SUB-INVESTMENT ADVISORY AGREEMENT
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AGREEMENT dated as of April 19, 2002, between BlackRock California
Municipal Bond Trust, a Delaware business trust (the "Trust"), BlackRock
Advisors, Inc. a Delaware corporation (the "Advisor"), and BlackRock Financial
Management, Inc., a Delaware corporation (the "Sub-Advisor").
WHEREAS, the Advisor has agreed to furnish investment advisory services to
the Trust, 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 Trust;
WHEREAS, the advisory agreement between the Advisor and the Trust dated
April 19, 2002 (such Agreement or the most recent successor agreement between
such parties relating to advisory services to the Trust is referred to herein as
the "Advisory Agreement") contemplates that the Advisor may sub-contract
investment advisory services with respect to the Trust to a sub-advisor pursuant
to a sub-advisory agreement agreeable to the Trust 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 Trust 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 Trust's Board of Trustees, the Sub-Advisor 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 Advisor: (a) acting as
investment advisor for and managing the investment and reinvestment of those
assets of the Trust 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 Trust and in voting, exercising consents and
exercising all other rights appertaining to such securities and other assets on
behalf of the Trust; (b) arranging, subject to the provisions of paragraph 3
hereof, for the purchase and sale of securities and other assets held in the
investment portfolio of the Trust; (c) providing investment research and credit
analysis concerning the Trust's investments, (d) assist the Advisor in
determining what portion of the Trust'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 Trust, and (f) maintaining the books
and records as are required to support Trust 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 Trust's Board of
Trustees, provide to the Advisor or the Trust any of the facilities and
equipment and perform any of the services described in Section 3 of the Advisory
Agreement. In addition, the Sub-Advisor will keep the Trust and the Advisor
informed of developments materially affecting the Trust and shall, on its own
initiative, furnish to the Trust 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
Trust, 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 Trust under the Advisory Agreement. The
Sub-Advisor will provide the services rendered by it under this Agreement in
accordance with the Trust'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 Trust's Prospectus and Statement of Additional
Information and the resolutions of the Trust's Board of Trustees.
3. Covenants. 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:
(a) (i) the provisions of the 1940 Act and the Investment Advisers Act
of 1940, as amended (the "Advisers Act") and all applicable Rules and
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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, as amended and restated, and By-Laws of the Trust, as such
documents are amended from time to time; (iv) the investment objectives and
policies of the Trust as set forth in its Registration Statement on Form N-2;
and (v) any policies and determinations of the Board of Trustees of the Trust;
(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-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 Trust 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 Trust's 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 addition, the Sub-Advisor is authorized to take
into account the sale of shares of the Trust in allocating purchase and sale
orders for portfolio securities to brokers or dealers (including brokers and
dealers that are affiliated with the Advisor or the Sub-Advisor), provided that
the Sub-Advisor 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 Trust's securities be purchased from or sold to the Advisor,
the Sub-Advisor or any affiliated person thereof, except to the extent permitted
by the SEC or by applicable law;
(c) will maintain books and records with respect to the Trust's
securities transactions and will render to the Advisor and the Trust'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 the Sub-Advisor makes investment recommenda-
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tions for the Trust, its investment advisory personnel will not inquire or take
into consideration whether the issuer of securities proposed for purchase or
sale for the Trust's account are customers of the commercial department of its
affiliates; and
(e) will treat confidentially and as proprietary information of the
Trust all records and other information relative to the Trust, and the Trust's
prior, current or potential shareholders, and will not use such records and
information for any purpose other than performance of its responsibilities and
duties hereunder, except after prior notification to and approval in writing by
the Trust, 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 Trust.
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 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-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. Agency Cross Transactions. From time to time, the Sub-Advisor or brokers
or dealers affiliated with it may find themselves in a position to buy for
certain of their brokerage clients (each an "Account") securities which the
Sub-Advisor'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 Advisor 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
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the advisory client's consent. This is because in a situation where the
Sub-Advisor is making the investment decision (as opposed to a brokerage client
who makes his own investment decisions), and the Sub-Advisor 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-Advisor's part regarding the advisory client. The Securities and Exchange
Commission has adopted a rule under the Advisers Act which permits the
Sub-Advisor 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-Advisor 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-Advisor.
7. 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 Trust 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 Trust operations (other
than the provision of investment advice and administrative services required to
be provided hereunder) of all personnel employed by the Sub-Advisor who devote
substantial time to the Trust operations or the operations of other investment
companies advised or sub-advised by the Sub-Advisor.
8. 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 (i)
prior to April 30, 2003, 38% of the monthly advisory fees received by the
Advisor, (ii) from May 1, 2003 to April 30, 2004, 19% of the monthly advisory
fee received by the Advisor; and (iii) after April 30, 2004, 0% of the advisory
fees received by the Advisor; provided that thereafter the Sub-Advisor may be
compensated at cost for any services rendered to the Trust at the request of the
Advisor and approved of by the Board of Trustees. 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 Managed Assets of the Trust
shall be calculated pursuant to the procedures adopted by resolutions of
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the Trustees of the Trust for calculating the value of the Trust's assets or
delegating such calculations to third parties.
9. Indemnity.
(a) The Trust 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
Trust 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 Trust 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
Trust 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
Trust 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
prosecution of such action, suit or other proceeding by such Indemnitee was
authorized by a majority of the full Board of Trustees of the Trust.
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(b) The Trust shall make advance payments in connection with the
expenses of defending any action with respect to which indemnification might be
sought hereunder if the Trust 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 Trust unless it is
subsequently determined that such Indemnitee is entitled to such indemnification
and if the trustees of the Trust 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 Trust shall be insured against losses arising by
reason of any lawful advance, or (C) a majority of a quorum consisting of
trustees of the Trust who are neither "interested persons" of the Trust (as
defined in Section 2(a)(19) of the 0000 Xxx) nor parties to the proceeding
("Disinterested Non-Party Trustees") 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 Trust, 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.
10. 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 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.
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(b) Notwithstanding anything to the contrary contained in this
Agreement, the parties hereto acknowledge and agree that, as provided in Section
5.1 of Article V of the Declaration of Trust, as amended and restated, this
Agreement is executed by the Trustees and/or officers of the Trust, not
individually but as such Trustees and/or officers of the Trust, and the
obligations hereunder are not binding upon any of the Trustees or Shareholders
individually but bind only the estate of the Trust.
11. Duration and Termination. This Agreement shall become effective as of
the date hereof and, unless sooner terminated with respect to the Trust 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
Trust for successive periods of 12 months, provided such continuance is
specifically approved at least annually by both (a) the vote of a majority of
the Trust's Board of Trustees or a vote of a majority of the outstanding voting
securities of the Trust at the time outstanding and entitled to vote and (b) by
the vote of a majority of the Trustees, who are not parties to this Agreement or
interested persons (as such term is defined in the 0000 Xxx) of any such party,
cast in person at a meeting called for the purpose of voting on such approval.
Notwithstanding the foregoing, this Agreement may be terminated by the Trust or
the 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 Trust or the Advisor 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-Advisor on 60
days' written notice (which notice may be waived by the Trust and the Advisor),
and will terminate automatically upon any termination of the Advisory Agreement
between the Trust 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.)
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.
13. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an
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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. 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.
15. 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.
16. 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.
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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, INC.
By: /s/ Xxxx Xxxxxxxx
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Name: Xxxx X. Xxxxxxxx
Title: Managing Director
BLACKROCK FINANCIAL MANAGEMENT, INC.
By: /s/ Xxxx Xxxxxxxx
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Name: Xxxx X. Xxxxxxxx
Title: Managing Director
BLACKROCK CALIFORNIA MUNICIPAL BOND TRUST
By: /s/ Xxxx Xxxxxxxx
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Name: Xxxx X. Xxxxxxxx
Title: Secretary
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