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 811-21359
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MBIA Capital/Claymore Managed Duration Investment Grade Municipal Fund
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(Exact name of registrant as specified in charter)
2455 Corporate West Drive, Lisle, IL 60532
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(Address of principal executive offices) (Zip code)
J. Thomas Futrell
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
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Date of fiscal year end: July 31
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Date of reporting period: January 31, 2010
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. Section 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The registrant's semi-annual report transmitted to shareholders pursuant to Rule
30e-1 under the Investment Company Act of 1940, as amended (the "Investment
Company Act"), is as follows:
SEMIANNUAL
REPORT
January 31, 2010
(Unaudited)
MBIA CAPITAL/CLAYMORE MANAGED DURATION |
INVESTMENT GRADE MUNICIPAL FUND | MZF
Logo: CUTWATER ASSET MANAGEMENT
Logo: Claymore (R)
WWW.CLAYMORE.COM/MZF
... YOUR STREAM TO THE LATEST,
MOST UP-TO-DATE INFORMATION ABOUT THE
MBIA CAPITAL/CLAYMORE MANAGED DURATION
INVESTMENT GRADE MUNICIPAL FUND
[PHOTO OF A LAKE]
MZF | MBIA CAPITAL/CLAYMORE
LISTED | MANAGED DURATION
NYSE | INVESTMENT GRADE
MUNICIPAL FUND
Logo: CUTWATER ASSET MANAGEMENT Logo: Claymore (R)
There can be no assurence the fund will achieve its investment objective.
The value of the fund will fluctuate with the value of the underlying securites.
Historically, closed-end funds often trade at a discount to their net
asset value.
NOT FDIC-INSURED o NOT BANK-GUARANTEED o MAY LOSE VALUE
The shareholder report you are reading right now is just the beginning of the
story. Online at WWW.CLAYMORE.COM/MZF, 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 and tax characteristics
Cutwater Asset Management and Claymore are continually updating and expanding
shareholder information services on the Fund's website, in an ongoing effort to
provide you with the most current information about how your Fund's assets are
managed, and the results of our efforts. It is just one more way we are working
to keep you better informed about your investment in the Fund.
2 | Semiannual Report | January 31, 2010
MZF | MBIA Capital/Claymore Managed Duration Investment Grade Municipal Fund
Dear SHAREHOLDER |
We thank you for your investment in MBIA Capital/Claymore Managed Duration
Investment Grade Municipal Fund (the "Fund"). This report covers performance
for the semiannual period ended January 31, 2010.
The Fund's investment objective is to provide high current income exempt from
regular Federal income tax while seeking to protect the value of the Fund's
assets during periods of interest rate volatility. Under normal market
conditions, the Fund seeks to achieve this objective by investing at least 80%
of its total assets in municipal bonds of investment-grade quality and normally
investing substantially all of its total assets in securities of
investment-grade quality.
All Fund returns cited--whether based on net asset value ("NAV") or market
price--assume the reinvestment of all distributions. For the six-month period
ended January 31, 2010, the Fund provided a total return based on market price
of 16.59% and a total return of 12.51% based on NAV. As of January 31, 2010,
the Fund's market price of $13.35 represented a discount of 3.54% to NAV of
$13.84. Past performance is not a guarantee of future results. The Fund
performed exceptionally well, with an NAV return more than double that of the
municipal bond market as a whole, as measured by the Barclays Municipal Bond
Index. The Fund's performance benefited from favorable decisions with regard to
credit quality, duration and market sectors.
On August 3, 2009, the Fund announced a 22.95% increase in the monthly dividend
to $0.0750 per share. On November 2, 2009, the Fund announced a 10.00% increase
in the monthly dividend to $0.0825 per share. The increased dividend represents
an annualized distribution rate of 7.42% based on the most recent market price
of $13.35 on January 31, 2010. This distribution rate represents a taxable
equivalent yield of 11.41% for shareholders in the 35% federal income tax
bracket.
The market value of the Fund's shares fluctuates from time to time, and it may
be higher or lower than the Fund's NAV. The current discount to NAV may provide
an opportunity for suitable investors to purchase shares of the Fund below the
market value of the securities in the underlying portfolio. We believe that,
over the long term, the progress of the NAV will be reflected in the market
price return to shareholders.
The Fund's Investment Adviser, known during the period covered by this report
as MBIA Capital Management Corp. ("MBIA"), is owned by MBIA Asset Management
Group, which manages fixed-income products with a total value of approximately
$42 billion as of January 31, 2010. Its parent company, MBIA, Inc., is listed
on the New York Stock Exchange and is a component stock of the S&P 500 Index.
On February 8, 2010, MBIA, Inc. announced that it has restructured MBIA Asset
Management Group. The firm, now known as Cutwater Asset Management
("Cutwater"), will operate under the MBIA corporate umbrella as a separate
operating company focused on fixed-income asset management. Cutwater continues
to be led by the management team in place before the restructuring. In addition
to its third-party advisory business, Cutwater will continue to manage
proprietary portfolios on a fee-for-services basis for MBIA, Inc.
Claymore Securities, Inc. ("Claymore") serves as the Fund's Servicing Agent.
Claymore entities provide supervision, management or servicing on more than
$15.2 billion in assets as of December 31, 2009. Claymore Securities, Inc.
currently offers closed-end funds, unit investment trusts and exchange-traded
funds.
On July 17, 2009, Claymore Group Inc., the parent of Claymore (the "Servicing
Agent"), entered into an Agreement and Plan of Merger between and among
Claymore Group Inc., Claymore Holdings, LLC and GuggClay Acquisition, Inc.
(with the latter two entities being wholly-owned, indirect subsidiaries of
Guggenheim Partners, LLC ("Guggenheim")). The transaction closed on October 14,
2009, whereby GuggClay Acquisition, Inc. merged into
Semiannual Report | January 31, 2010 | 3
MZF | MBIA Capital/Claymore Managed Duration Investment Grade Municipal Fund |
DEAR SHAREHOLDER continued
Claymore Group Inc., the surviving entity. The transaction resulted in a
change-of-control whereby Claymore Group Inc. and its subsidiaries, including
the Servicing Agent, became indirect, wholly-owned subsidiaries of Guggenheim.
The transaction has not affected the daily operations of the Fund or the
services provided by the Servicing Agent.
The servicing agreement for the Fund automatically terminated as a result of
the Guggenheim transaction. The Fund's Board of Trustees considered and
approved a new servicing agreement, which was substantially the same as the
prior agreement, for the Fund; however, shareholder approval of the new
servicing agreement is not required.
Claymore Advisors, LLC ("Claymore Advisors") serves as Administrator for the
Fund. While the administration agreement did not terminate automatically as a
result of the transaction, the Fund's Board of Trustees continues to monitor
the services received under the agreement to ensure that the continuation of
this agreement remains in the best interests of shareholders.
We encourage shareholders to consider the opportunity to reinvest their
distributions from the Fund through the Dividend Reinvestment Plan ("DRIP"),
which is described in detail on page 22 of the Fund's semiannual report. When
shares trade at a discount to NAV, the DRIP takes advantage of the discount by
reinvesting the monthly dividend distribution in common shares of the Fund
purchased in the market at a price less than NAV. Conversely, when the market
price of the Fund's common shares is at a premium above NAV, the DRIP reinvests
participants' dividends in newly-issued common shares at NAV, subject to an IRS
limitation that the purchase price cannot be more than 5% below the market
price per share. The DRIP provides a cost-effective means to accumulate
additional shares and enjoy the benefits of compounding returns over time.
Since the Fund endeavors to maintain a steady monthly distribution rate, the
DRIP plan effectively provides an income averaging technique, which causes
shareholders to accumulate a larger number of Fund shares when the market price
is depressed than when the price is higher.
On November 27, 2009, the Fund announced that it would commence a tender offer
for up to 15% of its outstanding common shares at a price equal to at least 98%
of the Fund's NAV per share on the date the tender offer expires. The Fund
commenced the initial tender offer on February 11, 2010 and this tender offer
closed on March 12, 2010. The Fund repurchased for cash, on a pro-rata basis
for those participating in the tender, 15% of the Fund's outstanding shares at
a price of $13.73 per share. In addition, upon the occurrence of certain events
and certain other terms and conditions, the Fund's Board of Trustees has also
agreed to conduct up to three further tender offers as soon as reasonably
practicable after June 1, 2010, September 1, 2010 and December 1, 2010.
To learn more about the Fund's performance, we encourage you to read the
Questions & Answers section of the report, which begins on page 5. You will
find information about how the Fund is managed, what impacted the performance
of the Fund during the six months ended January 31, 2010, and Cutwater's views
on the market environment.
We appreciate your investment, and we look forward to serving your investment
needs in the future. For the most up-to-date information on your investment,
please visit the Fund's website at www.claymore.com/mzf.
Sincerely,
/s/ Clifford D. Corso
Clifford D. Corso
President
MBIA Capital/Claymore Managed Duration Investment Grade Municipal Fund
4 | Semiannual Report | January 31, 2010
MZF | MBIA Capital/Claymore Managed Duration Investment Grade Municipal Fund
QUESTIONS & ANSWERS |
CLIFFORD D. CORSO
PORTFOLIO MANAGER
Clifford D. Corso is Chief Executive Officer and Chief Investment Officer of
Cutwater Asset Management ("Cutwater"), Chief Investment Officer of MBIA
Insurance Corp. and Executive Vice President & Chief Investment Officer of MBIA
Inc. His responsibilities include oversight and direction of the investments of
MBIA Inc. and its subsidiaries. He manages Cutwater's fixed income asset
management platform, directs the investment of all fixed income assets under
management, and oversees the portfolios of MBIA Insurance Corp. and its
affiliates. In addition, Mr. Corso's responsibilities include the direction of
investments for outside clients such as pension funds, sovereign governments,
state and local governments, and institutional investors. Mr. Corso is also an
active member of the Board of Directors for the MBIA Foundation, Inc. Before
joining MBIA in 1994, he was the co-head of fixed income at a subsidiary of
Alliance Capital Management. Throughout his 25-year career, Mr. Corso has
managed a wide array of fixed income products, including corporate,
asset-backed, government, mortgage and derivative products. Mr. Corso has a
bachelor's degree fromYale University and a master's degree from Columbia
University. He holds Series 7, 24, and 63 licenses from the Financial Industry
Regulatory Authority (FINRA).
JEFFREY S. MACDONALD,
CFA PORTFOLIO MANAGER
Mr. MacDonald, who joined MBIA in 2007, is a Director of Cutwater and has
extensive experience in the fixed-income markets across a variety of sectors
with particular emphasis on core and core plus strategies. He was previously a
vice president and portfolio manager at Hartford Investment Management Company
(HIMCO), where he managed core, core plus, intermediate core, and other
broad-based fixed-income styles. He was also instrumental in designing some of
HIMCO's fixed-income-based products, including a number of "alternative"
strategies. Prior to joining HIMCO, Mr. MacDonald was a fixed-income portfolio
analyst specializing in taxable/insurance portfolios at Wellington Management
Company. He began his career with Fidelity Investments as a fixed income trader
and lead systems analyst. Mr. MacDonald earned his bachelor's degree from
Trinity College in Connecticut and his master's degree from Boston University.
He holds the designation of Chartered Financial Analyst (CFA) through the CFA
Institute and is a member of the Hartford Security Analysts Society.
JAMES B. DICHIARO
PORTFOLIO MANAGER
Mr. DiChiaro joined MBIA in 1999 and is a Vice President of Cutwater. He
currently manages the company's municipal bond portfolios (taxable and
tax-exempt) and has extensive experience managing money market portfolios. Mr.
DiChiaro began his career at MBIA working with the conduit group structuring
medium-term notes for Meridian Funding Company and performing the treasury role
for an MBIA sponsored asset backed commercial paper conduit, Triple-A One
Funding Corporation.
Prior to joining MBIA he worked for Merrill Lynch supporting their asset-backed
securities trading desk. Mr. DiChiaro has a bachelor's degree from Fordham
University and a master's degree from Pace University.
In the following interview Portfolio Managers Clifford D. Corso, Jeffrey S.
MacDonald and James B. DiChiaro discuss the market environment and the
performance of the MBIA Capital/Claymore Managed Duration Investment Grade
Municipal Fund (the "Fund") for the semiannual period ended January 31, 2010.
- --------------------------------------------------------------------------------
PLEASE PROVIDE AN OVERVIEW OF THE MUNICIPAL MARKET DURING THE SIX-MONTH PERIOD
ENDED JANUARY 31, 2010.
The U.S. economy showed signs of improvement during the second half of 2009,
with GDP posting positive growth in third and fourth quarters of the year.
Although the general economy shows signs of recovery, conditions within the
municipal bond market warrant a degree of caution. With a national unemployment
rate hovering near 10%, states are faced with one of the most difficult fiscal
situations since the Great Depression. Estimates indicate that state tax
receipts are down in excess of 10% on a year-on-year basis with notable
decreases in personal income tax collections in well over half of the states.
State expenditures have been slashed to combat these revenue shortfalls but
some states have been forced to tap into their "rainy day funds."
Despite the deteriorating fundamental credit picture, strong technical factors
within the municipal bond market paved the way for robust tax-exempt bond
returns during the six months covered by this report. The success of the Build
America Bond program, scheduled to expire in December 2010, shifted a large
amount of new issue supply from the tax-exempt to the taxable market. Build
America Bonds, created in April 2009 by the U.S. government as part of the
effort to stimulate economic growth, are designed to appeal to a broader set of
investors than traditional tax-exempt bonds. Under the Build America Bonds
program, the U.S. Treasury Department makes a direct payment to the issuer of
the bonds in an amount equal to 35% of each interest payment. Potential
investors in these bonds include pension funds and other institutional
investors that do not generally invest in tax-exempt bonds. This program
continues to remain a more attractive form of financing for municipal issuers
and we expect its use to continue. The reduction of tax-exempt issuance
associated with the Build America Bonds program has primarily impacted the
supply of long maturity bonds; where issuers reap large savings by issuing to
the taxable markets.
With tax rates expected to rise in the near future, retail participants have
invested money in tax-exempt mutual funds at a record pace. Historically low
yields in the front end of the yield curve have pressured investors to extend
maturities out of money market mutual funds with yields near zero percent into
longer
Semiannual Report | January 31, 2010 | 5
MZF | MBIA Capital/Claymore Managed Duration Investment Grade Municipal Fund |
QUESTIONS & ANSWERS continued
maturity bonds and bond funds.(1) The decrease in long maturity tax-exempt
supply and subsequent increase in demand has led to a flattening of the
tax-exempt yield curve coupled with a significant compression of credit
spreads.(2) The market's strong returns come despite a weakening fiscal picture
amongst many issuers.
As mentioned, the tax-exempt yield curve flattened throughout this six-month
period primarily because issuance of Build America Bonds diminished tax-exempt
supply, along with record retail flows into tax-exempt mutual funds. The yield
curve did, however, steepen during some months. In late September, yields on
long-term tax-exempt bonds were pushed below 4%, a technical resistance point
for many retail investors. At those levels investors shied away from long
maturity bonds which caused prices to drift lower and the yield curve to
steepen. At that time credit spreads widened as mutual funds, which are major
buyers of lower rated securities, saw a slow down of fund inflows. However, the
steeper yield curve was short lived as renewed concerns about supply attracted
long maturity investors back into the market.
To summarize, technical factors, especially supply expectations, were major
drivers of performance in the municipal market during the six months ended
January 31, 2010. A recent proposal to extend indefinitely the Build America
Bonds program, which was originally intended to expire in December 2010, means
that these bonds may be a permanent factor in the municipal market. However,
the new proposal may reduce the subsidy from 35% to 28%, a level that would
bring the cost of issuing Build America Bonds more in line with the cost of
issuing traditional tax-exempt bonds.
- --------------------------------------------------------------------------------
HOW DID THE FUND PERFORM IN THIS MARKET ENVIRONMENT?
All Fund returns cited--whether based on net asset value ("NAV") or market
price--assume the reinvestment of all distributions. For the six-month period
ended January 31, 2010, the Fund provided a total return based on market price
of 16.59% and a total return of 12.51% based on NAV. Past performance is not a
guarantee of future results. The Fund's successful investment strategies
resulted in an NAV return that was significantly higher than the Barclays
Municipal Bond Index(3), a widely used measure of the municipal bond market as
a whole, which returned 4.90% for the six-month period ended January 31, 2010.
As of January 31, 2010, the Fund's market price of $13.35 represented a
discount of 3.54% to NAV of $13.84. The market value and NAV of the Fund's
shares fluctuate from time to time, and the Fund's market value may be higher
or lower than its NAV. The current discount to NAV may provide an opportunity
for suitable investors to purchase shares of the Fund below the market value of
the securities in the underlying portfolio. The Adviser believes that, over the
long term, the progress of the NAV will be reflected in the market price return
to shareholders.
On August 3, 2009, the Fund announced a 22.95% increase in the monthly dividend
to $0.0750 per share. On November 2, 2009, the Fund announced a 10.00% increase
in the monthly dividend to $0.0825 per share. The increased dividend represents
an annualized distribution rate of 7.42% based on the most recent market price
of $13.35 on January 31, 2010. For comparison, investors were receiving yields
of between 4% and 5% on individual tax-exempt bonds as of January 31, 2010.
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HOW IS THE PORTFOLIO STRUCTURED, AND WHAT HAS THAT STRUCTURE MEANT FOR
PERFORMANCE?
The Fund has a high quality portfolio that is diversified across issuers,
sectors and states. In selecting securities for the portfolio, the portfolio
management team, who together have more than 50 years of experience, are
supported by Cutwater's team of credit analysts, who evaluate the credit
quality of sectors and individual issuers, going far beyond the bond ratings
provided by rating agencies. Cutwater's proprietary quantitative models help to
evaluate the risk of individual securities as well as the overall portfolio,
supplementing the judgment of the experienced team. Thorough quantitative and
qualitative analysis helps ensure that the desired level of credit quality is
maintained in the Fund's portfolio while yield is added, as appropriate, by
buying higher-yielding bonds at what are considered to be attractive prices.
During the market turmoil of the prior fiscal year, the Fund had a large
allocation to pre-refunded securities, which have little credit risk.(4) As the
market returned to more normal conditions, the yield curve remained steep to
historical averages, and the decision was made to reduce the Fund's position in
pre-refunded securities. An emphasis was placed on bonds with longer maturities
and higher yields, including some bonds with lower credit ratings.
Diversification was increased across sectors with the addition of general
obligation bonds, higher education bonds, and essential service bonds some of
which carry credit ratings of single-A to BBB.
(1) The yield curve is a line that traces yields on a type of security over a
spectrum of maturities, generally ranging from three months to 30 years.
Ordinarily, the yield curve slopes upward, which means that investors
willing to invest in longer maturity securities are generally rewarded with
higher yields.
(2) Spread refers to the difference between the interest rate on Treasury
securities and non-Treasury securities that are similar in all respects
except credit quality.
(3) The Barclays Municipal Bond Index is a rules-based, market-value weighted
index engineered for the long-term tax-exempt bond market. To be included
in the index, bonds must be rated investment-grade (Baa3/BBB- or higher) by
at least two of the following ratings agencies: Moody's, S&P, Fitch.
An index is unmanaged and is not investable.
(4) A bond is pre-refunded when the issuer has purchased U.S. Treasury or
agency securities that provide a stream of cash flow to pay off the bonds
on their first call date.
6 | Semiannual Report | January 31, 2010
MZF | MBIA Capital/Claymore Managed Duration Investment Grade Municipal Fund |
QUESTIONS & ANSWERS continued
The duration of the portfolio was lengthened somewhat to take advantage of the
higher yields provided by longer-duration bonds. Concerns about a limited
supply of long-term tax-exempt bonds provide comfort with maintaining an
overweight position in long-duration bonds. As of January 31, 2010, the average
duration of the Fund's portfolio was 7.91 years, compared with 7.62 years at
July 31, 2009.(5)
The strategies described above were beneficial to the Fund's performance.
Relative to the Barclays Municipal Bond Index, the Fund held an overweight
position in single-A and BBB bonds, which generally performed better than bonds
with higher credit ratings. The Fund's longer duration than the Index was
positive for absolute and relative performance. Also, the Fund's performance
benefited from an emphasis on sectors that performed well, including
corporate-backed industrial development bonds and health care bonds.
As riskier bonds performed well, the Fund's remaining positions in pre-refunded
bonds and bonds with high credit ratings, including some general obligation
bonds and essential services bonds, detracted from performance. Also, the
Fund's position in short duration bonds had a negative impact on performance.
- --------------------------------------------------------------------------------
HOW HAS THE FUND'S LEVERAGE STRATEGY AFFECTED PERFORMANCE?
The Fund utilizes leverage (borrowing) as part of its investment strategy to
finance the purchase of additional securities that provide increased income and
greater appreciation potential to common shareholders than could be achieved
from a portfolio that is not leveraged. Of course, leverage results in greater
NAV volatility and entails more downside risk than an unleveraged portfolio.
Leverage adds to performance only when the cost of leverage is less than the
total return generated by investments. As of January 31, 2010, the Fund had
$69.45 million of leverage outstanding in the form of Auction Market Preferred
Shares ("AMPS(SM)"). During the six-month period ended January 31, 2010, the
cost of leverage was less than the return of the Fund's investments;
accordingly, leverage contributed to the Fund's total return. Based on the
maximum rates established for failed auctions, the Fund's annualized cost of
leverage for the six month period through January 31, 2010 was 1.49% .
There is no guarantee that the Fund's leverage strategy will be successful, and
the Fund's use of leverage may cause the Fund's NAV and market price of common
shares to be more volatile. Leverage adds value only when the return on
securities purchased exceeds the cost of leverage.
- --------------------------------------------------------------------------------
WHAT IS THE OUTLOOK FOR THE MUNICIPAL MARKET IN THE COMING MONTHS?
The fiscal condition of many states and municipalities is a concern, and that
is an important reason for undertaking an independent credit and operational
analysis of each bond under consideration for the portfolio, rather than
relying on agency credit ratings. The recovery of the broader economy should
help state budgets deficits, but with a lag. As unemployment is generally late
to recover from recessionary conditions, it will be some time before states see
a noticeable increase in tax receipts, especially income tax receipts. Sales
tax receipts also tend to suffer as consumers are hesitant to purchase big
ticket items during times of high unemployment.
Although credit spreads on single-A and BBB bonds have tightened from record
highs, they remain wide relative to historical averages. This could generate
positive total return for the Fund as its position in BBB credits and a few
securities with slightly lower ratings experience a tightening in their credit
spreads and revert to their longer term averages while providing attractive
levels of income.
Despite a record amount of municipal bond issuance slated for 2010, tax-exempt
supply is expected to be at its lowest in several years because of Build
America Bonds, which may absorb between 25%-30% of the municipal bond supply.
Tax rates are projected to rise, particularly affecting earners in higher
income brackets, which may create additional retail interest in tax-exempt
bonds. The net supply of tax-exempt bonds (that is, the face value of new
issues less maturities) is expected to be negative in 2010, lending credence to
the idea that the market may be faced with a deficiency of long maturity
tax-exempt bonds, which may set the stage for good performance in 2010.
- --------------------------------------------------------------------------------
MZF RISKS AND OTHER CONSIDERATIONS
The views expressed in this report reflect those of the portfolio managers only
through the report period as stated on the cover. These views are subject to
change at any time, based on market and other conditions and should not be
construed as a recommendation of any kind. The material may also include
forward looking statements that involve risk and uncertainty, and there is no
guarantee that any predictions will come to pass.
There can be no assurance that the Fund will achieve its investment objective.
The value of the Fund will fluctuate with the value of the underlying
securities. Historically, closed-end funds often trade at a discount to their
net asset value. An investment in this Fund may not be suitable for investors
who are, or as a result of this investment would become, subject to the federal
alternative minimum tax because the securities in the Fund may pay interest
that is subject to taxation under the federal alternative minimum tax. Special
rules apply to corporate holders. Additionally, any capital gains dividends
will be subject to capital gains taxes.
(5) Duration is a measure of the interest rate sensitivity of a bond or
fixed-income portfolio which incorporates time to maturity and coupon size.
The longer the duration, the greater the interest rate risk.
Semiannual Report | January 31, 2010 | 7
MZF | MBIA Capital/Claymore Managed Duration Investment Grade Municipal Fund |
QUESTIONS & ANSWERS continued
There can be no guarantee that hedging strategies will be employed or will be
successful. The premium paid for entering into such hedging strategies will
result in a reduction in the net asset value of the Fund and a subsequent
reduction of income to the Fund. Any income generated from hedging transactions
will not be exempt from income taxes.
Certain risks are associated with the leveraging of common shares of the Fund.
Both the net asset value and the market value of the Fund's shares may be
subject to higher volatility and a decline in value.
There are also specific risks associated with investing in municipal bonds,
including but not limited to interest rate and credit risk. Interest rate risk
is the risk that prices of Municipal Bonds generally increase when interest
rates decline and decrease when interest rates increase. Prices of longer term
securities generally change more in response to interest rate changes than
prices of shorter term securities. Credit risk is the risk that the issuer will
be unable to pay the interest or principal when due. The degree of credit risk
depends on both the financial condition of the issuer and the terms of the
obligation. The secondary market for municipal bonds is less liquid than many
other securities markets, which may adversely affect the Fund's ability to sell
its bonds at prices approximating those at which the Fund currently values
them. The ability of municipal issuers to make timely payments of interest and
principal may be diminished during general economic downturns. In addition,
laws enacted in the future by Congress or state legislatures or referenda could
extend the time for payment of principal and/or interest. In the event of
bankruptcy of an issuer, the Fund could experience delays in collecting
principal and interest.
Leverage creates certain risks for common shareholders, including higher
volatility of both the net asset value and the market value of the common
shares, because common shareholders bear the effects of changes in the value of
the Fund's investments. Leverage also creates the risk that the investment
return on the Fund's common shares will be reduced to the extent the dividends
paid on preferred shares and other expenses of the preferred shares exceed the
income earned by the Fund on its investments. If the Fund is liquidated,
preferred shareholders will be entitled to receive liquidating distributions
before any distribution is made to common shareholders. When the Fund uses
leverage, the fees paid to Cutwater and Claymore will be higher than if
leverage was not used.
There also risks associated with investing in Auction Market Preferred Shares
or AMPS. The AMPS are redeemable, in whole or in part, at the option of the
Fund on any dividend payment date for the AMPS, and will be subject to
mandatory redemption in certain circumstances. The AMPS will not be listed on
an exchange. You may only buy or sell AMPS through an order placed at an
auction with or through a broker-dealer that has entered into an agreement with
the auction agent and the Fund or in a secondary market maintained by certain
broker-dealers. These broker-dealers are not required to maintain this market,
and it may not provide you with liquidity. The AMPS market continues to remain
illiquid as auctions for nearly all AMPS continue to fail. A failed auction is
not a default, nor does it require the redemption of a fund's auction-rate
preferred shares. Provisions in the Fund's offering documents provide a
mechanism to set a maximum rate in the event of a failed auction, and, thus,
investors will continue to be entitled to receive payment for holding these
AMPS.
In addition to the risks described above, the Fund is also subject to: Market
Risk and Selection Risk, Call and Redemption Risk, Private Activity Bonds,
Risks of Tobacco-Related Municipal Bonds, Leverage, Inflation Risk, Derivatives
Risk, Affiliated Insurers, and Anti-takeover Provisions, Market Disruption.
Please see Fund's website for a more detailed discussion about Fund risks and
considerations.
8 | Semiannual Report | January 31, 2010
MZF | MBIA Capital/Claymore Managed Duration Investment Grade Municipal Fund
Fund SUMMARY | AS OF JANUARY 31, 2010 (unaudited)
FUND INFORMATION
- --------------------------------------------------------------------------------
Symbol on New York Stock Exchange: MZF
Initial Offering Date: August 27, 2003
Closing Market Price as of 01/31/10: $13.35
Net Asset Value as of 01/31/10: $13.84
Yield on Closing Market Price as of 01/31/10: 7.42%
Taxable Equivalent Yield on Closing Market Price as of 01/31/10(1): 11.41%
Monthly Distribution Per Common Share(2): $0.0825
Leverage as of 01/31/10(3): 39%
Percentage of total investments subject to alternative minimum tax
as of 01/31/10: 23.3%
- --------------------------------------------------------------------------------
(1) Taxable equivalent yield is calculated assuming a 35% federal income tax
bracket.
(2) Monthly distribution is subject to change.
(3) As a percentage of total investments.
TOTAL RETURNS
- --------------------------------------------------------------------------------
(INCEPTION 8/27/03) MARKET NAV
- --------------------------------------------------------------------------------
Six Month 16.59% 12.51%
One Year 42.46% 30.61%
Three Year - average annual 7.04% 3.86%
Five Year - average annual 5.75% 3.88%
Since Inception - average annual 3.83% 4.61%
- --------------------------------------------------------------------------------
Pie Chart:
SECTOR CONCENTRATION*
Health Care 19.4%
IDR/IRB 14.7%
Housing 11.4%
Prerefunded 7.2%
Higher Education 6.2%
General Obligation 5.9%
Power 5.7%
Water and Sewer 4.2%
Transportation 4.1%
Utility 3.9%
Tobacco 3.4%
Lease Backed Rev Bond 3.3%
All Other Sectors 10.6%
* As a percentage of long-term investments.
Pie Chart:
STATE/TERRITORY ALLOCATIONS*
New York 12.7%
California 10.2%
Texas 9.8%
Ohio 7.4%
Florida 6.7%
Louisiana 4.5%
Pennsylvania 4.2%
Wyoming 3.8%
South Dakota 3.4%
Illinois 3.4%
All other states 33.9%
* As a percentage of long-term municipal bonds and notes.
Line Chart:
SHARE PRICE & NAV PERFORMANCE
SHARE PRICE NAV
7/31/2009 10.05 11.3
9.98 11.36
10.02 11.45
10.15 11.5
10.23 11.56
10.32 11.58
10.57 11.61
10.67 11.65
10.48 11.66
10.5 11.69
10.3 11.67
10.14 11.69
10.13 11.67
9.97 11.61
9.5 11.59
9.34 11.58
9.5 11.61
9.7 11.6
9.69 11.6
9.63 11.58
9.63 11.57
9.58 11.53
9.61 11.49
9.52 11.52
9.51 11.52
9.43 11.52
9.6 11.52
9.51 11.45
9.65 11.45
9.6 11.45
9.68 11.45
9.9 11.33
9.98 11.39
9.85 11.53
9.86 11.54
9.84 11.52
9.83 11.49
9.78 11.47
9.77 11.47
9.9 11.46
9.84 11.5
9.97 11.54
10 11.58
10.2 11.56
10.12 11.55
10.09 11.55
10.13 11.54
10.07 11.59
10.16 11.61
9.99 11.55
9.98 11.59
10.06 11.63
10.21 11.74
10.16 11.8
9.98 11.87
10.07 11.97
10.19 12.02
10.25 12.01
10.27 11.99
10.36 12.01
10.32 12.07
10.59 12.08
10.69 12.11
10.79 12.12
10.83 12.13
10.78 12.14
10.85 12.26
10.93 12.34
10.89 12.39
10.86 12.46
11.02 12.49
10.97 12.5
11.04 12.52
11.11 12.56
11.2 12.59
11.18 12.66
11.2 12.74
11.23 12.75
11.2 12.77
11.17 12.75
11.25 12.7
11.3 12.64
11.23 12.64
11.12 12.58
11.2 12.56
11.13 12.58
11.23 12.58
11.09 12.57
11.09 12.52
11.13 12.45
10.92 12.39
10.86 12.32
10.8 12.36
10.81 12.39
10.82 12.41
10.85 12.43
10.8 12.38
10.88 12.38
10.86 12.39
10.92 12.39
10.94 12.38
10.95 12.38
10.9 12.39
10.93 12.39
11 12.41
11.04 12.42
11 12.43
10.95 12.45
11.01 12.5
11.13 12.56
11.18 12.59
11.18 12.66
11.24 12.62
11.26 12.62
11.21 12.59
11.19 12.59
11.24 12.58
11.27 12.56
11.41 12.57
11.43 12.62
11.49 12.62
11.59 12.6
11.71 12.6
11.78 12.6
11.76 12.66
11.81 12.68
7/31/2009 11.87 12.73
12.05 12.74
12.05 12.73
12.05 12.76
12.03 12.76
12.02 12.76
12.06 12.77
12.08 12.8
12.05 12.74
12.02 12.77
12.09 12.84
11.95 12.87
12.12 12.9
12.18 12.93
12.19 12.95
12.2 12.98
12.19 12.98
12.2 13.02
12.2 13.09
12.29 13.15
12.3 13.23
12.28 13.24
12.35 13.29
12.41 13.45
12.41 13.53
12.67 13.56
12.75 13.56
12.84 13.59
12.88 13.65
12.86 13.68
12.83 13.69
12.98 13.7
13.03 13.84
13.08 13.92
13.11 13.99
13.01 14.01
13.1 14.08
13.11 14.12
13.19 14.16
13.22 14.19
13.21 14.21
13.24 14.25
13.22 14.32
13.3 14.36
13.38 14.38
13.44 14.38
13.47 14.35
13.48 14.3
13.5 14.2
13.28 14.17
13.02 14.17
13.02 14.04
12.79 13.94
12.64 13.9
12.66 13.91
12.66 13.91
12.83 13.92
12.74 13.89
13.01 13.88
13.04 13.88
13.01 13.89
13.1 13.84
13 13.79
13.03 13.74
12.77 13.74
12.97 13.74
12.93 13.74
12.99 13.76
12.99 13.76
12.99 13.74
12.99 13.7
13.05 13.6
12.94 13.6
12.91 13.58
12.91 13.59
12.84 13.6
12.9 13.56
12.91 13.56
12.89 13.56
12.88 13.58
12.91 13.58
12.96 13.59
12.97 13.61
13 13.63
13.07 13.65
13.18 13.68
13.18 13.73
13.24 13.76
13.18 13.76
13.19 13.77
13.17 13.82
13.18 13.84
13.23 13.82
13.21 13.73
13.18 13.74
13.13 13.73
13.15 13.73
13.14 13.76
13.12 13.77
13.18 13.77
13.16 13.74
13.23 13.77
13.23 13.77
13.24 13.75
13.21 13.75
13.16 13.75
13.2 13.73
13.2 13.74
13.18 13.78
13.2 13.8
13.25 13.81
13.28 13.84
13.37 13.84
13.38 13.87
13.33 13.81
13.29 13.82
13.35 13.85
13.41 13.84
13.33 13.87
13.29 13.88
13.32 13.9
13.37 13.89
13.4 13.86
13.4 13.83
13.37 13.83
13.35 13.84
1/31/2010 13.35 13.84
Pie Chart:
CREDIT QUALITY*
AAA 17.5%
AA 24.3%
A 24.1%
BBB 27.6%
BB 2.3%
B 0.7%
N/A 3.5%
Average: A
* As a percentage of long-term investments. Based on Standard & Poor's or
other equivalent ratings.
Pie Chart:
MATURITY BREAKDOWN*
0-5 Years 10.8%
6-10 Years 5.7%
11-15 Years 22.4%
16-20 Years 19.9%
21-25 Years 17.0%
26-30 Years 21.4%
30 + Years 2.8%
Average Maturity: 19.5 years
* As a percentage of long-term investments.
Past performance does not guarantee future results. All portfolio data is
subject to change daily. For more current information, please visit
www.claymore.com/mzf. The above summaries are provided for informational
purposes only and should not be viewed as recommendations.
Semiannual Report | January 31, 2010 | 9
MZF | MBIA Capital/Claymore Managed Duration Investment Grade Municipal Fund |
Portfolio of INVESTMENTS | JANUARY 31, 2010 (unaudited)
RATING PRINCIPAL OPTIONAL
(S&P)* AMOUNT (000) DESCRIPTION CALL PROVISIONS** VALUE
- --------------------------------------------------------------------------------------------
MUNICIPAL BONDS & NOTES -- 159.1%
ALASKA -- 0.7%
A+ $ 750 Alaska Muni Bond Bank Auth,
Ser 1, 5.75%, 09/01/33 09/01/18 @ 100 $ 781,380
- --------------------------------------------------------------------------------------------
ALABAMA -- 2.4%
BBB 845 Courtland, AL Ind Dev Brd
Environ Imp Rev, AMT, Ser B,
6.25%, 08/01/25 08/01/13 @ 100 849,462
Baa3 1,890 Courtland, AL Ind Dev Brd
Solid Waste Disp Rev, AMT,
6.00%, 08/01/29 03/01/10 @ 101 1,800,395
- --------------------------------------------------------------------------------------------
2,649,857
- --------------------------------------------------------------------------------------------
CALIFORNIA -- 16.2%
BBB+ 5,000 California Public Works Brd
Dept Mental Health Lease Rev, Ser A,
5.00%, 06/01/24 06/01/14 @ 100 4,792,250
A- 6,000 California Various Purpose Gen Oblig,
5.125%, 11/01/24 11/01/13 @ 100 6,030,960
A- 2,500 Chula Vista, CA Ind Dev Rev, Ser B
AMT, 5.50% 12/01/21 06/02/14 @ 102 2,568,300
BBB 2,065 Golden State Tobacco Securitization
Rev, Ser A-1, 5.00%, 06/01/33 06/01/17 @ 100 1,609,048
AAA 2,750 Golden State Tobacco Settlement
Rev, Ser B, 5.375%, 06/01/28
(Prerefunded @ 06/01/10)+ 06/01/10 @ 100 2,795,870
- --------------------------------------------------------------------------------------------
17,796,428
- --------------------------------------------------------------------------------------------
COLORADO -- 5.0%
AA 3,500 Colorado Health Facs Auth Rev,
5.25%, 09/01/21
(Prerefunded @ 09/01/11)+ 09/01/11 @ 100 3,758,615
BBB 2,000 Colorado Health Facs Auth Rev,
5.25%, 05/15/42 05/15/17 @ 100 1,746,020
- --------------------------------------------------------------------------------------------
5,504,635
- --------------------------------------------------------------------------------------------
DISTRICT OF COLUMBIA -- 1.7%
Aaa 2,000 District of Columbia FHA Multi Family
Henson Ridge-Rmkt, AMT,
5.10%, 06/01/37 (FHA) 06/01/15 @ 102 1,903,680
- --------------------------------------------------------------------------------------------
FLORIDA -- 10.6%
AA- 1,000 Clearwater, FL Wtr & Swr Rev, Ser A,
5.25%, 12/01/39 12/01/19 @ 100 1,012,180
NR 2,500 Highlands Co., FL Health Facs
Auth Rev, Ser B, 5.25%, 11/15/23
(Prerefunded @ 11/15/12)+ 11/15/12 @ 100 2,776,300
NR 3,000 Highlands Co., FL Health Facs
Auth Rev, Ser D, 5.875%, 11/15/29
(Prerefunded @ 11/15/13)+ 11/15/13 @ 100 3,468,930
A- 2,200 Miami-Dade Co., FL Aviation Rev, AMT,
5.00%, 10/01/38 (CIFG) 10/01/15 @ 100 1,946,538
AAA 1,500 Miami-Dade Co., FL Sch Brd, Ser A,
5.375%, 02/01/34 (Assured Gty) 02/01/19 @ 100 1,530,540
RATING PRINCIPAL OPTIONAL
(S&P)* AMOUNT (000) DESCRIPTION CALL PROVISIONS** VALUE
- --------------------------------------------------------------------------------------------
FLORIDA (CONTINUED)
BBB $ 1,000 Seminole Indian Tribe FL Rev, Ser A,
144A, 5.25%, 10/01/27 10/01/17 @ 100 $ 892,890
- --------------------------------------------------------------------------------------------
11,627,378
- --------------------------------------------------------------------------------------------
ILLINOIS -- 5.3%
AAA 1,115 Chicago O'Hare Intl Arpt Rev 3rd Lien,
Ser A-2, AMT, 5.50%, 01/01/16 (AGM) 01/01/14 @ 100 1,195,391
Baa2 2,000 Illinois Fin Auth, Roosevelt Univ Rev,
5.50%, 04/01/37 04/01/17 @ 100 1,851,520
A- 1,000 Illinois Fin Auth, Rush Univ Med Ctr Rev,
Ser C, 6.375%, 11/01/29 05/01/19 @ 100 1,052,280
AA 1,880 Illinois Hsg Dev Auth Homeowner Mtg,
AMT, Ser A-2, 5.00%, 08/01/36 02/01/16 @ 100 1,764,606
- --------------------------------------------------------------------------------------------
5,863,797
- --------------------------------------------------------------------------------------------
INDIANA -- 1.9%
AA- 2,000 Indianapolis, IN Pub Impt Bond Bank Wtrwks,
Ser A, 5.50%, 01/01/29 01/01/19 @ 100 2,090,120
- --------------------------------------------------------------------------------------------
IOWA -- 1.6%
BBB 2,000 Iowa Tobacco Settlement Auth,
Cap Apprec Asset Bkd, Ser B,
5.60%, 06/01/34 06/01/17 @ 100 1,728,940
- --------------------------------------------------------------------------------------------
KENTUCKY -- 1.9%
Aa3 1,000 Kentucky Eco Dev Fin Auth Hosp Fac Rev,
Baptist Hlthcr Sys, Ser A, 5.625%, 08/15/27 08/15/18 @ 100 1,088,840
BBB+ 1,000 Owen Cnty, KY, Wtrwrks Sys Rev,
American Wtr Co, Ser B, 5.625%, 09/01/39 09/01/19 @ 100 1,018,100
- --------------------------------------------------------------------------------------------
2,106,940
- --------------------------------------------------------------------------------------------
LOUISIANA -- 7.2%
BBB 1,000 De Soto Parish, LA Environ Imp
Rev, AMT, Ser A, 5.85%, 11/01/27 11/01/13 @ 100 929,330
AA- 1,000 East Baton Rouge Parish, LA Swr Commn
Rev, Ser A, 5.25%, 02/01/34 02/01/19 @ 100 1,042,940
BB 3,000 Louisiana Govt, Environ Facs & Comnty
Dev Auth Rev, 6.75%, 11/01/32 11/01/17 @ 100 3,090,600
BBB+ 3,000 St. John Baptist Parish, LA
Marathon Oil Corp., Ser A,
5.125%, 06/01/37 06/01/17 @ 100 2,837,610
- --------------------------------------------------------------------------------------------
7,900,480
- --------------------------------------------------------------------------------------------
MARYLAND -- 0.9%
BBB- 1,000 Maryland Health & Hgr Ed Facs Auth Rev,
5.75%, 01/01/38 01/01/18 @ 100 970,220
- --------------------------------------------------------------------------------------------
MASSACHUSETTS -- 2.7%
AA- 1,000 Massachusetts Housing Fin Agency,
AMT, 5.10%, 12/01/27 06/01/17 @ 100 989,540
AA 950 Massachusetts Housing Fin Agency,
AMT, Ser 134, 5.60%, 12/01/38 06/01/18 @ 100 951,796
BBB 1,000 Massachusetts St Health & Ed Facs Auth Rev,
Ser A, 6.25%, 07/01/30 07/01/19 @ 100 1,061,260
- --------------------------------------------------------------------------------------------
3,002,596
- --------------------------------------------------------------------------------------------
See notes to financial statements.
10 | Semiannual Report | January 31, 2010
MZF | MBIA Capital/Claymore Managed Duration Investment Grade Municipal Fund |
PORTFOLIO OF INVESTMENTS (unaudited) continued
RATING PRINCIPAL OPTIONAL
(S&P)* AMOUNT (000) DESCRIPTION CALL PROVISIONS** VALUE
- --------------------------------------------------------------------------------------------
MICHIGAN -- 5.0%
AAA $ 1,000 Detroit, MI Sewer Disp Rev,
Sr Lien, Ser B, 7.50%, 07/01/33 (AGM) 07/01/19 @ 100 $ 1,175,100
AAA 1,000 Detroit, MI Wtr Supply Sys Rev,
2nd Lien, Ser B, 7.00%, 07/01/36 (AGM) 07/01/19 @ 100 1,130,970
BBB- 1,000 Michigan Strategic Fund Ltd Oblig Rev Adj Ref,
Dow Chemical, Ser B-1, 6.25%, 06/01/14 N/A 1,130,930
A- 2,000 Michigan Strategic Fund Ltd Oblig
Rev Ref, Ser C, 5.45%, 09/01/29 09/01/11 @ 100 2,017,940
- --------------------------------------------------------------------------------------------
5,454,940
- --------------------------------------------------------------------------------------------
MISSISSIPPI -- 0.9%
BBB 1,000 Warren County, MS Gulf Opp Zone,
Intl Paper Co., Ser A, 6.50%, 09/01/32 09/01/18 @ 100 1,031,060
- --------------------------------------------------------------------------------------------
NEBRASKA -- 2.7%
A- 3,000 Public Power Generation Agency,
Whelan Energy Ctr Unit 2,
5.00%, 01/01/41 (AMBAC) 01/01/17 @ 100 2,958,030
- --------------------------------------------------------------------------------------------
NEVADA -- 5.0%
A 5,410 Henderson, NV Health Care Fac Rev,
Ser A, 5.625%, 07/01/24 07/01/14 @ 100 5,529,236
- --------------------------------------------------------------------------------------------
NEW JERSEY -- 1.3%
BBB+ 1,500 New Jersey, Health Care Fac Fin Auth Rev,
Chilton Mem Hosp, 5.75%, 07/01/39 07/01/19 @ 100 1,455,840
- --------------------------------------------------------------------------------------------
NEW YORK -- 20.3%
A- 2,750 Long Island, NY Power Auth Rev, Ser A,
5.10%, 09/01/29 09/01/14 @ 100 2,803,790
AA- 4,000 Metropolitan Trans Auth Rev, Ser A,
5.125%, 01/01/24 07/01/12 @ 100 4,175,320
B- 750 New York City Indl Dev Rev, JFK
Intl Arpt, Ser A, AMT, 8.00%, 08/01/12 N/A 760,073
B- 500 New York City Indl Dev Rev, American Airlines
JFK Intl Arpt, AMT, 7.50%, 08/01/16 N/A 495,460
BB+ 1,000 New York Dorm Auth Rev, NYU Hosp Ctr,
Ser B, 5.25%, 07/01/24 07/01/17 @ 100 998,950
AA 2,250 New York, NY Gen Oblig, Ser J,
5.00%, 05/15/23 05/15/14 @ 100 2,379,375
A+ 1,750 New York Muni Bond Bank Agy Special
School Purpose Rev, Ser C,
5.25%, 12/01/22 06/01/13 @ 100 1,832,985
AA- 4,000 New York Tobacco Settlement Funding
Corp, Ser A1, 5.50%, 06/01/19 06/01/13 @ 100 4,251,640
A- 5,000 Suffolk Co, NY Ind Dev Agy Rev, AMT,
5.25%, 06/01/27 06/01/13 @ 100 4,543,800
- --------------------------------------------------------------------------------------------
22,241,393
- --------------------------------------------------------------------------------------------
NORTH CAROLINA -- 3.5%
A- 1,000 North Carolina Eastern Muni Power Agy
Sys Rev Ref, Ser D, 5.125%, 01/01/23 01/01/13 @ 100 1,019,570
A- 1,000 North Carolina Eastern Muni Power Agy
Sys Rev Ref, Ser D, 5.125%, 01/01/26 01/01/13 @ 100 1,013,840
RATING PRINCIPAL OPTIONAL
(S&P)* AMOUNT (000) DESCRIPTION CALL PROVISIONS** VALUE
- --------------------------------------------------------------------------------------------
NORTH CAROLINA (CONTINUED)
AA $ 1,745 North Carolina Housing Fin Agy Rev, AMT,
Ser 14A, 5.35%, 01/01/22 (AMBAC) 07/01/11 @ 100 $ 1,756,447
- --------------------------------------------------------------------------------------------
3,789,857
- --------------------------------------------------------------------------------------------
OHIO -- 11.8%
BBB 1,150 Buckeye OH, Tobacco Settlement Turbo Rev,
Ser A-2, 5.875%, 06/01/30 06/01/17 @ 100 983,043
BBB 2,000 Buckeye OH, Tobacco Settlement Turbo Rev,
Ser A-2, 5.75%, 06/01/34 06/01/17 @ 100 1,639,600
AA- 3,000 Cuyahoga Co., OH Rev Ref, Ser A,
6.00%, 01/01/20 07/01/13 @ 100 3,274,380
AA- 5,000 Lorain Co., OH Hosp Rev Ref, Ser A,
5.25%, 10/01/33 10/01/11 @ 101 4,896,400
BBB 1,000 Ohio Air Quality Dev Auth Rev Ref,
5.70%, 02/01/14 N/A 1,095,790
BBB 1,000 Ohio Air Quality Dev Auth Rev Ref,
5.625%, 06/01/18 N/A 1,072,320
- --------------------------------------------------------------------------------------------
12,961,533
- --------------------------------------------------------------------------------------------
OKLAHOMA -- 2.9%
A 3,525 Oklahoma Dev Fin Auth Rev,
5.00%, 02/15/42 02/15/17 @ 100 3,177,118
- --------------------------------------------------------------------------------------------
OREGON -- 0.9%
BBB 1,000 Gilliam Cnty, OR Solid Waste Disp Rev,
AMT, 6.00%, 08/01/25 (1) N/A 1,008,560
- --------------------------------------------------------------------------------------------
PENNSYLVANIA -- 6.7%
BBB 2,340 Pennsylvania Higher Education Facs Auth
Rev, 5.25%, 05/01/23 05/01/13 @ 100 2,359,913
BBB+ 2,000 Pennsylvania State Higher Education,
5.00%, 07/15/39 07/15/15 @ 100 1,762,520
BBB 1,000 Pennsylvania State Higher Education,
5.00%, 05/01/37 11/01/17 @ 100 924,440
AA- 1,000 Pennsylvania State Higher Education,
U of PA Health Sys, Ser B, 6.00%, 08/15/26 08/15/18 @ 100 1,131,020
AAA 1,110 Philadelphia, PA Gen Oblig Ref, Ser A,
5.375%, 08/01/30 (Assured Gty) 08/01/19 @ 100 1,156,487
- --------------------------------------------------------------------------------------------
7,334,380
- --------------------------------------------------------------------------------------------
RHODE ISLAND -- 1.3%
AAA 1,300 Rhode Island Convention Ctr Auth Rev Ref,
Ser A, 5.50%, 05/15/27 (Assured Gty) 05/15/19 @ 100 1,363,453
- --------------------------------------------------------------------------------------------
SOUTH CAROLINA -- 3.2%
AAA 2,500 Florence Co., SC Hosp Rev, Ser A,
5.25%, 11/01/27 (AGM) 11/01/14 @ 100 2,585,600
BBB 1,000 Georgetown Co., SC Environ Imp Rev,
AMT, Ser A, 5.30%, 03/01/28 03/01/14 @ 100 869,770
- --------------------------------------------------------------------------------------------
3,455,370
- --------------------------------------------------------------------------------------------
SOUTH DAKOTA -- 5.4%
AAA 4,990 South Dakota Hsg Dev Auth, Ser K, AMT,
5.05%, 05/01/36 11/01/15 @ 100 4,739,352
See notes to financial statements.
Semiannual Report | January 31, 2010 | 11
MZF | MBIA Capital/Claymore Managed Duration Investment Grade Municipal Fund |
PORTFOLIO OF INVESTMENTS (unaudited) continued
RATING PRINCIPAL OPTIONAL
(S&P)* AMOUNT (000) DESCRIPTION CALL PROVISIONS** VALUE
- --------------------------------------------------------------------------------------------
SOUTH DAKOTA (CONTINUED)
AA- $ 1,200 South Dakota St Hlth & Edl Fac, Ser A
5.25%, 11/01/34 11/01/14 @ 100 $ 1,203,396
- --------------------------------------------------------------------------------------------
5,942,748
- --------------------------------------------------------------------------------------------
TENNESSEE -- 2.2%
BBB+ 2,500 Knox Co., TN Health Edl & Hsg Facs Brd Rev,
5.25%, 04/01/27 04/01/17 @ 100 2,406,775
- --------------------------------------------------------------------------------------------
TEXAS -- 15.6%
Aa2 2,000 Bexar Co., TX Hsg Fin, AMT,
5.20%, 10/20/34 (GNMA/FHA) 10/20/14 @ 100 1,988,820
AAA 2,500 Houston, TX Utility System,
First Lien Rev Ref, Ser A,
5.00%, 11/15/33 (AGM) 11/15/17 @ 100 2,562,975
A 2,000 Lower Colorado River Auth Tex Rev, Ser A,
6.25%, 05/15/28 05/15/18 @ 100 2,227,920
BBB+ 1,885 Matagorda Co., TX Nav Dist No.1 Rev, AMT,
5.125%, 11/01/28 (AMBAC) (1) N/A 1,742,607
A- 2,000 North TX, Tollway Auth Rev, Ser A,
5.625%, 01/01/33 01/01/18 @ 100 2,046,640
A- 1,000 North TX, Tollway Auth Rev, Ser L-2,
6.00%, 01/01/38 (1) 01/01/13 @ 100 1,092,350
AAA 2,325 Pampa, TX Indep School
Dist, 5.00%, 08/15/36 (PSF) 08/15/17 @ 100 2,422,673
BBB+ 2,100 San Leanna Ed Facs Corp Higher Ed Rev,
5.125%, 06/01/36 06/01/17 @ 100 1,966,062
AAA 1,000 Tarrant Cnty, TX Cult Ed Facs Rev,
Ser A, 5.75%, 07/01/18 (Assured Gty) N/A 1,087,550
- --------------------------------------------------------------------------------------------
17,137,597
- --------------------------------------------------------------------------------------------
VIRGINIA -- 1.3%
BBB+ 1,250 Washington Co., VA Indl Dev Auth Hosp Fac Rev,
Ser C, 7.50%, 07/01/29 01/01/19 @ 100 1,410,075
- --------------------------------------------------------------------------------------------
WASHINGTON -- 0.9%
AA+ 1,000 Tes Properties, WA Rev,
5.625%, 12/01/38 06/01/19 @ 100 1,026,560
- --------------------------------------------------------------------------------------------
WEST VIRGINIA -- 2.9%
AAA 3,205 West Virginia Housing Dev Fund Rev,
Ser D, 5.20%, 11/01/21 05/01/11 @ 100 3,226,185
- --------------------------------------------------------------------------------------------
WISCONSIN -- 1.1%
AA 1,250 Wisconsin State Health & Ed Facs Rev,
Ser A, 5.00%, 11/15/36 11/15/16 @ 100 1,252,763
- --------------------------------------------------------------------------------------------
WYOMING -- 6.1%
BBB+ 4,000 Sweetwater Co., WY Solid Waste Disp Rev,
AMT, 5.60%, 12/01/35 12/01/15 @ 100 3,736,280
AA+ 3,100 Wyoming Cmnty Dev Auth Hsg Rev,
Ser 7, AMT, 5.10%, 12/01/38 12/01/16 @ 100 2,904,483
- --------------------------------------------------------------------------------------------
6,640,763
- --------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS & NOTES -- 159.1%
(Cost $171,466,375) 174,730,687
- --------------------------------------------------------------------------------------------
RATING REDEMPTION
(S&P)* VALUE (000) DESCRIPTION VALUE
- --------------------------------------------------------------------------------------------
PREFERRED SHARES -- 1.9%
Aaa $ 2,000 Centerline Equity Issuer Trust, AMT, Ser A-4-1,
5.75%, 05/15/15 (remarketing), 144A
(Cost $2,000,000) $ 2,076,900
- --------------------------------------------------------------------------------------------
TOTAL LONG-TERM INVESTMENTS -- 161.0%
(Cost $173,466,375) 176,807,587
- --------------------------------------------------------------------------------------------
NUMBER OF
SHARES DESCRIPTION VALUE
- --------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 1.0%
MONEY MARKET FUND -- 1.0%
1,160,481 JP Morgan Tax Free Money Market
(Cost $1,160,481) $ 1,160,481
- --------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 162.0%
(Cost $174,626,856) 177,968,068
Other assets in excess of liabilities -- 1.2% 1,339,709
Preferred Shares, at redemption value --
(-63.2% of Net Assets Applicable to Common
Shareholders or -39.0% of Total Investments) (69,450,000)
- --------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO
COMMON SHAREHOLDERS -- 100.0% (2) $109,857,777
============================================================================================
* For securities not rated by Standard & Poor's Rating Group, the rating by
Moody's Investor Services, Inc. or Fitch Ratings is provided. (unaudited)
** Date and price of the earliest optional call or put provision. There may be
other call provisions at varying prices at later dates.
+ This bond is prerefunded. U.S. government or U.S. government agency
securities, held in escrow, are used to pay interest on this security, as
well as to retire the bond in full at the date and price indicated under
the Optional Call Provisions.
(1) Step-up security. Security is a step-up bond where the coupon increases or
steps up at a predetermined date. Rate shown reflects the rate in effect on
January 31, 2010.
(2) Portfolio percentages are calculated based on net assets applicable to
common shareholders.
Glossary:
AGM -- Insured by Assured Guaranty Municipal Corp.
AMBAC -- Insured by Ambac Assurance Corporation
AMT -- Income from this security is a preference item under the Alternative
Minimum Tax
Assured Gty -- Insured by Assured Guaranty Corp.
CIFG -- Insured by CIFG Assurance NA
FHA -- Guaranteed by Federal Housing Administration
GNMA -- Guaranteed by Ginnie Mae
PSF -- Guaranteed by Texas Permanent School Fund
144A -- Security exempt from registration pursuant to Rule 144A under the
Securities Act of 1933. The securities may be resold in transactions
exempt from registration, normally to qualified institutional buyers.
At January 31, 2010 these securities amounted to $2,969,790 which
represents 2.7% of net assets applicable to common shareholders.
See notes to financial statements.
12 | Semiannual Report | January 31, 2010
MZF | MBIA Capital/Claymore Managed Duration Investment Grade Municipal Fund
Statement of ASSETS AND LIABILITIES | JANUARY 31, 2010 (unaudited)
ASSETS
Investments, at value (cost $174,626,856) $ 177,968,068
Interest receivable 2,242,726
Other assets 21,516
- ---------------------------------------------------------------------------------------------------------------
Total assets 180,232,310
- ---------------------------------------------------------------------------------------------------------------
LIABILITIES
Custodian bank 654,686
Investment advisory fee payable 39,941
Servicing agent fee payable 26,628
Dividends payable -- preferred shareholders 13,103
Administration fee payable 3,796
Accrued expenses and other liabilities 186,379
- ---------------------------------------------------------------------------------------------------------------
Total liabilities 924,533
- ---------------------------------------------------------------------------------------------------------------
PREFERRED SHARES, AT REDEMPTION VALUE
$.001 par value per share; 2,778 Auction Market Preferred Shares authorized,
issued and outstanding at $25,000 per share liquidation preference 69,450,000
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS $ 109,857,777
===============================================================================================================
COMPOSITION OF NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS
Common stock, $.001 par value per share; unlimited number of shares authorized,
7,935,591 shares issued and outstanding $ 7,936
Additional paid-in capital 112,471,279
Net unrealized appreciation on investments 3,341,212
Accumulated undistributed net investment income 1,209,306
Accumulated net realized loss on investments (7,171,956)
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS $ 109,857,777
===============================================================================================================
NET ASSET VALUE APPLICABLE TO COMMON SHAREHOLDERS (based on 7,935,591 common shares outstanding) $ 13.84
===============================================================================================================
See notes to financial statements.
Semiannual Report | January 31, 2010 | 13
MZF | MBIA Capital/Claymore Managed Duration Investment Grade Municipal Fund
Statement of OPERATIONS | FOR THE SIX MONTHS ENDED JANUARY 31, 2010 (unaudited)
INVESTMENT INCOME
Interest $ 4,892,143
- --------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment advisory fee $ 349,601
Servicing agent fee 233,068
Auction agent fees - preferred shares 72,728
Professional fees 64,479
Fund accounting 33,033
Trustees'fees and expenses 25,400
Administrative fee 24,651
Printing expenses 13,902
Custodian fee 10,683
NYSE listing fee 10,672
Insurance 10,400
Transfer agent fee 9,460
Interest 708
Other 13,033
- --------------------------------------------------------------------------------------------------------------------
Total expenses 871,818
Investment advisory fees waived (114,293)
Servicing agent fees waived (76,195)
- --------------------------------------------------------------------------------------------------------------------
Net expenses 681,330
- --------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 4,210,813
- --------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on:
Investments (30,855)
Net change in unrealized appreciation (depreciation) on:
Investments 8,932,693
- --------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 8,901,838
- --------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO AUCTION MARKET PREFERRED SHAREHOLDERS FROM
Net investment income (521,134)
- --------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS RESULTING FROM OPERATIONS $ 12,591,517
====================================================================================================================
See notes to financial statements.
14 | Semiannual Report | January 31, 2010
MZF | MBIA Capital/Claymore Managed Duration Investment Grade Municipal Fund
Statement of CHANGES IN NET ASSETS |
FOR THE
SIX MONTHS ENDED FOR THE
JANUARY 31, 2010 YEAR ENDED
(UNAUDITED) JULY 31, 2009
- -----------------------------------------------------------------------------------------------------------------------------------
INCREASE/(DECREASE) IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS RESULTING FROM OPERATIONS:
Net investment income $ 4,210,813 $ 8,078,285
Net realized gain (loss) on investments (30,855) (663,855)
Net change in unrealized appreciation (depreciation) on investments 8,932,693 (3,211,719)
DISTRIBUTIONS TO AUCTION MARKET PREFERRED SHAREHOLDERS FROM NET INVESTMENT INCOME (521,134) (1,920,054)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to common shareholders resulting
from operations 12,591,517 2,282,657
- -----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM
Net investment income (3,749,567) (5,792,982)
- -----------------------------------------------------------------------------------------------------------------------------------
Total change in net assets applicable to common shareholders 8,841,950 (3,510,325)
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS:
Beginning of period 101,015,827 104,526,152
- -----------------------------------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment income of $1,209,306 and
$1,269,194, respectively.) $ 109,857,777 $ 101,015,827
===================================================================================================================================
See notes to financial statements.
Semiannual Report | January 31, 2010 | 15
MZF | MBIA Capital/Claymore Managed Duration Investment Grade Municipal Fund
Financial HIGHLIGHTS |
FOR THE
PER SHARE OPERATING PERFORMANCE SIX MONTHS ENDED FOR THE FOR THE FOR THE FOR THE FOR THE
FOR ONE COMMON SHARE JANUARY 31, 2010 YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OUTSTANDING THROUGHOUT EACH PERIOD (UNAUDITED) JULY 31, 2009 JULY 31, 2008 JULY 31, 2007 JULY 31, 2006 JULY 31, 2005
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.73 $ 13.17 $ 14.21 $ 14.25 $ 14.68 $ 13.83
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net investment income 0.53 1.02 0.99 0.95 0.90 0.92
Net realized and unrealized gain/(loss) on
investments and swaptions transactions 1.12 (0.49) (1.06) (0.10) (0.41) 0.87
Distributions to preferred shareholders
from net investment income
(common share equivalent basis) (0.07) (0.24) (0.35) (0.31) (0.27) (0.16)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.58 0.29 (0.42) 0.54 0.22 1.63
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
FROM NET INVESTMENT INCOME (0.47) (0.73) (0.62) (0.58) (0.65) (0.78)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.84 $ 12.73 $ 13.17 $ 14.21 $ 14.25 $ 14.68
===================================================================================================================================
MARKET VALUE, END OF PERIOD $ 13.35 $ 11.87 $ 11.73 $ 12.63 $ 12.29 $ 13.15
===================================================================================================================================
TOTAL INVESTMENT RETURN(a)
Net asset value 12.51% 2.83% -3.07% 3.80% 1.57% 12.03%
Market value 16.59% 8.65% -2.29% 7.93% -1.60% 6.47%
RATIOS AND SUPPLEMENTAL DATA
Net assets end of period (thousands) $ 109,858 $ 101,016 $ 104,526 $ 112,777 $ 113,044 $ 116,511
Ratio of expenses to average net assets
(excluding interest expense on
floating rate note obligations and
net of fee waivers) (c) 1.25%(b) 1.54% 1.27% 1.28% 1.63% 1.53%
Ratio of expenses to average net assets
(excluding interest expense on
floating rate note obligations and
excluding fee waivers) (c) 1.60%(b) 1.91% 1.61% 1.62% 1.89% 1.77%
Ratio of expenses to average net assets
(including interest expense on
floating rate note obligations (d)
and net of fee waivers) (c) 1.25%(b) 1.54% 1.32% 1.44% 1.63% 1.53%
Ratio of expenses to average net assets
(including interest expense on
floating rate note obligations (d)
and excluding fee waivers) (c) 1.60%(b) 1.91% 1.66% 1.78% 1.89% 1.77%
Ratio of net investment income
to average net assets (c) 7.71%(b) 8.65% 7.15% 6.56% 6.21% 6.34%
Portfolio turnover 2% 21% 29% 4% 21% 15%
Preferred shares, at redemption
value ($25,000 per share
liquidation preference) (thousands) $ 69,450 $ 69,450 $ 69,450 $ 69,450 $ 69,450 $ 69,450
Preferred shares asset coverage per share $ 64,546 $ 61,363 $ 62,626 $ 65,597 $ 65,693 $ 66,941
Asset coverage per $1,000 of indebtedness (e) N/A N/A N/A $ 37,445 N/A N/A
N/A Not applicable.
(a) 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.
(b) Annualized.
(c) Calculated on the basis of income and expenses applicable to both common
and preferred shares relative to average net assets of common shareholders.
(d) See Note 2 of the Notes to Financial Statements for more information on
floating rate note obligations.
(e) Calculated by subtracting the Fund's total liabilities (not including the
floating rate note obligations) from the Fund's total assets and dividing
by the total number of indebtedness units, where one unit equals $1,000 of
indebtedness.
See notes to financial statements.
16 | Semiannual Report | January 31, 2010
MZF | MBIA Capital/Claymore Managed Duration Investment Grade Municipal Fund
Notes to FINANCIAL STATEMENTS | JANUARY 31, 2010 (unaudited)
Note 1 -- ORGANIZATION:
The MBIA Capital/Claymore Managed Duration Investment Grade Municipal Fund (the
"Fund") was organized as a Delaware statutory trust on May 20, 2003. The Fund
is registered as a diversified, closed-end management investment company under
the Investment Company Act of 1940, as amended. The Fund's investment objective
is to provide its common shareholders with high current income exempt from
regular federal income tax while seeking to protect the value of the Fund's
assets during periods of interest rate volatility. Prior to commencing
operations on August 27, 2003, the Fund had no operations other than matters
relating to its organization and registration and the sale and issuance of
6,981 common shares of beneficial interest to MBIA Capital Management Corp.
Note 2 -- ACCOUNTING POLICIES:
The preparation of 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 those estimates.
In June 2009, the Financial Accounting Standards Board ("FASB") established the
FASB Accounting Standards Codification(TM) ("ASC") as the single source of
authoritative accounting principles reorganized by the FASB in preparation of
financial statements in conformity with GAAP. The ASC superseded existing
non-grandfathered, non-U.S. Securities and Exchange Commission ("SEC")
accounting and reporting standards. The ASC did not change GAAP but rather
organized it into a hierarchy where all guidance with the ASC carried an equal
level of authority. The ASC became effective for financial statements issued
for interim and annual periods ending after September 15, 2009. The
implementation of ASC did not have a material effect of the Fund's financial
statements.
The following is a summary of significant accounting policies followed by the
Fund.
(a) VALUATION OF INVESTMENTS: The municipal bonds and preferred shares in which
the Fund invests are traded primarily in the over-the-counter markets. In
determining net asset value, the Fund uses the valuations of portfolio
securities furnished by a pricing service approved by the Board of Trustees.
The pricing service typically values portfolio securities at the bid price or
the yield equivalent when quotations are readily available. Securities for
which quotations are not readily available are valued at fair market value on a
consistent basis as determined by the pricing service using a matrix system to
determine valuations. The procedures of the pricing service and its valuations
are reviewed by the officers of the Fund under the general supervision of the
Board of Trustees. Positions in futures contracts, interest rate swaps and
options on interest rate swaps ("swaptions") are valued at closing prices for
such contracts established by the exchange or dealer market on which they are
traded, or if market quotations are not readily available, are valued at fair
value on a consistent basis using methods approved in good faith by the Board
of Trustees.
For those securities where quotations or prices are not available, the
valuations are determined in accordance with procedures established in good
faith by the Board of Trustees. Valuations in accordance with these procedures
are intended to reflect each security's (or asset's) "fair value". Such "fair
value" is the amount that the Fund might reasonably expect to receive for the
security (or asset) upon its current sale. Each such determination should be
based on a consideration of all relevant factors, which are likely to vary from
one pricing context to another. Examples of such factors may include, but are
not limited to: (i) the type of security, (ii) the initial cost of the
security, (iii) the existence of any contractual restrictions on the security's
disposition, (iv) the price and extent of public trading in similar securities
of the issuer or of comparable companies, (v) quotations or evaluated prices
from broker-dealers and/or pricing services, (vi) information obtained from the
issuer, analysts, and/or the appropriate stock exchange (for exchange traded
securities), (vii) an analysis of the issuer's financial statements, and (viii)
an evaluation of the forces that influence the issuer and the market(s) in which
the security is purchased and sold (e.g. the existence of pending merger
activity, public offerings or tender offers that might affect the value of the
security).
The Fund adopted ASC 820, Fair Value Measurements and Disclosures ("ASC 820")
(formerly known as the Statement of Financial Accounting Standard ("FAS") No.
157). In accordance with ASC 820, fair value is defined as the price that the
Fund would receive to sell an investment or pay to transfer a liability in an
orderly transaction with an independent buyer in the principal market, or in
the absence of a principal market, the most advantageous market for the
investment or liability. ASC 820 establishes three different categories for
valuations. Level 1 valuations are those based upon quoted prices in active
markets. Level 2 valuations are those based upon quoted prices in inactive
markets or based upon significant observable inputs (e.g. yield curves;
benchmark interest rates; indices). Level 3 valuations are those based upon
unobservable inputs (e.g. discounted cash flow analysis; non-market based
methods used to determine fair valuation). The following table represents the
Funds' investments carried on the Statement of Assets and Liabilities by
caption and by level within the fair value hierarchy as of January 31, 2010:
VALUATIONS (IN $000S) LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
- --------------------------------------------------------------------------------
DESCRIPTION
Assets:
Preferred Stock $2,077 $ -- $ -- $ 2,077
Municipal Bonds -- 174,731 -- 174,731
Money Market Funds 1,160 -- -- 1,160
- --------------------------------------------------------------------------------
Total $3,237 $174,731 $ -- $177,968
================================================================================
(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. Interest income and expenses are
accrued daily. All discounts/premiums are accreted/amortized for financial
reporting purposes over the life of each security.
(c) DIVIDENDS AND DISTRIBUTIONS: The Fund declares and pays on a monthly basis
dividends from net investment income to common shareholders. Distributions of
net realized capital gains, if any, will be paid at least annually. Dividends
and distributions to shareholders are recorded on the ex-dividend date.
Dividends and distributions to preferred shareholders are accrued and
determined as described in Note 7.
(d) INVERSE FLOATING RATE INVESTMENTS AND FLOATING RATE NOTE OBLIGATIONS:
Inverse floating rate instruments are notes whose coupon rate fluctuates
inversely to a predetermined interest rate index. These instruments typically
involve greater risks than a fixed rate municipal bond. In particular, the
holder of these inverse floating rate instruments retain all credit and
interest rate risk associated with the full underlying bond and not just the
par value of the inverse floating rate instrument. As such, these instruments
should be viewed as having inherent leverage and therefore involve many of the
risks associated with leverage. Leverage is a speculative technique that may
expose the Fund to greater risk and increased costs. Leverage may cause the
Fund's net asset value to be more volatile than if it had not been leveraged
because leverage tends to magnify the effect of any increases or decreases in
the value of the Fund's portfolio securities. The use of leverage may also
cause the Fund to liquidate portfolio positions when it may not be advantageous
to do so in order to satisfy its obligations with respect to inverse floating
rate instruments.
The Fund may invest in inverse floating rate securities through either a direct
purchase or through the transfer of bonds to a dealer trust in exchange for
cash and/or residual interests in the dealer trust. For those inverse floating
rate securities purchased directly, the instrument
Semiannual Report | January 31, 2010 | 17
MZF | MBIA Capital/Claymore Managed Duration Investment Grade Municipal Fund |
NOTES TO FINANCIAL STATEMENTS (unaudited) continued
is included in the Portfolio of Investments with income recognized on an
accrual basis. The Fund did not invest in inverse floaters during the period
ended January 31, 2010.
(e) SUBSEQUENT EVENTS: The Fund adopted ASC 855, Subsequent Events ("ASC 855")
(formerly known as FAS No. 165). ASC 855 requires an entity to recognize in the
financial statements the effects of all subsequent events that provide
additional evidence about conditions that existed at the date of the statement
of assets and liabilities. ASC 855 is intended to establish general standards
of accounting and for disclosure of events that occur after the statement of
assets and liabilities date but before the financial statements are issued or
are available to be issued. The Fund has performed an evaluation of subsequent
events through March 24, 2010, which is the date the financial statements were
issued.
Note 3 -- AGREEMENTS:
Pursuant to an Investment Advisory Agreement (the "Advisory Agreement") between
MBIA Capital Management Corp. (the "Adviser") and the Fund, the Adviser is
responsible for the daily management of the Fund's portfolio, which includes
buying and selling securities for the Fund, as well as investment research,
subject to the direction of the Fund's Board of Trustees. The Adviser is a
subsidiary of MBIA Asset Management, LLC which, in turn, is a wholly-owned
subsidiary of MBIA, Inc. The Advisory Agreement provides that the Fund shall
pay to the Adviser a monthly fee for its services at the annual rate of 0.39%
of the sum of the Fund's average daily managed assets. ("Managed Assets"
represent the Fund's total assets including the assets attributable to the
proceeds from any financial leverage but excluding the assets attributable to
floating rate note obligations, minus liabilities, other than debt representing
financial leverage.) The Adviser contractually agreed to waive a portion of the
management fees it is entitled to receive from the Fund at the annual rate of
0.09% of the Fund's average daily Managed Assets from the commencement of the
Fund's operations through September 1, 2008 and at the annual rate of 0.042%
thereafter through September 1, 2009. Effective June 16, 2006, the Adviser
voluntarily agreed to waive an additional 0.0375% of advisory fees and has
since agreed to forego the scheduled step down in the contractual waiver
scheduled for September 1, 2008 and September 1, 2009. These waivers are
voluntary in nature and can be discontinued or increased at the Adviser's
discretion.
Pursuant to a Servicing Agreement, Claymore Securities, Inc. (the "Servicing
Agent") acts as servicing agent to the Fund. The Servicing Agent receives an
annual fee from the Fund, payable monthly in arrears, in an amount equal to
0.26% of the average daily value of the Fund's Managed Assets. The Servicing
Agent contractually agreed to waive a portion of the servicing fee it is
entitled to receive from the Fund at the annual rate of 0.06% of the average
daily value of the Fund's Managed Assets from the commencement of the Fund's
operations through September 1, 2008 and at the annual rate of 0.028%
thereafter through September 1, 2009. Effective June 16, 2006, the Servicing
Agent voluntarily agreed to waive an additional 0.025% of servicing fees and
has since agreed to forego the scheduled step down in the contractual waiver
scheduled for September 1, 2008 and September 1, 2009. These waivers are
voluntary in nature and can be discontinued or increased at the Servicing
Agent's discretion.
On July 17, 2009, Claymore Group Inc., the parent of Claymore Securities, Inc.,
entered into an Agreement and Plan of Merger between and among Claymore Group
Inc., Claymore Holdings, LLC and GuggClay Acquisition, Inc. (with the latter
two entities being wholly-owned, indirect subsidiaries of Guggenheim Partners,
LLC ("Guggenheim")). The transaction closed on October 14, 2009, whereby
GuggClay Acquisition, Inc. merged into Claymore Group Inc., the surviving
entity. The transaction resulted in a change-of-control whereby Claymore Group
Inc. and its subsidiaries, including the Servicing Agent, became indirect,
wholly-owned subsidiaries of Guggenheim. The transaction has not affected the
daily operations of the Fund or the services provided by the Servicing Agent.
The servicing agreement for the Fund automatically terminated as a result of
the Guggenheim transaction. The Fund's Board of Trustees considered and
approved a new servicing agreement for the Fund; however, shareholder approval
of the new agreement was not required.
Under a separate Fund Administration agreement, Claymore Advisors, LLC, an
affiliate of the Servicing Agent, provides fund administration services to the
Fund. Claymore Advisors, LLC 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 0.0200%
Next $500,000,000 0.0150%
Over $1,000,000,000 0.0100%
================================================================================
For the six months ended January 31, 2010, the Fund incurred approximately
$25,000 in fund administration fees.
The Bank of New York Mellon ("BNY") acts as the Fund's custodian, accounting
agent, auction agent and transfer agent. As custodian, BNY is responsible for
the custody of the Fund's assets. As accounting agent, BNY is responsible for
maintaining the books and records of the Fund. As auction agent, BNY is
responsible for conducting the auction of the preferred shares. As transfer
agent, BNY is responsible for performing transfer agency services for the
Fund.
Certain officers and/or trustees of the Fund are officers and/or directors of
the Adviser and the Servicing Agent.
The Fund does not compensate its officers who are officers of the
aforementioned firms.
Note 4 -- FEDERAL INCOME TAXES:
The Fund intends to comply with the requirements of Subchapter M of the
Internal Revenue Code of 1986, as amended, applicable to regulated investment
companies. Accordingly, no provision for U.S. federal income taxes is required.
In addition, by distributing substantially all of its ordinary income and
long-term capital gains, if any, during each calendar year, the Fund intends
not to be subject to U.S. federal excise tax.
Information on the tax components of investments as of January 31, 2010 is as
follows:
COST OF
INVESTMENTS GROSS TAX GROSS TAX NET TAX UNREALIZED
FOR TAX UNREALIZED UNREALIZED APPRECIATION ON
PURPOSES APPRECIATION DEPRECIATION INVESTMENTS
- --------------------------------------------------------------------------------
$174,660,066 $6,627,831 ($3,319,829) $3,308,002
- --------------------------------------------------------------------------------
The difference between book and tax basis cost of investments is due to
book/tax differences on the recognition of partnership/trust income.
As of July 31, 2009, the components of accumulated earnings/(losses) (excluding
paid-in capital) on a tax basis were as follows:
ACCUMULATED UNREALIZED
UNDISTRIBUTED UNDISTRIBUTED CAPITAL AND APPRECIATION/
TAX-EXEMPT INCOME ORDINARY INCOME OTHER LOSSES (DEPRECIATION)
- --------------------------------------------------------------------------------
2009 $1,317,546 $-- ($7,156,243) ($5,624,691)
- --------------------------------------------------------------------------------
The cumulative timing differences under tax basis accumulated capital and other
losses as of July 31, 2009 are due to investments in partnerships/trusts.
As of July 31, 2009, for federal income tax purposes, the Fund had a capital
loss carryforward of $6,782,056 available to offset possible future capital
gains. The capital loss carryforward is set to expire as follows: $1,384,327 on
July 31, 2013, $625,460 on July 31, 2014 and $4,772,269 on July 31, 2017.
18 | Semiannual Report | January 31, 2010
MZF | MBIA Capital/Claymore Managed Duration Investment Grade Municipal Fund |
NOTES TO FINANCIAL STATEMENTS (unaudited) continued
Distributions paid to shareholders during the tax years ended July 31, 2009
were characterized as follows for tax purposes:
TAX EXEMPT ORDINARY LONG-TERM TOTAL
INCOME INCOME CAPITAL GAIN DISTRIBUTIONS
- --------------------------------------------------------------------------------
2009 $7,577,820 $135,216 $-- $7,713,036
- --------------------------------------------------------------------------------
Capital losses incurred after October 31 ("post-October losses") within the
taxable year are deemed to arise on the first business day of the Fund's next
taxable year. During the year ended July 31, 2009, the Fund incurred and
elected to defer $374,187 as post-October losses.
For all open tax years and all major jurisdictions, management of the Fund has
concluded that there are no significant uncertain tax positions that would
require recognition in the financial statements. Open tax years are those years
that are open for examination by taxing authorities (i.e. generally the last
four tax year ends and the interim tax period since then). Furthermore,
management of the Fund is also not aware of any tax positions for which it is
reasonably possible that the total amounts of unrecognized tax benefits will
significantly change in the next twelve months.
Note 5 -- INVESTMENT TRANSACTIONS:
Purchases and sales of investment securities, excluding short-term investments,
for the six months ended January 31, 2010, aggregated $3,506,506 and
$5,088,190, respectively.
Note 6 -- DERIVATIVES:
The Fund adopted ASC 815, Derivatives and Hedging ("ASC 815") (formerly known
as FAS No. 161), effective January 31, 2009. ASC 815 is intended to improve
financial reporting about derivative instruments by requiring enhanced
disclosures to enable investors to better understand: a) how and why a fund
uses derivative instruments, b) how derivatives instruments and related hedge
fund items are accounted for, and c) how derivative instruments and related
hedge items affect a fund's financial position, results of operations and cash
flows.
The adoption of ASC 815 had no impact to the financial statements as the Fund
did not hold derivative instruments during the six months ended January 31,
2010.
Note 7 -- CAPITAL:
There are an unlimited number of $.001 par value common shares of beneficial
interest authorized and 7,935,591 common shares outstanding at January 31,
2010, of which the Adviser owned 9,990 shares. There were no transactions in
common shares for the six months ended January 31, 2010 or the year ended July
31, 2009.
On October 27, 2003, the Fund issued 1,389 shares of Auction Market Preferred
Shares ("AMPS"), Series M7 and 1,389 shares of Auction Market Preferred Shares,
Series W28. The preferred shares have a liquidation value of $25,000 per share
plus any accumulated unpaid dividends. As of January 31, 2010, the Fund had
1,389 shares each of Auction Market Preferred Shares, Series M7 and W28,
outstanding. Dividends on the preferred shares are cumulative at a rate that is
set by auction procedures. Distributions of net realized capital gains, if any,
are made annually.
The broad auction-rate preferred securities market, including the Fund's AMPS,
has experienced considerable disruption since mid-February, 2008. The result
has been failed auctions on nearly all auction-rate preferred shares, including
the Fund's AMPS. A failed auction is not a default, nor does it require the
redemption of the Fund's AMPS.
Provisions in the AMPS offering documents establish a maximum rate in the event
of a failed auction. The AMPS reference rate is the higher of LIBOR or 90% of
the taxable equivalent of the short-term municipal bond rate. The maximum rate,
for auctions for which the Fund has not given notice that the auction will
consist of net capital gains or other taxable income, is the higher of the
reference rate times 110% or the reference rate plus 1.10% .
Management will continue to monitor events in the marketplace and continue to
evaluate the Fund's leverage as well as any alternative that may be available.
The range of dividend rates on the Fund's AMPS for the six months ended January
31, 2010, were as follows:
SERIES LOW HIGH AT 1/31/10 NEXT AUCTION DATE
- --------------------------------------------------------------------------------
M7 1.322% 1.626% 1.405% 2/01/10
W28 1.405% 1.585% 1.405% 2/24/10
- --------------------------------------------------------------------------------
The Fund is subject to certain limitations and restrictions while the AMPS are
outstanding. Failure to comply with these limitations and restrictions could
preclude the Fund from declaring any dividends or distributions to common
shareholders or repurchasing common shares and/or could trigger the mandatory
redemption of AMPS at their liquidation value plus any accrued dividends.
The AMPS, which are entitled to one vote per share, generally vote with the
common shares but vote separately as a class to elect two Trustees and on any
matters affecting the rights of the AMPS.
Note 8 -- BORROWINGS:
The Fund has an uncommitted $2,000,000 line of credit with BNY. Interest on the
amount borrowed is based on the Federal Funds Rate plus a spread on outstanding
balances. At January 31, 2010 there was no outstanding balance in connection
with the Fund's uncommitted line of credit. The average daily amount of
borrowings during the six months ended January 31, 2010 was $158,837 with a
related weighted average interest rate of 0.88% .
Note 9 -- INDEMNIFICATIONS:
In the normal course of business, the Fund enters into contracts that contain a
variety of representations, which provide general indemnifications. The Fund's
maximum exposure under these arrangements is unknown, as this would require
future claims that may be made against the Fund that have not yet occurred.
However, the Fund expects the risk of loss to be remote.
Note 10 -- SUBSEQUENT EVENTS:
On November 27, 2009, the Fund announced that it will commence a tender offer
for up to 15% of its outstanding common shares at a price equal to 98% of the
Fund's net asset value per share as of the close of the regular trading session
of the New York Stock Exchange on March 15, 2010. The tender offer commenced on
February 11, 2010 and this tender offer closed on March 12, 2010. The Fund
repurchased for cash, on a pro-rata basis for those participating in the tender
offer, 15% of the Fund's outstanding shares at a price of $13.73 per share. In
addition, upon the occurrence of certain events and certain other terms and
conditions, the Fund's Board of Trustees has also agreed to conduct up to three
further tender offers as soon as reasonably practicable after June 1, 2010,
September 1, 2010 and December 1, 2010.
On February 8, 2010, MBIA Inc. announced that it restructured MBIA Asset
Management Group. Which is, now known as Cutwater Asset Management
("Cutwater"). Cutwater will operate under the MBIA corporate umbrella as a
separate operating company focused on fixed-income asset management. Cutwater
continues to be led by the management team in place before the restructuring.
In addition to its third-party advisory business, Cutwater will continue to
manage proprietary portfolios on a fee-for-service basis for MBIA, Inc.
DIVIDEND DECLARATIONS -- COMMON SHAREHOLDERS
The Fund has declared the following dividends to common shareholders:
RATE PER DECLARATION EX-DIVIDEND RECORD PAYABLE
SHARE DATE DATE DATE DATE
- --------------------------------------------------------------------------------
$0.0825 2/01/10 2/10/10 2/12/10 2/26/10
$0.0825 2/01/10 3/11/10 3/15/10 3/31/10
- --------------------------------------------------------------------------------
Semiannual Report | January 31, 2010 | 19
MZF | MBIA Capital/Claymore Managed Duration Investment Grade Municipal Fund
Supplemental INFORMATION | (unaudited)
The Annual Meeting of Shareholders of the Fund was held on January 29, 2010. At
this meeting, common and preferred shareholders of the Fund voted on the
election of Trustees.
Voting results for the election of Trustees by common shareholders are set
forth below:
# OF SHARES
IN FAVOR AGAINST WITHHELD
- --------------------------------------------------------------------------------
Kevin M. Robinson 7,441,064 371,271 123,256
Voting results for the election of Trustees by preferred shareholders are set
forth below:
# OF SHARES
IN FAVOR AGAINST
- --------------------------------------------------------------------------------
Kevin M. Robinson 2,445 333
Ronald E. Toupin, Jr. 2,445 333
The terms of the following Trustees of the Fund did not expire in 2009: Randall
C. Barnes, Clifford D. Corso and Ronald A. Nyberg.
TRUSTEES
The Trustees of the MBIA Capital/Claymore Managed Duration Investment Grade
Municipal Fund and their principal occupations during the past five years:
NAME, ADDRESS*, NUMBER OF
YEAR OF TERM OF OFFICE** PRINCIPAL OCCUPATION DURING PORTFOLIOS IN THE OTHER
BIRTH AND POSITION(S) AND LENGTH OF THE PAST FIVE YEARS AND FUND COMPLEX*** DIRECTORSHIPS
HELD WITH REGISTRANT TIME SERVED OTHER AFFILIATIONS OVERSEEN BY TRUSTEE HELD BY TRUSTEE
- ------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES:
- ------------------------------------------------------------------------------------------------------------------------------------
Randall C. Barnes Since 2006 Private Investor (2001-present). Formerly, 41 None
Year of Birth: 1951 Senior Vice President & Treasurer, PepsiCo.,
Trustee Inc. (1993-1997), President, Pizza Hut
International (1991-1993) and Senior Vice
President, Strategic Planning and New
Business Development (1987-1990) of PepsiCo,
Inc. (1987-1997).
- ------------------------------------------------------------------------------------------------------------------------------------
Ronald A. Nyberg Since 2003 Partner of Nyberg & Cassioppi, LLC, a law 44 None
Year of Birth: 1953 firm specializing in corporate law, estate
Trustee planning and business transactions
(2000-present). Formerly, Executive Vice
President, General Counsel and Corporate
Secretary of Van Kampen Investments
(1982-1999).
- ------------------------------------------------------------------------------------------------------------------------------------
Ronald E. Toupin, Jr. Since 2003 Retired. Formerly, Vice President, Manager 41 None
Year of Birth: 1958 and Portfolio Manager of Nuveen Asset
Trustee Management (1998-1999), Vice President of
Nuveen Investment Advisory Corp.
(1992-1999), Vice President and Manager of
Nuveen Unit Investment Trusts (1991-1999),
and Assistant Vice President and Portfolio
Manager of Nuveen Unit Investment Trusts
(1988-1999), each of John Nuveen & Co., Inc.
(1982-1999).
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES:
- ------------------------------------------------------------------------------------------------------------------------------------
Clifford D. Corso+ Since 2003 President of Cutwater Asset Management; 1 None
113 King Street Chief Investment Officer, MBIA Insurance
Armonk, NY 10504 Corp.
Year of Birth: 1961
Trustee and President
- ------------------------------------------------------------------------------------------------------------------------------------
Kevin M. Robinson++ Trustee since 2009 Senior Managing Director and General Counsel 2 None
Year of Birth: 1959 Chief Legal Officer of Claymore Advisors, LLC, Claymore
Trustee and since 2008 Securities, Inc. and Claymore Group Inc.
Chief Legal Officer (2007-present). Formerly, Associate General
Counsel and Assistant Corporate Secretary of
NYSE Euronext, Inc. (2000-2007).
- ------------------------------------------------------------------------------------------------------------------------------------
* The business address of each Trustee unless otherwise noted is c/o MBIA
Capital/Claymore Managed Duration Investment Grade Municipal Fund, 2455
Corporate West Drive, Lisle, IL 60532.
** The Trustees of each class shall be elected at an annual meeting of
shareholders or special meeting in lieu thereof called for that purpose,
and each Trustee elected shall hold office until his or her successor shall
have been elected and shall have qualified. The term of office of a Trustee
shall terminate and a vacancy shall occur in the event of the death,
resignation, removal, bankruptcy, adjudicated incompetence or other
incapacity to perform the duties of the office, or removal, of a Trustee.
*** 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. Corso is an "interested person" (as defined in Section 2(a)(19) of the
Investment Company Act of 1940, as amended) of the Fund because of his
position as an officer of Cutwater Asset Management, the Fund's Investment
Adviser.
++ Mr. Robinson is an "interested person" (as defined in Section 2(a)(19) of
the Investment Company Act of 1940, as amended) of the Fund because of his
position as an officer of Claymore Securities, Inc., the Fund's Servicing
Agent, and certain of its affiliates.
20 | Semiannual Report | January 31, 2010
MZF | MBIA Capital/Claymore Managed Duration Investment Grade Municipal Fund |
SUPPLEMENTAL INFORMATION (unaudited) continued
PRINCIPAL EXECUTIVE OFFICERS
The Officers of the MBIA Capital/Claymore Managed Duration Investment Grade
Municipal 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 AND
POSITION(S) HELD WITH REGISTRANT LENGTH OF TIME SERVED OTHER AFFILIATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICERS:
- ------------------------------------------------------------------------------------------------------------------------------------
J. Thomas Futrell Since 2008 Senior Managing Director and Chief Investment Officer of
Year of birth: 1955 Claymore Advisors, LLC and Claymore Securities, Inc.
Chief Executive Officer (2008-present). Formerly, Managing Director of Research,
Nuveen Asset Management (2000-2007).
- ------------------------------------------------------------------------------------------------------------------------------------
Steven M. Hill Since 2006 Senior Managing Director of Claymore Advisors, LLC and
Year of Birth: 1964 Claymore Securities, Inc. (2005-present). Formerly, Chief
Chief Financial Officer, Financial Officer of Claymore Group Inc. (2005-2006).
Chief Accounting Officer Managing Director of Claymore Advisors, LLC and Claymore
and Treasurer Securities, Inc. (2003-2005). Treasurer of Henderson Global
Funds and Operations Manager for Henderson Global Investors
(North America) Inc., (2002-2003); Managing Director,
FrontPoint Partners LLC (2001-2002); Vice President, Nuveen
Investments (1999-2001); Chief Financial Officer, Skyline
Asset Management LP, (1999); Vice President, Van Kampen
Investments and Assistant Treasurer, Van Kampen mutual funds
(1989-1999).
- ------------------------------------------------------------------------------------------------------------------------------------
Melissa J. Nguyen Since 2006 Vice President and Assistant General Counsel of Claymore
Year of Birth: 1978 Group Inc. (2005-present). Secretary of certain funds in the
Secretary Fund Complex. Formerly, Associate, Vedder Price P.C.
(2003-2005).
- ------------------------------------------------------------------------------------------------------------------------------------
Bruce Saxon Since 2006 Vice President -- Fund Compliance Officer of Claymore
Year of Birth: 1957 Advisors, LLC (2006 -- present). Formerly, Chief Compliance
Chief Compliance Officer Officer/Assistant Secretary of Harris Investment Management,
Inc. (2003-2006). Director -- Compliance of Harrisdirect LLC
(1999-2003).
- ------------------------------------------------------------------------------------------------------------------------------------
Jeffrey S. MacDonald Since 2007 Director of Advisory Services Portfolio Management, MBIA
113 King Street Asset Management (2007-present). Formerly, Vice President
Armonk, NY 10504 and Portfolio Manager, Hartford Investment Management
Year of Birth: 1970 Company (2005-2007); Fixed Income Portfolio Analyst,
Vice President Wellington Management Company (2000-2004).
- ------------------------------------------------------------------------------------------------------------------------------------
Leonard I. Chubinsky Since 2003 General Counsel and Secretary, MBIA Asset Management LLC &
113 King Street MBIA Capital Management Corp.; Deputy General Counsel, MBIA
Armonk, NY 10504 Insurance Corp.
Year of Birth: 1948
Assistant Secretary and
Assistant Vice President
- ------------------------------------------------------------------------------------------------------------------------------------
* The business address of each officer, unless otherwise noted, is c/o MBIA
Capital/Claymore Managed Duration Investment Grade Municipal Fund, 2455
Corporate West Drive, Lisle, IL 60532.
** Officers serve at the pleasure of the Board of Trustees and until his or
her successor is appointed and qualified or until his or her earlier
resignation or removal.
Semiannual Report | January 31, 2010 | 21
MZF | MBIA Capital/Claymore Managed Duration Investment Grade Municipal Fund
Dividend Reinvestment PLAN | (unaudited)
Pursuant to the Fund's Automatic Dividend Reinvestment Plan (the "Plan"),
unless a shareholder is ineligible or elects otherwise, all dividend and
capital gains distributions are automatically reinvested by The Bank of New
York Mellon ("Administrator"), as agent for shareholders in administering the
Plan (the "Plan Agent"), in additional common shares of the Fund. Shareholders
whose shares are held in the name of a broker or nominee should contact such
broker or nominee to confirm that they are eligible to participate in the Plan.
Shareholders who are ineligible or who elect not to participate in the Plan
will receive all dividends and distributions in cash paid by check mailed
directly to the shareholder of record (or, if the shares are held in street or
other nominee name, then to such nominee) by Administrator, as dividend paying
agent. Such shareholders may elect not to participate in the Plan and to
receive all distributions of dividends and capital gains in cash by sending
written instructions to Administrator, as dividend paying agent, at the address
set forth below. Participation in the Plan is completely voluntary and may be
terminated or resumed at any time without penalty by written notice if received
by the Plan Agent not less than ten days prior to any dividend record date;
otherwise, such termination will be effective with respect to any subsequently
declared dividend or capital gains distribution.
Whenever the Fund declares an ordinary income dividend or a capital gain
dividend (collectively referred to as "dividends") payable in cash,
nonparticipants in the Plan will receive cash, and participants in the Plan
will receive the equivalent in common shares. The shares are acquired by the
Plan Agent for the participant's account, depending upon the circumstances
described below, either (i) through receipt of additional unissued but
authorized common shares from the Fund ("newly issued 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 dividend
payment date, the market price per common share plus estimated brokerage
commissions is greater than the net asset value per common share (such
condition being referred to herein as "market premium"), the Plan Agent will
invest the dividend amount in newly issued shares on behalf of the participant.
The number of newly issued common shares to be credited to the participant's
account will be determined by dividing the dollar amount of the dividend by the
net asset value per share on the payment date, provided that, if the net asset
value per share is less than or equal to 95% of the market price per share on
the payment date, the dollar amount of the dividend will be divided by 95% of
the market price per share on the payment date. If on the dividend payment date
the net asset value per share is greater than the market value plus estimated
brokerage commissions (such condition being referred to herein as "market
discount"), the Plan Agent will invest the dividend amount in shares acquired
on behalf of the participant in open-market purchases.
If, before the Plan Agent has completed its open-market purchases, the market
price of the common shares exceeds the net asset value per share, the average
per share purchase price paid by the Plan Agent may exceed the net asset value
of the Fund's shares, resulting in the acquisition of fewer shares than if the
dividend had been paid in newly issued shares on the dividend payment date.
Because of the foregoing difficulty with respect to open-market purchases, the
Plan provides that if the Plan Agent 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 Agent
may cease making open-market purchases and may invest the uninvested portion of
the dividend amount in newly issued shares at the net asset value per share at
the close of business on the last purchase date; provided that, if the net
asset value per share is less than 95% of the market price per share on the
payment date, the dollar amount of the dividend will be divided by 95% of the
market price per share on the payment date.
The Plan Agent maintains all shareholders' accounts in the Plan and furnishes
written confirmation of all transactions in the account, including information
needed by shareholders for tax records. Shares in the account of each Plan
participant will be held by the Plan Agent in the name of the participant, and
each shareholder's proxy will include those shares purchased or received
pursuant to the Plan. The Plan Agent will forward all proxy solicitation
materials to participants and vote proxies for shares held pursuant to the Plan
in accordance with the instructions of the participants.
There will be no brokerage charges with respect to shares issued directly by
the Fund as a result of dividends or capital gains distributions payable either
in shares or in cash. However, each participant will pay a pro rata share of
brokerage commissions incurred with respect to the Plan Agent's open-market
purchases in connection with the reinvestment of dividends. The automatic
reinvestment of dividends and distributions 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 in the Plan; however, the Fund reserves the
right to amend the Plan to include a service charge payable by the
participants. All questions and correspondence concerning the Plan should be
directed to the Plan Administrator, BNY Mellon Shareowner Services, P.O. Box
358015, Pittsburgh, PA 15252-8015, Phone Number: 866-488-3559.
22 | Semiannual Report | January 31, 2010
MZF | MBIA Capital/Claymore Managed Duration Investment Grade Municipal Fund
Fund INFORMATION |
BOARD OF TRUSTEES
Randall C. Barnes
Clifford D. Corso*
Ronald A. Nyberg
Kevin M. Robinson**
Ronald E. Toupin, Jr.
* Trustee is an "interested person" of the Fund as defined in the Investment
Company Act of 1940, as amended, as a result of his position as an officer of
the Fund's Investment Adviser.
** Trustee is an "interested person" of the Fund as defined in the Investment
Company Act of 1940, as amended, as a result of his position as an officer of
Claymore Securities, Inc., the Fund's Servicing Agent and certain of its
affiliates.
OFFICERS
Clifford D. Corso*
President
J. Thomas Futrell
Chief Executive Officer
Steven M. Hill
Chief Financial Officer,
Chief Accounting Officer
and Treasurer
Jeffrey S. MacDonald
Vice President
Bruce Saxon
Chief Compliance Officer
Melissa J. Nguyen
Secretary
Leonard I. Chubinsky
Assistant Secretary and
Assistant Vice President
INVESTMENT ADVISER
Cutwater Asset
Management Armonk,
New York
SERVICING AGENT
Claymore Securities, Inc.
Lisle, Illinois
ADMINISTRATOR
Claymore Advisors, LLC
Lisle, Illinois
ACCOUNTING AGENT,
CUSTODIAN, TRANSFER
AGENT AND AUCTION AGENT
The Bank of
New York Mellon
New York, New York
LEGAL COUNSEL
Simpson Thacher &
Bartlett LLP
New York, NewYork
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Ernst & Young LLP
Chicago, Illinois
PRIVACY PRINCIPLES OF MBIA CAPITAL/CLAYMORE MANAGED DURATION INVESTMENT GRADE
MUNICIPAL FUND FOR SHAREHOLDERS
The privacy of your personal financial information is extremely important to
us. When you open an account with us, we collect a significant amount of
information from you in order to properly invest and administer your account.
We take very seriously the obligation to keep that information private and
confidential, and we want you to know how we protect that important
information.
We collect nonpublic personal information about you from applications or other
forms you complete and from your transactions with us and our affiliates. We do
not disclose information about you, or our former clients, to our affiliates or
to service providers or third parties, except as permitted by law. We share
only the minimum information required to properly administer your accounts,
which enables us to send transaction confirmations, monthly or quarterly
statements, financial and tax forms. Even within MBIA and its affiliated
entities, only a limited number of people who actually service accounts will
ever have access to your personal financial information. Further, we do not
share information about our current or former clients with any outside
marketing groups or sales entities.
To ensure the highest degree of security and confidentiality, MBIA and its
affiliates maintain various physical, electronic and procedural safeguards to
protect your personal information. We also apply special measures for
authentication of information you request or submit to us on our website-
www.MBIA.com.
QUESTIONS CONCERNING YOUR SHARES OF MBIA CAPITAL/CLAYMORE MANAGED DURATION
INVESTMENT GRADE MUNICIPAL 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 Accounting Agent, Custodian, Transfer Agent and Auction Agent:
The Bank of New York Mellon, 101 Barclay 11E, New York, New York 10286
(866) 488-3559
This report is sent to shareholders of MBIA Capital/Claymore Managed Duration
Investment Grade Municipal 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.
The Fund has adopted the Adviser's proxy voting policies and procedures to
govern the voting of proxies relating to the voting securities of the Fund. A
description of the Adviser's proxy voting policies and procedures related to
portfolio securities is available without charge, upon request, by calling the
Fund at (866) 819-5301.
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 (866) 819-5301 or by
accessing the Fund's Form N-PX on the U.S. Securities and Exchange Commission's
("SEC") website at www.sec.gov or www.claymore/mzf.com.
The Fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The Fund's Form N-Q
is available on the SEC website at www.sec.gov or www.claymore.com/mzf. The
Fund's Form N-Q may also be viewed and copied at the SEC's Public Reference
Room in Washington, DC. Information on the operation of the Public Reference
Room may be obtained by calling (800) SEC-0330 or at www.sec.gov .
NOTICE TO SHAREHOLDERS
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that the Fund from time to time may purchase
shares of its common and preferred stock in the open market or in private
transactions.
Semiannual Report | January 31, 2010 | 23
MZF | MBIA Capital/Claymore Managed Duration Investment Grade Municipal Fund
About the FUND MANAGER |
CUTWATER ASSET MANAGEMENT
Cutwater Asset Management ("Cutwater"), the Fund's Investment Adviser, is based
in Armonk, New York and was created in 1991 to provide fixed-income investment
products and services to institutional and retail clients. The firm specializes
in the management of fixed-income securities and provides expertise in
investment-grade municipal bond investing. Cutwater is a wholly-owned
subsidiary of MBIA, Inc., which is listed on the New York Stock Exchange and is
a component stock of the S&P 500 Index. Additional information can be found at
cutwater.com.
INVESTMENT PHILOSOPHY
Cutwater Asset Management's philosophy is anchored in the conviction that a
high quality municipal portfolio diversified among maturities will provide
favorable risk-adjusted performance over time and through a variety of market
cycles. Cutwater Asset Management believes that security selection is enhanced
by its large and dedicated staff of credit analysts. Each analyst has a
thorough understanding of the broad market, but focuses research on a
particular segment of the larger market.
INVESTMENT PROCESS
Investment strategy, including credit quality, yield curve positioning and
duration targets, is set for portfolios at regular strategy meetings with the
firm's chief investment officer, portfolio managers and sector specialists.
Credit quality decisions are based on credit bands established for each of the
portfolios and the current relative value of securities within each of the
credit bands. Duration target decisions are based on duration bands which
direct the overall risk profile of portfolios relative to their benchmarks and
the consensus outlook on the term structure of interest rates. Duration
management is extended to each of the individual market sectors. Using the
guidelines established in the strategy meetings, the municipal portfolio
managers work closely with research analysts. Cutwater's rigorous bottom-up
process is rooted in fundamental credit analysis and Cutwater's proprietary
research.
CUTWATER ASSET MANAGEMENT
113 King Street
Armonk, NY 10504
(03/10)
CLAYMORE SECURITIES, INC.
2455 Corporate West Drive
Lisle, IL 60532
Member FINRA/SIPC
(03/10)
NOT FDIC-INSURED | NOT BANK-GUARANTEED | MAY LOSE VALUE
MZF
LISTED
NYSE
MZF-SAR0110
ITEM 2. CODE OF ETHICS.
Not applicable for a semi-annual reporting period.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable for a semi-annual reporting period.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Not applicable for a semi-annual reporting period.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANT.
Not applicable for a semi-annual reporting period.
ITEM 6. SCHEDULE OF INVESTMENTS.
The Schedule of Investments is included as part of Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable for a semi-annual reporting period.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable for a semi-annual reporting period.
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) as of a date within 90 days
of this filing and have concluded based on such
evaluation as required by Rule 30a-3(b) under the Investment Company Act of
1940, that the registrant's disclosure controls and procedures were effective as
of that date, in ensuring that information required to be disclosed by the
registrant in this Form N-CSR was recorded, processed, summarized, and reported
within the time periods specified in the Securities and Exchange Commission's
rules and forms.
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act) that
occurred during the registrant's last fiscal quarter of the period covered by
this report that have materially affected, or are reasonably likely to
materially affect, the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Not applicable.
(a)(2) Certifications of principal executive officer and principal financial
officer pursuant to Rule 30a-2 (a) of the Investment Company Act of 1940.
(a)(3) Not Applicable.
(b) Certifications of principal executive officer and principal financial
officer pursuant to Rule 30a-2(b) of the Investment Company Act of 1940 and
Section 906 of the Sarbanes-Oxley Act of 2002.
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) MBIA Capital /Claymore Managed Duration Investment Grade Municipal
------------------------------------------------------------------
Fund
By: /s/ J. Thomas Futrell
---------------------------------------------------
Name: J. Thomas Futrell
Title: Chief Executive Officer
Date: April 5, 2010
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ J. Thomas Futrell
---------------------------------------------------
Name: J. Thomas Futrell
Title: Chief Executive Officer
Date: April 5, 2010
By: /s/ Steven M. Hill
---------------------------------------------------
Name: Steven M. Hill
Title: Chief Financial Officer, Chief Accounting Officer and Treasurer
Date: April 5, 2010