SUB-ADVISORY AGREEMENT
AGREEMENT dated as of May 31, 2007, between BlackRock
Advisors, LLC, a Delaware limited liability company ("Adviser"),
and BlackRock Financial Management, Inc., a Delaware corporation
("Sub-Adviser").
WHEREAS, Adviser has agreed to furnish investment
advisory services to the portfolios named on Appendix A attached
hereto (the "Portfolios") of BlackRock Funds II (the "Fund"), an
open-end, management investment company registered under the
Investment Company Act of 1940 ("1940 Act"); and
WHEREAS, Adviser wishes to retain Sub-Adviser to
provide it with sub-advisory services as described below in
connection with Adviser's advisory activities on behalf of each
Portfolio;
WHEREAS, the investment advisory agreement between
Adviser and the Fund dated May 31, 2007 (such Agreement or the
most recent successor agreement between such parties relating to
advisory services to each Portfolio is referred to herein as the
"Advisory Agreement") contemplates that Adviser may appoint a
sub-adviser to perform investment advisory services with respect
to the Portfolios;
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:
1. Appointment. Adviser hereby appoints Sub-Adviser
to act as sub-adviser with respect to each 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.
2. Services of Sub-Adviser. Subject to the oversight
and supervision of Adviser and the Fund's Board of Trustees, Sub-
Adviser will supervise the day-to-day operations of the
Portfolios and perform the following services: (i) act as
investment adviser for and manage the investment and reinvestment
of those assets of the Portfolios as Adviser may from time to
time request and in connection therewith have complete discretion
in purchasing and selling such securities and other assets for
the Portfolios and in voting, exercising consents and exercising
all other rights appertaining to such securities and other assets
on behalf of the Portfolios; (ii) provide investment research and
credit analysis concerning the Portfolios' investments; (iii)
assist Adviser in determining what portion of the Portfolios'
assets will be invested in cash and cash equivalents and money
market instruments; (iv) place orders for all purchases and sales
of the investments made for the Portfolios; 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). At the request of Adviser, Sub-Adviser
will also, subject to the oversight and supervision of Adviser
and the direction and control of the Fund's Board of Trustees,
provide to Adviser or the Fund any of the facilities and
equipment and perform any of the services described in Section 4
of the Advisory Agreement. In addition, Sub-Adviser will keep
the Fund and Adviser informed of developments materially
affecting the Portfolios 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
periodically communicate to Adviser, at such times as Adviser may
direct, information concerning the purchase and sale of
securities for the Portfolios, 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 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
each Portfolio's investment objective, policies and restrictions
as stated in such 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.
3. Other Sub-Adviser Covenants. Sub-Adviser further
agrees that it:
(a) will comply with (i) the provisions of the
1940 Act and the Investment Advisers Act of 1940, as amended and
all applicable rules and regulations of the Securities and
Exchange Commission (the "SEC"), (ii) any other applicable
provision of law and (iii) the provisions of this Agreement, the
Declaration of Trust and the Code of Regulations of the Fund as
such are amended from time to time;
(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 a 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 of either the transaction or the overall
responsibility of Adviser and Sub-Adviser to each Portfolio and
their other clients and that the total commissions paid by each
Portfolio will be reasonable in relation to the benefits to such
Portfolio over the long-term. In no instance, however, will a
Portfolio's securities be purchased from or sold to Adviser, Sub-
Adviser, the Fund's distributor or any affiliated person thereof,
except to the extent permitted by the SEC or by applicable law.
Subject to the foregoing and the provisions of the 1940 Act, the
Securities Exchange Act of 1934, as amended, and other applicable
provisions of law, Sub-Adviser may select brokers and dealers
with which it or the Fund is affiliated;
(c) will maintain or cause Adviser to maintain
books and records with respect to each Portfolio's securities
transactions and will furnish 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 a 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 departments of its
affiliates. In dealing with commercial customers of its
affiliates, Sub-Adviser will not inquire or take into
consideration whether securities of those customers are held by
the Fund; and
(e) will treat confidentially and as proprietary
information of the Fund all records and other information
relative to the Fund, any of 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.
4. Services Not Exclusive. Sub-Adviser's services
hereunder are not deemed 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.
5. Books and Records. In compliance with the
requirements of Rule 31a-3 under the 1940 Act, Sub-Adviser hereby
agrees that all records which it maintains for each 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.
6. Expenses. During the term of this Agreement, Sub-
Adviser will bear all costs and expenses of its employees and any
overhead incurred by Sub-Adviser in connection with its duties
hereunder; provided that the Board of Trustees of the Fund may
approve reimbursement to Sub-Adviser 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 investment advice required to be
provided hereunder) of all personnel employed by Sub-Adviser who
devote substantial time to Fund operations or the operations of
other investment companies advised or sub-advised by Sub-Adviser.
7. Compensation. For the services provided and the
expenses assumed pursuant to this Agreement, Adviser will pay to
Sub-Adviser a fee, computed daily and payable monthly, at the
annual rates set forth on Appendix A attached 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.
For purposes of the fee rates set forth on Appendix A,
the net assets of the Portfolios shall be calculated pursuant to
the procedures adopted by resolutions of the Fund's Board of
Trustees for calculating the value of the Fund's assets or
delegating such calculations to third parties.
If 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 any
Portfolio, 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 such Portfolio to the aggregate fees that would
otherwise be paid by the Fund to Adviser under the Advisory
Agreement with respect to such Portfolio. Adviser shall inform
Sub-Adviser prior to waiving any advisory fees.
8. Limitation of Liability. Sub-Adviser shall not be
liable for any error of judgment or mistake of law or for any
loss suffered by Adviser or by any 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.
9. Duration and Termination. This Agreement will
become effective as of the date hereof and, unless sooner
terminated with respect to a Portfolio as provided herein, shall
continue in effect with respect to the Portfolios until March 31,
2009. Thereafter, if not terminated, this Agreement shall
continue in effect with respect to the Portfolios 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 each
Portfolio. Notwithstanding the foregoing, this Agreement may be
terminated with respect to each 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 such Portfolio), or by Adviser or Sub-
Adviser on sixty 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 as such terms in the 1940 Act.)
10. 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.
11. 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.
12. 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.
13. 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.
14. 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 officers designated below as
of the day and year first above written.
BLACKROCK ADVISORS, LLC
By:________________________________
Name:
Title:
BLACKROCK FINANCIAL MANAGEMENT,
INC.
By:________________________________
Name:
Title:
[PAGE BREAK]
Appendix A
Portfolios and Sub-Advisory Fees
The information will be in the following order:
Portfolio
Sub-Advisory Fee (as a percentage of average daily net assets)
Enhanced Income Portfolio 0.150%
Low Duration Bond Portfolio
First $1 billion 0.350%
$1 billion - $2 billion 0.300%
$2 billion - $3 billion 0.275%
Over $3 billion 0.250%
Intermediate Government Bond Portfolio
First $1 billion 0.350%
$1 billion - $2 billion 0.300%
$2 billion - $3 billion 0.275%
Over $3 billion 0.250%
Intermediate Bond Portfolio II
First $1 billion 0.350%
$1 billion - $2 billion 0.300%
$2 billion - $3 billion 0.275%
Over $3 billion 0.250%
Total Return Portfolio II
First $1 billion 0.350%
$1 billion - $2 billion 0.300%
$2 billion - $3 billion 0.275%
Over $3 billion 0.250%
Total Return Portfolio
First $1 billion 0.350%
$1 billion - $2 billion 0.300%
$2 billion - $3 billion 0.275%
Over $3 billion 0.250%
Government Income Portfolio
First $1 billion 0.350%
$1 billion - $2 billion 0.300%
$2 billion - $3 billion 0.275%
Over $3 billion 0.250%
Inflation Protected Bond Portfolio
First $1 billion 0.250%
$1 billion - $2 billion 0.225%
$2 billion - $3 billion 0.200%
Over $3 billion 0.175%
GNMA Portfolio
First $1 billion 0.400%
$1 billion - $2 billion 0.350%
$2 billion - $3 billion 0.325%
Over $3 billion 0.300%
Managed Income Portfolio
First $1 billion 0.350%
$1 billion - $2 billion 0.300%
$2 billion - $3 billion 0.275%
Over $3 billion 0.250%
International Bond Portfolio
First $1 billion 0.400%
$1 billion - $2 billion 0.350%
$2 billion - $3 billion 0.325%
Over $3 billion 0.300%
High Yield Bond Portfolio
First $1 billion 0.350%
$1 billion - $2 billion 0.300%
$2 billion - $3 billion 0.275%
Over $3 billion 0.250%
AMT-Free Municipal Bond Portfolio
First $1 billion 0.350%
$1 billion - $2 billion 0.300%
$2 billion - $3 billion 0.275%
Over $3 billion 0.250%
Delaware Municipal Bond Portfolio
First $1 billion 0.400%
$1 billion - $2 billion 0.350%
$2 billion - $3 billion 0.325%
Over $3 billion 0.300%
Ohio Municipal Bond Portfolio
First $1 billion 0.350%
$1 billion - $2 billion 0.300%
$2 billion - $3 billion 0.275%
Over $3 billion 0.250%
Kentucky Municipal Bond Portfolio
First $1 billion 0.400%
$1 billion - $2 billion 0.350%
$2 billion - $3 billion 0.325%
Over $3 billion 0.300%
Long Duration Bond Portfolio
First $1 billion 0.350%
$1 billion - $2 billion 0.300%
$2 billion - $3 billion 0.275%
Over $3 billion 0.250%
A-2
