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)
J. Thomas Futrell
2455 Corporate West Drive, Lisle, IL 60532
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(Name and address of agent for service)
Registrant's telephone number, including area code: (630) 505-3700
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Date of fiscal year end: December 31
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Date of reporting period: June 30, 2008
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. Section 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The registrant's annual report transmitted to shareholders pursuant to Rule
30e-1 under the Investment Company Act of 1940 is as follows:
SEMIANNUAL
REPORT
June 30, 2008
(Unaudited)
TS&W/Claymore | TYW
Tax-Advantaged Balanced Fund
Logo: Claymore(SM)
Logo: TS&W Thompson, Siegel & Walmsley LLC
Investment Management
www.tswclaymore.com
... home port for the LATEST,
most up-to-date INFORMATION about the
TS&W/Claymore Tax-Advantaged Balanced Fund
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 | SemiAnnual Report | June 30, 2008
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
Dear SHAREHOLDER |
We are pleased to submit the semi-annual report for the TS&W/Claymore
Tax-Advantaged Balanced Fund (the "Fund") for the six months ended June 30,
2008. The Fund's investment objective is to provide a high level of total
after-tax return, including attractive tax-advantaged income. The Fund focuses
its investments on securities that generate income that is exempt from regular
federal income tax (and which are not preference items for the purposes of the
alternative minimum tax) and common stocks and preferred securities that are
eligible to pay dividends which, for individual investors, qualify for the
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.
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 June 30,
2008, TS&W managed or supervised approximately $7.4 billion in assets. SMC Fixed
Income Management ("SMC") is responsible for the Fund's portfolio of municipal
bonds. As of June 30, 2008, 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 six months ended
June 30, 2008, the Fund provided a total return based on market price of -11.48%
and a return of -9.96% based on NAV. As of June 30, 2008, the Fund's market
price of $11.11 represented a discount of 14.21% to NAV of $12.95. Past
performance is not a guarantee of future results.
The value of the Fund's shares fluctuates from time to time, and market price
may be higher or lower than the Fund's NAV. The current discount to NAV may
provide an opportunity for suitable investors to purchase shares of the Fund
below the market value of the securities in the underlying portfolio. We believe
that, over the long term, the progress of the NAV will be reflected in the
market price return to shareholders.
We encourage shareholders to consider the opportunity to reinvest their
distributions from the Fund through the Dividend Reinvestment Plan ("DRIP"),
which is described in detail on page 30 of the Fund's semi-annual report. When
shares trade at a discount to NAV, the DRIP takes advantage of the discount by
reinvesting the quarterly dividend distribution in common shares of the Fund
purchased in the market at a price less than NAV. Conversely, when the 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.
SemiAnnual Report | June 30, 2008 | 3
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | DEAR SHAREHOLDER continued
The Fund paid quarterly dividends of $0.2525 on March 31, 2008, and June 30,
2008. This represents an annualized distribution rate of 9.09%, based on the
Fund's closing market price of $11.11 on June 30, 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 2008 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/ J. Thomas Futrell
J. Thomas Futrell
Chief Executive Officer
TS&W/Claymore Tax-Advantaged Balanced Fund
4 | SemiAnnual Report | June 30, 2008
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, L.P.
Mr. Giordano is a Managing Member of SMC. He leads 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, L.P.
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 over 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 for
the semi-annual period ended June 30, 2008.
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WILL YOU REMIND US OF THIS FUND'S OBJECTIVE AND HOW YOU SEEK TO ACHIEVE IT?
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 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 THE FIRST HALF OF 2008?
All Fund returns cited--whether based on net asset value ("NAV") or market
price--assume the reinvestment of all distributions. For the six months ended
June 30, 2008, the Fund provided a total return based on market price of -11.48%
and a return of -9.96% based on NAV. As of June 30, 2008, the Fund's market
price of $11.11 represented a discount of 14.21% to NAV of $12.95. Past
performance is not a guarantee of future results.
The market value and net asset value of the Fund's shares fluctuates from time
to time, and market value may be higher or lower than the Fund's NAV. The
current discount to NAV may provide an opportunity for suitable investors to
purchase shares of the Fund below the market value of the securities in the
underlying portfolio. We believe that, over the long term, the progress of the
NAV will be reflected in the market price return to shareholders.
For NAV performance comparison purposes, the municipal bond market, as measured
by the Lehman Brothers Municipal Long Bond Index(1), a widely used measure of
the municipal bond market as a whole, returned -2.33% for the six months ended
June 30, 2008. The broad equity market, as measured by the Standard & Poor's 500
Index ("S&P 500")(1), returned -11.91%. The high-yield bond market, as measured
by the Merrill Lynch High Yield Master II Index1, returned -1.28% for the
period, and the Merrill Lynch Fixed Rate Preferred Securities Index(1) returned
- -0.71%.
The Fund paid quarterly dividends of $0.2525 on March 31, 2008, and June 30,
2008. This represents an annualized distribution rate of 9.09%, based on the
Fund's closing market price of $11.11 on June 30, 2008.
(1) The Lehman Brothers Municipal Long Bond Index is a rules-based,
market-value-weighted index engineered for the long-term (22+ years)
tax-exempt bond market. The S&P 500 is generally representative of the U.S.
stock market. It is a capitalization-weighted index of 500 stocks designed
to measure the performance of the broad economy, representing all major
industries. The Merrill Lynch High Yield Bond Master II Index tracks the
performance of below investment grade U.S. dollar-denomintaed corporate
bonds publicly issued in the U.S. domestic market. The Merrill Lynch Fixed
Rate Preferred Securities Index tracks the performance of fixed rate US
dollar denominated preferred securities issued in the US domestic market.
All indices are unmanaged and it is not possible to invest directly in any
index.
SemiAnnual Report | June 30, 2008 | 5
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | QUESTIONS & ANSWERS continued
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HOW ARE ASSETS ALLOCATED AMONG THE VARIOUS ASSET CLASSES?
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 securitiesAs of June 30, 2008, approximately 57.3% of the Fund's
assets were invested in municipal securities. Of the remaining assets in the
Fund's portfolio as of June 30, 2008, approximately 33.1% were invested in
equity securities consisting primarily of large-cap dividend-paying stocks, and
approximately 9.6% 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.
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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 Fund's leverage is achieved through the issuance of Auction Market
Preferred Shares ("AMPS"). AMPS holders receive a dividend that is reset every
seven or 28 days, depending on the tranche.(2) The purpose of leverage is to
finance the purchase of additional securities that provide increased income and
potentially greater appreciation potential to common shareholders than could be
achieved from a portfolio that is not leveraged. However, when leveraged
investments fall in price, leverage reduces overall return, and this was the
case during the last six months.
The broad auction-rate preferred securities market has experienced considerable
disruption in the past few months, 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 AMPS such as those issued
by the Fund. We believe that this increase in failed auctions is simply a
liquidity issue. 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, one that auctions each week and one that
auctions every 28 days. The most recent auctions for these series have failed,
as have auctions of most AMPS. As of June 30, 2008, the maximum rates
established as a result of failed auctions were 3.95% and 3.70% for the Fund's
7-day AMPS and 28-day AMPS, respectively. These maximum rates are not
significantly different from, and in many cases lower than, past successful
auctions. Nevertheless, we will continue to evaluate the benefits and impacts of
leverage on the Fund, as well as exploring other methods of utilizing leverage.
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.
- --------------------------------------------------------------------------------
WILL YOU PROVIDE AN OVERVIEW OF THE MUNICIPAL BOND MARKET FOR THE SIX MONTHS
ENDED JUNE 30, 2008?
Six months ago, when we reported on the Fund's performance for the 2007 calendar
year, we said that the final months of 2007 represented the worst period in many
years for the bond market. As financial markets became extremely volatile and
increasingly illiquid, a flight to quality drove a pronounced rally in U.S.
Treasury securities, while every other area of the fixed income market dropped
sharply as spreads widened dramatically. As leading financial firms wrote down
billions of dollars of assets in December 2007, market liquidity essentially
vanished.
January was reasonably quiet, and then things got even worse in February as
investors feared a collapse of financial markets; the Lehman Brothers Municipal
Long Bond Index had a negative return of -7.66% for that one month. The extreme
volatility continued as 2008 progressed, with a sharp rebound in March, fairly
flat markets in April and May, and a drop of almost 2% in June. The net effect
of this volatility was negative returns for most bond classes, including
municipal bonds; the Lehman Brothers U.S. Municipal Long Bond Index returned
- -2.33% for the six months ended June 30, 2008.
- --------------------------------------------------------------------------------
HOW DID THE MUNICIPAL BOND PORTION OF THE FUND PERFORM IN THIS ENVIRONMENT?
The Fund's portfolio of municipal bonds performed significantly better than the
Lehman Brothers Municipal Long Bond Index, with a return of -0.61% for the
six-month period. This outperformance resulted from a combination of factors.
(2) The term tranche is used to describe a security that can be partitioned and
sold to investors.
6 | SemiAnnual Report | June 30, 2008
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | QUESTIONS & ANSWERS continued
First was the portfolio's positioning with regard to bond ratings. Since an
important goal of this Fund is to provide a superior level of federally
tax-exempt income, the Fund's bond portfolio has traditionally included mainly
lower-rated investment-grade bonds. In December and January, we sold some of the
higher yielding bonds in the portfolio. This proved to be a good decision, as
spreads widened dramatically in February. At that point, we were able to buy
some hospital and other bonds rated A and BBB at what we considered to be very
attractive prices. As spreads have narrowed since then, these bonds have
performed very well.
The second factor in the outperformance was various duration calls. (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.) The portfolio's duration was relatively short
as we entered the period. Then in February, when the bond market dropped, we
increased the duration and so benefited from the subsequent rally.
The third aspect of the strong performance was significant gains produced by
hedging strategies. We generally use interest rate swaps to manage the municipal
portfolio's exposure to interest rates or to manage its duration. (An interest
rate swap is an agreement between two parties to exchange one stream of future
interest payments for another based on a specified principal amount. Duration is
a measure of the interest rate sensitivity of a bond or fixed-income portfolio
which incorporates time to maturity and coupon size. The longer the duration,
the greater the interest rate risk.) The interest rate swaps used in the
municipal portfolio exchange a floating rate payment (typically either the Bond
Market Association Municipal Swap Index ("BMA") or London Interbank Offered Rate
("LIBOR")) for a fixed rate payment.
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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?
Among the greatest contributors to performance over this period were some of the
hospital and other bonds rated A and BBB that we purchased in February at what
we considered to be very attractive prices. As spreads have narrowed since then,
these bonds have performed very well. Performance benefited also from reducing
the position in A-rated hospital bonds in January, in advance of the extreme
widening of spreads that occurred in February.
In prior periods, the Fund had a significant position in land-secured housing
credits. These bonds, which are issued by local municipalities, represented much
of the portfolio's high-yield or non-rated exposure. We eliminated most of these
bonds in December 2007 and January 2008, realizing gains.
Also, approximately 10% of the portfolio's bonds rated single-A or lower were
pre-refunded. Since the credit risk carried by these bonds has been eliminated,
they performed relatively well. (Pre-refunded bonds are backed by an escrow of
securities, usually U.S. Treasury securities, which have been selected to meet
interest payments and pay off the bonds on their first call date. Bond issuers
will typically do this during times of lower interest rates to reduce their
interest costs.)
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WHICH AREAS OF THE MUNICIPAL SECURITIES PORTFOLIO HURT PERFORMANCE?
The only significant negative was the portfolio's very small
position in insured bonds. Insured bonds performed poorly for roughly the past
year, as concerns have mounted regarding the financial strength of the monoline
bond insurers. (The companies that insure municipal bonds are called monolines
because financial guaranty insurance is the only type of insurance they offer.
Insurance regulations prevent multiline insurance companies such as
property/casualty and life insurance companies from offering financial guaranty
insurance.) However, all of the Fund's insured bonds have underlying credits
with solid ratings, and we also do our own credit analysis before purchasing any
bond. So we are very comfortable with all of the underlying credits in the
portfolio.
SemiAnnual Report | June 30, 2008 | 7
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | QUESTIONS & ANSWERS continued
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WHAT IS YOUR OUTLOOK FOR THE MUNICIPAL MARKET, AND WHAT DOES THIS MEAN FOR THE
FUND?
In an environment of considerable economic uncertainty and continued turmoil in
financial markets, we are trying to focus mainly on the long term. Municipal
bonds have throughout their existence been regarded as a high quality fixed
income asset class with an extremely low default rate, and we are seeing what we
regard as some unusually attractive opportunities in the current market.
However, municipalities could face revenue challenges in the months ahead if the
U.S. economy slows further. Some states are already reporting lower than
projected tax revenues, and tax revenue will be impacted if economic growth
slows further, the housing slump continues, and the unemployment rate continues
to increase.
Because of the flight to quality as investors sought to avoid credit risk, we
have decided to upgrade the quality of the Fund's bond portfolio. Accordingly,
we have purchased more higher-rated securities, particularly AA or AAA rated
general obligation bonds. We have recently been able to purchase 30-year AAA
credits at 109% of the yields on U.S. Treasury securities, and A or BBB bonds at
yields up to 120% of treasury yields; these yield premiums are unusual relative
to past experience. The November presidential election may be followed by
increases in personal income tax and capital gains tax rates, which could
further increase the appeal of municipal bonds relative to taxable bonds. We
believe this may result in dramatic outperformance by municipal bonds.
Although the financial viability of the bond insurers continues to affect the
municipal 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.
The Fund has never had a significant position in insured bonds, and those
insured bonds in the portfolio are ones that our credit analysis indicates
represent good quality independent of any insurance. Bond insurance and ratings
apply only to the bonds in the portfolio and not to the shares of the trust
which will fluctuate in 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 2008?
EQUITY MARKET
The first half of 2008 was a period of considerable economic uncertainty and
significant turmoil throughout the capital markets. Essentially all U.S. equity
indices posted negative returns for this period. The S&P 500 Index, which is
generally regarded as a good indicator of the broad stock market, returned
- -11.91% for this period. The only industry sectors within the S&P 500 with
positive returns for this period were energy, materials and utilities; the
weakest sector by far was financials.
Growth stocks performed better than value stocks for the period, but, in a
slowing economy, growth has become rather scarce. Furthermore, much of the
growth formerly seen in the financial sector has proven to be illusory, and now
we are seeing an implosion, arguably even a panic, in the financial sector. This
is highly relevant for the Fund's income-oriented equity strategy because
approximately 25% of all dividends paid by companies in the S&P 500 come from
the financial sector. Traditionally, in a market that is weak overall, low beta,
high yield stocks perform relatively well.(3) But with factors specific to the
financial industry creating weakness in that sector, stocks with lower yields
have performed better.
Furthermore, there is a generally trade-off between growth and income. Most
growth comes from companies that pay little or no dividends. The challenge for
an equity strategy such as ours is to find reasonable values within the realm of
stocks with dividends without excessive risk, either of dividend cuts or of
sharp drops in the stock prices of stocks with attractive dividend yields.
(3) Beta is a measure of a stock's sensitivity to general market trends.
8 | SemiAnnual Report | June 30, 2008
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | QUESTIONS & ANSWERS continued
HIGH-YIELD MARKET
Concerns about credit quality were a major driver of bond market activity in the
first half 2008. The best performing fixed income asset class was U.S. Treasury
securities, and spreads (the difference between yields on bonds that carry
various degrees of risk) continued to widen. However, high yield bonds as an
asset class did not perform as poorly as might be expected, given the slowing
economy and problems in the financial services industry. The return of the
Lehman Brothers U.S. Corporate High Yield Index(4) was -1.31% for the six months
ended June 30, 2008, while return of the Lehman Brothers U.S. Aggregate Bond
Index(5), which is considered indicative of broad bond market trends, returned
1.13% for the six-month period. What those return numbers don't reveal is that
it was industrial bonds such as railroads and materials that kept return of the
Lehman Aggregate Index positive; some of the worst performing bonds were those
of investment-grade commercial and investment banks with dramatically
deteriorating balance sheets. In March, Bear Stearns Cos. Inc., on the brink of
collapse, was taken over by another financial service firm; in early July a
fairly large California bank failed; and several prominent banks are fighting
for their lives. Bonds of many of these companies may still carry
investment-grade ratings, but their yields at current prices are definitely in
high-yield territory.
It was really investment grade bonds, mainly in the financial services industry,
that experienced much of the deterioration in credit quality and in market
price. Strong equity and credit markets between 2003 and 2006 made it possible
for many companies with lower credit ratings to refinance their balance sheets.
The current credit crisis is therefore not so debilitating for these companies
because they can operate for several years without needing to issue new debt. In
contrast, many large banks are highly leveraged, and they are faced with the
need to obtain new capital by issuing bonds or preferred stock in order to meet
the payment terms of bonds currently on their balance sheets. With very little
liquidity in capital markets, this situation can create a debt spiral from which
companies cannot recover.
Of course, the falling prices of some investment grade bonds create some
attractive opportunities for high yield managers. Ten-year bonds of some banks
and brokerage firms that we consider financially sound are yielding as much as
8%. Careful credit analysis is necessary, since credit ratings don't mean very
much when companies' financial situations are changing rapidly. But, in a market
that is very uncomfortable with credit risk, we are finding some unusual
opportunities to upgrade credit quality and yield simultaneously by doing
independent analysis of issuers' balance sheets and liquidity positions.
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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
2.23% as of June 30, 2008. The annualized dividend yield of the Fund's equity
portfolio was 4.11% as of June 30, 2008, represented a significant premium to
the yield of the index; however, there is no guarantee that this level of income
will be maintained.
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HOW DID THE COMMON EQUITY PORTFOLIO PERFORM OVER THIS PERIOD?
We are pleased with the relative performance of the equity portion of the Fund
during the first half of 2008, even though absolute return was negative. The
common equity portion of the portfolio had a return of approximately -11.59%
gross of fees, compared with -11.91% for the S&P 500 Index and -13.57% for the
Russell 1000(R) Value Index(6). 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 slightly better than that of the more growth-oriented
S&P 500 Index.
(4) The Lehman Brothers U.S. Corporate High-Yield Index is an unmanaged index
that covers the USD-denominated, non-investment grade, fixed-rate, taxable
corporate bond market. It is not possible to invest directly in an index.
(5) The U.S. Aggregate Index is an unmanaged index that covers the
USD-denominated, investment-grade, fixed-rate, taxable bond market of
SEC-registered securities. It is not possible to invest directly in an
index.
(6) The Russell 1000(R) Value Index is an unmanaged index that measures the
performance of the large-cap value segment of the U.S. equity universe. It
includes those Russell 1000(R) companies with lower price-to-book ratios
and lower expected growth values. It is not possible to invest directly in
an index.
SemiAnnual Report | June 30, 2008 | 9
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | QUESTIONS & ANSWERS continued
- --------------------------------------------------------------------------------
WHICH AREAS OF THE COMMON EQUITY PORTFOLIO HELPED PERFORMANCE?
A key decision that helped relative performance was to underweight the financial
sector relative to the S&P 500 and Russell 1000(R) Value indices. Within the
financial sector, our positioning was defensive, with an underweight in banks,
and we avoided the lower quality financial firms, many of which have performed
very poorly. Nonetheless, the financial sector was the Fund's worst in terms of
absolute return.
Also positive was an overweight in utilities, which declined much less than the
market overall. In fact, some of the utilities in the Fund's portfolio were up
during the first half of 2008. Utility holdings that performed particularly well
were TECO Energy, Inc., an electric utility with significant reserves of
Appalachian coal, and Dominion Resources, Inc., which has significant natural
gas and oil reserves. Both of these positions were sold because they had reached
their price targets; they are therefore not in the portfolio at period end.
The equity portfolio's position in the technology sector added value relative to
the Fund's benchmarks, although it did not perform particularly well on an
absolute basis. We have added to the Fund's position in the technology sector
during 2008, emphasizing more defensive names, as we believe these companies
have good prospects for long-term growth. Technology positions include Seagate
Technology, a disk drive manufacturer with a fairly attractive yield, and Cisco
Systems, Inc. (0.7% and 0.7% of total net investments, respectively). Cisco
provides an excellent example of our strategy of investing in very strong
industry-leading companies, even if they pay little or no dividends, as we focus
on the yield of the entire equity portfolio. You could characterize it as a
"barbell" strategy, combining companies with good dividend yields that may not
generating much growth with companies like Cisco that don't currently pay
dividends but are adding value by buying back their stock and by generating
earnings growth. In the current market downturn, we have been able to purchase
Cisco stock at the lowest valuation in many years, and we believe that this
solid company will emerge from this period of slow growth with a stronger market
position than ever. We have also added to a position in Corning Incorporated
(0.8% of total net investments), a leader in liquid crystal flat panel displays
and fiber optics, which, like Cisco, is dominant in its segment of the
technology industry.
Also positive was an overweight in the energy sector, which continued to perform
well in an environment of dramatically rising oil prices; holdings that
contributed strongly to performance include Chevron Corp. and ConocoPhillips
(1.2% and 0.6% of total net investments, respectively).
- --------------------------------------------------------------------------------
WHICH AREAS OF THE COMMON EQUITY PORTFOLIO HURT PERFORMANCE?
As mentioned above, the Fund's positions in the financial sector, including Bank
of America Corp. and Citigroup, Inc. were down along with the entire sector
(0.8% and 0.4% of total net investments, respectively). However, performance
relative to the benchmarks benefited from the sale early in the period of
American International Group, Inc. (AIG) (not held in the portfolio at period
end); although this stock was sold at a loss, we eliminated the position at
significantly higher prices than where AIG closed the period.
A major negative was a position in General Electric Co. (GE) (1.2% of total net
investments), which currently sells at the lowest valuation in several decades,
with a yield above 4.5%. We believe there is undue concern in the market about
GE Capital, the company's finance arm. Furthermore, much of GE's business is
doing well, especially the segments that relate to industrial capital spending
projects such as wind energy, turbines and jet engines.
Other detractors were positions in large pharmaceutical companies such as Merck
& Co., Inc. and Pfizer, Inc. (0.7% and 0.9% of total net investments,
respectively). These large companies have performed poorly, in large part
because of concerns that they may be losing market share to generic drugs. But
with Pfizer selling at approximately 7.5x earnings with a yield above 7%, and
Merck at approximately 11x earnings with a yield above 4%, we believe these
stocks offer good value. We did diversify some of the portfolio's position in
this industry out of Merck into Eli Lilly & Co. (0.7% of total net investments),
which we believe may have better growth prospects. We find the financial
strength of these large companies very appealing in a difficult economic
environment.
10 | SemiAnnual Report | June 30, 2008
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | QUESTIONS & ANSWERS continued
- --------------------------------------------------------------------------------
WHAT CHANGES HAVE BEEN MADE IN THE EQUITY PORTFOLIO IN RECENT MONTHS?
Early in the period we reduced or eliminated positions in some
telecommunications stocks that were major contributors to performance in 2007,
including AT&T, Inc., Verizon Communications, Inc., and Deutsche Telekom AG
(1.1%, 1.2%, and 0.4% of total net investments, respectively). This proved to be
a good decision, as all of these stocks were down in the first half of 2008.
AT&T detracted from performance for the period, as the position remained
significant, despite the reduction. Now, at lower prices, we are once again
considering these stocks.
Until recently we have had little interest in the consumer discretionary sector,
but we have recently purchased shares of The Walt Disney Company and added to a
position in Wal-Mart Stores, Inc., which was actually one of the portfolio's
best performing holdings in the first half of 2008 (0.5% and 0.5% of total net
investments, respectively). In an environment of concern about consumer
spending, we believe that Disney has some interesting cushions that other
consumer discretionary stocks lack. While most consumer discretionary stocks are
almost exclusively domestic and are hurt by high costs of food and energy,
Disney actually benefits from the weakness of the dollar, which encourages
foreign travel to its theme parks. Longer-term, we believe the key to media
success is content, and Disney has a valuable inventory of movies and other
content with almost limitless life cycles.
- --------------------------------------------------------------------------------
HOW DID THE PORTFOLIO'S HIGH-YIELD BONDS AND PREFERRED STOCKS PERFORM?
This portion of the portfolio performed very well for the six months ended June
30, 2008. The high yield bond portion of the portfolio returned 0.86%, compared
with -1.28% for the Merrill Lynch High Yield Master II Index. The preferred
portion of the portfolio returned 5.03%, compared with -0.71% for the Merrill
Lynch U.S Fixed Rate Preferred Stock Index (the "Preferred Index"). For the
six-month period, this portion of the portfolio had a return of 2.13%, compared
with -1.09% for the blended benchmark we use to evaluate performance, which is
67% Merrill Lynch High Yield Master II Index and 33% Merrill Lynch U.S Fixed
Rate Preferred Stock Index.
During the first half of 2008, the composition of the taxable non-equity portion
of the portfolio averaged approximately 68% high-yield bonds and 32% preferred
stocks. A key factor in the portfolio's strong performance was its higher credit
quality than the high yield index, and we continue to keep a very watchful eye
on credit quality, taking action to sell positions that we believe are
deteriorating.
In the preferred stock portion of the portfolio, the major reason for the Fund's
much stronger performance than the Preferred Index was an emphasis of preferreds
issued by Real Estate Investment Trusts ("REITs"), with just a small positioning
bank preferreds. During this period a number of banks in need of capital issued
preferred stock, and many of these issues have deteriorated as the banks'
financial situations became worst.
Among the securities that contributed to performance was a bond of DRS
Technologies, Inc. (0.3 % of total net investments) a supplier of
high-technology products and services to the U.S. military and the defense
industry. DRS has reached an agreement to be acquired by an Italian company, and
the DRS bonds have performed well in the expectation that the acquiring company
is likely to make a tender offer for the bonds.
Another positive was a CCC-rated bond of IMAX Corp. (0.2 % of total net
investments), which operates movie theatres. This is a bond with a fairly short
maturity issued by a company with a growing international business, and our
credit analysis indicates the quality is better than the CCC rating suggests. We
believe that movies are a business that can prosper even when consumers are
reluctant to spend money; high gasoline prices may keep people from taking a
driving vacation, but think they will still spend a few dollars for a night at
the movies.
Other bonds that performed well include BB-rated bonds of Phillips-VanHeusen
Corp., an apparel manufacturer that continues to perform well, and DirectTV
Holdings/DirecTV Financing Co. (0.3 % and 0.2% of total net investments).
One of the biggest detractors from performance was a BB-rated bond of department
store operator Dillards, Inc. (0.2 % of total net investments). We have liked
this family-run company in large part because it owns much of the real estate
under its stores. Even if the business performs poorly, the real estate could
prove a valuable asset for bond holders.
Another bond in the portfolio that performed poorly was General Motors
Acceptance Corp. LLC (GMAC) (0.2 % of total net investments), the finance
company that was spun off by General Motors Corp. several years ago. At the
time, we believed
SemiAnnual Report | June 30, 2008 | 11
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | QUESTIONS & ANSWERS continued
the finance company would prosper, especially after a private equity firm made a
large investment in the company. But the very weak condition of the auto
industry has exacerbated GMAC's problems, and a downgrade now seems possible.
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
non-qualified dividend income (income that does not qualify for the favorable
tax treatment accorded certain dividends) without taking significant credit
risk.
- --------------------------------------------------------------------------------
WHAT IS YOUR OUTLOOK FOR THE EQUITY AND HIGH-YIELD MARKETS IN THE MONTHS AHEAD?
The last few months have been a very difficult period for all investors, and we
are hopeful that the worst may be over for the markets and the economy. It has
been about nine months since the Federal Reserve began lowering interest rates,
and it often takes that long for the full effect of stimulus to be felt. The key
questions are how much longer it will take for issues in the U.S. housing market
to be resolved and what will happen to the price of oil in the months ahead. If
oil prices continue to rise, that will be a major drag on economic growth
throughout the world. 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.
Periods of very negative market sentiment can present opportunities for value
managers such as ourselves. 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.
We are finding some unusually good values among stocks that have dropped in
price along with the market but that we believe have excellent long-term growth
prospects. In the high yield portion of the portfolio, we are selectively taking
advantage of opportunities to purchase quality bonds with attractive yields that
our own analysis suggests are priced below their long-term values.
12 | SemiAnnual Report | June 30, 2008
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | QUESTIONS & ANSWERS continued
- --------------------------------------------------------------------------------
TYW RISKS AND OTHER CONSIDERATIONS
The views expressed in this report reflect those of the portfolio manager only
through the report period as stated on the cover. These views are subject to
change at any time, based on market and other conditions and should not be
construed as a recommendation of any kind. The material may also include forward
looking statements that involve risk and uncertainty, and there is no guarantee
that any predictions will come to pass. There can be no assurance that the Fund
will achieve its investment objectives. The value of the Fund will fluctuate
with the value of the underlying securities. Historically, closed-end funds
often trade at a discount to their net asset value. 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. The Fund is subject to
investment risk, including the possible loss of the entire amount that you
invest.
MUNICIPAL SECURITIES MARKET RISK. The yields on and market prices of municipal
securities are dependent on a variety of factors, including general conditions
of the municipal securities market, the size of a particular offering, the
maturity of the obligation and the rating of the issue. The value of outstanding
municipal securities will vary as a result of changing evaluations of the
ability of their issuers to meet interest and principal payments. Such values
will also change in response to changes in the interest rates payable on new
issues of municipal securities and changes in general interest rate levels.
Changes in the value of the municipal securities held in the Fund's portfolio
arising from these or other factors will cause changes in the Fund's net asset
value per share.
INCOME AND INTEREST RATE RISK. The income shareholders receive from the Fund is
based primarily on the dividends and interest earned by the Fund from its
investments, which can vary widely over the short and long term. The dividend
income from the Fund's investment in equity securities will be influenced by
both general economic activity and issuer-specific factors. In the event of a
recession or adverse events effecting a specific industry or issuer, the issuers
of the common stocks held by the Fund may reduce the dividends paid on such
common stocks. Interest rate risk is the risk that municipal securities and
other debt (and, in certain cases, equity) securities in which the Fund invests
(and the Fund's net assets) will decline in value because of changes in interest
rates.
LOWER GRADE SECURITIES. Investment in fixed income securities of
below-investment grade quality (commonly known as "Junk bonds") involves
substantial risk of loss. They are considered predominantly speculative with
respect to the issuer's ability to pay interest and repay principal and are
susceptible to default or decline in market value due to adverse economic and
business developments. Debt securities in the lowest investment grade category
may also be considered to have speculative characteristics by certain ratings
agencies. The market values for fixed income securities of below investment
grade quality tend to be more volatile, and these securities are less liquid,
than investment grade debt securities.
COMMON STOCK RISK. The common stocks and other equity securities in which the
Fund invests may experience substantial volatility in their market value.
Although common stocks typically provide higher returns than debt securities,
they are also more susceptible to adverse changes in market value due to
issuer-specific events. The market values of common stocks are also sensitive to
changes in investor perceptions as well as general movements in the equities
markets.
LEVERAGE RISK. 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.
AMPS RISK. There also risks associated with investing in Auction Market
Preferred Shares or AMPS. The AMPS are redeemable, in whole or in part, at the
option of the Fund on any dividend payment date for the AMPS, and will be
subject to mandatory redemption in certain circumstances. The AMPS will not be
listed on an exchange. You may only buy or sell AMPS through an order placed at
an auction with or through a broker-dealer that has entered into an agreement
with the auction agent and the Fund or in a secondary market maintained by
certain broker-dealers. These broker-dealers are not required to maintain this
market, and it may not provide you with liquidity. Please see the Fund's
prospectus for a more thorough discussion of risks associated with AMPS.
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 the taxpayers should seek
advice based on the taxpayer's particular circumstances from an independent tax
advisor.
In addition to the risks described above, the Fund is also subject to:
Investment Risk, Common Share Market Risk, Tax Risk, Credit Risk, Geographical
and Sector Risk, Interest Rate and Hedging Transactions Risk, Value Investing
Risk, Illiquid Investments Risk, Foreign Securities Risk, Small- and
Medium-Sized Company Risk, Fund Distribution Risk, Market Discount Risk,
Portfolio Turnover, and Current Developments. Please see www.tswclaymore.com for
a more detailed discussion about Fund risks and considerations.
SemiAnnual Report | June 30, 2008 | 13
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
Fund SUMMARY | AS OF JUNE 30, 2008 (unaudited)
FUND STATISTICS
- -------------------------------------------------------
Share Price $11.11
Common Share Net Asset Value $12.95
Premium/(Discount) to NAV -14.21%
Net Asset Applicable to
Common Shareholders ($000) $199,452
- -------------------------------------------------------
TOTAL RETURNS
- -------------------------------------------------------
(INCEPTION 4/28/04) MARKET NAV
- -------------------------------------------------------
Six Months -11.48% -9.96%
One Year -18.11% -15.47%
Three Year - average annual 0.63% 1.34%
Since Inception - average annual -0.01% 4.14%
- -------------------------------------------------------
TOP TEN HOLDINGS % OF TOTAL
MUNICIPAL PORTFOLIO NET INVESTMENTS
- --------------------------------------------------------------------------------
Northside Independent School District General Obligation Bonds,
PSF Guaranteed, AAA, Aaa, 5.000%, 8/15/2033 3.0%
Calallen Independent School District Revenue Unlimited
Tax School Building Bonds, Series 2008,
PSF Guaranteed, AAA, NR 5.000%, 2/15/2038 2.5%
California Health Facilities Financing Authority Revenue
Series 1755, NR, Aa3 (Underlying Obligor: Sutter Health),
8.480%, 11/15/2046 2.3%
Massachusetts Development Finance Agency Revenue WGBH Educational
Foundation Issue, Series 2008A, Assured Guaranty, AAA, Aaa,
5.000%, 1/1/2042 2.1%
Arizona Transportation Board Revenue Highway Revenue
Bonds, Series 2008A, AAA, Aa1, 5.000%, 7/1/2033 2.1%
Northside Independent School District General Obligation Bonds, PSF
Guaranteed, AAA, Aaa, 5.000%, 8/15/2038 1.9%
City of New York General Obligation, Fiscal 2008, Subseries I-1,
AA, Aa3, 5.000%, 2/1/2028 1.9%
Golden State Tobacco Securitization CorporationTobacco Settlement
Asset-Backed Bonds, Series 2007A-1, BBB, Baa3, 5.750%, 6/1/2047 1.9%
City of Detroit Water Supply System Revenue, Rols RR II R 11448,
BHAC/FGIC Insured, AAA, NR, 9.682%, 7/1/2026 1.7%
Missouri Development Finance Board Branson Landing Project,
Series 2004A, BBB+, Baa1, 5.625%, 12/1/2028 1.7%
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS % OF TOTAL
EQUITY AND INCOME PORTFOLIO NET INVESTMENTS
- --------------------------------------------------------------------------------
BP PLC ADR (United Kingdom) 1.5%
Royal Dutch Shell PLC, Class B ADR (United Kingdom) 1.4%
Progress Energy, Inc. 1.2%
Verizon Communications, Inc. 1.2%
General Electric Co. 1.2%
Chevron Corp. 1.2%
Centerpoint Energy, Inc. 1.1%
AT&T, Inc. 1.1%
Dow Chemical Co. (The) 0.9%
3M Co. 0.9%
- --------------------------------------------------------------------------------
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 NET INVESTMENTS
- --------------------------------------------------------------------------------
Healthcare 15.3%
General Obligations 13.4%
Special Tax 7.3%
Oil, Gas & Consumable Fuels 6.1%
Diversified Financial Services 4.2%
Diversified Telecommunications 4.2%
Pharmaceuticals 3.8%
Tobacco 3.4%
General Funds 3.3%
Higher Education 3.2%
- --------------------------------------------------------------------------------
Line Chart:
SHARE PRICE & NAV PERFORMANCE
Share Price NAV
6/30/07 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
13.1 14.94
13.2 14.88
13.42 14.93
13.17 14.83
13.04 14.95
13.03 14.82
13.11 14.94
13.26 14.99
13.14 14.92
13.3 14.99
13.16 14.83
13.14 14.84
13.05 14.58
12.88 14.46
12.75 14.37
12.95 14.56
12.86 14.53
12.81 14.39
12.95 14.54
13.11 14.55
13.13 14.51
13.13 14.68
13.3 14.81
13.21 14.71
12.97 14.48
12.99 14.46
13 14.46
13.05 14.44
13.05 14.46
13.01 14.53
13 14.61
12.63 14.39
12.59 14.32
12.68 14.24
12.58 14.24
12.55 14.12
12.4 14.16
12.57 14.14
12.56 14.13
12.48 13.96
12.28 13.67
11.84 13.29
11.72 13.43
11.69 13.57
11.91 13.7
11.9 13.61
11.76 13.61
11.72 13.52
11.89 13.67
11.77 13.36
11.66 13.33
11.45 13.18
11.33 13.1
11.49 13.39
11.36 13.13
11.45 13.35
11.63 13.46
11.76 13.49
11.74 13.43
11.66 13.34
11.54 13.29
11.6 13.34
11.89 13.6
11.84 13.65
11.97 13.69
12.03 13.7
12.06 13.74
12 13.79
12 13.82
11.94 13.84
11.7 13.73
11.82 13.7
11.82 13.74
11.91 13.93
11.99 13.9
12.04 13.98
12.06 13.92
11.99 13.85
12.03 13.87
12.08 13.9
12.14 13.95
12.09 13.94
12.09 13.98
12.15 13.98
12.27 14.11
12.31 14.13
12.31 14.08
12.37 14.12
12.27 14
12.29 14.05
12.25 14.04
12.42 14.13
12.43 14.09
12.42 14.16
12.52 14.26
12.55 14.33
12.56 14.33
12.54 14.28
12.45 14.2
12.42 14.21
12.34 14.13
12.43 14.13
12.47 14.14
12.54 14.13
12.56 14.21
12.55 14.13
12.54 14.11
12.53 14.07
12.6 14.17
12.55 13.99
12.37 13.97
12.48 13.85
12.08 13.48
11.95 13.42
11.95 13.49
11.87 13.49
11.84 13.43
11.75 13.31
11.76 13.24
11.63 13.01
11.42 12.98
11.38 12.96
11.35 13.04
11.26 12.87
11.26 12.85
6/30/08 11.11 12.95
Pie Chart:
PORTFOLIO CONCENTRATION BY ASSET CLASS*
Municipal Bonds 57.3%
Common Stocks 33.1%
Corporate Bonds 5.1%
Preferred Stocks 4.4%
Investment Companies 0.1%
*As a percentage of total net investments
Pie Chart:
CREDIT QUALITY*
AAA 19.4%
AA 13.5%
A 11.0%
BBB 11.1%
BB 2.9%
B 1.9%
CCC/NR 7.1%
Common Stock/Other 33.1%
*Represents higher rating of either S&P, Moody's or Fitch as a percentage of
long-term investments
14 | SemiAnnual Report | June 30, 2008
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
Portfolio of INVESTMENTS | JUNE 30, 2008 (unaudited)
OPTIONAL CALL
PRINCIPAL AMOUNT PROVISIONS VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG-TERM MUNICIPAL BONDS - 98.8%
ARIZONA - 5.7%
$ 7,000,000 Arizona Transportation Board Highway
Revenue Bonds, Series 2008A, AAA, Aa1 7/1/18 @ 100 $ 7,149,240
5.00%, 7/1/2033
4,500,000 Maricopa County Pollution Control Corp., Pollution Control Revenue
Refunding Public Service Co-A-RMK, BB+, Baa3
5.750%, 11/1/2022 5/1/09 @ 100 4,227,750
- ------------------------------------------------------------------------------------------------------------------------------------
11,376,990
- ------------------------------------------------------------------------------------------------------------------------------------
CALIFORNIA - 19.6%
5,000,000 Alhambra Certificates of Participation
Police Facilities 91-1-RMK, AMBAC Insured, AA, Aa3
6.750%, 9/1/2023 N/A 5,574,400
8,250,000 California Health Facilities Financing Authority Revenue
Series 1755, NR, Aa3 (Underlying Obligor: Sutter Health) (a)
8.480%, 11/15/2046 11/15/16 @ 100 7,805,655
5,000,000 California Statewide Communities Development Authority Revenue
Bentley School, NR, NR (b)
6.750%, 7/1/2032 7/1/10 @ 103 5,082,450
2,180,000 California Statewide Communities Development Authority Revenue
Sub-Wildwood Elementary School, NR, NR
7.000%, 11/1/2029 11/1/09 @ 102 2,183,553
7,500,000 Golden State Tobacco Securitization Corporation
Tobacco Settlement Asset-Backed Bonds, Series 2007A-1, BBB, Baa3
5.750%, 6/1/2047 6/1/17 @ 100 6,356,250
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 1,793,252
2,505,000 6.375%, 9/1/2032 3/1/12 @ 101 2,770,781
820,000 Snowline California Joint Union School District Community Facility
Special Tax, No. 2002-1, Series A, NR, NR
5.400%, 9/1/2034 9/1/08 @ 103 707,168
5,000,000 State of California
Various Purpose General Obligation Bonds, A+, A1
5.125%, 8/1/2036 8/1/18 @ 100 4,973,950
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 1,784,934
- ------------------------------------------------------------------------------------------------------------------------------------
39,032,393
- ------------------------------------------------------------------------------------------------------------------------------------
COLORADO - 2.4%
1,355,000 Denver Health & Hospital Authority Health Care Revenue
Series 1998A, ACA Insured (Prerefunded), BBB, NR
5.375%, 12/1/2028 12/1/08 @ 101 1,388,631
1,000,000 Denver Health & Hospital Authority Health Care Revenue
Series 2004A (Prerefunded), BBB, NR
6.000%, 12/1/2031 12/1/11 @ 100 1,089,510
2,000,000 Denver Health & Hospital Authority Health Care Revenue
Series 2004A (Prerefunded), AAA, NR
6.250%, 12/1/2033 12/1/14 @ 100 2,296,980
- ------------------------------------------------------------------------------------------------------------------------------------
4,775,121
- ------------------------------------------------------------------------------------------------------------------------------------
OPTIONAL CALL
PRINCIPAL AMOUNT PROVISIONS VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
FLORIDA - 0.4%
$ 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 $ 853,240
- ------------------------------------------------------------------------------------------------------------------------------------
ILLINOIS - 5.8%
4,500,000 City of Chicago
General Obligation Refunding Bonds, Series 2008A, AA-, Aa3
5.250%, 1/1/2037 1/1/18 @ 100 4,628,835
5,000,000 Illinois Finance Authority Revenue
OSF Healthcare System, Series 2007A, A, A2
5.750%, 11/15/2037 11/15/17 @ 100 5,017,600
2,000,000 Metropolitan Pier and Exposition Authority
McCormick Place Expansion Project, Series 2004A, AAA, A1
5.500%, 6/15/2027 6/15/09 @ 100 2,000,520
- ------------------------------------------------------------------------------------------------------------------------------------
11,646,955
- ------------------------------------------------------------------------------------------------------------------------------------
MARYLAND - 3.6%
Maryland Health & Higher Educational Facilities Authority Revenue
University of Maryland Medical System Issue, Series 2005, AMBAC Insured, AA, Aa3
2,000,000 5.250%, 7/1/2028 7/1/18 @ 100 2,012,380
5,000,000 5.500%, 7/1/2024 7/1/18 @ 100 5,182,950
- ------------------------------------------------------------------------------------------------------------------------------------
7,195,330
- ------------------------------------------------------------------------------------------------------------------------------------
MASSACHUSETTS - 4.9%
1,820,000 Massachusetts Development Finance Agency Revenue
Evergreen Center, BBB-, NR
5.500%, 1/1/2035 1/1/15@ 100 1,572,953
930,000 Massachusetts Development Finance Agency Revenue
Hampshire College, Series 2004, BBB, Baa2
5.625%, 10/1/2024 10/1/14 @ 100 936,240
7,300,000 Massachusetts Development Finance Agency Revenue
WGBH Educational Foundation Issue, Series 2008A, ASSURED, AAA, Aaa
5.000%, 1/1/2042 1/1/18 @ 100 7,300,000
- ------------------------------------------------------------------------------------------------------------------------------------
9,809,193
- ------------------------------------------------------------------------------------------------------------------------------------
MICHIGAN - 3.0%
5,000,000 City of Detroit
Water Supply System Revenue, Rols RR II R 11448, BHAC/FGIC Insured, AAA, NR
(Underlying Obligor: City of Detroit Water Supply System) (a)
9.682%, 7/1/2026 7/1/18 @ 100 5,897,000
- ------------------------------------------------------------------------------------------------------------------------------------
MISSOURI - 6.5%
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 4,506,340
6,000,000 Missouri Development Finance Board
Branson Landing Project, Series 2004A, BBB+, Baa1 (b)
5.625%, 12/1/2028 6/1/14 @ 100 5,774,340
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 2,722,740
- ------------------------------------------------------------------------------------------------------------------------------------
13,003,420
- ------------------------------------------------------------------------------------------------------------------------------------
See notes to financial statements.
SemiAnnual Report | June 30, 2008 | 15
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | PORTFOLIO OF INVESTMENTS
(unaudited) continued
OPTIONAL CALL
PRINCIPAL AMOUNT PROVISIONS VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
NEW JERSEY - 0.8%
$ 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 $ 1,585,372
- ------------------------------------------------------------------------------------------------------------------------------------
NEW YORK - 9.8%
6,320,000 City of New York
General Obligation, Fiscal 2008, Subseries I-1, AA, Aa3
5.000%, 2/1/2028 2/1/18 @ 100 6,435,403
5,000,000 New York City Transitional Finance Authority
Building Aid Revenue Bonds, Series 2008 S-1, AA-, A1
5.000%, 1/15/2034 1/15/18 @ 100 5,051,700
4,500,000 New York State Dormitory Authority Revenue
Cabrini of Westchester, Series 2006, GNMA Collateralized, AA, NR (c)
8.600%, 2/15/2041 2/15/17 @ 103 4,600,665
3,500,000 New York State Urban Development Corp.
State Personal Income Tax Revenue Bonds, Series 2005B, AAA, NR
5.000%, 3/15/2035 3/15/15 @ 100 3,547,495
- ------------------------------------------------------------------------------------------------------------------------------------
19,635,263
- ------------------------------------------------------------------------------------------------------------------------------------
OHIO - 3.9%
4,560,000 Akron, Bath & Copley Joint Township Hospital District Revenue
Hospital Facilities-Summa Health Systems, Series A,
RADIAN Insured, NR, A3 (b)
5.500%, 11/15/2034 11/15/14 @ 100 4,562,098
4,000,000 Buckeye Tobacco Settlement Financing Authority
Series 2311, AA, NR
(Underlying Obligor: Buckeye Tobacco Settlement
Financing Authority) (a)
7.775%, 6/1/2015 N/A 3,280,800
- ------------------------------------------------------------------------------------------------------------------------------------
7,842,898
- ------------------------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA - 4.7%
2,000,000 Allegheny County Hospital Development Authority Health System Revenue
West Penn, Series 2007A, BB, Ba2 (c)
8.597%, 11/15/2040 11/15/17 @ 100 1,648,900
4,000,000 Allegheny County Hospital Development Authority Revenue
Rols RR II, BB, Ba3
(Underlying Obligor: Allegheny County Hospital Development
Authority Health System) (a)
5.375%, 11/15/2040 11/15/17 @ 100 2,595,600
1,750,000 Allegheny County Hospital Development Authority Revenue
University of Pittsburg Medical Center, Series 2008 B, AA-, Aa3
5.000%, 6/15/2018 N/A 1,804,110
3,250,000 Pennsylvania Higher Educational Facilities Authority
Widener University Series 2003, BBB+, NR
5.375%, 7/15/2029 7/15/13 @ 100 3,239,762
- ------------------------------------------------------------------------------------------------------------------------------------
9,288,372
- ------------------------------------------------------------------------------------------------------------------------------------
PUERTO RICO - 3.9%
2,500,000 Commonwealth of Puerto Rico
Public Improvement Refunding Bonds, Sub-Series 2003 C-7,
MBIA Insured, AA, A2
6.000%, 7/1/2027 7/1/18 @ 100 2,612,800
OPTIONAL CALL
PRINCIPAL AMOUNT PROVISIONS VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
$ 5,000,000 Puerto Rico Electric Power Authority
Power Revenue Revenue Bonds, Series WW, BBB+, A3
5.500%, 7/1/2038 7/1/18 @ 100 $ 5,092,400
- ------------------------------------------------------------------------------------------------------------------------------------
7,705,200
- ------------------------------------------------------------------------------------------------------------------------------------
RHODE ISLAND - 3.6%
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 3,345,810
3,000,000 6.375%, 8/15/2021 (Prerefunded) 8/15/12 @ 100 3,336,780
500,000 6.375%, 8/15/2021 8/15/12 @ 100 522,465
- ------------------------------------------------------------------------------------------------------------------------------------
7,205,055
- ------------------------------------------------------------------------------------------------------------------------------------
SOUTH CAROLINA - 2.5%
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 1,554,539
3,305,000 Spartanburg Regional Health Service District, Inc.
Hospital Revenue and Revenue Refunding Bonds,
Series 2008A, ASSURED, AAA, Aaa
5.250%, 4/15/2025 4/15/18 @ 100 3,425,104
- ------------------------------------------------------------------------------------------------------------------------------------
4,979,643
- ------------------------------------------------------------------------------------------------------------------------------------
TEXAS - 15.5%
8,535,000 Calallen Independent School District Revenue
Unlimited Tax School Building Bonds, Series 2008,
PSF Guaranteed, AAA, NR
5.000%, 2/15/2038 2/15/18 @ 100 8,573,408
5,000,000 North Texas Tollway Authority Revenue
Rols RR II R-11392-1, BHAC Insured, NR, Aaa
(Underlying Obligor: North Texas Tollway Authority) (a)
9.782%, 1/1/2040 1/1/18 @ 100 5,670,900
Northside Independent School District
General Obligation Bonds, PSF Guaranteed, AAA, Aaa
10,000,000 5.000%, 8/15/2033 8/15/18 @ 100 10,094,400
6,500,000 5.000%, 8/15/2038 8/15/18 @ 100 6,530,420
- ------------------------------------------------------------------------------------------------------------------------------------
30,869,128
- ------------------------------------------------------------------------------------------------------------------------------------
WISCONSIN - 2.2%
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 3,177,977
Wisconsin State Health & Educational Facilities Authority Revenue
Blood Center Southeastern Project, A-, NR
500,000 5.500%, 6/1/2024 6/1/14 @ 100 503,990
750,000 5.750%, 6/1/2034 6/1/14 @ 100 748,958
- ------------------------------------------------------------------------------------------------------------------------------------
4,430,925
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LONG-TERM MUNICIPAL BONDS - 98.8%
(Cost $202,579,200) 197,131,498
- ------------------------------------------------------------------------------------------------------------------------------------
See notes to financial statements.
16 | SemiAnnual Report | June 30, 2008
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | PORTFOLIO OF INVESTMENTS (unaudited) continued
NUMBER
0F SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 56.7%
AEROSPACE & DEFENSE - 0.4%
17,500 Rockwell Collins, Inc. $ 839,300
- ------------------------------------------------------------------------------------------------------------------------------------
CAPITAL MARKETS - 0.9%
47,500 Morgan Stanley 1,713,325
- ------------------------------------------------------------------------------------------------------------------------------------
CHEMICALS - 1.6%
90,000 Dow Chemical Co. (The) 3,141,900
- ------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS - 1.0%
25,000 HSBC Holdings PLC ADR (United Kingdom) 1,917,500
- ------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES - 2.5%
90,000 Pitney Bowes, Inc. 3,069,000
50,000 Waste Management, Inc. 1,885,500
- ------------------------------------------------------------------------------------------------------------------------------------
4,954,500
- ------------------------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 3.4%
100,000 Cisco Systems, Inc. (d) 2,326,000
125,000 Corning, Inc. 2,881,250
30,000 Harris Corp. 1,514,700
- ------------------------------------------------------------------------------------------------------------------------------------
6,721,950
- ------------------------------------------------------------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS - 1.2%
125,000 Seagate Technology (Cayman Islands) 2,391,250
- ------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES - 4.8%
115,000 Bank of America Corp. 2,745,050
75,000 Citigroup, Inc. 1,257,000
92,500 ING Groep N.V. ADR (Netherlands) 2,918,375
75,000 JPMorgan Chase & Co. 2,573,250
- ------------------------------------------------------------------------------------------------------------------------------------
9,493,675
- ------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION - 6.0%
107,500 AT&T, Inc. 3,621,675
90,000 Deutsche Telekom AG ADR (Germany) 1,473,300
60,000 Embarq Corp. 2,836,200
115,000 Verizon Communications, Inc. 4,071,000
- ------------------------------------------------------------------------------------------------------------------------------------
12,002,17
- ------------------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES - 2.1%
100,000 Progress Energy, Inc. 4,183,000
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES - 0.9%
37,500 Quest Diagnostics, Inc. 1,817,625
- ------------------------------------------------------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE - 1.1%
67,500 Carnival Corp. (Panama) 2,224,800
- ------------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS - 2.3%
30,000 Kimberly-Clark Corp. 1,793,400
45,000 Procter & Gamble Co. 2,736,450
- ------------------------------------------------------------------------------------------------------------------------------------
4,529,850
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER
0F SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES - 3.6%
45,000 3M Co. $ 3,131,550
150,000 General Electric Co. 4,003,500
- ------------------------------------------------------------------------------------------------------------------------------------
7,135,050
- ------------------------------------------------------------------------------------------------------------------------------------
MACHINERY - 0.7%
20,000 Caterpillar, Inc. 1,476,400
- ------------------------------------------------------------------------------------------------------------------------------------
MEDIA - 0.8%
50,000 Walt Disney Co. (The) 1,560,000
- ------------------------------------------------------------------------------------------------------------------------------------
MULTILINE RETAIL - 0.8%
30,000 Wal-Mart Stores, Inc. 1,686,000
- ------------------------------------------------------------------------------------------------------------------------------------
MULTI-UTILITIES - 3.3%
237,500 Centerpoint Energy, Inc. 3,811,875
67,500 DTE Energy Co. 2,864,700
- ------------------------------------------------------------------------------------------------------------------------------------
6,676,575
- ------------------------------------------------------------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS - 10.1%
75,000 BP PLC ADR (United Kingdom) 5,217,750
40,000 Chevron Corp. 3,965,200
21,500 ConocoPhillips 2,029,385
31,000 Exxon Mobil Corp. 2,732,030
60,719 Royal Dutch Shell PLC, Class B ADR (United Kingdom) 4,864,199
30,000 Valero Energy Corp. 1,235,400
- ------------------------------------------------------------------------------------------------------------------------------------
20,043,964
- ------------------------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS - 6.5%
55,000 Eli Lilly & Co. 2,538,800
50,000 GlaxoSmithKline PLC ADR (United Kingdom) 2,211,000
40,000 Johnson & Johnson 2,573,600
67,500 Merck & Co., Inc. 2,544,075
175,000 Pfizer, Inc. 3,057,250
- ------------------------------------------------------------------------------------------------------------------------------------
12,924,725
- ------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 1.1%
52,500 Rayonier, Inc. 2,229,150
- ------------------------------------------------------------------------------------------------------------------------------------
SPECIALTY RETAIL - 0.6%
32,500 Best Buy Co., Inc. 1,287,000
- ------------------------------------------------------------------------------------------------------------------------------------
TOBACCO - 1.0%
100,000 Altria Group, Inc. 2,056,000
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS - 56.7%
(Cost $120,682,936) 113,005,714
- ------------------------------------------------------------------------------------------------------------------------------------
See notes to financial statements.
SemiAnnual Report | June 30, 2008 | 17
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | PORTFOLIO OF INVESTMENTS
(unaudited) continued
OPTIONAL CALL
PRINCIPAL AMOUNT PROVISIONS VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS - 8.8%
AEROSPACE/DEFENSE - 0.9%
$ 1,000,000 DRS Technologies, Inc., B, B3
6.875%, 11/1/2013 11/1/08 @ 103.44 $ 1,000,000
700,000 L-3 Communications Corp., BB+, Ba3
7.625%, 6/15/2012 6/15/09 @ 101.27 707,000
- ------------------------------------------------------------------------------------------------------------------------------------
1,707,000
- ------------------------------------------------------------------------------------------------------------------------------------
APPAREL - 0.5%
1,000,000 Phillips-Van Heusen Corp., BB+, Ba3
7.250%, 2/15/2011 2/15/09 @ 101.81 1,002,500
- ------------------------------------------------------------------------------------------------------------------------------------
AUTO MANUFACTURERS - 0.5%
1,000,000 Navistar International Corp., NR, NR
7.500%, 6/15/2011 6/15/09 @ 101.88 980,000
- ------------------------------------------------------------------------------------------------------------------------------------
AUTO PARTS & EQUIPMENT - 0.3%
600,000 Goodyear Tire & Rubber Co. (The), BB-, B2
7.857%, 8/15/2011 N/A 596,250
- ------------------------------------------------------------------------------------------------------------------------------------
BANKS - 0.5%
400,000 Capital One Financial Corp., BBB, Baa1
6.150%, 9/1/2016 N/A 352,616
100,000 FCB/NC Capital Trust I, BB+, A3
8.050%, 3/1/2028 3/1/09 @ 103.62 102,727
500,000 First Tennessee Bank NA, A-, A1
2.779%, 5/18/2009 (e) N/A 478,909
- ------------------------------------------------------------------------------------------------------------------------------------
934,252
- ------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES - 0.2%
350,000 Rent-A-Center, Inc., B+, B2
7.500%, 5/1/2010 5/1/09 @ 100.00 338,625
- ------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES - 1.2%
1,750,000 Citigroup, Inc., A, A2
8.400%, 4/29/49 (f) 4/30/18 @ 100.00 1,663,566
1,000,000 General Motors Acceptance Corp. LLC, B, B3
6.875%, 9/15/2011 N/A 718,572
- ------------------------------------------------------------------------------------------------------------------------------------
2,382,138
- ------------------------------------------------------------------------------------------------------------------------------------
ELECTRONICS - 0.4%
700,000 IMAX Corp. (Canada), CCC, Caa2
9.625%, 12/1/2010 12/1/08 @ 102.41 703,500
- ------------------------------------------------------------------------------------------------------------------------------------
FOOD - 1.1%
1,465,000 Dean Foods Co., B, B3
7.000%, 6/1/2016 N/A 1,270,888
935,000 Smithfield Foods, Inc., BB-, Ba3
7.000%, 8/1/2011 N/A 853,188
- ------------------------------------------------------------------------------------------------------------------------------------
2,124,076
- ------------------------------------------------------------------------------------------------------------------------------------
OPTIONAL CALL
PRINCIPAL AMOUNT PROVISIONS VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
FOREST PRODUCTS & PAPER - 0.3%
$ 239,000 Boise Cascade LLC, BB-, B2
7.125%, 10/15/2014 10/15/09 @ 103.56 $ 191,200
500,000 Domtar Corp., B+, NR
7.875%, 10/15/2011 N/A 502,500
- ------------------------------------------------------------------------------------------------------------------------------------
693,700
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 0.4%
740,000 DaVita, Inc., B, B2
7.250%, 3/15/2015 3/15/10 @ 103.63 719,650
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - 0.5%
500,000 Odyssey Re Holdings Corp., BBB-,Baa3
7.650%, 11/1/2013 N/A 530,309
500,000 Presidential Life Corp., B+, B2
7.875%, 2/15/2009 N/A 498,750
- ------------------------------------------------------------------------------------------------------------------------------------
1,029,059
- ------------------------------------------------------------------------------------------------------------------------------------
IRON/STEEL - 0.2%
455,000 Allegheny Technologies, Inc., BBB-, Baa3
8.375%, 12/15/2011 N/A 481,756
- ------------------------------------------------------------------------------------------------------------------------------------
MEDIA - 0.4%
750,000 DirecTV Holdings LLC/DirecTV Financing Co., BB, Ba3
8.375%, 3/15/2013 3/15/09 @ 102.79 772,500
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICE/BUSINESS EQUIPMENT - 0.5%
1,000,000 Xerox Capital Trust I, BB+, Baa3
8.000%, 2/1/2027 2/1/09 @ 101.96 976,061
- ------------------------------------------------------------------------------------------------------------------------------------
RETAIL - 0.4%
700,000 Dillards, Inc., BB-, B2
7.130%, 8/1/2018 N/A 525,000
475,000 Pantry, Inc. (The), B-, B3
7.750%, 2/15/2014 2/15/09 @ 103.88 356,250
- ------------------------------------------------------------------------------------------------------------------------------------
881,250
- ------------------------------------------------------------------------------------------------------------------------------------
SEMICONDUCTORS - 0.1%
345,000 Advanced Micro Devices, Inc., B, B2
7.750%, 11/1/2012 11/1/08 @ 103.88 297,563
- ------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 0.4%
850,000 Overseas Shipholding Group, Inc., BB, Ba1
8.750%, 12/1/2013 N/A 892,500
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS - 8.8%
(Cost $18,583,163) 17,512,380
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER
0F SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS - 7.5%
DIVERSIFIED FINANCIAL SERVICES - 2.0%
60,000 ABN Amro Capital Funding Trust VII, Series G, 6.080%, A, A1 1,029,600
31,650 Deutsche Bank Contingent Capital Trust II, 6.550%, A+, Aa3 625,087
50,000 Merrill Lynch & Co., Inc., Series 3, 6.375%, BBB+, A3 843,000
61,000 Merrill Lynch & Co., Inc., Series MER, 8.625%, A-, A3 1,415,200
- ------------------------------------------------------------------------------------------------------------------------------------
3,912,887
- ------------------------------------------------------------------------------------------------------------------------------------
See notes to financial statements.
18 | SemiAnnual Report | June 30, 2008
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | PORTFOLIO OF INVESTMENTS
(unaudited) continued
NUMBER
0F SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - 2.4%
50,000 Aegon NV (Netherlands), 6.500%, A-, A3 $ 867,000
31,200 Allianz SE (Germany), 8.375%, A+, A3 776,880
25,000 Aspen Insurance Holdings, Ltd. (Bermuda), 7.401%, BBB-, Ba1 (e) 540,000
33,200 ING Groep NV (Netherlands), 7.375%, A, A1 726,748
50,000 Metlife, Inc., Series B, 6.500%, BBB, Baa1 1,070,000
48,600 Prudential PLC (United Kingdom), 6.500%, A-, Baa1 899,100
- ------------------------------------------------------------------------------------------------------------------------------------
4,879,728
- ------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 3.1%
20,000 Apartment Investment & Management Co., Series U, 7.750%, B+, Ba3 465,000
20,000 Brandywine Realty Trust, Series C, 7.500%, NR, NR 420,000
11,000 Capital Automotive REIT, Series A, 7.500%, NR, B1 138,875
20,000 CBL & Associates Properties, Inc., Series C, 7.750%, NR, NR 438,000
25,000 CBL & Associates Properties, Inc., Series D, 7.375%, NR, NR 510,750
12,500 Duke Realty Corp., Series L, 6.600%, BBB, Baa2 240,125
25,000 First Industrial Realty Trust, Inc., Series J, 7.250%, BBB-, Baa3 525,000
20,000 Health Care REIT, Inc., Series D, 7.875%, BB+, Baa3 477,000
15,500 Kimco Realty Corp., Series G, 7.750%, BBB+, Baa2 368,435
12,000 PS Business Parks, Inc., Series H, 7.000%, BBB-, Baa3 244,800
16,000 Public Storage, Inc., Series M, 6.625%, BBB+, Baa1 317,920
20,000 Realty Income Corp., Series D, 7.375%, BBB-, Baa2 478,000
18,500 Regency Centers Corp., Series D, 7.250%, BBB, Baa3 398,675
25,000 Taubman Centers, Inc., Series G, 8.000%, NR, B1 585,000
25,000 Vornado Realty Trust, Series E, 7.000%, BBB-, Baa3 525,000
- ------------------------------------------------------------------------------------------------------------------------------------
6,132,580
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS - 7.5%
(Cost $18,228,249) 14,925,195
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANIES - 0.0%
7,000 DWS RREEF Real Estate Fund II, Inc.
(Cost $96,569) 80,640
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LONG-TERM INVESTMENTS - 171.8%
(Cost $360,170,117) 342,655,427
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 0.9%
$ 1,700,000 Blount County, Tennessee Public Building Authority
Local Government Public Improvement, Series A-3-A, AMBAC Insured, AA, Aa3 (g)
5.000%, 6/1/2026
(Cost $1,700,000) 1,700,000
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 172.7%
(Cost $361,870,117) 344,355,427
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
FLOATING RATE NOTE OBLIGATIONS - (1.6%)
$(3,250,000) Notes with interest rates ranging from 1.58% to 1.59% on June 30, 2008,
and contractual maturity of collateral ranging from 2040 to 2041.
(Cost ($3,250,000)) $ (3,250,000)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL NET INVESTMENTS - 171.1%
(Cost $358,620,117) 341,105,427
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities in excess of Other Assets - (10.9%) (21,653,665)
Preferred Shares, at Liquidation Value - (-60.2% of Net Assets
Applicable to Common Shareholders or -35.2% of Total Investments) (120,000,000)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS - 100.0% $ 199,451,762
====================================================================================================================================
ACA ACA Financial Guaranty Corporation
ADR American Depositary Receipt
AMBAC Ambac Assurance Corporation
ASSURED Assured Guaranty Corp.
BHAC Bershire Hathaway Assurance Corp.
FGIC Financial Guaranty Insurance Company
FHLMC Freddie Mac
FNMA Fannie Mae
GNMA Ginnie Mae
LLC Limited Liability Corporation
MBIA MBIA Insurance Corporation
N/A Not Applicable
PLC Public Limited Company
PSF Permanent School Fund (Texas)
RADIAN Radian Asset Assurance, Inc
REIT Real Estate Investment Trust
(a) Inverse floating rate investment. Interest rate shown is that in effect
at June 30, 2008.
(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.
(d) Non-income producing security
(e) Floating or variable rate coupon
(f) Security has a fixed rate coupon which will convert to a floating or
variable rate coupon on a future
(g) 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 June 30, 2008.
Ratings shown are per Standard & Poor's and Moody's. Securities classified as
NR are not rated.
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.
SemiAnnual Report | June 30, 2008 | 19
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
Statement of ASSETS AND LIABILITIES | JUNE 30, 2008 (unaudited)
ASSETS
Investments in securities, at value (cost $361,870,117) $344,355,427
Cash 114,432
Interest receivable 2,328,784
Receivable for securities sold 1,305,006
Dividends receivable 232,696
Unrealized appreciation on swap 219,531
Other assets 23,554
- --------------------------------------------------------------------------------------------------------------
Total assets 348,579,430
- --------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for securities purchased 25,283,749
Floating rate note obligations 3,250,000
Dividend payable - preferred shares 212,607
Advisory fee payable 188,365
Administration fee payable 14,396
Accrued expenses and other liabilities 178,551
- --------------------------------------------------------------------------------------------------------------
Total liabilities 29,127,668
- --------------------------------------------------------------------------------------------------------------
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 $199,451,762
==============================================================================================================
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 (8,465,723)
Accumulated net unrealized depreciation on investments and swaps (17,295,159)
Accumulated undistributed net investment income 6,501,181
- --------------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS $199,451,762
==============================================================================================================
NET ASSET VALUE APPLICABLE TO COMMON SHAREHOLDERS (based on 15,407,000
common shares outstanding) $ 12.95
==============================================================================================================
See notes to financial statements.
20 | SemiAnnual Report | June 30, 2008
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
Statement of OPERATIONS | FOR THE YEAR ENDED JUNE 30, 2008 (unaudited)
INVESTMENT INCOME
Interest $ 6,065,725
Dividends (net of foreign withholding taxes of $40,103) 2,946,251
- ---------------------------------------------------------------------------------------------------------------
Total income $ 9,011,976
- ---------------------------------------------------------------------------------------------------------------
EXPENSES
Advisory fee 1,168,406
Auction agent fee-preferred shares 157,761
Professional fees 80,526
Trustees' fees and expenses 69,205
Fund accounting 49,085
Administration fee 40,842
Printing expenses 30,773
Custodian fee 25,127
Miscellaneous 12,158
Transfer agent fee 11,326
NYSE listing fee 10,556
Insurance 9,490
Interest expense on floating rate note obligations 43,061
- ---------------------------------------------------------------------------------------------------------------
Total expenses 1,708,316
- ---------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 7,303,660
- ---------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND SWAPS
Net realized gain (loss) on:
Investments (9,206,883)
Swaps 2,217,500
Net change in unrealized appreciation (depreciation) on:
Investments (20,620,587)
Swaps (82,900)
- ---------------------------------------------------------------------------------------------------------------
Net realized and unrealized loss on investments and swaps (27,692,870)
- ---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS FROM
Net investment income (2,580,440)
- ---------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS RESULTING FROM OPERATIONS $ (22,969,650)
===============================================================================================================
See notes to financial statements.
SemiAnnual Report | June 30, 2008 | 21
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
Statement of CHANGES IN NET ASSETS
APPLICABLE TO COMMON SHAREHOLDERS |
FOR THE
SIX MONTHS ENDED FOR THE
JUNE 30, 2008 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2007
- ------------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS
RESULTING FROM OPERATIONS
Net investment income $ 7,303,660 $ 14,213,283
Net realized gain (loss) on investments and swaps (6,989,383) 11,807,236
Net change in unrealized appreciation (depreciation) on investments
and swaps (20,703,487) (28,478,448)
- ------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS
From and in excess of net investment income (2,580,440) (4,541,977)
From realized gains - (1,746,672)
- ------------------------------------------------------------------------------------------------------------------
Total distributions to Preferred Shareholders (2,580,440) (6,288,649)
- ------------------------------------------------------------------------------------------------------------------
Net decrease in net assets applicable to common shareholders resulting
from operations (22,969,650) (8,746,578)
- ------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS:
From and in excess of net investment income (7,780,535) (14,723,314)
From realized gains - (5,662,073)
- ------------------------------------------------------------------------------------------------------------------
Total distributions to Common Shareholders (7,780,535) (20,385,387)
- ------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets applicable to common shareholders (30,750,185) (29,131,965)
NET ASSETS
Beginning of period 230,201,947 259,333,912
- ------------------------------------------------------------------------------------------------------------------
End of period (including accumulated undistributed net investment income
of $6,501,181 and $9,558,496, respectively) $199,451,762 $230,201,947
==================================================================================================================
See notes to financial statements.
22 | SemiAnnual Report | June 30, 2008
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
Financial HIGHLIGHTS |
FOR THE PERIOD
FOR THE FOR THE FOR THE FOR THE APRIL 28, 2004*
PER SHARE OPERATING PERFORMANCE SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
FOR A COMMON SHARE OUTSTANDING JUNE 30, 2008 DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
THROUGHOUT THE PERIOD (UNAUDITED) 2007 2006 2005 2004
====================================================================================================================================
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.94 $ 16.83 $ 15.44 $ 15.47 $ 14.33(b)
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) 0.47 0.92 0.91 0.88 0.52
Net realized and unrealized gain on investments,
options and swaps (1.78) (1.08) 1.79 0.29 1.29
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS
From and in excess of net investment income
(common share equivalent basis) (0.17) (0.30) (0.37) (0.26) (0.07)
From realized gains (common share equivalent basis) - (0.11) - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions to Preferred Shareholders (0.17) (0.41) (0.37) (0.26) (0.07)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (1.48) (0.57) 2.33 0.91 1.74
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From and in excess of net investment income (0.51) (0.95) (0.94) (0.94) (0.47)
From realized gains - (0.37) - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions to Common Shareholders (0.51) (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 $ 12.95 $ 14.94 $ 16.83 $ 15.44 $ 15.47
====================================================================================================================================
MARKET VALUE, END OF PERIOD $ 11.11 $ 13.10 $ 15.77 $ 13.35 $ 13.62
====================================================================================================================================
TOTAL INVESTMENT RETURN (c)
Net asset value -9.96% -3.60% 15.50% 6.02% 11.42%
Market value -11.48% -8.97% 25.98% 4.80% -6.05%
RATIOS AND SUPPLEMENTAL DATA
Net assets applicable to common shareholders,
end of period (thousands) $ 199,452 $ 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 $ 120,000
Preferred shares asset coverage per share $ 66,552 $ 72,959 $ 79,028 $ 74,545 $ 74,664
Ratios to average net assets applicable to
common shareholders: (d)
Total expenses (including interest expense on
floating rate note obligations(e)) 1.59% 1.53% 1.50% - -
Total expenses (excluding interest expense on
floating rate note obligations) 1.55% 1.44% 1.46% 1.52% 1.36%
Net investment income, prior to effect of
dividends to preferred shares 6.81% 5.60% 5.70% 5.73% 5.31%
Net investment income, after effect of dividends
to preferred shares 4.40% 3.81% 3.41% 4.05% 4.58%
Ratios to average managed assets: (d)(f)
Total expenses (including interest expense on
floating rate note obligations(e)) 1.02% 1.04% 1.01% - -
Total expenses (excluding interest expense on
floating rate note obligations) 1.00% 0.98% 0.98% 1.01% 0.98%
Net investment income, prior to effect of
dividends to preferred shares 4.38% 3.80% 3.84% 3.80% 3.83%
Portfolio turnover rate 96% 114% 159% 103% 75%
Asset coverage per $1,000 unit of indebtedness(h) $ 92,293 $ 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.
(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.
SemiAnnual Report | June 30, 2008 | 23
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
Notes to FINANCIAL STATEMENTS | JUNE 30, (2008) (unaudited)
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 AND DERIVATIVES
The Fund values equity securities at the last reported sale price on the
principle exchange or in the principle 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.
In September, 2006, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard No. 157, "Fair Valuation
Measurements" ("FAS 157"). This standard clarifies the definition of fair value
for financial reporting, establishes a framework for measuring fair value and
requires additional disclosures about the use of fair value measurements. FAS
157 establishes three different categories for valuations. Level 1 valuations
are those based upon quoted prices in active markets. Level 2 valuations are
those based upon quoted prices in inactive markets or based upon significant
observable inputs (i.e. yield curves; benchmark interest rates; indices). Level
3 valuations are those based upon unobservable inputs (i.e. discounted cash flow
analysis; non-market based methods used to determine fair valuation). Details of
the valuations as of June 30, 2008 were as follows:
Valuations at June 30, 2008
DESCRIPTION SECURITIES DERIVATIVES TOTAL
- --------------------------------------------------------------------------------
(value in $000s)
Assets :
Level 1 $ 145,524 $ - $145,524
Level 2 198,831 220 199,051
Level 3 - - -
- --------------------------------------------------------------------------------
Total $ 344,355 $ 220 $344,575
================================================================================
Liabilities
Level 1 $ - $ - $ -
Level 2 - - -
Level 3 - - -
- --------------------------------------------------------------------------------
Total $ - $ - $ -
================================================================================
(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 June 30, 2008 were as follows:
NOTIONAL UNREALIZED
TERMINATION AMOUNT FIXED FLOATING APPRECIATION/
COUNTERPARTY DATE (000) RATE RATE (DEPRECIATION)
- --------------------------------------------------------------------------------
RBC Dain Rauscher* 9/10/2038 $10,000,000 3.224% 30-Yr LIBOR $ 219,531
================================================================================
LIBOR - London Interbank Offering Rate
* For the swap noted, the Fund pays a floating rate and receives a fixed
rate.
24 | SemiAnnual Report | June 30, 2008
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | NOTES TO FINANCIAL STATEMENTS
(unaudited) continued
(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 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 FundStatement 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 June 30, 2008, Fund
investments with a par value of $6,500,000 (market value of approximately
$6,250,000) are held by the dealer trusts and serve as collateral for the
$3,250,000 in floating rate notes outstanding at that date. Contractual
maturities of the floating rate notes and interest rates in effect at June 30,
2008 are presented on the Portfolio of Investments. The average floating rate
notes outstanding and average annual interest rate during the six-months ended
June 30, 2008 were $3,694,444 and 2.34%, 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 if 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 Mellon ("BNY") acts as the Fund's custodian, accounting
agent, auction agent and transfer agent. As custodian, BNY is responsible for
the custody of the Fund's assets. As accounting agent, BNY is responsible for
maintaining the books and records of the Fund'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 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%
SemiAnnual Report | June 30, 2008 | 25
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | NOTES TO FINANCIAL STATEMENTS
(unaudited) continued
Certain officers and trustees of the Fund are also officers and directors of the
Adviser, Sub-Adviser, or Sub-Adviser 2. 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.
Information on the tax components of investments and net assets as of June 30,
2008 is as follows:
COST OF NET TAX NET TAX
INVESTMENTS GROSS TAX GROSS TAX UNREALIZED UNREALIZED
FOR TAX UNREALIZED UNREALIZED DEPRECIATION APPRECIATION
PURPOSES APPRECIATION DEPRECIATION ON INVESTMENTS ON DERIVATIVES
- --------------------------------------------------------------------------------
$361,828,867 $9,201,838 $(26,675,278) $(17,473,440) $219,531
The differences between book basis and tax basis unrealized appreciation/
(depreciation) is attributable to additional income accrued for tax purposes on
certain preferred stocks and investments in real estate investment trusts.
For the year ended December 31, 2007, 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
- --------------------------------------------------------------------------------
Ordinary income $6,067,201
Tax-exempt income $7,772,917
Long-term capital gain $12,833,918
- --------------------------------------------------------------------------------
Total Distributions $26,674,036
- --------------------------------------------------------------------------------
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. Management
has evaluated the implications of FIN 48 and has determined it does not have any
impact on the financial statements as of June 30, 2008.
Tax years for 2004, 2005, 2006 and 2007 are still subject to examination by
major jurisdictions.
Note 5 - INVESTMENT IN SECURITIES:
For the six months ended June 30, 2008, purchases and sales of investments,
excluding short-term securities, were $ 324,661,211 and $ 312,622,251,
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 six months ended
June 30, 2008 or the year ended December 31, 2007.
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.
The board auction-rate preferred securities market, including the Fund's Auction
Market Preferred Shares ("AMPS"), has experienced considerable disruption in the
past several months. The result has been failed auctions on nearly all
auction-rate preferred shares, including the Fund's AMPS. A failed auction is
not a default, nor does it require the redemption of the Fund's AMPS. Provisions
on the offering documents of the Fund's AMPS provide a mechanism to set a
maximum rate in the event of a failed auction. The maximum rate is LIBOR + 1.25%
or LIBOR x 125%, whichever is greater.
For the period ended June 30, 2008, the annualized dividend rates ranged from:
HIGH LOW AT 6/30/08
- --------------------------------------------------------------------------------
Series M7 5.40% 3.54% 3.95%
Series T28 6.19% 3.70% 3.70%
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.
26 | SemiAnnual Report | June 30, 2008
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | NOTES TO FINANCIAL STATEMENTS
(unaudited) continued
Note 8 - RECENT ACCOUNTING PRONOUNCEMENT:
In March 2008, the FASB issued Statement of Financial Accounting Standard No.
161 ("SFAS No. 161"), "Disclosures about Derivative Instruments and Hedging
Activities." This standard is intended to enhance financial statement
disclosures for derivative instruments and hedging activities and enable
investors to understand: a) how and why a fund uses derivative instruments, b)
how derivatives instruments and related hedge fund items are accounted for, and
c) how derivative instruments and related hedge items affect a fund's financial
position, results of operations and cash flows. SFAS No. 161 is effective for
financial statements issued for fiscal years and interim periods beginning after
November 15, 2008. As of June 30, 2008, management does not believe the adoption
of SFAS No. 161 will impact the financial statement amounts; however, additional
footnote disclosures may be required about the use of derivative instruments and
hedging items.
SemiAnnual Report | June 30, 2008 | 27
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
FEDERAL INCOME TAX INFORMATION
In January 2009, you will be advised on IRS Form 1099 DIV or substitute 1099 DIV
as to the federal tax status of the distributions received by you in the
calendar year 2008.
TRUSTEES
The Trustees of the TS&W/Claymore Tax-Advantaged Balanced Fund and their
principal occupations during the past five years:
NUMBER OF
NAME, ADDRESS,* PORTFOLIOS
YEAR OF TERM OF OFFICE** PRINCIPAL OCCUPATION DURING IN THE
BIRTH AND POSITION(S) AND LENGTH OF THE PAST FIVE YEARS AND 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). Previously, Senior Vice 42 None.
Year of Birth: 1951 President & Treasurer, PepsiCo., Inc. (1993-1997),
Trustee 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 Executive Officer and 2 Trustee, SXC
Year of Birth: 1955 Director of Priority Healthcare Corp. (2002-2005). Health Solutions.
Trustee 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 Previously, President and Chief Investment Officer 2 Trustee, Old Mutual
Year of Birth: 1942 of TRW Investment Management Co. (1990-2003). Advisor Mutual
Trustee Funds.
- ------------------------------------------------------------------------------------------------------------------------------------
L. Kent Moore Since 2004 Partner at WilSource Enterprise (December 2 Trustee, Old Mutual
Year of Birth: 1955 2005-present). Previously, Managing Director High Advisor Mutual
Trustee Sierra Energy L.P., (2004-2005). Previously, Funds.
Portfolio Manager and Vice President of Janus
Capital Corp. (2000-2002) and SeniorAnalyst/Portfolio
Manager of Marsico Capital Management (1997-1999).
- ------------------------------------------------------------------------------------------------------------------------------------
Ronald A. Nyberg Since 2004 Partner of Nyberg & Cassioppi, LLC, a law firm 45 None.
Year of Birth: 1953 specializing in corporate law, estate planning and
Trustee 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, Manager and Portfolio 42 None.
Year of Birth: 1958 Manager of Nuveen Asset Management (1998-1999),
Trustee Vice President of Nuveen Investment Advisory Corp.
(1992-1999), Vice President and Manager of Nuveen
Unit Investment Trusts (1991-1999), and Assistant
Vice President and Portfolio Manager of Nuveen
Unit Investment Trusts (1988-1999), each of John
Nuveen & Co., Inc. (1982-1999).
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES:
- ------------------------------------------------------------------------------------------------------------------------------------
Matthew J. Appelstein+ Since 2005 Senior Vice President of Product Strategy and 2 None.
Year of Birth: 1961 Retirement Solutions Planning, Director of
Trustee 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 Attorney. Formerly, Senior Managing Director and 45 None.
Year of Birth: 1965 Chief Administrative Officer of Claymore Advisors,
Trustee; Chief Executive LLC and Claymore Securities, Inc. (2007-present).
and Legal Officer 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. Appelstein, 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 as a result of his former position as an officer
of, and his equity ownership in, the Adviser and certain of its affiliates.
28 | SemiAnnual Report | June 30, 2008
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | SUPPLEMENTAL INFORMATION
(unaudited) continued
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:
- ------------------------------------------------------------------------------------------------------------------------------------
J. Thomas Futrell Effective May 29, 2008 Senior Managing Director, Chief Investment Officer (2008-present)
Year of birth: 1955 of Claymore Advisors, LLC and Claymore Securities, Inc.; Chief
Chief Executive Officer Executive Officer of certain other Funds advised by Claymore
Advisors, LLC. Formerly, Managing Director in charge of Research
(2000-2007) for Nuveen Asset Management.
- ------------------------------------------------------------------------------------------------------------------------------------
Kevin M. Robinson Effective May 29, 2008 Senior Managing Director, General Counsel of Claymore Advisors,
Year of birth: 1959 LLC and Claymore Group Inc.(2007-present); Formerly, Associate
Chief Legal Officer General Counsel (2000- 2007) of NYSE Euronext, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Steven M. Hill Since 2004 Senior Managing Director of Claymore Advisors LLC and Claymore
Year of Birth: 1964 Securities, Inc. (2005-present). Chief Financial Officer of
Chief Financial Officer, Chief Claymore Group Inc. (2005-2006), Managing Director (2003-2005) of
Accounting Officer and Treasurer Claymore Advisors, LLC and Claymore Securities, Inc.; Formerly,
Treasurer of Henderson Global Funds and Operations Manager for
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 (2006-present). Previously, Senior Managing Director of Claymore
Vice President Advisors, LLC (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 (2006-present). Previously, Managing Director of Claymore
Vice President Advisors, LLC (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 (2006-present). Previously, Managing Director of Claymore
Vice President Advisors, LLC (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 J. Patterson Since 2006 Vice President, Assistant General Counsel of Claymore Group Inc.
Year of Birth: 1971 (2006- Present). Secretary of certain other Funds advised by
Secretary Claymore Advisors, LLC. 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).
- ------------------------------------------------------------------------------------------------------------------------------------
* 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.
SemiAnnual Report | June 30, 2008 | 29
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 Mellon (the
"Plan Administrator"), Administrator for shareholders in the Fund's Dividend
Reinvestment Plan (the "Plan"), in additional common shares of the Fund.
Participation in the Plan is completely voluntary and may be terminated or
resumed at any time without penalty by notice if received and processed by the
Plan Administrator prior to the dividend record date; otherwise such termination
or resumption will be effective with respect to any subsequently declared
dividend or other distribution. Some brokers may automatically elect to receive
cash on your behalf and may re-invest that cash in additional common shares of
the Fund for you. If you wish for all dividends declared on your common shares
of the Fund to be automatically reinvested pursuant to the Plan, please contact
your broker.
The Plan Administrator will open an account for each common shareholder under
the Plan in the same name in which such common shareholder's common shares are
registered. Whenever the Fund declares a dividend or other distribution
(together, a "Dividend") payable in cash, non-participants in the Plan will
receive cash and participants in the Plan will receive the equivalent in common
shares. The common shares will be acquired by the Plan Administrator for the
participants' accounts, depending upon the circumstances described below, either
(i) through receipt of additional unissued but authorized common shares from the
Fund ("Newly Issued Common Shares") or (ii) by purchase of outstanding common
shares on the open market ("Open-Market Purchases") on the New York Stock
Exchange or elsewhere. If, on the payment date for any Dividend, the closing
market price plus estimated brokerage commission per common share is equal to or
greater than the net asset value per common share, the Plan Administrator will
invest the Dividend amount in Newly Issued Common Shares on behalf of the
participants. The number of Newly Issued Common Shares to be credited to each
participant's account will be determined by dividing the dollar amount of the
Dividend by the net asset value per common share on the payment date; provided
that, if the net asset value is less than or equal to 95% of the closing market
value on the payment date, the dollar amount of the Dividend will be divided by
95% of the closing market price per common share on the payment date. If, on the
payment date for any Dividend, the net asset value per common share is greater
than the closing market value plus estimated brokerage commission, the Plan
Administrator will invest the Dividend amount in common shares acquired on
behalf of the participants in Open-Market Purchases.
If, before the Plan Administrator has completed its Open-Market Purchases, the
market price per common share exceeds the net asset value per common share, the
average per common share purchase price paid by the Plan Administrator may
exceed the net asset value of the common shares, resulting in the acquisition of
fewer common shares than if the Dividend had been paid in Newly Issued Common
Shares on the Dividend payment date. Because of the foregoing difficulty with
respect to Open-Market Purchases, the Plan provides that if the Plan
Administrator is unable to invest the full Dividend amount in Open-Market
Purchases during the purchase period or if the market discount shifts to a
market premium during the purchase period, the Plan Administrator may cease
making Open-Market Purchases and may invest the uninvested portion of the
Dividend amount in Newly Issued Common Shares at net asset value per common
share at the close of business on the Last Purchase Date provided that, if the
net asset value is less than or equal to 95% of the then current market price
per common share; the dollar amount of the Dividend will be divided by 95% of
the market price on the payment date.
The Plan Administrator maintains all shareholders' accounts in the Plan and
furnishes written confirmation of all transactions in the accounts, including
information needed by shareholders for tax records. Common shares in the account
of each Plan participant will be held by the Plan Administrator on behalf of the
Plan participant, and each shareholder proxy will include those shares purchased
or received pursuant to the Plan. The Plan Administrator will forward all proxy
solicitation materials to participants and vote proxies for shares held under
the Plan in accordance with the instruction of the participants. There will be
no brokerage charges with respect to common shares issued directly by the Fund.
However, each participant will pay a pro rata share of brokerage commission
incurred in connection with Open-Market Purchases. The automatic reinvestment of
Dividends will not relieve participants of any Federal, state or local income
tax that may be payable (or required to be withheld) on such Dividends.
The Fund reserves the right to amend or terminate the Plan. There is no direct
service charge to participants with regard to purchases in the Plan; however,
the Fund reserves the right to amend the Plan to include a service charge
payable by the participants.
All correspondence or questions concerning the Plan should be directed to the
Plan Administrator, The Bank of New York Mellon, P.O. Box 463, East Syracuse,
New York 13057-0463, Attention: Shareholder Services Department, Phone Number:
(866) 488-3559.
30 | SemiAnnual Report | June 30, 2008
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
Investment Advisory and SUBADVISORY AGREEMENT APPROVALS |
On January 22, 2008, the Board of Trustees (the "Board"), including those
trustees who are not interested persons as defined by the Investment Company Act
of 1940 (the "Independent Trustees"), of TS&W/Claymore Tax-Advantaged Balanced
Fund (the "Fund") met to consider the renewal of: (1) the investment advisory
agreement ("Investment Advisory Agreement") between the Fund and Claymore
Advisors, LLC ("Adviser"), (2) the subadvisory agreement ("TS&W Subadvisory
Agreement") relating to management of the equity and income securities portion
of the Fund's portfolio (the "Equity and Income Portfolio") among the Adviser,
the Fund and Thompson, Siegel & Walmsley LLC ("TS&W") and (3) the subadvisory
agreement ("SMC Subadvisory Agreement") relating to management of the municipal
securities portion of the Fund's portfolio (the "Municipal Portfolio") among the
Adviser, the Fund and SMC Fixed Income Management, L.P. ("SMC") (The Investment
Advisory Agreement, the TS&W Subadvisory Agreement and the SMC Subadvisory
Agreement are collectively referred to as the "Advisory Agreements"). As part of
its review process, the Nominating and Governance Committee of the Board
(referred to as the "Committee" and consisting solely of the Independent
Trustees) was represented by independent legal counsel. The Board reviewed
materials received from the Adviser, TS&W, SMC and independent legal counsel.
The Board also had previously received, throughout the year, Board meeting
information regarding performance and operating results of the Fund.
In preparation for its review, the Committee communicated with independent legal
counsel regarding the nature of information to be provided, and independent
legal counsel, on behalf of the Committee, sent a formal request for
information. The Adviser, TS&W and SMC provided extensive information in
response to the request. Among other information, the Adviser, TS&W and SMC
provided general information to assist the Committee in assessing the nature and
quality of services provided by the Adviser, TS&W and SMC and information
comparing the investment performance, advisory fee and total expenses of the
Fund to other funds, information about the profitability of the Advisory
Agreements to the Adviser, TS&W and SMC and the compliance policies and
procedures adopted by each of the Adviser, TS&W and SMC.
Based upon their review, the Committee and the Board concluded that it was in
the best interests of the Fund to renew each of the Advisory Agreements. In
reaching this conclusion for the Fund, no single factor was determinative in the
Board's analysis, but rather the Board considered a variety of factors.
INVESTMENT ADVISORY AGREEMENT
With respect to the nature, extent and quality of services currently provided by
the Adviser, the Board noted that the Adviser had delegated responsibility for
the investment and reinvestment of the Equity and Income Portfolio to TS&W and
the Municipal Portfolio to SMC. The Board considered the Adviser's
responsibility to oversee TS&W and SMC and that the Adviser has similar
oversight responsibilities for other registered funds for which it serves as
investment adviser. The Board reviewed financial information regarding the
Adviser and its parent company and considered the parent company's guaranty of
the Adviser's obligations under the Investment Advisory Agreement. The Board
considered the experience and qualifications of the Adviser's Advisory Oversight
Group. Specifically, the Board noted the ongoing oversight activities performed
by the Adviser, including on-site diligence visits and regular monitoring of
compliance with policies and procedures and with the Fund's investment
parameters as described in its prospectus and statement of additional
information. After considering these factors, the Board concluded that the
Adviser and its personnel were qualified to serve the Fund in such capacity.
The Board reviewed the Fund's investment performance by reviewing the Fund's net
asset value and market price returns for the three month, six month, one year,
three year and since inception (April 28, 2004) periods ended December 31, 2007
and compared it to the net asset value and market price returns of the Fund's
only peer closed-end fund, which also invests a minimum of 50% of its total
assets in municipal securities with the remaining portion invested in equity and
other fixed-income securities with an emphasis on providing tax-advantaged
income ("peer fund"), the Lehman Brothers Municipal Bond Index, the Russell 1000
Value Index and a group of open-end mutual funds with investment strategies
similar to that of the Fund, for the same time periods. The Board also
considered the Fund's use of leverage and the negative impact of the leverage on
the Fund's performance for the year ended December 31, 2007. The Board noted
that the Fund's use of leverage had a positive effect on the Fund's portfolio
since inception. The Board noted that the Fund's investment results were
consistent with the Fund's investment objective. The Board also considered that
the Adviser does not directly control investment performance but had delegated
such duties to TS&W and SMC. With respect to the Fund's market price
performance, the Board noted that the Fund's shares were trading at a discount,
but that since inception performance based upon a market price total return
basis had been positive. The Board concluded that the Adviser had appropriately
reviewed and monitored TS&W's and SMC's investment performance and efforts to
seek the Fund's investment objective, and that the Adviser's performance was
satisfactory.
The Board compared the Fund's advisory fee (which includes the subadvisory fees
paid to TS&W and SMC) and expense ratio to the peer fund and to other funds with
either municipal portfolios or equity portfolios ("comparable funds") and to the
advisory fee that the Adviser charges to other closed-end funds for which it
serves as adviser. The Board also reviewed the mean and median advisory fees and
expense ratios of the comparable funds. The Board concluded that the Fund's
advisory fee was reasonable.
With respect to the costs of services to be provided and profits realized by the
Adviser from its relationship to the Fund, the Board reviewed information
regarding the revenues the Adviser received under the Investment Advisory
Agreement as well as the estimated direct and indirect costs the Adviser incurs
in providing the services described in the Investment Advisory Agreement,
including paying the subadvisory fees to TS&W and SMC. The Board concluded that
the Adviser's profitability was not unreasonable.
The Board considered the extent to which economies of scale could be realized
with respect to the management of the Fund as the Fund grows and whether fee
levels reflect a reasonable sharing of such economies of scale for the benefit
of Fund investors and also considered the current assets of the Fund. Because of
the nature of closed-end funds, the Board does not expect the Fund to grow
significantly in the next twelve months. The Board also considered the Adviser's
statement that, although it has increased assets under management as a result of
new product offerings, it has also increased staff and upgraded systems as a
result and the Adviser thus does not anticipate achieving economies of scale
with respect to the Fund in the coming year. Therefore, the Board concluded that
the Fund is unlikely to realize any significant economies of scale with respect
to the advisory services at the time the Investment Advisory Agreement was being
renewed.
The Board considered other benefits available to the Adviser because of its
relationship to the Fund and noted that the administrative services fees
received by the Adviser from serving as administrator to the Fund provide it
with additional revenue and concluded that the management fee was reasonable,
taking into account this benefit. The Board also considered the Adviser's
statement that it benefited from its association with TS&W and SMC and that the
Adviser anticipates that it may derive future benefits as a result of potential
new product offerings.
SemiAnnual Report | June 30, 2008 | 31
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | INVESTMENT ADVISORY AND
SUBADVISORY AGREEMENT APPROVALS continued
TS&W SUBADVISORY AGREEMENT
With respect to the nature, extent and quality of services provided by TS&W, the
Board considered the qualifications, experience, good reputation and skills of
TS&W's portfolio management and other key personnel. The Board considered TS&W's
success in achieving the Fund's investment objective as it relates to the Equity
and Income Portfolio of providing a high level of after-tax return and in
managing the portfolio's equity and high yield securities, preferred stocks and
real estate investment trusts for purposes of generating income to help pay the
Fund's expenses. The Board compared the Equity and Income Portfolio's
performance to the Russell 1000 Value Index and the S&P 500 Index for the year
ended December 31, 2007, noting the portfolio's strong performance versus the
Russell 1000 Value Index and slight underperformance versus the S&P 500 Index.
Considering these factors, the Board concluded that TS&W was qualified to
provide the services under the TS&W Subadvisory Agreement.
The Board reviewed the subadvisory fee paid by the Adviser to TS&W and compared
it to the fees charged by TS&W to other comparable investment company clients
for which TS&W serves as adviser. The Board noted that the sub-advisory fee
charged to the Fund was lower than the advisory fees charged by TS&W to its
comparable investment company clients. Accordingly, the Board concluded that the
subadvisory fee was reasonable.
With respect to the costs of services to be provided and profits realized by
TS&W from its relationship to the Fund, the Board reviewed information regarding
the revenues TS&W received under the TS&W Subadvisory Agreement and estimated
direct and indirect allocated expenses of TS&W in providing services under the
TS&W Subadvisory Agreement and concluded that the profitability was not
unreasonable.
The Board reviewed the extent to which economies of scale with respect to the
subadvisory services provided to the Fund would be realized as the Fund grows
and whether fee levels reflect a reasonable sharing of such economies of scale
for the benefit of Fund investors. The Board considered TS&W's statement that
the realization of economies of scale with regard to a closed-end fund is not
likely due to the fixed nature of the assets and concluded that the Fund is
unlikely to realize any significant economies of scale with respect to the
subadvisory services at the time the TS&W Subadvisory Agreement was being
reviewed.
The Board considered other benefits derived by TS&W from its relationship with
the Fund, including its use of soft dollars, and other business relationships of
affiliates of TS&W with the Adviser. The Board noted TS&W's statement that it
receives indirect benefits in the form of soft dollar arrangements which may or
may not be used for the benefit of the Fund and may be used for the benefit of
other clients of TS&W. The Board concluded that the subadvisory fee was
reasonable, taking into account these benefits.
SMC SUBADVISORY AGREEMENT
With respect to the nature, extent and quality of the services provided by SMC,
the Board considered the qualifications, experience, good reputation and skills
of the SMC portfolio management team and other key personnel. In evaluating the
performance of the Municipal Portfolio, the Board considered SMC's success in
achieving the Fund's investment objective as it relates to the Municipal
Portfolio of providing a high level of tax-advantaged income and the portfolio
management team's performance track record for the Municipal Portfolio. The
Board noted that the Municipal Portfolio had underperformed its primary
benchmark index, the Lehman Brothers Municipal Long Bond Index, during the year
ended December 31, 2007, but noted SMC's statement that this underperformance
was primarily due to the highly volatile markets for non-U.S. Treasury fixed
income securities during the year and the Municipal Portfolio's overweight
position in lower-rated securities compared to the benchmark index. The Board
concluded that SMC was qualified to provide services under the SMC Subadvisory
Agreement.
The Board reviewed the subadvisory fee paid by the Adviser to SMC and compared
it to the fees charged by SMC to other municipal securities products that it
manages. The Board determined that the fee charged by SMC was within an
acceptable range of the other fees charged by SMC and considered that the
Adviser pays SMC from its management fee. Accordingly, the Board concluded that
the subadvisory fee was reasonable.
With respect to the costs of services provided and profits realized by SMC, the
Board reviewed the subadvisory fee and noted the limited nature of SMC's
profitability information given the short period of time that SMC had been in
existence. The Board noted that SMC's profitability with respect to the Fund was
negative at the time the SMC Subadvisory Agreement was being reviewed and thus
was not unreasonable.
The Board reviewed the extent to which economies of scale with respect to the
subadvisory services provided to the Fund would be realized as the Fund grows.
The Board considered the amount of SMC's subadvisory fee, SMC's statement that
its expenses are expected to remain the same for the next twelve months and that
no economies of scale can be expected to be realized. Given this statement, the
Board concluded that the Fund is unlikely to realize any significant economies
of scale with respect to the subadvisory services from SMC.
The Board considered other benefits to SMC and its affiliates to be derived from
its relationship with the Fund. The Board concluded that any such additional
benefits to SMC and its affiliates derived from its relationship with the Fund
were negligible and, after taking into account such other benefits, the
subadvisory fee paid to SMC was reasonable.
OVERALL CONCLUSIONS
Based upon all of the information considered and the conclusions reached, the
Board determined that the terms of each Advisory Agreement continue to be fair
and reasonable and that the continuation of each Advisory Agreement is in the
best interests of the Fund.
32 | SemiAnnual Report | June 30, 2008
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
Fund INFORMATION |
BOARD OF TRUSTEES
Matthew J. Appelstein*
Randall C. Barnes
Steven D. Cosler
Nicholas Dalmaso**
Robert M. Hamje
L. Kent Moore
Ronald A. Nyberg
Ronald E. Toupin, Jr.
* Trustee is an "interested person" of the Fund as defined in the Investment
Company Act of 1940, as amended, as a result of his former position as an
officer of, and his equity ownership in, the Adviser and certain of its
affiliates.
** Trustee is an "interested person' of the Trust as defined in the Investment
Company Act of 1940, as amended, as a result of his former position as an
officer of, and his equity ownership in, the Adviser and certain of its
affiliates.
OFFICERS
J. Thomas Futrell
Chief Executive
Kevin Robinson
Chief Legal Officer
Steven M. Hill
Chief Financial Officer,
Chief Accounting Officer
and Treasurer
Vincent R. Giordano
Vice President
George Gregorio
Vice President
Roberto W. Roffo
Vice President
Bruce Saxon
Chief Compliance Officer
Matthew J. Patterson
Secretary
INVESTMENT MANAGER - EQUITY AND INCOME
Thompson, Siegel & Walmsley LLC
Richmond, Virginia
INVESTMENT MANAGER - MUNICIPALS
SMC Fixed Income
Management, LP
Princeton, New Jersey
INVESTMENT ADVISER AND ADMINISTRATOR
Claymore Advisors, LLC
Lisle, Illinois
CUSTODIAN AND
TRANSFER AGENT
The Bank of New York Mellon
New York, New York
PREFERRED STOCK - DIVIDEND PAYING AGENT
The Bank of New York Mellon
New York, New York
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom LLP
Chicago, Illinois
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Ernst & Young LLP
Chicago, Illinois
PRIVACY PRINCIPLES OF 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 Mellon, 101
Barclay 11E New York, NY 10286; (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 proxy voting policies and procedures related to
portfolio securities is available without charge, upon request, by calling the
Fund at (866)882-0688. 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 (866)882-0688 or by accessing the Fund Form N-PX on the SEC's website at
www.sec.gov or www.claymore.com. 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 Form N-Q is available on the SEC website at
www.sec.gov or www.claymore.com. The Fund's Form N-Q may also be viewed and
copied at the SEC's Public Reference Room in Washington, DC; information on the
operation of the Public Reference Room may be obtained by calling (800) SEC-0330
or at www.sec.gov.
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.
SemiAnnual Report | June 30, 2008 | 33
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.
34 | SemiAnnual Report | June 30, 2008
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
(This page is intentionally left blank)
SemiAnnual Report | June 30, 2008 | 35
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-SAR-0608
ITEM 2. CODE OF ETHICS.
Not applicable for a semi-annual reporting period.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable for a semi-annual reporting period.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable for a semi-annual reporting period.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable for a semi-annual reporting period.
ITEM 6. SCHEDULE OF INVESTMENTS.
The Schedule of Investments is included as part of Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable for a semi-annual reporting period.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
(a) Not applicable for a semi-annual reporting period.
(b) There has been no change, as of the date of this filing, in the
Portfolio Manager identified in response to paragraph (a) (1) of this
item in the registrant's most recent annual report on Form N-CSR.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
None.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The registrant has not made any material changes to the procedures by which
shareholders may recommend nominees to the registrant's Board of Trustees.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial officer
have evaluated the registrant's disclosure controls and procedures within 90
days of this filing and have concluded based on such evaluation, that the
registrant's disclosure controls and procedures were effective as of that date
in ensuring that information required to be disclosed by the registrant in this
Form N-CSR was recorded, processed, summarized, and reported within the time
periods specified in the Securities and Exchange Commission's rules and forms.
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940)
that occurred during the registrant's last fiscal quarter that have materially
affected, or are reasonably likely to materially affect, the registrant's
internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Not Applicable
(a)(2) Certifications of principal executive officer and principal financial
officer pursuant to Rule30a-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.
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/ J. Thomas Futrell
---------------------------------------------------------------
Name: J. Thomas Futrell
Title: Chief Executive Officer
Date: September 8, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ J. Thomas Futrell
---------------------------------------------------------------
Name: J. Thomas Futrell
Title: Chief Executive Officer
Date: September 8, 2008
By: /s/ Steven M. Hill
---------------------------------------------------------------
Name: Steven M. Hill
Title: Treasurer and Chief Financial Officer
Date: September 8, 2008