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, Chief Executive Officer
2455 Corporate West Drive, Lisle, IL 60532
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(Name and address of agent for service)
Registrant's telephone number, including area code: (630) 505-3700
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Date of fiscal year end: December 31
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Date of reporting period: January 1, 2009 - December 31, 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, as amended (the "Investment
Company Act") is as follows: [Provide full text of annual report.]
ANNUAL TS&W/ CLAYMORE |
REPORT | TYW
December 31, 2009 TAX-ADVANTAGED BALANCED FUND |
Picture of two boats
TS&W Thompson, Siegel & Walmsley LLC LOGO
------------------------------ CLAYMORE(R)
INVESTMENT MANAGEMENT
WWW.CLAYMORE.COM/TYW
... HOME PORT FOR THE LATEST,
MOST UP-TO-DATE INFORMATION ABOUT THE
TS&W/CLAYMORE TAX-ADVANTAGED BALANCED FUND
Graphic:
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TYW | TS&W/
LISTED | Claymore
NYSE(R) | Tax-Advantaged
| Balanced Fund
TS&W Thompson, Siegel & Walmsley LLC LOGO
------------------------------ CLAYMORE(SM)
INVESTMENT MANAGEMENT
There can be no assurance the Fund will achieve its investment objective. The
value of the Fund will fluctutate with the value of the underlying securities.
Historically, closed-end funds often trade at a discount to their net asset
value.
NOT FDIC-INSURED o NOT BANK-GUARANTEED o MAY LOSE VALUE
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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 | Annual Report | December 31, 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 fiscal
year ended December 31, 2009. We are pleased to report very strong performance
for the year just ended.
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 (the "Adviser") is the investment adviser to the Fund,
with responsibility for managing the Fund's overall asset allocation. Claymore
entities provided supervision, management or servicing on approximately $15.2
billion in assets as of December 31, 2009. Two investment sub-advisers are
responsible for day-to-day management of the Fund's investments. Thompson,
Siegel & Walmsley, LLC ("TS&W") manages the Fund's equity portfolio and other
non-municipal income-producing securities. As of December 31, 2009, TS&W
managed or supervised approximately $7.4 billion in assets. SMC Fixed Income
Management, LP ("SMC") is responsible for the Fund's portfolio of municipal
bonds. As of December 31, 2009, SMC managed or supervised approximately $1.1
billion in assets. Collectively, TS&W and SMC are also referred to as the
"Sub-Advisers."
All Fund returns cited--whether based on net asset value ("NAV") or market
price--assume the reinvestment of all distributions. For the 12 months ended
December 31, 2009, the Fund provided a total return based on market price of
57.57% and a total return based on NAV of 41.34%. As of December 31, 2009, the
Fund's market price of $9.54 per share represented a discount of 13.35% to its
NAV of $11.01 per share. Past performance is not a guarantee of future results.
The market price of the Fund's shares fluctuates from time to time, and it may
be higher or lower than the Fund's NAV.
The Fund paid quarterly dividends of $0.2525 on March 31, 2009, and $0.1800 on
June 30, September 30 and December 31, 2009. The most recent dividend
represents an annualized distribution rate of 7.55% based on the Fund's closing
market price of $9.54 on December 31, 2009. This translates into tax advantaged
distribution rate of 10.93% for investors in the 35% federal income tax
bracket, based upon the 2009 tax characteristics of distributions paid.
However, there is no guarantee that this level of income will be maintained.
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")). The transaction closed on October 14, 2009 (the "Effective
Date"), whereby GuggClay Acquisition, Inc. merged into Claymore Group Inc., the
surviving entity. The transaction resulted in a change-of-control whereby
Claymore Group Inc. and its subsidiaries, including the Adviser, became
indirect, wholly-owned subsidiaries of Guggenheim. The transaction has not
affected the daily operations of the Fund or the investment management
activities of the Adviser.
Under the Investment Company Act of 1940, as amended, (the "1940 Act"), the
consummation of this transaction resulted in the automatic termination of the
Advisory & Sub-Advisory Agreements. Accordingly, on September 28, 2009, the
Board of Trustees approved an interim investment advisory agreement between the
Fund and the Adviser (the "Interim Advisory Agreement") and interim
sub-advisory agreements among the Fund, the Adviser and TS&W as well as among
the Fund, the Adviser and SMC (each an "Interim Sub-Advisory Agreement",
together, the "Interim Sub-Advisory Agreements" and together with the Interim
Advisory
Annual Report | December 31, 2009 | 3
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | DEAR SHAREHOLDER continued
Agreement, the "Interim Agreements").The Interim Agreements took effect as of
the Effective Date and terminated upon the approval of new advisory
agreements.
On September 28, 2009, the Board of Trustees approved a new investment advisory
agreement between the Fund and the Adviser (the "New Advisory Agreement"), a
new sub-advisory agreement among the Fund, the Adviser and TS&W(the "New TS&W
Sub-Advisory Agreement"), and a new sub-advisory agreement among the Fund, the
Adviser and SMC (the "New SMC Sub-Advisory Agreement" and together with the New
Advisory Agreement and New TS&W Sub-Advisory Agreement, the "New Agreements")
and recommended that the New Agreements be submitted to the shareholders of the
Fund for their approval. The New Agreements, which were approved by
shareholders on February 18, 2010, have an initial term of one year.
Thereafter, the New Agreements will continue in effect only if their
continuance is approved annually by the Board of Trustees. Other than effective
dates, there are no material differences between the terms of the New
Agreements and those of the original Advisory Agreement and Sub-Advisory
Agreements.
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.
We encourage shareholders to consider the opportunity to reinvest their
distributions from the Fund through the Dividend Reinvestment Plan ("DRIP"),
which is described in detail on page 30 of the Fund's 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 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
4 | Annual Report | December 31, 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.
ROBERTOW. 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
12 months ended December 31, 2009.
================================================================================
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 and real
estate investment trusts.
================================================================================
HOW DID THE FUND PERFORM DURING 2009?
All Fund returns cited--whether based on net asset value ("NAV") or market
price--assume the reinvestment of all distributions. For the 12 months ended
December 31, 2009, the Fund provided a total return based on market price of
57.57% and a total return based on NAV of 41.34%. As of December 31, 2009, the
Fund's market price of $9.54 per share represented a discount of 13.35% to its
NAV of $11.01 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 23.47% for the 12 months ended December 31, 2009. The broad equity
market, as measured by the S&P 500 Index, returned 26.46%. The high-yield bond
market, as measured by the Merrill Lynch High Yield Master II Index (the "High
Yield Index"), returned 57.51% for the period, and the Merrill Lynch Fixed Rate
Preferred Stock Index returned 20.07%.
Annual Report | December 31, 2009 | 5
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | QUESTIONS & ANSWERS
continued
The Fund paid quarterly dividends of $0.2525 on March 31, 2009, and $0.1800 on
June 30, September 30 and December 31, 2009. The most recent dividend
represents an annualized distribution rate of 7.55% based on the Fund's closing
market price of $9.54 on December 31, 2009. This translates into a tax
advantaged distribution rate of 10.93% for investors in the 35% federal income
tax bracket, based upon the 2009 tax characteristics of distributions paid.
================================================================================
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 December 31, 2009, approximately 54.3% of the
Fund's portfolio was invested in municipal securities. Of the remaining assets
in the Fund's portfolio as of December 31, 2009, approximately 34.8% were
invested in equity securities consisting primarily of large-cap dividend-paying
stocks, and approximately 10.9% 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
rebal-anced to maintain at least 50% of the Fund's total assets in municipal
securities.
================================================================================
HOW HAS THE FUND'S LEVERAGE STRATEGY AFFECTED PERFORMANCE?
The Fund utilizes leverage (borrowing) as part of its investment strategy to
finance the purchase of additional securities that provide increased income and
potentially greater appreciation potential to common shareholders than could be
achieved from a portfolio that is not leveraged. Of course, leverage results in
greater NAV volatility and entails more downside risk than an unleveraged
portfolio. Leverage adds to performance only when the cost of leverage is less
than the total return generated by investments purchased with the leverage
proceeds. During the fiscal year ended December 31, 2009, the cost of leverage
was much less than the return of the Fund's investments; accordingly, leverage
made a significant contribution to the Fund's total return.
As of December 31, 2009, the Fund had $105 million of leverage outstanding in
the form of Auction Market Preferred Shares ("AMPSSM"). During the year ended
December 31, 2009, the Fund redeemed $15 million of AMPS. The Fund has two
series of AMPS, one 7-day series and one 28-day series. AMPS holders receive a
dividend that is reset every 7 or 28 days, depending on the tranche.1 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 2009,
established maximum rates were based on a spread of 125 basis points over the
applicable LIBOR rates, with the maximum rates ranging from 1.46% to 2.13%.
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.
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 DURING 2009.
A year ago, in the Fund's last annual report, we described conditions in the
municipal bond market, indeed in the markets for all bonds that carry credit
risk, as dismal. In December 2008 and early 2009, 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
spreads of 125% to 130% over 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 discount to Treasury securities.)
Beginning in March 2009, there was a major rally in the market for municipal
bonds, along with other debt and equity investments. Encouraged by government
efforts to stimulate the economy and revive capital markets, investors who had
fled from all but the very safest investments in late 2008 once again embraced
risk and invested in more volatile stocks and bonds. At first, the rally was
concentrated in highly rated bonds. As the year
- ---------------------
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 | Annual Report | December 31, 2009
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | QUESTIONS & ANSWERS
continued
progressed and conditions in the capital markets began to seem more normal,
riskier bonds also began to perform well, as investors sought higher yields. In
the last six months of 2009, municipal bonds performed in line with taxable
bonds, with a marginal increase in volatility near the end of the year.
For the 12 months ended December 2009, the return of the Barclays Capital U.S.
Municipal Long Bond Index, which measures performance of the U.S. municipal
market, was 23.47%.
================================================================================
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 the period
surveyed, generating return of 26.47% on an unlevered basis. With the positive
impact of leverage, actual return to shareholders was approximately 30% for the
12-month period. Much of the Fund's success during the year was based on SMC's
identification of sectors within the municipal market that appeared not to be
trading at fair value, purchasing bonds at what were believed to be bargain
prices, and then taking advantage of subsequent rallies to sell and move into
different sectors.
During the last few months of 2008, correctly anticipating that the market
would become illiquid, SMC sharply reduced the portfolio's holdings of A and
lower rated securities, replacing them AAA and AA-rated securities. A
significant investment was a large position in Texas Permanent School Fund
("TPSF") bonds; as of December 31, 2008, bonds guaranteed by the TPSF bonds
represented 24.2 % of the Fund's municipal bond portfolio. 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, and 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.
A considerable portion of the proceeds of the sale of the TPSF bonds was
invested in an issue of bonds of the New York State Dormitory Authority that are
backed by a dedicated revenue stream from the personal income taxes of New York
residents. In the first calendar quarter of 2009, 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 secure because of their direct tax backing. This proved
to be a good decision, as these bonds rallied significantly in the second
quarter of the year. SMC took advantage of this rally and sold most of this
position near mid-year. This proved to be a good decision, as these bonds
generally performed in line with the municipal market as a whole in the last
half of 2009. (Other bonds issued by the New York State Dormitory remain in the
portfolio as of 12/31/09.)
Much of the new bond issuance during 2009 was in the form of Build America
Bonds, which are a new type of taxable municipals on which the federal
government reimburses the states for 35% of their interest cost. 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. SMC purchased
some Build America Bonds for the Fund's portfolio early in 2009, and continued
to hold these bonds through the third quarter of the year. While the income
from these securities is taxable, SMC felt they provided an attractive total
return opportunity. As the market became more familiar with these bonds, they
traded generally in line with U.S. Treasury bonds. Most of the Fund's Build
America Bond position was eliminated in the fourth quarter in the belief that
more attractive yields were available elsewhere in the market.
Around mid-year 2009, SMC made the decision to make a significant investment in
insured municipal bonds. Traditionally, issuers of municipal bonds can purchase
insurance that guarantees the payment of principal and interest on a bond issue
if the issuer defaults. By taking advantage of the insurers' higher credit
ratings, issuers have been able to reduce their interest costs. However, since
2007, most of the insurers' credit ratings have been downgraded because of
their exposure to collateralized debt obligations related to subprime
mortgages. Because of these downgrades, the market has recently placed little
value on the existence of insurance in valuing bonds, evaluating the underlying
bonds on their own merit instead. Of the major insurers, only two, Assured
Guaranty Corporation ("Assured") and Berkshire Hathaway Assurance, still have
high credit ratings and remain active in insuring bonds. However, because of
the problems experienced by the other insurers of municipal bonds, the market
tended to
Annual Report | December 31, 2009 | 7
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | QUESTIONS & ANSWERS
continued
regard bonds insured by Assured similarly to other insured bonds. Based on
SMC's evaluation, Assured's credit quality and its credit rating, the decision
was made to significantly increase the portfolio's exposure to bonds with lower
underlying credits that were insured by Assured, which were trading below what
SMC considered to be fair value. As the market stabilized, these insured bonds
performed well, contributing to the portfolio's performance. Not only did the
underlying bonds rally, but also the spreads on insured bonds versus
non-insured bonds narrowed, contributing to performance. Among the insured
bonds that performed particularly well was a 2027 Detroit Michigan Sewer
Disposal bond with a 7.00% coupon; this is now one of the portfolio's largest
holdings.
The overall quality of the portfolio, in terms of credit rating, did not change
significantly during the year. However, as described above, the nature of the
bonds in the portfolio and the sectors emphasized were changed several times
during the year in order to enhance overall performance and increase income.
================================================================================
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. While SMC monitors interest rates very
closely and acts quickly to adjust the portfolio to changing market rates,
positions in the portfolio are not traded in search of incremental gains that
could be achieved by active trading based on daily changes in rates. 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.
================================================================================
WHAT IS THE OUTLOOK FOR THE MUNICIPAL BOND MARKET, AND WHAT DOES THIS MEAN FOR
THE FUND?
SMC believes that the municipal market will perform better than the taxable bond
market over the next few months, as the continuing massive issuance of treasury
securities will create substantial supply of taxable bonds. As long as the Build
America Bond program is in place, it appears that most new municipal bonds will
be Build America Bonds, rather than traditional tax-exempt bonds. Following the
strong performance of municipal bonds in 2009, returns of the same magnitude
really cannot be expected in the year ahead. Accordingly, SMC's current focus is
on income and increasing the average coupon of the portfolio. Ongoing efforts
will be made to purchase bonds that can provide an attractive level of income
such as the Detroit Sewer bonds purchased during 2009. It seems likely that the
Federal Reserve will eventually raise short-term interest rates, which currently
remain near zero. SMC therefore expects that longer-term bonds will perform
better than short-term bonds during 2010.
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 2009.
For the 12 months ended December 31, 2009, the broad equity market, as measured
by the Standard & Poor's 500 Index ("S&P 500), returned 26.46%, after a
disastrous return of -37.00% in the previous year. The extremely poor
performance of equity and bond markets in 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, and
the federal government began to flood the economy with financial stimulus. 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, moved up
sharply from March through mid-summer, and then continued to move up fairly
steadily through the end of the year. 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 Index returned 57.51% for the 12
months ended December 31, 2009, compared to a return of 5.93% for the Barclays
U.S. Aggregate Bond Index, which measures performance of the bond market as a
whole.
In the equity market, growth stocks significantly outperformed value stocks
during 2009, across all market capitalization categories. It appears that, with
growth very scarce, investors flocked to stocks that they considered to have
good growth prospects. For the 12-month period ended December 31, 2009, the
return of the Russell 1000 Growth Index was 37.21%, compared with 19.69% for
the Russell 1000 Value Index. There have been only
8 | Annual Report | December 31, 2009
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | QUESTIONS & ANSWERS
continued
two years with a wider gap between growth and value in the 30-plus years that
history of the Russell indices is available. Consistent with this growth focus
in the market's strength, many of the best performing stocks were the ones with
minimal or no dividend yield.
A striking feature of 2009 that was detrimental to the performance of the
equity portion of the Fund was a tough dividend environment. Standard & Poor's
("S&P") announced in January 2010 that 2009 was the worst year ever for
dividends, with fewer dividend increases and more dividend cuts than in any
year since S&P began keeping dividend records in 1955. S&P commented that
dividend cuts were extremely deep, costing investors $58 billion in income
during 2009.
================================================================================
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.
================================================================================
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 18.07% (excluding the effect of
leverage) for the full year 2009. This was below the Russell 1000 Value Index,
which returned 19.69%, and the S&P 500 Index, which returned 26.46%.
================================================================================
WHAT WERE THE MAIN DETERMINANTS OF THE PERFORMANCE OF THE EQUITY PORTFOLIO?
The Fund's performance was driven more by selection of individual stocks than by
sector decisions. Relative to the S&P 500, the portfolio was overweight in
energy, which was not one of the best performing sectors. However, some of the
Fund's energy holdings, including BP PLC, an international oil company; and
Noble Corp., an offshore drilling company, (1.7% and 0.9% of total net
investments at period end, respectively) performed very well; both of these
stocks were up more than 30%. Kimberly-Clark Corporation (1.1% of total net
investments at period end), a producer of tissues and other personal care
products in the consumer staples sector, also performed very well, though the
sector was not among the strongest. The Fund's positioning in the technology
sector, which was quite strong, detracted from performance relative to the S&P
500. While two of the Fund's top five positions, Cisco Systems, Inc. (0.6% of
total net investments at period end), a provider of networking products and
services, and Corning Inc. (not held in the portfolio at period end), which
produces optical fiber and other technology-oriented products, were in the
technology sector, the Fund's weight in this sector averaged approximately 9% to
10%, compared with the S&P 500's weight of 18% to 19%. In the highly cyclical
materials sector, the Fund's performance was hurt by the elimination early in
the year of positions in Freeport-McMoRan Copper & Gold Inc., a mining company,
and The Dow Chemical Company, a diversified chemical company (neither held in
the portfolio at period end). Both of these stocks were sold after they cut
their dividends, and both performed very well.
Looking at holdings that made the strongest absolute contributions to equity
performance, the top five were Cummins, Inc. (not held in the portfolio at
period end), a manufacturer of diesel engines, truck engines and generators;
JPMorgan Chase & Co. (0.8% of total net investments at period end), a financial
holding company; BP PLC; Cisco Systems, Inc. and Corning Inc.
Among the major detractors from performance were Bank of America Corp. (common
stock not held in the portfolio at period end) a leading U.S. bank; The Dow
Chemical Company; Nintendo Co., Ltd. (0.5% of total net investments at period
end), a Japanese manufacturer of computer games and game consoles; Wells Fargo
& Company (0.2% of total net investments at period end), a large bank; and
Caterpillar Inc. (not held in the portfolio at period end), a manufacturer of
engines and machinery.
In the market environment of 2009, with growth stocks much stronger than value
stocks and dividend cuts by so many companies, it was very difficult to find
the premium income mandated by the Fund's strategy while still maintaining
exposure to the market's upside potential. TS&W has pursued this elusive
combi-
Annual Report | December 31, 2009 | 9
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | QUESTIONS & ANSWERS
continued
nation in part through what is termed a "barbell" strategy, buying stocks in
stable sectors with good dividends, such as health care and communications, in
combination with industrial or technology stocks with minimal dividends but
strong exposure to an improving market and economy.
================================================================================
HOW DID THE PORTFOLIO'S HIGH-YIELD BONDS AND PREFERRED STOCKS PERFORM?
Benefiting from the major strength in the high-yield bond market, this portion
of the Fund's portfolio had a return of 39.57% for 2009. Impressive as this
return is, it trailed the 57.51% return of 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 20.07% for the year, and the return of the blended
benchmark was 45.15%.
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 market
debacle of late 2008 and early 2009. Then, in the strong market rally that
began in March 2009, all of the bonds in the portfolio went up. However, the
portfolio lagged the High Yield Index 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 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.
The position in the bond and preferred portion of the portfolio that made the
greatest contribution to return for 2009 was one mentioned in the mid-year
report as a detractor: a bond of Dillards, Inc. (0.2% of total net investments
at period end), a department store chain that performed poorly in a very weak
retail environment. 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. Other major positives were
bonds of hotel operator Wyndham Worldwide Corporation; Genworth Financial, Inc.,
a financial security company with a substantial mortgage insurance business; and
Xerox Corporation, a document processing company (0.2%, 0.1% and 0.4% of total
net investments at period end, respectively). All of these bonds were purchased
for the portfolio at prices TS&W considered to be cheap relative to their
intrinsic value.
In a very strong market environment for high yield bonds and preferred stocks,
none of the portfolio's holdings detracted from returns. Among the positions
that added least were bonds of pork processor Smithfield Foods, Inc. and
preferred stocks of two leveraged real estate investment trusts, First
Industrial Realty Trust, Inc. and Capital Automotive REIT (0.3%, 0.1% and less
than 0.1% of total net investments at period end, respectively).
================================================================================
WHAT IS THE OUTLOOK FOR THE EQUITY AND HIGH-YIELD MARKETS IN THE MONTHS AHEAD?
TS&W believes that the first few months of 2010 will prove to be critical for
the direction of the equity market. Year-over-year earnings comparisons are a
key driver of equity returns, and, with very poor earnings reported in 2009,
comparisons will almost certainly be positive. It will be important to monitor
investors' reactions to improved earnings as 2010 progresses. If the reaction
to improved earnings is enthusiastic, the market will likely move up. But if
the market does not seem to care about earnings improvement off the 2009 lows,
there may be considerable downside risk. 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 high-yield market, the Fund benefited in 2009 from TS&W's ability to buy
both high yield and investment-grade bonds at very favorable prices early in
the year when the bond market was extremely weak. On the heels of the
subsequent impressive recovery in the high-yield market, it will be much more
difficult to generate returns anywhere near as high as those experienced in the
year just ended. Nonetheless, there are still investors with money on the
sidelines, and it seems likely that the high-yield market will continue to
provide positive returns.
10 | Annual Report | December 31, 2009
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | QUESTIONS & ANSWERS
continued
================================================================================
INDEX DEFINITIONS
Indices are unmanaged, reflect no expenses 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.
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.
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.
Russell 1000[R] Growth Index measures the performance of the 1,000 largest
companies in the Russell 3000 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.
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.
================================================================================
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
Annual Report | December 31, 2009 | 11
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | QUESTIONS & ANSWERS
continued
are also sensitive to changes in investor perceptions as well as general
movements in the equities markets.
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. The information below 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 AMPS market continues to
remain illiquid as auctions for nearly all AMPS continue to fail. A failed
auction is not a default, nor does it require the redemption of a fund's
auction-rate preferred shares. Provisions in the Fund's offering documents
provide a mechanism to set a maximum rate in the event of a failed auction,
and, thus, investors will continue to be entitled to receive payment for
holding these AMPS.
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 | Annual Report | December 31, 2009
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
Fund SUMMARY | AS OF DECEMBER 31, 2009 (unaudited)
FUND STATISTICS
- ------------------------------------------------------------------------------
Share Price $9.54
Common Share Net Asset Value $11.01
Premium/(Discount) to NAV -13.35%
Net Asset Applicable to Common Shareholders ($000) $169,674
- ------------------------------------------------------------------------------
TOTAL RETURNS
- ------------------------------------------------------------------------------
(INCEPTION 4/28/04) MARKET NAV
- ------------------------------------------------------------------------------
One Year 57.57% 41.34%
Three Year - average annual -6.88% -5.45%
Five Year - average annual 1.29% 0.69%
Since Inception - average annual 0.03% 2.54%
- ------------------------------------------------------------------------------
TOP TEN HOLDINGS % OF TOTAL
MUNICIPAL PORTFOLIO(1) NET INVESTMENTS
- ------------------------------------------------------------------------------
Frisco Texas Independent School District School Improvements,
Series 3373, PSF Guaranteed, Series A, NR, Aaa, 6.00%, 8/15/2038 2.8%
State of Minnesota School Improvements, AAA, Aa1,
5.00%, 10/1/2018 2.8%
Forney Independent School District Unlimited Tax School
Building Bonds, Series A, PSF Guaranteed, AAA, NR, 6.00%, 8/15/2037 2.7%
Birmingham Special Care Facilities Financing Authority Health
Care Facilities Revenue, ASSURED Insured, AAA, Aa3, 6.00%, 6/1/2039 2.7%
Rhode Island State Health & Educational Building Corp. Revenue
Hospital Financing Lifespan Obligation, ASSURED Insured, Series A,
AAA, NR, 11.30%, 5/15/2017 2.5%
City of Detroit, Water Supply System Revenue Rols RR II R 11448,
BHAC/FGIC Insured, AAA, NR, 10.83%, 1/1/2016 2.1%
Detroit Michigan Sewer Disposal Revenue
Refunding-Senior Lien-Series C-1-RMKT, FSA Insured,
AAA, Aa3, 7.00%, 7/1/2027 2.1%
Metropolitan Transportation Authority Revenue
Transportation - Series 2008C, A, A2, 6.50%, 11/15/2028 2.0%
North Texas Tollway Authority Revenue Rols RR II R-11392-1,
BHAC Insured, NR, Aa1, 10.82%, 1/1/2016 2.0%
M-S-R Energy Authority, Natural Gas Revenue, Series B, A, NR,
7.00%, 11/1/2034 2.0%
- ------------------------------------------------------------------------------
(1) Excludes short-term
TOP TEN HOLDINGS % OF TOTAL
EQUITY AND INCOME PORTFOLIO NET INVESTMENTS
- ------------------------------------------------------------------------------
BP PLC, ADR (United Kingdom) 1.7%
AT&T, Inc. 1.6%
Verizon Communications, Inc. 1.5%
Royal Dutch Shell PLC, ADR - Class B (United Kingdom) 1.5%
Centerpoint Energy, Inc. 1.3%
Waste Management, Inc. 1.2%
Pfizer, Inc. 1.2%
H.J. Heinz Co. 1.1%
Kimberly-Clark Corp. 1.1%
Chevron Corp. 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 11.0%
Water & Sewer 7.3%
Oil, Gas and Consumable Fuels 5.3%
Special Tax 5.1%
Toll Roads 4.6%
Telecommunications 4.5%
General Funds 4.1%
General Obligation 4.0%
Pharmaceuticals 3.7%
Insurance 3.5%
- ------------------------------------------------------------------------------
LINE CHART:
SHARE PRICE & NAV PERFORMANCE
- --------------------------------------
Share Price NAV
12/31/08 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
7.95 9.12
7.9 8.97
7.9 8.97
7.9 8.97
7.9 8.97
7.85 9
7.7 8.93
7.6 8.96
7.72 8.97
7.72 8.98
7.72 8.98
7.72 8.98
7.79 9.1
7.91 9.12
8.05 9.27
8.07 9.31
8.03 9.29
8.03 9.29
8.03 9.29
8.09 9.37
8.05 9.43
8.17 9.44
8.23 9.58
8.28 9.63
8.28 9.63
8.28 9.63
8.42 9.65
8.59 9.61
8.3 9.61
8.46 9.66
8.47 9.7
8.47 9.7
8.47 9.7
8.62 9.78
8.62 9.8
8.69 9.8
8.65 9.77
8.69 9.85
8.69 9.85
8.69 9.85
8.67 9.83
8.59 9.79
8.71 9.86
8.8 9.93
8.78 9.92
8.78 9.92
8.78 9.92
8.46 9.8
8.61 9.86
8.66 9.95
8.68 9.99
8.87 10.11
8.87 10.11
8.87 10.11
8.77 10.13
8.88 10.15
8.89 10.17
8.86 10.2
8.91 10.23
8.91 10.23
8.91 10.23
8.84 10.19
8.72 10.09
8.73 10.15
8.8 10.22
8.88 10.29
8.88 10.29
8.88 10.29
8.88 10.29
9.03 10.37
9.06 10.44
9.18 10.57
9.11 10.45
9.11 10.45
9.11 10.45
9.11 10.5
9.17 10.53
9.29 10.65
9.38 10.68
9.37 10.74
9.37 10.74
9.37 10.74
9.33 10.74
9.4 10.78
9.3 10.78
9.36 10.83
9.36 10.83
9.36 10.83
9.48 10.92
9.56 10.92
9.72 10.93
9.72 10.86
9.5 10.83
9.5 10.83
9.5 10.83
9.59 10.9
9.58 10.97
9.62 10.94
9.62 10.94
9.64 10.92
9.64 10.92
9.64 10.92
9.54 10.95
9.57 10.86
9.61 10.9
9.59 10.94
9.54 10.92
9.54 10.92
9.54 10.92
9.6 11
9.62 10.97
9.59 10.93
9.65 11
9.58 10.9
9.58 10.9
9.58 10.9
9.47 10.83
9.42 10.83
9.27 10.71
9.37 10.77
9.22 10.61
9.22 10.61
9.22 10.61
9.2 10.64
9.19 10.61
9.28 10.64
9.21 10.72
9.28 10.74
9.28 10.74
9.28 10.74
9.34 10.82
9.3 10.82
9.3 10.82
9.28 10.76
9.29 10.8
9.29 10.8
9.29 10.8
9.29 10.9
9.31 10.89
9.36 10.87
9.25 10.79
9.22 10.78
9.22 10.78
9.22 10.78
9.23 10.88
9.3 10.9
9.33 10.94
9.33 10.94
9.3 10.84
9.3 10.84
9.3 10.84
9.32 10.84
9.34 10.95
9.42 10.99
9.41 10.98
9.45 11.02
9.45 11.02
9.45 11.02
9.43 11.05
9.41 11.05
9.51 11.08
9.61 11.07
9.38 10.93
9.38 10.93
9.38 10.93
9.35 10.98
9.33 10.94
9.4 10.96
9.33 10.92
9.36 10.94
9.36 10.94
9.36 10.94
9.45 11
9.46 11.01
9.49 11.03
9.5 11.06
9.5 11.06
9.5 11.06
9.5 11.06
9.5 11.07
9.55 11.07
9.49 11.07
12/31/09 9.54 11.01
- --------------------------------------
PIE CHART:
PORTFOLIO CONCENTRATION BY ASSET CLASS(2)
- ---------------------------------------------
Municipal Bonds 54.3%
Common Stocks 34.8%
Corporate Bonds 6.1%
Preferred Stocks 4.8%
- ---------------------------------------------
(2) As a percentage of total net investments
PIE CHART:
CREDIT QUALITY(3)
- ---------------------------------------------
AAA 27.2%
AA 7.1%
A 15.0%
BBB 6.2%
BB 5.0%
B 2.5%
CCC/NR 2.2%
Common Stock/Other 34.8%
- ---------------------------------------------
(3) Represents higher rating of either S&P, Moody's or Fitch as a percentage of
total net investments
Annual Report | December 31, 2009 | 13
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund |
Portfolio of INVESTMENTS | DECEMBER 31, 2009
PRINCIPAL OPTIONAL CALL
AMOUNT DESCRIPTION PROVISIONS VALUE
=======================================================================================================
LONG-TERM MUNICIPAL BONDS -- 88.2%
ALABAMA -- 4.5%
$ 7,150,000 Birmingham Special Care Facilities Financing Authority,
Health Care Facilities Revenue, ASSURED Insured, AAA, Aa3
6.00%, 6/1/2039 6/1/19 @ 100.00 $ 7,601,952
- -------------------------------------------------------------------------------------------------------
ARIZONA -- 1.9%
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 3,238,770
- -------------------------------------------------------------------------------------------------------
CALIFORNIA -- 10.4%
4,610,000 Alhambra Certificates of Participation,
Police Facilities 91-1-RMK, AMBAC Insured, NR, NR
6.75%, 9/1/2023 N/A 5,231,244
2,500,000 Golden State Tobacco Securitization Corp.,
Tobacco Settlement Asset-Backed Bonds, Series 2007A-1, BBB, Baa3
5.75%, 6/1/2047 6/1/17 @ 100.00 1,856,900
5,000,000 Los Angeles Municipal Improvement Corp.,
Build America Bonds-Recovery Zone Economic Development, AA-, A1
7.757%, 9/1/2039 (a) 9/1/19 @ 100.00 4,991,100
5,000,000 M-S-R Energy Authority,
Natural Gas Revenue, Series B, A, NR
7.00%, 11/1/2034 N/A 5,585,050
- -------------------------------------------------------------------------------------------------------
17,664,294
- -------------------------------------------------------------------------------------------------------
DISTRICT OF COLUMBIA -- 0.7%
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 1,119,710
- -------------------------------------------------------------------------------------------------------
GEORGIA -- 2.4%
4,000,000 City of Atlanta, Georgia Water and Waste Revenue,
Revenue Bonds, FSA Insured, Series B, AAA, Aa3
5.375%, 11/1/2039 11/1/19 @ 100.00 4,108,840
- -------------------------------------------------------------------------------------------------------
LOUISIANA -- 2.7%
4,000,000 Louisiana State Citizens Property Insurance Corp. Assessment Revenue,
Series C-2-RMKT, ASSURED Insured, AAA, Aa3
6.75%, 6/1/2026 6/1/18 @ 100.00 4,651,400
- -------------------------------------------------------------------------------------------------------
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 1,476,129
- -------------------------------------------------------------------------------------------------------
MICHIGAN -- 8.9%
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)
10.83%, 1/1/2016 (b) N/A 5,867,500
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 5,746,900
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 3,554,220
- -------------------------------------------------------------------------------------------------------
15,168,620
- -------------------------------------------------------------------------------------------------------
PRINCIPAL OPTIONAL CALL
AMOUNT DESCRIPTION PROVISIONS VALUE
====================================================================================================
MINNESOTA -- 4.6%
$ 7,300,000 State of Minnesota,
School Improvements, AAA, Aa1
5.00%, 10/1/2018 10/1/11 @ 100.00 $ 7,850,274
- ----------------------------------------------------------------------------------------------------
MISSOURI -- 3.5%
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 4,219,828
2,000,000 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 1,761,360
- ----------------------------------------------------------------------------------------------------
5,981,188
- ----------------------------------------------------------------------------------------------------
NEW JERSEY -- 0.7%
1,000,000 Newark Housing Authority Revenue,
South Ward Police Facility, ASSURED Insured, NR, Aa3
6.75%, 12/1/2038 12/1/19 @ 100.00 1,126,290
- ----------------------------------------------------------------------------------------------------
NEW YORK -- 18.6%
4,500,000 Brooklyn Arena Local Development Corp.,
Recreational Facilities Improvements, BBB-, Baa3
6.25%, 7/15/2040 1/15/20 @ 100.00 4,561,785
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 3,457,200
5,000,000 Metropolitan Transportation Authority Revenue,
Transportation - Series 2008C, A, A2
6.50%, 11/15/2028 11/15/18 @ 100.00 5,724,550
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 5,574,200
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 1,102,570
1,000,000 New York State Dormitory Authority Revenue,
Health, Hospital, Nursing Home Improvements, Series A, A, NR
6.00%, 7/1/2038 7/1/19 @ 100.00 1,039,620
New York State Dormitory Authority Revenue,
Health, Hospital & Nursing Home Improvements, FHA Insured, AAA, Aa2
4,500,000 6.25%, 8/15/2034 8/15/19 @ 100.00 4,945,050
2,500,000 6.00%, 8/15/2038 8/15/19 @ 100.00 2,683,025
2,220,000 New York State Dormitory Authority Revenue,
School Districts Financing Program, ASSURED Insured, Series A, AAA, Aa3
5.625%, 10/1/2029 10/1/19 @ 100.00 2,404,260
- ----------------------------------------------------------------------------------------------------
31,492,260
- ----------------------------------------------------------------------------------------------------
OHIO -- 1.4%
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 2,402,360
- ----------------------------------------------------------------------------------------------------
See notes to financial statements.
14 | Annual Report | December 31, 2009
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | PORTFOLIO OF INVESTMENTS
continued
PRINCIPAL OPTIONAL CALL
AMOUNT DESCRIPTION PROVISIONS VALUE
============================================================================================================
PENNSYLVANIA -- 2.2%
$ 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 $ 3,666,850
- ------------------------------------------------------------------------------------------------------------
PUERTO RICO -- 3.2%
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 5,379,850
- ------------------------------------------------------------------------------------------------------------
RHODE ISLAND -- 4.4%
5,500,000 Rhode Island State Health & Educational Building Corp. Revenue,
Hospital Financing Lifespan Obligation, ASSURED Insured, Series A, AAA, NR
(Underlying Obligor: Rhode Island State Health and Educational Building Corp.)
11.30%, 5/15/2017 (b) N/A 6,878,520
500,000 Rhode Island State Health & Educational Building Corp. Revenue,
Hospital Financing Lifespan Obligation, A-, A3
6.375%, 8/15/2021 8/15/12 @ 100.00 516,045
- ------------------------------------------------------------------------------------------------------------
7,394,565
- ------------------------------------------------------------------------------------------------------------
TEXAS -- 15.6%
6,700,000 Forney Independent School District,
Unlimited Tax School Building Bonds, Series A, PSF Guaranteed, AAA, NR
6.00%, 8/15/2037 (c) N/A 7,621,585
7,000,000 Frisco Texas Independent School District,
School Improvements, Series 3373, PSF Guaranteed, Series A, NR, Aaa
6.00%, 8/15/2038 (c) N/A 7,930,230
5,000,000 North Texas Tollway Authority Revenue,
Refunding-System-First Tier-Series K-1, ASSURED Insured, AAA, Aa3
5.75%, 1/1/2038 1/1/19 @ 100.00 5,302,600
5,000,000 North Texas Tollway Authority Revenue,
Rols RR II R-11392-1, BHAC Insured, NR, Aa1
(Underlying Obligor: North Texas Tollway Authority)
10.82%, 1/1/2016 (b) N/A 5,652,300
- ------------------------------------------------------------------------------------------------------------
26,506,715
- ------------------------------------------------------------------------------------------------------------
WISCONSIN -- 1.6%
2,000,000 Wisconsin State Health & Educational Facilities Authority Revenue,
Aurora Health Care, Series A, NR, A3
5.60%, 2/15/2029 2/15/10 @ 100.00 1,976,740
750,000 Wisconsin State Health & Educational Facilities Authority Revenue,
Blood Center Southeastern Project, A-, NR
5.75%, 6/1/2034 6/1/14 @ 100.00 759,862
- ------------------------------------------------------------------------------------------------------------
2,736,602
- ------------------------------------------------------------------------------------------------------------
TOTAL LONG-TERM MUNICIPAL BONDS -- 88.2%
(Cost $144,387,432) 149,566,669
- ------------------------------------------------------------------------------------------------------------
NUMBER
OF SHARES DESCRIPTION VALUE
============================================================================================================
COMMON STOCKS -- 57.4%
AEROSPACE & DEFENSE -- 1.0%
35,000 ITT Corp. $ 1,740,900
- ------------------------------------------------------------------------------------------------------------
BEVERAGES -- 0.9%
22,500 Diageo PLC, ADR (United Kingdom) 1,561,725
- ------------------------------------------------------------------------------------------------------------
CAPITAL MARKETS -- 0.9%
50,000 Morgan Stanley 1,480,000
- ------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS -- 0.3%
20,000 Wells Fargo & Co. 539,800
- ------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES -- 4.0%
100,000 Pitney Bowes, Inc. 2,276,000
37,500 Republic Services, Inc. 1,061,625
100,000 Waste Management, Inc. 3,381,000
- ------------------------------------------------------------------------------------------------------------
6,718,625
- ------------------------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 1.1%
75,000 Cisco Systems, Inc. (d) 1,795,500
- ------------------------------------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS -- 1.7%
75,000 EMC Corp. (d) 1,310,250
12,500 IBM Corp. 1,636,250
- ------------------------------------------------------------------------------------------------------------
2,946,500
- ------------------------------------------------------------------------------------------------------------
CONTAINERS & PACKAGING -- 1.3%
75,000 Bemis Co., Inc. 2,223,750
- ------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES -- 1.3%
52,500 JPMorgan Chase & Co. 2,187,675
- ------------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION -- 5.7%
155,000 AT&T, Inc. 4,344,650
125,000 Verizon Communications, Inc. 4,141,250
112,500 Windstream Corp. 1,236,375
- ------------------------------------------------------------------------------------------------------------
9,722,275
- ------------------------------------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES -- 1.5%
62,500 Noble Corp. (Switzerland) 2,543,750
- ------------------------------------------------------------------------------------------------------------
FOOD PRODUCTS -- 3.3%
75,000 H.J. Heinz Co. 3,207,000
50,000 Kraft Foods, Inc. 1,359,000
30,000 McCormick & Co., Inc. 1,083,900
- ------------------------------------------------------------------------------------------------------------
5,649,900
- ------------------------------------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 1.2%
25,000 Becton, Dickinson and Co. 1,971,500
- ------------------------------------------------------------------------------------------------------------
HOTELS RESTAURANTS & LEISURE -- 1.4%
67,500 Yum! Brands, Inc. 2,360,475
- ------------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 1.9%
50,000 Kimberly-Clark Corp. 3,185,500
- ------------------------------------------------------------------------------------------------------------
See notes to financial statements.
Annual Report | December 31, 2009 | 15
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | PORTFOLIO OF INVESTMENTS
continued
NUMBER
OF SHARES DESCRIPTION VALUE
================================================================================
INDUSTRIAL CONGLOMERATES -- 2.6%
30,000 3M Co. $ 2,480,100
132,500 General Electric Co. 2,004,725
- --------------------------------------------------------------------------------
4,484,825
- --------------------------------------------------------------------------------
INSURANCE -- 2.5%
50,000 Chubb Corp. 2,459,000
52,500 MetLife, Inc. 1,855,875
- --------------------------------------------------------------------------------
4,314,875
- --------------------------------------------------------------------------------
MULTILINE RETAIL -- 1.6%
60,000 Macy's, Inc. 1,005,600
35,000 Target Corp. 1,692,950
- --------------------------------------------------------------------------------
2,698,550
- --------------------------------------------------------------------------------
MULTI-UTILITIES -- 2.7%
257,500 Centerpoint Energy, Inc. 3,736,325
50,000 TECO Energy, Inc. 811,000
- --------------------------------------------------------------------------------
4,547,325
- --------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS -- 7.0%
80,000 BP PLC, ADR (United Kingdom) 4,637,600
40,000 Chevron Corp. 3,079,600
70,719 Royal Dutch Shell PLC, ADR - Class B (United Kingdom) 4,110,895
- --------------------------------------------------------------------------------
11,828,095
- --------------------------------------------------------------------------------
PHARMACEUTICALS -- 7.6%
105,000 Bristol-Myers Squibb Co. 2,651,250
55,000 Eli Lilly & Co. 1,964,050
37,500 Johnson & Johnson 2,415,375
67,500 Merck & Co., Inc. 2,466,450
185,000 Pfizer, Inc. 3,365,150
- --------------------------------------------------------------------------------
12,862,275
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS -- 0.9%
35,000 Rayonier, Inc. 1,475,600
- --------------------------------------------------------------------------------
SEMICONDUCTORS -- 1.1%
90,000 Intel Corp. 1,836,000
- --------------------------------------------------------------------------------
SOFTWARE -- 1.9%
50,000 Nintendo Co. Ltd., ADR (Japan) 1,491,000
100,000 Symantec Corp. (d) 1,789,000
- --------------------------------------------------------------------------------
3,280,000
- --------------------------------------------------------------------------------
TOBACCO -- 2.0%
32,500 Philip Morris International, Inc. 1,566,175
35,000 Reynolds American, Inc. 1,853,950
- --------------------------------------------------------------------------------
3,420,125
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS -- 57.4%
(Cost $97,029,396) 97,375,545
- --------------------------------------------------------------------------------
PRINCIPAL OPTIONAL CALL
AMOUNT DESCRIPTION PROVISIONS VALUE
==========================================================================================
CORPORATE BONDS -- 10.0%
BANKS -- 0.3%
$ 100,000 FCB/NC Capital Trust I, BB, Baa1
8.05%, 3/1/2028 3/1/10 @ 103.62 $ 85,768
500,000 Union Planters Corp., BBB-, Ba1
7.75%, 3/1/2011 N/A 497,124
- ------------------------------------------------------------------------------------------
582,892
- ------------------------------------------------------------------------------------------
COMMERCIAL SERVICES -- 0.6%
350,000 Iron Mountain, Inc., B+, B2
7.75%, 1/15/2015 1/15/10 @ 101.29 351,750
600,000 Hertz Corp. (The), CCC+, B2
8.875%, 1/1/2014 1/1/10 @ 104.44 613,500
- ------------------------------------------------------------------------------------------
965,250
- ------------------------------------------------------------------------------------------
CONTAINERS & PACKAGING -- 0.3%
600,000 Greif, Inc., BB+, Ba2
7.75%, 8/1/2019 N/A 612,000
- ------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES -- 1.7%
750,000 Ford Motor Credit Co. LLC, B-, B3
8.70%, 10/1/14 N/A 784,119
633,000 General Motors Acceptance Corp. LLC, CCC, Ca
6.875%, 9/15/2011 (e) N/A 623,505
500,000 Goldman Sachs Capital II, BBB, A3
5.793%, 12/29/2049 (f) (g) 6/1/12 @ 100.00 387,500
1,000,000 Raymond James Financial, Inc., BBB, Baa2
8.60%, 8/15/2019 N/A 1,081,855
- ------------------------------------------------------------------------------------------
2,876,979
- ------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATIONS -- 0.6%
500,000 Frontier Communications Corp., BB, Ba2
7.125%, 3/15/19 N/A 472,500
500,000 Windstream Corp., BB-, Ba3
8.625%, 8/1/16 8/1/11 @ 104.31 508,750
- ------------------------------------------------------------------------------------------
981,250
- ------------------------------------------------------------------------------------------
FOOD -- 1.1%
965,000 Dean Foods Co., B, B3
7.00%, 6/1/2016 N/A 945,700
935,000 Smithfield Foods, Inc., B-, Caa1
7.00%, 8/1/2011 N/A 932,663
- ------------------------------------------------------------------------------------------
1,878,363
- ------------------------------------------------------------------------------------------
FOREST PRODUCTS & PAPER -- 0.1%
239,000 Boise Cascade LLC, B+, Caa1
7.125%, 10/15/2014 10/15/10 @ 102.38 215,399
37,000 Domtar Corp., BB-, Ba3
7.875%, 10/15/2011 N/A 38,665
- ------------------------------------------------------------------------------------------
254,064
- ------------------------------------------------------------------------------------------
See notes to financial statements.
16 | Annual Report | December 31, 2009
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | PORTFOLIO OF INVESTMENTS
continued
PRINCIPAL OPTIONAL CALL
AMOUNT DESCRIPTION PROVISIONS VALUE
===============================================================================================
HEALTH CARE -- 1.1%
$ 550,000 Community Health Systems, Inc., B, B3
8.875%, 7/15/2015 7/15/11 @ 104.44 $ 569,250
740,000 DaVita, Inc., B, B2
7.25%, 3/15/2015 3/15/10 @ 103.63 741,850
500,000 HCA, Inc., BB, Ba3
8.50%, 4/15/2019 (e) 4/15/14 @ 104.25 538,750
- -----------------------------------------------------------------------------------------------
1,849,850
- -----------------------------------------------------------------------------------------------
INDEPENDENT POWER PRODUCERS -- 0.3%
475,000 NRG Energy, Inc., BB-, B1
8.50%, 6/15/2019 6/15/14 @ 104.25 486,875
- -----------------------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL -- 0.3%
500,000 NetFlix, Inc., BB-, Ba2
8.50%, 11/15/2017 (e) 11/15/13 @ 104.25 518,750
- -----------------------------------------------------------------------------------------------
INSURANCE -- 0.2%
500,000 Genworth Financial, Inc., BB+, Ba1
6.15%, 11/15/66 (f) 11/15/16 @ 100.00 353,750
- -----------------------------------------------------------------------------------------------
IRON/STEEL -- 0.2%
350,000 Allegheny Technologies, Inc., BBB-, Baa3
9.375%, 6/1/2019 N/A 402,869
- -----------------------------------------------------------------------------------------------
LEISURE TIME -- 0.4%
600,000 Royal Caribbean Cruises Ltd. (Liberia), BB-, Ba3
7.00%, 6/15/2013 N/A 598,500
- -----------------------------------------------------------------------------------------------
LODGING -- 0.3%
500,000 Wyndham Worldwide Corp., BBB-, Ba2
6.00%, 12/1/2016 N/A 465,797
- -----------------------------------------------------------------------------------------------
MEDIA -- 0.3%
500,000 Cablevision Systems Corp., B+, B1
8.625%, 9/15/2017 (e) N/A 520,625
- -----------------------------------------------------------------------------------------------
OFFICE/BUSINESS EQUIPMENT -- 0.6%
1,000,000 Xerox Capital Trust I, BB+, Baa3
8.00%, 2/1/2027 2/1/10 @ 101.72 990,000
- -----------------------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS -- 0.2%
350,000 Tesoro Corp., BB+, Ba1
6.25%, 11/1/2015 11/1/10 @ 103.13 332,500
- -----------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS -- 0.3%
500,000 Omega Healthcare Investors, Inc., BB+, Ba3
7.00%, 1/15/2016 1/15/11 @ 103.50 492,500
- -----------------------------------------------------------------------------------------------
RETAIL -- 0.6%
700,000 Dillards, Inc., B-, B3
7.13%, 8/1/2018 N/A 605,500
475,000 Pantry, Inc. (The), B-, Caa1
7.75%, 2/15/2014 2/15/10 @ 103.88 456,000
- -----------------------------------------------------------------------------------------------
1,061,500
- -----------------------------------------------------------------------------------------------
TRANSPORTATION -- 0.5%
850,000 Overseas Shipholding Group, Inc., BB, Ba2
8.75%, 12/1/2013 N/A 889,312
- -----------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS -- 10.0%
(Cost $16,669,438) 17,113,626
- -----------------------------------------------------------------------------------------------
NUMBER
OF SHARES DESCRIPTION VALUE
===========================================================================================
PREFERRED STOCKS -- 7.8%
DIVERSIFIED FINANCIAL SERVICES -- 2.5%
50,000 Bank of America Corp., Series 3, 6.375%, BB, Ba3 $ 952,500
56,000 Bank of America Corp., Series MER, 8.625%, BB, Ba3 1,374,240
23,060 BB&T Capital Trust VI, 9.60%, BBB, A2 655,365
31,650 Deutsche Bank Contingent Capital Trust II, 6.55%, BBB+, Aa3 657,687
60,000 RBS Capital Funding Trust VII, Series G, 6.08%, CC, B3 600,000
- -------------------------------------------------------------------------------------------
4,239,792
- -------------------------------------------------------------------------------------------
ELECTRIC -- 0.3%
20,000 Dominion Resources, Inc., 8.375%, BBB, Baa3 548,000
- -------------------------------------------------------------------------------------------
INSURANCE -- 3.0%
50,000 Aegon NV (Netherlands), 6.50%, BBB, Baa2 897,000
31,200 Allianz SE (Germany), 8.375%, A+, A3 768,300
25,000 Aspen Insurance Holdings Ltd. (Bermuda), 7.401%, BBB-, Ba1 (f) 555,000
33,200 ING Groep NV (Netherlands), 7.375%, BB, Ba1 654,040
50,000 Metlife, Inc., Series B, 6.50%, BBB-, Baa1 1,200,000
48,600 Prudential PLC (United Kingdom), 6.50%, A-, Baa1 1,094,472
- -------------------------------------------------------------------------------------------
5,168,812
- -------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS -- 2.0%
15,480 Apartment Investment & Management Co., Series T, 8.00%, B+, Ba3 352,789
19,000 Brandywine Realty Trust, Series C, 7.50%, NR, NR 428,450
11,000 Capital Automotive REIT, Series A, 7.50%, NR, NR 110,000
10,000 CBL & Associates Properties, Inc., Series C, 7.75%, NR, NR 204,000
10,000 First Industrial Realty Trust, Inc., Series J, 7.25%, B-, B2 168,400
6,700 Health Care REIT, Inc., Series D, 7.875%, BB, Baa3 165,825
13,000 Kimco Realty Corp., Series G, 7.75%, BBB-, Baa2 319,150
12,000 PS Business Parks, Inc., Series H, 7.00%, BB+, Baa3 262,200
24,500 Public Storage, Series M, 6.625%, BBB, Baa1 570,605
15,200 Regency Centers Corp., Series D, 7.25%, BB+, Baa3 349,752
3,432 Taubman Centers, Inc., Series G, 8.00%, NR, B1 84,221
15,000 Vornado Realty Trust, Series E, 7.00%, BBB-, Baa3 349,650
- -------------------------------------------------------------------------------------------
3,365,042
- -------------------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS -- 7.8%
(Cost $15,842,752) 13,321,646
- -------------------------------------------------------------------------------------------
TOTAL LONG-TERM INVESTMENTS -- 163.4%
(Cost $273,929,018) 277,377,486
- -------------------------------------------------------------------------------------------
See notes to financial statements.
Annual Report | December 31, 2009 | 17
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | PORTFOLIO OF INVESTMENTS
continued
PRINCIPAL OPTIONAL CALL
AMOUNT DESCRIPTION PROVISIONS VALUE
===========================================================================================================
SHORT-TERM INVESTMENTS -- 5.3%
MUNICIPAL BONDS -- 5.3%
NEW HAMPSHIRE -- 4.1%
$ 6,900,000 New Hampshire Health & Education Facilities Authority Revenue,
University and College Improvements, Series H-B-2-RMKT, NR, A1
0.10%, 7/1/2033 (h) 2/1/10 @ 100.00 $ 6,900,000
- -----------------------------------------------------------------------------------------------------------
OKLAHOMA -- 1.2%
2,000,000 Oklahoma Turnpike Authority Revenue,
Turnpike Revenue, Series F, AA-, Aa3
0.10%, 1/1/2028 (h) 2/1/10 @ 100.00 2,000,000
- -----------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS -- 5.3%
(Cost $8,900,000) 8,900,000
- -----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 168.7%
(Cost $282,829,018) 286,277,486
- -----------------------------------------------------------------------------------------------------------
FLOATING RATE NOTE OBLIGATIONS -- (4.0%)
(6,850,000) Notes with interest rates ranging from 0.23% to 0.25% on December 31, 2009,
and contractual maturities of collateral from 2016 to 2037.
(Cost ($6,850,000)) (6,850,000)
- -----------------------------------------------------------------------------------------------------------
TOTAL NET INVESTMENTS -- 164.7%
(Cost $275,979,018) 279,427,486
Liabilities in excess of Other Assets -- (2.8%) (4,753,277)
Preferred Shares, at Liquidation Value -- (-61.9% of Net Assets
Applicable to Common Shareholders or -37.6% of Total Investments) (105,000,000)
- -----------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS -- 100.0% $ 169,674,209
===========================================================================================================
ADR American Depositary Receipt
AMBAC Ambac Assurance Corporation
ASSURED Assured Guaranty Corporation
BHAC Berkshire Hathaway Assurance Corporation
FGIC Financial Guaranty Insurance Company
FHA Federal Housing Administration
FSA Financial Services Authority
LLC Limited Liability Corporation
N/A Not Applicable
PLC Public Limited Company
PSF Permanent School Fund (Texas)
REIT Real Estate Investment Trust
(a) Taxable municipal bond issued as part of the Build America Bond program.
(b) Inverse floating rate investment. Interest rate shown is that in effect at
December 31, 2009.
(c) Underlying security related to inverse floating rate investment entered
into by the Fund.
(d) Non-income producing security.
(e) 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 December 31,
2009, these securities amounted to $2,201,630, which represents 1.30% of
net assets applicable to common shares.
(f) Floating or variable rate coupon. The rate shown is as of December 31,
2009.
(g) Security is a hybrid bond that will convert to a preferred stock on the
first call date.
(h) 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 that earned by the Fund as of December 31, 2009.
Ratings (unaudited) shown are per Standard & Poor's and Moody's. Securities
classified as NR are not rated.
All percentages shown in Portfolio of Investments are based on Net Assets
Applicable to Common Shareholders, unless otherwise noted.
See notes to financial statements.
18 | Annual Report | December 31, 2009
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund |
Statement of ASSETS AND LIABILITIES | DECEMBER 31, 2009
ASSETS
Investments in securities, at value (cost $282,829,018) $ 286,277,486
Cash 60,105
Interest receivable 3,049,281
Dividends receivable 333,796
Other assets 6,284
- --------------------------------------------------------------------------------------------------------------------------
Total assets 289,726,952
- --------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for securities purchased 7,858,669
Floating rate note obligations 6,850,000
Advisory fee payable 163,185
Dividend payable - preferred shares 42,338
Administration fee payable 5,937
Accrued expenses and other liabilities 132,614
- --------------------------------------------------------------------------------------------------------------------------
Total liabilities 15,052,743
- --------------------------------------------------------------------------------------------------------------------------
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 $ 169,674,209
==========================================================================================================================
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 (53,178,842)
Net unrealized appreciation on investments 3,448,468
Accumulated undistributed net investment income 693,120
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS $ 169,674,209
==========================================================================================================================
NET ASSET VALUE APPLICABLE TO COMMON SHAREHOLDERS (based on 15,407,000 common shares outstanding) $ 11.01
==========================================================================================================================
See notes to financial statements.
Annual Report | December 31, 2009 | 19
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund |
Statement of OPERATIONS | FOR THE YEAR ENDED DECEMBER 31, 2009
INVESTMENT INCOME
Interest $ 9,593,829
Dividends (net of foreign withholding taxes of $3,431) 4,787,182
- ----------------------------------------------------------------------------------------------------------------------
Total income $ 14,381,011
- ----------------------------------------------------------------------------------------------------------------------
EXPENSES
Advisory fee 1,774,185
Professional fees 274,049
Preferred share maintenance 263,886
Trustees'fees and expenses 150,420
Fund accounting 79,961
Administration fee 65,691
Printing expenses 55,461
Custodian fee 48,616
Miscellaneous 38,620
Insurance 22,917
NYSE listing fee 21,170
Transfer agent fee 18,768
Interest expense on floating rate note obligations 17,718
- ----------------------------------------------------------------------------------------------------------------------
Total expenses 2,831,462
- ----------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 11,549,549
- ----------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND SWAPS
Net realized loss on:
Investments (17,105,925)
Swaps (4,358,812)
Net change in unrealized appreciation on:
Investments 55,627,655
Swaps 7,465,814
- ----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments and swaps 41,628,732
- ----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS FROM
Net investment income (1,739,505)
- ----------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS RESULTING FROM OPERATIONS $ 51,438,776
======================================================================================================================
See notes to financial statements.
20 | Annual Report | December 31, 2009
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
Statement of CHANGES IN NET ASSETS
APPLICABLE TO COMMON SHAREHOLDERS |
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, 2009 DECEMBER 31, 2008
===============================================================================================================================
INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS
RESULTING FROM OPERATIONS
Net investment income $ 11,549,549 $ 14,220,982
Net realized loss on investments and swaps (21,464,737) (30,600,181)
Net change in unrealized appreciation (depreciation) on investments and swaps 63,093,469 (63,053,329)
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS
From net investment income (1,739,505) (4,762,868)
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to common shareholders
resulting from operations 51,438,776 (84,195,396)
- ------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS:
From and in excess of net investment income (12,210,048) (15,561,070)
- ------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets applicable to common shareholders 39,228,728 (99,756,466)
NET ASSETS
Beginning of period 130,445,481 230,201,947
- ------------------------------------------------------------------------------------------------------------------------------
End of period (including accumulated undistributed net investment income
of $693,120 and $3,207,411, respectively) $ 169,674,209 $ 130,445,481
===============================================================================================================================
See notes to financial statements.
Annual Report | December 31, 2009 | 21
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund |
Financial HIGHLIGHTS |
FOR THE FOR THE
PER SHARE OPERATING PERFORMANCE YEAR ENDED YEAR ENDED
FOR A COMMON SHARE OUTSTANDING THROUGHOUT THE PERIOD DECEMBER 31, 2009 DECEMBER 31, 2008
=================================================================================================================================
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.47 $ 14.94
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) 0.75 0.92
Net realized and unrealized gain (loss) on investments, options and swaps 2.69 (6.07)
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS
From and in excess of net investment income (common share equivalent basis) (0.11) (0.31)
From realized gains (common share equivalent basis) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions to Preferred Shareholders (0.11) (0.31)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.33 (5.46)
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From and in excess of net investment income (0.79) (1.01)
From realized gains -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions to common shareholders (0.79) (1.01)
- ---------------------------------------------------------------------------------------------------------------------------------
Common and preferred shares'offering expenses charged to paid-in capital -- --
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.01 $ 8.47
=================================================================================================================================
MARKET VALUE, END OF PERIOD $ 9.54 $ 6.65
=================================================================================================================================
TOTAL INVESTMENT RETURN (b)
Net asset value 41.34% -37.97%
Market value 57.57% -43.70%
RATIOS AND SUPPLEMENTAL DATA
Net assets applicable to common shareholders, end of period (thousands) $ 169,674 $ 130,445
Preferred shares, at liquidation value ($25,000 per share liquidation preference) (thousands) $ 105,000 $ 120,000
Preferred shares asset coverage per share $ 65,399 $ 52,176
Ratios to average net assets applicable to common shareholders:
Total expenses (excluding interest expense on floating rate note obligations) 1.93% 1.67%
Total expenses (including interest expense on floating rate note obligations(c)) 1.94% 1.72%
Net investment income, prior to effect of dividends to preferred shares 7.92% 7.48%
Net investment income, after effect of dividends to preferred shares 6.73% 4.97%
Portfolio turnover rate 151% 181%
Asset coverage per $1,000 unit of indebtedness(e) $ 41,098 $ --
FOR THE FOR THE
PER SHARE OPERATING PERFORMANCE YEAR ENDED YEAR ENDED
FOR A COMMON SHARE OUTSTANDING THROUGHOUT THE PERIOD DECEMBER 31, 2007 DECEMBER 31, 2006
==================================================================================================================================
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.83 $ 15.44
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) 0.92 0.91
Net realized and unrealized gain (loss) on investments, options and swaps (1.08) 1.79
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS
From and in excess of net investment income (common share equivalent basis) (0.30) (0.37)
From realized gains (common share equivalent basis) (0.11) --
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions to Preferred Shareholders (0.41) (0.37)
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (0.57) 2.33
- ----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From and in excess of net investment income (0.95) (0.94)
From realized gains (0.37) --
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions to common shareholders (1.32) (0.94)
- ----------------------------------------------------------------------------------------------------------------------------------
Common and preferred shares'offering expenses charged to paid-in capital -- --
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.94 $ 16.83
==================================================================================================================================
MARKET VALUE, END OF PERIOD $ 13.10 $ 15.77
==================================================================================================================================
TOTAL INVESTMENT RETURN (b)
Net asset value -3.60% 15.50%
Market value -8.97% 25.98%
RATIOS AND SUPPLEMENTAL DATA
Net assets applicable to common shareholders, end of period (thousands) $ 230,202 $ 259,334
Preferred shares, at liquidation value ($25,000 per share liquidation preference) (thousands) $ 120,000 $ 120,000
Preferred shares asset coverage per share $ 72,959 $ 79,028
Ratios to average net assets applicable to common shareholders:
Total expenses (excluding interest expense on floating rate note obligations) 1.44% 1.46%
Total expenses (including interest expense on floating rate note obligations(c)) 1.53% 1.50%
Net investment income, prior to effect of dividends to preferred shares 5.60% 5.70%
Net investment income, after effect of dividends to preferred shares 3.81% 3.41%
Portfolio turnover rate 114% 159%
Asset coverage per $1,000 unit of indebtedness(e) $ 74,727 $ 29,902
FOR THE
PER SHARE OPERATING PERFORMANCE YEAR ENDED
FOR A COMMON SHARE OUTSTANDING THROUGHOUT THE PERIOD DECEMBER 31, 2005
=====================================================================================================================
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.47
- ---------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) 0.88
Net realized and unrealized gain (loss) on investments, options and swaps 0.29
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS
From and in excess of net investment income (common share equivalent basis) (0.26)
From realized gains (common share equivalent basis) --
- ---------------------------------------------------------------------------------------------------------------------
Total distributions to Preferred Shareholders (0.26)
- ---------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.91
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From and in excess of net investment income (0.94)
From realized gains --
- ---------------------------------------------------------------------------------------------------------------------
Total distributions to common shareholders (0.94)
- ---------------------------------------------------------------------------------------------------------------------
Common and preferred shares'offering expenses charged to paid-in capital -- (d)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.44
=====================================================================================================================
MARKET VALUE, END OF PERIOD $ 13.35
=====================================================================================================================
TOTAL INVESTMENT RETURN (b)
Net asset value 6.02%
Market value 4.80%
RATIOS AND SUPPLEMENTAL DATA
Net assets applicable to common shareholders, end of period (thousands) $ 237,818
Preferred shares, at liquidation value ($25,000 per share liquidation preference) (thousands) $ 120,000
Preferred shares asset coverage per share $ 74,545
Ratios to average net assets applicable to common shareholders:
Total expenses (excluding interest expense on floating rate note obligations) 1.52%
Total expenses (including interest expense on floating rate note obligations(c)) --
Net investment income, prior to effect of dividends to preferred shares 5.73%
Net investment income, after effect of dividends to preferred shares 4.05%
Portfolio turnover rate 103%
Asset coverage per $1,000 unit of indebtedness(e) $ --
(a) Based on average shares outstanding during the period.
(b) 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.
(c) See note 2(d) of the Notes to Financial Statements for more information on
floating rate note obligations.
(d) Amount is less than $0.01.
(e) Calculated by subtracting the Fund's total liabilities (not including the
floating rate note obligations) from the Fund's total assets and dividing
by the total number of indebtedness units, where one unit equals $1,000 of
indebtedness.
See notes to financial statements.
22 | Annual Report | December 31, 2009
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
Notes to FINANCIAL STATEMENTS | DECEMBER 31, 2009
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.
In June 2009, the Financial Accounting Standards Board ("FASB") established the
FASB Accounting Standards CodificationTM ("ASC") as the single source of
authoritative accounting principles reorganized by the FASB in preparation of
financial statements in conformity with GAAP. The ASC superseded existing
non-grandfathered, non-U.S. Securities and Exchange Commission ("SEC")
accounting and reporting standards. The ASC did not change GAAP but rather
organized it into a hierarchy where all guidance with the ASC carried an equal
level of authority. The ASC became effective for financial statements issued
for interim and annual periods ending after September 15, 2009. The ASC did not
have a material effect on the Fund's financial statements.
The following is a summary of significant accounting policies consistently
followed by the Fund.
(a) VALUATION OF INVESTMENTS
The Fund values equity securities at the last reported sale price on the
principal exchange or in the principal Over-the-Counter ("OTC") market in which
such securities are traded, as of the close of regular trading on the New York
Stock Exchange ("NYSE") on the day the securities are being valued or, if there
are no sales, at the mean between the last available bid and asked prices on
that day. Securities traded on the NASDAQ are valued at the NASDAQ Official
Closing Price. Preferred stocks are valued at their sales price as of the close
of the exchange on which they are traded. Preferred stocks for which the last
sales price is not available are valued at the last available bid price. Debt
securities are valued at the last available bid price for such securities or,
if such prices are not available, at prices for securities of comparable
maturity, quality and type. Foreign securities are translated from the local
currency into U.S. dollars using the current exchange rate. The Fund's
securities that are primarily traded in foreign markets may be traded in such
markets on days that the NYSE is closed. As a result, the net asset value of
the Fund may be significantly affected on days when holders of common shares
have no ability to trade common shares on the NYSE. Investment Companies are
valued at the last available closing price. For those securities where
quotations or prices are not available, valuations are determined in accordance
with procedures established in good faith by the Board of Trustees. Short-term
securities with remaining maturities of 60 days or less are valued at amortized
cost, which approximates market value.
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).
The Fund adopted ASC 820, Fair Value Measurements and Disclosures ("ASC 820")
(formerly known as the Statement of Financial Accounting Standard ("SFAS") No.
157). In accordance with ASC 820, fair value is defined as the price that the
Fund would receive to sell an investment or pay to transfer a liability in an
orderly transaction with an independent buyer in the principal market, or in
the absence of a principal market the most advantageous market for the
investment or liability. ASC 820 establishes three different categories for
valuations. Level 1 valuations are those based upon quoted prices in active
markets. Level 2 valuations are those based upon quoted prices in inactive
markets or based upon significant observable inputs (e.g. yield curves;
benchmark interest rates; indices). Level 3 valuations are those based upon
unobservable inputs (e.g. discounted cash flow analysis; non-market based
methods used to determine fair valuation). The following table represents the
Fund's investments carried on the Statement of Assets and Liabilities by
caption and by level within the fair value hierarchy as of December 31, 2009:
DESCRIPTION LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
================================================================================
(value in $000s)
Assets:
Municipal Bonds $ -- $ 158,467 $ -- $ 158,467
Common Stocks 97,375 -- -- 97,375
Corporate Bonds -- 17,113 -- 17,113
Preferred Stocks 13,322 -- -- 13,322
- --------------------------------------------------------------------------------
Total $ 110,697 $ 175,580 $ -- $ 286,277
================================================================================
(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 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 predetermined interest rate index. These instruments typically
involve greater risks than a fixed rate municipal bond. In particular, the
holder of these inverse floating rate instruments retain all credit and
interest rate risk associated with the full underlying bond and not just the
par
Annual Report | December 31, 2009 | 23
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | NOTES TO FINANCIAL
STATEMENTS continued
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, ASC 860, Transfers and
Servicing ("ASC 860") (formerly known as SFAS No. 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
December 31, 2009, Fund investments with a par value of $13,700,000 (market
value of approximately $15,600,000) 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 December 31, 2009 are presented on the Portfolio of Investments. The average
floating rate notes balance and average annual interest rate during the year
ended December 31, 2009 were $ 5,203,704 and 0.35%, respectively.
(e) SUBSEQUENT EVENTS
The Fund has adopted ASC 855, Subsequent Events ("ASC 855") (formerly known as
SFAS No. 165). ASC 855 requires an entity to recognize in the financial
statements the effects of all subsequent events that provide additional
evidence about conditions that existed at the date of the statement of assets
and liabilities. ASC 855 is intended to establish general standards of
accounting and for disclosure of events that occur after the statement of
assets and liabilities date but before the financial statements are issued or
are available to be issued. The Fund has performed an evaluation of subsequent
events through February 24, 2010, 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 received a fee, payable monthly, at an annual rate equal to
0.70% of the Fund's average daily managed assets (total assets including the
assets attributable to the proceeds from any financial leverage but excluding
the assets attributable to floating rate note obligations, minus liabilities,
other than debt representing financial leverage).
The Adviser has entered into an Investment Sub-Advisory Agreement (the
"Sub-Advisory Agreement") with Thompson, Siegel & Walmsley LLC ("TS&W"). TS&W
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 TS&W, the Adviser pays monthly
to TS&W 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 ("SMC").
SMC 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 SMC, the Adviser pays monthly
to SMC 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.
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 is the surviving entity. This transaction was completed on
October 14, 2009 (the "Effective Date") and resulted in a change-of-control
whereby Claymore Group Inc. and its subsidiaries, including the Adviser, became
indirect, wholly-owned subsidiaries of Guggenheim. The transaction has not
affected the daily operations of the Funds or the investment management
activities of the Adviser.
Under the Investment Company Act of 1940, as amended, (the "1940 Act"), the
consummation of this transaction resulted in the automatic termination of the
Advisory & Sub-Advisory Agreements. Accordingly, on September 28, 2009, the
Board of Trustees approved an interim investment advisory agreement between the
Fund and the Adviser (the "Interim Advisory Agreement") and interim
sub-advisory agreements among the Fund, the Adviser and TS&W as well as among
the Fund, the Adviser and SMC (each an "Interim Sub-Advisory Agreement",
together, the "Interim Sub-Advisory Agreements" and together with the Interim
Advisory Agreement, the "Interim Agreements"). The Interim Agreements took
effect as of the Effective Date and terminated upon the approval of new
advisory agreements.
On September 28, 2009, the Board of Trustees approved a new investment advisory
agreement between the Fund and the Adviser (the "New Advisory Agreement"), a
new sub-advisory agreement among the Fund, the Adviser and TS&W(the "New TS&W
Sub-Advisory Agreement"), and a new sub-advisory agreement among the Fund, the
Adviser and SMC (the "New SMC Sub-Advisory Agreement" and together with the New
Advisory Agreement and New TS&W Sub-Advisory Agreement, the "New Agreements")
and recommended that the New Agreements be submitted to the shareholders of the
Fund for their approval. The New Agreements, which were approved by
shareholders on February 18, 2010, have an initial term of one year.
Thereafter, the New Agreements will continue in effect only if their
continuance is approved by the Board of Trustees. Other than effective dates,
there are no material differences between the terms of the New Agreements and
those of the original Advisory Agreement and Sub-Advisory Agreements.
24 | Annual Report | December 31, 2009
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | NOTES TO FINANCIAL
STATEMENTS continued
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 ASSETS RATE
================================================================================
First $200,000,000 0.0275%
Next $300,000,000 0.0200%
Next $500,000,000 0.0150%
Over $1,000,000,000 0.0100%
Certain officers and trustees of the Fund are also officers and directors of
the Adviser, TS&W and SMC. 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 December
31, 2009 is as follows:
COST OF NET TAX
INVESTMENTS GROSS TAX GROSS TAX UNREALIZED
FOR TAX UNREALIZED UNREALIZED APPRECIATION
PURPOSES APPRECIATION DEPRECIATION ON INVESTMENTS
===============================================================================
$283,669,858 $15,596,332 $(12,988,704) $2,607,628
- -------------------------------------------------------------------------------
Tax components of the following balances as of December 31, 2009 are as
follows:
UNDISTRIBUTED
LONG-TERM
UNDISTRIBUTED GAINS/
ORDINARY (ACCUMULATED
INCOME* CAPITAL LOSS)
================================================================================
$734,370 $(52,379,252)
- --------------------------------------------------------------------------------
* 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.
Due to inherent differences in the recognition of income, expense and realized
gains/losses under U.S. generally accepted accounting principles and federal
income tax purposes, permanent differences between book and tax basis reporting
have been identified and appropriately reclassified on the Statement of Assets
and Liabilities. A permanent book and tax basis difference relating to swap
income in the amount of $46,188 was reclassified from accumulated net realized
gain to accumulated undistributed net investment income. Also, permanent book to
tax differences relating to the Fund's investments in real estate investment
trusts and partnerships totaling $160,475 were reclassified from accumulated
undistributed net investment income to accumulated net realized gain.
At December 31, 2009, for federal income tax purposes, the Fund has a capital
loss carryforward of $52,243,833 available to offset future capital gains. Of
the capital loss carryforward, $23,316,538 is set to expire on December 31,
2016, and $28,927,295 is set to expire on December 31, 2017.
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
$135,419.
For the year ended December 31, 2009 and 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: 2009 2008
================================================================================
Ordinary income* $ 4,736,647 $ 7,252,594
Tax-exempt income $ 9,212,906 $13,062,725
Long-term capital gain $ -- $ 8,619
- --------------------------------------------------------------------------------
Total Distributions $13,949,553 $20,323,938
================================================================================
* For the years ended December 31, 2009 and 2008 the Fund received
approximately $4.2 million and $5.0 million, respectively, of qualified
dividend income.
For all open tax years and all major jurisdictions, management of the Fund has
concluded that there are no significant uncertain tax positions that would
require recognition in the financial statements. Open tax years are those that
are open for examination by taxing authorities (i.e. generally the last four
tax year ends and the interim tax period since then). Furthermore, management
of the Fund is also not aware of any tax positions for which it is reasonably
possible that the total amounts of unrecognized tax benefits will significantly
change in the next twelve months.
Note 5 -- INVESTMENT IN SECURITIES:
For the year ended December 31, 2009, purchases and sales of investments,
excluding short-term securities, were $373,525,124 and $381,483,713,
respectively.
Note 6 -- DERIVATIVES:
(a) SWAPS
A swap is an agreement to exchange the return generated by one instrument for
the return generated by another instrument. The Fund may enter into swap
agreements to manage its exposure to interest rates and/or credit risk or to
generate income. The swaps are valued daily at current market value and any
unrealized gain or loss is included in the Statement of Assets and Liabilities.
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. Upon termination of a swap agreement, a payable to or
receivable from swap counterparty is established on the Statement of Assets and
Liabilities to reflect the net gain/loss, including interest income/expense, on
terminated swap positions. The line item is removed upon settlement according to
the terms of the swap agreement.
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 gain (loss) and, in the case of accruals for
Annual Report | December 31, 2009 | 25
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | NOTES TO FINANCIAL
STATEMENTS continued
periodic payments, are included as part of unrealized appreciation
(depreciation) on the Statement of Operations.
As of December 31, there were no swap contracts outstanding.
(b) ACCOUNTING PRONOUNCEMENT FOR DERIVATIVES:
The Fund adopted FASB ASC 815, Derivatives and Hedging ("ASC 815") (formerly
known as SFAS No. 161), effective January 1, 2009. ASC 815 is intended to
improve financial reporting about derivative instruments by requiring enhanced
disclosures to enable investors to better understand: a) how and why a fund
uses derivative instruments, b) how derivatives instruments and related hedge
fund items are accounted for, and c) how derivative instruments and related
hedge items affect a fund's financial position, results of operations and cash
flows.
Swaps with a notional value of $20 million that were outstanding at December
31, 2008 were closed during the year ended December 31, 2009. There were no
other swap transactions during the year.
There were no derivative positions outstanding as of December 31, 2009.
The following table presents the effect of Derivative Instruments on the
Statement of Operations for the year ended December 31, 2009:
AMOUNT OF REALIZED GAIN/(LOSS) ON DERIVATIVES
===========================================================================================
(value in $000s) SWAPS
===========================================================================================
Interest rate risk ($4,359)
===========================================================================================
CHANGE IN UNREALIZED APPRECIATION/(DEPRECIATION) ON DERIVATIVES
===========================================================================================
(value in $000s) SWAPS
===========================================================================================
Interest rate risk $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 year ended
December 31, 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 year ended December 31, 2009, the annualized dividend rates ranged
from:
HIGH LOW AT 12/31/09
================================================================================
Series M7 1.70% 1.46% 1.47%
Series T28 2.13% 1.48% 1.48%
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 of 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 -- RECENT ACCOUNTING PRONOUNCEMENTS:
On January 21, 2010, the FASB issued an ASU, Fair Value Measurements and
Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements
which provides guidance on how investment assets and liabilities are to be
valued and disclosed. Specifically, the amendment requires reporting entities
to disclose i) the input and valuation techniques used to measure fair value
for both recurring and nonrecurring fair value measurements, for Level 2 or
Level 3 positions ii) transfers between all levels (including Level 1 and Level
2) will be required to be disclosed on a gross basis (i.e. transfers out must
be disclosed separately from transfers in) as well as the reason(s) for the
transfer and iii) purchases, sales, issuances and settlements must be shown on
a gross basis in the Level 3 rollforward rather than as one net number. The
effective date of the amendment is for interim and annual periods beginning
after December 15, 2009 however, the requirement to provide the Level 3
activity for purchases, sales, issuances and settlements on a gross basis will
be effective for interim and annual periods beginning after December 15, 2010.
At this time the Fund is evaluating the implications of the amendment to ASC
820 and the impact to the financial statements.
26 | Annual Report | December 31, 2009
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
Report of INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM|
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF
TS&W/CLAYMORE TAX-ADVANTAGED BALANCED FUND
We have audited the accompanying statement of assets and liabilities of
TS&W/Claymore Tax-Advantaged Balanced Fund (the Fund), including the portfolio
of investments, as of December 31, 2009, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights
for each of the five years in the period then ended. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audits to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. We were not engaged to perform an audit of the Fund's internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Fund's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. Our procedures included
confirmation of securities owned as of December 31, 2009, by correspondence
with the custodian and brokers or by other appropriate auditing procedures
where replies from brokers were not received. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
TS&W/Claymore Tax-Advantaged Balanced Fund at December 31, 2009, and the
results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended, in conformity
with U.S. generally accepted accounting principles.
Ernst & Young LLP
Chicago, Illinois
February 24, 2010
Annual Report | December 31, 2009 | 27
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
Supplemental INFORMATION | (unaudited)
FEDERAL INCOME TAX INFORMATION
Qualified dividend income of as much as $4,234,530 was received by the Fund
through December 31, 2009. The Fund intends to designate the maximum amount of
dividends that qualify for the reduced tax rate pursuant to the Jobs and Growth
Tax Relief Reconciliation Act of 2003.
For corporate shareholders, $3,361,191 of investment income qualifies for the
dividends-received deduction.
Subchapter M of the Internal Revenue Code of 1986, as amended, requires the
Fund to advise shareholders within 60 days of the Fund's tax year end as to the
federal tax status of dividends and distributions received by shareholders
during such tax period. The Fund hereby designates $9,212,906 as tax-exempt
income according to IRC Section 852(b)(5)(A).
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.
TRUSTEES
The Trustees of the TS&W/Claymore Tax-Advantaged Balanced Fund and their principal occupations during the past five years:
NAME, ADDRESS*, NUMBER OF
YEAR OF TERM OF OFFICE** PORTFOLIOS IN THE
BIRTH AND POSITION(S) AND LENGTH OF PRINCIPAL OCCUPATIONS DURING THE PAST FIVE YEARS FUND COMPLEX*** OTHER DIRECTORSHIPS
HELD WITH REGISTRANT TIME SERVED AND OTHER AFFILIATIONS OVERSEEN BY TRUSTEE HELD BY TRUSTEE
====================================================================================================================================
INDEPENDENT TRUSTEES:
====================================================================================================================================
Randall C. Barnes Since 2005 Private Investor (2001-present). Formerly, Senior 41 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 Retired. Formerly, President, Chief Executive 2 Director, SXC
Year of Birth: 1955 Officer 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 Retired. Formerly, President and Chief 2 Trustee, Old Mutual
Year of Birth: 1942 Investment Officer of TRW Investment Management Advisor Mutual
Trustee Co. (1990-2003). Funds.
- ------------------------------------------------------------------------------------------------------------------------------------
L. Kent Moore Since 2004 Owner, Eagle River Ventures, LLC (1999-present) 2 Trustee, Old Mutual
Year of Birth: 1955 and Chairman Foothills Energy Ventures, LLC Advisor Mutual
Trustee (2006-present). Formerly, Partner at WilSource Funds.
Enterprise (2005-2006), Managing Director High
Sierra Energy L.P. (2004-2005) Portfolio Manager
and Vice President of Janus Capital Corp.
(2000-2002) and Senior Analyst/Portfolio Manger
of Marsico Capital Management (1997-1999).
- ------------------------------------------------------------------------------------------------------------------------------------
Ronald A. Nyberg Since 2004 Partner of Nyberg & Cassioppi, LLC, a law firm 44 None.
Year of Birth: 1953 specializing in corporate law, estate planning
Trustee and business transactions (2000-present). Formerly,
Executive Vice President, General Counsel and
Corporate Secretary of Van Kampen Investments
(1982-1999).
- ------------------------------------------------------------------------------------------------------------------------------------
Ronald E. Toupin, Jr. Since 2004 Retired. Formerly, Vice President, Manager and 41 None.
Year of Birth: 1958 Portfolio Manager of Nuveen Asset Management
Trustee (1998-1999), Vice President of Nuveen Investment
Advisory Corp. (1992-1999), Vice President and
Manager of Nuveen Unit Investment Trusts
(1991-1999), and Assistant Vice President and
Portfolio Manager of Nuveen Unit Investment Trusts
(1988-1999), each of John Nuveen & Company, Inc.
(1982-1999).
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES:
====================================================================================================================================
Matthew J. Appelstein+ Since 2005 Senior Vice President of Product Strategy and 2 None.
Year of Birth: 1961 Retirement Solutions Planning, Director of
Trustee Investment Services, Old Mutual Asset Management
(2003-present). Formerly, Senior Vice President
of Consulting Relationships, Fidelity Management
Trust Co.(1998-2003).
- ------------------------------------------------------------------------------------------------------------------------------------
* 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 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.
As of October 14, 2009, Nicholas Dalmaso resigned his position as Trustee for
the Fund.
28 | Annual Report | December 31, 2009
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | SUPPLEMENTAL INFORMATION
(unaudited) continued
OFFICERS
The Officers of the TS&W/Claymore Tax-Advantaged Balanced Fund and their
principal occupations during the past five years:
NAME, ADDRESS*, YEAR OF BIRTH AND TERM OF OFFICE** AND PRINCIPAL OCCUPATIONS DURING THE PAST FIVE YEARS
POSITION(S) HELD WITH REGISTRANT LENGTH OF TIME SERVED AND OTHER AFFILIATIONS
====================================================================================================================================
OFFICERS:
====================================================================================================================================
J. Thomas Futrell Since 2008 Senior Managing Director, Chief Investment Officer of Claymore
Year of Birth: 1955 Advisors, LLC and Claymore Securities, Inc.; Chief Executive
Chief Executive Officer Officer of certain other Funds advised 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,
Year of Birth: 1959 LLC, Claymore Securities, Inc. and Claymore Group, Inc.
Chief Legal Officer (2007-present). Chief Legal Officer of 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
Year of Birth: 1964 Securities, Inc. (2005-present); Formerly, Chief Financial Officer
Chief Financial Officer, Chief of Claymore Group, Inc.(2005-2006); Managing Director of Claymore
Accounting Officer and Treasurer Advisors, LLC and Claymore 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.
Year of Birth: 1948 (2006-present). Formerly, Senior Managing Director of Claymore
Vice President Advisors, LLC (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).
Year of Birth: 1949 Formerly, 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).
Year of Birth: 1966 Formerly, 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.
Year of Birth: 1957 (2006-present). Formerly, Chief Compliance Officer/Assistant
Chief Compliance Officer Secretary of Harris 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,
Year of Birth: 1978 Inc. (2007-present). Secretary of certain funds in the Fund Complex.
Secretary Formerly, Law Clerk, Idaho State Courts (2003-2006).
- ------------------------------------------------------------------------------------------------------------------------------------
Elizabeth H. Hudson Since 2009 Assistant General Counsel of Claymore Group Inc. (2009-present).
Year of Birth: 1980 Assistant Secretary of certain funds in the Fund Complex. Formerly,
Assistant Secretary Associate at Bell, Boyd & Lloyd LLP (nka K&L Gates LLP) (2007-2008).
- ------------------------------------------------------------------------------------------------------------------------------------
* 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.
Annual Report | December 31, 2009 | 29
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
Dividend Reinvestment PLAN | (unaudited)
Unless the registered owner of common shares elects to receive cash by
contacting the Plan Administrator, all dividends declared on common shares of
the Fund will be automatically reinvested by The Bank of New York Mellon (the
"Plan Administrator"), Administrator for shareholders in the Fund's Dividend
Reinvestment Plan (the "Plan"), in additional common shares of the Fund.
Participation in the Plan is completely voluntary and may be terminated or
resumed at any time without penalty by notice if received and processed by the
Plan Administrator prior to the dividend record date; otherwise such
termination or resumption will be effective with respect to any subsequently
declared dividend or other distribution. Some brokers may automatically elect
to receive cash on your behalf and may re-invest that cash in additional common
shares of the Fund for you. If you wish for all dividends declared on your
common shares of the Fund to be automatically reinvested pursuant to the Plan,
please contact your broker.
The Plan Administrator will open an account for each common shareholder under
the Plan in the same name in which such common shareholder's common shares are
registered. Whenever the Fund declares a dividend or other distribution
(together, a "Dividend") payable in cash, non-participants in the Plan will
receive cash and participants in the Plan will receive the equivalent in common
shares. The common shares will be acquired by the Plan Administrator for the
participants' accounts, depending upon the circumstances described below,
either (i) through receipt of additional unissued but authorized common shares
from the Fund ("Newly Issued Common Shares") or (ii) by purchase of outstanding
common shares on the open market ("Open-Market Purchases") on the New York
Stock Exchange or elsewhere. If, on the payment date for any Dividend, the
closing market price plus estimated brokerage commission per common share is
equal to or greater than the net asset value per common share, the Plan
Administrator will invest the Dividend amount in Newly Issued Common Shares on
behalf of the participants. The number of Newly Issued Common Shares to be
credited to each participant's account will be determined by dividing the
dollar amount of the Dividend by the net asset value per common share on the
payment date; provided that, if the net asset value is less than or equal to
95% of the closing market value on the payment date, the dollar amount of the
Dividend will be divided by 95% of the closing market price per common share on
the payment date. If, on the payment date for any Dividend, the net asset value
per common share is greater than the closing market value plus estimated
brokerage commission, the Plan Administrator will invest the Dividend amount in
common shares acquired on behalf of the participants in Open-Market Purchases.
If, before the Plan Administrator has completed its Open-Market Purchases, the
market price per common share exceeds the net asset value per common share, the
average per common share purchase price paid by the Plan Administrator may
exceed the net asset value of the common shares, resulting in the acquisition
of fewer common shares than if the Dividend had been paid in Newly Issued
Common Shares on the Dividend payment date. Because of the foregoing difficulty
with respect to Open-Market Purchases, the Plan provides that if the Plan
Administrator is unable to invest the full Dividend amount in Open-Market
Purchases during the purchase period or if the market discount shifts to a
market premium during the purchase period, the Plan Administrator may cease
making Open-Market Purchases and may invest the uninvested portion of the
Dividend amount in Newly Issued Common Shares at net asset value per common
share at the close of business on the Last Purchase Date provided that, if the
net asset value is less than or equal to 95% of the then current market price
per common share; the dollar amount of the Dividend will be divided by 95% of
the market price on the payment date.
The Plan Administrator maintains all shareholders' accounts in the Plan and
furnishes written confirmation of all transactions in the accounts, including
information needed by shareholders for tax records. Common shares in the
account of each Plan participant will be held by the Plan Administrator on
behalf of the Plan participant, and each shareholder proxy will include those
shares purchased or received pursuant to the Plan. The Plan Administrator will
forward all proxy solicitation materials to participants and vote proxies for
shares held under the Plan in accordance with the instruction of the
participants.
There will be no brokerage charges with respect to common shares issued
directly by the Fund. However, each participant will pay a pro rata share of
brokerage commission incurred in connection with Open-Market Purchases. The
automatic reinvestment of Dividends will not relieve participants of any
Federal, state or local income tax that may be payable (or required to be
withheld) on such Dividends.
The Fund reserves the right to amend or terminate the Plan. There is no direct
service charge to participants with regard to purchases in the Plan; however,
the Fund reserves the right to amend the Plan to include a service charge
payable by the participants.
All correspondence or questions concerning the Plan should be directed to the
Plan Administrator, BNY Mellon Shareowner Services, P.O. Box 358015,
Pittsburgh, Pennsylvania 15252-8015, Attention: Shareholder Services
Department, Phone Number: (866) 488-3559.
30 | Annual Report | December 31, 2009
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
Board Considerations Regarding Contract Approvals of the Interim and New
Investment Advisory Agreements and Interim and New Investment Sub-Advisory
Agreements.
On September 28, 2009, the Board of Trustees (the "Board") of the TS&W/Claymore
Tax-Advantaged Balanced Fund (the "Fund"), including those trustees who are not
"interested persons" as defined by the Investment Company Act of 1940 (the
"Independent Trustees"), on the recommendation of the Nominating & Governance
Committee (referred to as the "Committee" and consisting solely of the
Independent Trustees) of the Board of the Fund, approved: (1) an interim
("Interim Advisory Agreement") and new ("New Advisory Agreement") advisory
agreement (together, the "Investment Advisory Agreements") between the Fund and
Claymore Advisors, LLC ("Adviser") ; (2) an interim ("Interim TS&W Sub-Advisory
Agreement") and new ("New TS&W Sub-Advisory Agreement") investment sub-advisory
agreement (together the "TS&W Investment Sub-Advisory Agreements") among the
Adviser, the Fund and Thompson, Siegel & Walmsley LLC ("TS&W"), the sub-adviser
to the Fund's equity and income securities portion of the Fund's portfolio; and
(3) an interim ("Interim SMC Sub-Advisory Agreement") and new ("New SMC
Sub-Advisory Agreement") investment sub-advisory agreement (together the "SMC
Investment Sub-Advisory Agreements") among the Adviser, the Fund and SMC Fixed
Income Management, L.P. ("SMC"), the sub-adviser to the Fund's municipal
securities portion of the Fund's portfolio. (The Investment Advisory
Agreements, the TS&W Investment Sub-Advisory Agreements, and the SMC Investment
Sub-Advisory Agreements are together referred to as the "Advisory Agreements.")
As part of its review process, the Committee was represented by independent
legal counsel.
Based upon its review, the Board and the Committee concluded that it was in the
best interest of the Fund to approve 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.
INTERIM ADVISORY AGREEMENT AND NEW ADVISORY AGREEMENT
- -----------------------------------------------------
The Board reviewed materials received from the Adviser, Guggenheim Partners,
LLC ("Guggenheim") and independent legal counsel. The Board also had previously
received, throughout the year, Board meeting information regarding performance
and operating results of the Fund. Earlier this year, the Adviser informed the
Board that it was in discussions with Guggenheim concerning a strategic
transaction, including a potential sale of a controlling interest in the
Adviser (the "Transaction"). The Adviser provided periodic reports to
representatives of the Board as to the status and nature of such discussions
with Guggenheim and the Adviser's operating and financial results. In the
spring of 2009, the Adviser informed the Board that Guggenheim had arranged up
to $20 million of subordinated loans to Claymore Group as interim financing for
working capital and for inventory purchases in connection with its business of
creating, distributing and supervising unit investment trusts and other
investment products.
Following the execution of a merger agreement between Claymore and Guggenheim
(the "Merger Agreement"), a telephonic meeting was held on July 28, 2009, and
attended by certain members of the Board, the chief executive officer of
Claymore Group and the chief executive officer of Guggenheim. Such executive
officers summarized the principal terms of the Merger Agreement, and described
the Transaction, the business plans for the Adviser following the consummation
of the Transaction and answered such questions as were raised at the meeting.
Representatives of the Board requested additional information regarding the
Transaction, Guggenheim and the impact of the Transaction on the Shareholders
of the Fund.
During the third quarter of 2009, the Committee received reports on the progress
of the Transaction, including the debt financing and additional equity financing
arranged by Guggenheim. As part of its review process, the Committee was
represented by independent legal counsel. The Committee reviewed materials
received from the Adviser, Guggenheim and independent legal counsel. The Adviser
and Guggenheim provided, among other information, information regarding the
terms of the Transaction and potential benefits to the Adviser from the
Transaction. The information provided regarding Guggenheim included (i)
financial information, (ii) information regarding senior executives of the firm,
(iii) information regarding other Guggenheim affiliated investment managers,
(iv) information regarding litigation and regulatory matters and (v) potential
conflicts of interest. The Adviser and Guggenheim also provided information
regarding Guggenheim's and the Adviser's intentions for the business, operations
and personnel of the Adviser following the closing of the Transaction. The
Committee met and discussed the Transaction and the Interim Advisory Agreement
and the New Advisory Agreement in September 2009. Additional supplemental
information regarding the Transaction and Guggenheim was provided by the Adviser
and Guggenheim and reviewed by the Committee.
Subsequent to these meetings, the Board met in person to consider the Interim
Advisory Agreement and the New Advisory Agreement at a meeting held on
September 28, 2009. The Board met with representatives of the Adviser and
Guggenheim to discuss the Transaction. Representatives from the Adviser and
Guggenheim discussed the Transaction with, and answered questions from, the
Board. The Committee met in executive session to discuss the Transaction and
the information provided at the Board meeting. The Committee concluded that it
was in the best interest of the Fund to approve the Interim Advisory Agreement
and New Advisory Agreement and, accordingly, recommended to the Board the
approval of the Interim Advisory Agreement and New Advisory Agreement. The
Board subsequently approved the Interim Advisory Agreement and approved the New
Advisory Agreement for a one-year term. The Board also determined to consider
the continuation of the agreement during the course of the one-year term by
conducting a thorough review of the various information that is part of the
Board's regular annual consideration of the continuation of the Fund's advisory
agreement. In reaching the conclusion to approve the Interim Advisory Agreement
and New Advisory Agreement, no single factor was determinative in the Board's
analysis, but rather the Board considered a variety of factors. Provided below
is an overview of the primary factors the Board considered in connection with
the review of the Interim Advisory Agreement and the New Advisory Agreement.
In connection with the Board's consideration of the Interim Advisory Agreement
and the New Advisory Agreement, the Trustees considered, among other
information, the following factors:
o within the last year, the Board had engaged in a thorough review of
the various factors, including fees and performance, that are part of
the decision whether to continue an advisory agreement;
o Board approval of the Fund's Investment Advisory Agreements was a
condition to the closing of the Transaction;
o Claymore's statement to the Board that the manner in which the Fund's
assets are managed will not change as a result of the Transaction;
o the aggregate advisory fee rate payable by the Fund will not change
under the Interim Advisory Agreement or New Advisory Agreement;
o there are no material differences between the terms of the Interim
Advisory Agreement and New Advisory Agreement and the terms of the
Fund's prior advisory agreement, except for those provisions in the
Interim Advisory Agreement which are necessary to comply with Rule
15a-4 under the 1940 Act;
o the capabilities of the Adviser's personnel who will provide advisory
(if applicable), management, shareholder servicing and administrative
services to the Fund are not expected to change, and the key personnel
who currently provide advisory (if applicable), management,
shareholder servicing and administrative services to the Fund are
expected to continue to do so after the Transaction;
Annual Report | December 31, 2009 | 31
TYW | TS&W/Claymore Tax-Advantaged Balanced Fund | BOARD CONSIDERATIONS
continued
o the assurance from the Adviser and Guggenheim that following the
Transaction there will not be any diminution in the nature, quality
and extent of services provided to the Fund;
o the Adviser's current financial condition;
o the impact of the Transaction on the Adviser's day-to-day operations;
o the reputation, capabilities, experience, organizational structure and
financial resources of Guggenheim;
o the long-term business goals of Guggenheim and the Adviser with regard
to the business and operations of the Adviser;
o that Shareholders of the Fund will not bear any costs in connection
with the Transaction, inasmuch as the Adviser will bear the costs,
fees and expenses incurred by the Fund in connection with the Fund's
Proxy Statement and any other costs of the Fund associated with the
Transaction; and
o that the Adviser and relevant acquisition subsidiaries have agreed to
refrain from imposing or seeking to impose, for a period of two years
after the Closing, any "unfair burden"(within the meaning of Section
15(f) of 1940 Act) on the Fund.
Nature, Extent and Quality of Services Provided by the Adviser. The Board noted
that key management personnel servicing the Fund are expected to remain with
the Adviser following the Transaction and that the services provided to the
Fund by the Adviser are not expected to change. The Board also considered the
Adviser's and Guggenheim's representations to the Board that Guggenheim intends
for the Adviser to continue to operate following the closing of the Transaction
in much the same manner as it operates today, and that the impact of the
Transaction on the day-to-day operations of the Adviser would be neutral or
positive. The Board also considered Guggenheim's statement that the Adviser's
compliance policies and procedures, disaster recovery plans, information
security controls and insurance program would not change materially following
consummation of the Transaction. Based on this review, the Board concluded that
the range and quality of services provided by the Adviser to the Fund were
expected to continue under the Interim Advisory Agreement and the New Advisory
Agreement at the same or improved levels.
Advisory Fees. The Board also considered the fact that the advisory fee rates
payable to the Adviser would be the same under the Interim Advisory Agreement
and New Advisory Agreement as they are under the Fund's prior advisory
agreement, which had within the last year been determined to be reasonable. The
Board concluded that these factors supported approval of the Interim Advisory
Agreement and New Advisory Agreement.
Performance. With respect to the performance of the Fund, the Board considered
that, the sub-adviser would continue to manage the Fund's portfolios following
the closing of the Transaction, subject to Shareholder approval of the New
Sub-Advisory Agreements. The Board concluded that these factors supported
approval of the Interim Advisory Agreement and New Advisory Agreement.
Profitability. The Board noted that it was too early to predict how the
Transaction may affect the Adviser's future profitability from its relationship
with the Fund, but concluded that this matter would be given further
consideration on an annual basis going forward. The Board also noted that the
Adviser's fee rates under the Interim Advisory Agreement and New Advisory
Agreement are the same as those assessed under the Fund's prior advisory
agreement.
Economies of Scale. The Board considered any potential economies of scale that
may result from the Transaction. The Board further noted Guggenheim's statement
that such economies of scale could not be predicted in advance of the closing
of the Transaction.
Other Benefits. The Board noted its prior determination that the advisory fees
were reasonable, taking into consideration other benefits to the Adviser
(including the receipt by Claymore of an administrative fee). The Board also
considered other benefits to the Adviser, Guggenheim and their affiliates
expected to be derived from their relationships with the Fund as a result of
the Transaction and noted that no additional benefits were reported by the
Adviser or Guggenheim as a result of the Transaction. Therefore, the Board
concluded that the advisory fees continued to be reasonable, taking into
consideration other benefits.
NEW SUB-ADVISORY AGREEMENTS AND INTERIM SUB-ADVISORY AGREEMENTS
- ---------------------------------------------------------------
In conjunction with the consideration of the Transaction and the approval of a
New Advisory Agreement and Interim Advisory Agreement, the Board, including the
Independent Trustees, also considered the Fund's New TS&W Sub-Advisory
Agreement, Interim TS&W Sub-Advisory Agreement, New SMC Sub-Advisory Agreement
and Interim SMC Sub-Advisory Agreement. The Board noted that while the closing
of the Transaction would result in the termination of the prior sub-advisory
agreements pursuant to their terms, TS&W and SMC (together, the "Sub-Advisers")
were not a party to the Transaction and the operations of the Sub-Advisers and
the services to be provided by the Sub-Advisers would be unaffected by the
Transaction.
The Board determined that there were no material differences between the terms
of the Interim TS&W Sub-Advisory Agreement and the corresponding prior
sub-advisory agreement or the Interim SMC Sub-Advisory Agreement and the
corresponding prior sub-advisory agreement, except with respect to those
provisions required to comply with Rule 15a-4 under the 1940 Act, and that
there were no material differences between the terms of the New TS&W
Sub-Advisory Agreement and the corresponding prior sub-advisory agreement or
the New SMC Sub-Advisory Agreement and the corresponding prior sub-advisory
agreement. The Board noted that the compensation to be received by the
Sub-Advisers under the Interim TS&W Sub-Advisory Agreement, New TS&W
Sub-Advisory Agreement, Interim SMC Sub-Advisory Agreement and New SMC
Sub-Advisory Agreement is not greater than the compensation the Sub-Advisers
would have received under the corresponding prior sub-advisory agreements. The
Board noted that the scope and quality of services to be provided to the Fund
under the Interim TS&W Sub-Advisory Agreement, New TS&W Sub-Advisory Agreement,
Interim SMC Sub-Advisory Agreement and New SMC Sub-Advisory Agreement would be
at least equivalent to the scope and quality of services provided under the
corresponding prior sub-advisory agreement. The Board noted that, within the
last year, it had engaged in a thorough review of the various factors,
including fees and performance, which are part of the evaluation of the renewal
or approval of a sub-advisory agreement.
The Board noted that the factors previously considered with respect to approval
of the prior sub-advisory agreements continued to support the approval of the
Interim TS&W Sub-Advisory Agreement, New TS&W Sub-Advisory Agreement, Interim
SMC Sub-Advisory Agreement and New SMC Sub-Advisory Agreement. The Board also
determined to consider such factors again within one year of the execution of
the New TS&W Sub-Advisory Agreement and the New SMC Sub-Advisory Agreement.
Based upon its review, the Board concluded that it was in the best interest of
the Fund to approve the Interim TS&W Sub-Advisory Agreement, New TS&W
Sub-Advisory Agreement, Interim SMC Sub-Advisory Agreement and New SMC
Sub-Advisory Agreement.
OVERALL CONCLUSIONS
Based upon all of the information considered and the conclusions reached, the
Board determined that the terms of the Advisory Agreements are fair and
reasonable and that approval of the Advisory Agreements is in the best
interests of the Fund.
32 | Annual Report | December 31, 2009
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TYW | TS&W/Claymore Tax-Advantaged Balanced Fund
Fund INFORMATION |
BOARD OF TRUSTEES OFFICERS INVESTMENT MANAGER -- PREFERRED STOCK --
J. Thomas Futrell EQUITY AND INCOME DIVIDEND PAYING AGENT
Matthew J.Appelstein* Chief Executive Officer Thompson, Siegel & The Bank of
Walmsley LLC New York Mellon
Randall C. Barnes Kevin Robinson Richmond,Virginia New York, New York
Chief Legal Officer
Steven D. Cosler INVESTMENT MANAGER -- LEGAL COUNSEL
Steven M. Hill MUNICIPALS Skadden, Arps, Slate,
Robert M. Hamje Chief Financial Officer, SMC Fixed Income Meagher & Flom LLP
Chief Accounting Officer Management, LP Chicago, Illinois
L. Kent Moore and Treasurer Princeton, New Jersey
Ronald A. Nyberg Vincent R. Giordano INVESTMENT ADVISER INDEPENDENT REGISTERED
Vice President AND ADMINISTRATOR PUBLIC ACCOUNTING FIRM
Ronald E.Toupin, Jr. Claymore Advisors, LLC Ernst & Young LLP
George Gregorio Lisle, Illinois Chicago, Illinois
* Trustee is an "interested person" of the Vice President
Fund as defined in the Investment CUSTODIAN AND
Company Act of 1940, as amended. Roberto W. Roffo TRANSFER AGENT
Vice President The Bank of
New York Mellon
Bruce Saxon New York, New York
Chief Compliance Officer
Mark E. Mathiasen
Secretary
Elizabeth H. Hudson
Assistant Secretary
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 December 31, is also
available, without charge and upon request by calling (866)882-0688, 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.
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.
Annual Report | December 31, 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 TYW
Lisle, IL 60532 LISTED
Member FINRA/SIPC (02/10) NOT FDIC-INSURED | NOT BANK-GUARANTEED | MAY LOSE VALUE NYSE(R) TYW-AR-1209
ITEM 2. CODE OF ETHICS.
(a) The registrant has adopted a code of ethics (the "Code of Ethics") that
applies to its principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions.
(b) No information need be disclosed pursuant to this paragraph.
(c) The registrant has not amended its Code of Ethics during the period covered
by the shareholder report presented in Item 1 hereto.
(d) The registrant has not granted a waiver or an implicit waiver to its
principal executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions from a provision
of its Code of Ethics during the period covered by this report.
(e) Not applicable.
(f) (1) The registrant's Code of Ethics is attached hereto as an exhibit.
(2) Not applicable.
(3) Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Trustees has determined that it has at least one audit
committee financial expert serving on its audit committee (the "Audit
Committee"), Randall C. Barnes. Mr. Barnes is an "independent" Trustee. Mr.
Barnes qualifies as an audit committee financial expert by virtue of his
experience obtained as a former Senior Vice President, Treasurer of PepsiCo,
Inc.
(Under applicable securities laws, a person who is determined to be an audit
committee financial expert will not be deemed an "expert" for any purpose,
including without limitation for the purposes of Section 11 of the Securities
Act of 1933, as amended, as a result of being designated or identified as an
audit committee financial expert. The designation or identification of a person
as an audit committee financial expert does not impose on such person any
duties, obligations, or liabilities that are greater than the duties,
obligations, and liabilities imposed on such person as a member of the audit
committee and Board of Trustees in the absence of such designation or
identification. The designation or identification of a person as an audit
committee financial expert doesn't affect the duties, obligations or liability
of any other member of the audit committee or Board of Trustees.)
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees: the aggregate fees billed for professional services rendered by
the principal accountant for the audit of the registrant's annual financial
statements or services that are normally provided by the accountant in
connection with statutory and regulatory filings or engagements
were $40,500 and $40,500 for the fiscal years ending December 31, 2009, and
December 31, 2008, respectively.
(b) Audit-Related Fees: the aggregate fees billed for assurance and related
services by the principal accountant that are reasonably related to the
performance of the audit of the registrant's financial statements and are not
reported under paragraph (a) of this Item were $6,300 and $6,300 for the fiscal
years ending December 31, 2009, and December 31, 2008, respectively.
Specifically, this amount represents the amount paid for the audit of the
preferred shares asset coverage test.
The registrant's principal accountant did not bill fees for non-audit services
that required approval by the Audit Committee pursuant to paragraph (c)(7)(ii)
of Rule 2-01 of Regulation S-X during the Registrant's last two fiscal years.
(c) Tax Fees: the aggregate fees billed for professional services rendered by
the principal accountant for tax compliance, tax advice, and tax planning
including federal, state and local income tax return preparation and related
advice and determination of taxable income and miscellaneous tax advice were
$6,000 and $6,000 for the fiscal years ending December 31, 2009 and December 31,
2008, respectively.
The registrant's principal accountant did not bill fees for non-audit services
that required approval by the Audit Committee pursuant to paragraph (c)(7)(ii)
of Rule 2-01 of Regulation S-X during the Registrant's last two fiscal years.
(d) All Other Fees: the aggregate fees billed for products and services provided
by the principal accountant, other than the services reported in paragraphs 4(a)
thru 4(c) of this Item were $0 and $0 for the fiscal years ending December 31,
2009, and December 31, 2008, respectively.
The registrant's principal accountant did not bill fees for non-audit services
that required approval by the registrant's audit committee pursuant to paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X during the Registrant's last two
fiscal years.
(e) Audit Committee Pre-Approval Policies and Procedures.
(i) The Registrant's audit committee reviews, and in its sole
discretion, pre-approves, pursuant to written pre-approval procedures (A) all
engagements for audit and non-audit services to be provided by the principal
accountant to the registrant and (B) all engagements for non-audit services to
be provided by the principal accountant (1) to the registrant's investment
adviser (not including a sub-adviser whose role is primarily portfolio
management and is sub-contracted or overseen by another investment adviser) and
(2) to any entity controlling, controlled by or under common control with the
registrant's investment adviser that provides ongoing services to the
registrant; but in the case of the services described in subsection (B)(1) or
(2), only if the engagement relates directly to the operations and financial
reporting of the registrant; provided that such pre-approval need not be
obtained in circumstances in which the pre-approval requirement is waived under
rules promulgated by the Securities and Exchange Commission or New York Stock
Exchange listing standards. Sections IV.C.2 and IV.C.3 of the Audit Committee's
revised Audit Committee Charter contain the Audit Committee's Pre-Approval
Policies and Procedures and such sections are included below.
V.C.2 Pre-approve any engagement of the independent auditors to provide any
non-prohibited services to the I Trust, including the fees and other
compensation to be paid to the independent auditors (unless an
exception is available under Rule 2-01 of Regulation S-X).
(a) The Chairman or any member of the Audit Committee may grant the
pre-approval of services to the Fund for non-prohibited services up to
$10,000. All such delegated pre-approvals shall be presented to the
Audit Committee no later than the next Audit Committee meeting.
V.C.3 Pre-approve any engagement of the independent auditors, including the
fees and other compensation to be paid to the independent auditors, to
provide any non-audit services to the Adviser (or any "control I
affiliate" of the Adviser providing ongoing services to the Trust), if
the engagement relates directly to the operations and financial
reporting of the Trust (unless an exception is available under Rule
2-01 of Regulation S-X).
(a) The Chairman or any member of the Audit Committee may grant
the pre-approval for non-prohibited services to the Adviser up
to $10,000. All such delegated pre-approvals shall be
presented to the Audit Committee no later than the next Audit
Committee meeting.
(ii) None of the services described in each of Items 4(b) through (d) were
approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01
of Regulation S-X.
(f) Not Applicable.
(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, the registrant's investment adviser (not
including a sub-adviser whose role is primarily portfolio management and is
sub-contracted with or overseen by another investment adviser) and or any entity
controlling, controlled by, or under common control with the adviser that
provides ongoing services to the registrant that directly related to the
operations and financial reporting of the registrant was $12,300 and $12,300 for
the fiscal years ending December 31, 2009, and December 31, 2008, respectively.
(h) Not Applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
(a)The registrant has a separately designated standing audit committee
established in accordance with Section 3(a)(58)(A) of the Securities Exchange
Act of 1934, as amended. The audit committee of the registrant is comprised of:
Randall C. Barnes, Steven D. Cosler, Robert M. Hamje, L. Kent Moore, Ronald A.
Nyberg and Ronald E. Toupin, Jr.
(b) Not Applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
The Schedule of Investments is included as part of Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
The registrant has delegated the voting of proxies relating to its voting
securities to the investment sub-adviser of its equity portfolio, Thompson,
Siegel & Walmsley LLC ("TS&W"). TS&W's proxy voting polices and procedures are
included as an exhibit hereto.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
(a)(1) TS&W is responsible for the day-to-day management of the equity and
income securities portion of the registrant's portfolio. SMC Fixed Income
Management, LP ("SMC") also serves as investment sub-adviser to the registrant
and is responsible for the day-to-day management of the municipal securities
portion of the registrant's portfolio.
TS&W Portfolio Managers
The following individuals at TS&W share primary responsibility for the
management of the equity and income securities portion of the registrant's
portfolio:
NAME SINCE PROFESSIONAL EXPERIENCE
William M. Bellamy, CFA, 2004 Mr. Bellamy is a member of the Investment Policy
Portfolio Manager Committee and has over 23 years of experience working
with fixed income securities. Prior to joining Thompson, Siegel
& Walmsley LLC in 2002, Mr. Bellamy was with Trusco Capital
Management where he served as a Vice President, Fixed
Income Portfolio Manager. Prior to Trusco, he was employed with
First Union Capital Markets, Clayton Brown & Associates and
Merrill Lynch Capital Markets in Institutional Fixed Income
Sales. Mr. Bellamy received his Bachelor of Science from Cornell
University and his MBA from Duke University.
Paul A. Ferwerda, CFA, 2004 Mr. Ferwerda is a member of the Investment Policy Committee and
Portfolio Manager brings to the investment team 23 years experience with the firm
and 28 years overall investment experience. Mr. Ferwerda
contributes significant research expertise within the Financial
sector. Prior to joining the firm, Mr. Ferwerda was a Portfolio
Manager with AmSouth Bank in Birmingham, AL. He received his
Bachelor of Science degree from Auburn University and his MBA from
Duke University.
Mr. Ferwerda is responsible for managing the qualified dividend income ("QDI")
portion of the Fund. Mr. Bellamy is responsible for managing the non-QDI portion
of the Fund, including high yield bonds, preferred stocks and real estate
investment trusts.
SMC Portfolio Managers
The following individuals at SMC share primary responsibility for the management
of the municipal securities portion of the registrant's portfolio:
NAME SINCE PROFESSIONAL EXPERIENCE
Vincent R. Giordano 2004 Senior Managing Director and Portfolio Manager of SMC Fixed Income
Management. Previously, Senior Managing
Director of Claymore Advisors, LLC;
Senior Vice President and Portfolio
Manager of Merrill Lynch Asset
Management, Inc.
Roberto W. Roffo 2004 Senior Managing Director and Portfolio Manager of SMC Fixed Income
Management. Previously, Senior Managing Director of Claymore
Advisors, LLC; Director and Vice President of Merrill Lynch
Investment Managers.
Mr. Roffo is responsible for identifying investment opportunities and executing
transactions on behalf of the municipal securities portion of the registrant's
portfolio. Mr. Giordano oversees Mr. Roffo's activities and works jointly with
Mr. Roffo to formulate investment strategies.
The information disclosed in this paragraph (a)(1) of Item 8 is provided as of
December 31, 2009.
(a)(2)
TS&W Other Accounts Managed
TS&W does not manage any accounts for which the advisory fee is based upon the
performance of the account. The following table summarizes information regarding
each of the other accounts managed by the TS&W portfolio managers as of December
31, 2009:
REGISTERED INVESTMENT OTHERR POOLED
COMPANIES INVESTMENT VEHICLES OTHER ACCOUNTS
------------------------- ---------------------------- --------------------------
#OF #OF #OF
NAME ACCOUNTS TOTAL ASSETS ACCOUNTS TOTAL ASSETS ACCOUNTS TOTAL ASSETS
- ----------------- -------- ------------ -------- ------------ -------- ------------
William M. Bellamy 1 $52.5M 0 687.9M 263 $740.4M
Paul A. Ferwerda 0 0 0 0 0 0
SMC Other Accounts Managed
SMC does not manage any accounts for which the advisory fee is based upon the
performance of the account. The following table summarizes information regarding
each of the other accounts managed by the SMC portfolio managers as of December
31, 2009:
REGISTERED INVESTMENT OTHERR POOLED
COMPANIES INVESTMENT VEHICLES OTHER ACCOUNTS
------------------------- ---------------------------- --------------------------
#OF #OF #OF
NAME ACCOUNTS TOTAL ASSETS ACCOUNTS TOTAL ASSETS ACCOUNTS TOTAL ASSETS
- ----------------- -------- ------------ -------- ------------ -------- ------------
Vincent R. Giordano 1 $148,936M 0 0 15 $46,633M
Roberto W. Roffo
1 $148,936M 0 0 15 $46,633M
TS&W Potential Conflicts of Interest
Three of the products TS&W advises are long-short strategies and may sell
securities short. Procedures are in place to ensure that no primary security
holding in accounts managed by TS&W will be shorted by any account advised by
TS&W that utilizes the Four Factor investment process. The term "primary
holdings" refer to any core holding in any of the firm's equity products,
including TYW. Primary holdings specifically exclude miscellaneous securities
most frequently held in the taxable portfolios of TS&W's clients.
Mr. Bellamy and Mr. Ferwerda do not manage accounts that can short securities.
The portfolio managers responsible for those portfolios that can short
securities are not separated from the rest of TS&W's investment personnel and
therefore have access to full information about TS&W's investment research and
the strategies being employed for accounts managed by TS&W.
Some other accounts managed by TS&W pay TS&W management fees at rates comparable
to and in some cases lower than those paid by the registrant and other accounts
managed by TS&W. Two of the long-short strategies that TS&W manages have
performance fee incentives. As a result, TS&W may have a conflict between its
own interests and the interests of its other investment advisory clients in
managing these long-short accounts. TS&W has adopted various procedures and
safeguards to mitigate these potential conflicts.
SMC Potential Conflicts of Interest
At times there may be instances when securities are being purchased or sold by
SMC for more than one account. On a daily basis, SMC's Chief Compliance Officer
reviews and approves all trades for all accounts assuring that there has been
fair allocation among accounts. When necessary, SMC's Chief Compliance Officer
will question the portfolio managers to assure fair allocation among all
accounts managed has taken place.
(a)(3)
TS&W Portfolio Manager Compensation
TS&W compensates Mr. Bellamy and Mr. Ferwerda for their management of the equity
and income producing securities portion of the registrant's portfolio.
Compensation is comprised of a fixed base salary and discretionary performance
bonus that is based on the overall success of the firm, an individual's
responsibility and his/her performance versus expectations, which are reviewed
annually. That evaluation includes the professional's own self-assessment of
their years' work relative to their responsibilities and also includes peer and
supervisor evaluations. TS&W's compensation strategy is to provide reasonable
base salaries commensurate with an individual's responsibility and provide
performance bonus awards that can exceed base salary. A summary of the input
goes to the Remuneration Committee of TS&W's Board of Directors and they
determine the specific compensation, salary plus bonus, for the individual.
Total compensation of TS&W's portfolio managers is not related to fund
performance. In concurrence with Old Mutual (US) Holdings Inc., in May 2007,
TS&W began to offer key employees the opportunity to purchase equity interest in
TS&W and facilitate the awarding of equity interest to certain key employees as
a component of long-term incentive compensation. Old Mutual (US) Holdings Inc.
remains a majority owner.
Additionally, there is a qualified profit sharing plan and a long-term incentive
plan, which is eligible for participation by all TS&W associates.
SMC Portfolio Manager Compensation
SMC compensates Mr. Giordano and Mr. Roffo for their management of the municipal
securities portion of the registrant's portfolio. Compensation consists of a
fixed based salary and is based on the experience and qualifications of each
portfolio manager. All SMC employees are also eligible to participate in a
401(k) plan, which does not include matching funds from any other party.
(a)(4)
TS&W Portfolio Manager Securities Ownership
The following table discloses the dollar range of equity securities of the
registrant beneficially owned by each TS&W portfolio manager as of December 31,
2009:
DOLLAR RANGEE OF EQUITY
NAME OF PORTFOLIO MANAGER SECURITIES IN FUND
- --------------------------------------------------------------------------------
William M. Bellamy None
Paul A. Ferwerda $10,001-$50,000
SMC Portfolio Manager Securities Ownership
The following table discloses the dollar range of equity securities of the
registrant beneficially owned by each SMC portfolio manager as of December 31,
2009:
DOLLAR RANGEE OF EQUITY
NAME OF PORTFOLIO MANAGER SECURITIES IN FUND
- --------------------------------------------------------------------------------
Vincent R. Giordano $10,001-$50,000
Roberto W. Roffo None
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
None.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The registrant has not made any material changes to the procedures by which
shareholders may recommend nominees to the registrant's Board of Trustees.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial officer
have evaluated the registrant's disclosure controls and procedures (as defined
in Rule 30a3(c) under the Investment Company Act) as of a date within 90 days of
this filing and have concluded based on such evaluation as required by Rule
30a-3(b) under the Investment Company Act of 1940, that the registrant's
disclosure controls and procedures were effective, as of that date, in ensuring
that information required to be disclosed by the registrant in this Form N-CSR
was recorded, processed, summarized, and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms.
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940)
that occurred during the registrant's second fiscal quarter of the period
covered by this report that have materially affected, or are reasonably likely
to materially affect, the registrant's internal control over financial
reporting.
ITEM 12. EXHIBITS.
(a)(1) Code of Ethics for Chief Executive and Senior Financial Officer.
(a)(2) Certifications of principal executive officer and principal financial
officer pursuant to Rule 30a-2(a) of the Investment Company Act.
(a)(3) Not Applicable.
(b) Certifications of principal executive officer and principal financial
officer pursuant to Rule 30a-2(b) of the Investment Company Act and Section 906
of the Sarbanes-Oxley Act of 2002.
(c) Proxy Voting Policies and Procedures.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) TS&W/Claymore Tax-Advantaged Balanced Fund
------------------------------------------
By: /s/ J. Thomas Futrell
--------------------------------------
Name: J. Thomas Futrell
Title: Chief Executive Officer
Date: March 4, 2010
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ J. Thomas Futrell
--------------------------------------
Name: J. Thomas Futrell
Title: Chief Executive Officer
Date: March 4, 2010
By: /s/ Steven M. Hill
--------------------------------------
Name: Steven M. Hill
Title: Treasurer and Chief Financial Officer
Date: March 4, 2010