,628,400
-------------------------------------------------------------------------------------
BANKS - 8.6%
12,500 Bank of America Corp., Ser. L, 7.25%, 2049 8,750,000
125,000 Citigroup, Inc., Ser. T, 6.50%, 2015 4,026,250
80,500 Keycorp, Ser. A, 7.75%, 2049 7,886,585
7,000 Wachovia Corp., Ser. L, 7.50%, 2049 4,655,000
-------------------------------------------------------------------------------------
25,317,835
-------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES - 4.6%
60,000 AMG Capital Trust II, 5.15%, 2037 (a) 915,000
77,076 Legg Mason, Inc., 7.00%, 2011 1,765,040
21,310 SLM Corp., Ser. C, 7.25%, 2010 10,963,995
-------------------------------------------------------------------------------------
13,644,035
-------------------------------------------------------------------------------------
ELECTRIC - 4.1%
150,660 Entergy Corp., 7.625%, 2009 7,087,046
24,000 NRG Energy, Inc., 5.75%, 2009 5,001,000
-------------------------------------------------------------------------------------
12,088,046
-------------------------------------------------------------------------------------
HEALTHCARE SERVICES - 1.0%
7,000 HealthSouth Corp., 6.50%, 2049 (a) 3,073,000
-------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS/HOUSEWARES - 3.1%
271,379 Avery Dennison Corp., 7.875%, 2020 9,235,027
-------------------------------------------------------------------------------------
INSURANCE - 4.4%
70,000 Aspen Insurance Holdings, Ltd., 5.625%, 2049 (Bermuda) 2,747,500
640,903 MetLife, Inc., Ser. B, 6.375%, 2009 (d) 5,556,629
70,000 Reinsurance Group of America, Equity Security Unit,
5.75%, 2051 3,094,700
111,135 XL Capital Ltd., 10.75%, 2011 (Cayman Islands) 1,673,693
-------------------------------------------------------------------------------------
13,072,522
-------------------------------------------------------------------------------------
MINING - 6.2%
186,000 Credit Suisse, Ser. Barrick Gold Corp., 9.00%, 2009
(Switzerland) (c) 4,354,260
1,500 Freeport-McMoRan Copper & Gold, Inc., Ser. B,
5.50%, 2049 1,007,250
70,000 Freeport-McMoRan Copper & Gold, Inc., 6.75%, 2010 3,414,600
38,463 Hecla Mining Co., 6.50%, 2011 996,192
300,000 Vale Capital Ltd., Ser. RIO, 5.50%, 2010 (Brazil) 8,475,000
-------------------------------------------------------------------------------------
18,247,302
-------------------------------------------------------------------------------------
OIL & GAS SERVICES - 1.1%
149,250 Merrill Lynch & Co., Inc., Ser. Halliburton Co.,
8.00%, 2009 (a)(c) 3,201,413
-------------------------------------------------------------------------------------
PHARMACEUTICALS - 7.1%
18,000 Mylan, Inc., 6.50%, 2010 10,253,880
78,291 Schering-Plough Corp., 6.00%, 2010 10,552,061
-------------------------------------------------------------------------------------
20,805,941
-------------------------------------------------------------------------------------
SAVINGS & LOANS - 5.3%
402,200 New York Community Capital Trust V, 6.00%, 2051 15,685,800
-------------------------------------------------------------------------------------
TELECOMMUNICATIONS - 3.1%
128,095 Crown Castle International Corp., 6.25%, 2012 4,795,557
14,179 Lucent Technologies Capital Trust I, 7.75%, 2017 4,253,700
-------------------------------------------------------------------------------------
9,049,257
-------------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
-------------------------------------------------------------------------------------
TRANSPORTATION - 2.6%
200,000 Bristow Group, Inc. 5.50%, 2009 $ 6,500,000
1,000 Kansas City Southern, 5.125%, 2049 1,064,000
-------------------------------------------------------------------------------------
7,564,000
-------------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS - 52.4%
(Cost $237,753,190) 154,612,578
-------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
-------------------------------------------------------------------------------------
CONVERTIBLE BONDS - 86.9%
AUTO MANUFACTURERS - 1.7%
$ 7,813,750 General Motors Corp., B-, Ser. D, 1.50%, 6/01/09 $ 5,157,075
-------------------------------------------------------------------------------------
BANKS - 9.4%
10,000,000 BES Finance Ltd., Ser. EMTN, A, 1.25%, 2/26/11
(Portugal) 8,078,000
2,900,000 Boston Private Financial Holdings, Inc., NR,
3.00%, 7/15/27 2,533,875
4,000,000 National City Corp., A-, 4.00%, 2/01/11 3,355,000
7,000,000 PrivateBancorp, Inc., NR, 3.625%, 3/15/27 6,623,750
8,000,000 US Bancorp, AA, 1.454%, 9/20/36 (b) 7,040,000
-------------------------------------------------------------------------------------
27,630,625
-------------------------------------------------------------------------------------
BIOTECHNOLOGY - 11.2%
8,750,000 Amgen, Inc., A+, 0.125%, 2/01/11 8,137,500
9,500,000 Genzyme Corp., BBB+, 1.25%, 12/01/23 9,975,000
7,000,000 Gilead Sciences, Inc., NR, 0.50%, 5/01/11 8,513,750
8,000,000 Invitrogen Corp., BB+, 3.25%, 6/15/25 6,460,000
-------------------------------------------------------------------------------------
33,086,250
-------------------------------------------------------------------------------------
COAL - 0.3%
1,500,000 Massey Energy Co., BB-, 3.25%, 8/01/15 832,500
-------------------------------------------------------------------------------------
COMMERCIAL SERVICES - 1.5%
4,600,000 Quanta Services, Inc., NR, 3.75%, 4/30/26 4,479,250
-------------------------------------------------------------------------------------
COMPUTERS - 1.6%
5,000,000 EMC Corp., A-, 1.75%, 12/01/11 4,787,500
-------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES - 4.5%
6,250,000 Merrill Lynch & Co. Inc., NR, 0.00%, 3/13/32 (e) 6,414,375
7,000,000 Nasdaq OMX Group, BB+, 2.50%, 8/15/13 (a) 5,250,000
3,000,000 National Financial Partners Corp., NR, 0.75%, 2/01/12 1,488,750
-------------------------------------------------------------------------------------
13,153,125
-------------------------------------------------------------------------------------
ELECTRICAL COMPONENTS AND EQUIPMENT - 0.2%
1,100,000 Suntech Power Holdings Co. Ltd., NR, 0.25%,
2/15/12 (China) 694,375
-------------------------------------------------------------------------------------
ELECTRONICS - 2.5%
9,000,000 Flextronics International Ltd., BB-, 1.00%,
8/01/10 (Singapore) 7,335,000
-------------------------------------------------------------------------------------
HEALTHCARE PRODUCTS - 6.7%
11,355,000 Hologic, Inc., B+, 2.00%, 12/15/37 (f) 5,932,988
16,000,000 Medtronic, Inc., AA-, 1.625%, 4/15/13 13,880,000
-------------------------------------------------------------------------------------
19,812,988
-------------------------------------------------------------------------------------
INSURANCE - 3.8%
5,000,000 Prudential Financial, Inc., A+, 0.419%, 12/12/36
(b)(d) 4,884,500
7,000,000 Prudential Financial, Inc., A+, 1.189%, 12/15/37 (b) 6,379,100
-------------------------------------------------------------------------------------
11,263,600
-------------------------------------------------------------------------------------
See notes to financial statements.
Annual Report | October 31, 2008 | 11
AVK | Advent Claymore Convertible Securities and Income Fund | PORTFOLIO OF
INVESTMENTS continued
PRINCIPAL
AMOUNT VALUE
-------------------------------------------------------------------------------------
LEISURE TIME - 2.6%
$ 9,000,000 Carnival Corp., A-, 2.00%, 4/15/21 (Panama) $ 7,571,250
-------------------------------------------------------------------------------------
MISCELLANEOUS MANUFACTURING - 3.9%
9,000,000 Eastman Kodak Co., B, 3.375%, 10/15/33 7,436,250
8,000,000 Trinity Industries, Inc., BB-, 3.875%, 6/01/36 4,100,000
-------------------------------------------------------------------------------------
11,536,250
-------------------------------------------------------------------------------------
OIL & GAS-- 10.1%
5,000,000 Carrizo Oil & Gas, Inc., NR, 4.375%, 6/01/28 2,687,500
1,800,000 Chesapeake Energy Corp., BB, 2.25%, 12/15/38 902,250
2,900,000 Chesapeake Energy Corp., BB, 2.75%, 11/15/35 2,019,125
5,000,000 Nabors Industries, Inc., BBB+, 0.94%, 5/15/11 3,962,500
5,000,000 Petroplus Finance Ltd., Ser. PPHN, BB-, 3.375%, 3/26/13
(Switzerland) 3,471,995
12,500,000 Transocean, Inc., Ser. A, BBB+, 1.625%, 12/15/37
(Cayman Islands) 11,062,500
7,000,000 Transocean, Inc., Ser. B, BBB+, 1.50%, 12/15/37
(Cayman Islands) 5,635,000
-------------------------------------------------------------------------------------
29,740,870
-------------------------------------------------------------------------------------
PHARMACEUTICALS - 11.3%
5,000,000 Allergan, Inc., NR, 1.50%, 4/01/26 4,531,250
4,000,000 Medicis Pharmaceutical Corp., NR, 2.50%, 6/04/32 2,700,000
18,250,000 Teva Pharmaceutical Finance LLC, Ser. C, BBB+, 0.25%,
2/01/26 (Israel) (d) 17,177,812
10,000,000 Watson Pharmaceuticals, Inc., BB+, 1.75%, 3/15/23 8,837,500
-------------------------------------------------------------------------------------
33,246,562
-------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 4.0%
7,000,000 Hospitality Properties Trust, BBB, 3.80%, 3/15/27 3,990,000
11,300,000 Host Hotels & Resorts LP, BBB-, 2.625%, 4/15/27 (a) 7,076,625
1,500,000 Prologis, BBB+, 2.25%, 4/01/37 690,000
-------------------------------------------------------------------------------------
11,756,625
-------------------------------------------------------------------------------------
SEMICONDUCTORS - 3.7%
15,000,000 Intel Corp., A-, 2.95%, 12/15/35 10,781,250
-------------------------------------------------------------------------------------
SOFTWARE - 4.4%
3,369,000 Novell, Inc., NR, 0.50%, 7/15/24 3,251,085
10,000,000 Red Hat, Inc., BB-, 0.50%, 1/15/24 9,837,500
-------------------------------------------------------------------------------------
13,088,585
-------------------------------------------------------------------------------------
TELECOMMUNICATIONS - 2.9%
8,600,000 NII Holdings, Inc., NR, 3.125%, 6/15/12 4,773,000
5,000,000 Qwest Communications International, Inc., B+, 3.50%,
11/15/25 3,825,000
-------------------------------------------------------------------------------------
8,598,000
-------------------------------------------------------------------------------------
TRANSPORTATION - 0.6%
3,189,000 YRC Worldwide, Inc., B+, 5.00%, 8/08/23 1,817,730
-------------------------------------------------------------------------------------
TOTAL CONVERTIBLE BONDS - 86.9%
(Cost $307,962,236) 256,369,410
-------------------------------------------------------------------------------------
CORPORATE BONDS - 21.6%
AGRICULTURE - 0.5%
2,000,000 Vector Group Ltd., NR, 11.00%, 8/15/15 1,570,000
-------------------------------------------------------------------------------------
AUTO PARTS & EQUIPMENT - 0.5%
1,000,000 Tenneco, Inc., Ser. B, BB, 10.25%, 7/15/13 855,000
1,000,000 Tenneco, Inc., BB-, 8.125%, 11/15/15 525,000
-------------------------------------------------------------------------------------
1,380,000
-------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
-------------------------------------------------------------------------------------
BANKS - 1.4%
$ 5,000,000 JPMorgan Chase & Co., A, 7.90%, 04/29/49 $ 4,062,630
-------------------------------------------------------------------------------------
COMMUNICATIONS, MEDIA & ENTERTAINMENT - 0.9%
3,000,000 Rainbow National Services LLC, BB, 8.75%, 9/01/12 (a) 2,655,000
-------------------------------------------------------------------------------------
COMPUTERS - 1.1%
4,500,000 SunGard Data Systems, Inc., B-, 10.25%, 8/15/15 3,172,500
-------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES - 0.3%
125,000 GMAC LLC, B-, 4.054%, 5/15/09 (b) 108,940
625,000 GMAC LLC, B-, 5.625%, 5/15/09 530,063
375,000 GMAC LLC, B-, 7.75%, 1/19/10 280,943
-------------------------------------------------------------------------------------
919,946
-------------------------------------------------------------------------------------
HEALTHCARE PRODUCTS - 1.9%
6,100,000 Hanger Orthopedic Group, Inc., CCC+, 10.25%, 6/01/14 5,581,500
-------------------------------------------------------------------------------------
HEALTHCARE SERVICES - 0.9%
3,000,000 HCA, Inc., BB-, 9.25%, 11/15/16 2,557,500
-------------------------------------------------------------------------------------
HOLDING COMPANIES - DIVERSIFIED - 1.8%
6,000,000 Leucadia National Corp., BB+, 8.125%, 9/15/15 5,340,000
-------------------------------------------------------------------------------------
LEISURE TIME - 0.2%
1,400,000 Travelport LLC, B, 9.875%, 9/01/14 672,000
-------------------------------------------------------------------------------------
MEDIA - 0.4%
1,500,000 Nielsen Finance LLC/Co., B-, 10.00%, 8/01/14 1,095,000
-------------------------------------------------------------------------------------
OFFICE/BUSINESS EQUIPMENT - 0.9%
3,500,000 Xerox Capital Trust I, BB+, 8.00%, 2/01/27 2,607,752
-------------------------------------------------------------------------------------
OIL & GAS SERVICES - 1.2%
4,500,000 CCS, Inc., B-, 11.00%, 11/15/15 (Canada) (a) 3,487,500
250,000 Forbes Energy Services Ltd., B, 11.00%, 2/15/15
(Bermuda) 175,000
-------------------------------------------------------------------------------------
3,662,500
-------------------------------------------------------------------------------------
PHARMACEUTICALS - 1.3%
4,760,000 Axcan Intermediate Holdings, Inc., B-, 12.75%,
3/01/16 (a) 3,927,000
-------------------------------------------------------------------------------------
PIPELINES - 0.9%
3,000,000 Williams Cos., Inc., BB+, 8.125%, 3/15/12 2,745,000
-------------------------------------------------------------------------------------
SEMICONDUCTORS - 1.2%
5,900,000 Amkor Technology, Inc., B+, 9.25%, 6/01/16 3,540,000
-------------------------------------------------------------------------------------
TELECOMMUNICATIONS - 5.9%
4,500,000 Broadview Networks Holdings, Inc., CCC+, 11.375%,
9/01/12 3,262,500
6,173,000 Centennial Cellular Co., B, 10.125%, 6/15/13 5,493,970
2,750,000 Fairpoint Communications, Inc., B+, 13.125%, 4/01/18 1,952,500
5,500,000 Intelsat Jackson Holdings Ltd., CCC+, 11.25%, 6/15/16
(Bermuda) 4,730,000
1,000,000 Intelsat Ltd., CCC+, 6.50%, 11/01/13 (Bermuda) 505,000
2,000,000 Sprint Capital Corp., BB, 8.375%, 3/15/12 1,611,100
-------------------------------------------------------------------------------------
17,555,070
-------------------------------------------------------------------------------------
TRANSPORTATION - 0.3%
1,400,000 USF Corp., B+, 8.50%, 4/15/10 826,000
-------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS - 21.6%
(Cost$ 78,829,260) 63,869,398
-------------------------------------------------------------------------------------
See notes to financial statements.
12 | Annual Report | October 31, 2008
AVK | Advent Claymore Convertible Securities and Income Fund | PORTFOLIO OF
INVESTMENTS continued
PRINCIPAL
AMOUNT VALUE
-------------------------------------------------------------------------------------
TERM LOANS (FUNDED) - 2.4%
HEALTHCARE SERVICES - 1.1%
$ 3,930,000 HCA, Inc., Term Loan B, NR, 6.012%, 11/16/13 (b) $ 3,253,058
-------------------------------------------------------------------------------------
TELECOMMUNICATIONS - 1.3%
4,000,000 ALLTEL Communications LLC, BB-, 4.388%, 5/15/15 (b) 3,828,752
-------------------------------------------------------------------------------------
TOTAL TERM LOANS (FUNDED) - 2.4%
(Cost$ 7,861,502) 7,081,810
-------------------------------------------------------------------------------------
TOTAL LONG-TERM INVESTMENTS - 163.3%
(Cost $632,406,188) 481,933,196
-------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 25.7%
U.S. GOVERNMENT AND AGENCY SECURITIES - 5.1%
15,000,000 U.S. Treasury Bill
yielding 0.101%, 1/29/09 maturity (d)
(Cost $14,996,257) 14,984,595
-------------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
-------------------------------------------------------------------------------------
MONEY MARKET FUNDS - 20.6%
15,000,000 Dreyfus Treasury & Agency Cash Management - Investor
Shares $ 15,000,000
45,909,445 Goldman Sachs Financial Prime Obligations 45,909,445
-------------------------------------------------------------------------------------
(Cost$ 60,909,445) 60,909,445
-------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS - 25.7%
(Cost $75,905,702) 75,894,040
-------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 189.0%
(Cost $708,311,890) 557,827,236
Other assets in excess of liabilities - 4.2% 12,274,259
Preferred Stock, at redemption value - (-93.2% of Net
Assets Applicable to Common Shareholders or -49.3% of
Total Investments) (275,000,000)
-------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS - 100.0% $ 295,101,495
-------------------------------------------------------------------------------------
LLC - Limited Liability Corp.
(a) Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At October 31,
2008, these securities amounted to 11.9% of net assets.
(b) Floating rate security. The rate shown is as of October 31, 2008.
(c) Synthetic Convertible - A synthetic convertible security is either a bond
or preferred security structured by an investment bank that provides
exposure to a specific company's common stock.
(d) All or a portion of these securities have been physically segregated in
connection with swap agreements.
(e) Zero-coupon bond.
(f) Security is a "step up" bond where the coupon increases or steps up at a
predetermined date.
Ratings shown are per Standard & Poor's. Securities classified as NR are not
rated by Standard & Poor's. (unaudited)
All percentages shown in the Portfolio of Investments are based on Net Assets
Applicable to Common Shareholders unless otherwise noted.
See notes to financial statements.
Annual Report | October 31, 2008 | 13
AVK | Advent Claymore Convertible Securities and Income Fund
Statement of ASSETS AND LIABILITIES|OCTOBER 31, 2008
ASSETS
Investments in securities, at value (cost $708,311,890) $ 557,827,236
Cash 753,111
Restricted cash 4,759,864
Receivable for securities sold 26,154,872
Interest receivable 3,811,146
Dividends receivable 1,753,001
Receivable from swap counterparty 241,751
Other assets 37,163
--------------------------------------------------------------------------------------
Total assets 595,338,144
--------------------------------------------------------------------------------------
LIABILITIES
Payable for securities purchased 13,877,826
Net unrealized depreciation on swaps 6,487,876
Payable to swap counterparty 3,849,795
Advisory fee payable 240,956
Dividends payable - preferred shares 411,110
Payable to affiliate (Note 4) 111,082
Servicing fee payable 73,555
Administration fee payable 4,792
Accrued expenses and other liabilities 179,657
--------------------------------------------------------------------------------------
Total liabilities 25,236,649
--------------------------------------------------------------------------------------
PREFERRED STOCK, AT REDEMPTION VALUE
Auction Market Preferred Shares
$0.001 par value per share; 11,000 authorized, issued and
outstanding at $25,000 per share liquidation preference 275,000,000
--------------------------------------------------------------------------------------
$ 295,101,495
--------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS
COMPOSITION OF NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS
Common Stock, $0.001 par value per share; unlimited number of
shares authorized, 23,562,858 shares issued and outstanding $ 23,563
Additional paid-in capital 557,888,469
Net unrealized depreciation on investments, swaps and foreign
currency translation (156,998,364)
Accumulated net realized gain (loss) on investments, swaps and
foreign currency transactions (103,329,792)
Distributions in excess of net investment income (2,482,381)
--------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS $ 295,101,495
--------------------------------------------------------------------------------------
NET ASSET VALUE APPLICABLE TO COMMON SHAREHOLDERS
(based on 23,562,858 common shares outstanding) $ 12.52
--------------------------------------------------------------------------------------
See notes to financial statements.
14 | Annual Report | October 31, 2008
AVK | Advent Claymore Convertible Securities and Income Fund
Statement of OPERATIONS|FOR THE YEAR ENDED OCTOBER 31, 2008
INVESTMENT INCOME
Dividends (net of foreign withholding taxes of $129,383) $ 23,185,835
Interest (net of foreign withholding taxes of $3,262) 22,044,835
Securities lending income (net of foreign withholding tax credits of $8,817) 627,567
------------------------------------------------------------------------------------------------------------------------------------
Total income $ 45,858,237
------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Advisory fee 4,445,376
Servicing agent fee 1,728,757
Preferred share maintenance 734,575
Professional fees 166,457
Fund accounting 165,032
Administration fee 149,308
Printing 145,356
Trustees' fees and expenses 140,320
Federal taxes 111,082
Custodian 103,887
Insurance 76,885
ICI dues 32,399
NYSE listing fee 21,693
Transfer agent 18,583
Rating agency fee 9,131
Miscellaneous 19,472
------------------------------------------------------------------------------------------------------------------------------------
Total expenses 8,068,313
Advisory and Servicing agent fees waived (1,373,055)
------------------------------------------------------------------------------------------------------------------------------------
Net expenses 6,695,258
------------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 39,162,979
------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, SWAPS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) on:
Investments (86,543,429)
Swaps (4,585,234)
Foreign currency transactions 378,688
Net change in unrealized appreciation (depreciation) on:
Investments (248,077,211)
Swaps (6,178,425)
Foreign currency translation (36,419)
------------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS, SWAPS AND FOREIGN CURRENCY TRANSACTIONS (345,042,030)
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS FROM NET INVESTMENT INCOME AND REALIZED GAINS (12,207,940)
------------------------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS RESULTING FROM OPERATIONS $ (318,086,991)
------------------------------------------------------------------------------------------------------------------------------------
See notes to financial statements.
Annual Report | October 31, 2008 | 15
AVK | Advent Claymore Convertible Securities and Income Fund
Statement of CHANGES IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS|
FOR THE FOR THE
YEAR ENDED YEAR ENDED
OCTOBER 31, 2008 OCTOBER 31, 2007
-----------------------------------------------------------------------------------------------------------------------------------
CHANGE IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS RESULTING FROM OPERATIONS:
Net investment income $ 39,162,979 $ 45,710,140
Net realized gain (loss) on investments, swaps and foreign currency transactions (90,749,975) 22,996,632
Net change in unrealized appreciation (depreciation) on investments,
swaps and foreign currency translation (254,292,055) 39,775,644
-----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS:
From net investment income (11,491,856) (12,201,859)
From net realized gains (716,084) (2,568,713)
-----------------------------------------------------------------------------------------------------------------------------------
(12,207,940) (14,770,572)
-----------------------------------------------------------------------------------------------------------------------------------
Net increase/decrease in net assets applicable to Common Shareholders resulting from operations (318,086,991) 93,711,844
-----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS:
From and in excess of net investment income (48,148,533) (48,853,828)
From net realized gains (3,000,244) (11,762,566)
Return of capital (363,640) --
-----------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions to common shareholders (51,512,417) (60,616,394)
-----------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Reinvestment of dividends 395,146 3,827,474
-----------------------------------------------------------------------------------------------------------------------------------
Total increase/decrease in net assets (369,204,262) 36,922,924
-----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS
Beginning of period 664,305,757 627,382,833
-----------------------------------------------------------------------------------------------------------------------------------
End of period (including distributions in excess of net investment income of
($2,482,381) and undistributed net investment income of $1,193,236 respectively) $ 295,101,495 $664,305,757
-----------------------------------------------------------------------------------------------------------------------------------
See notes to financial statements.
16 | Annual Report | October 31, 2008
AVK | Advent Claymore Convertible Securities and Income Fund
Financial HIGHLIGHTS|
FOR THE FOR THE
PER SHARE OPERATING PERFORMANCE YEAR ENDED YEAR ENDED
FOR A SHARE OF COMMON STOCK OUTSTANDING THROUGHOUT THE PERIOD OCTOBER 31, 2008 OCTOBER 31, 2007
-----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 28.23 $ 26.82
-----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) 1.66 1.94
Net realized and unrealized gain/loss on investments,
swaps and foreign currency transactions (14.66) 2.68
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS:
From net investment income (common share equivalent basis) (0.49) (0.52)
From net realized gains (common share equivalent basis) (0.03) (0.11)
-----------------------------------------------------------------------------------------------------------------------------
Total preferred distributions (common share equivalent basis) (0.52) (0.63)
-----------------------------------------------------------------------------------------------------------------------------
Total from investment operations (13.52) 3.99
-----------------------------------------------------------------------------------------------------------------------------
COMMON AND PREFERRED SHARES' OFFERING EXPENSES CHARGED
TO PAID-IN-CAPITAL IN EXCESS OF PAR VALUE -- --
-----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS:
From and in excess of net investment income (2.05) (2.08)
From net realized gain (0.13) (0.50)
Return of capital (0.01) --
-----------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions to Common Shareholders (2.19) (2.58)
-----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.52 $ 28.23
-----------------------------------------------------------------------------------------------------------------------------
MARKET VALUE, END OF PERIOD $ 13.11 $ 25.15
-----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN (d)
Net asset value -51.06% 15.63%
Market value -41.96% 2.48%
RATIOS AND SUPPLEMENTAL DATA
Net assets, applicable to Common Shareholders, end of period (thousands) $ 295,101 $ 664,306
Preferred shares, at redemption value ($25,000 per share
liquidation preference) (thousands) $ 275,000 $ 275,000
Preferred shares asset coverage per share $ 51,827 $ 85,391
RATIOS TO AVERAGE NET ASSETS APPLICABLE TO COMMON SHARES:
Net Expenses, after fee waiver 1.22% 1.08%
Net Expenses, before fee waiver 1.47% 1.37%
Net Investment Income, after fee waiver, prior to effect of dividends to
preferred shares 7.14% 7.09%
Net Investment Income, before fee waiver, prior to effect of dividends to
preferred shares 6.89% 6.80%
Net Investment Income, after fee waiver, after effect of dividends to
preferred shares 4.92% 4.80%
Net Investment Income, before fee waiver, after effect of dividends to
preferred shares 4.67% 4.51%
RATIOS TO AVERAGE MANAGED ASSETS: (f)
Net Expenses, after fee waiver 0.81% 0.76%
Net Expenses, before fee waiver 0.98% 0.96%
Net Investment Income, after fee waiver, prior to effect of dividends to
preferred shares 4.76% 4.97%
Net Investment Income, before fee waiver, prior to effect of dividends to
preferred shares 4.59% 4.77%
Portfolio turnover rate 87% 76%
FOR THE FOR THE
PER SHARE OPERATING PERFORMANCE YEAR ENDED YEAR ENDED
FOR A SHARE OF COMMON STOCK OUTSTANDING THROUGHOUT THE PERIOD OCTOBER 31, 2006 OCTOBER 31, 2005
-----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 25.69 $ 26.10
-----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) 1.99 2.33
Net realized and unrealized gain/loss on investments,
swaps and foreign currency transactions 2.28 0.10
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS:
From net investment income (common share equivalent basis) (0.56) (0.35)
From net realized gains (common share equivalent basis) -- --
-----------------------------------------------------------------------------------------------------------------------------
Total preferred distributions (common share equivalent basis) (0.56) (0.35)
-----------------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.71 2.08
-----------------------------------------------------------------------------------------------------------------------------
COMMON AND PREFERRED SHARES' OFFERING EXPENSES CHARGED
TO PAID-IN-CAPITAL IN EXCESS OF PAR VALUE --* --
-----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS:
From and in excess of net investment income (2.58) (2.49)
From net realized gain -- --
Return of capital -- --
-----------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions to Common Shareholders (2.58) (2.49)
-----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 26.82 $ 25.69
-----------------------------------------------------------------------------------------------------------------------------
MARKET VALUE, END OF PERIOD $ 27.03 $ 23.62
-----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN (d)
Net asset value 15.15% 8.14%
Market value 26.86% 2.52%
RATIOS AND SUPPLEMENTAL DATA
Net assets, applicable to Common Shareholders, end of period (thousands) $ 627,383 $ 599,998
Preferred shares, at redemption value ($25,000 per share
liquidation preference) (thousands) $ 275,000 $ 275,000
Preferred shares asset coverage per share $ 82,035 $ 79,545
RATIOS TO AVERAGE NET ASSETS APPLICABLE TO COMMON SHARES:
Net Expenses, after fee waiver 1.12% 1.12%
Net Expenses, before fee waiver 1.41% 1.41%
Net Investment Income, after fee waiver, prior to effect of dividends to
preferred shares 7.62% 8.90%
Net Investment Income, before fee waiver, prior to effect of dividends to
preferred shares 7.33% 8.61%
Net Investment Income, after fee waiver, after effect of dividends to
preferred shares 5.49% 7.56%
Net Investment Income, before fee waiver, after effect of dividends to
preferred shares 5.20% 7.27%
RATIOS TO AVERAGE MANAGED ASSETS: (f)
Net Expenses, after fee waiver 0.77% 0.77%
Net Expenses, before fee waiver 0.97% 0.97%
Net Investment Income, after fee waiver, prior to effect of dividends to
preferred shares 5.26% 6.14%
Net Investment Income, before fee waiver, prior to effect of dividends to
preferred shares 5.06% 5.94%
Portfolio turnover rate 81% 64%
FOR THE PERIOD
FOR THE APRIL 30, 2003(a)
PER SHARE OPERATING PERFORMANCE YEAR ENDED THROUGH
FOR A SHARE OF COMMON STOCK OUTSTANDING THROUGHOUT THE PERIOD OCTOBER 31, 2004 OCTOBER 31, 2003
--------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 26.14(b) $ 23.88(b)
--------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) 2.41 0.93
Net realized and unrealized gain/loss on investments,
swaps and foreign currency transactions 0.08 2.28
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS:
From net investment income (common share equivalent basis) (0.15) (0.03)
From net realized gains (common share equivalent basis) -- --
--------------------------------------------------------------------------------------------------------------------------
Total preferred distributions (common share equivalent basis) (0.15) (0.03)
--------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.34 3.18
--------------------------------------------------------------------------------------------------------------------------
COMMON AND PREFERRED SHARES' OFFERING EXPENSES CHARGED
TO PAID-IN-CAPITAL IN EXCESS OF PAR VALUE (0.05) (0.06)
--------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS:
From and in excess of net investment income (2.15) (0.86)
From net realized gain (0.18) --
Return of capital -- --
--------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions to Common Shareholders (2.33) (0.86)
--------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 26.10 $ 26.14
--------------------------------------------------------------------------------------------------------------------------
MARKET VALUE, END OF PERIOD $ 25.41 $ 24.95
--------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN (d)
Net asset value 8.93% 13.29%
Market value 11.44% 3.40%
RATIOS AND SUPPLEMENTAL DATA
Net assets, applicable to Common Shareholders, end of period (thousands) $ 609,455 $ 610,415
Preferred shares, at redemption value ($25,000 per share
liquidation preference) (thousands) $ 275,000 $ 215,000
Preferred shares asset coverage per share $ 80,405 $ 95,978
RATIOS TO AVERAGE NET ASSETS APPLICABLE TO COMMON SHARES:
Net Expenses, after fee waiver 1.05% 0.88%(e)
Net Expenses, before fee waiver 1.33% 1.12%(e)
Net Investment Income, after fee waiver, prior to effect of dividends to
preferred shares 9.07% 7.51%(e)
Net Investment Income, before fee waiver, prior to effect of dividends to
preferred shares 8.79% 7.27%(e)
Net Investment Income, after fee waiver, after effect of dividends to
preferred shares 8.49% 7.28%(e)
Net Investment Income, before fee waiver, after effect of dividends to
preferred shares 8.21% 7.04%(e)
RATIOS TO AVERAGE MANAGED ASSETS: (f)
Net Expenses, after fee waiver 0.75% 0.73%(e)
Net Expenses, before fee waiver 0.95% 0.93%(e)
Net Investment Income, after fee waiver, prior to effect of dividends to
preferred shares 6.44% 6.27%(e)
Net Investment Income, before fee waiver, prior to effect of dividends to
preferred shares 6.24% 6.07%(e)
Portfolio turnover rate 112% 34%
* Represents less than $0.01.
(a) Commencement of operations.
(b) Before reimbursement of offering expenses charged to capital during the
period.
(c) Based on average shares outstanding during the period.
(d) Total investment return is calculated assuming a purchase of a common share
at the beginning of the period and a sale on the last day of the period
reported either at net asset value ("NAV") or market price per share.
Dividends and distributions are assumed to be reinvested at NAV for NAV
returns or the prices obtained under the Fund's Dividend Reinvestment Plan
for market value returns. Total investment return does not reflect
brokerage commissions. A return calculated for a period of less than one
year is not annualized.
(e) Annualized.
(f) Managed assets are equal to net assets applicable to Common Shareholders
plus outstanding leverage such as the liquidation value of preferred
shares.
See notes to financial statements.
Annual Report | October 31, 2008 | 17
AVK | Advent Claymore Convertible Securities and Income Fund
Notes to FINANCIAL STATEMENTS|OCTOBER 31, 2008
Note 1 - ORGANIZATION:
Advent Claymore Convertible Securities and Income Fund (the "Fund") was
organized as a Delaware statutory trust on February 19, 2003. The Fund is
registered as a diversified, closed-end management investment company under the
Investment Company Act of 1940, as amended.
Note 2 - ACCOUNTING POLICIES:
The preparation of the financial statements in accordance with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from these estimates.
The following is a summary of significant accounting policies followed by the
Fund.
(A) VALUATION OF INVESTMENTS
Equity securities listed on an exchange are valued at the last reported sale
price on the primary exchange on which they are traded. Equity securities traded
on an exchange for which there are no transactions on a given day are valued at
the mean of the closing bid and asked prices. Securities traded on NASDAQ are
valued at the NASDAQ Official Closing Price. Equity securities not listed on a
securities exchange or NASDAQ are valued at the mean of the closing bid and
asked prices. Debt securities are valued by independent pricing services or
dealers using the mean of the closing bid and asked prices for such securities
or, if such prices are not available, at prices for securities of comparable
maturity, quality and type. For those securities where quotations or prices are
not available, valuations are determined in accordance with procedures
established in good faith by the Board of Trustees. Futures contracts are valued
using the settlement price established each day on the exchange on which they
are traded. Short-term securities with remaining maturities of 60 days or less
are valued at amortized cost, which approximates market value.
(B) INVESTMENT TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are accounted for on the trade date. Realized gains and
losses on investments are determined on the identified cost basis. Dividend
income is recorded on the ex-dividend date and interest income is recorded on an
accrual basis. Discounts or premiums on debt securities purchased are accreted
or amortized to interest income over the lives of the respective securities
using the effective interest method.
(C) CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies are translated into
U.S. dollars at the mean of the bid and asked price of respective exchange rates
on the last day of the period. Purchases and sales of investments denominated in
foreign currencies are translated at the exchange rate on the date of the
transaction.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Foreign exchange realized gain or loss resulting from the holding of a foreign
currency, expiration of a currency exchange contract, difference in exchange
rates between the trade date and settlement date of an investment purchased or
sold, and the difference between dividends or interest actually received
compared to the amount shown in a Fund's accounting records on the date of
receipt is shown as net realized gains or losses on foreign currency
transactions in the Fund's Statement of Operations.
Foreign exchange unrealized gain or loss on assets and liabilities, other than
investments, is shown as unrealized appreciation (depreciation) on foreign
currency translation in the Fund's Statement of Operations.
(D) SWAPS
A swap is an agreement to exchange the return generated by one instrument for
the return generated by another instrument. The Fund may enter into swap
agreements to manage its exposure to interest rates and/or credit risk or to
generate income. Interest rate swap agreements involve the exchange by the Fund
with another party of their respective commitments to pay or receive interest.
Total return swap agreements involve commitments to receive (and pay) interest
over a floating rate (LIBOR) based on a notional amount. To the extent the total
return of the security (price changes, interest paid/received, rebate earned on
collateral posted by the Fund) is positive, the Fund will receive a payment from
the counterparty (or if negative, make a payment to the counterparty). The swaps
are valued daily at current market value and any unrealized gain or loss is
included in the Statement of Assets and Liabilities. Gain or loss is realized on
the termination date of the swap and is equal to the difference between the
Fund's basis in the swap and the proceeds of the closing transaction, including
any fees. During the period that the swap agreement is open, the Fund may be
subject to risk from the potential inability of the counterparty to meet the
terms of the agreement. The swaps involve
18 | Annual Report | October 31, 2008
AVK | Advent Claymore Convertible Securities and Income Fund | NOTES TO
FINANCIAL STATEMENTS continued
elements of both market and credit risk in excess of the amounts reflected on
the Statement of Assets and Liabilities. Upon termination of a swap agreement, a
payable to or receivable from swap counterparty is established on the Statement
of Assets and Liabilities to reflect the net gain/loss, including interest
income/expense, on terminated swap positions. This line item is removed upon
settlement according to the terms of the swap agreement.
Realized gain (loss) upon termination of swap contracts is recorded on the
Statement of Operations. Fluctuations in the value of swap contracts are
recorded as a component of net change in unrealized appreciation (depreciation)
of swap contracts. Net periodic payments received by the Fund are included as
part of realized gains (losses) and, in the case of accruals for periodic
payments, are included as part of unrealized appreciation (depreciation) on the
Statement of Operations.
(E) SECURITIES LENDING
The Fund may lend its securities to broker-dealers and financial institutions.
The loans are collateralized by cash or securities at least equal at all times
to the market value of the securities loaned. The Fund may bear the risk of
delay in recovery of, or loss of rights in, the securities loaned should the
borrower of the securities experience financial difficulty. The Fund receives
compensation for lending its securities in the form of fees or it retains a
portion of interest on the investment of any cash received as collateral. The
Fund also continues to receive interest and dividends on the securities loaned,
and any gain or loss in the market price of the securities loaned that may occur
during the term of the loan will be for the account of the Fund. During the year
ended October 31, 2008, the Fund maintained a securities lending agreement with
Lehman Brothers acting as the counterparty. Pursuant to the lending agreement,
the Fund had the right to sell or repledge the collateral received, U.S.
Treasury Bonds from Lehman Brothers, in the case of default. On September 25,
2008 the outstanding securities on loan were removed from the portfolio, and the
collateral received was sold resulting in a loss of $59,023. As of October 31,
2008, the Fund had no securities on loan.
(F) CONCENTRATION OF RISK
It is the Fund's policy to invest a significant portion of its assets in
convertible securities. Although convertible securities do derive part of their
value from that of the securities into which they are convertible, they are not
considered derivative financial instruments. However, certain of the Fund's
investments include features which render them more sensitive to price changes
in their underlying securities. Consequently, this exposes the Fund to greater
downside risk than traditional convertible securities, but still less than that
of the underlying common stock.
(G) DISTRIBUTIONS TO SHAREHOLDERS
The Fund declares and pays monthly dividends to common shareholders. These
dividends consist of investment company taxable income, which generally includes
qualified dividend income, ordinary income and short-term capital gains. Any net
realized long-term gains are distributed annually to common shareholders.
Distributions to shareholders are recorded on the ex-dividend date. The amount
and timing of distributions are determined in accordance with federal income tax
regulations, which may differ from U.S. generally accepted accounting
principles.
Note 3 - INVESTMENT MANAGEMENT AGREEMENT, SERVICING AGREEMENT AND OTHER
AGREEMENTS:
Pursuant to the Investment Management Agreement (the "Agreement") between the
Fund and Advent Capital Management, LLC, the Fund's investment adviser (the
"Advisor"), the Advisor is responsible for the daily management for the Fund's
portfolio of investments, which includes buying and selling securities for the
Fund, as well as investment research. The Advisor will receive an annual fee
from the Fund based on the average value of the Fund's Managed Assets, which
includes the amount from the issuance of the Preferred Shares. In addition,
subject to the approval of the Fund's Board of Trustees, a pro rata portion of
the salaries, bonuses, health insurance, retirement benefits and similar
employment costs for the time spent on Fund operations (other than the provision
of services required under the Agreement) of all personnel employed by the
Advisor who devote substantial time to Fund operations may be reimbursed by the
Fund to the Advisor. For the year ended October 31, 2008, the Advisor was not
reimbursed by the Fund for these items. The annual fee will be determined as
follows:
(a) If the average value of the Fund's Managed Assets (calculated monthly) is
greater than $250 million, the fee will be a maximum amount equal to 0.54%
of the average value of the Fund's Managed Assets. In addition, the Advisor
has agreed to waive receipt of a portion of the management fee or other
expenses of the Fund in the amount of 0.115% of the average value of the
Managed Assets for the first five years of the Fund's operations ending
April 30, 2008. Effective May 1, 2008, the Advisor is waiving receipt of a
portion of the management fee or other expenses of the Fund in the amount
of 0.065% of the average value of the Managed Assets for an additional one
year. For the year ended October 31, 2008, the Advisor waived advisory fees
of $751,429.
Annual Report | October 31, 2008 | 19
AVK | Advent Claymore Convertible Securities and Income Fund | NOTES TO
FINANCIAL STATEMENTS continued
Pursuant to a Servicing Agreement between the Fund and Claymore Securities,
Inc., the Fund's servicing agent (the "Servicing Agent"), the Servicing Agent
will act as servicing agent to the Fund. The Servicing Agent will receive an
annual fee from the Fund, which will be based on the average value of the Fund's
Managed Assets. The fee will be determined as follows:
(a) If the average value of the Fund's Managed Assets (calculated monthly) is
greater than $250 million, the fee will be a maximum amount equal to 0.21%
of the average value of the Fund's Managed Assets. In addition, the
Servicing Agent has agreed to waive receipt of a portion of the servicing
fee of the Fund in the amount of 0.085% of the average value of the Managed
Assets for the first five years of the Fund's operations ending April 30,
2008. Effective May 1, 2008, the Servicing Agent is waiving receipt of a
portion of the servicing fee of the Fund in the amount of 0.065% of the
average value of the Managed Assets for an additional one year. For the
year ended October 31, 2008, the Servicing Agent waived fees of $621,626.
The fee waivers of the Advisor and the Servicing Agent are contractual
commitments of more than one year and are not subject to recoupment.
The Bank of New York Mellon ("BNY") acts as the Fund's custodian, accounting
agent, auction agent and transfer agent. As custodian, BNY is responsible for
the custody of the Fund's assets. As accounting agent, BNY is responsible for
maintaining the books and records of the Fund's securities and cash. As auction
agent, BNY is responsible for conducting the auction of the preferred shares. As
transfer agent, BNY is responsible for performing transfer agency services for
the Fund.
Prior to May 1, 2008, BNY provided Fund Administration services to the Fund.
Effective May 1, 2008, Claymore Advisors, LLC began providing Fund
Administration services to the Fund. As compensation for its services performed
under the Administration Agreement, Claymore Advisors, LLC receives an
administration fee payable monthly at the annual rate set forth below as a
percentage of the average daily managed assets of the Fund:
MANAGED ASSETS RATE
-----------------------------------------------------------------
First $200,000,000 0.0275%
Next $300,000,000 0.0200%
Next $500,000,000 0.0150%
Over $1,000,000,000 0.0100%
-----------------------------------------------------------------
Certain officers and trustees of the Fund are also officers and directors of the
Advisor or Servicing Agent. The Fund does not compensate its officers or
trustees who are officers of the aforementioned firms.
Note 4 - FEDERAL INCOME TAXES:
The Fund intends to continue to comply with the requirements of Subchapter M of
the Internal Revenue Code of 1986, as amended, applicable to regulated
investment companies. Accordingly, no provision for U.S. federal income taxes is
required. In addition, by distributing substantially all of its ordinary income
and long-term capital gains, if any, during each calendar year, the Fund can
avoid a 4% federal excise tax that is assessed on the amount of the
under-distribution. For the 2007 calendar year, the Fund was under distributed
for excise tax purposes. Therefore, the Fund was subject to a 4% excise tax
totaling $107,961. This amount was initially paid by Claymore Advisors, LLC, an
affiliate of the Fund, and will be reimbursed by the Fund.
In order to present paid-in capital in excess of par and accumulated net
realized gains or losses on the Statement of Assets and Liabilities that more
closely represent their tax character, certain adjustments have been made to
undistributed net investment income and accumulated net realized gains or losses
on investments. For the year ended October 31, 2008, the adjustments were to
decrease accumulated net realized gain on investments by $16,693,832, decrease
paid-in capital by $107,961 and increase undistributed net investment income by
$16,801,793 due to the difference in the treatment for book and tax purposes of
Canadian income trusts, publicly traded partnerships, trust preferreds,
distribution reclass, convertible bonds, contingent payment debt instruments,
swaps, and foreign currency.
20 | Annual Report | October 31, 2008
AVK | Advent Claymore Convertible Securities and Income Fund | NOTES TO
FINANCIAL STATEMENTS continued
At October 31, 2008, the cost and related gross unrealized appreciation and
depreciation on investments for tax purposes, excluding swap agreements are as
follows:
COST OF NET TAX
INVESTMENTS GROSS TAX GROSS TAX UNREALIZED
FOR TAX UNREALIZED UNREALIZED DEPRECIATION
PURPOSES APPRECIATION DEPRECIATION ON INVESTMENTS
----------------------------------------------------------------
$716,320,143 $2,911,459 $(161,404,366) $(158,492,907)
----------------------------------------------------------------
UNDISTRIBUTED UNDISTRIBUTED
NET TAX UNREALIZED ORDINARY LONG-TERM
DEPRECIATION INCOME/ GAINS/
ON DERIVATIVES AND (ACCUMULATED (ACCUMULATED
FOREIGN CURRENCY ORDINARY LOSS) CAPITAL LOSS)
----------------------------------------------------------------
$(7,119,355) $0 $(96,787,165)
----------------------------------------------------------------
The differences between book basis and tax basis unrealized
appreciation/(depreciation) are attributable to the tax deferral of losses on
wash sales and income adjustments for tax purposes on certain convertible
securities.
At October 31, 2008, for federal income tax purposes, the Fund had a capital
loss carryforward of $96,787,165 available to offset possible future capital
gains. The capital loss carryforward is set to expire on October 31, 2016.
For the years ended October 31, 2008 and October 31, 2007, the tax character of
distributions paid of $54,863,421 and $53,996,821 was ordinary income,
$8,493,296 and $21,390,145 was long-term capital gain, and $363,640 and $0 was
return of capital, respectively.
On July 13, 2006, the Financial Accounting Standards Board ("FASB") released
FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" ("FIN
48"). FIN 48 provides guidance for how uncertain tax positions should be
recognized, measured, presented and disclosed in the financial statements. FIN
48 requires the evaluation of tax positions taken or expected to be taken in the
course of preparing the Fund's tax returns to determine whether the tax
positions are "more-likely-than-not" of being sustained by the applicable tax
authority. Tax positions not deemed to meet the more-likely-than-not threshold
would be recorded as a tax expense in the current year. Management has evaluated
the implication of FIN 48 and has determined it does not have any impact on the
financial statements as of October 31, 2008. There is no tax liability resulting
from unrecognized tax benefits relating to uncertain income tax positions taken
or expected to be taken on the tax return for the fiscal year-end October 31,
2008. The Fund is also not aware of any tax positions for which it is reasonably
possible that the total amounts of unrecognized tax benefits will significantly
change in twelve months.
FIN 48 requires the Fund to analyze all open tax years. Open tax years are those
years that are open for examination by the relevant income taxing authority. As
of October 31, 2008, open Federal and state income tax years include the tax
years ended October 31, 2004, 2005, 2006 and 2007. The Fund has no examination
in progress.
Note 5 - INVESTMENTS IN SECURITIES AND SWAPS:
For the year ended October 31, 2008, purchases and sales of investments, other
than short-term securities, were $687,542,570 and $750,380,232, respectively.
The Fund entered into total return and credit default swap agreements during the
year ended October 31, 2008 to generate additional income. As of October 31,
2008, the Fund had swaps with a total notional value of $24,804,168 outstanding.
Details of the swap agreements outstanding as of October 31, 2008 were as
follows:
TOTAL RETURN SWAP AGREEMENTS
NOTIONAL PAYING
TERMINATION AMOUNT FLOATING
COUNTERPARTY UNDERLYING TERM LOANS DATE (000) RATE
----------------------------------------------------------------------------------------------------------------------------------
JPMorgan Chase & Co. Bausch & Lomb, US LIBOR + 3.25%, due 04/26/15 04/01/2009 $3,588 2.07%
JPMorgan Chase & Co. CCS Corp., US LIBOR + 3.00%, due 11/14/14 04/01/2009 3,841 2.07%
JPMorgan Chase & Co. Community Health Systems, Inc., US LIBOR + 2.25%, due 07/25/14 04/01/2009 1,800 2.07%
JPMorgan Chase & Co. Energy Future Holdings, US LIBOR + 3.50%, due 10/10/14 04/01/2009 2,048 2.07%
JPMorgan Chase & Co. Fairpoint Communications, Inc., US LIBOR + 2.75%, due 03/08/15 04/01/2009 1,390 2.07%
JPMorgan Chase & Co. Lyondell Chemical Co., US LIBOR + 3.25%, due 12/20/14 04/01/2009 3,807 2.07%
JPMorgan Chase & Co. Mac Gen LLC, US LIBOR + 2.00%, due 02/22/12 04/01/2009 5,998 2.07%
JPMorgan Chase & Co. Virgin Media Investment Holding, GBP LIBOR + 2.125%, due 10/04/13 04/01/2009 2,332 5.57%
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN SWAP AGREEMENTS
UNREALIZED
APPRECIATION/
COUNTERPARTY (DEPRECIATION)
--------------------------------------
JPMorgan Chase & Co. $ (795,635)
JPMorgan Chase & Co. (1,279,961)
JPMorgan Chase & Co. (463,910)
JPMorgan Chase & Co. (470,867)
JPMorgan Chase & Co. (379,206)
JPMorgan Chase & Co. (1,952,885)
JPMorgan Chase & Co. (327,519)
JPMorgan Chase & Co. (817,893)
--------------------------------------
$(6,487,876)
--------------------------------------
Annual Report | October 31, 2008 | 21
AVK | Advent Claymore Convertible Securities and Income Fund | NOTES TO
FINANCIAL STATEMENTS continued
For each swap noted, the Fund pays a floating rate and receives the total return
of the underlying asset, which includes receiving a floating interest rate
component. The market value of the swaps outstanding reflects the current
receivable and payable for the underlying asset, including the total return and
the interest rate component, which may have different payment dates.
Note 6 - CAPITAL:
COMMON SHARES
The Fund has an unlimited amount of common shares, $0.001 par value, authorized
and 23,562,858 issued and outstanding. In connection with the Fund's dividend
reinvestment plan, the Fund issued 31,536 shares during the year ended October
31, 2008, and 141,118 shares during the year ended October 31, 2007. At October
31, 2008, Advent Capital Management LLC, the Fund's investment adviser, owned
6,924 shares of the Fund.
PREFERRED SHARES
On June 19, 2003, the Fund's Board of Trustees authorized the issuance of
Auction Market Preferred Shares ("AMPS"), as part of the Fund's leverage
strategy. AMPS issued by the Fund have seniority over the common shares.
On July 24, 2003, the Fund issued 2,150 shares of Series M7, 2,150 shares of
Series T28, 2,150 shares of Series W7 and 2,150 shares of Series TH28, each with
a liquidation value of $25,000 per share plus accrued dividends. In addition, on
March 16, 2004, the Fund issued 1,200 shares of Series F7 and 1,200 shares of
Series W28 each with a liquidation value of $25,000 per share plus accrued
dividends.
Dividends are accumulated daily at a rate set through an auction process. The
broad auction-rate preferred securities market, including the Fund's AMPS, has
experienced considerable disruption since mid-February, 2008. The result has
been failed auctions on nearly all auction-rate preferred shares, including the
Fund's AMPS. A failed auction is not a default, nor does it require the
redemption of the Fund's AMPS.
Provisions in the AMPS offering documents establish a maximum rate in the event
of a failed auction. The AMPS reference rate is the LIBOR Rate for a dividend
period of fewer than 365 days. The maximum rate, for auctions for which the Fund
has not given notice that the auction will consist of net capital gains or other
taxable income, is the higher of the reference rate times 125% or the reference
rate plus 1.25%. Distributions of net realized gains, if any, are made annually.
Management will continue to monitor events in the marketplace and continue to
evaluate the Fund's leverage as well as any alternative that may be available.
For the year ended October 31, 2008, the annualized dividend rates ranged from:
HIGH LOW AT OCTOBER 31, 2008
--------------------------------------------------------------------
Series M7 5.94% 3.39% 3.39%
Series T28 6.19 3.70 4.78
Series W7 5.77 3.27 3.27
Series W28 5.65 3.65 5.54
Series TH28 5.76 3.64 5.76
Series F7 5.94 3.41 3.41
The Fund is subject to certain limitations and restrictions while Preferred
Shares are outstanding. Failure to comply with these limitations and
restrictions could preclude the Fund from declaring any dividends or
distributions to common shareholders or repurchasing common shares and/or could
trigger the mandatory redemption of Preferred Shares at their liquidation value.
Preferred Shares, which are entitled to one vote per share, generally vote with
the common stock but vote separately as a class to elect two Trustees and on any
matters affecting the rights of the Preferred Shares.
Note 8 - INDEMNIFICATIONS:
In the normal course of business, the Fund enters into contracts that contain a
variety of representations, which provide general indemnifications. The Fund's
maximum exposure under these arrangements is unknown, as this would involve
future claims that may be made against the Fund that have not yet occurred.
However, the Fund expects the risk of loss to be remote.
22 | Annual Report | October 31, 2008
AVK | Advent Claymore Convertible Securities and Income Fund | NOTES TO
FINANCIAL STATEMENTS continued
Note 9 - SUBSEQUENT EVENT:
On October 31, 2008, the Fund declared monthly dividends to common shareholders
of $0.1718 per common share. This dividend is payable on November 28, 2008 to
shareholders of record on November 14, 2008. On December 1, 2008, the Fund
declared a monthly dividend to common shareholders of $0.0939 per common share.
This dividend is payable on December 31, 2008 to shareholders of record on
December 15, 2008.
On December 1, 2008 the Fund announced the redemption of the following preferred
shares:
NUMBER OF
SHARES AMOUNT REDEMPTION
SERIES REDEEMED REDEEMED DATE
-----------------------------------------------------------------------
M7 102 $2,550,000 December 23, 2008
T28 102 $2,550,000 January 14, 2009
W7 102 $2,550,000 December 26, 2008
W28 56 $1,400,000 January 2, 2009
TH28 102 $2,550,000 January 2, 2009
F7 56 $1,400,000 December 29, 2008
Note 10 - ACCOUNTING PRONOUNCEMENTS:
In September 2006, the FASB released Statement of Financial Accounting Standards
("SFAS") No. 157, "Fair Value Measurements" ("FAS 157"). This standard clarifies
the definition of fair value for financial reporting, establishes a framework
for measuring fair value and requires additional disclosures about the use of
fair value measurements. FAS 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007 and interim periods within
those fiscal years. As of October 31, 2008, the Fund does not believe the
adoption of FAS 157 will impact the amounts reported in the financial
statements, however, additional disclosure will be required about the inputs
used to develop measurements of fair value and the effect of certain of the
measurements reported in the statement of operations for a fiscal period.
In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative
Instruments and Hedging Activities." This standard is intended to enhance
financial statement disclosures for derivative instruments and hedging
activities and enable investors to understand: a) how and why a fund uses
derivative instruments, b) how derivatives instruments and related hedge fund
items are accounted for, and c) how derivative instruments and related hedge
items affect a fund's financial position, results of operations and cash flows.
SFAS No. 161 is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008. In September 2008, the FASB
issued a Staff Position amending SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This amendment would require disclosures by
sellers of credit derivatives, including credit derivatives embedded in a hybrid
instrument. This amendment is effective for financial statements issued for
fiscal years and interim periods ending after November 15, 2008. As of October
31, 2008, management does not believe the adoption of SFAS No. 161 nor amended
SFAS No. 133 will impact the financial statement amounts; however, additional
footnote disclosures may be required about the use of derivative instruments and
hedging items.
Annual Report | October 31, 2008 | 23
AVK | Advent Claymore Convertible Securities and Income Fund
Report of INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM|
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF
ADVENT CLAYMORE CONVERTIBLE SECURITIES AND INCOME FUND:
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets applicable to common shareholders and the financial
highlights present fairly, in all material respects, the financial position of
the Advent Claymore Convertible Securities and Income Fund (the "Fund") at
October 31, 2008, the results of its operations for the year then ended, the
changes in its net assets applicable to common shareholders for each of the two
years in the period then ended and the financial highlights for each of the
periods presented, in conformity with accounting principles generally accepted
in the United States of America. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 2008 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
December 26, 2008
24 | Annual Report | October 31, 2008
AVK | Advent Claymore Convertible Securities and Income Fund
Supplemental INFORMATION| (unaudited)
FEDERAL INCOME TAX INFORMATION
Qualified dividend income of as much as $10,985,341 was received by the Fund
through October 31, 2008. The Fund intends to designate the maximum amount of
dividends that qualify for the reduced tax rate pursuant to the Jobs and Growth
Tax Relief Reconciliation Act of 2003.
The Fund is designating $8,493,296 as long-term capital gains distributions
pursuant to IRS Section 852(b)(3)(C).
For corporate shareholders $7,473,564 of investment income (dividend income plus
short-term gains, if any) qualified for the dividends-received deduction.
In January 2009, you will be advised on IRS Form 1099 DIV or substitute 1099 DIV
as to the federal tax status of the distributions received by you in the
calendar year 2008.
RESULTS OF SHAREHOLDER VOTES
The Annual Meeting of Shareholders of the Fund was held on September 23, 2008.
At this meeting, shareholders voted on the election of trustees.
With regard to the election of the following trustee by common shareholders of
the Fund:
# OF SHARES
----------------------------------------------------------------------
IN FAVOR WITHHELD
----------------------------------------------------------------------
Daniel L. Black 19,470,152 482,428
With regard to the election of the following trustees by preferred shareholders
of the Fund:
# OF SHARES
----------------------------------------------------------------------
IN FAVOR WITHHELD
----------------------------------------------------------------------
Ronald A. Nyberg 9,044 421
Michael A. Smart 9,157 308
The other trustees of the Fund whose terms did not expire in 2008 are Randall C.
Barnes, Nicholas Dalmaso, Tracy V. Maitland, Derek Medina, and Gerald L.
Seizert.
TRUSTEES
The Trustees of the Advent Claymore Convertible Securities and Income Fund and
their principal occupations during the past five years:
NUMBER OF
NAME, ADDRESS*, YEAR OF TERM OF OFFICE* PRINCIPAL OCCUPATIONS DURING FUNDS IN
BIRTH AND POSITION(S) AND LENGTH OF THE PAST FIVE YEARS AND FUND COMPLEX** OTHER DIRECTORSHIPS
HELD WITH REGISTRANT TIME SERVED OTHER AFFILIATIONS OVERSEEN BY TRUSTEE HELD BY TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES:
------------------------------------------------------------------------------------------------------------------------------------
Daniel L. Black+ Since 2005 Partner, the Wicks Group of Cos., LLC 3 Director of Penn Foster
Year of birth: 1960 (2003-present). Formerly, Managing Education Group, Inc.
Trustee Director and Co-head of the Merchant
Banking Group at BNY Capital Markets,
a division of The Bank of New York
Co., Inc. (1998-2003).
------------------------------------------------------------------------------------------------------------------------------------
Randall C. Barnes++ Since 2005 Private Investor (2001-present). 43 None.
Year of birth: 1951 Formerly, Senior Vice President,
Trustee Treasurer PepsiCo, Inc. (1993-1997),
President, Pizza Hut International
(1991-1993) and Senior Vice
President, Strategic Planning and New
Business Development (1987-1990) of
PepsiCo, Inc. (1987-1997).
------------------------------------------------------------------------------------------------------------------------------------
Derek Medina+ Since 2003 Senior Vice President, Business 3 Director of Young
Year of birth: 1966 Affairs at ABC News (2008-present). Scholar's Institute.
Trustee Vice President, Business Affairs and
News Planning at ABC News (2003-2008).
Formerly, Executive Director, Office
of the President at ABC News (2000-
2003). Former Associate at Cleary
Gottlieb Steen & Hamilton (law firm)
(1995-1998). Former associate in
Corporate Finance at J.P.
Morgan/Morgan Guaranty (1988-1990).
------------------------------------------------------------------------------------------------------------------------------------
Ronald A. Nyberg++ Since 2003 Partner of Nyberg & Cassioppi, LLC., 46 None.
Year of birth: 1953 a law firm specializing in corporate
Trustee law, estate planning and business
transactions (2000-present). Formerly,
Executive Vice President, General
Counsel and Corporate Secretary of
Van Kampen Investments (1982-1999).
------------------------------------------------------------------------------------------------------------------------------------
Gerald L. Seizert, CFP+ Since 2003 Chief Executive Officer of Seizert 3 Former Director of Loomis,
Year of birth: 1952 Capital Partners, LLC, where he Sayles and Co., L.P.
Trustee directs the equity disciplines of the
firm and serves as a co-manager of
the firm hedge fund, Proper
Associates, LLC (2000-present).
Formerly, Co-Chief Executive
(1998-1999) and a Managing Partner
and Chief Investment Officer-Equities
of Munder Capital Management, LLC
(1995-1999). Former Vice President
and Portfolio Manager of Loomis,
Sayles & Co., L.P. (asset manager)
(1984-1995). Former Vice President
and Portfolio Manager at First of
America Bank (1978-1984).
------------------------------------------------------------------------------------------------------------------------------------
Michael A. Smart+ Since 2003 Managing Partner, Cordova, Smart & 3 Director, Country Pure Foods.
Year of birth: 1960 Williams, LLC, Advisor First Atlantic Chairman, Board of Directors,
Trustee Capital Ltd., (2001-present). Berkshire Blanket, Inc.
Formerly, a Managing Director in President and Chairman, Board
Investment Banking-The Private Equity of Directors, Sqwincher
Group (1995-2001) and a Vice Holdings. Director, Sprint
President in Investment Banking- Industrial Holdings.
Corporate Finance (1992-1995) at Co-chairman, Board of
Merrill Lynch & Co. Founding Partner Directors, H2O Plus.
of The Carpediem Group, (1991-1992).
Associate at Dillon, Read and Co.
(investment bank) (1988-1990).
------------------------------------------------------------------------------------------------------------------------------------
Annual Report | October 31, 2008 | 25
AVK | Advent Claymore Convertible Securities and Income Fund | SUPPLEMENTAL
INFORMATION (unaudited) continued
NUMBER OF
NAME, ADDRESS*, YEAR OF TERM OF OFFICE* PRINCIPAL OCCUPATIONS DURING FUNDS IN
BIRTH AND POSITION(S) AND LENGTH OF THE PAST FIVE YEARS AND FUND COMPLEX** OTHER DIRECTORSHIPS
HELD WITH REGISTRANT TIME SERVED OTHER AFFILIATIONS OVERSEEN BY TRUSTEE HELD BY TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES:
------------------------------------------------------------------------------------------------------------------------------------
Tracy V. Maitland+0 Since 2003 President of Advent Capital 3 None.
Year of birth: 1960 Management, LLC, which he founded in
Trustee, President and 1995. Prior to June, 2001, President
Chief Executive Officer of Advent Capital Management, a
division of Utendahl Capital.
------------------------------------------------------------------------------------------------------------------------------------
Nicholas Dalmaso++00 Since 2003 Attorney. Formerly, Senior Managing 45 None.
Year of Birth: 1965 Director and Chief Administrative
Trustee Officer (2007-2008) and General
Counsel (2001-2007) of Claymore
Advisors, LLC and Claymore
Securities, Inc. Formerly, Assistant
General Counsel, John Nuveen and
Company Inc. (1999-2000). Former Vice
President and Associate General
Counsel of Van Kampen Investments,
Inc. (1992-1999).
------------------------------------------------------------------------------------------------------------------------------------
+ Address for all Trustees noted: 1065 Avenue of the Americas, 31st Floor,
New York, NY 10018.
++ Address for all Trustees noted: 2455 Corporate West Drive, Lisle, IL 60532.
* After a Trustee's initial term, each Trustee is expected to serve a
three-year term concurrent with the class of Trustees for which he serves:
- Messrs. Maitland and Dalmaso, as a Class III Trustees, are expected to
stand for re-election at the Fund's 2009 annual meeting of shareholders.
- Messrs. Seizert, Medina and Barnes, as Class I Trustees, are expected to
stand for re-election at the Fund's 2010 annual meeting of shareholders.
- Messrs. Smart, Nyberg and Black, as Class II Trustees, are expected to
stand for re-election at the Fund's 2011 annual meeting of shareholders.
** The Claymore Fund Complex consists of U.S. registered investment companies
advised or serviced by Claymore Advisors, LLC or Claymore Securities, Inc.
The Claymore Fund Complex is overseen by multiple Boards of Trustees.
0 Mr. Maitland is an "interested person" (as defined in section 2(a)(19) of
the 1940 Act) of the Fund because of his position as an officer of Advent
Capital Management, LLC, the Fund's Advisor.
00 Mr. Dalmaso is an "interested person" (as defined in section 2(a)(19) of
the 1940 Act) of the Fund because of his former position as an officer of,
and his equity ownership in, the Fund's Servicing Agent and certain of its
affiliates.
--------------------------------------------------------------------------------
OFFICERS
The Officers of the Advent Claymore Convertible Securities and Income Fund and
their principal occupations during the past five years:
NAME, ADDRESS*, YEAR OF BIRTH AND TERM OF OFFICE** AND PRINCIPAL OCCUPATION DURING THE PAST FIVE YEARS
POSITION(S) HELD WITH REGISTRANT LENGTH OF TIME SERVED AND OTHER AFFILIATIONS
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS:
------------------------------------------------------------------------------------------------------------------------------------
F. Barry Nelson Since 2003 Co-Portfolio Manager at Advent Capital Management, LLC
Year of birth: 1943 (June 2001- present). Prior to June 2001, Mr. Nelson held
Vice President and the same position at Advent Capital Management, a division
Assistant Secretary of Utendahl Capital.
------------------------------------------------------------------------------------------------------------------------------------
Robert White Since 2005 Chief Financial Officer, Advent Capital Management, LLC
Year of birth: 1965 (July 2005-present). Previously, Vice President, Client
Treasurer and Service Manager, Goldman Sachs Prime Brokerage (1997-2005).
Chief Financial Officer
------------------------------------------------------------------------------------------------------------------------------------
Rodd Baxter Since 2003 General Counsel, Advent Capital Management, LLC (2002-
Year of birth: 1950 present). Formerly, Director and Senior Counsel, SG Cowen
Secretary and Securities Corp. (1998-2002).
Chief Compliance Officer
------------------------------------------------------------------------------------------------------------------------------------
* Address for all Officers: 1065 Avenue of the Americas, 31st Floor, New
York, NY 10018
** Officers serve at the pleasure of the Board of Trustees and until his or
her successor is appointed and qualified or until his or her earlier
resignation or removal.
26 | Annual Report | October 31, 2008
AVK | Advent Claymore Convertible Securities and Income Fund
Dividend Reinvestment PLAN| (unaudited)
Unless the registered owner of common shares elects to receive cash by
contacting the Plan Administrator, all dividends declared on common shares of
the Fund will be automatically reinvested by The Bank of New York Mellon (the
"Plan Administrator"), Administrator for shareholders in the Fund's Dividend
Reinvestment Plan (the "Plan"), in additional common shares of the Fund.
Participation in the Plan is completely voluntary and may be terminated or
resumed at any time without penalty by notice if received and processed by the
Plan Administrator prior to the dividend record date; otherwise such termination
or resumption will be effective with respect to any subsequently declared
dividend or other distribution. Some brokers may automatically elect to receive
cash on your behalf and may re-invest that cash in additional common shares of
the Fund for you. If you wish for all dividends declared on your common shares
of the Fund to be automatically reinvested pursuant to the Plan, please contact
your broker.
The Plan Administrator will open an account for each common shareholder under
the Plan in the same name in which such common shareholder's common shares are
registered. Whenever the Fund declares a dividend or other distribution
(together, a "Dividend") payable in cash, non-participants in the Plan will
receive cash and participants in the Plan will receive the equivalent in common
shares. The common shares will be acquired by the Plan Administrator for the
participants' accounts, depending upon the circumstances described below, either
(i) through receipt of additional unissued but authorized common shares from the
Fund ("Newly Issued Common Shares") or (ii) by purchase of outstanding common
shares on the open market ("Open-Market Purchases") on the New York Stock
Exchange or elsewhere. If, on the payment date for any Dividend, the closing
market price plus estimated brokerage commission per common share is equal to or
greater than the net asset value per common share, the Plan Administrator will
invest the Dividend amount in Newly Issued Common Shares on behalf of the
participants. The number of Newly Issued Common Shares to be credited to each
participant's account will be determined by dividing the dollar amount of the
Dividend by the net asset value per common share on the payment date; provided
that, if the net asset value is less than or equal to 95% of the closing market
value on the payment date, the dollar amount of the Dividend will be divided by
95% of the closing market price per common share on the payment date. If, on the
payment date for any Dividend, the net asset value per common share is greater
than the closing market value plus estimated brokerage commission, the Plan
Administrator will invest the Dividend amount in common shares acquired on
behalf of the participants in Open-Market Purchases.
If, before the Plan Administrator has completed its Open-Market Purchases, the
market price per common share exceeds the net asset value per common share, the
average per common share purchase price paid by the Plan Administrator may
exceed the net asset value of the common shares, resulting in the acquisition of
fewer common shares than if the Dividend had been paid in Newly Issued Common
Shares on the Dividend payment date. Because of the foregoing difficulty with
respect to Open-Market Purchases, the Plan provides that if the Plan
Administrator is unable to invest the full Dividend amount in Open-Market
Purchases during the purchase period or if the market discount shifts to a
market premium during the purchase period, the Plan Administrator may cease
making Open-Market Purchases and may invest the uninvested portion of the
Dividend amount in Newly Issued Common Shares at net asset value per common
share at the close of business on the Last Purchase Date provided that, if the
net asset value is less than or equal to 95% of the then current market price
per common share; the dollar amount of the Dividend will be divided by 95% of
the market price on the payment date.
The Plan Administrator maintains all shareholders' accounts in the Plan and
furnishes written confirmation of all transactions in the accounts, including
information needed by shareholders for tax records. Common shares in the account
of each Plan participant will be held by the Plan Administrator on behalf of the
Plan participant, and each shareholder proxy will include those shares purchased
or received pursuant to the Plan. The Plan Administrator will forward all proxy
solicitation materials to participants and vote proxies for shares held under
the Plan in accordance with the instruction of the participants.
There will be no brokerage charges with respect to common shares issued directly
by the Fund. However, each participant will pay a pro rata share of brokerage
commission incurred in connection with Open-Market Purchases. The automatic
reinvestment of Dividends will not relieve participants of any Federal, state or
local income tax that may be payable (or required to be withheld) on such
Dividends.
The Fund reserves the right to amend or terminate the Plan. There is no direct
service charge to participants with regard to purchases in the Plan; however,
the Fund reserves the right to amend the Plan to include a service charge
payable by the participants.
All correspondence or questions concerning the Plan should be directed to the
Plan Administrator, The Bank of New York Mellon, Attention: Stock Transfer
Department, 101 Barclay 11E, New York, NY 10286, Phone Number: (866) 488-3559.
Annual Report | October 31, 2008 | 27
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AVK | Advent Claymore Convertible Securities and Income Fund
Fund INFORMATION|
BOARD OF TRUSTEES
Randall C. Barnes
Daniel Black
Nicholas Dalmaso*
Tracy V. Maitland**
Chairman
Derek Medina
Ronald A. Nyberg
Gerald L. Seizert
Michael A. Smart
* Trustee is an "interested person" of the Fund as defined in the Investment
Company Act of 1940, as amended, because of his former position as an
officer of, and his equity ownership in, the Servicing Agent and certain of
its affiliates.
** Trustee is an "interested person" of the Fund as defined in the Investment
Company Act of 1940, as amended.
OFFICERS
Tracy V. Maitland
President and Chief Executive Officer
F. Barry Nelson
Vice President and Assistant Secretary
Robert White
Treasurer and Chief Financial Officer
Rodd Baxter
Secretary and Chief Compliance Officer
INVESTMENT MANAGER
Advent Capital Management, LLC
New York, New York
SERVICING AGENT
Claymore Securities, Inc.
Lisle, Illinois
CUSTODIAN AND TRANSFER AGENT
The Bank of New York Mellon
New York, New York
ADMINISTRATOR
Claymore Advisors, LLC
Lisle, Illinois
PREFERRED STOCK-
DIVIDEND PAYING AGENT
The Bank of New York Mellon
New York, New York
LEGAL COUNSEL
Skadden, Arps, Slate,
Meagher & Flom LLP
New York, New York
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP
New York, New York
PRIVACY PRINCIPLES OF THE FUND
The Fund is committed to maintaining the privacy of its shareholders and to
safeguarding their non-public personal information. The following information is
provided to help you understand what personal information the Fund collects, how
the Fund protects that information and why, in certain cases, the Fund may share
information with select other parties.
Generally, the Fund does not receive any non-public personal information
relating to its shareholders, although certain non-public personal information
of its shareholders may become available to the Fund. The Fund does not disclose
any non-public personal information about its shareholders or former
shareholders to anyone, except as permitted by law or as is necessary in order
to service shareholder accounts (for example, to a transfer agent or third party
administrator).
The Fund restricts access to non-public personal information about its
shareholders to employees of the Fund's investment advisor and its affiliates
with a legitimate business need for the information. The Fund maintains
physical, electronic and procedural safeguards designed to protect the
non-public personal information of its shareholders.
QUESTIONS CONCERNING YOUR SHARES OF ADVENT CLAYMORE CONVERTIBLE SECURITIES AND
INCOME FUND?
o If your shares are held in a Brokerage Account, contact your Broker.
o If you have physical possession of your shares in certificate form,
contact the Fund's Custodian and Transfer Agent: The Bank of New York
Mellon, 101 Barclay 11E, New York, NY 10286; (866) 488-3559.
This report is sent to shareholders of Advent Claymore Convertible Securities
and Income Fund for their information. It is not a Prospectus, circular or
representation intended for use in the purchase or sale of shares of the Fund or
of any securities mentioned in this report.
A description of the Fund's proxy voting policies and procedures related to
portfolio securities is available without charge, upon request, by calling the
Fund at (866) 274-2227.
Information regarding how the Fund voted proxies for portfolio securities, if
applicable, during the most recent 12-month period ended June 30, is also
available, without charge and upon request by calling the Fund at (866) 274-2227
or by accessing the Fund's Form N-PX on the U.S. Securities & Exchange
Commission's ("SEC") website at www.sec.gov or www.claymore.com.
The Fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The Fund's Form N-Q is
available on the SEC website at www.sec.gov or www.claymore.com. The Fund's Form
N-Q may also be viewed and copied at the SEC's Public Reference Room in
Washington, DC; information on the operation of the Public Reference Room may be
obtained by calling (800) SEC-0330 or at www.sec.gov.
In October 2008, the Fund submitted a CEO annual certification to the New York
Stock Exchange ("NYSE") in which the Fund's principal executive officer
certified that he was not aware, as of the date of the certification, of any
violation by the Fund of the NYSE's Corporate Governance listing standards. In
addition, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and
related SEC rules, the Fund's principal executive and principal financial
officers have made quarterly certifications, included in filings with the SEC on
Forms N-CSR and N-Q, relating to, among other things, the Fund's disclosure
controls and procedures and internal control over financial reporting.
NOTICE TO SHAREHOLDERS
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the Fund may from time to time purchase shares of its
common stock in the open market.
Annual Report | October 31, 2008 | 31
ADVENT CAPITAL MANAGEMENT, LLC
1065 Avenue of the Americas
New York, New York 10018
AVK
LISTED
NYSE (R)
AVK-AR-1008
ITEM 2. CODE OF ETHICS.
(a) The registrant has adopted a code of ethics (the "Code of Ethics") that
applies to its principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions.
(b) No information need be disclosed pursuant to this paragraph.
(c) The registrant has not amended its Code of Ethics during the period covered
by the shareholder report presented in Item 1 hereto.
(d) The registrant has not granted a waiver or an implicit waiver from a
provision of its Code of Ethics.
(e) Not applicable.
(f) (1) The registrant's Code of Ethics is attached hereto as an exhibit.
(2) Not applicable.
(3) Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Trustees has determined that it has six audit
committee financial experts serving on its audit committee, each of whom is an
"independent" Trustee: Randall C. Barnes, Daniel Black, Derek Medina, Ronald
Nyberg, Gerald L. Seizert and Michael A. Smart.
Mr. Barnes qualifies as an audit committee financial expert by virtue of his
experience obtained as a former Senior Vice President, Treasurer of PepsiCo,
Inc.
Mr. Black qualifies as an audit committee financial expert by virtue of his
experience obtained as a partner of a private equity firm, which includes review
and analysis of audited and unaudited financial statements using GAAP to show
accounting estimates, accruals and reserves.
Mr. Medina qualifies as an audit committee financial expert by virtue of his
experience obtained as a Senior Vice President, Business Affairs of ABC News and
as a former associate in Corporate Finance at J.P. Morgan/Morgan Guaranty, which
includes review and analysis of audited and unaudited financial statements using
GAAP to show accounting estimates, accruals and reserves.
Mr. Nyberg qualifies as an audit committee financial expert by virtue of his
experience obtained as an Executive Vice President, General Counsel and
Secretary of Van Kampen Investments, which included review and analysis of
offering documents and audited and unaudited financial statements using GAAP to
show accounting estimates, accruals and reserves.
Mr. Seizert qualifies as an audit committee financial expert by virtue of his
experience obtained as the chief executive officer and portfolio manager of an
asset management company, which includes review and analysis of audited and
unaudited financial statements using GAAP to show accounting estimates, accruals
and reserves.
Mr. Smart qualifies as an audit committee financial expert by virtue of his
experience obtained as a managing partner of a private equity firm and a former
Vice President at Merrill Lynch & Co, which includes review and analysis of
audited and unaudited financial statements using GAAP to show accounting
estimates, accruals and reserves.
(Under applicable securities laws, a person who is determined to be an audit
committee financial expert will not be deemed an "expert" for any purpose,
including without limitation for the purposes of Section 11 of the Securities
Act of 1933, as a result of being designated or identified as an audit committee
financial expert. The designation or identification of a person as an audit
committee financial expert does not impose on such person any duties,
obligations, or liabilities that are greater than the duties, obligations, and
liabilities imposed on such person as a member of the audit committee and Board
of Trustees in the absence of such designation or identification. The
designation or identification of a person as an audit committee financial expert
pursuant to this Item does not affect the duties, obligations, or liability of
any other member of the audit committee or Board of Trustees.)
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees: the aggregate fees billed in each of the last two fiscal years
for professional services rendered by the principal accountant for the audit of
the registrant's annual financial statements are as follows:
2008: $77,500
2007: $82,450
(b) Audit-Related Fees: the aggregate fees billed in each of the last two
fiscal years for assurance and related services by the principal accountant
that are reasonably related to the performance of the audit of the
registrant's financial statements and are not reported under paragraph (a)
of this item are as follows:
2008: $16,700
2007: $15,900
(c) Tax Fees: the aggregate fees billed in each of the last two fiscal years
for professional services rendered by the principal accountant for tax
compliance, tax advice, and tax planning are as follows:
2008: $14,500
2007: $14,167
(d) All Other Fees: the aggregate fees billed in each of the last two fiscal
years for products and services provided by the principal accountant, other
than the services reported in paragraphs (a) and (c) of this Item are as
follows:
2008: $23,800
2007: $0
(e) Audit Committee Pre-Approval Policies and Procedures.
(1) In accordance with Rule 2-01(c)(7)(A), the Audit Committee
pre-approves all of the Audit and Tax Fees of the registrant. All of
the services described in paragraphs (b) through (d) above were
approved by the Audit Committee in accordance with paragraph (c)(7) of
Rule 2-01 of Regulation S-X.
The Trust's Audit Committee has adopted written policies relating to
the pre-approval of the audit and non-audit services performed by the
Trust's independent auditors. Unless a type of service to be provided
by the independent auditors has received general pre-approval, it
requires specific pre-approval by the Audit Committee. Under the
policies, on an annual basis, the Trust's Audit Committee reviews and
pre-approves the services to be provided by the independent auditors
without having obtained specific pre-approval from the Audit
Committee. The Audit Committee has delegated pre-approval authority to
the Audit Committee Chairperson. In addition, the Audit Committee
pre-approves any permitted non-audit services to be provided by the
independent auditors to the registrant's investment adviser or any
entity controlling, controlled by, or under common control with the
adviser if such services relate directly to the operations and
financial reporting of the Trust.
AUDIT COMMITTEE PRE-APPROVAL POLICY OF
ADVENT CLAYMORE CONVERTIBLE SECURITIES AND INCOME FUND
STATEMENT OF PRINCIPLES
The Audit Committee (the "Audit Committee") of the Board of Trustees (the
"Board") of Advent Claymore Convertible Securities and Income Fund (the
"Trust,") is required to pre-approve all Covered Services (as defined in the
Audit Committee Charter) in order to assure that the provision of the Covered
Services does not impair the auditors' independence. Unless a type of service to
be provided by the Independent Auditor (as defined in the Audit Committee
Charter) is pre-approved in accordance with the terms of this Audit Committee
Pre-Approval Policy (the "Policy"), it will require specific pre-approval by the
Audit Committee or by any member of the Audit Committee to which pre-approval
authority has been delegated.
This Policy and the appendices to this Policy describe the Audit,
Audit-Related, Tax and All Other services that are Covered Services and that
have been pre-approved under this Policy. The appendices hereto sometimes are
referred to herein as the "Service Pre-Approval Documents". The term of any such
pre-approval is 12 months from the date of pre-approval,
unless the Audit Committee specifically provides for a different period. At its
June meeting of each calendar year, the Audit Committee will review and
re-approve this Policy and approve or re-approve the Service Pre-Approval
Documents for that year, together with any changes deemed necessary or desirable
by the Audit Committee. The Audit Committee may, from time to time, modify the
nature of the services pre-approved, the aggregate level of fees pre-approved or
both. The Audit Committee hereby directs that each version of this Policy and
the Service Pre-Approval Documents approved, re-approved or amended from time to
time be maintained with the books and records of the Trust.
DELEGATION
In the intervals between the scheduled meetings of the Audit Committee, the
Audit Committee delegates pre-approval authority under this Policy to the
Chairman of the Audit Committee (the "Chairman"). The Chairman shall report any
pre-approval decisions under this Policy to the Audit Committee at its next
scheduled meeting. At each scheduled meeting, the Audit Committee will review
with the Independent Auditor the Covered Services pre-approved by the Chairman
pursuant to delegated authority, if any, and the fees related thereto. Based on
these reviews, the Audit Committee can modify, at its discretion, the
pre-approval originally granted by the Chairman pursuant to delegated authority.
This modification can be to the nature of services pre-approved, the aggregate
level of fees approved, or both. The Audit Committee expects pre-approval of
Covered Services by the Chairman pursuant to this delegated authority to be the
exception rather than the rule and may modify or withdraw this delegated
authority at any time the Audit Committee determines that it is appropriate to
do so.
PRE-APPROVED FEE LEVELS
Fee levels for all Covered Services to be provided by the Independent
Auditor and pre-approved under this Policy will be established annually by the
Audit Committee and set forth in the Service Pre-Approval Documents. Any
increase in pre-approved fee levels will require specific pre-approval by the
Audit Committee (or the Chairman pursuant to delegated authority).
AUDIT SERVICES
The terms and fees of the annual Audit services engagement for the Trust
are subject to the specific pre-approval of the Audit Committee. The Audit
Committee will approve, if necessary, any changes in terms, conditions or fees
resulting from changes in audit scope, Trust structure or other matters.
In addition to the annual Audit services engagement specifically approved
by the Audit Committee, any other Audit services for the Trust not listed in the
Service Pre-Approval Document for the respective period must be specifically
pre-approved by the Audit Committee (or the Chairman pursuant to delegated
authority).
AUDIT-RELATED SERVICES
Audit-Related services are assurance and related services that are not
required for the audit, but are reasonably related to the performance of the
audit or review of the financial statements of the Trust and, to the extent they
are Covered Services, the other Covered Entities (as defined in the Audit
Committee Charter) or that are traditionally performed by the Independent
Auditor. Audit-Related services that are Covered Services and are not listed in
the Service Pre-Approval Document for the respective period must be specifically
pre-approved by the Audit Committee (or the Chairman pursuant to delegated
authority).
TAX SERVICES
The Audit Committee believes that the Independent Auditor can provide Tax
services to the Covered Entities such as tax compliance, tax planning and tax
advice without impairing the auditor's independence. However, the Audit
Committee will not permit the retention of the Independent Auditor in connection
with a transaction initially recommended by the Independent Auditor, the sole
business purpose of which may be tax avoidance and the tax treatment of which
may not be supported in the Internal Revenue Code and related regulations. Tax
services that are Covered Services and are not listed in the Service
Pre-Approval Document for the respective period must be specifically
pre-approved by the Audit Committee (or the Chairman pursuant to delegated
authority).
ALL OTHER SERVICES
All Other services that are Covered Services and are not listed in the
Service Pre-Approval Document for the respective period must be specifically
pre-approved by the Audit Committee (or the Chairman pursuant to delegated
authority).
PROCEDURES
Requests or applications to provide Covered Services that require approval by
the Audit Committee (or the Chairman pursuant to delegated authority) must be
submitted to the Audit Committee or the Chairman, as the case may be, by both
the Independent Auditor and the Chief Financial Officer of the respective
Covered Entity, and must include a joint statement as to whether, in their view,
(a) the request or application is consistent with the SEC's rules on auditor
independence and (b) the requested service is or is not a non-audit service
prohibited by the SEC. A request or application submitted to the Chairman
between scheduled meetings of the Audit Committee should include a discussion as
to why approval is being sought prior to the next regularly scheduled meeting of
the Audit Committee.
(2) None of the services described in each of Items 4 (b) through (d) were
approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of
Rule 2-01 of Regulation S-X.
(f) The aggregate non-audit fees billed for the last two fiscal years by the
registrant's accountant for services rendered to the registrant, the
registrant's investment adviser, and any entity controlling, controlled by,
or under common control with the adviser that provides ongoing services to
the registrant (not including a sub-adviser whose role is primarily
portfolio management and is subcontracted with or overseen by another
investment adviser) that directly related to the operations and financial
reporting of the registrant are as follows:
2008: $55,000
2007: $30,067
(g) Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
(a) The registrant has a separately designated standing audit committee
established in accordance with Section 3(a)(58)(A) of the Securities Exchange
Act of 1934. The audit committee of the registrant is comprised of: Randall C.
Barnes, Daniel Black, Derek Medina, Ronald Nyberg, Gerald L. Seizert and Michael
A. Smart.
(b) Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
The Schedule of Investments is included as part of Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
The registrant has delegated the voting of proxies relating to its voting
securities to its investment advisor, Advent Capital Management, LLC (the
"Advisor"). The Advisor's Proxy Voting Policies and Procedures are included as
an exhibit hereto.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
(a) (1) F. Barry Nelson is primarily responsible for the day-to-day management
of the registrant's portfolio. The following provides information
regarding the portfolio managers as of October 31, 2008:
------------------------------------------------------------------------------
NAME SINCE PROFESSIONAL EXPERIENCE
------------------------------------------------------------------------------
------------------------------------------------------------------------------
F. Barry Nelson 2003 Portfolio Manager at Advent Capital
(Inception) Management, LLC for more than six years.
------------------------------------------------------------------------------
(a) (2) (i-iii) Other accounts managed. Mr. Nelson does not manage any
performance based fee accounts. The following summarizes
information regarding each of the other accounts managed by
Mr. Nelson as of October 31, 2008:
REGISTERED INVESTMENT OTHER POOLED INVESTMENT
COMPANIES VEHICLES OTHER ACCOUNTS
# OF # OF # OF
NAME ACCOUNTS TOTAL ASSETS ACCOUNTS TOTAL ASSETS ACCOUNTS TOTAL ASSETS
F. Barry Nelson 1 $ 386 million 1 $ 13 million 24 $ 712 million
(a) (2) (iv) Conflicts of Interest. If another account of the Portfolio
Manager has investment objectives and policies that are similar
to those of the Registrant, the Portfolio Manager will allocate
orders pro-rata among the Registrant and such other
accounts, or, if the Portfolio Manager deviates from this
policy, the Portfolio Manager will allocate orders such that
all accounts (including the Registrant) receive fair and
equitable treatment.
(a) (3) Compensation Structure. The salary of the Portfolio Manager is fixed.
The bonus of the Portfolio Manager is 100% discretionary. The bonus is
determined by senior management at Advent Capital Management, LLC.
(a) (4) Securities ownership. The following table discloses the dollar range
of equity securities of the Fund beneficially owned by F. Barry Nelson
as of October 31, 2008:
DOLLAR RANGE OF EQUITY
NAME OF PORTFOLIO MANAGER SECURITIES IN FUND
F. Barry Nelson $100,001-$500,000
(b) Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
None.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The registrant has not made any material changes to the procedures by which
shareholders may recommend nominees to the registrant's Board of Trustees.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial
officer have evaluated the registrant's disclosure controls and procedures
(as defined in Rule 30a-3(c) under the Investment Company Act of 1940) as
of a date within 90 days of this filing and have concluded based on such
evaluation, as required by Rule 30a-3(b) under the Investment Company Act
of 1940, that the registrant's disclosure controls and procedures were
effective, as of that date, in ensuring that information required to be
disclosed by the registrant in this Form N-CSR was recorded, processed,
summarized, and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms.
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act of
1940) that occurred during the registrant's second fiscal quarter of the
period covered by this report that have materially affected, or are
reasonably likely to materially affect, the registrant's internal control
over financial reporting.
ITEM 12. EXHIBITS.
(a) (1) Code of Ethics for Chief Executive and Senior Financial Officers.
(a) (2) Certification of principal executive officer and principal financial
officer pursuant to Rule 30a-2(a) of the Investment Company Act
of 1940.
(b) Certification of principal executive officer and principal financial
officer pursuant to Rule 30a-2(b) of the Investment Company Act of 1940 and
Section 906 of the Sarbanes-Oxley Act of 2002.
(c) Proxy Voting Policies and Procedures.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Advent Claymore Convertible Securities and Income Fund
By: /s/ Tracy V. Maitland
-----------------------------------------------------------------------
Name: Tracy V. Maitland
Title: President and Chief Executive Officer
Date: January 9, 2009
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ Tracy V. Maitland
-----------------------------------------------------------------------
Name: Tracy V. Maitland
Title: President and Chief Executive Officer
Date: January 9, 2009
By: /s/ Robert White
-----------------------------------------------------------------------
Name: Robert White
Title: Treasurer and Chief Financial Officer
Date: January 9, 2009