SUB-INVESTMENT ADVISORY AGREEMENT
AGREEMENT dated as of July 16, 2002, between BlackRock
California Municipal Income Trust II, 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 July 16, 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:
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(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 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;
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(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 recommendations 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
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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 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 July 31, 2003, 38% of the monthly advisory fees received
by the Advisor, (ii) from August 1, 2003 to July 31, 2004, 19% of the monthly
advisory fee received by the Advisor; and (iii) after July 31, 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.
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(b) For purposes of this Agreement, the Managed
Assets of the Trust shall be calculated 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. 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
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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.
(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
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the performance of its duties or from reckless disregard by it of its duties
under this Agreement.
(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.
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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. 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 X. Xxxxxxxx
-----------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Managing Director
BLACKROCK FINANCIAL MANAGEMENT, INC.
By:/s/ Xxxx X. Xxxxxxxx
-----------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Managing Director
BLACKROCK CALIFORNIA MUNICIPAL
INCOME TRUST II
By:/s/ Xxxx X. Xxxxxxxx
-----------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Secretary
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