UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21515
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TS&W / Claymore Tax-Advantaged Balanced Fund
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(Exact name of registrant as specified in charter)
2455 Corporate West Drive, Lisle, IL 60532
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(Address of principal executive offices) (Zip code)
Nicholas Dalmaso, Chief Legal and Executive Officer
2455 Corporate West Drive, Lisle, IL 60532
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(Name and address of agent for service)
Registrant's telephone number, including area code: (630) 505-3700
Date of fiscal year end: December 31
Date of reporting period: December 31, 2007
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. Section 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The registrant's annual report transmitted to shareholders pursuant to Rule
30e-1 under the Investment Company Act of 1940 is as follows:
Annual
Report
December 31, 2007
TS&W/Claymore
Tax-Advantaged Balanced Fund TYW
photo of: 2 boats on water.
Logo: TS&W Thompson, Siegel & Walmsley LLC
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INVESTMENT MANAGEMENT
Logo: CLAYMORE(R)
www.tswclaymore.com
... home port for the LATEST,
most up-to-date INFORMATION about the
TS&W/Claymore Tax-Advantaged Balanced Fund
TYW
LISTED
NYSE
TS&W/
Claymore
Tax-Advantaged
Balanced Fund
Logo: TS&W Thompson, Siegel & Walmsley LLC
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INVESTMENT MANAGEMENT
Logo: CLAYMORE
There can be no assurance the Fund will achieve its investment objective. The
value of the Fund will fluctuate with the value of the underlying securities.
Historically, closed-end funds often trade at a discount to their net asset
value.
NOT FDIC INSURED o NOT BANK GUARANTEED o MAY LOSE VALUE
The shareholder report you are reading right now is just the beginning of the
story. Online at WWW.TSWCLAYMORE.COM, you will find:
o Daily, weekly and monthly data on share prices, distributions and more
o Portfolio overviews and performance analyses
o Announcements, press releases and special notices
o Fund and adviser contact information
Thompson, Siegel & Walmsley LLC and Claymore are continually updating and
expanding shareholder information services on the Fund's website, in
an ongoing effort to provide you with the most current information about how
your Fund's assets are managed, and the results of our efforts. It is just one
more way we are working to keep you better informed about your investment in the
Fund.
2 | Annual Report | December 31, 2007
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
Dear SHAREHOLDER
We are pleased to submit the annual report for the TS&W/Claymore Tax-Advantaged
Balanced Fund (the "Fund") for the fiscal year ended December 31, 2007. As you
may know, the Fund's investment objective is to provide a high level of total
after-tax return, including attractive tax-advantaged income. The Fund seeks to
achieve its investment objective by investing in a portfolio of assets
consisting primarily of municipal securities that generate income that is exempt
from regular federal income tax (and which is not a preference item for purposes
of the alternative minimum tax) and common stocks and preferred securities that
are eligible to pay dividends which, for individual investors, qualify for
federal income taxation at long-term capital gain rates ("tax-advantaged
income"), while also offering the potential for capital appreciation through
exposure to equity markets.
Claymore Advisors, LLC is the Investment Adviser to the Fund, with
responsibility for managing the Fund's overall asset allocation. Two Investment
Sub-Advisers are responsible for day-to-day management of the Fund's
investments. Thompson, Siegel & Walmsley LLC ("TS&W") manages the Fund's equity
portfolio and other non-municipal income-producing securities. As of December
31, 2007, TS&W managed or supervised approximately $7.8 billion in assets. SMC
Fixed Income Management, L.P. ("SMC") is responsible for the Fund's portfolio of
municipal bonds. As of December 31, 2007, SMC managed or supervised
approximately $300 million in assets.
All Fund returns cited - whether based on net asset value ("NAV") or market
price - assume the reinvestment of all distributions. For the 12 months ended
December 31, 2007, the Fund provided a total return based on market price of
- -8.97%. This represents a closing market price of $13.10 on December 31, 2007,
versus $15.77 on December 31, 2006. On an NAV basis, the Fund generated a total
return of -3.60%. This represents a NAV of $14.94 on December 31, 2007, versus
$16.83 on December 31, 2006. The Fund's market price at December 31, 2007,
represented a discount to NAV of 12.32%; as of December 31, 2006, the share
price was at a 6.30% discount to NAV.
We believe that the Fund's market price discount to NAV represents an
opportunity, as common shares of the Fund continue to be available in the market
at prices below the value of the securities in the underlying portfolio. We
encourage shareholders to consider the opportunity to reinvest their
distributions from the Fund through the Dividend Reinvestment Plan ("DRIP"),
which is described in detail on page 28 of the Fund's annual report. When shares
trade at a discount to NAV, the DRIP takes advantage of the discount by
reinvesting the quarterly dividend distribution in common shares of the Fund
purchased in the market at a price less than NAV. Conversely, when the market
price of the Fund's common shares is at a premium above NAV, the DRIP reinvests
participants' dividends in newly-issued common shares at NAV, subject to an IRS
limitation that the purchase price cannot be more than 5% below the market price
per share. The DRIP provides a cost-effective means to accumulate additional
shares and enjoy the benefits of compounding returns over time. Since the Fund
endeavors to maintain a steady quarterly distribution rate, the DRIP plan
effectively provides an income averaging technique, which causes shareholders to
accumulate a larger number of Fund shares when the market price is depressed
than when the price is higher.
Annual Report | December 31, 2007 | 3
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | DEAR SHAREHOLDER continued
During 2007, the Fund distributed dividends of approximately $1.32 per share.
For 2007 federal income tax purposes, approximately 48% of these distributions
were sourced from realized long-term capital gains, 29% were tax-exempt
dividends, 15% were qualified dividend income subject to tax at the long-term
capital gains rate, and 8% were fully taxable ordinary income. However, there is
no guarantee that this level of income will be maintained.
The Fund last paid its quarterly dividend of $0.2525 on December 31, 2007. On an
annualized basis, this distribution equates to a 7.71% rate based upon the
closing market price of $13.10 on December 31, 2007. Given the Fund's 2007 tax
characteristics for distribution paid, this rate represents a tax-advantaged
distribution rate of 10.42% for an individual shareholder subject to the maximum
federal income tax rate of 35%.
In December 2007 we announced a change to a calendar quarter dividend cycle;
dividends were previously distributed on the last day of February, May, August
and November. As a result of the change to a calendar quarter dividend cycle, a
quarterly dividend of $0.2525 was declared on December 3, 2007, payable on
December 31, 2007, to shareholders of record December 14, 2007. We expect to
announce the next regular quarterly dividend in March of 2008.
To learn more about the Fund's performance and investment strategy, we encourage
you to read the Questions & Answers section of the report, which begins on page
5. You will find information about what impacted the performance of the Fund
during the first half of 2007 and the Investment Adviser's and Sub-Advisers'
views on the market environment.
We appreciate your investment and look forward to serving your investment needs
in the future. For the most up-to-date information on your investment, please
visit the Fund's website at www.tswclaymore.com.
Sincerely,
/s/ Nicholas Dalmaso
Nicholas Dalmaso
TS&W/Claymore Tax-Advantaged Balanced Fund
The broad auction-rate preferred securities market has experienced some
disruption in the past few months, but those disruptions have increased
dramatically in recent days and your Fund was not immune to this disruption. The
result has been an increasing number of failed auctions on many, if not all,
auction-rate preferred shares, including Auction Market Preferred Shares
("AMPS") like those issued by the Fund. We believe this increase in failed
actions is simply a liquidity issue and investors need to be aware that a failed
auction is not a default nor does it require the redemption of a fund's
auction-rate preferred shares. Provisions in the offering documents of the
Fund's AMPS provide a mechanism to set a maximum rate in the event of a failed
auction, and, thus, investors will continue to be entitled to receive payment
for holding these AMPS. This maximum rate is determined based upon a multiple of
or a spread to LIBOR, whichever is greater.
The Fund has two series of AMPS; a seven day series auctioning each Monday
("M-7") and a 28-day series that auctions every fourth Tuesday ("T-28"). The
auction for the M-7 series for February 18, 2008 failed, while the next auction
for the T-28 series is scheduled for March 11, 2008. The maximum rate
established for this failed auction of the M-7 series was 4.386%. This maximum
rate is not significantly different from, and in many cases lower than, recent
successful auctions. Nevertheless, we will continue to evaluate the benefits and
impacts of leverage on the Fund.
4 | Annual Report | December 31, 2007
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
QUESTIONS & ANSWERS
The TS&W/Claymore Tax-Advantaged Balanced Fund (the "Fund") is managed jointly
by Thompson, Siegel & Walmsley LLC ("TS&W") and SMC Fixed Income Management, LP
("SMC"). The teams employ their specialized experience to different sleeves
within the Fund, but work closely with one another to collectively guide the
overall operations of the Fund. The individuals named below are responsible for
managing the Fund.
VINCENT R. GIORDANO, PORTFOLIO MANAGER, MANAGING MEMBER
SMC FIXED INCOME MANAGEMENT, LP.
Mr. Giordano is a Managing Member of SMC. He leads the SMC's municipal
fixed-income investment management team and co-manages the Fund's municipal
securities portfolio. Prior to joining SMC, Mr. Giordano was employed by
Claymore Advisors, LLC and Merrill Lynch. He has more than 30 years of
investment experience.
ROBERTO W. ROFFO, PORTFOLIO MANAGER, MANAGING DIRECTOR
SMC FIXED INCOME MANAGEMENT, LP.
Mr. Roffo co-manages the Fund's municipal portfolio. He has more than 15 years
of investment management experience focused on the municipal securities market.
Prior to joining SMC, Mr. Roffo was employed by Claymore Advisors, LLC and
Merrill Lynch. He has worked closely with Mr. Giordano throughout his career. He
holds a Bachelor's Degree from the University of Massachusetts.
PAUL A. FERWERDA, CFA, PORTFOLIO MANAGER, SENIOR VICE PRESIDENT -
DOMESTIC EQUITY AND RESEARCH
THOMPSON, SIEGEL & WALMSLEY LLC
Mr. Ferwerda is responsible for the day-to-day management of the Fund's common
stock portfolio. He has been with TS&W for over 20 years and has more than 25
years of investment experience. Mr. Ferwerda has extensive equity research
experience within the financial sector and holds an MBA from Duke University.
WILLIAM M. BELLAMY, CFA, PORTFOLIO MANAGER, VICE PRESIDENT
THOMPSON, SIEGEL & WALMSLEY LLC
Mr. Bellamy joined TS&W in 2002. He has 20 years of investment industry
experience focused on the fixed-income markets. Mr. Bellamy is responsible for
managing the Fund's taxable fixed-income securities. He holds an MBA from Duke
University.
In the following interview, Claymore Advisors, TS&W and SMC share their thoughts
on the market and discuss the factors that influenced the Fund's performance in
the fiscal year ended December 31, 2007.
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WILL YOU REMIND US OF THIS FUND'S OBJECTIVES AND HOW YOU SEEK TO ACHIEVE THEM?
The Fund's primary investment objective is to provide a high level of total
after-tax return, including attractive tax-advantaged income. The Fund seeks to
achieve its objective by investing in a pool of assets that generate income that
is either exempt from regular federal income tax or qualifies for federal income
taxation at long-term capital gain rates ("tax-advantaged income"), while also
offering the potential for capital appreciation through exposure to equity
markets. The portfolio is comprised primarily of municipal securities, equity
securities, preferred securities and high-yield debt securities.
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HOW DID THE FUND PERFORM DURING 2007?
All Fund returns cited - whether based on net asset value ("NAV") or market
price - assume the reinvestment of all distributions. For the 12 months ended
December 31, 2007, the Fund provided a total return based on market price of
- -8.97% and a return of -3.60% based on NAV. As of December 31, 2007, the Fund's
market price of $13.10 represented a discount of 12.32% to NAV of $14.94.
For NAV performance comparison purposes, the municipal bond market, as measured
by the Lehman Brothers U.S. Municipal Long Bond Index (the "Lehman Muni Index"),
a widely used measure of the municipal bond market as a whole, returned 0.46%
for the 12 months ended December 31, 2007. The broad equity market, as measured
by the S&P 500 Index, returned 5.49%. The high-yield bond market, as measured by
the Merrill Lynch High Yield Master II Index, returned 2.19% for the year, and
the Merrill Lynch U.S. Fixed Rate Preferred Stock Index returned -11.31%.
During 2007, the Fund distributed dividends of approximately $1.32 per share.
For 2007 federal income tax purposes, approximately 48% of these distributions
were sourced from realized long-term capital gains, 29% were tax exempt
dividends, 15% were qualified dividend income subject to tax at the long-term
capital gains rate, and 8% were fully taxable ordinary income.
In December 2007 we announced a change to a calendar quarter dividend cycle;
dividends were previously distributed on the last day of February, May, August
and November. As a result, a quarterly dividend of $0.2525 was declared on
December 3, 2007, payable on December 31, 2007, to shareholders of record
December 14, 2007. In addition, the Fund paid a year-end supplemental dividend
on December 31, 2007 in the amount of $0.115 to shareholders of record on
December 26, 2007. We expect to announce the next regular quarterly dividend in
March of 2008.
Annual Report | December 31, 2007 | 5
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | QUESTIONS & ANSWERS continued
Bar Chart:
DIVIDENDS PAID FOR 2007
Feb 0.2344
May 0.2344
Aug 0.2344
Nov 0.2525
Dec* 0.3675
*Includes a special year and distributions of $0.115 per share.
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HOW ARE ASSETS ALLOCATED AMONG THE VARIOUS ASSET CLASSES?
Under normal market conditions, the Fund invests at least 50%, and may invest up
to 60%, of its total assets in debt securities on which the interest is exempt
from regular federal income tax and is not a preference item for purposes of the
alternative minimum tax ("municipal securities"). As of December 31, 2007,
approximately 55.5% of the Fund's assets were invested in municipal securities.
Of the remaining assets in the Fund's portfolio as of December 31, 2007,
approximately 35.7% were invested in equity securities consisting primarily of
large-cap dividend-paying stocks, and approximately 8.8% were invested in other
taxable income-producing securities, which include high-yield bonds, preferred
stocks, real estate investment trusts and other income producing securities.
From time to time, assets are rebalanced to maintain at least 50% of total
assets in municipal securities. Growth within the Fund's common stock portfolio
enabled us to reallocate the Fund's assets in late January of 2007 and again in
December 2007, as the equity and taxable income portion of the portfolio
appreciated to a level close to the maximum allowable allocation of 50% of
assets. Assets within the equity and taxable income portfolio were sold and
general obligation municipal securities were purchased with the proceeds.
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HOW DOES THE FUND EMPLOY LEVERAGE?
TYW, like many closed-end funds, utilizes leverage as part of its investment
strategy. The purpose of leverage is to finance the purchase of additional
securities that provide the potential for increased income and capital
appreciation to common shareholders than could otherwise be achieved from an
unleveraged portfolio.
In executing this strategy, the Fund issued Auction Market Preferred Shares (the
"AMPS") shortly after the Fund was first brought to market. During 2007, the
AMPS detracted from the Fund's return. Early in the year, before the Federal
Reserve Board (the "Fed") began to lower interest rates in September, the AMPS
reduced net income. As short-term rates declined as a result of the Fed's
actions to lower rates, the cost of AMPS did not decline. As a result of the
liquidity and credit crises that started with the sub-prime issues, while rates
paid on AMPS historically have tracked LIBOR, this trend did not continue the
latter part of 2007. (LIBOR, or London InterBank Offered Rate is the interest
rate that banks charge one another in the short-term international interbank
market. Because LIBOR rates are widely used as reference rates for financial
instruments, they provide the basis for some of the world's most liquid and
active interest rate markets.) Investors were concerned about credit quality and
seemed to ignore the fact that the Fund's AMPS are rated Aaa/AAA by Moody's
Investors Service and Fitch.
During 2007, we also used inverse floaters, which are derivative structures that
involve leveraging individual municipal bonds in the portfolio using
intermediate-term notes with floating rates, and the additional income received
on this leverage contributed favorably to the Fund's performance.
Going forward, we expect to employ a leverage program whenever we believe that
it can add value. Of course, leverage results in greater NAV volatility and
entails more downside risk than an unleveraged portfolio. The use of leverage
also makes the Fund more vulnerable to rising interest rates.
The following questions are related to the municipal securities portfolio and
are answered by Portfolio Managers Vincent R. Giordano and Roberto W. Roffo, who
have managed the municipal securities portfolio since the Fund's inception.
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WILL YOU PROVIDE AN OVERVIEW OF THE MUNICIPAL MARKET AND THE PERFORMANCE OF THE
MUNICIPAL BOND PORTION OF THE FUND FOR THE 12 MONTHS ENDED DECEMBER 31, 2007?
It was an extraordinarily challenging time for the tax-exempt market and for
bond managers generally. The first half of the year was fairly quiet, with
modestly rising interest rates and new issuance of municipal bonds absorbed
fairly easily. Beginning in late summer, markets became extremely volatile and
increasingly illiquid. Initially, the concern on the part of market participants
was limited to the sub-prime segment of the mortgage-backed securities market.
However, these concerns broadened to include
6 | Annual Report | December 31, 2007
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | QUESTIONS & ANSWERS continued
a wide range of financial institutions and markets. The final quarter of the
year was tumultuous, with a flight to quality driving a pronounced rally in U.S.
Treasury securities, while every other area of the fixed income market dropped
sharply as spreads between risky securities and U.S. Treasury securities widened
dramatically. As leading financial firms wrote down billions of dollars of
assets in December, market liquidity for certain types of risky fixed income
securities essentially vanished.
Although municipal bonds have throughout their existence been regarded as a high
quality fixed income asset class with an extremely low default rate, investors
shunned even the highest rated bonds in December, causing a widening of spreads
between municipal securities and U.S. Treasury securities. Municipal securities
with ratings below AAA performed very poorly, regardless of underlying
fundamentals.
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HOW DID THE MUNICIPAL BOND PORTION OF THE FUND PERFORM IN THIS ENVIRONMENT?
For the full year 2007, the portfolio of municipal bonds produced a return of
- -1.91%, before fees and expenses. For comparison purposes, the Lehman Muni
Index, a widely used measure of the municipal bond market as a whole, posted a
total return of 0.46%. Since the Lehman Muni Index produces annual income of
approximately 4.25%, this means that the market value of the bonds that make up
the Lehman Muni Index declined approximately 3.70%. The Lehman Muni Index
consists of approximately 30,000 bonds with an average rating of AA+ to AAA (as
rated by Moody's, Standard & Poor's and other major rating agencies). Since an
important goal of this Fund is to provide a superior level of tax-free income,
the Fund's bond portfolio includes mainly lower-rated investment-grade bonds. In
an environment in which investors generally avoided bonds with a risk component,
it is not surprising that a portfolio of lower-rated municipal securities such
as those in the Fund's portfolio would underperform the Lehman Muni Index.
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HOW DO YOU SELECT MUNICIPAL SECURITIES FOR THE FUND?
We begin by analyzing broad macroeconomic trends and developments affecting the
fixed-income markets. Our team analyzes the economic outlook, market conditions
and perceived effects on interest rates and yield curves. From there, we
incorporate a bottom-up and top-down analysis that helps us construct a
portfolio that we believe optimizes federally tax-exempt income while seeking to
avoid undue credit risk and market timing risk. While we monitor interest rates
very closely and act quickly to adjust the portfolio to changing market rates,
we do not trade the portfolio in search of incremental gains that could be
achieved by active trading based on daily changes in rates. Our proprietary
unbiased research helps us identify undervalued sectors that we believe have the
potential for ratings upgrades and capital appreciation; however, there is no
guarantee that such events will occur.
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WHICH ISSUES OR SECTORS CONTRIBUTED TO THE PERFORMANCE OF THE MUNICIPAL
SECURITIES PORTFOLIO?
Although prices of all municipal bonds dropped as spreads between municipal
securities and U.S. Treasury securities widened, the Fund's non-insured
long-duration bonds with AAA ratings performed better than other holdings.
(Duration is a measure of a bond's price sensitivity to changes in interest
rates, expressed in years. Duration approximates how much a bond's price will
change if interest rates change by a given amount.)
Also, approximately 10% of the portfolio's bonds rated single-A or lower were
pre-refunded during the fiscal year ended December 31, 2007. (Pre-refunded bonds
are backed by securities, usually U.S. Treasury securities, which are held in
escrow to meet interest payments and pay off the principal amount of bonds on
their first call date. Bond issuers will typically pre-refund bonds during times
of lower interest rates to reduce their borrowing costs.) Since the credit risk
carried by bonds is eliminated in connection with the pre-refunding process,
these bonds performed relatively well during the latter part of the year when
spreads between risky securities and U.S. Treasury securities generally widened.
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WHICH AREAS OF THE MUNICIPAL SECURITIES PORTFOLIO HURT PERFORMANCE?
Since the Fund's inception, it has been positioned with an overweight in
investment-grade health care credits. We initially purchased these securities
because of their attractive prices, relatively high yields and what we believed
to be their strong upside potential. These bonds performed well from the Fund's
inception through the first half of 2007; in fact, they performed so well that
spreads on such bonds relative to the highest rated municipal securities
narrowed significantly. As the year progressed, spreads on these bonds widened
more than those on other lower rated bonds because they had previously been so
narrow; performance of health care credits was therefore among the worst in the
municipal market in the last few months of the year. Fortunately, we sold many
of the health-care credits in the portfolio after their prices rose, and some
others in the portfolio were pre-refunded, essentially eliminating credit risk.
However, the health care credits remaining in the portfolio, many of which
carried low investment-grade ratings, detracted from performance.
Annual Report | December 31, 2007 | 7
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | QUESTIONS & ANSWERS continued
Another area of emphasis for the Fund has been land-secured housing credits.
These bonds, which are issued by local municipalities, represent most of the
portfolio's high-yield or non-rated exposure. Many corporate land developers
borrow money from local governments to help subsidize the construction of new
housing developments. Bonds from such transactions are called special tax
allocation securities and are secured by property taxes assessed on the new
homes. At their inception, these securities have higher levels of risk because
of the time lag between their issuance and when property taxes are collected.
During a period in which risky mortgages dominated the financial news, these
bonds performed relatively well because the underlying properties were secured
mainly by older, more secure mortgages. Although prices of these bonds dropped
as their spreads widened along with the rest of the market, they performed
better than other high-yield municipal bonds. As the end of the year approached,
we sold some of the Fund's holdings in this category because of their relative
outperformance within the high yield sector.
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WHAT IS YOUR OUTLOOK FOR THE ECONOMY AND THE MUNICIPAL MARKET, AND WHAT DOES
THIS MEAN FOR THE FUND?
While issues regarding sub-prime mortgages and related credit concerns did not
directly impact municipal bonds, the impact on bond insurers, who back mortgage
as well as tax-exempt debt, did affect the municipal securities market in 2007.
Additionally, some hedge funds that invested in municipal-structured trades were
forced from the market, putting additional pressure on the municipal securities
market.
Municipalities could face revenue challenges in 2008 if the consensus of
economic forecasts, calling for further slowing, proves to be correct. Many
states are already reporting lower than projected tax revenues, and tax revenue
will be impacted if economic growth slows further, the housing slump continues
or the unemployment rate moves higher.
Although the financial viability of the bond insurers continues to affect the
municipal securities market, the credit quality of municipal securities backed
by insurance has not deteriorated. We believe that individual bonds should be
evaluated on their own fundamentals, bearing in mind that insurance is usually
purchased to lower the interest rate paid by the issuer, not to secure a
low-quality credit. With municipal bonds trading at significantly lower prices
than we saw a few months ago, some strategists are touting municipal bonds as an
attractive investment value for 2008.
INSURED BONDS HELD AT DECEMBER 31, 2007
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% OF LONG-TERM
INSURER INVESTMENTS
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AMBAC 1.6%
FGIC 0.9%
MBIA 2.3%
RADIAN 1.3%
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We believe that the market has over-reacted to credit problems in certain
sectors, dumping any securities perceived as risky, regardless of underlying
fundamentals. Whenever such imbalances occur, we believe that opportunities may
be created. Although we believe that there may still be further problems in the
credit markets, we are selectively looking for opportunities to purchase bonds
of reasonable quality that may be selling below their long-term intrinsic value.
The Fund's equity portfolio and taxable fixed-income securities are managed by
TS&W. The following questions are related to those portions of the portfolio and
are answered by Portfolio Managers Paul A. Ferwerda and William M. Bellamy.
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WILL YOU PROVIDE AN OVERVIEW OF THE U.S. EQUITY AND HIGH-YIELD BOND MARKETS
DURING 2007?
EQUITY MARKET
It was a generally positive period for the U.S. equity market, although with
considerable volatility. Except for a period of weakness in late February and
early March, equity markets were quite strong during the first half of 2007. By
the end of May, most indices were at or near their all-time highs, and positive
trends continued through mid-July before stocks moved lower in the late summer.
A rally in September was sparked in part by the first of the Fed's three
interest rate reductions. In the fourth quarter, volatility increased and most
indices declined, as markets responded to further bad news about the potential
impact of the sub-prime mortgage crisis.
There was a major change in market leadership in 2007: after a period of
approximately seven years during which small-cap stocks generally outperformed
their large-cap peers, large-cap stocks regained market leadership as investors
became less comfortable with risk. Growth stocks performed much better than
value stocks during 2007.
HIGH-YIELD MARKET
In the first half 2007, returns in the high-yield market moderated from the high
levels generated in 2006, but high-yield bonds still outperformed investment
grade bonds. The second half of the year was dramatically different. Problems in
the high-yield market began with the near collapse of two levered hedge funds in
June and continued with a major drop in the equity market in August. Following a
spike in LIBOR rates in the latter part of the year, liquidity largely vanished
from portions of the credit markets. The result was a major deterioration in the
high yield market, as there was a flight to quality by fixed income investors
seeking to avoid credit risk. In this environment U.S. Treasury securities were
the best performing issues, and spreads widened significantly.
8 | Annual Report | December 31, 2007
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | QUESTIONS & ANSWERS continued
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BEFORE WE DISCUSS THE SPECIFIC PERFORMANCE ATTRIBUTES OF THE PORTFOLIOS, WILL
YOU DESCRIBE HOW YOU CHOOSE EQUITY AND HIGH-YIELD SECURITIES?
TS&W's investment process is value-driven and team-oriented. On the equity side,
we have a proprietary quantitative valuation model that we apply to more than
400 stocks. This directs our review process toward companies that we believe
have the highest expected return potential over a multi-year period. Our
in-house research analysts are responsible for validating the model inputs for
companies under their coverage and monitoring them over the holding period. Buys
and sells are discussed at weekly research meetings or more frequently as
needed. TS&W's fixed-income team is responsible for overall bond market strategy
as well as security selection. In-house analysts are used to support the credit
review process.
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PLEASE TELL US ABOUT THE DIVIDEND INCOME EARNED ON THE FUND'S EQUITY
INVESTMENTS.
Our informal goal is for the common equity portfolio to generate a dividend
yield of about two times the yield on the S&P 500 Index, which was approximately
1.96% as of December 31, 2007. We were very pleased with the portfolio's
dividend yield during 2007, which maintained a significant premium to the yield
of the index. The annualized yield on the equity portion of the portfolio was
approximately 3.75%; however, there is no guarantee that this level of income
will be maintained. The portfolio's yield was enhanced as many companies in
which the Fund was invested increased their regular dividends and some also
declared special dividends.
- --------------------------------------------------------------------------------
WHICH AREAS OF THE COMMON EQUITY PORTFOLIO HELPED PERFORMANCE?
We are pleased with the performance of the equity portion of the Fund in of
2007, on an absolute basis as well as relative to the indices we use for
comparison. The common equity portion of the portfolio had a return of
approximately 4.7%, before fees and expenses, compared with 5.5% for the S&P 500
Index and a negative return of -0.2% for the Russell 1000(R) Value Index. We
consider this return a significant accomplishment during a period of market
leadership by growth stocks, since this value-oriented portfolio significantly
outperformed the Russell 1000(R) Value Index and posted a return just slightly
below that of the more growth-oriented S&P 500 Index. This was a period when
many investors lost money, since the median price change of the broad Russell
3000(R) Index was -8% and almost a quarter of the companies in that index were
down at least 30%.
The equity portfolio's performance was particularly strong in
telecommunications, a sector that combines growth with relatively high dividend
yields. The equity portfolio was overweight relative to the S&P 500 Index and
the Russell 1000(R) Value Index in telecommunications, which was among the best
performing industry sectors. Among the best performing telecommunications
holdings were AT&T, Inc., Verizon Communications, Inc., Vodafone Group PLC and
Deutsche Telekom AG (0.9%, 1.2%, 0.7% and 0.8% of total net investments,
respectively).
Another area where we added considerable value was the portfolio's significant
underweight relative to the indices in the consumer discretionary sector, a
position we maintained because of concern about consumer spending. While index
returns in this sector were negative, the portfolio's return was positive
because of strong performance of Regal Entertainment Group (not held in the
portfolio at period end), which operates movie theaters throughout the United
States. We have begun to add to this sector very gradually, as we find
opportunities that we believe represent reasonable risk and attractive
dividends.
In the consumer staples sector, we added value through stock selection; holdings
that performed well included The Procter & Gamble Company and Merck & Co., Inc.
(0.9% and 0.8% of total net investments, respectively). Also positive was an
overweight in utilities, a high-yielding sector that performed well.
Performance benefited from an overweight in the energy sector, which performed
well; holdings included Chevron Corp. and Royal Dutch Shell PLC (1.5% and 1.3%
of total net investments, respectively). However our stock selection did not add
value because most of the energy stocks that performed best during this period
were smaller, riskier companies that tend to respond strongly to rising oil
prices.
Although the portfolio's main equity focus is on securities of U.S. issuers, we
may invest in American depositary receipts ("ADRs") or (American depositary
shares) ("ADSs") and in other dollar-denominated securities of foreign issuers,
and this flexibility to take advantage of international opportunities often
contributes to income and total return. We often find that yields are higher in
international markets than in the U.S., and during 2007, international markets
(as measured by the Morgan Stanley EAFE Index) performed better than U.S.
markets. In order to identify attractive foreign investments, we work closely
with TS&W's international team. We review attractive opportunities they have
identified to see if they pay dividends and have securities in which this Fund
can invest. During 2007, four of the top five contributors among equity
positions were ADRs or ADSs; these were Nokia Corp. (0.4% of total net
investments), Vodafone Group PLC, Deutsche Telekom AG and Royal Dutch Shell PLC.
Annual Report | December 31, 2007 | 9
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | QUESTIONS & ANSWERS continued
- --------------------------------------------------------------------------------
WHICH AREAS OF THE COMMON EQUITY PORTFOLIO HURT PERFORMANCE?
The financial sector performed poorly throughout 2007, as the impact of the
sub-prime mortgage crisis became more and more pervasive. In this sector, the
Fund was slightly overweight relative to the S&P 500 Index but significantly
underweight relative to the Russell 1000(R) Value Index, which has a major
financial component. The Fund's performance benefited from our avoidance of the
stocks with greatest exposure to sub-prime mortgages. However, even the
strongest companies in this sector, including those with secure dividends and
minimal exposure to mortgages, performed poorly. An example is American
International Group, Inc. (1.0% of total net investments); this is a diversified
insurance company with excess capital, which we believe bodes well for the
possibility of future stock buybacks or dividend increases. But since AIG is a
very large company in a problematic sector, when investors make the decision to
avoid the financial sector, as they did during 2007, there is selling pressure
on the stock.
The sector in which our investment decisions added least value was information
technology, a low-yield sector that was quite strong. However, the best
performing stock in the portfolio for the year, Nokia Corp., was in the
technology sector.
- --------------------------------------------------------------------------------
HOW DID THE PORTFOLIO'S HIGH-YIELD BONDS AND PREFERRED STOCKS PERFORM?
On an absolute basis, this portion of the portfolio had a negative return for
the year. However, it performed better than the benchmark we have established to
evaluate performance. Early in 2007, the benchmark was changed from the Merrill
Lynch High Yield Master II Index to a blend of 67% Merrill Lynch High Yield
Master II Index and 33% Merrill Lynch U.S. Fixed Rate Preferred Stock Index. For
the full year 2007, this portion of the portfolio had a return of -0.8%, before
fees and expenses, compared with -2.4% for this blended benchmark.
During 2007, the composition of the taxable non-equity portion of the portfolio
averaged approximately 68% high-yield bonds and 32% preferred stocks. A slight
overweight in high yield bonds versus preferred stocks contributed to relative
performance. But more important was the portfolio's higher credit quality than
the high yield index, and we continue to keep a very watchful eye on credit
quality, taking quick action to sell positions that we believe are
deteriorating. A market such as this also creates opportunities, as some higher
quality bonds have sold off along with weaker issues. We have made opportunistic
purchases that have upgraded the overall quality of the portfolio.
In managing the high-yield portion of the portfolio, we place greater focus on
income than on total return. Our strategy is to generate a high level of income
that does not qualify for the favorable tax treatment accorded certain dividends
(also known as non-QDI income) without taking significant credit risk.
- --------------------------------------------------------------------------------
WHAT IS YOUR OUTLOOK FOR THE EQUITY AND HIGH-YIELD MARKETS IN THE MONTHS AHEAD?
Our outlook is rather cautious at this time. There is increasing evidence that
economic growth in the U.S. is slowing, and we believe that companies will have
difficulty achieving earnings growth. There is growing criticism that the
Federal Reserve has been slow to provide the needed stimulus, but we believe
they are moving in the right direction, and they have indicated willingness to
lower interest rates further. There is also political risk, since a change in
the White House could portend changes in the current favorable tax treatment of
dividends and capital gains.
If investors begin to favor more defensive issues, that may be beneficial to the
value-oriented equity style used in managing this portfolio. When market
sentiment is very negative, that can be a time of opportunity for value managers
such as TS&W. In the past, widespread discussion of negatives in the financial
press, such as we are seeing now, has often signaled that a bottom is at hand.
Also a somewhat weaker stock market favors our strategy, because dividends
become a more important aspect of returns when stock prices are not moving up so
much.
We believe that current valuations are reasonable, and stocks are selling at the
lowest multiples of earnings in some time. Interest rates are extremely low, and
other things being equal, that is positive for stocks. We are carefully
examining the financial sector as we seek opportunities, while striving to avoid
problems that are still likely to arise as there are further interest rate
resets on mortgage-related securities. Similarly, in the high yield portion of
the portfolio, we are selectively taking advantage of opportunities to purchase
high quality bonds that have dropped in price along with riskier issues.
l0 | Annual Report | December 31, 2007
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | QUESTIONS & ANSWERS continued
- --------------------------------------------------------------------------------
TYW RISKS AND OTHER CONSIDERATIONS
Under normal market conditions, the Fund will invest at least 50%, and may
invest up to 60%, of its total assets in municipal securities. Additionally, the
Fund will invest at least 40%, and may invest up to 50%, of its total assets in
equity securities and other income securities. Under normal market conditions,
the Fund will invest at least 25% of its total assets in equity securities.
There can be no assurance that the Fund will achieve its investment objective.
The value of the Fund will fluctuate with the value of the underlying
securities. Historically, closed-end funds often trade at a discount to their
net asset value. Additionally, any capital gains dividends will be subject to
capital gains taxes.
The Investment Manager may, but is not required to, utilize a variety of
strategic transactions to seek to protect the value of the Fund's assets in the
municipal securities portfolio against the volatility of interest rate changes
and other market movements. There can be no guarantee that hedging strategies
will be employed or will be successful. The premium paid for entering into such
hedging strategies will result in a reduction in the net asset value of the Fund
and a subsequent reduction of income to the Fund. Any income generated from
hedging transactions will not be exempt from income taxes.
The Fund may seek to enhance the level of the Fund's current income through the
use of leverage. Certain risks are associated with the leveraging of common
stock. Both the net asset value and the market value of shares of common stock
may be subject to higher volatility and a decline in value. There is no
assurance that the Fund will utilize leverage or, if leverage is utilized, that
it will be successful in enhancing the level of the Fund's current income.
There are also specific risks associated with investing in municipal bonds. The
secondary market for municipal bonds is less liquid than many other securities
markets, which may adversely affect the Fund's ability to sell its bonds at
prices approximating those at which the Fund currently values them. The ability
of municipal issuers to make timely payments of interest and principal may be
diminished during general economic downturns. In addition, laws enacted in the
future by Congress or state legislatures or referenda could extend the time for
payment of principal and/or interest. In the event of bankruptcy of an issuer,
the Fund could experience delays in collecting principal and interest.
There are also risks associated with investing in Auction Market Preferred
Shares or AMPS. The AMPS are redeemable, in whole or in part, at the option of
the Fund on any dividend payment date for the AMPS, and will be subject to
mandatory redemption in certain circumstances. The AMPS will not be listed on an
exchange. You may only buy or sell AMPS through an order placed at an auction
with or through a broker-dealer that has entered into an agreement with the
auction agent and the Fund or in a secondary market maintained by certain
broker-dealers. These broker-dealers are not required to maintain this market,
and it may not provide you with liquidity.
FUND DISTRIBUTION RISK In order to make regular quarterly distributions on its
common shares, the Fund may have to sell a portion of its investment portfolio
at a time when independent investment judgment may not dictate such action. In
addition, the Fund's ability to make distributions more frequently than annually
from any net realized capital gains by the Fund is subject to the Fund obtaining
exemptive relief from the Securities and Exchange Commission, which cannot be
assured. To the extent the total quarterly distributions for a year exceed the
Fund's net investment company income and net realized capital gain for that
year, the excess will generally constitute a return of the Fund's capital to its
common shareholders. Such return of capital distributions generally are tax-free
up to the amount of a common shareholder's tax basis in the common shares
(generally, the amount paid for the common shares). In addition, such excess
distributions will decrease the Fund's total assets and may increase the Fund's
expense ratio.
It is important to note that closed-end funds often trade at a discount to their
market value.
The federal tax advice contained herein was not intended or written to be used,
and it cannot be used by any taxpayer, for the purpose of avoiding penalties
that may be imposed on the taxpayer; the advice was written to support the
promotion or marketing of the matters addressed and taxpayers should seek advice
based on the taxpayer's circumstance from an independent tax advisor.
Annual Report | December 31, 2007 | l1
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
Fund SUMMARY | AS OF DECEMBER 31, 2007 (unaudited)
FUND STATISTICS
- --------------------------------------------------------------------------------
Share Price $13.10
Common Share Net Asset Value $14.94
Premium/(Discount) to NAV -12.32%
Net Asset Applicable to Common Shareholders ($000) $230,202
- --------------------------------------------------------------------------------
TOTAL RETURNS
- --------------------------------------------------------------------------------
(INCEPTION 4/28/04) MARKET NAV
- --------------------------------------------------------------------------------
One Year -8.97% -3.60%
Three Year - average annual 6.32% 5.69%
Since Inception - average annual 3.36% 7.74%
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS % OF TOTAL
MUNICIPAL PORTFOLIO INVESTMENTS
- --------------------------------------------------------------------------------
New York State Dormitory Authority Revenue
Mental Health Services Facilities Improvement (Prerefunded),
Series 2000D-1, 5.250%, 8/15/2030 2.2%
California Health Facilities Financing Authority Revenue
Series 1755, 6.530%, 11/15/2046 2.2%
New York State Dormitory Authority Revenue, Rols-R-816, Series A,
MBIA Insured, 6.429%, 7/1/2046 2.2%
UBS Municipal Various States, 6.644%, 8/1/2057 (PR) 2.1%
New York City Municipal Water Finance Authority, Water and Sewer
System Revenue Bonds, Fiscal 2008, Series A, 5.000%, 6/15/2038 1.9%
Allegheny County Hospital Development Authority, Health
System Revenue (PA), West Penn, Series 2007A, 7.058%, 11/15/2040 1.9%
Municipal Security Trust Certificates (CA), Series 7044,
Class B, 7.125%, 6/1/2047 1.8%
Missouri Development Finance Board, Branson Landing Project,
Series 2004A, 5.625%, 12/1/2028 1.6%
Health and Educational Facilities Authority of the
State of Missouri, BJC Health System, Series 2005B, 3.750%, 5/15/2034 1.5%
Alhambra Certificates of Participation (CA), Police Facilities 91-1-RMK,
AMBAC Insured, 6.750%, 9/1/2023 1.5%
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS % OF TOTAL
EQUITY AND INCOME PORTFOLIO INVESTMENTS
- --------------------------------------------------------------------------------
Chevron Corp. 1.5%
General Electric Co. 1.5%
BP PLC ADR (United Kingdom) 1.4%
Royal Dutch Shell PLC, Class B ADR (United Kingdom) 1.3%
Bank of America Corp. 1.2%
Progress Energy, Inc. 1.2%
Verizon Communications, Inc. 1.1%
Pfizer, Inc. 1.0%
American International Group, Inc. 1.0%
GlaxoSmithKline PLC ADR (United Kingdom) 1.0%
- --------------------------------------------------------------------------------
Securities and holdings are subject to change daily. For more current
information, please visit www.claymore.com. The above summaries are provided for
informational purposes only and should not be viewed as recommendations. Past
performance does not guarantee future results.
% OF TOTAL
TOP TEN SECTORS INVESTMENTS
- --------------------------------------------------------------------------------
Health Care 15.1%
General Obligations 9.6%
Higher Education 7.4%
Oil, Gas & Consumable Fuels 5.0%
Tobacco 4.9%
Diversified Financial Services 4.8%
Continuing Care Retirement Centers 3.7%
Diversified Telecommunications 3.6%
Special Tax 3.5%
Pharmaceuticals 3.3%
- --------------------------------------------------------------------------------
Line Chart:
SHARE PRICE & NAV PERFORMANCE
- --------------------------------------------------------------------------------
NAV Share Price
12/31/06 15.77 16.83
15.5 16.83
15.58 16.48
15.42 16.72
15.6 16.72
15.54 16.72
15.57 16.69
15.55 16.71
15.55 16.77
15.64 16.78
15.55 16.8
15.65 16.79
15.71 16.84
15.74 16.8
15.61 16.86
15.68 16.93
15.83 16.82
15.79 16.82
15.72 16.8
15.7 16.85
15.79 16.91
15.79 16.96
15.81 16.96
15.82 16.96
15.89 17
15.83 17
15.92 16.99
15.89 16.93
15.72 16.9
15.65 16.75
15.64 16.84
15.7 16.85
15.72 16.84
15.72 16.65
15.74 16.81
15.6 16.81
15.61 16.83
15.72 16.89
15.66 16.59
15.56 16.63
15.57 16.58
15.2 16.46
15.2 16.35
15.22 16.49
15.26 16.47
15.34 16.52
15.39 16.53
15.27 16.56
15.23 16.38
15.21 16.42
15.28 16.48
15.29 16.45
15.25 16.53
15.34 16.61
15.47 16.77
15.45 16.75
15.51 16.77
15.49 16.8
15.43 16.75
15.38 16.67
15.4 16.72
15.55 16.7
15.5 16.72
15.51 16.76
15.5 16.76
15.68 16.79
15.67 16.76
15.59 16.8
15.6 16.76
15.61 16.82
15.65 16.89
15.75 16.99
15.71 17.01
15.72 17.05
15.73 17.04
15.78 17.13
15.77 17.08
15.7 17.08
15.72 17.17
15.77 17.14
15.68 17.14
15.63 17.12
15.61 17.14
15.65 17.19
15.72 17.23
15.85 17.28
15.85 17.32
15.72 17.3
15.89 17.33
15.69 17.2
15.75 17.06
15.7 17.05
15.56 17.06
15.85 17.13
15.75 17.1
15.76 17.14
15.64 17.12
15.64 17.1
15.56 17.07
15.63 16.97
15.59 17.02
15.8 17.02
15.8 17.09
15.82 17.05
15.77 17.07
15.76 17.09
15.67 17
15.48 16.93
15.44 16.7
15.42 16.76
15.31 16.77
15.18 16.58
15.38 16.71
15.35 16.76
15.35 16.86
15.34 16.85
15.37 16.91
15.27 16.77
15.15 16.78
15.02 16.66
15.05 16.67
14.88 16.67
15 16.77
15.17 16.77
15.06 16.81
15.12 16.94
15.21 16.96
15.2 16.87
15.3 16.87
15.21 16.91
15.09 16.8
15.04 16.83
15.18 17
15.15 17.02
15.13 17.01
15.21 16.99
15.12 17
15.14 17.02
15.15 16.93
15.03 16.98
14.86 16.76
14.77 16.8
14.46 16.56
14.48 16.42
14.66 16.5
14.63 16.44
14.51 16.48
14.72 16.51
14.47 16.24
14.49 16.39
14.64 16.41
14.65 16.51
14.42 16.22
14.32 16.2
14.16 15.96
13.81 15.7
13.35 15.51
13.26 15.44
13.93 15.62
13.66 15.61
13.94 15.61
14.1 15.72
14.14 15.75
14.29 15.82
14.2 15.75
14.09 15.6
14.27 15.9
14.28 15.9
14.43 16.05
14.44 16.13
14.45 16.08
14.54 16.16
14.49 16.11
14.53 16.14
14.56 16.27
14.55 16.28
14.63 16.3
14.67 16.28
14.48 16.23
14.71 16.47
14.7 16.52
14.58 16.45
14.69 16.5
14.68 16.45
14.62 16.49
14.64 16.52
14.62 16.57
14.62 16.55
14.75 16.68
14.82 16.68
14.78 16.64
14.62 16.65
14.67 16.72
14.68 16.66
14.72 16.74
14.84 16.7
14.86 16.7
14.89 16.71
14.77 16.64
14.72 16.56
14.63 16.6
14.6 16.58
14.57 16.43
14.52 16.45
14.6 16.54
14.48 16.5
14.59 16.51
14.65 16.61
14.7 16.63
14.6 16.47
14.65 16.55
14.37 16.27
14.34 16.26
14.26 16.17
14.2 16.18
14.02 15.88
14 15.85
14.01 15.69
13.89 15.61
13.88 15.64
13.7 15.53
13.65 15.44
13.68 15.48
13.42 15.36
13.2 15.39
13.15 15.26
13.27 15.41
13.21 15.19
13.25 15.32
13.45 15.54
13.48 15.54
13.56 15.64
13.52 15.59
13.43 15.53
13.52 15.66
13.67 15.73
13.65 15.67
13.72 15.72
13.43 15.55
13.27 15.33
13.11 15.29
12.97 15.12
12.85 14.96
12.91 15.01
12.84 15
12.79 15.02
12.7 15
12.83 15.06
12.92 15.04
12.88 14.95
12.98 14.99
12/31/07 13.1 14.94
Pie Charts:
PORTFOLIO CONCENTRATION BY ASSET CLASS*
- --------------------------------------------------------------------------------
Municipal Bonds 55.5%
Common Stocks 35.7%
Corporate Bonds 4.8%
Preferred Stocks 3.9%
Investment Companies 0.1%
*As a percentage of total net investments
CREDIT QUALITY*
- --------------------------------------------------------------------------------
AAA 15.1%
AA 11.2%
A 10.1%
BBB 11.3%
BB 2.5%
B 2.4%
NR 10.2%
Common Stock/Other 37.2%
*Represents higher rating of either S&P, Moody's or Fitch as a percentage of
long-term investments
12 | Annual Report | December 31, 2007
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
Portfolio of INVESTMENTS | DECEMBER 31, 2007
OPTIONAL CALL
PRINCIPAL AMOUNT PROVISIONS VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG-TERM MUNICIPAL BONDS - 84.7%
ARIZONA - 2.0%
$ 4,500,000 Maricopa County Pollution Control Corp., Pollution Control Revenue
Refunding Public Service Co-A-RMK, BBB, Baa
5.750%, 11/1/2022 2/4/08 @ 101 $ 4,499,595
- ------------------------------------------------------------------------------------------------------------------------------------
CALIFORNIA - 19.0%
5,000,000 Alhambra Certificates of Participation, Police Facilities 91-1-RMK,
AMBAC Insured, AAA, Aaa
6.750%, 9/1/2023 N/A 5,769,900
8,250,000 California Health Facilities Financing Authority Revenue Series 1755,
NR, Aa3 (Underlying Obligor: Sutter Health) (a)
6.530%, 11/15/2046 11/15/16 @ 100 8,466,150
5,000,000 California Statewide Communities Development Authority
Revenue Bentley School, NR, NR (b)
6.750%, 7/1/2032 7/1/10 @ 103 5,249,700
2,180,000 California Statewide Communities Development Authority Revenue
Sub-Wildwood Elementary School, NR, NR
7.000%, 11/1/2029 11/1/09 @ 102 2,266,219
2,500,000 Los Angeles Unified School District Election of 1997,
Series E (2002), AAA, Aaa
5.125%, 1/1/2027 7/1/12 @ 100 2,701,300
8,000,000 Municipal Security Trust Certificates Series 7044, Class B, NR,
NR (Underlying Obligor: Golden State Tobacco) (a)
7.125%, 6/1/2047 6/1/17 @ 100 7,009,120
Murrieta Valley Unified School District,
Special Tax Community Facilities District No. 2000-2, NR, NR
1,625,000 6.300%, 9/1/2024 3/1/12 @ 101 1,810,608
2,505,000 6.375%, 9/1/2032 3/1/12 @ 101 2,798,335
820,000 Snowline California Joint Union School District Community Facility
Special Tax, No. 2002-1, Series A, NR, NR
5.400%, 9/1/2034 3/1/08 @ 103 747,791
5,000,000 State of California, Various Purpose General Obligation Bonds, A+, A1
5.000%, 11/1/2037 11/1/17 @ 100 5,034,450
1,870,000 William S. Hart Joint School Financing Authority
CFD's No's 90-1, 99-1 & 2000-1 Series 2004, BBB+, NR
5.625%, 9/1/2034 9/1/12 @ 100 1,886,232
- ------------------------------------------------------------------------------------------------------------------------------------
43,739,805
- ------------------------------------------------------------------------------------------------------------------------------------
OPTIONAL CALL
PRINCIPAL AMOUNT PROVISIONS VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
COLORADO - 2.1%
$ 1,355,000 Denver Health & Hospital Authority Health Care Revenue
Series 1998A, ACA Insured (Prerefunded), CCC, NR
5.375%, 12/1/2028 12/1/08 @ 101 $ 1,396,788
Denver Health & Hospital Authority Health Care Revenue
Series 2004A (Prerefunded), BBB, NR
1,000,000 6.000%, 12/1/2031 12/1/11 @ 100 1,098,020
2,000,000 6.250%, 12/1/2033 12/1/14 @ 100 2,327,200
- ------------------------------------------------------------------------------------------------------------------------------------
4,822,008
- ------------------------------------------------------------------------------------------------------------------------------------
DELAWARE - 0.2%
500,000 Delaware Health Facilities Authority
Beebe Medical Center Project, Series 2004A, BBB+, Baa1
5.500%, 6/1/2024 6/1/14 @ 100 495,710
- ------------------------------------------------------------------------------------------------------------------------------------
FLORIDA - 2.8%
5,450,000 St. Johns County Industrial Development Authority, First Mortgage Revenue
Presbyterian Retirement, Series 2004A, NR, NR
5.625%, 8/1/2034 8/1/14 @ 101 5,445,967
1,000,000 St. Johns County Industrial Development Authority, Health Care
Glenmoor Project, Series 2006A, NR, NR
5.250% 1/1/2026 1/1/16 @ 100 895,330
- ------------------------------------------------------------------------------------------------------------------------------------
6,341,297
- ------------------------------------------------------------------------------------------------------------------------------------
ILLINOIS - 3.1%
5,000,000 Illinois Finance Authority Revenue
OSF Healthcare System, Series 2007A, A, A2
5.750%, 11/15/2037 11/15/17 @ 100 5,170,850
2,000,000 Metropolitan Pier and Exposition Authority
McCormick Place Expansion Project, Series 2004A, AAA, A1
5.500%, 6/15/2027 2/4/08 @ 100 2,000,840
- ------------------------------------------------------------------------------------------------------------------------------------
7,171,690
- ------------------------------------------------------------------------------------------------------------------------------------
LOUISIANA - 2.8%
3,000,000 UBS Municipal Various States, FGIC Insured, AAA, NR
(Underlying Obligor: 19th Judicial Building Commission) (a)
7.263%, 6/1/2041 6/1/17 @ 100 3,394,500
2,747,000 UBS Municipal Various States
GNMA/FNMA/FHLMC Guaranteed, NR, Aaa
(Underlying Obligor: Lafayette Public Trust Finance Authority) (a)
6.947%, 5/1/2015 N/A 3,040,874
- ------------------------------------------------------------------------------------------------------------------------------------
6,435,374
- ------------------------------------------------------------------------------------------------------------------------------------
MASSACHUSETTS - 1.8%
Massachusetts Development Finance Agency Revenue
Evergreen Center, BBB-, NR
1,505,000 5.500%, 1/1/2020 1/1/15@ 100 1,517,160
1,820,000 5.500%, 1/1/2035 1/1/15@ 100 1,710,618
930,000 Massachusetts Development Finance Agency Revenue
Hampshire College, Series 2004, BBB, Baa2
5.625%, 10/1/2024 10/1/14 @ 100 945,299
- ------------------------------------------------------------------------------------------------------------------------------------
4,173,077
- ------------------------------------------------------------------------------------------------------------------------------------
MICHIGAN - 1.2%
3,065,000 Monroe County Hospital Finance Authority Hospital Revenue
Refunding Mercy Memorial Hospital Corporation, BBB-, Baa3
5.500%, 6/1/2035 6/1/16 @ 100 2,743,022
- ------------------------------------------------------------------------------------------------------------------------------------
See notes to financial statements.
Annual Report | December 31, 2007 | 13
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | PORTFOLIO OF INVESTMENTS
continued
OPTIONAL CALL
PRINCIPAL AMOUNT PROVISIONS VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
MISSOURI -5.9%
$ 4,690,000 Cole County Industrial Development Authority
Senior Living Facilities Revenue
Lutheran Senior Services Heisinger Project, NR, NR (b)
5.500%, 2/1/2035 2/1/14 @ 100 $ 4,670,114
6,000,000 Missouri Development Finance Board
Branson Landing Project, Series 2004A, BBB+, Baa1 (b)
5.625%, 12/1/2028 6/1/14 @ 100 6,057,540
3,000,000 Missouri State Health & Educational Facilities Authority Revenue
Senior Living Facilities Revenue
Lutheran Senior, Series A, NR, NR (b)
5.375%, 2/1/2035 2/1/15 @ 100 2,934,960
- ------------------------------------------------------------------------------------------------------------------------------------
13,662,614
- ------------------------------------------------------------------------------------------------------------------------------------
NEW JERSEY - 2.4%
1,000,000 New Jersey Economic Development Authority Revenue
Cigarette Tax, BBB, Baa2
5.500%, 6/15/2031 6/15/14 @ 100 948,290
1,450,000 New Jersey Educational Facilities Authority
Stevens Institute of Technology (Prerefunded), Series 2004B, BBB+, Baa2
5.375%, 7/1/2034 7/1/14 @ 100 1,612,183
Township of Irvington (Qualified Bonds), NR, A1
1,350,000 5.000%, 1/1/2020 1/1/18 @ 100 1,410,521
1,425,000 5.000%, 1/1/2022 1/1/18 @ 100 1,474,904
- ------------------------------------------------------------------------------------------------------------------------------------
5,445,898
- ------------------------------------------------------------------------------------------------------------------------------------
NEW YORK - 20.9%
5,000,000 City of New York
General Obligation, Fiscal 2007, Series C, AA, Aa3
5.000%, 1/1/2026 1/1/17 @ 100 5,153,500
5,000,000 City of New York
General Obligation, Fiscal 2008, Series G, AA, Aa3
5.000%, 8/1/2024 8/1/17 @ 100 5,192,700
3,470,000 Nassau County Tobacco Settlement Corp.
Tobacco Settlement Asset-Backed Bonds, Series 2006, Class A, AAA, Aaa
6.250%, 7/15/2020 7/15/09 @ 101 3,674,695
7,000,000 New York City Municipal Water Finance Authority
Water and Sewer System Revenue Bonds, Fiscal 2008, Series A, AA+, Aa2
5.000%, 6/15/2038 6/15/17 @ 100 7,272,440
8,035,000 New York State Dormitory Authority Revenue
Mental Health Services Facilities Improvement (Prerefunded), Series 2000D-1, AAA, Aaa
5.250%, 8/15/2030 8/15/10 @ 100 8,474,836
1,500,000 New York State Urban Development Corp.
State Personal Income Tax (Prerefunded), Series 2002A, AAA, Aa3
5.125%, 3/15/2027 3/15/12 @ 100 1,612,710
4,500,000 New York State Dormitory Authority Revenue
Cabrini of Westchester, Series 2006, GNMA Collateralized, AA, NR (c)
6.570%, 2/15/2041 2/15/17 @ 103 4,727,970
7,750,000 New York State Dormitory Authority Revenue, Rols-R-816, Series A, MBIA Insured, NR, Aaa
(Underlying Obligor: The New School) (a)
6.429%, 7/1/2046 7/1/16 @ 100 8,259,175
3,565,000 TSASC, Inc
TFABS, Plan Principle 2019, Series 1, AAA, Aaa
6.250%, 7/15/2027 7/15/09 @ 101 3,771,413
- ------------------------------------------------------------------------------------------------------------------------------------
48,139,439
- ------------------------------------------------------------------------------------------------------------------------------------
OPTIONAL CALL
PRINCIPAL AMOUNT PROVISIONS VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
OHIO - 3.8%
$ 4,560,000 Akron, Bath & Copley Joint Township Hospital District Revenue
Hospital Facilities-Summa Health Systems, Series A, RADIAN Insured, AA, Aa3 (b)
5.500%, 11/15/2034 11/15/14 @ 100 $ 4,627,397
4,000,000 Buckeye Tobacco Settlement Financing Authority, Series 2311, AA, NR
(Underlying Obligor: Buckeye Tobacco Settlement Financing Authority) (a)
9.252%, 6/1/2015 N/A 4,214,640
- ------------------------------------------------------------------------------------------------------------------------------------
8,842,037
- ------------------------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA - 5.9%
3,000,000 Allegheny County Hospital Development Authority Health System Revenue
West Penn, Series 2007A, BB, Ba2
5.375%, 11/15/2040 2,594,460
5,000,000 Allegheny County Hospital Development Authority Health System Revenue
West Penn, Series 2007A, BB, Ba2 (c)
7.058%, 11/15/2040 11/15/17 @ 100 4,324,100
4,000,000 Allegheny County Hospital Development Authority Revenue
Rols RR II, NR, Aaa (Underlying Obligor: Allegheny County Hospital)(a)
5.375%, 11/15/2040 11/15/17 @ 100 2,918,560
3,750,000 Pennsylvania Higher Educational Facilities Authority
Widener University, Series 2003, BBB+, NR
5.375%, 7/15/2029 7/15/13 @ 100 3,770,400
- ------------------------------------------------------------------------------------------------------------------------------------
13,607,520
- ------------------------------------------------------------------------------------------------------------------------------------
PUERTO RICO - 3.4%
7,500,000 UBS Municipal Various States, A+, NR
(Underlying Obligor: Puerto Rico Sales Tax Financing Corporation) (a)
6.644%, 8/1/2057 8/1/17 @ 100 7,862,400
- ------------------------------------------------------------------------------------------------------------------------------------
RHODE ISLAND - 3.2%
Rhode Island State Health & Educational Building Corporation Revenue
Hospital Financing Lifespan, A-, A3
3,000,000 6.500%, 8/15/2032 8/15/12 @ 100 3,408,300
3,000,000 6.375%, 8/15/2021 (Prerefunded) 8/15/12 @ 100 3,396,450
500,000 6.375%, 8/15/2021 8/15/12 @ 100 531,925
- ------------------------------------------------------------------------------------------------------------------------------------
7,336,675
- ------------------------------------------------------------------------------------------------------------------------------------
SOUTH CAROLINA - 0.7%
1,430,000 Lexington County Health Services District, Inc., Hospital Revenue
Lexington Medical Center, Series 2004, A+, A2
5.500%, 5/1/2032 5/1/14 @ 100 1,585,984
- ------------------------------------------------------------------------------------------------------------------------------------
TEXAS - 1.5%
3,285,000 Texas Water Development Board, State Revolving Fund,
Subordinate Lien Revenue Bonds, Series 2008A, AAA, Aaa
5.000%, 7/15/2024 7/15/17 @ 100 3,476,516
- ------------------------------------------------------------------------------------------------------------------------------------
WISCONSIN - 2.0%
3,350,000 Wisconsin State Health & Educational Facilities Authority Revenue
Aurora Health Care, Series A, BBB+, NR
5.600%, 2/15/2029 2/15/09 @ 101 3,295,998
Wisconsin State Health & Educational Facilities Authority Revenue
Blood Center Southeastern Project, BBB+, NR
500,000 5.500%, 6/1/2024 6/1/14 @ 100 507,255
750,000 5.750%, 6/1/2034 6/1/14 @ 100 757,965
- ------------------------------------------------------------------------------------------------------------------------------------
4,561,218
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LONG-TERM MUNICIPAL BONDS - 84.7%
(Cost $198,020,353) 194,941,879
- ------------------------------------------------------------------------------------------------------------------------------------
See notes to financial statements.
l4 | Annual Report | December 31, 2007
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | PORTFOLIO OF INVESTMENTS
continued
NUMBER
0F SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 58.5%
CAPITAL MARKETS - 1.4%
60,000 Morgan Stanley $ 3,186,600
- ------------------------------------------------------------------------------------------------------------------------------------
CHEMICALS - 1.5%
90,000 Dow Chemical Co. (The) 3,547,800
- ------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS - 2.0%
25,000 HSBC Holdings PLC ADR (United Kingdom) 2,092,750
65,000 Wachovia Corp. 2,471,950
- ------------------------------------------------------------------------------------------------------------------------------------
4,564,700
- ------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES - 4.3%
35,000 Avery Dennison Corp. 1,859,900
90,000 Pitney Bowes, Inc. 3,423,600
55,000 R. R. Donnelley & Sons Co. 2,075,700
75,000 Waste Management, Inc. 2,450,250
- ------------------------------------------------------------------------------------------------------------------------------------
9,809,450
- ------------------------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 2.3%
125,000 Corning, Inc. 2,998,750
37,500 Nokia Corp. ADR (Finland) 1,439,625
40,000 Telefonaktiebolaget LM Ericsson ADR (Sweden) 934,000
- ------------------------------------------------------------------------------------------------------------------------------------
5,372,375
- ------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES - 6.1%
115,000 Bank of America Corp. 4,744,900
105,000 Citigroup, Inc. 3,091,200
92,500 ING Groep NV ADR (Netherlands) 3,599,175
60,000 JPMorgan Chase & Co. 2,619,000
- ------------------------------------------------------------------------------------------------------------------------------------
14,054,275
- ------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION - 6.0%
80,000 AT&T, Inc. 3,324,800
140,000 Deutsche Telekom AG ADR (Germany) 3,033,800
60,000 Embarq Corp. 2,971,800
100,000 Verizon Communications, Inc. 4,369,000
- ------------------------------------------------------------------------------------------------------------------------------------
13,699,400
- ------------------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES - 2.0%
92,500 Progress Energy, Inc. 4,479,775
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES - 1.2%
50,000 Quest Diagnostics, Inc. 2,645,000
- ------------------------------------------------------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE - 1.3%
67,500 Carnival Corp. (Panama) 3,003,075
- ------------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS - 2.3%
30,000 Kimberly-Clark Corp. 2,080,200
45,000 Procter & Gamble Co. 3,303,900
- ------------------------------------------------------------------------------------------------------------------------------------
5,384,100
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER
0F SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES - 3.8%
37,500 3M Co. $ 3,162,000
150,000 General Electric Co. 5,560,500
- ------------------------------------------------------------------------------------------------------------------------------------
8,722,500
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - 2.8%
65,000 American International Group, Inc. 3,789,500
70,000 Cincinnati Financial Corp. 2,767,800
- ------------------------------------------------------------------------------------------------------------------------------------
6,557,300
- ------------------------------------------------------------------------------------------------------------------------------------
MACHINERY - 0.6%
20,000 Caterpillar, Inc. 1,451,200
- ------------------------------------------------------------------------------------------------------------------------------------
MULTILINE RETAIL - 0.9%
27,500 Target Corp. 1,375,000
15,200 Wal-Mart Stores, Inc. 722,456
- ------------------------------------------------------------------------------------------------------------------------------------
2,097,456
- ------------------------------------------------------------------------------------------------------------------------------------
MULTI-UTILITIES - 3.6%
175,000 Centerpoint Energy, Inc. 2,997,750
50,000 Dominion Resources, Inc. 2,372,500
165,000 TECO Energy, Inc. 2,839,650
- ------------------------------------------------------------------------------------------------------------------------------------
8,209,900
- ------------------------------------------------------------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS - 8.1%
75,000 BP PLC ADR (United Kingdom) 5,487,750
60,000 Chevron Corp. 5,599,800
27,500 ConocoPhillips 2,428,250
60,719 Royal Dutch Shell PLC, Class B ADR (United Kingdom) 5,039,677
- ------------------------------------------------------------------------------------------------------------------------------------
18,555,477
- ------------------------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS - 5.5%
75,000 GlaxoSmithKline PLC ADR (United Kingdom) 3,779,250
30,000 Johnson & Johnson 2,001,000
50,000 Merck & Co., Inc. 2,905,500
175,000 Pfizer, Inc. 3,977,750
- ------------------------------------------------------------------------------------------------------------------------------------
12,663,500
- ------------------------------------------------------------------------------------------------------------------------------------
TOBACCO - 1.6%
50,000 Altria Group, Inc. 3,779,000
- ------------------------------------------------------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES - 1.2%
75,000 Vodafone Group PLC ADR (United Kingdom) 2,799,000
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS - 58.5%
(Cost $124,831,653) 134,581,883
- ------------------------------------------------------------------------------------------------------------------------------------
OPTIONAL CALL
PRINCIPAL AMOUNT PROVISIONS VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS - 7.8%
AEROSPACE/DEFENSE - 0.7%
$ 1,000,000 DRS Technologies, Inc., B, B3
6.875%, 11/1/2013 11/1/08 @ 103.44 995,000
700,000 L-3 Communications Corp., BB+, Ba3
7.625%, 6/15/2012 2/4/08 @ 103.81 716,625
- ------------------------------------------------------------------------------------------------------------------------------------
1,711,625
- ------------------------------------------------------------------------------------------------------------------------------------
See notes to financial statements.
Annual Report | December 31, 2007 | l5
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | PORTFOLIO OF INVESTMENTS
continued
OPTIONAL CALL
PRINCIPAL AMOUNT PROVISIONS VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
APPAREL - 0.4%
$ 1,000,000 Phillips-Van Heusen Corp., BB+, Ba3
7.250%, 2/15/2011 2/15/08 @ 103.63 $ 1,006,250
- ------------------------------------------------------------------------------------------------------------------------------------
AUTO MANUFACTURERS - 0.4%
1,000,000 Navistar International Corp., NR, NR
7.500%, 6/15/2011 6/15/08 @ 103.75 980,000
- ------------------------------------------------------------------------------------------------------------------------------------
AUTO PARTS & EQUIPMENT - 0.3%
600,000 Goodyear Tire & Rubber Co. (The), B, B2
7.857%, 8/15/2011 N/A 607,500
- ------------------------------------------------------------------------------------------------------------------------------------
BANKS - 0.1%
100,000 FCB/NC Capital Trust I, BB+, A3
8.050%, 3/1/2028 3/1/08 @ 104.03 104,395
- ------------------------------------------------------------------------------------------------------------------------------------
COAL - 0.2%
500,000 Massey Energy Co., B+, B2
6.625%, 11/15/2010 2/4/08 @ 103.31 488,750
- ------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES - 0.2%
350,000 Rent-A-Center, Inc., B+, B2
7.500%, 5/1/2010 2/4/08 @ 102.50 326,375
- ------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES - 0.4%
1,000,000 General Motors Acceptance Corp. LLC, BB+, Ba3
6.875%, 9/15/2011 N/A 855,494
- ------------------------------------------------------------------------------------------------------------------------------------
ELECTRONICS - 0.3%
700,000 IMAX Corp. (Canada), CCC+, Caa2
9.625%, 12/1/2010 2/4/08 @ 104.81 694,750
- ------------------------------------------------------------------------------------------------------------------------------------
FOOD - 1.0%
1,465,000 Dean Foods Co., B, B3
7.000%, 6/1/2016 N/A 1,303,850
935,000 Smithfield Foods, Inc., BB, Ba3
7.000%, 8/1/2011 N/A 920,975
- ------------------------------------------------------------------------------------------------------------------------------------
2,224,825
- ------------------------------------------------------------------------------------------------------------------------------------
FOREST PRODUCTS & PAPER - 0.4%
400,000 Boise Cascade LLC, B+, B2
7.125%, 10/15/2014 10/15/09 @ 103.56 387,000
500,000 Domtar, Inc., B+, NR
7.875%, 10/15/2011 N/A 510,625
- ------------------------------------------------------------------------------------------------------------------------------------
897,625
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 0.3%
740,000 DaVita, Inc., B, B2
7.250%, 3/15/2015 3/15/10 @ 103.63 741,850
- ------------------------------------------------------------------------------------------------------------------------------------
HOME FURNISHINGS - 0.4%
1,000,000 Sealy Mattress Co., B, B2
8.250%, 6/15/2014 6/15/09 @ 104.13 955,000
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - 0.5%
500,000 Odyssey Re Holdings Corp., BBB-,Baa3
7.650%, 11/1/2013 N/A 539,177
500,000 Presidential Life Corp., B, B2
7.875%, 2/15/2009 N/A 495,000
- ------------------------------------------------------------------------------------------------------------------------------------
1,034,177
- ------------------------------------------------------------------------------------------------------------------------------------
OPTIONAL CALL
PRINCIPAL AMOUNT PROVISIONS VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
IRON/STEEL - 0.2%
$ 455,000 Allegheny Technologies, Inc., BB+, Baa3
8.375%, 12/15/2011 N/A $ 484,575
- ------------------------------------------------------------------------------------------------------------------------------------
MEDIA - 0.3%
750,000 DirecTV Holdings LLC/DirecTV Financing Co., BB-, Ba3
8.375%, 3/15/2013 3/15/08 @ 104.19 780,000
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICE/BUSINESS EQUIPMENT - 0.4%
1,000,000 Xerox Capital Trust I, BB, Baa3
8.000%, 2/1/2027 2/4/08 @ 102.21 998,736
- ------------------------------------------------------------------------------------------------------------------------------------
OIL & GAS - 0.2%
500,000 Chesapeake Energy Corp., BB, Ba3
6.500%, 8/15/2017 N/A 482,500
- ------------------------------------------------------------------------------------------------------------------------------------
RETAIL - 0.6%
500,000 Bon-Ton Stores, Inc. (The), CCC+, B3
10.250%, 3/15/2014 3/15/10 @ 105.13 377,500
700,000 Dillards, Inc., BB, B1
7.130%, 8/1/2018 N/A 563,500
475,000 Pantry, Inc. (The), B-, B3
7.750%, 2/15/2014 2/15/09 @ 103.88 437,000
- ------------------------------------------------------------------------------------------------------------------------------------
1,378,000
- ------------------------------------------------------------------------------------------------------------------------------------
SEMICONDUCTORS - 0.1%
345,000 Advanced Micro Devices, Inc., B, B2
7.750%, 11/1/2012 11/1/08 @ 103.88 300,150
- ------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 0.4%
850,000 Overseas Shipholding Group, Inc., BB+, Ba1
8.750%, 12/1/2013 N/A 898,875
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS - 7.8%
(Cost $18,696,340) 17,951,452
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER
0F SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS - 6.4%
DIVERSIFIED FINANCIAL SERVICES - 1.4%
60,000 ABN Amro Capital Funding Trust VII, 6.080%, A, A1 1,114,800
37,650 Deutsche Bank Contingent Capital Trust II, 6.550%, A+, Aa3 813,616
50,000 Merrill Lynch & Co., Inc., 6.375%, A-, A3 1,002,000
15,000 Merrill Lynch Capital Trust III, 7.375%, A-, A2 339,600
- ------------------------------------------------------------------------------------------------------------------------------------
3,270,016
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - 2.2%
20,000 ACE Ltd., (Cayman Islands) 7.800%, BBB, Baa2 478,000
50,000 Aegon NV (Netherlands), 6.500%, A-, A3 1,006,000
25,000 Aspen Insurance Holdings, Ltd., (Bermuda) 7.401%, BBB-, Ba1 546,250
33,200 ING Groep NV (Netherlands), 7.375%, A, A1 789,828
50,000 Metlife, Inc., 6.500%, BBB, Baa1 1,092,000
48,600 Prudential PLC, (United Kingdom) 6.500%, A-, Baa1 980,748
- ------------------------------------------------------------------------------------------------------------------------------------
4,892,826
- ------------------------------------------------------------------------------------------------------------------------------------
MEDIA - 0.2%
20,000 Comcast Corp., 7.000%, BBB+, Baa2 448,800
- ------------------------------------------------------------------------------------------------------------------------------------
See notes to financial statements.
l6 | Annual Report | December 31, 2007
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | PORTFOLIO OF INVESTMENTS
continued
NUMBER
0F SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 2.6%
20,000 Apartment Investment & Management Co., 7.750%, B+, Ba3 $ 418,400
20,000 Brandywine Realty Trust, Series C, 7.500%, NR, NR 408,800
11,000 Capital Automotive REIT, Series A, 7.500%, NR, B1 181,500
20,000 CBL & Associates Properties, Series C, 7.750%, NR, NR 440,000
25,000 CBL & Associates Properties, Series D, 7.375%, NR, NR 490,000
12,500 Duke Realty Corp., Series L, 6.600%, BBB, Baa2 245,625
25,000 First Industrial Realty Trust, 7.250%, BBB-, Baa3 506,250
20,000 Health Care REIT, Inc., Series D, 7.875%, BB+, Baa3 465,800
15,500 Kimco Realty Corp., 7.750%, BBB+, Baa2 354,330
12,000 PS Business Parks, Inc., Series H, 7.000%, BBB-, Baa3 235,200
16,000 Public Storage, Inc., 6.625%, BBB+, Baa1 304,000
20,000 Realty Income Corp., Series D, 7.375%, BBB-, Baa2 473,000
18,500 Regency Centers Corp., 7.250%, BBB-, Baa3 381,100
25,000 Taubman Centers, Inc., 8.000%, NR, B1 591,250
25,000 Vornado Realty Trust, Series E, 7.000%, BBB-, Baa3 532,500
- ------------------------------------------------------------------------------------------------------------------------------------
6,027,755
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS - 6.4%
(Cost $17,454,099) 14,639,397
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANIES - 0.0%
7,000 DWS RREEF Real Estate Fund II, Inc.
(Cost $96,569) 90,300
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LONG-TERM INVESTMENTS - 157.4%
(Cost $359,099,014) 362,204,911
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 8.4%
$ 1,200,000 Blount County, Tennessee Public Building Authority
Local Government Public Improvement, Series D-5-C, NR, Aaa (d)
4.000%, 6/1/2030 1,200,000
1,400,000 Blount County, Tennessee Public Building Authority
Local Government Public Improvement, Series A-3-A, NR, Aaa (d)
3.820%, 6/1/2026 1,400,000
5,900,000 Health and Educational Facilities Authority of the State of Missouri
BJC Health System, Series 2005B, AA, Aa2 (d)
3.750%, 5/15/2034 5,900,000
545,000 Delaware River Port Authority, Pennsylvania
Municipal Sectors, Series SGA-89, AAA, NR (d)
3.750%, 1/1/2026 545,000
600,000 Sevier County, Tennessee Public Building Authority
Local Government Public Improvement, Series IV-E-5, NR, Aaa (d)
3.820%, 6/1/2020 600,000
850,000 Sevier County, Tennessee Public Building Authority
Local Government Public Improvement, Series IV-F-1, NR, Aaa (d)
3.820%, 6/1/2025 850,000
2,900,000 Sevier County, Tennessee Public Building Authority
Local Government Public Improvement, Series VI-C-1, NR, Aaa (d)
3.820%, 6/1/2034 2,900,000
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
$ 1,650,000 Sevier County, Tennessee Public Building Authority
Local Government Public Improvement, Series VI-D-1, NR, Aaa (d)
3.820%, 6/1/2030 $ 1,650,000
4,370,000 Sevier County, Tennessee Public Building Authority
Local Government Public Improvement, Series VI-E-1, NR, Aaa (d)
3.820%, 6/1/2020 4,370,000
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS - 8.4%
(Cost $19,415,000) 19,415,000
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 165.8%
(Cost $378,514,014) 381,619,911
- ------------------------------------------------------------------------------------------------------------------------------------
FLOATING RATE NOTE OBLIGATIONS - (2.1%)
(4,750,000) Notes with interest rates ranging from 3.48% to 3.50% on December
31, 2007 and contractual maturities of collateral of ranging from
2040 to 2041.
(Cost ($4,750,000)) (4,750,000)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL NET INVESTMENTS - 163.7%
(Cost $373,764,014) 376,869,911
Liabilities in excess of Other Assets - ( -11.6%) (26,667,964)
Preferred Shares, at Liquidation Value - (-52.1% of Net Assets
Applicable to Common Shareholders or -31.4% of Total Investments) (120,000,000)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS - 100.0% $ 230,201,947
====================================================================================================================================
ACA - ACA Financial Guaranty Corporation
ADR - American Depositary Receipt
AMBAC - Ambac Assurance Corporation
FGIC - Financial Guaranty Insurance Company
FHLMC - Federal Home Loan Mortgage Corporation
FNMA - Federal National Mortgage Association
GNMA - Government National Mortgage Association
LLC - Limited Liability Corporation
MBIA - MBIA Insurance Corporation
N/A - Not Applicable
NV - Publicly-Traded Company
PLC - Public Limited Company
RADIAN - Radian Asset Assurance, Inc
REIT - Real Estate Investment Trust
(a) Inverse floating rate investment. Interest rate shown is that in effect at
December 31, 2007. See Note 2(e) in the "Notes to the Financial Statements"
section of this report.
(b) All or a portion of these securities have been physically segregated in
connection with swap agreements.
(c) Underlying security related to inverse floating rate investments entered
into by the Fund. See Note 2(e) in the "Notes to the Financial Statements"
section of this report.
(d) Security has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short-term security. The rate shown
is as of December 31, 2007.
Ratings shown are per Standard & Poor's and Moody's. Securities classified as NR
are not rated. (unaudited)
All percentages shown in the Portfolio of Investments are based on Net Assets
Applicable to Common Shareholders unless otherwise noted.
See notes to financial statements.
Annual Report | December 31, 2007 | 17
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
Statement of ASSETS AND LIABILITIES | DECEMBER 31, 2007
ASSETS
Investments in securities, at value (cost $378,514,014) $ 381,619,911
Cash 67,156
Interest receivable 2,840,663
Receivable for securities sold 2,065,000
Dividends receivable 331,328
Net unrealized appreciation on swaps 302,431
Other assets 6,402
- ---------------------------------------------------------------------------------------------------------------
Total assets 387,232,891
- ---------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for securities purchased 31,721,925
Floating rate note obligations 4,750,000
Advisory fee payable 211,369
Dividend payable - preferred shares 191,599
Administration fee payable 15,098
Accrued expenses and other liabilities 140,953
- ---------------------------------------------------------------------------------------------------------------
Total liabilities 37,030,944
- ---------------------------------------------------------------------------------------------------------------
PREFERRED SHARES, AT REDEMPTION VALUE
$.01 par value per share; 4,800 Auction Market Preferred Shares authorized,
issued and outstanding at $25,000 per share liquidation preference 120,000,000
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS $230,201,947
===============================================================================================================
COMPOSITION OF NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS
Common stock, $.01 par value per share; unlimited number of
shares authorized, 15,407,000 shares issued and outstanding $ 154,070
Additional paid-in capital 218,557,393
Accumulated net realized loss on investments and swaps (1,476,340)
Accumulated net unrealized appreciation on investments and swaps 3,408,328
Accumulated undistributed net investment income 9,558,496
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS $ 230,201,947
===============================================================================================================
NET ASSET VALUE APPLICABLE TO COMMON SHAREHOLDERS (based on 15,407,000
common shares outstanding) $ 14.94
===============================================================================================================
See notes to financial statements.
l8 | Annual Report | December 31, 2007
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
Statement of OPERATIONS | FOR THE YEAR ENDED DECEMBER 31, 2007
INVESTMENT INCOME
Interest $ 11,925,942
Dividends (net of foreign withholding taxes of $79,706) 6,165,349
- ---------------------------------------------------------------------------------------------------------------
Total income $ 18,091,291
- ---------------------------------------------------------------------------------------------------------------
EXPENSES
Advisory fee 2,617,677
Auction agent fee-preferred shares 315,301
Professional fees 161,197
Trustees' fees and expenses 136,361
Fund accounting 108,447
Administration fee 89,791
Printing expenses 63,662
Custodian fee 55,067
Transfer agent fee 35,924
Miscellaneous 24,647
Insurance 23,760
NYSE listing fee 21,977
Interest expense on floating rate note obligations 224,197
- ---------------------------------------------------------------------------------------------------------------
Total expenses 3,878,008
- ---------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 14,213,283
- ---------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND SWAPS
Net realized gain (loss) on:
Investments 14,001,736
Swaps (2,194,500)
Net change in unrealized appreciation (depreciation) on:
Investments (28,963,293)
Swaps 484,845
- ---------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments and swaps (16,671,212)
- ---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS FROM
Net investment income and net realized gains (6,288,649)
- ---------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS RESULTING FROM OPERATIONS $ (8,746,578)
===============================================================================================================
See notes to financial statements.
Annual Report | December 31, 2007 | 19
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
Statement of CHANGES IN NET ASSETS
APPLICABLE TO COMMON SHAREHOLDERS |
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, 2007 DECEMBER 31, 2006
- ----------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS
RESULTING FROM OPERATIONS
Net investment income $14,213,283 $14,087,404
Net realized gain on investments and swaps 11,807,236 11,312,240
Net change in unrealized appreciation (depreciation)
on investments and swaps (28,478,448) 16,209,364
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS
From and in excess of net investment income (4,541,977) (5,648,917)
From net realized gains (1,746,672) -
- ----------------------------------------------------------------------------------------------------------------
Total distributions to Preferred Shareholders (6,288,649) (5,648,917)
- ----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to
common shareholders resulting from operations (8,746,578) 35,960,091
- ----------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS:
From and in excess of net investment income (14,723,314) (14,444,063)
From net realized gains (5,662,073) -
- ----------------------------------------------------------------------------------------------------------------
Total distributions to Common Shareholders (20,385,387) (14,444,063)
- ----------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets applicable to common shareholders (29,131,965) 21,516,028
NET ASSETS
Beginning of period 259,333,912 237,817,884
- ----------------------------------------------------------------------------------------------------------------
End of period (including accumulated undistributed net investment income
of $9,558,496 and $7,769,994, respectively) $230,201,947 $259,333,912
================================================================================================================
See notes to financial statements.
20 | Annual Report | December 31, 2007
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
Financial HIGHLIGHTS
FOR THE PERIOD
FOR THE FOR THE FOR THE APRIL 28, 2004*
YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
PER SHARE OPERATING PERFORMANCE DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
FOR A COMMON SHARE OUTSTANDING THROUGHOUT THE PERIOD 2007 2006 2005 2004
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.83 $ 15.44 $ 15.47 $ 14.33(b)
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) 0.92 0.91 0.88 0.52
Net realized and unrealized gain on investments, options and swaps (1.08) 1.79 0.29 1.29
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS
From and in excess of net investment income
(common share equivalent basis) (0.30) (0.37) (0.26) (0.07)
From realized gains (common share equivalent basis) (0.11) - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions to Preferred Shareholders (0.41) (0.37) (0.26) (0.07)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (0.57) 2.33 0.91 1.74
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From and in excess of net investment income (0.95) (0.94) (0.94) (0.47)
From realized gains (0.37) - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions to Common Shareholders (1.32) (0.94) (0.94) (0.47)
- ------------------------------------------------------------------------------------------------------------------------------------
Common and Preferred Shares' offering expenses charged
to paid-in capital - - -(g) (0.13)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.94 $ 16.83 $ 15.44 $ 15.47
====================================================================================================================================
MARKET VALUE, END OF PERIOD $ 13.10 $ 15.77 $ 13.35 $ 13.62
====================================================================================================================================
TOTAL INVESTMENT RETURN (c)
Net asset value -3.60% 15.50% 6.02% 11.42%
Market value -8.97% 25.98% 4.80% -6.05%
RATIOS AND SUPPLEMENTAL DATA
Net assets applicable to common shareholders, end of period (thousands) $ 230,202 $ 259,334 $ 237,818 $ 238,386
Preferred shares, at liquidation value ($25,000 per share liquidation
preference) (thousands) $ 120,000 $ 120,000 $ 120,000 $ 120,000
Preferred shares asset coverage per share $ 72,959 $ 79,028 $ 74,545 $ 74,664
Ratios to average net assets applicable to common shareholders: (d)
Total expenses (excluding interest expense on
floating rate note obligations) 1.44% 1.46% 1.52% 1.36%
Total expenses (including interest expense on floating
rate note obligations(e)) 1.53% 1.50% - -
Net investment income, prior to effect of dividends to preferred shares 5.60% 5.70% 5.73% 5.31%
Net investment income, after effect of dividends to preferred shares 3.81% 3.41% 4.05% 4.58%
Ratios to average managed assets: (d)(f)
Total expenses (excluding interest expense on floating rate
note obligations) 0.98% 0.98% 1.01% 0.98%
Total expenses (including interest expense on floating rate
note obligations(e)) 1.04% 1.01% - -
Net investment income, prior to effect of dividends to preferred shares 3.80% 3.84% 3.80% 3.83%
Portfolio turnover rate 114% 159% 103% 75%
Asset coverage per $1,000 unit of indebtedness(h) $ 74,727 $ 29,902 - -
====================================================================================================================================
* Commencement of investment operations.
(a) Based on average shares outstanding during the period.
(b) Before reimbursement of offering expenses charged to capital.
(c) Total investment return is calculated assuming a purchase of a common share
at the beginning of the period and a sale on the last day of the period
reported either at net asset value ("NAV") or market price per share.
Dividends and distributions are assumed to be reinvested at NAV for NAV
returns or the prices obtained under the Fund's Dividend Reinvestment Plan
for market value returns. Total investment return does not reflect
brokerage commissions. A return calculated for a period of less than one
year is not annualized.
(d) Annualized, for periods less than one year..
(e) See note 2(e) of the Notes to Financial Statements for more information on
floating rate note obligations.
(f) Managed assets is equal to net assets applicable to common shareholders
plus outstanding leverage, such as the liquidation value of preferred
shares.
(g) Amount is less than $0.01.
(h) Calculated by subtracting the Fund's total liabilities (not including the
floating rate note obligations) from the Fund's total assets and dividing
by the total number of indebtedness units, where one unit equals $1,000 of
indebtedness.
See notes to financial statements.
Annual Report | December 31, 2007 | 21
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
Notes to FINANCIAL STATEMENTS | DECEMBER 31, 2007
Note 1 - ORGANIZATION:
TS&W/Claymore Tax-Advantaged Balanced Fund (the "Fund") was organized as a
Delaware statutory trust on February 12, 2004. The Fund is registered as a
diversified, closed-end management investment company under the Investment
Company Act of 1940.
Under normal market conditions, the Fund will invest at least 50%, but less than
60% of its total assets in debt securities and other obligations issued by or on
behalf of states, territories and possessions of the United States and the
District of Columbia and their political subdivisions, agencies and
instrumentalities, the interest on which is exempt from regular federal income
tax and which is not a preference item for purposes of the alternative minimum
tax (the "Municipal Securities Portfolio") and at least 40%, but less than 50%,
of its total assets in common stocks, preferred securities and other income
securities (the "Equity and Income Securities Portfolio").
Note 2 - ACCOUNTING POLICIES:
The preparation of the financial statement in accordance with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from these estimates.
The following is a summary of significant accounting policies consistently
followed by the Fund.
(A) VALUATION OF INVESTMENTS
The Fund values equity securities at the last reported sale price on the
principal exchange or in the principal Over-the-Counter ("OTC") market in which
such securities are traded, as of the close of regular trading on the New York
Stock Exchange ("NYSE") on the day the securities are being valued or, if there
are no sales, at the mean between the last available bid and asked prices on
that day. Securities traded on the NASDAQ are valued at the NASDAQ Official
Closing Price. Preferred stocks are valued at their sales price as of the close
of the exchange on which they are traded. Preferred stocks for which the last
sales price is not available are valued at the last available bid price. Debt
securities are valued at the last available bid price for such securities or, if
such prices are not available, at prices for securities of comparable maturity,
quality and type. Foreign securities are translated from the local currency into
U.S. dollars using the current exchange rate. The Fund's securities that are
primarily traded in foreign markets may be traded in such markets on days that
the NYSE is closed. As a result, the net asset value of the Fund may be
significantly affected on days when holders of common shares have no ability to
trade common shares on the NYSE. Investment Companies are valued at the last
available closing price. For those securities where quotations or prices are not
available, valuations are determined in accordance with procedures established
in good faith by the Board of Trustees. Short-term securities with remaining
maturities of 60 days or less are valued at amortized cost, which approximates
market value.
(B) INVESTMENT TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are accounted for on the trade date. Realized gains and
losses on investments are determined on the identified cost basis. Dividend
income is recorded net of applicable withholding taxes on the ex-dividend date
and interest income is recorded on an accrual basis. Discounts or premiums on
debt securities purchased are accreted or amortized to interest income over the
lives of the respective securities using the effective interest method.
(C) SWAPS
A swap is an agreement to exchange the return generated by one instrument for
the return generated by another instrument. The Fund may enter into swap
agreements to manage its exposure to interest rates or to manage the duration of
its portfolio. The swaps are valued at current market value and any unrealized
gain or loss is included in the Statement of Operations. Gain or loss is
realized on the termination date of the swap and is equal to the difference
between the Fund's basis in the swap and the proceeds of the closing
transaction, including any fees. During the period that the swap agreement is
open, the Fund may be subject to risk from the potential inability of the
counterparty to meet the terms of the agreement. The swaps involve elements of
both market and credit risk in excess of the amounts reflected on the Statement
of Assets and Liabilities. The Fund usually invests in Forward Interest Rate
Swaps. Forward interest rate swap transactions involve the Fund's agreement with
a counterparty to pay, in the future, a fixed or variable rate payment in
exchange for the counterparty paying the Fund a variable or fixed rate payment,
the accruals for which would begin at a specified date in the future (the
"effective date"). The Fund may terminate the swap contract prior to the
effective date, at which point a realized gain or loss is recognized.
Details of the swap agreements outstanding as of December 31, 2007 were as
follows:
NOTIONAL UNREALIZED
TERMINATION AMOUNT FIXED FLOATING APPRECIATION/
COUNTERPARTY DATE (000) RATE RATE (DEPRECIATION)
- ------------------------------------------------------------------------------------
Morgan Stanley* 3/31/2010 $ 15,000 4.742% 2-Yr LIBOR $ 296,654
JP Morgan Chase & Co.* 4/23/2010 15,000 4.773% 2-Yr LIBOR 239,023
JP Morgan Chase & Co.** 12/12/2037 10,000 3.997% 30-Yr BMA (233,246)
- ------------------------------------------------------------------------------------
$ 302,431
- ------------------------------------------------------------------------------------
BMA - Bond Market Association Municipal Swap Index.
LIBOR - London Interbank Offering Rate
* For each swap noted, the Fund pays a floating rate and receives a fixed
rate.
** For each swap noted, the Fund pays a fixed rate and receives a floating
rate.
(D) DISTRIBUTIONS TO SHAREHOLDERS
The Fund declares and pays quarterly dividends to common shareholders. These
dividends consist of tax-exempt income and investment company taxable income,
which generally includes qualified dividend income, ordinary income and
short-term capital gains. Any net realized long-term capital gains are
distributed annually to common shareholders.
Distributions to shareholders are recorded on the ex-dividend date. The amount
and timing of distributions are determined in accordance with federal income tax
regulations, which may differ from U.S. generally accepted accounting
principles.
(E) INVERSE FLOATING RATE INVESTMENTS AND FLOATING RATE NOTE OBLIGATIONS
Inverse floating rate instruments are notes whose coupon rate fluctuates
inversely to a pre-determined interest rate index. The Fund may invest in
inverse floating rate securities through either a direct purchase or through the
transfer of bonds to a dealer trust in exchange for cash and/or residual
interests in the dealer trust.
For those inverse floating rate securities purchased directly, the instrument is
included in the Portfolio of Investments with income recognized on an accrual
basis.
For those inverse floating rate securities purchased through a transfer of a
fixed rate bond to a dealer trust in exchange for cash and/or residual interests
in the dealer trusts' assets and cash flows, FASB Statement No. 140, Accounting
for Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities (FAS 140) calls for this transaction to be accounted for as a
financing by the dealer trust of the transferred fixed rate bond. In these
transactions, the
22 | Annual Report | December 31, 2007
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | NOTES TO FINANCIAL STATEMENTS
continued
dealer trusts fund the purchases of the fixed rate bonds by issuing floating
rate notes to third parties and allowing the Fund to retain residual interests
in the bonds. The residual interests held by the Fund (the inverse floating rate
investments) include the right of the Fund to cause the holders of the floating
rate notes to tender their notes at par at the next interest rate reset date and
to transfer the municipal bond from the dealer trusts to the Fund, thereby
collapsing the dealer trusts. The Fund accounts for the transfer of bonds to the
dealer trusts as secured borrowings, with the securities transferred remaining
in the Fund's Portfolio of Investments, and the related floating rate notes
reflected as a liability under the caption `'Floating rate note obligations'' on
the Statement of Assets and Liabilities. The Fund records the interest income
from the fixed rate bonds under the caption `'Interest'' and records the
expenses related to floating rate note obligations and any administrative
expenses of the dealer trusts under the caption `'Interest expense on floating
rate note obligations'' on the Fund's Statement of Operations. The notes issued
by the dealer trusts have interest rates that reset weekly and the floating rate
note holders have the option to tender their notes to the dealer trusts for
redemption at par at each reset date. At December 31, 2007, Fund investments
with a par value of $9,500,000 (market value of approximately $8,500,000) are
held by the dealer trusts and serve as collateral for the $4,750,000 in floating
rate notes outstanding at that date. Contractual maturities of the floating rate
notes and interest rates in effect at December 31, 2007 are presented on the
Portfolio of Investments. The average floating rate notes outstanding and
average annual interest rate during the year ended December 31, 2007 were
$6,118,000 and 3.67%, respectively
These instruments typically involve greater risks than a fixed rate municipal
bond. In particular, the holder of these inverse floating rate instruments
retain all credit and interest rate risk associated with the full underlying
bond and not just the par value of the inverse floating rate instrument. As
such, these instruments should be viewed as having inherent leverage and
therefore involve many of the risks associated with leverage. Leverage is a
speculative technique that may expose the Fund to greater risk and increased
costs. Leverage may cause the Fund's net asset value to be more volatile than if
it had not been leveraged because leverage tends to magnify the effect of any
increases or decreases in the value of the Fund's portfolio securities. The use
of leverage may also cause the Fund to liquidate portfolio positions when it may
not be advantageous to do so in order to satisfy its obligations with respect to
inverse floating rate instruments.
Note 3 - INVESTMENT ADVISORY AGREEMENT, INVESTMENT SUB-ADVISORY AGREEMENT AND
OTHER AGREEMENTS:
Pursuant to an Investment Advisory Agreement (the "Agreement") between the Fund
and Claymore Advisors, LLC (the "Adviser"), the Adviser is responsible for
managing, either directly or through others selected by it, the investment
activities of the Fund and the Fund's business affairs and other administrative
matters. The Adviser received a fee, payable monthly, at an annual rate equal to
0.70% of the Fund's average daily managed assets (total assets including the
assets attributable to the proceeds from any financial leverage but excluding
the assets attributable to floating rate note obligations, minus liabilities,
other than debt representing financial leverage).
The Adviser has entered into an Investment Sub-Advisory Agreement (the
"Sub-Advisory Agreement") with Thompson, Siegel & Walmsley LLC (the
"Sub-Adviser"). The Sub-Adviser is responsible for day-to-day portfolio
management of the Fund's assets allocated to the Equity and Income Securities
Portfolio. Under the terms of the Sub-Advisory Agreement between the Adviser and
the Sub-Adviser, the Adviser pays monthly to the Sub-Adviser a fee at the annual
rate of 0.42% of the Fund's average daily managed assets attributable to the
Equity and Income Securities Portfolio.
On July 11, 2006, the Adviser entered into an Investment Sub-Advisory Agreement
(the "Sub-Advisory Agreement 2") with SMC Fixed Income Management, LP (the
"Sub-Adviser 2"). The Sub-Adviser 2 is responsible for day-to-day portfolio
management of the Fund's assets allocated to the Municipal Securities Portfolio.
Under the terms of the Sub-Advisory Agreement 2 between the Adviser and the
Sub-Adviser 2, the Adviser pays monthly to the Sub-Adviser 2 a fee at the annual
rate of 0.30% of the Fund's average daily managed assets attributable to the
Municipal Securities Portfolio. Prior to July 11, 2006 the Adviser was
responsible for the day-to-day portfolio management for the Municipal Securities
Portfolio.
The Bank of New York ("BNY") acts as the Fund's custodian, accounting agent,
auction agent and transfer agent. As custodian, BNY is responsible for the
custody of the Fund's assets. As accounting agent, BNY is responsible for
maintaining the books and records of the Fund's securities and cash. As transfer
agent, BNY is responsible for performing transfer agency services for the Fund.
Under a separate Fund Administration agreement (the "Administration Agreement'),
the Adviser provides fund administration services to the Fund. As compensation
for services performed under the Administration Agreement, the Adviser receives
an administration fee payable monthly at the annual rate set forth below as a
percentage of the average daily managed assets of the Fund:
MANAGED NET ASSETS RATE
- --------------------------------------------------------------------------------
First $200,000,000 0.0275%
Next $300,000,000 0.0200%
Next $500,000,000 0.0150%
Over $1,000,000,000 0.0100%
Certain officers and trustees of the Fund are also officers and directors of the
Adviser, Sub-Adviser, or Muni Sub-Adviser. The Fund does not compensate its
officers or trustees who are officers of the aforementioned firms.
Note 4 - FEDERAL INCOME TAXES:
The Fund intends to comply with the requirements of Subchapter M of the Internal
Revenue Code of 1986, as amended, applicable to regulated investment companies.
Accordingly, no provision for U.S. federal income taxes is required. In
addition, by distributing substantially all of its ordinary income and long-term
capital gains, if any, during each calendar year, the Fund intends not to be
subject to U.S. federal excise tax.
Due to inherent differences in the recognition of income, expense and realized
gains/losses under U.S. generally accepted accounting principles and federal
income tax purposes, permanent differences between book and tax basis reporting
have been identified and appropriately reclassified on the Statement of Assets
and Liabilities. A permanent book and tax basis difference relating to a
distribution reclass in the amount of $7,139,125 was reclassified from
accumulated undistributed net investment income to accumulated net realized
gain. Also, permanent book to tax differences relating to the Fund's investments
in real estate investment trusts totaling $298,615 were reclassified from
accumulated new realized gain to accumulated undistributed net investment
income..
Capital losses incurred after October 31 ("post-October" losses) within the
taxable year are deemed to arise on the first business day of the Fund's next
taxable year. The Fund incurred and will elect to defer capital losses of
$1,517,590.
Annual Report | December 31, 2007 | 23
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | NOTES TO FINANCIAL STATEMENTS
continued
Information on the tax components of investments and net assets as of December
31, 2007 is as follows:
UNDISTRIBUTED
COST OF NET TAX NET TAX LONG-TERM
INVESTMENTS GROSS TAX GROSS TAX UNREALIZED UNREALIZED UNDISTRIBUTED CAPITAL GAINS/
FOR TAX UNREALIZED UNREALIZED APPRECIATION DEPRECIATION ORDINARY (ACCUMULATED
PURPOSES APPRECIATION DEPRECIATION ON INVESTMENTS ON DERIVATIVES INCOME* CAPITAL LOSS)
- -------------------------------------------------------------------------------------------------------------
$378,472,764 $20,021,468 $(16,874,321) $3,147,147 $302,431 $9,558,496 $(1,517,590)
*Includes tax-exempt income
The differences between book basis and tax basis unrealized
appreciation/(depreciation) is attributable to additional income accrued for tax
purposes on investments in real estate investment trusts.
For the years ended December 31, 2007 and 2006, the tax character of
distributions paid to common and preferred shareholders as reflected in the
Statement of Changes in Net Assets was as follows:
DISTRIBUTIONS PAID FROM: 2007 2006
- --------------------------------------------------------------------------------
Ordinary income $6,067,201 $7,322,467
Tax-exempt income 7,772,917 3,092,337
Long-term capital gain 12,833,918 9,678,176
- --------------------------------------------------------------------------------
Total Distributions $26,674,036 $20,092,980
- --------------------------------------------------------------------------------
On July 13, 2006, the Financial Accounting Standards Board ("FASB") released
FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" ("FIN
48"). FIN 48 provides guidance for how uncertain tax positions should be
recognized, measured, presented and disclosed in the financial statements. FIN
48 requires the evaluation of tax positions taken or expected to be taken in the
course of preparing the Company's tax returns to determine whether the tax
positions are "more-likely-than-not" of being sustained by the applicable tax
authority. Tax positions not deemed to meet the more-likely-than-not threshold
would be recorded as a tax benefit or expense in the current year. Adoption of
FIN 48 is required for fiscal years beginning after December 15, 2006, but not
before its last NAV calculation in the first required financial statement
reporting period for its fiscal year beginning after December 15, 2006, and is
to be applied to all open tax years as of the effective date. Management has
evaluated the implications of FIN 48 and has determined it does not have any
impact on the financial statements as of December 31, 2007.
Tax years for 2004, 2005 and 2006 are still subject to examination by major
jurisdictions.
Note 5 - INVESTMENT IN SECURITIES
For the year ended December 31, 2007, purchases and sales of investments,
excluding short-term securities, were $425,604,732 and $419,849,051,
respectively.
Note 6 - CAPITAL
COMMON SHARES
The Fund has an unlimited amount of common shares, $0.01 par value, authorized
and 15,407,000 issued and outstanding. In connection with the Fund's dividend
reinvestment plan, the Fund did not issue any shares during the years ended
December 31, 2007 and 2006.
PREFERRED SHARES
On April 29, 2004, the Fund's Board of Trustees authorized the issuance of
preferred shares, in addition to the existing common shares, as part of the
Fund's leverage strategy. The Fund may also borrow or issue debt securities
collectively with preferred shares for leveraging purposes. Preferred shares
issued by the Fund have seniority over the common shares.
On July 1, 2004, the Fund issued 2,400 shares of Preferred Shares Series M7 and
2,400 shares of Preferred Shares Series T28 each with a net asset and
liquidation value of $25,000 per share plus accrued dividends. Dividends are
accumulated daily at an annual rate set through auction procedures. Distribution
of net realized capital gains, if any, are paid annually.
For the year ended December 31, 2007, the annualized dividend rates ranged from:
HIGH LOW AT 12/31/07
- --------------------------------------------------------------------------------
Series M7 6.25% 4.50% 5.40%
Series T28 6.19% 4.60% 6.19%
The Fund is subject to certain limitations and restrictions while Preferred
Shares are outstanding. Failure to comply with these limitations and
restrictions could preclude the Fund from declaring any dividends or
distributions to common shareholders or repurchasing common shares and/or could
trigger the mandatory redemption on Preferred Shares at their liquidation value.
Preferred Shares, which are entitled to one vote per share, generally vote with
the common stock but vote separately as a class to elect two Trustees and on any
matters affecting the rights of the Preferred Shares.
Note 7 - INDEMNIFICATIONS
In the normal course of business, the Fund enters into contracts that contain a
variety of representations, which provide general indemnifications. The Fund's
maximum exposure under these arrangements is unknown, as this would require
future claims that may be made against the Fund that have not yet occurred.
However, the Fund expects the risk of loss to be remote.
Note 8 - RECENT ACCOUNTING PRONOUNCEMENTS
In September, 2006, the FASB issued Statement of Financial Accounting Standards
No. 157, "Fair Valuation Measurements" ("FAS 157"). This standard clarifies the
definition of fair value for financial reporting, establishes a framework for
measuring fair value and requires additional disclosures about the use of fair
value measurements. FAS 157 is effective for financial statements issued for
fiscal years beginning after November 15, 2007 and interim periods within those
fiscal years. As of December 31, 2007, the Funds do not believe the adoption of
FAS 157 will impact the amounts reported in the financial statements, however,
additional disclosure will be required about the inputs used to develop
measurements of fair value and the effect of certain of the measurements
reported in the statement of operations for a fiscal period.
Note 9 - SUBSEQUENT EVENT:
In December 2007 the Board of Trustees announced a change to a calendar quarter
dividend cycle; dividends were previously distributed on the last day of
February, May, August and November. As a result, a quarterly dividend of $0.2525
was declared on December 3, 2007, payable on December 31, 2007, to shareholders
of record December 14, 2007. The Fund expects to announce the next regular
quarterly dividend on March of 2008.
24 | Annual Report | December 31, 2007
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
Report of INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
TS&W/CLAYMORE TAX-ADVANTAGED BALANCED FUND
We have audited the accompanying statement of assets and liabilities of
TS&W/Claymore Tax-Advantaged Balanced Fund (the "Fund"), including the portfolio
of investments, as of December 31, 2007, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of the
three years in the period then ended and for the period from April 28, 2004
(commencement of investment operations) through December 31, 2004. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement.
Our audits included consideration of internal control over financial reporting
as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of December 31, 2007, by correspondence with the custodian
and brokers or by other appropriate auditing procedures where replies from
brokers were not received. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
TS&W/Claymore Tax-Advantaged Balanced Fund at December 31, 2007, and the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial highlights for
each of the three years in the period then ended and for the period from April
28, 2004 (commencement of investment operations) through December 31, 2004, in
conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
February 20, 2008
Annual Report | December 31, 2007 | 25
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
Supplemental INFORMATION | (unaudited)
FEDERAL INCOME TAX INFORMATION
Qualified dividend income of as much as $5,137,956 was received by the Fund
through December 31, 2007. The Fund intends to designate the maximum amount of
dividends that qualify for the reduced tax rate pursuant to the Jobs and Growth
Tax Relief Reconciliation Act of 2003.
For corporate shareholders, $4,345,915 of investment income qualifies for the
dividends-received deduction.
Subchapter M on the Internal Revenue Code of 1986, as amended, requires the Fund
to advise shareholders within 60 days of the Fund's tax year end as to the
federal tax status of dividends and distributions received by shareholders
during such tax period. The Fund hereby designates $12,833,918 as long-term
capital gains according to IRC Section 852(b)(3)(C). The Fund hereby designates
$7,772,917 as tax-exempt income according to IRC Section 852(b)(5)(A).
In January 2008, you will be advised on IRS Form 1099 DIV or substitute 1099 DIV
as to the federal tax status of the distributions received by you in the
calendar year 2007.
TRUSTEES
The Trustees of the TS&W/Claymore Tax-Advantaged Balanced Fund and their
principal occupations during the past five years:
NAME, ADDRESS*, YEAR TERM OF OFFICE** PRINCIPAL OCCUPATION DURING NUMBER OF PORTFOLIOS
OF BIRTH AND POSITION(S) AND LENGTH OF THE PAST FIVE YEARS AND IN FUND COMPLEX*** OTHER DIRECTORSHIPS
HELD WITH REGISTRANT TIME SERVED OTHER AFFILIATIONS OVERSEEN BY TRUSTEE HELD BY TRUSTEE
- ------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES:
- ------------------------------------------------------------------------------------------------------------------------------------
Randall C. Barnes Since 2005 Investor (2001-present). 47 None.
Year of Birth: 1951 Previously, Senior Vice
Trustee President & Treasurer
(1993-1997), President, Pizza
Hut International (1991-1993)
and Senior Vice President,
Strategic Planning and New
Business Development (1987-1990)
of PepsiCo, Inc. (1987-1997).
- ------------------------------------------------------------------------------------------------------------------------------------
Steven D. Cosler Since 2005 Previously, President, Chief 2 Trustee, SXC
Year of Birth: 1955 Executive Officer and Director Health Solutions.
Trustee of Priority Healthcare Corp.
(2002-2005). Previously,
President and Chief Operating
Officer of Priority Healthcare
Corp. (2001-2002). Previously,
Executive Vice President and
Chief Operating Officer of
Priority Healthcare Corp.
(2000-2001).
- ------------------------------------------------------------------------------------------------------------------------------------
Robert M. Hamje Since 2004 Advisor to the Cleveland 2 Trustee, Old Mutual
Year of Birth: 1942 Foundation Investment Committee. Advisor Mutual
Trustee Previously, President and Chief Funds.
Investment Officer of TRW
Investment Management Co.
(1990-2003).
- ------------------------------------------------------------------------------------------------------------------------------------
L. Kent Moore Since 2004 Partner at WilSource Enterprise 2 Trustee, Old Mutual
Year of Birth: 1955 (December 2005-present). Advisor Mutual
Trustee Previously, Managing Director Funds.
High Sierra Energy L.P.,
(2004-2005). Previously,
Portfolio Manager and Vice
President of Janus Capital Corp.
(2000-2002) and Senior
Analyst/Portfolio Manager of
Marsico Capital Management
(1997-1999).
- ------------------------------------------------------------------------------------------------------------------------------------
Ronald A. Nyberg Since 2004 Partner of Nyberg & Cassioppi, 50 None.
Year of Birth: 1953 LLC, a law firm specializing in
Trustee corporate law, estate planning
and business transactions
(2000-present). Previously,
Executive Vice President,
General Counsel and Corporate
Secretary of Van Kampen
Investments (1982-1999).
- ------------------------------------------------------------------------------------------------------------------------------------
Ronald E. Toupin, Jr. Since 2004 Previously, Vice President, 47 None.
Year of Birth: 1958 Manager and Portfolio Manager of
Trustee Nuveen Asset Management
(1998-1999), Vice President of
Nuveen Investment Advisory Corp.
(1992-1999), Vice President and
Manager of Nuveen Unit
Investment Trusts (1991-1999),
and Assistant Vice President and
Portfolio Manager of Nuveen Unit
Investment Trusts (1988-1999),
each of John Nuveen & Co., Inc.
(1982-1999).
- ------------------------------------------------------------------------------------------------------------------------------------
* Address for all Trustees: 2455 Corporate West Drive, Lisle, IL 60532
** After a Trustees' initial term, each Trustee is expected to serve a
three-year term concurrent with the class of Trustees for which he serves:
- Messrs. Barnes, Dalmaso and Hamje, as Class I Trustees, are expected
to stand for re-election at the Fund's 2008 annual meeting of
shareholders.
- Messrs. Moore and Nyberg, as Class II Trustees, are expected to stand
for re-election at the Fund's 2009 annual meeting of shareholders.
- Messrs. Applestein, Cosler and Toupin, as Class III Trustees, are
expected to stand for re-election at the Fund's 2010 annual meeting of
shareholders.
*** The Claymore Fund Complex consists of U.S. registered investment companies
advised or serviced by Claymore Advisors, LLC or Claymore Securities, Inc.
The Claymore Fund Complex is overseen by multiple Boards of Trustees.
+ Mr. Appelstein is an "interested person" (as defined in Section 2(a)(19) of
the 1940 Act) of the Fund because of his position as an officer of Old
Mutual Asset Management, the parent company of the Fund's Sub-Adviser.
++ Mr. Dalmaso is an "interested person" (as defined in Section 2(a)(19) of
the 1940 Act) of the Fund because of his position as an officer of Claymore
Advisors, LLC, the Fund's Investment Adviser.
26 | Annual Report | December 31, 2007
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | SUPPLEMENTAL INFORMATION
(unaudited) continued
NAME, ADDRESS*, YEAR TERM OF OFFICE** PRINCIPAL OCCUPATION DURING NUMBER OF PORTFOLIOS
OF BIRTH AND POSITION(S) AND LENGTH OF THE PAST FIVE YEARS AND IN FUND COMPLEX*** OTHER DIRECTORSHIPS
HELD WITH REGISTRANT TIME SERVED OTHER AFFILIATIONS OVERSEEN BY TRUSTEE HELD BY TRUSTEE
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES:
- ------------------------------------------------------------------------------------------------------------------------------------
Matthew J. Appelstein+ Since 2005 Senior Vice President of Product 2 None.
Year of Birth: 1961 Strategy and Retirement Solutions
Trustee Planning, Director of Investment
Services, Old Mutual Asset
Management (2003-present).
Previously, Senior Vice President
of Consulting Relationships,
Fidelity Management Trust Co.
(1998-2003).
- ------------------------------------------------------------------------------------------------------------------------------------
Nicholas Dalmaso++ Since 2004 Senior Managing Director and Chief 50 None.
Year of Birth: 1965 Administrative Officer of Claymore
Trustee; Chief Executive and Advisors, LLC and Claymore
Legal Officer Securities, Inc. (2007-present).
Previously, Senior Managing
Director and General Counsel of
Claymore Group, Inc., Claymore
Advisors, LLC and Claymore
Securities, Inc. (2001-2007).
Assistant General Counsel, John
Nuveen and Co., Inc. (1999-2001).
Former Vice President and Associate
General Counsel of Van Kampen
Investments, Inc. (1992-1999).
- ------------------------------------------------------------------------------------------------------------------------------------
* Address for all Trustees: 2455 Corporate West Drive, Lisle, IL 60532
** After a Trustees' initial term, each Trustee is expected to serve a
three-year term concurrent with the class of Trustees for which he serves:
- Messrs. Barnes, Dalmaso and Hamje, as Class I Trustees, are expected
to stand for re-election at the Fund's 2008 annual meeting of
shareholders.
- Messrs. Moore and Nyberg, as Class II Trustees, are expected to stand
for re-election at the Fund's 2009 annual meeting of shareholders.
- Messrs. Applestein, Cosler and Toupin, as Class III Trustees, are
expected to stand for re-election at the Fund's 2010 annual meeting of
shareholders.
*** The Claymore Fund Complex consists of U.S. registered investment companies
advised or serviced by Claymore Advisors, LLC or Claymore Securities, Inc.
The Claymore Fund Complex is overseen by multiple Boards of Trustees.
+ Mr. Appelstein is an "interested person" (as defined in Section 2(a)(19) of
the 1940 Act) of the Fund because of his position as an officer of Old
Mutual Asset Management, the parent company of the Fund's Sub-Adviser.
++ Mr. Dalmaso is an "interested person" (as defined in Section 2(a)(19) of
the 1940 Act) of the Fund because of his position as an officer of Claymore
Advisors, LLC, the Fund's Investment Adviser.
OFFICERS
The Officers of the TS&W/Claymore Tax-Advantaged Balanced Fund and their
principal occupations during the past five years:
NAME, ADDRESS*, YEAR OF BIRTH AND TERM OF OFFICE** AND PRINCIPAL OCCUPATION DURING THE PAST FIVE YEARS
POSITION(S) HELD WITH REGISTRANT LENGTH OF TIME SERVED AND OTHER AFFILIATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICERS:
- ------------------------------------------------------------------------------------------------------------------------------------
Steven M. Hill Since 2004 Senior Managing Director of Claymore Advisors, LLC and Claymore
Year of Birth: 1964 Securities, Inc. (2005-present). Previously, Chief Financial
Chief Financial Officer, Officer of Claymore Group, Inc. (2005-2006); Managing Director of
Chief Accounting Officer Claymore Advisors, LLC and Claymore Securities, Inc. (2003-2005);
and Treasurer Previously, Treasurer of Henderson Global Funds and Operations
Manager of Henderson Global Investors (NA) Inc. (2002-2003);
Managing Director, FrontPoint Partners LLC (2001-2002); Vice
President, Nuveen Investments (1999-2001).
- ------------------------------------------------------------------------------------------------------------------------------------
Vincent R. Giordano Since 2004 Senior Managing Director of SMC Fixed Income Management, LP.***
Year of Birth: 1948 Previously, Senior Managing Director of Claymore Advisors, LLC
Vice President (2004-2006); Senior Vice President and Portfolio Manager of
Merrill Lynch Asset Management, Inc. (1985-2001).
- ------------------------------------------------------------------------------------------------------------------------------------
George Gregorio Since 2004 Managing Director of SMC Fixed Income Management, LP.***
Year of Birth: 1949 Previously, Managing Director of Claymore Advisors, LLC
Vice President (2004-2006); Sell Side Analyst for JB Hanauer & Co.
- ------------------------------------------------------------------------------------------------------------------------------------
Roberto W. Roffo Since 2004 Managing Director of SMC Fixed Income Management, LP.***
Year of Birth: 1966 Previously, Managing Director of Claymore Advisors, LLC
Vice President (2004-2006); Director and Vice President of Merrill Lynch
Investment Managers.
- ------------------------------------------------------------------------------------------------------------------------------------
Bruce Saxon Since 2006 Vice President, Fund Compliance Officer of Claymore Group, Inc.
Year of Birth: 1957 (2006-present). Previously, Chief Compliance Officer/Assistant
Chief Compliance Officer Secretary of Harris Investment Management, Inc. (2003-2006);
Director-Compliance of Harrisdirect LLC (1999-2003).
- ------------------------------------------------------------------------------------------------------------------------------------
Matthew Patterson Since 2006 Vice President, Assistant General Counsel of Claymore Group, Inc.
Year of Birth: 1971 (2006- Present). Secretary of certain funds in the Fund Complex.
Secretary Previously, Chief Compliance Officer and Clerk, The Preferred
Group of Mutual Funds (2005-2006). Chief Compliance Officer and
Secretary, Caterpillar Investment Management Ltd (2005-2006).
Securities Counsel, Caterpillar Inc. (2004-2006); Associate,
Skadden, Arps, Slate, Meagher & Flom LLP (2002-2004).
- ------------------------------------------------------------------------------------------------------------------------------------
James Howley Since 2007 Vice President, Fund Administration of Claymore Securities, Inc.
Year of birth: 1972 (2004-present). Formerly, Manager, Mutual Fund Administration of
Assistant Treasurer Van Kampen Investments, Inc. (1996-2004).
- ------------------------------------------------------------------------------------------------------------------------------------
Melissa Nguyen Since 2005 Vice President, Assistant General Counsel of Claymore Group Inc.
Year of birth: 1978 (2005-present). Formerly, Associate, Vedder, Price, Kaufman &
Assistant Secretary Kammholz, P.C. (2003-2005).
- ------------------------------------------------------------------------------------------------------------------------------------
* Address for all Officers: 2455 Corporate West Drive, Lisle, IL 60532
** Officers serve at the pleasure of the Board of Trustees and until his or
her successor is appointed and qualified or until his or her earlier
resignation or removal.
*** Effective July 11, 2006.
Annual Report | December 31, 2007 | 27
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
Dividend Reinvestment PLAN | (unaudited)
Unless the registered owner of common shares elects to receive cash by
contacting the Plan Administrator, all dividends declared on common shares of
the Fund will be automatically reinvested by The Bank of New York (the "Plan
Administrator"), Administrator for shareholders in the Fund's Dividend
Reinvestment Plan (the "Plan"), in additional common shares of the Fund.
Participation in the Plan is completely voluntary and may be terminated or
resumed at any time without penalty by notice if received and processed by the
Plan Administrator prior to the dividend record date; otherwise such termination
or resumption will be effective with respect to any subsequently declared
dividend or other distribution. Some brokers may automatically elect to receive
cash on your behalf and may re-invest that cash in additional common shares of
the Fund for you. If you wish for all dividends declared on your common shares
of the Fund to be automatically reinvested pursuant to the Plan, please contact
your broker.
The Plan Administrator will open an account for each common shareholder under
the Plan in the same name in which such common shareholder's common shares are
registered. Whenever the Fund declares a dividend or other distribution
(together, a "Dividend") payable in cash, non-participants in the Plan will
receive cash and participants in the Plan will receive the equivalent in common
shares. The common shares will be acquired by the Plan Administrator for the
participants' accounts, depending upon the circumstances described below, either
(i) through receipt of additional unissued but authorized common shares from the
Fund ("Newly Issued Common Shares") or (ii) by purchase of outstanding common
shares on the open market ("Open-Market Purchases") on the New York Stock
Exchange or elsewhere. If, on the payment date for any Dividend, the closing
market price plus estimated brokerage commission per common share is equal to or
greater than the net asset value per common share, the Plan Administrator will
invest the Dividend amount in Newly Issued Common Shares on behalf of the
participants. The number of Newly Issued Common Shares to be credited to each
participant's account will be determined by dividing the dollar amount of the
Dividend by the net asset value per common share on the payment date; provided
that, if the net asset value is less than or equal to 95% of the closing market
value on the payment date, the dollar amount of the Dividend will be divided by
95% of the closing market price per common share on the payment date. If, on the
payment date for any Dividend, the net asset value per common share is greater
than the closing market value plus estimated brokerage commission, the Plan
Administrator will invest the Dividend amount in common shares acquired on
behalf of the participants in Open-Market Purchases.
If, before the Plan Administrator has completed its Open-Market Purchases, the
market price per common share exceeds the net asset value per common share, the
average per common share purchase price paid by the Plan Administrator may
exceed the net asset value of the common shares, resulting in the acquisition of
fewer common shares than if the Dividend had been paid in Newly Issued Common
Shares on the Dividend payment date. Because of the foregoing difficulty with
respect to Open-Market Purchases, the Plan provides that if the Plan
Administrator is unable to invest the full Dividend amount in Open-Market
Purchases during the purchase period or if the market discount shifts to a
market premium during the purchase period, the Plan Administrator may cease
making Open-Market Purchases and may invest the uninvested portion of the
Dividend amount in Newly Issued Common Shares at net asset value per common
share at the close of business on the Last Purchase Date provided that, if the
net asset value is less than or equal to 95% of the then current market price
per common share; the dollar amount of the Dividend will be divided by 95% of
the market price on the payment date.
The Plan Administrator maintains all shareholders' accounts in the Plan and
furnishes written confirmation of all transactions in the accounts, including
information needed by shareholders for tax records. Common shares in the account
of each Plan participant will be held by the Plan Administrator on behalf of the
Plan participant, and each shareholder proxy will include those shares purchased
or received pursuant to the Plan. The Plan Administrator will forward all proxy
solicitation materials to participants and vote proxies for shares held under
the Plan in accordance with the instruction of the participants.
There will be no brokerage charges with respect to common shares issued directly
by the Fund. However, each participant will pay a pro rata share of brokerage
commission incurred in connection with Open-Market Purchases. The automatic
reinvestment of Dividends will not relieve participants of any Federal, state or
local income tax that may be payable (or required to be withheld) on such
Dividends.
The Fund reserves the right to amend or terminate the Plan. There is no direct
service charge to participants with regard to purchases in the Plan; however,
the Fund reserves the right to amend the Plan to include a service charge
payable by the participants.
All correspondence or questions concerning the Plan should be directed to the
Plan Administrator, The Bank of New York, P.O. Box 463, East Syracuse, New York
13057-0463, Attention: Shareholder Services Department, Phone Number: (866)
488-3559.
28 | Annual Report | December 31, 2007
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
Fund INFORMATION
BOARD OF TRUSTEES OFFICERS INVESTMENT MANAGER - PREFERRED STOCK -
Matthew J. Appelstein* Nicholas Dalmaso EQUITY AND INCOME DIVIDEND PAYING AGENT
Chief Executive and Thompson, Siegel & The Bank of New York
Randall C. Barnes Legal Officer Walmsley LLC New York, New York
Richmond, Virginia
Steven D. Cosler Steven M. Hill LEGAL COUNSEL
Chief Financial Officer, INVESTMENT MANAGER - Skadden, Arps, Slate,
Nicholas Dalmaso* Chief Accounting Officer MUNICIPALS Meagher & Flom LLP
and Treasurer SMC Fixed Income Chicago, Illinois
Robert M. Hamje Management, LP
Vincent R. Giordano Princeton, New Jersey INDEPENDENT REGISTERED
L. Kent Moore Vice President PUBLIC ACCOUNTING FIRM
INVESTMENT ADVISER Ernst & Young LLP
Ronald A. Nyberg George Gregorio AND ADMINISTRATOR Chicago, Illinois
Vice President Claymore Advisors, LLC
Ronald E. Toupin, Jr. Lisle, Illinois
Roberto W. Roffo
Vice President ACCOUNTING AGENT,
CUSTODIAN AND
Bruce Saxon TRANSFER AGENT
Chief Compliance Officer The Bank of New York
New York, New York
Matthew Patterson
Secretary
James Howley
Assistant Treasurer
Melissa Nguyen
Assistant Secretary
* Trustee is an "interested person" of the Fund as defined in the Investment
Company Act of 1940, as amended.
PRIVACY PRINCIPLES OF TS&W/CLAYMORE TAX-ADVANTAGED BALANCED FUND FOR
SHAREHOLDERS
The Fund is committed to maintaining the privacy of its shareholders and to
safeguarding its non-public personal information. The following information is
provided to help you understand what personal information the Fund collects, how
we protect that information and why, in certain cases, we may share information
with select other parties.
Generally, the Fund does not receive any non-public personal information
relating to its shareholders, although certain non-public personal information
of its shareholders may become available to the Fund. The Fund does not disclose
any non-public personal information about its shareholders or former
shareholders to anyone, except as permitted by law or as is necessary in order
to service shareholder accounts (for example, to a transfer agent or third party
administrator).
The Fund restricts access to non-public personal information about the
shareholders to Claymore Advisors, LLC employees with a legitimate business need
for the information. The Fund maintains physical, electronic and procedural
safeguards designed to protect the non-public personal information of its
shareholders.
Questions concerning your shares of TS&W/Claymore Tax-Advantaged Balanced Fund?
o If your shares are held in a Brokerage Account, contact your Broker.
o If you have physical possession of your shares in certificate form,
contact the Fund's Custodian and Transfer Agent: The Bank of New York,
101 Barclay 11E, New York, NY 12086 (866) 488-3559
This report is sent to shareholders of TS&W/Claymore Tax-Advantaged Balanced
Fund for their information. It is not a Prospectus, circular or representation
intended for use in the purchase or sale of shares of the Fund or of any
securities mentioned in this report.
A description of the Fund's proxy voting policies and procedures related to
portfolio securities is available without charge, upon request, by calling the
Fund at (800) 345-7999 or on the Securities & Exchange Commission's ("SEC's")
website at http://www.sec.gov.
Information regarding how the Fund voted proxies for portfolio securities, if
applicable, during the most recent 12-month period ended June 30, is also
available, without charge and upon request by calling the Fund at (800) 345-7999
or by accessing the Fund's Form N-PX on the SEC's website at http://www.sec.gov.
The Fund files it complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The Fund's Form N-Q is
available on the SEC website at http://www.sec.gov. The Fund's Form N-Q may also
be viewed and copied at the SEC's Public Reference Room in Washington, DC;
information on the operation of the Public Reference Room may be obtained by
calling (800) SEC-0330 or at www.claymore.com.
In June 2007, the Fund submitted a CEO annual certification to the NYSE in which
the Fund's principal executive officer certified that he was not aware, as of
the date of the certification, of any violation by the Fund of the NYSE's
Corporate Governance listing standards. In addition, as required by Section 302
of the Sarbanes-Oxley Act of 2002 and related SEC rules, the Fund's principal
executive and principal financial officers have made quarterly certifications,
included in filings with the SEC on Forms N-CSR and N-Q, relating to, among
other things, the Fund's disclosure controls and procedures and internal control
over financial reporting.
Annual Report | December 31, 2007 | 29
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
About the FUND MANAGER
TS&W/Claymore Tax-Advantaged Balanced Fund (TYW) is managed jointly by seasoned
investment professionals from SMC Fixed Income Management, LP and Thompson,
Siegel & Walmsley LLC. The teams employ their specialized experience to
different sleeves within the Fund, but work closely with one another to
collectively guide the overall operations of TYW.
CLAYMORE ADVISORS, LLC
Claymore Advisors, LLC is a registered investment adviser that provides
investment management and research-related services to registered investment
companies. Claymore Advisors, LLC is responsible for the Fund's overall asset
allocation.
SMC FIXED INCOME MANAGEMENT, LP
SMC Fixed Income Management, LP ("SMC") is a subsidiary of Spring Mountain
Capital LP ("Spring Mountain"). Spring Mountain is an investment management firm
founded in July 2001 that specializes in alternative investments and advisory
services for both broad asset allocation and/or focused portfolios.
SMC'S INVESTMENT PHILOSOPHY AND PROCESS
SMC attempts to identify investment grade and below-investment grade municipal
securities that are trading at attractive valuations relative to the Firm's
evaluation of the issuer's creditworthiness, and with respect to private
activity bonds, the profit potential of the corporation from which the revenue
supporting the bonds is derived.
The municipal management team begins their credit selection process by analyzing
broad macroeconomic trends and developments affecting the fixed-income markets.
The managers analyze the economic outlook, market conditions and perceived
effects on interest rates and yield curves. From there they incorporate a
bottom-up and top-down analysis that helps construct a portfolio that the
managers believe optimizes federally tax-exempt income while seeking to avoid
undue credit risk and market timing risk. SMC's proprietary, unbiased research
helps the managers identify undervalued sectors that they believe have the
potential for ratings upgrades and capital appreciation.
THOMPSON, SIEGEL & WALMSLEY LLC (TS&W)
Thompson, Siegel & Walmsley LLC (TS&W) is a registered investment adviser
founded in 1969 in Richmond, Virginia and provides investment management
services to corporations, pension and profit-sharing plans, 401(k) and thrift
plans, open and closed-end mutual funds, trusts, estates and other institutions
and individuals. The firm is a wholly owned subsidiary of Old Mutual (US)
Holdings Inc. TS&W is responsible for the day-to-day management of the equity
and taxable income securities portion of the Fund.
TS&W INVESTMENT PHILOSOPHY AND PROCESS
Thompson, Siegel & Walmsley LLC's investment process is value-driven and
team-oriented. TS&W pursues a relative value-oriented philosophy and focuses its
equity selection on the higher dividend-paying stocks that meet its investment
criteria. TS&W employs a proprietary quantitative valuation model that is
applied to more than 400 stocks. This directs the managers' review process
toward companies that they believe have the highest expected return potential
over a multi-year period. TS&W's in-house research analysts are responsible for
validating the model inputs for companies under their coverage and monitoring
them over the holding period. Buys and sells are discussed at weekly research
meetings or more frequently as needed. TS&W's Fixed-Income team is responsible
for overall bond market strategy as well as security selection. In-house
analysts are used to support the credit review process.
30 | Annual Report | December 31, 2007
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
(This page is intentionally left blank)
Annual Report | December 31, 2007 | 31
CLAYMORE SECURITIES, INC.
2455 Corporate West Drive
Lisle, IL 60532
Member FINRA/SIPC
NOT FDIC-INSURED | NOT BANK-GUARANTEED | MAY LOSE VALUE
TYW
LISTED
NYSE
TYW-AR-1207
ITEM 2. CODE OF ETHICS.
(a) The registrant has adopted a code of ethics (the "Code of Ethics") that
applies to its principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions.
(b) No information need be disclosed pursuant to this paragraph.
(c) During the period covered by the annual report, the Code of Ethics was
revised to include more detail regarding the procedures to be followed for
investigating, enforcing and reporting Code of Ethics issues.
(d) The registrant has not granted a waiver or an implicit waiver to its
principal executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions from a provision
of its Code of Ethics during the period covered by this report.
(e) Not applicable.
(f) (1) The registrant's Code of Ethics is attached hereto as an exhibit.
(2) Not applicable.
(3) Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Trustees has determined that it has at least one audit
committee financial expert serving on its audit committee, Ronald E. Toupin, Jr.
Mr. Toupin is an "independent" Trustee for purposes of Item 3 of Form N-CSR. Mr.
Toupin qualifies as an audit committee financial expert by virtue of his
experience obtained as a portfolio manager and research analyst, which included
review and analysis of offering documents and audited and unaudited financial
statements using GAAP to show accounting estimates, accruals and reserves.
(Under applicable securities laws, a person who is determined to be an audit
committee financial expert will not be deemed an "expert" for any purpose,
including without limitation for the purposes of Section 11 of the Securities
Act of 1933, as amended, as a result of being designated or identified as an
audit committee financial expert. The designation or identification of a person
as an audit committee financial expert does not impose on such person any
duties, obligations, or liabilities that are greater than the duties,
obligations, and liabilities imposed on such person as a member of the audit
committee and Board of Trustees in the absence of such designation or
identification. The designation or identification of a person as an audit
committee financial expert doesn't affect the duties, obligations or liability
of any other member of the audit committee or Board of Trustees.)
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees: the aggregate fees billed for the fiscal year 2007 for
professional services rendered by the principal accountant for the audit of the
registrant's annual financial statements were approximately $39,000. The
aggregate fees billed for the fiscal year 2006 for professional services
rendered by the principal accountant for the audit of the registrant's annual
financial statements were $37,000.
(b) Audit-Related Fees: the aggregate fees billed for the fiscal year 2007 for
assurance and related services by the principal accountant that are reasonably
related to the performance of the audit of the registrant's financial statements
and are not reported under paragraph (a) of this Item were $6,000. The
Audit-Related Fees for the fiscal year 2006 were $5,500. Specifically, this
amount represents the amount paid for the audit of the preferred shares asset
coverage test.
(c) Tax Fees: the aggregate fees billed for the fiscal year 2007, for
professional services rendered by the principal accountant for tax compliance,
tax advice, and tax planning were $7,000. The Tax Fees for the fiscal year 2006
were $6,000.
(d) All Other Fees: the aggregate fees billed for the fiscal year 2007, for
products and services provided by the principal accountant, other than the
services reported in paragraphs (a) and (c) of this Item were $0. The Other
Audit Fees for the fiscal year 2005 were $0.
The registrant's principal accountant did not bill fees for services not
included in Items 4(b), (c) or (d) above that required pre-approval by the Audit
Committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X during
the Registrant's last two fiscal years.
(e) Audit Committee Pre-Approval Policies and Procedures.
The Registrant's audit committee reviews, and in its sole discretion,
pre-approves, pursuant to written pre-approval procedures (A) all engagements
for audit and non-audit services to be provided by the principal accountant to
the registrant and (B) all engagements for non-audit services to be provided by
the principal accountant (1) to the registrant's investment adviser (not
including a sub-adviser whose role is primarily portfolio management and is
sub-contracted or overseen by another investment adviser) and (2) to any entity
controlling, controlled by or under common control with the registrant's
investment adviser that provides ongoing services to the registrant; but in the
case of the services described in subsection (B)(1) or (2), only if the
engagement relates directly to the operations and financial reporting of the
registrant; provided that such pre-approval need not be obtained in
circumstances in which the pre-approval requirement is waived under rules
promulgated by the Securities and Exchange Commission or New York Stock Exchange
listing standards. Sections IV.C.2 and IV.C.3 of the Audit Committee's revised
Audit Committee Charter contain the Audit Committee's Pre-Approval Policies and
Procedures and such sections are included below.
IV.C.2 Pre-approve any engagement of the independent auditors to provide any
non-prohibited services to the Trust, including the fees and other
compensation to be paid to the independent auditors (unless an exception is
available under Rule 2-01 of Regulation S-X).
(a) The Chairman or any member of the Audit Committee may grant the
pre-approval of services to the Fund for non-prohibited services up to
$10,000. All such delegated pre-approvals shall be presented to the
Audit Committee no later than the next Audit Committee meeting.
IV.C.3 Pre-approve any engagement of the independent auditors, including the
fees and other compensation to be paid to the independent auditors, to
provide any non-audit services to the Adviser (or any "control affiliate"
of the Adviser providing ongoing services to the Trust), if the engagement
relates directly to the operations and financial reporting of the Trust
(unless an exception is available under Rule 2-01 of Regulation S-X).
(a) The Chairman or any member of the Audit Committee may grant the
pre-approval for non-prohibited services to the Adviser up to $10,000.
All such delegated pre-approvals shall be presented to the Audit
Committee no later than the next Audit Committee meeting.
(ii) None of the services described in each of Items 4(b) through (d) were
approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01
of Regulation S-X.
(f) Not Applicable.
(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, the registrant's investment adviser and any
entity controlling, controlled by, or under common control with the adviser that
provides ongoing services to the registrant (not including a sub-adviser whose
role is primarily portfolio management and is sub-contracted with or overseen by
another investment adviser) that directly related to the operations and
financial reporting of the registrant for the fiscal year 2007 were $13,000 and
for the fiscal year 2006 were $11,500.
(h) Not Applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
(a) The registrant has a separately designated standing audit committee
established in accordance with Section 3(a)(58)(A) of the Securities Exchange
Act of 1934. The audit committee of the registrant is comprised of: Randall C.
Barnes, Steven D. Cosler, Robert M. Hamje, L. Kent Moore, Ronald A. Nyberg and
Ronald E. Toupin, Jr.
(b) Not Applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
The Schedule of Investments is included as part of Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
The registrant has delegated the voting of proxies relating to its voting
securities to the investment sub-adviser of its equity portfolio, Thompson,
Siegel & Walmsley, LLC. ("TS&W"). TS&W's Proxy Voting Policies and Procedures
are included as an exhibit hereto.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
(a)(1) TS&W is responsible for the day-to-day management of the equity and
income securities portion of the registrant's portfolio. SMC Fixed Income
Management, LP ("SMC") also serves as investment sub-adviser to the registrant
and is responsible for the day-to-day management of the municipal securities
portion of the registrant's portfolio.
TS&W Portfolio Managers
The following individuals at TS&W share primary responsibility for the
management of the equity and income securities portion of the registrant's
portfolio:
NAME SINCE PROFESSIONAL EXPERIENCE
William M. Bellamy, CFA, 2004 Mr. Bellamy has over 17 years of experience working with fixed
Vice President and income securities. Prior to joining Thompson, Siegel & Walmsley, LLC
Portfolio Manager in 2002, Mr. Bellamy was with Trusco Capital Management where
he served as a Vice President, Fixed Income Portfolio Manager.
Prior to Trusco, he was employed with First Union Capital Markets,
Clayton Brown & Associates and Merrill Lynch Capital Markets in
Institutional Fixed Income Sales. Mr. Bellamy received his
Bachelor of Science from Cornell University and his MBA from Duke
University.
Paul A. Ferwerda, CFA, 2004 Mr. Ferwerda is a member of the Investment Policy Committee and
Senior Vice President and brings to the investment team 20 years experience with the firm
Portfolio Manager, Domestic and 24 years overall investment experience. Mr. Ferwerda
Equity and Research contributes significant research expertise within the Financial
sector. Prior to joining the firm, Mr. Ferwerda was a Portfolio
Manager with AmSouth Bank in Birmingham, AL. He received his
Bachelor of Science degree from Auburn University and his MBA from
Duke University.
Mr. Ferwerda is responsible for managing the qualified dividend income ("QDI")
portion of the Fund. Mr. Bellamy is responsible for managing the non-QDI portion
of the Fund, including high yield bonds, preferred stocks and real estate
investment trusts.
SMC Portfolio Managers
The following individuals at SMC share primary responsibility for the management
of the municipal securities portion of the registrant's portfolio:
NAME SINCE PROFESSIONAL EXPERIENCE
Vincent R. Giordano 2004 Senior Managing Director and Portfolio Manager of SMC Fixed Income
Management. Previously, Senior Managing Director of Claymore
Advisors, LLC; Senior Vice President and Portfolio Manager of
Merrill Lynch Asset Management, Inc.
Roberto W. Roffo 2004 Senior Managing Director and Portfolio Manager of SMC Fixed Income
Management. Previously, Senior Managing Director of Claymore
Advisors, LLC; Director and Vice President of Merrill Lynch
Investment Managers.
Mr. Roffo is responsible for identifying investment opportunities and executing
transactions on behalf of the municipal securities portion of the registrant's
portfolio. Mr. Giordano oversees Mr. Roffo's activities and works jointly with
Mr. Roffo to formulate investment strategies.
The information disclosed in this paragraph (a)(1) of Item 8 is provided as of
March 9, 2007.
(a)(2)
TS&W Other Accounts Managed
TS&W does not manage any accounts for which the advisory fee is based upon the
performance of the account. The following table summarizes information regarding
each of the other accounts managed by the TS&W portfolio managers as of December
31, 2007:
REGISTERED INVESTMENT OTHER POOLED INVESTMENT
COMPANIES VEHICLES OTHER ACCOUNTS
- -----------------------------------------------------------------------------------------------------------------------------
NAME # OF # OF # OF
ACCOUNTS TOTAL ASSETS ACCOUNTS TOTAL ASSETS ACCOUNTS TOTAL ASSETS
- -----------------------------------------------------------------------------------------------------------------------------
William M. Bellamy 1 $35,012,170 0 0 23 $362,185,100
Paul A. Ferwerda 0 0 0 0 30 $320,500,00
SMC Other Accounts Managed
SMC does not manage any accounts for which the advisory fee is based upon the
performance of the account. The following table summarizes information regarding
each of the other accounts managed by the SMC portfolio managers as of December
31, 2007:
REGISTERED INVESTMENT OTHER POOLED INVESTMENT
COMPANIES VEHICLES OTHER ACCOUNTS
- -----------------------------------------------------------------------------------------------------------------------------
NAME # OF # OF # OF
ACCOUNTS TOTAL ASSETS ACCOUNTS TOTAL ASSETS ACCOUNTS TOTAL ASSETS
- -----------------------------------------------------------------------------------------------------------------------------
Vincent R. Giordano 1 $17,000,000 0 0 3 $19,000,000
Roberto W. Roffo 1 $17,000,000 0 0 $19,000,000
TS&W Potential Conflicts of Interest
Two of the other accounts TS&W advises are long-short accounts and may sell
securities short, including securities with respect to which other accounts
managed by TS&W hold long positions. Procedures are in place to ensure that no
primary holdings in accounts managed by TS&W will be shorted by any other
account advised by TS&W. The term "primary holdings" refer to any core holding
in any of the firm's equity products. Primary holdings specifically exclude
miscellaneous securities most frequently held in the taxable portfolios of
TS&W's clients.
Mr. Bellamy and Mr. Ferwerda do not manage accounts that can short securities.
The portfolio managers responsible for those portfolios that can short
securities are not separated from the rest of TS&W's investment personnel and
therefore have access to full information about TS&W's investment research and
the strategies being employed for accounts managed by TS&W.
Some other accounts managed by TS&W pay TS&W management fees at rates comparable
to and in some cases lower than those paid by the registrant and other accounts
managed by TS&W. The long-short accounts that TS&W manages have performance fee
incentives. As a result, TS&W may have a conflict between its own
interests and the interests of its other investment advisory clients in managing
these long-short accounts. The Sub-Adviser has adopted various procedures and
safeguards to mitigate these potential conflicts.
SMC Potential Conflicts of Interest
At times there may be instances when securities are being purchased or sold by
SMC for more than one account. On a daily basis, SMC's Chief Compliance Officer
reviews and approves all trades for all accounts assuring that there has been
fair allocation among accounts. When necessary, SMC's Chief Compliance Officer
will question the portfolio managers to assure fair allocation among all
accounts managed has taken place.
(a)(3)
TS&W Portfolio Manager Compensation
TS&W compensates Mr. Bellamy and Mr. Ferwerda for their management of the equity
and income producing securities portion of the registrant's portfolio.
Compensation is comprised of a fixed base salary and discretionary performance
bonus that is based on the overall success of the firm, an individual's
responsibility and his/her performance versus expectations, which are reviewed
annually. That evaluation includes the professional's own self-assessment of
their years' work relative to their responsibilities and also includes peer and
supervisor evaluations. TS&W's compensation strategy is to provide reasonable
base salaries commensurate with an individual's responsibility and provide
performance bonus awards that can exceed base salary. A summary of the input
goes to the Remuneration Committee of TS&W's Board of Directors and they
determine the specific compensation, salary plus bonus, for the individual.
Total compensation of TS&W's portfolio managers is not related to fund
performance. Additionally, there is a qualified profit sharing plan and a
long-term incentive plan, which is eligible for participation by all TS&W
associates.
SMC Portfolio Manager Compensation
SMC compensates Mr. Giordano and Mr. Roffo for their management of the municipal
securities portion of the registrant's portfolio. Compensation consists of a
fixed based salary and is based on the experience and qualifications of each
portfolio manager. All SMC employees are also eligible to participate in a
401(k) plan, which does not include matching funds from any other party.
(a)(4)
TS&W Portfolio Manager Securities Ownership
The following table discloses the dollar range of equity securities of the
registrant beneficially owned by each TS&W portfolio manager as of December 31,
2007:
DOLLAR RANGE OF EQUITY
NAME OF PORTFOLIO MANAGER SECURITIES IN FUND
- --------------------------------------------------------------------------------
William M. Bellamy None
Paul A. Ferwerda $10,001-$50,000
SMC Portfolio Manager Securities Ownership
The following table discloses the dollar range of equity securities of the
registrant beneficially owned by each SMC portfolio manager as of December 31,
2007:
NAME OF PORTFOLIO MANAGER
DOLLAR RANGE OF EQUITY
NAME OF PORTFOLIO MANAGER SECURITIES IN FUND
- --------------------------------------------------------------------------------
Vincent R. Giordano $10,001-$50,000
Roberto W. Roffo $1-$10,000
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
None.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The registrant has not made any material changes to the procedures by which
shareholders may recommend nominees to the registrant's Board of Trustees.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial
officer have evaluated the registrant's disclosure controls and procedures
within 90 days of this filing and have concluded based on such evaluation, that
the registrant's disclosure controls and procedures were effective as of that
date in ensuring that information required to be disclosed by the registrant in
this Form N-CSR was recorded, processed, summarized, and reported within the
time periods specified in the Securities and Exchange Commission's rules and
forms.
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940)
that occurred during the registrant's second fiscal quarter of the period
covered by this report that have materially affected, or are reasonably likely
to materially affect, the registrant's internal control over financial
reporting.
ITEM 12. EXHIBITS.
(a)(1) Code of Ethics for Chief Executive and Senior Financial Officer.
(a)(2) Certifications of principal executive officer and principal financial
officer pursuant to Rule 30a-2 of the Investment Company Act of 1940.
(b) Certifications of principal executive officer and principal financial
officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(c) Proxy Voting Policies and Procedures.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) TS&W/Claymore Tax-Advantaged Balanced Fund
By: /s/ Nicholas Dalmaso
_____________________________________________________________________
Name: Nicholas Dalmaso
Title: Chief Legal and Executive Officer
Date: March 6, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ Nicholas Dalmaso
_____________________________________________________________________
Name: Nicholas Dalmaso
Title: Chief Legal and Executive Officer
Date: March 6, 2008
By: /s/ Steven M. Hill
_____________________________________________________________________
Name: Steven M. Hill
Title: Treasurer and Chief Financial Officer
Date: March 6, 2008