================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-CSR
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CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-21515
TS&W / Claymore Tax-Advantaged Balanced Fund
--------------------------------------------------
(Exact name of registrant as specified in charter)
2455 Corporate West Drive
Lisle, IL 60532
---------------------------------------------------
(Address of principal executive offices) (Zip code)
Nicholas Dalmaso, Chief Legal and Executive Officer
TS&W / Claymore Tax-Advantaged Balanced Fund
2455 Corporate West drive
Lisle, IL 60532
---------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (630) 505-3700
Date of fiscal year end: December 31, 2004
Date of reporting period: June 30, 2004
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 semi-annual report transmitted to shareholders pursuant to Rule
30e-1 under the Investment Company Act of 1940 is as follows:
SemiAnnual
Report
June 30, 2004
Unaudited
TS&W/Claymore |
| TYW
Tax-Advantaged Balanced Fund |
[GRAPHIC]
Thompson, Siegel & Walmsley, Inc. [LOGO]
Investment Counsel CLAYMORE(R)
www.tswclaymore.com
... home port for the LATEST,
most up-to-date INFORMATION about the
TS&W/Claymore Tax-Advantaged Balanced Fund
[GRAPHIC]
The shareholder report you are reading right now is just the beginning of
the story. Online at tswclaymore.com, you will find:
. Daily, weekly and monthly data on share prices, distributions and more
. Monthly portfolio overviews and performance analyses
. Announcements, press releases and special notices
. Fund and advisor contact information
Thompson, Siegel & Walmsley, and Claymore Securities, are constantly
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 small way we are working to keep you
better informed about your investment in the Fund.
| SemiAnnual Report | June 30, 2004
TS&W/Claymore Tax-Advantaged Balanced Fund
Dear Shareholder
We are pleased to welcome you to the TS&W / Claymore Tax-Advantaged Balanced
Fund. This semi-annual report covers the period since the Fund's inception on
April 28, 2004 through June 30, 2004.
Your Fund focuses its investments on securities that generate income that is
either exempt from regular federal income tax or qualifies for federal income
taxation at long-term capital gains rates ("tax-advantaged income"), while also
offering the potential for capital appreciation through exposure to equity
markets.
Under normal market conditions, the Fund will invest at least 50%, and may
invest up to 60% of its total assets in municipal securities. In addition, the
Fund will invest at least 40%, and may invest up to 50% of its total assets in
equity securities and other income-producing securities, of which, at least 25%
will be invested in equity securities.
The Fund's investment adviser, Claymore Advisors, LLC, is responsible for
managing the investment activities of the Fund and the Fund's business affairs
and other administrative matters, and is directly responsible for the day-to-day
portfolio management of the Fund's municipal securities portfolio. Claymore
Advisors, LLC is an affiliate of Claymore Securities, Inc., a privately-held
financial services company offering unique investment solutions for financial
advisors and their valued clients.
Thompson, Siegel & Walmsley, Inc. ("TS&W") serves as the Fund's investment
sub-adviser and is responsible for the day-to-day portfolio management of the
Fund's equity and other income-producing securities portfolio. TS&W provides
customized financial services and products to individuals, families and
institutions. Founded in 1969, TS&W combines the professional resources and
breadth of services of a major investment manager with the individual focus and
commitment to personal attention of a trusted local adviser.
The total return of the portfolio for the period ended June 30, 2004 was 0.42%
based on the change in Net Asset Value ("NAV"). The Fund's benchmark is
comprised of 54% of the Lehman Brother's Municipal Bond Index and 46% of the
Russell 1000 Value Index. During the brief period since the Fund's inception,
this benchmark returned 0.67%, performing slightly better than the Fund.
Although our NAV rose from $14.33 per common share at the beginning of the
period on April 28, 2004 to $14.39 on June 30, 2004, the market price declined
from $15.00 on April 28 to $13.10 on June 30, representing a market price
discount from NAV of 8.96%. As a result of this discount, the return at market
price for the period ended June 30, 2004 was -12.67%. This discount from NAV
highlights the fact that most closed-end funds
SemiAnnual Report | June 30, 2004 | 1
TS&W/Claymore Tax-Advantaged Balanced Fund | Dear Shareholder continued
have fallen out of favor with investors recently. However, we feel that this
discount represents an opportunity as common shares of the Fund are now
available in the market at prices below the value of the securities in the
underlying portfolio.
At the beginning of July, the Fund declared its initial quarterly dividend of
$0.234375 per share, payable on August 31, 2004 to shareholders of record as of
August 13, 2004. This represents an annualized 6.25% distribution based upon the
Fund's initial $15 common share price. In January 2005, you will receive a
statement detailing the components for tax purposes of the dividends paid by the
Fund in 2004. You have the opportunity to reinvest these dividends through the
Dividend Reinvestment Plan ("DRIP") that is described in detail on page 16 of
this report.
When shares trade at a discount to the net asset value ("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 can not be
more than 5% below the market price per share. The DRIP provides a low-cost
means to accumulate additional shares and enjoy the benefits of compounded
returns over time.
Also in early July, the Fund completed the issuance of $120 million of Auction
Market Preferred Shares ("AMPS"), each with a par value of $25,000 per share.
AMPS are traditionally used as money-market alternatives for high-net worth and
institutional investors. The proceeds raised by the issuance of AMPS are pooled
and invested together with the Fund's other assets, with any spread between the
portfolio return and the short-term rate paid to AMPS holders borne by the
common shareholders.
For more specific information on the positioning of the portfolio and our market
outlook, please refer to the portfolio management question and answer portion of
the report. We appreciate your investment with us and would like to thank you
for giving us the opportunity to serve your investment needs. For further
information on the Fund, please call 1-800-345-7999 or visit the Fund's website
at www.tswclaymore.com.
Sincerely,
/s/ Nickolas Dalmaso
- ------------------------------
Nick Dalmaso
Senior Managing Director - Claymore Advisors, LLC
August 6, 2004
2 | SemiAnnual Report | June 30, 2004
TS&W/Claymore Tax-Advantaged Balanced Fund
Questions & Answers |
- --------------------------------------------------------------------------------
How did the equity and high-yield markets perform during the period?
The broad equity market, as measured by the S&P 500, generated a positive total
return of 1.64% for the period from the inception of the Fund on April 28, 2004
to June 30, 2004 while the Russell 1000 Value Index returned 1.72% during this
same period. The market was led by non-consumer cyclical sectors such as
Industrials, Materials and Technology while the Consumer, Health Care and
Communication sectors lagged the overall market during the period reported.
Other general notable patterns during this period were small-capitalization
value stocks slightly outperforming large growth stocks while non-dividend
paying stocks generally out performed dividend-paying stocks.
With respect to the high-yield market, rising interest rates pressured
fixed-income securities during the same period. The Treasury curve flattened by
28 basis points with intermediate maturities (2 - 4 years) rising the most. The
Merrill Lynch High Yield Index generated a total return of -0.5% and the Merrill
Lynch Preferred Index posted a total return of -2.0%.
- --------------------------------------------------------------------------------
What is the investment process used for selecting securities?
TS&W uses a proprietary equity valuation model for assessing the attractiveness
of more than 400 stocks with a market capitalization of at least $2.5 billion. A
long-term expected rate of return is calculated for each stock with buy and sell
targets also established. Stocks with the highest expected return are reviewed
by an in-house analyst and are subject to peer review by the entire investment
team. Above-market dividend yields are an important characteristic of the Fund's
stocks and, as a result, are favored over low- or nondividend paying stocks. The
portfolio is also subject to diversification constraints across ten major
economic sectors in order to attempt to control overall risk.
With respect to the high-yield securities in the portfolio, a bottom-up approach
is primarily used in the selection process. Each security is analyzed with
regard to credit fundamentals, cash flows and business outlook. In-house
analysis from TS&W's fixed income and equity investment team is also combined
with the outside opinion of two independent ratings services. Securities
selected for the portfolio combine both a constructive fundamental outlook and
an appraisal of relative value within and across all sectors.
- --------------------------------------------------------------------------------
Are there any specific sectors which have helped or hindered performance and
what is your outlook for the market?
Eight of the ten economic sectors contributed to the total return over this
period with Industrials and Materials having the most significant impact to the
Fund while Consumer Staples and Technology performed the weakest. Dividend
income is considered an important component of the expected total return and
therefore some sectors that consistently offer higher yields will be favored
while lower yielding sectors will be underweighted. It is TS&W's expectation
that the overall market will remain choppy but maintain a favorable upward bias
as increasing corporate profits, rising dividends and historically low interest
rates combine to produce a constructive investment environment. TS&W also
believes this economic backdrop going forward will be supportive of attractive
returns in the equity and high-yield portion of the Fund.
SemiAnnual Report | June 30, 2004 | 3
TS&W/Claymore Tax-Advantaged Balanced Fund | Questions & Answers continued
- --------------------------------------------------------------------------------
How did the municipal bond market perform during the period?
The municipal market was fairly volatile over the period since the Fund's
inception on April 28, 2004 through June 30, 2004, but the net result was a
relatively flat market during the reporting period. The Lehman Brother's
Municipal Bond Index, an unmanaged index of approximately 1,100 investment grade
tax-exempt bonds, declined 0.36% during the month of May but rebounded in the
month of June, resulting in a return since the Fund's inception of -0.23% for
the period.
- --------------------------------------------------------------------------------
What is the investment process used for selecting municipal bonds?
Our investment approach starts with analyzing the broader macroeconomic trends
and developments affecting the fixed-income markets. Our team analyzes the
economic outlook, market conditions and perceived effects on interest rates and
yield curves. From there, we incorporate a bottom-up and top-down analysis to
construct a portfolio that optimizes tax-exempt income while seeking to avoid
undue credit risk and market timing risk. Through implementing our
proprietary-unbiased research, we try to identify undervalued sectors and select
credits within these sectors that we believe have the potential for rating
upgrades and capital appreciation, however there is no guarantee this will
occur.
- --------------------------------------------------------------------------------
Are there any specific sectors which have helped or hindered performance and
what is your outlook for the market?
One of the significant factors that contributed to the Fund's performance was
our over-weight concentration in the Health Care and related sectors (Health
Care and related sectors represented nearly 33% of all municipal securities in
the portfolio). During the initial investment period for the Fund, we felt that
this sector was the most undervalued relative to other sectors within the
municipal market. As yields tightened during the period, these lower-quality
health care bonds outperformed. We feel that the Health Care sector is now fully
valued and, for the future, we currently expect to diversify the portfolio
across more sectors to reduce concentration risk.
During the period, it was the team's decision to avoid the Tobacco sector
because of the impending litigation risk within the tobacco industry. This
foresight benefitted the Fund as these tobacco bonds underperformed as yield
spreads widened during the period.
With respect to our outlook for the market, we expect interest rates to remain
stable to slightly higher throughout 2004. The last day of June was perhaps the
most notable day of the reporting period as the Federal Reserve Open Market
Committee announced the first in what is expected to be a series of increases in
the Fed Funds target rate. At the same time, the current high costs of energy,
and its resulting drag on the economy, have led us to believe that interest
rates will be relatively stable in the foreseeable future.
The Lehman Brother's Municipal Bond Index is an unmanaged index of approximately
1,100 investment grade tax-exempt bonds classified into four sectors: general
obligation, revenue, insured and pre-refunded. It includes reinvested interest
and does not include payment of commissions or expenses.
The Russell 1000 Value Index is an unmanaged index considered indicative of the
value-oriented domestic stock market in general and is comprised of stocks in
the Russell 1000 that have lower price-to-book ratios and lower forecasted
growth values.
The S&P 500 Index is an unmanaged index considered indicative of the large cap
domestic stock market in general and is comprised of 500 widely held stocks
chosen by Standard and Poor's.
4 | SemiAnnual Report | June 30, 2004
TS&W/Claymore Tax-Advantaged Balanced Fund
Fund Summary | As of June 30, 2004 (unaudited)
2004 Weekly Share Price Performance
[GRAPHIC APPEARS HERE]
Share Price NAV
4/28/04 $ 15.00 $ 14.30
5/31/04 $ 14.75 $ 14.27
6/30/04 $ 13.10 $ 14.39
Top 10 Holdings - Municipal Portfolio*
- --------------------------------------
Central Unified School District (CA) 5.750%, 7/01/2029, 3.2%
Palm Springs Financing Authority Lease Revenue (CA) 5.500%, 11/01/2035, 3.1%
Illinois Finance Authority Revenue (IL) 5.500%, 8/15/2043, 3.0%
Richardson Hospital Authority (TX) 6.000%, 12/01/2034, 2.9%
Sayre Health Care Facilities Authority Revenue (PA) 5.875%, 12/01/2031, 2.7%
Foothill/Eastern Transportation Corridor Agency (CA) 5.000%, 1/01/2035, 2.5%
Northwest Parkway Public Highway Authority Revenue (CO) 7.125%, 6/15/2041, 2.2%
Highlands County Health Facilities Authority Revenue (FL) 6.000%, 11/15/2025, 2.2%
Missouri State Development Finance Board (MO) 5.625%, 12/01/2028, 2.1%
Norco Redevelopment Agency (CA) 5.125%, 3/01/2030, 2.1%
* As a percentage of total investments
Top Ten Portfolio Industries*
- -----------------------------
Health Services 19.2%
Banking and Finance 12.1%
Schools & Educational Services 7.2%
Leisure & Entertainment 6.7%
Telecommunications 4.7%
Oil and Gas 4.5%
Economic Development 4.3%
Pollution Control 3.0%
Transportation-Revenue 2.9%
Special Purpose Entitiy 2.9%
* As a percentage of total investments
Portfolio Concentration*
- ------------------------
[CHART]
Pie Chart
Asset Class
- -----------
Municipal Bonds 57.6%
Common Stocks 34.3%
Corporate Bonds 6.5%
Preferred Stocks 1.1%
Short-Term Investment 0.4%
Investment Companies 0.1%
* As a percentage of total investments
Top 10 Holdings - Equity and Income Portfolio*
- ----------------------------------------------
Trac-X NA High Yield Series TI 7.735% 3/25/09 2.1%
KeySpan Corp. 1.0%
Merck & Co., Inc. 1.0%
Citigroup, Inc. 1.0%
BT Group PLC ADR 1.0%
GlaxoSmithKline PLC ADR 1.0%
PNC Financial Services Group 1.0%
ING Groep NV ADR 1.0%
HSBC Holdings PLC ADR 1.0%
Australia and New Zealand Banking Group Ltd. ADR 1.0%
* As a percentage of total investments
Portfolio Credit Quality*
- -------------------------
[CHART]
Pie Chart
AAA 17.1%
AA 7.5%
A 10.7%
BBB 19.7%
BB 5.3%
B 3.5%
NR 1.6%
Common Stock/Other 34.6%
*Represents higher rating of either S&P or Moody's ratings as a percentage of
long-term investments
SemiAnnual Report | June 30, 2004 | 5
TS&W/Claymore Tax-Advantaged Balanced Fund
Portfolio of Investments| June 30, 2004 (unaudited)
Principal Amount Value
- --------------------------------------------------------------------------------
Long Term Municipal Bonds - 61.0%
Arizona - 3.5%
$ 3,300,000 Maricopa County Industrial Development $ 3,187,635
Authority Health Facilities Revenue
Catholic Healthcare West-A, Series A,
BBB+, Baa1
5.375%, 7/01/2023
4,500,000 Maricopa County Pollution Control Corporation 4,512,645
Pollution Control Revenue
Reference Public Service Co-A-RMK, BBB, Baa2
5.750%, 11/01/2022
- --------------------------------------------------------------------------------
7,700,280
- --------------------------------------------------------------------------------
California - 19.0%
5,000,000 California State, BBB, A3 4,961,600
5.250%, 4/01/2034
7,000,000 Central Unified School District, 7,517,650
Series A, AAA, NR
5.750%, 7/01/2029
1,395,000 Corona-Norco Unified School District Community 1,390,759
Facilities District No. 98-1, AMBAC
Insured, AAA, Aaa
5.100%, 9/01/2032
6,000,000 Foothill/Eastern Transportation Corridor Agency 5,880,360
California Toll Road Revenue
Senior Lien, Series A, MBIA-IBC Insured, AAA,
Aaa 5.000%, 1/01/2035
Hawaiian Gardens Public Finance Authority
Tax Allocation Redevelopment Project No. 1,
AMBAC Insured, AAA, NR
1,580,000 5.250%, 12/01/2023 1,632,456
1,505,000 5.250%, 12/01/2022 1,563,710
5,000,000 Norco Redevelopment Agency Tax Allocation 4,989,000
Reference Project Area No. 1, MBIA
Insured, AAA, Aaa
5.125%, 3/01/2030
1,000,000O Orange County Community Facilities District 984,940
Special Tax, No. 03-1-Ladera Ranch,
Series A, NR, NR
5.625%, 8/15/2034
1,800,000 Palm Springs Community Redevelopment Agency Tax 1,771,974
Allocation Reference Merged Production
No. 1, Series A, A-, NR
5.500%, 9/01/2034
7,000,000 Palm Springs Financing Authority Lease Revenue 7,332,010
Convention Center Project, Series A, MBIA
Insured, AAA, Aaa
5.500%, 11/01/2035
915,000 Poway Unified School District Special Tax 898,640
Community Facilities District Number
10-Area-E, NR, NR
5.750%, 9/01/2032
1,350,000 Poway Unified School District Special Tax 1,362,312
Community Facilities District Number
6-Area-A, NR, NR
6.125%, 9/01/2033
1,870,000 William S Hart Joint School 1,866,597
Financing Authority Revenue, BBB+, NR
5.625%, 9/01/2034
- --------------------------------------------------------------------------------
42,152,008
- --------------------------------------------------------------------------------
Colorado - 4.3%
$ 1,355,000 Denver Health & Hospital Authority $ 1,293,822
Healthcare Revenue, Series A, ACA-CBI
Insured, A, NR
5.375%, 12/01/2028
Denver Health & Hospital Authority
Healthcare Revenue, Series A, BBB, Baa3
1,000,000 6.000%, 12/01/2031 984,090
2,000,000 6.250%, 12/01/2033 2,021,220
5,000,000 Northwest Parkway Public Highway
Authority Revenue
First Tier - Sub-Series D, BB+, Ba1
7.125%, 6/15/2041 5,247,550
- --------------------------------------------------------------------------------
9,546,682
- --------------------------------------------------------------------------------
Connecticut - 2.1%
5,000,000 Mohegan Tribe Indians Gaming Authority 4,698,150
Public Improvement Priority
Distribution, BBB-, NR
5.250%, 1/01/2033
- --------------------------------------------------------------------------------
Florida - 2.3%
5,000,000 Highlands County Health Facilities 5,145,350
Authority Revenue
Hospital-Adventist Health
Systems, Series D, A, A3
6.000%, 11/15/2025
Georgia - 1.6%
Milledgeville-Baldwin County
Development Authority Revenue
Georgia College and State University
Foundation, BBB, NR
2,500,000 5.625%, 9/01/2030 2,464,400
1,000,000 6.000%, 9/01/2033 1,022,450
- --------------------------------------------------------------------------------
3,486,850
- --------------------------------------------------------------------------------
Illinois - 5.9%
4,000,000 Illinois Educational Facilities 3,939,800
Authority Revenues
University of Chicago, Series A, AA, Aa1
5.125%, 7/1/2038
7,000,000 Illinois Finance Authority Revenue 7,060,060
Northwestern Memorial Hospital, Series
A, AA+, Aa2
5.500%, 8/15/2043
2,000,000 Metropolitan Pier & Exposition Authority 2,001,420
Dedicated State Tax Revenue
McCormick Place Exposition
Project, Series A, AA-, A1
5.500%, 6/15/2027
- --------------------------------------------------------------------------------
13,001,280
- --------------------------------------------------------------------------------
Indiana - 0.9%
2,000,000 Indiana Health Facility Financing 2,027,400
Authority Hospital Revenue
Deaconess Hospital, Obligated - Series
A, AMBAC Insured, AAA, NR
5.375%, 3/01/2034
- --------------------------------------------------------------------------------
Kansas - 1.2%
2,500,000 Burlington Pollution Control Revenue 2,542,325
Reference Kansas Gas & Electric
Co. Project A, AAA, Aaa
5.300%, 6/01/2031
- --------------------------------------------------------------------------------
Massachusetts - 0.4%
930,000 Massachusetts State Development Finance 934,008
Agency Revenue
Hampshire College, BBB, Baa2
5.625%, 10/01/2024
- --------------------------------------------------------------------------------
Missouri - 2.3%
5,000,000 Missouri State Development Finance Board 5,013,300
Infrastructure Facilities Revenue
Branson Landing Project, Series
A, BBB+, Baa1
5.625%, 12/01/2028
- --------------------------------------------------------------------------------
See notes to financial statements.
6 | SemiAnnual Report | June 30, 2004
TS&W/Claymore Tax-Advantaged Balanced Fund | Portfolio of Investments continued
(unaudited)
Principal Amount Value
- --------------------------------------------------------------------------------
Long Term Municipal Bonds (continued)
New Jersey - 2.0%
$ 3,000,000 New Jersey Health Care Facilities $ 3,007,680
Financing Authority Revenue
Saint Elizabeth Hospital Obligated
Group, BBB-, Baa3
6.000%, 7/01/2020
1,450,000 New Jersey State Educational Facilities 1,430,642
Authority Revenue
Stevens Institute of Technology, Series
B, BBB+, Baa2
5.375%, 7/01/2034
- --------------------------------------------------------------------------------
4,438,322
- --------------------------------------------------------------------------------
Ohio - 3.8%
4,560,000 Akron Bath Copley Joint Township 4,625,208
Hospital District Revenue
Hospital Facilities-Summa Health
Systems, Series A, NR, Aa3
5.500%, 11/15/2034
3,800,000 Austintown Local School District 3,811,096
School Improvement, FSA Insured, NR, Aaa
5.125%, 12/01/2030
- --------------------------------------------------------------------------------
8,436,304
- --------------------------------------------------------------------------------
Oklahoma - 0.5%
1,190,000 Claremore, Public Works Authority 1,215,954
Capital Improvement Revenue
Series A, FSA Insured, AAA, Aaa
5.250%, 6/01/2027
- --------------------------------------------------------------------------------
Pennsylvania - 2.9%
6,330,000 Sayre Health Care Facilities Authority 6,411,340
Revenue
Guthrie Health, Series A, A-, NR
5.875%, 12/01/2031
- --------------------------------------------------------------------------------
Rhode Island - 3.0%
Rhode Island State Health & Educational
Building Corporation Revenue
Hospital Financing Lifespan Obligated
Group, BBB, Baa2
3,500,000 6.375%, 8/15/2021 3,636,430
3,000,000 6.500%, 8/15/2032 3,096,630
- --------------------------------------------------------------------------------
6,733,060
- --------------------------------------------------------------------------------
South Carolina - 2.2%
5,000,000 Lexington County Health Services District 4,912,300
Income Hospital Revenue, A, A2
5.500%, 5/01/2037
- --------------------------------------------------------------------------------
Texas - 3.1%
6,780,000 Richardson Hospital Authority 6,786,848
Hospital Refinance & Improvement
Richardson Regional, BBB, Baa2
6.000%, 12/01/2034
- --------------------------------------------------------------------------------
Total Long Term Municipal Bonds
(Cost $134,654,055) 135,181,761
================================================================================
See notes to financial statements.
Number of Shares Value
- --------------------------------------------------------------------------------
Common Stocks - 36.3%
Automotive - 0.9%
45,000 DaimlerChrysler AG $ 2,118,150
- --------------------------------------------------------------------------------
Banking and Finance - 9.6%
35,000 Australia and New Zealand Banking 2,240,000
Group Ltd. ADR
15,000 Bank of America Corp 1,269,300
40,000 BB&T Corp. 1,478,800
51,000 Citigroup, Inc. 2,371,500
30,000 HSBC Holdings PLC ADR 2,247,300
95,000 ING Groep NV ADR 2,251,500
75,000 New York Community Bancorp, Inc. 1,472,250
42,500 PNC Financial Services Group 2,255,900
60,000 U.S. Bancorp 1,653,600
47,500 Wachovia Corp. 2,113,750
50,000 Washington Mutual, Inc. 1,932,000
- --------------------------------------------------------------------------------
21,285,900
- --------------------------------------------------------------------------------
Beverages, Food and Tobacco - 2.0%
40,000 Altria Group, Inc. 2,002,000
57,500 Sara Lee Corp. 1,321,925
30,000 UST, Inc. 1,080,000
- --------------------------------------------------------------------------------
4,403,925
- --------------------------------------------------------------------------------
Building and Building Products - 0.8%
55,000 Masco Corp. 1,714,900
- --------------------------------------------------------------------------------
Business Equipment and Services - 0.7%
37,500 Pitney Bowes, Inc. 1,659,375
- --------------------------------------------------------------------------------
Computers & Micro - 0.5%
55,000 Hewlett-Packard Co. 1,160,500
- --------------------------------------------------------------------------------
Computer-Software and Peripherals - 0.6%
45,000 Microsoft Corp. 1,285,200
- --------------------------------------------------------------------------------
Conglomerates - 0.5%
37,500 General Electric Co. 1,215,000
- --------------------------------------------------------------------------------
Consumer Goods and Services - 0.7%
90,000 Mattel, Inc. 1,642,500
- --------------------------------------------------------------------------------
Forest and Paper Products - 0.8%
57,500 MeadWestvaco Corp. 1,689,925
- --------------------------------------------------------------------------------
Household and Personal Care
Products - 1.3%
21,500 Kimberly-Clark Corp. 1,416,420
66,500 Newell Rubbermaid, Inc. 1,562,750
- --------------------------------------------------------------------------------
2,979,170
- --------------------------------------------------------------------------------
Insurance - 1.4%
30,000 Allstate Corp. (The) 1,396,500
40,000 St. Paul Travelers Cos., Inc. (The) 1,621,600
- --------------------------------------------------------------------------------
3,018,100
- --------------------------------------------------------------------------------
Mining - 0.8%
17,500 Rio Tino PLC ADR 1,715,875
- --------------------------------------------------------------------------------
Oil and Gas - 4.8%
35,000 BP PLC ADR 1,874,950
23,500 ChevronTexaco Corp. 2,211,585
65,000 KeySpan Corp. 2,385,500
42,500 Shell Transport & Trading Co. PLC ADR 1,899,750
22,500 Total SA ADR 2,161,800
- --------------------------------------------------------------------------------
10,533,585
- --------------------------------------------------------------------------------
SemiAnnual Report 1 June 30, 2004 | 7
TS&W/Claymore Tax-Advantaged Balanced Fund | Portfolio of Investments continued
(unaudited)
Number of Shares Value
- --------------------------------------------------------------------------------
Common Stocks (continued)
Pharmaceuticals - 3.0%
86,000 Bristol-Myers Squibb Co. $ 2,107,000
55,000 GlaxoSmithKline PLC ADR 2,280,300
50,000 Merck & Co., Inc. 2,375,000
- --------------------------------------------------------------------------------
6,762,300
- --------------------------------------------------------------------------------
Publishing - 0.9%
60,000 R.R. Donnelley & Sons Co. 1,981,200
- --------------------------------------------------------------------------------
Telecommunications - 4.5%
85,000 BCE, Inc. ADR 1,703,400
77,500 BellSouth Corp. 2,032,050
62,500 BT Group PLC ADR 2,287,500
77,500 SBC Communications, Inc. 1,879,375
58,500 Verizon Communications, Inc. 2,117,115
- --------------------------------------------------------------------------------
10,019,440
- --------------------------------------------------------------------------------
Utilities-Gas and Electric - 1.7%
34,000 DTE Energy Co. 1,378,360
52,500 NiSource, Inc. 1,082,550
28,500 Progress Energy, Inc. 1,255,425
- --------------------------------------------------------------------------------
3,716,335
- --------------------------------------------------------------------------------
Waste Management - 0.8%
55,000 Waste Management, Inc. 1,685,750
- --------------------------------------------------------------------------------
Total Common Stocks
(Cost $79,028,563) 80,587,130
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
Corporate Bonds - 6.9%
Automotive - 0.7%
$ 500,000 DaimlerChrysler NA Holding, BBB, A3 574,464
8.500%, 1/18/2031
1,000,000 Navistar International, BB-, Ba3 1,025,000
7.500%, 6/15/2011
- --------------------------------------------------------------------------------
1,599,464
- --------------------------------------------------------------------------------
Banking and Finance - 0.2%
500,000 E* Trade Financial 497,500
Corp., B+, B1, (a)
8.000%, 6/15/2011
- --------------------------------------------------------------------------------
Building and Building Products - 0.8%
1,000,000 K Hovnanian Enterprises, BB, Ba2 930,000
6.500%, 1/15/2014
1,000,000 KB Home, BB+, Ba1, (a) 920,000
5.750%, 2/01/2014
- --------------------------------------------------------------------------------
1,850,000
- --------------------------------------------------------------------------------
Health and Medical Facilities - 0.5%
1,000,000 Triad Hospitals, Inc., B+, B2 1,007,500
7.000%, 5/15/2012
- --------------------------------------------------------------------------------
Retail-Apparel and Shoes - 0.7%
1,000,000 Foot Locker, Inc., BB+, Ba2 1,057,500
8.500%, 1/15/2022
415,000 Phillips-Van Heusen Corp., BB, B1 419,150
7.750%, 11/15/2023
- --------------------------------------------------------------------------------
1,476,650
- --------------------------------------------------------------------------------
Special Purpose Entity - 3.1%
5,000,000 Trac-X NA High Yield, Series $ 4,887,500
T1, NR, B3, (a)
7.375%, 3/25/2009
2,000,000 Trac-X NA High Yield 1,940,000
Series, T3, NR, B3, (a)
8.000%, 3/25/2009
- --------------------------------------------------------------------------------
6,827,500
- --------------------------------------------------------------------------------
Telecommunications - 0.5%
1,000,000 Nextel Communications, Inc., BB, B2 991,250
6.875%, 10/31/2013
- --------------------------------------------------------------------------------
Travel Services - 0.4%
1,000,000 Royal Caribbean Cruises, BB+, Ba2 988,750
6.875%, 12/01/2013
- --------------------------------------------------------------------------------
Total Corporate Bonds
(Cost $15,068,419) 15,238,614
================================================================================
Number of Shares Value
- --------------------------------------------------------------------------------
Preferred Stocks - 1.1%
Real Estate Investment Trusts - 1.1%
10,000 CareAmerica Realty Corp., Series 252,900
E, 7.500%, BBB-, Baa3
20,000 CBL & Associates Properties, Series 505,800
C, 7.750%, NR, NR
20,000 Developers Divers 517,000
Realty, 8.600%, BBB-, Ba1
20,000 Health Care REIT, Inc., Series 501,000
D, 7.875%, BB+, Ba1
10,000 Istar Financial, Inc., Series 232,400
I, 7.500%, B+, Ba3
20,000 Realty Income Corp., 7.375%, BBB-, Baa3 508,000
- --------------------------------------------------------------------------------
Total Preferred Stocks
(Cost $2,473,400) 2,517,100
================================================================================
Investment Companies - 0.1%
5,000 AEW Real Estate Income Fund 80,750
5,000 Neuberger Berman Real Estate Income 87,400
Fund, Inc.
7,000 Scudder Preef Real Estate Fund II 95,760
- --------------------------------------------------------------------------------
Total Investment Companies
(Cost 266,359) 263,910
================================================================================
Total Long Term Investments
(Cost $231,490,796) - 105.4% 233,788,515
================================================================================
Principal Amount Value
- --------------------------------------------------------------------------------
Short Term Investment - 0.5%
New York - 0.5%
$1,000,000 Port Authority New York & New Jersey 1,000,000
Special Obligation Revenue
Versatile Structure Obligation, Series
2, A+/A-1+, A2/VMIG1
1.060%, 5/01/2019, (b)
- --------------------------------------------------------------------------------
Total Short-Term Investments
(Cost $1,000,000) 1,000,000
================================================================================
Total Investments
(Cost $232,490,796) - 105.9% 234,788,515
Liabilities in excess of other assets - (5.9%) (13,029,866)
================================================================================
Net Assets - 100.0% $221,758,649
================================================================================
ADR American Depositary Receipt.
Ratings shown are per Standard & Poor's and Moody's. Securities classified
NR are not rated.
(a) Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At June 30, 2004,
these securities amounted to $8,245,000 or 3.7% of net assets.
(b) 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
disclosed is that currently in effect. This rate changes periodically based
on market conditions or a specified market index.
See notes to financial statements.
8 | SemiAnnual Report | June 30, 2004
TS&W/Claymore Tax-Advantaged Balanced Fund
Statement of Assets and Liabilities | June 30, 2004 (unaudited)
Assets
Investments in securities, at value (cost $232,490,796) $234,788,515
Cash 19,723
Interest and dividends receivable 1,856,318
Other assets 33,824
- --------------------------------------------------------------------------------
Total assets 236,698,380
- --------------------------------------------------------------------------------
Liabilities
Payable for securities purchased 13,926,586
Unrealized depreciation on swap transactions 533,412
Offering costs payable 284,502
Advisory fee payable 126,654
Accrued expenses and other liabilities 68,577
- --------------------------------------------------------------------------------
Total liabilities 14,939,731
- --------------------------------------------------------------------------------
Net Assets $221,758,649
================================================================================
Composition of Net Assets
Common shares of beneficial interest:
Par value $0.01 per share $ 154,070
Paid in capital 220,089,205
Undistributed net investment income 1,237,035
Net realized loss on investments (1,485,968)
Net unrealized appreciation on investments and
swap transactions 1,764,307
- --------------------------------------------------------------------------------
Net Assets $221,758,649
================================================================================
Common Shares
Net asset value per share
($221,758,649 / 15,407,000 shares of beneficial interest
issued and outstanding) $ 14.39
================================================================================
See notes to financial statements.
SemiAnnual Report | June 30, 2004 | 9
TS&W/Claymore Tax-Advantaged Balanced Fund
Statement of Operations | For the Period April 28, 2004* through June 30, 2004
(unaudited)
Investment Income
Interest $1,151,721
Dividends (net of foreign withholding
taxes of $18,594) 439,464
- --------------------------------------------------------------------------------
Total income $ 1,591,185
- --------------------------------------------------------------------------------
Expenses
Advisory fee 258,396
Printing expense 12,653
Administration fee 12,479
Trustees' fees 12,230
Audit fee 11,387
Fund accounting fee 10,633
Insurance 9,342
Legal fees 8,493
Transfer agent fee 5,464
Custodian fee 5,464
Registration fee 2,548
Miscellaneous 5,061
- --------------------------------------------------------------------------------
Total Expenses 354,150
- --------------------------------------------------------------------------------
Net investment income 1,237,035
- --------------------------------------------------------------------------------
Realized and Unrealized Gain/Loss on Investments
Net realized loss on investments (1,485,968)
Net unrealized appreciation (depreciation) on:
Investments 2,297,719
Swap transactions (533,412)
- --------------------------------------------------------------------------------
Net realized and unrealized gain on investments
and swap transactions 278,339
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $ 1,515,374
================================================================================
* Commencement of investment operations.
See notes to financial statements.
10 | SemiAnnual Report | June 30, 2004
TS&W/Claymore Tax-Advantaged Balanced Fund
Statement of Changes in Net Assets|
For the Period April 28, 2004* through June 30, 2004 (unaudited)
Increase in Net Assets from Operations
Net investment income $ 1,237,035
Net realized loss on investments (1,485,968)
Net unrealized appreciation on investments
and swap transactions 1,764,307
- --------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,515,374
- --------------------------------------------------------------------------------
Capital Share Transactions
Net proceeds from the issuance of common shares 220,605,000
Common shares' offering expenses charged to
paid-in-capital (462,000)
- --------------------------------------------------------------------------------
Net increase from capital share transactions 220,143,000
- --------------------------------------------------------------------------------
Total increase 221,658,374
Net Assets
Beginning of period 100,275
- --------------------------------------------------------------------------------
End of period (including undistributed net
investment income of $1,237,035) $221,758,649
================================================================================
* Commencement of investment operations.
See notes to financial statements.
SemiAnnual Report | June 30, 2004 | 11
TS&W/Claymore Tax-Advantaged Balanced Fund
Financial Highlights| For the Period April 28, 2004* through June 30, 2004
(unaudited)
Per share operating performance for a common share
outstanding throughout the period
Net asset value, beginning of period $ 14.33/(a)/
- --------------------------------------------------------------------------------
Income from investment operations
Net investment income 0.08
Net realized and unrealized gain 0.01
- --------------------------------------------------------------------------------
Total from investment operations 0.09
- --------------------------------------------------------------------------------
Common shares' offering expenses charged to
paid-in-capital (0.03)
- --------------------------------------------------------------------------------
Net asset value, end of period $ 14.39
================================================================================
Market value, end of period $ 13.10
================================================================================
Total investment return /(b)/
Net asset value 0.42%
Market value -12.67%
Ratios and supplemental data
Net assets, end of period (thousands) $221,759
Ratio of expenses to average net assets /(c)/ 0.96%
Ratio of net investment income to average net assets /(c)/ 3.35%
Portfolio turnover rate 24%
* Commencement of investment operations.
/(a)/ Before reimbursement of offering expenses charged to capital.
/(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 or market price per
share. Dividends and distributions are assumed to be reinvested in
accordance with the Fund's dividend reinvestment plan. Total investment
return does not reflect brokerage commissions. A return calculated for a
period of less than one year is not annualized.
/(c)/ Annualized.
See notes to financial statements.
12 | SemiAnnual Report | June 30, 2004
TS&W/Claymore Tax-Advantaged Balanced Fund
Notes to Financial Statements | June 30, 2004(unaudited)
Note 1 - Organization:
TS&W/Claymore Tax-Advantaged Balanced Fund (the "Fund") was organized as a
Delaware statutory trust on February 12, 2004. The Fund is registered as a
diversified, closed-end management investment company under the Investment
Company Act of 1940, as amended, and Securities Act of 1933, as amended.
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 accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
these estimates.
The following is a summary of significant accounting policies consistently
followed by the Fund.
(a) Valuation of Investments
Readily marketable portfolio securities listed on the New York Stock Exchange
are generally valued at the last sale price at the close of the New York Stock
Exchange. If no sales are reported, the securities are valued at the mean of the
closing bid and asked prices on such day. If no bid or asked prices are quoted
on such day, then the security is valued by such method as the Fund's Board of
Trustees shall determine in good faith to reflect its fair market value. Readily
marketable securities not listed on the New York Stock Exchange but listed on
other domestic or foreign securities exchanges or trading on the National
Association of Securities Dealers Automated Quotations, Inc. ("NASDAQ") National
List are valued in a similar manner. Portfolio securities traded on more than
one securities exchange are valued at the last sale price at the close of the
exchange representing the principal market for such securities.
Readily marketable securities traded in the over-the-counter market, including
listed securities whose primary market is believed by the Advisor to be
over-the-counter, but excluding securities admitted to trading on the NASDAQ
National List, are valued at the mean of the current bid and asked prices as
reported by NASDAQ or such other comparable source as the Fund's Trustees deem
appropriate to reflect fair market value. However, certain fixed-income
securities may be valued on the basis of prices provided by a pricing service
when such prices are believed by the Trustees to reflect the fair market value
of such securities. Where securities are traded on more than one exchange and
also over-the-counter, the securities will generally be valued using the
quotations the Trustees believe reflect most closely the value of such
securities.
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 current exchange rates. The Fund values all
other types of securities and assets, including restricted securities and
securities for which market quotations are not readily available, by a method
that the Trustees of the Fund believe accurately reflects fair value. The Fund's
securities which 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 the Common Shares on the NYSE.
The Fund values certain securities on the basis of bid quotations from
independent pricing services or principal market makers, or, if quotations are
not available, by the method that the Board of Trustees believes accurately
reflects fair value. The Fund periodically verifies valuations provided by the
pricing services. Short-term securities with remaining maturities of less than
60 days may be valued at cost which, when combined with interest earned,
approximates market value.
(b) Investment Transactions and Investment Income
Investment transactions are accounted for on the trade date. Realized gains and
losses on investments are determined on the identified cost basis. Dividend
income is recorded net of applicable withholding taxes on the ex-dividend date
and interest income is recorded on an accrual basis. Discounts or premiums on
debt securities purchased are accreted or amortized to interest income over the
lives of the respective securities using the effective interest method.
(c) Swaps
A swap is an agreement to exchange the return generated by one instrument for
the return generated by another instrument. The Fund may enter into swap
agreements to manage its exposure to interest rates and credit risk or to manage
the duration of its portfolio. Dividends and interest on the securities in the
swap are included in the value of the exchange. 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 Statements of Assets and Liabilities.
The Fund entered into interest rate swap agreements during the period ended June
30, 2004. The Fund generally invests in these interest rate swap transactions in
order to manage the duration of the Municipal Securities Portfolio. Details of
the swap agreements outstanding as of June 30, 2004 were as follows:
Notional
Termination Amount Fixed Floating Unrealized
Counterparty Date (000) Rate Rate Depreciation
- -----------------------------------------------------------------------------
Morgan Stanley (a) 08/12/04 $17,200 4.665% 3 Month Libor $(533,412)
- -----------------------------------------------------------------------------
(a) Fund pays the floating rate plus a spread and receives the fixed rate.
(d) Other
In the normal course of business, the Fund enters into contracts that provide
general indemnifications. The Fund's maximum exposure under these arrangements
is dependent upon claims that may be made against the Fund in the future and,
therefore, cannot be estimated; however, the risk of material loss from such
claims is considered remote.
SemiAnnual Report | June 30, 2004 | 13
TS&W/Claymore Tax-Advantaged Balanced Fund | Notes to Financial Statements
(unaudited) continued
Note 3 - Investment Advisory Agreement, Investment Sub-Advisory Agreement and
Other Agreements:
Pursuant to an Investment Advisory Agreement (the "Agreement") between the
Advisor and the Fund, the Advisor 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. In addition to serving
as investment adviser of the Fund, the Advisor will provide day-to-day portfolio
management of the Fund's assets allocated to the Municipal Securities Portfolio.
The Advisor will receive a fee, payable monthly, at an annual rate equal to .70%
of the Fund's average daily managed assets (total assets, including the assets
attributable to the proceeds from any financial leverage, minus liabilities,
other than debt representing financial leverage).
The Advisor has entered into an Investment Sub-Advisory agreement with
Thompson, Siegel & Walmsley, Inc., the "Sub-Advisor", to act as the investment
sub-adviser 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
investment sub-advisory agreement between the Advisor and the Sub-Advisor, the
Advisor pays monthly to the Sub-Advisor a fee at the annual rate of .42% of the
Fund's average managed assets attributable to the Equity and Income Securities
Portfolio.
The Bank of New York ("BNY") acts as the Fund's custodian, administrator and
transfer agent. As custodian, BNY is responsible for the custody of the Fund's
assets. As Administrator, BNY is responsible for maintaining the books and
records of the Fund's securities and cash. As transfer agent, BNY is responsible
for performing transfer agency services for the Fund.
Note 4 - Federal Income Taxes:
The Fund intends to comply with the requirements 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.
At June 30, 2004, the cost and related gross unrealized appreciation and
depreciation for tax purposes are as follows:
Gross Gross Net Unrealized
Cost of Unrealized Unrealized Appreciation on
Investments Appreciation Depreciation Investments
- ------------------------------------------------------------
$232,490,796 $4,011,315 $(1,713,596) $2,297,719
- ------------------------------------------------------------
Note 5 - Investment in Securities:
For the period ended June 30, 2004, purchases and sales of investments, other
than short-term securities, were $293,251,715 and $60,275,252, respectively.
Note 6 - Capital:
In connection with its organizational process, The Fund sold 7,000 common shares
of beneficial interest to the Advisor for consideration of $100,275.
The Fund issued 15,000,000 common shares of beneficial interest in its initial
public offering. These shares were all issued at $14.325 per share after
deducting the sales load but before a reimbursement of expenses to the
underwriters of $0.005 per share. In connection with the initial public offering
of the Fund's common shares, the underwriters were granted an option to purchase
additional common shares. On May 18, 2004, the underwriters purchased, at a
price of $14.325 per common share (after deducting the sales load but before
underwriters' expense reimbursement), 400,000 common shares of the Fund pursuant
to this over-allotment option.
Offering costs, estimated at $462,000 or $0.03 per share, in connection with the
issuance of the common shares have been borne by the Fund and were charged to
paid-in-capital. The Advisor has agreed to pay offering expenses (other than the
sales load, but including the reimbursement of expenses to the underwriters) in
excess of $0.03 per common share. The Advisor has also agreed to pay the Fund's
organizational expenses, which are estimated at $25,000.
Note 7 - Subsequent Events:
(a) 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. Offering
costs, including the 1% sales charge associated with the issuance of preferred
shares, estimated at $1,550,000, will be borne by the common shareholders as a
direct reduction to paid-in-capital.
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.
Distributions of net realized capital gains, if any, are paid annually.
The Fund is subject to certain limitations and restrictions while Preferred
Shares are outstanding. Failure to comply with these limitations and
restrictions could preclude the Fund from declaring any dividends or
distributions to common shareholders or repurchasing common shares and/or could
trigger the mandatory redemption on Preferred Shares at their liquidation value.
Preferred Shares, which are entitled to one vote per share, generally vote with
the common shares but vote separately as a class to elect two Trustees and on
any matters affecting the rights of the Preferred Shares.
(b) Distribution
The Fund has adopted a policy of paying quarterly distributions on its Common
Shares at a rate that represents a fixed percentage of the initial public
offering price on an annualized basis, and an additional distribution on an
annual basis of any realized income and/or gains in excess of the quarterly
distributions for that year. This quarterly dividend was declared by the Board
of Trustees on July 1, 2004, at a rate of $0.234375 per common share and is
payable on August 31, 2004 to shareholders of record on August 13, 2004.
14 | SemiAnnual Report | June 30, 2004
TS&W/Claymore Tax-Advantaged Balanced Fund
Supplemental Informationl | (unaudited)
Trustees
The trustees of the TS&W/Claymore Tax-Advantaged Fund and their principal
occupations during the past five years:
Name, Address*, Age Term of Office Principal Occupation during Other Directorships
and Position(s) held and Length of the Past Five Years and Held by
with Registrant Time Served Other Affiliations Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Independent Trustees:
- --------------------------------------------------------------------------------------------------------------------------------
Robert M Hamje Since 2004 Formerly, Advisor to the Cleveland Foundation
Age:61 Investment Committee. Formerly, President and
Trustee Chief Investment Officer of TRW Investment
Management Company (1990-2003).
- --------------------------------------------------------------------------------------------------------------------------------
L. Kent Moore Since 2004 Formerly, Portfolio Manager and Vice
Age:46 President of Janus Capital Corp.(2000-2002)
Trustee and Senior Analyst/Portfolio Manager of
Marisco Capital Management (1997-1999).
- --------------------------------------------------------------------------------------------------------------------------------
Ronald A. Nyberg Since 2004 Founding partner of Nyberg & Gustafson, a law Trustee, Advent Claymore
Age:50 firm specializing in Corporate Law, Estate Convertible Securities and Income
Trustee Planning and Business Transactions from Fund, MBIA Capital/Claymore Managed
2000-present. Formerly, Executive Vice Duration Investment Grade Municipal
President, General Counsel and Corporate Income Fund, Western Asset/Claymore
Secretary of Van Kampen Investments U.S. Treasury Inflation Protected
(1982-1999). Edward Hospital Foundation, Securities Fund, Dreman/Claymore
Naperville, IL. Trustee North Park Dividend & Income Fund and Western
University, Chicago. Treasury Inflation Protected
Securities Fund 2.
- --------------------------------------------------------------------------------------------------------------------------------
Ronald E. Toupin, Jr. Since 2004 Formerly, Vice President, Manager and Trustee, Advent Claymore
Age:46 Portfolio Manager of Nuveen Asset Convertible Securities and Income
Trustee Management (1998-1999), Vice President of Fund, MBIA Capital/ Claymore
Nuveen Investment Advisory Corporation Managed Duration Investment Grade
(1992-1999), Vice President and Manager Municipal Fund, Western
of Nuveen Unit Investment Trusts Asset/Claymore U.S. Treasury
(1991-1999), and Assistant Vice President Inflation Protected Securities
and Portfolio Manager of Nuveen Unit Fund, Dreman/Claymore Dividend &
Investment Trusts (1988-1999), each of Income Fund and Western
John Nuveen & Company, Inc. (1982-1999). Asset/Claymore U.S. Treasury
Inflation Protected Securities Fund
2.
- --------------------------------------------------------------------------------------------------------------------------------
Interested Trustees:
- --------------------------------------------------------------------------------------------------------------------------------
Nicholas Dalmaso Since 2004 Senior Managing Director and General Trustee, Advent Claymore
Age:39 Counsel of Claymore Advisors, LLC and Convertible Securities and Income
Trustee and Chief Legal Claymore Securities, Inc. Fund, Dreman/Claymore Dividend &
and Executive Officer (2001-present). Manager, Claymore Fund Income Fund, MBIA Capital/Claymore
Management Company, LLC, Formerly, Managed Duration Investment Grade
Assistant General Counsel, John Nuveen Municipal Fund, Western
and Company, Inc. (1999-2000). Former Asset/Claymore U.S. Treasury
Vice President and Associate General Inflation Protected Securities
Counsel of Van Kampen Investments, Inc. Fund, Flaherty & Crumrine/Claymore
(1992-1999). Preferred Securities & Income Fund,
Inc., Flaherty & Crumrine /
Claymore Total Return Fund and
Western Asset/Claymore U.S.
Treasury Inflation Protected
Securities Fund 2.
- --------------------------------------------------------------------------------------------------------------------------------
Scott F. Powers Since 2004 Chief Executive Officer of Old Mutual Director, Acadian Asset Management,
200 Clarendon Street T-53 (U.S.) Holdings Inc., Chief Executive Inc., Analytic Investors, Inc.,
Boston, MA 02116 Officer of Old Mutual Asset Managers Barrow Hanley, Mewhinney & Strauss,
Age: 44 (U.S.) LLC. Prior to 2001, Executive Inc., Dwight Asset Management
Trustee Vice President of Swales and Marketing Company, eSecLending LLC, Integra
and Product Development at Mellon Capital Financial Corporation,
Institutional Asset Management, Chief Integra Capital Quebec Corporation
Operating Officer and head of marketing Old Mutual Asset Managers(US)
and client service for The Boston Holdings, Inc., Pilgrim Baxter &
Company Asset Management (1989-1999). Associates, Ltd., Provident
Financial Advisor for Dean Witter Investment Counsel, Inc., Rogge
(1985-1989). Global Partners plc, Thompson,
Siegel & Walmsley, Inc., United
Investments Co., Ltd. And UAM
(Japan) Inc.
- --------------------------------------------------------------------------------------------------------------------------------
*Address for all Trustees unless otherwise noted: 2455 Corporate West Drive,
Lisle, IL 60532
SemiAnnual Report | June 30, 2004 | 15
TS&W/Claymore Tax-Advantaged Balanced Fund
Dividend Reinvestment Plan |
Unless the registered owner of common shares elects to receive cash by
contacting the Plan Administrator, all dividends declared on common shares of
the Fund will be automatically reinvested by the Bank of New York (the "Plan
Administrator"), Administrator for shareholders in the Fund's Dividend
Reinvestment Plan (the "Plan"), in additional common shares of the Fund.
Participation in the Plan is completely voluntary and may be terminated or
resumed at any time without penalty by notice if received and processed by the
Plan Administrator prior to the dividend record date; otherwise such termination
or resumption will be effective with respect to any subsequently declared
dividend or other distribution. Some brokers may automatically elect to receive
cash on your behalf and may re-invest that cash in additional common shares of
the Fund for you. If you wish for all dividends declared on your common shares
of the Fund to be automatically reinvested pursuant to the Plan, please contact
your broker.
The Plan Administrator will open an account for each common shareholder under
the Plan in the same name in which such common shareholder's common shares are
registered. Whenever the Fund declares a dividend or other distribution
(together, a "Dividend") payable in cash, non-participants in the Plan will
receive cash and participants in the Plan will receive the equivalent in common
shares. The common shares will be acquired by the Plan Administrator for the
participants' accounts, depending upon the circumstances described below, either
(i) through receipt of additional unissued but authorized common shares from the
Fund ("Newly Issued Common Shares") or (ii) by purchase of outstanding common
shares on the open market ("Open-Market Purchases") on the New York Stock
Exchange or elsewhere. If, on the payment date for any Dividend, the closing
market price plus estimated brokerage commission per common share is equal to or
greater than the net asset value per common share, the Plan Administrator will
invest the Dividend amount in Newly Issued Common Shares on behalf of the
participants. The number of Newly Issued Common Shares to be credited to each
participant's account will be determined by dividing the dollar amount of the
Dividend by the net asset value per common share on the payment date; provided
that, if the net asset value is less than or equal to 95% of the closing market
value on the payment date, the dollar amount of the Dividend will be divided by
95% of the closing market price per common share on the payment date. If, on the
payment date for any Dividend, the net asset value per common share is greater
than the closing market value plus estimated brokerage commission, the Plan
Administrator will invest the Dividend amount in common shares acquired on
behalf of the participants in Open-Market Purchases.
If, before the Plan Administrator has completed its Open-Market Purchases, the
market price per common share exceeds the net asset value per common share, the
average per common share purchase price paid by the Plan Administrator may
exceed the net asset value of the common shares, resulting in the acquisition of
fewer common shares than if the Dividend had been paid in Newly Issued Common
Shares on the Dividend payment date. Because of the foregoing difficulty with
respect to Open-Market Purchases, the Plan provides that if the Plan
Administrator is unable to invest the full Dividend amount in Open-Market
Purchases during the purchase period or if the market discount shifts to a
market premium during the purchase period, the Plan Administrator may cease
making Open-Market Purchases and may invest the uninvested portion of the
Dividend amount in Newly Issued Common Shares at net asset value per common
share at the close of business on the Last Purchase Date provided that, if the
net asset value is less than or equal to 95% of the then current market price
per common share; the dollar amount of the Dividend will be divided by 95% of
the market price on the payment date.
The Plan Administrator maintains all shareholders' accounts in the Plan and
furnishes written confirmation of all transactions in the accounts, including
information needed by shareholders for tax records. Common shares in the account
of each Plan participant will be held by the Plan Administrator on behalf of the
Plan participant, and each shareholder proxy will include those shares purchased
or received pursuant to the Plan. The Plan Administrator will forward all proxy
solicitation materials to participants and vote proxies for shares held under
the Plan in accordance with the instruction of the participants.
There will be no brokerage charges with respect to common shares issued directly
by the Fund. However, each participant will pay a pro rata share of brokerage
commission incurred in connection with Open-Market Purchases. The automatic
reinvestment of Dividends will not relieve participants of any Federal, state or
local income tax that may be payable (or required to be withheld) on such
Dividends.
The Fund reserves the right to amend or terminate the Plan. There is no direct
service charge to participants with regard to purchases in the Plan; however,
the Fund reserves the right to amend the Plan to include a service charge
payable by the participants.
All correspondence or questions concerning the Plan should be directed to the
Plan Administrator, The Bank of New York, 2 Hanson Place, Brooklyn, NY 11217,
Attention: Irina Krylov, Phone Number: (718) 315-4818
16 | SemiAnnual Report | June 30, 2004
TS&W/Claymore Tax-Advantaged Balanced Fund
Fund Information
Board of Trustees Investment Manager
Nicholas Dalmaso Thompson, Siegel & Walmsley, Inc.
Richmond, Virginia
Robert M. Hamje
Investment Adviser
L. Kent Moore Claymore Advisors, LLC
Lisle, Illinois
Ronald A. Nyberg
Administrator, Custodian and
Scott F. Powers Transfer Agent
The Bank of New York
Ronald E. Toupin, Jr. New York, New York
Officers Preferred Stock - Dividend Paying Agent
Nicholas Dalmaso The Bank of New York
Chief Executive and Legal Officer New York, New York
Steven M. Hill Legal Counsel
Chief Financial Officer and Treasurer Skadden, Arps, Slate, Meagher & Flom LLP
Chicago, Illinois
Heidemarie Gregoriev
Secretary Independent Registered
Public Accounting Firm
Vincent R. Giordano Ernst & Young LLP
Vice President Chicago, Illinois
George Gregorio
Vice President
Anne S. Kochevar
Vice President
Roberto W. Roffo
Vice President
Privacy Principles of TS&W/Claymore Tax-Advantaged Balanced Fund for
Shareholders
The Fund is committed to maintaining the privacy of 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 nonpublic personal information relating
to its shareholders, although certain nonpublic personal information of its
shareholders may become available to the Fund. The Fund does not disclose any
nonpublic 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 nonpublic 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 nonpublic personal information of its
shareholders.
Questions concerning your shares of TS&W/Claymore Tax-Advantaged Balanced Fund?
.. If your shares are held in a Brokerage Account, contact your Broker.
.. If you have physical possession of your shares in certificate form, contact
the Fund's Administrator, Custodian and Transfer Agent:
The Bank of New York, 101 Barclay Street, New York, New York 10286
1-800-701-8178
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 1-800-345-7999 or on the U.S. Securities and Exchange Commission's
website at http://www.sec.gov
SemiAnnual Report | June 30, 2004 | 17
Claymore Securities, Inc. [LOGO] TYW
2455 Corporate West Drive LISTED
Lisle, IL 60532 NYSE
TYW-SAR-0604
ITEM 2. CODE OF ETHICS.
Not applicable for a semi-annual reporting period.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable for a semi-annual reporting period.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable for a semi-annual reporting period.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable for a semi-annual reporting period.
ITEM 6. SCHEDULE OF INVESTMENTS.
The Schedule of Investments is included as part of Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable for a semi-annual reporting period.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
None
ITEM 9. 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 10. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial
officer have evaluated the registrant's disclosure controls and procedures
within 90 days of this filing and have concluded 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 timely.
(b) The registrant's principal executive officer and principal financial
officer are aware of no change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent fiscal
half-year that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting.
ITEM 11. EXHIBITS.
(a) (1) Not required
(a) (2) The certifications required by Rule 30a-2(a) under the
Investment Company Act of 1940, as amended, (the "Act") (17CFR
270.30a-2(a)) are attached hereto.
(a) (3) None
(b) The certifications required by Rule 30a-2(b) under the Act (17 CFR
270.30a-2(b)) and Section 906 of the Sarbanes-Oxley Act of 2002 are
attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) TS&W / Claymore Tax-Advantaged Balanced Fund
By: /s/ Nicholas Dalmaso
----------------------------------
Name: Nicholas Dalmaso
Title: Chief Legal and Executive Officer
Date: 9/03/04
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ Nicholas Dalmaso
----------------------------------
Name: Nicholas Dalmaso
Title: Chief Legal and Executive Officer
Date: 9/03/04
By: /s/ Steven M. Hill
----------------------------------
Name: Steven M. Hill
Title: Treasurer and Chief Financial Officer
Date: 9/03/04