Exhibit 4(bb)
SUB-ADVISORY AGREEMENT
Core Plus Portfolio
AGREEMENT dated as of January __, 2001, between BlackRock Advisors, Inc., a
Delaware corporation ("Adviser"), and BlackRock Financial Management, Inc., a
Delaware corporation ("Sub-Adviser").
WHEREAS, Adviser has agreed to furnish investment advisory services to the
Core Plus Portfolio (the "Portfolio") of BlackRock Funds (the "Fund"), an
open-end, management investment company registered under the Investment Company
Act of 1940 ("1940 Act"); and
WHEREAS, Adviser wishes to retain the Sub-Adviser to provide it with
sub-advisory services as described below in connection with Adviser's advisory
activities on behalf of the Portfolio;
WHEREAS, the advisory agreement between Adviser and the Fund dated January
4, 1996 (such Agreement or the most recent successor agreement between such
parties relating to advisory services to the Portfolio is referred to herein as
the "Advisory Agreement") contemplates that Adviser may sub-contract investment
advisory services with respect to the Portfolio to a sub-adviser pursuant to a
sub-advisory agreement agreeable to the Fund and approved in accordance with the
provisions of the 1940 Act;
WHEREAS, this Agreement has been approved in accordance with the provisions
of the 1940 Act, and Sub-Adviser is willing to furnish such services upon the
terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
Appointment. Adviser hereby appoints Sub-Adviser to act as sub-adviser with
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respect to the Portfolio as provided in Section 2 of the Advisory Agreement.
Sub-Adviser accepts such appointment and agrees to render the services herein
set forth for the compensation herein provided.
1. Services of Sub-Adviser. Subject to the oversight and supervision
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of Adviser and the Fund's Board of Trustees, Sub-Adviser will supervise the
day-to-day operations of the Portfolio and perform the following services: (i)
provide investment research and credit analysis concerning the Portfolio's
investments, (ii) conduct a continual program of investment of the Portfolio's
assets, (iii) determine what portion of the Portfolio's assets will be invested
in cash, cash equivalents and money market instruments, (iv) place orders for
all purchases and sales of the investments made for the Portfolio, and (v)
maintain the books and records as are required
to support Fund operations (in conjunction with record-keeping and accounting
functions performed by Adviser). In addition, Sub-Adviser will keep the Fund and
Adviser informed of developments materially affecting the Fund and shall, on its
own initiative, furnish to the Fund from time to time whatever information
Sub-Adviser believes appropriate for this purpose. Sub-Adviser will communicate
to Adviser on each day that a purchase or sale of an instrument is effected for
the Portfolio (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 will be effected, (iv) the CUSIP number of the instrument, if any, and
(v) such other information as Adviser may reasonably require for purposes of
fulfilling its obligations to the Fund under the Advisory Agreement. Sub-Adviser
will provide the services rendered by it under this Agreement in accordance with
the Portfolio's investment objectives, policies and restrictions as stated in
the Portfolio's Prospectuses and Statements of Additional Information (as
currently in effect and as they may be amended or supplemented from time to
time), and the resolutions of the Fund's Board of Trustees.
2. Other Sub-Adviser Covenants. Sub-Adviser further agrees that it:
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(a) will comply with all applicable Rules and Regulations of the
Securities and Exchange Commission (the "SEC") and will in addition conduct its
activities under this Agreement in accordance with other applicable law;
(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, Sub-Adviser will attempt to obtain the best
price and the most favorable execution of its orders. In placing orders,
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, Sub-Adviser may, subject to the
approval of the Fund's Board of Trustees, select brokers on the basis of the
research, statistical and pricing services they provide to the Portfolio and
other clients of Adviser or Sub-Adviser. Information and research received from
such brokers will be in addition to, and not in lieu of, the services required
to be performed by 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 Sub-Adviser determines in good
faith that such commission is reasonable in terms either of the transaction or
the overall responsibility of Adviser and Sub-Adviser to the Portfolio and their
other clients and that the total commissions paid by the Portfolio will be
reasonable in relation to the benefits to the Portfolio over the long-term. In
addition, Sub-Adviser is authorized to take into account the sale of shares of
the Fund in allocating purchase and sale orders for portfolio securities to
brokers or dealers (including brokers and dealers that are affiliated with
Adviser, Sub-Adviser or the Fund's distributor), provided that Sub-Adviser
believes that the quality of the transaction and the commission are comparable
to what they would be with other qualified firms. In no instance, however, will
the Portfolio's securities be purchased from or sold to the Adviser,
Sub-Adviser, the Fund's distributor or any affiliated person thereof, except to
the extent permitted by the SEC or by applicable law;
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(c) will maintain or cause Adviser to maintain books and records with
respect to the Portfolio's securities transactions and will render to Adviser
and the Fund's Board of Trustees such periodic and special reports as they may
request;
(d) will maintain a policy and practice of conducting its investment
advisory services hereunder independently of the commercial banking operations
of its affiliates. When Sub-Adviser makes investment recommendations for the
Portfolio, its investment advisory personnel will not inquire or take into
consideration whether the issuer of securities proposed for purchase or sale for
the Portfolio's account are customers of the commercial department of its
affiliates; and
(e) will treat confidentially and as proprietary information of the
Fund all records and other information relative to the Fund, the Portfolio's and
the Fund's prior, current or potential shareholders, and will not use such
records and information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior notification to and
approval in writing by the Fund, which approval shall not be unreasonably
withheld and may not be withheld where Sub-Adviser may be exposed to civil or
criminal contempt proceedings for failure to comply, when requested to divulge
such information by duly constituted authorities, or when so requested by the
Fund.
3. Services Not Exclusive. Sub-Adviser's services hereunder are not deemed
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to be exclusive, and Sub-Adviser shall be free to render similar services to
others so long as its services under this Agreement are not impaired thereby.
4. Books and Records. In compliance with the requirements of Rule 31a-3
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under the 1940 Act, Sub-Adviser hereby agrees that all records which it
maintains for the Portfolio are the property of the Fund and further agrees to
surrender promptly to the Fund any such records upon the Fund's request.
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.
5. Expenses. During the term of this Agreement, Sub-Adviser will pay all
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expenses incurred by it in connection with its activities under this Agreement
other than the cost of securities, commodities, and other investments (including
brokerage commissions and other transaction charges, if any) purchased or sold
for the Portfolio.
6. Compensation. For the services which the Sub-Adviser will render to
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Adviser under this Agreement, Adviser will pay to Sub-Adviser a fee, computed
daily and payable monthly, at the annual rate of .35 % of the first $1 billion
of the Portfolio's average daily net assets, .30% of the next $1 billion of its
average daily net assets, .275% of the next $1 billion of its average daily net
assets and .25% of the average daily net assets of the Portfolio in excess of $3
billion.
If the Adviser waives any or all of its advisory fee payable under the
Advisory Agreement, or reimburses the Fund pursuant to Section 8(b) of that
Agreement, with respect to
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the Portfolio, the Sub-Adviser will bear its share of the amount of such waiver
or reimbursement by waiving fees otherwise payable to it hereunder on a
proportionate basis to be determined by comparing the aggregate fees that would
otherwise be paid to it hereunder with respect to the Portfolio to the aggregate
fees that would otherwise be paid by the Fund to the Adviser under the Advisory
Agreement with respect to the Portfolio. Adviser shall inform Sub-Adviser prior
to waiving any advisory fees.
7. Limitation on Liability. Sub-Adviser will not be liable for any error of
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judgment or mistake of law or for any loss suffered by Adviser or by the
Portfolio 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 obligations or duties under this Agreement.
8. Duration and Termination. This Agreement will become effective as of the
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date hereof and, unless sooner terminated with respect to the Portfolio as
provided herein, shall continue in effect with respect to the Portfolio until
March 31, 2002. Thereafter, if not terminated, this Agreement shall continue in
effect with respect to the Portfolio for successive annual periods ending on
March 31, provided such continuance is specifically approved at least annually
(a) by the vote of a majority of those members of the Fund's Board of Trustees
who are not interested persons of any party to this Agreement, cast in person at
a meeting called for the purpose of voting on such approval, and (b) by the
Fund's Board of Trustees or by a vote of a majority of the outstanding voting
securities of the Portfolio. Notwithstanding the foregoing, this Agreement may
be terminated with respect to the Portfolio at any time, without the payment of
any penalty, by the Fund (by vote of the Fund's Board of Trustees or by vote of
a majority of the outstanding voting securities of the Portfolio), or by Adviser
or Sub-Adviser on 60 days' written notice, and will terminate automatically upon
any termination of the Advisory Agreement between the Fund and 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.)
9. Amendment of this Agreement. No provision of this Agreement may be
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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.
10. Miscellaneous. The captions in this Agreement are included for
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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 otherwise, 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 and shall be
governed by Delaware law.
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11. Counterparts. This Agreement may be executed in counterparts by the
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parties hereto, each of which shall constitute an original counterpart, and all
of which, together, shall constitute one Agreement.
[End of Text]
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
BLACKROCK ADVISORS, INC.
By:____________________________________
BLACKROCK FINANCIAL MANAGEMENT, INC.
By:____________________________________
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