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 811-21582
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Madison / Claymore Covered Call & Equity Strategy Fund
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(Exact name of registrant as specified in charter)
2455 Corporate West Drive
Lisle, IL 60532
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(Address of principal executive offices) (Zip code)
J. Thomas Futrell
Madison / Claymore Covered Call & Equity Strategy Fund
2455 Corporate West Drive
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Lisle, IL 60532
(Name and address of agent for service)
Registrant's telephone number, including area code: (630) 505-3700
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Date of fiscal year end: December 31
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Date of reporting period: June 30, 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. Section 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The registrant's semi-annual report transmitted to shareholders pursuant to Rule
30e-1 under the Investment Company Act of 1940, as amended (the "Investment
Company Act"), is as follows:
SEMIANNUAL
REPORT
June 30, 2008
(Unaudited)
Madison/Claymore
Covered Call & Equity Strategy Fund | MCN
Madison Investment Advisors
Logo: CLAYMORE(SM)
www.madisonclaymore.com
... YOUR ROAD TO THE LATEST,
MOST UP-TO-DATE INFORMATION ABOUT THE
MADISON/CLAYMORE COVERED CALL & EQUITY STRATEGY FUND
The shareholder report you are reading right now is just the beginning of the
story. Online at WWW.MADISONCLAYMORE.COM, you will find:
o Daily, weekly and monthly data on share prices, distributions and more
o Portfolio overviews and performance analyses
o Announcements, press releases and special notices
o Fund and adviser contact information
Madison Asset 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 way we are working
to keep you better informed about your investment in the Fund.
2 | SemiAnnual Report | June 30, 2008
MCN | Madison/Claymore Covered Call & Equity Strategy Fund
Dear SHAREHOLDER |
We are pleased to submit the semi-annual shareholder report for the
Madison/Claymore Covered Call & Equity Strategy Fund (the "Fund") for the six
months ended June 30, 2008.
Madison Asset Management, LLC, a wholly-owned subsidiary of Madison Investment
Advisors, Inc., is the Fund's investment manager. Founded in 1974, Madison is an
independently owned firm that acts as an investment adviser for individuals,
corporations, pension funds, endowments, insurance companies and mutual funds.
Madison and its subsidiaries manage in excess of $8 billion in assets. Claymore
Advisors, LLC is the investment adviser to the Fund.
The Fund's primary investment objective is to provide a high level of current
income and current gains, with a secondary objective of long-term capital
appreciation. The Fund pursues its investment objectives by investing in a
portfolio consisting primarily of high-quality, large-capitalization common
stocks that are, in the view of the Fund's investment manager, selling at a
reasonable price in relation to their long-term earnings growth rates. On an
ongoing and consistent basis, the Fund sells covered call options to seek to
generate a reasonably steady return from option premiums. There can be no
assurance that the Fund will achieve its investment objectives.
Under normal market conditions, the Fund allocates at least 80% of its total
assets to an integrated investment strategy pursuant to which the Fund invests
in a portfolio of equity securities and writes covered call options on a portion
of the equity securities held in the Fund's portfolio; pending investment in
equity securities or as covered call options, the assets of the Fund allocated
to its integrated investment strategy are held in cash or cash equivalents. The
Fund invests, under normal market conditions, at least 65% of its total assets
in equity securities in common stocks of large capitalization issuers that meet
the Fund's selection criteria.
All Fund returns cited--whether based on net asset value ("NAV") or market
price--assume the reinvestment of all distributions. For the six months ended
June 30, 2008, the Fund provided a total return based on market price of -7.12%
and a return of -9.61% based on NAV. As of June 30, 2008, the Fund's market
price of $10.00 represented a discount of 10.39% to NAV of $11.16. Past
performance is not a guarantee of future results.
The market value of the Fund's shares fluctuates from time to time, and it may
be higher or lower than the Fund's NAV. The current discount to NAV may provide
an opportunity for suitable investors to purchase shares of the Fund below the
market value of the securities in the underlying portfolio. We believe that,
over the long term, the progress of the NAV will be reflected in the market
price return to shareholders.
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 23 of the Fund's semi-annual report. When
shares trade at a discount to NAV, the DRIP takes advantage of the discount by
reinvesting the quarterly dividend distribution in common shares of the Fund
purchased in the market at a price less than NAV. Conversely, when the
SemiAnnual Report | June 30, 2008 | 3
MCN | Madison/Claymore Covered Call & Equity Strategy Fund |
DEAR SHAREHOLDER continued
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. Since
the Fund endeavors to maintain a steady quarterly distribution rate, the DRIP
plan effectively provides an income averaging technique, which causes
shareholders to accumulate a larger number of Fund shares when the market price
is depressed than when the price is higher.
The Fund paid quarterly dividends of $0.33 on February 29, 2008, and May 30,
2008. On August 1, 2008, subsequent to the six-month period covered by this
semi-annual shareholder report, the Board of Trustees of the Fund declared a
quarterly dividend of $0.28 per share, reflecting a reduction of $0.05 per share
from the quarterly dividend paid by the Fund on May 30, 2008.This reduced
dividend level represents an annualized distribution rate of 11.20%, based on
the Fund's closing market price of $10.00 on June 30, 2008. However, there is no
guarantee that this level of income will be maintained.
To learn more about the Fund's performance and investment strategy, we encourage
you to read the Questions & Answers section of the report, which begins on page
5. You will find information about Madison's investment philosophy and
discipline, its views on the market environment and how it structured the Fund's
portfolio based on its views.
We appreciate your investment and look forward to serving your investment needs
in the future. For the most up-to-date information on your investment, please
visit the Fund's website at www.madisonclaymore.com.
Sincerely,
/s/ J. Thomas Futrell
J. Thomas Futrell
Chief Executive Officer
Madison/Claymore Covered Call & Equity Strategy Fund
4 | SemiAnnual Report | June 30, 2008
MCN | Madison/Claymore Covered Call & Equity Strategy Fund
QUESTIONS & ANSWERS |
We at Madison Asset Management LLC are pleased to address the progress of the
Madison/Claymore Covered Call & Equity Strategy Fund (the "Fund") for the
six-month period ended June 30, 2008. Introduced in July 2004, the Fund
continues to pursue its investment objectives by investing in high-quality,
large-capitalization common stocks that are, in our view, selling at reasonable
prices with respect to their projected long-term earnings growth rates. Our
option-writing strategy has provided a steady stream of option premiums, which
helps the Fund achieve its primary objective to provide a high level of current
income and current gains, with a secondary objective of long-term capital
appreciation.
Madison Asset Management, LLC ("MAM"), a wholly owned subsidiary of Madison
Investment Advisors, Inc., with its affiliates, manages more than $8 billion in
individual, corporate, pension, insurance, endowment, and mutual fund assets as
of June 30, 2008.
--------------------------------------------------------------------------------
WHAT HAPPENED IN THE MARKET DURING THE FIRST HALF OF 2008?
The general trend for stocks during the first half of 2008 was illustrated by
the fate of the widely watched Dow Jones Industrial Average. The index hit its
high for this six-month period on the first day of trading in 2008, and its
closing low for the first half of the year was on June 27. For many Americans
this may have felt like a straight-line decline, since that's the path of
consumer confidence, which sank steadily to hit a 15-year low by the end of the
period. In actuality, the stock market had a major rally during the period, with
the Standard & Poor's 500 Index (the "S&P 500"), which is generally regarded as
a good indicator of the broad stock market, rising double-digits between March
10 and May 19, before dropping 10% to end the period.
The source of this high volatility could be pinned to three key problem areas:
high commodity prices, with gasoline leading the way; the continuing distress in
the housing market; and the continuing impact of the already well-established
credit crisis. The market dropped in early March as one of the nation's largest
investment banks stumbled into what looked like dissolution, until the Federal
Reserve and a leading financial institution worked out a rescue. This gave hope
to many that the credit crisis might have bottomed, but the subsequent rally
rolled over in June in the face of surging oil prices, concerns over inflation,
and a recognition that credit problems would continue to emerge. Higher energy
and ramping inflation at a time when the economy was slowing brought the term
"stagflation" back into circulation. Stagflation is generally a poor environment
for stock investors.
The stock decline was broad, hitting domestic stocks of all sizes and even
extending to international markets, with the broad international indices also
showing double-digit losses. Within the stocks of the S&P 500, only the energy
sector showed significant upside for the period, as it rose 8.1% for the period.
The materials sector was up fractionally, while every other sector was down,
with the financial sector dropping -30.9% and the consumer discretionary sector
down -13.9%.
--------------------------------------------------------------------------------
HOW DID THE FUND PERFORM GIVEN THE MARKET CONDITIONS DURING SIX MONTHS ENDED
JUNE 30, 2008?
All Fund returns cited--whether based on net asset value ("NAV") or market
price--assume the reinvestment of all distributions. For the six months ended
June 30, 2008, the Fund provided a total return based on market price of -7.12%
and a return of -9.61% based on NAV. As of June 30, 2008, the Fund's market
price of $10.00 represented a discount of 10.39% to NAV of $11.16. Past
performance is not a guarantee of future results. The Fund's NAV per share
decreased $1.86 in the first half of 2008 from $13.02 as of December 31, 2007,
to $11.16 on June 30, 2008, as several of the Fund's stocks experienced a
decline in value in the first half of 2008.
The Fund's return, although negative, was above the -11.91% return of the S&P
500 for the six months ended June 30, 2008. The Fund's benchmark, the CBOE S&P
500 BuyWrite Index (the "BXM"), posted a negative return of -5.89% over these
six months. The main source for the performance gap between the Fund and the BXM
can be attributed to the fortunes of the underlying stocks. The Fund tends to
concentrate its holdings in the consumer discretionary, financial, technology
and health care sectors, all of which were strongly negative for the period,
while the S&P 500's
SemiAnnual Report | June 30, 2008 | 5
MCN | Madison/Claymore Covered Call & Equity Strategy Fund |
QUESTIONS & ANSWERS continued
energy sector, where the Fund has historically been underweighted, was up 8.1%.
Secondly, a bifurcated market has hurt results because the Fund's "winners" get
called away without the Fund fully participating in their upside. Currently, we
believe we have a portfolio of high-quality stocks trading at attractive prices
on a number of valuation metrics.
The market value and NAV of the Fund's shares fluctuate from time to time, and
the market value may be higher or lower than the Fund's NAV. The current
discount to NAV may provide an opportunity for suitable investors to purchase
shares of the Fund below the market value of the securities in the underlying
portfolio. We believe that, over the long term, the progress of the NAV will be
reflected in the market price return to shareholders.
--------------------------------------------------------------------------------
PLEASE DESCRIBE THE FUND'S PORTFOLIO EQUITY AND OPTION STRUCTURE.
As of June 30, 2008, the Fund held 49 common stocks. Covered call options were
written against approximately 90% of the Fund's net assets as of June 30, 2008.
During the first half of 2008, the Fund's managers wrote call options that
generated premiums of $25.9 million. It is the strategy of the Fund to write
"out-of-the-money" call options, and at June 30 the majority of the Fund's call
options (84 of 100 different options, or 84%) were still "out-of-the-money".
("Out-the-money" means the stock price is below the strike price at which the
shares would be called away.) Since the Fund is mainly "out-of-the-money," the
Fund is well positioned to participate in some of the upside should its stock
holdings rally.
--------------------------------------------------------------------------------
WHICH SECTORS ARE PREVALENT IN THE FUND?
From a sector perspective, based on long-term investments the Fund's largest
exposure was in the technology sector, followed by consumer discretionary,
financials and health care sectors. The fund has no holdings in the materials or
utilities sectors.
--------------------------------------------------------------------------------
WILL YOU DESCRIBE THE FUND'S DIVIDEND POLICY?
The Fund paid quarterly dividends of $0.33 on February 29, 2008, and May 30,
2008. On August 1, 2008, subsequent to the six-month period covered by this
semi-annual shareholder report, the Board of Trustees of the Fund declared a
quarterly dividend of $0.28 per share, reflecting a reduction of $0.05 per share
from the quarterly dividend paid by the Fund on May 30, 2008.This reduced
dividend represents an annualized distribution rate of 11.20%, based on the
Fund's closing market price of $10.00 on June 30, 2008. However, there is no
guarantee that this level of income will be maintained.
--------------------------------------------------------------------------------
WILL YOU PLEASE DISCUSS THE FUND'S SECURITY AND OPTION SELECTION PROCESS?
The Fund is managed by two teams of investment professionals. We like to think
of these teams as a "right hand" and "left hand" meaning they work together to
make common stock and option decisions. We use fundamental analysis to select
solid companies with good growth prospects and attractive valuations. We then
seek attractive call options to write against those stocks. It is our belief
that this partnership of active management between the equity and option teams
provides investors with an innovative, risk-moderated approach to equity
investing.
6 | SemiAnnual Report | June 30, 2008
MCN | Madison/Claymore Covered Call & Equity Strategy Fund |
QUESTIONS & ANSWERS continued
MAM seeks to invest in a portfolio of common stocks that have favorable "PEG"
ratios (Price-Earnings ratio to Growth rate) as well as financial strength and
industry leadership. As bottom-up investors, we focus on the fundamental
businesses of our companies. Our stock selection philosophy strays away from the
"beat the street" objective, as we seek companies that have sustainable
competitive advantages, predictable cash flows, solid balance sheets and
high-quality management teams. By concentrating on long-term prospects and
circumventing the "instant gratification" school of thought, we believe we bring
elements of consistency, stability and predictability to our shareholders.
Once we have selected attractive and solid names for the Fund, we employ our
call writing strategy. This procedure entails selling calls that are primarily
out-of the-money, meaning that the strike price is higher than the common stock
price, so that the Fund can participate in some stock appreciation. Option
premiums received by the Fund provide a high level of cash flow and add an
element of downside protection. Call options may be written over a number of
time periods and at differing strike prices in an effort to maximize the
protective value to the strategy and spread this cash flow evenly throughout the
year.
--------------------------------------------------------------------------------
WHAT IS MANAGEMENT'S OUTLOOK FOR THE MARKET AND FUND IN 2008?
As is usually the case in volatile markets, the market was rife with conflicting
signals during the first half of 2008. On the negative side was a weak economy
and increasing inflation. Corporate profits were under pressure, and the Federal
Reserve was in the difficult position of facing a slowing economy, which would
normally promote lower rates, and serious inflation, which is typically treated
with the opposite. On the positive side, valuations of many high-quality
companies reached levels we haven't seen for years and interest rates remained
low. The slide in consumer confidence and cash flows out of stock funds were
both potential contrary indicators, suggesting that the market might be
oversold. By the end of the period, we were more positive about the prospects of
our portfolio than we had been for a number of reports, with the recognition
that the realization of these prospects may take time. On the option writing
side, the VIX Index spiked upward at the end of 2007 from very low levels. (VIX
is the ticker symbol for the Chicago Board Options Exchange Volatility Index, a
popular measure of the implied volatility of options on the S&P 500 Index.) This
higher level of volatility has caused option premiums to increase and we look
for this positive trend to continue into the second half of 2008.
SemiAnnual Report | June 30, 2008 | 7
MCN | Madison/Claymore Covered Call & Equity Strategy Fund |
QUESTIONS & ANSWERS continued
--------------------------------------------------------------------------------
MCN RISKS AND OTHER CONSIDERATIONS
The views expressed in this report reflect those of the portfolio manager 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 include forward
looking statements that involve risk and uncertainty, and there is no guarantee
that any predictions 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.
EQUITY RISK: The value of the securities held by the Funds will fall due to
general market and economic conditions, perceptions regarding the industries in
which the issuers of securities held by the Funds participate, or factors
relating to specific companies in which the Funds invest.
RISKS ASSOCIATED WITH OPTIONS ON SECURITIES: There are several risks associated
with transactions in options on securities. For example, there are significant
differences between the securities and options markets that could result in an
imperfect correlation between these markets, causing a given transaction not to
achieve its objectives. A decision as to whether, when and how to use options
involves the exercise of skill and judgment, and even a well-conceived
transaction may be unsuccessful to some degree because of market behavior or
unexpected events. As the writer of a covered call option, the Fund forgoes,
during the option's life, the opportunity to profit from increases in the market
value of the security covering the call option above the sum of the premium and
the strike price of the call but has retained the risk of loss should the price
of the underlying security decline. The writer of an option has no control over
the time when it may be required to fulfill its obligation as a writer of the
option. Once an option writer has received an exercise notice, it cannot effect
a closing purchase transaction in order to terminate its obligation under the
option and must deliver the underlying security at the exercise price. Please
refer to the Fund's prospectus for a more thorough discussion of the risks
associated with investments in options on equity securities.
FOREIGN INVESTMENT RISK: Investing in non-U.S. issuers may involve unique risks
such as currency, political, and economic risk, as well as less market
liquidity, generally greater market volatility and less complete financial
information than for U.S. issuers.
RISKS OF MID-CAP COMPANIES: Mid-cap companies often are newer or less
established companies than larger companies. Investments in mid-cap companies
carry additional risks because earnings of these companies tend to be less
predictable; they often have limited product lines, markets, distribution
channels or financial resources; and the management of such companies may be
dependent upon one or a few key people. The market movements of equity
securities of mid-cap companies may be more abrupt or erratic than the market
movements of equity securities of larger, more established companies or the
stock market in general.
INDUSTRY CONCENTRATION RISK: To the extent that the Fund makes substantial
investments in a single industry, the Fund will be more susceptible to adverse
economic or regulatory occurrences affecting those sectors.
FUND DISTRIBUTION RISK: In order to make regular quarterly distributions on its
common shares, the Fund may have to sell a portion of its investment portfolio
at a time when independent investment judgment may not dictate such action. In
addition, the Fund's ability to make distributions more frequently than annually
from any net realized capital gains by the Fund is subject to the Fund obtaining
exemptive relief from the Securities and Exchange Commission, which cannot be
assured. To the extent the total quarterly distributions for a year exceed the
Fund's net investment company income and net realized capital gain for that
year, the excess will generally constitute a return of the Fund's capital to its
common shareholders. Such return of capital distributions generally are tax-free
up to the amount of a common shareholder's tax basis in the common shares
(generally, the amount paid for the common shares). In addition, such excess
distributions will decrease the Fund's total assets and may increase the Fund's
expense ratio.
FINANCIAL LEVERAGE: The Fund is authorized to utilize leverage through the
issuance of preferred shares and/or the Fund may also borrow or issue debt
securities for financial leveraging purposes and for temporary purposes such as
settlement of transactions. Although the use of any financial leverage by the
Fund may create an opportunity for increased net income, gains and capital
appreciation for the Common Shares, it also results in additional risks and can
magnify the effect of any losses. If the income and gains earned on securities
purchased with financial leverage proceeds are greater than the cost of
financial leverage, the Fund's return will be greater than if financial leverage
had not been used. Conversely, if the income or gain from the securities
purchased with such proceeds does not cover the cost of financial leverage, the
return to the Fund will be less than if financial leverage had not been used.
Financial leverage also increases the likelihood of greater volatility of net
asset value and market price of and dividends on the Common Shares than a
comparable portfolio without leverage.
An investment in the Fund includes, but is not limited to, risks and
considerations such as: Investment Risk, Not a Complete Investment Program,
Equity Risk, Risks Associated with Options on Securities, Limitation on Option
Writing Risk, Risks of Mid-Cap Companies, Income Risk, Foreign Securities Risk,
Industry Concentration Risk, Derivatives Risk, Illiquid Securities Risk, Fund
Distribution Risk, Market Discount Risk, Other Investment Companies, Financial
Leverage Risk, Management Risk, Risks Related to Preferred Securities, Interest
Rate Risk, Inflation Risk, Current Developments Risk and Anti-Takeover
Provisions. Please see www.madisonclaymore.com for a more detailed discussion
about Fund risks and considerations.
8 | SemiAnnual Report | June 30, 2008
MCN | Madison/Claymore Covered Call & Equity Strategy Fund
Fund SUMMARY | AS OF JUNE 30, 2008 (unaudited)
FUND STATISTICS
-------------------------------------------------------
Share Price $10.00
Common Share Net Asset Value $11.16
Premium/(Discount) to NAV -10.39%
Net Assets ($000) $214,955
-------------------------------------------------------
TOTAL RETURNS
-------------------------------------------------------
(INCEPTION 7/28/04) MARKET NAV
-------------------------------------------------------
Six Month -7.12% -9.61%
One Year -24.20% -16.53%
Three Year - average annual -4.91% -0.30%
Since Inception - average annual-1.30% 2.43%
-------------------------------------------------------
% OF LONG TERM
SECTOR BREAKDOWN INVESTMENTS
-------------------------------------------------------
Consumer Discretionary 24.2%
Technology 23.3%
Health Care 18.4%
Financials 18.2%
Consumer Services 7.3%
Software 2.9%
Computers 2.7%
Industrial 1.4%
Energy 1.3%
Insurance 0.3%
-------------------------------------------------------
% OF LONG-TERM
TOP TEN HOLDINGS INVESTMENTS
-------------------------------------------------------
Cisco Systems, Inc. 3.7%
Bed Bath & Beyond, Inc. 3.5%
eBay, Inc. 3.3%
Kohl's Corp. 3.0%
Symantec Corp. 2.9%
Williams-Sonoma, Inc. 2.9%
Intuit, Inc. 2.8%
Capital One Financial Corp. 2.8%
Linear Technology Corp. 2.7%
Dell, Inc. 2.7%
-------------------------------------------------------
Sectors and holdings are subject to change daily. For more current information,
please visit www.claymore.com/mcn. The above summaries are provided for
informational purposes only and should not be viewed as recommendations. Past
performance does not guarantee future results.
Line Chart:
SHARE PRICE & NAV PERFORMANCE
6/30/07 14.73 14.79
14.84 14.84
15.03 14.85
15.1 14.87
15 14.92
14.95 14.9
14.79 14.81
14.93 14.85
15.12 14.99
14.96 14.97
14.96 14.95
14.92 14.94
14.79 14.9
14.92 14.92
14.83 14.86
14.82 14.84
14.73 14.73
14.5 14.74
14.05 14.54
14.05 14.4
14.1 14.46
14.33 14.25
14.15 14.19
14.14 14.25
14.09 13.96
14.08 14.08
13.98 14.24
14 14.44
13.95 14.15
13.89 14.1
13.63 13.76
13.05 13.58
12.15 13.44
11.93 13.44
12.82 13.7
12.99 13.7
12.98 13.74
13.3 13.87
13.4 13.85
13.43 13.97
13.36 13.87
13.04 13.69
13.07 13.85
13.1 13.84
13.3 13.95
13.43 14.03
13.36 13.92
13.46 13.92
13.34 13.78
13.5 13.73
13.58 13.89
13.46 13.9
13.54 14.02
13.4 14.02
13.32 13.96
13.58 14.23
13.53 14.26
13.35 14.14
13.27 14.16
13.1 14.1
13.15 14.02
13.02 14.1
13.05 14.14
13.09 14.13
13.16 14.25
13.16 14.28
13.2 14.28
13.36 14.26
13.53 14.38
13.5 14.32
13.52 14.34
13.41 14.34
13.21 14.29
13.21 14.31
13.15 14.21
13.03 14.13
13.03 14.12
12.97 14.06
12.67 13.83
12.65 13.93
12.77 13.95
12.56 13.93
12.41 13.85
12.46 14
12.55 14.07
12.45 14.03
12.53 14.11
12.35 13.85
12.3 13.79
12.28 13.67
12.3 13.76
12 13.54
11.77 13.54
11.71 13.45
11.72 13.48
11.65 13.4
11.75 13.32
11.5 13.21
11.5 13.22
11.26 13.02
11.19 13.01
11 12.89
11.13 13.06
11.03 12.81
11.05 12.98
11.36 13.28
11.35 13.29
11.49 13.36
11.63 13.29
11.63 13.23
11.74 13.32
11.78 13.47
11.8 13.45
11.89 13.56
11.66 13.25
11.56 13.23
11.46 13.13
11.19 13
11.1 12.93
11.1 12.99
11.12 12.96
11.02 13.02
11.19 13.14
11.53 13.2
11.46 13.17
11.25 13.03
11.25 13.02
11.41 13.02
11.48 12.86
11.63 12.76
11.29 12.48
11.17 12.5
11.1 12.27
11.09 12.39
11.15 12.56
11.12 12.4
11.18 12.54
11.05 12.27
11.04 12.33
10.86 12.09
10.64 12.12
10.68 12.25
11.05 12.6
11.23 12.68
11.18 12.5
11.39 12.71
11.53 12.78
11.82 12.75
12.03 12.92
12.32 13.13
12.11 12.98
11.92 12.68
11.8 12.59
11.75 12.69
11.8 12.62
11.97 12.68
12.17 12.69
11.77 12.46
11.27 12.29
11.22 12.28
11.25 12.28
11.34 12.35
11.13 12.24
11.2 12.32
11.3 12.48
11.45 12.58
11.4 12.63
11.46 12.44
11.21 12.15
11.25 12.12
11.35 12.11
11.25 12.14
11 11.83
10.7 11.79
10.59 11.58
10.71 11.9
10.8 11.82
10.79 11.88
10.55 11.64
10.15 11.44
10.53 11.96
10.33 11.76
10.55 12.06
10.72 12.28
10.78 12.26
10.84 12.11
10.77 11.95
10.56 11.83
10.62 11.93
10.91 12.34
11.02 12.35
10.9 12.33
10.92 12.33
10.91 12.31
10.98 12.25
10.91 12.1
10.98 12.19
10.73 12
10.62 11.93
10.47 11.99
10.78 12.18
10.83 12.23
10.97 12.45
10.95 12.43
10.96 12.32
11 12.36
11.02 12.5
11.1 12.6
11.19 12.61
11.2 12.61
11.16 12.54
11.39 12.77
11.54 12.78
11.44 12.65
11.5 12.7
11.38 12.53
11.44 12.5
11.39 12.45
11.52 12.6
11.19 12.24
11.19 12.31
11.18 12.43
11.25 12.4
11.16 12.37
11.1 12.26
10.93 12.1
10.92 12.18
10.91 12.06
10.91 12.17
11 12.21
11.09 12.34
11.17 12.35
11.12 12.25
11.09 12.26
11.19 12.28
11.32 12.38
11.1 12.05
11.02 11.97
10.88 11.98
10.69 11.72
10.69 11.79
10.85 11.99
10.94 12.04
10.8 11.92
10.71 11.81
10.76 11.88
10.54 11.65
10.49 11.5
10.37 11.53
10.41 11.64
10.15 11.34
10.1 11.26
6/30/08 10 11.16
Bar Chart:
QUARTERLY DIVIDENDS PER SHARE
8/07 0.2344
11/08 0.2344
2/08 0.2344
5/08 0.2525
Pie Chart:
PORTFOLIO COMPOSITION (% of Total Investments)
Long-Term Investments 96.7%
Short-Term Investments 3.9%
SemiAnnual Report | June 30, 2008 | 9
MCN | Madison/Claymore Covered Call & Equity Strategy Fund
Portfolio of INVESTMENTS | JUNE 30, 2008 (unaudited)
NUMBER
OF SHARES DESCRIPTION VALUE
--------------------------------------------------------------------------------
LONG-TERM INVESTMENTS 101.5%
COMMON STOCKS 101.5%
COMPUTERS 2.7%
265,800 Dell, Inc. (a) $ 5,815,704
--------------------------------------------------------------------------------
CONSUMER DISCRETIONARY 24.5%
400,000 American Eagle Outfitters, Inc. 5,452,000
270,000 Bed Bath & Beyond, Inc. (a) 7,587,000
110,000 Best Buy Co., Inc. 4,356,000
183,000 Coach, Inc. (a) 5,285,040
140,000 Home Depot, Inc. 3,278,800
165,000 Kohl's Corp. (a) 6,606,600
210,000 Lowe's Cos., Inc. 4,357,500
230,000 Starbucks Corp. (a) 3,620,200
125,000 Target Corp. 5,811,250
320,000 Williams-Sonoma, Inc. 6,348,800
--------------------------------------------------------------------------------
52,703,190
--------------------------------------------------------------------------------
CONSUMER SERVICES 7.4%
263,400 eBay, Inc. (a) 7,198,722
60,000 Garmin, Ltd. (Cayman Islands) 2,570,400
225,000 Intuit, Inc. (a) 6,203,250
--------------------------------------------------------------------------------
15,972,372
--------------------------------------------------------------------------------
ENERGY 1.3%
34,000 Unit Corp. (a) 2,820,980
--------------------------------------------------------------------------------
FINANCIALS 18.5%
60,000 Affiliated Managers Group, Inc. (a) 5,403,600
160,000 Capital One Financial Corp. 6,081,600
220,000 Citigroup, Inc. 3,687,200
320,000 Countrywide Financial Corp. 1,360,000
211,000 Marshall & Ilsley Corp. 3,234,630
140,000 Merrill Lynch & Co., Inc. 4,439,400
150,000 Morgan Stanley 5,410,500
67,800 State Street Corp. 4,338,522
240,000 Wells Fargo & Co. 5,700,000
--------------------------------------------------------------------------------
39,655,452
--------------------------------------------------------------------------------
HEALTH CARE 18.6%
120,000 Amgen, Inc. (a) 5,659,200
60,000 Biogen Idec, Inc. (a) 3,353,400
100,000 Community Health Systems, Inc. (a) 3,298,000
70,000 Genentech, Inc. (a) 5,313,000
310,000 Mylan, Inc. 3,741,700
270,000 Pfizer, Inc. 4,716,900
200,000 UnitedHealth Group, Inc. 5,250,000
40,900 Varian Medical System, Inc. (a) 2,120,665
41,300 Waters Corp. (a) 2,663,850
57,500 Zimmer Holdings, Inc. (a) 3,912,875
--------------------------------------------------------------------------------
40,029,590
--------------------------------------------------------------------------------
NUMBER
OF SHARES DESCRIPTION VALUE
--------------------------------------------------------------------------------
INDUSTRIAL 1.4%
--------------------------------------------------------------------------------
50,000 United Parcel Services Corp. - Class B $ 3,073,500
--------------------------------------------------------------------------------
INSURANCE 0.4%
123,800 MGIC Investment Corp. 756,418
--------------------------------------------------------------------------------
SOFTWARE 3.0%
330,000 Symantec Corp. (a) 6,385,500
--------------------------------------------------------------------------------
TECHNOLOGY 23.7%
65,000 Adobe Systems, Inc. (a) 2,560,350
100,000 Altera Corp. 2,070,000
160,000 Applied Materials, Inc. 3,054,400
160,000 Check Point Software Technologies (Israel) (a) 3,787,200
345,000 Cisco Systems, Inc. (a) 8,024,700
394,000 EMC Corp. (a) 5,787,860
600,000 Flextronics International Ltd. (Singapore) (a) 5,640,000
5,000 Google, Inc. - Class A (a) 2,632,100
180,000 Linear Technology Corp. 5,862,600
157,300 QLogic Corp. (a) 2,295,007
250,000 Yahoo!, Inc. (a) 5,165,000
122,000 Zebra Technologies Corp. - Class A (a) 3,982,080
--------------------------------------------------------------------------------
50,861,297
--------------------------------------------------------------------------------
TOTAL LONG-TERM INVESTMENTS 101.5%
(Cost $298,439,451) 218,074,003
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS 4.1%
MONEY MARKET FUNDS 3.7%
7,886,702 AIM Liquid Assets Money Market Fund (Cost $7,886,702) 7,886,702
--------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
--------------------------------------------------------------------------------
U.S. GOVERNMENT 0.4%
$1,000,000 U.S. Treasury Note (coupon 4.625%, maturity 9/30/08)
(Cost $1,006,768) $ 1,007,422
--------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS 4.1%
(Cost $8,893,470) 8,894,124
--------------------------------------------------------------------------------
TOTAL INVESTMENTS 105.6%
(Cost $307,332,921) 226,968,127
Liabilities in excess of Other Assets - (0.1%) (305,488)
Total Value of Options Written - (5.5%) (11,707,828)
--------------------------------------------------------------------------------
NET ASSETS 100.0% $214,954,811
================================================================================
(a) Non-income producing security.
See notes to financial statements.
10 | SemiAnnual Report | June 30, 2008
MCN | Madison/Claymore Covered Call & Equity Strategy Fund |
PORTFOLIO OF INVESTMENTS (unaudited) continued
CONTRACTS
(100 SHARES EXPIRATION EXERCISE
PER CONTRACT) CALL OPTIONS WRITTEN(a) DATE PRICE VALUE
---------------------------------------------------------------------------------------------
650 Adobe Systems, Inc. January 2009 $ 35.00 $ 448,500
150 Affiliated Managers Group, Inc. September 2008 105.00 45,000
200 Affiliated Managers Group, Inc. January 2009 110.00 108,000
150 Affiliated Managers Group, Inc. January 2009 120.00 48,000
100 Affiliated Managers Group, Inc. September 2008 80.00 148,500
1,000 Altera Corp. January 2009 20.00 287,500
500 American Eagle Outfitters, Inc. November 2008 20.00 12,500
3,500 American Eagle Outfitters, Inc. January 2009 25.00 35,000
300 Amgen, Inc. July 2008 47.50 25,950
317 Amgen, Inc. July 2008 50.00 5,865
350 Amgen, Inc. January 2009 50.00 108,500
1,000 Applied Materials, Inc. January 2009 17.50 305,000
600 Applied Materials, Inc. January 2009 20.00 103,500
1,779 Bed Bath & Beyond, Inc. January 2009 30.00 480,330
200 Bed Bath & Beyond, Inc. August 2008 30.00 17,000
721 Bed Bath & Beyond, Inc. August 2008 32.50 23,433
400 Best Buy Co., Inc. January 2009 45.00 109,000
197 Best Buy Co., Inc. September 2008 47.50 12,313
200 Best Buy Co., Inc. September 2008 52.50 3,500
600 Biogen Idec, Inc. January 2009 65.00 154,500
1,000 Capital One Financial Corp. January 2009 45.00 435,000
1,600 Check Point Software Technologies
(Israel) January 2009 22.50 496,000
2,800 Cisco Systems, Inc. January 2009 27.50 243,600
650 Cisco Systems, Inc. January 2009 30.00 27,950
1,000 Citigroup, Inc. September 2008 27.50 6,500
1,830 Coach, Inc. August 2008 30.00 301,950
1,000 Community Health Systems, Inc. January 2009 35.00 325,000
691 Countrywide Financial Corp. January 2009 10.00 2,418
45 Countrywide Financial Corp. July 2008 6.00 68
255 Countrywide Financial Corp. October 2008 6.00 1,657
705 Countrywide Financial Corp. July 2008 7.50 3,525
404 Countrywide Financial Corp. July 2008 5.00 2,626
658 Dell, Inc. November 2008 20.00 210,560
800 Dell, Inc. November 2008 22.00 162,000
1,000 Dell, Inc. January 2009 25.00 121,500
634 eBay, Inc. October 2008 27.50 148,356
500 eBay, Inc. October 2008 30.00 66,500
1,500 eBay, Inc. January 2009 35.00 127,500
500 EMC Corp. October 2008 16.00 39,000
800 EMC Corp. October 2008 17.00 40,400
2,640 EMC Corp. January 2009 17.50 224,400
500 Flextronics International Ltd.
(Singapore) January 2009 10.00 51,000
1,700 Flextronics International Ltd.
(Singapore) January 2009 12.50 64,600
300 Garmin, Ltd. (Cayman Islands) January 2009 50.00 126,000
150 Garmin, Ltd. (Cayman Islands) January 2009 60.00 32,250
CONTRACTS
(100 SHARES EXPIRATION EXERCISE
PER CONTRACT) CALL OPTIONS WRITTEN(a) DATE PRICE VALUE
---------------------------------------------------------------------------------------------
300 Genentech, Inc. September 2008 $ 70.00 $ 235,500
400 Genentech, Inc. January 2009 70.00 418,000
50 Google, Inc. - Class A September 2008 580.00 89,250
1,072 Home Depot, Inc. January 2009 30.00 70,216
328 Home Depot, Inc. August 2008 30.00 2,624
293 Intuit, Inc. January 2009 30.00 55,670
1,957 Intuit, Inc. January 2009 35.00 107,635
750 Kohl's Corp. July 2008 45.00 22,500
900 Kohl's Corp. January 2009 50.00 189,000
1,100 Linear Technology Corp. August 2008 30.00 352,000
200 Linear Technology Corp. August 2008 32.50 32,000
500 Linear Technology Corp. November 2008 37.50 47,500
400 Lowe's Cos., Inc. January 2009 25.00 41,000
1,600 Lowe's Cos., Inc. July 2008 27.50 8,000
288 Marshall & Ilsley Corp. September 2008 25.00 1,440
1,422 Marshall & Ilsley Corp. January 2009 30.00 17,775
500 Merrill Lynch & Co., Inc. July 2008 55.00 2,500
500 Merrill Lynch & Co., Inc. January 2009 60.00 5,500
400 Merrill Lynch & Co., Inc. January 2009 65.00 4,000
300 MGIC Investment Corp. December 2008 15.00 6,750
200 MGIC Investment Corp. January 2009 15.00 5,500
479 MGIC Investment Corp. September 2008 20.00 2,395
800 Morgan Stanley January 2009 55.00 36,000
158 Mylan, Inc. October 2008 12.50 15,010
2,942 Mylan, Inc. January 2009 15.00 161,810
1,573 QLogic Corp. January 2009 15.00 235,950
680 Starbucks Corp. October 2008 16.00 95,880
220 Starbucks Corp. January 2009 20.00 14,190
1,400 Starbucks Corp. January 2009 22.50 40,600
317 State Street Corp. November 2008 75.00 87,175
361 State Street Corp. November 2008 80.00 56,857
301 Symantec Corp. January 2009 15.00 152,005
2,199 Symantec Corp. January 2009 17.50 703,680
800 Symantec Corp. July 2008 17.50 158,000
250 Target Corp. July 2008 55.00 1,375
1,000 Target Corp. January 2009 60.00 215,000
340 Unit Corp. September 2008 50.00 1,133,900
500 United Parcel Services Corp. -
Class B July 2008 70.00 3,750
700 UnitedHealth Group, Inc. January 2009 55.00 3,500
209 Varian Medical System, Inc. November 2008 50.00 118,085
200 Varian Medical System, Inc. November 2008 55.00 62,000
413 Waters Corp. November 2008 65.00 204,435
2,400 Wells Fargo & Co. July 2008 27.50 48,000
2,450 Williams-Sonoma, Inc. August 2008 27.50 12,250
750 Williams-Sonoma, Inc. August 2008 25.00 11,250
See notes to financial statements.
SemiAnnual Report | June 30, 2008 | 11
MCN | Madison/Claymore Covered Call & Equity Strategy Fund |
PORTFOLIO OF INVESTMENTS (unaudited) continued
CONTRACTS
(100 SHARES EXPIRATION EXERCISE
PER CONTRACT) CALL OPTIONS WRITTEN(a) DATE PRICE VALUE
---------------------------------------------------------------------------------------------
700 Yahoo!, Inc. January 2009 $ 25.00 $ 101,150
900 Yahoo!, Inc. July 2008 25.00 14,850
900 Yahoo!, Inc. January 2009 27.50 77,850
819 Zebra Technologies Corp. -
Class A August 2008 35.00 73,710
200 Zebra Technologies Corp. -
Class A November 2008 35.00 39,500
201 Zebra Technologies Corp. -
Class A November 2008 40.00 12,060
400 Zimmer Holdings, Inc. January 2009 70.00 206,000
175 Zimmer Holdings, Inc. January 2009 75.00 56,000
---------------------------------------------------------------------------------------------
TOTAL VALUE OF CALL OPTIONS WRITTEN
(Premiums received $22,733,881) 11,610,828
---------------------------------------------------------------------------------------------
PUT OPTIONS WRITTEN
200 Cisco Systems, Inc. January 2009 22.50 35,500
200 Cisco Systems, Inc. January 2009 25.00 61,500
---------------------------------------------------------------------------------------------
TOTAL VALUE OF PUT OPTIONS WRITTEN
(Premiums received $97,807) 97,000
---------------------------------------------------------------------------------------------
TOTAL OPTIONS WRITTEN
(Premiums received $22,831,688) $11,707,828
=============================================================================================
(a) Non-income producing security.
See notes to financial statements.
12 | SemiAnnual Report | June 30, 2008
MCN | Madison/Claymore Covered Call & Equity Strategy Fund
Statement of ASSETS AND LIABILITIES | JUNE 30, 2008 (UNAUDITED)
ASSETS
Investments at value (cost $307,332,921) $226,968,127
Dividends and interest receivable 32,030
Other assets 12,333
---------------------------------------------------------------------------------------------------------------
Total assets 227,012,490
---------------------------------------------------------------------------------------------------------------
LIABILITIES
Options written, at value (premiums received of $22,831,688) 11,707,828
Payables:
Investment advisory fee 93,897
Investment management fee 93,897
Other affiliates 18,791
Accrued expenses and other liabilities 143,266
---------------------------------------------------------------------------------------------------------------
Total liabilities 12,057,679
---------------------------------------------------------------------------------------------------------------
NET ASSETS $214,954,811
===============================================================================================================
COMPOSITION OF NET ASSETS
Common stock, $.01 par value per share; unlimited number of shares authorized,
19,268,423 shares issued and outstanding $ 192,684
Additional paid-in capital 275,590,772
Accumulated net realized gain on investments and options transactions 20,990,816
Net unrealized depreciation on investments and options transactions (69,240,934)
Distributions in excess of net investment income (12,578,527)
---------------------------------------------------------------------------------------------------------------
NET ASSETS $214,954,811
===============================================================================================================
NET ASSET VALUE (based on 19,268,423 common shares outstanding) $ 11.16
===============================================================================================================
See notes to financial statements.
SemiAnnual Report | June 30, 2008 | 13
MCN | Madison/Claymore Covered Call & Equity Strategy Fund
Statement of OPERATIONS | FOR THE SIX MONTHS ENDED JUNE 30, 2008 (UNAUDITED)
INVESTMENT INCOME
Dividends $ 1,451,754
Interest 180,996
---------------------------------------------------------------------------------------------------------------
Total income $ 1,632,750
---------------------------------------------------------------------------------------------------------------
EXPENSES
Investment advisory fee 587,516
Investment management fee 587,516
Professional fees 75,918
Trustees' fees and expenses 67,804
Printing expenses 42,984
Fund accounting 30,960
Administrative fee 30,508
Custodian fee 28,058
NYSE listing fee 12,108
Transfer agent fee 9,232
Insurance 8,216
Interest expense and fees 7,778
Other 5,520
---------------------------------------------------------------------------------------------------------------
Total expenses 1,494,118
---------------------------------------------------------------------------------------------------------------
Net investment income 138,632
---------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on:
Investments 2,796,849
Options 15,559,404
Net change in unrealized appreciation (depreciation) on:
Investments (46,127,985)
Options 4,524,271
---------------------------------------------------------------------------------------------------------------
Net realized and unrealized loss on investments and options transactions (23,247,461)
---------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(23,108,829)
===============================================================================================================
See notes to financial statements.
14 | SemiAnnual Report | June 30, 2008
MCN | Madison/Claymore Covered Call & Equity Strategy Fund
Statement of CHANGES IN NET ASSETS |
FOR THE
SIX MONTHS ENDED FOR THE
JUNE 30, 2008 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2007
----------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS RESULTING FROM OPERATIONS
Net investment income $ 138,632 $ 3,319,693
Net realized gain on investments and options 18,356,253 22,084,839
Net unrealized depreciation on investments and options (41,603,714) (35,228,751)
----------------------------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations (23,108,829) (9,824,219)
----------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From and in excess of net investment income (12,717,159) (25,364,524)
----------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Reinvestment of dividends - 2,119,016
----------------------------------------------------------------------------------------------------------------
Total decrease in net assets (35,825,988) (33,069,727)
NET ASSETS:
Beginning of period 250,780,799 283,850,526
----------------------------------------------------------------------------------------------------------------
End of period (including distributions in excess of net
investment income of ($12,578,527) and $0, respectively.) $214,954,811 $250,780,799
===============================================================================================================
See notes to financial statements.
SemiAnnual Report | June 30, 2008 | 15
MCN | Madison/Claymore Covered Call & Equity Strategy Fund
FOR THE
PERIOD
JULY 28,
FOR THE FOR THE FOR THE FOR THE 2004*
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
JUNE 30, 2008 DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
(UNAUDITED) 2007 2006 2005 2004
------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.02 $ 14.84 $ 14.74 $ 15.14 $ 14.33(a)
------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net investment income (loss)(b) 0.01 0.17 0.01 (0.02) (0.02)
Net realized and unrealized gain
on investments and options (1.21) (0.67) 1.41 0.94 1.16
------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (1.20) (0.50) 1.42 0.92 1.14
------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND IN EXCESS
OF NET INVESTMENT INCOME (0.66) (1.32) (1.32) (1.32) (0.30)
------------------------------------------------------------------------------------------------------------------------------
OFFERING EXPENSES CHARGED TO
PAID-IN-CAPITAL - - - - (0.03)
------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.16 $ 13.02 $ 14.84 $ 14.74 $ 15.14
------------------------------------------------------------------------------------------------------------------------------
MARKET VALUE, END OF PERIOD $ 10.00 $ 11.41 $ 15.11 $ 14.80 $ 14.90
------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN (C)
Net asset value -9.61% -3.81% 10.22% 6.36% 7.80%
Market value -7.12% -16.85% 11.86% 8.49% 1.35%
RATIOS AND SUPPLEMENTAL DATA
Net assets end of period (thousands) $214,955 $250,781 $283,851 $278,344 $280,290
Ratio of expenses to average net assets 1.27%(d) 1.25% 1.28% 1.27% 1.24%(d)
Ratio of net investment income (loss)
to average net assets 0.12%(d) 1.20% 0.04% (0.16%) (0.36%)(d)
Portfolio turnover 15% 103% 59% 109% 33%
* Commencement of investment operations.
(a) Before deduction of offering expenses charged to capital.
(b) Based on average shares outstanding.
(c) Total investment return is calculated assuming a purchase of a common share
at the beginning of the period and a sale on the last day of the period
reported either at net asset value (NAV) or market price per share.
Dividends and distributions are assumed to be reinvested at NAV for returns
at NAV or in accordance with the Fund's dividend reinvestment plan for
returns at market value. Total investment return does not reflect brokerage
commissions. A return calculated for a period of less than one year is not
annualized.
(d) Annualized.
See notes to financial statements.
16 | SemiAnnual Report | June 30, 2008
MCN | Madison/Claymore Covered Call & Equity Strategy Fund
Notes to FINANCIAL STATEMENTS | JUNE 30, 2008 (unaudited)
Note 1 - ORGANIZATION:
Madison/Claymore Covered Call & Equity Strategy Fund (formerly the
Madison/Claymore Covered Call Fund) (the "Fund") was organized as a Delaware
statutory trust on May 6, 2004. The Fund is registered as a diversified,
closed-end management investment company under the Investment Company Act of
1940.
The Fund's primary investment objective is to provide a high level of current
income and current gains, with a secondary objective of long-term capital
appreciation. The Fund will, under normal market conditions, pursue its primary
investment objective by allocating at least 80% of total assets to an integrated
investment strategy pursuant to which the Fund invests in a portfolio of equity
securities consisting primarily of high quality, large capitalization common
stocks that are, in the view of the Fund's investment manager, selling at a
reasonable price in relation to their long-term earnings growth rates and writes
(sells) covered call options against a portion of the equity securities held;
pending investment in equity securities or covered call options, assets of the
Fund allocated to its integrated investment strategy will be held in cash or
cash equivalents. The Fund seeks to produce a high level of current income and
gains through premiums received from writing options and, to a lesser extent,
from dividends. There can be no assurance that the Fund will achieve its
investment objectives. The Fund's investment objectives are considered
fundamental and may not be changed without shareholder approval.
Note 2 - SIGNIFICANT 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 consistently
followed by the Fund.
(a) VALUATION OF INVESTMENTS
Readily marketable portfolio securities listed on an exchange or traded in the
over-the-counter market are generally valued at their last reported sale price.
If no sales are reported, the securities are valued at the mean of the closing
bid and asked prices on such day. If no bid or asked prices are quoted on such
day, then the security is valued by such method as the Fund's Board of Trustees
shall determine in good faith to reflect its fair value. Securities traded on
NASDAQ are valued at the NASDAQ official closing price. Portfolio securities
traded on more than one securities exchange are valued at the last sale price at
the close of the exchange representing the principal market for such securities.
Debt securities are valued at the last available bid price for such securities
or, if such prices are not available, at the mean between the last bid and asked
price. Exchange-traded options are valued at the mean of the best bid and best
asked prices across all option exchanges. Short-term debt securities having a
remaining maturity of sixty days or less are valued at amortized cost, which
approximates market value.
In September, 2006, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 157, "Fair Valuation
Measurements" ("FAS 157"). This standard clarifies the definition of fair value
for financial reporting, establishes a framework for measuring fair value and
requires additional disclosures about the use of fair value measurements. FAS
157 establishes three different categories for valuations. Level 1 valuations
are those based upon quoted prices in active markets. Level 2 valuations are
those based upon quoted prices in inactive markets or based upon significant
observable inputs (i.e. yield curves; benchmark interest rates; indices). Level
3 valuations are those based upon unobservable inputs (i.e. discounted cash flow
analysis; non-market based methods used to determine fair valuation). Details of
the valuations as of June 30, 2008 were as follows:
VALUATIONS AT JUNE 30, 2008
DESCRIPTION
(VALUE IN $000S) SECURITIES DERIVATIVES TOTAL
--------------------------------------------------------------------------------
Assets:
Level 1 $225,961 $ - $ 225,961
Level 2 1,007 - 1,007
Level 3 - - -
--------------------------------------------------------------------------------
Total $226,968 $ - $ 226,968
================================================================================
Liabilities:
Level 1 $ - $ 11,708 $ 11,708
Level 2 - - -
Level 3 - - -
--------------------------------------------------------------------------------
Total $ - $ 11,708 $ 11,708
================================================================================
(b) INVESTMENT TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are accounted for on the trade date. Realized gains and
losses on investments are determined on the identified cost basis. Dividend
income is recorded net of applicable withholding taxes on the ex-dividend date
and interest income is recorded on an accrual basis. Discounts or premiums on
debt securities purchased are accreted or amortized to interest income over the
lives of the respective securities using the effective interest method.
SemiAnnual Report | June 30, 2008 | 17
MCN | Madison/Claymore Covered Call & Equity Strategy Fund |
NOTES TO FINANCIAL STATEMENTS (unaudited) continued
To earn greater income on otherwise uninvested cash temporarily held by the
Fund, such as income earned from stock sold or called away, stock dividends and
covered call writing premiums, the Fund may invest such cash in repurchase
agreements. Repurchase agreements are short-term investments in which the Fund
acquires ownership of a debt security and the seller agrees to repurchase the
security at a future time and specified price. Repurchase agreements are fully
collateralized by the underlying debt security. The Fund will make payment for
such securities only upon physical delivery or evidence of book entry transfer
to the account of the custodian bank. The seller is required to maintain the
value of the underlying security at not less than the repurchase proceeds due
the Fund.
(c) OPTIONS
An option on a security is a contract that gives the holder of the option, in
return for a premium, the right to buy from (in the case of a call) or sell to
(in the case of a put) the writer of the option the security underlying the
option at a specified exercise or "strike" price. The writer of an option on a
security has an obligation upon exercise of the option to deliver the underlying
security upon payment of the exercise price (in the case of a call) or to pay
the exercise price upon delivery of the underlying security (in the case of a
put).
There are several risks associated with transactions in options on securities.
As the writer of a covered call option, the Fund forgoes, during the option's
life, the opportunity to profit from increases in the market value of the
security covering the call option above the sum of the premium and the strike
price of the call but has retained the risk of loss should the price of the
underlying security decline. The writer of an option has no control over the
time when it may be required to fill its obligation as writer of the option.
Once an option writer has received an exercise notice, it cannot effect a
closing purchase transaction in order to terminate its obligation under the
option and must deliver the underlying security at the exercise price.
(d) DISTRIBUTIONS TO SHAREHOLDERS
The Fund declares and pays quarterly dividends 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. These dividends consist of investment company taxable income, which
generally includes qualified dividend income, ordinary income and short-term
capital gains, including premiums received on written options. Realized
short-term capital gains are considered ordinary income for tax purposes and
will be reclassified at the Fund's fiscal year end on the Fund's Statement of
Assets and Liabilities from accumulated net realized gains to distributions in
excess of net investment income. Any net realized long-term capital gains are
distributed annually to common shareholders.
Note 3 - INVESTMENT ADVISORY AGREEMENT, INVESTMENT MANAGEMENT AGREEMENT AND
OTHER TRANSACTIONS WITH AFFILIATES:
Pursuant to an Investment Advisory Agreement (the "Agreement") between the Fund
and Claymore Advisors, LLC (the "Adviser"), the Adviser will furnish offices,
necessary facilities and equipment, provide certain administrative services,
oversee the activities of Madison Asset Management LLC (the "Investment
Manager"), provide personnel, including certain officers required for the Fund's
administrative management and compensate all officers and trustees of the Fund
who are its affiliates. As compensation for these services, the Fund will pay
the Investment Adviser a fee, payable monthly, in an amount equal to 0.50% of
the Fund's average daily managed assets. Managed assets equal the net assets of
the Fund plus any assets attributable to financial leverage.
Pursuant to an Investment Management Agreement between the Fund and the
Investment Manager, the Investment Manager, under the supervision of the Fund's
Board of Trustees and the Adviser, will provide a continuous investment program
for the Fund's portfolio; provide investment research and make and execute
recommendations for the purchase and sale of securities; and provide certain
facilities and personnel, including officers required for the Fund's
administrative management and compensation of all officers and trustees of the
Fund who are its affiliates. As compensation for these services, the Fund will
pay the Investment Manager a fee, payable monthly, in an amount equal to 0.50%
of the Fund's average daily managed assets.
Under separate Fund Administration and Fund Accounting agreements, the Adviser
provides fund administration services and the Investment Manager provides fund
accounting services to the Fund. The Adviser receives a fund 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 0.0175%
Next $500,000,000 0.0125%
Over $1,000,000,000 0.0100%
18 | SemiAnnual Report | June 30, 2008
MCN | Madison/Claymore Covered Call & Equity Strategy Fund |
NOTES TO FINANCIAL STATEMENTS (unaudited) continued
The Investment Manager receives a fund accounting fee based on the combined
managed assets of the Fund and the Madison Strategic Sector Premium Fund, a
closed-end investment company sponsored by the Investment Manager. The fund
accounting fee is allocated on a prorated basis of the managed assets of each
fund. This fee is payable monthly at the annual rate set forth below as a
percentage of the average daily managed assets of the two funds:
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
Claymore Advisors, LLC or Madison Asset Management LLC. The Fund does not
compensate its officers or trustees who are officers or interested persons of
the two aforementioned firms.
Note 4 - FEDERAL INCOME TAXES:
The Fund intends to comply with the requirements of Subchapter M of the Internal
Revenue Code of 1986, as amended, applicable to regulated investment companies.
Accordingly, no provision for U.S. federal income taxes is required. In
addition, by distributing substantially all of its ordinary income and long-term
capital gains, if any, during each calendar year, the Fund intends not to be
subject to U.S. federal excise tax.
Information on the components of investments, excluding written options, and net
assets as of June 30, 2008 is as follows:
COST OF NET TAX NET TAX
INVESTMENTS GROSS TAX GROSS TAX UNREALIZED UNREALIZED
FOR TAX UNREALIZED UNREALIZED DEPRECIATION ON DEPRECIATION
PURPOSES APPRECIATION DEPRECIATION INVESTMENTS ON DERIVATIVES
--------------------------------------------------------------------------------------------------------------
$307,930,902 $3,978,068 (84,940,843) $(80,962,775) $11,123,860
For the year ended December 31, 2007, the tax character of distributions paid to
common shareholders as reflected in the statement of changes in net assets was
as follows:
DISTRIBUTIONS PAID FROM: 2007
------------------------------------------------
Ordinary income $25,023,276
Long-term capital gain 341,248
------------------------------------------------
$25,364,524
------------------------------------------------
On July 13, 2006, the Financial Accounting Standards Board ("FASB") released
FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" ("FIN
48"). FIN 48 provides guidance for how uncertain tax positions should be
recognized, measured, presented and disclosed in the financial statements. FIN
48 requires the evaluation of tax positions taken or expected to be taken in the
course of preparing the Fund's tax returns to determine whether the tax
positions are "more-likely than-not" of being sustained by the applicable tax
authority. Tax positions not deemed to meet the more-likely than-not threshold
would be recorded as a tax benefit or expense in the current year. Management
has evaluated the implications of FIN 48 and has determined it does not have any
impact on the Fund's financial statements as of June 30, 2008.
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. Tax
years ended 2004, 2005, 2006 and 2007 remain subject to examination by major
jurisdictions.
Note 5 - INVESTMENT TRANSACTIONS AND OPTIONS WRITTEN:
During the six months ended June 30, 2008, the cost of purchases and proceeds
from sales of investments, excluding written options and short-term investments
were $71,222,182 and $36,963,359, respectively.
SemiAnnual Report | June 30, 2008 | 19
MCN | Madison/Claymore Covered Call & Equity Strategy Fund |
NOTES TO FINANCIAL STATEMENTS (unaudited) continued
Transactions in option contracts during the six months ended June 30, 2008 were
as follows:
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
-------------------------------------------------------------------
Options outstanding, beginning of year 58,498 $16,774,714
Options written during the year 85,664 25,879,387
Options expired during the year (37,155) (9,755,013)
Options closed during the year (23,606) (6,891,728)
Options assigned during the year (7,228) (3,175,672)
-------------------------------------------------------------------
Options outstanding, end of year 76,173 $22,831,688
-------------------------------------------------------------------
Note 6 - CAPITAL:
COMMON SHARES
The Fund has an unlimited amount of common shares, $0.01 par value authorized
and 19,268,423 issued and outstanding.
Transactions in common shares were as follows:
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2008 DECEMBER 31, 2007
------------------------------------------------------------------------------
Beginning Shares 19,268,423 19,124,936
Shares issued through dividend reinvestment 0 143,487
------------------------------------------------------------------------------
Ending Shares 19,268,423 19,268,423
------------------------------------------------------------------------------
Note 7 - SHORT-TERM BORROWINGS:
On April 30, 2008, the Fund entered into a Revolving Credit Agreement with M&I
Marshall & Ilsley Bank, which provides for a revolving credit facility to be
used as leverage for the Fund. The credit facility provides for a secured line
of credit for the Fund, where Fund assets are pledged against advances made to
the Fund. The Fund may borrow an amount up to 20% of the Fund's total assets
(including the proceeds of such financial leverage). In addition, the Fund has
agreed to pay facility commitment fees on the unused line of credit, which are
included in "Interest expense and fees" on the Statement of Operations. The
total commitment under the Revolving Credit Agreement is $50,000,000. For the
period ended June 30, 2008, the Fund had not utilized any portion of the line of
credit. The maturity date for the Revolving Credit Agreement is February 28,
2009.
Note 8 - INDEMNIFICATIONS:
In the normal course of business, the Fund enters into contracts that provide
general indemnifications. The Fund's maximum exposure under these arrangements
is dependent upon claims that may be made against the Fund in the future, and,
therefore cannot be estimated; however, the risk of material loss from such
claims is considered remote.
Note 9 - RECENT ACCOUNTING PRONOUNCEMENTS:
In March 2008, the FASB issued Statement of Financial Accounting Standards No.
161 ("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 derivative 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. As of June 30, 2008, management does not believe the adoption
of SFAS No. 161 will impact the financial statement amounts; however, additional
footnote disclosures may be required about the use of derivative instruments and
hedging items.
Note 10 - SUBSEQUENT EVENT:
On August 1, 2008, the Board of Trustees declared a quarterly dividend of $0.28
per common share. The dividend is payable August 29, 2008 to shareholders of
record on August 15, 2008.
20 | SemiAnnual Report | June 30, 2008
MCN | Madison/Claymore Covered Call & Equity Strategy Fund
Supplemental INFORMATION | (unaudited)
FEDERAL INCOME TAX INFORMATION
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.
TRUSTEES
The Trustees of the Madison/Claymore Covered Call & Equity Strategy Fund and
their principal occupations during the past five years:
NUMBER OF
PORTFOLIOS IN
TERM OF THE FUND
NAME, ADDRESS*, YEAR OF OFFICE** AND PRINCIPAL OCCUPATION DURING COMPLEX***
BIRTH AND POSITION(S) HELD LENGTH OF THE PAST FIVE YEARS AND OVERSEEN BY OTHER DIRECTORSHIPS
WITH REGISTRANT TIME SERVED OTHER AFFILIATIONS TRUSTEE HELD BY TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES:
------------------------------------------------------------------------------------------------------------------------------------
Randall C. Barnes Since 2004 Investor (2001-present). Previously, Senior Vice 42 None.
Year of birth: 1951 President & Treasurer, PepsiCo., Inc.
Trustee (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).
------------------------------------------------------------------------------------------------------------------------------------
Philip E. Blake Since 2004 Private investor; Managing Partner of Forecastle 1 Director,
Year of birth: 1944 Inc. (2000-present). Madison
1 South Pinckney Street Newspapers,
Suite 501 Inc.,
Madison, WI 53703 Forecastle, Inc,
Trustee Nemtes, Inc.
Trustee, the
Mosaic family of
mutual funds and
Madison
Strategic Sector
Premium Fund.
------------------------------------------------------------------------------------------------------------------------------------
James R. Imhoff, Jr. Since 2004 Chairman and CEO of First Weber Group. 1 Director, Park
Year of birth: 1944 Bank. Trustee,
5250 East Terrace Drive the Mosaic
Sector Premium Fund. family of mutual
Madison, WI 53718 funds and
Trustee Madison
Strategic
------------------------------------------------------------------------------------------------------------------------------------
Ronald A. Nyberg Since 2004 Partner of Nyberg & Cassioppi, LLC, a law firm 45 None.
Year of birth: 1953 specializing in corporate law, estate planning
Trustee and business transactions from 2000-present.
Formerly, Executive Vice President, General
Counsel and Corporate Secretary of Van Kampen
Investments (1982-1999).
------------------------------------------------------------------------------------------------------------------------------------
Ronald E. Toupin, Jr. Since 2004 Retired. Formerly, Vice President, Manager and 42 None.
Year of birth: 1958 Portfolio Manager of Nuveen Asset Management
Trustee (1998-1999), Vice President of Nuveen Investment
Advisory Corp. (1992-1999), Vice President and
Manager of Nuveen Unit Investment Trusts
(1991-1999), and Assistant Vice President and
Portfolio Manager of Nuveen Unit Investment
Trusts (1988-1999), each of John Nuveen &
Company, Inc. (1982-1999).
------------------------------------------------------------------------------------------------------------------------------------
Lorence Wheeler Since 2004 Formerly, President of Credit Union Benefits 1 Director, Grand
Year of birth: 1938 Services, Inc. and Pension Specialist for CUNA Mountain Bank
135 Sunset Blvd. Mutual Group. FSB. Trustee,
Tabernash, CO 80478 the Mosaic
Trustee family of mutual
funds and
Madison
Strategic Sector
Premium Fund.
------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES:
------------------------------------------------------------------------------------------------------------------------------------
Frank E. Burgess+ Since 2004 Founder, President and CEO of Madison Investment 1 Director,
Year of birth: 1942 Advisors, Inc. (1974-present) and Madison Asset Capital
550 Science Drive Management, LLC. Bankshares,
Madison, WI 53711 Inc., Outrider
Trustee and Senior Foundation,
Vice President Inc., and Santa
Barbara
Community
Bankcorp.
Trustee, the
Mosaic family of
mutual funds and
Madison
Strategic Sector
Premium Fund.
------------------------------------------------------------------------------------------------------------------------------------
Nicholas Dalmaso++ Since 2004 Attorney. Formerly, Senior Managing Director and 45 None
Year of birth: 1965 Chief Administrative Officer (2007-2008) and
Trustee General Counsel (2001-2007) of Claymore
Associate General Advisors, LLC and Claymore Securities, Inc.
Formerly, Assistant General Counsel, John Nuveen
and Company (1999-2001). Formerly Vice President
and Counsel of Van Kampen Investments
(1992-1999).
------------------------------------------------------------------------------------------------------------------------------------
* Address for all Trustees, unless otherwise noted: 2455 Corporate West
Drive, Lisle, IL 60532
** After a Trustee's initial term, each Trustee is expected to serve a
three-year term concurrent with the class of Trustees for which he serves:
-Messrs. Barnes and Burgess, as Class I Trustees, are expected to stand for
re-election at the Fund's 2008 annual meeting of shareholders.
-Messrs. Blake, Dalmaso and Imhoff, as Class II Trustees, are expected to
stand for re-election at the Fund's 2009 annual meeting of shareholders.
-Messrs. Nyberg, Toupin and Wheeler, as Class III Trustees, are expected to
stand for re-election at the Fund's 2010 annual meeting of shareholders.
*** The Claymore Fund Complex consists of U.S. registered investment companies
advised or serviced by Claymore Advisors, LLC or Claymore Securities, Inc.
The Claymore Fund Complex is overseen by multiple Boards of Trustees.
+ Mr. Burgess is an "interested person" (as defined in section 2(a) (19)) of
the Fund because of his position as an officer of Madison Asset Management,
LLC, the Fund's Investment Manager.
++ Mr. Dalmaso is an "interested person"(as defined in Section 2(a)(19) of the
1940 Act) of the Fund as a result of his former position as an officer of,
and his equity ownership in the Fund's Adviser and certain of its
affiliates.
SemiAnnual Report | June 30, 2008 | 21
MCN | Madison/Claymore Covered Call & Equity Strategy Fund |
SUPPLEMENTAL INFORMATION (unaudited) continued
OFFICERS
The Officers of the Madison/Claymore Covered Call & Equity Strategy 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:
------------------------------------------------------------------------------------------------------------------------------------
J. Thomas Futrell Effective May 29, 2008 Senior Managing Director and Chief Investment Officer of Claymore
Year of birth: 1955 Advisors, LLC and Claymore Securities Inc. (2008-Present). Chief
Chief Executive Officer Executive Officer of certain funds in the Fund Complex. Formerly,
Managing Director of Research, Nuveen Asset Management (2000-2007).
------------------------------------------------------------------------------------------------------------------------------------
Kevin M. Robinson Effective May 29, 2008 Senior Managing Director, General Counsel and Corporate Secretary
Year of birth: 1959 (2007-present) of Claymore Advisors, LLC and Claymore Securities,
Chief Legal Officer Inc.; Chief Legal Officer of certain funds in the Fund Complex.
Formerly, Associate General Counsel (2000-2007) of NYSE Euronext, Inc.
Formerly, Archipelago Holdings, Inc. Senior Managing Director and
Associate General Counsel (1997-2000) of ABN Amro Inc. Formerly,
Senior Counsel in the Enforcement Division (1989-1997) of the U.S.
Securities and Exchange Commission.
------------------------------------------------------------------------------------------------------------------------------------
Steven M. Hill Since 2004 Senior Managing Director of Claymore Advisors, LLC and Claymore
Year of birth: 1964 Securities, Inc. (2005-present). Formerly, Chief Financial Officer
Chief Financial Officer, Chief (2005-2006) Claymore Group Inc. Managing Director of Claymore
Accounting Officer and Treasurer Advisors, LLC and Claymore Securities, Inc. (2003-2005). Previously,
Treasurer of Henderson Global Funds and Operations Manager for
Henderson Global Investors (North America) Inc. (2002-2003); Managing
Director, FrontPoint Partners LLC (2001-2002)
------------------------------------------------------------------------------------------------------------------------------------
Matthew J. Patterson Since 2006 Vice President, Assistant General Counsel of Claymore Group Inc.
Year of birth: 1971 (2006-present). Chief Compliance Officer and Clerk, The Preferred
Secretary Group of Mutual Funds (2005-2006); Chief Compliance Officer and
Secretary, Caterpillar Investment Management Ltd. (2005-2006);
Securities Counsel, Caterpillar, Inc. (2004-2006); Associate, Skadden,
Arps, Slate, Meagher & Flom LLP (2002-2004).
------------------------------------------------------------------------------------------------------------------------------------
Jay Sekelsky Since 2004 Managing Director of Madison Investment Advisors, Inc.; Vice President
550 Science Drive of Madison Asset Management, LLC; Vice President of Funds in the
Madison, WI 53711 Mosaic family of funds and Madison Strategic Sector Premium Fund.
Year of birth: 1959
Vice President
------------------------------------------------------------------------------------------------------------------------------------
Kay Frank Since 2004 Managing Director of Madison Investment Advisors, Inc.; Vice President
550 Science Drive of Madison Asset Management, LLC; President of Funds in the Mosaic
Madison, WI 53711 family of funds and President of Madison Strategic Sector Premium
Year of birth: 1960 Fund.
Vice President
------------------------------------------------------------------------------------------------------------------------------------
Stephen Share Since 2006 Vice President, Madison Asset Management, LLC (2004-present);
550 Science Drive Investment Analyst, University of Wisconsin Foundation
Madison, WI 53711 (2003-2004); Research Analyst, Ark Asset Management (1999-2002).
Year of birth: 1967
Vice President
------------------------------------------------------------------------------------------------------------------------------------
Greg Hoppe Since 2008 Vice President of Madison Mosaic, LLC; Vice President of Madison Asset
Year of birth: 1969 Management LLC
------------------------------------------------------------------------------------------------------------------------------------
Bruce Saxon Since 2006 Vice President-Fund Compliance Officer of Claymore Advisors, LLC
Year of birth: 1957 (Feb 2006-present). Previously, Chief Compliance
Chief Compliance Officer Officer/Assistant Secretary of Harris Investment Management, Inc.
(2003-2006). Director-Compliance of Harrisdirect LLC (1999-2003).
------------------------------------------------------------------------------------------------------------------------------------
* Address for all Officers, unless otherwise noted: 2455 Corporate West
Drive, Lisle, IL 60532
** Officers serve at the pleasure of the Board of Trustees and until his or
her successor is appointed and qualified or until his or her earlier
resignation or removal.
22 | SemiAnnual Report | June 30, 2008
MCN | Madison/Claymore Covered Call & Equity Strategy 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 11W, New York, New York 10286, Phone Number: (866)
488-3559.
SemiAnnual Report | June 30, 2008 | 23
MCN | Madison/Claymore Covered Call & Equity Strategy Fund
Investment Advisory Agreement and Investment Management
Agreement APPROVALS | (unaudited)
On April 10 and 22, 2008, the Board of Trustees, including those trustees who
are not interested persons as defined by the Investment Company Act of 1940 (the
"Independent Trustees") of Madison/Claymore Covered Call & Equity Strategy Fund
(the "Fund") met to consider the renewal of: (1) the investment advisory
agreement ("Investment Advisory Agreement") between the Fund and Claymore
Advisors, LLC ("Adviser") and (2) the investment management agreement
("Investment Management Agreement") among the Adviser, the Fund and Madison
Asset Management, LLC ("Manager"). (The Investment Advisory Agreement and the
Investment Management Agreement are together referred to as the "Advisory
Agreements.") As part of its review process, the Nominating and Governance
Committee of the Board (referred to as the "Committee" and consisting solely of
the Independent Trustees) was represented by independent legal counsel. The
Board reviewed materials received from the Adviser, the Manager and independent
legal counsel. The Board also had previously received, throughout the year,
Board meeting information regarding performance and operating results of the
Fund.
In preparation for its review, the Committee communicated with independent legal
counsel regarding the nature of information to be provided, and independent
legal counsel, on behalf of the Committee, sent a formal request for information
to the Adviser and Manager. The Adviser and the Manager provided extensive
information in response to the request. Among other information, the Adviser and
Manager provided general information to assist the Committee in assessing the
nature and quality of services provided by the Adviser and Manager, information
comparing the investment performance, advisory fees and total expenses of the
Fund to other funds, information about the profitability from the Advisory
Agreements to each of the Adviser and the Manager and the compliance policies
and procedures adopted by each of the Adviser and the Manager.
Based upon their review, the Committee and the Board concluded that it was in
the best interests of the Fund to renew each of the Advisory Agreements. In
reaching this conclusion for the Fund, no single factor was determinative in the
Board's analysis, but rather the Board considered a variety of factors.
INVESTMENT ADVISORY AGREEMENT
With respect to the nature, extent and quality of services provided by the
Adviser, the Board noted that the Manager was responsible for the investment and
reinvestment of the Fund's assets. The Board considered the Adviser's
responsibility to oversee the Manager and that the Adviser has similar oversight
responsibilities for other registered funds for which it serves as investment
adviser. The Board also considered the secondary market support provided by the
Adviser to the Fund, including the Adviser's efforts to educate investment
professionals about the Fund and other funds sponsored by the Adviser. The Board
reviewed financial information regarding the Adviser and its parent company and
considered the parent company's guaranty of the Adviser's obligations under the
Investment Advisory Agreement. The Board considered the experience and
qualifications of the Adviser's personnel, including those personnel providing
compliance oversight and oversight of the Manager's portfolio management
activities. Specifically, the Board noted the ongoing oversight activities
performed by the Adviser, including on-site compliance reviews and monitoring of
compliance with policies and procedures and with the Fund's investment policies.
After considering these factors, the Board concluded that the Adviser and its
personnel were qualified to serve the Fund in an oversight capacity.
The Board considered the Fund's investment performance by reviewing the Fund's
total return on a net asset value and market price basis for the three month,
six month, one year and since inception periods ended March 31, 2008. The Board
compared the Fund's performance to the performance of a peer group of closed-end
funds ("peer group of funds") provided by the Adviser for the same time periods.
The peer group of funds included other domestic equity closed-end funds that
write individual call options on a majority of the fund's assets. The Board
noted that the Fund's investment results were consistent with that aspect of the
Fund's investment strategy to write covered call options on common stocks to
generate income. The Board also considered that the Adviser does not directly
control investment performance but such duties were the Manager's
responsibility. The Board concluded that the Adviser had reviewed and monitored
the Manager's investment performance.
The Board compared the Fund's advisory and sub-advisory fees and expense ratio
to the peer group of funds and to the advisory fee that the Adviser charged to
other closed-end funds for which it serves as adviser. The Board also reviewed
the mean and median advisory fees and expense ratios of the peer group of funds.
The Board noted that the Fund's expense ratio was within the range of the
expense ratios of the peer group of funds and in line with the estimated expense
ratio disclosed in the Fund's initial offering prospectus. The Board also
considered that the combined advisory and sub-advisory fees were at the median
of the peer group of funds and concluded that the Fund's advisory fee was
reasonable.
With respect to the costs of services to be provided and profits realized by the
Adviser from its relationship to the Fund, the Board reviewed information
regarding the revenues the Adviser received under the Investment Advisory
Agreement as well as the estimated allocated direct and indirect costs the
Adviser incurred in providing the services to the Fund and concluded that the
Adviser's profitability was not unreasonable.
The Board considered the extent to which economies of scale could be realized
with respect to the management of the Fund as the Fund grows and whether fee
levels reflected a reasonable sharing of such economies of scale for the benefit
of Fund investors. The Board considered the Adviser's statement that, by design,
closed-end funds' assets remain relatively fixed and therefore economies of
scale in such funds are not typically obtained though growth in assets, although
it has increased assets under management as a result of new product offerings
and has experienced related economies in its servicing, information technology
and operations functions, it has also increased staff and upgraded systems and
the Adviser anticipates neither economies of scale nor increased costs of
services to the Fund. Accordingly, the Board concluded that fee levels were
appropriate.
The Board considered other benefits available to the Adviser because of its
relationship with the Fund and noted that the administrative services fees
received by the Adviser from serving as administrator provides it with
additional revenue but concluded that the advisory fee was reasonable taking
into account any benefits from such administration agreement.
INVESTMENT MANAGEMENT AGREEMENT
With respect to the nature, extent and quality of services provided by the
Manager, the Board considered the qualifications, experience and skills of the
Manager's portfolio management and other key personnel. The Board also
considered the Manager's implementation of the strategy to write covered call
options on a portion of the Fund's equity securities. The Board considered the
Manager's experience in achieving the Fund's investment objective of providing a
high level of current income (through the Fund's quarterly payment of
distributions of $0.33 per share for thirteen quarters) and current gains with a
secondary objective of long-term capital appreciation. The Board concluded that
the Manager was qualified to provide the services under the Investment
Management Agreement.
In considering investment performance, the Board reviewed the performance of the
Fund and the peer group of funds for various periods of time. The Board noted
that the Fund's returns on a net asset value basis were lower than the Standard
& Poor's 500 Index and the CBOE BuyWrite ("BXM") Index (the "Relevant Indices")
returns for the year ended December 31, 2007 and since inception due to
underperformance in the last half of 2007. The Board considered that the Fund's
investments in the financial and consumer discretionary sectors
24 | SemiAnnual Report | June 30, 2008
MCN | Madison/Claymore Covered Call & Equity Strategy Fund | INVESTMENT ADVISORY
AGREEMENT AND INVESTMENT MANAGEMENT AGREEMENT APPROVALS (unaudited) continued
hurt the Fund's performance during the last year, with the crisis in U.S. credit
markets having a particularly negative impact on these sectors. The Board noted,
however, the difficult markets and the Fund's better performance relative to the
Standard & Poor's 500 Index for the three and six month periods ended March 31,
2008 and considered the Adviser's statement that the Manager's options writing
has positioned the Fund to benefit from a recovering stock market.
The Board reviewed the management fee paid by the Fund to the Manager and
compared it to the fees charged by the Manager to other investment company
clients for which the Manager serves as adviser that have a covered call
strategy. The Board considered that the Fund's management fee was lower than the
Manager's two investment company clients' advisory fees and that the Manager did
not serve as sub-adviser for other funds. The Board concluded that the
management fee was reasonable.
With respect to the costs of services to be provided and profits realized by the
Manager from its relationship to the Fund, the Board reviewed information
regarding the revenues the Manager received under the Investment Management
Agreement and estimated allocated expenses of the Manager in providing services
under the Investment Management Agreement for the year ended December 31, 2007
and concluded that the Manager's profitability was not unreasonable.
The Board reviewed the extent to which economies of scale with respect to the
sub-advisory services provided to the Fund would be realized as the Fund grew
and whether fee levels reflect a reasonable sharing of such economies of scale
for the benefit of Fund investors. The Board considered the Manager's statement
that the asset level of the closed-end Fund was relatively stable, that its
expenses relating to providing the Fund services were expected to remain the
same and that the Manager thus did not anticipate any economies of scale with
respect to the Fund. Given these factors, the Board concluded that the Fund was
unlikely to realize any significant economies of scale with respect to the
management services to justify a breakpoint at the time that the Investment
Management Agreement was being reviewed.
The Independent Trustees considered other benefits available to the Manager
because of its relationship to the Fund and noted that the accounting services
fees received by the Manager from serving as accounting services provider to the
Fund provided it with additional revenue, but concluded that the management fee
was reasonable considering any benefits from such accounting services agreement.
The Board also considered the Manager's use of soft dollars. The Board noted the
Manager's statement that it receives indirect benefits in the form of soft
dollar arrangements, which may or may not be used for the benefit of the Fund
and may be used for the benefit of other clients of the Manager. The Board
concluded that the sub-advisory fees were reasonable, taking into account these
benefits.
OVERALL CONCLUSIONS
Based upon all of the information considered and the conclusions reached, the
Board determined that the terms of each Advisory Agreement continue to be fair
and reasonable and that the continuation of each Advisory Agreement is in the
best interests of the Fund.
SemiAnnual Report | June 30, 2008 | 25
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MCN | Madison/Claymore Covered Call & Equity Strategy Fund
Fund INFORMATION |
BOARD OF TRUSTEES
Randall C. Barnes
Philip E. Blake
Frank Burgess*
Nicholas Dalmaso**
James Imhoff, Jr.
Ronald A. Nyberg
Ronald E. Toupin, Jr.
Lorence Wheeler
* Trustee is an "interested person" of the Fund as defined in the Investment
Company Act of 1940, as amended.
** Trustee is an "interested person' of the Trust as defined in the Investment
Company Act of 1940, as amended, as a result of his former position as an
officer of, and his equity ownership in, the Adviser and certain of its
affiliates.
OFFICERS
J. Thomas Futrell
Chief Executive Officer
Kevin M. Robinson
Chief Legal Officer
Steven M. Hill
Chief Financial Officer, Chief
Accounting Officer and Treasurer
Frank Burgess
Senior Vice President
Matthew Patterson
Secretary
Jay Sekelsky
Vice President
Kay Frank
Vice President
Stephen Share
Vice President
Greg Hoppe
Vice President
Bruce Saxon
Chief Compliance Officer
INVESTMENT MANAGER
Madison Asset Management, LLC
550 Science Drive
Madison, WI 53711
INVESTMENT ADVISER
Claymore Advisors, LLC.
2455 Corporate West Drive
Lisle, IL 60532
ADMINISTRATOR
Claymore Advisors, LLC.
2455 Corporate West Drive
Lisle, IL 60532
CUSTODIAN AND TRANSFER AGENT
The Bank of New York Mellon
New York, New York
LEGAL COUNSEL
Vedder Price P.C.
Chicago, Illinois
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Ernst & Young LLP
Chicago, Illinois
PRIVACY PRINCIPLES OF MADISON/CLAYMORE COVERED CALL & EQUITY STRATEGY FUND
FOR SHAREHOLDERS
The Fund is committed to maintaining the privacy of shareholders and to
safeguarding its non-public information. The following information is provided
to help you understand what personal information the Fund collects, how we
protect that information and why, in certain cases, we may share information
with select other parties.
Generally, the Fund does not receive any non-public personal information
relating to its shareholders, although certain non-public personal information
of its shareholders may become available to the Fund. The Fund does not disclose
any non-public personal information about its shareholders or former
shareholders to anyone, except as permitted by law or as is necessary in order
to service shareholder accounts (for example, to a transfer agent or third party
administrator).
The Fund restricts access to non-public personal information about the
shareholders to Claymore Advisors, LLC employees with a legitimate business need
for the information. The Fund maintains physical, electronic and procedural
safeguards designed to protect the non-public personal information of its
shareholders.
QUESTIONS CONCERNING YOUR SHARES OF MADISON/CLAYMORE COVERED CALL & EQUITY
STRATEGY 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 11W, New York, New York 10286
(866) 488-3559
This report is sent to shareholders of Madison/Claymore Covered Call & Equity
Strategy 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 (800) 851-0264.
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 (800) 851-0264
or by accessing the Fund's Form N-PX on the SEC's 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 reviewed 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 September 2007, the Fund submitted a CEO annual certification to the NYSE in
which the Fund's principal executive officer certified that he was not aware, as
of the date of the certification, of any violation by the Fund of the NYSE's
Corporate Governance listing standards. In addition, as required by Section 302
of the Sarbanes-Oxley Act of 2002 and related SEC rules, the Fund's principal
executive and principal financial officers have made quarterly certifications,
including in filings with the SEC on forms N-CSR and N-Q, relating to, among
other things, the Fund's disclosure controls and procedures and internal control
over financial reporting.
SemiAnnual Report | June 30, 2008 | 27
MCN | Madison/Claymore Covered Call & Equity Strategy Fund
About the FUND MANAGER |
MADISON ASSET MANAGEMENT, LLC
Madison Asset Management, LLC, (MAM) a wholly-owned subsidiary of Madison
Investment Advisors, Inc., with its affiliates, manages more than $8 billion in
individual, corporate, pension, insurance, endowment and mutual fund assets.
INVESTMENT PHILOSOPHY
MAM believes in investing in high-quality growth companies, which deliver
potentially consistent and sustainable earnings growth, yet sell at attractive
valuations. Historically, shareholders of these types of companies have been
rewarded over the long term with above-average returns, and favorable risk
characteristics. Constructing portfolios with positive risk/reward profiles has
historically allowed clients to participate during strong market environments,
while mitigating potential declines.
INVESTMENT PROCESS
The managers employ a fundamental, bottom-up strategy in constructing equity
portfolios. The managers look for companies that they believe are consistently
growing at an above-average pace, yet sell at below-average multiple.
The managers follow a rigorous three-step process when evaluating companies and
then employ an actively-managed option strategy to help enhance income and
mitigate downside risk.
1. BUSINESS MODEL. The managers look for a sustainable competitive
advantage, cash flow that is both predictable and growing, as well as
a rock-solid balance sheet.
2. MANAGEMENT. When assessing management, the managers look to see how
the company has allocated capital in the past, their track record for
enhancing shareholder value and the nature of their accounting
practices.
3. PROPER VALUATION. The final step in the process is assessing the
proper valuation for the company. The managers strive to purchase
securities trading at a discount to their intrinsic value as
determined by discounted cash flows. They corroborate this valuation
work with additional valuation methodologies.
The covered call investment strategy focuses on stocks in which the managers
have high confidence in their continuing earnings growth rates, but sell at
reasonable Price-Earnings Ratios. By writing the majority of the Fund's calls
out-of-the-money, meaning the strike price is higher than the stock price, the
Fund can participate in some stock appreciation while still receiving income in
the form of option premiums. The covered call strategy also tends to reduce the
risk compared to just owning the stock.
CLAYMORE SECURITIES, INC.
2455 Corporate West Drive
Lisle, IL 60532
Member FINRA/SIPC
NOT FDIC-INSURED | NOT BANK-GUARANTEED | MAY LOSE VALUE
MCN
LISTED
NYSE
MCN-SAR-0608
ITEM 2. CODE OF ETHICS.
Not applicable for a semi-annual reporting period.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable for a semi-annual reporting period.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable for a semi-annual reporting period.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable for a semi-annual reporting period.
ITEM 6. SCHEDULE OF INVESTMENTS.
The Schedule of Investments is included as part of Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable for a semi-annual reporting period.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
(a) Not applicable for a semi-annual reporting period.
(b) There has been no change, as of the date of this filing, in the
Portfolio Manager identified in response to paragraph (a) (1) of this
item in the registrant's most recent annual report on Form N-CSR.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
None.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The registrant has not made any material changes to the procedures by which
shareholders may recommend nominees to the registrant's Board of Trustees.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial officer
have evaluated the registrant's disclosure controls and procedures (as defined
in Rule 30a-3(c) under the Investment Company Act of 1940) within 90 days of
this filing and have concluded based on such evaluation,
that the registrant's disclosure controls and procedures were effective, as of
that date, in ensuring that information required to be disclosed by the
registrant in this Form N-CSR was recorded, processed, summarized, and reported
within the time periods specified in the Securities and Exchange Commission's
rules and forms.
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940)
that occurred during the registrant's last fiscal quarter of the period covered
by this report that have materially affected, or are reasonably likely to
materially affect, the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Not applicable.
(a)(2) Certifications of principal executive officer and principal financial
officer pursuant to Rule 30a-2(a) under the Investment Company Act of
1940.
(a)(3) Not Applicable.
(b) Certifications of principal executive officer and principal financial
officer pursuant to Rule 30a-2(b) under the Investment Company Act of
1940.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Madison / Claymore Covered Call & Equity Strategy Fund
By: /s/ J. Thomas Futrell
-------------------------------------------------------------------------
Name: J. Thomas Futrell
Title: Chief Executive Officer
Date: September 5, 2008
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/ J. Thomas Futrell
-------------------------------------------------------------------------
Name: J. Thomas Futrell
Title: Chief Executive Officer
Date: September 5, 2008
By: /s/ Steven M. Hill
-------------------------------------------------------------------------
Name: Steven M. Hill
Title: Chief Accounting Officer, Chief Financial Officer and Treasurer
Date: September 5, 2008