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
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811-21403
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Western Asset/Claymore Inflation-Linked
Securities & Income Fund
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(Exact name of registrant as
specified in charter)
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385 East Colorado Boulevard, Pasadena, CA
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91101
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(Address of principal executive
offices)
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(Zip code)
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Robert I. Frenkel, Esq.
Legg Mason & Co., LLC
100 First Stamford Place
Stamford, CT 06902
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(Name and address of agent for
service)
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Registrants telephone number, including
area code:
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(888) 777-0102
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Date of fiscal year end:
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December 31
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Date of reporting period:
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December 31,
2009
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ITEM 1.
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REPORT TO STOCKHOLDERS.
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The
Annual
Report to Stockholders is filed
herewith.
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Western
Asset/Claymore Inflation-Linked Securities & Income Fund
New York
Stock Exchange Symbol: WIA
Commentary
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Letter to Shareholders
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ii
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Investment Commentary
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iv
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Annual Report to Shareholders
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Managements Discussion of Fund Performance
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1
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Fund Highlights
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3
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Portfolio Diversification
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6
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Spread Duration
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7
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Effective Duration
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8
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Portfolio of Investments
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9
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Financial Statements
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15
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Notes to Financial Statements
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20
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Report of Independent Registered Public Accounting
Firm
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31
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Important Tax Information
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32
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Trustees and Officers
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33
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Trustee Consideration of the Management and
Advisory Agreements
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37
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For more information, visit us on
the web
at www.claymore.com/wia.
Dear
Shareholder:
We thank you for your investment in Western
Asset/Claymore Inflation-Linked Securities & Income Fund (the Fund).
As investment adviser for the Fund, we are pleased to submit the Funds
shareholder report for the twelve months ended December 31, 2009.
For the twelve months ended December 31,
2009, Western Asset/Claymore Inflation-Linked Securities & Income Fund
returned 16.39% based on its net asset value (NAV)
i
and 18.51% based on its New York Stock Exchange
(NYSE) market price per share. The Funds unmanaged benchmarks, the Barclays
U.S. Government Inflation-Linked 1-10 Year Index
ii
and the Barclays U.S. Government
Inflation-Linked All Maturities Index
iii
, returned 11.14% and 10.48%, respectively,
over the same time frame.
During 2009, the Fund provided its investors
with monthly distributions of $0.046 per share in January and February and
monthly distributions of $0.038 per share in each month from March through
December.
The Fund outperformed its benchmarks during
the period as the overall bond market rallied and investor risk appetite
increased. The largest contributor to the Funds relative performance for the
period was its allocation to investment grade corporate bonds, as spreads
narrowed during the reporting period. In particular, our holdings in the
Industrials and Financials sectors generated strong returns. Within the
investment grade sector, Energy company
Hess
Corp.
, Media companies
Comcast
Corp.
and
Time Warner Inc.
and
Financials firms
SLM Corp.
and
JPMorgan Chase and Co.
were significant
contributors. Our exposure to several fallen angels (investment grade
corporate bonds that were subsequently downgraded to non-investment grade
status) also contributed to performance. Within this area, the Funds holdings
in
General Motors Corp.
and
Ford Motor Co.
produced strong returns.
Also significantly contributing to performance
was the Funds holdings of U.S. Treasury Inflation-Protected Securities
(TIPS)
iv
. At times
during the reporting period, we boosted our TIPS exposure through the use of
leverage. Elsewhere, our exposure to structured mortgage-backed securities
(MBS), namely collateralized mortgage obligations, was also rewarded.
Somewhat detracting from results was the
Funds holding of a Citigroup Depositary Receipt, which performed poorly.
The Funds investment objective is to provide
current income. Capital appreciation, when consistent with current income, is a
secondary objective. Under normal market conditions, the Fund will invest:
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At
least 80% of its total managed assets in inflation-linked securities
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At
least 60% of its total managed assets in U.S. Treasury Inflation
Protected-Securities (TIPS)
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No more than 40% of its total managed assets in
non-U.S. dollar investments, which gives the Fund the flexibility to invest
up to 40% of its total managed assets in non-U.S. dollar inflation-linked
securities (no more than 20% of its non-U.S. dollar exposure may be unhedged)
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The Fund continues its policy of not investing
in bonds that are below investment grade quality at the time of purchase. Up to
20% of the Funds portfolio securities may represent corporate debt securities
of investment grade quality at the time of their purchase that are not
inflation-linked securities. The Fund currently expects that the average
effective duration
v
of its
portfolio will range between zero and fifteen years, although this target
duration may change from time to time. The Fund expects to continue its use of
credit default swaps.
On July 17, 2009, Claymore Group Inc.,
the parent of Claymore Securities, Inc. (the Servicing Agent), 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, 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 Servicing Agent, became indirect,
The Letter
to Shareholders is not a part of the Annual Report to Shareholders.
ii
wholly-owned subsidiaries of Guggenheim. The
transaction has not affected the daily operations of the Fund or the services
provided by the Servicing Agent.
The servicing agreement for the Fund
automatically terminated as a result of the Guggenheim transaction. The Funds
Board of Trustees considered and approved a new servicing agreement for the
Fund; however, shareholder approval of the new agreement is not required.
Shareholders have the opportunity to reinvest
their dividends from the Fund through the Dividend Reinvestment Plan (DRIP),
which is described in detail on page 4 of this report. If shares are
trading at a discount to NAV, the DRIP takes advantage of the discount by
reinvesting the monthly 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 Funds 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.
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 Funds website at www.claymore.com/wia.
Sincerely,
Western
Asset Management Company
January 20,
2010
i
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Net asset value (NAV) is calculated by subtracting
total liabilities and outstanding preferred stock (if any) from the closing
value of all securities held by the Fund (plus all other assets) and dividing
the result (total net assets) by the total number of the common shares
outstanding. The NAV fluctuates with changes in the market prices of securities
in which the Fund has invested. However, the price at which an investor may
buy or sell shares of the Fund is the Funds market price as determined by
supply of and demand for the Funds shares.
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ii
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The Barclays U.S. Government Inflation-Linked 1-10
Year Index measures the performance of the intermediate U.S. TIPS market.
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iii
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The Barclays U.S. Government Inflation-Linked All
Maturities Index measures the performance of the U.S. TIPS market. The Index
includes TIPS with one or more years remaining maturity with total
outstanding issue size of $500 million or more.
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iv
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U.S. Treasury Inflation-Protected Securities
(TIPS) are inflation-indexed securities issued by the U.S. Treasury in
five-year, ten-year and twenty-year maturities. The principal is adjusted to
the Consumer Price Index, the commonly used measure of inflation. The coupon
rate is constant, but generates a different amount of interest when
multiplied by the inflation-adjusted principal.
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v
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Duration is the measure of the
price sensitivity of a fixed-income security to an interest rate change of
100 basis points. Calculation is based on the weighted average of the present
values for all cash flows.
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The Letter
to Shareholders is not a part of the Annual Report to Shareholders.
iii
Western
Asset/Claymore Inflation-Linked Securities & Income Fund
Financial Market Overview
While 2008 was characterized by upheaval in
the financial markets, periods of extreme volatility, illiquidity and
heightened risk aversion, 2009 was largely a return to more normal conditions
and increased investor risk appetite.
Looking back at the tail end of 2008,
investors fled fixed-income securities that were seen as being risky and
flocked to the relative safety of short-term Treasuries, driving the latters
prices higher and their yields to historically low levels. In contrast,
non-Treasury spreads widened to historically wide levels in some cases, as the
market priced in worst-case scenarios. This caused nearly every spread sector
to lag equal-duration
i
Treasuries
during the year. While this trend continued in early 2009, some encouraging
economic data and a thawing of the once frozen credit markets helped bolster
investor confidence.
In a stunning turnaround, by the end of the
first quarter of 2009, risk aversion had been replaced by robust demand for
riskier, and higher-yielding, fixed-income securities. Despite some temporary
setbacks, riskier assets continued to perform well during the remainder of the
year. Looking at 2009 as a whole, every spread sector outperformed
equal-duration Treasuries.
While economic news often surprised on the
upside during 2009, incoming economic data did not suggest a dramatic rebound
in growth in 2010. As such, the Federal Reserve Board (Fed)
ii
continued its
accommodative monetary policy during 2009. The Fed met eight times in 2009 and,
on each occasion, kept the federal funds rate
iii
in a range of 0 to 1/4 percent. This
trend continued at the Feds meeting in January 2010. At that time, the
Fed said that it will maintain the target range for the federal funds rate at
0 to 1/4 percent and continues to anticipate that economic conditions,
including low rates of resource utilization, subdued inflation trends, and
stable inflation expectations, are likely to warrant exceptionally low levels
of the federal funds rate for an extended period.
Economic Review
While the U.S. economy was weak during the
first half of the twelve-month reporting period ended December 31, 2009,
the lengthiest recession since the Great Depression finally appeared to have
ended during the second half of the year.
Looking back, the U.S. Department of Commerce
reported that first quarter 2009 U.S. gross domestic product (GDP)
iv
contracted 6.4%. The economic environment then
started to get relatively better during the second quarter, as GDP fell 0.7%.
The economys more modest contraction was due, in part, to smaller declines in
both exports and business spending. After contracting four consecutive
quarters, the Commerce Department reported that third quarter 2009 GDP growth
was 2.2%. A variety of factors helped the economy to expand, including the
governments $787 billion stimulus program, its Cash for Clunkers car rebate
program, which helped spur an increase in car sales, and tax credits for
first-time home buyers. Economic growth then accelerated during the fourth
quarter of 2009, as the advance estimate for GDP growth was 5.7%. The Commerce
Department cited a slower drawdown in business inventories and consumer
spending as contributing factors spurring the economys higher growth rate.
Even before GDP advanced in the third quarter,
there were signs that the economy was starting to regain its footing. The
manufacturing sector, as measured by the Institute for Supply Managements PMI
v
, rose to 52.9 in August 2009,
the first time it surpassed 50 since January 2008 (a reading below 50
indicates a contraction, whereas a reading above 50 indicates an expansion).
PMI data subsequently showed that manufacturing expanded from September through
December as well. In addition, Decembers PMI reading of 55.9 was the
highest since April 2006.
There were some mixed signals from the housing
market toward the end of the reporting period. According to its most recent
data, the S&P/Case-Shiller Home Price Index
vi
indicated that month-over-month home prices
rose for the sixth straight month in November. However, according to the
National Association of Realtors, while existing home sales rose 7.4% in
November, sales fell by nearly 17% in December.
One area that remained weakand could hamper
the magnitude of economic recoverywas the labor market. While monthly job
losses have moderated compared to earlier in the year, the unemployment rate
remained elevated during the reporting period. After reaching a twenty-six-year
high of 10.1% in October 2009, the unemployment rate fell to 10.0% in November and
remained unchanged the following month. Since December 2007, the
unemployment rate has more than doubled and the number of unemployed workers
has risen by more than eight million.
The
Investment Commentary is not a part of the Annual Report to Shareholders.
iv
Market Review
Both short- and long-term Treasury yields
fluctuated during the reporting period. When the period began, Treasury yields
were extremely low, given numerous flights to quality that were triggered by
the fallout from the financial crisis in 2008. After starting the period at 0.76%
and 2.25%, respectively, two- and ten-year Treasury yields then generally moved
higher (and their prices lower) until early June. Two- and ten-year yields
peaked at 1.42% and 3.98%, respectively, before falling and ending the
reporting period at 1.14% and 3.85%, respectively. Over the twelve months ended
December 31, 2009, longer-term yields moved higher than their shorter-term
counterparts as economic data improved and there were concerns regarding future
inflation given the governments massive stimulus program. In a reversal from
2008, investor risk aversion faded during the twelve-month reporting period,
driving spread sector (non-Treasury) prices higher. For the twelve months ended
December 31, 2009, the Barclays Capital U.S. Aggregate Index
vii
returned 5.93%.
During the reporting period, there was a shift
in terms of expectations for inflation. Fears of inflation had increased in
mid-2008 (before the reporting period began). This was, in part, due to sharply
rising oil prices, which peaked at $145 a barrel in July 2008. Fears of
inflation were then replaced with fears of deflation, as global economic
conditions weakened and the financial crisis took hold in the fall of 2008. By
the end of 2008, oil prices had fallen to $45 a barrel as demand waned and oil
reserves moved higher. While inflation, as measured by the Consumer Price Index
for All Urban Consumers (CPI-U)
viii
, was 2.7% during the twelve-month period
ended December 31, 2009, there were fears of higher inflation in the
future. This was due to central banks accommodative monetary policies, signs
that the global economy was recovering and rising oil prices, which hit $79 a
barrel in December 2009. Inflation expectations led to increased demand
for U.S. Treasury Inflation-Protected Securities (TIPS)
ix
, and the Barclays Capital
Global Real Index: U.S. TIPS
x
gained 11.41% during the twelve months ended December 31,
2009.
The investment grade bond market generated
solid results during the reporting period. Spreads on these securities had moved
to extremely wide levels in late 2008, as the weakening economy and credit
crunch triggered fears of escalating default rates. Investment grade bond
spreads then significantly narrowed in 2009, as the economic environment
improved and corporate profits were often better than expected. All told, the
investment grade bond asset class, as measured by the Barclays Capital U.S.
Credit Index
xi
, returned
16.04% during the twelve-month period ended December 31, 2009.
In the mortgage-backed securities market, both
agency and non-agency issues did well during the year. Agencies were supported
by the governments purchase programs of these securities as they sought to
keep long-term interest rates low in an attempt to revive the housing market.
The non-agency sector improved, particularly later in the year, as housing data
stabilized and there was positive sentiment surrounding the launch of the
Public-Private Investment Program (PPIP).
The high-yield bond market produced very
strong results during the twelve months ended December 31, 2009. In sharp
contrast to its poor results in 2008, the asset class posted positive returns
during eleven of the twelve months of the reporting period. This strong rally
was due to a variety of factors, including the unfreezing of the credit
markets, improving economic data and strong investor demand. All told, the
Barclays Capital U.S. Corporate High Yield 2% Issuer Cap Index
xii
returned 58.76% for the
twelve months ended December 31, 2009.
Emerging market debt prices rallied sharplyposting
positive returns during every month but February of 2009. This rally was
triggered by rising commodity prices, optimism that the worst of the global
recession was over and increased investor risk appetite. Over the twelve months
ended December 31, 2009, the JPMorgan Emerging Markets Bond Index Global
(EMBI Global)
xiii
returned
28.18%.
Market Outlook
Some economists have floated the notion of a
double-dip economic recession because of the expiration of various fiscal and
monetary stimulus programs. However, we believe this economic phenomenon seems
unlikely. As long as the Fed maintains the current low rate environment, which
we believe it will, access to credit should remain sufficient. Given the
elevated levels of unemployment, the recent dip in jobless claims is a positive
sign that the labor market is stabilizing. The financial market is focused on
consumer spending, but we believe more sustained gains in capital expenditures
and exports will be key to the U.S. recovery.
We believe that the Fed is likely to keep the
federal funds rate anchored at 0 to 1/4 percent in the near future. A large
concern the Fed now faces is excess bank reserves. Government support from the
Troubled Asset Relief Program (TARP) and the Feds various special liquidity
programs helped banks restore their balance sheets, but banks then held on to
reserves in excess of their capital
The
Investment Commentary is not a part of the Annual Report to Shareholders.
v
requirements. As the recovery accelerates, banks may
quickly reduce these excess reserves by extending credit. We believe increased
lending should stimulate economic activity but, in doing so, might also
contribute to inflationary pressures. Therefore, as the Fed manages the level
of bank reserves, in our opinion, it must be careful not to inhibit economic
growth and increase inflation. As long as the economic recovery is still in its
infancy, we believe the Fed should continue its current policies.
Although the labor market is stabilizing, the
declining trend in jobless claims reflects a drop-off in layoffs rather than an
increase in hires. For unemployment to truly decline, we will need to see
specific types of job growth. We believe the source of new job growth will
probably have to come from the service sector, as the housing market remains
weak and is unlikely to contribute significant new jobs any time soon. The
recent increase in industrial production and capacity utilization indicates
that factory-related jobs could increase in the coming year.
Despite an uptick in consumer spending in
November, most likely due to the holidays, we think consumers will likely
continue to demonstrate a more conservative mindset with increased savings and
less consumption. Businesses, especially those that are export-oriented, should
benefit from a lower U.S. dollar and increased future spending. Corporate
profits in the fourth quarter of 2009 showed improvement, leading to a better
outlook for the business sector compared to a year ago. Therefore, we think
that businesses, rather than consumers, are likely to be the primary
contributors to future economic growth. Considering current Fed policies, the
likelihood of moderate inflation in the months ahead, a stabilizing labor
market and an improved business climate, we find fears of a double-dip
recession to be exaggerated.
Western
Asset Management Company
January 29,
2010
All index performance reflects no
deduction for fees, expenses or taxes. Please note that an investor cannot
invest directly in an index.
i
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Duration is the measure of the price sensitivity of
a fixed-income security to an interest rate change of 100 basis points.
Calculation is based on the weighted average of the present values for all
cash flows.
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ii
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The Federal Reserve Board (Fed) is responsible for
the formulation of policies designed to promote economic growth, full
employment, stable prices and a sustainable pattern of international trade
and payments.
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iii
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The federal funds rate is the rate charged by one
depository institution on an overnight sale of immediately available funds
(balances at the Federal Reserve) to another depository institution; the rate
may vary from depository institution to depository institution and from day
to day.
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iv
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Gross domestic product (GDP) is the market value
of all final goods and services produced within a country in a given period
of time.
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v
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The Institute for Supply Managements PMI is based
on a survey of purchasing executives who buy the raw materials for
manufacturing at more than 350 companies. It offers an early reading on the
health of the manufacturing sector.
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vi
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The S&P/Case-Shiller Home Price Index measures
the residential housing market, tracking changes in the value of the residential
real estate market in twenty metropolitan regions across the United States.
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vii
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The Barclays Capital U.S. Aggregate Index is a
broad-based bond index comprised of government, corporate, mortgage- and
asset-backed issues, rated investment grade or higher, and having at least
one year to maturity.
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viii
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The Consumer Price Index for All Urban Consumers
(CPI-U) is a measure of the average change in prices over time of goods and
services purchased by households, which covers approximately 87% of the total
population and includes, in addition to wage earners and clerical worker
households, groups such as professional, managerial and technical workers,
the self-employed, short-term workers, the unemployed and retirees and others
not in the labor force.
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ix
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U.S. Treasury Inflation-Protected Securities
(TIPS) are inflation-indexed securities issued by the U.S. Treasury in
five-year, ten-year and twenty-year maturities. The principal is adjusted to
the Consumer Price Index, the commonly used measure of inflation. The coupon
rate is constant, but generates a different amount of interest when
multiplied by the inflation-adjusted principal.
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x
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The Barclays Capital Global Real Index: U.S. TIPS
represents an unmanaged market index made up of U.S. Treasury Inflation-Linked
Index securities.
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xi
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The Barclays Capital U.S. Credit Index is an index
composed of corporate and non-corporate debt issues that are investment grade
(rated Baa3/BBB- or higher).
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xii
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The Barclays Capital U.S. Corporate High Yield 2%
Issuer Cap Index is an index of the 2% Issuer Cap component of the Barclays
Capital U.S. Corporate High Yield Index, which covers the U.S.
dollar-denominated, non-investment grade, fixed-rate, taxable corporate bond
market.
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xiii
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The JPMorgan Emerging Markets
Bond Index Global (EMBI Global) tracks total returns for U.S.
dollar-denominated debt instruments issued by emerging market sovereign and
quasi-sovereign entities: Brady bonds, loans, Eurobonds and local market
instruments.
|
The
Investment Commentary is not a part of the Annual Report to Shareholders.
vi
Western Asset/Claymore Inflation-Linked
Securities & Income Fund
Annual Report to
Shareholders
December 31,
2009
|
Annual Report to Shareholders
|
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Managements
Discussion of Fund Performance
Performance
Review
For the twelve months ended December 31,
2009, Western Asset/Claymore Inflation-Linked Securities & Income Fund
returned 16.39% based on its net asset value (NAV)
i
and 18.51% based on its New York Stock Exchange
(NYSE) market price per share. The Funds unmanaged benchmarks, the Barclays
U.S. Government Inflation-Linked 1-10 Year Index
ii
and the Barclays U.S. Government
Inflation-Linked All Maturities Index
iii
, returned 11.14% and 10.48%, respectively,
over the same time frame. The Lipper Corporate Debt Closed-End Funds BBB-Rated
Category Average
iv
returned
28.22% for the same period. Please note that Lipper performance returns are
based on each funds NAV.
During the twelve-month period, the Fund made
distributions to shareholders totaling $0.47 per share, which included a return
of capital of $0.10 per share. The performance table shows the Funds
twelve-month total return based on its NAV and market price as of December 31,
2009.
Past performance is no guarantee of
future results.
PERFORMANCE
SNAPSHOT
as of December 31, 2009
PRICE PER SHARE
|
|
12-MONTH
TOTAL RETURN*
|
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$12.85
(NAV)
|
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16.39%
|
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$12.30
(Market Price)
|
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18.51%
|
|
All figures represent past
performance and are not a guarantee of future results.
*
|
Total returns are based on changes in NAV or market
price, respectively. Total returns assume the reinvestment of all
distributions in additional shares.
|
The Fund outperformed its benchmarks during
the period as the overall bond market rallied and investor risk appetite
increased. The largest contributor to the Funds relative performance for the
period was its allocation to investment grade corporate bonds, as spreads
narrowed during the reporting period. In particular, our holdings in the
Industrials and Financials sectors generated strong returns. Within the
investment grade sector, Energy company
Hess
Corp.
, Media companies
Comcast
Corp.
and
Time Warner Inc.
and Financials firms
SLM Corp.
and
JPMorgan Chase and Co.
were
significant contributors. Our exposure to several fallen angels (investment
grade corporate bonds that were subsequently downgraded to non-investment grade
status) also contributed to performance. Within this area, the Funds holdings
in
General Motors Corp.
and
Ford Motor Co.
produced strong returns.
Also significantly contributing to performance
was the Funds holdings of U.S. Treasury Inflation-Protected Securities
(TIPS)
v
. At times
during the reporting period, we boosted our TIPS exposure through the use of leverage.
Elsewhere, our exposure to structured mortgage-backed securities (MBS),
namely collateralized mortgage obligations, was also rewarded.
Somewhat detracting from results was the
Funds holding of a Citigroup Depositary Receipt, which performed poorly.
The market rebounded during 2009. Nominal
Treasuries, however, suffered as investors sold them for riskier assets. TIPS,
on the other hand, outperformed as fears of deflation subsided and future
inflation became a concern due to the various fiscal and monetary stimulus
programs created. There were a number of adjustments made to the portfolio
during the reporting period. We tactically adjusted our TIPS exposure during
the fiscal year as opportunities changed. TIPS began the year priced for
deflation while the corporate bond market was priced for disaster. At the
beginning of the period, we were underweight TIPS, favoring mortgage-backed
security pass-throughs as we thought they would be the first sector to recover
once the Federal Reserve Board (Fed)
vi
began its purchase program. We then increased
our TIPS exposure, taking full advantage of our ability to use leverage, in the
spring of 2009, as economic conditions started to become less negative and
monthly changes in inflation (as measured by the Consumer Price Index
vii
) turned positive. We
maintained this posture through the spring and then gradually began decreasing
leverage and moving back to a neutral position, having found more compelling
opportunities elsewhere. By the end of November, the Fund had no leverage at
all. We also moved from agency MBS to non-agency MBS because we felt the latter
represented greater potential after the government had been supporting the
agency mortgage market. We also pared our exposure to investment grade Industrials
bonds in the fourth quarter after spreads narrowed significantly and reached
pre-Lehman Brothers collapse levels. In contrast, throughout the period, we
increased the Funds exposure to investment grade Financials and Canadian and
Australian inflation-linked bonds as we believed these asset classes
represented further growth opportunities.
During the fiscal year, we employed the use of
Treasury futures and options, Eurodollar futures and interest rate swaps to
manage the portfolios yield curve
viii
strategy and duration
ix
. Credit default swaps were
also used during the fiscal year to increase the portfolios corporate
exposure. Currency contracts were used to hedge our non-U.S. dollar security
exposure. The use of these derivative instruments was, overall, positive for
performance.
Western
Asset Management Company
January 19,
2010
1
|
Annual Report to Shareholders
|
|
Managements
Discussion of Fund Performance
The
information provided is not intended to be a forecast of future events, a
guarantee of future results or investment advice. Views expressed may differ
from those of the firm as a whole.
Portfolio
holdings and breakdowns are as of December 31, 2009 and are subject to
change and may not be representative of the portfolio managers current or
future investments. Please refer to pages 9 through 14 for a list and
percentage breakdown of the Funds holdings.
The mention
of sector breakdowns is for informational purposes only and should not be construed
as a recommendation to purchase or sell any securities. The information
provided regarding such sectors is not a sufficient basis upon which to make an
investment decision. Investors seeking financial advice regarding the
appropriateness of investing in any securities or investment strategies
discussed should consult their financial professional. The Funds top five
sector holdings (as a percentage of net assets) as of December 31, 2009
were: U.S. Government and Agency Obligations (84.0%), Foreign Government
Obligations (5.2%), Corporate Bonds and Notes (3.0%), Mortgage-Backed
Securities (3.0%) and Yankee Bonds (0.9%). The Funds portfolio composition is
subject to change at any time.
RISKS:
Bonds are subject to a variety of risks, including interest rate, credit and
inflation risk. As interest rates rise, bond prices fall, reducing the value of
a fixed-income investments price. The Fund is subject to the additional risks
associated with inflation-protected securities, including liquidity risk, prepayment
risk, extension risk and deflation risk. Investments in foreign companies,
including emerging markets, involve risks beyond those inherent solely in
domestic investments. Leverage may cause a fund to be more volatile than if the
fund had not been leveraged, which may increase the risk of investment loss. To
the extent that the Fund invests in asset-backed, mortgage-backed or
mortgage-related securities, its exposure to prepayment and extension risks may
be greater than investments in other fixed-income securities. International
investments are subject to currency fluctuations, social, economic and
political risk. These risks are magnified in emerging markets.
All index
performance reflects no deduction for fees, expenses or taxes. Please note that
an investor cannot invest directly in an index.
i
|
Net asset value (NAV) is calculated by subtracting
total liabilities and outstanding preferred stock (if any) from the closing
value of all securities held by the Fund (plus all other assets) and dividing
the result (total net assets) by the total number of the common shares
outstanding. The NAV fluctuates with changes in the market prices of
securities in which the Fund has invested. However, the price at which an
investor may buy or sell shares of the Fund is the Funds market price as
determined by supply of and demand for the Funds shares.
|
ii
|
The Barclays U.S. Government Inflation-Linked 1-10
Year Index measures the performance of the intermediate U.S. TIPS market.
|
iii
|
The Barclays U.S. Government Inflation-Linked All
Maturities Index measures the performance of the U.S. TIPS market. The Index
includes TIPS with one or more years remaining maturity with total
outstanding issue size of $500 million or more.
|
iv
|
Lipper, Inc., a wholly-owned subsidiary of
Reuters, provides independent insight on global collective investments.
Returns are based on the twelve-month period ended December 31, 2009,
including the reinvestment of all distributions, including returns of
capital, if any, calculated among the 21 funds in the Funds Lipper category.
|
v
|
U.S. Treasury Inflation-Protected Securities
(TIPS) are inflation-indexed securities issued by the U.S. Treasury in
five-year, ten-year and twenty-year maturities. The principal is adjusted to
the Consumer Price Index, the commonly used measure of inflation. The coupon
rate is constant, but generates a different amount of interest when
multiplied by the inflation-adjusted principal.
|
vi
|
The Federal Reserve Board (Fed) is responsible for
the formulation of policies designed to promote economic growth, full
employment, stable prices and a sustainable pattern of international trade
and payments.
|
vii
|
The Consumer Price Index measures the average change
in U.S. consumer prices over time in a fixed market basket of goods and
services determined by the U.S. Bureau of Labor Statistics.
|
viii
|
The yield curve is the graphical depiction of the
relationship between the yield on bonds of the same credit quality but
different maturities.
|
ix
|
Duration is the measure of the
price sensitivity of a fixed-income security to an interest rate change of
100 basis points. Calculation is based on the weighted average of the present
values for all cash flows.
|
2
|
Annual Report to Shareholders
|
|
Fund
Highlights
|
|
December 31,
|
|
|
2009
|
|
2008
|
Net Asset Value
|
|
$374,527,079
|
|
$334,566,563
|
Per Share
|
|
$12.85
|
|
$11.48
|
Market Value Per Share
|
|
$12.30
|
|
$10.80
|
Net Investment Income
|
|
$10,276,219
|
|
$23,779,618
|
Per Common Share
|
|
$0.35
|
|
$0.82
|
Dividends Paid to Common Shareholders
A
|
|
$13,760,131
|
|
$24,635,209
|
Per Common Share from Net Income
|
|
$0.37
|
|
$0.85
|
Per Common Share from Tax Return of Capital
|
|
$0.10
|
|
|
The Fund
Western Asset/Claymore Inflation-Linked
Securities & Income Fund (WIA or the Fund) is a diversified,
closed-end management investment company which seeks to provide current income
for its shareholders. Capital appreciation, when consistent with current
income, is a secondary investment objective. Substantially all of the Funds
net investment income (after payment of any interest expense in connection with
forms of leverage (if applicable)) is distributed to the Funds shareholders. A
Dividend Reinvestment Plan is available to those shareholders of record desiring
to participate in it. The Funds common shares are listed on the New York Stock
Exchange (NYSE) where they are traded under the symbol WIA.
Fund
Performance
Total return for the Fund for various periods ended December 31
are presented below, along with those of comparative indices.
|
|
|
|
Average
Annual Return
|
|
|
|
Year Ended
December 31, 2009
|
|
Three
Years
|
|
Five
Years
|
|
Since
Inception
B
|
|
Total Return Based on:
|
|
|
|
|
|
|
|
|
|
|
|
|
Market Value
|
|
18.51%
|
|
8.56
|
%
|
|
4.50
|
%
|
|
2.81
|
%
|
|
Net Asset Value
|
|
16.39%
|
|
5.50
|
%
|
|
3.21
|
%
|
|
3.83
|
%
|
|
Barclays U.S. Government Inflation-Linked 1-10 year
Index
C,D
|
|
11.14%
|
|
6.78
|
%
|
|
4.74
|
%
|
|
5.03
|
%
|
|
Barclays U.S. Government Inflation-Linked All
Maturities Index
D,E
|
|
10.48%
|
|
6.67
|
%
|
|
4.62
|
%
|
|
5.31
|
%
|
|
The
performance data quoted represents past performance and does not guarantee
future results. Current performance may be lower or higher than the performance
data quoted. The investment return and principal value of the Fund will
fluctuate so that an investors shares, when sold, may be worth more or less
than the original cost. Calculations assume reinvestment of dividends and
capital gain distributions. Performance figures for periods shorter than one
year represent cumulative figures and are not annualized.
A
|
Total dividend distribution of $13,760,131 of which
$10,901,459 was from net investment income and $2,858,672 was from tax return
of capital.
|
B
|
The Funds inception date is September 26,
2003.
|
C
|
This index is the U.S. component of the 1 to 10 year
Barclays Global Inflation-Linked Bond Index, which measures the performance
of the major government inflation-linked bond markets. Although it is not
possible to invest directly in an index, it is possible to purchase
investment vehicles designed to track the performance of certain indexes. The
performance of the index does not reflect deductions for fees, expenses or
taxes.
|
D
|
This return does not include reinvestment of
dividends or capital gain distributions.
|
E
|
This index is the U.S. component of the all
maturities Barclays Global Inflation-Linked Bond Index, which measures the
performance of the major government inflation-linked bond markets.
|
|
Index return is for the period
beginning September 30, 2003.
|
3
|
Annual Report to Shareholders
|
|
Fund
HighlightsContinued
Investment
Policies
The Funds investment policies provide that
under normal market conditions and at the time of purchase, its portfolio will
be invested as follows:
·
|
At least 80% of its total managed assets
F
in inflation-linked securities
|
|
|
·
|
At least 60% of its total managed assets in U.S. Treasury
Inflation-Protected Securities
|
|
|
·
|
No more than 40% of its total managed assets in
non-U.S. dollar investments (no more than 20% of its non-U.S. dollar exposure
may be unhedged)
|
Each of the foregoing policies is a
non-fundamental policy that may be changed without shareholder approval. The
Fund has also adopted the following non-fundamental policy, which, to the
extent required by applicable law, may only be changed after notice to
shareholders: under normal market conditions, the Fund will invest at least 80%
of its total managed assets in inflation protected securities and non-inflation
protected securities and instruments with the potential to enhance the Funds
income.
Up to 20% of the Funds portfolio securities
may represent corporate debt securities of investment-grade quality at the time
of their purchase that are not inflation-linked securities. In addition, to the
extent permitted by the foregoing policies, the Fund may invest in emerging
market debt securities. Reverse repurchase agreements and other forms of
leverage will not exceed 38% of the Funds total managed assets.
Dividend
Reinvestment Plan
The Fund and American Stock Transfer &
Trust Company LLC (Agent), as the Transfer Agent and Registrar of WIA, offer
a convenient way to add shares of WIA to your account. WIA offers to all common
shareholders a Dividend Reinvestment Plan (Plan). Under the Plan, cash
distributions (e.g., dividends and capital gains) on the common shares are
automatically invested in shares of WIA unless the shareholder elects otherwise
by contacting the Agent at the address set forth below.
As a participant in the Dividend Reinvestment
Plan, you will automatically receive your dividend or net capital gains
distribution in newly issued shares of WIA, if the market price of the shares
on the date of the distribution is at or above the net asset value (NAV) of the
shares, minus estimated brokerage commissions that would be incurred upon the
purchase of common shares on the open market. The number of shares to be issued
to you will be determined by dividing the amount of the cash distribution to
which you are entitled (net of any applicable withholding taxes) by the greater
of the NAV per share on such date or 95% of the market price of a share on such
date. If the market price of a share on such distribution date is below the
NAV, less estimated brokerage commissions that would be incurred upon the
purchase of common shares on the open market, the Agent will, as agent for the
participants, buy shares of WIA through a broker on the open market. All common
shares acquired on your behalf through the Plan will be automatically credited
to an account maintained on the books of the Agent.
Additional
Information Regarding the Plan
WIA will pay all costs applicable to the Plan,
except for brokerage commissions for open market purchases by the Agent under
the Plan, which will be charged to participants. All shares acquired through
the Plan receive voting rights and are eligible for any stock split, stock
dividend, or other rights accruing to shareholders that the Board of Trustees
may declare.
You may terminate participation in the Plan at
any time by giving notice to the Agent. Such termination will be effective
prior to the record date next succeeding the receipt of such instructions or by
a later date of termination specified in such instructions. Upon termination, a
participant will receive a certificate for the full shares credited to his or her
account or may request the sale of all or part of such shares. Fractional
shares credited to a terminating account will be paid for in cash at the
current market price at the time of termination.
F
|
Total managed assets means the
total assets of the Fund (including any assets attributable to leverage)
minus accured liabilities (other than liabilities representing leverage).
|
4
|
Annual Report to Shareholders
|
|
Dividends and other distributions invested in
additional shares under the Plan are subject to income tax just as if they had
been received in cash. After year end, dividends paid on the accumulated shares
will be included in the Form 1099-DIV information return to the Internal
Revenue Service and only one Form 1099-DIV will be sent to participants
each year.
Inquiries regarding the Plan, as well as
notices of termination, should be directed to American Stock Transfer &
Trust Company LLC, 59 Maiden Lane, New York, NY 10038. Investor Relations telephone
number 1-888-888-0151.
Annual
Certifications
In May 2009, the Fund submitted its
annual Chief Executive Officer certification to the NYSE in which the Funds
principal executive officer certified that he was not aware, as of the date of
the certification, of any violation by the Fund of the NYSEs Corporate
Governance listing standards. In addition, as required by Section 302 of
the Sarbanes-Oxley Act of 2002 and related U.S. Securities and Exchange
Commission (SEC) rules, the Funds principal executive and principal
financial officers have made quarterly certifications, included in filings with
the SEC on Forms N-CSR and N-Q, relating to, among other things, the Funds
disclosure controls and procedures and internal control over financial reporting.
Schedule
of Portfolio Holdings
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. You may obtain a free copy of the Funds Form N-Q
by calling 1-800-345-7999, by visiting the Funds website
(http://www.westernclaymore.com), or by writing to the Fund, or you may obtain
a copy of this report (and other information relating to the Fund) from the
SECs website (http://www.sec.gov). Additionally, the Funds Form N-Q can
be viewed or copied at the SECs Public Reference Room in Washington D.C.
Information about the operation of the Public Reference Room can be
obtained by calling 1-800-SEC-0330.
Proxy
Voting
You may request a free description of the
policies and procedures that the Fund uses to determine how proxies relating to
the Funds portfolio securities are voted by calling 1-800-345-7999 or by
writing to the Fund, or you may obtain a copy of these policies and procedures
(and other information relating to the Fund) from the SECs website
(http://www.sec.gov). You may request a free report regarding how the Fund
voted proxies relating to portfolio securities during the most recent 12-month
period ended June 30, by calling 1-800-345-7999 or by writing to the Fund,
or you may obtain a copy of this report (and other information relating to the
Fund) from the SECs website (http://www.sec.gov).
5
|
Annual Report to Shareholders
|
|
Portfolio
Diversification
December 31,
2009
The pie and bar charts above represent the
Funds portfolio as of December 31, 2009 and do not include derivatives
such as Futures Contracts and Swaps. The Funds portfolio is actively managed,
and its portfolio composition, credit quality breakdown, and other portfolio
characteristics will vary from time to time. U.S. Treasury Inflation Protected
Securities are unrated, but are backed by the full faith and credit of the
government of the United States of America and are therefore considered by the
Funds investment adviser to be comparable to bonds rated AAA/Aaa.
Quarterly
Comparison of Market Price and Net Asset Value (NAV), Discount or Premium to
NAV and Average Daily Volume of Shares Traded
|
|
Market
Price
|
|
Net Asset
Value
|
|
Premium/
(Discount)
|
|
Average
Daily Volume (Shares)
|
|
March 31, 2009
|
|
$11.49
|
|
$11.89
|
|
(3.36)%
|
|
101,108
|
|
June 30, 2009
|
|
$11.80
|
|
$12.23
|
|
(3.52)%
|
|
77,332
|
|
September 30, 2009
|
|
$12.04
|
|
$12.65
|
|
(4.82)%
|
|
66,784
|
|
December 31, 2009
|
|
$12.30
|
|
$12.85
|
|
(4.28)%
|
|
69,509
|
|
A
|
Ratings shown are expressed as a
percentage of the portfolio. Standard & Poors Ratings Services
provide capital markets with credit ratings for the evaluation and assessment
of credit risk.
|
B
|
Expressed as a percentage of the
portfolio.
|
C
|
Yankee Bond -A U.S. dollar-denominated
bond issued in the U.S. by foreign entities.
|
6
|
Annual Report to Shareholders
|
|
Spread
Duration
Western Asset/Claymore Inflation-Linked Securities &
Income Fund
December 31, 2009
Economic Exposure
Spread
duration is defined as the change in value for a 100 basis point change in the
spread relative to Treasuries. The spread over Treasuries is the annual
risk-premium demanded by investors to hold non-Treasury securities. This chart
highlights the market sector exposure of the Funds portfolio and the exposure
relative to the selected benchmark as of the end of the reporting period.
ABSAsset Backed Securities
HYHigh Yield
IG CreditInvestment Grade Credit
MBSMortgage Backed Securities
90% BCIL/10% BCUSC90% Barclays Capital Inflation Linked
U.S. All Maturity/10% Barclays Capital U.S. Credit
7
|
Annual Report to Shareholders
|
|
Effective
Duration
Western Asset/Claymore Inflation-Linked Securities &
Income Fund
December 31, 2009
Interest Rate Exposure
Effective
duration is defined as the change in value for a 100 basis point change in
Treasury yields. This chart highlights the interest rate exposure of the Funds
portfolio relative to the selected benchmark as of the end of the reporting
period.
CMBSCommercial Mortgage Backed Securities
IG CreditInvestment Grade Credit
MBSMortgage Backed Securities
90% BCIL/10% BCUSC90% Barclays Capital Inflation Linked
U.S. All Maturity/10% Barclays Capital U.S. Credit
8
|
Annual Report to Shareholders
|
|
Portfolio
of Investments
December 31,
2009
Western Asset/Claymore
Inflation-Linked Securities & Income Fund
|
|
% OF
NET ASSETS
|
|
RATE
|
|
MATURITY
DATE
|
|
PAR/
SHARES
|
|
VALUE
|
|
Long-Term Securities
|
|
96.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government and Agency Obligations
|
|
84.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury Inflation-Protected
Securities
A
|
|
84.0%
|
|
|
|
|
|
|
|
|
|
United States Treasury Inflation-Protected Security
|
|
|
|
2.375
%
|
|
4/15/11
|
|
13,297,789
|
|
$
|
13,690,486
|
|
United States Treasury Inflation-Protected Security
|
|
|
|
3.375
%
|
|
1/15/12
|
|
3,481,821
|
|
3,723,916
|
|
United States Treasury Inflation-Protected Security
|
|
|
|
3.000
%
|
|
7/15/12
|
|
27,532,212
|
|
29,601,423
|
B
|
United States Treasury Inflation-Protected Security
|
|
|
|
1.875
%
|
|
7/15/13
|
|
41,194,300
|
|
43,385,960
|
|
United States Treasury Inflation-Protected Security
|
|
|
|
2.000
%
|
|
1/15/14
|
|
6,855,731
|
|
7,249,936
|
C
|
United States Treasury Inflation-Protected Security
|
|
|
|
1.625
%
|
|
1/15/15
|
|
19,698,714
|
|
20,486,663
|
|
United States Treasury Inflation-Protected Security
|
|
|
|
2.000
%
|
|
1/15/16
|
|
16,010,358
|
|
16,907,194
|
|
United States Treasury Inflation-Protected Security
|
|
|
|
2.375
%
|
|
1/15/17
|
|
10,558,511
|
|
11,404,015
|
|
United States Treasury Inflation-Protected Security
|
|
|
|
1.625
%
|
|
1/15/18
|
|
22,236,583
|
|
22,762,967
|
|
United States Treasury Inflation-Protected Security
|
|
|
|
1.375
%
|
|
7/15/18
|
|
14,686,039
|
|
14,715,866
|
|
United States Treasury Inflation-Protected Security
|
|
|
|
2.125
%
|
|
1/15/19
|
|
2,819,180
|
|
2,989,653
|
|
United States Treasury Inflation-Protected Security
|
|
|
|
1.875
%
|
|
7/15/19
|
|
7,491,908
|
|
7,776,368
|
|
United States Treasury Inflation-Protected Security
|
|
|
|
2.375
%
|
|
1/15/25
|
|
8,027,670
|
|
8,470,444
|
|
United States Treasury Inflation-Protected Security
|
|
|
|
2.000
%
|
|
1/15/26
|
|
74,344,696
|
|
74,664,156
|
|
United States Treasury Inflation-Protected Security
|
|
|
|
1.750
%
|
|
1/15/28
|
|
16,200,202
|
|
15,534,471
|
B
|
United States Treasury Inflation-Protected Security
|
|
|
|
2.500
%
|
|
1/15/29
|
|
7,350,005
|
|
7,883,454
|
|
United States Treasury Inflation-Protected Security
|
|
|
|
3.875
%
|
|
4/15/29
|
|
10,453,932
|
|
13,452,088
|
|
Total U.S.
Government and Agency Obligations
(Cost$294,398,727)
|
|
|
|
|
|
|
|
|
|
314,699,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
Annual Report to Shareholders
|
|
Portfolio
of InvestmentsContinued
Western Asset/Claymore
Inflation-Linked Securities & Income FundContinued
|
|
% OF
NET ASSETS
|
|
RATE
|
|
MATURITY
DATE
|
|
PAR/
SHARES
|
|
VALUE
|
|
Corporate Bonds and Notes
|
|
3.0
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automobiles
|
|
0.4
%
|
|
|
|
|
|
|
|
|
|
Motors Liquidation Co.
|
|
|
|
8.375
%
|
|
7/15/33
|
|
5,880,000
|
|
$
|
1,587,600
|
D
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Finance
|
|
0.5
%
|
|
|
|
|
|
|
|
|
|
SLM Corp.
|
|
|
|
0.000
%
|
|
2/1/10
|
|
2,000,000
|
|
2,001,720
|
E
|
|
|
|
|
|
|
|
|
|
|
|
|
Diversified Financial Services
|
|
1.1
%
|
|
|
|
|
|
|
|
|
|
Citigroup Inc.
|
|
|
|
6.010
%
|
|
1/15/15
|
|
2,070,000
|
|
2,113,673
|
|
JPMorgan Chase and Co.
|
|
|
|
7.900
%
|
|
12/31/49
|
|
1,940,000
|
|
2,001,032
|
F
|
|
|
|
|
|
|
|
|
|
|
4,114,705
|
|
Health Care Providers and
Services
|
|
1.0
%
|
|
|
|
|
|
|
|
|
|
HCA Inc.
|
|
|
|
5.750
%
|
|
3/15/14
|
|
4,000,000
|
|
3,760,000
|
|
Total
Corporate Bonds and Notes
(Cost$14,482,619)
|
|
|
|
|
|
|
|
|
|
11,464,025
|
|
Asset-Backed Securities
|
|
0.6
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Rate Securities
|
|
0.1
%
|
|
|
|
|
|
|
|
|
|
Structured Asset Securities Corp. 2002-AL1 A3
|
|
|
|
3.450
%
|
|
2/25/32
|
|
348,538
|
|
285,318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indexed Securities
E
|
|
0.5
%
|
|
|
|
|
|
|
|
|
|
Ameriquest Mortgage Securities Inc. 2005-R11 A2D
|
|
|
|
0.561
%
|
|
1/25/36
|
|
50,000
|
|
32,465
|
|
Amresco Residential Securities Mortgage Loan Trust
1997-3 M1A
|
|
|
|
0.786
%
|
|
9/25/27
|
|
3,007
|
|
2,226
|
|
Asset Backed Funding Certificates 2004-OPT2 M1
|
|
|
|
0.781
%
|
|
8/25/33
|
|
40,000
|
|
28,551
|
|
Countrywide Asset-Backed Certificates 2002-4 A1
|
|
|
|
0.971
%
|
|
2/25/33
|
|
3,575
|
|
2,826
|
|
Countrywide Home Equity Loan Trust 2007-GW A
|
|
|
|
0.983
%
|
|
8/15/37
|
|
1,125,913
|
|
795,881
|
|
EMC Mortgage Loan Trust 2004-C A1
|
|
|
|
0.781
%
|
|
3/25/31
|
|
40,959
|
|
35,726
|
G
|
Novastar Home Equity Loan 2003-2 A1
|
|
|
|
0.841
%
|
|
9/25/33
|
|
1,407,411
|
|
922,671
|
|
|
|
|
|
|
|
|
|
|
|
1,820,346
|
|
Variable Rate Securities
H
|
|
N.M.
|
|
|
|
|
|
|
|
|
|
SLC Student Loan Trust 2008-1 A4A
|
|
|
|
1.854
%
|
|
12/15/32
|
|
100,000
|
|
104,764
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Asset-Backed Securities
(Cost$1,369,584)
|
|
|
|
|
|
|
|
|
|
2,210,428
|
|
Mortgage-Backed Securities
|
|
3.0
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Rate Securities
|
|
0.2
%
|
|
|
|
|
|
|
|
|
|
Countrywide Alternative Loan Trust 2004-J1
|
|
|
|
6.000
%
|
|
2/25/34
|
|
16,833
|
|
16,481
|
|
Countrywide Alternative Loan Trust 2004-2 CB
|
|
|
|
4.250
%
|
|
3/25/34
|
|
56,180
|
|
53,501
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
Annual Report to Shareholders
|
|
|
|
% OF
NET ASSETS
|
|
RATE
|
|
MATURITY
DATE
|
|
PAR/
SHARES
|
|
VALUE
|
|
Mortgage-Backed Securities
Continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Rate SecuritiesContinued
|
|
|
|
|
|
|
|
|
|
|
|
Residential Asset Mortgage Products Inc. 2004-SL2
|
|
|
|
8.500
%
|
|
10/25/31
|
|
21,284
|
|
$
|
20,193
|
|
Residential Asset Mortgage Products Inc. 2004-SL4
|
|
|
|
7.500
%
|
|
7/25/32
|
|
172,501
|
|
163,445
|
|
Washington Mutual MSC Mortgage Pass-Through
Certificates 2002-MS12 B2
|
|
|
|
6.500
%
|
|
5/25/32
|
|
672,988
|
|
436,948
|
|
Washington Mutual MSC Mortgage Pass-Through
Certificates 2004-RA1
|
|
|
|
7.000
%
|
|
3/25/34
|
|
68,494
|
|
69,575
|
|
|
|
|
|
|
|
|
|
|
|
760,143
|
|
Indexed Securities
E
|
|
1.2
%
|
|
|
|
|
|
|
|
|
|
Banc of America Mortgage Securities 2003-D
|
|
|
|
4.569
%
|
|
5/25/33
|
|
98,992
|
|
89,344
|
|
Banc of America Mortgage Securities 2005-F
|
|
|
|
4.982
%
|
|
7/25/35
|
|
166,620
|
|
140,345
|
|
Bear Stearns Adjustable Rate Mortgage Trust 2004-9
24A1
|
|
|
|
5.405
%
|
|
11/25/34
|
|
238,590
|
|
227,713
|
|
Countrywide Home Loan Mortgage Pass-Through Trust
2003-56 6A1
|
|
|
|
3.461
%
|
|
12/25/33
|
|
645,698
|
|
531,972
|
|
Countrywide Home Loans 2005-09 1A1
|
|
|
|
0.531
%
|
|
5/25/35
|
|
203,641
|
|
110,688
|
|
Countrywide Home Loans 2005-R2 1AF1
|
|
|
|
0.571
%
|
|
6/25/35
|
|
788,742
|
|
693,927
|
G
|
Countrywide Home Loans 2005-R3
|
|
|
|
0.631
%
|
|
9/25/35
|
|
1,548,159
|
|
1,161,245
|
G
|
IndyMac Inda Mortgage Loan Trust 2007-AR7 1A1
|
|
|
|
6.158
%
|
|
11/25/37
|
|
252,070
|
|
174,883
|
|
JPMorgan Mortgage Trust 2004-A1 1A1
|
|
|
|
4.306
%
|
|
10/25/33
|
|
132,175
|
|
125,317
|
|
JPMorgan Mortgage Trust 2004-A1 1A1
|
|
|
|
4.794
%
|
|
2/25/34
|
|
53,320
|
|
50,934
|
|
MASTR Adjustable Rate Mortgages Trust 2004-13
|
|
|
|
3.096
%
|
|
11/21/34
|
|
350,000
|
|
284,016
|
|
MLCC Mortgage Investors Inc. 2003-H
|
|
|
|
2.412
%
|
|
1/25/29
|
|
14,121
|
|
12,639
|
|
Sequoia Mortgage Trust 2003-8 A1
|
|
|
|
0.553
%
|
|
1/20/34
|
|
40,593
|
|
30,575
|
|
Structured Adjustable Rate Mortgage Loan Trust
2005-3XS A3
|
|
|
|
0.601
%
|
|
1/25/35
|
|
777,581
|
|
602,742
|
I
|
WaMu Mortgage Pass-Through Certificates 2003-AR8 A
|
|
|
|
2.851
%
|
|
8/25/33
|
|
41,626
|
|
38,605
|
|
WaMu Mortgage Pass-Through Certificates 2003-AR10
|
|
|
|
2.825
%
|
|
10/25/33
|
|
145,072
|
|
129,133
|
|
|
|
|
|
|
|
|
|
|
|
4,404,078
|
|
Variable Rate Securities
H
|
|
1.6
%
|
|
|
|
|
|
|
|
|
|
Chase Mortgage Finance Corp. 2007-A1 2A3
|
|
|
|
4.128
%
|
|
2/25/37
|
|
62,397
|
|
57,791
|
|
CS First Boston Mortgage Securities Corp. 2004-AR6
2A1
|
|
|
|
3.578
%
|
|
10/25/34
|
|
55,473
|
|
47,903
|
|
GSR Mortgage Loan Trust 2004-11 1A1
|
|
|
|
3.787
%
|
|
9/25/34
|
|
347,568
|
|
276,767
|
|
JPMorgan Mortgage Trust 2006-A2 5A1
|
|
|
|
3.445
%
|
|
11/25/33
|
|
23,030
|
|
21,206
|
|
Merrill Lynch Mortgage Investors Inc. 2005-A2
|
|
|
|
4.258
%
|
|
2/25/35
|
|
1,772,177
|
|
1,538,669
|
|
Merrill Lynch Mortgage Investors Trust 2004-A1 2A1
|
|
|
|
3.789
%
|
|
2/25/34
|
|
41,699
|
|
40,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
|
Annual Report to Shareholders
|
|
Portfolio
of InvestmentsContinued
Western Asset/Claymore
Inflation-Linked Securities & Income FundContinued
|
|
% OF
NET ASSETS
|
|
RATE
|
|
MATURITY
DATE
|
|
PAR/
SHARES
|
|
VALUE
|
|
Mortgage-Backed Securities
Continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable Rate Securities
H
Continued
|
|
|
|
|
|
|
|
|
|
|
|
Morgan Stanley Capital I 2004-RR2 X
|
|
|
0.932
%
|
|
10/28/33
|
|
966,493
|
|
$
|
14,275
|
G,I,J
|
Thornburg Mortgage Securities Trust 2007-4 2A1
|
|
|
|
6.200
%
|
|
9/25/37
|
|
374,962
|
|
299,516
|
|
WaMu Mortgage Pass-Through Certificates 2005-AR3 A2
|
|
|
|
4.610
%
|
|
3/25/35
|
|
4,005,892
|
|
3,412,929
|
|
WaMu Mortgage Pass-Through Certificates 2007-HY1
1A1
|
|
|
|
5.673
%
|
|
2/25/37
|
|
445,339
|
|
283,379
|
|
|
|
|
|
|
|
|
|
|
|
5,992,955
|
|
Total
Mortgage-Backed Securities
(Cost$8,717,982)
|
|
|
|
|
|
|
|
|
|
11,157,176
|
|
Yankee Bonds
K
|
|
0.9
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Banks
|
|
N.M.
|
|
|
|
|
|
|
|
|
|
Glitnir Banki Hf
|
|
|
|
6.693
%
|
|
6/15/16
|
|
1,240,000
|
|
124
|
D,F,G,J
|
Kaupthing Bank Hf
|
|
|
|
7.125
%
|
|
5/19/16
|
|
2,060,000
|
|
206
|
D,G,J
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
330
|
|
Diversified Financial Services
|
|
0.3
%
|
|
|
|
|
|
|
|
|
|
UFJ Finance Aruba AEC
|
|
|
|
6.750
%
|
|
7/15/13
|
|
1,025,000
|
|
1,141,191
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Government
|
|
0.5
%
|
|
|
|
|
|
|
|
|
|
Russian Federation
|
|
|
|
7.500
%
|
|
3/31/30
|
|
1,748,400
|
|
1,973,506
|
G
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil, Gas and Consumable Fuels
|
|
0.1
%
|
|
|
|
|
|
|
|
|
|
Gazprom
|
|
|
|
6.510
%
|
|
3/7/22
|
|
190,000
|
|
174,325
|
G
|
Total
Yankee Bonds
(Cost$6,233,636)
|
|
|
|
|
|
|
|
|
|
3,289,352
|
|
Foreign Government Obligations
|
|
5.2
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canadian Government Bond
|
|
|
|
4.250
%
|
|
12/1/21
|
|
6,690,478
|
CAD
|
8,433,579
|
L
|
Commonwealth of Australia
|
|
|
|
4.000
%
|
|
8/20/20
|
|
7,930,000
|
AUD
|
11,029,512
|
L
|
Total
Foreign Government Obligations
(Cost$17,476,242)
|
|
|
|
|
|
|
|
|
|
19,463,091
|
|
Preferred Stocks
|
|
0.2
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae
|
|
|
|
8.250
%
|
|
|
|
278,700
|
shs
|
306,570
|
F,M,N
|
Freddie Mac
|
|
|
|
8.375
%
|
|
|
|
309,625
|
|
325,106
|
F,M,N
|
Total
Preferred Stocks
(Cost$14,820,998)
|
|
|
|
|
|
|
|
|
|
631,676
|
|
Total
Long-Term Securities
(Cost$357,499,788)
|
|
|
|
|
|
|
|
|
|
362,914,808
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
|
Annual Report to Shareholders
|
|
|
|
|
|
|
|
|
|
|
|
% OF
NET ASSETS
|
|
PAR/
SHARES
|
|
VALUE
|
|
Short-Term Securities
|
|
2.4%
|
|
|
|
|
|
|
Repurchase Agreement
|
|
2.4%
|
|
|
|
|
|
|
Interest in $8,952,000 repurchase agreement dated
12/31/09 with Banc of America, 0.010% due 1/4/10; Proceeds at
maturity$8,952,010; (Fully collateralized by U.S. Treasury Note, 4.125% due
5/15/15; Market value$9,131,040)
|
|
|
|
8,952,000
|
|
|
$ 8,952,000
|
|
|
Total Short-Term Securities
(Cost$8,952,000)
|
|
|
|
|
|
|
8,952,000
|
|
|
Total Investments
(Cost$366,451,788)
O
|
|
99.3%
|
|
|
|
|
371,866,808
|
|
|
Other Assets Less Liabilities
|
|
0.7%
|
|
|
|
|
2,660,271
|
|
|
Net Assets
|
|
100.0%
|
|
|
|
|
$374,527,079
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPIRATION
|
|
ACTUAL
CONTRACTS
|
|
(DEPRECIATION)
|
|
Futures Contracts Purchased
P
|
|
|
|
|
|
|
|
|
|
German Euro Bobl Futures
|
|
March 2010
|
|
47
|
|
|
$ (58,955
|
)
|
|
U.S. Treasury Note Futures
|
|
March 2010
|
|
32
|
|
|
(103,604
|
)
|
|
|
|
|
|
|
|
|
$ (162,559
|
)
|
|
|
|
|
|
|
|
|
|
|
|
N.M.
|
Not Meaningful.
|
|
Securities are denominated in U.S. Dollars, unless
otherwise noted.
|
A
|
Treasury Inflation-Protected Security Treasury security
whose principal value is adjusted daily in accordance with changes to the
Consumer Price Index for All Urban Consumers. Interest is calculated on the
basis of the current adjusted principal value.
|
B
|
All or a portion of this security is collateral to cover
futures.
|
C
|
All or a portion of this security is collateral to cover
swaps.
|
D
|
The coupon payment on these securities is currently in
default as of December 31, 2009.
|
E
|
Indexed Security The rates of interest earned on these
securities are tied to the London Interbank Offered Rate (LIBOR), the Euro
Interbank Offered Rate (EURIBOR) Index, the Consumer Price Index (CPI),
the one-year Treasury Bill Rate or the ten-year Japanese Government Bond
Rate. The coupon rates are the rates as of December 31, 2009.
|
F
|
Stepped Coupon Security A security with a predetermined
schedule of interest or dividend rate changes at which time it begins to
accrue interest or pay dividends according to the predetermined schedule.
|
G
|
Rule 144a Security A security purchased pursuant to
Rule 144a under the Securities Act of 1933 which may not be resold
subject to that rule except to qualified institutional buyers. These
securities, which the Funds investment adviser has determined to be liquid,
unless otherwise noted, represent 1.08% of net assets.
|
H
|
The coupon rates shown on variable rate securities are the
rates at December 31, 2009. These rates vary with the weighted average
coupon of the underlying loans.
|
I
|
Security is valued in good faith at fair value by or under
the direction of the Board of Trustees.
|
J
|
Illiquid security.
|
K
|
Yankee Bond A dollar-denominated bond issued in the U.S.
by foreign entities.
|
L
|
Inflation-Protected Security Security whose principal
value is adjusted daily or monthly in accordance with changes to the relevant
countrys Consumer Price Index or its equivalent used as an inflation proxy.
Interest is calculated on the basis of the current adjusted principal value.
|
M
|
On September 7, 2008, the Federal Housing Finance
Agency placed Fannie Mae (FNMA) and Freddie Mac (FHLMC) into conservatorship.
|
N
|
Non-income producing.
|
13
|
Annual Report to Shareholders
|
|
Portfolio
of InvestmentsContinued
Western Asset/Claymore
Inflation-Linked Securities & Income FundContinued
|
|
O
|
Aggregate cost for federal income tax purposes is
$367,611,515.
|
P
|
Futures are described in more detail in the notes to
financial statements.
|
Abbreviations
used in this schedule
:
AUDAustralian Dollar
CADCanadian Dollar
See notes to financial statements.
14
|
Annual Report to Shareholders
|
|
Statement
of Assets and Liabilities
December 31,
2009
Western Asset/Claymore
Inflation-Linked Securities & Income Fund
Assets:
|
|
|
|
|
|
Investment securities at value (Cost$357,499,788)
|
|
|
|
$362,914,808
|
|
Short-term securities at value (Cost$8,952,000)
|
|
|
|
8,952,000
|
|
Cash
|
|
|
|
702
|
|
Foreign currency at value (Cost$146,157)
|
|
|
|
146,977
|
|
Interest receivable
|
|
|
|
3,046,350
|
|
Deposits with brokers for open futures contracts
|
|
|
|
135,601
|
|
Unrealized appreciation of forward foreign currency
contracts
|
|
|
|
133,693
|
|
Amounts receivable for open swaps
|
|
|
|
2,903
|
|
Total assets
|
|
|
|
375,333,034
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
Unrealized depreciation of swaps
|
|
$259,442
|
|
|
|
Accrued management fee
|
|
129,610
|
|
|
|
Unrealized depreciation of forward foreign currency
contracts
|
|
78,256
|
|
|
|
Futures variation margin payable
|
|
71,455
|
|
|
|
Accrued servicing agent fees
|
|
48,604
|
|
|
|
Accrued administration fee
|
|
8,493
|
|
|
|
Accrued expenses
|
|
|
210,095
|
|
|
|
Total liabilities
|
|
|
|
|
805,955
|
|
Net Assets
|
|
|
|
$374,527,079
|
|
|
|
|
|
|
|
Summary of Shareholders Equity:
|
|
|
|
|
|
Common shares, no par value, unlimited number of
shares authorized, 29,152,821 shares issued and outstanding (Note 5)
|
|
|
|
$405,638,527
|
|
Overdistributed net investment income
|
|
|
|
(706,324
|
)
|
Accumulated net realized loss on investments,
options, futures, swaps and foreign currency transactions
|
|
|
|
(35,454,339
|
)
|
Unrealized appreciation of investments, futures,
swaps and foreign currency translations
|
|
|
|
5,049,215
|
|
Net Assets
|
|
|
|
$374,527,079
|
|
|
|
|
|
|
|
Net Asset Value Per Common Share:
|
|
|
|
|
|
($374,527,079 ÷ 29,152,821 common shares issued and
outstanding)
|
|
|
|
|
$12.85
|
|
|
|
|
|
|
|
|
See notes to financial statements.
15
|
Annual Report to Shareholders
|
|
Statement
of Operations
Western Asset/Claymore
Inflation-Linked Securities & Income Fund
|
|
FOR THE
YEAR ENDED
DECEMBER 31, 2009
|
|
Investment Income:
|
|
|
|
|
|
Interest
|
|
$13,645,690
|
|
|
|
Dividends
|
|
75,156
|
|
|
|
Total income
|
|
|
|
$13,720,846
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
Management fees (Note 2)
|
|
1,795,778
|
|
|
|
Servicing agent fees (Note 2)
|
|
673,417
|
|
|
|
Audit and legal fees
|
|
173,765
|
|
|
|
Administration fee (Note 2)
|
|
100,000
|
|
|
|
Trustees fees and expenses
|
|
91,224
|
|
|
|
Reports to shareholders
|
|
76,078
|
|
|
|
Custodian fees
|
|
52,270
|
|
|
|
Transfer agent and shareholder servicing expense
|
|
49,188
|
|
|
|
Registration fees
|
|
24,156
|
|
|
|
Taxes, other than federal income taxes
|
|
9,464
|
|
|
|
Other expenses
|
|
37,650
|
|
|
|
|
|
3,082,990
|
|
|
|
Interest expense (Note 3)
|
|
361,637
|
|
|
|
Net expenses
|
|
|
|
3,444,627
|
|
Net Investment Income
|
|
|
|
10,276,219
|
|
|
|
|
|
|
|
Net Realized and Unrealized
Gain/(Loss) on Investments (Notes 1, 3 and 4):
|
|
|
|
|
|
Net realized gain/(loss) on:
|
|
|
|
|
|
Investments
|
|
(7,205,046
|
)
|
|
|
Written options
|
|
351,145
|
|
|
|
Futures
|
|
(555,154
|
)
|
|
|
Swaps
|
|
1,657,026
|
|
|
|
Foreign currency transactions
|
|
(568,669
|
)
|
|
|
|
|
|
|
(6,320,698
|
)
|
Change in unrealized appreciation/(depreciation)
of:
|
|
|
|
|
|
Investments
|
|
45,513,676
|
|
|
|
Futures
|
|
1,994,343
|
|
|
|
Swaps
|
|
2,307,375
|
|
|
|
Foreign currency translations
|
|
(50,268
|
)
|
|
|
|
|
|
|
49,765,126
|
|
Net Realized and Unrealized Gain
on Investments
|
|
|
|
43,444,428
|
|
Change in Net Assets Resulting
From Operations
|
|
|
|
$53,720,647
|
|
|
|
|
|
|
|
See notes to financial statements.
16
|
Annual Report to Shareholders
|
|
Statement
of Changes in Net Assets
Western Asset/Claymore
Inflation-Linked Securities & Income Fund
|
|
|
FOR THE
YEARS ENDED
DECEMBER 31,
|
|
|
|
2009
|
|
2008
|
|
Change in Net Assets:
|
|
|
|
|
|
Net investment income
|
|
|
$ 10,276,219
|
|
|
$ 23,779,618
|
|
Net realized gain/(loss)
|
|
|
(6,320,698
|
)
|
|
6,442,861
|
|
Change in unrealized appreciation/(depreciation)
|
|
|
49,765,126
|
|
|
(61,000,751
|
)
|
Change in Net Assets Resulting
from Operations
|
|
|
53,720,647
|
|
|
(30,778,272
|
)
|
|
|
|
|
|
|
|
|
Distributions
to Common Shareholders From (Note 1):
|
|
|
|
|
|
|
|
Net investment income
|
|
|
(10,901,459
|
)
|
|
(24,635,209
|
)
|
Return of capital
|
|
|
(2,858,672
|
)
|
|
|
|
Decrease in net assets from distribution to
shareholders
|
|
|
(13,760,131
|
)
|
|
(24,635,209
|
)
|
Change in Net Assets
|
|
|
39,960,516
|
|
|
(55,413,481
|
)
|
|
|
|
|
|
|
|
|
Net Assets:
|
|
|
|
|
|
|
|
Beginning of year
|
|
|
334,566,563
|
|
|
389,980,044
|
|
End of year
|
|
|
$374,527,079
|
|
|
$334,566,563
|
|
(Overdistributed) and undistributed net investment
income, respectively
|
|
|
$
(706,324
|
)
|
|
$ 132,947
|
|
|
|
|
|
|
|
|
|
See notes to financial statements.
17
|
Annual Report to Shareholders
|
|
Statement
of Cash Flows
Western Asset/Claymore
Inflation-Linked Securities & Income Fund
|
|
FOR THE
YEAR ENDED
DECEMBER 31, 2009
|
Cash flows provided (used) by operating activities:
|
|
|
|
Interest and dividends received
|
|
|
$ 12,871,287
|
|
Operating expenses paid
|
|
|
(3,038,355
|
)
|
Interest paid
|
|
|
(363,578
|
)
|
Net purchases of short-term investments
|
|
|
(8,952,000
|
)
|
Realized loss on futures contracts
|
|
|
(555,154
|
)
|
Realized gain on options
|
|
|
351,145
|
|
Realized gain on swap contracts
|
|
|
1,657,026
|
|
Realized loss on foreign currency transactions
|
|
|
(568,669
|
)
|
Net change in unrealized appreciation on futures
contracts
|
|
|
1,994,343
|
|
Net change in unrealized depreciation on foreign
currencies
|
|
|
(50,268
|
)
|
Purchases of long-term investments
|
|
|
(188,291,752
|
)
|
Proceeds from disposition of long-term investments
|
|
|
241,659,272
|
|
Deposits with brokers for futures contracts
|
|
|
3,264,437
|
|
Change in premium for swap contracts
|
|
|
(182,563
|
)
|
Change in payable to brokervariation margin
|
|
|
607,658
|
|
Change in receivable/payable for open forward
currency contracts
|
|
|
51,026
|
|
Net cash provided by operating activities
|
|
|
60,453,855
|
|
Cash flows provided (used) by financing activities:
|
|
|
|
|
Cash distributions paid on Common Stock
|
|
|
(14,716,974
|
)
|
Cash paid on reverse repurchase agreements
|
|
|
(49,918,800
|
)
|
Net cash used by financing activities
|
|
|
(64,635,774
|
)
|
Net decrease in cash:
|
|
|
(4,181,919
|
)
|
Cash, beginning of year
|
|
|
4,329,598
|
|
Cash, end of year
|
|
|
$ 147,679
|
|
Reconciliation of Increase in Net
Assets From Operations to Net Cash Flows Provided (Used) by Operating
Activities:
|
|
|
|
|
Increase in net assets from operations
|
|
|
$ 53,720,647
|
|
Accretion of discount on investments
|
|
|
(2,703,611
|
)
|
Amortization of premium on investments
|
|
|
1,274,909
|
|
Decrease in investments, at value
|
|
|
3,705,892
|
|
Decrease in interest and dividends receivable
|
|
|
672,766
|
|
Decrease in premium for written swaps
|
|
|
(182,563
|
)
|
Increase in payable for open forward currency
contracts
|
|
|
51,026
|
|
Increase in payable to brokervariation margin
|
|
|
607,658
|
|
Decrease in deposits with brokers for futures
contracts
|
|
|
3,264,437
|
|
Decrease in interest payable
|
|
|
(1,941
|
)
|
Increase in accrued expenses
|
|
|
44,635
|
|
Total adjustments
|
|
|
6,733,208
|
|
Net cash flows provided by operating activities
|
|
|
$ 60,453,855
|
|
|
|
|
|
|
See notes to financial statements.
18
|
Annual Report to Shareholders
|
|
Financial
Highlights
Contained below is per share operating
performance data for a share of common stock outstanding throughout each period
shown, total investment return, ratios to average net assets and other
supplemental data. This information has been derived from information in the
financial statements.
|
|
YEARS ENDED DECEMBER 31,
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
Net asset value, beginning of year
|
|
|
$11.48
|
|
|
$13.38
|
|
|
$12.83
|
|
|
$13.50
|
|
|
$14.43
|
|
Investment operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
.35
|
A
|
|
.82
|
A
|
|
.70
|
A
|
|
.72
|
A
|
|
1.15
|
|
Net realized and unrealized gain/(loss)
|
|
|
1.49
|
|
|
(1.87
|
)
|
|
.54
|
|
|
(.46
|
)
|
|
(.92
|
)
|
Total from investment operations
|
|
|
1.84
|
|
|
(1.05
|
)
|
|
1.24
|
|
|
.26
|
|
|
.23
|
|
Dividends paid to preferred shareholders from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
(.30
|
)
|
|
(.23
|
)
|
Total from investment operations applicable to
common shareholders
|
|
|
1.84
|
|
|
(1.05
|
)
|
|
1.24
|
|
|
(.04
|
)
|
|
|
|
Distributions paid to common shareholders from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
(.37
|
)
|
|
(.85
|
)
|
|
(.69
|
)
|
|
(.43
|
)
|
|
(.93
|
)
|
Return of capital
|
|
|
(.10
|
)
|
|
|
|
|
|
|
|
(.20
|
)
|
|
|
|
Total distributions paid to common shareholders
|
|
|
(.47
|
)
|
|
(.85
|
)
|
|
(.69
|
)
|
|
(.63
|
)
|
|
(.93
|
)
|
Net asset value, end of year
|
|
|
$12.85
|
|
|
$11.48
|
|
|
$13.38
|
|
|
$12.83
|
|
|
$13.50
|
|
Market value, end of year
|
|
|
$12.30
|
|
|
$10.80
|
|
|
$11.73
|
|
|
$11.42
|
|
|
$12.01
|
|
Average market value per share
|
|
|
$11.71
|
|
|
$11.57
|
|
|
$11.56
|
|
|
$11.53
|
|
|
$12.90
|
|
Total Investment Return Based On:
B
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value
|
|
|
18.51
|
%
|
|
(.91
|
)
%
|
|
8.95
|
%
|
|
.40
|
%
|
|
(2.98
|
)
%
|
Net asset value
|
|
|
16.39
|
%
|
|
(8.24
|
)
%
|
|
9.95
|
%
|
|
(.27
|
)
%
|
|
(.01
|
)
%
|
Ratios and Supplemental Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of total expense to average weekly net assets
(including interest expense) attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares
C
|
|
|
.97
|
%
|
|
1.21
|
%
|
|
.91
|
%
|
|
1.36
|
%
|
|
1.45
|
%
|
Total managed assets
C,D
|
|
|
.77
|
%
|
|
1.02
|
%
|
|
.88
|
%
|
|
.90
|
%
|
|
.92
|
%
|
Ratio of net expense to average weekly net assets
(including interest expense) attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares
E
|
|
|
.97
|
%
|
|
1.21
|
%
|
|
.91
|
%
|
|
1.36
|
%
|
|
1.44
|
%
|
Total managed assets
D,E
|
|
|
.77
|
%
|
|
1.02
|
%
|
|
.88
|
%
|
|
.90
|
%
|
|
.92
|
%
|
Ratio of net expense to average weekly net assets
(excluding interest expense) attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares
E
|
|
|
.87
|
%
|
|
.83
|
%
|
|
.76
|
%
|
|
1.16
|
%
|
|
1.20
|
%
|
Total managed assets
D,E
|
|
|
.69
|
%
|
|
.70
|
%
|
|
.74
|
%
|
|
.77
|
%
|
|
.76
|
%
|
Ratio of net investment income to average weekly
net assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares
E
|
|
|
2.91
|
%
|
|
6.29
|
%
|
|
5.45
|
%
|
|
5.50
|
%
|
|
8.22
|
%
|
Total managed assets
D,E
|
|
|
2.29
|
%
|
|
5.28
|
%
|
|
5.32
|
%
|
|
3.63
|
%
|
|
5.21
|
%
|
Asset coverage on preferred shares, end of year
F
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
G
|
|
|
292
%
|
|
Portfolio turnover rate
|
|
|
43
%
|
|
|
52
%
|
|
|
72
%
|
|
|
146
%
|
|
|
38
%
|
|
Net assets, end of year (in thousands)
|
|
$374,527
|
$334,567
|
$389,980
|
$374,119
|
$393,708
|
A
Computed
using average daily shares outstanding.
B
Total
return based on market value reflects changes in market value. Total return
based on net asset value reflects changes in the Funds net asset value during
the period. Each figure includes reinvestments of dividends and distributions.
These figures will differ depending upon the level of any discount from or
premium to net asset value at which the Funds shares trade during the period.
Total investment return is not annualized for periods of less than one year.
Brokerage commissions are not reflected in the calculations.
C
This
ratio reflects total expenses before compensating balance credits.
D
Total
managed assets included the liquidation value of preferred shares through November 22,
2006.
E
This
ratio reflects expenses net of compensating balance credits.
F
Asset
coverage on preferred shares equals net assets of common shares plus the
redemption value of the preferred shares divided by the value of outstanding
preferred stock.
G
The
last series of preferred shares was redeemed on November 22, 2006.
N/A Not applicable.
See notes to financial statements.
19
|
Annual Report to Shareholders
|
|
Notes to
Financial Statements
1.
Organization and Significant Accounting Policies
Western Asset/Claymore Inflation-Linked
Securities & Income Fund (Fund) is registered under the Investment
Company Act of 1940, as amended (the 1940 Act), as a diversified, closed-end
management investment company. The Fund commenced operations on September 26,
2003.
The Funds primary investment objective is to
provide current income for its shareholders. Capital appreciation, when
consistent with current income, is a secondary investment objective.
The following are significant accounting
policies consistently followed by the Fund and are in conformity with U.S.
generally accepted accounting principles (GAAP). Estimates and assumptions
are required to be made regarding assets, liabilities and changes in net assets
resulting from operations when financial statements are prepared. Changes in
the economic environment, financial markets and any other parameters used in
determining these estimates could cause actual results to differ. Subsequent
events have been evaluated through February 19, 2010, the issuance date of
the financial statements.
(a) Investment Valuation
Debt securities are valued at the last quoted
bid provided by an independent pricing service that are based on transactions
in debt obligations, quotations from bond dealers, market transactions in
comparable securities and various other relationships between securities.
Publicly traded foreign government debt securities are typically traded
internationally in the over-the-counter market, and are valued at the mean
between the last quoted bid and asked prices as of the close of business of
that market. Futures contracts are valued daily at the settlement price
established by the board of trade or exchange on which they are traded. Equity
securities for which market quotations are available are valued at the last
reported sales price or official closing price on the primary market or
exchange on which they trade. When prices are not readily available, or are
determined not to reflect fair value, such as when the value of a security has
been significantly affected by events after the close of the exchange or market
on which the security is principally traded, but before the Fund calculates its
net asset value, the Fund values these securities at fair value as determined
in accordance with procedures approved by the Funds Board of Trustees.
The Fund has adopted Financial Accounting
Standards Board Codification Topic 820 (formerly, Statement of Financial
Accounting Standards No. 157) (ASC Topic 820). ASC Topic 820 establishes
a single definition of fair value, creates a three-tier hierarchy as a
framework for measuring fair value based on inputs used to value the Funds
investments, and requires additional disclosure about fair value. The hierarchy
of inputs is summarized below.
·
|
|
Level 1quoted prices in active markets for identical investments
|
·
|
|
Level 2other significant observable inputs (including quoted prices
for similar investments, interest rates, prepayment speeds, credit risk,
etc.)
|
·
|
|
Level 3significant unobservable inputs (including
the Funds own assumptions in determining the fair value of investments)
|
The inputs or methodology used for valuing
securities are not necessarily an indication of the risk associated with
investing in those securities.
The Fund uses valuation techniques to measure
fair value that are consistent with the market approach and/or income approach,
depending on the type of the security and the particular circumstance. The market
approach uses prices and other relevant information generated by market
transactions involving identical or comparable securities. The income approach
uses valuation techniques to convert future amounts to a single present amount.
20
|
Annual Report to Shareholders
|
|
The following is a summary of the inputs used in
valuing the Funds assets carried at fair value:
Description
|
|
Quoted Prices
(Level 1)
|
|
Other
Significant
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Total
|
|
Long-Term Investments:
|
|
|
|
|
|
|
|
|
|
U.S. Government and Agency Obligations
|
|
|
|
|
|
$ 314,699,060
|
|
|
|
|
|
$ 314,699,060
|
|
Corporate Bonds and Notes
|
|
|
|
|
|
11,464,025
|
|
|
|
|
|
11,464,025
|
|
Asset-Backed Securities
|
|
|
|
|
|
2,210,428
|
|
|
|
|
|
2,210,428
|
|
Mortgage-Backed Securities
|
|
|
|
|
|
11,157,176
|
|
|
|
|
|
11,157,176
|
|
Yankee Bonds
|
|
|
|
|
|
3,289,352
|
|
|
|
|
|
3,289,352
|
|
Foreign Government Obligations
|
|
|
|
|
|
19,463,091
|
|
|
|
|
|
19,463,091
|
|
Preferred Stocks
|
|
|
$ 631,676
|
|
|
|
|
|
|
|
|
631,676
|
|
Total Long-Term Investments
|
|
|
$ 631,676
|
|
|
$ 362,283,132
|
|
|
|
|
|
$ 362,914,808
|
|
Short-Term Investment
|
|
|
|
|
|
8,952,000
|
|
|
|
|
|
8,952,000
|
|
Total Investments
|
|
|
$ 631,676
|
|
|
$ 371,235,132
|
|
|
|
|
|
$ 371,866,808
|
|
Other Financial Instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures Contracts
|
|
|
$ (162,559
|
)
|
|
|
|
|
|
|
|
$ (162,559
|
)
|
Forward Foreign Currency Contracts
|
|
|
|
|
|
$ 55,437
|
|
|
|
|
|
55,437
|
|
Credit Default Swaps on Corporate IssuesSell
Protection
|
|
|
|
|
|
(259,442
|
)
|
|
|
|
|
(259,442
|
)
|
Total Other Financial Instruments
|
|
|
$ (162,559
|
)
|
|
$
(204,005
|
)
|
|
|
|
|
$ (366,564
|
)
|
Total
|
|
|
$ 469,117
|
|
|
$ 371,031,127
|
|
|
|
|
|
$ 371,500,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Portfolio of Investments for additional detailed
categorizations.
(b) Repurchase Agreements
The Fund may enter into repurchase agreements
with institutions that its investment adviser has determined are creditworthy.
Each repurchase agreement is recorded at cost. Under the terms of a typical
repurchase agreement, a fund takes possession of an underlying debt obligation
subject to an obligation of the seller to repurchase, and of the fund to
resell, the obligation at an agreed-upon price and time, thereby determining
the yield during a funds holding period. When entering into repurchase
agreements, it is the Funds policy that its custodian or a third party custodian,
acting on the Funds behalf, take possession of the underlying collateral
securities, the market value of which, at all times, at least equals the
principal amount of the repurchase transaction, including accrued interest. To
the extent that any repurchase transaction maturity exceeds one business day,
the value of the collateral is marked to market and measured against the value
of the agreement to ensure the adequacy of the collateral. If the counterparty
defaults, the Fund generally has the right to use the collateral to satisfy the
terms of the repurchase transaction. However, if the market value of the
collateral declines during the period in which the Fund seeks to assert its
rights or if bankruptcy proceedings are commenced with respect to the seller of
the security, realization of the collateral by the Fund may be delayed or
limited.
(c) Reverse Repurchase
Agreements
The Fund may enter into reverse repurchase
agreements. Under the terms of a typical reverse repurchase agreement, a Fund
sells a security subject to an obligation to repurchase the security from the
buyer at an agreed-upon time and price. In the event the buyer of securities
under a reverse repurchase agreement files for bankruptcy or becomes insolvent,
the funds use of the proceeds of the agreement may be restricted pending a
determination by the counterparty, or its trustee or receiver, whether to
enforce the Funds obligation to repurchase the securities. In entering into
reverse repurchase agreements, the Fund will maintain cash, U.S. government
securities or other liquid debt obligations at least equal in value to its
obligations with respect to reverse repurchase agreements or will take other
actions permitted by law to cover its obligations.
21
|
Annual Report to Shareholders
|
|
Notes to
Financial StatementsContinued
(d) Futures Contracts
The Fund may use futures contracts to gain
exposure to, or hedge against, changes in the value of interest rates or
foreign currencies. A futures contract represents a commitment for the future
purchase or sale of an asset at a specified price on a specified date.
Upon entering into a futures contract, the
Fund is required to deposit cash or cash equivalents with a broker in an amount
equal to a certain percentage of the contract amount. This is known as the
initial margin and subsequent payments (variation margin) are made or
received by the Fund each day, depending on the daily fluctuation in the value
of the contract. For certain futures, including foreign denominated futures,
variation margin is not settled daily, but is recorded as a net variation
margin payable or receivable. Futures contracts are valued daily at the
settlement price established by the board of trade or exchange on which they
are traded. The daily changes in contract value are recorded as unrealized
gains or losses in the Statement of Operations and the Fund recognizes a
realized gain or loss when the contract is closed.
Futures contracts involve, to varying degrees,
risk of loss in excess of the amounts reflected in the financial statements. In
addition, there is the risk that the Fund may not be able to enter into a
closing transaction because of an illiquid secondary market.
(e) Written Options
When the Fund writes an option, an amount
equal to the premium received by the Fund is recorded as a liability, the value
of which is marked to market daily to reflect the current market value of the
option written. If the option expires, the premium received is recorded as a
realized gain. When a written call option is exercised, the difference between
the premium received plus the option exercise price and the Funds basis in the
underlying security (in the case of a covered written call option), or the cost
to purchase the underlying security (in the case of an uncovered written call
option), including brokerage commission, is recognized as a realized gain or
loss. When a written put option is exercised, the amount of the premium
received is subtracted from the cost of the security purchased by the Fund from
the exercise of the written put option to form the Funds basis in the
underlying security purchased. The writer or buyer of an option traded on an
exchange can liquidate the position before the exercise of the option by
entering into a closing transaction. The cost of a closing transaction is
deducted from the original premium received resulting in a realized gain or
loss to the Fund.
The risk in writing a covered call option is
that the Fund may forego the opportunity of profit if the market price of the
underlying security increases and the option is exercised. The risk in writing
a put option is that the Fund may incur a loss if the market price of the
underlying security decreases and the option is exercised. The risk in writing
a call option is that the Fund is exposed to the risk of loss if the market
price of the underlying security increases. In addition, there is the risk that
the Fund may not be able to enter into a closing transaction because of an
illiquid secondary market.
(f) Forward Foreign Currency
Contracts
The Fund may enter into a forward foreign
currency contract to hedge against foreign currency exchange rate risk on its
non-U.S. dollar denominated securities or to facilitate settlement of a foreign
currency denominated portfolio transaction. A forward foreign currency contract
is an agreement between two parties to buy and sell a currency at a set price
with delivery and settlement at a future date. The contract is marked to market
daily and the change in value is recorded by the Fund as an unrealized gain or
loss. When a forward foreign currency contract is closed, through either
delivery or offset by entering into another forward foreign currency contract,
the Fund recognizes a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value of the contract
at the time it is closed.
Forward foreign currency contracts involve
elements of market risk in excess of the amounts reflected on the Statement of
Assets and Liabilities. The Fund bears the risk of an unfavorable change in the
foreign exchange rate underlying the forward foreign currency contract. Risks
may also arise upon entering into these contracts from the potential inability
of the counterparties to meet the terms of their contracts.
22
|
Annual Report to Shareholders
|
|
(g) Swap Agreements
The Fund may invest in swaps for the purpose
of managing its exposure to interest rate, credit or market risk, or for other
purposes. The use of swaps involves risks that are different from those
associated with ordinary portfolio transactions.
Swap contracts are marked to market daily and
changes in value are recorded as unrealized appreciation/(depreciation). Gains
or losses are realized upon termination of the swap agreement. Periodic
payments and premiums received or made by the Fund are recognized in the
Statement of Operations as realized gains or losses, respectively. Collateral,
in the form of restricted cash or securities, may be required to be held in
segregated accounts with the Funds custodian in compliance with the terms of
the swap contracts. Securities held as collateral for swap contracts are
identified in the Schedule of Investments and restricted cash, if any, is
identified on the Statement of Assets and Liabilities. Risks may exceed amounts
recorded in the Statement of Assets and Liabilities. These risks include
changes in the returns of the underlying instruments, failure of the counterparties
to perform under the contracts terms, and the possible lack of liquidity with
respect to the swap agreements.
Payments received or made at the beginning of
the measurement period are reflected as a premium or deposit, respectively, on
the Statement of Assets and Liabilities. These upfront payments are amortized
over the life of the swap and are recognized as realized gain or loss in the
Statement of Operations. A liquidation payment received or made at the
termination of the swap is recognized as realized gain or loss in the Statement
of Operations. Net periodic payments received or paid by the Fund are
recognized as realized gain or loss at the time of receipt or payment in the
Statement of Operations.
As disclosed in the Funds summary of open
swap contracts, the aggregate fair value of credit default swaps in a net
liability position as of December 31, 2009 was $259,442. The aggregate
fair value of assets posted as collateral for all swaps was $365,895. If a
defined credit event had occurred as of December 31, 2009, the swaps
credit-risk-related contingent features would have been triggered and the Fund
would have been required to pay up to $3,800,000 less the value of the
contracts related reference obligations
Credit Default Swaps
The Fund may enter into credit default swap
(CDS) contracts for investment purposes, to manage its credit risk or to add
leverage. CDS agreements involve one party making a stream of payments to
another party in exchange for the right to receive a specified return in the
event of a default by a third party, typically corporate or sovereign issuers,
on a specified obligation, or in the event of a write-down, principal
shortfall, interest shortfall or default of all or part of the referenced
entities comprising a credit index. The Fund may use a CDS to provide
protection against defaults of the issuers (i.e., to reduce risk where the Fund
has exposure to a sovereign issuer) or to take an active long or short position
with respect to the likelihood of a particular issuers default. As a seller of
protection, the Fund generally receives an upfront payment or a stream of
payments throughout the term of the swap provided that there is no credit
event. If the Fund is a seller of protection and a credit event occurs, as defined
under the terms of that particular swap agreement, the maximum potential amount
of future payments (undiscounted) that the Fund could be required to make under
a credit default swap agreement would be an amount equal to the notional amount
of the agreement. These amounts of potential payments will be partially offset
by any recovery of values from the respective referenced obligations. As a
seller of protection, the Fund effectively adds leverage to its portfolio
because, in addition to its total net assets, the Fund is subject to investment
exposure on the notional amount of the swap. As a buyer of protection, the Fund
generally receives an amount up to the notional value of the swap if a credit
event occurs.
Implied spreads are the theoretical prices a
lender receives for credit default protection. When spreads rise, market
perceived credit risk rises and when spreads fall, market perceived credit risk
falls. The implied credit spread of a particular referenced entity reflects the
cost of buying/selling protection and may include upfront payments required to
enter into the agreement. Wider credit spreads and decreasing market values,
when compared to the notional amount of the swap, represent a deterioration of
the referenced entitys credit soundness and a greater likelihood or risk of
default or other credit event occurring as defined under the terms of the
agreement. Credit spreads utilized in determining the period end market value
of credit default swap agreements on corporate or sovereign issues are
disclosed in the Notes to Financial Statements and serve as an indicator of the
current status of the payment/performance risk and represent the likelihood or
risk of default for credit derivatives. For credit default swap agreements on
asset-backed securities
23
|
Annual Report to Shareholders
|
|
Notes to
Financial StatementsContinued
and credit indices, the quoted market prices and
resulting values, particularly in relation to the notional amount of the
contract as well as the annual payment rate, serve as an indication of the
current status of the payment/performance risk.
The Funds maximum risk of loss from
counterparty risk, as the protection buyer, is the fair value of the contract
(this risk is mitigated by the posting of collateral by the counterparty to the
Fund to cover the Funds exposure to the counterparty). As the protection
seller, the Funds maximum risk is the notional amount of the contract. Credit
default swaps are considered to have credit risk-related contingent features
since they require payment by the protection seller to the protection buyer
upon the occurrence of a defined credit event.
Entering into a CDS agreement involves, to
varying degrees, elements of credit, market and documentation risk in excess of
the related amounts recognized on the Statement of Assets and Liabilities. Such
risks involve the possibility that there will be no liquid market for these
agreements, that the counterparty to the agreement may default on its
obligation to perform or disagree as to the meaning of the contractual terms in
the agreement, and that there will be unfavorable changes in net interest
rates.
Interest Rate Swaps
The Fund may enter into interest rate swap
contracts. Interest rate swaps are agreements between two parties to exchange
cash flows based on a notional principal amount. The Fund may elect to pay a
fixed rate and receive a floating rate, or, receive a fixed rate and pay a
floating rate on a notional principal amount. The net interest received or paid
on interest rate swap agreements is accrued daily as interest income. Interest
rate swaps are marked to market daily based upon quotations from market makers
and the change, if any, is recorded as an unrealized gain or loss in the
Statement of Operations. When a swap contract is terminated early, the Fund
records a realized gain or loss equal to the difference between the original
cost and the settlement amount of the closing transaction.
The risks of interest rate swaps include changes
in market conditions that will affect the value of the contract or changes in
the present value of the future cash flow streams and the possible inability of
the counterparty to fulfill its obligations under the agreement. The Funds
maximum risk of loss from counterparty credit risk is the discounted net value
of the cash flows to be received from the counterparty over the contracts
remaining life, to the extent that that amount is positive. This risk is
mitigated by the posting of collateral by the counterparty to the Fund to cover
the Funds exposure to the counterparty.
(h) Inflation-Indexed Bonds
Inflation-indexed bonds are fixed-income
securities whose principal value or interest rate is periodically adjusted
according to the rate of inflation. As the index measuring inflation changes,
the principal value or interest rate of inflation-indexed bonds will be
adjusted accordingly. Inflation adjustments to the principal amount of
inflation-indexed bonds are reflected as an increase or decrease to investment
income on the Statement of Operations. Repayment of the original bond principal
upon maturity (as adjusted for inflation) is guaranteed in the case of U.S.
Treasury inflation-indexed bonds. For bonds that do not provide a similar
guarantee, the adjusted principal value of the bond repaid at maturity may be
less than the original principal.
(i) Foreign Currency Translation
Investment securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts based upon prevailing exchange rates on the date of valuation.
Purchases and sales of investment securities and income and expense items
denominated in foreign currencies are translated into U.S. dollar amounts based
upon prevailing exchange rates on the respective dates of such transactions.
The Fund does not isolate that portion of the
results of operations resulting from fluctuations in foreign exchange rates on
investments from the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss on investments.
Net realized foreign exchange gains or losses
arise from sales of foreign currencies, including gains and losses on forward
foreign currency contracts, currency gains or losses realized between the trade
and settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Funds books and the U.S. dollar
24
|
Annual Report to Shareholders
|
|
equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the fair
values of assets and liabilities, other than investments in securities, on the
date of valuation, resulting from changes in exchange rates.
Foreign security and currency transactions may
involve certain considerations and risks not typically associated with those of
U.S. dollar denominated transactions as a result of, among other factors, the
possibility of lower levels of governmental supervision and regulation of
foreign securities markets and the possibility of political or economic
instability.
(j) Credit and Market Risk
Investments in securities that are
collateralized by residential real estate mortgages are subject to certain
credit and liquidity risks. When market conditions result in an increase in
default rates of the underlying mortgages and foreclosure values of underlying
real estate properties are materially below the outstanding amount of these
underlying mortgages, collection of the full amount of accrued interest and
principal on these investments may be doubtful. Such market conditions may
significantly impair the value and liquidity of these investments and may
result in a lack of correlation between their credit ratings and values.
The Fund may invest in securities denominated
in the currencies of emerging market countries, as well as in securities issued
by companies located in emerging market countries and by governments of
emerging market countries. Future economic or political developments could
adversely affect the liquidity or value, or both, of such securities.
(k) Security Transactions and
Investment Income
Security transactions are accounted for on a
trade date basis. Interest income, adjusted for amortization of premium and
accretion of discount, is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date. The cost of investments sold is determined by
use of the specific identification method. To the extent any issuer defaults or
credit event occurs by the issuer, the Fund may halt any additional interest
income accruals and consider the realizability of interest accrued up to the
date of default or credit event.
(l) Distributions to
Shareholders
Distributions from net investment income for
the Fund, if any, are declared and paid on a monthly basis. Distributions of
net realized gains, if any, are declared at least annually. Distributions are
recorded on the ex-dividend date and are determined in accordance with income
tax regulations, which may differ from GAAP.
(m) Compensating Balance
Agreements
The Fund has an arrangement with its custodian
bank whereby a portion of the custodians fees is paid indirectly by credits
earned on the Funds cash deposit with the bank.
(n) Other
In the normal course of business, the Fund
enters into contracts that provide general indemnifications. The Funds 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,
based on experience, the risk of material loss from such claims is considered
remote.
(o) Federal and Other Taxes
It is the Funds policy to comply with the federal
income and excise tax requirements of the Internal Revenue Code of 1986 (the
Code) as amended, applicable to regulated investment companies. Accordingly,
the Fund intends to distribute its taxable income and net realized gains, if
any, to shareholders in accordance with the timing requirements imposed by the
Code. Therefore, no federal income tax provision is required in the Funds
financial statements.
Management has analyzed the Funds tax
positions taken on federal income tax returns for all open tax years and has
concluded that as of December 31, 2009, no provision for federal income
tax is required in the Funds financial statements. The Funds federal and
state income and federal excise tax returns for tax years for which the
applicable statutes of limitations have not expired are subject to examination
by Internal Revenue Service and state departments of revenue.
25
|
Annual Report to Shareholders
|
|
Notes to
Financial StatementsContinued
(p) Reclassification
GAAP requires that certain components of net
assets be adjusted to reflect permanent differences between financial and tax
reporting. These reclassifications have no effect on net assets or net asset
values per share. During the current year, the following reclassifications have
been made:
|
|
Overdistributed Net
Investment Income
|
|
Accumulated Net
Realized Loss
|
|
Paid-in Capital
|
|
|
(a)
|
|
|
$ 9,464
|
|
|
|
|
|
$ (9,464
|
)
|
|
|
(b)
|
|
|
$
(223,495
|
)
|
|
$ 223,495
|
|
|
|
|
|
(a)
Reclassifications
are primarily due to a non-deductible excise tax paid by the Fund.
(b)
Reclassifications are primarily due
to foreign currency transactions treated as ordinary income for tax purposes
and book/tax differences in the treatment of swaps.
2.
Investment Management Agreement and Other Transactions with Affiliates
The Fund has entered into an Investment
Advisory Agreement with Western Asset Management Company (Investment Adviser),
which provides for payment of a monthly fee computed at the annual rate of
0.40% of the Funds average weekly assets. Average weekly assets means the
average weekly value of the total assets of the Fund (including any assets
attributable to leverage) minus accrued liabilities (other than liabilities
representing leverage). For purposes of calculating average weekly assets,
neither the liquidation preference of any preferred shares outstanding nor any
liabilities associated with any instrument or transactions used by the
Investment Adviser to leverage the Funds portfolio (whether or not such instruments
or transactions are covered as described in the prospectus) is considered a
liability.
Western Asset Management Company Pte. Ltd.
(Western Asset Singapore), Western Asset Management Company Limited (Western
Asset London) and Western Asset Management Company Ltd (Western Asset Japan)
are the Funds investment advisers. Western Asset London, Western Asset
Singapore and Western Asset Japan provide certain advisory services to the Fund
relating to currency transactions and investment in non-U.S. denominated
securities. Western Asset London, Western Asset Singapore and Western Asset
Japan do not receive any compensation from the Fund.
Claymore Securities, Inc. (Servicing
Agent) acts as servicing agent for the Fund. For its services, the Servicing
Agent receives an annual fee from the Fund, payable monthly in arrears, which
is based on the Funds average weekly assets in a maximum amount equal to 0.15%
of the Funds average weekly assets.
Under an administrative agreement with the
Fund, Legg Mason Partners Fund Advisor, LLC (LMPFA) (Administrator), an
affiliate of the Investment Manager, provides certain administrative and
accounting functions for the Fund. In consideration for these services, the
Fund pays the Administrator a monthly fee at an annual rate of $100,000.
The Board approved the substitution of LMPFA
for Legg Mason Fund Adviser, Inc. (LMFA). Effective September 30,
2009, LMPFA assumed the rights and responsibilities of LMFA under its
administrative agreement.
3.
Investments
During the year ended December 31, 2009,
the aggregate cost of purchases and proceeds from sales of investments
(excluding short-term investments) and U.S Government & Agency
Obligations were as follows:
|
|
|
Investments
|
|
U.S. Government &
Agency Obligations
|
|
|
Purchases
|
|
$ 31,788,351
|
|
$156,503,401
|
|
|
Sales
|
|
24,901,045
|
|
215,847,385
|
|
26
|
Annual Report to Shareholders
|
|
At December 31, 2009, the aggregate gross
unrealized appreciation and depreciation of investments for federal income tax
purposes were as follows:
|
Gross
unrealized appreciation
|
|
$ 26,031,732
|
|
|
Gross
unrealized depreciation
|
|
(21,776,439
|
)
|
|
Net
unrealized appreciation
|
|
$ 4,255,293
|
|
Transactions in reverse repurchase agreements for the
Fund during the year ended December 31, 2009 were as follows:
|
Average
Daily
Balance
|
|
|
Weighted
Average
Interest Rate
|
|
|
Maximum
Amount
Outstanding
|
|
|
|
$ 93,749,935
|
|
|
0.38%
|
|
|
$ 172,949,400
|
|
|
During the year ended December 31, 2009
the interest rates on reverse repurchase agreements ranged from 0.15% to 0.70%.
Interest expense incurred on reverse repurchase agreements totaled $361,637.
During the year ended December 31, 2009,
written option transactions for the Fund were as follows:
|
|
|
Number of
Contracts
|
|
Premiums
|
|
|
Written options, outstanding December 31, 2008
|
|
|
|
|
|
|
|
|
Options written
|
|
|
346
|
|
|
$ 351,145
|
|
|
Options closed
|
|
|
|
|
|
|
|
|
Options exercised
|
|
|
(84
|
)
|
|
(117,424
|
)
|
|
Options expired
|
|
|
(262
|
)
|
|
(233,721
|
)
|
|
Written options, outstanding December 31, 2009
|
|
|
|
|
|
|
|
At December 31, 2009, the Fund had the
following open forward currency exchange contracts:
|
|
Settlement
|
|
Contract to
|
|
Unrealized
|
|
|
Broker
|
|
Date
|
|
Receive
A
|
|
Deliver
A
|
|
Gain/(Loss)
|
|
|
Credit Suisse First Boston (London)
|
|
2/17/2010
|
|
USD
|
|
3,852,789
|
|
AUD
|
|
4,231,509
|
|
|
$ 69,951
|
|
|
|
Credit Suisse First Boston (London)
|
|
2/17/2010
|
|
USD
|
|
2,905,920
|
|
AUD
|
|
3,200,000
|
|
|
45,219
|
|
|
|
Credit Suisse First Boston (London)
|
|
2/17/2010
|
|
USD
|
|
4,285,228
|
|
AUD
|
|
4,772,767
|
|
|
18,523
|
|
|
|
Credit Suisse First Boston (London)
|
|
2/17/2010
|
|
USD
|
|
4,495,110
|
|
CAD
|
|
4,783,022
|
|
|
(78,256
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ 55,437
|
|
|
A
Definitions
of currency abbreviations:
AUD
Australian Dollar
CAD
Canadian Dollar
USD
United States Dollar
27
|
Annual Report to Shareholders
|
|
Notes to
Financial StatementsContinued
At December 31, 2009, the Fund had the following
open swap contracts:
CREDIT DEFAULT SWAP ON CORPORATE
ISSUESSELL PROTECTION
1
Swap Counterparty
(Reference Entity)
|
|
Termination
Date
|
|
Implied Credit
Spread At
December 31, 2009
2
|
|
Periodic
Payments
Received
by the
Fund
|
|
Contract
Notional
Amount
3
|
|
Market
Value
|
|
Upfront
Premiums Paid/
(Received)
|
|
Unrealized
Appreciation/
(Depreciation)
|
|
JP Morgan
Chase & Co. (SLM Corporation, 5.125% due 8/27/12)
|
|
December 20,
2012
|
|
5.14%
|
|
2.50%
Quarterly
|
|
$ 3,800,000
|
|
$ (259,442
|
)
|
|
|
$ (259,442)
|
|
1
If
the Fund is a seller of protection and a credit event occurs, as defined under
the terms of that particular swap agreement, the Fund will either (i) pay
to the buyer of protection an amount equal to the notional amount of the swap
and take delivery of the referenced obligation or underlying securities
comprising the referenced index or (ii) pay a net settlement amount in the
form of cash or securities equal to the notional amount of the swap less the
recovery value of the referenced obligation or underlying securities comprising
the referenced index.
2
Implied
credit spreads, utilized in determining the market value of credit default swap
agreements on corporate issues or sovereign issues of an emerging country as of
period end serve as an indicator of the current status of the
payment/performance risk and represent the likelihood or risk of default for
the credit derivative. The implied credit spread of a particular referenced
entity reflects the cost of buying/selling protection and may include upfront
payments required to be made to enter into the agreement. Wider credit spreads
represent a deterioration of the referenced entitys credit soundness and a
greater likelihood or risk of default or other credit event occurring as
defined under the terms of the agreement. A credit spread identified as
Defaulted indicates a credit event has occurred for the referenced entity or
obligation.
3
The
maximum potential amount the Fund could be required to make as a seller of
credit protection or receive as a buyer of credit protection if a credit event
occurs as defined under the terms of that particular swap agreement.
Percentage shown is an
annual percentage rate.
4.
Derivative Instruments and Hedging Activities
Financial Accounting Standards Board
Codification Topic 815 (formerly, Statement of Financial Accounting Standards No. 161)
(ASC Topic 815) requires enhanced disclosure about an entitys derivative and
hedging activities.
Below is a table, grouped by derivative type
that provides information about the fair value and the location of derivatives
within the Statement of Assets and Liabilities at December 31, 2009.
Asset Derivatives
1
|
|
Foreign Exchange
Contracts Risk
|
|
Other
Contracts Risk
|
|
Total
|
|
Forward Foreign Currency Contracts
|
|
$ 133,693
|
|
|
|
|
|
$133,693
|
|
|
|
|
|
|
|
|
|
|
|
Liability Derivatives
1
|
Interest Rate Contracts Risk
|
|
Foreign Exchange
Contracts Risk
|
|
Credit
Contracts Risk
|
|
Other
Contracts Risk
|
|
Total
|
|
Futures Contracts
2
|
$162,559
|
|
|
|
|
|
|
|
|
|
|
|
$162,559
|
|
|
Swap Contracts
3
|
|
|
|
|
|
|
$259,442
|
|
|
|
|
|
259,442
|
|
|
Forward Foreign Currency Contracts
|
|
|
|
$78,256
|
|
|
|
|
|
|
|
|
78,256
|
|
|
Total
|
$162,559
|
|
|
$78,256
|
|
|
$259,442
|
|
|
|
|
|
$500,257
|
|
|
1
Generally,
the balance sheet location for asset derivatives is receivables/net unrealized
appreciation(depreciation) and for liability derivatives is payables/net
unrealized appreciation(depreciation).
2
Includes
cumulative appreciation/depreciation of futures contracts as reported in the
footnotes. Only current days variation margin is reported within the
receivables and/or payables of the Statement of Assets and Liabilities.
3
Values
include premiums paid/(received) on swap contracts which are shown separately
in the Statement of Assets and liabilities.
28
|
Annual Report to Shareholders
|
|
The following tables provide information about
the effect of derivatives and hedging activities on the Funds Statement of
Operations for the year ended December 31, 2009. The first table provides
additional detail about the amounts and sources of gains/(losses) realized on
derivatives during the period. The second table provides additional information
about the changes in unrealized appreciation/(depreciation) resulting from the
Funds derivatives and hedging activities during the period.
Amount of Realized Gain or (Loss) on
Derivatives Recognized
|
|
Interest Rate
Contracts Risk
|
|
Foreign Exchange
Contracts Risk
|
|
Credit
Contracts Risk
|
|
Other
Contracts Risk
|
|
Total
|
|
Written Options
|
|
$ 351,145
|
|
|
|
|
|
|
|
|
|
|
|
$ 351,145
|
|
Futures Contracts
|
|
(555,154
|
)
|
|
|
|
|
|
|
|
|
|
|
(555,154
|
)
|
Swap Contracts
|
|
2,038,276
|
|
|
|
|
|
$ (381,250
|
)
|
|
|
|
|
1,657,026
|
|
Forward Foreign Currency Contracts
|
|
|
|
|
$ (464,192
|
)
|
|
|
|
|
|
|
|
(464,192
|
)
|
Total
|
|
$ 1,834,267
|
|
|
$ (464,192
|
)
|
|
$ (381,250
|
)
|
|
|
|
|
$ 988,825
|
|
Change in Unrealized
Appreciation/Depreciation on Derivatives Recognized
|
|
Interest Rate
Contracts Risk
|
|
Foreign Exchange
Contracts Risk
|
|
Credit
Contracts Risk
|
|
Other
Contracts Risk
|
|
Total
|
|
Futures Contracts
|
|
$ 1,994,343
|
|
|
|
|
|
|
|
|
|
|
|
$ 1,994,343
|
|
Swap Contracts
|
|
|
|
|
|
|
|
$ 2,307,375
|
|
|
|
|
|
2,307,375
|
|
Forward Foreign Currency Contracts
|
|
|
|
|
$ (51,026
|
)
|
|
|
|
|
|
|
|
(51,026
|
)
|
Total
|
|
$ 1,994,343
|
|
|
$ (51,026
|
)
|
|
$ 2,307,375
|
|
|
|
|
|
$ 4,250,692
|
|
During the year ended December 31, 2009,
the Fund had average market values of $7,723,540 and $24,509,887 in forward
foreign currency contracts to sell and futures contracts to buy, respectively,
and average notional balances of $23,909,723 in credit default swap contracts
to sell protection. As of December 31, 2009, the Fund did not have any
open written options, forward foreign currency contracts to buy, and futures
contracts to sell, but had average market values of $25,459, $2,840,739 and $2,922,451,
respectively. As of December 31, 2009, the Fund did not have any open
interest rate swap contracts but had an average notional balance of $6,107,692.
The Fund has several credit related contingent
features that if triggered would allow its derivatives counterparties to close
out and demand payment or additional collateral to cover their exposure from
the Fund. Credit related contingent features are established between the Fund
and its derivatives counterparties to reduce the risk that the Fund will not
fulfill its payment obligations to its counterparties. These triggering
features include, but are not limited to, a percentage decrease in the Funds
net assets and or percentage decrease in the Funds Net Asset Value or NAV. The
contingent features are established within the Funds International Swap and
Derivatives Association, Inc. master agreements which govern positions in
swaps, over-the-counter options, and forward currency exchange contracts for
each individual counterparty.
5.
Common Shares
Of the 29,152,821 shares of common stock
outstanding at December 31, 2009, the Investment Adviser owned 6,981
shares.
6.
Trustee Compensation
Each Independent Trustee receives a fee of
$15,000 for serving as a Trustee of the Fund and a fee of $1,500 and related
expenses for each meeting of the Board of Trustees attended. The Chairman of
the Board receives an additional $5,000 for serving in that capacity. The Audit
Committee Chairman and the Governance and Nominating Committee Chairman each
receive an additional $3,000 for serving in their respective capacities.
Members of the Audit Committee and the Governance and Nominating Committee
receive $500 for each committee meeting attended.
29
|
Annual Report to Shareholders
|
|
Notes
to Financial StatementsContinued
7.
Income Tax Information and Distributions to Shareholders
Subsequent to the fiscal year
end, the Fund has made the following distributions:
|
Record Date
Payable Date
|
|
|
|
Record Date
Payable Date
|
|
|
|
|
1/15/10
|
|
|
|
2/12/10
|
|
|
|
|
1/29/10
|
|
$0.038000
|
|
2/26/10
|
|
$0.038000
|
|
The tax character of distributions paid during the
fiscal years ended December 31, was as follows:
|
|
|
2009
|
|
2008
|
|
|
Distributions paid from:
|
|
|
|
|
|
|
Ordinary Income
|
|
$ 10,901,459
|
|
$ 24,635,209
|
|
|
Tax Return of Capital
|
|
2,858,672
|
|
|
|
|
Total Distributions Paid
|
|
$ 13,760,131
|
|
$ 24,635,209
|
|
As of December 31, 2009, the components of
accumulated earnings on a tax basis were as follows:
|
Capital loss carryforward*
|
|
$ (32,756,280
|
)
|
|
Other book/tax temporary differences
(
a)
|
|
(2,244,656
|
)
|
|
Unrealized appreciation/(depreciation)
(
b)
|
|
3,889,488
|
|
|
Total accumulated earnings/(losses)net
|
|
$ (31,111,448
|
)
|
*
As of December 31, 2009, the Fund had the
following net capital loss carryforward remaining:
|
Year of Expiration
|
|
Amount
|
|
|
12/31/2014
|
|
$ (23,725,089
|
)
|
|
12/31/2015
|
|
(4,099,686
|
)
|
|
12/31/2017
|
|
(4,931,505
|
)
|
|
|
|
$ (32,756,280
|
)
|
These amounts will be available to offset any future taxable
capital gains
(a)
Other
book/tax temporary differences are attributable primarily to the tax deferral
of losses on straddles, the realization for tax purposes of unrealized
gains/(losses) on certain futures and foreign currency contracts, interest
accrued for tax purposes on defaulted securities and book/tax differences in
the timing of the deductibility of various expenses.
(b)
The
difference between book-basis and tax-basis unrealized
appreciation/(depreciation) is attributable primarily to the realization for
book purposes of unrealized losses on certain securities lending transactions.
30
|
Annual Report to Shareholders
|
|
Report
of Independent Registered Public Accounting Firm
To
the Board of Trustees and Shareholders of Western Asset/Claymore
Inflation-Linked Securities & Income Fund:
In our opinion, the accompanying statement of
assets and liabilities, including the portfolio of investments, and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Western Asset/Claymore Inflation-Linked Securities & Income Fund (the
Fund) at December 31, 2009, the results of its operations, the changes
in its net assets, and the financial highlights for each of the periods
presented, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as financial statements) are the responsibility of the
Funds management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at December 31, 2009 by correspondence with the custodian
and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers
LLP
Baltimore, Maryland
February 19, 2010
31
|
Annual Report to Shareholders
|
|
Important
Tax Information (Unaudited)
The following information is provided with respect to
the distributions paid during the taxable year ended December 31, 2009:
Record
Date:
Payable
Date:
|
|
|
Monthly
January 2009
|
|
Monthly
February 2009
December 2009
|
|
Ordinary Income:
|
|
|
|
|
|
Qualified Dividend Income for Individuals**
|
|
|
0.69
|
%
|
|
|
0.69
|
%
|
|
Dividends Qualifying for the Dividends
Received Deduction for Corporations**
|
|
|
0.69
|
%
|
|
|
0.69
|
%
|
|
Interest from Federal Obligations
|
|
|
59.99
|
%*
|
|
|
59.99
|
%*
|
|
Tax Return of Capital
|
|
|
10.06
|
%
|
|
|
21.93
|
%
|
|
* This Fund has met the quarterly
asset requirements for California, Connecticut and New York resident
shareholders.
** Expressed as a percentage net of Tax Return of
Capital.
The law varies in each state as to whether and what
percentage of dividend income attributable to Federal obligations is exempt
from state income tax. We recommend that you consult with your tax adviser to
determine if any portion of the dividends you received is exempt from state
income taxes.
Please retain this information for your records.
32
|
Annual Report to Shareholders
|
|
Trustees
and Officers
The Trustees and officers of the Fund, their ages (as
of December 31, 2009), and a description of their principal occupations
during the past five years are listed below. Except as noted, each Trustees
and officers principal occupation and business experience for the last five
years has been with the employer(s) indicated, although in some cases the
Trustee or officer may have held different positions with such employer(s).
Unless otherwise indicated, the business address of the persons listed below is
c/o Western Asset Management Company, 385 East Colorado Boulevard, Pasadena, CA
91101.
Name and Age
|
|
|
Position(s)
Held With Fund
|
|
|
Term of
Office and
Length of
Time Served
|
|
|
Principal
Occupations
During the Past 5 Years
|
|
|
Number of
Portfolios
in Fund
Complex*
Overseen
by Trustee
(A)
|
|
|
Other
Directorships
Held by Trustee
|
Independent
Trustees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael Larson
50
|
|
|
Trustee and Chairman of
the Board of Trustees
(B,C)
|
|
|
Term expires in 2011;
served since September 2004
|
|
|
Chief Investment Officer
for William H. Gates III (1994-present).
|
|
|
2
|
|
|
Pan American Silver
Corp. (1999-present); Republic Services Inc. (2009-present), Grupo Telensa
S.A.B. (2009-present).
|
Ronald A. Nyberg
56
|
|
|
Trustee
(B,C)
|
|
|
Term expires in 2009;
served since January 2004
|
|
|
Partner of
Nyberg & Cassioppi, LLC, a law firm specializing in corporate law,
estate planning and business transactions (2000- present); Formerly,
Executive Vice President, General Counsel and Corporate Secretary of Van
Kampen Investments (1982-1999).
|
|
|
44
|
|
|
None
|
Ronald E.
Toupin, Jr.
51
|
|
|
Trustee
(B,C)
|
|
|
Term expires in 2010;
served since January 2004
|
|
|
Retired. Formerly: Vice
President, Manager and Portfolio Manager of Nuveen Asset Management, an
investment advisory firm (1998-1999); Vice President and Portfolio Manager of
Nuveen Investment Advisory Corporation, an investment advisory firm
(1992-1999); Vice President and Manager of Nuveen Unit Investment Trusts
(1991-1999); and Assistant Vice President and Portfolio Manager of Nuveen
Unit Trusts (1988- 1999), and John Nuveen & Company, Inc.
(1982-1999)
|
|
|
41
|
|
|
None
|
Interested
Trustee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R. Jay Gerken
58
|
|
|
Trustee and President
(D)
|
|
|
Term expires 2010;
served since March 2007
|
|
|
Managing Director of
Legg Mason & Co., Chairman, President and Chief Executive Officer of
certain mutual funds associated with Legg Mason & Co., LLC (Legg
Mason & Co.) or its affiliates (2005-present); President of Legg
Mason Partners Fund Advisor, LLC (LMPFA) (2006-present); Chairman of Smith
Barney Fund Management LLC and Citi Fund Management Inc. (2002-2005);
Chairman, President and Chief Executive Officer of Travelers Investment
Adviser, Inc. (2002- 2005).
|
|
|
147
|
|
|
None
|
33
|
Annual Report to Shareholders
|
|
Trustees
and OfficersContinued
Name and Age
|
|
|
Position(s)
Held With Fund
|
|
|
Term of
Office and
Length of
Time Served
|
|
|
Principal
Occupations
During the Past 5 Years
|
|
|
Number of
Portfolios
in Fund
Complex*
Overseen
by Trustee
(A)
|
|
|
Other
Directorships
Held by Trustee
|
Officers(E)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles A. Ruys de Perez
52
|
|
|
Vice President
|
|
|
Served since
March 2007
|
|
|
General Counsel of
Western Asset Management Company (2007-present). Formerly: Chief Compliance
Officer, Putnam Investments (2004-2007); Managing Director and Senior Counsel
of Putnam Investments (2001-2004).
|
|
|
N/A
|
|
|
N/A
|
Frances M. Guggino
53
55 Water Street
New York, NY 10041
|
|
|
Treasurer and Principal
Financial and Accounting Officer
|
|
|
Served since 2009
|
|
|
Director of Legg Mason;
Chief Financial Officer and Treasurer of certain mutual funds associated with
Legg Mason; formerly, Controller of certain mutual funds associated with
Citigroup Asset Management (CAM) (1999 to 2004)
|
|
|
N/A
|
|
|
N/A
|
Steven M. Hill
45
2455 Corporate
West Drive
Lisle, IL 60532
|
|
|
Assistant Treasurer
|
|
|
Served since
May 2004
|
|
|
Senior Managing Director
of Claymore Advisors, LLC and Claymore Securities, Inc. (2005-present);
Chief Financial Officer of Claymore Group Inc. (2005-2006); Managing Director
of Claymore Advisors, LLC and Claymore Securities, Inc. (2003- 2005);
Chief Financial and Accounting Officer and Treasurer or Assistant Treasurer
of certain closed-end investment companies in the Claymore fund complex;
Treasurer of Henderson Global Funds and Operations Manager for Henderson
Global Investors (North America) Inc. (2002-2003).
|
|
|
N/A
|
|
|
N/A
|
Susan C. Curry
43
55 Water St.
New York, NY 10041
|
|
|
Assistant Treasurer
|
|
|
Served since
February 2007
|
|
|
Director of TaxMutual
Funds, Legg Mason & Co. (2005- present); Director of Tax Mutual
Funds, Citigroup (2004- 2005); Assistant Treasurer, Western Asset
Funds, Inc., Western Asset Income Fund, Western Asset Premier Bond Fund,
Western Asset/Claymore Inflation-Linked Opportunities & Income Fund
(2007-present); Partner, Deloitte & Touche (1990-2004).
|
|
|
N/A
|
|
|
N/A
|
34
|
Annual Report to Shareholders
|
|
Name and Age
|
|
|
Position(s)
Held With Fund
|
|
|
Term of
Office and
Length of
Time Served
|
|
|
Principal
Occupations
During the Past 5 Years
|
|
|
Number of
Portfolios
in Fund
Complex*
Overseen
by Trustee
(A)
|
|
|
Other
Directorships
Held by Trustee
|
Erin K. Morris
43
100 Light Street
Baltimore, MD 21202
|
|
|
Assistant Treasurer
|
|
|
Served since
January 2004
|
|
|
Vice President and
Manager, Global Funds Administration, Legg Mason & Co. (2005-
present); Assistant Vice President and Manager, Legg Mason Wood Walker,
Incorporated (2002-2005); Treasurer, Western Asset Income Fund, Western Asset
Funds, Inc. and Western Asset Premier Bond Fund (2006- present);
Assistant Treasurer of Western Asset/Claymore Inflation-Linked
Opportunities & Income Fund (2003-present); Assistant Treasurer of
certain Legg Mason Partners Fixed Income Fund complex (2007- present);
Assistant Treasurer, Western Asset Income Fund, Western Asset
Funds, Inc., Western Asset Premier Bond Fund, Legg Mason Income
Trust, Inc. and Legg Mason Tax-Free Income Fund (2001-2006).
|
|
|
N/A
|
|
|
N/A
|
Todd F. Kuehl
40
100 Light Street
Baltimore, MD 21202
|
|
|
Chief Compliance Officer
|
|
|
Served since
February 2007
|
|
|
Vice President, Legg
Mason & Co. (2006-present); Chief Compliance Officer of Western
Asset/Claymore Inflation-Linked Opportunities & Income Fund, Western
Asset Income Fund, Western Asset Premier Bond Fund, Western Asset Funds, Inc.
(2007-present) and Barrett Growth Fund and Barrett Opportunity Fund (2006-
present); Branch Chief, Division of Investment Management, U.S. Securities
and Exchange Commission (2002-2006).
|
|
|
N/A
|
|
|
N/A
|
Melissa J. Nguyen
31
2455 Corporate
West Drive
Lisle, IL 60532
|
|
|
Secretary
|
|
|
Served since
February 2006
|
|
|
Vice President and
Assistant General Counsel of Claymore Group, Inc. (2005-present);
Secretary of certain funds in the Claymore fund complex (2005- present).
Formerly, Associate, Vedder Price, P.C. (2003-2005).
|
|
|
N/A
|
|
|
N/A
|
35
|
Annual Report to Shareholders
|
|
Trustees
and OfficersContinued
Name and Age
|
|
|
Position(s)
Held With Fund
|
|
|
Term of
Office and
Length of
Time Served
|
|
|
Principal
Occupations
During the Past 5 Years
|
|
|
Number of
Portfolios
in Fund
Complex*
Overseen
by Trustee
(A)
|
|
|
Other
Directorships
Held by Trustee
|
Mark E. Mathiasen
31
2455 Corporate
West Drive
Lisle, IL 60532
|
|
|
Assistant Secretary
|
|
|
Served since
May 2007
|
|
|
Vice President and Assistant
General Counsel of Claymore Advisors, LLC (2007 to present). Secretary of
certain funds in the Claymore fund complex. Previously, Law Clerk for the
Idaho State Courts (2003- 2007).
|
|
|
N/A
|
|
|
N/A
|
(A)
Each
Trustee also serves as a Trustee of Western Asset/Claymore Inflation-Linked
Opportunities & Income Fund, a closed-end investment company, which is
considered part of the same Fund Complex as the Fund. The Investment Manager
serves as investment adviser to Western Asset/Claymore Inflation-Linked Securities &
Income Fund. Messrs. Nyberg and Toupin also serve as Trustees of Claymore
Dividend & Income Fund, MBIA Capital/Claymore Managed Duration
Investment Grade Municipal Fund, TS&W/Claymore Tax-Advantaged Balanced
Fund, Madison/Claymore Covered Call & Equity Strategy Fund,
Fiduciary/Claymore MLP Opportunity Fund, Old Mutual/Claymore Long- Short Fund,
and Claymore/Guggenheim Strategic Opportunities Fund, each of which is a
closed-end management investment company, Claymore Exchange-Traded Fund Trust
(consisting of 16 separate portfolios) and Claymore Exchange Traded Fund Trust
2 (consisting of 16 separate portfolios), each an open-end management
investment company. Additionally, Mr. Nyberg serves as a Trustee for
Advent Claymore Convertible Securities & Income Fund, Advent/Claymore
Enhanced Growth & Income Fund and Advent/Claymore Global Convertible
Securities and Income Fund, each a closed-end investment company. Mr. Gerken
serves as Director/Trustee to 145 other portfolios associated with Legg Mason &
Co., LLC or its affiliates. Legg Mason & Co., LLC is an affiliate of
Western Asset Management Co. (WAM).
(B)
Member
of the Audit Committee of the Board of Trustees.
(C)
Member
of the Governance and Nominating Committee of the Board of Trustees.
(D)
Mr. Gerken
is an interested person (as defined above) of the Fund because of his
positions with subsidiaries of, and ownership of shares of common stock of,
Legg Mason, Inc., the parent company of WAM.
(E)
Each
officer shall hold office until his or her respective successor is chosen and
qualified, or in each case until he or she sooner dies, resigns, is removed
with or without cause or becomes disqualified.
Mr. Dalmaso resigned from the Board
on October 14, 2009.
36
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Annual Report to Shareholders
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Trustees
Consideration of the Management and Advisory Agreements
The Independent Trustees considered the
following Investment Management Agreements with respect to the Fund (the Agreements)
(i) an Investment Management Agreement between the Fund and Western Asset
Management Company (Western Asset), (ii) an Investment Management
Agreement between Western Asset and Western Asset Management Company Limited (WAML),
(iii) an Investment Management Agreement between Western Asset and Western
Asset Management Company Pte. Ltd. in Singapore (Western Singapore) and (iv) an
Investment Management Agreement between Western Asset and Western Asset
Management Company Ltd in Japan (Western Japan, and together with Western
Singapore and WAML the Non-U.S. Advisers and together with Western Asset, the
Advisers) at a meeting held on October 26, 2009. At a meeting held on November 16,
2009, the Independent Trustees reported to the full Board of Trustees their
considerations and recommendation with respect to the Agreements, and the Board
of Trustees, including a majority of the Independent Trustees, considered and
approved renewal of the Agreements.
The Trustees noted that although Western Assets
business is operated through separate legal entities, such as the Non-U.S.
Advisers, its business is highly integrated and senior investment personnel at
Western Asset have supervisory oversight responsibility over the investment
decisions made by the Non-U.S. Advisers. Therefore, in connection with their
deliberations noted below, the Trustees primarily focused on the information
provided by Western Asset when considering the approval of the Agreements. The
Trustees also noted that the Fund does not pay any management fees directly to
any of the Non-U.S. Advisers because Western Asset pays the Non-U.S. Advisers
for services provided to the Fund out of the management fees Western Asset
receives from the Fund.
In arriving at their decision to renew the
Agreements, the Trustees met with representatives of Western Asset, including
relevant investment advisory personnel; reviewed a variety of information
prepared by Western Asset and materials provided by Lipper Inc. (Lipper) and
counsel to the Independent Trustees; reviewed performance and expense
information for peer groups of comparable funds selected and prepared by
Lipper, and certain other products available from Western Asset for investments
in U.S. TIPS, including separate accounts managed by Western Asset; and
requested and reviewed additional information as necessary. These reviews were
in addition to information obtained by the Trustees at their regular quarterly
meetings with respect to the Funds performance and other relevant matters,
such as information on public trading in the Funds shares and differences
between the Funds share price and net asset value per share, and related
discussions with Western Assets personnel.
As part of their review, the Trustees examined
the Advisers ability to provide high quality investment management services to
the Fund. The Trustees considered the investment philosophy and research and
decision-making processes of the Advisers; the experience of their key advisory
personnel responsible for management of the Fund; the ability of the Advisers
to attract and retain capable research and advisory personnel; the capability
and integrity of the Advisers senior management and staff; and the level of
skill required to manage the Fund. In addition, the Trustees reviewed the
quality of the Advisers services with respect to regulatory compliance and
compliance with the investment policies of the Fund and conditions that might
affect the Advisers ability to provide high quality services to the Fund in
the future, including their business reputation, financial condition and
operational stability. Based on the foregoing, the Trustees concluded that the
Advisers investment process, research capabilities and philosophy were well
suited to the Fund given its investment objectives and policies, and that the
Advisers would be able to meet any reasonably foreseeable obligations under the
Agreements.
In reviewing the quality of the services
provided to the Fund, the Trustees also reviewed a comparison of the
performance of the Fund to the average performance of all leveraged closed-end
funds that invest at least 65% of their assets in corporate and government debt
issues rated in the top four grades regardless of asset size. The Trustees
noted that although the Fund had met its primary objective of providing current
income to shareholders, the performance of the Fund over the one- and five-year
periods ended August 31, 2009 was well below that of the Lipper peer group
over the same periods. However, the Funds performance for the three-year
period ended on that date was slightly higher than the average performance of
the peer group. The Trustees concluded that the Advisers management of the
Fund would continue to be in the best interests of the shareholders.
The Trustees also considered the management
fee and total expenses payable by the Fund. They reviewed information
concerning management fees paid to investment advisers of similarly-managed
funds, as well as fees paid by Western Assets other clients, including
separate accounts managed by Western Asset. The Trustees noted that the Funds
total expense ratio and the management fee paid to Western Asset were each well
below the corresponding medians of the Funds Lipper peer group. The Trustees
noted that the management fee paid by the Fund was generally higher than the
fees paid by clients of Western Asset for accounts with similar investment
strategies, but that the administrative and operational responsibilities for
Western Asset with respect to the Fund were also
37
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Annual Report to Shareholders
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Trustees
Consideration of the Management and Advisory AgreementsContinued
relatively higher and that the Funds investment
strategy included investments in asset classes other than U.S. TIPS, which was
generally not the case for Western Assets other clients. In light of these
differences, the Trustees concluded that the differences in management fees
from those paid by Western Assets other clients were reasonable.
The Trustees further evaluated the benefits of
the advisory relationship to the Advisers, including, among others, the
profitability of the relationship to the Advisers; the direct and indirect
benefits that the Advisers may receive from their relationships with the Fund,
including the fallout benefits, such as reputational value derived from
serving as investment adviser; and the affiliation between the Advisers and
Legg Mason Partners Funds Advisor, LLC, the Funds administrator. In that
connection, the Trustees concluded that the Advisers profitability was
consistent with levels of profitability that had been determined by courts not
to be excessive. The Trustees noted that Western Asset does not have soft
dollar arrangements.
Finally, the Trustees considered, in light of
the profitability information provided by Western Asset, the extent to which
economies of scale would be realized by the Advisers as the assets of the Fund
grow. The Trustees concluded that because the Fund is a closed-end fund and
does not make a continuous offer of its securities, the Funds size was
relatively fixed and it would be unlikely that the Advisers would realize
economies of scale from the Funds growth. The Trustees further noted that, as
the Advisers profitability was consistent with levels of profitability that
had been determined by courts not to be excessive, any economies of scale that
may currently exist were being appropriately shared with shareholders.
In their deliberations with respect to these
matters, the Independent Trustees were advised by their independent counsel,
who are independent of the Advisers within the meaning of the Securities and
Exchange Commission rules regarding the independence of counsel. The
Independent Trustees weighed the foregoing matters in light of the advice given
to them by their independent counsel as to the law applicable to the review of
investment advisory contracts. In arriving at a decision, the Trustees,
including the Independent Trustees, did not identify any single matter as
all-important or controlling, and the foregoing summary does not detail all the
matters considered. The Trustees judged the terms and conditions of the
Agreements, including the investment advisory fees, in light of all of the
surrounding circumstances.
Based upon their review, the Trustees, including
all of the Independent Trustees, determined, in the exercise of their business
judgment, that they were satisfied with the quality of investment advisory
services being provided by the Advisers; that the fees to be paid to the
Advisers under the Agreements were fair and reasonable given the scope and
quality of the services rendered by the Advisers; and that approval of the
Agreements was in the best interest of the Fund and its shareholders.
38
Privacy
Policy
We are committed to keeping nonpublic personal
information about you secure and confidential. This notice is intended to help
you understand how we fulfill this commitment. From time to time, we may
collect a variety of personal information about you, including:
·
Information we receive from you on
applications and forms, via the telephone, and through our websites;
·
Information about your transactions with
us, our affiliates, or others (such as your purchases, sales, or account
balances); and
·
Information we receive from consumer
reporting agencies.
We do not disclose nonpublic personal
information about our customers or former customers, except to our affiliates
(such as broker-dealers or investment advisers within the Legg Mason family of
companies) or as is otherwise permitted by applicable law or regulation. For
example, we may share this information with others in order to process your
transactions or service an account. We may also provide this information to
companies that perform marketing services on our behalf, such as printing and
mailing, or to other financial institutions with whom we have joint marketing
agreements. When we enter into such agreements, we will require these companies
to protect the confidentiality of this information and to use it only to
perform the services for which we hired them.
With respect to our internal security
procedures, we maintain physical, electronic, and procedural safeguards to
protect your nonpublic personal information, and we restrict access to this
information.
If you decide at some point either to close
your account(s) or become an inactive customer, we will continue to adhere
to our privacy policies and practices with respect to your nonpublic personal
information.
|
NOT PART OF THE ANNUAL REPORT
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Western Asset/Claymore Inflation-Linked
Securities & Income Fund
The
Board of Trustees
R. Jay Gerken
Michael Larson
Ronald A. Nyberg
Ronald E.
Toupin, Jr.
Officers
R. Jay Gerken,
President
Charles A. Ruys de
Perez, Vice President
Todd F. Kuehl, Chief
Compliance Officer
Frances M. Guggino,
Treasurer and Principal Financial
and Accounting Officer
Steven M. Hill,
Assistant Treasurer
Erin K. Morris,
Assistant Treasurer
Susan C. Curry,
Assistant Treasurer
Melissa J. Nguyen,
Secretary
Mark Mathiasen,
Assistant Secretary
Investment
Advisers
Western Asset
Management Company
385 East Colorado
Boulevard
Pasadena, CA 91101
Western Asset
Management Company Limited
10 Exchange Square
London, England EC2A2EN
Western Asset
Management Company Pte. Ltd.
1 George Street #23-01
Singapore 049145
|
Investment
Advisers (continued)
Western Asset
Management Company Ltd
36F Shin-Marunouchi
Building
5-1 Maranouchi 1-Chronu
Chiyoda
Tokyo 100-6536
Servicing
Agent
Claymore Securities, Inc.
2455 Corporate West
Drive
Lisle, IL 60532
Custodian
State Street Bank and
Trust Company
1 Lincoln Street
Boston, MA 02111
Counsel
Ropes & Gray
LLP
1211 Avenue of the
Americas
New York, NY 10036
Independent
Registered Public Accounting Firm
PricewaterhouseCoopers
LLP
100 East Pratt Street
Baltimore, MD 21202
Transfer
Agent
American Stock Transfer &
Trust Company LLC
59 Maiden Lane
New York, New York, NY
10038
|
This report is sent to shareholders
of Western Asset/Claymore Inflation-Linked Securities & Income 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.
In accordance with Section 23(c) of
the Investment Company Act of 1940, the Fund hereby gives
notice that it may, from time to time, repurchase its shares in the open market
at the option
of the Board of Trustees, and on such terms as the Board of Trustees shall
determine.
WIA-A-(02/10)
Item 2.
Code of Ethics
(a)
Western Asset/Claymore Inflation-Linked
Securities & Income Fund (Registrant) has adopted a Code of Ethics,
as defined in the instructions to Item 2 of Form N-CSR, that applies
to the Registrants principal executive, financial and accounting officers, a
copy of which is attached as an exhibit to this Form N-CSR.
(b)
Omitted.
(c)
Not applicable.
(d)
Not applicable.
(e)
Not applicable
Item 3.
Audit Committee Financial Expert
The Audit Committee of
the Registrants Board of Trustees is comprised solely of Trustees who are independent
(as such term has been defined by the Securities and Exchange Commission (SEC)
in regulations implementing Section 407 of the Sarbanes-Oxley Act of 2002
(the Regulations)). In addition, the Board of Trustees of the Registrant has
determined that Mr. Ronald E. Toupin, Jr. qualifies as an audit
committee financial expert (as such term has been defined in the Regulations)
based on its review of his pertinent experience, knowledge and education. The
SEC has stated that the designation or identification of a person as an audit
committee financial expert pursuant to this Item 3 of Form N-CSR does
not impose on such person any duties, obligations or liability that are greater
than the duties, obligations and liabilities imposed on such person as a member
of the Audit Committee and the Board of Trustees in absence of such designation
or identification.
Item 4.
Principal Accounting Fees and Services
(a)
Audit Fees
Fiscal Year Ended December 31,
2008 $30,000
Fiscal Year Ended December 31,
2009 $31,500
(b)
Audit-Related Fees
Fiscal Year Ended December 31,
2008 $0
Fiscal Year Ended December 31,
2009 $0
During the year ended December 31,
2009, review of the rating agency compliance testing for the Registrants
auction market preferred shares outstanding was reviewed.
PricewaterhouseCoopers
LLP billed fees in the amount of $230,000and $230,000, respectively for
non-audit services that required preapproval by the Audit Committee pursuant to
paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X during the
Registrants fiscal year ended December 31, 2008 and December 31,
2009, respectively.
During the year ended December 31,
2009, PricewaterhouseCoopers LLP conducted a SAS 70 audit to review and test
operating effectiveness of controls placed in operation for Western Asset
Management Company. During the year ended December 31, 2009,
PricewaterhourseCoopers LLP reviewed the Australian Superannuation Circular.
(c)
Tax Fees
Fiscal Year Ended December 31,
2008 $4,000
Fiscal Year Ended December 31,
2009 $4,000
Services include
preparation of federal and state income tax returns and preparation of excise
tax returns.
PricewaterhouseCoopers
LLP did not bill fees for tax services that required preapproval by the Audit
Committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation
S-X during the Registrants last two fiscal years.
(d)
All Other Fees
There were no fees billed
to the Registrant during each of the last two fiscal years by
PricewaterhouseCoopers LLP that were not disclosed in Items 4(a), (b) or (c) above.
PricewaterhouseCoopers
LLP did not bill fees for services not included in Items 4(a), (b) or (c) above
that required pre-approval by the Audit Committee pursuant to paragraph (c)(7)(ii) of
Rule 2-01 of Regulation S-X during the Registrants last two fiscal years.
(e)
(1) The Audit
Committee has determined that all work performed for the Registrant by
PricewaterhouseCoopers LLP will be pre-approved by the full Audit Committee
and, therefore, has not adopted preapproval policies and procedures.
(2) None.
(f)
Not applicable.
(g)
Non-Audit Fees
Fiscal Year Ended December 31,
2008 $362,500
Fiscal Year Ended December 31,
2009 $0
(h)
The Audit Committee of the Registrant has considered
whether the non-audit services that were rendered by the Registrants principal
accountant to the Registrants investment adviser (not including any
sub-adviser whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser) and any entity controlling,
controlled by, or under common control with the investment adviser and that
were not preapproved by the Audit Committee are compatible with maintaining the
principal accountants independence.
Item 5.
Audit Committee of Listed Registrants
a) Registrant has a
separately-designated standing Audit Committee established in accordance with
Section 3(a)58(A) of the Exchange Act
.
The Audit Committee consists of the following Board members:
Michael
Larson
Ronald
A. Nyberg
Ronald
E. Toupin, Jr.
b) Not applicable
Item 6.
Schedule of Investments
The schedule of
investments in securities of unaffiliated issuers as of the close of the
reporting period is included as part of the annual report to shareholders
contained in Item 1 hereof.
Item 7.
Disclosure of Proxy Voting Policies and Procedures for
Closed-End Management Investment Companies
Proxy Voting Guidelines and Procedures
The Proxy Voting Policies
and Procedures govern in determining how proxies relating to the funds
portfolio securities are voted and are provided below. Information regarding how each fund voted
proxies (if any) relating to portfolio securities during the most recent
12-month period ended June 30 is available without charge (1) by
calling 888-425-6432, (2) on the funds website at
http://www.leggmason.com/individualinvestors
and (3) on the SECs website at http://www.sec.gov.
Background
Western Asset Management
Company (WA), Western Asset Management Company Limited (WAML), Western
Asset Management Company Ltd (WAMCL) and Western Asset Management Company
Pte. Ltd. (WAMC) (together Western Asset) have adopted and implemented
policies and procedures that we believe are reasonably designed to ensure that
proxies are voted in the best interest of clients, in accordance with our
fiduciary duties and SEC Rule 206(4)-6 under the Investment Advisers Act
of 1940 (Advisers Act). Our authority to vote the proxies of our clients is
established through investment management agreements or comparable documents,
and our proxy voting guidelines have been tailored to reflect these specific
contractual obligations. In addition to SEC requirements governing advisers,
our proxy voting policies reflect the long-standing fiduciary standards and
responsibilities for ERISA accounts. Unless a manager of ERISA assets has been
expressly precluded from voting proxies, the Department of Labor has determined
that the responsibility for these votes lies with the Investment Manager.
In exercising its voting
authority, Western Asset will not consult or enter into agreements with
officers, directors or employees of Legg Mason Inc. or any of its affiliates
(except that WA, WAML, WAMCL and WAMC may so consult and agree with each other)
regarding the voting of any securities owned by its clients.
Policy
Western Assets proxy voting
procedures are designed and implemented in a way that is reasonably expected to
ensure that proxy matters are handled in the best interest of our clients.
While the guidelines included in the procedures are intended to provide a
benchmark for voting standards, each vote is ultimately cast on a case-by-case
basis, taking into consideration Western Assets contractual obligations to our
clients and all other relevant facts and circumstances at the time of the vote
(such that these guidelines may be overridden to the extent Western Asset deems
appropriate).
Procedures
Responsibility and Oversight
The Western Asset Compliance
Department (Compliance Department) is responsible for administering and
overseeing the proxy voting process. The gathering of proxies is coordinated
through the Corporate Actions area of Investment Support (Corporate Actions).
Research analysts and portfolio managers are responsible for determining
appropriate voting positions on each proxy utilizing any applicable guidelines
contained in these procedures.
Client Authority
Prior to August 1,
2003, all existing client investment management agreements (IMAs) will be
reviewed to determine whether Western Asset has authority to vote client
proxies. At account start-up, or upon amendment of an IMA, the applicable
client IMA are similarly reviewed. If an agreement is silent on proxy voting,
but contains an overall delegation of discretionary authority or if the account
represents assets of an ERISA plan, Western Asset will assume responsibility
for proxy voting. The Client Account Transition Team maintains a matrix of
proxy voting authority.
Proxy Gathering
Registered owners of record,
client custodians, client banks and trustees (Proxy Recipients) that receive
proxy materials on behalf of clients should forward them to Corporate Actions.
Prior to August 1, 2003, Proxy Recipients of existing clients will be
reminded of the appropriate routing to Corporate Actions for proxy materials
received and reminded of their responsibility to forward all proxy materials on
a timely basis. Proxy Recipients for new clients (or, if Western Asset becomes
aware that the applicable Proxy Recipient for an existing client has changed,
the Proxy Recipient for the existing client) are notified at start-up of
appropriate routing to Corporate Actions of proxy materials received and
reminded of their responsibility to forward all proxy materials on a timely
basis. If Western Asset personnel other than Corporate Actions receive proxy
materials, they should promptly forward the materials to Corporate Actions.
Proxy Voting
Once proxy materials are
received by Corporate Actions, they are forwarded to the Compliance Department
for coordination and the following actions:
a.
Proxies are reviewed to determine accounts impacted.
b.
Impacted accounts are checked to confirm Western Asset voting authority.
c.
Compliance Department staff reviews proxy issues to determine any material
conflicts of interest. (See conflicts of interest section of these procedures
for further information on determining material conflicts of interest.)
d.
If a material conflict of interest exists, (i) to the extent reasonably
practicable and permitted by applicable law, the client is promptly notified,
the conflict is disclosed and Western Asset obtains the clients proxy voting
instructions, and (ii) to the extent that it is not reasonably practicable
or permitted by applicable law to notify the client and obtain such
instructions (e.g., the client is a mutual fund or other commingled vehicle or
is an ERISA plan client), Western Asset seeks voting instructions from an
independent third party.
e.
Compliance Department staff provides proxy material to the appropriate research
analyst or portfolio manager to obtain their recommended vote. Research
analysts and portfolio managers determine votes on a case-by-case basis taking
into account the voting guidelines contained in these procedures. For avoidance
of doubt, depending on the best interest of each individual client, Western
Asset may vote the same proxy differently for different clients. The analysts
or portfolio managers basis for their decision is documented and maintained by
the Compliance Department.
f.
Compliance Department staff votes the proxy pursuant to the instructions
received in (d) or (e) and returns the voted proxy as indicated in
the proxy materials.
Timing
Western Asset personnel act
in such a manner to ensure that, absent special circumstances, the proxy
gathering and proxy voting steps noted above can be completed before the
applicable deadline for returning proxy votes.
Recordkeeping
Western Asset maintains
records of proxies voted pursuant to Section 204-2 of the Advisers Act and
ERISA DOL Bulletin 94-2. These records include:
a.
A copy of Western Assets policies and procedures.
b.
Copies of proxy statements received regarding client securities.
c.
A copy of any document created by Western Asset that was material to making a decision
how to vote proxies.
d.
Each written client request for proxy voting records and Western Assets
written response to both verbal and written client requests.
e.
A proxy log including:
1.
Issuer name;
2.
Exchange ticker symbol of the issuers shares to be voted;
3.
Council on Uniform Securities Identification Procedures (CUSIP) number for
the shares to be voted;
4.
A brief identification of the matter voted on;
5.
Whether the matter was proposed by the issuer or by a shareholder of the
issuer;
6.
Whether a vote was cast on the matter;
7.
A record of how the vote was cast; and
8.
Whether the vote was cast for or against the recommendation of the issuers
management team.
Records are maintained in an
easily accessible place for five years, the first two in Western Assets
offices.
Disclosure
Part II of the WA Form ADV,
the WAML Form ADV, the WAMCL Form ADV and WAMC Form ADV, each,
contain a description of Western Assets proxy policies. Prior to August 1,
2003, Western Asset will deliver Part II of its revised Form ADV to
all existing clients, along with a letter identifying the new disclosure.
Clients will be provided a copy of these policies and procedures upon request.
In addition, upon request, clients may receive reports on how their proxies
have been voted.
Conflicts of Interest
All proxies are reviewed by
the Compliance Department for material conflicts of interest. Issues to be
reviewed include, but are not limited to:
1.
Whether Western Asset (or, to the extent required to be considered by
applicable law, its affiliates) manages assets for the company or an employee
group of the company or otherwise has an interest in the company;
2.
Whether Western Asset or an officer or director of Western Asset or the
applicable portfolio manager or analyst responsible for recommending the proxy
vote (together, Voting Persons) is a close relative of or has a personal or
business relationship with an executive, director or person who is a candidate
for director of the company or is a participant in a proxy contest; and
3.
Whether there is any other business or personal relationship where a Voting
Person has a personal interest in the outcome of the matter before
shareholders.
Voting Guidelines
Western Assets substantive
voting decisions turn on the particular facts and circumstances of each proxy
vote and are evaluated by the designated research analyst or portfolio manager.
The examples outlined below are meant as guidelines to aid in the decision
making process.
Guidelines are grouped
according to the types of proposals generally presented to shareholders. Part I
deals with proposals which have been approved and are recommended by a
companys board of directors; Part II deals with proposals submitted by
shareholders for inclusion in proxy statements; Part III addresses issues
relating to voting shares of investment companies; and Part IV addresses
unique considerations pertaining to foreign issuers.
I.
Board Approved Proposals
The vast majority of matters
presented to shareholders for a vote involve proposals made by a company itself
that have been approved and recommended by its board of directors. In view of
the enhanced corporate governance practices currently being implemented in
public companies, Western Asset generally votes in support of decisions reached
by independent boards of directors. More specific guidelines related to certain
board-approved proposals are as follows:
1. Matters relating to the
Board of Directors
Western Asset votes proxies
for the election of the companys nominees for directors and for board-approved
proposals on other matters relating to the board of directors with the
following exceptions:
a.
Votes are withheld for the entire board of directors if the board does not have
a majority of independent directors or the board does not have nominating,
audit and compensation committees composed solely of independent directors.
b.
Votes are withheld for any nominee for director who is considered an
independent director by the company and who has received compensation from the
company other than for service as a director.
c.
Votes are withheld for any nominee for director who attends less than 75% of
board and committee meetings without valid reasons for absences.
d.
Votes are cast on a case-by-case basis in contested elections of directors.
2.
Matters relating to Executive Compensation
Western Asset generally
favors compensation programs that relate executive compensation to a companys
long-term performance. Votes are cast on a case-by-case basis on board-approved
proposals relating to executive compensation, except as follows:
a.
Except where the firm is otherwise withholding votes for the entire board of
directors, Western Asset votes for stock option plans that will result in a
minimal annual dilution.
b.
Western Asset votes against stock option plans or proposals that permit
replacing or repricing of underwater options.
c.
Western Asset votes against stock option plans that permit issuance of options
with an exercise price below the stocks current market price.
d.
Except where the firm is otherwise withholding votes for the entire board of
directors, Western Asset votes for employee stock purchase plans that limit the
discount for shares purchased under the plan to no more than 15% of their
market value, have an offering period of 27 months or less and result in
dilution of 10% or less.
3.
Matters relating to Capitalization
The management of a
companys capital structure involves a number of important issues, including
cash flows, financing needs and market conditions that are unique to the
circumstances of each company. As a result, Western Asset votes on a
case-by-case basis on board-approved proposals involving changes to a companys
capitalization except where Western Asset is otherwise withholding votes for
the entire board of directors.
a.
Western Asset votes for proposals relating to the authorization of additional
common stock.
b.
Western Asset votes for proposals to effect stock splits (excluding reverse
stock splits).
c.
Western Asset votes for proposals authorizing share repurchase programs.
4.
Matters relating to Acquisitions, Mergers, Reorganizations and Other
Transactions
Western Asset votes these
issues on a case-by-case basis on board-approved transactions.
5.
Matters relating to Anti-Takeover Measures
Western Asset votes against
board-approved proposals to adopt anti-takeover measures except as follows:
a.
Western Asset votes on a case-by-case basis on proposals to ratify or approve
shareholder rights plans.
b.
Western Asset votes on a case-by-case basis on proposals to adopt fair price
provisions.
6.
Other Business Matters
Western Asset votes for
board-approved proposals approving such routine business matters such as
changing the companys name, ratifying the appointment of auditors and
procedural matters relating to the shareholder meeting.
a.
Western Asset votes on a case-by-case basis on proposals to amend a companys
charter or bylaws.
b.
Western Asset votes against authorization to transact other unidentified,
substantive business at the meeting.
II.
Shareholder Proposals
SEC regulations permit
shareholders to submit proposals for inclusion in a companys proxy statement.
These proposals generally seek to change some aspect of a companys corporate
governance structure or to change some aspect of its business operations.
Western Asset votes in accordance with the recommendation of the companys
board of directors on all shareholder proposals, except as follows:
1. Western Asset votes for
shareholder proposals to require shareholder approval of shareholder rights
plans.
2. Western Asset votes for
shareholder proposals that are consistent with Western Assets proxy voting
guidelines for board-approved proposals.
3. Western Asset votes on a
case-by-case basis on other shareholder proposals where the firm is otherwise
withholding votes for the entire board of directors.
III.
Voting Shares of Investment Companies
Western Asset may utilize
shares of open or closed-end investment companies to implement its investment
strategies. Shareholder votes for investment companies that fall within the
categories listed in Parts I and II above are voted in accordance with those
guidelines.
1. Western Asset votes on a
case-by-case basis on proposals relating to changes in the investment
objectives of an investment company taking into account the original intent of
the fund and the role the fund plays in the clients portfolios.
2. Western Asset votes on a
case-by-case basis all proposals that would result in increases in expenses (e.g.,
proposals to adopt 12b-1 plans, alter investment advisory arrangements or
approve fund mergers) taking into account comparable expenses for similar funds
and the services to be provided.
IV.
Voting Shares of Foreign Issuers
In the event Western Asset
is required to vote on securities held in foreign issuers i.e. issuers that
are incorporated under the laws of a foreign jurisdiction and that are not
listed on a U.S. securities exchange or the NASDAQ stock market, the following
guidelines are used, which are premised on the existence of a sound corporate
governance and disclosure framework. These guidelines, however, may not be
appropriate under some circumstances for foreign issuers and therefore apply
only where applicable.
1. Western Asset votes for
shareholder proposals calling for a majority of the directors to be independent
of management.
2. Western Asset votes for
shareholder proposals seeking to increase the independence of board nominating,
audit and compensation committees.
3. Western Asset votes for
shareholder proposals that implement corporate governance standards similar to
those established under U.S. federal law and the listing requirements of U.S.
stock exchanges, and that do not otherwise violate the laws of the jurisdiction
under which the company is incorporated.
4. Western Asset votes on a
case-by-case basis on proposals relating to (1) the issuance of common
stock in excess of 20% of a companys outstanding common stock where
shareholders do not have preemptive rights, or (2) the issuance of common
stock in excess of 100% of a companys outstanding common stock where
shareholders have preemptive rights.
Item 8.
Portfolio Managers of Closed-End Management Investment
Companies
(a)(1):
NAME AND
ADDRESS
|
|
PRINCIPAL OCCUPATION(S) DURING
PAST 5 YEARS
|
|
|
|
S.
Kenneth Leech
Western
Asset
385 East Colorado Blvd.
Pasadena,
CA 91101
|
|
Co-portfolio
manager of the fund; Chief Investment Officer of Western Asset from 1998 to
2008; Senior Advisor/Chief Investment Officer Emeritus of Western Asset.
|
|
|
|
Stephen
A. Walsh
Western
Asset
385 East Colorado Blvd.
Pasadena,
CA 91101
|
|
Co-portfolio
manager of the fund; Deputy Chief Investment Officer of Western Asset from
2000 to 2008; Chief Investment Officer of Western Asset since 2008.
|
|
|
|
Keith
J. Gardner
Western
Asset
385 East Colorado Blvd.
Pasadena,
CA 91101
|
|
Co-portfolio
manager of the fund; portfolio manager and research analyst at Western Asset
since 1994.
|
|
|
|
Michael C. Buchanan
Western Asset
385 East Colorado Blvd.
Pasadena, CA
91101
|
|
Co-portfolio
manager of the fund; Managing Director and head of U.S. Credit Products from
2003-2005 at Credit Suisse Asset Management
|
Peter
H. Stutz
Western
Asset
385 East Colorado Blvd.
Pasadena,
CA
|
|
Co-portfolio
manager of the fund; portfolio manager at Western Asset since 1997.
|
|
|
|
Paul
E. Wynn
Western
Asset
385 East Colorado Blvd.
Pasadena,
CA
|
|
Co-portfolio
manager of the fund; portfolio manager at Western Asset for more than five
years
|
(a)(2): DATA TO BE PROVIDED BY FINANCIAL CONTROL
The following tables set forth certain additional information with respect
to the funds portfolio managers for the fund. Unless noted otherwise, all
information is provided as of December 31, 2009.
Other Accounts Managed by Portfolio Managers
The table below identifies the number of accounts (other than the fund) for
which the funds portfolio managers have day-to-day management responsibilities
and the total assets in such accounts, within each of the following categories:
registered investment companies, other pooled investment vehicles, and other
accounts. For each category, the number of accounts and total assets in the
accounts where fees are based on performance is also indicated.
|
|
Registered
|
|
Other Pooled
|
|
|
Portfolio
|
|
Investment
|
|
Investment
|
|
Other
|
Manager(s)
|
|
Companies
|
|
Vehicles
|
|
Accounts
|
|
|
|
|
|
|
|
S. Kenneth Leech
|
|
108 registered
investment companies with $184.0 billion in total assets under management
|
|
229 Other pooled
investment vehicles
with $107.7 billion in assets
under management*
|
|
832
Ot
her accounts with
$190.2 on in total assets under management**
|
|
|
|
|
|
|
|
Stephen A. Walsh
|
|
108 registered
investment companies with $184.0 billion in total assets under management
|
|
229 Other pooled
investment vehicles
with $107.7 billion in assets
under management*
|
|
832
Other accounts with $190.2 billion in
total assets under management**
|
|
|
|
|
|
|
|
Keith J. Gardner
|
|
5 registered investment
companies with $1.2 billion in total assets under management
|
|
6 Other pooled investment
vehicles with $0.6 billion in assets under management***
|
|
2 Other accounts with $0.1
billion in total assets under management
|
Michael C. Buchanan
|
|
17
registered investment Companies with $9.6 billion in total assets Under
management
|
|
8 Other pooled
investment vehicles with $4.0 billion in assets under management
|
|
14 Other accounts with
$1.9 billion in total assets under management
|
|
|
|
|
|
|
|
Peter H. Stutz
|
|
3
registered
investment Companies with $1.4 billion in total assets Under management
|
|
1 Other pooled investment
vehicle with $4 million in assets under management
|
|
13 Other accounts with
$2.5 billion in total assets under management***
|
|
|
|
|
|
|
|
Paul E. Wynn
|
|
1
registered
investment Company with $38 million in total assets Under management
|
|
4 Other pooled investment
vehicles with $0.4 billion in assets under management
|
|
27 Other accounts with
$8.9 billion in total assets under management****
|
*
Includes 6 accounts managed, totaling
$1.1 billion, for which advisory fee is performance based.
**
Includes 93 accounts managed,
totaling $24.2 billion, for which advisory fee is performance based.
***
Includes 2
accounts managed, totaling $0.5 billion, for which advisory fee is performance
based.
****
Includes 3
accounts managed, totaling $0.6 billion, for which advisory fee is performance
based.
The numbers above reflect the overall number of portfolios
managed by employees of Western Asset Management Company (Western
Asset). Mr. Leech and Mr. Walsh
are involved in the management of all the Firms portfolios, but they are not
solely responsible for particular portfolios.
Western Assets investment discipline emphasizes a team approach that
combines the efforts of groups of specialists working in different market
sectors. They are responsible for overseeing implementation of Western Assets
overall investment ideas and coordinating the work of the various sector teams.
This structure ensures that client portfolios benefit from a consensus that
draws on the expertise of all team members.
(a)(3):
Portfolio Manager Compensation
With respect to the
compensation of the portfolio managers,
Western Assets compensation
system
assigns each employee a
total compensation
range, which is
derived from
annual market surveys that benchmark each role with its job
function and peer universe. This method is designed to reward employees with
total compensation reflective of the external market value of their skills,
experience, and ability to produce desired results. Standard compensation
includes competitive base salaries, generous employee benefits, and a
retirement plan.
In addition, the
subadvisers employees are eligible for bonuses. These are structured to
closely align the interests of employees with those of the subadviser, and are
determined by the professionals job function and pre-tax performance as
measured by a formal review process. All bonuses are completely discretionary.
The principal factor considered is a portfolio managers investment performance
versus appropriate peer groups and benchmarks (
e.g
.,
a securities index and with respect to a fund, the benchmark set forth in the
funds Prospectus to which the funds average annual total returns are compared
or, if none, the benchmark set forth in the funds annual report). Performance
is reviewed on a 1, 3 and 5 year basis for compensationwith 3 years having the
most emphasis. The subadviser may also measure a portfolio managers pre-tax
investment performance against other benchmarks, as it determines appropriate.
Because portfolio managers are generally responsible for multiple accounts
(including the funds) with similar investment strategies, they are generally
compensated on the performance of the aggregate group of similar accounts,
rather than a specific account. Other factors that may be considered when
making bonus decisions include client service, business development, length of
service to the subadviser, management or supervisory
responsibilities,
contributions to developing business strategy and overall contributions to the
subadvisers business.
Finally, in order to attract
and retain top talent, all professionals are eligible for additional incentives
in recognition of outstanding performance. These
are
determined based
upon the factors described above and include Legg Mason stock options and
long-term incentives that vest over a set period of time past the award date.
Potential Conflicts of Interest
Conflicts of Interest
The manager, subadvisers and
portfolio managers have interests which conflict with the interests of the
fund. There is no guarantee that the policies and procedures adopted by the
manager, the subadvisers and the fund will be able to identify or mitigate
these conflicts of interest.
Some examples of material
conflicts of interest include:
Allocation
of Limited Time and Attention
. A portfolio manager who is
responsible for managing multiple funds and/or accounts may devote unequal time
and attention to the management of those funds and/or accounts. A portfolio
manager may not be able to formulate as complete a strategy or identify equally
attractive investment opportunities for each of those funds and accounts as
might be the case if he or she were to devote substantially more attention to
the management of a single fund. Such a portfolio manager may make general
determinations across multiple funds, rather than tailoring a unique approach
for each fund. The effects of this conflict may be more pronounced where funds
and/or accounts overseen by a particular portfolio manager have different
investment strategies.
Allocation
of Limited Investment Opportunities; Aggregation of Orders
. If a
portfolio manager identifies a limited investment opportunity that may be
suitable for multiple funds and/or accounts, the opportunity may be allocated
among these several funds or accounts, which may limit the funds ability to
take full advantage of the investment opportunity. Additionally, a subadviser
may aggregate transaction orders for multiple accounts for purpose of
execution. Such aggregation may cause the price or brokerage costs to be less
favorable to a particular client than if similar transactions were not being
executed concurrently for other accounts. In addition, a subadvisers trade
allocation policies may result in the funds orders not being fully executed or
being delayed in execution.
Pursuit of
Differing Strategies
. At times, a portfolio manager may determine that
an investment opportunity may be appropriate for only some of the funds and/or
accounts for which he or she exercises investment responsibility, or may decide
that certain of the funds and/or accounts should take differing positions with
respect to a particular security. In these cases, the portfolio manager may
place separate transactions for one or more funds or accounts which may affect
the market price of the security or the execution of the transaction, or both,
to the detriment or benefit of one or more other funds and/or accounts. For
example, a portfolio manager may determine that it would be in the interest of
another account to sell a security that the fund holds long, potentially
resulting in a decrease in the market value of the security held by the fund.
Cross
Trades
. Portfolio managers may manage funds that engage in cross trades,
where one of the managers funds or accounts sells a particular security to
another fund or account managed by the same manager. Cross trades may pose
conflicts of interest because of, for example, the possibility that one account
sells a security to another account at a higher price than an independent third
party would pay or otherwise enters into a transaction that it would not enter
into with an independent party, such as the sale of a difficult-to-obtain
security.
Selection
of Broker/Dealers
. Portfolio managers may select or influence the
selection of the brokers and dealers that are used to execute securities
transactions for the funds and/or accounts that they supervise. In
addition
to executing trades, some brokers and dealers provide subadvisers with
brokerage and research services, These services may be taken into account in
the selection of brokers and dealers whether a broker is being selected to
effect a trade on an agency basis for a commission or (as is normally the case
for the funds) whether a dealer is being selected to effect a trade on a
principal basis. This may result in the payment of higher brokerage fees and/or
execution at a less favorable price than might have otherwise been available.
The services obtained may ultimately be more beneficial to certain of the
managers funds or accounts than to others (but not necessarily to the funds
that pay the increased commission or incur the less favorable execution). A
decision as to the selection of brokers and dealers could therefore yield
disproportionate costs and benefits among the funds and/or accounts managed.
Variation in Financial and Other
Benefits
. A conflict of interest arises where the financial
or other benefits available to a portfolio manager differ among the funds
and/or accounts that he or she manages. If the amount or structure of the
investment managers management fee and/or a portfolio managers compensation
differs among funds and/or accounts (such as where certain funds or accounts
pay higher management fees or performance-based management fees), the portfolio
manager might be motivated to help certain funds and/or accounts over others.
Similarly, the desire to maintain assets under management or to enhance the
portfolio managers performance record or to derive other rewards, financial or
otherwise, could influence the portfolio manager in affording preferential
treatment to those funds and/or accounts that could most significantly benefit
the portfolio manager. A portfolio manager may, for example, have an incentive
to allocate favorable or limited opportunity investments or structure the
timing of investments to favor such funds and/or accounts. Also, a portfolio
managers or the managers or a subadvisers desire to increase assets under
management could influence the portfolio manager to keep a fund open for new
investors without regard to potential benefits of closing the fund to new
investors. Additionally, the portfolio manager might be motivated to favor
funds and/or accounts in which he or she has an ownership interest or in which
the investment manager and/or its affiliates have ownership interests.
Conversely, if a portfolio manager does not personally hold an investment in
the fund, the portfolio managers conflicts of interest with respect to the
fund may be more acute.
Related Business Opportunities
. The
investment manager or its affiliates may provide more services (such as
distribution or recordkeeping) for some types of funds or accounts than for
others. In such cases, a portfolio manager may benefit, either directly or
indirectly, by devoting disproportionate attention to the management of funds
and/or accounts that provide greater overall returns to the investment manager
and its affiliates.
(a)(4):
Portfolio Manager Securities Ownership
The table below identifies the dollar range of
securities beneficially owned by each portfolio managers as of December 31,
2009.
Portfolio Manager(s)
|
|
Dollar Range of
Portfolio
Securities
Beneficially
Owned
|
S.
Kenneth Leech
|
|
A
|
Stephen
A. Walsh
|
|
E
|
Keith
J. Gardner
|
|
A
|
Michael
C. Buchanan
|
|
A
|
Peter
H. Stutz
|
|
C
|
Paul
E. Wynn
|
|
A
|
Dollar
Range ownership is as follows:
A: none
B: $1 - $10,000
C: 10,001 - $50,000
D: $50,001 - $100,000
E: $100,001 - $500,000
F: $500,001 - $1 million
G: over $1 million
Item 9.
Purchases of Equity Securities by Closed-End
Management Investment Companies and Affiliated Purchasers
None.
Item 10.
Submission of Matters to a Vote of Security Holders
There have been no
material changes to the procedures by which shareholders may recommend nominees
to the Registrants Board of Trustees that have been implemented since the
Registrant last provided disclosure in response to the requirements of this
Item 10.
Item 11.
Controls and Procedures
(a)
The Registrants principal executive and principal
financial officers have concluded, based on their evaluation of the Registrants
disclosure controls and procedures as of a date within 90 days of the filing
date of this report, that the Registrants disclosure controls and procedures
are reasonably designed to ensure that information required to be disclosed by
the Registrant on Form N-CSR is recorded, processed, summarized and
reported within the required time periods in the SECs rules and forms and
that information required to be disclosed by the Registrant in the reports that
it files or submits on Form N-CSR is accumulated and communicated to the
Registrants management, including its principal executive and principal
financial officers, as appropriate to allow timely decisions regarding required
disclosure.
(b)
There were no changes in the Registrants internal
control over financial reporting during the Registrants second fiscal quarter
of the period covered by this report that have materially affected, or are
reasonably likely to materially affect, the Registrants internal control over
financial reporting
Item 12.
Exhibits
(a)(1)
|
Code of Ethics subject
to the disclosure required by Item 2 filed as an exhibit hereto.
|
|
|
(a)(2)
|
Certifications pursuant
to Rule 30a-2(a) under the Investment Company Act of 1940 filed
as an exhibit hereto.
|
|
|
(a)(3)
|
Not applicable.
|
|
|
(b)
|
Certifications pursuant
to Rule 30a-2(b) under the Investment Company Act of 1940 filed
as an exhibit hereto.
|
|
|
(c)
|
Proxy Voting Policies
and Procedures pursuant to the disclosure required by Item 7 filed as
an exhibit 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, there unto duly authorized.
Western Asset/Claymore Inflation-Linked Securities &
Income Fund
By:
|
/s/ R. Jay Gerken
|
|
|
R. Jay Gerken
|
|
|
Trustee
and President
|
|
|
Western Asset/Claymore Inflation-Linked Securities &
Income Fund
|
|
|
|
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 below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated.
By:
|
/s/ R. Jay Gerken
|
|
|
(R. Jay Gerken)
|
|
|
Trustee
and President
|
|
|
Western Asset/Claymore Inflation-Linked Securities &
Income Fund
|
|
|
|
Date:
|
March 4,
2010
|
|
By:
|
/s/ Frances M. Guggino
|
|
|
(Frances M. Guggino)
|
|
|
Treasurer
and Principal Financial and Accounting Officer
|
|
|
Western Asset/Claymore Inflation-Linked Securities &
Income Fund
|
|
|
|
Date:
|
March 4,
2010
|
|
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