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, 2009
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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:
TS&W/Claymore
Tax-Advantaged Balanced Fund | TYW
SEMIANNUAL
REPORT
June 30, 2009
(Unaudited)
photo: 2 boats near an island
logo: TYW LISTED NYSE | TS&W/Claymore Tax-Advantaged Balanced Fund
Logo: TS&W/Thompson, Siegel & Walmsley LLC
Investment Management
Logo: CLAYMORE(SM)
www.claymore.com/tyw
... home port for the LATEST,
most up-to-date INFORMATION about the
TS&W/CLAYMORE TAX-ADVANTAGED BALANCED FUND
photo: 2 boats near an island
Logo: TS&W/Thompson, Siegel & Walmsley LLC
Investment Management
Logo: claymore
There can be no assurance the Fund will achieve its investment objective.
The value of the Fund will fluctuate with the value of the underlying
securiites. Historically, closed-end funds often trade at a discount to
their net asset value.
The information on this website is intended for U.S. residents only.
The information provided does not constitute a solicitation to buy,
or an offer to sell securities. (c) 2003 Claymore Securities, Inc.
NOT FDIC-INSURED o NOT BANK-GUARANTEED o MAY LOSE VALUE
The shareholder report you are reading right now is just the beginning of the
story. Online at WWW.CLAYMORE.COM/TYW, 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, SMC Fixed Income Management, LP 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, 2009
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
Dear SHAREHOLDER |
We thank you for your investment in the TS&W/Claymore Tax-Advantaged Balanced
Fund (the "Fund"). This report covers the Fund's performance for the semiannual
period ended June 30, 2009. We are pleased to report performance that is much
better than in the last fiscal year, largely reflecting improved market
conditions.
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 mainly on (i) municipal securities, 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 (such securities referred to generally as
"municipal securities") and (ii) common stocks and preferred securities that are
eligible to pay dividends which, for individual shareholders, qualify for the
long-term capital gains rate. The portfolio is comprised primarily of municipal
securities, equity securities, preferred securities and high-yield debt
securities.
Claymore Advisors, LLC is the Adviser to the Fund, with responsibility for
managing the Fund's overall asset allocation. Claymore entities provided
supervision, management, servicing and/or distribution on approximately $12.9
billion in assets as of June 30, 2009. Two investment sub-advisers are
responsible for day-to-day management of the Fund's investments. Thompson,
Siegel & Walmsley, Inc. ("TS&W") manages the Fund's equity portfolio and other
non-municipal income-producing securities. As of June 30, 2009, TS&W managed or
supervised approximately $5.3 billion in assets. SMC Fixed Income Management
("SMC") is responsible for the Fund's portfolio of municipal bonds. As of June
30, 2009, SMC managed or supervised approximately $850 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, 2009, the Fund provided a total return based on market price of 26.10%
and a total return of 12.83% based on NAV. As of June 30, 2009, the Fund's
market price was $7.92 per share, which represented a discount of 12.78% to its
NAV of $9.08 per share. Past performance is not a guarantee of future results.
The market value and NAV of the Fund's shares fluctuate from time to time, and
the Fund's market value may be higher or lower than its NAV. The current
discount to NAV may provide an opportunity for suitable investors to purchase
shares of the Fund below the market value of the securities in the underlying
portfolio. We believe that, over the long term, the progress of the NAV will be
reflected in the market price return to shareholders.
In an effort to enhance shareholder value, the Fund announced on January 2,
2009, the adoption of an open-market share repurchase plan (the "Plan")
authorizing the purchase of up to 5% of its outstanding common shares in the
open market on a quarterly basis, subject to applicable regulatory and legal
restrictions and in consideration of certain operational and market factors,
including the size of the market price discount to net asset value of the Fund.
There is no assurance that the Fund will purchase shares at any particular
discount levels or in any particular amounts. There is also no assurance that
the market price of the Fund's shares, either absolutely or relative to the net
asset value, will increase as a result of any share repurchases.
The Fund paid quarterly dividends of $0.2525 on March 31, 2009, and $0.1800 on
June 30, 2009. The most recent dividend represents an annualized distribution
rate of 9.09% based on the Fund's closing market price of $7.92 on June 30,
2009. However, there is no guarantee that this level of income will be
maintained.
Semiannual Report | June 30, 2009 | 3
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | DEAR SHAREHOLDER continued
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 29 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.
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 2009 and the 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. claymore.com/tyw.
Sincerely,
/s/ J. Thomas Futrell
J. Thomas Futrell
Chief Executive Officer
TS&W/Claymore Tax-Advantaged Balanced Fund
AN UPDATE ON THE FUND
AGREEMENT AND PLAN OF MERGER
On July 17, 2009, Claymore Group Inc., the parent of the Adviser, entered into
an Agreement and Plan of Merger between and among Claymore Group Inc., Claymore
Holdings, LLC and GuggClay Acquisition, Inc., (with the latter two entities
being wholly-owned, indirect subsidiaries of Guggenheim Partners, LLC
("Guggenheim")) whereby GuggClay Acquisition, Inc. will merge into Claymore
Group Inc. which will be the surviving entity. The parties intend that the
completed merger will result in a change-of-control whereby Claymore Group Inc.
and its subsidiaries, including the Adviser, will become indirect, wholly-owned
subsidiaries of Guggenheim. The transaction is not expected to affect the daily
operations of the Fund or the investment management activities of the Adviser.
Under the 1940 Act, consummation of this transaction will result in the
automatic termination of the Advisory Agreement. Accordingly, prior to such
consummation, the Fund expects to enter into a new investment advisory agreement
with the Adviser, to become effective upon the consummation of the transaction.
This new investment advisory agreement will be subject to the initial approval
of the Board of Trustees and subsequent approval by the Fund's shareholders.
4 | Semiannual Report | June 30, 2009
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 portfolio management teams employ their specialized experience to
different sleeves within the Fund, but work closely with one another to
collectively guide the overall operations of the Fund. The individuals named
below are responsible for managing the Fund.
VINCENT R. GIORDANO, PORTFOLIO MANAGER, MANAGING MEMBER SMC FIXED INCOME
MANAGEMENT, LP
Mr. Giordano is a Managing Member of SMC. He leads 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 ("Claymore") and Merrill Lynch. He has more than 30 years of investment
experience.
ROBERTO W. ROFFO, PORTFOLIO MANAGER, MANAGING DIRECTOR SMC FIXED INCOME
MANAGEMENT, LP
Mr. Roffo co-manages the Fund's municipal securities 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 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, TS&W and SMC share their thoughts on the
market and discuss the factors that influenced the Fund's performance for the
six months ended June 30, 2009.
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PLEASE REMIND US OF THIS FUND'S OBJECTIVE AND STRATEGY.
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 portfolio of assets consisting primarily of (i)
municipal securities, 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 (such securities referred to generally as "municipal securities")
and (ii) common stocks and preferred securities that are eligible to pay
dividends which, for individual shareholders, qualify for the long-term capital
gains rate. 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 2009?
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, 2009, the Fund provided a total return based on market price of 26.10%
and a total return based on NAV of 12.83%. As of June 30, 2009, the Fund's
market price of $7.92 per share represented a discount of 12.78% to its NAV of
$9.08 per share. Past performance is not a guarantee of future results.
The market value and NAV of the Fund's shares fluctuate from time to time, and
the Fund's market value may be higher or lower than its NAV. The current
discount to NAV may provide an opportunity for suitable investors to purchase
shares of the Fund below the market value of the securities in the underlying
portfolio. The Adviser believes that, over the long term, the progress of the
NAV will be reflected in the market price return to shareholders.
For NAV performance comparison purposes, the municipal bond market, as measured
by the Barclays Capital U.S. Municipal Long Bond Index ("Barclays Municipal
Index"), a widely used measure of the municipal bond market as a whole, returned
12.19% for the six months ended June 30, 2009. The broad equity market, as
measured by the S&P 500, returned 3.16%. The high-yield bond market, as measured
by the Merrill Lynch High Yield Master II Index, returned 29.37% for the period,
and the Merrill Lynch Fixed Rate Preferred Stock Index returned 2.71%.
The Fund paid quarterly dividends of $0.2525 on March 31, 2009, and $0.1800 on
June 30, 2009. The most recent dividend represents an annualized distribution
rate of 9.09% based on the Fund's closing market price of $7.92 on June 30,
2009.
Semiannual Report | June 30, 2009 | 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
municipal securities. As of June 30, 2009, approximately 55.3% of the Fund's
assets were invested in municipal securities. Of the remaining assets in the
Fund's portfolio as of June 30, 2009, approximately 33.9% were invested in
equity securities consisting primarily of large-cap dividend-paying stocks, and
approximately 10.8% were invested in other taxable income-producing securities,
which include but are not limited to high-yield bonds, preferred stocks and real
estate investment trusts. From time to time, assets are rebalanced to maintain
at least 50% of the Fund's total assets in municipal securities.
- --------------------------------------------------------------------------------
HOW DOES THE FUND EMPLOY LEVERAGE?
TYW, like many closed-end funds, utilizes leverage as part of its investment
strategy. As of June 30, 2009, the Fund had $105 million of leverage outstanding
in the form of Auction Market Preferred Shares ("AMPS"). AMPS holders receive a
dividend that is reset every 7 or 28 days, depending on the tranche1. 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 unleveraged.
However, when leveraged investments fall in price, leverage reduces the overall
return. The use of leverage will also result in greater volatility of the net
asset value (NAV) and market price of common shares because changes in the value
of the Fund's portfolio of investments, including investments purchased with the
proceeds of the financial leverage, are borne entirely by the holders of common
shares.
The Fund has two series of AMPS, one 7-day series and one 28-day series. The
broad auction-rate preferred securities market remains essentially frozen, as it
has been since February 2008. The auctions for nearly all auction-rate preferred
shares, including those issued by the Fund, continue to fail. 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 LIBOR2, whichever is greater. During the
six-month period ended June 30, 2009, established maximum rates were based on a
spread of 125 basis points over the applicable LIBOR rates, with the maximum
rates ranging from 1.49% to 2.13%. The Adviser will continue to evaluate the
benefits and impacts of leverage on the Fund as well as explore other forms of
leverage.
There is no guarantee that the Fund's leverage strategy will be successful, and
the Fund's use of leverage may cause the Fund's NAV and market price of common
shares to be more volatile. Leverage adds value only when the return on
securities purchased exceeds the cost of leverage. Since the portfolio's total
return was sufficiently positive during this period, the effect of leverage was
positive.
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.
- --------------------------------------------------------------------------------
PLEASE PROVIDE AN OVERVIEW OF THE MUNICIPAL BOND MARKET FOR THE SIX MONTHS ENDED
JUNE 30, 2009.
Six months ago, in the Fund's annual report, we described conditions in the
municipal bond market, as well as in the markets for all bonds that carry credit
risk, as dismal. Since then, conditions have improved significantly, and there
has been a major rally in the municipal bond market. For the six months ended
June 30, 2009, the return of the Barclays Municipal Index, which measures the
performance of the U.S. long-term municipal bond market, was 12.19%.
Last December, municipal bonds were trading at prices that SMC believes
reflected irrational fear on the part of investors, since the default rate on
investment-grade municipal bonds with high credit ratings has historically been
extremely low. Municipal bonds were trading at yields of 125% to 130% of U.S.
Treasury securities, compared with a historical norm of 85% to 90%. (Because of
the tax advantages of municipal bonds, they normally trade at a discounted
spread to Treasury securities.) Around late December and early January,
investors became less fearful and began to recognize the extreme value
represented by municipal bonds at those prices. The result was that prices of
municipal bonds moved up sharply during the first quarter of 2009, and that
rally continued in the second quarter. For the most part, this rally was
concentrated in highly rated bonds. However, toward the end of the period, lower
rated bonds also began to rally, as investors began to reach for yield.
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1 The term tranche is used to describe a specific series of AMPS. The Fund
has issued two tranches of AMPS.
2 LIBOR is the interest rate that banks charge one another in the short-term
international interbank market.
6 | Semiannual Report | June 30, 2009
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | QUESTIONS & ANSWERS continued
- --------------------------------------------------------------------------------
HOW DID THE MUNICIPAL BOND PORTION OF THE FUND PERFORM IN THIS ENVIRONMENT, AND
WHAT DECISIONS DROVE THAT PERFORMANCE?
The Fund's municipal bond portfolio performed very well. During 2008, correctly
anticipating that the market would become less liquid, SMC sharply reduced the
portfolio's holdings of A and lower rated securities, replacing them with AAA
and AA-rated securities. A significant investment during 2008 and early 2009 was
a large position in Texas Permanent School Fund ("TPSF") bonds, which
represented 24.2% of the Fund's municipal bond portfolio as of December 31,
2008. The TPSF bond guarantee program was created by the state of Texas to help
school districts secure higher credit ratings so they could issue bonds with
lower interest rates. These bonds significantly outperformed the market at the
beginning of 2009, when investors once again began to show interest in highly
rated municipal bonds, as the TPSF bonds did not have the credit and insurance
problems that were plaguing many municipal bonds. The announcement in late 2008
by the state of Texas that no more of these bonds would be issued created a
scarcity situation and was a further factor in the strong performance of these
bonds. SMC sold most of these bonds in January 2009, realizing significant
gains; as of June 30, 2009, bonds guaranteed by the TSPF represented 10.7% of
the Fund's municipal bond portfolio.
A considerable portion of the proceeds of the sale of the TPSF bonds was
invested in bonds of the New York State Dormitory Authority, which are backed by
a dedicated revenue stream from the personal income taxes of New York residents.
These bonds were trading at prices SMC believed represented good value because
of investors' concerns about the financial services industry, which is very
important to the economy of the state of New York. SMC took a significant
position in these AAA-rated bonds, believing that they were less vulnerable
secure because of their direct tax backing. This proved to be a good decision,
as these bonds rallied significantly, especially in the second quarter of the
year.
Near the end of the period, after bonds with the highest credit ratings had
rallied, it became difficult to find good values in this segment of the market.
At the same time, there were new issues at interest rates higher than had been
available in quite some time. SMC made the decision to increase the portfolio's
income by selectively buying bonds with higher coupons and slightly lower credit
ratings. Besides increasing income, these higher-coupon bonds helped mute the
volatility of the portfolio.
As outlined above, most of SMC's investment decisions contributed to performance
over this period. The small remaining position in non-investment-grade municipal
bonds, approximately 3% of the municipal bond portfolio as of June 30, 2009,
hurt performance somewhat. Although these bonds had positive returns, they did
not appreciate as much as the higher rated bonds in the portfolio. The market
for lower-rated bonds, which was essentially frozen in late 2008, continues to
be less liquid on a relative basis. As liquidity improves and opportunities
arise, these bonds are being selectively sold.
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HOW ARE MUNICIPAL SECURITIES SELECTED FOR THE FUND?
SMC begins by analyzing broad macroeconomic trends and developments affecting
the fixed-income markets, including the economic outlook, market conditions and
perceived effects on interest rates and yield curves. From there, a bottom-up
and top-down analysis is incorporated to help construct a portfolio that SMC
believes optimizes federally tax-exempt income while seeking to avoid undue
credit risk and market timing risk. SMC's proprietary unbiased research makes it
possible to identify undervalued sectors that are considered to have the
potential for ratings upgrades and capital appreciation; however, there is no
guarantee that such events will occur.
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WHAT IS THE OUTLOOK FOR THE MUNICIPAL BOND MARKET, AND WHAT DOES THIS MEAN FOR
THE FUND?
There has been a significant rally in municipal bonds over the last six months,
and the Fund has participated in that rally. In recent months, demand for
municipal bonds has outstripped new issuance, and that has further contributed
to strong performance. This may continue to be the case because many new issues
are Build America Bonds, which are taxable municipals on which the federal
government reimburses the states for 35% of interest cost from these bonds. The
result is lower net interest costs for the states, but these taxable bonds lack
the tax advantages that appeal to traditional municipal bond investors.
Investors continue to seek municipal bonds with high coupons and low convexity,
which is a measure of the sensitivity of the duration of a bond to changes in
interest rates.
Over the next few months, SMC believes that weakness in the overall economy will
continue, although it appears that the worst of the recession may be over. SMC
believes that the U.S. Treasury will attempt to push yields on its bonds down,
which will be difficult when so many new Treasury securities are being issued to
fund
Semiannual Report | June 30, 2009 | 7
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | QUESTIONS & ANSWERS continued
stimulus programs. Even after the recent rally, municipal bonds are still
selling to yield approximately the same as Treasury securities, despite the tax
advantages of municipal bonds. It seems likely that municipal bonds will
continue to perform relatively well.
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.
- --------------------------------------------------------------------------------
PLEASE PROVIDE AN OVERVIEW OF THE U.S EQUITY AND HIGH-YIELD BOND MARKETS DURING
THE FIRST HALF OF 2009.
It is difficult to describe the first half of 2009 in a general way because the
first two months of the period were so very different from the last four months.
The extremely poor performance of equity and bond markets in the last few months
of 2008 continued in January and February of 2009. In early March the markets
seemed to sense that the worst was over, as the economic news began to shift
from universally bad to mixed, with some indicators turning positive. Investors
appeared to regain their appetite for risk, and a strong rally in the financial
markets benefitted equities and bonds that carry credit risk, which includes
essentially all non-U.S. government securities. Equities and corporate bonds,
both investment grade and high yield, posted very strong returns in the period
from March through June. The best performing bonds were the lowest rated bonds,
which rebounded dramatically as investors once again demonstrated willingness to
take on risk. The high-yield bond market, as measured by the Merrill Lynch High
Yield Master II Index, returned 29.37% for the six months ended June 30, 2009,
compared to a return of 1.90% for the Barclays U.S. Aggregate Bond Index and
- -4.30% for the Barclays U.S. Treasury Bond Index.
In the equity market, growth stocks significantly outperformed value stocks
during the six months ended June 30, 2009, across all market capitalization
categories, especially in January and February, when markets continued to
decline. It appears that, with growth very scarce, investors flocked to stocks
that they believe had good growth prospects. This is unusual in a weak market;
in most past market slumps, value stocks have performed better than growth
stocks, as investors have sought to control risk. For the six-month period, the
return of the Russell 1000(R) Growth Index was 11.53%, compared with -2.87% for
the Russell 1000(R) Value Index.
A striking feature of the first half of 2009 that was very detrimental to the
performance of the equity portion of the Fund was a very tough dividend
environment. Standard & Poor's ("S&P") announced that the first quarter of 2009
was the worst quarter for dividends since S&P began keeping dividend records in
1955. A record high number of companies announced dividend decreases, and a
record low number announced increases. In the second quarter, dividend increases
set another record low, and the number of dividend decreases was the highest
since the second quarter of 1957. Some of the best performing stocks were those
of companies that cut their dividends.
For the six months ended June 30, 2009, the broad equity market, as measured by
the Standard & Poor's 500 Index ("S&P 500"), returned 3.16%. Within the S&P 500,
the strongest industry sector by far was information technology, with a return
above 20%. Other sectors with positive returns were materials and consumer
discretionary. The weakest sector was industrials, down approximately 8%,
followed by financials.
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PLEASE DESCRIBE HOW EQUITY AND HIGH-YIELD SECURITIES ARE SELECTED FOR THE FUND.
TS&W's investment process is value-driven and team-oriented. On the equity side,
a proprietary quantitative valuation model is applied to more than 400 stocks.
This directs TS&W's review process toward companies believed to 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.
8 | Semiannual Report | June 30, 2009
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | QUESTIONS & ANSWERS continued
- --------------------------------------------------------------------------------
HOW DID THE EQUITY PORTFOLIO PERFORM OVER THIS PERIOD?
The recent environment, with growth stocks and non-dividend-paying stocks
performing much better than value stocks and stocks with high dividends, was not
positive for the Fund's management style, which focuses on value and dividends.
The common equity portion of the portfolio, including some perpetual preferreds,
had a return of approximately -2.71% for the six months ended June 30, 2009.
This was better than the Russell 1000 Value Index, which returned -2.87%, but
below the S&P 500, which returned 3.16%. The equity portion of the portfolio
performed much better than a passive dividend-focused approach, as measured by
the Dow Jones U.S. Select Dividend Index which returned -12.54% in the first
half of 2009.
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WHAT WERE THE MAIN DETERMINANTS OF THE PERFORMANCE OF THE EQUITY PORTFOLIO?
The main reason for the portfolio's underperformance relative to the S&P 500 was
an underweight relative to the index in the technology sector, which performed
very well. This sector, which has few stocks with significant dividends, had an
average weight of 17% to 18% in the S&P 500 for the six-month period, while the
portfolio's weight was in the range of 9% to 10%.
Relative to the Russell 1000 Value Index, the portfolio's performance benefited
from sector decisions, particularly an underweight in the energy sector, which
performed poorly because of a sharp drop in energy related commodity prices.
With the collapse of financials, energy has become the second largest weight in
the value benchmark, with a weight of close to 20% weight in the Russell 1000
Value Index. TS&W bought energy stocks near the end of the period, in the belief
that there is little downside risk in the sector at the current prices of
natural gas and oil.
The portfolio's position in utilities has been reduced, largely because this
sector has performed well and contributed to performance. Balancing this
reduction, the position in consumer staples has been increased, in order to
maintain an appropriate emphasis on sectors that are not highly sensitive to
economic trends. In anticipation of incipient economic improvement later this
year, there has been an increase in the exposure to the industrials sector,
balanced by a reduction in the consumer discretionary sector.
Looking at holdings that contributed to equity performance, the top five were
stocks with considerable cyclical exposure. The best performing stock was
Cummins, Inc. (1.0% of total net investments), a manufacturer of diesel engines,
truck engines and generators. This is a company with a strong competitive
position and a balance sheet superior to any competitor. Cummins benefited from
a competitor's decision to exit the truck engine market, leaving a gap in the
market. Cummins is the clear leader in technology and also in production volume,
and it is very much geared to an international recovery, with a strong presence
in Asia, particularly China.
Other holdings that performed well include Corning Incorporated (0.2% of total
net investments), which produces optical fiber and other technology-oriented
products, and Cisco Systems, Inc. (0.9% of total net investments), a provider of
networking products and services and one of the few stocks in the portfolio that
does not pay a divided. Rounding out the top five are JPMorgan Chase & Co. (0.9%
of total net investments), a financial holding company that recovered sharply
from a very weak position at the end of 2008, and Rayonier Inc. (0.8% of total
net investments), a real estate investment trust in the forest products
business.
Three of the four stocks that detracted most from performance have heavy
involvement in financial services and continue to suffer from the financial
crisis: two banks, Bank of America Corp. (0.8% of total investments) and Wells
Fargo & Company (0.2% of total net investments), and General Electric Company
(0.6% of total net investments), a diversified company with a large financial
services business. The fourth in this group is The Dow Chemical Company (not
held in portfolio at period end), a diversified chemical company that has
considerable sensitivity to overall economic conditions. All four of these
companies reduced their dividends.
Semiannual Report | June 30, 2009 | 9
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | QUESTIONS & ANSWERS continued
- --------------------------------------------------------------------------------
HOW DID THE PORTFOLIO'S HIGH-YIELD BONDS AND PREFERRED
STOCKS PERFORM?
Benefiting from the strength in the high-yield bond market, this portion of the
Fund's portfolio had a return of 17.64% for the six months ended June 30, 2009.
Impressive as this return is, it trailed the 29.37% return of the Merrill Lynch
High Yield Master II Index (the "High Yield Index"), which measures return of
the high yield market as a whole. Since this portion of the portfolio includes
both high yield bonds and preferred stock, a blended benchmark which is 67% the
High Yield Index and 33% the Merrill Lynch U.S Fixed Rate Preferred Stock Index
(the "Preferred Index") is helpful in evaluating performance. The Preferred
Index returned 2.71% for the six-month period, and the return of the blended
benchmark was 20.56%.
The reason for the portfolio's underperformance relative to the benchmark is
very simple. Because the portfolio has a bias to higher quality within the realm
of high-yield bonds, it was not down as much as the market in the last half of
2008. Then, in the strong market rally that began in March 2009, the portfolio
lagged because its holdings were concentrated in higher quality bonds at a time
when bonds of the lowest quality, in terms of credit rating, performed best.
TS&W's investment strategy since the inception of this Fund has been to look for
quality companies that are mispriced and that generate good strong sustainable
yields. The Fund's strategy continues to focus on high quality bond issues from
companies with strong cash flow and moderate leverage, which TS&W believes will
provide superior risk-adjusted return over the long term.
Positions that contributed to return for the six months ended June 30, 2009,
include Freeport-McMoRan Copper & Gold, Inc. (0.2% of total net investments), a
copper mining company, and Willis Group Holdings Limited (0.3% of total net
investments), a global insurance broker. Both of these bonds are actually
investment grade issues purchased in late 2008 when the extremely weak bond
market presented opportunities to get high yields on bonds with investment grade
ratings. Also positive was a bond of hotel operator Wyndham Worldwide
Corporation (0.2% of total net investments).
In this environment, nearly all high yield bonds were up, but there were a few
positions that detracted from performance. One of these was a bond of Dillards,
Inc. (0.2 % of total net investments), a department store chain that performed
poorly, reflecting weakness throughout the retail industry. Although the future
of this business may not be particularly bright, the company owns much of the
real estate under its stores, and that could prove to be a valuable asset for
bond holders. Another negative was a Boise Cascade LLC bond (0.1 % of total net
investments); this is a heavily levered paper company in a cyclical industry
that has not done well recently. Also negative was a preferred stock issue of
First Industrial Realty Trust, Inc. (less than 0.1 % of total net investments),
a real estate investment trust with substantial involvement in industrial and
commercial real estate; this position has been reduced substantially.
- --------------------------------------------------------------------------------
WHAT IS THE OUTLOOK FOR THE EQUITY AND HIGH-YIELD MARKETS IN THE MONTHS AHEAD?
TS&W generally agrees with the consensus view that the economy is likely to
resume growth later this year, and that should be positive for markets. There's
evidence across numerous industries that conditions are beginning to stabilize,
or at least not getting worse. Businesses have gone through an unprecedented
inventory liquidation, and a return to producing to meet demand could produce a
meaningful jolt to economic activity. Despite all the publicity, very little of
the $800 billion fiscal stimulus package has been spent, so in the second half
of 2009, a significant increase in government spending will contribute to
growth.
At this point, the debate is really about the shape of this recovery, not
whether there will be a recovery. It seems likely that the return to growth will
be gradual and mild. Because the service sector is so important to the U.S.
economy, discrete bottlenecks in manufacturing that mandate immediate labor
additions when business picks up are less prevalent, and that means employment
may be slow to recover. Capital markets are highly sensitive to each data point
on the economy, so it seems reasonable to expect continued volatility and only
moderately positive trends as the economy improves.
In the first half of 2009, many companies missed revenue projections but were
able to report reasonably strong earnings because of good cost controls. In
order for markets to demonstrate real strength, investors will have to see some
real revenue growth. In the belief that revenue-driven earnings growth will
begin to be evident before too long, TS&W is beginning to increase exposure in
cyclical areas, but in a very disciplined way.
- --------------------------------------------------------------------------------
INDEX DEFINITIONS
Indices are unmanaged and it is not possible to invest directly in an index.
Barclays Capital U.S. Municipal Long Bond Index is a rules-based,
market-value-weighted index engineered for the long-term (22+ years) tax-exempt
bond market.
10 | Semiannual Report | June 30, 2009
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | QUESTIONS & ANSWERS continued
The S&P 500 is an unmanaged, capitalization-weighted index of 500 stocks. The
index is designed to measure performance of the broad domestic economy through
changes in the aggregate market value of 500 stocks representing all major
industries.
The Merrill Lynch High Yield Master II Index is a commonly used benchmark index
for high yield corporate bonds and is a measure of the broad high yield market.
The Merrill Lynch Fixed Rate Preferred Securities Index is designed to replicate
the total return of a diversified group of investment-grade preferred
securities. The Index is rebalanced on a monthly basis.
Russell 1000(R) Growth Index measures the performance of the 1,000 largest
companies in the Russell 3000(R) Index, which represents approximately 92% of
the total market capitalization of the Russell 3000 Index. Russell 2000(R) Index
measures the performance of the 2,000 smallest companies in the Russell 3000
Index, which represents approximately 8% of the total market capitalization of
the Russell 3000 Index.
The Russell 1000(R) Value Index measures the performance of those Russell 1000
companies with lower price-to-book ratios and lower forecasted growth values,
while the Russell 1000 Growth Index measures the performance of those Russell
1000 companies with higher price-to-book ratios and higher forecasted growth
values.
Barclays Capital U.S. Government Bond/Credit Index measures performance of U.S.
dollar denominated U.S. Treasuries, government-related, and investment grade
U.S. corporate securities that have a remaining maturity of greater than or
equal to 1 year. In Addition, the securities have $250 million or more of
outstanding face value, and must be fixed rate and non-convertible.
Barclays U.S. Aggregate Bond Index represents securities that are U.S. domestic,
taxable, and dollar denominated. The index covers the U.S. investment grade
fixed rate bond market, with index components for government and corporate
securities, mortgage pass-through securities, and asset-backed securities.
Barclays U.S. Corporate High Yield Index is comprised of issues that meet the
following criteria: at least $150 million par value outstanding, maximum credit
rating of Ba1 (including defaulted issues) and at least one year to maturity.
- --------------------------------------------------------------------------------
TYW RISKS AND OTHER CONSIDERATIONS
The views expressed in this report reflect those of the portfolio managers only
through the report period as stated on the cover. These views are subject to
change at any time, based on market and other conditions and should not be
construed as a recommendation of any kind. The material may also include forward
looking statements that involve risk and uncertainty, and there is no guarantee
that any predictions will come to pass. There can be no assurance that the Fund
will achieve its investment 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.
Semiannual Report | June 30, 2009 | 11
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | QUESTIONS & ANSWERS continued
GEOGRAPHICAL AND SECTOR RISK. The Fund may invest in municipal securities of
issuers located in the same state or territory or in the same economic sector.
Governmental issuers of municipal securities are not considered part of any
"industry." The issuers of these municipal securities may be related in such a
way that an economic, business or political development or change affecting one
municipal security would also affect other municipal securities held by the
Fund. Within the Fund's portfolio of municipal securities, the Fund may invest
all of its assets in municipal securities the interest on which is paid solely
from revenues from the same economic sector. The Fund's investments in revenue
bonds may emphasize municipal securities backed by revenue from essential
services, such as hospitals and healthcare, power generation, transportation,
education and housing. Subject to the availability of suitable investment
opportunities, the Adviser or the Investment Sub-Adviser, as applicable, will
attempt to diversify the Fund's investments to seek to minimize the portfolio's
sensitivity to credit and other risks associated with a particular issuer,
industry or sector, or to the impact of a single economic, political or
regulatory occurrence. The Fund is not required to diversify its holdings in
municipal securities among a fixed number of states or economic sectors, and,
consequently, the Fund's portfolio may be adversely affected by developments in
a single state, region or economic sector. Focus of the Fund's investments in
one or a limited number of states or economic sectors will subject the Fund, to
a greater extent than if such investments were not so focused, to the risks of
adverse economic, business or political developments affecting the particular
state, economic sector or other area of focus. To the extent that the Fund
focuses its assets in the hospital and healthcare sector, the Fund will be
subject to risks associated with such sector, including adverse government
regulation and reduction in reimbursement rates, as well as government approval
of products and services and intense competition. Issuers in the power
generation sector can be significantly affected by government regulation,
financing difficulties, supply and demand of services or fuel and natural
resource conservation. The transportation sector, including airports, airlines,
ports and other transportation facilities, can be significantly affected by
changes in the economy, fuel prices, labor relations, insurance costs and
government regulation.
STATE CONCENTRATION RISK. To the extent the Fund concentrates its investments in
Texas municipal bonds, the Fund may be significantly impacted by political,
economic, or regulatory developments that affect issuers in Texas and their
ability to pay principal and interest on their obligations. The information
below was obtained from publicly available official documents and statements and
has not been independently verified by the Fund. Recent broad-based market
declines and volatility may have a significant adverse effect on the Texas
economy. To the extent that industries which account for significant portions of
the Texas economy are affected to a greater extent than the broader market, the
Texas economy may be more adversely affected. As a result, recent market and
economic developments may adversely affect municipal securities of Texas
issuers. This information is intended only as a general summary and is not
intended as a discussion of any specific factor that may affect any particular
obligation or issuer.
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. 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.claymore.com/tyw
for a more detailed discussion about Fund risks and considerations.
12 | Semiannual Report | June 30, 2009
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
Fund SUMMARY | AS OF JUNE 30, 2009 (unaudited)
FUND STATISTICS
- --------------------------------------------------------------------------------
Share Price $7.92
Common Share Net Asset Value $9.08
Premium/(Discount) to NAV -12.78%
Net Asset Applicable to Common
Shareholders ($000) $139,918
- --------------------------------------------------------------------------------
TOTAL RETURNS
- --------------------------------------------------------------------------------
(Inception 4/28/04) Market NAV
- --------------------------------------------------------------------------------
Six Months 26.10% 12.83%
One Year -19.80% -22.27%
Three Year - average annual -9.02% -9.48%
Five Year - average annual -1.70% -1.72%
Since Inception -
average annual -4.19% -1.59%
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS % of Total
MUNICIPAL PORTFOLIO* Net Investments
- --------------------------------------------------------------------------------
Frisco Texas Independent School District School Improvements,
Series 3373, PSF Guaranteed, Series A, NR, Aaa, 6.00%, 8/15/2016 3.1%
Forney Independent School District, Unlimited Tax School
Building Bonds, Series A, PSF Guaranteed, AAA, NR, 6.00%, 8/15/2037 2.9%
North Texas Tollway Authority Revenue Refunding-System-First
Tier-Series K-1, ASSURED, AAA, Aa2, 5.75%, 1/1/2038 2.7%
Rhode Island Health & Educational Building Corp. Revenue
Hospital Financing Lifespan Obligation, ASSURED, Series A, AAA,
Aa2, 7.00%, 5/15/2039 2.7%
City of Detroit Water Supply System Revenue,Rols RR II R 11448,
BHAC/FGIC Insured, AAA, NR, 10.74%, 1/1/2016 2.3%
Detroit Michigan Sewer Disposal Revenue Refunding-Senior Lien-
Series C-1-RMKT, FSA Insured, AAA, Aa3, 7.00%, 7/1/2027 2.3%
Alhambra Certificates of Participation Police Facilities
91-1-RMK, AMBAC Insured, BBB, NR, 6.75%, 9/1/2023 2.2%
Metropolitan Transportation Authority Revenue Transportation -
Series 2008C, A, A2, 6.50%, 11/15/2028 2.2%
North Texas Tollway Authority Revenue Rols RR II
R-11392-1, BHAC Insured, NR, Aa1, 10.74%, 1/1/2016 2.2%
New York State Dormitory Authority Income Tax Revenue PIT
Education - Series B, AAA, NR, 5.75%, 3/15/2036 2.2%
- --------------------------------------------------------------------------------
*Excludes short-term investments
TOP TEN HOLDINGS % of Total
EQUITY AND INCOME PORTFOLIO Net Investments
- --------------------------------------------------------------------------------
BP PLC, ADR (United Kingdom) 1.4%
Verizon Communications, Inc. 1.4%
Royal Dutch Shell PLC, ADR (United Kingdom) 1.2%
AT&T, Inc. 1.2%
Pfizer, Inc. 1.1%
Chevron Corp. 1.1%
Progress Energy, Inc. 1.1%
Centerpoint Energy, Inc. 1.1%
Kimberly-Clark Corp. 1.1%
Waste Management, Inc. 1.1%
- --------------------------------------------------------------------------------
Securities and holdings are subject to change daily. For more current
information, please visit www.claymore.com/tyw. 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
- --------------------------------------------------------------------------------
Health Care 8.8%
General Obligation 8.6%
Water & Sewer 8.5%
Special Tax 5.6%
Oil, Gas and Consumable Fuels 5.1%
Toll Roads 4.9%
Telecommunications 4.0%
Transportation 4.0%
Pharmaceuticals 3.5%
Insurance 3.3%
- --------------------------------------------------------------------------------
Line chart:
SHARE PRICE & NAV PERFORMANCE
Share
Price
($) NAV ($)
------ --------
6/30/08 11.29 12.98
11.39 12.91
11.4 12.95
11.32 12.88
11.31 13.03
11.23 12.92
11.2 12.95
11.03 12.8
10.98 12.67
10.78 12.57
10.88 12.65
10.82 12.7
10.94 12.72
10.93 12.73
10.99 12.76
11.15 12.76
11.09 12.67
10.84 12.62
10.81 12.53
10.91 12.63
10.97 12.75
10.91 12.7
11.01 12.68
11.08 12.65
11.18 12.79
11.01 12.78
10.88 12.77
11.11 12.96
11.25 13.02
11.39 13.01
11.24 12.95
11.27 13.02
11.18 13.09
11.12 13.01
11.04 12.88
11.01 12.84
11.09 12.9
11.08 12.97
10.99 12.85
11.04 12.85
11.05 12.85
11.04 12.98
10.96 12.91
11.02 12.92
11.04 12.95
11.03 12.8
11.04 12.84
11.12 13.02
10.93 12.81
10.93 12.8
10.62 12.58
10.63 12.58
10.3 12.09
9.72 11.91
9 11.45
8.85 11.51
9.59 12.16
9.6 11.81
9.27 11.64
9.19 11.54
9.47 11.67
9.32 11.59
8.89 10.81
8.99 11.05
9.3 11.08
9.2 10.86
9.2 10.9
8.46 10.52
7.83 10.04
7.13 9.66
6.52 8.89
5.68 8.33
6.45 8.99
6.92 8.91
6.6 8.28
6.38 8.43
6.65 8.42
6.95 8.78
7.15 8.88
6.9 8.93
7.04 9.21
7.03 9.08
7.05 8.98
7.26 9.44
7.5 9.44
7.67 9.43
8.19 9.53
8.06 9.57
8.15 9.87
8.52 9.58
8.36 9.33
8.26 9.57
8.22 9.48
8.03 9.35
7.63 8.99
7.7 9.38
7.68 9.12
7.26 8.97
7.4 8.96
7.03 8.51
6.64 7.93
6.75 8.18
6.66 8.46
6.6 8.37
6.7 8.54
6.71 8.61
6.49 8.01
6.43 8.16
6.65 8.24
6.54 7.96
6.5 8.06
6.8 8.19
6.62 7.98
6.67 8.04
6.23 7.61
6.35 7.61
6 7.52
6.22 7.85
6.45 7.88
6.14 7.89
6.42 8
6.21 8
6.65 8.02
6.36 8.06
6.54 8.11
6.41 8.12
6.43 8.31
6.65 8.47
6.65 8.47
7.15 8.78
7.51 8.81
7.9 8.97
7.69 8.91
7.95 8.96
7.77 8.89
7.65 8.78
7.8 8.82
7.46 8.64
7.6 8.61
7.66 8.65
7.41 8.23
7.55 8.37
7.4 8.27
7.46 8.26
7.35 8.31
7.37 8.36
7.55 8.65
7.4 8.54
7.54 8.43
7.68 8.42
7.59 8.57
7.55 8.54
7.65 8.64
7.73 8.81
7.86 8.82
7.75 8.54
7.68 8.59
7.73 8.61
7.7 8.54
7.16 8.26
7.13 8.19
7.23 8.09
6.56 7.98
6.25 7.78
6.43 7.97
6.51 7.9
6.62 7.84
6.45 7.75
6.22 7.46
6.14 7.34
6.13 7.45
5.64 7.2
5.54 7.21
5.34 7.15
5.9 7.46
5.98 7.24
6.19 7.44
6.14 7.52
6.06 7.55
6.27 7.65
6.37 7.79
6.37 7.78
6.26 7.7
6.63 8.04
6.56 7.93
6.7 7.98
6.7 8.02
6.69 7.93
6.45 7.77
6.8 7.88
6.85 7.98
7.12 8.12
7.02 8.18
7.05 8.16
7.13 8.03
7.22 8.07
7.32 8.24
7.29 8.25
7.12 8.16
6.95 8.26
7.12 8.4
7.3 8.5
7.29 8.31
7.26 8.45
7.27 8.44
7.35 8.5
7.38 8.59
7.28 8.54
7.39 8.54
7.54 8.64
7.49 8.66
7.55 8.72
7.67 8.87
7.7 8.87
7.88 8.99
7.8 8.97
8.02 9.14
7.92 9.05
7.83 9.11
7.67 9
7.72 9.07
7.7 9.03
7.84 9.19
7.99 9.21
8.05 9.25
7.87 9.19
7.96 9.18
8.1 9.29
8.08 9.15
8.15 9.19
8.09 9.27
8.2 9.37
8.35 9.42
8.27 9.35
8.3 9.39
8.29 9.36
8.14 9.33
8.12 9.33
8.1 9.29
8.07 9.15
8.02 9.16
7.8 9.02
7.75 8.96
7.81 8.95
7.84 8.96
7.87 8.99
7.7 8.88
7.65 8.89
7.61 8.92
7.72 9.07
7.9 9.07
8.12 9.14
6/30/09 7.92 9.08
Pie chart:
PORTFOLIO CONCENTRATION BY ASSET CLASS*
Municipal Bonds 55.3%
Common Stocks 33.9%
Corporate Bonds 6.5%
Preferred Stocks 4.3%
*As a percentage of total net investments
Pie chart:
CREDIT QUALITY*
AAA 22.4%
AA 11.3%
A 15.5%
BBB 9.4%
BB 3.2%
B 3.0%
CCC/NR 0.5%
Common Stock/Other 34.7%
*Represents higher rating of either S&P, Moody's or Fitch as a percentage of
total net investments
Semiannual Report | June 30, 2009 | 13
Portfolio of INVESTMENTS | JUNE 30, 2009 (unaudited)
PRINCIPAL OPTIONAL CALL
AMOUNT PROVISIONS VALUE
- ------------------------------------------------------------------------------------------------------------
LONG-TERM MUNICIPAL BONDS -- 99.4%
ARIZONA -- 7.2%
$ 3,000,000 Glendale Western Loop 101, Public Facilities Corp.,
Third Lien Excise Tax Revenue, Series A, AA, A2
7.00%, 7/1/2033 1/1/14 @ 100.00 $ 3,194,520
4,500,000 Maricopa County Pollution Control Corp., Pollution
Control Revenue,
Refunding Public Service Co-A-RMK, BB+, Baa3
5.75%, 11/1/2022 5/1/10 @ 100.00 4,042,170
2,750,000 Mesa, Arizona Utility System Revenue,
Multiple Utility Improvements, AA-, A1
6.375%, 7/1/2033 7/1/19 @ 100.00 2,862,393
- ------------------------------------------------------------------------------------------------------------
10,099,083
- ------------------------------------------------------------------------------------------------------------
CALIFORNIA -- 9.1%
4,810,000 Alhambra Certificates of Participation,
Police Facilities 91-1-RMK, AMBAC Insured, BBB, NR
6.75%, 9/1/2023 N/A 5,541,361
2,500,000 Corona-Norca California Unified School District,
School Improvements, ASSURED, Election 2006 -
Series B, AAA, Aa2
5.375%, 2/1/2034 8/1/18 @ 100.00 2,516,850
2,100,000 California Statewide Communities Development
Authority Revenue,
Sub-Wildwood Elementary School, NR, NR
7.00%, 11/1/2029 11/1/09 @ 102.00 1,731,009
5,000,000 Golden State Tobacco Securitization Corporation,
Tobacco Settlement Asset-Backed Bonds,
Series 2007A-1, BBB, Baa3
5.75%, 6/1/2047 6/1/17 @ 100.00 3,006,900
- ------------------------------------------------------------------------------------------------------------
12,796,120
- ------------------------------------------------------------------------------------------------------------
DISTRICT OF COLUMBIA -- 0.8%
1,000,000 District of Columbia Water & Sewer Authority,
Public Utility Revenue, Series A, AA, Aa3
6.00%, 10/1/2035 10/1/18 @ 100.00 1,069,440
- ------------------------------------------------------------------------------------------------------------
FLORIDA -- 0.7%
1,000,000 Broward County Florida Port Facilities Revenue,
Airport & Marina Improvements, Series A, A-, A2
5.50%, 9/1/2029 9/1/19 @ 100.00 978,460
- ------------------------------------------------------------------------------------------------------------
ILLINOIS -- 6.1%
4,000,000 Cook County, Illinois, Refunding Bonds,
Health, Hospital and Nursing home Improvments, AA, Aa3
6.31%, 11/15/2031 N/A 4,067,120
5,000,000 Illinois Finance Authority Revenue,
OSF Healthcare System, Series 2007A, A, A2
5.75%, 11/15/2037 11/15/17 @ 100.00 4,405,600
- ------------------------------------------------------------------------------------------------------------
8,472,720
- ------------------------------------------------------------------------------------------------------------
LOUISIANA -- 3.2%
4,000,000 Louisiana State Citizens Property Insurance Corp. Assessment Revenue,
Series C-2-RMKT, ASSURED, AAA, Aa2
6.75%, 6/1/2026 6/1/18 @ 100.00 4,494,880
- ------------------------------------------------------------------------------------------------------------
MASSACHUSETTS -- 0.9%
1,820,000 Massachusetts Development Finance Agency Revenue,
Evergreen Center, BBB-, NR
5.50%, 1/1/2035 1/1/15 @ 100.00 1,290,507
- ------------------------------------------------------------------------------------------------------------
PRINCIPAL OPTIONAL CALL
AMOUNT PROVISIONS VALUE
- ------------------------------------------------------------------------------------------------------------
MICHIGAN -- 10.5%
$ 5,000,000 Detroit Michigan Sewer Disposal Revenue,
Refunding-Senior Lien-Series C-1-RMKT, FSA
Insured, AAA, Aa3
7.00%, 7/1/2027 7/1/19 @ 100.00 $ 5,573,150
3,000,000 Detroit Michigan Sewer Disposal Revenue,
Sewer Improvements, Senior Lien-Series B-RMKT,
FSA Insured, AAA, Aa3
7.50%, 7/1/2033 7/1/19 @ 100.00 3,444,450
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)
10.69%, 1/1/2016 (a) N/A 5,650,200
- ------------------------------------------------------------------------------------------------------------
14,667,800
- ------------------------------------------------------------------------------------------------------------
MISSOURI -- 4.2%
4,690,000 Cole County Industrial Development Authority,
Senior Living Facilities Revenue,
Lutheran Senior Services Heisinger Project, NR, NR
5.50%, 2/1/2035 2/1/14 @ 100.00 3,620,399
3,000,000 Missouri State Health & Educational Facilities
Authority Revenue,
Senior Living Facilities Revenue,
Lutheran Senior, Series A, NR, NR
5.375%, 2/1/2035 2/1/15 @ 100.00 2,232,990
- ------------------------------------------------------------------------------------------------------------
5,853,389
- ------------------------------------------------------------------------------------------------------------
NEW YORK -- 16.2%
3,000,000 Long Island Power Authority Revenue,
Electrical Light and Power Improvements, Series A, A-, A3
6.25%, 4/1/2033 4/1/19 @ 100.00 3,301,710
5,000,000 Metropolitan Transportation Authority Revenue,
Transportation - Series 2008C, A, A2
6.50%, 11/15/2028 11/15/18 @ 100.00 5,492,700
5,000,000 New York City Municipal Water Finance Authority,
Water and Sewer Revenue, Series FF-2, AA+, Aa3
5.50%, 6/15/2040 6/15/19 @ 100.00 5,236,050
5,000,000 New York State Dormitory Authority Income Tax Revenue,
PIT Education - Series B, AAA, NR
5.75%, 3/15/2036 3/15/19 @ 100.00 5,348,750
1,000,000 New York State Dormitory Authority Revenue,
The Bronx-Lebanon Hospital Center, NR, Aa2
6.50%, 8/15/2030 2/15/19 @ 100.00 1,064,650
2,220,000 New York State Dormitory Authority Revenue,
School Districts Financing Program, ASSURED,
Series A, AAA, Aa2
5.625%, 10/1/2029 10/1/19 @ 100.00 2,286,933
- ------------------------------------------------------------------------------------------------------------
22,730,793
- ------------------------------------------------------------------------------------------------------------
OHIO -- 1.9%
1,000,000 Akron, Bath & Copley Joint Township Hospital
District Revenue,
Hospital Facilities-Summa Health Systems, Series A,
RADIAN Insured, NR, Baa1
5.50%, 11/15/2034 11/15/14 @ 100.00 833,300
2,900,000 Buckeye Tobacco Settlement Financing Authority,
Tobacco Settlement Asset-Backed Bonds,
Series 2007A-2, BBB, Baa3
6.50%, 6/1/2047 6/1/17 @ 100.00 1,783,210
- ------------------------------------------------------------------------------------------------------------
2,616,510
- ------------------------------------------------------------------------------------------------------------
See notes to financial statements.
l4 Semiannual Report | June 30, 2009
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund |
PORTFOLIO OF INVESTMENTS (unaudited) continued
PRINCIPAL OPTIONAL CALL
AMOUNT PROVISIONS VALUE
- ------------------------------------------------------------------------------------------------------------
PENNSYLVANIA -- 2.1%
$ 5,000,000 Allegheny County Hospital Development Authority
Health System Revenue,
West Penn, Series 2007A, BB, Ba3
5.375%, 11/15/2040 11/15/17 @ 100.00 $ 2,959,150
- ------------------------------------------------------------------------------------------------------------
PUERTO RICO -- 6.3%
4,000,000 Puerto Rico Electric Power Authority,
Power Revenue Bonds, Series WW, BBB+, A3
5.50%, 7/1/2038 7/1/18 @ 100.00 3,675,400
5,000,000 Puerto Rico Sales Tax Financing Revenue,
Public Improvements, First Sub-Series A, A+, A2
6.50%, 8/1/2044 8/1/19 @ 100.00 5,186,800
- ------------------------------------------------------------------------------------------------------------
8,862,200
- ------------------------------------------------------------------------------------------------------------
RHODE ISLAND -- 5.1%
6,000,000 Rhode Island Health & Educational Building Corp.
Revenue, Hospital Financing Lifespan Obligation,
ASSURED, Series A, AAA, Aa2
7.00%, 5/15/2039 5/15/19 @ 100.00 6,579,420
500,000 Rhode Island State Health & Educational
Building Corporation Revenue,
Hospital Financing Lifespan, A-, A3
6.375%, 8/15/2021 8/15/12 @ 100.00 509,350
- ------------------------------------------------------------------------------------------------------------
7,088,770
- ------------------------------------------------------------------------------------------------------------
TEXAS -- 19.4%
6,700,000 Forney Independent School District,
Unlimited Tax School Building Bonds, Series A,
PSF Guaranteed, AAA, NR
6.00%, 8/15/2037 (b) 8/15/18 @ 100.00 7,272,582
7,000,000 Frisco Texas Independent School District,
School Improvements, Series 3373, PSF Guaranteed,
Series A, NR, Aaa
6.00%, 8/15/2016 (b) N/A 7,592,830
6,500,000 North Texas Tollway Authority Revenue,
Refunding-System-First Tier-Series K-1,
ASSURED, AAA, Aa2
5.75%, 1/1/2038 1/1/19 @ 100.00 6,755,515
5,000,000 North Texas Tollway Authority Revenue,
Rols RR II R-11392-1, BHAC Insured, NR, Aa1
(Underlying Obligor: North Texas Tollway Authority)
10.69%, 1/1/2016 (a) N/A 5,472,000
- ------------------------------------------------------------------------------------------------------------
27,092,927
- ------------------------------------------------------------------------------------------------------------
WASHINGTON -- 3.1%
3,930,000 Port of Seattle Passenger Facilities Charge Revenue,
Port Seattle-Passenger, Series A, BHAC/MBIA Insured, AAA, Aa1
5.50%, 12/1/2019 N/A 4,409,617
- ------------------------------------------------------------------------------------------------------------
WISCONSIN -- 2.6%
3,350,000 Wisconsin State Health & Educational Facilities
Authority Revenue,
Aurora Health Care, Series A, BBB+, A3
5.60%, 2/15/2029 2/15/10 @ 100.00 2,940,664
750,000 Wisconsin State Health & Educational Facilities
Authority Revenue,
Blood Center Southeastern Project, A-, NR
5.75%, 6/1/2034 6/1/14 @ 100.00 700,215
- ------------------------------------------------------------------------------------------------------------
3,640,879
- ------------------------------------------------------------------------------------------------------------
TOTAL LONG-TERM MUNICIPAL BONDS -- 99.4%
(Cost $144,067,579) 139,123,245
- ------------------------------------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
COMMON STOCKS -- 59.9%
BEVERAGES -- 1.0%
25,000 Diageo PLC, ADR (United Kingdom) $ 1,431,250
- ------------------------------------------------------------------------------------------------------------
CAPITAL MARKETS -- 1.0%
50,000 Morgan Stanley 1,425,500
- ------------------------------------------------------------------------------------------------------------
CHEMICALS -- 0.4%
8,000 Monsanto Co. 594,720
- ------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS -- 0.3%
20,000 Wells Fargo & Co. 485,200
- ------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES -- 4.6%
100,000 Pitney Bowes, Inc. 2,193,000
67,500 Republic Services, Inc. 1,647,675
92,500 Waste Management, Inc. 2,604,800
- ------------------------------------------------------------------------------------------------------------
6,445,475
- ------------------------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 1.9%
115,000 Cisco Systems, Inc. (c) 2,143,600
30,000 Corning, Inc. 481,800
- ------------------------------------------------------------------------------------------------------------
2,625,400
- ------------------------------------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS -- 0.7%
10,000 IBM Corp. 1,044,200
- ------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES -- 1.6%
65,000 JPMorgan Chase & Co. 2,217,150
- ------------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION -- 5.2%
115,000 AT&T, Inc. 2,856,600
115,000 Verizon Communications, Inc. 3,533,950
112,500 Windstream Corp. 940,500
- ------------------------------------------------------------------------------------------------------------
7,331,050
- ------------------------------------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES -- 1.1%
50,000 Noble Corp. (Switzerland) 1,512,500
- ------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 1.9%
70,000 Progress Energy, Inc. 2,648,100
- ------------------------------------------------------------------------------------------------------------
FOOD & STAPLES RETAILING -- 0.5%
30,000 Kroger Co. (The) 661,500
- ------------------------------------------------------------------------------------------------------------
FOOD PRODUCTS -- 1.8%
70,000 H.J. Heinz Co. 2,499,000
- ------------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 2.8%
50,000 Kimberly-Clark Corp. 2,621,500
25,000 Procter & Gamble Co. (The) 1,277,500
- ------------------------------------------------------------------------------------------------------------
3,899,000
- ------------------------------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES -- 2.4%
30,000 3M Co. 1,803,000
132,500 General Electric Co. 1,552,900
- ------------------------------------------------------------------------------------------------------------
3,355,900
- ------------------------------------------------------------------------------------------------------------
See notes to financial statements.
Semiannual Report | June 30, 2009 l5
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund |
PORTFOLIO OF INVESTMENTS (unaudited) continued
NUMBER
OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
INSURANCE -- 1.9%
50,000 Chubb Corp. $ 1,994,000
25,000 Willis Group Holdings Ltd. (Bermuda) 643,250
- ------------------------------------------------------------------------------------------------------------
2,637,250
- ------------------------------------------------------------------------------------------------------------
MACHINERY -- 1.7%
67,500 Cummins, Inc. 2,376,675
- ------------------------------------------------------------------------------------------------------------
MEDIA -- 1.5%
80,000 Comcast Corp. - Class A 1,159,200
40,000 Walt Disney Co. (The) 933,200
- ------------------------------------------------------------------------------------------------------------
2,092,400
- ------------------------------------------------------------------------------------------------------------
MULTILINE RETAIL -- 0.7%
80,000 Macy's, Inc. 940,800
- ------------------------------------------------------------------------------------------------------------
MULTI-UTILITIES -- 4.3%
237,500 Centerpoint Energy, Inc. 2,631,500
50,000 DTE Energy Co. 1,600,000
150,000 TECO Energy, Inc. 1,789,500
- ------------------------------------------------------------------------------------------------------------
6,021,000
- ------------------------------------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS -- 7.9%
75,000 BP PLC, ADR (United Kingdom) 3,576,000
40,000 Chevron Corp. 2,650,000
40,000 ConocoPhillips 1,682,400
60,719 Royal Dutch Shell PLC, ADR (United Kingdom) 3,088,168
- ------------------------------------------------------------------------------------------------------------
10,996,568
- ------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS -- 7.0%
105,000 Bristol-Myers Squibb Co. 2,132,550
55,000 Eli Lilly & Co. 1,905,200
20,000 Johnson & Johnson 1,136,000
67,500 Merck & Co., Inc. 1,887,300
185,000 Pfizer, Inc. 2,775,000
- ------------------------------------------------------------------------------------------------------------
9,836,050
- ------------------------------------------------------------------------------------------------------------
PROFESSIONAL SERVICES -- 0.7%
12,500 Dun & Bradstreet Corp. 1,015,125
- ------------------------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS -- 1.4%
52,500 Rayonier, Inc. 1,908,375
- ------------------------------------------------------------------------------------------------------------
ROAD & RAIL -- 1.1%
42,500 Norfolk Southern Corp. 1,600,975
- ------------------------------------------------------------------------------------------------------------
SEMICONDUCTORS -- 1.0%
85,000 Intel Corp. 1,406,750
- ------------------------------------------------------------------------------------------------------------
SOFTWARE -- 1.8%
50,000 Nintendo Co. Ltd., ADR (Japan) 1,723,500
50,000 Symantec Corp. (c) 778,000
- ------------------------------------------------------------------------------------------------------------
2,501,500
- ------------------------------------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS -- 0.7%
17,500 VF Corp. 968,625
- ------------------------------------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
TOBACCO -- 1.0%
32,500 Philip Morris International, Inc. $ 1,417,650
- ------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS -- 59.9%
(Cost $99,109,349) 83,895,688
- ------------------------------------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
CORPORATE BONDS -- 11.5%
AEROSPACE & DEFENSE -- 0.5%
$ 700,000 L-3 Communications Corp., BB+, Ba3
7.625%, 6/15/2012 6/15/10 @ 100.00 701,750
- ------------------------------------------------------------------------------------------------------------
APPAREL -- 0.7%
1,000,000 Phillips-Van Heusen Corp., BB+, Ba3
7.25%, 2/15/2011 2/15/10 @ 100.00 985,000
- ------------------------------------------------------------------------------------------------------------
AUTO PARTS & EQUIPMENT -- 0.4%
600,000 Goodyear Tire & Rubber Co. (The), B+, B2
7.86%, 8/15/2011 N/A 585,000
- ------------------------------------------------------------------------------------------------------------
BANKS -- 0.3%
400,000 Capital One Financial Corp., BBB-, Baa2
6.15%, 9/1/2016 N/A 354,012
100,000 FCB/NC Capital Trust I, BB, A3
8.05%, 3/1/2028 3/1/10 @ 103.22 80,165
- ------------------------------------------------------------------------------------------------------------
434,177
- ------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES -- 0.5%
600,000 Iron Mountain, Inc. B+, B2
7.75%, 1/15/2015 1/15/10 @ 101.29 576,000
120,000 Rent-A-Center, Inc., B+, B2
7.50%, 5/1/2010 N/A 120,000
- ------------------------------------------------------------------------------------------------------------
696,000
- ------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES -- 0.8%
633,000 General Motors Acceptance Corp. LLC, CCC, Ca
6.875%, 9/15/2011 (d) N/A 553,875
600,000 Lazard Group LLC, BBB-, Ba1
6.85%, 6/15/2017 N/A 551,194
- ------------------------------------------------------------------------------------------------------------
1,105,069
- ------------------------------------------------------------------------------------------------------------
ELECTRONICS -- 0.5%
700,000 IMAX Corp. (Canada), CCC, Caa2
9.625%, 12/1/2010 12/1/09 @ 100.00 693,875
- ------------------------------------------------------------------------------------------------------------
FOOD -- 1.6%
1,465,000 Dean Foods Co., B, B3
7.00%, 6/1/2016 N/A 1,336,813
935,000 Smithfield Foods, Inc., B, Caa1
7.00%, 8/1/2011 N/A 888,250
- ------------------------------------------------------------------------------------------------------------
2,225,063
- ------------------------------------------------------------------------------------------------------------
See notes to financial statements.
l6 Semiannual Report | June 30, 2009
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund |
PORTFOLIO OF INVESTMENTS (unaudited) continued
PRINCIPAL OPTIONAL CALL
AMOUNT PROVISIONS VALUE
- ------------------------------------------------------------------------------------------------------------
FOREST PRODUCTS & PAPER -- 0.1%
$ 239,000 Boise Cascade LLC, B+, Caa1
7.125%, 10/15/2014 10/15/09 @ 103.56 $ 126,073
37,000 Domtar Corp., BB-, Ba3
7.875%, 10/15/2011 N/A 36,075
- ------------------------------------------------------------------------------------------------------------
162,148
- ------------------------------------------------------------------------------------------------------------
HEALTH CARE -- 0.9%
550,000 Community Health Systems, Inc., B, B3
8.875%, 7/15/2015 7/15/11 @ 104.44 539,000
740,000 DaVita, Inc., B, B2
7.25%, 3/15/2015 3/15/10 @ 103.63 695,600
- ------------------------------------------------------------------------------------------------------------
1,234,600
- ------------------------------------------------------------------------------------------------------------
INSURANCE -- 0.9%
500,000 Odyssey Re Holdings Corp., BBB-,Baa3
7.65%, 11/1/2013 N/A 472,723
900,000 Willis North America, Inc., BBB-, Baa3
6.20%, 3/28/2017 N/A 797,024
- ------------------------------------------------------------------------------------------------------------
1,269,747
- ------------------------------------------------------------------------------------------------------------
IRON/STEEL -- 0.3%
350,000 Allegheny Technologies, Inc., BBB-, Baa3
9.375%, 6/1/2019 N/A 370,897
- ------------------------------------------------------------------------------------------------------------
LODGING -- 0.3%
500,000 Wyndham Worldwide Corp., BBB-, Ba2
6.00%, 12/1/2016 N/A 391,049
- ------------------------------------------------------------------------------------------------------------
MEDIA -- 0.5%
750,000 DirecTV Holdings LLC/DirecTV Financing Co., BB, Ba2
8.375%, 3/15/2013 3/15/10 @ 101.40 751,875
- ------------------------------------------------------------------------------------------------------------
METALS & MINING -- 0.4%
500,000 Freeport-McMoRan Copper & Gold, Inc., BBB-, Ba2
8.375%, 4/1/2017 4/1/12 @ 104.19 503,750
- ------------------------------------------------------------------------------------------------------------
OFFICE/BUSINESS EQUIPMENT -- 0.5%
1,000,000 Xerox Capital Trust I, BB+, Baa3
8.00%, 2/1/2027 2/1/10 @ 101.72 760,000
- ------------------------------------------------------------------------------------------------------------
RETAIL -- 1.2%
700,000 Dillards, Inc., B-, B3
7.13%, 8/1/2018 N/A 395,500
500,000 Macy's Retail Holdings, Inc., BB, Ba2
6.625%, 4/1/2011 N/A 483,353
425,000 New Albertsons, Inc., B+, Ba3
7.25%, 5/1/2013 N/A 408,000
475,000 Pantry, Inc. (The), B-, Caa1
7.75%, 2/15/2014 2/15/10 @ 102.58 420,375
- ------------------------------------------------------------------------------------------------------------
1,707,228
- ------------------------------------------------------------------------------------------------------------
TEXTILES -- 0.5%
670,000 Mohawk Industries, Inc., BB+, Ba1
6.25%, 1/15/2011 N/A 651,461
- ------------------------------------------------------------------------------------------------------------
PRINCIPAL OPTIONAL CALL
AMOUNT PROVISIONS VALUE
- ------------------------------------------------------------------------------------------------------------
TRANSPORTATION -- 0.6%
- ------------------------------------------------------------------------------------------------------------
$ 850,000 Overseas Shipholding Group, Inc., BB, Ba1
8.75%, 12/1/2013 N/A $ 786,250
- ------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS -- 11.5%
(Cost $16,774,749) 16,014,939
- ------------------------------------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS -- 7.6%
DIVERSIFIED FINANCIAL SERVICES -- 2.3%
60,000 ABN Amro Capital Funding Trust VII, Series G, 6.08%, B, A1 687,000
50,000 Bank of America Corp., Series 3, 6.375%, B, B3 815,500
56,000 Bank of America Corp., Series MER, 8.625%, B, B3 1,135,680
31,650 Deutsche Bank Contingent Capital Trust II, 6.55%, BBB+, Aa3 569,067
134 GMAC Preferred Blocker, Inc., 7.00%, C, NR (d) 57,628
- ------------------------------------------------------------------------------------------------------------
3,264,875
- ------------------------------------------------------------------------------------------------------------
ELECTRIC -- 0.4%
20,000 Dominion Resources, Inc., 8.38%, BBB, Baa3 508,000
- ------------------------------------------------------------------------------------------------------------
INSURANCE -- 3.1%
50,000 Aegon NV (Netherlands), 6.50%, BBB, Baa1 745,000
31,200 Allianz SE (Germany), 8.375%, A+, A3 700,440
25,000 Aspen Insurance Holdings, Ltd. (Bermuda), 7.40%, BBB-, Ba1 (e) 400,250
33,200 ING Groep NV (Netherlands), 7.375%, BBB, A3 587,640
50,000 Metlife, Inc., Series B, 6.50%, BBB-, Baa1 1,027,500
48,600 Prudential PLC (United Kingdom), 6.50%, A-, Baa1 867,510
- ------------------------------------------------------------------------------------------------------------
4,328,340
- ------------------------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS -- 1.8%
19,000 Brandywine Realty Trust, Series C, 7.50%, NR, NR 307,420
11,000 Capital Automotive REIT, Series A, 7.50%, NR, B1 50,532
10,000 CBL & Associates Properties, Inc., Series C, 7.75%, NR, NR 142,500
10,000 First Industrial Realty Trust, Inc., Series J, 7.25%, B, B2 114,400
6,700 Health Care REIT, Inc., Series D, 7.875%, BB, Baa3 150,884
13,000 Kimco Realty Corp., Series G, 7.75%, BBB-, Baa2 268,450
12,000 PS Business Parks, Inc., Series H, 7.00%, BB+, Baa3 221,400
24,500 Public Storage, Inc., Series M, 6.625%, BBB, Baa1 489,265
15,200 Regency Centers Corp., Series D, 7.25%, BBB-, Baa3 289,712
3,432 Taubman Centers, Inc., Series G, 8.00%, NR, B1 65,723
20,100 Vornado Realty Trust, Series E, 7.00%, BBB-, Baa3 390,945
- ------------------------------------------------------------------------------------------------------------
2,491,231
- ------------------------------------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS -- 7.6%
(Cost $15,190,940) 10,592,446
- ------------------------------------------------------------------------------------------------------------
TOTAL LONG-TERM INVESTMENTS -- 178.4%
(Cost $275,142,617) 249,626,31
- ------------------------------------------------------------------------------------------------------------
See notes to financial statements.
Semiannual Report | June 30, 2009 l7
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund |
PORTFOLIO OF INVESTMENTS (unaudited) continued
PRINCIPAL OPTIONAL CALL
AMOUNT PROVISIONS VALUE
- ------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 3.2%
MUNICIPAL BONDS -- 3.2%
TENNESSEE -- 3.2%
$ 4,400,000 Sevier County Tennessee Public Building Authority
Local Government Public Improvements-VI-K-1, AA+, Aa2
2.50%, 6/1/2034 (f)
(Cost $4,400,000) 6/1/27 @ 100.00 $ 4,400,000
- ------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 181.6%
(Cost $279,542,617) 254,026,318
- ------------------------------------------------------------------------------------------------------------
FLOATING RATE NOTE OBLIGATIONS -- (4.9%)
(6,850,000) Notes with an interest rate of 0.35% on June 30, 2009,
and contractual maturities of collateral in 2016 to 2037.
(Cost ($6,850,000)) (6,850,000)
- ------------------------------------------------------------------------------------------------------------
TOTAL NET INVESTMENTS -- 176.7%
(Cost $272,692,617) 247,176,318
Liabilities in excess of Other Assets -- (1.6%) (2,258,686)
Preferred Shares, at Liquidation Value -- (-75.1% of Net Assets
Applicable to Common Shareholders or -41.9% of Total Investments) (105,000,000)
- ------------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS -- 100.0% $ 139,917,632
============================================================================================================
ADR American Depositary Receipt
AMBAC Ambac Assurance Corporation
ASSURED Assured Guaranty Corp.
BHAC Berkshire Hathaway Assurance Corp.
FGIC Financial Guaranty Insurance Company
FSA Financial Services Authority
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, 2009. See Note 2(d) in the "Notes to the Financial Statements"
section.
(b) Underlying security related to inverse floating rate investment entered
into by the Fund.
(c) Non-income producing security
(d) Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At June 30, 2009,
these securities amounted to 0.44% of net assets applicable to common
shares.
(e) Floating or variable rate coupon. The rate shown is as of June 30, 2009.
(f) 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, 2009.
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.
l8 Semiannual Report | June 30, 2009
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
Statement of ASSETS AND LIABILITIES | JUNE 30, 2009 (unaudited)
ASSETS
Investments in securities, at value (cost $279,542,617) $254,026,318
Cash 20,905
Receivable for securities sold 2,645,463
Interest receivable 2,599,596
Dividends receivable 268,582
Other assets 19,019
- ---------------------------------------------------------------------------------------------------------------
Total assets 259,579,883
- ---------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for securities purchased 7,515,952
Floating rate note obligations 6,850,000
Advisory fee payable 141,488
Dividend payable - preferred shares 66,344
Administration fee payable 13,060
Accrued expenses and other liabilities 75,407
- ---------------------------------------------------------------------------------------------------------------
Total liabilities 14,662,251
- ---------------------------------------------------------------------------------------------------------------
PREFERRED SHARES, AT REDEMPTION VALUE
$.01 par value per share; 4,200 Auction Market Preferred Shares authorized,
issued and outstanding at $25,000 per share liquidation preference 105,000,000
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS $139,917,632
===============================================================================================================
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 (54,584,455)
Accumulated net unrealized depreciation on investments (25,516,299)
Accumulated undistributed net investment income 1,306,923
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS $139,917,632
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE APPLICABLE TO COMMON SHAREHOLDERS (based on 15,407,000 common shares outstanding) $ 9.08
===============================================================================================================
See notes to financial statements.
Semiannual Report | June 30, 2009 | 19
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
Statement of OPERATIONS | FOR THE SIX MONTHS ENDED JUNE 30, 2009 (unaudited)
INVESTMENT INCOME
Interest $ 4,716,158
Dividends 2,341,772
- --------------------------------------------------------------------------------------------------------------
Total income $ 7,057,930
- --------------------------------------------------------------------------------------------------------------
EXPENSES
Advisory fee 838,070
Preferred share maintenance 147,110
Professional fees 112,719
Trustees' fees and expenses 88,508
Fund accounting 39,832
Administration fee 31,383
Printing expenses 26,781
Custodian fee 20,739
Miscellaneous 19,335
NYSE listing fee 10,498
Insurance 10,182
Transfer agent fee 9,324
Interest expense on floating rate note obligations 7,890
- --------------------------------------------------------------------------------------------------------------
Total expenses 1,362,371
- --------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 5,695,559
- --------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND SWAPS Net realized gain
(loss) on:
Investments (18,351,063)
Swaps (4,405,000)
Net change in unrealized appreciation on:
Investments 26,662,888
Swaps 7,465,814
- --------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments and swaps 11,372,639
- --------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS FROM
Net investment income (932,520)
- --------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS RESULTING FROM OPERATIONS $ 16,135,678
===============================================================================================================
See notes to financial statements.
20 | Semiannual Report | June 30, 2009
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, 2009 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2008
- -----------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS
RESULTING FROM OPERATIONS
Net investment income $ 5,695,559 $ 14,220,982
Net realized loss on investments and swaps (22,756,063) (30,600,181)
Net change in unrealized appreciation (depreciation) on investments and swaps 34,128,702 (63,053,329)
- -----------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS
From net investment income (932,520) (4,762,868)
- -----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to common shareholders
resulting from operations 16,135,678 (84,195,396)
- -----------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS:
From and in excess of net investment income (6,663,527) (15,561,070)
- -----------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets applicable to common shareholders 9,472,151 (99,756,466)
NET ASSETS
Beginning of period 130,445,481 230,201,947
- -----------------------------------------------------------------------------------------------------------------
End of period (including accumulated undistributed net investment income
of $1,306,923 and $3,207,411, respectively) $ 139,917,632 $ 130,445,481
=================================================================================================================
See notes to financial statements.
Semiannual Report | June 30, 2009 | 21
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
Financial HIGHLIGHTS |
FOR THE PERIOD
APRIL 28,
FOR THE FOR THE FOR THE FOR THE FOR THE 2004*
PER SHARE OPERATING PERFORMANCE SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
FOR A COMMON SHARE OUTSTANDING JUNE 30, 2009 DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
THROUGHOUT THE PERIOD (UNAUDITED) 2008 2007 2006 2005 2004
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.47 $ 14.94 $ 16.83 $ 15.44 $ 15.47 $ 14.33(b)
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) 0.37 0.92 0.92 0.91 0.88 0.52
Net realized and unrealized gain (loss) on investments,
options and swaps 0.73 (6.07) (1.08) 1.79 0.29 1.29
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS
From and in excess of net investment income
(common share equivalent basis) (0.06) (0.31) (0.30) (0.37) (0.26) (0.07)
From realized gains (common share equivalent basis) - - (0.11) - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions to Preferred Shareholders (0.06) (0.31) (0.41) (0.37) (0.26) (0.07)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.04 (5.46) (0.57) 2.33 0.91 1.74
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From and in excess of net investment income (0.43) (1.01) (0.95) (0.94) (0.94) (0.47)
From realized gains - - (0.37) - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions to Common Shareholders (0.43) (1.01) (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 $ 9.08 $ 8.47 $ 14.94 $ 16.83 $ 15.44 $15.47
====================================================================================================================================
MARKET VALUE, END OF PERIOD $ 7.92 $ 6.65 $ 13.10 $ 15.77 $ 13.35 $13.62
====================================================================================================================================
TOTAL INVESTMENT RETURN (C)
Net asset value 12.83% -37.97% -3.60% 15.50% 6.02% 11.42%
Market value 26.10% -43.70% -8.97% 25.98% 4.80% -6.05%
RATIOS AND SUPPLEMENTAL DATA
Net assets applicable to common shareholders,
end of period (thousands) $ 139,918 $ 130,445 $230,202 $259,334 $ 237,818 $238,386
Preferred shares, at liquidation value ($25,000
per share liquidation
preference) (thousands) $ 105,000 $ 120,000 $120,000 $120,000 $ 120,000 $120,000
Preferred shares asset coverage per share $ 58,314 $ 52,176 $ 72,959 $ 79,028 $ 74,545 $ 74,664
Ratios to average net assets applicable to
common shareholders: (d)
Total expenses (excluding interest expense on
floating rate note obligations) 2.08% 1.67% 1.44% 1.46% 1.52% 1.36%
Total expenses (including interest expense on
floating rate note obligations(e) 2.10% 1.72% 1.53% 1.50% - -
Net investment income, prior to effect of
dividends to preferred shares 8.76% 7.48% 5.60% 5.70% 5.73% 5.31%
Net investment income, after effect of
dividends to preferred shares 7.33% 4.97% 3.81% 3.41% 4.05% 4.58%
Ratios to average managed assets: (d)(f)
Total expenses (excluding interest expense
on floating rate note obligations) 1.13% 1.02% 0.98% 0.98% 1.01% 0.98%
Total expenses (including interest expense on
floating rate note obligations(e) 1.14% 1.05% 1.04% 1.01% - -
Net investment income, prior to effect of
dividends to preferred shares 4.76% 4.58% 3.80% 3.84% 3.80% 3.83%
Portfolio turnover rate 93% 181% 114% 159% 103% 75%
Asset coverage per $1,000 unit of indebtedness(h) 34,754 - 74,727 29,902 - -
* Commencement of investment operations.
(a) Based on average shares outstanding during the period.
(b) Before reimbursement of offering expenses charged to capital.
(c) Total investment return is calculated assuming a purchase of a common share
at the beginning of the period and a sale on the last day of the period
reported either at net asset value ("NAV") or market price per share.
Dividends and distributions are assumed to be reinvested at NAV for NAV
returns or the prices obtained under the Fund's Dividend Reinvestment Plan
for market value returns. Total investment return does not reflect
brokerage commissions. A return calculated for a period of less than one
year is not annualized.
(d) Annualized for periods less than one year.
(e) See note 2(d) 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.
22 | Semiannual Report | June 30, 2009
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
Notes to FINANCIAL STATEMENTS | JUNE 30, 2009 (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
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.
For those securities whose quotations or prices are not available, the
valuations are determined in accordance with procedures established in good
faith by the Board of Trustees. Valuations in accordance with these procedures
are intended to reflect each security's (or asset's) "fair value". Such fair
value is the amount that the Fund might reasonably expect to receive for the
security (or asset) upon its current sale. Each such determination should be
based on a consideration of all relevant factors, which are likely to vary from
one pricing context to another. Examples of such factors may include, but are
not limited to: (i) the type of security, (ii) the initial cost of the security,
(iii) the existence of any contractual restrictions on the security's
disposition, (iv) the price and extent of public trading in similar securities
of the issuer or of comparable companies, (v) quotations or evaluated prices
from broker-dealers and/or pricing services, (vi) information obtained from the
issuer, analysts, and/or the appropriate stock exchange (for exchange traded
securities), (vii) an analysis of the company's financial statements, and (viii)
an evaluation of the forces that influence the issuer and the market(s) in which
the security is purchased and sold (e.g. the existence of pending merger
activity, public offerings or tender offers that might affect the value of the
security).
In September, 2006, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 157, "Fair Valuation
Measurements" ("FAS 157"). The Fund adopted FAS 157 on January 1, 2008. 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 (e.g.
yield curves; benchmark interest rates; indices). Level 3 valuations are those
based upon unobservable inputs (e.g. discounted cash flow analysis; non-market
based methods used to determine fair valuation). In April 2009, the FASB issued
FSP FAS 157-4, "Determining Fair Value When Volume and Level of Activity for the
Asset or Liability Have Significantly Decreased and Identifying Transactions
That Are Not Orderly" (FSP 157-4). FSP 157-4 provides guidance on how to
determine the fair value of assets and liabilities when the volume and level of
activity for the asset/liability has significantly decreased. FSP 157-4 requires
disclosure in interim and annual periods of the inputs and valuation techniques
used to measure fair value and a discussion of changes in valuation techniques.
The Fund adopted FSP 157-4 effective on June 30, 2009. The following table
represents the Funds' investments carried on the Statement of Assets and
Liabilities by caption and by level within the fair value hierarchy as of June
30, 2009:
DESCRIPTION LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
- --------------------------------------------------------------------------------
(value in $000s)
Assets:
Common stocks:
Consumer Discretionary $ 4,002 $ - $ - $ 4,002
Consumer Staples 9,908 9,908
Energy 12,509 - - 12,509
Financials 8,673 - - 8,673
Health Care 9,836 - - 9,836
Industrials 14,794 - - 14,794
Information Technology 7,578 - - 7,578
Materials 595 - - 595
Telecommunication
Services 7,331 - - 7,331
Utilities 8,669 8,669
Preferred Stock 10,593 - - 10,593
Municipal Bonds - 143,523 - 143,523
Corporate Bonds - 16,015 - 16,015
- --------------------------------------------------------------------------------
Total $94,488 $159,538 $ - $ 254,026
================================================================================
Liabilities:
Interest rate contracts $ - $ - $ - $ -
- --------------------------------------------------------------------------------
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) 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
Semiannual Report | June 30, 2009 | 23
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund |
NOTES TO FINANCIAL STATEMENTS (unaudited) continued
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.
(d) 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. These instruments typically
involve greater risks than a fixed rate municipal bond. In particular, the
holder of these inverse floating rate instruments retain all credit and interest
rate risk associated with the full underlying bond and not just the par value of
the inverse floating rate instrument. As such, these instruments should be
viewed as having inherent leverage and therefore involve many of the risks
associated with leverage. Leverage is a speculative technique that may expose
the Fund to greater risk and increased costs. Leverage may cause the Fund's net
asset value to be more volatile than if it had not been leveraged because
leverage tends to magnify the effect of any increases or decreases in the value
of the Fund's portfolio securities. The use of leverage may also cause the Fund
to liquidate portfolio positions when it may not be advantageous to do so in
order to satisfy its obligations with respect to inverse floating rate
instruments. The Fund may invest in inverse floating rate securities through
either a direct purchase or through the transfer of bonds to a dealer trust in
exchange for cash and/or residual interests in the dealer trust.
For those inverse floating rate securities purchased directly, the instrument 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 Fund's Statement of
Operations. The notes issued by the dealer trusts have interest rates that reset
weekly and the floating rate note holders have the option to tender their notes
to the dealer trusts for redemption at par at each reset date. At June 30, 2009,
Fund investments with a par value of $13,700,000 (market value of approximately
$14,900,000) are held by the dealer trusts and serve as collateral for the
$6,850,000 in floating rate notes outstanding at that date. Contractual
maturities of the floating rate notes and interest rates in effect at June 30,
2009 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, 2009 were $ 3,303,704 and 0.47%, respectively.
(e) SUBSEQUENT EVENTS
Effective June 30, 2009, the Fund adopted Statement of Financial Accounting
Standards No. 165 ("SFAS No. 165"), "Subsequent Events". SFAS No. 165 required
an entity to recognize in the financial statements the effects of all subsequent
events that provide additional evidence about conditions that existed at the
date of the balance sheet. SFAS No. 165 is intended to establish general
standards of accounting and for disclosure of events that occur after the
balance sheet date but before the financial statements are issued or are
available to be issued. The Funds have performed an evaluation of subsequent
events through August 24, 2009, which is the date the financial statements were
issued.
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 receives 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 auction
agent, BNY is responsible for conducting the auction of the preferred shares. As
transfer agent, BNY is responsible for performing transfer agency services for
the Fund.
Under a separate Fund Administration agreement (the "Administration Agreement'),
the Adviser provides fund administration services to the Fund. As compensation
for services performed under the Administration Agreement, the Adviser receives
an administration fee payable monthly at the annual rate set forth below as a
percentage of the average daily managed assets of the Fund:
MANAGED NET ASSETS RATE
- -----------------------------------------------------------------
First $200,000,000 0.0275%
Next $300,000,000 0.0200%
Next $500,000,000 0.0150%
Over $1,000,000,000 0.0100%
24 | Semiannual Report | June 30, 2009
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,
2009 is as follows:
COST OF NET TAX
INVESTMENTS GROSS TAX GROSS TAX UNREALIZED
FOR TAX UNREALIZED UNREALIZED APPRECIATION
PURPOSES APPRECIATION DEPRECIATIONON INVESTMENTS
- --------------------------------------------------------------------------------
$272,651,601 $5,901,335 $(31,376,618) $(25,475,283)
- --------------------------------------------------------------------------------
Tax components of the following balances as of December 31, 2008 are as follows:
UNDISTRIBUTED
LONG-TERM
UNDISTRIBUTED GAINS/
ORDINARY (ACCUMULATED
INCOME* CAPITAL LOSS)
- --------------------------------------------------------------------------------
$3,228,036 $(31,890,033)
- --------------------------------------------------------------------------------
*Includes tax-exempt income.
The differences between book basis and tax basis unrealized appreciation
(depreciation) is attributable to additional income accrued for tax purposes on
certain preferred stocks and investments in real estate investment trusts.
At December 31, 2008, for federal income tax purposes, the Fund has a capital
loss carryforward of $23,316,538 available to offset future capital gains. The
capital loss carryforward is set to expire on December 31, 2016.
Capital losses incurred after October 31 ("post-October" losses) within the
taxable year are deemed to arise on the first business day of the Fund's next
taxable year. The Fund incurred and will elect to defer capital losses of
$8,573,495.
For the year ended December 31, 2008, 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: 2008
- --------------------------------------------------------------------------------
Ordinary income $7,252,594
Tax-exempt income $13,062,725
Long-term capital gain $8,619
- --------------------------------------------------------------------------------
Total Distributions $20,323,938
- --------------------------------------------------------------------------------
Effective January 1, 2008, the Fund adopted the provisions of FASB
Interpretation No. 48 ("FIN 48") Accounting for Uncertainty in Income Taxes. FIN
48 sets forth a minimum threshold for financial statement recognition of the
benefit of a tax position taken or expected to be taken in a tax return. The
implication of FIN 48 did not result in any unrecognized tax benefits in the
accompanying financial statements.
FIN 48 requires the Fund to analyze all open tax years. Open tax years are those
years that are open for examination by the relevant income taxing authority.
Open federal and state income tax years include the tax years ended 2005, 2006,
2007 and 2008. The Fund has no examinations in progress.
Note 5 - INVESTMENT IN SECURITIES:
For the six months ended June 30, 2009, purchases and sales of investments,
excluding short-term securities, were $240,668,393 and $232,807,473,
respectively.
Note 6 - DERIVATIVES:
In March 2008, the FASB issued 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.
The Fund adopted SFAS No. 161 effective January 1, 2009.
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.
Realized gain (loss) upon termination of swap contracts is recorded on the
Statement of Operations. Fluctuations in the value of swap contracts are
recorded as a component of net change in unrealized appreciation (depreciation)
of swap contracts. Net periodic payments received by the Fund are included as
part of realized gains (losses) and, in the case of accruals for periodic
payments, are included as part of unrealized appreciation (depreciation) on the
Statement of Operations. As of June 30, 2009 there were no swap contracts
outstanding.
The following table presents the types of derivatives in the Fund by location as
presented on the Statement of Assets and Liabilities as of June 30, 2009:
STATEMENT OF ASSET & LIABILITY PRESENTATION OF FAIR VALUES OF
DERIVATIVE INSTRUMENTS:
- --------------------------------------------------------------------------------
(AMOUNT IN THOUSANDS)
ASSET DERIVATIVES LIABILITY DERIVATIVES
- --------------------------------------------------------------------------------
DERIVATIVES NOT
ACCOUNTED FOR
AS HEDGING STATEMENT OF STATEMENT OF
INSTRUMENTS ASSETS AND FAIR ASSETS AND FAIR
UNDER STATEMENT 133 LIABILITIES LOCATION VALUE LIABILITIES LOCATION VALUE
- --------------------------------------------------------------------------------
Unrealized Unrealized
Interest rate appreciation depreciation
contracts on swaps $ - on swaps $ -
================================================================================
At June 30, 2009, there were no interest rate swaps outstanding.
Semiannual Report | June 30, 2009 | 25
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund |
NOTES TO FINANCIAL STATEMENTS (unaudited) continued
The following table presents the effect of Derivative Instruments on the
Statement of Operations for the six months ended June 30, 2009: (amount in
thousands)
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES
- --------------------------------------------------------------------------------
DERIVATIVES NOT ACCOUNTED FOR AS HEDGING
INSTRUMENTS UNDER STATEMENT 133 SWAPS
- --------------------------------------------------------------------------------
Interest rate contracts $(4,405)
================================================================================
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES
- --------------------------------------------------------------------------------
DERIVATIVES NOT ACCOUNTED FOR AS HEDGING
INSTRUMENTS UNDER STATEMENT 133 SWAPS
- --------------------------------------------------------------------------------
Interest rate contracts $7,466
================================================================================
Note 7 - 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, 2009 or the year ended December 31, 2008.
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. On February 27, 2009,
the Fund announced the redemption of 100 shares of each series of Auction Market
Preferred Shares ("AMPS"). On March 10, 2009, the Fund announced the redemption
of 200 shares of each series of AMPS. Bank of New York Mellon is the auction
agent and provides administrative, transfer agency, and dividend distribution
services for the preferred shares.
The broad auction-rate preferred securities market, including the Fund's AMPS,
has experienced considerable disruption since February 2008. The result has been
failed auctions on nearly all auction-rate preferred shares, including the
Fund's AMPS. A failed auction is not a default, nor does it require the
redemption of the Fund's AMPS. Provisions 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, 2009, the annualized dividend rates ranged from:
HIGH LOW AT 6/30/09
- --------------------------------------------------------------------------------
Series M7 1.70% 1.49% 1.54%
Series T28 2.13% 1.57% 1.57%
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 8 - INDEMNIFICATIONS:
In the normal course of business, the Fund enters into contracts that contain a
variety of representations, which provide general indemnifications. The Fund's
maximum exposure under these arrangements is unknown, as this would require
future claims that may be made against the Fund that have not yet occurred.
However, the Fund expects the risk of loss to be remote.
Note 9 - SUBSEQUENT EVENT
On July 17, 2009, Claymore Group Inc., the parent of the Adviser, entered into
an Agreement and Plan of Merger between and among Claymore Group Inc., Claymore
Holdings, LLC and GuggClay Acquisition, Inc., (with the latter two entities
being wholly-owned, indirect subsidiaries of Guggenheim Partners, LLC
("Guggenheim")) whereby GuggClay Acquisition, Inc. will merge into Claymore
Group Inc. which will be the surviving entity. The parties intend that the
completed merger will result in a change-of-control whereby Claymore Group Inc.
and its subsidiaries, including the Adviser, will become indirect, wholly-owned
subsidiaries of Guggenheim. The transaction is not expected to affect the daily
operations of the Fund or the investment management activities of the Adviser.
Under the 1940 Act, consummation of this transaction will result in the
automatic termination of the Advisory Agreement. Accordingly, prior to such
consummation, the Fund expects to enter into a new investment advisory agreement
with the Adviser, to become effective upon the consummation of the transaction.
This new investment advisory agreement will be subject to the initial approval
of the Board of Trustees and subsequent approval by the Fund's shareholders.
26 | Semiannual Report | June 30, 2009
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
Supplemental INFORMATION | (unaudited)
FEDERAL INCOME TAX INFORMATION
In January 2010, 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 2009.
RESULT OF SHAREHOLDER VOTES
The Annual Meeting of Shareholders of the Fund was held on July 20, 2009.
Holders of the Fund's auction market preferred shares, par value $0.01 per
share, liquidation preference $25,000 per share ("Preferred Shares") voted on
the election of a Class II Trustee. Holders of the Preferred Shares and holders
of the Fund's common share of beneficial interest, par value $0.01 per share
("Common Shares") voted together as a single class on the election of Class II
Trustees.
Voting results with respect to the election of a Class II Trustee by the holders
of Preferred Shares voting as a separate class are set forth below:
# OF SHARES # OF SHARES
IN FAVOR WITHHELD
- --------------------------------------------------------------------------------
L. Kent Moore 4,025 81
Voting results with respect to the election of Class II Trustee by holders of
Preferred Shares and holders of Common Shares voting as a single class are set
forth below:
# OF SHARES # OF SHARES
IN FAVOR WITHHELD
- --------------------------------------------------------------------------------
Matthew J. Appelstein 14,186,231 897,704
Ronald A. Nyberg 14,189,028 894,907
The other Trustees of the Fund whose terms did not expire in 2009 are Randall C.
Barnes, Robert M. Hamje, Steven D. Cosler, Nicholas Dalmaso, and Ronald E.
Toupin, Jr.
TRUSTEES
The Trustees of the TS&W/Claymore Tax-Advantaged Balanced Fund and their
principal occupations during the past five years:
NAME, ADDRESS*,
YEAR OF BIRTH TERM OF OFFICE** NUMBER OF
AND POSITION(S) AND LENGTH PRINCIPAL OCCUPATIONS PORTFOLIOS IN THE OTHER
HELD WITH OF TIME DURING THE PAST FIVE FUND COMPLEX*** DIRECTORSHIPS
REGISTRANT SERVED AND OTHER AFFILIATIONS OVERSEEN BY TRUSTEE HELD BY TRUSTEE
- ------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES:
- ------------------------------------------------------------------------------------------------------------------------------------
Randall C. Barnes Since 2005 Private Investor (2001-present). Formerly, Senior 43 None.
Year of Birth: 1951 Vice President & Treasurer, PepsiCo., Inc.
Trustee (1993-1997), President, Pizza Hut International
(1991-1993) and Senior Vice President,
Strategic Planning and New Business Development
(1987-1990) of PepsiCo, Inc. (1987-1997).
- ------------------------------------------------------------------------------------------------------------------------------------
Steven D. Cosler Since 2005 Formerly, President, Chief Executive Officer 2 Director, SXC
Year of Birth: 1955 and Director of Priority Healthcare Corp. Health Solutions.
Trustee (2002-2005). Formerly, President and Chief
Operating Officer of Priority Healthcare Corp.
(2001-2002). Formerly, Executive Vice President
and Chief Operating Officer of Priority
Healthcare Corp. (2000-2001).
- ------------------------------------------------------------------------------------------------------------------------------------
Robert M. Hamje Since 2004 Formerly, 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,
Year of Birth: 1955 2005-present). Formerly, Managing Director High Old Mutual
Trustee Mutual Funds. Sierra Energy L.P., (2004-2005). Formerly, Advisor
Portfolio Manager and Vice President of Janus
Capital Corp. (2000-2002) and Senior Analyst/Portfolio
Manager of Marsico Capital Management (1997-1999).
- ------------------------------------------------------------------------------------------------------------------------------------
Ronald A. Nyberg Since 2004 Partner of Nyberg & Cassioppi, LLC, a law firm 46 None.
Year of Birth: 1953 specializing in corporate law, estate planning and
Trustee business transactions (2000-present). Formerly,
Executive Vice President, General Counsel and
Corporate Secretary of Van Kampen Investments (1982-1999).
- ------------------------------------------------------------------------------------------------------------------------------------
Ronald E. Since 2004 Retired. Formerly, Vice President, Manager and 43 None.
Toupin, Jr. Portfolio Manager of Nuveen Asset Management
Year of Birth: 1958 (1998-1999), Vice President of Nuveen Investment
Trustee Advisory Corp. (1992-1999), Vice President
and Manager of Nuveen Unit Investment Trusts
(1991-1999), and Assistant Vice President and
Portfolio Manager of Nuveen Unit Investment Trusts
(1988-1999), each of John Nuveen & Company, Inc. (1982-1999).
- ------------------------------------------------------------------------------------------------------------------------------------
Semiannual Report | June 30, 2009 | 27
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund |
SUPPLEMENTAL INFORMATION (unaudited) continued
NAME, ADDRESS*,
YEAR OF BIRTH TERM OF OFFICE** NUMBER OF
AND POSITION(S) AND LENGTH PRINCIPAL OCCUPATIONS PORTFOLIOS IN THE OTHER
HELD WITH OF TIME DURING THE PAST FIVE FUND COMPLEX*** DIRECTORSHIPS
REGISTRANT SERVED AND OTHER AFFILIATIONS OVERSEEN BY TRUSTEE HELD BY TRUSTEE
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES:
- ------------------------------------------------------------------------------------------------------------------------------------
Matthew J. Since 2005 Senior Vice President of Product Strategy and Retirement 2 None.
Appelstein+ Solutions Planning, Director of Investment Services,
Year of Birth: 1961 Old Mutual Asset Management (2003-present).
Trustee Formerly, 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 (2007-2008) and
Trustee General Counsel (2001-2007) of Claymore Advisors,
LLC and Claymore Securities, Inc. Formerly,
Senior Managing Director and General Counsel of
Claymore Group, Inc., Claymore Advisors, LLC
and Claymore Securities, Inc. (2001-2007). Assistant
General Counsel, John Nuveen and Co., Inc.
(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 and Hamje, as Class I Trustees, are expected to stand for
re-election at the Fund's 2011 annual meeting of shareholders.
-Messrs. Appelstein, Moore and Nyberg, as Class II Trustees, are expected
to stand for re-election at the Fund's 2012 annual meeting of shareholders.
-Messrs. Cosler, Dalmaso 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.
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 OCCUPATIONS DURING
POSITION(S) HELD LENGTH OF THE PAST FIVE YEARS
WITH REGISTRANT TIME SERVED AND OTHER AFFILIATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICERS:
- ------------------------------------------------------------------------------------------------------------------------------------
J. Thomas Futrell Since 2008 Senior Managing Director, Chief Investment Officer of Claymore Advisors, LLC and
Year of birth: 1955 Claymore Securities, Inc.; Chief Executive Officer of certain other Funds advised
Chief Executive Officer by Claymore Advisors, LLC (2008-present). Formerly, Managing Director in charge
of Research for Nuveen Asset Management. (2000-2007)
- ------------------------------------------------------------------------------------------------------------------------------------
Kevin Robinson Since 2008 Senior Managing Director and General Counsel of Claymore Advisors, LLC, Claymore
Year of birth: 1959 Securities, Inc. and Claymore Group, Inc. (2007-present). Chief Legal Officer of
Chief Legal Officer certain other funds in the Fund Complex. Formerly, Associate General
Counsel and Assistant Corporate Secretary of NYSE Euronext, Inc. (2000-2007).
- ------------------------------------------------------------------------------------------------------------------------------------
Steven M. Hill Since 2004 Senior Managing Director of Claymore Advisors, LLC and Claymore Securities, Inc.
Year of Birth: 1964 (2005-present); Formerly, Chief Financial Officer of Claymore Group
Chief Financial Officer, Chief Inc. (2005-2006); Managing Director of Claymore Advisors, LLC and Claymore
Accounting Officer and Treasurer Securities, Inc. (2003-2005). Formerly, Treasurer of Henderson Global
Funds and Operations Manager for Henderson Global Investors (NA) Inc.,
(2002-2003). Formerly, Managing Director, Front Point Partners LLC
(2001-2002). Formerly, Vice President, Nuveen Investments (1999-2001).
- ------------------------------------------------------------------------------------------------------------------------------------
Vincent R. Giordano Since 2004 Senior Managing Director of SMC Fixed Income Management, LP. (2006-present).
Year of Birth: 1948 Formerly, Senior Managing Director of Claymore Advisors, LLC
Vice President (2004-2006). Formerly, 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 (2006-present). Formerly,
Year of Birth: 1949 Managing Director of Claymore Advisors, LLC (2004-2006).
Vice President Formerly, Sell Side Analyst for JB Hanauer & Co.
- ------------------------------------------------------------------------------------------------------------------------------------
Roberto W. Roffo Since 2004 Managing Director of SMC Fixed Income Management, LP (2006-present). Formerly,
Year of Birth: 1966 Managing Director of Claymore Advisors, LLC (2004-2006).
Vice President Formerly, Director and Vice President of Merrill Lynch Investment Managers.
- ------------------------------------------------------------------------------------------------------------------------------------
Bruce Saxon Since 2006 Vice President, Fund Compliance Officer of Claymore Group, Inc. (2006-present).
Year of Birth: 1957 Formerly, Chief Compliance Officer/Assistant Secretary of Harris
Chief Compliance Officer Investment Management, Inc. (2003-2006). Formerly, Director-Compliance of
Harrisdirect LLC (1999-2003).
- ------------------------------------------------------------------------------------------------------------------------------------
Mark E. Mathiasen Since 2008 Vice President; Assistant General Counsel of Claymore Securities, Inc.
Year of birth: 1978 (2007-present). Secretary of certain funds in the Fund Complex. Formerly, Law
Secretary Clerk, Idaho State Courts (2003-2006).
- ------------------------------------------------------------------------------------------------------------------------------------
* 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.
28 | Semiannual Report | June 30, 2009
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, BNY Mellon Shareowner Services, P.O. Box 358015, Pittsburgh,
Pennsylvania 15252-8015, Attention: Shareholder Services Department, Phone
Number: (866) 488-3559.
Semiannual Report | June 30, 2009 | 29
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
Investment Advisory and SUBADVISORY AGREEMENT CONTRACT RE-APPROVAL |
On January 20, 2009, 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 that request as well as to a follow-up request for supplemental
information. 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 program of 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 personnel providing services
to the Fund. 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. The Board also considered the secondary market support services
provided by the Adviser to the Fund and the Adviser's collaboration with the
Sub-Advisers on the Fund's use of leverage and the Fund's distribution rate.
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, 2008
and compared it to the net asset value and market price returns of a custom
blended peer group of funds selected by the Adviser emphasizing large
capitalization value and/or dividend paying common or preferred stocks ("equity
peer group") and a peer group of funds selected by the Adviser investing
primarily in municipal securities with long maturities that are investment grade
("municipal peer group") (the equity peer group together with the municipal peer
group, the "custom blended peer group") and to relevant benchmark indices for
the same time periods. The Board also considered the impact of leverage on the
Fund's performance for the year ended December 31, 2008 and since inception. The
Board also considered that the Adviser does not directly control investment
performance but had delegated such duties to TS&W and SMC.
The Board considered the Fund's advisory fee (which includes the subadvisory
fees paid to TS&W and SMC) and expense ratio to the equity peer group and
municipal peer group 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.
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 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. Given the
size of the Fund, the Board does not anticipate significant economies of scale.
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.
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
ability to achieve 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, the S&P 500 Index and the custom
blended peer group for the year ended December 31, 2008, noting the portfolio's
outperformance relative to the Russell 1000 Value Index, the S&P 500 Index and
the custom blended peer group.
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.
30 | SemiAnnual Report | June 30, 2009
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund |
INVESTMENT ADVISORY AND SUBADVISORY AGREEMENT APPROVALS continued
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.
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. Given the size of the Fund, the Board does
not anticipate significant economies of scale.
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.
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, 2008, 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 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.
With respect to the costs of services provided and profits realized by SMC, the
Board reviewed the subadvisory fee revenue. The Board noted SMC's statement that
SMC's profitability with respect to the Fund was negative at the time the SMC
Subadvisory Agreement was being reviewed.
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. Given the size of the Fund, the Board does
not anticipate significant economies of scale.
The Board considered other benefits to SMC and its affiliates to be derived from
its relationship with the Fund.
OVERALL CONCLUSIONS
Based upon all of the information considered, the Board determined that the
terms of each Advisory Agreement continue to be fair and reasonable taking into
consideration the costs of services to be provided and profit realized,
economies of scale and other benefits to the Adviser, TS&W and SMC.
Semiannual Report | June 30, 2009 | 31
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.
** 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 Officer
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
Mark E. Mathiasen
Secretary
INVESTMENT MANAGER - EQUITY AND INCOME
Thompson, Siegel & Walmsley LLC
Richmond, Virginia
INVESTMENT MANAGER - MUNICIPALS
SMC Fixed Income
Management, LP
Princeton, New Jersey
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's 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 (866)392-3004, by visiting
Claymore's website at www.claymore.com/tyw or by accessing the Fund's Form N-PX
on the U.S. Securities and Exchange Commission's ("SEC") website at www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The Fund's Form N-Q is
available on the SEC website at www.sec.gov or by visiting Claymore's website at
www.claymore.com/tyw. 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.
In August 2008, 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.
NOTICE TO SHAREHOLDERS
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that the Fund may from time to time purchase
its shares of common stock and preferred stock in the open market.
Semiannual Report | June 30, 2009 | 35
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
About the FUND MANAGERS |
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 majority owned subsidiary of Old Mutual (US)
Holdings Inc. TS&W is responsible for the day-today 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's investment process uses a combination of quantitative and
qualitative methods based on a four-factor screen. Parts one and two of the
screen attempt to assess a company's attractiveness based on cash flows relative
to other stocks and as compared to their industry or sector peers. The third
factor considers the relative earnings prospects of the company. The fourth
factor involves looking at the company's recent price action. TS&W generally
limits its investment universe to those companies with a minimum of three years
of sound operating history.
TS&W's analysts also perform rigorous fundamental analysis, exploring numerous
factors that may affect the outlook for a company. They evaluate publicly
available information including sell-side research, company filings, and trade
periodicals. The analysts may speak with company management to hear their
perspectives and outlook on the pertinent business issues. They apply a
consistent and disciplined review in a team environment that encourages critical
thinking and analysis for each company considered for investment.
Established positions in the portfolio are ranked daily and are reviewed
regularly in the same manner to re-examine their fundamental and valuation
characteristics. The product team meets periodically to discuss each stock's
place in the portfolio. TS&W employs a consistent sell discipline.
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.
CLAYMORE SECURITIES, INC.
2455 Corporate West Drive
Lisle, IL 60532
Member FINRA/SIPC (02/09)
NOT FDIC-INSURED | NOT BANK-GUARANTEED | MAY LOSE VALUE
TYW
Listed
NYSE(R)
TYW-SAR-0609
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 1, 2009
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 1, 2009
By: /s/ Steven M. Hill
--------------------------------------------------------
Name: Steven M. Hill
Title: Treasurer and Chief Financial Officer
Date: September 1, 2009