Exhibit 99.(g)(ii)
INVESTMENT SUB-ADVISORY AGREEMENT
THIS INVESTMENT SUB-ADVISORY AGREEMENT (the "Agreement") dated as of
April __, 2004, among TS&W/Claymore Tax-Advantaged Balanced Fund, a Delaware
statutory trust (the "Trust"), Claymore Advisors, LLC, a Delaware limited
liability company (the "Adviser"), and Xxxxxxxx, Xxxxxx & Xxxxxxxx, Inc., a
Virginia corporation ("TS&W" or the "Sub-Adviser").
WHEREAS, the Adviser has agreed to furnish investment management and
advisory services to the Trust, a closed-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940 Act")
with respect to the Trust Assets (defined below);
WHEREAS, the investment advisory agreement between the Adviser and the
Trust dated as of April __, 2004 (such agreement or the most recent successor
agreement between such parties relating to advisory services to the Trust is
referred to herein as the "Investment Advisory Agreement") contemplates that the
Adviser may sub-contract investment advisory services with respect to the Trust
to a sub-adviser(s) pursuant to a sub-advisory agreement(s) agreeable to the
Trust and approved in accordance with the provisions of the 1940 Act;
WHEREAS, the Adviser wishes to retain the Sub-Adviser to provide
certain sub-advisory services with respect to that portion of the Trust's assets
(the "Trust Assets") allocated at any time and from time to time to the Equity
and Income Securities Portfolio (as described in the Trust's Prospectus for
common shares dated April _, 2004) and including the proportionate share of such
Trust Assets attributable to the proceeds from any preferred shares or other
form of financial leverage of the Trust that may be outstanding, but minus the
sum of the proportionate share of the Trust's accrued liabilities (other than
the proportionate share of the Trust's aggregate indebtedness constituting
financial leverage) (such portion of the Trust Assets so allocated, the "Equity
and Income Assets"). The liquidation preference of any preferred shares of the
Trust, if any, constituting financial leverage shall not be considered a
liability of the Trust. For purposes of this Agreement, the total assets of the
Trust shall be calculated in the same manner as set forth in the Investment
Advisory Agreement;
WHEREAS, the Sub-Adviser is a registered investment adviser under the
Investment Advisers Act of 1940, as amended (the "Advisers Act"); and
WHEREAS, this Agreement has been approved in accordance with the
provisions of the 1940 Act, and the Sub-Adviser is willing to furnish such
services upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, it is agreed by and between the parties hereto as
follows:
1. APPOINTMENT. The Adviser hereby appoints the Sub-Adviser to act
as a sub-adviser with respect to the Trust as set forth in this Agreement and
the Sub-Adviser accepts such appointment and agrees to render the services
herein set forth for the compensation herein provided. In connection with such
appointment, the Adviser has furnished (or shall, as such documents become
available or are amended, promptly furnish) the Sub-Adviser with copies of each
of the following:
(a) The Trust's Agreement and Declaration of Trust and all amendments
thereto (such agreement, as presently in effect and as it shall from time
to time be amended, is herein called the "Agreement and Declaration of
Trust ");
(b) The Trust's By-Laws and all amendments thereto (such By-Laws, as
presently in effect and as they shall from time to time be amended, are
herein called the "By-Laws");
(c) Resolutions of the Trust's Board of Trustees (the "Trustees")
authorizing the appointment of the Adviser as the investment manager and
Sub-Adviser as investment sub-adviser and approving the Investment Advisory
Agreement and this Agreement;
(d) The Trust's most recently filed Amendment to its Registration Statement
on Form N-2 under the Securities Act of 1933, as amended, and the 1940 Act,
including all exhibits thereto, relating to common shares of beneficial
interest of the Trust;
(e) The Trust's most recent prospectus (such prospectus, as presently in
effect, and all amendments and supplements thereto are herein called the
"Prospectus"); and
60
(f) The Trust's most recent statement of additional information (such
statement of additional information, as presently in effect, and all
amendments and supplements thereto are herein called the "Statement of
Additional Information"); and
(g) The Investment Advisory Agreement.
2. SERVICES OF THE SUB-ADVISER. Subject to the succeeding provisions
of this section, the oversight and supervision of the Adviser and the direction
and control of the Trust's Board of Trustees, the Sub-Adviser will perform
investment advisory services on behalf of the Trust and certain of the
day-to-day operations of the Trust associated with such investment advisory
services, which may include one or more of the following services at the request
of the Adviser: (i) managing the investment and reinvestment of the Equity and
Income Assets in accordance with the investment policies of the Trust; (ii)
arranging, subject to the provisions of paragraph 3 hereof, for the purchase and
sale of securities and other assets for the Equity and Income Securities
Portfolio; (iii) providing investment research and credit analysis concerning
the Equity and Income Securities Portfolio; (v) placing orders for purchases and
sales of Equity and Income Assets, (vi) maintaining the books and records as are
required to support Trust investment operations as they relate to the Equity and
Income Securities Portfolio, and (vii) monitoring on a daily basis the
investment activities and portfolio holdings relating to the Equity and Income
Securities Portfolio. At the request of the Adviser, the Sub-Adviser will also,
subject to the supervision of the Trust's Board of Trustees, consult with the
Adviser as to the overall management of the Trust Assets and the investment
policies and practices of the Trust, including (but not limited to) asset
allocation decisions and the use by the Trust of financial leverage and elements
(e.g., form, amount and costs) relating to such financial leverage and the
utilization by the Trust of any interest rate or other hedging or risk
management transactions in connection therewith; provided that the Adviser shall
be responsible for and make all determinations regarding such matters under and
in accordance with the Investment Advisory Agreement. In addition, the
Sub-Adviser will keep the Trust and the Adviser informed of developments
materially adversely affecting the Equity and Income Securities Portfolio and
shall furnish to the Trust all information relevant to such developments. The
Sub-Adviser will periodically communicate to the Adviser, at such times as the
Adviser may reasonably direct, information concerning the purchase and sale of
securities for the Equity and Income Securities Portfolio, including: (i) the
name of the issuer, (ii) the amount of the purchase or sale, (iii) the name of
the broker or dealer, if any, through which the purchase or sale is effected,
(iv) the CUSIP number of the instrument, if any, and (v) such other information
as the Adviser may reasonably require for purposes of fulfilling its obligations
to the Trust under the Investment Advisory Agreement. The Sub-Adviser will
provide the
61
services rendered by it under this Agreement in accordance with the Trust's
investment objective, policies and restrictions (as currently in effect and as
they may be amended or supplemented from time to time) applicable to the Equity
and Income Securities Portfolio as stated in the Trust's Prospectus filed with
the SEC as part of the Trust's Registration Statement on Form N-2 and the
resolutions of the Trust's Board of Trustees as and when communicated to the
Sub-Adviser.
3. COVENANTS. In the performance of its duties under this Agreement,
the Sub-Adviser:
(a) shall at all times comply and act in accordance with: (i) the
provisions of the 1940 Act and the Advisers Act and all applicable Rules and
Regulations of the Securities and Exchange Commission (the "SEC"); (ii) any
other applicable provision of law; (iii) the provisions of the Agreement and
Declaration of Trust and By-Laws of the Trust, as such documents are amended
from time to time (provided that a copy of such amendments have been furnished
to the Sub-Adviser); (iv) the investment objective, policies and restrictions of
the Trust applicable to the Equity and Income Securities Portfolio as set forth
in the Prospectus, as such investment objective, policies and restrictions are
amended from time to time (provided that a copy of such amendments have been
furnished to the Sub-Adviser); and (v) any policies, determinations and/or
resolutions of the Board of Trustees of the Trust or the Adviser as and when
communicated to the Sub-Adviser;
(b) will place orders either directly with the issuer or with any
broker or dealer. Subject to the other provisions of this paragraph, in placing
orders with brokers and dealers, the Sub-Adviser will seek to obtain the best
price and the most favorable execution of its orders, except to the extent
permitted and described below. In placing orders, the Sub-Adviser will consider
the experience and skill of the broker-dealer's securities traders as well as
the broker-dealer's financial responsibility and administrative efficiency.
Consistent with this obligation, the Sub-Adviser may select brokers on the basis
of the research, statistical and pricing services they provide to the Trust and
other clients of the Adviser or the Sub-Adviser, as the case may be. Information
and research received from such brokers will be in addition to, and not in lieu
of, the services required to be performed by the Sub-Adviser hereunder. A
commission paid to such brokers may be higher than that which another qualified
broker would have charged for effecting the same transaction, provided that the
Sub-Adviser determines in good faith that such commission is reasonable in terms
either of the transaction or the overall responsibility of the Adviser and the
Sub-Adviser to the Trust and their other clients and that the total commissions
paid by the Trust will be reasonable in relation to the benefits to the Trust
over the long-term. In no instance, however, will the
62
Trust's securities be purchased from or sold to the Adviser, the Sub-Adviser or
any affiliated person thereof, except to the extent permitted by the SEC or by
applicable law;
(c) will maintain books and records with respect to the Trust's
securities transactions with respect to the Equity and Income Securities
Portfolio and render to the Adviser and the Trust's Board of Trustees such
periodic and special reports as they may reasonably request; and
(d) will treat confidentially and as proprietary information of the
Trust all records and other information relative to the Trust, and the Trust's
prior, current or potential shareholders, and will not use such records and
information for any purpose other than performance of its responsibilities and
duties hereunder, except (i) with the prior written approval by the Trust or
(ii) where such information is required to be disclosed by applicable law.
4. SERVICES NOT EXCLUSIVE. Nothing in this Agreement shall prevent
the Sub-Adviser or any officer, employee or other affiliate thereof from acting
as investment adviser for any other person, firm or corporation, or from
engaging in any other lawful activity, and shall not in any way limit or
restrict the Sub-Adviser or any of its officers, employees or agents from
buying, selling or trading any securities for their own accounts or for the
accounts of others for whom it or they may be acting; provided, however, that
the Sub-Adviser will not undertake any activities which, in its reasonable
judgment, would be reasonably likely to materially and adversely affect the
performance of its obligations under this Agreement.
5. BOOKS AND RECORDS. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Sub-Adviser hereby agrees that all records which
it maintains for the Trust are the property of the Trust and further agrees to
surrender promptly to the Trust any such records upon the Trust's request. The
Sub-Adviser further agrees to preserve for the periods prescribed by Rule 31a-2
under the 1940 Act the records required to be maintained by Rule 31a-1 under the
1940 Act.
6. AGENCY CROSS TRANSACTIONS. From time to time, the Sub-Adviser or
brokers or dealers affiliated with the Sub-Adviser may find themselves in a
position to buy for certain of their brokerage clients (each an "Account")
securities which the Sub-Adviser's investment advisory clients wish to sell, and
to sell for certain of their brokerage clients securities which advisory clients
wish to buy. Where one of the parties is an advisory client, the Sub-Adviser or
the affiliated broker or dealer cannot participate in this
63
type of transaction (known as a cross transaction) on behalf of an advisory
client and retain commissions from both parties to the transaction without the
advisory client's consent. This is because in a situation where a Sub-Adviser is
making the investment decision (as opposed to a brokerage client who makes his
own investment decisions), and the Sub-Adviser or an affiliate is receiving
commissions from one or both sides of the transaction, there is a potential
conflicting division of loyalties and responsibilities on the Sub-Adviser's part
regarding the Advisory client. The SEC has adopted a rule under the Advisers Act
which permits a Sub-Adviser or its affiliates to participate on behalf of an
Account in agency cross transactions if the Advisory client has given written
consent in advance. By execution of this Agreement, the Trust authorizes the
Sub-Adviser or its affiliates to participate in agency cross transactions
involving an Account. The Trust may revoke its consent at any time by written
notice to the Sub-Adviser.
7. EXPENSES. During the term of this Agreement, the Sub-Adviser will
bear all costs and expenses of its employees and any overhead incurred by the
Sub-Adviser in connection with its duties hereunder and shall bear the costs of
any salaries or trustees fees of any officers or trustees of the Trust who are
affiliated persons (as defined in the 0000 Xxx) of the Sub-Adviser (and who are
not also such affiliated persons of the Adviser).
8. COMPENSATION. The Adviser agrees to pay to the Sub-Adviser and
the Sub-Adviser agrees to accept as full compensation for all services rendered
hereunder by the Sub-Adviser as such, a fee, computed and paid monthly in
arrears at the annual rate equal to [0.42%] of the average [daily/weekly] Equity
and Income Assets, determined by taking an average of all of the determinations
of such amounts during such month while this Agreement is in effect (the
"Sub-Advisory Fee"). For any period less than a month during which this
Agreement is in effect, the Sub-Advisory Fee shall be prorated according to the
proportion which such period bears to a full month of 28, 29, 30 or 31 days, as
the case may be.
9. CERTAIN INFORMATION. The Sub-Advisers shall promptly notify the
Adviser in writing of the occurrence of any of the following events: (a) the
Sub-Adviser shall fail to be registered as an investment adviser under the
Advisers Act, (b) the Sub-Adviser shall have been served or otherwise have
notice of any action, suit, proceeding, inquiry or investigation, at law or in
equity, before or by any court, public board or body, involving the affairs of
the Trust, (c) there is a change in control of the Sub-Adviser or any parent of
the Sub-Adviser within the meaning of the 1940 Act, or (d) there is an adverse
change in the business or financial position of the Sub-Adviser which would be
reasonably
64
likely to have a materially adverse effect on its ability to perform its
obligations under this Agreement.
10. LIMITATION ON LIABILITY.
(a) The Sub-Adviser will not be liable for any error of judgment or
mistake of law or for any loss suffered by the Sub-Adviser, the Adviser or by
the Trust (including, without limitation, by reason of the purchase, sale or
retention of any Equity and Income Asset) in connection with the performance of
the Sub-Adviser's obligations under this Agreement, except a loss resulting from
the Sub-Adviser's breach of fiduciary duty with respect to the Sub-Adviser's
receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or from reckless disregard by it of its duties under this Agreement.
(b) The Trust may, but shall not be required to, make advance payments
to the Sub-Adviser in connection with the expenses of the Sub-Adviser in
defending any action with respect to which damages or equitable relief might be
sought against the Sub-Adviser under this Section (which payments shall be
reimbursed to the Trust by the Sub-Adviser as provided below) if the Trust
receives (i) a written affirmation of the Sub-Adviser's good faith belief that
the standard of conduct necessary for the limitation of liability in this
Section has been met and (ii) a written undertaking to reimburse the Trust
whether or not the Sub-Adviser shall be deemed to have liability under this
Section, such reimbursement to be due upon (1) a final decision on the merits by
a court or other body before whom the proceeding was brought as to whether or
not the Sub-Adviser is liable under this Section or (2) in the absence of such a
decision, upon the request of the Sub-Adviser for reimbursement by a majority
vote of a quorum consisting of trustees of the Trust who are neither "interested
persons" of the Trust (as defined in Section 2(a)(19) of the 0000 Xxx) nor
parties to the proceeding ("Disinterested Non-Party Trustees"). In addition, at
least one of the following conditions must be met: (A) the Sub-Adviser shall
provide a security for such Sub-Adviser undertaking, (B) the Trust shall be
insured against losses arising by reason of any lawful advance, or (C) a
majority of a quorum of the Disinterested Non-Party Trustees of the Trust or an
independent legal counsel in a written opinion, shall determine, based on a
review of readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the Sub-Adviser ultimately will be found
not to be liable under this Section.
12. DURATION AND TERMINATION. This Agreement shall become effective
as of the date hereof and shall continue (unless terminated automatically as set
forth below) in effect for a period of two years. Thereafter, if not terminated,
this Agreement shall
65
continue in effect with respect to the Trust for successive periods of 12
months, provided such continuance is specifically approved at least annually by
both (a) the vote of a majority of the Trust's Board of Trustees or a vote of a
majority of the outstanding voting securities of the Trust at the time
outstanding and entitled to vote and (b) by the vote of a majority of the
Trustees, who are not parties to this Agreement or interested persons (as such
term is defined in the 0000 Xxx) of any such party, cast in person at a meeting
called for the purpose of voting on such approval. Notwithstanding the
foregoing, this Agreement may be terminated by the Trust or the Adviser at any
time, without the payment of any penalty, upon giving the Sub-Adviser 60 days'
notice (which notice may be waived by the Sub-Adviser), provided that such
termination by the Trust or the Adviser shall be directed or approved by the
vote of a majority of the Trustees of the Trust in office at the time or by the
vote of the holders of a majority of the voting securities of the Trust at the
time outstanding and entitled to vote, or by the Sub-Adviser on 60 days' written
notice (which notice may be waived by the Trust and the Adviser). This Agreement
will also immediately terminate in the event of its assignment. (As used in this
Agreement, the terms "majority of the outstanding voting securities,"
"interested person" and "assignment" shall have the same meanings of such terms
in the 1940 Act.)
13. NOTICES. Any notice under this Agreement shall be in writing to
the other party at such address as the other party may designate from time to
time for the receipt of such notice and shall be deemed to be received on the
earlier of the date actually received or on the fourth day after the postmark if
such notice is mailed first class postage prepaid.
14. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may
be changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. Any amendment of this Agreement shall be
subject to the 1940 Act.
15. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware for contracts to be
performed entirely therein without reference to choice of law principles thereof
and in accordance with the applicable provisions of the 1940 Act.
16. USE OF THE NAME TS&W. The Sub-Adviser has consented to the use by the
Trust of the name or identifying word "TS&W" in the name of the Trust. Such
consent is conditioned upon the employment of the Sub-Adviser as the investment
sub-adviser to the Trust. The parties acknowledge that "TS&W" and "Xxxxxxxx,
Xxxxxx & Xxxxxxxx" and
66
"Xxxxxxxx, Xxxxxx & Xxxxxxxx, Inc." are and remain the property of the
Sub-Adviser and that the Sub-Adviser is not hereby granting to any party hereto
a license or franchise with respect to the use of such name. The Trust and the
Advisor each agrees not to use the name "TS&W" or "Xxxxxxxx, Xxxxxx & Xxxxxxxx"
in any sales material without first presenting such document to the Sub-Adviser
and obtaining its express consent prior to use. The names or identifying words
"TS&W" may be used from time to time in other connections and for other purposes
by the Sub-Adviser and any of its affiliates. The Sub-Adviser may require the
Trust to cease using "TS&W" in the name of the Trust if the Trust or the Adviser
ceases to employ, for any reason, the Sub-Adviser, any successor thereto or any
affiliate thereof as investment sub-adviser of the Trust. No press release shall
be issued with respect to the Trust without the prior consent of Old Mutual
Asset Management and the Sub-Adviser, and the Adviser and the Trust shall
consult with Old Mutual and the Sub-Adviser before making any public disclosure
that may be required by applicable law. No right to the use of the name Old
Mutual is granted hereby.
17. MISCELLANEOUS.
(a) The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule or
other wise, the remainder of this Agreement shall not be affected thereby. This
Agreement shall be binding on, and shall inure to the benefit of the parties
hereto and their respective successors.
(b) The parties hereto are each independent contactors. No party is,
nor may any party represent itself as, an employee, agent, representative or
partner of the other parties, except to the extent that the Adviser and
Sub-Adviser may represent that they act as investment adviser and sub-adviser,
respectively, of the Trust. This Agreement is not intended to create an
association, joint venture, or partnership between the parties, or to impose any
partnership liability upon any party, and each party hereby disclaims any such
liability.
18. COUNTERPARTS. This Agreement may be executed in counter parts by
the parties hereto, each of which shall constitute an original counterpart, and
all of which, together, shall constitute one Agreement.
67
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their duly authorized officers designated below as of the day and
year first above written.
CLAYMORE ADVISORS, LLC
By:
----------------------------------
Xxxxxxxx Xxxxxxx
Senior Managing Director and
General Counsel
XXXXXXXX, XXXXXX & XXXXXXXX, INC.
By:
----------------------------------
-----------------------------
-----------------------------
TS&W/CLAYMORE TAX-ADVANTAGED
BALANCED FUND
By:
-----------------------------
Xxxxxxxx Xxxxxxx
Trustee and Chief Legal and
Executive Officer
68
