Exhibit (g)(3)
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SUB-INVESTMENT ADVISORY AGREEMENT
AGREEMENT dated as of July 19, 2001, between BlackRock
California Municipal Income 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 July 19, 2001 (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 invest ment 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 equiva ▇▇▇▇▇ 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
Agree ment, 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 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 de terminations
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 transac tion, 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 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 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
commis sions from one or both sides of the transaction, there is a potential
conflicting divi sion 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: (i) prior to July 31, 2002, to 38% of the monthly advisory fees
received by the Advisor, (ii) from August 1, 2002 to July 31, 2003, to 19% of
the monthly advisory fee received by the Advisor; and (iii) after July 31,
2003, 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 Agree
ment 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 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 unlaw ful; 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.
(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 indemnifica tion 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 ▇▇▇▇ ▇▇▇) 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.
(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 ▇▇▇▇ ▇▇▇) 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 Agree
ment 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 provi sions 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 other wise, 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 counter
parts 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 duly authorized officers designated below
as of the day and year first above written.
BLACKROCK ADVISORS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Title: President
BLACKROCK FINANCIAL MANAGEMENT, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Title: President
BLACKROCK CALIFORNIA
MUNICIPAL INCOME TRUST
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Title: President, Chief Executive Officer
and Chief Financial Officer