Exhibit (g)(2)
SUB-INVESTMENT ADVISORY AGREEMENT
AGREEMENT dated September 29, 2006, between BlackRock Advisors, LLC,
a Delaware limited liability company (the "Advisor"), and BlackRock Investment
Management, LLC, a Delaware limited liability company (the "Sub-Advisor").
WHEREAS, the Advisor has agreed to furnish investment advisory
services to the BlackRock Multi-Strategy Hedge Advantage, a Delaware statutory
trust (the "Fund") and a closed-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Advisor wishes to retain the Sub-Advisor to provide it
with certain sub-advisory services as described below in connection with
Advisor's advisory activities on behalf of the Funds;
WHEREAS, the advisory agreement between the Advisor and the
Corporation, dated September 29, 2006 (such agreement or the most recent
successor agreement between such parties relating to advisory services to the
Corporation is referred to herein as the "Advisory Agreement") contemplates that
the Advisor may sub-contract investment advisory services with respect to the
Funds to a sub-advisor pursuant to a sub-advisory agreement agreeable to the
Corporation and approved in accordance with the provisions of the 1940 Act; and
WHEREAS, this Agreement has been approved in accordance with the
provisions of the 1940 Act, and the Sub-Advisor 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 Advisor hereby appoints the Sub-Advisor to act
as sub-advisor with respect to the Fund and the Sub-Advisor accepts such
appointment and agrees to render the services herein set forth for the
compensation herein provided.
2. Services of the Sub-Advisor. Subject to the succeeding provisions
of this section, the oversight and supervision of the Advisor and the direction
and control of the Fund's Board of Trustees, the Sub-Advisor will perform
certain of the day-to-day operations of the Fund, which may include one or more
of the following services, at the request of the Advisor: (a) acting as
investment advisor for and managing the investment and reinvestment of those
assets of the Fund as the Advisor may from time to time request and in
connection therewith have complete discretion in purchasing and selling such
securities and other assets for the Fund and in voting, exercising consents and
exercising all other rights appertaining to such securities and other assets on
behalf of the Fund; (b) arranging, subject to the provisions of paragraph 3
hereof, for the purchase and sale of securities and other assets of the Fund;
(c) providing investment research and credit analysis concerning the Fund's
investments, (d) assist the Advisor in determining what portion of the Fund's
assets will be invested in cash, cash equivalents and money market instruments,
(e) placing orders for all purchases and sales of such investments made for the
Fund, and (f) maintaining the books and records as are required to support Fund
investment operations. At the request of the Advisor, the Sub-Advisor will also,
subject to the oversight and supervision of the Advisor and the direction and
control of the Fund's Board of Trustees, provide to the Advisor or the Fund any
of the facilities and equipment and perform any of the services described in the
investment advisory agreement between the Advisor and the Fund (the "Advisory
Agreement"). In addition, the Sub-Advisor will keep the Fund and the Advisor
informed of developments materially affecting the Fund and shall, on its own
initiative, furnish to the Fund from time to time whatever information the
Sub-Advisor believes appropriate for this purpose. The Sub-Advisor will
periodically communicate to the Advisor, at such times as the Advisor may
direct, information concerning the purchase and sale of securities for the Fund,
including: (a) the name of the issuer, (b) the amount of the purchase or sale,
(c) the name of the broker or dealer, if any, through which the purchase or sale
is effected, (d) the CUSIP number of the instrument, if any, and (e) such other
information as the Advisor may reasonably require for purposes of fulfilling its
obligations to the Fund under the Advisory Agreement. The Sub-Advisor will
provide the services rendered by it under this Agreement in accordance with the
Fund's investment objectives, policies and restrictions (as currently in effect
and as they may be amended or supplemented from time to time) as stated in the
Fund's Prospectus and Statement of Additional Information and the resolutions of
the Fund's Board of Trustees.
3. Covenants. (a) In the performance of its duties under this
Agreement, the Sub-Advisor shall at all times conform to, and act in accordance
with, any requirements imposed by: (i) the provisions of the 1940 Act and the
Investment Advisers Act of 1940, as amended (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 Fund, as such documents
are amended from time to time; (iv) the investment objectives and policies of
the Fund as set forth in its Registration Statement on Form N-2; and (v) any
policies and determinations of the Board of the Trustees of the Fund and
(b) In addition, the Sub-Advisor will:
(i) 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-Advisor will attempt to obtain
the best price and the most favorable execution of its orders. In placing
orders, the Sub-Advisor 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-Advisor may select brokers on the basis of the research, statistical
and pricing services they provide to the Fund and other clients of the
Advisor or the Sub-Advisor. 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-Advisor 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-Advisor
determines in good faith that such commission is reasonable in terms
either of the transaction or the overall responsibility of the Advisor and
the Sub-Advisor to the Fund's and their other clients and that the total
commissions paid by the Fund will be reasonable in relation to the
benefits to the Fund over the long-term. Subject to the foregoing and the
provisions of the 1940 Act, the
-2-
Securities Exchange Act of 1934, as amended, and other applicable
provisions of law, the Advisor may select brokers and dealers with which
it or the Fund is affiliated;
(ii) maintain books and records with respect to the Fund's
securities transactions and will render to the Advisor and the Fund's
Board of Trustees such periodic and special reports as they may request;
(iii) maintain a policy and practice of conducting its investment
advisory services hereunder independently of the commercial banking
operations of its affiliates. When the Sub-Advisor makes investment
recommendations for the Fund, its investment advisory personnel will not
inquire or take into consideration whether the issuer of securities
proposed for purchase or sale for the Fund's account are customers of the
commercial department of its affiliates; and
(iv) treat confidentially and as proprietary information of the Fund
all records and other information relative to the Fund, 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 the Sub-Advisor 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.
4. Services Not Exclusive. Nothing in this Agreement shall prevent
the Sub-Advisor or any officer, employee or other affiliate thereof from acting
as investment advisor 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-Advisor or any of its officers, employees or agents from
buying, selling or trading any securities for its or their own accounts or for
the accounts of others for whom it or they may be acting; provided, however,
that the Sub-Advisor will undertake no activities which, in its judgment, 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-Advisor hereby agrees that all records which
it maintains for the Fund are the property of the Fund and further agrees to
surrender promptly to the Fund any such records upon the Fund's request. The
Sub-Advisor 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 (to the extent such books and records are not maintained by the
Advisor).
6. Expenses. During the term of this Agreement, the Sub-Advisor will
bear all costs and expenses of its employees and any overhead incurred by the
Sub-Advisor in connection with its duties hereunder; provided that the Board of
Trustees of the Fund may approve reimbursement to the Sub-Advisor of the
pro-rata portion of the salaries, bonuses, health insurance, retirement benefits
and all similar employment costs for the time spent on Fund operations
(including, without limitation, compliance matters) (other than the provision of
-3-
investment advice and administrative services required to be provided hereunder)
of all personnel employed by the Sub-Advisor who devote substantial time to the
Fund operations or the operations of other investment companies advised or
sub-advised by the Sub-Advisor.
7. Compensation.
(a) The Advisor agrees to pay to the Sub-Advisor and the Sub-Advisor
agrees to accept as full compensation for all services rendered by the
Sub-Advisor as such, a monthly fee in arrears at an annual rate equal to the
amount set forth in Schedule A hereto. 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 Net Assets of the Fund shall
be calculated pursuant to the procedures adopted by resolutions of the Trustees
of the Fund for calculating the value of the Fund's assets or delegating such
calculations to third parties.
8. Indemnity.
(a) The Fund hereby agrees to indemnify the Sub-Advisor and each of
the Sub-Advisor's directors, officers, employees, agents, associates and
controlling persons and the directors, partners, members, officers, employees
and agents thereof (including any individual who serves at the Sub-Advisor's
request as director, officer, partner, member, trustee or the like of another
entity) (each such person being an "Indemnitee") against any liabilities and
expenses, including amounts paid in satisfaction of judgments, in compromise or
as fines and penalties, and counsel fees (all as provided in accordance with
applicable state law) reasonably incurred by such Indemnitee in connection with
the defense or disposition of any action, suit or other proceeding, whether
civil or criminal, before any court or administrative or investigative body in
which such Indemnitee may be or may have been involved as a party or otherwise
or with which such Indemnitee may be or may have been threatened, while acting
in any capacity set forth herein or thereafter by reason of such Indemnitee
having acted in any such capacity, except with respect to any matter as to which
such Indemnitee shall have been adjudicated not to have acted in good faith in
the reasonable belief that such Indemnitee's action was in the best interest of
the Fund and furthermore, in the case of any criminal proceeding, so long as
such Indemnitee had no reasonable cause to believe that the conduct was
unlawful; provided, however, that (1) no Indemnitee shall be indemnified
hereunder against any liability to the Fund or its shareholders or any expense
of such Indemnitee arising by reason of (i) willful misfeasance, (ii) bad faith,
(iii) gross negligence or (iv) reckless disregard of the duties involved in the
conduct of such Indemnitee's position (the conduct referred to in such clauses
(i) through (iv) being sometimes referred to herein as "disabling conduct"), (2)
as to any matter disposed of by settlement or a compromise payment by such
Indemnitee, pursuant to a consent decree or otherwise, no indemnification either
for said payment or for any other expenses shall be provided unless there has
been a determination that such settlement or compromise is in the best interests
of the Fund and that such Indemnitee appears to have acted in good faith in the
reasonable belief that such Indemnitee's action was in the best interest of the
Fund and did not involve disabling conduct by such Indemnitee and (3) with
respect to any action, suit or other proceeding voluntarily prosecuted by any
Indemnitee as plaintiff, indemnification shall be mandatory only if the
-4-
prosecution of such action, suit or other proceeding by such Indemnitee was
authorized by a majority of the full Board of Trustees of the Fund.
(b) The Fund shall make advance payments in connection with the
expenses of defending any action with respect to which indemnification might be
sought hereunder if the Fund receives a written affirmation of the Indemnitee's
good faith belief that the standard of conduct necessary for indemnification has
been met and a written undertaking to reimburse the Fund unless it is
subsequently determined that such Indemnitee is entitled to such indemnification
and if the Trustees of the Fund determine that the facts then known to them
would not preclude indemnification. In addition, at least one of the following
conditions must be met: (A) the Indemnitee shall provide a security for such
Indemnitee-undertaking, (B) the Fund shall be insured against losses arising by
reason of any unlawful advance, or (C) a majority of a quorum consisting of
Trustees of the Fund who are neither "interested persons" of the Fund (as
defined in Section 2(a)(19) of the 0000 Xxx) nor parties to the proceeding
("Disinterested Non-Party Trustees") 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 Indemnitee ultimately will be found entitled to indemnification.
(c) All determinations with respect to indemnification hereunder
shall be made (1) by a final decision on the merits by a court or other body
before whom the proceeding was brought that such Indemnitee is not liable by
reason of disabling conduct, or (2) in the absence of such a decision, by (i) a
majority vote of a quorum of the Disinterested Non-Party Trustees of the Fund,
or (ii) if such a quorum is not obtainable or even, if obtainable, if a majority
vote of such quorum so directs, independent legal counsel in a written opinion.
All determinations that advance payments in connection with the expense of
defending any proceeding shall be authorized shall be made in accordance with
the immediately preceding clause (2) above.
The rights accruing to any Indemnitee under these provisions shall
not exclude any other right to which such Indemnitee may be lawfully entitled.
9. Limitation on Liability.
(a) The Sub-Advisor will not be liable for any error of judgment or
mistake of law or for any loss suffered by the Advisor or by the Fund 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.
10. Duration and Termination. This Agreement shall become effective
as of the date hereof and, unless sooner terminated with respect to the Fund as
provided herein, shall continue in effect for a period of two years. Thereafter,
if not terminated, this Agreement shall continue in effect with respect to the
Fund 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 Fund's Board of Trustees or a vote of a majority of the outstanding voting
securities of the Fund at the time outstanding and entitled to vote and (b) by
the vote of a majority of the Trustees, who
-5-
are not parties to this Agreement or interested persons (as such term is defined
in the 0000 Xxx) of any such party, cast in person at a meeting called for the
purpose of voting on such approval. Notwithstanding the foregoing, this
Agreement may be terminated by the Fund or the Advisor at any time, without the
payment of any penalty, upon giving the Sub-Advisor 60 days' notice (which
notice may be waived by the Sub-Advisor), provided that such termination by the
Fund or the Advisor shall be directed or approved by the vote of a majority of
the Trustees of the Fund in office at the time or by the vote of the holders of
a majority of the voting securities of the Fund at the time outstanding and
entitled to vote, or by the Sub-Advisor on 60 days' written notice (which notice
may be waived by the Fund and the Advisor), and will terminate automatically
upon any termination of the Advisory Agreement between the Fund and the Advisor.
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.)
11. 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.
12. Amendment of this Agreement. This Agreement may be amended by
the parties only if such amendment is specifically approved by the vote of the
Board of Trustees of the Fund, including a majority of those Trustees who are
not parties to this Agreement or interested persons of any such party cast in
person at a meeting called for the purpose of voting on such approval and, where
required by the 1940 Act, by a vote of a majority of the outstanding voting
securities of the Fund.
13. 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 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.
14. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York 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. To the extent
that the applicable laws of the State of New York, or any of the provisions,
conflict with the applicable provisions of the 1940 Act, the latter shall
control.
15. 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.
-6-
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.
BLACKROCK ADVISORS, LLC
By:
-------------------------------
Name: Xxxxxx X. Xxxxx
Title: Managing Director
BLACKROCK INVESTMENT MANAGEMENT, LLC
By:
-------------------------------
Name:
Title:
Agreed and Accepted:
MULTI-STRATEGY HEDGE ADVANTAGE
By:
----------------------------------
Name: Xxxxxx X. Xxxxx
Title: Vice President & Treasurer
-7-
Schedule A
Sub-Investment Advisory Fee
74.00% of the monthly advisory fee received by the Advisor from the Fund.
-8-
