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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-12
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TS&W / CLAYMORE TAX-ADVANTAGED BALANCED FUND
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(Names of Registrant As Specified in its Charters)
Payment of Filing Fee (Check the appropriate box):
/X/ No Fee Required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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[THOMPSON, SIEGEL & WALMSLEY, INC. LOGO]
[CLAYMORE LOGO]
TS&W / CLAYMORE TAX-ADVANTAGED BALANCED FUND
2455 CORPORATE WEST DRIVE
LISLE, ILLINOIS 60532
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 27, 2006
Notice is hereby given to the holders of common shares of beneficial
interest, par value $0.01 per share ("Common Shares"), and holders of Auction
Market Preferred Shares, par value $0.01 per share, liquidation preference
$25,000 per share ("Preferred Shares," and together with the Common Shares,
"Shares"), of TS&W / Claymore Tax-Advantaged Balanced Fund (the "Fund") that the
annual meeting of Shareholders of the Fund (the "Annual Meeting") will be held
at the offices of the Fund, 2455 Corporate West Drive, Lisle, Illinois 60532, on
Tuesday, June 27, 2006, at 8:30 a.m. Central time. The Annual Meeting is being
held for the following purposes:
1. To approve an investment sub-advisory agreement among the Fund, Claymore
Advisors, LLC and SMC Fixed Income Management, LP;
2. To elect Trustees in the following manner:
(a) to elect one Trustee as a Class II Trustee by holders of Common
Shares and Preferred Shares voting together as a single class, to
serve until the Fund's 2009 annual meeting of Shareholders or until
a successor shall have been elected and qualified;
(b) to elect one Trustee as a Class II Trustee by holders of Preferred
Shares voting as a separate class, to serve until the Fund's 2009
annual meeting of Shareholders or until a successor shall have been
elected and qualified; and
3. To transact such other business as may properly come before the Annual
Meeting or any adjournments or postponements thereof.
THE BOARD OF TRUSTEES (THE "BOARD") OF THE FUND, INCLUDING THE INDEPENDENT
TRUSTEES, UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" EACH PROPOSAL.
The Board has fixed the close of business on May 1, 2006 as the record date
for the determination of Shareholders entitled to notice of, and to vote at, the
Annual Meeting. WE URGE YOU TO MARK, SIGN, DATE, AND MAIL THE ENCLOSED PROXY IN
THE POSTAGE-PAID ENVELOPE PROVIDED OR RECORD YOUR VOTING INSTRUCTIONS VIA
TELEPHONE OR THE INTERNET SO YOU WILL BE REPRESENTED AT THE ANNUAL MEETING.
By order of the
Board of Trustees
/s/ Nicholas Dalmaso
Nicholas Dalmaso, Chief Legal and Executive Officer
Lisle, Illinois
June 1, 2006
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING IN
PERSON OR BY PROXY. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE
VOTE BY TELEPHONE, INTERNET OR MAIL. IF VOTING BY MAIL PLEASE SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING POSTAGE-PAID ENVELOPE. IF YOU
ATTEND THE ANNUAL MEETING AND WISH TO VOTE IN PERSON, YOU WILL BE ABLE TO DO SO
AND YOUR VOTE AT THE ANNUAL MEETING WILL REVOKE ANY PROXY YOU MAY HAVE
SUBMITTED. MERELY ATTENDING THE ANNUAL MEETING, HOWEVER, WILL NOT REVOKE ANY
PREVIOUSLY SUBMITTED PROXY. YOUR VOTE IS EXTREMELY IMPORTANT. NO MATTER HOW MANY
OR HOW FEW SHARES YOU OWN, PLEASE SEND IN YOUR PROXY CARD (OR VOTE BY TELEPHONE
OR THROUGH THE INTERNET PURSUANT TO THE INSTRUCTIONS CONTAINED ON THE PROXY
CARD) TODAY.
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TS&W / CLAYMORE TAX-ADVANTAGED BALANCED FUND
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 27, 2006
This document gives you information you need to vote on the matters listed
on the accompanying Notice of Annual Meeting of Shareholders ("Notice of Annual
Meeting"). Much of the information in this proxy statement ("Proxy Statement")
is required under rules of the Securities and Exchange Commission ("SEC"); some
of it is technical. If there is anything you don't understand, please contact us
at our toll-free number, (866) 882-0688.
This Proxy Statement is furnished to the holders of common shares of
beneficial interest, par value $0.01 per share ("Common Shares"), and holders of
Auction Market Preferred Shares, par value $0.01 per share, liquidation
preference $25,000 per share ("Preferred Shares," and together with the Common
Shares, "Shares"), of TS&W / Claymore Tax-Advantaged Balanced Fund (the "Fund")
in connection with the solicitation by the Board of Trustees of the Fund (the
"Board") of proxies to be voted at the annual meeting of Shareholders of the
Fund to be held on Tuesday, June 27, 2006, and any adjournment or postponement
thereof (the "Annual Meeting"). The Annual Meeting will be held at the offices
of the Fund, 2455 Corporate West Drive, Lisle, Illinois 60532 on June 27, 2006,
at 8:30 a.m. Central time. This Proxy Statement and the enclosed proxy card are
first being sent to the Fund's Shareholders on or about June 5, 2006.
- WHY IS A SHAREHOLDER MEETING BEING HELD?
The Common Shares of the Fund are listed on the New York Stock Exchange
(the "NYSE"), which requires the Fund to hold a meeting of Shareholders
to elect Trustees each fiscal year. In addition, Shareholders are also
being asked to approve an investment sub-advisory agreement with a new
successor investment sub-adviser, SMC Fixed Income Management, LP
("SMC"), that will be responsible for making investment decisions with
respect to the investment of that portion of the Fund's assets allocated
for investment in municipal securities (the "Municipal Securities
Portfolio").
- WHAT PROPOSALS WILL BE VOTED ON AT THE ANNUAL MEETING?
Shareholders of the Fund are being asked to vote on the following
proposals at the Annual Meeting:
1. To approve an investment sub-advisory agreement among the Fund,
Claymore Advisors, LLC and SMC Fixed Income Management, LP;
2. To elect Trustees in the following manner:
(a) to elect one Trustee as a Class II Trustee by holders of
Common Shares and Preferred Shares voting together as a single
class, to serve until the Fund's 2009 annual meeting of
Shareholders or until a successor shall have been elected and
qualified;
(b) to elect one Trustee as a Class II Trustee by holders of
Preferred Shares voting as a separate class, to serve until
the Fund's 2009 annual meeting of Shareholders or until a
successor shall have been elected and qualified.
- WHY AM I BEING ASKED TO VOTE ON A NEW SUB-ADVISORY AGREEMENT?
Claymore Advisors, LLC ("Claymore" or the "Adviser") currently serves as
the Fund's investment adviser and, in addition to its Fund-wide
investment advisory responsibilities, is responsible, through its Fixed
Income Investment Group, located in Princeton, New Jersey (the
"Princeton Fixed Income Group"), for the Fund's overall asset allocation
and for the day-to-day management of the Fund's Municipal Securities
Portfolio. Thompson, Siegel & Walmsley, Inc. ("TS&W") serves as the
Fund's investment sub-adviser and is responsible for the day-to-day
management of that portion of the Fund's assets allocated for investment
in equity securities and other income-producing securities (the "Equity
and Income Portfolio").
Claymore has entered into an asset purchase agreement, dated May 4,
2006, (the "Transaction Agreement"), with SMC Fixed Income Management,
LP to sell substantially all of the assets of the Princeton Fixed Income
Group to SMC (the "Transaction"). It is a condition to the consummation
of the Transaction that the portfolio management personnel employed by
Claymore's Princeton Fixed Income Group who are currently responsible
for the management of the Fund's Municipal Securities Portfolio become
employees of SMC. In order for the management of the Fund to continue
uninterrupted after the
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consummation of the Transaction, we are asking Shareholders of the Fund
to approve an investment sub-advisory agreement among the Fund, the
Adviser and SMC (the "SMC Sub-Advisory Agreement"), pursuant to which
SMC will become responsible for making investment decisions with respect
to the investment of the Fund's Municipal Securities Portfolio following
consummation of the Transaction.
- WHO IS SMC FIXED INCOME MANAGEMENT, LP?
SMC Fixed Income Management, LP is a newly organized subsidiary of
Spring Mountain Capital, LP ("Spring Mountain") and is registered with
the SEC as an investment adviser under the Investment Advisers Act of
1940, as amended (the "Advisers Act"). Spring Mountain is an investment
management firm founded by John L. (Launny) Steffens in July 2001 that
specializes in alternative investments and advisory services for both
broad asset allocation and/or focused portfolios. As of December 1,
2005, Spring Mountain directly managed over $1.4 billion in assets in
fund of funds structures and separately managed accounts and provided
investment advisory services to over $2 billion in assets. Launny
Steffens is the Chairman of Spring Mountain and is actively involved in
its management.
- WHY IS CLAYMORE SELLING THE PRINCETON FIXED INCOME GROUP?
Claymore believes that the sale of the Princeton Fixed Income Group will
provide the Princeton Fixed Income Group with an opportunity to attract
other clients while continuing to provide the same high quality advisory
services on behalf of the Fund's Municipal Securities Portfolio.
- HOW WILL THE SALE OF THE PRINCETON FIXED INCOME GROUP AND THE APPROVAL
OF THE SMC SUB-ADVISORY AGREEMENT AFFECT SHAREHOLDERS OF THE FUND?
Claymore currently serves as the Fund's investment adviser and is
responsible for the day-to-day management of the Fund's Municipal
Securities Portfolio. In addition Claymore is responsible for the Fund's
overall asset allocation and other Fund-wide investment management
decisions, such as those involving the Fund's use of leverage and
hedging strategies, and oversight of TS&W, the Fund's sub-adviser with
respect to the Equity and Income Portfolio. Upon approval of the SMC
Sub-Advisory Agreement by Shareholders and consummation of the
Transaction, Claymore will continue to serve as the Fund's investment
adviser and will continue to be responsible for the Fund's overall asset
allocation and other Fund-wide investment management decisions. Pursuant
to the SMC Sub-Advisory Agreement, SMC will serve as a sub-adviser to
the Fund and will assume responsibility for the day-to-day management of
the Fund's Municipal Securities Portfolio following consummation of the
Transaction. The portfolio management personnel who currently manage the
Fund's Municipal Securities Portfolio will accept employment with SMC
and will continue to manage the Fund's Municipal Securities Portfolio.
TS&W will continue to be responsible for the day-to-day management of
the Fund's Equity and Income Portfolio pursuant to an investment
sub-advisory agreement currently in place among the Fund, the Adviser
and TS&W.
- WILL THE FUND'S PORTFOLIO MANAGEMENT TEAM CHANGE AS A RESULT OF THE
TRANSACTION?
No. The portfolio management personnel employed by Claymore's Princeton
Fixed Income Group who are currently responsible for the management of
the Fund's Municipal Securities Portfolio will, as a condition of
consummating the Transaction, accept employment with SMC and will
continue to be responsible for the day-to-day management of the Fund's
Municipal Securities Portfolio.
- WILL THE TOTAL ADVISORY FEES PAID BY THE FUND CHANGE?
No. The total fee paid by the Fund for advisory services will remain the
same. The Fund's investment advisory agreement with the Adviser will
remain in effect and the Fund will continue to pay an advisory fee to
the Adviser at the annual rate of 0.70% of the Fund's average daily
Managed Assets (as defined herein). The Adviser will pay a sub-advisory
fee to TS&W at the annual rate of 0.42% of the Fund's average daily
Managed Assets attributable to the Fund's Equity and Income Portfolio
and a sub-advisory fee to SMC at the annual rate of 0.30% of the Fund's
average daily Managed Assets attributable to the Fund's Municipal
Securities Portfolio.
- WHAT WILL HAPPEN IF THE FUND'S SHAREHOLDERS DO NOT APPROVE THE SMC
SUB-ADVISORY AGREEMENT?
In the event that Shareholders of the Fund fail to approve the SMC
Sub-Advisory Agreement, the Transaction will not be consummated.
Claymore will continue to serve as the Fund's investment adviser and
will be responsible for providing investment management services with
respect to the Fund's Municipal Securities Portfolio. The Fund's Board
of Trustees may consider alternative options to provide
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investment management services with respect to the Fund's Municipal
Securities Portfolio in the future and will take such actions as it
deems to be in the best interests of the Fund.
- WILL YOUR VOTE MAKE A DIFFERENCE?
YES! Your vote is important and could make a difference in the
governance of the Fund, no matter how many Shares you own.
- WHO IS ASKING FOR YOUR VOTE?
The enclosed proxy is solicited by the Board for use at the Annual
Meeting to be held on Tuesday, June 27, 2006, and, if the Annual Meeting
is adjourned or postponed, at any later meetings, for the purposes
stated in the Notice of Annual Meeting (see previous page). The Notice
of Annual Meeting, the proxy and this Proxy Statement are being mailed
on or about June 5, 2006.
- HOW DOES THE BOARD RECOMMEND THAT SHAREHOLDERS VOTE ON EACH PROPOSAL?
The Board recommends that you vote "FOR" each proposal.
- WHO IS ELIGIBLE TO VOTE?
Shareholders of record of the Fund at the close of business on May 1,
2006 are entitled to be present and to vote at the Annual Meeting or any
adjournment or postponement thereof. Each Share is entitled to one vote.
Shares represented by duly executed proxies will be voted in accordance
with your instructions. If you sign the proxy, but don't fill in a vote,
your Shares will be voted in accordance with the Board's recommendation.
If any other business is brought before the Annual Meeting, your Shares
will be voted at the proxies' discretion unless you specify otherwise in
your proxy.
- HOW MANY SHARES OF THE FUND WERE OUTSTANDING AS OF THE RECORD DATE?
At the close of business on May 1, 2006, the Fund had 15,407,000 Common
Shares outstanding and 4,800 Preferred Shares outstanding.
PROPOSAL 1: APPROVAL OF SUB-ADVISORY AGREEMENT
INTRODUCTION
Claymore currently serves as the Fund's investment adviser and is
responsible for the day-to-day management of the Fund's Municipal Securities
Portfolio and for the Fund's overall asset allocation and other Fund-wide
investment management decisions, such as those involving the Fund's use of
leverage and hedging strategies, and oversight of the Fund's sub-adviser. TS&W
serves as the Fund's investment sub-adviser and is responsible for the
day-to-day management of the Fund's Equity and Income Portfolio.
Claymore has entered into the Transaction Agreement with SMC to sell
substantially all of the assets of Claymore's Princeton Fixed Income Group to
SMC. Upon the consummation of the Transaction, the portfolio management
personnel employed by Claymore who are currently responsible for the management
of the Fund's Municipal Securities Portfolio will, as a condition of
consummating the Transaction, accept employment with SMC.
In order for the management of the Fund to continue uninterrupted after the
consummation of the Transaction, we are asking the Shareholders of the Fund to
approve an investment sub-advisory agreement among the Fund, the Adviser and
SMC, pursuant to which SMC will be responsible for the day-to-day management of
the Fund's Municipal Securities Portfolio.
Following the consummation of the Transaction, the Fund's advisory
agreement with the Adviser and the sub-advisory agreement among the Fund, the
Adviser and TS&W will remain in effect and the total fees paid by the Fund for
advisory services will remain the same.
As described below, the Board, including a majority of the Trustees who
are not "interested persons" of the Fund, the Adviser, TS&W or SMC, approved
the SMC Sub-Advisory Agreement and recommended its approval by Shareholders
in order to ensure continuity of investment advisory services after the
consummation of the Transaction. The Investment Company Act of 1940, as
amended (the "1940 Act"), requires that the SMC Sub-Advisory Agreement be
approved by the Fund's Shareholders in order for it to become effective.
THE TRANSACTION
On May 4, 2006, Claymore entered into the Transaction Agreement pursuant
to which Claymore will sell substantially all of the assets of its Princeton
Fixed Income Group to SMC. SMC is a newly created subsidiary of Spring
Mountain and is registered with the SEC as an investment adviser under the
Advisers Act. Spring
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Mountain will provide capital to SMC to be used by SMC to purchase Claymore's
Princeton Fixed Income Group and to cover SMC's operating expenses over the
following twelve months.
Consummation of the Transaction is subject to certain terms and conditions,
including, among others: (i) approval of the SMC Sub-Advisory Agreement by the
Board of Trustees of the Fund, (ii) approval of the SMC Sub-Advisory Agreement
by Shareholders of the Fund, (iii) the execution of the SMC Sub-Advisory
Agreement by the Fund, the Adviser and SMC and (iv) termination of employment
with the Adviser and acceptance of employment with SMC by certain personnel of
the Princeton Fixed Income Group, including the personnel who currently manage
the Fund's Municipal Securities Portfolio.
Although there is no assurance that the Transaction will be completed, the
closing of the Transaction is expected to occur as soon as practicable following
the approval of the SMC Sub-Advisory Agreement by Shareholders of the Fund,
assuming each of the other terms and conditions applicable to the Transaction is
satisfied or waived.
Until the consummation of the Transaction, the Adviser will continue to
conduct the business of its Princeton Fixed Income Group and will continue to be
responsible for the day-to-day management of the Fund's Municipal Securities
Portfolio.
If the Transaction has not be completed by December 15, 2006, the
Transaction Agreement may be terminated by either the Adviser or SMC. In the
event that the Transaction Agreement is terminated or the Transaction is not
consummated for any reason, including the failure of Shareholders of the Fund
to approve the SMC Sub-Advisory Agreement, Claymore will continue to serve as
the Fund's investment adviser and will be responsible for providing
investment management services with respect to the Fund's Municipal
Securities Portfolio. The Fund's Board of Trustees may consider alternative
options to provide investment management services with respect to the Fund's
Municipal Securities Portfolio in the future and will take such actions as it
deems to be in the best interests of the Fund.
SMC FIXED INCOME MANAGEMENT, LP
SMC Fixed Income Management, LP is a newly organized subsidiary of Spring
Mountain Capital, LP and is registered with the SEC as an investment adviser
pursuant to the Advisers Act. Spring Mountain is an investment management firm,
founded in July 2001, specializing in alternative investments and advisory
services for both broad asset allocation and/or focused portfolios. As of
December 1, 2005, Spring Mountain directly managed over $1.4 billion in assets
in fund of funds structures and separately managed accounts and provided
investment advisory services to over $2 billion in assets.
It is a condition to the consummation of the Transaction that the portfolio
management personnel employed by the Adviser's Princeton Fixed Income Group who
currently manage the Fund's Municipal Securities Portfolio accept employment
with SMC. Following the consummation of the Transaction, such personnel will
continue to be responsible for the management of the Fund's Municipal Securities
Portfolio.
SMC is a Delaware limited partnership, with its principal offices at 5
Vaughn Drive, Suite 119, Princeton, New Jersey 08540. The General Partner of SMC
is SMC Fixed Income Management, LLC, a Delaware limited liability company with
its principal offices at 65 East 55th Street, New York, New York 10022, and the
initial limited partners of SMC will be Spring Mountain and Vincent Giordano.
Mr. Giordano is currently a Vice President of the Fund. The Managing Members of
SMC Fixed Income Management, LLC will be Spring Mountain and Mr. Giordano.
Spring Mountain is a Delaware limited partnership, with its principal offices at
65 East 55th Street, New York, New York 10022.
SMC SUB-ADVISORY AGREEMENT
Pursuant to the SMC Sub-Advisory Agreement, SMC will act as the Fund's
investment sub-adviser and will be responsible for the day-to-day management of
the Fund's Municipal Securities Portfolio. Under the terms of the SMC
Sub-Advisory Agreement, subject to the oversight of the Board of Trustees and
the supervision of the Adviser, SMC will furnish continuously an investment
program for the Fund's Municipal Securities Portfolio in accordance with the
Fund's investment objective and policies, make investment decisions with respect
to the Municipal Securities Portfolio on behalf of the Fund and place all orders
for the purchase and sale of portfolio securities and all other investments in
the Municipal Securities Portfolio for the Fund.
Pursuant to the SMC Sub-Advisory Agreement, the Adviser will pay to SMC a
monthly fee at the annual rate of 0.30% of the Fund's average daily Managed
Assets attributable to the Fund's Municipal Securities Portfolio. "Managed
Assets" of the Fund means the total assets of the Fund, including the assets
attributable to
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the proceeds from any financial leverage, minus liabilities, other than
liabilities related to any financial leverage. The liquidation preference of
the Fund's Preferred Shares is not a liability and thus the assets attributable
to the Preferred Shares are included in the Fund's Managed Assets.
If approved by Shareholders of the Fund, the SMC Sub-Advisory Agreement
will continue until two years from the date of implementation and from
year-to-year thereafter if approved annually (i) by the Fund's Board of Trustees
or by the holders of a majority of its outstanding voting securities and (ii) by
a majority of the Trustees who are not "interested persons" (as defined in the
1940 Act) of any party to the SMC Sub-Advisory Agreement, by vote cast in person
at a meeting called for the purpose of voting on such approval. The SMC
Sub-Advisory Agreement will terminate automatically on its assignment and may be
terminated without penalty on 60 days written notice at the option of a party
thereto, by the Fund's Board of Trustees or by a vote of a majority (as defined
in the 1940 Act) of the Fund's outstanding Shares.
The SMC Sub-Advisory Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard for its
obligations and duties thereunder, SMC is not liable for any error or judgment
or mistake of law or for any loss suffered by the Fund.
A form of the SMC Sub-Advisory Agreement is attached to this Proxy
Statement as Appendix A and the discussion contained herein regarding the SMC
Sub-Advisory Agreement is qualified in its entirety by reference to the attached
form of sub-advisory agreement.
ADVISORY FEES
The total advisory fee paid by the Fund will remain unchanged following
approval of the SMC Sub-Advisory Agreement and the consummation of the
Transaction. The Fund will continue to pay to the Adviser a monthly fee at the
annual rate of 0.70% of the Fund's average daily Managed Assets. Pursuant to the
Sub-Advisory Agreement with TS&W, the Adviser will continue to pay to TS&W a
monthly fee at the annual rate of 0.42% of the Fund's average daily Managed
Assets attributable to the Fund's Equity and Income Portfolio. Pursuant to the
SMC Sub-Advisory Agreement, the Adviser will pay to SMC a monthly fee at the
annual rate of 0.30% of the Fund's average daily Managed Assets attributable to
the Fund's Municipal Securities Portfolio.
BOARD APPROVAL OF THE SMC SUB-ADVISORY AGREEMENT
Claymore discussed with the Trustees of the Fund over a period of time
in early 2006 the possible sale of Claymore's Princeton Fixed Income Group.
The Board of Trustees of the Fund, including those Trustees who are not
"interested persons" of the Fund, Claymore or SMC, met on March 8, 2006 and
on April 11, 2006 to review the Transaction, the SMC Sub-Advisory Agreement
and related matters. In advance of the meeting of the Board on March 8, 2006,
the Independent Trustees, through their independent legal counsel, requested
information from Claymore regarding its plans for the Princeton Fixed Income
Group, which was provided to the Trustees prior to the meeting. The Board
requested further information and materials from Claymore and SMC regarding
the Transaction in order to consider the SMC Sub-Advisory Agreement, which
requested information was provided to the Board. Officers and employees of
Claymore, including members of Claymore's Princeton Fixed Income Group who
will accept employment with SMC following the Transaction, and of SMC,
including Launny Steffens, founder and Chairman of Spring Mountain, attended
the Board meeting and answered questions from and participated in discussions
with the Board regarding SMC, the Transaction and the SMC Sub-Advisory
Agreement. The Board, including a majority of the Trustees who are not
"interested persons" of the Fund, the Adviser, TS&W or SMC, approved the
continuation of the advisory agreement between the Fund and Claymore.
In considering the SMC Sub-Advisory Agreement, the Board reviewed SMC's
responses to various inquiries by the Board, including those related to
regulatory and legal issues, compliance policies and procedures, SMC's and
Spring Mountain's Form ADV and financial information regarding SMC and Spring
Mountain. The Board also considered information about the portfolio,
performance, investment strategy, portfolio management team and fees and
expenses of the Fund and sub-advisory fees of municipal securities funds.
Officers and employees of Claymore and SMC, including Launny Steffens and
members of Claymore's Princeton Fixed Income Group answered questions from
and participated in discussions with the Trustees.
The Independent Trustees, with the assistance of their independent legal
counsel, met separately from the "interested" Trustees of the Fund and
officers and employees of Claymore, TS&W and SMC to consider approval of the
SMC Sub-Advisory Agreement. In considering approval of the SMC Sub-Advisory
Agreement, the Board of Trustees, including the Independent Trustees, did not
identify any single factor or group of factors as determinative in its
analysis. After considering all factors together, the Board of Trustees,
including the Independent Trustees, determined, in the exercise of its business
judgment, that approval of the SMC Sub-Advisory Agreement was in the best
interests of the Fund. The following summary provides more detail on certain
matters considered by the Board but does not detail all matters considered.
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With respect to the nature, extent and quality of the services to be
provided by SMC, the Board considered that it was a condition to the closing
of the Transaction that the portfolio management personnel employed by
Claymore's Princeton Fixed Income Group who are currently responsible for the
management of the Fund's Municipal Securities Portfolio become employees of
SMC and that such personnel were expected to continue to provide such
services to the Fund. The Board considered the nature, extent and quality of
the services provided by such personnel and the roles and responsibilities of
such personnel along with the roles and responsibilities of other SMC
personnel. The Board determined that the nature, extent and quality of the
services to be provided by SMC supported approval of the SMC Sub-Advisory
Agreement.
With respect to the performance of the Fund, the Board considered that
the portfolio management personnel employed by Claymore's Princeton Fixed
Income Group and currently responsible for the management of the Municipal
Securities Portfolio would become employees of SMC and continue to manage the
Municipal Securities Portfolio following the consummation of the Transaction.
The Board considered the investment performance of the Fund relative to
applicable benchmarks since the Fund's inception and for the 2005 calendar
year and relative to its peer fund for the 2005 calendar year and concluded
that the Fund's performance was acceptable. The Board determined that the
performance of the Fund and the Municipal Securities Portfolio supported
approval of the SMC Sub-Advisory Agreement.
With respect to the proposed sub-advisory fee to be paid to SMC, the
Board considered that the total advisory fee would remain unchanged as a
result of the approval of the SMC Sub-Advisory Agreement and the consummation
of the Transaction. The Board also considered the sub-advisory fees to be
paid to SMC as compared to the sub-advisory fees paid by other registered
funds that invest in municipal securities and utilize investment sub-advisory
arrangements and concluded that the Fund's fees were within an acceptable
range of the other registered funds and that Claymore would pay the
sub-advisory fee to SMC. The Board concluded that the sub-advisory fees to be
paid to SMC were reasonable. With respect to the costs of services to be
provided and profits to be realized by SMC, the Board considered financial
information relating to SMC and Spring Mountain and considered the
anticipated financial support to be provided to SMC by Spring Mountain and
concluded that it was sufficient. The Board also reviewed the sub-advisory
fee to be paid to SMC and considered that it had been negotiated at arm's
length between Claymore and SMC, an unaffiliated third party, and that
Claymore would compensate SMC from its fees. The Board considered the
estimated profitability of Claymore and concluded that it was not
unreasonable. The Board concluded that the sub-advisory fees to be paid to
SMC and the profitability considerations supported approval of the SMC
Sub-Advisory Agreement.
The Board considered the extent to which economies of scale could be
realized and noted that given the size of the Fund and its status as a
closed-end investment company, significant additional opportunities for
economies of scale were unlikely.
The Board considered other benefits to SMC and its affiliates to be
derived from its relationship with the Fund. The Board concluded that any
such additional benefits to SMC and its affiliates to be derived from its
relationship with the Fund were negligible and, after taking into account
such other benefits, determined that the sub-advisory fee to be paid to SMC
was reasonable.
After considering all factors together, the Board of Trustees, including
a majority of the Trustees who are not "interested persons" of the Fund, the
Adviser, TS&W or SMC, in the exercise of its business judgment, approved the
SMC Sub-Advisory Agreement and recommended its approval by Shareholders to
provide for continued investment advisory services to the Fund after the
consummation of the Transaction.
SHAREHOLDER APPROVAL
To become effective, the 1940 Act requires that the SMC Sub-Advisory
Agreement must be approved by a vote of a majority of the outstanding voting
securities of the Fund. The "vote of a majority of the outstanding voting
securities" is defined by the 1940 Act as the lesser of the vote of (a) 67% or
more of the voting securities of the Fund that are present or represented by
proxy, provided that holders of more than 50% of the outstanding voting
securities of the Fund are present or represented by proxy or (b) more than 50%
of the outstanding voting securities of the Fund. The holders of the Fund's
Common Shares and the holders of the Fund's Preferred Shares will have equal
voting rights (i.e., one vote per Share) and will vote together as a single
class with respect to the approval of the SMC Sub-Advisory Agreement.
The SMC Sub-Advisory Agreement was approved by the Board, and by the
Independent Trustees separately, after consideration of all factors which it
determined to be relevant to its deliberations, including those discussed
above. The Board also determined to submit the SMC Sub-Advisory Agreement for
consideration by the Shareholders of the Fund.
6
<Page>
The Board of the Fund, including the Independent Trustees, unanimously
recommends that you vote "FOR" the approval of the SMC Sub-Advisory Agreement.
PROPOSAL TWO: ELECTION OF TRUSTEES
The Common Shares of the Fund are listed on the NYSE, which requires the
Fund to hold a meeting of Shareholders to elect Trustees each fiscal year.
Therefore, Shareholders of the Fund are being asked to elect Trustees to the
Board in the following manner:
(a) to elect one Trustee (Ronald A. Nyberg) as a Class II Trustee by
holders of Common Shares and Preferred Shares voting together as a
single class, to serve until the Fund's 2009 annual meeting of
Shareholders or until a successor shall have been elected and
qualified;
(b) to elect one Trustee (L. Kent Moore) as a Class II Trustee by holders
of Preferred Shares voting as a separate class, to serve until the
Fund's 2009 annual meeting of Shareholders or until a successor shall
have been elected and qualified.
COMPOSITION OF THE BOARD OF TRUSTEES
The Trustees of the Fund are classified into three classes of Trustees:
Class I Trustees, Class II Trustees and Class III Trustees. Assuming each of the
nominees is elected at the Annual Meeting, the Board will be constituted as
follows:
CLASS I TRUSTEES
-Mr. Randall C. Barnes, Mr. Nicholas Dalmaso* and Mr. Robert M. Hamje
are the Class I Trustees. It is currently anticipated that the Class I
Trustees will next stand for election at the Fund's 2008 annual meeting
of Shareholders.
CLASS II TRUSTEES
-Mr. L. Kent Moore* and Mr. Ronald A. Nyberg are the Class II Trustees.
Mr. Moore and Mr. Nyberg are standing for election at the Annual
Meeting. It is currently anticipated that the Class II Trustees will
next stand for election at the Fund's 2009 annual meeting of
Shareholders.
CLASS III TRUSTEES
-Mr. Matthew J. Appelstein, Mr. Steven D. Cosler and Mr. Ronald E.
Toupin, Jr. are the Class III Trustees. It is currently anticipated
that the Class III Trustees will stand for election at the Fund's 2007
annual meeting of Shareholders.
- ----------
* Designated as Trustee representing holders of the Fund's Preferred
Shares.
Generally, the Trustees of only one class are elected at each annual
meeting, so that the regular term of only one class of Trustees will expire
annually and any particular Trustee stands for election only once in each three
year period. Each Class II Trustee will hold office for three years or until his
successor shall have been elected and qualified. The other Trustees of the Fund
will continue to serve under their current terms as described above. Unless
authority is withheld, it is the intention of the persons named in the proxy to
vote the proxy "FOR" the election of the Class II Trustees named above. Each
Class II Trustee nominee has indicated that he has consented to serve as a
Trustee if elected at the Annual Meeting. If a designated nominee declines or
otherwise becomes unavailable for election, however, the proxy confers
discretionary power on the persons named therein to vote in favor of a
substitute nominee or nominees.
Certain information concerning the Trustees and officers of the Fund is set
forth in the tables below. The "interested" Trustees (as defined in Section
2(a)(19) of the Investment Company Act of 1940, as amended (the "1940 Act")) are
indicated below. Independent Trustees are those who are not interested persons
of the Fund, the Adviser, TS&W or SMC and comply with the definition of
"independent" (as defined in Rule 10A-3 of the Securities Exchange Act of 1934)
(the "Independent Trustees").
The Fund is part of a fund complex (referred to herein as the "Fund
Complex") comprised of fourteen closed-end funds, including the Fund, and five
open-end funds.
7
<Page>
TRUSTEES
<Table>
<Caption>
NUMBER OF
TERM OF PORTFOLIOS
OFFICE AND IN FUND
POSITION(S) LENGTH COMPLEX
HELD TIME OF PRINCIPAL OCCUPATION OVERSEEN OTHER DIRECTORSHIPS
NAME, ADDRESS(1) AND AGE WITH FUND SERVED(2) DURING THE PAST FIVE YEARS BY TRUSTEE HELD BY TRUSTEE
- ------------------------ ----------- ---------- -------------------------- ---------- ---------------------------
INDEPENDENT TRUSTEES:
Randall C. Barnes Trustee Trustee Formerly, Senior Vice 14 None.
Year of birth: 1951 since President Treasurer
2005 (1993-1997), President,
Pizza Hut International
(1991-1993) and Senior
Vice President, Strategic
Planning and New Business
Development (1987-1990) of
PepsiCo, Inc. (1987-1997).
Steven D. Cosler Trustee Trustee Formerly, President, Chief 2 None.
Year of birth: 1955 since Executive Officer and
2005 Director of Priority
Healthcare Corporation
(2002-2005). Formerly,
President and Chief
Operating Officer of
Priority Healthcare
Corporation (2001-2002).
Formerly, Executive Vice
President and Chief
Operating Officer of
Priority Healthcare
Corporation (2000-2001).
Robert M. Hamje Trustee Trustee Advisor to the Cleveland 2 Trustee, Old Mutual Advisor
Year of birth: 1942 since Foundation Investment Funds.
2004 Committee. Formerly,
President and Chief
Investment Officer of TRW
Investment Management
Company (1990-2003).
L. Kent Moore*(3) Trustee Trustee Partner at WillSource 2 Trustee, Old Mutual Advisor
Year of birth: 1955 since Enterprise (2005-present). Funds.
2004 Previously, Managing
Director High Sierra
Energy L.P., (2004-2005).
Formerly, Portfolio
Manager and Vice President
of Janus Capital Corp.
(2000-2002) and Senior
Analyst / Portfolio
Manager of Marsico Capital
Management (1997-1999).
Ronald A. Nyberg(3) Trustee Trustee Principal of Ronald A. 17 None.
Year of birth: 1953 since Nyberg, Ltd., a law firm
2004 specializing in corporate
law, estate planning and
business transactions
(2000-present). Formerly,
Executive Vice President,
General Counsel and
Corporate Secretary of Van
Kampen Investments
(1982-1999).
</Table>
8
<Page>
<Table>
<Caption>
NUMBER OF
TERM OF PORTFOLIOS
OFFICE AND IN FUND
POSITION(S) LENGTH COMPLEX
HELD TIME OF PRINCIPAL OCCUPATION OVERSEEN OTHER DIRECTORSHIPS
NAME, ADDRESS(1) AND AGE WITH FUND SERVED(2) DURING THE PAST FIVE YEARS BY TRUSTEE HELD BY TRUSTEE
- ------------------------ ----------- ---------- -------------------------- ---------- ---------------------------
Ronald E. Toupin, Jr. Trustee Trustee Formerly Vice President, 15 None.
Year of birth: 1958 since Manager and Portfolio
2004 Manager of Nuveen Asset
Management (1998-1999),
Vice President of Nuveen
Investment Advisory
Corporation (1992-1999),
Vice President and Manager
of Nuveen Unit Investment
Trusts (1991-1999), and
Assistant Vice President
and Portfolio Manager of
Nuveen Unit Trusts
(1988-1999), each of John
Nuveen & Company, Inc.
(asset manager)
(1982-1999).
INTERESTED TRUSTEES:
Matthew J. Appelstein+ Trustee Trustee Director of Investment 2 Trustee, Old Mutual Advisor
Year of birth: 1961 since Services, Old Mutual Asset Funds.
2005 Management (2003-present).
Formerly, Senior Vice
President of Consulting
Relationship and Director
of Investment Services,
Fidelity Management Trust
Company (1998-2003).
Nicholas Dalmaso+ * Trustee, Trustee Senior Managing Director 17 None.
Year of birth: 1965 Chief Legal since and General Counsel of
and 2004 Claymore Advisors, LLC and
Executive Claymore Securities, Inc.
Officer (2001-present). Formerly,
Assistant General Counsel,
John Nuveen and Company
Inc. (1999-2000).
Formerly, Vice President
and Associate General
Counsel of Van Kampen
Investments, Inc.
(1992-1999).
</Table>
- ----------
+ "Interested person" of the Fund as defined in the 1940 Act. Mr.
Appelstein is an interested person of the Fund because he is an officer
of Old Mutual Asset Management, the parent company of TS&W. Mr. Dalmaso
is an interested person of the Fund because he is an officer of the
Adviser and certain of its affiliates.
* Designated as Trustee representing holders of the Fund's Preferred
Shares.
(1) The business address of each Trustee of the Fund is 2455 Corporate West
Drive, Lisle, Illinois 60532, unless otherwise noted.
(2) After a Trustee's initial term, each Trustee is expected to serve a three
year term concurrent with the class of Trustees for which he serves.
(3) Nominee for election as a Trustee at the Annual Meeting.
9
<Page>
EXECUTIVE OFFICERS
The following information relates to the executive officers of the Fund who
are not Trustees. The officers are appointed by the Trustees and serve until
their respective successors are chosen and qualified. The Fund's officers
receive no compensation from the Fund but may also be officers or employees
of the Adviser, TS&W or SMC or affiliates of the Adviser, TS&W or SMC and may
receive compensation in such capacities.
OFFICERS:
<Table>
<Caption>
PRINCIPAL OCCUPATION DURING
NAME, ADDRESS(1) AND AGE TITLE THE PAST FIVE YEARS
- ----------------------------- ---------------------- -------------------------------------------
Steven M. Hill Chief Financial Senior Managing Director and Chief
Year of birth: 1964 Officer, Chief Financial Officer of Claymore Advisors, LLC
Accounting Officer and and Claymore Securities, Inc.; Chief
Treasurer Financial Officer, Chief Accounting Officer
and Treasurer of certain funds in the Fund
Complex. Previously, Treasurer of Henderson
Global Funds and Operations Manager for
Henderson Global Investors (NA) Inc.
(2002-2003); Managing Director, FrontPoint
Partners LLC (2001-2002); Vice President,
Nuveen Investments (1999-2001); Chief
Financial Officer, Skyline Asset Management
LP, (1999); Vice President, Van Kampen
Investments and Assistant Treasurer, Van
Kampen mutual funds (1989-1999).
Vincent R. Giordano Vice President Senior Managing Director of Claymore
Year of birth: 1948 Advisors, LLC. Previously, Senior Vice
President and Portfolio Manager of Merrill
Lynch Asset Management, Inc. (1985-2001).
George Gregorio Vice President Managing Director of Claymore Advisors,
Year of birth: 1948 LLC. Previously, Sell Side Analyst for JB
Hanauer & Co.
Roberto W. Roffo Vice President Managing Director of Claymore Advisors,
Year of birth: 1966 LLC. Previously, Director and Vice
President of Merrill Lynch Investment
Managers.
Richard C. Sarhaddi Assistant Secretary Assistant Vice President of Claymore
Year of birth: 1974 Advisors, LLC and Claymore Securities, Inc.
Previously, Editor, CCH Incorporated.
</Table>
- ------------
(1) The business address of each officer of the Fund is 2455 Corporate West
Drive, Lisle, Illinois 60532, unless otherwise noted.
Upon the consummation of the Transaction, Vincent R. Giordano, George
Gregorio and Roberto W. Roffo will accept employment with SMC and will continue
to serve as Vice Presidents of the Fund. Vincent R. Giordano will also be a
limited partner of SMC and a Managing Member of SMC's general partner, SMC Fixed
Income Management, LLC.
BOARD COMMITTEES
The Trustees have determined that the efficient conduct of the Trustees'
affairs makes it desirable to delegate responsibility for certain specific
matters to committees of the Board. The committees meet as often as necessary,
either in conjunction with regular meetings of the Trustees or otherwise. Two of
the committees of the Board are the Audit Committee and the Nominating and
Governance Committee.
AUDIT COMMITTEE The Board has an Audit Committee, composed of Randall C.
Barnes, Steven D. Cosler, Robert M. Hamje, L. Kent Moore, Ronald A. Nyberg and
Ronald E. Toupin, Jr. In addition to being Independent Trustees as defined
above, each of these Trustees also meets the additional independence
requirements for audit committee members as defined by the NYSE. The Audit
Committee is charged with selecting a firm of independent accountants for the
Fund and reviewing accounting matters with the accountants.
The Audit Committee presents the following report:
The Audit Committee has performed the following functions: (i) the Audit
Committee reviewed and discussed the audited financial statements of the Fund
with management of the Fund, (ii) the Audit Committee discussed with the
independent auditors the matters required to be discussed by the Statement on
Auditing Standards No. 61, (iii) the Audit Committee received the written
disclosures and the letter from the independent auditors required by Indendence
Standards Board Standard No. 1 and has discussed with the auditors the auditors'
independence and (iv) the Audit Committee recommended to the Board of Trustees
of the Fund that the financial statements be included in the Fund's Annual
Report for the past fiscal period.
The Audit Committee is governed by a written charter, the most recent
version of which was approved by the Board on August 17, 2005 (the "Audit
Committee Charter"). In accordance with proxy rules promulgated by the SEC, a
fund's audit committee charter is required to be filed at least once every three
years as an exhibit to a fund's proxy statement. The Fund's Audit Committee
Charter is attached hereto as Appendix B.
10
<Page>
NOMINATING AND GOVERNANCE COMMITTEE The Board has a Nominating and
Governance Committee, which is composed of Randall C. Barnes, Steven D. Cosler,
Robert M. Hamje, L. Kent Moore, Ronald A. Nyberg and Ronald E. Toupin, Jr, each
of whom is an Independent Trustee.
The Nominating and Governance Committee is governed by a written charter
(the "Nominating and Governance Committee Charter"). In accordance with proxy
rules promulgated by the SEC, a fund's nominating committee charter is required
to be filed at least once every three years as an exhibit to a fund's proxy
statement. The Fund's Nominating and Governance Committee Charter was filed as
Appendix B to the Fund's 2005 Proxy Statement.
As part of its duties, the Nominating and Governance Committee makes
recommendations to the full Board with respect to candidates for the Board. The
Nominating and Governance Committee will consider Trustee candidates recommended
by Shareholders. In considering candidates submitted by Shareholders, the
Nominating and Governance Committee will take into consideration the needs of
the Board and the qualifications of the candidate. To have a candidate
considered by the Nominating and Governance Committee, a Shareholder must submit
the recommendation in writing and must include the information required by the
Procedures for Shareholders to Submit Nominee Candidates, which are set forth as
Appendix A to the Fund's Nominating and Governance Committee Charter which was
filed as Appendix B to the Fund's 2005 Proxy Statement.
The Shareholder recommendation must be sent to the Fund's Secretary, c/o
Claymore Advisors, LLC, 2455 Corporate West Drive, Lisle, Illinois 60532.
SHAREHOLDER COMMUNICATIONS
Shareholders and other interested parties may contact the Board or any
member of the Board by mail. To communicate with the Board or any member of the
Board, correspondence should be addressed to the Board of Trustees or the Board
members with whom you wish to communicate by either name or title. All such
correspondence should be sent c/o the Fund's Secretary, c/o Claymore Advisors,
LLC, 2455 Corporate West Drive, Lisle, Illinois 60532.
TRUSTEE BENEFICIAL OWNERSHIP OF SECURITIES
As of April 10, 2006, each Trustee beneficially owned equity securities of
the Fund and other funds in the Fund Complex overseen by the Trustee in the
dollar range amounts as specified below:
<Table>
<Caption>
DOLLAR RANGE OF EQUITY AGGREGATE DOLLAR RANGE OF EQUITY SECURITIES
NAME OF TRUSTEE SECURITIES IN THE FUND OVERSEEN BY TRUSTEES IN THE FUND COMPLEX
--------------- -------------------------- ---------------------------------------------
INDEPENDENT TRUSTEES:
Randall C. Barnes $10,001-$50,000 over $100,000
Steven D. Cosler $10,001-$50,000 $10,001-$50,000
Robert M. Hamje $50,001-$100,000 $50,001-$100,000
L. Kent Moore over $100,000 over $100,000
Ronald A. Nyberg $50,001-$100,000 over $100,000
Ronald E. Toupin, Jr. 0 0
INTERESTED TRUSTEES:
Matthew Appelstein 0 0
Nicholas Dalmaso 0 0
</Table>
As of April 10, 2006, each Trustee and the Trustees and officers of the
Fund as a group owned less than 1% of the outstanding Shares of the Fund.
BOARD MEETINGS
During the Fund's fiscal year ended December 31, 2005, the Board held 4
meetings, the Fund's Audit Committee held 4 meetings and the Fund's Nominating
and Governance Committee held 3 meetings.
Each Trustee attended at least 75% of the meetings of the Board (and any
committee thereof on which he serves) held during the Fund's fiscal year ended
December 31, 2005. It is the Fund's policy to encourage Trustees to attend
annual Shareholders' meetings.
11
<Page>
TRUSTEE COMPENSATION
The Fund pays an annual retainer and fee per meeting attended to each
Trustee who is not affiliated with the Adviser, TS&W or SMC or their
respective affiliates and pays an additional annual fee to the chairman of the
Board and of any committee of the Board. The following table provides
information regarding the compensation of the Fund's Trustees for the Fund's
fiscal year ended December 31, 2005. The Fund does not accrue or pay retirement
or pension benefits to Trustees as of the date of this proxy statement.
<Table>
<Caption>
COMPENSATION TOTAL COMPENSATION
NAME OF BOARD MEMBER(1) FROM THE FUND FROM THE FUND COMPLEX
----------------------- ------------- ---------------------
Randall C. Barnes $ 11,000 $ 86,750
Steven D. Cosler $ 11,000 $ 18,250
Robert M. Hamje $ 22,500 $ 29,750
L. Kent Moore $ 22,500 $ 29,750
Ronald A. Nyberg $ 24,000 $ 231,875
Ronald E. Toupin, Jr. $ 24,000 $ 205,375
</Table>
- ----------
(1) Trustees not eligible for compensation are not included in the above
table.
SHAREHOLDER APPROVAL
With respect to Proposal 2(a), the affirmative vote of a majority of the
Shares present at the Annual Meeting at which a quorum (i.e., a majority of the
Shares entitled to vote on the Proposal) is present is necessary to approve the
proposal. The holders of the Fund's Common Shares and the holders of the Fund's
Preferred Shares will have equal voting rights (i.e. one vote per Share) and
will vote together as a single class with respect to Proposal 2(a).
With respect to Proposal 2(b), the affirmative vote of a majority of the
Preferred Shares present at the Annual Meeting at which a quorum (i.e., a
majority of the Preferred Shares entitled to vote on the Proposal) is present is
necessary to approve the proposal. The holders of the Fund's Preferred Shares
will have equal voting rights (i.e. one vote per Share) and will vote as a
separate class with respect to Proposal 2(b).
The Board of the Fund, including the Independent Trustees, unanimously
recommends that you for "FOR ALL" of the nominees for the Board of Trustees
listed in the Proxy Statement.
ADDITIONAL INFORMATION
FURTHER INFORMATION ABOUT VOTING AND THE ANNUAL MEETING
Information regarding how to vote via telephone or internet is included on
the enclosed proxy card.
Abstentions and "broker non-votes" (i.e., Shares held by brokers or
nominees as to which (i) instructions have not been received from the beneficial
owner or the persons entitled to vote and (ii) the broker does not have
discretionary voting power on a particular matter) will be counted as Shares
present at the Annual Meeting for quorum purposes. With respect to Proposal 1,
abstentions and broker non-votes will have the same effect as a vote AGAINST the
Proposal. With respect to Proposal 2, abstentions and broker non-votes will have
no effect on the outcome of the vote on the Proposal.
All properly executed proxies received prior to the Annual Meeting will be
voted at the Annual Meeting in accordance with the instructions marked thereon
or otherwise as provided therein. IF NO SPECIFICATION IS MADE ON A PROXY CARD,
IT WILL BE VOTED FOR THE PROPOSAL SPECIFIED ON THE PROXY CARD. Shareholders may
revoke their proxies at any time prior to the time they are voted by giving
written notice to the Secretary of the Fund, by delivering a subsequently dated
proxy prior to the date of the Annual Meeting or by attending and voting at the
Annual Meeting.
The Board has fixed the close of business on May 1, 2006 as the record date
for the determination of Shareholders of the Fund entitled to notice of, and to
vote at, the Annual Meeting. Shareholders of the Fund on that date will be
entitled to one vote on each matter to be voted on by the Fund for each Share
held and a fractional vote with respect to fractional Shares with no cumulative
voting rights.
12
<Page>
ADVISER AND SUB-ADVISERS
Claymore Advisors, LLC, a wholly-owned subsidiary of Claymore Group Inc.,
acts as the Fund's investment adviser and is currently responsible for the
day-to-day management of the Fund's Municipal Securities Portfolio. As of March
31, 2006, Claymore managed approximately $6.5 billion in total assets. Claymore
is located at 2455 Corporate West Drive, Lisle, Illinois 60532.
Thompson, Siegel & Walmsley, Inc. acts as the Fund's investment sub-adviser
and is responsible for the day-to-day management of the Fund's Equity and Income
Portfolio. As of March 31, 2006, TS&W managed approximately $7.2 billion in
total assets. TS&W is located at PO Box 6883, 5000 Monument Avenue, Richmond,
Virginia 23230. TS&W is wholly-owned by Old Mutual (US) Holdings Inc., a
wholly-owned subsidiary of Old Mutual plc, a London-based, multi-national
financial services firm. As of March 31, 2006, Old Mutual plc and its affiliates
had approximately $247.6 billion of assets under management. Old Mutual plc is
among the top 50 global financial services firms, based on assets under
management.
Upon approval of the SMC Sub-Advisory Agreement and consummation of the
Transaction, SMC Fixed Income Management, LP will act as the Fund's investment
sub-adviser and will be responsible for the day-to-day management of the Fund's
Municipal Securities Portfolio. SMC Fixed Income Management, LP is a newly
organized subsidiary of Spring Mountain Capital, LP, with its principal offices
at 5 Vaughn Drive, Princeton, New Jersey 08540. Spring Mountain is an investment
management firm founded in July 2001 specializing in alternative investments and
advisory services for both broad asset allocation and/or focused portfolios. As
of December 1, 2005 Spring Mountain directly managed over $1.4 billion in assets
in fund of funds structures and separately managed accounts and provided
investment advisory services to over $2 billion in assets.
ADMINISTRATOR
Claymore Advisors, LLC, located at 2455 Corporate West Drive, Lisle,
Illionis 60532, serves as the Fund's administrator.
INDEPENDENT AUDITOR
Ernst & Young LLP ("E&Y") has been selected as the independent auditor by
the Audit Committee of the Fund and approved by a majority of the Fund's Board,
including a majority of the Independent Trustees, to audit the accounts of the
Fund for and during the Fund's fiscal year ended in 2005 and fiscal year ending
in 2006. The Fund does not know of any direct or indirect financial interest of
E&Y in the Fund.
Representatives of E&Y will attend the Annual Meeting, will have the
opportunity to make a statement if they desire to do so and will be available to
answer questions.
AUDIT FEES
The aggregate fees billed to the Fund by E&Y for professional services
rendered for the audit of the Fund's annual financial statements for the Fund's
fiscal year ended December 31, 2005 were approximately $36,000.
AUDIT-RELATED FEES
The aggregate fees billed by E&Y and approved by the Audit Committee of the
Fund for the Fund's fiscal year ended December 31, 2005 for assurance and
related services reasonably related to the performance of the audit of the
Fund's annual financial statements were $3,200 (such fees relate to services
rendered, and out of pocket expenses incurred, in connection with the Fund's
registration statements, comfort letters and consents). E&Y did not perform any
other assurance and related services that were required to be approved by the
Fund's Audit Committee for such period.
TAX FEES
The aggregate fees billed by E&Y and approved by the Audit Committee of the
Fund for the Fund's fiscal year ended December 31, 2005 for professional
services rendered for tax compliance, tax advice, and tax planning were $5,000
(such fees relate to tax services provided by E&Y in connection with the Fund's
excise tax calculations and review of the Fund's tax returns). E&Y did not
perform any other tax compliance or tax planning services or render any tax
advice that were required to be approved by the Fund's Audit Committee for such
period.
13
<Page>
ALL OTHER FEES
Other than those services described above, E&Y did not perform any other
services on behalf of the Fund for the Fund's fiscal year ended December 31,
2005.
AGGREGATE NON-AUDIT FEES
The aggregate non-audit fees billed by E&Y for services rendered to the
Fund, the Adviser and any entity controlling, controlled by or under common
control with the Adviser that provides ongoing services to the Fund (not
including a sub-adviser whose primary role is portfolio management and is
sub-contracted with or overseen by another investment adviser) that directly
related to the operations and financial reporting of the Fund for the Fund's
fiscal year ended December 31, 2005 were $5,000.
AUDIT COMMITTEE'S PRE-APPROVAL POLICIES AND PROCEDURES
As noted above, the Audit Committee is governed by the Audit Committee
Charter, which includes Pre-Approval Policies and Procedures in Section IV of
such Charter. The Fund's Audit Committee Charter is attached hereto as Appendix
B. The Audit Committee of the Fund has approved all audit and non-audit services
provided by E&Y to the Fund, and all non-audit services provided by E&Y to the
Adviser, or any entity controlling, controlled by, or under common control with
the Adviser that provides ongoing services to the Fund that are related to the
operations of the Fund.
PRINCIPAL SHAREHOLDERS
As of May 1, 2006, to the knowledge of the Fund, no person beneficially
owned more than 5% of the voting securities of any class of securities of the
Fund.
FINANCIAL STATEMENTS AND OTHER INFORMATION
THE FUND WILL FURNISH, WITHOUT CHARGE, A COPY OF THE FUND'S MOST RECENT
ANNUAL REPORT AND SEMI-ANNUAL REPORT TO ANY SHAREHOLDER UPON REQUEST. REQUESTS
SHOULD BE DIRECTED TO CLAYMORE SECURITIES, INC., 2455 CORPORATE WEST DRIVE,
LISLE, ILLINOIS 60532, (866) 882-0688.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 and Section 30(h) of
the 1940 Act require the Fund's officers and Trustees, certain officers of the
Fund's investment adviser, affiliated persons of the investment adviser, and
persons who beneficially own more than ten percent of the Fund's Shares to file
certain reports of ownership ("Section 16 filings") with the SEC and the New
York Stock Exchange. Based upon the Fund's review of the copies of such forms
effecting the Section 16 filings received by it, the Fund believes that for
Fund's fiscal year ended December 31, 2005, all filings applicable to such
persons were completed and filed in a timely manner, except as follows: Mr.
Ronald A. Nyberg, Trustee, inadvertently filed one late report relating to his
purchase of the Fund's Preferred Shares and Messrs. Paul A. Ferwerda, H.B.
Thomson III and Horace P. Whitworth, each an officer of TS&W, each inadvertently
filed a late report relating to his purchase of the Fund's Common Shares.
PRIVACY PRINCIPLES OF THE FUND
The Fund is committed to maintaining the privacy of Shareholders and to
safeguarding their non-public personal information. The following information is
provided to help you understand what personal information the Fund collects, how
the Fund protects that information and why, in certain cases, the Fund may share
information with select other parties.
Generally, the Fund does not receive any non-public personal information
relating to its Shareholders, although certain non-public personal information
of its Shareholders may become available to the Fund. The Fund does not disclose
any non-public personal information about its Shareholders or former
shareholders to anyone, except as permitted by law or as is necessary in order
to service Shareholder accounts (for example, to a transfer agent or third party
administrator).
The Fund restricts access to non-public personal information about the
Shareholders to employees of the Adviser with a legitimate business need for the
information. The Fund maintains physical, electronic and procedural safeguards
designed to protect the non-public personal information of its Shareholders.
DEADLINE FOR SHAREHOLDER PROPOSALS
Shareholder proposals intended for inclusion in the Fund's proxy statement
in connection with the Fund's 2007 annual meeting of Shareholders pursuant to
Rule 14a-8 under the Securities Exchange Act of 1934 (the "Exchange Act") must
be received by the Fund at the Fund's principal executive offices by February
1, 2007. In
14
<Page>
order for proposals made outside of Rule 14a-8 under the Exchange Act to be
considered "timely" within the meaning of Rule 14a-4(c) under the Exchange Act,
such proposals must be received by the Fund at the Fund's principal executive
offices not later than April 21, 2007.
EXPENSES OF PROXY SOLICITATION
The cost of soliciting proxies will be borne by the Fund. Additional
proxy solicitation costs with regard to Proposal 1 will be borne by the
Adviser. The Fund has retained Georgeson Shareholder Communications, Inc.
("Georgeson") as its proxy solicitor and will pay its customary fee of
approximately $7,500 plus the reimbursement of reasonable out-of-pocket
expenses. Certain officers of the Fund and certain officers and employees of
Claymore or its affiliates (none of whom will receive additional compensation
therefore), SMC or its affiliates (none of whom will receive additional
compensation therefore) or Georgeson, the proxy solicitor, may solicit
proxies by telephone, mail, e-mail and personal interviews. Brokerage houses,
banks and other fiduciaries may be requested to forward proxy solicitation
material to their principals to obtain authorization for the execution of
proxies, and will be reimbursed by the Fund for such out-of-pocket expenses.
OTHER MATTERS
The management of the Fund knows of no other matters which are to be
brought before the Annual Meeting. However, if any other matters not now known
properly come before the Annual Meeting, it is the intention of the persons
named in the enclosed form of proxy to vote such proxy in accordance with their
judgment on such matters.
Very truly yours,
/s/ Nicholas Dalmaso
NICHOLAS DALMASO
CHIEF LEGAL AND EXECUTIVE OFFICER
June 1, 2006
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APPENDIX A
TS&W / CLAYMORE TAX-ADVANTAGED BALANCED FUND
FORM OF INVESTMENT SUB-ADVISORY AGREEMENT
THIS INVESTMENT SUB-ADVISORY AGREEMENT (the "Agreement") dated as of
____________ __, 2006, 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 SMC Fixed Income Management, LP,
a Delaware limited partnership (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 27, 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 Municipal
Securities Portfolio (as described in the Trust's Prospectus for common shares
dated April 27, 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 "Municipal
Securities 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.
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 certain
of the day-to-day operations of the Trust which may include one or more of the
following services at the request of the Adviser: (i) managing the investment
and reinvestment of the Municipal Securities 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 Municipal Securities Portfolio; (iii) providing investment research and
credit analysis concerning the Municipal Securities Assets; (iv) placing orders
for purchases and sales of Municipal Securities Assets, (v) maintaining the
books and records as are required to support Trust investment operations, as
they relate to the Municipal Securities Portfolio, (vi) monitoring on a daily
basis the investment activities and portfolio holdings relating to the Municipal
Securities Portfolio and (vii) voting proxies relating to the Municipal
Securities Portfolio's portfolio securities in accordance with the proxy voting
policies and procedures of the Sub-Adviser. At the request of the Adviser, the
Sub-Adviser will also, subject to the oversight and supervision of the Adviser
and the direction and control 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, 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
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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 affecting the
Municipal Securities Portfolio and shall, on its own initiative, 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
direct, information concerning the purchase and sale of securities for the
Municipal 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
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 (to the extent such
amendments are not available to Sub-Advisor at Board meetings or other
meetings where Sub-Advisor is, or should reasonably be expected to be, in
attendance, written notice of such amendments shall be provided to
Sub-Advisor), applicable to the Municipal 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.
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; (iv) the investment objectives, policies and restrictions of
the Trust applicable to the Municipal Securities Portfolio as set forth in the
Trust's Prospectus filed with the SEC as part of the Trust's Registration
Statement on Form N-2; and (v) any policies, determinations and/or resolutions
of the Board of Trustees of the Trust or the Adviser (to the extent such
policies, determinations and/or resolutions are not available to Sub-Advisor at
Board meetings or other meetings where Sub-Advisor is, or should reasonably be
expected to be, in attendance, written notice of such policies, determinations
and/or resolutions shall be provided to Sub-Advisor);
(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 adhere to the standard of best
execution in placing its orders. In placing orders, the Sub-Adviser will
consider the experience and skill of the firm's securities traders as well as
the firm'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 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 provided
that the Advisor shall provide the Sub-Advisor with a schedule of its affiliates
and the Trust's affiliates;
(c) will maintain books and records with respect to the Trust's securities
transactions with respect to the Municipal 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 non-public 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; provided that the Sub-Advisor may divulge such records to
regulators, auditors, its attorneys or as may be required in accordance with
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
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accounts of others for whom it or they may be acting; provided, however, that
the Sub-Adviser will not undertake any activities which will 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 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 their 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 1940 Act) of the Sub-Adviser.
8. COMPENSATION.
(a) The Adviser agrees to pay to the Sub-Adviser and the Sub-Adviser
agrees to accept as full compensation for all services rendered by the
Sub-Adviser as such, a monthly fee (the "Investment Management Fee") payable
in arrears at an annual rate equal to 0.30% of the average daily value of the
Municipal Securities Assets. For any period less than a month during which
this Agreement is in effect, the 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.
(b) For purposes of this Agreement, the total assets of the Trust shall be
calculated by the Advisor pursuant to the procedures adopted by resolutions of
the Trustees of the Trust for calculating the value of the Trust's assets or
delegating such calculations to third parties.
9. CERTAIN INFORMATION. The Sub-Adviser shall promptly notify the Adviser
in writing of the occurrence of any of the following events: (a) the Sub-Adviser
failing to be registered as an investment adviser under the Advisers Act, (b)
the Sub-Adviser having 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) the
occurrence of any change in control of the Sub-Adviser or any parent of the
Sub-Adviser within the meaning of the 1940 Act, or (d) the occurrence of any
material adverse change in the business or financial position of the
Sub-Adviser.
10. LIMITATION ON LIABILITY.
(a) The Sub-Adviser will not be liable for any loss arising from any error
of judgment or mistake of law or for any loss suffered by the Sub-Adviser, the
Adviser or by the Trust in connection with the performance of this Agreement,
except a loss resulting from a breach of fiduciary duty with respect to the
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
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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 1940 Act) 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.
11. 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 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 1940 Act) 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,
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 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 will terminate automatically upon any
termination of the Investment Advisory Agreement between 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.)
12. 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 or on the first day after the
electronic confirmation of receipt by the recipient of the notice if sent via
email.
13. 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.
14. 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.
15. USE OF THE NAME _______. The Sub-Adviser has consented to the use by
the Trust of the name or identifying word "__________" in the name of the Trust.
Such consent is conditioned upon the employment of the Sub-Adviser as the
Sub-Adviser to the Trust. The names or identifying words "___" 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
"_______" 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 Sub-Adviser of the Trust.
16. MISCELLANEOUS. 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.
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17. COUNTERPARTS. This Agreement may be executed in counterparts by the
parties hereto, each of which shall constitute an original counterpart, and all
of which, together, shall constitute one Agreement.
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:
--------------------------------
Name:
Title:
TS&W / CLAYMORE TAX-ADVANTAGED
BALANCED FUND
By:
--------------------------------
Name:
Title:
SMC FIXED INCOME MANAGEMENT, LP
By:
--------------------------------
Name:
Title:
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APPENDIX B
TS&W / CLAYMORE TAX-ADVANTAGED BALANCED FUND
AUDIT COMMITTEE CHARTER
APPROVED AUGUST 17, 2005
I. PURPOSE
The Audit Committee is a committee of the Board of the Trust. Its primary
function is to assist the Board in fulfilling certain of its responsibilities.
This Charter sets forth the duties and responsibilities of the Audit Committee.
The Audit Committee serves as an independent and objective party to monitor
the Trust's accounting policies, financial reporting and internal control
system, as well as the work of the independent auditors. The Audit Committee
assists Board oversight of (1) the integrity of the Trust's financial
statements; (2) the Trust's compliance with legal and regulatory requirements;
(3) the independent auditors' qualifications and independence; and (4) the
performance of the Trust's independent auditors. The Audit Committee also serves
to provide an open avenue of communication among the independent auditors, Trust
management, the personnel responsible for internal audit functions and the
Board.
- Trust management has the primary responsibility to establish and
maintain systems for accounting, reporting and internal control.
- The independent auditors have the primary responsibility to plan and
implement a proper audit, including consideration of the Trust's
accounting, reporting and internal control practices.
The Audit Committee may have additional functions and responsibilities as
deemed appropriate by the Board and the Audit Committee.
Although the Audit Committee has the responsibilities and powers set forth
in this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Trust's financial statements are complete and
accurate and have been prepared in accordance with generally accepted accounting
principles.
II. COMPOSITION
The Audit Committee shall be comprised of three or more board members as
determined by the Board, each of whom shall be an independent board member, and
free from any relationship that, in the opinion of the Board, would interfere
with the exercise of his or her independent judgment as a member of the Audit
Committee. For purposes of the Audit Committee, a board member is independent
if:
- he or she is not an "interested person" of the Trust as that term is
defined in the Investment Company Act of 1940; and
- he or she does not accept, directly or indirectly, any consulting,
advisory, or other compensatory fee from the Trust (except in the
capacity as a Board or committee member).
Each member of the Audit Committee shall be financially literate, as such
qualification is interpreted by the Board in its business judgment (or must
become financially literate within a reasonable time after his or her
appointment to the Audit Committee). The Audit Committee will review the
qualifications of its members and determine whether any of its members qualify
as an "audit committee financial expert" as defined in Form N-CSR. The Audit
Committee will submit such determination to the Board for its final
determination.
The members and Chairman of the Audit Committee shall be elected by the
Board annually and serve until their successors shall be duly elected and
qualified.
No member of the Audit Committee shall serve on the audit committee of
three or more public companies (or three or more investment company complexes)
in addition to his or her service on the Audit Committee of the Trust (excluding
service on the audit committees of other funds in the fund complex), unless the
Board determines that such simultaneous service would not impair the ability of
the Audit Committee member to serve effectively on the Audit Committee.
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III. MEETINGS
The Audit Committee shall meet two times annually, or more frequently as
circumstances dictate. Special meetings (including telephone meetings) may be
called by the Chairman or a majority of the members of the Audit Committee upon
reasonable notice to the other members of the Audit Committee.
As part of its job to foster open communication, the Audit Committee shall
meet annually with senior Trust management responsible for accounting and
financial reporting and the independent auditors in separate executive sessions
to discuss any matters that the Audit Committee, or any of such other persons,
believes should be discussed privately.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall:
A. CHARTER
Review this Charter, annually, and recommend changes, if any, to the
Board.
B. INTERNAL CONTROLS
1. Review, annually, with Trust management and the independent
auditors:
(a) the organizational structure, reporting relationship, adequacy
of resources and qualifications of the senior Trust management
personnel responsible for accounting and financial reporting;
and
(b) their separate evaluation of the adequacy and effectiveness of
the Trust's system of internal controls, including those of the
Trust's service providers.
2. Review, with Trust management and the independent auditors:
(a) the Trust's plan related to the Trust's systems for accounting,
reporting and internal controls;
(b) the responsibilities, resources and staffing with respect to
the activities in IV.B.2.(a) above; and
(c) any significant audit findings or recommendations related to
the Trust's systems for accounting, reporting and internal
controls and Trust management's response.
3. Monitor procedures for the receipt, retention and treatment of
complaints received by the Trust and/or the Audit Committee
regarding accounting, internal accounting controls or auditing
matters and the confidential, anonymous submission by officers and
trustees of the Trust or employees of the Adviser, underwriter and
any provider of accounting-related services to the Trust of concerns
regarding questionable accounting or auditing matters.
4. Review, annually, with Trust management and the independent
auditors, policies for valuation of Trust portfolio securities, and
the frequency and magnitude of pricing errors.
C. INDEPENDENT AUDITORS
1. Approve, and recommend to the Board, the appointment, retention or
termination of the independent auditors, and approve the fees and
other compensation to be paid to the independent auditors. Such
selection shall be pursuant to a written engagement letter approved
by the Audit Committee.
2. Pre-approve any engagement of the independent auditors to provide
any non-prohibited services to the Trust, including the fees and
other compensation to be paid to the independent auditors (unless an
exception is available under Rule 2-01 of Regulation S-X).
(a) The Chairman or any member of the Audit Committee may grant the
pre-approval of services to the Fund for non-prohibited
services up to $10,000. All such delegated pre-approvals shall
be presented to the Audit Committee no later than the next
Audit Committee meeting.
3. Pre-approve any engagement of the independent auditors, including
the fees and other compensation to be paid to the independent
auditors, to provide any non-audit services to the Adviser (or any
"control affiliate" of the Adviser providing ongoing services to the
Trust), if the engagement relates directly to the operations and
financial reporting of the Trust (unless an exception is available
under Rule 2-01 of Regulation S-X).
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(a) The Chairman or any member of the Audit Committee may grant the
pre-approval for non-prohibited services to the Adviser up to
$10,000. All such delegated pre-approvals shall be presented to
the Audit Committee no later than the next Audit Committee
meeting.
4. On an annual basis, request, receive in writing and review a report
by the independent auditors describing:
(a) the independent auditors' internal quality-control procedures;
(b) any material issues raised by the most recent internal
quality-control review, or peer review, of the independent
auditors, or by any inquiry or investigations by governmental
or professional authorities, within the preceding five years,
respecting one or more independent audits carried out by the
independent auditors, and any steps taken to deal with any such
issues; and
(c) all relationships between the independent auditors and the
Trust, so as to assess the auditors' independence, including
identification of all relationships the independent auditors
have with the Trust and all significant relationships the
independent auditors have with the Adviser (and any "control
affiliate" of the Adviser) and any material service provider to
the Trust (including, but not limited to, disclosures regarding
the independent auditors' independence required by Independence
Standards Board Standard No. 1 and compliance with the
applicable independence provisions of Rule 2-01 of Regulation
S-X).
In assessing the auditors' independence, the Audit Committee shall
take into account the opinions of Trust management. The Committee
will present its conclusions with respect to the independent
auditors to the Board, and recommend that the Board take appropriate
action, if any, in response to the independent auditors' report to
satisfy itself of the independent auditors' independence.
5. On an annual basis, review and evaluate the lead audit partner (such
review to include consideration of whether, in addition to the
regular rotation of the lead audit partner as required by law, in
order to assure continuing auditor independence, there should be
regular consideration of rotation of the firm serving as independent
auditors).
6. On an annual basis, meet with the independent auditors and Trust
management to review the arrangements for and scope of the proposed
audit for the current year and the audit procedures to be utilized.
7. Review the management letter prepared by the independent auditors
and Trust management's response.
D. FINANCIAL REPORTING PROCESSES
1. Review with Trust management and the independent auditors the
Trust's semi-annual financial statements.
2. Review with Trust management and the independent auditors the
matters that auditing professional standards require to be
communicated to the Audit Committee, including, but not limited to,
the matters required to be discussed by Statements on Auditing
Standards No. 61, including:
- the independent auditors' judgments about the quality, and not
just the acceptability, of the Trust's accounting principles as
applied in its financial reporting;
- the process used by Trust management in formulating estimates and
the independent auditors' conclusions regarding the
reasonableness of those estimates;
- all significant adjustments arising from the audit, whether or
not recorded by the Trust;
- when the independent auditors are aware that Trust management has
consulted with other accountants about significant accounting and
auditing matters, the independent auditors' views about the
subject of the consultation;
- any disagreements with Trust management regarding accounting or
reporting matters;
- any difficulties encountered in the course of the audit,
including any restrictions on the scope of the independent
auditors' activities or on access to requested information; and
- significant deficiencies in the design or operation of internal
controls.
B-3
<Page>
3. The independent auditors shall report, within 90 days prior to the
filing of the Trust's annual financial statements with the SEC, to
the Audit Committee:
(a) all critical accounting policies and practices to be used;
(b) all alternative treatments of financial information within GAAP
for policies and practices related to material items that have
been discussed with Trust management, the ramifications of the
use of such alternative disclosures and treatments, and the
treatment preferred by the independent auditor;
(c) other material written communications between the independent
auditors and Trust management including, but not limited to,
any management letter or schedule of unadjusted differences;
and
(d) all non-audit services provided to an entity in the "investment
company complex" as defined in paragraph (f)(14) of Rule 2-01
of Regulation S-X that were not pre-approved by the Audit
Committee.
4. Review, annually, with Trust management and the independent
auditors, the Trust's "disclosure controls and procedures" and the
Trust's "internal control over financial reporting" as defined in
Rule 30a-3(c) and (d) under the Investment Company Act of 1940.
5. Review with Trust management and the independent auditors a report
by Trust management covering any Form N-CSR and Form N-Q filed, and
any required certification of such filing, along with the results of
Trust management's most recent evaluation of the Trust's "disclosure
controls and procedures" and "internal control over financial
reporting."
E. PROCESS IMPROVEMENTS
Review with the independent auditors and Trust management significant
changes or improvements in accounting and auditing processes that have been
implemented.
F. LEGAL AND COMPLIANCE
1. Review any legal or regulatory matters that arise that could have a
material impact on the Trust's financial statements.
2. Review policies and procedures with respect to financial statement
risk assessment and risk management, including the steps Trust
management has taken to monitor and control such risk exposures.
3. Establish clear hiring policies for the Trust with respect to
employees or former employees of the independent auditors.
G. OTHER RESPONSIBILITIES
1. Review, annually, the performance of the Audit Committee.
2. Prepare a report of the Audit Committee as required to be included
in the annual proxy statement.
3. Investigate any other matter brought to its attention within the
scope of its duties, and have the authority in its discretion to
retain legal, accounting or other experts or consultants to advise
the Audit Committee, at the expense of the Trust, if, in the
Committee's judgment, that is appropriate.
4. Perform any other activities consistent with this Charter, the
Trust's Charter, By-Laws and governing law, as the Audit Committee
or the Board deems necessary or appropriate.
5. Maintain minutes of Committee meetings; report its significant
activities to the Board; and make such recommendations to the Board
as the Audit Committee may deem necessary or appropriate.
V. FUNDING
The Audit Committee shall receive appropriate funding, as determined by the
Audit Committee, for payment of (i) compensation to the independent auditors for
approved audit or non-audit services for the Trust; (ii) compensation to any
legal, accounting or other experts or consultants retained by the Audit
Committee pursuant to Section IV.G.3 above and (iii) ordinary administrative
expenses of the Audit Committee that are necessary or appropriate in carrying
out its duties.
B-4
<Page>
TS&W / CLAYMORE TAX-ADVANTAGED BALANCED FUND
BACKGROUND AND DEFINITIONS
FOR
AUDIT COMMITTEE CHARTER
APPROVED AUGUST 17, 2005
The following is supplemental information regarding the Audit Committee
Charter designed to provide the Audit Committee background information and
definitions to assist the Committee in fulfilling its responsibilities under the
Charter.
I. COMPOSITION
An "audit committee financial expert" of a company is defined as a person
who has all of the following attributes: (1) an understanding of generally
accepted accounting principles ("GAAP") and financial statements; (2) the
ability to assess the general application of GAAP in connection with the
accounting for estimates, accruals and reserves; (3) experience preparing,
auditing, analyzing or evaluating financial statements that present a breadth
and level of complexity of accounting issues that are generally comparable to
the breadth and complexity of issues that can reasonably be expected to be
raised by the company's financial statements, or experience actively supervising
one or more persons engaged in such activities; (4) an understanding of internal
controls and procedures for financial reporting; and (5) an understanding of
audit committee functions. An audit committee financial expert must have
acquired such attributes through any one or more of the following: (1) education
and experience as a principal financial officer, principal accounting officer,
controller, public accountant or auditor or experience in one or more positions
that involve the performance of similar functions (or active supervision of such
persons); or (2) experience overseeing or assessing the performance of companies
or public accountants with respect to the preparation, auditing or evaluation of
financial statements; or (3) other relevant experience.
Because the Trust is listed on the New York Stock Exchange, at least one
member of the Audit Committee must have accounting or related financial
management expertise, as the Board interprets such qualification in its business
judgment.
II. RESPONSIBILITIES AND DUTIES
Under Section 10A(h)(i)(1)(B) of the Securities Exchange Act of 1934 and
Rule 2-01 under Regulation S-X (Section (c)(7)), pre-approval of non-audit
services for the Trust pursuant to Section IV.C. 2 is not required, if:
A. the aggregate amount of all non-audit services provided to the Trust
is no more than 5% of the total fees paid by the Trust to the
independent auditors during the fiscal year in which the non-audit
services are provided;
B. the services were not recognized by Trust management at the time of
the engagement as non-audit services; and
C. such services are promptly brought to the attention of the Audit
Committee by Trust management and the Audit Committee approves them
(which may be by delegation) prior to the completion of the audit.
Under Section 10A(h)(i)(1)(B) of the Securities Exchange Act of 1934 and
Rule 2-01 under Regulation S-X (Section (c)(7)), pre-approval of non-audit
services for the Adviser (or any affiliate of the Adviser providing ongoing
services to the Trust) pursuant to Section IV.C.3 is not required, if:
A. the aggregate amount of all non-audit services provided is no more
than 5% of the total fees paid to the Trust's independent auditors
by the Trust, the Adviser and any "control affiliate" of the Adviser
providing ongoing services to the Trust during the fiscal year in
which the non-audit services are provided;
B. the services were not recognized by Trust management at the time of
the engagement as non-audit services; and
C. such services are promptly brought to the attention of the Audit
Committee by Trust management and the Audit Committee approves them
(which may be by delegation) prior to the completion of the audit.
B-5
<Page>
As used in Section IV.C.3, "control affiliate" means any entity
controlling, controlled by, or under common control with the Adviser.
"Investment company complex" includes: (1) an investment company and its
investment adviser or sponsor; (2) any entity controlled by or controlling an
investment adviser or sponsor in (1) above, or any entity under common control
with any investment adviser or sponsor in (1) above if the entity: (A) is an
investment adviser or sponsor or (B) is engaged in the business of providing
administrative, custodian, underwriter, or transfer agent services to any
investment company, investment adviser, or sponsor; and (3) an investment
company or entity that would be an investment company but for the exclusions
provided by Section 3(c) of the 1940 Act that has an investment adviser or
sponsor included in (1) and (2) above. Investment adviser does not include a
subadviser whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser. Sponsor is an entity that
establishes a unit investment trust.
"Disclosure controls and procedures" means controls and other procedures of
a registered management investment company that are designed to ensure that
information required to be disclosed by the investment company on Form N-CSR and
Form N-Q is recorded, processed, summarized and reported, within the time
periods specified in the SEC's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by an investment company in the
reports that it files or submits on Form N-CSR and Form N-Q is accumulated and
communicated to the investment company's management, including its principal
executive officer or officers and principal financial officer or officers, or
person performing similar functions, as appropriate to allow timely decisions
regarding required disclosure.
"Internal control over financial reporting" is a process designed by, or
under the supervision of, the Trust's principal executive and principal
financial officers, or persons performing similar functions, and effected by the
Trust's Board, management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with GAAP and includes
those policies and procedures that:
A. Pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of
the assets of the Trust;
B. Provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with GAAP, and that receipts and expenditures of the
Trust are being made only in accordance with authorization of
management and directors of the Trust; and
C. Provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the
Trust's assets that could have a material effect on the financial
statements.
The report to be prepared by the Audit committee to be included in the
annual proxy statement is governed by Item 306 of Regulation S-K, which requires
each proxy statement relating to a shareholder meeting at which directors are to
be elected to include a report, followed by the name of each Audit Committee
member, stating whether: (1) the Committee has reviewed and discussed the
audited financial statements with management, (2) the Committee has discussed
with the independent auditors the matters required to be discussed by SAS 61,
(3) the Committee has received the written disclosures and the letter from the
independent auditors required by Independence Standards Board Standard No. 1,
and has discussed with the independent auditors their independence, and (4)
based on the review and discussions referred to in paragraphs (1) through (3),
the Audit Committee recommended to the Board that the audited financial
statements be included in the Trust's annual report to shareholders required by
Section 30(e) of the Investment Company Act of 1940 and Rule 30d-1 thereunder.
B-6
<Page>
PLEASE DETACH PROXY CARD HERE
- ------------------------------------------------------------------------------
SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
TS&W / CLAYMORE TAX-ADVANTAGED BALANCED FUND
ANNUAL MEETING OF SHAREHOLDERS
JUNE 27, 2006
COMMON
P
R
O
X
Y
The annual meeting of shareholders of TS&W / Claymore Tax-Advantaged Balanced
Fund (the "Fund") will be held at the offices of the Fund, 2455 Corporate
West Drive, Lisle, Illinois, 60532, on Tuesday, June 27, 2006, at 8:30 A.M.
Central time (the "Annual Meeting"). The undersigned hereby appoints each of
Nicholas Dalmaso, Melissa J. Nguyen and Richard C. Sarhaddi as proxies to
represent and to vote all shares of the undersigned at the Annual Meeting and
all adjournments thereof, with all powers the undersigned would possess if
personally present, upon the matters specified on the reverse side.
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION
IS INDICATED AS TO THE PROPOSALS, THE PROXIES SHALL VOTE FOR SUCH PROPOSALS.
THE PROXIES MAY VOTE AT THEIR DISCRETION ON ANY OTHER MATTER THAT MAY
PROPERLY COME BEFORE THE MEETING.
CONTINUED AND TO BE SIGNED AND DATED ON REVERSE SIDE
SEE REVERSE SIDE SEE REVERSE SIDE
<Page>
PLEASE DETACH PROXY CARD HERE
- ------------------------------------------------------------------------------
X PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
THE BOARD OF TRUSTEES (THE "BOARD") OF THE FUND, INCLUDING THE INDEPENDENT
TRUSTEES, UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" EACH PROPOSAL.
PROPOSALS
1. To approve an investment sub-advisory agreement among FOR AGAINST
the Fund, Claymore Advisors, LLC and SMC Fixed Income
Management, LP;
2. Election of Trustees: FOR WITHHOLD
Class II Nominees:
(1) Ronald A. Nyberg
3. To transact such other business as may properly come before the Annual
Meeting or any adjournments or postponements thereof.
Date , 2006
-----------------------------------
Signature
-----------------------------------
Signature, if held jointly
Please sign here exactly as your
name appears in the records of the
Fund and date. If the shares are
held jointly, each holder should
sign. When signing as an attorney,
executor, administrator, trustee,
guardian, officer of a corporation
or other entity or in any other
representative capacity, please
give the full title under
signature(s).
<Page>
PLEASE DETACH PROXY CARD HERE
- ------------------------------------------------------------------------------
SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
TS&W / CLAYMORE TAX-ADVANTAGED BALANCED FUND
ANNUAL MEETING OF SHAREHOLDERS
JUNE 27, 2006
PREFERRED
P
R
O
X
Y
The annual meeting of shareholders of TS&W / Claymore Tax-Advantaged Balanced
Fund (the "Fund") will be held at the offices of the Fund, 2455 Corporate
West Drive, Lisle, Illinois, 60532, on Tuesday, June 27, 2006, at 8:30 A.M.
Central time (the "Annual Meeting"). The undersigned hereby appoints each of
Nicholas Dalmaso, Melissa J. Nguyen and Richard C. Sarhaddi as proxies to
represent and to vote all shares of the undersigned at the Annual Meeting and
all adjournments thereof, with all powers the undersigned would possess if
personally present, upon the matters specified on the reverse side.
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION
IS INDICATED AS TO THE PROPOSALS, THE PROXIES SHALL VOTE FOR SUCH PROPOSALS.
THE PROXIES MAY VOTE AT THEIR DISCRETION ON ANY OTHER MATTER THAT MAY
PROPERLY COME BEFORE THE MEETING.
CONTINUED AND TO BE SIGNED AND DATED ON REVERSE SIDE
SEE REVERSE SIDE SEE REVERSE SIDE
<Page>
PLEASE DETACH PROXY CARD HERE
- ------------------------------------------------------------------------------
X PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
THE BOARD OF TRUSTEES (THE "BOARD") OF THE FUND, INCLUDING THE INDEPENDENT
TRUSTEES, UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" EACH PROPOSAL.
PROPOSALS
<Table>
1. To approve an investment sub-advisory agreement among FOR AGAINST
the Fund, Claymore Advisors, LLC and SMC Fixed Income
Management, LP;
2. Election of Trustees: FOR WITHHOLD FOR ALL
EXCEPT
Class II Nominees:
(1) Ronald A. Nyberg, (2) L. Kent Moore
To withhold authority to vote for any individual nominee,
Check "FOR ALL EXCEPT" and write the nominee's
name on the line below.
</Table>
3. To transact such other business as may properly come before the Annual
Meeting or any adjournments or postponements thereof.
Date , 2006
-------------------------------------
Signature
-------------------------------------
Signature, if held jointly
Please sign here exactly as your name
appears in the records of the Fund and
date. If the shares are held jointly,
each holder should sign. When signing
as an attorney, executor,
administrator, trustee, guardian,
officer of a corporation or other
entity or in any other representative
capacity, please give the full title
under signature(s).