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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June 30,
2010
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ITEM
1. REPORT TO
STOCKHOLDERS.
The
Semi-Annual
Report to Stockholders
is filed herewith.
June 30, 2010
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Semi-Annual
Report
Western
Asset/Claymore Inflation-Linked Securities & Income Fund
(WIA)
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INVESTMENT PRODUCTS: NOT FDIC INSURED
·
NO BANK GUARANTEE
·
MAY LOSE VALUE
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II
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Western Asset/Claymore Inflation-Linked Securities
& Income Fund
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Investment
objectives
The
Funds primary investment objective is to provide current income. Capital
appreciation, when consistent with current income, is a secondary investment
objective.
Whats
inside
Letter
to shareholders
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II
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Investment
commentary
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IV
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Fund
highlights
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1
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Fund
at a glance
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4
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Quarterly
comparison
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5
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Spread
duration
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6
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Effective
duration
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7
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Schedule
of investments
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8
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Statement
of assets and liabilities
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12
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Statement
of operations
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13
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Statements
of changes in net assets
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14
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Statement
of cash flows
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15
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Financial
highlights
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16
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Notes
to financial statements
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17
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Letter
to shareholders
Dear
Shareholder,
We
thank you for your investment in Western Asset/Claymore Inflation-Linked
Securities & Income Fund. As investment adviser for the Fund, we are
pleased to submit the Funds semi-annual shareholder report for the six-month
reporting period ended June 30, 2010.
For
the six months ended June 30, 2010, the Fund returned 4.54% based on its
net asset value (NAV)
i
and 4.48% 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 3.13% and 4.42%,
respectively, for the same period. The Barclays World Government
Inflation-Linked All Maturities Index
iv
and the Funds
Custom Benchmark
v
returned -2.68% and 4.54%, respectively, over
the same time frame. All Fund returns citedwhether based on NAV or market
priceassume the reinvestment of all distributions. Past performance does not
guarantee future results. The market price of the Funds shares fluctuates from
time to time, and it may be higher or lower than the Funds NAV.
The
largest contributor to the Funds absolute performance for the period was our
large exposure to U.S. Treasury Inflation-Protected Securities (TIPS)
vi
. Treasury yields generally
fell over the period as various federal stimulus programs, initiated in
response to the financial crisis, significantly increased the national debt.
Investors, worried that this deficit spending would spur inflation, sought
protection by purchasing TIPS. An exposure to non-agency securities also
positively impacted performance as prices in the sector were bolstered by
government programs (such as the Public-Private Investment Program), improved
liquidity, strong paydowns, generally improving housing news and the growing
sentiment that a bottom in the housing market had been established. Exposure to
both investment grade credit and high-yield securities was additive to
performance given the narrowing of spreads on the back of strong corporate
earnings.
The
Funds exposure to several U.S. agency positions was a modest detractor from
performance for the period.
The
portfolio also employed several types of derivatives: both futures and options
on futures for U.S. Treasuries to manage duration
vii
and
yield curve
viii
exposure; Eurodollar futures and Eurodollar
future options to manage exposure to short-term rates; Euro-Bobl futures to
manage exposure to intermediate German rates; and credit default swaps to
manage exposure to a particular corporate issuer. Over the period, the impact
of the Treasury and Eurodollar derivatives, as well as the credit derivatives,
was slightly positive. Foreign exchange exposure also paid off, with gains from
positions in the Australian dollar, the euro and the pound offsetting losses
from the Canadian dollar and the Japanese yen.
As
of June 30, 2010, the Funds market price of $12.62 per share represented
a discount of 4.39% to its NAV of $13.20 per share. During the first six months
of 2010, the Fund provided its investors with monthly distributions of $0.038
per share. The most recent dividend represents an annualized distribution rate
of 3.61% based on the Funds closing market price of $12.62 on June 30,
2010.
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Western Asset/Claymore
Inflation-Linked Securities & Income Fund
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III
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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:
·
At
least 80% of its total managed assets in inflation-linked securities
·
At
least 60% of its total managed assets in TIPS
·
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)
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 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.
Shareholders
have the opportunity to reinvest their dividends from the Fund through the
Dividend Reinvestment Plan (DRIP), which is described in detail on page 2
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
July 16,
2010
i
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Net
asset value (NAV) is calculated by subtracting total liabilities, including
liabilities associated with financial leverage (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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The
Barclays World Government Inflation-Linked All Maturities Index measures the
performance of the major government inflation-linked bond markets.
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v
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The
Custom Benchmark is comprised of 90% Barclays Capital U.S. Government
Inflation-Linked All Maturities Index and 10% Barclays Capital U.S. Credit
Index. 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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vi
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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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vii
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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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viii
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The
yield curve is the graphical depiction of the relationship between the yield
on bonds of the same credit quality but different maturities.
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IV
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Western Asset/Claymore
Inflation-Linked Securities & Income Fund
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Investment
commentary
Economic
review
While
the overall U.S. economy continued to expand over the six months ended June 30,
2010, several economic data points weakened toward the end of the reporting
period. This, in combination with sovereign debt woes in Europe, caused
investor sentiment to turn negative and had significant implications for the
financial markets.
Looking
back, the U.S. Department of Commerce reported that U.S. gross domestic product
(GDP)
i
contracted four consecutive quarters,
beginning in the third quarter of 2008 through the second quarter of 2009.
Economic conditions then began to improve in the third quarter of 2009, as GDP
growth was 1.6%. A variety of factors helped the economy to regain its footing,
including the governments $787 billion stimulus program. Economic growth then
accelerated during the fourth quarter of 2009, as GDP growth was 5.0%. A slower
drawdown in business inventories and renewed consumer spending were
contributing factors spurring the economys higher growth rate. While the
recovery continued during the first half of 2010, it did so at a more modest
pace, as GDP growth was 3.7% during the first quarter of 2010 and an estimated
2.4% during the second quarter. The slower pace of growth in the second quarter
was due, in part, to slower consumer spending, which rose an annualized 1.6%
during the quarter, versus a 1.9% gain over the first three months of the year.
Even
before GDP growth turned positive, there were signs that the economy was on the
mend. The manufacturing sector, as measured by the Institute for Supply
Managements PMI
ii
, rose to 52.8
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). While June 2010s PMI reading of 56.2 was lower than Mays
reading of 59.7, manufacturing has now expanded eleven consecutive months
according to PMI data. The manufacturing sectors growth remained fairly
broad-based with thirteen of the eighteen industries tracked by the Institute
for Supply Management expanding during June.
After
experiencing sharp job losses in 2009, the U.S. Department of Labor reported
that over one million new positions were added during the first five months of
2010. Included in that total, however, were 700,000 temporary government jobs
tied to the 2010 Census. In June, 225,000 of these temporary positions were
eliminated, offsetting private sector growth and resulting in a net loss of
125,000 jobs for the month. However, the unemployment rate fell to 9.5% in
June, versus 9.7% and 9.9% in May and April, respectively.
There
was mixed news in the housing market during the period. According to the
National Association of Realtors, existing home sales increased 7.0% and 8.0%
in March and April, respectively, after sales had fallen for the period
from December 2009 through February 2010. The rebound was largely
attributed to people rushing to take advantage of the governments $8,000 tax
credit for first-time home buyers that expired at the end of April. However,
with the end of the tax credit, existing home sales then declined 2.2% and 5.1%
in May and June, respectively. In addition, the inventory of unsold homes
increased 2.5% to 3.99 million in June. Looking at home prices, the
S&P/Case-Shiller Home Price Index
iii
indicated that month-to-month U.S. home prices
rose 1.3% in May. This marked the second straight monthly increase following
six consecutive months of declining prices.
Financial
market overview
During
the first half of the reporting period, the financial markets were largely
characterized by healthy investor risk appetite and solid results by
lower-quality bonds. However, the market experienced a sharp sell-off during
the second half of the reporting period, during which risk aversion returned
and investors flocked to the relative safety of U.S. Treasury securities.
Given
certain pockets of weakness in the economy, including elevated unemployment in
the U.S., the Federal Reserve Board (Fed)
iv
remained
cautious. At its meeting in June 2010, the Fed said it will maintain the
target range for the federal funds rate
v
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.
However,
the Fed took several steps in reversing its accommodative monetary stance. On February 18,
2010, the Fed raised the discount
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Western
Asset/Claymore Inflation-Linked Securities & Income Fund
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V
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rate,
the interest rate it charges banks for temporary loans, from 1/2 to 3/4
percent. The Fed also concluded its $1.25 trillion mortgage securities purchase
program at the end of the first quarter of 2010. However, the Fed left the door
open for future stimulus measures if needed. In the minutes of its June meeting
that were released on July 14
th
(after the
reporting period ended), the Fed said, In addition to continuing to develop
and test instruments to exit from the period of unusually accommodative
monetary policy, the Committee would need to consider whether further policy
stimulus might become appropriate if the outlook were to worsen appreciably.
Fixed-income
market review
Continuing
the trend that began in the second quarter of 2009, nearly every spread sector
(non-Treasury) outperformed equal-duration
vi
Treasuries
during the first half of the reporting period. Over that time, investor
confidence was high given encouraging economic data, continued low interest
rates, benign inflation and rebounding corporate profits. However, robust
investor appetite was replaced with heightened risk aversion toward the end of April and
during the month of May. This was due to the escalating sovereign debt crisis
in Europe, uncertainties regarding new financial reforms in the U.S. and some
worse-than-expected economic data. Most spread sectors then produced positive
absolute returns in June, as investor demand for these securities began to
again increase.
Both
short- and long-term Treasury yields fluctuated during the period but generally
moved lower. When the period began, two- and ten-year Treasury yields were
1.14% and 3.85%, respectively. Two- and ten-year Treasury yields initially
rose, reaching as high as 1.18% and 4.01%, respectively, in early April. Yields
then largely declined amid the investor flight to quality. On June 30,
2010, two- and ten-year Treasury yields reached their lows for the reporting
period: 0.61% and 2.97%, respectively. Over the six-month reporting period, the
yield curve
vii
flattened, with longer-term Treasury yields
declining more than their shorter-term counterparts. For the six months ended June 30,
2010, the Barclays Capital U.S. Aggregate Index
viii
returned 5.33%.
Inflation
generally remained well-contained during the reporting period. For the six
months ended June 30, 2010, the seasonally adjusted rate of inflation, as
measured by the Consumer Price Index for All Urban Consumers (CPI-U)
ix
, was -0.3%. The CPI-U less
food and energy was a modest 0.6% over the same time frame. Elsewhere, there
were mixed signals regarding potential future inflation. The price of gold,
which is often a signal of rising prices, reached an all-time high of $1,266 an
ounce during the second quarter of 2010. In contrast, the price of oil fell
approximately 10% during the second half of the reporting period.
x
Despite modest inflation, inflation-protected
securities generated a positive return during the six months ended June 30,
2010, with the Barclays U.S. Government Inflation-Linked All Maturities Index
xi
returning 4.42%.
Performance
review
For
the six months ended June 30, 2010, Western Asset/Claymore
Inflation-Linked Securities & Income Fund returned 4.54% based on its
net asset value (NAV)
xii
and 4.48% 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
xiii
and
the Barclays U.S. Government Inflation-Linked All Maturities Index, returned
3.13% and 4.42%, respectively, over the same time frame. The Barclays World
Government Inflation-Linked All Maturities Index
xiv
and
the Funds Custom Benchmark
xv
returned -2.68% and 4.54%,
respectively, for the same period.
During
this six-month period, the Fund made distributions to shareholders totaling
$0.23 per share, which may have included a return of capital. The performance
table shows the Funds six-month total return based on its NAV and market price
as of June 30, 2010.
Past performance is no
guarantee of future results.
Performance
Snapshot as of June 30, 2010
Price Per Share
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6-Month Total Return*
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$13.20 (NAV)
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4.54%
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$12.62 (Market Price)
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4.48%
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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,
including returns of capital, if any, in additional shares. Performance figures
for periods shorter than one year represent cumulative figures and are not
annualized.
VI
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Western Asset/Claymore
Inflation-Linked Securities & Income Fund
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Investment
commentary (contd)
Western
Asset Management Company
July 30,
2010
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
investments are subject to risk including the possible loss of principal. All
index performance reflects no deduction for fees, expenses or taxes. Please
note that an investor cannot invest directly in an index.
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.
i
|
Gross
domestic product (GDP) is the market value of all final goods and services
produced within a country in a given period of time.
|
ii
|
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.
|
iii
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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.
|
iv
|
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.
|
v
|
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.
|
vi
|
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.
|
vii
|
The
yield curve is the graphical depiction of the relationship between the yield
on bonds of the same credit quality but different maturities.
|
viii
|
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.
|
ix
|
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.
|
x
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Source:
Wall Street Journal
, July 2010.
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xi
|
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.
|
xii
|
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.
|
xiii
|
The
Barclays U.S. Government Inflation-Linked 1-10 Year Index measures the
performance of the intermediate U.S. TIPS market.
|
xiv
|
The
Barclays World Government Inflation-Linked All Maturities Index measures the
performance of the major government inflation-linked bond markets.
|
xv
|
The
Custom Benchmark is comprised of 90% Barclays Capital U.S. Government
Inflation-Linked All Maturities Index and 10% Barclays Capital U.S. Credit
Index. 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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|
Western
Asset/Claymore Inflation-Linked Securities & Income Fund 2010
Semi-Annual Report
|
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1
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Fund
highlights (unaudited)
|
|
Six Months Ended
June 30, 2010
|
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Year Ended
December 31, 2009
|
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Net Asset Value
|
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$384,762,876
|
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$374,527,079
|
|
Per Share
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$13.20
|
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$12.85
|
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Market Value Per Share
|
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$12.62
|
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$12.30
|
|
Net Investment Income
|
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$6,179,235
|
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$10,276,219
|
|
Per Common Share
|
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$0.21
|
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$0.35
|
|
Dividends Paid to Common Shareholders
|
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$6,646,843
|
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$13,760,131
1
|
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Per Common Share from Net Income
|
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$0.23
|
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$0.37
|
|
Per Common Share from Tax Return of Capital
|
|
|
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$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 June 30 are presented below,
along with those of comparative indices.
|
|
|
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Average Annual Return
|
|
|
|
Six
Months Ended
June 30, 2010
|
|
One Year
|
|
Three Years
|
|
Five
Years
|
|
Since Fund
Inception
2
|
|
Total Return Based on:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market Value
|
|
4.48%
|
|
10.94
|
%
|
|
9.33
|
%
|
|
5.19
|
%
|
|
3.27
|
%
|
|
Net Asset Value
|
|
4.54
|
|
11.85
|
|
|
6.60
|
|
|
3.80
|
|
|
4.23
|
|
|
Barclays U.S. Government
Inflation-Linked 1-10 year Index
3,4
|
|
3.13
|
|
8.46
|
|
|
6.99
|
|
|
5.07
|
|
|
5.13
|
|
|
Barclays U.S. Government
Inflation-Linked All Maturities Index
4,5
|
|
4.42
|
|
9.53
|
|
|
7.61
|
|
|
4.97
|
|
|
5.61
|
|
|
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.
1
|
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.
|
2
|
The
Funds inception date is September 26, 2003.
|
3
|
The
Barclays U.S. Government Inflation-Linked 1-10 Year Index measures the
performance of the intermediate U.S. TIPS market.
|
4
|
This
return does not include reinvestment of dividends or capital gain
distributions.
|
5
|
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.
|
2
|
|
Western Asset/Claymore
Inflation-Linked Securities & Income Fund 2010 Semi-Annual Report
|
|
|
Fund
highlights (unaudited) (contd)
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
6
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.
6
Total
managed assets means the total assets of the Fund (including any assets
attributable to leverage) minus accured liabilities (other than liabilities
representing leverage).
|
|
Western
Asset/Claymore Inflation-Linked Securities & Income Fund 2010 Semi-Annual
Report
|
|
3
|
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.
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).
4
|
|
Western Asset/Claymore
Inflation-Linked Securities & Income Fund 2010 Semi-Annual Report
|
|
|
Fund at
a glance
(unaudited)
Standard &
Poors Debt Ratings
1
(at market value) June 30, 2010
Sector
Schedule
2
(at market value) June 30, 2010
|
The
bar graphs above represent the Funds portfolio as of June 30, 2010 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.
As a result the composition of its portfolio holdings and sectors is subject
to change at any 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.
|
1
|
Source:
Standard & Poors Rating Service. The ratings shown are based on
each portfolio securitys rating as determined by Standard & Poors
(S&P), a Nationally Recognized Statistical Ratings Organization
(NRSRO). These ratings are the opinions of S&P and are not measures of
quality or guarantees of performance. Securities held by the Fund may be
rated by other NRSROs, and these ratings may be higher or lower. The Fund
itself has not been rated by a NRSRO and the credit quality of the
investments in the Funds portfolio does not apply to the stability or safety
of the Fund.
|
2
|
Expressed
as a percentage of the portfolio.
|
|
|
Western
Asset/Claymore Inflation-Linked Securities & Income Fund 2010
Semi-Annual Report
|
|
5
|
Quarterly
comparison of market price and net asset value (NAV), discount or premium to
NAV and average daily volume of shares traded (unaudited)
|
|
Market Price
|
|
Net Asset
Value
|
|
Premium/
(Discount)
|
|
Average
Daily Volume
(Shares)
|
|
September 30, 2009
|
|
$12.04
|
|
$12.65
|
|
(4.82
|
)%
|
|
66,784
|
|
December 31, 2009
|
|
$12.30
|
|
$12.85
|
|
(4.28
|
)%
|
|
69,509
|
|
March 31, 2010
|
|
$12.12
|
|
$12.88
|
|
(5.90
|
)%
|
|
61,720
|
|
June 30, 2010
|
|
$12.62
|
|
$13.20
|
|
(4.39
|
)%
|
|
77,715
|
|
6
|
|
Western Asset/Claymore
Inflation-Linked Securities & Income Fund 2010 Semi-Annual Report
|
|
|
Spread
duration (unaudited)
Economic
Exposure June 30, 2010
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.
HY
|
High Yield
|
IG
Credit
|
Investment Grade Credit
|
MBS
|
Mortgage Backed Securities
|
90%
BCIL/10% BCUSC
|
90% Barclays Capital Inflation-Linked U.S. All Maturity/10% Barclays Capital
U.S. Credit
|
BCGII
10
|
Barclays U.S. Government Inflation-Linked 1-10 Year Index
|
BCGIMI
|
Barclays U.S. Government Inflation-Linked All Maturities Index
|
|
|
Western Asset/Claymore
Inflation-Linked Securities & Income Fund 2010 Semi-Annual Report
|
|
7
|
Effective
duration (unaudited)
Interest
Rate Exposure June 30, 2010
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.
IG
Credit
|
Investment Grade Credit
|
MBS
|
Mortgage Backed Securities
|
90%
BCIL/10% BCUSC
|
90% Barclays Capital Inflation-Linked U.S. All Maturity/10% Barclays Capital
U.S. Credit
|
BCGII
10
|
Barclays U.S. Government Inflation-Linked 1-10 Year Index
|
BCGIMI
|
Barclays U.S. Government Inflation-Linked All Maturities Index
|
8
|
|
Western Asset/Claymore
Inflation-Linked Securities & Income Fund 2010 Semi-Annual Report
|
|
|
Schedule
of investments (unaudited)
June
30, 2010
Western
Asset/Claymore Inflation-Linked Securities & Income Fund
Security
|
|
Rate
|
|
Maturity
Date
|
|
Face
Amount
|
|
Value
|
|
U.S.
Treasury Inflation Protected Securities 104.2%
|
|
|
|
|
|
|
|
|
|
U.S. Treasury Bonds, Inflation Indexed
|
|
3.500%
|
|
1/15/11
|
|
9,143,469
|
|
$ 9,295,625
|
|
U.S. Treasury Bonds, Inflation Indexed
|
|
3.375%
|
|
1/15/12
|
|
3,511,222
|
|
3,701,597
|
|
U.S. Treasury Bonds, Inflation Indexed
|
|
3.000%
|
|
7/15/12
|
|
16,719,548
|
|
17,786,723
|
(a)
|
U.S. Treasury Bonds, Inflation Indexed
|
|
1.875%
|
|
7/15/13
|
|
40,593,006
|
|
42,936,603
|
|
U.S. Treasury Bonds, Inflation Indexed
|
|
2.375%
|
|
1/15/25
|
|
8,095,500
|
|
8,980,314
|
|
U.S. Treasury Bonds, Inflation Indexed
|
|
2.000%
|
|
1/15/26
|
|
74,972,688
|
|
79,277,770
|
|
U.S. Treasury Bonds, Inflation Indexed
|
|
1.750%
|
|
1/15/28
|
|
24,609,481
|
|
24,963,242
|
(a)
|
U.S. Treasury Bonds, Inflation Indexed
|
|
3.875%
|
|
4/15/29
|
|
7,359,689
|
|
9,876,356
|
|
U.S. Treasury Bonds, Inflation Indexed
|
|
2.125%
|
|
2/15/40
|
|
2,128,125
|
|
2,331,793
|
|
U.S. Treasury Notes, Inflation Indexed
|
|
2.375%
|
|
4/15/11
|
|
43,393,438
|
|
44,115,548
|
(b)
|
U.S. Treasury Notes, Inflation Indexed
|
|
0.625%
|
|
4/15/13
|
|
9,963,034
|
|
10,167,745
|
|
U.S. Treasury Notes, Inflation Indexed
|
|
2.000%
|
|
1/15/14
|
|
37,800,792
|
|
40,269,637
|
(b)(c)
|
U.S. Treasury Notes, Inflation Indexed
|
|
1.250%
|
|
4/15/14
|
|
8,590,784
|
|
8,968,641
|
|
U.S. Treasury Notes, Inflation Indexed
|
|
2.000%
|
|
7/15/14
|
|
4,787,910
|
|
5,137,279
|
|
U.S. Treasury Notes, Inflation Indexed
|
|
1.625%
|
|
1/15/15
|
|
11,530,867
|
|
12,172,271
|
|
U.S. Treasury Notes, Inflation Indexed
|
|
0.500%
|
|
4/15/15
|
|
11,668,788
|
|
11,822,851
|
|
U.S. Treasury Notes, Inflation Indexed
|
|
1.875%
|
|
7/15/15
|
|
1,462,579
|
|
1,567,130
|
|
U.S. Treasury Notes, Inflation Indexed
|
|
2.000%
|
|
1/15/16
|
|
16,145,598
|
|
17,418,323
|
|
U.S. Treasury Notes, Inflation Indexed
|
|
2.375%
|
|
1/15/17
|
|
6,669,708
|
|
7,363,251
|
|
U.S. Treasury Notes, Inflation Indexed
|
|
1.625%
|
|
1/15/18
|
|
15,348,408
|
|
16,178,173
|
|
U.S. Treasury Notes, Inflation Indexed
|
|
1.375%
|
|
7/15/18
|
|
14,810,125
|
|
15,349,302
|
|
U.S. Treasury Notes, Inflation Indexed
|
|
2.125%
|
|
1/15/19
|
|
2,842,980
|
|
3,102,402
|
|
U.S. Treasury Notes, Inflation Indexed
|
|
1.875%
|
|
7/15/19
|
|
7,555,178
|
|
8,099,385
|
|
Total U.S. Treasury Inflation Protected Securities
(Cost $375,184,208)
|
|
|
|
|
|
|
|
400,881,961
|
|
Asset-Backed
Securities 0.6%
|
|
|
|
|
|
|
|
|
|
Financials
0.6%
|
|
|
|
|
|
|
|
|
|
Home Equity 0.6%
|
|
|
|
|
|
|
|
|
|
Ameriquest Mortgage Securities Inc., 2005-R11 A2D
|
|
0.677%
|
|
1/25/36
|
|
50,000
|
|
33,705
|
(d)
|
Amresco Residential Securities Mortgage Loan Trust, 1997-3 M1A
|
|
0.902%
|
|
9/25/27
|
|
2,796
|
|
2,016
|
(d)
|
Asset Backed Funding Certificates, 2004-OPT2 M1
|
|
0.897%
|
|
8/25/33
|
|
40,000
|
|
31,133
|
(d)
|
Countrywide Asset-Backed Certificates, 2002-4 A1
|
|
1.087%
|
|
2/25/33
|
|
3,575
|
|
3,071
|
(d)
|
Countrywide Home Equity Loan Trust, 2007-GW A
|
|
0.900%
|
|
8/15/37
|
|
1,050,714
|
|
806,834
|
(d)
|
EMC Mortgage Loan Trust, 2004-C A1
|
|
0.897%
|
|
3/25/31
|
|
38,571
|
|
31,033
|
(d)(e)
|
Novastar Home Equity Loan, 2003-2 A1
|
|
0.957%
|
|
9/25/33
|
|
1,282,536
|
|
1,043,348
|
(d)
|
Structured Asset Securities Corp., 2002-AL1 A3
|
|
3.450%
|
|
2/25/32
|
|
325,506
|
|
296,979
|
|
Total Home Equity
|
|
|
|
|
|
|
|
2,248,119
|
|
Student Loan 0.0%
|
|
|
|
|
|
|
|
|
|
SLC Student Loan Trust, 2008-1 A4A
|
|
2.137%
|
|
12/15/32
|
|
100,000
|
|
103,836
|
(d)
|
Total Asset-Backed Securities
(Cost $1,282,880)
|
|
|
|
|
|
|
|
2,351,955
|
|
Collateralized
Mortgage Obligations 2.8%
|
|
|
|
|
|
|
|
|
|
Banc of America Mortgage Securities, 2003-D
|
|
2.961%
|
|
5/25/33
|
|
92,015
|
|
88,472
|
(d)
|
Banc of America Mortgage Securities, 2005-F 2A2
|
|
4.176%
|
|
7/25/35
|
|
146,681
|
|
126,468
|
(d)
|
Bear Stearns Adjustable Rate Mortgage Trust,
2004-9 24A1
|
|
5.413%
|
|
11/25/34
|
|
217,285
|
|
205,219
|
(d)
|
Chase Mortgage Finance Corp., 2007-A1 2A3
|
|
3.815%
|
|
2/25/37
|
|
55,619
|
|
54,104
|
(d)
|
See Notes to Financial Statements
|
|
Western
Asset/Claymore Inflation-Linked Securities & Income Fund 2010
Semi-Annual Report
|
|
9
|
Western
Asset/Claymore Inflation-Linked Securities & Income Fund
Security
|
|
Rate
|
|
Maturity
Date
|
|
Face
Amount
|
|
Value
|
|
Countrywide Alternative Loan Trust, 2004-2 CB
|
|
4.250%
|
|
3/25/34
|
|
38,393
|
|
$
38,504
|
|
Countrywide Alternative Loan Trust, 2004-J1
|
|
6.000%
|
|
2/25/34
|
|
14,708
|
|
15,059
|
|
Countrywide Home Loan Mortgage Pass-Through Trust, 2003-56 6A1
|
|
3.476%
|
|
12/25/33
|
|
592,955
|
|
514,828
|
(d)
|
Countrywide Home Loan Mortgage Pass-Through Trust, 2005-9 1A1
|
|
0.647%
|
|
5/25/35
|
|
195,507
|
|
112,563
|
(d)
|
Countrywide Home Loans, 2005-R2 1AF1
|
|
0.687%
|
|
6/25/35
|
|
713,225
|
|
584,142
|
(d)(e)
|
Countrywide Home Loans, 2005-R3 AF
|
|
0.747%
|
|
9/25/35
|
|
1,365,831
|
|
1,096,476
|
(d)(e)
|
CS First Boston Mortgage Securities Corp., 2004-AR6 2A1
|
|
2.771%
|
|
10/25/34
|
|
50,319
|
|
45,751
|
(d)
|
GSR Mortgage Loan Trust, 2004-11 1A1
|
|
3.695%
|
|
9/25/34
|
|
330,207
|
|
285,919
|
(d)
|
Indymac Inda Mortgage Loan Trust, 2007-AR7 1A1
|
|
6.020%
|
|
11/25/37
|
|
229,581
|
|
174,554
|
(d)
|
JPMorgan Mortgage Trust, 2003-A1 1A1
|
|
4.098%
|
|
10/25/33
|
|
110,939
|
|
109,606
|
(d)
|
JPMorgan Mortgage Trust, 2004-A1 1A1
|
|
4.793%
|
|
2/25/34
|
|
49,371
|
|
49,486
|
(d)
|
JPMorgan Mortgage Trust, 2006-A2 5A1
|
|
3.367%
|
|
11/25/33
|
|
20,814
|
|
19,975
|
(d)
|
MASTR ARM Trust, 2004-13 3A7
|
|
2.959%
|
|
11/21/34
|
|
350,000
|
|
302,793
|
(d)
|
Merrill Lynch Mortgage Investors Inc., 2003-H A3
|
|
2.058%
|
|
1/25/29
|
|
12,984
|
|
12,410
|
(d)
|
Merrill Lynch Mortgage Investors Inc., 2005-A2
|
|
2.800%
|
|
2/25/35
|
|
1,588,212
|
|
1,563,610
|
(d)
|
Merrill Lynch Mortgage Investors Trust, 2004-A1
2A1
|
|
2.821%
|
|
2/25/34
|
|
40,293
|
|
37,561
|
(d)
|
Morgan Stanley Capital I, 2004-RR2 X
|
|
0.907%
|
|
10/28/33
|
|
943,895
|
|
11,940
|
(d)(e)(f)(g)
|
Residential Asset Mortgage Products Inc., 2004-SL2
A4
|
|
8.500%
|
|
10/25/31
|
|
19,745
|
|
20,117
|
|
Residential Asset Mortgage Products Inc., 2004-SL4
A5
|
|
7.500%
|
|
7/25/32
|
|
159,763
|
|
160,327
|
|
Sequoia Mortgage Trust, 2003-8 A1
|
|
0.668%
|
|
1/20/34
|
|
38,278
|
|
32,642
|
(d)
|
Structured Adjustable Rate Mortgage Loan Trust, 2005-3XS A3
|
|
0.717%
|
|
1/25/35
|
|
591,711
|
|
553,250
|
(d)
|
Thornburg Mortgage Securities Trust, 2007-4 2A1
|
|
6.207%
|
|
9/25/37
|
|
334,869
|
|
319,014
|
(d)
|
WaMu Mortgage Pass-Through Certificates, 2003-AR8 A
|
|
2.834%
|
|
8/25/33
|
|
38,532
|
|
38,545
|
(d)
|
WaMu Mortgage Pass-Through Certificates, 2005-AR3 A2
|
|
2.727%
|
|
3/25/35
|
|
3,617,315
|
|
3,431,922
|
(d)
|
WaMu Mortgage Pass-Through Certificates, 2007-HY1 1A1
|
|
5.574%
|
|
2/25/37
|
|
410,543
|
|
300,161
|
(d)
|
Washington Mutual Inc., MSC Pass-Through Certificates, 2004-RA1 2A
|
|
7.000%
|
|
3/25/34
|
|
60,389
|
|
62,552
|
|
Washington Mutual Inc., Pass-Through Certificates, 2003-AR10 A7
|
|
2.825%
|
|
10/25/33
|
|
132,911
|
|
127,024
|
(d)
|
Washington Mutual MSC Mortgage Pass-Through Certificates, 2002-MS12
B2
|
|
6.500%
|
|
5/25/32
|
|
595,133
|
|
467,375
|
|
Total Collateralized Mortgage Obligations
(Cost $7,845,985)
|
|
|
|
|
|
|
|
10,962,369
|
|
Corporate
Bonds & Notes 3.1%
|
|
|
|
|
|
|
|
|
|
Consumer
Discretionary 0.4%
|
|
|
|
|
|
|
|
|
|
Automobiles 0.4%
|
|
|
|
|
|
|
|
|
|
Motors Liquidation Co., Senior Debentures
|
|
8.375%
|
|
7/15/33
|
|
5,225,000
|
|
1,672,000
|
(h)
|
Consumer
Staples 0.6%
|
|
|
|
|
|
|
|
|
|
Beverages 0.2%
|
|
|
|
|
|
|
|
|
|
Anheuser-Busch InBev Worldwide Inc., Senior Notes
|
|
3.625%
|
|
4/15/15
|
|
680,000
|
|
696,002
|
(e)
|
Food Products 0.4%
|
|
|
|
|
|
|
|
|
|
Kraft Foods Inc., Senior Notes
|
|
4.125%
|
|
2/9/16
|
|
1,650,000
|
|
1,741,533
|
|
Total Consumer Staples
|
|
|
|
|
|
|
|
2,437,535
|
|
See Notes to Financial Statements
10
|
|
Western Asset/Claymore
Inflation-Linked Securities & Income Fund 2010 Semi-Annual Report
|
|
|
Schedule
of investments (unaudited) (contd)
June
30, 2010
Western
Asset/Claymore Inflation-Linked Securities & Income Fund
Security
|
|
Rate
|
|
Maturity
Date
|
|
Face
Amount
|
|
Value
|
|
Energy 0.1%
|
|
|
|
|
|
|
|
|
|
Oil, Gas & Consumable Fuels
0.1%
|
|
|
|
|
|
|
|
|
|
Gazprom, Loan Participation Notes, Senior Notes
|
|
6.510%
|
|
3/7/22
|
|
190,000
|
|
$
183,065
|
(e)
|
Financials 1.7%
|
|
|
|
|
|
|
|
|
|
Capital Markets 0.4%
|
|
|
|
|
|
|
|
|
|
Goldman Sachs Group Inc., Notes
|
|
4.750%
|
|
7/15/13
|
|
1,330,000
|
|
1,388,617
|
|
Kaupthing Bank HF, Subordinated Notes
|
|
7.125%
|
|
5/19/16
|
|
2,060,000
|
|
206
|
(e)(f)(h)
|
Total Capital Markets
|
|
|
|
|
|
|
|
1,388,823
|
|
Commercial Banks 0.0%
|
|
|
|
|
|
|
|
|
|
Glitnir Banki HF, Subordinated Notes
|
|
6.693%
|
|
6/15/16
|
|
1,240,000
|
|
1,550
|
(e)(f)(h)
|
Diversified Financial Services
1.1%
|
|
|
|
|
|
|
|
|
|
Bank of America Corp., Senior Notes
|
|
4.500%
|
|
4/1/15
|
|
940,000
|
|
950,078
|
|
Citigroup Inc., Senior Notes
|
|
6.010%
|
|
1/15/15
|
|
2,070,000
|
|
2,171,188
|
|
UFJ Finance Aruba AEC
|
|
6.750%
|
|
7/15/13
|
|
1,025,000
|
|
1,147,968
|
|
Total Diversified Financial
Services
|
|
|
|
|
|
|
|
4,269,234
|
|
Insurance 0.2%
|
|
|
|
|
|
|
|
|
|
Berkshire Hathaway Inc., Senior Notes
|
|
3.200%
|
|
2/11/15
|
|
830,000
|
|
854,743
|
|
Total Financials
|
|
|
|
|
|
|
|
6,514,350
|
|
Health Care 0.3%
|
|
|
|
|
|
|
|
|
|
Health Care Providers &
Services 0.3%
|
|
|
|
|
|
|
|
|
|
HCA Inc., Senior Notes
|
|
5.750%
|
|
3/15/14
|
|
1,000,000
|
|
930,000
|
|
Total Corporate Bonds &
Notes (Cost $16,951,566)
|
|
|
|
|
|
|
|
11,736,950
|
|
Non-U.S. Treasury Inflation
Protected Security 2.8%
|
|
|
|
|
|
|
|
|
|
Australia 2.8%
|
|
|
|
|
|
|
|
|
|
Australia Government, Bonds (Cost $10,572,763)
|
|
4.000%
|
|
8/20/20
|
|
7,930,000
AUD
|
|
10,803,815
|
|
Sovereign Bond 0.5%
|
|
|
|
|
|
|
|
|
|
Russia 0.5%
|
|
|
|
|
|
|
|
|
|
Russian Foreign Bond-Eurobond, Senior Bonds
(Cost $1,663,589)
|
|
7.500%
|
|
3/31/30
|
|
1,711,200
|
|
1,929,036
|
(e)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
Preferred Stocks 0.1%
|
|
|
|
|
|
|
|
|
|
Financials 0.1%
|
|
|
|
|
|
|
|
|
|
Thrifts & Mortgage Finance
0.1%
|
|
|
|
|
|
|
|
|
|
Federal Home Loan Mortgage Corp. (FHLMC)
|
|
8.375%
|
|
|
|
309,625
|
|
105,272
|
*
(d)
|
Federal National Mortgage Association (FNMA)
|
|
8.250%
|
|
|
|
278,700
|
|
94,758
|
*
(d)
|
Total Preferred Stocks (Cost
$14,820,997)
|
|
|
|
|
|
|
|
200,030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expiration
Date
|
|
Contracts
|
|
|
|
Purchased Options 0.0%
|
|
|
|
|
|
|
|
|
|
Eurodollar Futures, Put @ $98.50
|
|
|
|
9/13/10
|
|
104
|
|
5,200
|
|
U.S. Treasury 10-Year Notes Futures, Put @ $119.50
|
|
|
|
7/23/10
|
|
71
|
|
7,766
|
|
U.S. Treasury 10-Year Notes Futures, Put @ $120.00
|
|
|
|
7/23/10
|
|
93
|
|
15,984
|
|
Total Purchased Options (Cost $111,355)
|
|
|
|
|
|
|
|
28,950
|
|
Total Investments Before Short-Term Investment
(Cost $428,433,343)
|
|
|
|
|
|
|
|
438,895,066
|
|
See Notes to Financial Statements
|
|
Western
Asset/Claymore Inflation-Linked Securities & Income Fund 2010
Semi-Annual Report
|
|
11
|
Western
Asset/Claymore Inflation-Linked Securities & Income Fund
Security
|
|
Rate
|
|
Maturity Date
|
|
Face Amount
|
|
Value
|
|
Short-Term Investment 0.4%
|
|
|
|
|
|
|
|
|
|
Repurchase Agreement 0.4%
|
|
|
|
|
|
|
|
|
|
Morgan Stanley repurchase agreement dated 6/30/10; Proceeds at
maturity $1,664,000; (Fully collateralized by U.S. government agency
obligations, 2.610% due 4/15/14; Market value $1,705,600)
(Cost $1,664,000)
|
|
0.010%
|
|
7/1/10
|
|
1,664,000
|
|
$ 1,664,000
|
|
Total Investments 114.5%
(Cost $430,097,343#)
|
|
|
|
|
|
|
|
440,559,066
|
|
Liabilities in Excess of Other Assets (14.5)%
|
|
|
|
|
|
|
|
(55,796,190
|
)
|
Total Net Assets 100.0%
|
|
|
|
|
|
|
|
$384,762,876
|
|
|
Face
amount denominated in U.S. dollars, unless otherwise noted.
|
*
|
Non-income
producing security.
|
(a)
|
All
or a portion of this security is held at the broker as collateral for open
futures contracts.
|
(b)
|
All
or a portion of this security is held by the counterparty as collateral for
open reverse repurchase agreements.
|
(c)
|
All
or a portion of this security is held by the custodian as collateral for open
swap contracts.
|
(d)
|
Variable
rate security. Interest rate disclosed is that which is in effect at June 30,
2010.
|
(e)
|
Security
is exempt from registration under Rule 144A of the Securities Act of 1933.
This security may be resold in transactions that are exempt from
registration, normally to qualified institutional buyers. This security has
been deemed liquid pursuant to guidelines approved by the Board of Trustees,
unless otherwise noted.
|
(f)
|
Illiquid
security.
|
(g)
|
Security
is valued in good faith at fair value in accordance with procedures approved
by the Board of Trustees (See Note 1).
|
(h)
|
The
coupon payment on these securities is currently in default as of June 30,
2010.
|
#
|
Aggregate
cost for federal income tax purposes is substantially the same.
|
|
|
|
Abbreviations
used in this schedule:
|
|
ARM
Adjustable Rate Mortgage
|
|
AUD
Australian Dollar
|
See Notes to Financial Statements
12
|
|
Western Asset/Claymore
Inflation-Linked Securities & Income Fund 2010 Semi-Annual Report
|
|
|
Statement
of assets and liabilities (unaudited)
June 30,
2010
Assets:
|
|
|
|
Investments, at value (Cost $430,097,343)
|
|
$440,559,066
|
|
Foreign currency, at value (Cost $377,799)
|
|
359,719
|
|
Cash
|
|
844
|
|
Interest receivable
|
|
3,372,711
|
|
Unrealized appreciation on forward currency
contracts
|
|
864,578
|
|
Receivable from broker variation margin on open
futures contracts
|
|
5,026
|
|
Receivable for open swap contracts
|
|
2,639
|
|
Prepaid expenses
|
|
16,767
|
|
Total Assets
|
|
445,181,350
|
|
|
|
|
|
Liabilities:
|
|
|
|
Payable for open reverse repurchase agreement
|
|
59,498,488
|
|
Unrealized depreciation on forward currency
contracts
|
|
230,355
|
|
Unrealized depreciation on swaps
|
|
229,585
|
|
Investment management fee payable
|
|
144,705
|
|
Servicing agent fees payable
|
|
54,265
|
|
Trustees fees payable
|
|
29,650
|
|
Administration fee payable
|
|
8,219
|
|
Interest payable
|
|
6,941
|
|
Accrued expenses
|
|
216,266
|
|
Total Liabilities
|
|
60,418,474
|
|
Total Net Assets
|
|
$384,762,876
|
|
|
|
|
|
Net Assets:
|
|
|
|
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
|
|
(1,173,932)
|
|
Accumulated net realized loss on investments, futures contracts,
written options, swap contracts and foreign currency transactions
|
|
(30,680,080)
|
|
Net unrealized appreciation on investments, futures contracts, swap
contracts and foreign currencies
|
|
10,978,361
|
|
Total Net Assets
|
|
$384,762,876
|
|
|
|
|
|
Shares Outstanding
|
|
29,152,821
|
|
|
|
|
|
Net Asset Value
|
|
$13.20
|
|
See Notes to Financial Statements
|
|
Western
Asset/Claymore Inflation-Linked Securities & Income Fund 2010
Semi-Annual Report
|
|
13
|
Statement
of operations (unaudited)
For
the Six Months Ended June 30, 2010
Investment Income:
|
|
|
|
Interest
|
|
$
7,566,250
|
|
|
|
|
|
Expenses:
|
|
|
|
Investment management fee (Note 2)
|
|
792,840
|
|
Servicing agent fees (Note 2)
|
|
297,315
|
|
Legal fees
|
|
66,976
|
|
Administrative fees (Note 2)
|
|
49,589
|
|
Trustees fees
|
|
42,650
|
|
Interest expense (Note 3)
|
|
30,786
|
|
Transfer agent fees
|
|
29,425
|
|
Shareholder reports
|
|
25,117
|
|
Custody fees
|
|
24,990
|
|
Audit and tax
|
|
16,874
|
|
Stock exchange listing fees
|
|
10,664
|
|
Total Expenses
|
|
1,387,226
|
|
Less: Compensating balance arrangements (Note 1)
|
|
(211)
|
|
Net Expenses
|
|
1,387,015
|
|
Net Investment Income
|
|
6,179,235
|
|
|
|
|
|
Realized
and Unrealized Gain (Loss) on Investments, Futures Contracts, Written
Options, Swap Contracts and Foreign Currency Transactions (Notes 1, 3 and 4):
|
|
|
|
Net Realized Gain (Loss) From:
|
|
|
|
Investment transactions
|
|
5,062,109
|
|
Futures contracts
|
|
(278,244)
|
|
Written options
|
|
50,028
|
|
Swap contracts
|
|
47,764
|
|
Foreign currency transactions
|
|
(107,398)
|
|
Net Realized Gain
|
|
4,774,259
|
|
Change in Net Unrealized Appreciation/Depreciation
From:
|
|
|
|
Investments
|
|
5,046,703
|
|
Futures contracts
|
|
292,972
|
|
Swap contracts
|
|
29,857
|
|
Foreign currencies
|
|
559,614
|
|
Change in Net Unrealized
Appreciation/Depreciation
|
|
5,929,146
|
|
Net
Gain on Investments, Futures Contracts, Written Options, Swap Contracts and
Foreign Currency Transactions
|
|
10,703,405
|
|
Increase in Net Assets From
Operations
|
|
$16,882,640
|
|
See Notes to Financial Statements
14
|
|
Western Asset/Claymore
Inflation-Linked Securities & Income Fund 2010 Semi-Annual Report
|
|
|
Statements
of changes in net assets
For
the Six Months Ended June 30, 2010 (unaudited)
and the Year Ended December 31, 2009
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
Operations:
|
|
|
|
|
|
Net investment income
|
|
$
6,179,235
|
|
$ 10,276,219
|
|
Net realized gain (loss)
|
|
4,774,259
|
|
(6,320,698)
|
|
Change in net unrealized appreciation/depreciation
|
|
5,929,146
|
|
49,765,126
|
|
Increase in Net Assets From
Operations
|
|
16,882,640
|
|
53,720,647
|
|
|
|
|
|
|
|
Distributions to Shareholders
From (Note 1):
|
|
|
|
|
|
Net investment income
|
|
(6,646,843)
|
|
(10,901,459)
|
|
Return of capital
|
|
|
|
(2,858,672)
|
|
Decrease in Net Assets From
Distributions to Shareholders
|
|
(6,646,843)
|
|
(13,760,131)
|
|
Increase in Net Assets
|
|
10,235,797
|
|
39,960,516
|
|
|
|
|
|
|
|
Net Assets:
|
|
|
|
|
|
Beginning of period
|
|
374,527,079
|
|
334,566,563
|
|
End of period*
|
|
$384,762,876
|
|
$374,527,079
|
|
* Includes overdistributed net investment income
of:
|
|
$(1,173,932)
|
|
$(706,324)
|
|
See Notes to Financial Statements
|
|
Western
Asset/Claymore Inflation-Linked Securities & Income Fund 2010
Semi-Annual Report
|
|
15
|
Statement
of cash flows (unaudited)
For
the Six Months Ended June 30, 2010
Cash Flows Provided (Used) by
Operating Activities:
|
|
|
|
Interest and dividends received
|
|
$
|
4,639,409
|
|
Operating expenses paid
|
|
(1,316,693)
|
|
Interest paid
|
|
(23,845)
|
|
Net sales and maturities of short-term investments
|
|
7,176,645
|
|
Realized loss on futures contracts
|
|
(278,244)
|
|
Realized loss on options
|
|
(21,404)
|
|
Realized gain on swap contracts
|
|
47,764
|
|
Realized loss on foreign currency transactions
|
|
(107,398)
|
|
Net change in unrealized appreciation on futures
contracts
|
|
292,972
|
|
Net change in unrealized appreciation on foreign
currencies
|
|
559,614
|
|
Purchases of long-term investments
|
|
(138,518,323)
|
|
Proceeds from disposition of long-term investments
|
|
75,430,408
|
|
Change in receivable/payable to broker variation
margin
|
|
(76,481)
|
|
Change in receivable/payable for open forward
currency contracts
|
|
(578,786)
|
|
Cash deposits with brokers for futures contracts
|
|
135,601
|
|
Net Cash Used By Operating
Activities
|
|
(52,638,761)
|
|
|
|
|
|
Cash Flows Provided (Used) by
Financing Activities:
|
|
|
|
Cash distributions paid on Common Stock
|
|
(6,646,843)
|
|
Proceeds from reverse repurchase agreements
|
|
59,498,488
|
|
Net Cash Provided By Financing
Activities
|
|
52,851,645
|
|
Net Increase in Cash
|
|
212,884
|
|
Cash, Beginning of period
|
|
147,679
|
|
Cash, End of period
|
|
$
|
360,563
|
|
|
|
|
|
Reconciliation
of Increase in Net Assets from Operations to Net Cash Flows Provided (Used)
by Operating Activities:
|
|
|
|
Increase in Net Assets From
Operations
|
|
$
|
16,882,640
|
|
Accretion of discount on investments
|
|
(3,508,376)
|
|
Amortization of premium on investments
|
|
907,632
|
|
Increase in investments, at value
|
|
(66,121,371)
|
|
Increase in interest and dividends receivable
|
|
(326,097)
|
|
Decrease in payable for open forward currency
contracts
|
|
(578,786)
|
|
Decrease in payable to broker variation margin
|
|
(76,481)
|
|
Decrease in cash deposits with brokers for futures
contracts
|
|
135,601
|
|
Increase in prepaid expenses
|
|
(16,767)
|
|
Increase in interest payable
|
|
6,941
|
|
Increase in accrued expenses
|
|
56,303
|
|
Total Adjustments
|
|
(69,521,401)
|
|
Net Cash Flows Used by
Operating Activities
|
|
$
|
(52,638,761)
|
|
See Notes to Financial Statements
16
|
|
Western Asset/Claymore
Inflation-Linked Securities & Income Fund 2010 Semi-Annual Report
|
|
|
Financial
highlights
For a share of beneficial interest outstanding throughout each year
ended December 31, unless otherwise noted:
|
|
2010
1
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
asset value, beginning of period
|
|
$12.85
|
|
$11.48
|
|
$13.38
|
|
$12.83
|
|
$13.50
|
|
$14.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
0.21
|
2
|
0.35
|
2
|
0.82
|
2
|
0.70
|
2
|
0.72
|
2
|
1.15
|
|
Net realized and unrealized gain (loss)
|
|
0.37
|
|
1.49
|
|
(1.87)
|
|
0.54
|
|
(0.46)
|
|
(0.92)
|
|
Dividends paid to auction rate preferred stockholders from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
|
|
|
|
|
|
|
(0.30)
|
|
(0.23)
|
|
Total income (loss) from operations
|
|
0.58
|
|
1.84
|
|
(1.05)
|
|
1.24
|
|
(0.04)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less
distributions paid to common shareholders from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
(0.23)
|
|
(0.37)
|
|
(0.85)
|
|
(0.69)
|
|
(0.43)
|
|
(0.93)
|
|
Return of capital
|
|
|
|
(0.10)
|
|
|
|
|
|
(0.20)
|
|
|
|
Total distributions
|
|
(0.23)
|
|
(0.47)
|
|
(0.85)
|
|
(0.69)
|
|
(0.63)
|
|
(0.93)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
asset value, end of period
|
|
$13.20
|
|
$12.85
|
|
$11.48
|
|
$13.38
|
|
$12.83
|
|
$13.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
price, end of period
|
|
$12.62
|
|
$12.30
|
|
$10.80
|
|
$11.73
|
|
$11.42
|
|
$12.01
|
|
Total return, based on NAV
3
|
|
4.54
|
%
|
16.39
|
%
|
(8.24)
|
%
|
9.95
|
%
|
(0.27)
|
%
|
(0.01)
|
%
|
Total return, based on Market Price
3,4
|
|
4.48
|
%
|
18.51
|
%
|
(0.91)
|
%
|
8.95
|
%
|
0.40
|
%
|
(2.98)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
assets, end of period (000s)
|
|
$384,763
|
|
$374,527
|
|
$334,567
|
|
$389,980
|
|
$374,119
|
|
$393,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios
to average net assets:
5,6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross expenses
|
|
0.74
|
%
7
|
0.97
|
%
|
1.21
|
%
|
0.91
|
%
|
1.36
|
%
|
1.45
|
%
|
Net expenses
|
|
0.74
|
7,8
|
0.97
|
|
1.21
|
8
|
0.91
|
8
|
1.36
|
8
|
1.44
|
|
Net expenses, excluding interest expense
|
|
0.72
|
7,8
|
0.87
|
|
0.83
|
8
|
0.76
|
8
|
1.16
|
8
|
1.20
|
|
Net investment income
|
|
3.29
|
7
|
2.91
|
|
6.29
|
|
5.45
|
|
5.50
|
|
8.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio
turnover rate
|
|
19
|
%
|
43
|
%
|
52
|
%
|
72
|
%
|
146
|
%
|
38
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auction
rate preferred stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset coverage
9
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
10
|
292
|
%
|
1
|
For
the six months ended June 30, 2010 (unaudited).
|
2
|
Per
share amounts have been calculated using the average shares method.
|
3
|
Performance
figures may reflect fee waivers and/or expense reimbursements. In the absence
of fee waivers and/or expense reimbursements, the total return would have
been lower. Past performance is no guarantee of future results. Total returns
for periods of less than one year are not annualized.
|
4
|
The
total return calculation assumes that distributions are reinvested in
accordance with the Funds dividend reinvestment plan. Past performance is no
guarantee of future results. Total returns for periods of less than one year
are not annualized.
|
5
|
Calculated
on the basis of average net assets of common stock shareholders.
|
6
|
Gross
expenses reflects operating expenses prior to any expense waivers and/or
compensating balance arrangements. Net expenses reflects expenses less any
compensating balance arrangements and/or expense waivers.
|
7
|
Annualized.
|
8
|
The
impact of compensating balance arrangements to the expense ratio was less
than 0.01%.
|
9
|
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.
|
10
|
The
last series of preferred shares was redeemed on November 22, 2006.
|
N/A
|
Not
applicable.
|
See Notes to Financial Statements
|
|
Western
Asset/Claymore Inflation-Linked Securities & Income Fund 2010
Semi-Annual Report
|
|
17
|
Notes
to financial statements (unaudited)
1.
Organization and significant accounting policies
Western
Asset/Claymore Inflation-Linked Securities & Income Fund (the 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 the date the financial
statements were issued.
(a) Investment
valuation.
Debt securities are valued at the last quoted bid
price 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.
Short-term obligations with maturities of 60 days or less are valued at
amortized cost, which approximates fair value.
The
Fund has adopted Financial Accounting Standards Board Codification Topic 820 (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 1
quoted prices in active markets for identical investments
·
Level 2 other
significant observable inputs (including quoted prices for similar investments,
interest rates, prepayment speeds, credit risk, etc.)
·
Level 3 significant
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 of cash flow to a single present amount.
18
|
|
Western Asset/Claymore
Inflation-Linked Securities & Income Fund 2010 Semi-Annual Report
|
|
|
Notes
to financial statements (unaudited) (contd)
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. treasury inflation protected securities
|
|
|
|
|
$400,881,961
|
|
|
|
|
|
$400,881,961
|
|
Asset-backed securities
|
|
|
|
|
2,351,955
|
|
|
|
|
|
2,351,955
|
|
Collateralized mortgage obligations
|
|
|
|
|
10,950,429
|
|
|
$11,940
|
|
|
10,962,369
|
|
Corporate bonds & notes
|
|
|
|
|
11,736,950
|
|
|
|
|
|
11,736,950
|
|
Non-U.S. treasury inflation protected security
|
|
|
|
|
10,803,815
|
|
|
|
|
|
10,803,815
|
|
Sovereign bond
|
|
|
|
|
1,929,036
|
|
|
|
|
|
1,929,036
|
|
Preferred stocks
|
|
$200,030
|
|
|
|
|
|
|
|
|
200,030
|
|
Purchased options
|
|
28,950
|
|
|
|
|
|
|
|
|
28,950
|
|
Total long-term investments
|
|
$228,980
|
|
|
$438,654,146
|
|
|
$11,940
|
|
|
$438,895,066
|
|
Short-term investments
|
|
|
|
|
1,664,000
|
|
|
|
|
|
1,664,000
|
|
Total investments
|
|
$228,980
|
|
|
$440,318,146
|
|
|
$11,940
|
|
|
$440,559,066
|
|
Other financial instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures contracts
|
|
130,413
|
|
|
|
|
|
|
|
|
130,413
|
|
Forward foreign currency contracts
|
|
|
|
|
634,223
|
|
|
|
|
|
634,223
|
|
Credit default swap on corporate issues sell protection
|
|
|
|
|
(229,585
|
)
|
|
|
|
|
(229,585
|
)
|
Reverse repurchase agreements
|
|
|
|
|
(59,498,488
|
)
|
|
|
|
|
(59,498,488
|
)
|
Total other financial
instruments
|
|
$130,413
|
|
|
$(59,093,850
|
)
|
|
|
|
|
$(58,963,437
|
)
|
Total
|
|
$359,393
|
|
|
$381,224,296
|
|
|
$11,940
|
|
|
$381,595,629
|
|
See
Schedule of Investments for additional detailed categorizations.
Values
include any premiums paid or received with respect to swap contracts.
Following
is a reconciliation of investments in which significant unobservable inputs
(Level 3) were used in determining fair value:
Investments in Securities
|
|
Collateralized
Mortgaged
Obligations
|
|
Balance as of December 31, 2009
|
|
|
|
|
Accrued premiums/discounts
|
|
|
|
|
Realized gain/(loss)
1
|
|
|
|
|
Change in unrealized appreciation (depreciation)
2
|
|
|
|
|
Net purchases (sales)
|
|
|
|
|
Transfers in to Level 3
|
|
$11,940
|
|
|
Transfers out of Level 3
|
|
|
|
|
Balance as of June 30, 2010
|
|
$11,940
|
|
|
Net change in unrealized
appreciation (depreciation) in securities still held at June 30, 2010
2
|
|
|
|
|
1
This amount is included in
net realized gain (loss) from investment transactions in the accompanying
Statement of Operations.
2
This amount is included in
the change in net unrealized appreciation (depreciation) in the accompanying Statement
of Operations. Change in unrealized appreciation (depreciation) includes net
unrealized appreciation (depreciation) resulting from changes in investment
values during the reporting period and the reversal of previously recorded
unrealized appreciation (depreciation) when gains or losses are realized.
(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
|
|
Western
Asset/Claymore Inflation-Linked Securities & Income Fund 2010
Semi-Annual Report
|
|
19
|
one
business day, the value of the collateral is marked to market and measured
against the value of the agreement in an effort 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.
(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.
20
|
|
Western Asset/Claymore
Inflation-Linked Securities & Income Fund 2010 Semi-Annual Report
|
|
|
Notes
to financial statements (unaudited) (contd)
(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.
(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 Fair Values of Derivatives Statement of Assets and
Liabilities table that follows each Funds summary of open swap contracts, the
aggregate fair value of credit default swaps in a net liability position as of June 30,
2010 was $229,585. The aggregate fair value of assets posted as collateral, net
of assets received as collateral, for all swaps was $188,560. If a defined
credit event had occurred as of June 30, 2010, 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
|
|
Western
Asset/Claymore Inflation-Linked Securities & Income Fund 2010
Semi-Annual Report
|
|
21
|
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 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.
(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
22
|
|
Western Asset/Claymore
Inflation-Linked Securities & Income Fund 2010 Semi-Annual Report
|
|
|
Notes
to financial statements (unaudited) (contd)
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 equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in the 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) Loan
participations.
The Fund may invest in loans arranged through
private negotiation between one or more financial institutions. The Funds
investment in any such loan may be in the form of a participation in or an
assignment of the loan. In connection with purchasing participations, the Fund
generally will have no right to enforce compliance by the borrower with the
terms of the loan agreement related to the loan, or any rights of off-set
against the borrower and the Fund may not benefit directly from any collateral
supporting the loan in which it has purchased the participation.
The
Fund assumes the credit risk of the borrower, the lender that is selling the
participation and any other persons interpositioned between the Fund and the
borrower. In the event of the insolvency of the lender selling the
participation, the Fund may be treated as a general creditor of the lender and
may not benefit from any off-set between the lender and the borrower.
(k) 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.
(l) 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 a credit event occurs that impacts 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.
(m) 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.
(n) Compensating
balance arrangements.
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 on deposit with the bank. The amount is shown
as a reduction of expenses in the Statement of Operations.
(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
|
|
Western
Asset/Claymore Inflation-Linked Securities & Income Fund 2010
Semi-Annual Report
|
|
23
|
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 June 30, 2010, no
provision for 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.
(p) Reclassification.
GAAP requires
that certain components of net assets be reclassified to reflect permanent
differences between financial and tax reporting. These reclassifications have
no effect on net assets or net asset value per share.
2.
Investment management agreement and other transactions with affiliates
The
Fund has entered into an Investment Management 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 Adviser, 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.
3.
Investments
During
the six months ended June 30, 2010, 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
|
|
$ 5,471,152
|
|
|
$133,047,171
|
|
|
Sales
|
|
17,522,722
|
|
|
58,455,240
|
|
|
24
|
|
Western Asset/Claymore
Inflation-Linked Securities & Income Fund 2010 Semi-Annual Report
|
|
|
Notes
to financial statements (unaudited) (contd)
At
June 30, 2010, the aggregate gross unrealized appreciation and
depreciation of investments for federal income tax purposes were substantially
as follows:
Gross unrealized appreciation
|
|
$ 31,979,557
|
|
Gross unrealized depreciation
|
|
(21,517,834
|
)
|
Net unrealized appreciation
|
|
$ 10,461,723
|
|
Transactions
in reverse repurchase agreements for the Fund during the six months ended June 30,
2010 were as follows:
Average
Daily
Balance*
|
|
Weighted
Average
Interest Rate*
|
|
Maximum
Amount
Outstanding
|
|
$42,848,861
|
|
0.270%
|
|
$59,498,488
|
|
* Average
based on the number of days that the Fund had reversed repurchase agreements
outstanding.
Interest
rates on reverse repurchase agreements ranged from 0.220% to 0.300%, during the
six months ended June 30, 2010. Interest expense incurred on reverse
repurchase agreements totaled $30,786, during the six months ended June 30,
2010.
At
June 30, 2010, the Fund had the following open reverse repurchase
agreements:
Security
|
|
Value
|
|
Reverse
Repurchase Agreement with Deutsche Bank Securities Inc., dated 6/17/10
bearing 0.300% to be repurchased at $16,087,447 on 7/6/10, collateralized by:
$13,000,000 U.S. Treasury, Inflation Indexed Notes, 2.000% due 1/15/14;
Market value (including accrued interest) $16,087,447
|
|
$16,084,900
|
|
Reverse
Repurchase Agreement with Deutsche Bank Securities Inc., dated 6/17/10
bearing 0.300% to be repurchased at $43,420,462 on 7/6/10, collateralized by:
$39,510,000 U.S. Treasury, Inflation Indexed Notes, 2.375% due 4/15/11;
Market value (including accrued interest) $43,420,462
|
|
43,413,588
|
|
Total reverse repurchase agreements (Proceeds
$59,498,488)
|
|
$59,498,488
|
|
During
the six months ended June 30, 2010, written option transactions for the Fund
were as follows:
|
|
Number of Contracts
|
|
Premiums
|
|
Written options, outstanding December 31,
2009
|
|
|
|
|
|
Options written
|
|
54
|
|
$50,028
|
|
Options closed
|
|
|
|
|
|
Options expired
|
|
(54)
|
|
(50,028
|
)
|
Written options, outstanding
June 30, 2010
|
|
|
|
|
|
At
June 30, 2010, the Fund had the following open futures contracts:
|
|
Number of
Contracts
|
|
Expiration
Date
|
|
Basis
Value
|
|
Market
Value
|
|
Unrealized
Gain/(Loss)
|
|
Contracts to Buy:
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury 10-Year Notes
|
|
37
|
|
9/10
|
|
$ 4,463,511
|
|
$ 4,534,235
|
|
$ 70,724
|
|
U.S. Treasury 30-Year Bonds
|
|
18
|
|
9/10
|
|
2,215,246
|
|
2,295,000
|
|
79,754
|
|
|
|
|
|
|
|
|
|
|
|
150,478
|
|
Contracts to Sell:
|
|
|
|
|
|
|
|
|
|
|
|
90-Day Eurodollar
|
|
93
|
|
9/10
|
|
23,077,648
|
|
23,097,713
|
|
(20,065
|
)
|
Net unrealized gain on open
futures contracts
|
|
|
|
|
|
|
|
|
|
$130,413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Western
Asset/Claymore Inflation-Linked Securities & Income Fund 2010
Semi-Annual Report
|
|
25
|
At
June 30, 2010, the Fund had the following open forward foreign currency
contracts:
Foreign Currency
|
|
Counterparty
|
|
Local
Currency
|
|
Market
Value
|
|
Settlement
Date
|
|
Unrealized
Gain/(Loss)
|
Contracts to Buy:
|
|
|
|
|
|
|
|
|
|
|
|
Canadian Dollar
|
|
Citibank N.A.
|
|
3,986,323
|
|
$ 3,743,507
|
|
8/17/10
|
|
$ (29,991
|
)
|
Euro
|
|
Credit Suisse First Boston Inc.
|
|
2,550,000
|
|
3,119,029
|
|
8/17/10
|
|
(41,441
|
)
|
|
|
|
|
|
|
|
|
|
|
(71,432)
|
|
Contracts to Sell:
|
|
|
|
|
|
|
|
|
|
|
|
Australian Dollar
|
|
Credit Suisse First Boston Inc.
|
|
12,204,275
|
|
$10,214,859
|
|
8/17/10
|
|
$ 732,986
|
|
Euro
|
|
Citibank N.A.
|
|
2,768,533
|
|
3,386,327
|
|
8/17/10
|
|
131,592
|
|
Japanese Yen
|
|
Citibank N.A.
|
|
342,755,280
|
|
3,879,671
|
|
8/17/10
|
|
(158,923
|
)
|
|
|
|
|
|
|
|
|
|
|
705,655
|
|
Net unrealized gain on open
forward foreign currency contracts
|
|
|
|
|
|
|
$ 634,223
|
|
At
June 30, 2010, the Fund had the following open swap contracts:
CREDIT DEFAULT SWAPS ON CORPORATE
ISSUES SELL PROTECTION
1
Swap Counterparty
(Reference Entity)
|
|
Notional
Amount
2
|
|
Termination
Date
|
|
Implied
Credit
Spread at
June 30,
2010
3
|
|
Periodic
Payments
Received
by the
Fund
|
|
Market
Value
|
|
Upfront
Premiums
Paid/
(Received)
|
|
Unrealized
Appreciation/
(Depreciation)
|
JPMorgan
Securities Inc. (SLM Corp., 5.125%, due 8/27/12)
|
|
$3,800,000
|
|
12/20/12
|
|
5.21%
|
|
2.500%
Quarterly
|
|
$(229,585)
|
|
|
|
$(229,585)
|
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
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.
3
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.
Percentage shown is an
annual percentage rate.
4.
Derivative instruments and hedging activities
Financial
Accounting Standards Board Codification 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 June 30, 2010.
|
|
Interest
Rate
Contracts Risk
|
|
Foreign
Exchange
Contracts Risk
|
|
Total
|
|
Purchased Options
2
|
|
$ 28,950
|
|
|
|
|
|
$ 28,950
|
|
|
Futures Contracts
3
|
|
150,478
|
|
|
|
|
|
150,478
|
|
|
Forward Foreign Currency Contracts
|
|
|
|
|
$864,578
|
|
|
864,578
|
|
|
Total
|
|
$179,428
|
|
|
$864,578
|
|
|
$1,044,006
|
|
|
26
|
|
Western Asset/Claymore
Inflation-Linked Securities & Income Fund 2010 Semi-Annual Report
|
|
|
Notes
to financial statements (unaudited) (contd)
|
|
Interest
Rate
Contracts Risk
|
|
Foreign
Exchange
Contracts Risk
|
|
Credit
Contracts Risk
|
|
Total
|
|
Futures Contracts
3
|
|
$20,065
|
|
|
|
|
|
|
|
|
$ 20,065
|
|
|
Swap Contracts
4
|
|
|
|
|
|
|
|
$229,585
|
|
|
229,585
|
|
|
Forward Foreign Currency Contracts
|
|
|
|
|
$230,355
|
|
|
|
|
|
230,355
|
|
|
Total
|
|
$20,065
|
|
|
$230,355
|
|
|
$229,585
|
|
|
$480,005
|
|
|
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
Market value of purchased
options is reported in Investments of value in the Statement of Assets and
Liabilities.
3
Includes cumulative
appreciation/depreciation of futures contracts as reported in the footnotes.
Only variation margin is reported within the receivables and/or payables of the
Statement of Assets and Liabilities.
4
Values include premiums
paid/(received) on swap contracts which are shown separately in the Statement
of Assets and Liabilities.
The
following tables provide information about the effect of derivatives and
hedging activities on the Funds Statement of Operations for the six months
ended June 30, 2010. 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
|
|
Total
|
|
Purchased Options
|
|
$ (71,432
|
)
|
|
|
|
|
|
|
|
$ (71,432
|
)
|
|
Written Options
|
|
50,028
|
|
|
|
|
|
|
|
|
50,028
|
|
|
Futures Contracts
|
|
(278,244
|
)
|
|
|
|
|
|
|
|
(278,244
|
)
|
|
Swap Contracts
|
|
|
|
|
|
|
|
$47,764
|
|
|
47,764
|
|
|
Forward Foreign Currency Contracts
|
|
|
|
|
$(85,173
|
)
|
|
|
|
|
(85,173
|
)
|
|
Total
|
|
$(299,648
|
)
|
|
$(85,173
|
)
|
|
$47,764
|
|
|
$(337,057
|
)
|
|
CHANGE IN UNREALIZED
APPRECIATION/DEPRECIATION ON DERIVATIVES RECOGNIZED
|
|
Interest
Rate
Contracts Risk
|
|
Foreign
Exchange
Contracts Risk
|
|
Credit
Contracts Risk
|
|
Total
|
|
Purchased Options
|
|
$ (82,405
|
)
|
|
|
|
|
|
|
|
$ (82,405
|
)
|
|
Futures Contracts
|
|
292,972
|
|
|
|
|
|
|
|
|
292,972
|
|
|
Swap Contracts
|
|
|
|
|
|
|
|
$29,857
|
|
|
29,857
|
|
|
Forward Foreign Currency Contracts
|
|
|
|
|
$578,786
|
|
|
|
|
|
578,786
|
|
|
Total
|
|
$210,567
|
|
|
$578,786
|
|
|
$29,857
|
|
|
$819,210
|
|
|
During
the six months ended June 30, 2010, the volume of derivative activity for
the Fund was as follows:
|
|
Average
Market Value
|
|
Purchased options
|
|
$ 6,781
|
|
|
Written options
|
|
8,920
|
|
|
Forward foreign currency contracts (to buy)
|
|
4,809,854
|
|
|
Forward foreign currency contracts (to sell)
|
|
17,316,754
|
|
|
Futures contracts (to buy)
|
|
8,324,739
|
|
|
Futures contracts (to sell)
|
|
17,212,830
|
|
|
|
|
Average
Notional Balance
|
|
Credit default swap contracts (to sell protection)
|
|
$3,800,000
|
|
|
|
|
|
|
|
|
|
Western
Asset/Claymore Inflation-Linked Securities & Income Fund 2010
Semi-Annual Report
|
|
27
|
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 a
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.
As
of June 30, 2010, the total value of swap positions with credit related
contingent features in a net liability position was $229,585. If a contingent
feature would have been triggered as of June 30, 2010, the Fund would have
been required to pay this amount in cash to its counterparties. The Fund posted
collateral for its swap transactions in the amount of $188,560.
5.
Common shares
Of
the 29,152,821 shares of common stock outstanding at June 30, 2010, 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.
7.
Capital loss carryforward
As
of December 31, 2009, the Fund had a net capital loss carryforward of
approximately $32,756,280, of which $23,725,089 expires in 2014, $4,099,686
expires in 2015 and $4,931,505 expires in 2017. These amounts will be available
to offset any future taxable capital gains.
8.
Shareholder meeting results
The
Funds annual meeting of shareholders was held on May 25, 2010. Of the
29,152,821 common shares outstanding, the following shares were voted at the
meeting:
Election of Trustee:
|
|
For
|
|
Withheld
|
|
Michael Larson
|
|
21,733,375
|
|
337,860
|
|
Western
Asset/Claymore
Inflation-Linked
Securities & Income Fund
Board
of trustees
|
Investment
advisers
|
Custodian
|
R.
Jay Gerken
|
Western
Asset Management Company
|
State
Street Bank and Trust Company
|
Michael
Larson
|
385
East Colorado Boulevard
|
1
Lincoln Street
|
Ronald
A. Nyberg
|
Pasadena,
CA 91101
|
Boston,
MA 02111
|
Ronald
E. Toupin, Jr.
|
Western
Asset Management
|
|
|
Company
Limited
|
Counsel
|
Officers
|
10
Exchange Square
|
Ropes &
Gray LLP
|
R.
Jay Gerken
|
London,
England EC2A2EN
|
1211
Avenue of the Americas
|
President
|
Western
Asset Management
|
New
York, NY 10036
|
Charles A. Ruys de Perez
|
Company
Pte. Ltd.
|
|
Vice
President
Todd
F. Kuehl
|
1
George Street #23-01
Singapore
049145
|
Independent
registered public accounting firm
|
Chief
Compliance Officer
|
Western
Asset Management
|
PricewaterhouseCoopers
LLP
|
Kaprel
Ozsolak
|
Company
Ltd
|
100
East Pratt Street
|
Principal
Financial and Accounting Officer
|
36F
Shin-Marunouchi Building
|
Baltimore,
MD 21202
|
Erin
K. Morris
|
5-1
Maranouchi 1-Chronu Chiyoda
|
|
Treasurer
|
Tokyo
100-6536
|
Transfer
agent
|
Melissa
J. Nguyen
Secretary
|
Servicing
agent
|
American
Stock Transfer & Trust Company LLC
|
|
Claymore
Securities, Inc.
|
59
Maiden Lane
|
|
2455
Corporate West Drive
|
New
York, NY 10038
|
|
Lisle, IL
60532
|
|
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 with 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 SEMI-ANNUAL REPORT
|
|
|
|
|
Western
Asset/Claymore Inflation-Linked Securities & Income Fund
Western
Asset/Claymore Inflation-Linked Securities & Income Fund
55 Water Street
New York, NY 10041
Notice
is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that from time to time the Fund may purchase
at market prices, shares of its Common Stock in the open market.
The
Fund files its complete schedule of portfolio holdings with the Securities and
Exchange Commission (SEC) for the first and third quarters of each fiscal
year on Form N-Q. The Funds Forms N-Q are available on the SECs website
at www.sec.gov. The Funds Forms N-Q may be reviewed and copied at the SECs
Public Reference Room in Washington D.C., and information on the operation
of the Public Reference Room may be obtained by calling 1-800-SEC-0330. To
obtain information on Form N-Q from the Fund, shareholders can call
1-800-345-7999.
Information
on how the Fund voted proxies relating to portfolio securities during the prior
12-month period ended June 30th of each year and a description of the
policies and procedures that the Fund uses to determine how to vote proxies
related to portfolio transactions are available (1) without charge, upon
request, by calling 1-888-777-0102, (2) on the Funds website at
www.westernclaymore.com and (3) on the SECs website at www.sec.gov.
This
report is transmitted to the shareholders of Western Asset/Claymore
Inflation-Linked Securities & Income Fund for their information. This
is not a prospectus, circular or representation intended for use in the
purchase or sale of shares of the Fund or any securities mentioned in this
report.
American
Stock
Transfer & Trust Company
59 Maiden Lane
New York, NY 10038
WIA-S-(08-10)
ITEM
2.
CODE OF ETHICS.
Not
applicable.
ITEM
3.
AUDIT COMMITTEE
FINANCIAL EXPERT.
Not applicable.
ITEM
4.
PRINCIPAL
ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM
5.
AUDIT COMMITTEE
OF LISTED REGISTRANTS.
Not applicable.
ITEM
6.
SCHEDULE OF INVESTMENTS.
Included herein under Item 1.
ITEM 7.
DISCLOSURE OF PROXY VOITNG
POLIIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8.
PORTFOLIO MANAGERS OF
CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9.
PURCHASES OF EQUITY
SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED
PURCHASERS.
Not applicable.
ITEM 10.
SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 11.
CONTROLS AND PROCEDURES.
(a)
The registrants principal executive officer and
principal financial officer have concluded that the registrants disclosure
controls and procedures (as defined in Rule 30a- 3(c) under the
Investment Company Act of 1940, as amended (the 1940 Act)) are effective as
of a date within 90 days of the filing date of this report that includes the
disclosure required by this paragraph, based on their evaluation of the
disclosure controls and procedures required by Rule 30a-3(b) under
the 1940 Act and 15d-15(b) under the Securities Exchange Act of 1934.
(b)
There were no changes in the registrants internal
control over financial reporting (as defined in Rule 30a-3(d) under
the 1940 Act) that occurred during the registrants last fiscal half-year (the
registrants second fiscal half-year in the case of an annual report) that have
materially affected,
or
are likely to materially affect the registrants internal control over
financial reporting.
ITEM
12.
EXHIBITS.
(a) (1)
Not applicable.
Exhibit 99.CODE ETH
(a) (2)
Certifications pursuant to
section 302 of the Sarbanes-Oxley Act of 2002 attached hereto.
Exhibit 99.CERT
(b) Certifications
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 attached hereto.
Exhibit 99.906CERT
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:
|
August
31, 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:
|
August
31, 2010
|
|
|
|
|
|
|
|
By:
|
/s/
Kaprel Ozsolak
|
|
|
(Kaprel
Ozsolak)
|
|
|
Principal
Financial and Accounting Officer
|
|
|
Western Asset/Claymore Inflation-Linked Securities &
Income Fund
|
|
|
|
|
Date:
|
August
31, 2010
|
|
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