UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
[x] Filed by the Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
MBIA Capital/Claymore Managed Duration Investment Grade Municipal Fund
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
MBIA CAPITAL/CLAYMORE MANAGED DURATION INVESTMENT GRADE MUNICIPAL FUND
113 KING STREET, ARMONK, NEW YORK 10504
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
October 3, 2005
To the Shareholders:
Notice is hereby given that the Annual Meeting of Shareholders (the
"Meeting") of MBIA Capital/Claymore Managed Duration Investment Grade Municipal
Fund (the "Fund") will be held at the offices of Claymore Advisors, LLC, 2455
Corporate West Drive, Lisle, Illinois 60532, on Thursday, November 10, 2005 at
11:00 a.m., Central Standard time, for the purposes of considering and voting
upon the following:
1. The election of two Trustees of the Fund to hold office for a
term of three years, and until their successors are duly
elected and qualified (Proposal 1);
2. The approval of a new investment advisory agreement between
the Fund and Claymore Advisors, LLC (Proposal 2);
3. The approval of a new subadvisory agreement among the Fund,
Claymore Advisors, LLC and MBIA Capital Management Corp.
(Proposal 3); and
4. Any other business that may properly come before the Meeting
or any adjournments or postponements thereof.
The close of business on September 19, 2005 has been fixed by the Board
of Trustees of the Fund as the record date for the determination of shareholders
entitled to notice of, and to vote at, the Meeting or any postponement or
adjournment thereof. The enclosed proxy is being solicited on behalf of the
Board of Trustees of the Fund.
By Order of the Board of Trustees of the Fund,
/s/ Leonard Chubinsky
Leonard Chubinsky
Secretary
- --------------------------------------------------------------------------------
TO AVOID UNNECESSARY EXPENSE OF FURTHER SOLICITATION, WE URGE YOU TO
INDICATE VOTING INSTRUCTIONS ON THE ENCLOSED PROXY, DATE AND SIGN IT AND RETURN
IT PROMPTLY IN THE ENVELOPE PROVIDED, NO MATTER HOW LARGE OR HOW SMALL YOUR
HOLDINGS MAY BE.
- --------------------------------------------------------------------------------
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of
assistance to you and avoid the time and expense to the Fund involved in
validating your vote if you fail to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears in
the registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the
party signing should conform exactly to a name shown in the
registration.
3. All Other Accounts: The capacity of the individual signing the
proxy card should be indicated unless it is reflected in the
form of registration. For example:
REGISTRATION VALID SIGNATURE
------------ ---------------
CORPORATE ACCOUNTS
- ------------------
(1) ABC Corp.......................................................... ABC Corp. (by John Doe, Treasurer)
(2) ABC Corp.......................................................... John Doe, Treasurer
(3) ABC Corp., c/o John Doe, Treasurer................................ John Doe
(4) ABC Corp. Profit Sharing Plan..................................... John Doe, Trustee
TRUST ACCOUNTS
- --------------
(1) ABC Trust......................................................... Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee, u/t/d 12/28/78.............................. Jane B. Doe
PARTNERSHIP ACCOUNTS
- --------------------
(1) ABC Partnership.................................................. Jane B. Smith, Partner
(2) Smith and Doe, Limited Partnership............................... Jane B. Smith, General Partner
CUSTODIAL OR ESTATE ACCOUNTS
- ----------------------------
(1) John B. Smith, Cust., f/b/o John B. Smith, Jr. UGMA............... John B. Smith
(2) Estate of John B. Smith........................................... John B. Smith, Jr., Executor
IMPORTANT NEWS FOR FUND SHAREHOLDERS
WHILE WE ENCOURAGE YOU TO READ THE FULL TEXT OF THE ENCLOSED PROXY STATEMENT,
FOR YOUR CONVENIENCE, WE HAVE PROVIDED A BRIEF OVERVIEW OF THE MATTERS TO BE
VOTED ON.
Q. What am I being asked to vote "FOR" in this proxy?
A. You are being asked to vote in favor of proposals to:
1. Elect two Trustees to the Board of Trustees.
2. Approve a new investment advisory agreement between the Fund and
Claymore Advisors, LLC.
3. Approve a new subadvisory agreement among the Fund, Claymore
Advisors, LLC and MBIA Capital Management Corp.
Q. How does the Board suggest I vote in connection with the election
of two Trustees?
A. The Board unanimously recommends that you vote "FOR" the Trustee
nominees for the Board.
Q. Why am I being asked to vote on a new investment advisory agreement and
new subadvisory agreement?
A. In a continuing effort to provide shareholders with the most
efficient services, the Fund's management has recommended a restructuring
and reallocation of responsibilities among the Fund's service providers
including, MBIA Capital Management Corp., the Fund's current investment adviser,
and Claymore Advisors, LLC. This restructuring will allow MBIA Capital
Management Corp. to focus solely on providing investment advisory services to
the Fund. Claymore Advisors, LLC can provide oversight of MBIA Capital
Management Corp. while also providing administrative services. Restructuring the
allocation of duties is intended to allow each service provider to provide the
most effective services to the Fund.
Q. How does the proposed new investment advisory agreement differ from the
Fund's current investment advisory agreement?
A. The proposed new investment advisory agreement is with a different
investment adviser, Claymore Advisors, LLC, but is similar to the Fund's current
investment advisory agreement. A comparison of the two agreements can be found
in the Proxy Statement under Proposal 2.
Q. Will the Fund's total advisory and servicing fees increase?
A. No. Currently, the Fund pays MBIA Capital Management Corp. an advisory
fee of 0.39% of the Fund's managed assets and pays Claymore Securities, Inc. a
servicing fee of 0.26% of the Fund's managed assets (i.e., the net asset value
of the Fund's common shares plus the liquidation preference of the Fund's
preferred shares and the principal amount of any borrowing used for leverage)
for a total of 0.65% of the Fund's managed assets. Under the proposed new
(i)
investment advisory agreement, the Fund will pay Claymore Advisors, LLC, the
proposed new investment adviser and affiliate of Claymore Securities, Inc., a
fee of 0.65% of the Fund's managed assets. Claymore Advisors, LLC (and not the
Fund) will pay MBIA Capital Management Corp. a fee of 0.39% of the Fund's
managed assets under the proposed new subadvisory agreement. Both Claymore
Advisors, LLC and MBIA Capital Management Corp. have agreed to waive a portion
of their fees until 2009, as discussed in the Proxy Statement. The Fund will no
longer pay a servicing fee if the proposed new investment advisory agreement is
approved by the shareholders.
Q. How do the Trustees suggest I vote in connection with the new
investment advisory agreement and new subadvisory agreement?
A. The Trustees unanimously recommend that you vote "FOR" the approval of
the new investment advisory agreement and new subadvisory agreement.
Q. Why should I vote?
A. Your immediate response on the enclosed proxy card will help save the
costs of any further solicitations. We encourage all shareholders to participate
in the governance of the Fund.
Q. Who can I call if I have any questions?
A. Please feel free to call MIS Corporation, your proxy solicitor, at
1-877-256-6069 to answer any questions or if you need assistance in voting.
Q. What will happen if shareholders do not approve the new investment
advisory agreement and new subadvisory agreement?
A. If the new investment advisory agreement and the new subadvisory
agreement are not approved, the Fund's current investment advisory agreement and
sevicing agreement will continue until June 2006. This is discussed in more
detail in the proxy.
Q. How do I vote my shares?
A. You can vote your shares by attending the Meeting, or if you do not
attend, by signing and dating the enclosed proxy card, and mailing it in the
enclosed postage-paid envelope.
Q. Will anyone contact me?
A. You may receive a call from our proxy solicitor to verify that you
received your proxy materials, to answer any questions you may have about the
proposals and to encourage you to vote. The proxy solicitor may also accept your
vote over the phone at that time.
IT IS IMPORTANT THAT YOU VOTE PROMPTLY.
(ii)
MBIA CAPITAL/CLAYMORE MANAGED DURATION INVESTMENT GRADE MUNICIPAL FUND
113 KING STREET, ARMONK, NEW YORK 10504
----------------------
PROXY STATEMENT
----------------------
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 10, 2005
This proxy statement is furnished in connection with the solicitation
by the Board of Trustees (the "Board" or "Board of Trustees") of MBIA
Capital/Claymore Managed Duration Investment Grade Municipal Fund (the "Fund")
of proxies to be used at the Annual Meeting of Shareholders (the "Meeting") of
the Fund to be held at the offices of Claymore Advisors, LLC, 2455 Corporate
West Drive, Lisle, Illinois 60532, on Thursday, November 10, 2005, at 11:00
a.m., Central Standard time (and at any adjournment or postponements thereof)
for the purposes set forth in the accompanying Notice of Annual Meeting of
Shareholders. This proxy statement and the accompanying form of proxy are first
being mailed to shareholders on or about October 3, 2005.
The close of business on September 19, 2005 has been fixed as the
record date for the determination of shareholders entitled to notice of and to
vote at the Meeting. Each shareholder is entitled to one vote for each full
share and an appropriate fraction of a vote for each fractional share held, with
no shares having cumulative voting rights. On September 19, 2005, there were
7,935,570.978 shares of the Fund's common shares outstanding and 2,778 shares of
the Fund's auction market preferred shares ("preferred shares") outstanding.
These classes of stock are the only classes of stock currently authorized by the
Fund.
In accordance with the Fund's Second Amended and Restated Agreement
and Declaration of Trust, a quorum is constituted by the presence in person or
by proxy of the holders of record of a majority of the common shares and
preferred shares of the Fund entitled to vote at the Meeting. However, a quorum
for the election of Mark Jurish, as discussed below, is constituted by the
presence in person or by proxy of the holders of record of a majority of the
preferred shares of the Fund entitled to vote at the Meeting. In the event that
a quorum is not present at the Meeting or, in the event that a quorum is present
but sufficient votes have not been received to approve a proposal, the Meeting
may be adjourned to permit further solicitation of proxies. The presiding
officer or Trustee of the Fund for the Meeting or the affirmative vote of a
majority of the persons designated as proxies may adjourn the Meeting to permit
further solicitation of proxies or for other reasons consistent with Delaware
law and the Fund's Second Amended and Restated Agreement and Declaration of
Trust and Amended and Restated By-Laws. Unless otherwise instructed by a
shareholder granting a proxy, the persons designated as proxies may use their
discretionary authority to vote on questions of adjournment.
Shareholders who execute proxies retain the right to revoke them in
person at the Meeting or by written notice received by the Secretary of the Fund
at any time before they are voted. Unrevoked proxies will be voted in accordance
with the specifications thereon and, unless specified to the contrary, will be
voted FOR the election of Trustees.
The New York Stock Exchange ("NYSE") has taken the position that
broker-dealers that are members of the NYSE that have not received instructions
from a customer prior to the date specified in the broker-dealer firms' request
for voting instructions may not vote such customer's shares on the new
investment advisory agreement in Proposal 2 or the new subadvisory agreement in
Proposal 3. A signed proxy card or other authorization by a beneficial owner of
Fund shares that does not specify how the beneficial owner's shares should be
voted on a proposal will be deemed an instruction to vote such shares in favor
of the applicable proposal.
Broker non-votes (i.e., shares held by brokers or nominees, typically
in "street name," as to which proxies have been returned but instructions have
not been received from the beneficial owners or persons entitled to vote, and
the broker or nominee does not have discretionary voting power on a particular
matter) have no effect on the vote on Proposal 1 and effectively result in a
vote AGAINST Proposals 2 and 3.
At the Meeting, the preferred shareholders of the Fund will have equal
voting rights (i.e., one vote per share) with the Fund's common shareholders
and, except as shown in the summary chart below, will vote together with common
shareholders as a single class on all proposals to be brought before the
Meeting. As summarized below, the preferred shareholders of the Fund, voting as
a separate class, have the right to vote on the election of the Trustee
designated to represent the preferred shares. Mr. Jurish is one of the two
Trustees designated to represent the holders of the Fund's preferred shares.
Common shareholders will not participate in the election of Mr. Jurish.
SUMMARY OF VOTING RIGHTS ON PROPOSALS 1, 2 & 3
COMMON SHAREHOLDERS PREFERRED SHAREHOLDERS
- ----------------------------------- ------------------- ----------------------
PROPOSAL 1: ELECTION OF TRUSTEES
Mark Jurish........................ N/A X
Ronald A. Nyberg................... X X
PROPOSAL 2: APPROVAL OF INVESTMENT X X
ADVISORY AGREEMENT
PROPOSAL 3: APPROVAL OF SUB ADVISORY X X
AGREEMENT
Election of Mr. Nyberg to the Board will require the affirmative vote
of a majority of the votes of the common shareholders and the preferred
shareholders (voting together as a single class) of the Fund cast for the
election of Trustees at the Meeting, in person or by proxy. Election of Mr.
Jurish to the Board will require the
2
affirmative vote of a majority of the votes of the preferred shareholders
(voting as a separate class) of the Fund cast for the election of Trustees at
the Meeting, in person or by proxy. Approval of Proposals 2 and 3 requires the
affirmative vote of a "majority of the outstanding voting securities" of the
Fund. Under applicable law, the vote of a "majority of the outstanding voting
securities" means the affirmative vote of the lesser of (a) 67% or more of the
voting securities of the Fund that are present at the Meeting or represented by
proxy if holder of shares representing more than 50% of the outstanding voting
securities of the Fund are present or represented by proxy or (b) more than 50%
of the outstanding voting securities of the Fund.
The principal executive offices of the Fund are located at 113 King
Street, Armonk, New York 10504. MBIA Capital Management Corp. ("MBIA-CMC"),
whose principal business address is 113 King Street, Armonk, New York 10504, is
the Fund's current investment adviser and the proposed subadviser (see Proposals
2 and 3 below). MBIA-CMC is an affiliate of MBIA Insurance Corporation, a
leading financial guarantor in the municipal securities market. Claymore
Advisors, LLC ("Claymore"), whose principal business address is 2455 Corporate
West Drive, Lisle, Illinois 60532, is the proposed investment adviser for the
Fund (see Proposal 2 below). The Fund's administrator is Claymore. The Fund's
accounting agent is The Bank of New York, whose principal business address is
101 Barclay Street, New York, New York 10286.
PROPOSAL 1: ELECTION OF TRUSTEES
At the Meeting, preferred shareholders voting separately will be asked
to elect one Class I Trustee and common shareholders and preferred shareholders,
voting together as a single class, will be asked to elect one Class I Trustee,
each to serve for a term of three years, and until their successors are duly
elected and qualified. The terms of office of the Class I Trustees expire, if
elected at this Meeting, at the annual meeting of shareholders to be held in
2008, or thereafter in each case when their respective successors are duly
elected, however, the term of office of a Class I Trustee shall also 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 of Trustee. The nominees for Trustees are Mr. Jurish and Mr.
Nyberg.
At the Annual Meeting of Shareholders held on November 11, 2004, the
Fund's shareholders elected the Board of Trustees to a staggered term in
accordance with the Fund's Second Amended and Restated Agreement and Declaration
of Trust. Accordingly, the term of office of only a single class of Trustees
will expire in 2005. The effect of these staggered terms is to limit the ability
of other entities or persons to acquire control of the Fund by delaying the
replacement of a majority of the Board.
The persons named in the proxy intend to vote at the Meeting (unless
directed not to vote) FOR the election of the nominees named below. Both of the
Trustee nominees are currently members of the Fund's Board. Each nominee has
indicated that he will serve if elected, but if either Trustee nominee should be
unable to serve, the proxy will be voted for another person determined by the
persons named in the proxy in accordance with their judgment.
3
INFORMATION REGARDING TRUSTEE NOMINEES
The following table provides information concerning the nominees for
election as Trustees and the other Trustees of the Fund:
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
PRINCIPAL OVERSEEN BY OTHER
TERM OF OFFICE(2) OCCUPATION(S) NOMINEE DIRECTORSHIPS
NAME, ADDRESS(1) AND POSITION(S) HELD AND LENGTH OF DURING PAST 5 (INCLUDING THE HELD
AGE WITH THE FUND TIME SERVED YEARS FUND)(3) BY NOMINEE
- -------------------- ---------------- ----------------- ------------- -------------- -------------
INDEPENDENT TRUSTEE
NOMINEES(4)
Mark Jurish, Trustee Class I Since 2003 Founder and 1 None
Year of Birth: 1959 Chief Executive
Officer of Larch
Lane Advisors
LLC. Prior to
forming Larch
Lane Advisors,
Mr. Jurish was
Managing
Director at
Paloma Partners,
a firm that he
joined in 1988.
Ronald A. Nyberg, Trustee Class I Since 2003 Principal of 1 Director, Edward
Year of Birth: 1953 Ronald A. Hospital
Nyberg, Ltd., a Foundation,
law firm Naperville, IL;
specializing in Trustee, North
Corporate Law, Park University,
Estate Planning Chicago;
and Business Trustee, Advent
Transactions Claymore
(2000 - Convertible
present). Securities and
Formerly, Income Fund,
Executive Vice Advent/Claymore
President, Enhanced Growth
General Counsel, & Income Fund,
and Corporate Fiduciary/Claymore
Secretary of Van Dynamic Equity
Kampen Fund,
Investments Fiduciary/Claymore
(1982-1999), MLP Opportunity
former associate Fund, Old Mutual/
of Querrey & Claymore Long-
Harrow (law Short Fund,
firm) (1978 - Western
1982). Asset/Claymore
U.S. Treasury
Inflation
Protected
Securities Fund,
Dreman/Claymore
Dividend &
Income Fund,
Western
Asset/Claymore
U.S. Treasury
Inflation
Protected
Securities Fund
2,Claymore Trust,
TS&W/Claymore
Tax-Advantaged
Balanced Fund
and
Madison/Claymore
Covered Call
Fund.
- ----------
4
NUMBER OF
TERM OF PORTFOLIOS IN
OFFICE(2) FUND COMPLEX
AND OVERSEEN BY
POSITION(S) LENGTH OF PRINCIPAL TRUSTEE
HELD WITH TIME OCCUPATION(S) DURING (INCLUDING OTHER DIRECTORSHIPS HELD
NAME, ADDRESS(1) AND AGE THE FUND SERVED PAST 5 YEARS THE FUND)(3) BY TRUSTEE
- ------------------------ ----------- --------- -------------------- -------------- ------------------------
INDEPENDENT TRUSTEES(4)
Jerry S. Rosenbloom Trustee Since 2003 Frederick H. Ecker 1 Harleysville Group, Inc
Year of Birth: 1939 Class III Emeritus Professor of and Century Shares Funds.
Insurance and Risk
Management and
Professor of Insurance
and Risk Management at
the Wharton School of
the University of
Pennsylvania and
Academic Director of
the Certified Employee
Benefit Specialist
(CEBS) Program,
co-sponsored by the
Wharton School and the
International
Foundation of Employee
Benefit Plans.
Ronald E. Toupin, Jr. Trustee Since Formerly Vice 1 Trustee, Old
Year of Birth: 1958 Class II 2003 President, Manager and Mutual/Claymore Long-
Portfolio Manager of Short Fund,
Nuveen Asset Fiduciary/Claymore
Chairman Since Management Dynamic Equity Fund,
of the November (1998-1999), Vice Fiduciary/Claymore MLP
Board 2004 President of Nuveen Opportunity Fund, Western
Investment Advisory Asset/Claymore U.S.
Corporation Treasury Inflation
(1992-1999), Vice Protected Securities
President and Manager Fund, Dreman/Claymore
of Nuveen Unit Dividend & Income Fund,
Investment Trusts Western Asset/Claymore
(1991-1999), and U.S. Treasury Inflation
Assistant Vice Protected Securities Fund
President and 2, TS&W/Claymore
Portfolio Manager of Tax-Advantaged Balanced
Nuveen Unit Investment Fund, Madison/Claymore
Trusts (1988-1999), Covered Call Fund,
each of John Nuveen & Claymore Trust.
Company, Inc.
(1982-1999).
5
NUMBER OF
TERM OF PORTFOLIOS IN
OFFICE(2) FUND COMPLEX
AND OVERSEEN BY
POSITION(S) LENGTH OF PRINCIPAL TRUSTEE
HELD WITH TIME OCCUPATION(S) DURING (INCLUDING OTHER DIRECTORSHIPS HELD
NAME, ADDRESS(1) AND AGE THE FUND SERVED PAST 5 YEARS THE FUND)(3) BY TRUSTEE
- ------------------------ ----------- --------- -------------------- -------------- ------------------------
INTERESTED TRUSTEES
Clifford D. Corso(5), President Since 2003 President of MBIA-CMC 1 None
Year of Birth: 1961 and and Chief Investment
Trustee Officer, MBIA
Class III Insurance Corp.;
Managing Director of
the 1838 Investment
Advisors Funds
(2000-2004).
Nicholas Dalmaso(6), Trustee Since 2003 Senior Managing 1 Trustee, Advent Claymore
Year of Birth: 1965 Class II Director and General Convertible Securities
Counsel of Claymore and Income Fund,
Advisors, LLC and Advent Claymore Enhanced
Claymore Securities, Growth & Income Fund,
Inc. (asset manager) TS&W/Claymore
(2001-present). Tax-Advantaged Balanced
Formerly, Assistant Fund, Madison/Claymore
General Counsel, John Covered Call Fund,
Nuveen & Company, Inc. Fiduciary/Claymore
(1999-2001). Former Dynamic Equity Fund,
Vice President and Fiduciary/Claymore MLP
Associate General Opportunity Fund, Old
Counsel of Van Kampen Mutual/Claymore Long-
Investments Short Fund, Western
(1992-1999). Asset/Claymore U.S.
Treasury Inflation
Protected Securities
Fund, Western
Asset/Claymore U.S.
Treasury Inflation
Protected Securities Fund
2, Claymore Trust.
- ----------
(1) The business address of each Trustee nominee is c/o MBIA Capital/Claymore
Managed Duration Investment Grade Municipal Fund, 113 King Street, Armonk,
New York 10504.
(2) The terms of the office of Class II Trustees expire in 2006 or in each case
when their respective successors are duly elected and qualified, and the
terms of office of the Class III Trustees expire in 2007 or in each case
when their successors are duly elected and qualified. However, the term of
office of a Trustee shall terminate and a vacancy shall occur in the event
of the Trustee's death, resignation, removal, bankruptcy, adjudicated
incompetence or other incapacity to perform the duties of the office of a
Trustee.
(3) If the shareholders approve the new investment advisory agreement (Proposal
2 below), the Fund Complex will include Advent/Claymore Enhanced Growth &
Income Fund, Dreman/Claymore Dividend & Income Fund, Flaherty &
Crumrine/Claymore Preferred Securities Income Fund, Flaherty &
Crumrine/Claymore Total Return Fund, Fiduciary/Claymore MLP Opportunity
Fund, Fiduciary/Claymore Dynamic Equity Fund, Advent Claymore Convertible
Securities and Income Fund, Madison/Claymore Covered Call Fund, Old
Mutual/Claymore Long-Short Fund, TS&W/Claymore Tax-Advantaged Balanced
Fund, Western Asset/Claymore U.S. Treasury Inflation Protected Securities
Fund, Western Asset/Claymore U.S. Treasury Inflation Protected Securities
Fund 2, Claymore Trust (Claymore/Fidiciary Strategic Equity Fund,
Claymore/Fidiciary Large Cap Core Fund, Claymore Core Equity Fund and
Claymore Peroni Equity Opportunities Fund) and the Fund. Mr. Toupin, Mr.
Nyberg and Mr. Dalmaso would then oversee 13, 15 and 13 funds in the Fund
Complex, respectively. The number of funds overseen by Mr. Corso, Mr.
Rosenbloom and Mr. Jurish would not change.
(4) "Independent Trustees" are those Trustees who are not "interested persons"
of the Fund as defined in the Investment Company Act of 1940 ("1940 Act").
Each Independent Trustee is also independent (as that term is defined in
the NYSE listing standards).
(5) Mr. Corso is deemed an "interested person" by virtue of his position at
MBIA-CMC. Mr. Corso's positions with affiliated persons of the Fund are set
forth in the table above.
(6) Mr. Dalmaso is deemed an "interested person" by virtue of his position at
Claymore. Mr. Dalmaso's positions with affiliated persons of the Fund are
set forth in the table above.
BOARD COMMITTEES AND MEETINGS
BOARD OF TRUSTEES AND MEETINGS. The Board of Trustees is responsible for
ensuring that the Fund is managed in the best interest of its shareholders. The
Trustees oversee the Fund's business by, among other things, meeting with the
Fund's management and evaluating the performance of the Fund's service providers
including MBIA-CMC, the custodian, the transfer agent, the servicing agent and
the administrator. As part of this process, the Trustees consult with the Fund's
independent registered public accounting firm and with their own separate
independent counsel.
6
During the fiscal year ended July 31, 2005, the Board of Trustees met
four times. Other than Mr. Corso, each Trustee attended at least 75% of the
aggregate number of meetings of the Board and the committees for which he was
eligible. The Fund does not have a written policy regarding attendance by
Trustees at annual meetings of shareholders although Trustees are encouraged to
attend annual meetings of shareholders. Messrs. Dalmaso, Nyberg, Toupin and
Rosenbloom attended the Annual Meeting of Shareholders held in 2004.
The Board has an Audit Committee and a Nominating and Governance
Committee that meet periodically during the year and whose responsibilities are
described below.
AUDIT COMMITTEE. The Fund's Audit Committee is currently composed of Messrs.
Jurish, Nyberg, Rosenbloom and Toupin, all of whom have been determined not to
be "interested persons" of the Fund, MBIA-CMC or its affiliates, or Claymore or
its affiliates within the meaning of the 1940 Act, and who are "independent" as
defined in the NYSE listing standards. Mr. Rosenbloom serves as the Chairman of
the Audit Committee. The Audit Committee is, among other things, responsible
for: (i) overseeing the Fund's accounting and financial reporting policies and
practices, its internal controls over financial reporting and the quality,
integrity and objectivity of the Fund's financial statements and the independent
audit thereof, (ii) approving prior to appointment the engagement of the Fund's
independent registered public accounting firm, (iii) selecting, overseeing and
approving the compensation of the Fund's independent registered public
accounting firm and (iv) discussing the Fund's annual audited financial
statements and semi-annual financial statements with management and the
independent registered public accounting firm. This Committee met four times
during the fiscal year ended July 31, 2005. The Fund adopted an Audit Committee
Charter at a meeting held on July 21, 2003, as amended at a meeting on July 15,
2004, a copy of which was attached to the Proxy Statement for the Fund filed
with the Securities and Exchange Commission ("SEC") on September 29, 2004 and is
available on the Fund's website at WWW.MBIACLAYMORE.COM.
NOMINATING AND GOVERNANCE COMMITTEE. The Nominating and Governance Committee,
the principal functions of which are to select and nominate persons for election
as Trustees of the Fund and to oversee certain corporate governance matters of
the Fund, is currently composed of Messrs. Jurish, Nyberg, Rosenbloom and
Toupin. Mr. Nyberg serves as the Chairman of the Nominating and Governance
Committee. Only Trustees who are not "interested persons" of the Fund as defined
in the 1940 Act and who are "independent" as defined in the NYSE listing
standards are members of the Nominating and Governance Committee. The Nominating
and Governance Committee may accept nominees recommended by the shareholders as
it deems appropriate. Shareholders who wish to recommend a nominee should send
nominations that include biographical data and set forth the qualifications of
the proposed nominee to the Fund's Secretary. The Nominating and Governance
Committee met four times during the Fund's fiscal year ended July 31, 2005. The
Fund most recently adopted a Nominating and Governance Committee Charter at a
meeting held on November 11, 2004, a copy of which is attached to this Proxy
Statement as APPENDIX A.
The Nominating and Governance Committee identifies potential nominees
through its network of contacts, and may also engage, if it deems appropriate, a
professional search firm. While the Nominating and Governance Committee meets to
discuss and consider such candidates' qualifications and then chooses a
candidate by majority vote, the Nominating and Governance Committee does not
have specific, minimum qualifications for nominees and has not established
specific qualities or skills that it regards as necessary for one or more of the
Fund's Trustees to possess (other than any qualities or skills that may be
required by applicable law, regulation or listing standard). However, as set
7
forth in the Nominating and Governance Committee Charter, in evaluating a person
as a potential nominee to serve as a Trustee of the Fund, the Nominating and
Governance Committee may consider the following factors, among any others it may
deem relevant:
o whether or not the individual is an "interested person" as defined
in the 1940 Act and whether the person is otherwise qualified
under applicable laws and regulations to serve as a Trustee of the
Fund;
o whether or not the individual has any relationships that might
impair his or her independence, such as any business, financial or
family relationships with Fund management, the investment manager
of the Fund, Fund service providers or their affiliates;
o whether or not the individual serves on boards of, or is otherwise
affiliated with, competing financial service organizations or
their related mutual fund complexes;
o whether or not the individual is willing to serve, and willing and
able to commit the time necessary for the performance of the
duties of a Trustee of the Fund;
o the contribution the individual can make to the Board and the
Fund, with consideration being given to the individual's
educational background and business and professional experience;
o the character and integrity of the individual;
o the overall diversity of the Board's composition; and
o the Nominating and Governance Committee may, but is not required
to, retain a third-party search firm at the Fund's expense to
assist in the identification of nominees who are not "interested
persons" as defined in the 1940 Act ("Independent Trustee
Nominees").
The nominees for election at the Meeting currently serve as Trustees
and were unanimously nominated by the Board of Trustees and the Nominating and
Governance Committee.
8
EQUITY OWNERSHIP
The following table provides information concerning the dollar range of
equity securities owned beneficially by each Trustee as of September 19, 2005:
AGGREGATE DOLLAR RANGE OF EQUITY
SECURITIES IN ALL FUNDS OVERSEEN OR TO
DOLLAR RANGE(1) OF EQUITY BE OVERSEEN BY TRUSTEE/NOMINEE IN THE
NAME OF TRUSTEE/NOMINEE SECURITIES IN THE FUND FAMILY OF INVESTMENT COMPANIES(1)
- ----------------------- ------------------------- ----------------------------------------
INDEPENDENT TRUSTEE NOMINEES
Mark Jurish none none
Ronald A. Nyberg $1 - $10,000 $1 - $10,000
INDEPENDENT TRUSTEES
Jerry S. Rosenbloom $10,001 - $50,000 $10,001 - $50,000
Ronald E. Toupin, Jr. none none
INTERESTED TRUSTEES
Clifford D. Corso none none
Nicholas Dalmaso none none
- ----------
(1) Securities are valued as of September 19, 2005. Currently, the Fund is not
part of a Family of Investment Companies (the "Companies"). However, if the
shareholders approve the new investment advisory agreement (Proposal 2
below), the Fund will be a part of a Family of Investment Companies that
will include Advent Claymore Enhanced Growth & Income Fund, Dreman/Claymore
Dividend & Income Fund, Flaherty & Crumrine/Claymore Preferred Securities
Income Fund, Flaherty & Crumrine/Claymore Total Return Fund,
Fiduciary/Claymore MLP Opportunity Fund, Fiduciary/Claymore Dynamic Equity
Fund, Advent Claymore Convertible Securities and Income Fund,
Madison/Claymore Covered Call Fund, Old Mutual/Claymore Long-Short Fund,
TS&W/Claymore Tax-Advantaged Balanced Fund, Western Asset/Claymore U.S.
Treasury Inflation Protected Securities Fund and Western Asset/Claymore
U.S. Treasury Inflation Protected Securities Fund 2 and the Claymore Trust.
Mr. Nyberg would then own $50,001 - $100,000 in equity securities of funds
in the Companies.
As of September 19, 2005, the Trustees and officers of the Fund as a
group owned less than 1% of the outstanding securities of the Fund. As of
September 19, 2005, none of the Independent Trustees of the Fund nor any of
their immediate family members owned beneficially or of record any securities in
MBIA Inc., MBIA-CMC or any person directly or indirectly controlling, controlled
by or under common control with MBIA Inc. or MBIA-CMC or Claymore or any person
directly or indirectly controlling, controlled by or under common control with
Claymore.
To the knowledge of management, no person owned of record or owned
beneficially more than 5% of the Fund's common shares or preferred
shares outstanding as of September 19, 2005, except that Cede & Co., a nominee
for participants in the Depository Trust Company, held of record 7,898,516
common shares, equal to approximately 99.53% of the Fund's outstanding common
shares and 2,778 preferred shares, equal to 100% of the Fund's outstanding
preferred shares.
COMPENSATION
MBIA-CMC pays all compensation of officers and employees of the Fund
who are affiliated persons of MBIA Inc. or its subsidiaries and will continue to
pay compensation of officers and employees of the Fund who are affiliated
persons of MBIA Inc. if MBIA-CMC becomes subadviser of the Fund (see Proposal 3
below). Claymore will pay all compensation of officers and employees of the Fund
who are affiliated persons of Claymore if Claymore becomes the investment
adviser of the Fund (see Proposal 2 below).
9
The Fund pays each Independent Trustee a combined fee of $2,000 per
quarter for services on the Board and on the committees. Additionally, the Fund
pays each Independent Trustee a fee of $1,000 per Board meeting and $500 per
committee meeting (half of these amounts if the meetings are held
telephonically). The Chairman of the Board, so long as he is an Independent
Trustee, receives an additional $2,000 per year for his service, and the
Chairman of each of the Audit Committee and the Nominating and Governance
Committee receives an additional $1,500 per year for his service. The Fund
reimburses each Independent Trustee for his out-of-pocket expenses relating to
attendance at Board and committee meetings.
The Fund does not provide any pension or retirement benefits to the
Trustees or its officers.
The following table sets forth the compensation paid by the Fund to the
Independent Trustees during the fiscal year ended July 31, 2005 and the
aggregate compensation paid to them from all registered funds in the Fund
Complex (as defined below) for the calendar year ended December 31, 2004.
AGGREGATE COMPENSATION
AGGREGATE COMPENSATION FROM FUND AND FUND
NAME OF TRUSTEE POSITION WITH FUND FROM FUND COMPLEX(1)
--------------- ------------------ ---------------------- ----------------------
INDEPENDENT TRUSTEES
Jerry S. Rosenbloom Trustee $14,125 $13,375
Ronald E. Toupin, Jr. Trustee $14,250 $13,250
INDEPENDENT TRUSTEE NOMINEES
Mark Jurish Trustee $13,000 $13,000
Ronald A. Nyberg Trustee $14,125 $13,375
INTERESTED TRUSTEES
Clifford D. Corso Trustee $0 $0
Nicholas Dalmaso Trustee $0 $0
- ----------
(1) A Fund Complex means two or more registered investment companies that hold
themselves out to investors as related companies for purposes of investment
and investor services, or that have a common investment adviser or that
have an investment adviser that is an affiliated person of the investment
adviser of any of the other registered investment companies. Investment
companies are considered to be in the same family if they share the same
investment adviser or principal underwriter and hold themselves out to
investors as related companies for purposes of investment and investor
services. Currently, the Fund is not part of a Fund Complex. However, if
the shareholders approve the new investment advisory agreement (Proposal 2
below), the Fund Complex will include Advent/Claymore Enhanced Growth &
Income Fund, Dreman/Claymore Dividend & Income Fund, Flaherty &
Crumrine/Claymore Preferred Securities Income Fund, Flaherty &
Crumrine/Claymore Total Return Fund, Fiduciary/Claymore MLP Opportunity
Fund, Fiduciary/Claymore Dynamic Equity Fund, Advent Claymore Convertible
Securities and Income Fund, Madison/Claymore Covered Call Fund, Old
Mutual/Claymore Long-Short Fund, TS&W/Claymore Tax-Advantaged Balanced
Fund, Western Asset/Claymore U.S. Treasury Inflation Protected Securities
Fund, Claymore Trust (Claymore/Fidiciary Strategic Equity Fund,
Claymore/Fidiciary Large Cap Core Fund, Claymore Core Equity Fund and
Claymore Peroni Equity Opportunities Fund), Western Asset/Claymore U.S.
Treasury Inflation Protected Securities Fund 2 and the Fund. Mr. Toupin and
Mr. Nyberg would then have received $173,500 and $214,500 in compensation
from the Fund Complex, respectively.
10
REQUIRED VOTE
Election of Mr. Nyberg to the Board of Trustees of the Fund will
require the affirmative vote of a majority of the votes of the common
shareholders and the preferred shareholders (voting together as a single class)
of the Fund cast for the election of Trustees at the Meeting, in person or by
proxy. Election of Mr. Jurish to the Board of Trustees will require the
affirmative vote of a majority of the votes of the preferred shareholders
(voting as a separate class) of the Fund cast for the election of Trustees at
the Meeting, in person or by proxy.
THE TRUSTEES, INCLUDING THE TRUSTEES WHO ARE NOT "INTERESTED PERSONS,"
UNANIMOUSLY RECOMMEND THAT THE SHAREHOLDERS VOTE "FOR" THE NOMINEES FOR TRUSTEE.
PROPOSAL 2: APPROVAL OF NEW INVESTMENT ADVISORY AGREEMENT
The Board is proposing that the shareholders approve a new investment
advisory agreement between the Fund and Claymore ("New Investment Advisory
Agreement").
BACKGROUND
Since the inception of the Fund in 2003, MBIA-CMC has served as the
Fund's investment adviser under an investment advisory agreement between
MBIA-CMC and the Fund (the "Original Investment Advisory Agreement"). During the
same period, Claymore Securities, Inc. ("Claymore Securities"), an affiliate of
Claymore, has served as the Fund's servicing agent under a Servicing Agreement
between the Fund and Claymore Securities (the "Servicing Agreement"). Under the
Original Investment Advisory Agreement, MBIA-CMC has been responsible for
devising the Fund's overall investment strategy and implementing the strategy.
The Original Investment Advisory Agreement was approved by the Board of Trustees
for a two year term on July 21, 2003 and was approved by the sole shareholder of
the Fund on August 23, 2003. For the fiscal year ended July 31, 2005, the Fund
paid $718,065 to MBIA-CMC in investment advisory fees. Under the Servicing
Agreement, Claymore Securities has handled duties such as the coordination of
communications and marketing for the Fund. The Servicing Agreement was approved
by the Board of Trustees for a two year term on July 21, 2003. For the fiscal
year ended July 31, 2005, the Fund paid $478,710 to Claymore Securities in
servicing fees.
In a continuing effort to provide shareholders with the most efficient
services, the Fund's management recommended a restructuring and reallocation of
responsibilities among the Fund's service providers. Management believed that
the proposed restructuring the allocation of duties among the service providers
allows each service provider to provide the most effective services to the Fund.
At a meeting on June 29, 2005, the Board of Trustees considered and reviewed
plans for the Fund to restructure the service providers of the Fund. As part of
their review, the Board of Trustees considered the proposed New Investment
Advisory Agreement and a proposed new subadvisory agreement among the Fund,
Claymore and MBIA-CMC ("New Subadvisory Agreement"). A copy of the New
Investment Advisory Agreement is attached hereto as APPENDIX B and a copy of the
New Subadvisory Agreement is attached hereto as APPENDIX C.
As part of the restructuring of the service providers, on June 29,
2005, the Board of Trustees also considered and approved a new Administration
Agreement with Claymore to become effective August 1, 2005 (the "Administration
Agreement") and a new Accounting Services Agreement with The Bank of New York
also to become effective August 1, 2005. Since the inception of the Fund, MBIA
Municipal Investors Service Corp. ("MBIA-MISC") had provided both administrative
11
and accounting services to the Fund under the Accounting and Administrative
Services Agreement. For the services provided by MBIA-MISC under the Accounting
and Administrative Services Agreement, the Fund paid, in addition to reimbursing
MBIA-MISC for its out-of-pocket costs, an annual fee equal to 0.10% of the
Fund's average daily Managed Assets, (i.e., the net asset value of the Fund's
common shares plus the liquidation preference of the Fund's preferred shares and
the principal amount of any borrowing used for leverage) up to $250 million;
0.06% of the next $250 million; and 0.03% of the Managed Assets in excess of
$500 million, with a minimum annual fee of $100,000. For the services provided
and expenses assumed by Claymore under the Administration Agreement, the Fund
pays Claymore a fee, accrued daily and paid monthly, at the annualized rate of
0.0275% of the first $200,000,000; 0.02% of the next $300,000,000; 0.015% of the
next $500,000,000 and 0.01% for amounts over $1,000,000,000 of the Fund's
Managed Assets. In consideration for the services to be performed by The Bank of
New York under the Accounting Services Agreement, the Fund will reimburse The
Bank of New York for all out-of-pocket expenses and will pay The Bank of New
York a fee, accrued daily and paid monthly, at the annualized rate of 0.03% of
the Fund's Managed Assets. These changes in service providers reduce slightly
the overall fees paid by the Fund for administrative and accounting services, as
more fully described on APPENDIX D hereto.
At the June 29, 2005 meeting, the Board of Trustees also considered and
continued the Original Investment Advisory Agreement and the Servicing Agreement
until the earlier of June 29, 2006 or shareholder approval of the proposed New
Investment Advisory Agreement and proposed New Subadvisory Agreement. If the
Fund's shareholders approve the New Investment Advisory Agreement and New
Subadvisory Agreement, the Original Investment Advisory Agreement and the
Servicing Agreement will terminate.
The 1940 Act requires that the New Investment Advisory Agreement and
the New Subadvisory Agreement be approved by the Fund's shareholders in order
for each agreement to become effective. Based on the reasons discussed below
(see "Board Considerations" below), at the June 29, 2005 Board of Trustees
Meeting, the Trustees, including a majority of the Trustees who are not parties
to the Original Investment Advisory Agreement, Servicing Agreement, New
Investment Advisory Agreement or New Subadvisory Agreement and who are not
"interested persons" of the Fund, Claymore or MBIA-CMC, as defined in the 1940
Act (the "Independent Trustees"), unanimously approved the New Investment
Advisory Agreement and New Subadvisory Agreement and unanimously recommended
their approval by the Fund's shareholders in order to assure continuity of
investment advisory services to the Fund. In the event the Fund's shareholders
do not approve the New Investment Advisory Agreement or New Subadvisory
Agreement, the Original Investment Advisory Agreement and Servicing Agreement
will continue until June 2006 and the Board will take such action as it deems to
be in the best interest of the Fund and its shareholders.
COMPARISON OF ORIGINAL INVESTMENT ADVISORY AGREEMENT WITH NEW INVESTMENT
ADVISORY AGREEMENT
FEES
There is no change in the aggregate fees (both actual and after
waivers) paid by the Fund to Claymore as investment adviser compared to what was
previously paid to MBIA-CMC, as investment adviser, and Claymore, as Servicing
Agent, together.
12
If approved by the shareholders, under the New Investment Advisory
Agreement, Claymore would receive from the Fund a monthly fee at an annual rate
equal to 0.65% of the Fund's average daily Managed Assets. Because the proceeds
of any leverage are included in the calculation of Claymore's fee, that fee
increases if the Fund engages in more leveraging techniques. This was also true
under the Original Investment Advisory Agreement and the Servicing Agreement.
Claymore has agreed to contractually waive a portion of the management fee it
would be entitled to receive from the Fund under the New Investment Advisory
Agreement at the annual rate of 0.15% of the Fund's average daily Managed Assets
through September 1, 2008, and at the rate of 0.070% thereafter through
September 1, 2009, see APPENDIX B-1.
For its services rendered under the Original Investment Advisory
Agreement, MBIA-CMC receives from the Fund a monthly fee at an annual rate of
0.39% of the Fund's average daily Managed Assets. MBIA-CMC contractually agreed
to waive a portion of the advisory fees it was entitled to receive under the
Original Investment Advisory Agreement from the Fund at the annual rate of 0.09%
of the Fund's average daily Managed Assets through September 1, 2008, and at the
rate of 0.042% thereafter through September 1, 2009. MBIA-CMC will also continue
to waive a portion of its subadvisory fee from Claymore as described below in
Proposal 3.
For its services rendered under the Servicing Agreement, Claymore
Securities received from the Fund a monthly fee at an annual rate of 0.26% of
the Fund's average daily Managed Assets. Claymore contractually agreed to waive
a portion of the servicing fees it was entitled to receive from the Fund at the
annual rate of 0.06% of the Fund's average daily Managed Assets through
September 1, 2008, and at the rate of 0.028% thereafter through September 1,
2009.
A comparative schedule of the fees for service providers to the Fund
are included in APPENDIX D.
INVESTMENT ADVISORY SERVICES
The New Investment Advisory Agreement provides that, subject to the
direction and control of the Fund's Board of Trustees, Claymore will act
as investment adviser to the Fund and will supervise and arrange for the
day-to-day operation of the Fund. More specifically, Claymore will act as
investment adviser for and supervise and manage the investment and reinvestment
of the Fund's assets, supervise the investment program of the Fund and the
composition of its investment portfolio, support the Fund in the secondary
market and arrange for the purchase and sale of securities and other assets held
in the investment portfolio of the Fund. Under the Original Investment Advisory
Agreement, MBIA-CMC has similar responsibilities for managing the investment and
reinvestment of the Fund's assets and administering the Fund's affairs, subject
to the Board of Trustees and officers of the Fund. Under the New Subadvisory
Agreement, MBIA-CMC would continue to invest and reinvest the Fund's assets but
would be overseen by Claymore (see Proposal 3 below).
Under the New Investment Advisory Agreement, Claymore would be
permitted to delegate some or all of its duties and obligations under the New
Investment Advisory Agreement to one or more sub-investment advisers; provided,
however, that any such delegation would be pursuant to an agreement with terms
agreed upon by the Fund and approved in a manner consistent with the 1940 Act.
Under the Original Investment Advisory Agreement, MBIA-CMC has the right to
delegate its duties as well.
13
Additionally, under the New Investment Advisory Agreement, Claymore
would perform certain administrative services, many of which Claymore
Securities. currently performs under the Servicing Agreement. These
administrative services include, among other things, providing office facilities
and clerical or bookkeeping services for the Fund; replying to requests for
information on the Fund from shareholders or the public; overseeing the
determination of the Fund's net asset value; assisting in the preparation of
reports to be sent to Fund shareholders and filed with the SEC; and assisting in
the dissemination of the Fund's net asset value, market price, and discount
information. These administration services are in addition to the administration
services provided under the Administration Agreement. The Original Investment
Advisory Agreement does not have a similar provision.
PAYMENT OF EXPENSES
Under the proposed New Investment Advisory Agreement, Claymore would
bear all costs and expenses of its employees and any overhead expenses incurred
in connection with its duties thereunder and would bear the costs of any
salaries or trustees fees of any officers or Trustees of the Fund who are
affiliated persons, as defined in the 1940 Act, of Claymore.
Similarly, under the Original Investment Advisory Agreement, MBIA-CMC
bears all expenses in connection with the performance of its services under the
agreement and also pays the compensation of the Fund's Trustees, employees and
officers who are affiliated persons, as defined in the 1940 Act, of MBIA-CMC.
LIMITATION ON LIABILITY
Under the New Investment Advisory Agreement, Claymore assumes no
responsibility other than to render the services called for under the agreement
and Claymore is not liable for any error of judgment or mistake of law, or for
any loss in connection with the performance of the New Investment Advisory
Agreement. Claymore is not protected, however, for a loss resulting from a
breach of fiduciary duty with respect to the receipt of compensation for
services or a loss resulting from willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or from reckless
disregard by it of its duties under the New Investment Advisory Agreement.
The Original Investment Advisory Agreement has similar terms. Under the
Original Investment Advisory Agreement, in the absence of willful misfeasance,
bad faith, gross negligence or a reckless disregard of the performance of duties
of MBIA-CMC to the Fund, MBIA-CMC was not liable to the Fund or to any
shareholder of the Fund for any action or omission in the course of, or
connected with, rendering services thereunder or for any losses that may be
sustained in the purchase, holding or sale of any security, or otherwise.
The New Investment Advisory Agreement also provides that the Fund may
make advance payments to Claymore in connection with Claymore's expenses in
defending any action in which damages or equitable relief is sought against
Claymore. If such advance payment is made by the Fund, Claymore must provide
written affirmation stating its good faith belief that the standard of conduct
necessary for the limitation of liability under the New Investment Advisory
Agreement has been met and that it has stated that it will reimburse the Fund
14
whether or not it is deemed to have liability under the agreement. Also, at
least one of the following conditions must be met: (i) Claymore must provide a
security for its undertaking; (ii) the Fund will be insured against losses
arising by reason of any lawful advance or (iii) a majority of a quorum of the
disinterested non-party trustees of the Fund or an independent legal counsel in
a written opinion, shall determine based on review of readily available facts
that there is reason to believe that Claymore ultimately will be found not to be
liable under the limitation on liability section of the New Investment Advisory
Agreement. The Original Investment Advisory Agreement does not have similar
provisions.
TERM AND CONTINUANCE
If approved by the shareholders of the Fund, the New Investment
Advisory Agreement will terminate, unless sooner terminated as set forth
therein, two years from the date of implementation. Thereafter, if not
terminated, it will continue for successive periods of twelve months, provided
that such continuance is specifically approved at least annually by both (a) the
vote of a majority of the Board of Trustees or the vote of a majority of the
voting securities of the Fund at the time outstanding and entitled to vote and
(b) by the vote of a majority of the Trustees who are not parties to the
agreement or interested persons of any party to the agreement, such votes cast
in person at a meeting called for the purpose of voting on such proposal. The
Original Investment Advisory Agreement has a substantially similar provision.
TERMINATION
The New Investment Advisory Agreement may be terminated by the Fund at
any time, without the payment of any penalty, upon giving Claymore sixty days'
notice (which notice may be waived by Claymore), provided that such termination
by the Fund shall be directed or approved by the vote of a majority of the
Trustees of the Fund in office at the time or by the vote of the holders of a
majority of the voting securities of the Fund at the time outstanding and
entitled to vote, or by Claymore on sixty days' written notice (which notice may
be waived by the Fund). The New Investment Advisory Agreement will also
terminate automatically in the event of its "assignment," as defined in the 1940
Act. The Original Investment Advisory Agreement has substantially similar
provisions.
GOVERNING LAW
The New Investment Advisory Agreement is governed by Delaware law. The
Original Investment Advisory Agreement does not have a governing law provision.
USE OF NAME
Currently, the Fund uses the "Claymore" name in the name of the Fund
pursuant to the Servicing Agreement. Under the New Investment Advisory
Agreement, Claymore has consented to the continued use by the Fund of the name
"Claymore" in the name of the Fund. Claymore may require the Fund to cease using
"Claymore" in the name of the Fund if the Fund ceases to employ Claymore or an
affiliate as the investment adviser of the Fund or Claymore Securities as the
servicing agent of the Fund. The Original Investment Advisory Agreement does not
have a similar provision for the "MBIA" name.
15
BOARD CONSIDERATIONS
Copies of the proposed New Investment Advisory Agreement and New
Subadvisory Agreement had been distributed to the Board prior to the June 29,
2005 meeting of the Board. Considerations and conclusions regarding the
continuation of the Original Investment Advisory Agreement and approval of the
New Subadvisory Agreement were made together. Materials concerning each of
Claymore and MBIA-CMC as well as a memorandum from legal counsel to the Fund
regarding the criteria that should be considered in approving continuation of
the Original Investment Advisory Agreement and approving the New Investment
Advisory Agreement and New Subadvisory Agreement (collectively, the "Advisory
Agreements") had been distributed to the Board at or prior to the meeting.
Prior to and during the meeting, the Independent Trustees, with the
assistance of independent legal counsel, met separately from the "interested"
trustees of the Fund and officers and employees of Claymore and MBIA-CMC to
consider approval of the renewal of the Original Investment Advisory Agreement
and the New Investment Advisory Agreement and New Subadvisory Agreement. The
Board determined to adopt the considerations and conclusions of the Independent
Trustees. In considering approval of the renewal of the Original Investment
Advisory Agreement and approval of the New Investment Advisory Agreement and New
Subadvisory Agreement, the Board of Trustees, including the Independent
Trustees, did not identify any single factor or group of factors as all
important or controlling and considered all factors together.
MBIA - CMC Considerations
With respect to the nature, extent and quality of the services provided
by MBIA-CMC, the Board considered its response to various inquires, including
regulatory and legal issues, MBIA-CMC's Form ADV, financial information
regarding MBIA-CMC and the anticipated financial support of the Fund. The Board
also discussed MBIA-CMC's approach to addressing compliance issues related to
the Fund. The Board determined that MBIA-CMC acted appropriately in developing a
compliance system and in responding to any compliance issues. The Board also
considered the resources devoted to the Fund's operations. Based upon the
foregoing, the Board concluded that MBIA-CMC was well qualified to manage the
Fund and that the services provided by MBIA-CMC were satisfactory.
The Board also considered the investment performance of the Fund during
the initial term of the Original Investment Advisory Agreement (the "Initial
Term"). The Board noted that, consistent with the marketing of the Fund,
MBIA-CMC employed a hedging strategy during the Initial Term designed to protect
the value of the Fund's assets against an anticipated rise in interest rates
(the "Hedging Strategy"). The Board evaluated both the actual performance of the
Fund as well as an estimate of what performance would have been had the Hedging
Strategy not been employed by MBIA-CMC. The Board also compared the Fund's
performance (actual and estimated without the Hedging Strategy) to that of a
peer group of funds. The Board noted that the performance without the Hedging
Strategy appeared to be competitive with a peer group of funds that did not use
a hedging strategy. Although the Board noted that performance would have been
better had the Hedging Strategy not been employed by MBIA-CMC, the Board
concluded that in employing the Hedging Strategy MBIA-CMC acted in a manner
consistent with its market forecasts and economic outlooks and with a key
marketed feature of the Fund, and that MBIA-CMC had effectively implemented the
Hedging Strategy.
16
With respect to the costs of services provided and profits realized by
MBIA-CMC, the Board first considered the competitiveness of MBIA-CMC's fee and
the expense ratio of the Fund when compared to a peer group of closed-end
municipal bond funds initially offered during the same time period. The Board
also noted that the fee paid to MBIA-CMC was the same under the Original
Investment Advisory Agreement and the New Subadvisory Agreement. The Board also
considered MBIA-CMC's fees as compared to those charged by it to other
portfolios under its management that invested in tax-exempt municipal bonds. The
Board noted, however, that these portfolios were of different size and involved
different levels of services (without leverage and without hedging). Because of
these differences, the Board concluded the fees charged to other clients were
not directly comparable, and although such fees were considered, they were not
solely determinative. The Board noted that the investment strategy (including
the Hedging Strategy) employed by the Fund requires substantially more
quantitative and qualitative analysis by portfolio managers than is required for
these other portfolios. The Board also considered the multi-year fee waiver
provided by MBIA-CMC both under the Original Investment Advisory Agreement and
the proposed New Subadvisory Agreement. In light of these factors, the Board
concluded that the fees were reasonable.
With respect to the profits realized by MBIA-CMC, the Board reviewed
the profitability information provided by MBIA-CMC for the year ended December
31, 2004, including the methodology used to calculate profitability. As a
result, the Board concluded that profitability to MBIA-CMC was not excessive.
The Board considered the extent to which economies of scale would be
realized as the Fund grows and whether fee levels reflect a reasonable sharing
of such economies of scale for the benefit of Fund investors. Because the size
of the Fund is relatively small and because the Board does not expect the Fund
to grow significantly in the next twelve months, the Board concluded that the
Fund is unlikely to realize any significant economies of scale. The Board noted,
however, that the fee does reflect certain economies of scale within MBIA-CMC's
organization that have been shared with the Fund. For example, the Board noted
that MBIA-CMC employs the same management team, trading systems and credit
research resources with respect to the Fund as it does with respect to the other
municipal bond portfolios under its management and that the advisory fee was set
based upon the resulting economies of scale.
The Board considered benefits derived by MBIA-CMC from its relationship
with the Fund, including the benefits to MBIA-MISC, an affiliate of MBIA-CMC
from the separate Administrative Services and Accounting Agreements with the
Fund. Although an affiliate of MBIA-CMC does receive fees from the Fund for
these services in addition to the advisory fee paid to MBIA-CMC, the Board noted
that the level of fees were small, given the size of the Fund. The Board
concluded that the advisory fee was reasonable, taking into account these
benefits. The Board also considered that it had been proposed that the
Administrative Services and Accounting Agreement with MBIA-MISC be terminated
effective July 31, 2005.
Claymore Considerations
With respect to the nature, extent and quality of the services to be
provided by Claymore, the Board noted that Claymore would delegate
responsibility for the investment and re-investment of the Fund's assets to
MBIA-CMC, who had provided those services to the Fund since its inception. The
Board considered Claymore's responsibility to oversee MBIA-CMC and that Claymore
17
has similar oversight responsibilities for other registered funds for which it
serves as investment adviser. The Board considered financial information
regarding Claymore and its subsidiaries and the experience of Claymore's
personnel relating to advisory oversight and compliance, as well as its
capabilities concerning its monitoring of MBIA-CMC's portfolio management team,
and concluded that Claymore and its personnel were qualified to serve the Fund
in such capacity.
The Board then reviewed and discussed the terms of the New Investment
Advisory Agreement and New Subadvisory Agreement including the proposed fees and
the contractual fee waivers agreed to by Claymore and comparable advisory fees
and expense ratios of other closed-end funds that invest in municipal debt. The
Trustees reviewed the memorandum from Claymore regarding the reasonableness and
competitiveness of the proposed fees noting that the advisory fee (including the
subadvisory fee) was the same as the current fee structure of the investment
advisory fee paid to MBIA-CMC and servicing fee paid to Claymore Securities and
that the multi-year fee waiver currently in place was included in the proposed
Advisory Agreements. The Board determined that the fees were reasonable.
With respect to the costs of services to be provided and profits to be
realized by Claymore, the Board considered profitability information provided by
Claymore and concluded that the estimated profitability was reasonable.
The Board considered the extent to which economies of scale could be
realized and noted that given the size of the closed-end Fund, there were no
significant additional opportunities for economies of scale.
The Board considered "fall-out" benefits available to Claymore because
of its relationship to the Fund and noted that the administrative services fees
to be received by Claymore provide it with additional revenue but concluded that
there were negligible profits in providing the administrative services.
INFORMATION ABOUT CLAYMORE
Claymore is a registered investment adviser and a Delaware limited
liability company. Claymore is a wholly-owned subsidiary of Claymore Group, LLC.
The principal business address of Claymore and Claymore Group, LLC is 2455
Corporate West Drive, Lisle, Illinois 60532.
The name, title, address and principal occupation of the directors and
principal executive officers of Claymore are as set forth in APPENDIX E.
Claymore provides investment advisory services to certain other funds.
The table set forth in APPENDIX F lists other funds advised by Claymore that
have similar investment objectives as the Fund, the net assets of those funds,
and the management fees Claymore received from those funds during the fiscal
year most recently ended.
APPENDIX G shows amounts paid to affiliates of Claymore during the
Fund's most recently completed fiscal year for the services noted in the
Appendix. There were no other material payments by the Fund to Claymore or its
affiliates during that period.
18
SHAREHOLDER APPROVAL
To become effective with respect to the Fund, the New Investment
Advisory Agreement must be approved by a vote of a majority of the outstanding
voting securities of the Fund, with the common and preferred shareholders voting
together as a single class. The "vote of a majority of the outstanding voting
securities" is defined in the 1940 Act as the lesser of the vote of (i) 67% or
more of the shares of the Fund entitled to vote thereon present at the meeting
if the holders of more than 50% of such outstanding shares are present in person
or represented by proxy; or (ii) more than 50% of such outstanding shares of the
Fund entitled to vote thereon. The New Investment Advisory Agreement was
approved by the Board of the Fund at its meeting on June 29, 2005, after
consideration of all factors that it determined to be relevant to its
deliberations, including those discussed above. The Board of the Fund also
determined to submit the Fund's New Investment Advisory Agreement for
consideration by the shareholders of the Fund at the Meeting.
THE TRUSTEES, INCLUDING THE TRUSTEES WHO ARE NOT "INTERESTED PERSONS,"
UNANIMOUSLY RECOMMEND THAT THE SHAREHOLDERS VOTE FOR APPROVAL OF THE NEW
INVESTMENT ADVISORY AGREEMENT.
PROPOSAL 3: APPROVAL OF NEW SUBADVISORY AGREEMENT
For the reasons discussed above in Proposal 2, the Board of Trustees is
also proposing that the shareholders approve a New Subadvisory Agreement among
the Fund, Claymore and MBIA-CMC. The terms of the New Subadvisory Agreement are
discussed below.
DESCRIPTION OF NEW SUBADVISORY ARRANGEMENT
FEES
Pursuant to the proposed New Subadvisory Agreement, Claymore (and not
the Fund) would pay MBIA-CMC a monthly fee payable at an annual rate equal to
0.39% of the average daily value of the Fund's average daily Managed Assets.
MBIA-CMC has agreed to contractually waive a portion of the subadvisory fees it
would be entitled to receive from Claymore at the annual rate of 0.09% of the
Fund's average daily Managed Assets through September 1, 2008, and at the rate
of 0.042% thereafter through September 1, 2009, see APPENDIX C-1.
SUBADVISORY SERVICES
Claymore is proposing that MBIA-CMC serve as a subadviser to the Fund,
as permitted by the New Investment Advisory Agreement. Pursuant to the proposed
New Subadvisory Agreement among the Fund, Claymore and MBIA-CMC, MBIA-CMC will
focus solely on providing investment advisory services for the Fund,
including:(i) managing the investment and reinvestment of the Fund's assets in
accordance with the investment policies of the Fund; (ii) arranging for the
purchase and sale of securities and other assets for the Fund; (iii) providing
investment research and credit analysis concerning the Fund's assets; (iv)
maintaining the books and records as are required to support the Fund's
investment operations; (v) monitoring on a daily basis the investment activities
and portfolio holdings relating to the Fund and (vi) voting proxies relating to
the Fund's portfolio securities in accordance with the proxy voting policies and
procedures of
19
MBIA-CMC. The services contemplated under the New Subadvisory Agreement would be
similar to the services currently provided by MBIA-CMC under the Original
Investment Advisory Agreement. Claymore, as proposed investment adviser to the
Fund (see Proposal 2 above), will be responsible for supervising MBIA-CMC.
EXPENSES
Under the proposed New Subadvisory Agreement, MBIA-CMC would bear all
costs and expenses of its employees and any overhead expenses incurred in
connection with its duties thereunder and would bear the costs of any salaries
or trustees fees of any officers or Trustees of the Fund who are "affiliated
persons" (as defined in the 1940 Act) of MBIA-CMC.
LIMITATION ON LIABILITY
Under the New Subadvisory Agreement, MBIA-CMC assumes no responsibility
other than to render the services called for under the Agreement, and MBIA-CMC
is not liable for any error of judgment or mistake of law, or for any loss in
connection with the performance of the Agreement. MBIA-CMC is not protected,
however, for a loss resulting from a breach of fiduciary duty with respect to
the receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or from reckless disregard by it of its duties under the New Subadvisory
Agreement.
Unlike the Original Investment Advisory Agreement, the New Subadvisory
Agreement provides that the Fund may, but is not required to, make advance
payments to MBIA-CMC in connection with expenses incurred by it in its defense
of an action for damages or equitable relief claims made against MBIA-CMC under
the limitation on liability section of the agreement. Such advance may be made
if the Fund receives written confirmation from MBIA-CMC expressing its good
faith belief that the standard of conduct necessary for the limitation on
liability under the agreement has been met. In addition, MBIA-CMC must provide a
written undertaking providing that it will reimburse the Fund, regardless of
whether MBIA-CMC is deemed to have liability under the limitation on liability
section of the agreement. Reimbursement will be due upon: a final decision on
the merits by a court or other body before whom the proceeding was brought as to
whether or not MBIA-CMC is liable under the limitation on liability section of
the agreement; in the absence of such a decision, upon the request of MBIA-CMC
for reimbursement by a majority vote of a quorum consisting of Fund Trustees who
are neither "interested persons" of the Fund, as defined in the 1940 Act nor
parties to the proceeding. Additionally, MBIA-CMC must provide a security for
its undertaking; the Fund must be insured against losses arising by reason of
any lawful advance or a majority of a quorum of the disinterested non-party
trustees of the Fund or an independent legal counsel in a written opinion shall
determine based on a review of readily available facts that there is reason to
believe that MBIA-CMC ultimately will be found not to be liable under the
limited liability section of the agreement.
TERM AND CONTINUATION
If the New Subadvisory Agreement is approved by the shareholders of the
Fund, and the shareholders of the Fund approve the New Investment Advisory
Agreement, the New Subadvisory Agreement will terminate, unless sooner
20
terminated as set forth therein, two years from the date of implementation.
Thereafter, if not terminated, it will continue for successive periods of twelve
months, provided that such continuance is specifically approved at least
annually by (a) the vote of a majority of the Board of Trustees or the vote of a
majority of the outstanding voting securities of the Trust at the time
outstanding and entitled to vote and (b) the vote of a majority of the Trustees
who are not parties to the agreement or interested persons of any party to the
agreement, cast in person at a meeting called for the purpose of voting on such
proposal.
TERMINATION
Like the Original Investment Advisory Agreement, the New Subadvisory
Agreement may be terminated by the Fund at any time, without the payment of any
penalty, upon giving MBIA-CMC sixty days' notice (which notice may be waived by
MBIA-CMC), provided that such termination will be directed or approved by the
vote of a majority of the Trustees of the Fund in office at the time or by the
vote of the holders of a majority of the voting securities of the Fund at the
time outstanding and entitled to vote, or by MBIA-CMC on sixty days' written
notice (which notice may be waived by the Fund), and will terminate
automatically upon any termination of the Investment Advisory Agreement between
the Fund and Claymore. The New Subadvisory Agreement will also terminate
automatically in the event of its "assignment" as defined in the 1940 Act.
GOVERNING LAW
The New Subadvisory Agreement is governed by Delaware law.
USE OF NAME
Under the New Subadvisory Agreement, MBIA-CMC has consented to the
continued use by the Fund of the name "MBIA Capital" in the name of the Fund.
MBIA-CMC may require the Fund to cease using "MBIA Capital" in the name of the
Fund or the use of the name "MBIA" in other connections if the Fund or Claymore
ceases to employ MBIA-CMC or an affiliate as the investment adviser or
subadviser of the Fund. The Original Investment Advisory Agreement does not have
a similar provision.
BOARD CONSIDERATIONS
The Board considered the New Subadvisory Agreement in conjunction with
the New Investment Advisory Agreement. These considerations are discussed above.
INFORMATION ABOUT MBIA-CMC
MBIA-CMC is a registered investment adviser and is a Delaware
corporation. MBIA-CMC is a wholly owned subsidiary of MBIA Asset Management LLC
and an indirect wholly owned subsidiary of MBIA Inc. The principal business
address of MBIA-CMC, MBIA Asset Management LLC and MBIA Inc. is 113 King Street,
Armonk, NY 10504.
The name, title, address and principal occupation of the directors and
principal executive officers of MBIA-CMC are as set forth in APPENDIX E.
21
APPENDIX G shows amounts paid to affiliates of MBIA-CMC during the
Fund's most recently completed fiscal year for the services noted in the
Appendix. The aggregate brokerage commissions paid by the Fund to MBIA-CMC and
its affiliated brokers during the Fund's most recently completed fiscal year are
also set forth in APPENDIX G. There were no other material payments by the Fund
to MBIA-CMC or its affiliates during that period.
SHAREHOLDER APPROVAL
To become effective with respect to the Fund, the New Subadvisory
Agreement must be approved by a vote of a majority of the outstanding voting
securities of the Fund, with the common and preferred shareholders voting
together as a single class. The "vote of a majority of the outstanding voting
securities" is defined in the 1940 Act as the lesser of the vote of (i) 67% or
more of the shares of the Fund entitled to vote thereon present at the meeting
if the holders of more than 50% of such outstanding shares are present in person
or represented by proxy or (ii) more than 50% of such outstanding shares of the
Fund entitled to vote thereon. The New Subadvisory Agreement was approved by the
Board of the Fund after consideration of all factors that it determined to be
relevant to its deliberations, including those discussed above. The Board of the
Fund also determined to submit the Fund's New Subadvisory Agreement for
consideration by the shareholders of the Fund at the Meeting.
THE TRUSTEES, INCLUDING THE TRUSTEES WHO ARE NOT "INTERESTED PERSONS,"
UNANIMOUSLY RECOMMEND THAT THE SHAREHOLDERS VOTE FOR APPROVAL OF THE NEW
SUBADVISORY AGREEMENT.
ADDITIONAL INFORMATION
REPORT OF THE AUDIT COMMITTEE
After meetings of the Audit Committee on June 28, 2005 and September
20, 2005, the Audit Committee reports that it has: (i) reviewed and discussed
the Fund's audited financial statements with management; (ii) discussed with
PricewaterhouseCoopers LLC ("PwC"), the independent registered public accounting
firm to the Fund, the matters (such as the quality of the Fund's accounting
principles and internal controls) required to be discussed by Statement on
Auditing Standards No. 61; and (iii) previously received written confirmation
from PwC that it is independent along with written disclosures regarding such
independence as required by Independence Standards Board Standard No. 1, and
discussed the auditors' independence with PwC.
The members of the Audit Committee are not professionally engaged in
the practice of auditing or accounting and are not employed by the Fund for
accounting, financial management or internal control. Moreover, the Audit
Committee relies on and makes no independent verification of the facts presented
to it or representations made by management or the independent registered public
accounting firm. Accordingly, the Audit Committee's oversight does not provide
an independent
22
basis to determine that management has maintained appropriate accounting and
financial reporting principles and policies, internal controls or procedures
designed to assure compliance with accounting standards and applicable laws and
regulations. Furthermore, the Audit Committee's considerations and discussions
referred to above do not provide assurance that the audit of the Fund's
financial statements has been carried out in accordance with generally accepted
accounting standards or that the financial statements are presented in
accordance with generally accepted accounting principles.
Based on the review and discussions referred to in items (i) through
(iii) above, the Audit Committee recommended to the Board of Trustees (and the
Board has approved) that the audited financial statements be included in the
Fund's annual report for the Fund's fiscal year ended July 31, 2005.
Additionally, the Audit Committee recommended that Ernst & Young LLP be
appointed as the Fund's independent registered public accounting firm for the
fiscal year ending July 31, 2006.
Submitted by the Audit Committee
of the Fund's Board of Trustees
Jerry Rosenbloom, Chairperson
Mark Jurish
Ronald A. Nyberg
Ronald E. Toupin, Jr.
EXECUTIVE OFFICERS OF THE FUND
Certain biographical and other information relating to the officers
(other than Mr. Corso whose biographical information is given above) of the Fund
is set forth below, including their ages, their principal occupations for at
least the last five years and the length of time served.
POSITION(S) HELD TERM OF OFFICE AND PRINCIPAL OCCUPATION(S)
NAME, ADDRESS(1) AND AGE WITH FUND YEAR FIRST APPOINTED(2) DURING PAST 5 YEARS
- ------------------------ ---------------- ----------------------- -----------------------
Craig L. Armstrong Assistant Vice Since 2003 Vice President, MBIA-CMC
Year of Birth: 1970 President (2003-Present); Assistant Vice
President and Vice President, MBIA
Corp. (1999-2003); Senior Analyst,
MBIA Investment Management Corp.
(1999).
Leonard I. Chubinsky Secretary and Since 2005 (Secretary) General Counsel and Secretary,
Year of Birth: 1948 Counsel and MBIA-CMC.
2003 (Counsel)
Marc Morris Treasurer Since 2003 Chief Financial Officer of MBIA's
Year of Birth: 1959 fixed income business; President
MBIA Investment Management Corp.
23
POSITION(S) HELD TERM OF OFFICE AND PRINCIPAL OCCUPATION(S)
NAME, ADDRESS(1) AND AGE WITH FUND YEAR FIRST APPOINTED(2) DURING PAST 5 YEARS
- ------------------------ ---------------- ----------------------- -----------------------
Patrick M. Tucci Assistant Vice Since 2003 (Assistant Assistant Vice President and a
Year of Birth: 1970 President and Vice President) and Portfolio Manager, MBIA-CMC
Assistant Secretary 2005 (Assistant (2002-Present); Assistant Vice
Secretary) President, Vice President, Salomon
Smith Barney Global Equities
Group (2000-2001); Assistant Vice
President Salomon Smith Barney
Municipal Bond Group (1995-
2000).
Susan A. Voltz Vice President and Since 2003 (Vice Director and Senior Portfolio
Year of Birth: 1961 Assistant Secretary President) and 2005 Manager of MBIA-CMC.
(Assistant Secretary)
Richard Walz Chief Compliance Since 2004 Director of Operations of MBIA's
Year of Birth: 1959 Officer fixed income business, Chief Compliance
Officer of MBIA - CMC, MBIA-MISC
and Colorado Investors Service Corp.
- ----------
(1) The business address of each officer is c/o MBIA Capital Management Corp.,
113 King Street, Armonk, New York 10504.
(2) Elected by and serves at the pleasure of the Board of Trustees of the Fund
or until their successors have been duly elected and qualified.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PwC served as the Fund's independent registered public accounting for
the two most recent fiscal years.
On September 27, 2005, the Fund's Audit Committee recommended that
PwC be terminated as the Fund's independent registered public accounting firm
effective on the completion of services related to the audit of the July 31,
2005 financial statements and the Board concurred. On the same date, the Fund's
Audit Committee approved the engagement of Ernst & Young LLP ("Ernst & Young")
as the Fund's new independent registered public accounting firm for the fiscal
year ending July 31, 2006. Ernst & Young is located at Sears Tower, 233 S.
Wacker Drive, Chicago, Illinois 60606.
The reports of PwC on the Fund's financial statements for each of the
last two fiscal years contained no adverse opinion or disclaimer of opinion and
were not qualified or modified as to uncertainty, audit scope or accounting
principles. There have been no disagreements with PwC during the Fund's two most
recent fiscal years and any subsequent interim period on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure which, if not resolved to the satisfaction of PwC, would have
caused them to make reference thereto in their reports on the financial
statements for such years.
A representative of PwC and Ernst & Young, if requested by any
shareholder, will be present via telephone at the Meeting to respond to
appropriate questions from shareholders and will have an opportunity to make a
statement if they choose to do so.
AUDIT FEES. Audit Fees are fees related to the annual audit of the
Fund's financial statements and for services normally provided in connection
with the statutory and regulatory filings of the Fund. These fees also include
non-recurring fees billed to the Fund by PwC in connection with the initial
public offering of common shares of the Fund. For the initial fiscal year ended
July 31, 2004 and for the fiscal year ended July 31, 2005, PwC billed $ 58,000
and $65,000, respectively, to the Fund, including out-of-pocket expenses.
AUDIT-RELATED FEES. Audit-Related Fees are fees related to assurance
and related services related to the annual audit of the Fund and for review of
the Fund's financial statements, other than the Audit Fees described above.
These include agreed upon procedures reports performed for rating agencies and
the issuance of comfort letters. Audit-Related Fees billed by PwC to the Fund
for the initial fiscal year ended July 31, 2004 and for the fiscal year ended
July 31, 2005 were $46,500 and $15,000, respectively. PwC did not bill any
Audit-Related Fees to the Service Affiliates (as defined below) for
audit-related services related directly to the operations and financial
24
reporting of the Fund for the Fund's initial fiscal year ended July 31, 2004 or
for the fiscal year ended July 31, 2005.
TAX FEES. Tax Fees, which are fees associated with tax compliance, tax
advice and tax planning, including federal, state and local income tax return
preparation and related advice and determination of taxable income and
miscellaneous tax advice, rendered by PwC to the Fund for the initial fiscal
year ended July 31, 2004 and for the fiscal year ended July 31, 2005 were $8,000
and $8,500, respectively. PwC did not bill any Tax Fees to the Service
Affiliates for tax services related directly to the operations and financial
reporting of the Fund for the Fund's initial fiscal year ended July 31, 2004 or
July 31, 2005.
ALL OTHER FEES. All Other Fees are fees related to products and
services other than those services reported above under "Audit Fees,"
"Audit-Related Fees" and "Tax Fees". There were no All Other Fees billed by PwC
to the Fund or the Service Affiliates for the initial fiscal year ended July 31,
2004 or for the fiscal year ended July 31, 2005.
AGGREGATE NON-AUDIT FEES. The Aggregate Non-Audit Fees billed by PwC
for services rendered to the Fund for the initial fiscal year ended July 31,
2004 were $54,500, consisting of $46,500 Audit-Related Fees and $8,000 Tax Fees
and were $23,500 for the fiscal year ended July 31, 2005, consisting of $15,000
Audit-Related Fees and $8,500 Tax Fees. No Non-Audit Fees were billed by PwC for
services rendered to the Service Affiliates for the initial fiscal year ended
July 31, 2004 or for the fiscal year ended July 31, 2005.
The Fund's Audit Committee has adopted written policies relating to the
pre-approval of the audit and non-audit services performed by the
Fund's independent registered public accounting firm. Unless a type of service
to be provided by the independent registered public accounting firm has received
general pre-approval, it requires specific pre-approval by the Audit Committee.
Under the policies, on an annual basis, the Fund's Audit Committee reviews and
pre-approves the services to be provided by the independent registered public
accounting firm without having obtained specific pre-approval from the Audit
Committee. The Audit Committee has delegated pre-approval authority to the Audit
Committee Chairperson. In addition, the Audit Committee pre-approves any
permitted non-audit services to be provided by the independent registered public
accounting firm to MBIA-CMC or any entity controlling, controlled by, or under
common control with MBIA-CMC (MBIA-CMC and such other entities, together, the
"Service Affiliates") if such services related directly to the operations and
financial reporting of the Fund.
None of the services described above, provided in the initial fiscal
year ended July 31, 2004 or the fiscal year ended July 31, 2005, were approved
pursuant to the de minimis exception provided in Rule 2-01(c)(7)(i)(C) of
Regulation S-X promulgated by the SEC.
The Audit Committee has considered whether the provision of non-audit
services that were rendered by PwC to the Adviser and Services Affiliates that
were not pre-approved (not requiring pre-approval) is compatible with
maintaining PwC's independence. All services provided by PwC to the Fund, the
MBIA-CMC or Service Affiliates that were required to be pre-approved were
pre-approved as required.
25
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Each Trustee and certain officers of the Fund, MBIA-CMC, certain
affiliated persons of MBIA-CMC and persons who own beneficially more than 10% of
any class of outstanding equity securities of the Fund are required to file
forms reporting their affiliation with the Fund and reports of ownership and
changes in ownership with the SEC and the NYSE. These persons and entities are
required by SEC regulation to furnish the Fund with copies of all such forms
they file. Based solely on a review of those forms furnished to the Fund, the
Fund believes that the Fund's Trustees and relevant officers, MBIA-CMC and
relevant affiliated persons of MBIA-CMC have complied with all applicable filing
requirements during the fiscal year ended July 31, 2005.
PROPOSALS TO BE SUBMITTED BY SHAREHOLDERS AND OTHER SHAREHOLDER COMMUNICATIONS
All proposals by shareholders of the Fund that are intended to be
presented at the Fund's next annual meeting of shareholders to be held in 2006
must be received by the Fund for inclusion in the Fund's proxy statement and
proxy relating to that meeting no later than June 2, 2006. The submission by a
shareholder of a proposal for inclusion in the proxy materials does not
guarantee that it will be included. Shareholder proposals are subject to certain
requirements under the federal securities laws. In order for proposals made
outside of Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") to be considered "timely" within the meaning of Rule 14a-4(c)
under the Exchange Act, such proposal must be received by the Fund no later than
August 17, 2006. Shareholder proposals should be addressed to the attention of
the Secretary of the Fund at the address of the principal executive offices of
the Fund.
A shareholder who wishes to send any other communications to the Board
should also deliver such communications to the Secretary of the Fund at the
address of the principal executive offices of the Fund. The Secretary is
responsible for determining, in consultation with other officers of the Fund,
counsel, and other advisers as appropriate, which shareholder communications
will be relayed to the Board.
OTHER INFORMATION
THE FUND'S ANNUAL REPORT CONTAINING FINANCIAL STATEMENTS FOR THE FISCAL
YEAR ENDED JULY 31, 2005 AND THE FUND'S SUBSEQUENT SEMI-ANNUAL REPORT, IF ANY,
MAY BE OBTAINED FREE OF CHARGE BY WRITING TO THE FUND AT 113 KING STREET,
ARMONK, NEW YORK 10504, OR BY CALLING TOLL-FREE 1-800-345-7999.
EXPENSES OF PROXY SOLICITATION
The Fund will bear all costs in connection with the solicitation of
proxies for the Meeting. Certain officers of the Fund and certain officers and
employees of MBIA-CMC or its affiliates (none of whom will receive additional
compensation therefore), Claymore or its
26
affiliates (none of whom will receive additional compensation therefore) or MIS
Corporation, the proxy solicitor, may solicit proxies by telephone, mail, e-mail
and personal interviews. Brokerage houses, banks and other fiduciaries may be
requested to forward proxy solicitation material to their principals to obtain
authorization for the execution of proxies, and will be reimbursed by the Fund
for such out-of-pocket expenses. The Fund has also retained MIS Corporation as
its proxy solicitor and will pay its customary fee of approximately $5,300 plus
the reimbursement of reasonable out-of-pocket expenses.
OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Trustees of the
Fund does not know of any other matter which may come before the Meeting. If any
other matter properly comes before the Meeting, it is the intention of the
persons named in the proxy to vote the proxies in accordance with their judgment
on that matter.
DELIVERY OF DOCUMENTS TO SHAREHOLDERS SHARING AN ADDRESS
In some instances, the Fund may deliver to multiple shareholders
sharing a common address only one copy of this Proxy Statement or the Annual
Report. If requested by phone or in writing, the Fund will promptly provide a
separate copy of the Proxy Statement or the Annual Report, as applicable, to a
shareholder sharing an address with another shareholder. Requests by phone
should be directed to the Fund's Servicing Agent, Claymore Securities, at
1-800-345-7999, and requests in writing should be sent to Claymore Securities,
Inc., 2455 Corporate West Drive, Lisle, Illinois 60532. Shareholders sharing an
address who currently receive multiple copies and wish to receive only a single
copy should contact their broker or send a signed, written request to Claymore
Securities at the address above.
October 3, 2005
27
APPENDIX A
MBIA CAPITAL/CLAYMORE MANAGED DURATION INVESTMENT GRADE MUNICIPAL FUND
NOMINATING AND GOVERNANCE COMMITTEE CHARTER
ORGANIZATION AND GOVERNANCE
The Nominating and Governance Committee (the "Committee") of MBIA
Capital/Claymore Managed Duration Investment Grade Municipal Fund (the "Fund")
shall be comprised solely of Trustees who are not "interested persons" of the
Fund as defined in Section 2(a)(19) of the Investment Company Act of 1940, as
amended (the "1940 Act"), and who are "independent" as such term is defined in
the New York Stock Exchange listing standards (the "Independent Trustees").
The Committee shall be comprised of as many Independent Trustees as the Board of
Trustees of the Fund (the "Board") shall determine, but in any event not fewer
than three (3) members, each of whom shall serve for a term of one year which
shall be extendable at the sole discretion of the Board. The Board may remove or
replace any member of the Committee at any time in its sole discretion. The
Board shall nominate the members of the Committee and shall designate the
chairman and co-chairman of the Committee. The chairman or, in his absence, the
co-chairman, shall preside at each meeting of the Committee.
STATEMENT OF PURPOSES AND RESPONSIBILITIES
The Committee shall select and nominate persons for election as Trustees of the
Fund. The primary purposes and responsibilities of the Committee are (i) to
identify individuals qualified to become Trustees of the Fund in the event that
a position is vacated or created; (ii) to select, or to recommend that the Board
select, the Trustee nominees for each annual meeting of the shareholders; (iii)
to set any necessary standards or qualifications for service as a Trustee of the
Fund; (iv) to develop and recommend to the Board the Code of Ethics for Chief
Executive and Senior Financial Officers and the Joint Code of Ethics and to
oversee compliance therewith; (v) to make recommendations concerning the
continuing education of the Trustees on legal and other matters relating to
their activities as Trustees; (vi) to develop and recommend to the Board
procedures governing Trustee self-assessment; (vii) to develop and recommend to
the Board a schedule of Trustee compensation; and (viii) to undertake such
matters from time to time relating to Board nominations or governance of the
Fund as the Committee shall deem appropriate.
IDENTIFICATION AND EVALUATION OF POTENTIAL NOMINEES
The Committee may take into account a wide variety of factors in considering
Trustee nominees. In identifying and evaluating an individual as a potential
nominee to serve as a Trustee, or in evaluating whether to remove an incumbent
Trustee, the Committee shall consider among other factors it may deem relevant:
A-1
o whether or not the individual is an "interested person" as defined in
the 1940 Act and whether the person is otherwise qualified under
applicable laws and regulations to serve as a Trustee or Independent
Trustee of the Fund;
o whether or not the individual has any relationships that might impair
his or her independence, such as any business, financial or family
relationships with Fund management, the investment manager of the
Fund, Fund service providers or their affiliates;
o whether or not the individual serves on boards of, or is otherwise
affiliated with, competing financial service organizations or their
related mutual fund complexes;
o whether or not the individual is willing to serve, and willing and
able to commit the time necessary for the performance of the duties of
a Trustee of the Fund;
o the contribution the individual can make to the Board and the Fund,
with consideration being given to the individual's educational
background and business and professional experience;
o the character and integrity of the individual;
o the overall diversity of the Board's composition; and
o the Committee may, but is not required to, retain a third-party search
firm at the Fund's expense to assist in the identification of
Independent Trustee nominees.
CONSIDERATION OF NOMINEES RECOMMENDED BY SHAREHOLDERS
While the Committee is solely responsible for the selection and nomination of
the Fund's Trustees, the Committee shall accept nominations for the office of
Trustee made by Fund shareholders on the same basis as it considers and
evaluates nominees recommended by other sources. Shareholders who wish to
recommend a nominee should send nominations to the Secretary of the Fund which
include biographical information and set forth the qualifications of the
proposed nominee.
NOMINATION OF TRUSTEES
After a determination by the Committee that an individual should be selected and
nominated as a Trustee of the Fund, the Committee shall present its
recommendation to the full Board for its consideration.
GOVERNANCE MATTERS
The Committee shall develop and recommend to the Board the Code of Ethics for
Chief Executive and Senior Financial Officers and the Joint Code of Ethics and
oversee compliance therewith. At least annually, the Committee shall review and
reassess the adequacy of the Code of Ethics for Chief Executive and Senior
Financial Officers and the Joint Code of Ethics and recommend any proposed
changes to the Board.
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The Committee shall also review and consider any request for waivers of the Code
of Ethics for Chief Executive and Senior Financial Officers and the Joint Code
of Ethics and shall make a recommendation to the Board with respect to such
request. The Committee shall review and report to the Board regarding any actual
or potential conflicts of interest involving any Trustee and shall determine
whether such Trustee may vote on any issue as to which there may be a conflict.
In addition, the Committee shall review all related-party transactions and
determine whether such transactions are appropriate for the Fund to undertake.
QUORUM
A majority of the members of the Committee shall constitute a quorum, and the
act of a majority of the members of the Committee present at any meeting at
which there is quorum present shall be the act of the Committee.
MEETINGS
The Committee may meet either on its own or in conjunction with meetings of the
Board. Meetings of the Committee may be held in person, video conference or by
conference telephone. The Committee may take action by unanimous written consent
in lieu of a meeting.
The Committee will not have regularly scheduled meetings. Committee meetings
shall be held as and when the Committee or the Board determines necessary or
appropriate in accordance with the Fund's bylaws.
Members of the Committee shall receive at least three (3) days' prior written
notice of any meeting of the Committee.
Adopted: March 2004, as amended November 2004
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APPENDIX B
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT (the "Agreement"), dated as of
November __, 2005, between MBIA Capital/Claymore Managed Duration Investment
Grade Municipal Fund, a Delaware statutory trust (the "Trust"), and Claymore
Advisors, LLC, a Delaware limited liability company (the "Adviser").
WHEREAS, the Adviser has agreed to furnish investment advisory services
to the Trust, a closed-end management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, this Agreement has been approved in accordance with the
provisions of the 1940 Act, and the Adviser is willing to furnish such services
upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, it is agreed by and between the parties hereto as
follows:
1. IN GENERAL. The Adviser agrees, all as more fully set forth
herein, to act as investment adviser to the Trust with respect to the investment
of the Trust's assets and to supervise and arrange for the day-to-day operations
of the Trust and the purchase of securities for and the sale of securities held
in the investment portfolio of the Trust.
2. DUTIES AND OBLIGATIONS OF THE ADVISER WITH RESPECT TO
INVESTMENT OF ASSETS OF THE TRUST. Subject to the succeeding provisions of this
section and subject to the direction and control of the Trust's Board of
Trustees, the Adviser shall (i) act as investment adviser for and supervise and
manage the investment and reinvestment of the Trust's assets and, in connection
therewith, have complete discretion in purchasing and selling securities and
other assets for the Trust and in voting, exercising consents and exercising all
other rights appertaining to such securities and other assets on behalf of the
Trust; (ii) supervise the investment program of the Trust and the composition of
its investment portfolio; and (iii) arrange, subject to the provisions of
paragraph 4 hereof, for the purchase and sale of securities and other assets
held in the investment portfolio of the Trust. In performing its duties under
this Section 2, the Adviser may delegate some or all of its duties and
obligations under this Agreement to one or more sub-investment advisers;
provided, however, that any such delegation shall be pursuant to an agreement
with terms agreed upon by the Trust and approved in a manner consistent with the
1940 Act and provided, further, that no such delegation shall relieve the
Adviser from its duties and obligations of management and supervision of the
management of the Trust's assets pursuant to this Agreement and to applicable
law.
3. DUTIES AND OBLIGATIONS OF ADVISER WITH RESPECT TO THE
ADMINISTRATION OF THE TRUST. The Adviser also agrees to furnish office
facilities and equipment and clerical, bookkeeping and administrative services
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(other than such services, if any, provided by the Trust's Custodian, Transfer
Agent, Dividend Disbursing Agent and Registrar, Administrator and other service
providers) for the Trust. To the extent requested by the Trust, the Adviser
agrees to provide the following administrative services:
(a) Oversee the determination and publication of the Trust's
net asset value in accordance with the Trust's policy as adopted from time to
time by the Board of Trustees;
(b) Oversee the maintenance by the Trust's Custodian and
Transfer Agent, Dividend Disbursing Agent and Registrar of certain books and
records of the Trust as required under Rule 31a-1(b)(4) of the 1940 Act and
maintain (or oversee maintenance by the Trust's Administrator or such other
persons as approved by the Board of Trustees) such other books and records
required by law or for the proper operation of the Trust;
(c) Oversee the preparation and filing of the Trust's federal,
state and local income tax returns and any other required tax returns;
(d) Review the appropriateness of and arrange for payment of
the Trust's expenses;
(e) Prepare (or oversee the preparation) for review and
approval by officers of the Trust financial information for the Trust's
semi-annual and annual reports, proxy statements and other communications with
shareholders required or otherwise to be sent to Trust shareholders, and arrange
for the printing and dissemination of such reports and communications to
shareholders;
(f) Prepare (or oversee the preparation) for review by an
officer of the Trust the Trust's periodic financial reports required to be filed
with the Securities and Exchange Commission ("SEC") on Forms N-SAR, N-CSR, N-Q,
N-PX and such other reports, forms and filings, as may be mutually agreed upon;
(g) Prepare reports relating to the business and affairs of
the Trust as may be mutually agreed upon and not otherwise appropriately
prepared by the Trust's Custodian, counsel or auditors;
(h) Prepare (or oversee the preparation of) such information
and reports as may be required by any stock exchange or exchanges on which the
Trust's shares are listed;
(i) Make such reports and recommendations to the Board of
Trustees concerning the performance of the independent accountants as the Board
of Trustees may reasonably request or deems appropriate;
(j) Make such reports and recommendations to the Board of
Trustees concerning the performance and fees of the Trust's Custodian, Transfer
Agent, Administrator and Dividend Disbursing Agent and Registrar as the Board of
Trustees may reasonably request or deems appropriate;
(k) Oversee and review calculations of fees paid to the
Trust's service providers;
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(l) Oversee the Trust's portfolio and perform necessary
calculations as required under Section 18 of the 1940 Act;
(m) Consult with the Trust's officers, independent
accountants, legal counsel, Custodian, Administrator or other accounting agent,
Transfer Agent and Dividend Disbursing Agent and Registrar in establishing the
accounting policies of the Trust and monitor financial and shareholder
accounting services;
(n) Review implementation of any share purchase programs
authorized by the Board of Trustees;
(o) Determine the amounts available for distribution as
dividends and distributions to be paid by the Trust to its shareholders; prepare
and arrange for the printing of dividend notices to shareholders; and provide
the Trust's Dividend Disbursing Agent and Registrar and Custodian with such
information as is required for such parties to effect the payment of dividends
and distributions and to implement the Trust's dividend reinvestment plan;
(p) Prepare such information and reports as may be required by
any banks from which the Trust borrows funds;
(q) Provide such assistance to the Custodian and the Trust's
counsel and auditors as generally may be required to properly carry on the
business and operations of the Trust;
(r) Assist in the preparation and filing of Forms 3, 4, and 5
pursuant to Section 16 of the Securities Exchange Act of 1934, as amended, and
Section 30(f) of the 1940 Act for the officers and trustees of the Trust, such
filings to be based on information provided by those persons;
(s) Respond to or refer to the Trust's officers or Transfer
Agent, shareholder (including any potential shareholder) inquiries relating to
the Trust; and
(t) Maintain the Trust's Website;
(u) Perform Secondary Market support for the Trust including
monitoring the Trust's service providers and the Trust
Specialists and other matters relating thereto;
(v) Supervise any other aspects of the Trust's administration
as may be agreed to by the Trust and the Adviser.
All services are to be furnished through any directors, officers or employees of
the Adviser or its affiliates as the Adviser deems appropriate in order to
fulfill its obligations hereunder. The Trust will reimburse the Adviser or its
affiliates for all out-of- pocket expenses incurred by them in connection with
the performance of the administrative services described in this paragraph 3.
4. COVENANTS. In the performance of its duties under this
Agreement, the Adviser:
(a) shall at all times conform to, and act in accordance with,
any requirements imposed by: (i) the provisions of the 1940 Act and the
Investment Advisers Act of 1940, as amended, and all applicable Rules and
Regulations of the Securities and Exchange Commission (the "SEC"); (ii) any
other applicable provision of law; (iii) the provisions of the Agreement and
Declaration of Trust, as amended and restated, and By-Laws of the Trust, as such
documents are amended from time to time; (iv) the investment objective and
policies of the Trust as set forth in its Registration Statement on Form N-2 (as
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such may be amended or supplemented from time to time); and (v) any policies and
determinations of the Board of Trustees of the Trust;
(b) will place orders either directly with the issuer or with
any broker or dealer. Subject to the other provisions of this paragraph, in
placing orders with brokers and dealers, the Adviser will attempt to obtain the
best price and the most favorable execution of its orders. In placing orders,
the Adviser will consider the experience and skill of the firm's securities
traders as well as the firm's financial responsibility and administrative
efficiency. Consistent with this obligation, the Adviser may select brokers on
the basis of the research, statistical and pricing services they provide to the
Trust and other clients of the Adviser. Information and research received from
such brokers will be in addition to, and not in lieu of, the services required
to be performed by the Adviser hereunder. A commission paid to such brokers may
be higher than that which another qualified broker would have charged for
effecting the same transaction, provided that the Adviser determines in good
faith that such commission is reasonable in terms either of the transaction or
the overall responsibility of the Adviser to the Trust and its other clients and
that the total commissions paid by the Trust will be reasonable in relation to
the benefits to the Trust over the long-term. In no instance, however, will the
Trust's securities be purchased from or sold to the Adviser, or any affiliated
person thereof, except to the extent permitted by the SEC or by applicable law;
and
(c) will treat confidentially and as proprietary information
of the Trust all records and other information relative to the Trust, and the
Trust's prior, current or potential shareholders, and will not use such records
and information for any purpose other than performance of its responsibilities
and duties hereunder, except after prior notification to and approval in writing
by the Trust, which approval shall not be unreasonably withheld and may not be
withheld where the Adviser may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such information by
duly constituted authorities, or when so requested by the Trust.
5. SERVICES NOT EXCLUSIVE. Nothing in this Agreement shall
prevent the Adviser or any officer, employee or other affiliate thereof from
acting as investment adviser for any other person, firm or corporation, or from
engaging in any other lawful activity, and shall not in any way limit or
restrict the Adviser or any of its officers, employees or agents from buying,
selling or trading any securities for its or their own accounts or for the
accounts of others for whom it or they may be acting; provided, however, that
the Adviser will undertake no activities which, in its judgment, will adversely
affect the performance of its obligations under this Agreement.
6. BOOKS AND RECORDS. In compliance with the requirements of
Rule 31a-3 under the 1940 Act, the Adviser hereby agrees that all records which
it maintains for the Trust are the property of the Trust and further agrees to
surrender promptly to the Trust any such records upon the Trust's request. The
Adviser further agrees to preserve for the periods prescribed by Rule 31a-2
under the 1940 Act the records required to be maintained by Rule 31a-1 under the
1940 Act.
7. AGENCY CROSS TRANSACTIONS. From time to time, the Adviser or
brokers or dealers affiliated with it may find themselves in a position to buy
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for certain of their brokerage clients (each an "Account") securities which the
Adviser's investment advisory clients wish to sell, and to sell for certain of
their brokerage clients securities which advisory clients wish to buy. Where one
of the parties is an advisory client, the Adviser or the affiliated broker or
dealer cannot participate in this type of transaction (known as a cross
transaction) on behalf of an advisory client and retain commissions from one or
both parties to the transaction without the advisory client's consent. This is
because in a situation where the Adviser is making the investment decision (as
opposed to a brokerage client who makes his own investment decisions), and the
Adviser or an affiliate is receiving commissions from both sides of the
transaction, there is a potential conflicting division of loyalties and
responsibilities on the Adviser's part regarding the advisory client. The SEC
has adopted a rule under the Investment Advisers Act of 1940, as amended, which
permits the Adviser or its affiliates to participate on behalf of an Account in
agency cross transactions if the advisory client has given written consent in
advance. By execution of this Agreement, the Trust authorizes the Adviser or its
affiliates to participate in agency cross transactions involving an Account. The
Trust may revoke its consent at any time by written notice to the Adviser.
8. EXPENSES. During the term of this Agreement, the Adviser will
bear all costs and expenses of its employees and any overhead incurred in
connection with its duties hereunder and shall bear the costs of any salaries or
trustees fees of any officers or trustees of the Trust who are affiliated
persons (as defined in the 1940 Act) of the Adviser.
9. COMPENSATION OF THE ADVISER.
(a) The Trust agrees to pay to the Adviser and the Adviser
agrees to accept as full compensation for all services rendered by the Adviser
as such, a monthly fee (the "Investment Advisory Fee") in arrears at an annual
rate equal to 0.65% of the average daily value of the Trust's Managed Assets.
"Managed Assets" means the average net assets of the Trust plus assets acquired
from the sale of any preferred shares plus the proceeds of any borrowings used
for financial leverage; provided, that the liquidation preference of any
outstanding preferred shares issues by the Trust (other than accumulated
dividends) shall not be considered a liability for purposes of determining the
Trust's net assets. For any period less than a month during which this Agreement
is in effect, the fee shall be prorated according to the proportion which such
period bears to a full month of 28, 29, 30 or 31 days, as the case may be.
(b) For purposes of this Agreement, the total assets of the
Trust shall be calculated pursuant to the procedures adopted by resolutions of
the Trustees of the Trust for calculating the value of the Trust's assets or
delegating such calculations to third parties.
10. LIMITATION ON LIABILITY. (a) The Adviser will not be liable
for any error of judgment or mistake of law or for any loss suffered by Adviser
or by the Trust in connection with the performance of this Agreement, except a
loss resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or from
reckless disregard by it of its duties under this Agreement.
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(b) The Trust may, but shall not be required to, make advance
payments to the Adviser in connection with the expenses of the Adviser in
defending any action with respect to which damages or equitable relief might be
sought against the Adviser under this Section (which payments shall be
reimbursed to the Trust by the Adviser as provided below) if the Trust receives
(i) a written affirmation of the Adviser's good faith belief that the standard
of conduct necessary for the limitation of liability in this Section has been
met and (ii) a written undertaking to reimburse the Trust whether or not the
Adviser shall be deemed to have liability under this Section, such reimbursement
to be due upon (1) a final decision on the merits by a court or other body
before whom the proceeding was brought as to whether or not the Adviser is
liable under this Section or (2) in the absence of such a decision, upon the
request of the Adviser for reimbursement by a majority vote of a quorum
consisting of trustees of the Trust who are neither "interested persons" of the
Trust (as defined in Section 2(a)(19) of the 1940 Act) nor parties to the
proceeding ("Disinterested Non-Party Trustees"). In addition, at least one of
the following conditions must be met: (A) the Adviser shall provide a security
for such Adviser undertaking, (B) the Trust shall be insured against losses
arising by reason of any lawful advance, or (C) a majority of a quorum of the
Disinterested Non-Party Trustees of the Trust or an independent legal counsel in
a written opinion, shall determine, based on a review of readily available facts
(as opposed to a full trial-type inquiry), that there is reason to believe that
the Adviser ultimately will be found not to be liable under this Section.
11. DURATION AND TERMINATION. This Agreement shall become
effective as of the date hereof and, unless sooner terminated with respect to
the Trust as provided herein, shall continue in effect for a period of two
years. Thereafter, if not terminated, this Agreement shall continue in effect
with respect to the Trust for successive periods of 12 months, provided such
continuance is specifically approved at least annually by both (a) the vote of a
majority of the Trust's Board of Trustees or the vote of a majority of the
outstanding voting securities of the Trust at the time outstanding and entitled
to vote, and (b) by the vote of a majority of the Trustees who are not parties
to this Agreement or interested persons of any party to this Agreement, cast in
person at a meeting called for the purpose of voting on such approval.
Notwithstanding the foregoing, this Agreement may be terminated by the Trust at
any time, without the payment of any penalty, upon giving the Adviser 60 days'
notice (which notice may be waived by the Adviser), provided that such
termination by the Trust shall be directed or approved by the vote of a majority
of the Trustees of the Trust in office at the time or by the vote of the holders
of a majority of the voting securities of the Trust at the time outstanding and
entitled to vote, or by the Adviser on 60 days' written notice (which notice may
be waived by the Trust). This Agreement will also immediately terminate in the
event of its assignment. (As used in this Agreement, the terms "majority of the
outstanding voting securities," "interested person" and "assignment" shall have
the same meanings of such terms in the 1940 Act.)
13. NOTICES. Any notice under this Agreement shall be in writing
to the other party at such address as the other party may designate from time to
time for the receipt of such notice and shall be deemed to be received on the
earlier of the date actually received or on the fourth day after the postmark if
such notice is mailed first class postage prepaid.
14. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement
may be changed, waived, discharged or terminated orally, but only by an
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instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought. Any amendment of this
Agreement shall be subject to the 1940 Act.
15. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware for contracts to
be per formed entirely therein without reference to choice of law principles
thereof and in accordance with the applicable provisions of the 1940 Act.
16. USE OF THE NAME CLAYMORE. The Adviser has consented to the
use by the Trust of the name or identifying word "Claymore" in the name of the
Trust. Such consent is conditioned upon the employment of the Adviser as the
investment adviser to the Trust. The name or identifying word "Claymore" may be
used from time to time in other connections and for other purposes by the
Adviser and any of its affiliates. The Adviser may require the Trust to cease
using "Claymore" in the name of the Trust if the Trust ceases to employ, for any
reason, the Adviser, any successor thereto or any affiliate thereof as
investment adviser of the Trust.
17. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding on, and shall inure to the
benefit of the parties hereto and their respective successors.
18. COUNTERPARTS. This Agreement may be executed in counterparts
by the parties hereto, each of which shall constitute an original counterpart,
and all of which, together, shall constitute one Agreement.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by their duly authorized officers, all as of the day
and the year first above written.
MBIA CAPITAL/CLAYMORE MANAGED DURATION
INVESTMENT GRADE MUNICIPAL FUND
By:
----------------------------------------
Name:
Title:
CLAYMORE ADVISORS, LLC
By:
----------------------------------------
Name:
Title:
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APPENDIX B-1
CLAYMORE ADVISORS, LLC
WAIVER RELIANCE LETTER
November ____, 2005
MBIA Capital/Claymore Managed Duration
Investment Grade Municipal Fund
113 King Street
Armonk, New York 10504
Ladies and Gentlemen:
Claymore Advisors, LLC (the "Adviser") and MBIA Capital/Claymore
Managed Duration Investment Grade Municipal Fund (the "Fund") have entered into
an Investment Advisory Agreement, dated as of the date hereof (the "Investment
Advisory Agreement"), pursuant to which the Adviser has agreed to furnish
certain services to the Fund on the terms and subject to the conditions of the
Investment Advisory Agreement.
The Investment Advisory Agreement provides, among other things, that
the Fund will pay to the Adviser as full compensation for all services rendered
by the Adviser to the Fund under the Investment Advisory Agreement a monthly fee
in arrears at an annual rate equal to .65% of the average daily value of such
Fund's Managed Assets (as defined in the Investment Advisory Agreement) (such
fee being referred to herein as the "Advisory Fee"). The Adviser hereby
covenants to waive receipt of certain payments that would be expenses of the
Fund, as set forth below.
For the period from November ____, 2005 through September 1, 2006, and
for the 12 month periods through September 1 in each indicated year during the
term of the Investment Advisory Agreement (including any continuation thereof),
the Adviser will waive receipt of certain payments that would be expenses of the
Fund in the amount determined by applying the following annual rates to the
average daily value of the Fund's Managed Assets:
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THROUGH SEPTEMBER 1 WAIVER
------------------- ------
2006 .150%
2007 .150%
2008 .150%
2009 .070%
The Adviser intends to cease to so waive receipt of payments upon the
earlier of (i) September 2, 2009 or (ii) termination of the Investment Advisory
Agreement.
Please acknowledge the foregoing by signing this letter in the space
provided below and returning the executed copy to the Adviser.
Sincerely,
CLAYMORE ADVISORS, LLC
By:
------------------------
Name:
Title:
CONFIRMED AND ACCEPTED
MBIA CAPITAL/CLAYMORE MANAGED
DURATION INVESTMENT GRADE
MUNICIPAL FUND
By:
--------------------------------------------------
Name:
Title:
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APPENDIX C
INVESTMENT SUB-ADVISORY AGREEMENT
THIS INVESTMENT SUB-ADVISORY AGREEMENT (the "Agreement") dated
as of November __, 2005, among MBIA Capital/Claymore Managed Duration Investment
Grade Municipal Fund, a Delaware statutory trust (the "Trust"), Claymore
Advisors, LLC, a Delaware limited liability company (the "Investment Adviser"),
and MBIA Capital Management Corp., a Delaware corporation (the "Investment
Sub-Adviser").
WHEREAS, the Investment Adviser has agreed to furnish
investment management and advisory services to the Trust, a closed-end
management investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act") with respect to the Trust Assets (defined
below);
WHEREAS, the investment advisory agreement between the
Investment Adviser and the Trust dated as of November __, 2005 (such agreement
or the most recent successor agreement between such parties relating to advisory
services to the Trust is referred to herein as the "Investment Advisory
Agreement") contemplates that the Investment Adviser may sub-contract investment
advisory services with respect to the Trust to a sub-adviser(s) pursuant to a
sub-advisory agreement(s) agreeable to the Trust and approved in accordance with
the provisions of the 1940 Act;
WHEREAS, the Investment Adviser wishes to retain the
Investment Sub-Adviser to provide certain sub-advisory services;
WHEREAS, the Investment Sub-Adviser is a registered investment
adviser under the Investment Advisers Act of 1940, as amended (the "Advisers
Act"); and
WHEREAS, this Agreement has been approved in accordance with
the provisions of the 1940 Act, and the Investment Sub-Adviser is willing to
furnish such services upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual covenants
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, it is agreed by and between the parties hereto as
follows:
1. APPOINTMENT. The Investment Adviser hereby appoints the
Investment Sub-Adviser to act as a sub-adviser with respect to the Trust as set
forth in this Agreement and the Investment Sub-Adviser accepts such appointment
and agrees to render the services herein set forth for the compensation herein
provided.
2. SERVICES OF THE INVESTMENT SUB-ADVISER. Subject to the
succeeding provisions of this section, the oversight and supervision of the
Investment Adviser and the direction and control of the Trust's Board of
Trustees, the Investment Sub-Adviser will perform certain of the day-to-day
operations of the Trust which shall include one or more of the following
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services at the request of the Investment Adviser: (i) managing the investment
and reinvestment of the Trust Assets in accordance with the investment policies
of the Trust; (ii) arranging, subject to the provisions of paragraph 3 hereof,
for the purchase and sale of securities and other assets for the Trust; (iii)
providing investment research and credit analysis concerning the Trust Assets;
(v) placing orders for purchases and sales of Trust Assets, (vi) maintaining the
books and records as are required to support Trust investment operations, (vii)
monitoring on a daily basis the investment activities and portfolio holdings
relating to the Trust and (vii) voting proxies relating to the Trust's portfolio
securities in accordance with the proxy voting policies and procedures of the
Investment Sub-Adviser.. At the request of the Investment Adviser, the
Investment Sub-Adviser will also, subject to the oversight and supervision of
the Investment Adviser and the direction and control of the Trust's Board of
Trustees, consult with the Investment Adviser as to the overall management of
the Trust Assets and the investment policies and practices of the Trust,
including (but not limited to) the use by the Trust of financial leverage and
elements (e.g., form, amount and costs) relating to such financial leverage and
the utilization by the Trust of any interest rate or other hedging or risk
management transactions in connection therewith, and will perform any of the
services described in the Investment Advisory Agreement. In addition, the
Investment Sub-Adviser will keep the Trust and the Investment Adviser informed
of developments materially affecting the Trust and shall, upon request, furnish
to the Trust all information relevant to such developments. The Investment
Sub-Adviser will periodically communicate to the Investment Adviser, at such
times as the Investment Adviser may direct, information concerning the purchase
and sale of securities for the Trust, including: (i) the name of the issuer,
(ii) the amount of the purchase or sale, (iii) the name of the broker or dealer,
if any, through which the purchase or sale is effected, (iv) the CUSIP number of
the instrument, if any, and (v) such other information as the Investment Adviser
may reasonably require for purposes of fulfilling its obligations to the Trust
under the Investment Advisory Agreement. The Investment Sub-Adviser will provide
the services rendered by it under this Agreement in accordance with the Trust's
investment objective, policies and restrictions (as currently in effect and as
they may be amended or supplemented from time to time) as stated in the Trust's
Prospectus filed with the Securities and Exchange Commission ("SEC") as part of
the Trust's Registration Statement on Form N-2 and the resolutions of the
Trust's Board of Trustees.
3. COVENANTS. In the performance of its duties under this
Agreement, the Investment Sub-Adviser:
(a) shall at all times comply and act in accordance with: (i)
the provisions of the 1940 Act and the Advisers Act and all applicable Rules and
Regulations of the SEC; (ii) any other applicable provision of law; (iii) the
provisions of the Agreement and Declaration of Trust and By-Laws of the Trust,
as such documents are amended from time to time; (iv) the investment objective,
policies and restrictions of the Trust as set forth in the Trust's Prospectus
filed with the SEC as part of the Trust's Registration Statement on Form N-2 as
currently in effect and as they may be amended or supplemented from time to
time; and (v) any policies, determinations and/or resolutions of the Board of
Trustees of the Trust or the Investment Adviser;
(b) will place orders either directly with the issuer or with
any broker or dealer. Subject to the other provisions of this paragraph, in
placing orders with brokers and dealers, the Investment Sub-Adviser will follow
its best execution policies as approved by the Board of Trustees. Consistent
with this obligation, the Investment Sub-Adviser may select brokers on the basis
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of the research, statistical and pricing services they provide to the Trust and
other clients of the Investment Adviser or the Investment Sub-Adviser, as the
case may be. Information and research received from such brokers will be in
addition to, and not in lieu of, the services required to be performed by the
Investment Sub-Adviser hereunder. A commission paid to such brokers may be
higher than that which another qualified broker would have charged for effecting
the same transaction, provided that the Investment Sub-Adviser determines in
good faith that such commission is reasonable in terms either of the transaction
or the overall responsibility of the Investment Adviser and the Investment
Sub-Adviser to the Trust and their other clients and that the total commissions
paid by the Trust will be reasonable in relation to the benefits to the Trust
over the long-term. In no instance, however, will the Trust's securities be
purchased from or sold to the Investment Adviser, the Investment Sub-Adviser or
any affiliated person thereof, except to the extent permitted by the SEC or by
applicable law;
(c) will maintain books and records with respect to the
Trust's securities transactions and render to the Investment Adviser and the
Trust's Board of Trustees such periodic and special reports as they may request;
and
(d) will treat confidentially and as proprietary information
of the Trust all records and other information relative to the Trust, and the
Trust's prior, current or potential shareholders, and will not use such records
and information for any purpose other than performance of its responsibilities
and duties hereunder.
4. SERVICES NOT EXCLUSIVE. Nothing in this Agreement shall
prevent the Investment Sub-Adviser or any officer, employee or other affiliate
thereof from acting as investment adviser for any other person, firm or
corporation, or from engaging in any other lawful activity, and shall not in any
way limit or restrict the Investment Sub-Adviser or any of its officers,
employees or agents from buying, selling or trading any securities for their own
accounts or for the accounts of others for whom it or they may be acting;
provided, however, that the Investment Sub-Adviser will not undertake any
activities which will adversely affect the performance of its obligations under
this Agreement.
5. BOOKS AND RECORDS. In compliance with the requirements of
Rule 31a-3 under the 1940 Act, the Investment Sub-Adviser hereby agrees that all
records which it maintains for the Trust are the property of the Trust and
further agrees to surrender promptly to the Trust any such records upon the
Trust's request. The Investment Sub-Adviser further agrees to preserve for the
periods prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-1 under the 1940 Act.
6. AGENCY CROSS TRANSACTIONS. From time to time, the
Investment Sub-Adviser or brokers or dealers affiliated with the Investment
Sub-Adviser may find themselves in a position to buy for certain of their
brokerage clients (each an "Account") securities which the Investment
Sub-Adviser's investment advisory clients wish to sell, and to sell for certain
of their brokerage clients securities which advisory clients wish to buy. Where
one of the parties is an advisory client, the Investment Sub-Adviser or the
affiliated broker or dealer cannot participate in this type of transaction
(known as a cross transaction) on behalf of an advisory client and retain
commissions from both parties to the transaction without the advisory client's
C-3
consent. This is because in a situation where a Investment Sub-Adviser is making
the investment decision (as opposed to a brokerage client who makes his own
investment decisions), and the Investment Sub-Adviser or an affiliate is
receiving commissions from one or both sides of the transaction, there is a
potential conflicting division of loyalties and responsibilities on the
Investment Sub-Adviser's part regarding the Advisory client. The SEC has adopted
a rule under the Advisers Act which permits a Investment Sub-Adviser or its
affiliates to participate on behalf of an Account in agency cross transactions
if the Advisory client has given written consent in advance. By execution of
this Agreement, the Trust authorizes the Investment Sub-Adviser or its
affiliates to participate in agency cross transactions involving an Account. The
Trust may revoke its consent at any time by written notice to the Investment
Sub-Adviser.
7. EXPENSES. During the term of this Agreement, the Investment
Sub-Adviser will bear all costs and expenses of its employees and any overhead
incurred by the Investment Sub-Adviser in connection with their duties hereunder
and shall bear the costs of any salaries or trustees fees of any officers or
trustees of the Trust who are affiliated persons (as defined in the 1940 Act) of
the Investment Sub-Adviser.
8. COMPENSATION.
(a) The Investment Adviser agrees to pay to the Investment
Sub-Adviser and the Investment Sub-Adviser agrees to accept as full compensation
for all services rendered by the Investment Sub-Adviser as such, a monthly fee
(the "Investment Management Fee") payable in arrears at an annual rate equal to
0.39% of the average daily value of the Trust's Managed Assets. "Managed Assets"
means the average net assets of the Trust plus assets acquired from the sale of
any preferred shares plus the proceeds of any borrowings used for financial
leverage; provided, that the liquidation preference of any outstanding preferred
shares issued by the Trust (other than accumulated dividends) shall not be
considered a liability for purposes of determining the Trust's net assets. For
any period less than a month during which this Agreement is in effect, the fee
shall be prorated according to the proportion which such period bears to a full
month of 28, 29, 30 or 31 days, as the case may be.
(b) For purposes of this Agreement, the total assets of the
Trust shall be calculated pursuant to the procedures adopted by resolutions of
the Trustees of the Trust for calculating the value of the Trust's assets or
delegating such calculations to third parties.
9. CERTAIN INFORMATION. The Investment Sub-Adviser shall
promptly notify the Investment Adviser in writing of the occurrence of any of
the following events: (a) the Investment Sub-Adviser failing to be registered as
an investment adviser under the Advisers Act, (b) the Investment Sub-Adviser
having been served or otherwise have notice of any action, suit, proceeding,
inquiry or investigation, at law or in equity, before or by any court, public
board or body, involving the affairs of the Trust, (c) the occurrence of any
change in control of the Investment Sub-Adviser or any parent of the Investment
Sub-Adviser within the meaning of the 1940 Act or (d) the occurrence of any
adverse change in the business or financial position of the Investment
Sub-Adviser.
C-4
10. LIMITATION ON LIABILITY.
(a) The Investment Sub-Adviser will not be liable for any
error of judgment or mistake of law or for any loss suffered by the Investment
Sub-Adviser, the Investment Adviser or by the Trust in connection with the
performance of this Agreement, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard by it of its
duties under this Agreement.
(b) The Trust may, but shall not be required to, make advance
payments to the Investment Sub-Adviser in connection with the expenses of the
Investment Sub-Adviser in defending any action with respect to which damages or
equitable relief might be sought against the Investment Sub-Adviser under this
Section (which payments shall be reimbursed to the Trust by the Investment
Sub-Adviser as provided below) if the Trust receives (i) a written affirmation
of the Investment Sub-Adviser's good faith belief that the standard of conduct
necessary for the limitation of liability in this Section has been met and (ii)
a written undertaking to reimburse the Trust whether or not the Investment
Sub-Adviser shall be deemed to have liability under this Section, such
reimbursement to be due upon (1) a final decision on the merits by a court or
other body before whom the proceeding was brought as to whether or not the
Investment Sub-Adviser is liable under this Section or (2) in the absence of
such a decision, upon the request of the Investment Sub-Adviser for
reimbursement by a majority vote of a quorum consisting of trustees of the Trust
who are neither "interested persons" of the Trust (as defined in Section
2(a)(19) of the 1940 Act) nor parties to the proceeding ("Disinterested
Non-Party Trustees"). In addition, at least one of the following conditions must
be met: (A) the Investment Sub-Adviser shall provide a security for such
Investment Sub-Adviser undertaking, (B) the Trust shall be insured against
losses arising by reason of any lawful advance, or (C) a majority of a quorum of
the Disinterested Non-Party Trustees of the Trust or an independent legal
counsel in a written opinion, shall determine, based on a review of readily
available facts (as opposed to a full trial-type inquiry), that there is reason
to believe that the Investment Sub-Adviser ultimately will be found not to be
liable under this Section.
11. DURATION AND TERMINATION. This Agreement shall become
effective as of the date hereof and shall continue (unless terminated
automatically as set forth below) in effect for a period of two years.
Thereafter, if not terminated, this Agreement shall continue in effect with
respect to the Trust for successive periods of 12 months, provided such
continuance is specifically approved at least annually by both (a) the vote of a
majority of the Trust's Board of Trustees or a vote of a majority of the
outstanding voting securities of the Trust at the time outstanding and entitled
to vote and (b) by the vote of a majority of the Trustees, who are not parties
to this Agreement or interested persons (as such term is defined in the 1940
Act) of any such party, cast in person at a meeting called for the purpose of
voting on such approval. Notwithstanding the foregoing, this Agreement may be
terminated by the Trust, without the payment of any penalty, upon giving the
Investment Sub-Adviser 60 days' notice (which notice may be waived by the
Investment Sub-Adviser), provided that such termination by the Trust shall be
directed or approved by the vote of a majority of the Trustees of the Trust in
office at the time or by the vote of the holders of a majority of the voting
securities of the Trust at the time outstanding and entitled to vote, or by the
Investment Sub-Adviser on 60 days' written notice (which notice may be waived by
the Trust), and will terminate automatically upon any termination of the
Investment Advisory Agreement between the Trust and the Investment Adviser. This
Agreement will also immediately terminate in the event of its assignment. (As
C-5
used in this Agreement, the terms "majority of the outstanding voting
securities," "interested person" and "assignment" shall have the same meanings
of such terms in the 1940 Act.)
12. NOTICES. Any notice under this Agreement shall be in
writing to the other party at such address as the other party may designate from
time to time for the receipt of such notice and shall be deemed to be received
on the earlier of the date actually received or on the fourth day after the
postmark if such notice is mailed first class postage prepaid.
13. AMENDMENT OF THIS AGREEMENT. No provision of this
Agreement may be changed, waived, discharged or terminated orally, but only by
an instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought. Any amendment of this
Agreement shall be subject to the 1940 Act.
14. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware for contracts to
be performed entirely therein without reference to choice of law principles
thereof and in accordance with the applicable provisions of the 1940 Act.
15. USE OF THE NAME MBIA CAPITAL OR MBIA. The Investment
Sub-Adviser has consented to the use by the Trust of the name or identifying
word "MBIA Capital" in the name of the Trust. Such consent is conditioned upon
the employment of the Investment Sub-Adviser as the investment sub-adviser to
the Trust. The names or identifying words "MBIA Capital" or "MBIA" may be used
from time to time in other connections and for other purposes by the Investment
Sub-Adviser and any of its affiliates. The Investment Sub-Adviser may require
the Trust to cease using "MBIA Capital" in the name of the Trust if the Trust or
the Investment Adviser ceases to employ, for any reason, the Investment
Sub-Adviser, any successor thereto or any affiliate thereof as investment
sub-adviser of the Trust.
16. MISCELLANEOUS. The captions in this Agreement are included
for convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or other wise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding on, and shall inure to the
benefit of the parties hereto and their respective successors.
17. COUNTERPARTS. This Agreement may be executed in
counterparts by the parties hereto, each of which shall constitute an original
counterpart, and all of which, together, shall constitute one Agreement.
C-6
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their duly authorized officers designated below as
of the day and year first above written.
CLAYMORE ADVISORS, LLC
By:
----------------------------
MBIA CAPITAL MANAGEMENT CORP.
By:
----------------------------
MBIA CAPITAL/CLAYMORE MANAGED DURATION
INVESTMENT GRADE MUNICIPAL FUND
By:
-----------------------------
C-7
APPENDIX C-1
MBIA CAPITAL MANAGEMENT CORP.
WAIVER RELIANCE LETTER
November ____, 2005
MBIA Capital/Claymore Managed Duration
Investment Grade Municipal Fund
113 King Street
Armonk, New York 10504
Ladies and Gentlemen:
MBIA Capital/Claymore Managed Duration Investment Grade Municipal Fund
(the "Fund"), Claymore Advisors, LLC ("Claymore") and MBIA Capital Management
Corp. (the "Sub-Adviser") have entered into an Investment Sub-Advisory
Agreement, dated as of the date hereof (the "Investment Sub-Advisory
Agreement"), pursuant to which the Sub-Adviser has agreed to furnish investment
advisory services to the Fund on the terms and subject to the conditions of the
Investment Sub-Advisory Agreement.
The Investment Sub-Advisory Agreement provides, among other things,
that Claymore will pay to the Sub-Adviser as full compensation for all services
rendered by the Sub-Adviser to the Fund under the Investment Sub-Advisory
Agreement a monthly fee in arrears at an annual rate equal to .39% of the
average daily value of such Fund's Managed Assets (as defined in the Investment
Sub-Advisory Agreement) (such fee being referred to herein as the "Sub-Advisory
Fee"). The Sub-Adviser hereby covenants to waive receipt of certain payments
that would be expenses of the Fund, as set forth below.
For the period from November ____, 2005 through September 1, 2006, and
for the 12 month periods through September 1 in each indicated year during the
term of the Investment Sub-Advisory Agreement (including any continuation
thereof in accordance with Section 15 of the Investment Company Act of 1940, as
amended), the Sub-Adviser will waive receipt of certain payments that would be
expenses of the Fund in the amount determined by applying the following annual
rates to the average daily value of the Fund's Managed Assets:
C-1-1
THROUGH SEPTEMBER 1 WAIVER
------------------- ------
2006 .090%
2007 .090%
2008 .090%
2009 .042%
The Sub-Adviser intends to cease to so waive receipt of payments upon
the earlier of (i) September 2, 2009 or (ii) termination of the Investment
Sub-Advisory Agreement.
Please acknowledge the foregoing by signing this letter in the space
provided below and returning the executed copy to the Sub-Adviser.
Sincerely,
MBIA CAPITAL MANAGEMENT CORP.
By:
-----------------------------------------
Name:
Title:
CONFIRMED AND ACCEPTED
MBIA CAPITAL/CLAYMORE MANAGED
DURATION INVESTMENT GRADE
MUNICIPAL FUND
By:
--------------------------------------------------
Name:
Title:
C-1-2
APPENDIX D
COMPARATIVE SCHEDULE OF FEES
MBIA CAPITAL/CLAYMORE MANAGED DURATION INVESTMENT GRADE MUNICIPAL FUND
SUMMARY OF SERVICE PROVIDERS
- ------------------------------------------------------------------------------------------------------------------------------------
CURRENT PROPOSED
- --------------------------------------------------------------------- ----------------------------------------------------------
FUNCTION PROVIDER FEE* FUNCTION PROVIDER FEE*
- -------------------- ------------------------ ---------------- ----------------- -------------------- -----------
Adviser MBIA-CMC (1) 0.3900% Adviser Claymore (4)(5) 0.6500%
Servicing Agent Claymore Securities (2) 0.2600 Servicing Agent n/a 0.0000
Fund Accounting MBIA-MISC (3) 0.0500 Fund Accounting The Bank of New York 0.0300
Fund Admin MBIA-MISC (3) 0.0500 Fund Admin Claymore 0.0275
Custodian The Bank of New York 0.0100 Custodian The Bank of New York 0.0100
Transfer Agent The Bank of New York 0.0200 Transfer Agent The Bank of New York 0.0200
Auction Agent The Bank of New York 0.0100 Auction Agent The Bank of New York 0.0100
TOTAL 0.79% TOTAL 0.75%
- ----------
* Based on managed assets.
(1) Gross fee shown. MBIA-CMC has agreed to waive a portion of its fee (.09%
through 9-1-08; .042% from 9-1-08 through 9-1-09).
(2) Gross fee shown. Claymore has agreed to waive a portion of its fee (.06%
through 9-1-08; .028% from 9-1-08 through 9-1-09).
(3) MBIA-MISC charges .10% for combined Fund Accounting and Fund Administration
services under the Accounting and Administration Services Agreement;
MBIA-MISC estimates that these fees should be allocated equally between the
services.
(4) Claymore will pay MBIA-CMC directly a fee of 0.39% as subadviser to the
Fund. MBIA-CMC has agreed to waive a portion of its fee (.09% through
9-1-08; .042% from 9-1-08 through 9-1-09).
(5) Claymore has agreed to waive a portion of its fee (.15% through 9-1-08;
.070% from 9-1-08 through 9-1-09).
D-1
APPENDIX E
OFFICERS AND DIRECTORS OF MBIA CAPITAL MANAGEMENT CORP.
The address of the officers and directors of MBIA Capital Management Corp. is
113 King Street, Armonk, New York.
- ------------------------------------------------------------ ---------------------------------------------------------
Name Title
- ------------------------------------------------------------ ---------------------------------------------------------
Clifford D. Corso President, Director
- ------------------------------------------------------------ ---------------------------------------------------------
Marc Morris Treasurer, Director
- ------------------------------------------------------------ ---------------------------------------------------------
Gary Dunton Director
- ------------------------------------------------------------ ---------------------------------------------------------
Edmund Berrigan Managing Director
- ------------------------------------------------------------ ---------------------------------------------------------
Sharon Fera Vice President
- ------------------------------------------------------------ ---------------------------------------------------------
Susan Voltz Director
- ------------------------------------------------------------ ---------------------------------------------------------
Joseph Schachinger Financial Operations Principal
- ------------------------------------------------------------ ---------------------------------------------------------
Robert Claiborne Director
- ------------------------------------------------------------ ---------------------------------------------------------
Richard Walz Chief Compliance Officer, Financial Operations Principal
- ------------------------------------------------------------ ---------------------------------------------------------
Carol Blair Managing Director
- ------------------------------------------------------------ ---------------------------------------------------------
Leonard Chubinsky Secretary, General Counsel
- ------------------------------------------------------------ ---------------------------------------------------------
Neil Budnick Director
- ------------------------------------------------------------ ---------------------------------------------------------
David McCollum Managing Director
- ------------------------------------------------------------ ---------------------------------------------------------
Eric Williamson Managing Director
- ------------------------------------------------------------ ---------------------------------------------------------
Gerhard Oberholzer Director
- ------------------------------------------------------------ ---------------------------------------------------------
Jason Cameron Director
- ------------------------------------------------------------ ---------------------------------------------------------
Jesse Fogarty Director
- ------------------------------------------------------------ ---------------------------------------------------------
E-1
OFFICERS AND DIRECTORS OF CLAYMORE ADVISORS, LLC
The address of the officers and directors of Claymore Advisors, LLC is 2455
Corporate West Drive, Lisle, Illinois 60532.
- ------------------------------------------------------------ ---------------------------------------------------------
Name Title
- ------------------------------------------------------------ ---------------------------------------------------------
David Hooten Chairman of the Board, Chief Executive Officer
- ------------------------------------------------------------ ---------------------------------------------------------
Nicholas Dalmaso Senior Managing Director, Secretary, General Counsel
- ------------------------------------------------------------ ---------------------------------------------------------
Michael Rigert President
- ------------------------------------------------------------ ---------------------------------------------------------
Anthony DiLeonardi Senior Managing Director, Distribution
- ------------------------------------------------------------ ---------------------------------------------------------
Anne Kochevar Senior Managing Director and Chief Compliance Officer
- ------------------------------------------------------------ ---------------------------------------------------------
Brian Wesbury Senior Managing Director
- ------------------------------------------------------------ ---------------------------------------------------------
Steven Hill Senior Managing Director, Chief Financial Officer,
Treasurer
- ------------------------------------------------------------ ---------------------------------------------------------
E-2
APPENDIX F
Other Funds Advised by Claymore Advisors, LLC
The following table lists certain information regarding funds for which Claymore
Advisors, LLC provides investment advisory or subadvisory services which have
similar investment objectives to the Fund. All of the information below is given
as of the end of the last fiscal year of each fund.
- -------------------------- ---------------------- ----------------- -------------------- --------------------
Fund Adviser/Subadviser Net Assets Management Fee (as Management Fee
a percentage of (after waivers, if
average daily net any) ($)
assets) (%)
- -------------------------- ---------------------- ----------------- -------------------- --------------------
- -------------------------- ---------------------- ----------------- -------------------- --------------------
Dreman/Claymore Dividend Adviser $1,377,295,000 .85% $11,707,000
& Income Fund
.34%* $4,683,000*
- -------------------------- ---------------------- ----------------- -------------------- --------------------
- -------------------------- ---------------------- ----------------- -------------------- --------------------
Fiduciary/Claymore MLP Adviser $530,237,000 1.00% $5,302,000
Opportunity Fund
.50%* $2,651,000*
- -------------------------- ---------------------- ----------------- -------------------- --------------------
- -------------------------- ---------------------- ----------------- -------------------- --------------------
Fiduciary/Claymore Adviser $113,138,000 1.00% $1,131,000
Dynamic Equity Fund
.50% $565,500*
- -------------------------- ---------------------- ----------------- -------------------- --------------------
- -------------------------- ---------------------- ----------------- -------------------- --------------------
Madison/Claymore Covered Adviser $277,547,000 1.00% $2,775,000
Call Fund
.50%* $1,387,500*
- -------------------------- ---------------------- ----------------- -------------------- --------------------
- -------------------------- ---------------------- ----------------- -------------------- --------------------
Old Mutual/Claymore Adviser $364,149,000 1.00% $3,642,000
Long-Short Fund
.50%* $1,821,000*
- -------------------------- ---------------------- ----------------- -------------------- --------------------
- -------------------------- ---------------------- ----------------- -------------------- --------------------
Western Asset/Claymore Adviser $1,361,068,000 .60% $8,166,000
U.S. Treasury Inflation
Protected Securities .33%* $4,492,000*
Fund 2
- -------------------------- ---------------------- ----------------- -------------------- --------------------
*Represents the amount that Claymore received.
F-1
OTHER FUNDS ADVISED BY MBIA CAPITAL MANAGEMENT CORP.
The following table lists certain information regarding funds for which MBIA
Capital Management Corp. provides investment advisory or subadvisory services
which have similar investment objectives to the Fund. All of the information
below is given as of the end of the last fiscal year of each fund.
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
FUND ADVISER/SUBADVISER NET ASSETS ($) MANAGEMENT FEE (AS A MANAGEMENT FEE
PERCENTAGE OF (AFTER WAIVERS, IF
AVERAGE DAILY NET ANY) ($)
ASSETS) (%)
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
1838 BOND-DEBENTURE Subadviser(1) $101,181,100 0.218% of month-end $47,847
TRADING FUND net assets
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
ENTERPRISE FUND Subadviser $31,631,875 0.15% $50,237
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ----------
(1) MBIA Capital Management Corp. ("MBIA-CMC") currently serves as investment
adviser to the 1838 Bond-Debenture Trading Fund (the "1838 Fund") under an
interim investment advisory agreement unanimously approved by the Board of
Directors on June 2, 2005 (the "Interim Agreement"). Shareholders of the
1838 Fund must approve a new agreement. Under the Interim Agreement,
MBIA-CMC is entitled to a fee at the annual rate of 0.50% on the first $100
million of the 1838 Fund's month end net assets and 0.40% on the 1838
Fund's month end net assets in excess of $100 million.
F-2
APPENDIX G
PAYMENTS TO CLAYMORE AND AFFILIATES AND MBIA-CMC AND AFFILIATES
The Fund paid the following amounts to MBIA-CMC and affiliates of MBIA-CMC
during the most recent fiscal year:
Investment Advisory Fee $718,065
Administration and Accounting Fee $184,118
Brokerage Fees $0
The Fund paid the following amounts to affiliates of Claymore during the most
recent fiscal year:
Servicing Fee $478,710
G-1
ANNEX A
DETACH HERE
PROXY
MBIA CAPITAL/CLAYMORE MANAGED DURATION INVESTMENT GRADE MUNICIPAL FUND
COMMON SHARES
PROXY IN CONNECTION WITH THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 10, 2005
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned holder of common shares of MBIA Capital/Claymore
Managed Duration Investment Grade Municipal Fund (the "Fund") hereby appoints
Nicholas Dalmaso, Heidemarie Gregoriev and Richard Sarhaddi, and each of them,
as attorneys and proxies for the undersigned, with full power of substitution in
each, to represent the undersigned and to vote on behalf of the undersigned all
common shares of the Fund which the undersigned is entitled to vote at the
Annual Meeting of Shareholders of the Fund to be held at Claymore Advisors, LLC,
2455 Corporate West Drive, Lisle, Illinois on Thursday, November 10, 2005 at
11:00 a.m., Central Standard time, and at any postponements or adjournments
thereof. The undersigned hereby acknowledges receipt of the Notice of Meeting
and accompanying Proxy Statement and hereby instructs said attorneys and proxies
to vote said shares as indicated hereon. In their discretion, the proxies are
authorized to vote upon such other business as may properly come before the
Meeting. A majority of the proxies present and acting at the Meeting in person
or by substitute (or, if only one shall be so present, then that one) shall have
and may exercise all of the power and authority of said proxies hereunder. The
undersigned hereby revokes any proxy previously given.
THIS PROXY, IF PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE
SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION
OF THE NOMINEES AS TRUSTEE, FOR THE APPROVAL OF THE NEW INVESTMENT ADVISORY
AGREEMENT AND FOR THE APPROVAL OF THE NEW SUBADVISORY AGREEMENT.
Please refer to the Proxy Statement for a discussion of the Proposals.
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF SHAREHOLDERS
MBIA CAPITAL/CLAYMORE MANAGED DURATION INVESTMENT GRADE MUNICIPAL FUND
NOVEMBER 10, 2005
PLEASE MARK
[x] VOTES AS IN
THIS EXAMPLE.
1. Election of Trustees Nominee 2. Approval of New Investment Advisory Agreement
CLASS I, to serve until the 2008 Annual Meeting of FOR [ ] AGAINST [ ] ABSTAIN [ ]
Shareholders:
3. Approval of New Subadvisory Agreement
(02) Ronald Nyberg FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. Any other business that may properly come before
the meeting.
FOR [ ] WITHHELD The persons named as proxies are authorized to vote in
NOMINEE FROM [ ] their discretion on any other business that may
NOMINEE properly come before the Meeting.
[ ]____________________________________________________
(INSTRUCTION: To withhold authority to vote for any Please check the box to the
individual nominee, write the name of the nominee(s) on right if you will be [ ]
the line above.) attending the Meeting.
PLEASE COMPLETE, SIGN AND DATE HEREON AND MAIL IN
ACCOMPANYING POSTPAID ENVELOPE. Please sign this
proxy as your name appears on this Proxy. If joint
owners, EITHER may sign this Proxy. When signing as
attorney, executor, administrator, trustee, guardian
or corporate officer, please give your full title.
Signature
Signature: ________________ Date: __________ 2005 (if jointly held) __________________ Date:________ 2005
DETACH HERE
PROXY
MBIA CAPITAL/CLAYMORE MANAGED DURATION INVESTMENT GRADE MUNICIPAL FUND
PREFERRED SHARES
PROXY IN CONNECTION WITH THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 10, 2005
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned holder of preferred shares of MBIA Capital/Claymore
Managed Duration Investment Grade Municipal Fund (the "Fund") hereby appoints
Nicholas Dalmaso, Heidemarie Gregoriev and Richard Sarhaddi, and each of them,
as attorneys and proxies for the undersigned, with full power of substitution in
each, to represent the undersigned and to vote on behalf of the undersigned all
preferred shares of the Fund which the undersigned is entitled to vote at the
Annual Meeting of Shareholders of the Fund to be held at Claymore Advisors, LLC,
2455 Corporate West Drive, Lisle, Illinois on Thursday, November 10, 2005 at
11:00 a.m., Central Standard time, and at any postponements or adjournments
thereof. The undersigned hereby acknowledges receipt of the Notice of Meeting
and accompanying Proxy Statement and hereby instructs said attorneys and proxies
to vote said shares as indicated hereon. In their discretion, the proxies are
authorized to vote upon such other business as may properly come before the
Meeting. A majority of the proxies present and acting at the Meeting in person
or by substitute (or, if only one shall be so present, then that one) shall have
and may exercise all of the power and authority of said proxies hereunder. The
undersigned hereby revokes any proxy previously given.
THIS PROXY, IF PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE
SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION
OF THE NOMINEES AS TRUSTEES, FOR THE APPROVAL OF THE NEW INVESTMENT ADVISORY
AGREEMENT AND FOR THE APPROVAL OF THE NEW SUBADVISORY AGREEMENT.
Please refer to the Proxy Statement for a discussion of the Proposals.
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF SHAREHOLDERS
MBIA CAPITAL/CLAYMORE MANAGED DURATION INVESTMENT GRADE MUNICIPAL FUND
NOVEMBER 10, 2005
PLEASE MARK
[ ] VOTES AS IN
THIS EXAMPLE.
1. Election of Trustees. Nominees 2. Approval of New Investment Advisory Agreement
CLASS I, to serve until the 2008 Annual Meeting of FOR [ ] AGAINST [ ] ABSTAIN [ ]
Shareholders:
3. Approval of New Subadvisory Agreement
(01) Mark Jurish FOR [ ] AGAINST [ ] ABSTAIN [ ]
(02) Ronald Nyberg
4. Any other business that may properly come before
the meeting.
FOR [ ] WITHHELD The persons named as proxies are authorized to vote in
ALL FROM ALL [ ] their discretion on any other business that may
NOMINEES NOMINEES properly come before the Meeting.
[ ]____________________________________________________
(INSTRUCTION: To withhold authority to vote for any Please check the box to the
individual nominee, write the name of the nominee(s) on right if you will be [ ]
the line above.) attending the Meeting.
PLEASE COMPLETE, SIGN AND DATE HEREON AND MAIL IN
ACCOMPANYING POSTPAID ENVELOPE. Please sign this
proxy as your name appears on this Proxy. If joint
owners, EITHER may sign this Proxy. When signing as
attorney, executor, administrator, trustee, guardian
or corporate officer, please give your full title.
Signature
Signature: ________________ Date: __________ 2005 (if jointly held) __________________ Date:________ 2005