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
--------------------------------------------------------------
(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)
Nicholas Dalmaso
Madison / Claymore Covered Call & Equity Strategy Fund
2455 Corporate West Drive
Lisle, IL 60532
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(Name and address of agent for service)
Registrant's telephone number, including area code: (630) 505-3700
Date of fiscal year end: December 31
Date of reporting period: December 31, 2007
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 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:
ANNUAL
REPORT
December 31, 2007
MADISON/CLAYMORE | MCN
COVERED CALL & EQUITY STRATEGY FUND
Photo of: covered bridge.
Logo: Madison Investment Advisors
CLAYMORE (R)
WWW.MADISONCLAYMORE.COM
... your road to the LATEST,
most up-to-date INFORMATION about the
Madison/Claymore Covered Call & Equity Strategy Fund
Photo of: covered bridge.
MCN
LISTED
NYSE
Madison/Claymore
Covered Call &
Equity Strategy
Fund
Logo: Madison Investment Advisors
CLAYMORE (R)
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 | Annual Report | December 31, 2007
MCN | Madison/Claymore Covered Call & Equity Strategy Fund
Dear Shareholder
We are pleased to submit the annual shareholder report for the Madison/Claymore
Covered Call & Equity Strategy Fund (the "Fund") for the 12 months ended
December 31, 2007. Before a name change effective October 31, 2007, the Fund was
called the Madison/Claymore Covered Call Fund.
In connection with the decision to change the Fund's name, the Fund's Board of
Trustees approved a change to the Fund's previously effective non-fundamental
investment policy that the Fund employ, under normal market conditions, an
option strategy of writing (selling) covered call options on common stocks
comprising at least 80% of the total assets of the Fund. Under the revised
non-fundamental investment policy adopted by the Fund's Board of Trustees, the
Fund will, under normal market conditions, allocate at least 80% of total assets
to an integrated investment strategy pursuant to which the Fund invests in a
portfolio of equity securities and writes (sells) covered call options against a
portion of the equity securities held in the Fund's portfolio; 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's Board of Trustees also approved a change to the Fund's previously
effective non-fundamental investment policy that the Fund invest, under normal
market conditions, at least 65% of its total assets in common stocks of large
capitalization issuers that meet the Fund's selection criteria. Under the
revised non-fundamental investment policy adopted by the Fund's Board of
Trustees, the Fund will, under normal market conditions, invest at least 65% of
its equity securities investments in common stocks of large capitalization
issuers that meet the Fund's selection criteria.
It is anticipated that the Fund's name change and revised investment policies
will provide greater flexibility in managing the Fund's portfolio of investments
in a manner consistent with the Fund's primary investment objective to seek a
high level of current income and current gains with a secondary objective of
long-term capital appreciation. The Fund pursues these objectives by investing
in a portfolio of what the Investment Manager believes to be high-quality, large
capitalization stocks that are trading at reasonable valuations in relation to
their long-term earnings growth rates. The Fund will, on an ongoing and
consistent basis, sell covered call options to seek to generate a reasonably
steady return from option premiums.
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 more than $9 billion in assets. Claymore
Advisors, LLC is the investment adviser to the Fund.
All Fund returns cited - whether based on net asset value ("NAV") or market
price - assume the reinvestment of all distributions. For the 12-month period
ended December 31, 2007, the Fund provided a total return based on market value
of -16.85%. This represents a closing market price of $11.41 on December 31,
2007, versus $15.11 on December 31, 2006. On an
Annual Report | December 31, 2007 | 3
MCN | Madison/Claymore Covered Call & Equity Strategy Fund | DEAR SHAREHOLDER
continued
NAV basis, the Fund generated a total return of -3.81%. This represents an NAV
of $13.02 on December 31, 2007, versus $14.84 on December 31, 2006. The Fund's
market price at December 31, 2007, represented a discount to market value of
12.37%; as of December 31, 2006, the share price was at a 1.82% premium to NAV.
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 24 of the Fund's 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 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 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.
During 2007 the Fund paid quarterly dividends of $.33 per share, for a total of
$1.32. This represents a distribution rate of 11.57% based on the Fund's closing
price of $11.41 on December 31, 2007. 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/ Nicholas Dalmaso
Nicholas Dalmaso
Madison/Claymore Covered Call & Equity Strategy Fund
4 | Annual Report | December 31, 2007
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 fiscal
year ended December 31, 2007. 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 long-term earnings growth rates. Our option-writing
strategy has provided a steady stream of option premiums, which helps achieve
our goal of providing a high level of current income and current gains enhanced
risk-adjusted returns 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 $9 billion in
individual, corporate, pension, insurance, endowment, and mutual fund assets as
of December 31, 2007.
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HOW HAVE THE FUND'S NAME CHANGE AND REVISED INVESTMENT PARAMETERS AFFECTED THE
WAY THE PORTFOLIO IS MANAGED?
We believe that the Fund's name change and revised investment policies provide
greater flexibility in managing the Fund's portfolio of investments in a manner
consistent with the Fund's primary investment objective, which is to seek a high
level of current income and current gains with a secondary objective of
long-term capital appreciation. While we welcome this enhanced flexibility,
there has not been any material change in the way we manage the portfolio.
--------------------------------------------------------------------------------
WHAT HAPPENED IN THE MARKET DURING 2007?
The year ended December 31, 2007, will probably not be remembered for the new
highs or near highs the major indices hit in July. Instead, the key word for the
year will be one familiar to all readers of business publications or viewers of
business news: subprime. The credit problems that were under the surface for the
first part of the year broke into true crisis proportion by the early fall. Not
only did hundreds of thousands of Americans face losing their homes as
adjustable-rate mortgages kicked into higher rates, but financial institutions
that held securities based on lower-grade mortgages began to suffer significant
losses as the value of these securities declined.
A credit crisis was in full effect, as institutions were no longer willing to
lend to each other on favorable terms. Investors fled riskier stock investments
for more secure ones such as bonds with the highest ratings and cash, and
investors' fears were particularly negative for the fortunes of stocks in the
financial and consumer discretionary sectors. Meanwhile, the price of crude oil
inched up towards $100 per barrel, and the stocks of energy companies followed
suit. By year end, the fortunes of the best and worst sectors of the stock
market were gapping by more than 50%, the kind of return differential last seen
during the tech stock boom and bust in 1999 and 2000.
In the last few months of 2007 the Federal Reserve Board (the "Fed") took
several steps to address the crisis, including three interest rate cuts. While
lower interest rates are historically positive for stocks, there was
considerable overhang from other economic indicators, particularly on the
inflation front, as prices of energy and food marched higher. As news, both
positive and negative, flooded the market on an almost daily basis, we saw high
volatility as investors struggled to digest the news and attempt to understand
where the economy was headed.
--------------------------------------------------------------------------------
HOW DID THE FUND PERFORM GIVEN THE MARKETPLACE CONDITIONS DURING 2007?
All Fund returns cited - whether based on net asset value ("NAV") or market
price - assume the reinvestment of all distributions. For the 12-month period
ending December 31, 2007, the Fund had a return of -16.85% on a market price
basis. On a NAV basis, the return was -3.81%. By comparison, the Standard &
Poor's 500 Index ("S&P 500"), which is generally regarded as a good indicator of
the broad stock market, returned 5.49%, and the CBOE S&P 500 BuyWrite Index
("BXM") returned 6.55%. The BXM is an index that simulates an ongoing covered
call strategy on the S&P 500 and consists of an unmanaged portfolio of stocks
upon which a one-month at-the-money call option on the S&P 500 is continuously
written.
The market price return relative to NAV return reflects a market price as of
December 31, 2007, that was significantly below NAV. The Fund's shares closed
December at $11.41, representing a 12.37% discount
Annual Report | December 31, 2007 | 5
MCN | Madison/Claymore Covered Call & Equity Strategy Fund | QUESTIONS & ANSWERS
continued
to its NAV of $13.02. The Fund's NAV decreased $1.82 in 2007 from $14.84 as of
December 31, 2006, as several of the stocks in the Fund's portfolio experienced
declines in value in 2007.
As most investors may know, 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 portfolios and at more attractive yield levels than would be
available if the shares were trading at or above NAV. We believe that, over the
long term, the growth of NAV will be reflected in the market price return earned
by shareholders.
Since its inception on July 28, 2004, the Fund's NAV has decreased $1.31 per
share, and the Fund has paid a total of $4.26 per share in quarterly dividends,
resulting in a 21.57% cumulative total return on an NAV basis, compared with a
33.7% increase for the BXM over the same period. We believe the Fund has lagged
the BXM for two primary reasons. First, the Fund invests mainly in high quality
stocks, which have been out of favor since the inception of the Fund. However,
should investors become more risk adverse, we feel high quality stocks and this
Fund will outperform. Secondly, a bifurcated market such as the one we had in
2007 negatively impacted the Fund's results. The Fund had its fair share of
winners in 2007, including Transocean, Inc., Apache Corp., Genzyme Corp., Biogen
Idec, Inc. and Google, Inc. (None of these stocks were held in the portfolio at
period end.) However, because these stocks moved up so dramatically, they were
called away under the Fund's covered call program; the Fund therefore did not
fully participate in the upside. At the same time, a number of stocks in the
Fund's portfolio posted significant declines; these include Capital One
Financial Corp., Countrywide Financial Corp., Citigroup, Inc., MGIC Investment
Corp., Home Depot, Inc. and Lowe's Cos., Inc (3.2%, 0.6%, 2.5%, 1.0%, 1.6%, and
2.0% of long-term investments, respectively). While writing options on these
stocks generated premiums that offset some of their declines, it wasn't enough
to avoid overall losses on these positions. While we have sold or trimmed a few
positions, in general we feel many of 2007's `losers' are trading at multi-year
lows on a number of valuation metrics and offer the Fund's investors significant
value. Therefore, the Fund continues to hold many of these positions and
continues to write options against them.
--------------------------------------------------------------------------------
PLEASE DESCRIBE THE FUND'S PORTFOLIO EQUITY AND OPTION STRUCTURE.
As of December 31, 2007, the Fund held 44 common stocks. Covered call options
were written against approximately 73% of net assets on December 31, 2007.
During the year, the Fund wrote call options that generated premiums of $34.6
million. It is the strategy of the Fund to write "out-of-the-money" options,
meaning that the strike price is higher than the current price of the underlying
stock, so that the Fund has the potential to participate in some stock price
appreciation. At the end of 2007, the majority of the Fund's options (58 of 76
different options, or 76%) were still "out-of-the-money." With this positioning,
we believe the Fund is well positioned to participate to the upside should its
stock holdings rally.
--------------------------------------------------------------------------------
WHICH INDUSTRY SECTORS ARE PREVALENT IN THE FUND?
The Fund's largest exposure was in the health care sector, followed by the
consumer discretionary, technology and financials sectors. The Fund continues to
remain absent from the materials and utilities sectors.
--------------------------------------------------------------------------------
WILL YOU DESCRIBE THE FUND'S DIVIDEND POLICY?
The Fund paid quarterly dividends of $0.33 per share in February, May, August,
and November of 2007. Based on the Fund's market price of $11.41 per share on
December 31, 2007, and at the current quarterly dividend rate of $0.33, the
annualized distribution rate was 11.6%. All dividends during 2007 represent a
combination of earned net income and short-term and long-term capital gains. The
2007 distribution did not include any return of capital. It is management's
intention to continue to pay dividends consisting of only earned net income and
capital gains.
6 | Annual Report | December 31, 2007
MCN | Madison/Claymore Covered Call & Equity Strategy Fund | QUESTIONS & ANSWERS
continued
--------------------------------------------------------------------------------
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
what we believe to be solid companies with good growth prospects and attractive
valuations. We then seek what we believe to be 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.
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 the 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 the Fund's
shareholders.
Once we have selected what we believe to be 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 potentially participate in
some stock appreciation. By receiving option premiums, the Fund receives a
favorable level of cash flow and adds 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 potentially 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 THE FUND IN 2008?
As we line up the positives and negatives for 2008, we see that they are fairly
evenly balanced, with a slight tilt towards the negative. The positives that are
working for the market begin with the Fed in the midst of lowering interest
rates. As we saw through the end of 2007, the Fed cuts are no guarantee of an
immediate market rally. Although the U.S. economy is slowing, the global economy
is still robust, which should continue to support U.S. stocks, particularly the
multi-national companies. Another potential positive is the impact of a lower
dollar, which helps many U.S. companies compete globally.
On the negative side, housing continues to weigh on the economy and markets. The
availability of credit at the end of 2007 remained poor, and this may limit
growth. Probably the biggest fear we have is stagflation. This would entail
rising inflation driven by higher energy prices and raw material prices while
overall economic growth is slowing. Stagflation is not generally a good
environment for the valuation of either stocks or bonds.
Given that backdrop, we believe the Fund's holdings dovetail nicely with our
outlook, with an emphasis on stocks that we believe can produce earnings in a
difficult economy. In prior reports we have talked about risk, and how we felt
it wasn't being properly weighed in the investment equation. As that changes,
and as risk becomes more of a focus, we believe it should benefit the Fund's
higher-quality, more predictably growing companies. As a result, we feel good
regarding the prospects of the Fund's portfolio, even as we enter what will
likely be a volatile and uneven 2008. 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 S&P 500 index options.) We believe that this increase
in volatility, if sustained, should enable the Fund to earn greater option
premiums than in the past.
Annual Report | December 31, 2007 | 7
MCN | Madison/Claymore Covered Call & Equity Strategy Fund | QUESTIONS & ANSWERS
continued
--------------------------------------------------------------------------------
MCN RISKS AND OTHER CONSIDERATIONS
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.
A strategy of writing (selling) covered call options entails various risks. For
example, the correlation between the equity securities and options markets may,
at times, be imperfect and can furthermore be affected by market behavior and
unforeseen events, thus causing a given transaction to not achieve its
objectives. There may be times when the Fund will be required to purchase or
sell equity securities to meet its obligations under the options contracts on
certain options at inopportune times when it may not be beneficial to the Fund.
The Fund will forego the opportunity to profit from increases in the market
value of equity securities that it has written call options on, above the sum of
the premium and the strike price of the option. Furthermore, the Fund's downside
protection on equity securities it has written call options on would be limited
to the amount of the premium received for writing the call option and thus the
Fund would be at risk for any further price declines in the stock below that
level. Please refer to the Fund's prospectus for a more thorough discussion of
the risks associated with investments in options on equity securities.
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.
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
Fundexpense ratio.
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.
8 | Annual Report | December 31, 2007
MCN | Madison/Claymore Covered Call & Equity Strategy Fund
Fund SUMMARYlAS OF DECEMBER 31, 2007 (unaudited)
FUND STATISTICS
-------------------------------------------------------
Share Price $11.41
Common Share Net Asset Value $13.02
Premium/(Discount) to NAV -12.37%
Net Assets ($000) $250,781
-------------------------------------------------------
TOTAL RETURNS
-------------------------------------------------------
(INCEPTION 7/28/04) MARKET NAV
-------------------------------------------------------
One Year -16.85% -3.81%
Three Year - average annual 0.30% 4.09%
Since Inception - average annual 0.66% 5.86%
-------------------------------------------------------
% OF LONG TERM
SECTOR BREAKDOWN INVESTMENTS
-------------------------------------------------------
Health Care 23.5%
Consumer Discretionary 22.4%
Technology 17.2%
Financials 13.9%
Consumer Services 7.0%
Energy 6.8%
Computers 2.4%
Exchange-Traded Funds 2.2%
Software 2.1%
Industrial 1.5%
Insurance 1.0%
-------------------------------------------------------
% OF LONG-TERM
TOP TEN HOLDINGS INVESTMENTS
-------------------------------------------------------
Apache Corp. 5.4%
UnitedHealth Group, Inc. 4.9%
eBay, Inc. 3.7%
Cisco Systems, Inc. 3.6%
Williams-Sonoma, Inc. 3.5%
American Eagle Outfitters, Inc. 3.4%
Biogen Idec, Inc. 3.4%
Morgan Stanley Co. 3.4%
Intuit, Inc. 3.3%
Capital One Financial Corp. 3.2%
-------------------------------------------------------
Sectors and holdings are subject to change daily. For more current information,
please visit www.claymore.com. The above summaries are provided for
informational purposes only and should not be viewed as recommendations. Past
performance does not guarantee future results.
Line Chart:
SHARE PRICE & NAV PERFORMANCE
Share Price NAV
12/31/06 15.11 14.84
14.98 14.88
15.1 14.98
14.95 14.95
15.12 14.94
15.13 14.96
15.22 14.99
15.16 15.05
15.22 15.09
15.21 15.07
15.22 15.06
15.17 15.01
15.14 15.05
15.21 14.97
15.13 14.97
15.18 15.03
15.09 15
15.09 14.98
15.2 14.97
15.47 15
15.42 15.06
15.52 15.11
15.59 15.12
15.74 15.11
15.54 15.14
15.66 15.18
15.75 15.17
15.66 15.13
15.8 15.1
15.1 14.81
15.12 14.89
15.2 14.92
15.1 14.91
15.1 14.94
15.08 14.94
15 14.96
14.95 14.94
14.99 14.9
14.85 14.63
14.85 14.64
14.95 14.6
14.88 14.48
14.73 14.39
14.71 14.54
14.87 14.55
14.95 14.57
15 14.58
15 14.59
14.99 14.41
14.86 14.48
15.04 14.52
15.05 14.49
15 14.56
15.05 14.61
15.16 14.79
15.03 14.77
15.16 14.77
15.1 14.77
15.12 14.7
15.1 14.62
15.09 14.63
15.25 14.63
15.18 14.61
15.23 14.71
15.16 14.72
15.15 14.76
15.14 14.77
15.2 14.79
15.19 14.74
15.23 14.8
15.21 14.84
15.14 14.94
15.1 14.98
15.12 15.01
15.12 15
15.23 15.05
15.29 15.03
15.4 15.02
15.53 15.07
15.46 15.09
15.53 15.08
15.5 15.01
15.3 15.03
15.23 15.1
15.31 15.11
15.48 15.11
15.41 15.11
15.46 15.1
15.52 15.15
15.48 15.02
15.06 14.74
15 14.71
14.97 14.66
14.96 14.74
14.95 14.7
14.76 14.78
14.76 14.8
14.75 14.81
14.76 14.8
14.58 14.75
14.7 14.77
14.85 14.79
14.95 14.84
14.87 14.88
15 14.91
14.99 14.92
15.05 14.87
14.9 14.83
14.7 14.71
14.8 14.8
14.75 14.8
14.72 14.75
14.88 14.83
14.82 14.86
14.79 14.89
14.77 14.91
14.8 14.88
14.77 14.83
14.76 14.86
14.64 14.77
14.64 14.77
14.59 14.74
14.62 14.82
14.68 14.82
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
12/31/07 11.41 13.02
Bar Chart:
QUARTERLY DIVIDENDS PER SHARE
2/07 0.33
5/07 0.33
8/07 0.33
11/07 0.33
Pie Chart:
PORTFOLIO COMPOSITION (% of Total Investments)
Long-Term Investments 90.7%
Short-Term Investments 9.3%
Annual Report | December 31, 2007 | 9
MCN | Madison/Claymore Covered Call & Equity Strategy Fund
Portfolio of INVESTMENTS | DECEMBER 31, 2007
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
COMMON STOCKS - 92.8%
CONSUMER DISCRETIONARY - 21.3%
384,100 American Eagle Outfitters, Inc. $ 7,977,757
232,000 Bed Bath & Beyond, Inc. (a) 6,818,480
70,300 Best Buy Co., Inc. 3,701,295
140,000 Home Depot, Inc. 3,771,600
155,000 Kohl's Corp. (a) 7,099,000
210,000 Lowe's Cos., Inc. 4,750,200
230,000 Starbucks Corp. (a) 4,708,100
125,000 Target Corp. 6,250,000
320,000 Williams-Sonoma, Inc. 8,288,000
--------------------------------------------------------------------------------
53,364,432
--------------------------------------------------------------------------------
COMPUTERS - 2.3%
234,200 Dell, Inc. (a) 5,740,242
--------------------------------------------------------------------------------
CONSUMER SERVICES - 6.6%
263,400 eBay, Inc. (a) 8,742,246
250,000 Intuit, Inc. (a) 7,902,500
--------------------------------------------------------------------------------
16,644,746
--------------------------------------------------------------------------------
ENERGY - 6.5%
119,400 Apache Corp. 12,840,276
74,000 Unit Corp. (a) 3,422,500
--------------------------------------------------------------------------------
16,262,776
--------------------------------------------------------------------------------
FINANCIALS - 13.2%
22,900 Affiliated Managers Group (a) 2,689,834
160,000 Capital One Financial Corp. 7,561,600
200,000 Citigroup, Inc. 5,888,000
155,000 Countrywide Financial Corp. 1,385,700
140,000 Merrill Lynch & Co., Inc. 7,515,200
150,000 Morgan Stanley Co. 7,966,500
--------------------------------------------------------------------------------
33,006,834
--------------------------------------------------------------------------------
HEALTH CARE - 22.2%
115,000 Amgen, Inc. (a) 5,340,600
140,000 Biogen Idec, Inc. (a) 7,968,800
100,000 Community Health Systems, Inc. (a) 3,686,000
40,000 Genentech, Inc. (a) 2,682,800
95,000 Genzyme Corp. (a) 7,071,800
310,000 Mylan, Inc. (a) 4,358,600
270,000 Pfizer, Inc. 6,137,100
200,000 UnitedHealth Group, Inc. 11,640,000
58,900 Varian Medical System, Inc. (a) 3,072,224
57,500 Zimmer Holdings, Inc. (a) 3,803,625
--------------------------------------------------------------------------------
55,761,549
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
INDUSTRIAL - 1.4%
50,000 United Parcel Services Corp. - Class B $ 3,536,000
--------------------------------------------------------------------------------
INSURANCE 1.0%
103,400 MGIC Investment Corp. 2,319,262
--------------------------------------------------------------------------------
SOFTWARE - 2.0%
316,000 Symantec Corp. (a) 5,100,240
--------------------------------------------------------------------------------
TECHNOLOGY - 16.3%
110,000 Altera Corp. 2,125,200
140,000 Applied Materials, Inc. 2,486,400
320,000 Cisco Systems, Inc. (a) 8,662,400
570,000 Flextronics International Ltd. (Singapore) (a) 6,874,200
50,000 Intel Corp. 1,333,000
170,000 Linear Technology Corp. 5,411,100
36,000 Maxim Integrated Products, Inc. 953,280
208,800 QLogic Corp. (a) 2,964,960
250,000 Yahoo!, Inc. (a) 5,815,000
122,000 Zebra Technologies Corp. - Class A (a) 4,233,400
--------------------------------------------------------------------------------
40,858,940
--------------------------------------------------------------------------------
Total Common Stocks - 92.8%
(Cost $266,903,880) 232,595,021
--------------------------------------------------------------------------------
EXCHANGE-TRADED FUND - 2.0%
100,000 Powershares QQQ (Cost $5,051,950) 5,124,000
--------------------------------------------------------------------------------
Total Long Term Investments - 94.8%
(Cost $271,955,830) 237,719,021
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 10.3%
MONEY MARKET FUNDS - 3.3%
8,246,231 AIM Liquid Assets Money Market Fund (Cost $8,246,231) 8,246,231
--------------------------------------------------------------------------------
PAR VALUE VALUE
--------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 6.0%
$ 15,000,000 Morgan Stanley Co. (issued 12/31/07, yielding 1.050%;
collateralized by $10,130,000 of original face of U.S.
Treasury Inflation Protected Securities due 4/15/32;
to be sold on 1/02/08 at $15,000,875)
(Cost $15,000,000) $ 15,000,000
--------------------------------------------------------------------------------
U.S. GOVERNMENT - 1.0%
2,500,000 U.S. Treasury Note (coupon 4.375%, maturity 1/31/08)
(Cost $2,500,439) 2,500,439
--------------------------------------------------------------------------------
Total Short-Term Investments - 10.3%
(Cost $25,746,670) 25,746,670
--------------------------------------------------------------------------------
Total Investments - 105.1%
(Cost $297,702,500) 263,465,691
Liabilities in excess of other assets - (1.0%) (2,509,767)
Total Value of Options Written - (4.1%) (10,175,125)
--------------------------------------------------------------------------------
Net Assets - 100.0% $250,780,799
================================================================================
(a) Non-income producing security.
See notes to financial statements.
10 | Annual Report | December 31, 2007
MCN | Madison/Claymore Covered Call & Equity Strategy Fund | PORTFOLIO OF
INVESTMENTS continued
CONTRACTS
(100 SHARES EXPIRATION EXERCISE
PER CONTRACT) CALL OPTIONS WRITTEN(a) DATE PRICE VALUE
-----------------------------------------------------------------------------------------------------------
100 Affiliated Managers Group January 2009 $ 120.00 $ 180,500
900 Altera Corp. January 2008 20.00 20,250
200 Altera Corp. January 2008 22.50 1,000
1,200 American Eagle Outfitters, Inc. January 2008 25.00 9,000
800 American Eagle Outfitters, Inc. (b) January 2008 26.63 6,000
350 Amgen, Inc. January 2008 65.00 1,750
750 Apache Corp. January 2008 70.00 2,827,500
69 Apache Corp. January 2008 75.00 225,630
175 Apache Corp. January 2008 80.00 482,125
200 Apache Corp. January 2008 85.00 453,000
1,395 Applied Materials, Inc. January 2008 20.00 10,462
200 Bed Bath & Beyond, Inc. February 2008 35.00 4,000
707 Bed Bath & Beyond, Inc. February 2008 37.50 5,303
1,158 Bed Bath & Beyond, Inc. January 2008 40.00 5,790
400 Best Buy Co., Inc. March 2008 47.50 260,000
300 Best Buy Co., Inc. June 2008 50.00 192,000
1,400 Biogen Idec, Inc. January 2008 50.00 1,043,000
123 Capital One Financial Corp. January 2008 70.00 615
200 Capital One Financial Corp. January 2008 75.00 1,000
500 Cisco Systems, Inc. January 2008 27.50 28,250
1,500 Cisco Systems, Inc. January 2008 30.00 13,500
200 Cisco Systems, Inc. January 2008 32.50 500
500 Cisco Systems, Inc. April 2008 32.50 21,250
750 Citigroup, Inc. March 2008 50.00 3,750
900 Community Health Systems, Inc. January 2008 40.00 20,250
771 Countrywide Financial Corp. January 2008 22.50 3,855
200 Countrywide Financial Corp. January 2008 25.00 1,000
200 Countrywide Financial Corp. April 2008 15.00 8,000
1,900 Dell, Inc. January 2008 27.50 14,250
1,334 eBay, Inc. January 2008 35.00 63,365
500 eBay, Inc. April 2008 37.50 70,000
5,100 Flextronics International Ltd. (Singapore) January 2008 12.50 104,550
400 Genentech, Inc. January 2008 75.00 3,000
950 Genzyme Corp. January 2008 65.00 940,500
1,128 Home Depot, Inc. February 2008 37.50 5,640
272 Home Depot, Inc. February 2008 40.00 1,360
500 Intel Corp. January 2008 22.50 215,000
840 Intuit, Inc. January 2008 30.00 163,800
1,660 Intuit, Inc. January 2008 32.50 74,700
1,000 Kohl's Corp. April 2008 50.00 242,500
1,700 Linear Technology Corp. January 2008 35.00 21,250
CONTRACTS
(100 SHARES EXPIRATION EXERCISE
PER CONTRACT) CALL OPTIONS WRITTEN(a) DATE PRICE VALUE
-----------------------------------------------------------------------------------------------------------
200 Lowe's Cos., Inc. January 2008 $ 27.50 $ 1,000
300 Lowe's Cos., Inc. January 2008 30.00 1,500
1,600 Lowe's Cos., Inc. January 2008 32.50 8,000
360 Maxim Integrated Products, Inc. January 2008 30.00 2,700
700 Merrill Lynch & Co., Inc. January 2008 75.00 3,500
700 Merrill Lynch & Co., Inc. January 2008 80.00 3,500
479 MGIC Investment Corp. March 2008 25.00 148,490
356 MGIC Investment Corp. January 2008 40.00 1,780
100 Morgan Stanley Co. January 2008 60.00 1,750
1,100 Morgan Stanley Co. January 2008 65.00 5,500
1,105 Mylan, Inc. January 2008 17.50 5,525
502 Mylan, Inc. April 2008 17.50 10,040
1,592 Pfizer, Inc. January 2008 25.00 11,940
400 Powershares QQQ January 2008 50.00 80,000
600 Powershares QQQ January 2008 53.00 80,400
201 QLogic Corp. January 2008 12.50 35,175
314 QLogic Corp. April 2008 15.00 26,690
73 QLogic Corp. January 2008 17.50 365
1,100 Starbucks Corp. April 2008 22.50 90,750
300 Starbucks Corp. July 2008 22.50 42,000
860 Symantec Corp. January 2008 17.50 6,450
2,300 Symantec Corp. January 2008 20.00 11,500
350 Target Corp. January 2008 60.00 4,375
900 Target Corp. January 2008 65.00 4,500
500 UnitedHealth Group, Inc. January 2008 50.00 417,500
900 UnitedHealth Group, Inc. January 2008 55.00 319,500
200 UnitedHealth Group, Inc. March 2008 55.00 98,000
400 UnitedHealth Group, Inc. June 2008 60.00 134,000
500 United Parcel Services Corp. - Class B January 2008 75.00 6,250
409 Varian Medical System, Inc. May 2008 45.00 368,100
180 Varian Medical System, Inc. January 2008 45.00 130,500
2,950 Williams-Sonoma, Inc. February 2008 32.50 29,500
620 Zebra Technologies Corp. - Class A February 2008 35.00 113,150
375 Zebra Technologies Corp. - Class A May 2008 40.00 48,750
-----------------------------------------------------------------------------------------------------------
TOTAL VALUE OF CALL OPTIONS WRITTEN
(Premiums received $16,621,167) 10,001,875
-----------------------------------------------------------------------------------------------------------
PUT OPTIONS WRITTEN
1,540 Mylan, Inc. January 2008 15.00 173,250
-----------------------------------------------------------------------------------------------------------
TOTAL VALUE OF PUT OPTIONS WRITTEN
(Premiums received $153,547) 173,250
-----------------------------------------------------------------------------------------------------------
TOTAL OPTIONS WRITTEN
(Premiums received $16,774,714) $ 10,175,125
===========================================================================================================
(a) Non-income producing security
(b) Represents 150 shares per contract.
See notes to financial statements.
Annual Report | December 31, 2007 | 11
MCN | Madison/Claymore Covered Call & Equity Strategy Fund
Statement of ASSETS AND LIABILITIES | DECEMBER 31, 2007
ASSETS
Investments, at value (cost $297,702,500) $263,465,691
Investments sold receivable 279,560
Dividends and interest receivable 117,570
Other assets 5,515
---------------------------------------------------------------------------------------------------------------
Total assets 263,868,336
---------------------------------------------------------------------------------------------------------------
LIABILITIES
Options written, at value (premiums received of $16,774,714) 10,175,125
Payables:
Investments purchased 2,535,717
Investment advisory fee 107,942
Investment management fee 107,942
Other affiliates 17,530
Trustees' fees 1,357
Accrued expenses and other liabilities 141,924
---------------------------------------------------------------------------------------------------------------
Total liabilities 13,087,537
---------------------------------------------------------------------------------------------------------------
NET ASSETS $250,780,799
===============================================================================================================
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 2,634,563
Net unrealized depreciation on investments and options transactions (27,637,220)
---------------------------------------------------------------------------------------------------------------
NET ASSETS $250,780,799
===============================================================================================================
NET ASSET VALUE (based on 19,268,423 common shares outstanding) $ 13.02
===============================================================================================================
See notes to financial statements.
12 | Annual Report | December 31, 2007
MCN | Madison/Claymore Covered Call & Equity Strategy Fund
Statement of OPERATIONS | FOR THE YEAR ENDED DECEMBER 31, 2007
INVESTMENT INCOME
Dividends $ 4,644,914
Interest 2,143,961
---------------------------------------------------------------------------------------------------------------
Total income $ 6,788,875
---------------------------------------------------------------------------------------------------------------
EXPENSES
Investment advisory fee 1,382,347
Investment management fee 1,382,347
Professional fees 180,417
Trustees' fees and expenses 137,223
Printing expenses 94,075
Custodian fee 77,420
Fund accounting 70,294
Administrative fee 68,382
Transfer agent fee 31,556
Insurance 19,085
NYSE listing fee 16,068
Other 9,968
---------------------------------------------------------------------------------------------------------------
Total expenses 3,469,182
---------------------------------------------------------------------------------------------------------------
Net investment income 3,319,693
---------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on:
Investments 8,952,069
Options 13,132,770
Net change in unrealized appreciation (depreciation) on:
Investments (48,253,918)
Options 13,025,167
---------------------------------------------------------------------------------------------------------------
Net realized and unrealized loss on investments and options transactions (13,143,912)
---------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(9,824,219)
===============================================================================================================
See notes to financial statements.
Annual Report | December 31, 2007 | 13
MCN | Madison/Claymore Covered Call & Equity Strategy Fund
Statement of CHANGES IN NET ASSETS
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, 2007 DECEMBER 31, 2006
----------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS
Net investment income $ 3,319,693 $ 116,196
Net realized gain on investments and options 22,084,839 24,085,337
Net unrealized appreciation (depreciation) on investments and options (35,228,751) 2,944,176
----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations (9,824,219) 27,145,709
----------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From and in excess of net investment income (25,364,524) (25,045,274)
----------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Reinvestment of dividends 2,119,016 3,406,095
----------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (33,069,727) 5,506,530
NET ASSETS:
Beginning of period 283,850,526 278,343,996
----------------------------------------------------------------------------------------------------------------
End of period (including distributions in excess of
net investment income of $0 and $0, respectively) $250,780,799 $283,850,526
================================================================================================================
See notes to financial statements.
14 | Annual Report | December 31, 2007
MCN | Madison/Claymore Covered Call & Equity Strategy Fund
Financial HIGHLIGHTS
FOR THE PERIOD
FOR THE FOR THE FOR THE JULY 28, 2004*
YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
DECEMBER 31, 2007 DECEMBER 31, 2006 DECEMBER 31, 2005 DECEMBER 31, 2004
-------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.84 $ 14.74 $ 15.14 $ 14.33(a)
-------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net investment income (loss)(b) 0.17 0.01 (0.02) (0.02)
Net realized and unrealized gain (loss)
on investments and options (0.67) 1.41 0.94 1.16
-------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (0.50) 1.42 0.92 1.14
-------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS FROM AND IN EXCESS OF
NET INVESTMENT INCOME (1.32) (1.32) (1.32) (0.30)
-------------------------------------------------------------------------------------------------------------------------------
OFFERING EXPENSES CHARGED TO PAID-IN-CAPITAL - - - (0.03)
-------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.02 $ 14.84 $ 14.74 $ 15.14
-------------------------------------------------------------------------------------------------------------------------------
MARKET VALUE, END OF PERIOD $ 11.41 $ 15.11 $ 14.80 $ 14.90
-------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN(C)
Net asset value -3.81% 10.22% 6.36% 7.80%
Market value -16.85% 11.86% 8.49% 1.35%
RATIOS AND SUPPLEMENTAL DATA
Net assets end of period (thousands) $ 250,781 $ 283,851 $ 278,344 $ 280,290
Ratio of expenses to average net assets 1.25% 1.28% 1.27% 1.24%(d)
Ratio of net investment income (loss)
to average net assets 1.20% 0.04% (0.16%) (0.36%)(d)
Portfolio turnover 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.
Annual Report | December 31, 2007 | 15
MCN | Madison/Claymore Covered Call & Equity Strategy Fund
Notes to FINANCIAL STATEMENTS | DECEMBER 31, 2007
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.
(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.
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.
16 | Annual Report | December 31, 2007
(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 annual 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 annual 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%
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 of the two aforementioned
firms.
Annual Report | December 31, 2007 | 17
MCN | Madison/Claymore Covered Call & Equity Strategy Fund | NOTES TO FINANCIAL
STATEMENTS continued
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.
Due to inherent differences in the recognition of income, expenses, and realized
gains/losses under U.S. generally accepted accounting principles and federal
income tax purposes, permanent differences between book and tax basis reporting
have been identified and appropriately reclassified on the Statement of Assets
and Liabilities. A permanent book and tax difference relating to a distribution
reclass in the amount of $22,044,831 was reclassified from accumulated
undistributed net investment income to accumulated net realized gain. Net
realized gains or losses may differ for financial reporting and tax reporting
primarily as a result of the deferral of losses relating to wash sale
transactions.
Information on the components of investments, excluding written options, and net
assets as of December 31, 2007 is as follows:
UNDISTRIBUTED
COST OF NET TAX NET TAX LONG-TERM
INVESTMENTS GROSS TAX GROSS TAX UNREALIZED UNREALIZED UNDISTRIBUTED GAIN/
FOR TAX UNREALIZED UNREALIZED DEPRECIATION ON DEPRECIATION ORDINARY (ACCUMULATED
PURPOSES APPRECIATION DEPRECIATION INVESTMENTS ON DERIVATIVES INCOME CAPITAL LOSS)
-----------------------------------------------------------------------------------------------------------------
$298,376,256 $9,160,876 $(44,071,441) $(34,910,565) $6,599,589 $3,308,319 $ 0
For the years ended December 31, 2007 and 2006, 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 2006
------------------------------------------------------------------
Ordinary income $25,023,276 $22,630,077
Long-term capital gain 341,248 2,415,197
------------------------------------------------------------------
$25,364,524 $25,045,274
------------------------------------------------------------------
On July 13, 2006, the Financial Accounting Standards Board ("FASB") released
FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" ("FIN
48"). FIN 48 provides guidance for how uncertain tax positions should be
recognized, measured, presented and disclosed in the financial statements. FIN
48 requires the evaluation of tax positions taken or expected to be taken in the
course of preparing the Fund's tax returns to determine whether the tax
positions are "more-likely-than-not" of being sustained by the applicable tax
authority. Tax positions not deemed to meet the more-likely-than-not threshold
would be recorded as a tax benefit or expense in the current year. Adoption of
FIN 48 is required for fiscal years beginning after December 15, 2006, and is to
be applied to all open tax years as of the effective date. 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 December 31, 2007.
Tax years ended 2004, 2005 and 2006 remain subject to examination by major
jurisdictions.
Note 5 - INVESTMENT TRANSACTIONS AND OPTIONS WRITTEN:
During the year ended December 31, 2007, the cost of purchases and proceeds from
sales of investments, excluding written options and short-term investments were
$258,611,242 and $259,526,286, respectively.
Transactions in option contracts during the year ended December 31, 2007 were as
follows:
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
-------------------------------------------------------------------
Options outstanding, beginning of year 69,868 $17,331,527
Options written during the year 129,955 34,641,875
Options expired during the year (45,090) (8,141,607)
Options closed during the year (28,670) (8,386,831)
Options assigned during the year (67,565) (18,670,250)
-------------------------------------------------------------------
Options outstanding, end of year 58,498 $16,774,714
===================================================================
18 | Annual Report | December 31, 2007
MCN | Madison/Claymore Covered Call & Equity Strategy Fund | NOTES TO FINANCIAL
STATEMENTS continued
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:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2007 DECEMBER 31, 2006
--------------------------------------------------------------------------------
Beginning Shares 19,124,936 18,889,180
Shares issued through dividend reinvestment 143,487 235,756
--------------------------------------------------------------------------------
Ending Shares 19,268,423 19,124,936
--------------------------------------------------------------------------------
Note 7 - 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 8 - RECENT ACCOUNTING PRONOUNCEMENTS
In September, 2006, the FASB issued Statement of Financial Accounting Standards
No. 157, "Fair Valuation Measurements" ("FAS 157"). This standard clarifies the
definition of fair value for financial reporting, establishes a framework for
measuring fair value and requires additional disclosures about the use of fair
value measurements. FAS 157 is effective for financial statements issued for
fiscal years beginning after November 15, 2007 and interim periods within those
fiscal years. As of December 31, 2007, the Funds do not believe the adoption of
FAS 157 will impact the amounts reported in the financial statements, however,
additional disclosure will be required about the inputs used to develop
measurements of fair value and the effect of certain of the measurements
reported in the statement of operations for a fiscal period.
Note 9 - SUBSEQUENT EVENT:
On February 1, 2008, the Board of Trustees declared a quarterly dividend of
$0.33 per common share. This dividend is payable February 29, 2008 to
shareholders of record on February 15, 2008.
Annual Report | December 31, 2007 | 19
MCN | Madison/Claymore Covered Call & Equity Strategy Fund
Report of INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
MADISON/CLAYMORE COVERED CALL & EQUITY STRATEGY FUND
We have audited the accompanying statement of assets and liabilities of
Madison/Claymore Covered Call & Equity Strategy Fund (formerly the
Madison/Claymore Covered Call Fund) (the "Fund"), including the portfolio of
investments, as of December 31, 2007, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of the
three years in the period then ended and for the period from July 28, 2004
(commencement of investment operations) through December 31, 2004. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. Our
audits included consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the
Fund's internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements and financial
highlights, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
Our procedures included confirmation of securities owned as of December 31,
2007, by correspondence with the custodian and brokers or by other appropriate
auditing procedures where replies from brokers were not received. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Madison/Claymore Covered Call & Equity Strategy Fund at December 31, 2007, and
the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the three years in the period then ended and for the
period from July 28, 2004 (commencement of investment operations) through
December 31, 2004, in conformity with U.S. generally accepted accounting
principles.
/s/ Ernst & Young LLP
Chicago, Illinois
February 20, 2008
20 | Annual Report | December 31, 2007
MCN | Madison/Claymore Covered Call & Equity Strategy Fund
Supplemental INFORMATION | (unaudited)
FEDERAL INCOME TAX INFORMATION
Qualified dividend income of as much as $4,634,322 was received by the Fund
through December 31, 2007. The Fund intends to designate the maximum amount of
dividends that qualify for the reduced tax rate pursuant to the Jobs and Growth
Tax Relief Reconciliation Act of 2003.
For corporate shareholders, $4,644,914 of investment income qualifies for
dividends-received deduction.
The Fund hereby designates $341,248 of distributions as long-term capital gains
according to IRC Section 852(b)(3)(C).
In January 2008, shareholders will be advised on IRS Form 1099 DIV or substitute
1099 DIV as to the federal tax status of the distributions received by
shareholders in calendar year 2007.
RESULTS OF SHAREHOLDER VOTES
The Annual Meeting of Shareholders of the Fund was held on August 13, 2007.
Holders of the Fund's common shares of beneficial interest voted on the election
of Trustees.
Voting results for the election of Trustees are set forth below:
# OF SHARES IN FAVOR # OF SHARES WITHHELD
---------------------------------------------------------------------
Ronald A. Nyberg 17,313,938 275,683
Ronald E. Toupin, Jr. 17,309,526 280,095
Lorence D. Wheeler 17,297,875 291,746
The terms of the following Trustees of the Fund did not expire in 2007: Randall
C. Barnes, Philip E. Blake, Frank Burgess, Nicholas Dalmaso and James R. Imhoff,
Jr.
TRUSTEES
The Trustees of the Madison/Claymore Covered Call & Equity Strategy Fund and
their principal occupations during the past five years:
NAME, ADDRESS*, YEAR TERM OF OFFICE** PRINCIPAL OCCUPATION DURING NUMBER OF PORTFOLIOS
OF BIRTH AND POSITION(S) AND LENGTH OF THE PAST FIVE YEARS AND IN FUND COMPLEX*** OTHER DIRECTORSHIPS
HELD WITH REGISTRANT TIME SERVED OTHER AFFILIATIONS OVERSEEN BY TRUSTEE HELD BY TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES:
------------------------------------------------------------------------------------------------------------------------------------
Randall C. Barnes Since 2004 Formerly, Senior Vice President & 47 None.
Year of birth: 1951 Treasurer (1993-1997), President,
Trustee 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 1 Director, Madison
Year of birth: 1944 of Forecastle Inc. (2000-present). Newspapers, Inc.,
1 South Pinckney Street Forecastle, Inc,
Suite 501 Nemtes, Inc.
Madison, WI 53703 Trustee, the Mosaic
Trustee family of mutual
funds and Madison
Strategic Sector
Premium Fund.
------------------------------------------------------------------------------------------------------------------------------------
James R. Imhoff, Jr. Since 2004 Chairman and CEO of First 1 Director, Park Bank.
Year of birth: 1944 Weber Group. Trustee, the Mosaic
5250 East Terrace Drive family of mutual
Madison, WI 53718 funds and Madison
Trustee Strategic Sector
Premium Fund.
------------------------------------------------------------------------------------------------------------------------------------
Ronald A. Nyberg Since 2004 Partner of Nyberg & Cassioppi, LLC, 50 None.
Year of birth: 1953 a law firm specializing in corporate
Trustee law, estate planning 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 Formerly, Vice President, Manager 47 None.
Year of birth: 1958 and Portfolio Manager of Nuveen
Trustee Asset Management (1998-1999), Vice
President of Nuveen Investment
Advisory Corp. (1992-1999), Vice
President and Manager of Nuveen Unit
Investment Trusts (1991-1999), and
Assistant Vice President and
Portfolio Manager of Nuveen Unit
Investment Trusts (1988-1999), each
of John Nuveen & Company, Inc.
(1982-1999).
------------------------------------------------------------------------------------------------------------------------------------
Lorence Wheeler Since 2004 Formerly, President of Credit Union 1 Director, Grand
Year of birth: 1938 Benefits Services, Inc. and Pension Mountain Bank FSB.
135 Sunset Blvd. Specialist for CUNA Mutual Group. Trustee, the Mosaic
Tabernash, CO 80478 family of mutual
Trustee funds and Madison
Strategic Sector
Premium Fund.
------------------------------------------------------------------------------------------------------------------------------------
Annual Report | December 31, 2007 | 21
MCN | Madison/Claymore Covered Call & Equity Strategy Fund | SUPPLEMENTAL
INFORMATION (unaudited) continued
NAME, ADDRESS*, YEAR TERM OF OFFICE** PRINCIPAL OCCUPATION DURING NUMBER OF PORTFOLIOS
OF BIRTH AND POSITION(S) AND LENGTH OF THE PAST FIVE YEARS AND IN FUND COMPLEX*** OTHER DIRECTORSHIPS
HELD WITH REGISTRANT TIME SERVED OTHER AFFILIATIONS OVERSEEN BY TRUSTEE HELD BY TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES:
------------------------------------------------------------------------------------------------------------------------------------
Frank E. Burgess+ Since 2004 Founder, President and CEO of 1 Director, Capital
Year of birth: 1942 Madison Investment Advisors, Inc. Bankshares, Inc.,
550 Science Drive (1974-present) and Madison Asset Outrider Foundation,
Madison, WI 53711 Management, LLC Inc., and Santa
Trustee and Barbara Community
Senior Vice President Bankcorp. Trustee,
the Mosaic family of
mutual funds and
Madison Strategic
Sector Premium Fund.
------------------------------------------------------------------------------------------------------------------------------------
Nicholas Dalmaso++ Since 2004 Senior Managing Director and Chief 50 None.
Year of birth: 1965 Administrative Officer of Claymore
Trustee; Chief Legal and Advisors, LLC and Claymore
Executive Officer Securities, Inc. (2007-present).
Formerly, Senior Managing Director
and General Counsel of Claymore
Group Inc., Claymore Advisors, LLC
and Claymore Securities, Inc.
(2001-2007). Assistant General
Counsel, John Nuveen and Co., Inc.
(asset manager) (1999-2001). Former
Vice President and Associate
General Counsel of Van Kampen
Investments, Inc. (1992-1999).
------------------------------------------------------------------------------------------------------------------------------------
* Address for all Trustees, unless otherwise noted: 2455 Corporate West
Drive, Lisle, IL 60532
** After a Trustee's initial term, each Trustee is expected to serve a
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 Fund because of his position as an officer of Claymore Advisors, LLC,
the Fund's Investment Adviser.
22 | Annual Report | December 31, 2007
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:
------------------------------------------------------------------------------------------------------------------------------------
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 Officers
Chief Financial Officer, (2005-2006) Claymore Group Inc. Managing Director of Claymore
Chief Accounting Officer Advisors, LLC and Claymore Securities, Inc. (2003-2005). Previously,
and Treasurer Treasurer of Henderson Global Funds and Operations Manager for
Henderson Global Investors (North America) Inc. (2002-2003); Managing
Director, FrontPoint Partners LLC (2001-2002).
------------------------------------------------------------------------------------------------------------------------------------
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 (2003-2004);
Madison, WI 53711 Research Analyst, Ark Asset Management (1999-2002).
Year of birth: 1967
Vice President
------------------------------------------------------------------------------------------------------------------------------------
Ray DiBernardo Since 2004 Vice President of Madison Investment Advisors, Inc. Previously, Vice
550 Science Drive President and Portfolio Manager, Concord Investment Company.
Madison, WI 53711
Year of birth: 1962
Vice President
------------------------------------------------------------------------------------------------------------------------------------
Matthew J. Patterson Since 2006 Vice President, Attorney of Claymore Securities, Inc. (2006-present)
Year of birth: 1971 Chief Compliance Officer and Clerk, The Preferred Group of Mutual
Secretary 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).
------------------------------------------------------------------------------------------------------------------------------------
Melissa Nguyen Since 2005 Vice President of Claymore Securities, Inc.; previously, Associate,
Year of birth: 1978 Vedder, Price, Kaufman & Kammholz, P.C. (2003-2005).
Assistant Secretary
------------------------------------------------------------------------------------------------------------------------------------
Bruce Saxon Since 2006 Vice President - Fund Compliance Officer of Claymore Advisors, LLC
Year of birth: 1957 (Feb 2006 - present). Chief Compliance Officer/Assistant Secretary of
Chief Compliance Officer Harris Investment Management, Inc. (2003-2006). Director - Compliance
of Harrisdirect LLC (1999-2003).
------------------------------------------------------------------------------------------------------------------------------------
James Howley Since 2006 Vice President, Fund Administration of Claymore Securities, Inc.
Year of birth: 1972 (2004-present). Previously, Manager, Mutual Fund Administration of Van
Assistant Treasurer Kampen Investments, Inc.
------------------------------------------------------------------------------------------------------------------------------------
* 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 resignation or
removal.
Annual Report | December 31, 2007 | 23
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 (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, Attention: Stock Transfer Department,
101 Barclay 11W, New York, New York 10286, Phone Number: (866) 488-3559.
24 | Annual Report | December 31, 2007
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.
OFFICERS
Nicholas Dalmaso
Chief Executive and
Legal Officer
Steven M. Hill
Chief Financial Officer,
Chief Accounting Officer
and Treasurer
James Howley
Assistant Treasurer
Frank Burgess
Senior Vice President
Jay Sekelsky
Vice President
Kay Frank
Vice President
Stephen Share
Vice President
Ray DiBernardo
Vice President
Matthew Patterson
Secretary
Melissa Nguyen
Assistant Secretary
Bruce Saxon
Chief Compliance Officer
INVESTMENT MANAGER
Madison Asset
Management, LLC
Madison, Wisconsin
INVESTMENT ADVISER
Claymore Advisors, LLC
Lisle, Illinois
ADMINISTRATOR
Claymore Advisors, LLC
Lisle, Illinois
CUSTODIAN AND
TRANSFER AGENT
The Bank of New York
New York, New York
LEGAL COUNSEL
Skadden, Arps, Slate,
Meagher & Flom LLP
Chicago, Illinois
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Ernst & Young LLP
Chicago, Illinois
PRIVACY PRINCIPLES OF 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,
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) 345-7999 or on the U.S. Securities and Exchange Commission's
("SEC's") website at http://www.sec.gov.
Information regarding how the Fund voted proxies for portfolio securities, if
applicable, during the most recent 12-month period ended June 30, is also
available, without charge and upon request by calling the Fund at (800) 345-7999
or by accessing the Fund's Form N-PX on the SEC's website at http://www.sec.gov.
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 http://www.sec.gov. 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.claymore.com.
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 princpal 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.
Annual Report | December 31, 2007 | 25
MCN | Madison/Claymore Covered Call & Equity Strategy Fund
About the FUND MANAGERl
MADISON ASSET MANAGEMENT, LLC
Madison Asset Management, LLC, (MAM) a wholly-owned subsidiary of Madison
Investment Advisors, Inc., with its affiliates, manages more than $9 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.
26 | Annual Report | December 31, 2007
MCN | Madison/Claymore Covered Call & Equity Strategy Fund
(This page is intentionally left blank)
Annual Report | December 31, 2007 | 27
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-AR-1207
ITEM 2. CODE OF ETHICS.
(a) The registrant has adopted a code of ethics (the "Code of Ethics") that
applies to its principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions.
(b) No information need be disclosed pursuant to this paragraph.
(c) During the registrant's fiscal year ended December 31, 2007, the Code of
Ethics was not amended.
(d) The registrant has not granted a waiver or an implicit waiver to its
principal executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions from a provision
of its Code of Ethics during the period covered by this report.
(e) Not applicable.
(f) (1) The registrant's Code of Ethics is attached hereto as an exhibit.
(2) Not applicable.
(3) Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Trustees has determined that it has at least one audit
committee financial expert serving on its audit committee (the "Audit
Committee"), Ronald E. Toupin, Jr. Mr. Toupin is an "independent" Trustee for
purposes of this Item 3 of Form N-CSR. Mr. Toupin qualifies as an audit
committee financial expert by virtue of his experience obtained as a portfolio
manager and research analyst, which included review and analysis of offering
documents and audited and unaudited financial statements using GAAP to show
accounting estimates, accruals and reserves.
(Under applicable securities laws, a person who is determined to be an audit
committee financial expert will not be deemed an "expert" for any purpose,
including without limitation for the purposes of Section 11 of the Securities
Act of 1933, as amended, as a result of being designated or identified as an
audit committee financial expert. The designation or identification of a person
as an audit committee financial expert does not impose on such person any
duties, obligations, or liabilities that are greater than the duties,
obligations, and liabilities imposed on such person as a member of the Audit
Committee and Board of Trustees in the absence of such designation or
identification. The designation or identification of a person as an audit
committee financial expert does not affect the duties, obligations or liability
of any other member of the Audit Committee or Board of Trustees.)
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees: the aggregate fees billed for professional services rendered by
the principal accountant for the audit of the registrant's annual financial
statements or services that are normally provided by the accountant in
connection with statutory and regulatory filings or engagements were $48,000 for
the fiscal year ending December 31, 2007, and $46,000 for the fiscal year ending
December 31, 2006.
(b) Audit-Related Fees: the aggregate fees billed for assurance and related
services by the principal accountant that are reasonably related to the
performance of the audit of the registrant's financial statements and are not
reported under paragraph 4(a) were $0 for the fiscal year ending December 31,
2007 and $0 for the fiscal year ending December 31, 2006.
(c) Tax Fees: the aggregate fees billed for professional services rendered by
the principal accountant for tax compliance, tax advice, and tax planning were
$6,000 for the fiscal year ending December 31, 2007 and $6,000 for the fiscal
year ending December 31, 2006.
(d) All Other Fees: the aggregate fees billed for products and services provided
by the principal accountant, other than the services reported in paragraphs (a)
and (c) of this Item were $0 for the fiscal year ending December 31, 2007 and $0
for the fiscal year ending December 31, 2006.
The registrant's principal accountant did not bill fees for non-audit services
that required approval by the Audit Committee pursuant to paragraph (c)(7)(ii)
of Rule 2-01 of Regulation S-X during the Registrant's last two fiscal years.
(e) Audit Committee Pre-Approval Policies and Procedures.
(i) The Audit Committee reviews, and in its sole discretion,
pre-approves, pursuant to written pre-approval procedures (A) all engagements
for audit and non-audit services to be provided by the principal accountant to
the registrant and (B) all engagements for non-audit services to be provided by
the principal accountant (1) to the registrant's investment adviser (not
including a sub-adviser whose role is primarily portfolio management and is
sub-contracted or overseen by another investment adviser) and (2) to any entity
controlling, controlled by or under common control with the registrant's
investment adviser that provides ongoing services to the registrant; but in the
case of the services described in subsection (B)(1) or (2), only if the
engagement relates directly to the operations and financial reporting of the
registrant; provided that such pre-approval need not be obtained in
circumstances in which the pre-approval requirement is waived under rules
promulgated by the Securities and Exchange Commission or New York Stock Exchange
listing standards. Sections IV.C.2 and IV.C.3 of the Audit Committee's revised
Audit Committee Charter contain the Audit Committee's Pre-Approval Policies and
Procedures and such sections are included below.
V.C.2 Pre-approve any engagement of the independent auditors to provide any
non-prohibited services to the I Trust, including the fees and other
compensation to be paid to the independent auditors (unless an
exception is available under Rule 2-01 of Regulation S-X).
(a) The Chairman or any member of the Audit Committee may grant the
pre-approval of services to the Fund for non-prohibited services up to
$10,000. All such delegated pre-approvals shall be presented to the
Audit Committee no later than the next Audit Committee meeting.
V.C.3 Pre-approve any engagement of the independent auditors, including the
fees and other compensation to be paid to the independent auditors, to
provide any non-audit services to the Adviser (or any "control I
affiliate" of the Adviser providing ongoing services to the Trust), if
the engagement relates directly to the operations and financial
reporting of the Trust (unless an exception is available under Rule
2-01 of Regulation S-X).
(a) The Chairman or any member of the Audit Committee may grant the
pre-approval for non-prohibited services to the Adviser up to $10,000.
All such delegated pre-approvals shall be presented to the Audit
Committee no later than the next Audit Committee meeting.
(ii) None of the services described in each of Items 4(b) through (d) were
approved by the Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01
of Regulation S-X.
(f) Not applicable.
(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, the registrant's investment adviser and any
entity controlling, controlled by, or under common control with the adviser that
provides ongoing services to the registrant (not including a sub-adviser whose
role is primarily portfolio management and is sub-contracted with or overseen by
another investment adviser) that directly related to the operations and
financial reporting of the registrant was $0 for the fiscal year ending December
31, 2007 and $0 for the fiscal year ending December 31, 2006.
(h) Not Applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
(a) The Audit Committee was established in accordance with Section 3(a)(58)(A)
of the Securities Exchange Act of 1934. The Audit Committee is comprised of:
Randall C. Barnes, Philip E. Blake, James R. Imhoff, Jr., Ronald A. Nyberg,
Ronald E. Toupin, Jr. and Lorence D. Wheeler.
(b) Not Applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
The Schedule of Investments is included as part of Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
The registrant has delegated the responsibility for voting of proxies relating
to its voting securities to its investment manager, Madison Asset Management,
LLC (the "Investment Manager"). The Investment Manager's proxy voting policies
and procedures are included as an exhibit hereto.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
(a) (1) Frank E. Burgess, the President and founder of Madison Investment
Advisors, Inc., is responsible for the day-to-day management of the registrant's
portfolio. The Investment Manager is a wholly owned subsidiary of Madison
Investment Advisors, Inc.
(a) (2) Other portfolios managed.
As of the end of the registrant's most recent fiscal year, Mr. Burgess was
involved in the management of the following accounts:
MATERIAL CONFLICTS OF
INTEREST THAT MAY
ARISE IN CONNECTION
WITH THE MANAGER'S
MANAGEMENT OF THE
TRUST'S INVESTMENTS
CATEGORY OF OTHER NUMBER MANAGED TOTAL ASSETS AND THE INVESTMENTS OF
NAME OF MANAGER ACCOUNTS MANAGED IN CATEGORY IN CATEGORY THE OTHER ACCOUNTS
-----------------------------------------------------------------------------------------------------------------------
Frank Burgess Registered investment 3* (including the* $ 365,540,000 None identified. One of
companies registrant) the four funds managed
by Mr. Burgess, the
Madison Mosaic Equity
Trust ("MADOX"), has
investment strategies
similar to the registrant.
MADOX contains a fulcrum
fee that rewards Madison
Asset Management, LLC
("MAM") if MADOX
outperforms the BXM Index
and penalizes MAM for
underperforming the index.
As of the date of this
filing, MADOX assets were
approximately $11 million.
MAM's compliance program
includes procedures to
monitor trades by MADOX,
the registrant and other
funds managed by the
portfolio manager.
Other pooled investment 0 $ 0 None identified.
vehicles
Other accounts None Not None identified
applicable
* Except as disclosed above with regard to MADOX, the advisory fee was not
based on the performance of any of these accounts.
(a) (3) Compensation.
All compensation is measured and paid on an annual, calendar year basis. The
portfolio manager is a majority owner of the Investment Manager and does not
receive "incentive" compensation.
DIFFERENCE IN METHODOLOGY OF
COMPENSATION WITH
OTHER ACCOUNTS MANAGED
STRUCTURE OF COMPENSATION (RELATES TO THE "OTHER
FOR MANAGING MOSAIC ACCOUNTS" MENTIONED IN
NAME OF MANAGER EQUITY TRUST PORTFOLIOS SPECIFIC CRITERIA THE CHART ABOVE)
-------------------------------------------------------------------------------------------------------------------------
Frank Burgess The Investment Manager believes Not None. Compensation is based on the
investment professionals should applicable. entire employment relationship,
receive compensation for the not based on the performance of
performance of their client's any single account or type of
accounts, their individual account.
effort, and the overall
profitability of the firm. The
manager is a controlling
shareholder of Madison
Investment Advisors, Inc. and
participates in the overall
profitability of the firm
through his individual ownership
in the firm. Madison Investment
Advisors, Inc. also offers an
Employee Stock Ownership Plan
(ESOP) in which all employees
are eligible to participate in
after one year of employment.
The Investment Manager believes
its portfolio managers' goals
are aligned with those of
long-term investors, recognizing
client goals to outperform over
the long-term, rather than
focused on short-term
performance contests.
(a) (4) Ownership of Securities.
As of December 31, 2007, the portfolio manager beneficially owned the following
amounts of the registrant:
NAME OF MANAGER NAME OF REGISTRANT RANGE OF OWNERSHIP INTEREST
Frank Burgess Madison/Claymore Covered
Call & Equity Strategy Fund $100,001 - $500,000
(b) Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
None.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The registrant has not made any material changes to the procedures by which
shareholders may recommend nominees to the registrant's Board of Trustees.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial officer
have evaluated the registrant's disclosure controls and procedures (as defined
in Rule 30a-3(c) under the Investment Company Act of 1940) as of a date within
90 days of this filing and have concluded based on such evaluation, 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) Code of Ethics for Chief Executive and Senior Financial Officer.
(a)(2) Certifications of principal executive officer and principal financial
officer pursuant to Rule 30a-2(a) of the Investment Company Act.
(a)(3) Not Applicable.
(b) Certifications of principal executive officer and principal financial
officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(c) Madison Asset Management, LLC Proxy Voting Policies
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/ Nicholas Dalmaso
---------------------------------------------------------------
Name: Nicholas Dalmaso
Title: Chief Legal and Executive Officer
Date: March 3, 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/ Nicholas Dalmaso
---------------------------------------------------------------
Name: Nicholas Dalmaso
Title: Chief Legal and Executive Officer
Date: March 3, 2008
By: /s/ Steven M. Hill
---------------------------------------------------------------
Name: Steven M. Hill
Title: Treasurer and Chief Financial Officer
Date: March 3, 2008