The Western Asset/Claymore Inflation-Linked Securities Fund (NYSE: WIA) is built to weather stormy markets. Whether the tailwinds are credit writedowns, inflation fears, a slumping dollar, or interest rate surprises, this fund has it covered.

As of October 31, 2007, over 80% of its $390 million portfolio was invested in U.S. Treasury inflation-protected securities [TIPS] with the highest "AAA" credit rating. TIPS pay a fixed rate of interest, but the government adjusts their principal value each year by the rate of consumer inflation. The end result is a security that increases in value as inflation rises.

The balance of the portfolio was invested in government-backed mortgage securities and higher-yielding corporate bonds like Ford's (NYSE: F) 7.45% note. The portfolio wasn't leveraged, but hedging strategies were in place to limit risk. The fund may also invest up to 40% of its assets in non-U.S. dollar inflation-linked securities to hedge against the falling dollar, a strategy that has worked well in recent months.

After hiking the payment +10% in October, WIA pays a monthly dividend of $0.0575 a share, which equates to $0.69 annually. Including the year-end capital gains payout of $0.0467, the total annual payout of $0.7367 gives a yield of 6.0%. An annual management fee of 0.79% of the fund's average weekly asset value takes a small bite out of distributable income.

The distribution is taxable as ordinary income, but the portion coming from U.S. TIPS -- over 70% in 2006 -- is exempt from state income tax in many states. A dividend reinvestment plan is available and potential investors can contact the fund at 1-866-486-2228 for more information.

WIA raked in returns of over +13% in the past year, placing it at the top of the leader boards for its category. With year-to-date returns of close to +5.5%, WIA is on track for a successful 2008. Also, the fund has traded at a double-digit discount to its portfolio value since September 2005, and despite the recent price run-up, WIA is still attractively priced at a -12% discount.

Action To Take ---> With its defensive portfolio of low-risk inflation-linked Treasuries, this fund is well-suited for conservative investors looking to weather a market downturn.

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Carla Pasternak

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