EXHIBIT (G)(i)
INVESTMENT ADVISORY AGREEMENT
-----------------------------
AGREEMENT, dated December , 1998, between The BlackRock High Yield Trust
(the "Trust"), a Delaware business trust, and BlackRock Advisors, Inc. (the
"Adviser"), a Delaware corporation.
WHEREAS, Adviser has agreed to furnish investment advisory services to The
BlackRock High Yield Trust (the "Trust"), a closed-end management investment
company registered under the Investment Company Act of 1940 ("Act");
WHEREAS, this Agreement allows Adviser to sub-contract investment advisory
services with respect to the Trust to an affiliate or third party sub-adviser
pursuant to a sub-investment advisory agreement agreeable to the Trust and
approved in accordance with the provisions of the Act;
WHEREAS, it is contemplated that Adviser will engage BlackRock Financial
Management, Inc. (the "Sub-Adviser") as sub-adviser to provide it with sub-
advisory services as described in the Sub-Investment Advisory Agreement by and
between the Trust, the Adviser and the Sub-Adviser dated December , 1998; and
WHEREAS, this Agreement has been approved in accordance with the provisions
of the Act, and Adviser is willing to furnish such services upon the terms and
conditions herein set forth;
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. In General
----------
The Adviser agrees, all as more fully set forth herein, to act as
investment adviser to the Trust with respect to the investment of the Trust's
assets and to supervise and arrange the purchase of securities for and the sale
of securities held in the investment portfolio of the Trust.
2. Duties and Obligations of the Adviser with
Respect to Investments of Assets of the Trust
---------------------------------------------
(a) Subject to the succeeding provisions of this section and subject
to the direction and control of the Trust's Board of Trustees, the Adviser shall
(i) act as investment adviser for and supervise and manage the investment and
reinvestment of the Trust's assets and in connection therewith have complete
discretion in purchasing and
selling 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; (ii) supervise continuously the investment
program of the Trust and the composition of its investment portfolio; (iii)
arrange, 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; and (iv) engage an affiliate or third party sub-adviser to serve as sub-
investment adviser for all or a portion of the Trust's assets, pursuant to a
sub-investment advisory agreement agreeable to the Trust and approved in
accordance with the provisions of the Act;
(b) The Adviser shall give the Trust the benefit of its best judgment
and effort in rendering services hereunder, but the Adviser shall not be liable
for any act or omission or for any loss sustained by the Trust in connection
with the matters to which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of its reckless disregard of its obligations and duties
under this Agreement; and
(c) Nothing in this Agreement shall prevent the Adviser or any
officer, employee or other affiliate thereof from acting as investment adviser
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 Adviser 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 Adviser will undertake no activities
which, in its judgment, will adversely affect the performance of its obligations
under this Agreement.
3. Covenants . In the performance of its duties under this Agreement,
----------
the Adviser shall at all times conform to, and act in accordance with, any
requirements imposed by:
(a) (i) the provisions of the 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;
(iii) the provisions of the Agreement and Declaration of Trust and By-Laws of
the Trust, as such documents are amended from time to time; (iv) the investment
objective 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, Adviser will attempt to obtain the best price
and the most favorable execution of its orders. In placing orders, Adviser will
consider the experience and skill of the firm's securities traders as well as
the firm's financial responsibility and administra-
2
tive efficiency. Consistent with this obligation, Adviser may, subject to the
approval of the Trust's Board of Trustees, select brokers on the basis of the
research, statistical and pricing services they provide to the Trust and other
clients of Adviser or any 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 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 Adviser determines in good faith that such
commission is reasonable in terms either of the transaction or the overall
responsibility of Adviser and any sub-adviser 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, Adviser
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 Adviser or any sub-
adviser), provided that Adviser 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 Adviser, any sub-adviser or any affiliated person thereof, except to the
extent permitted by the SEC or by applicable law;
(c) will maintain or cause the Sub-Adviser to maintain books and
records with respect to the Trust's securities transactions and will render to
the Sub-Adviser 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 Adviser 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 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 Trust.
4. Expenses. The Adviser will bear all costs and expenses of its
--------
employees and any overhead incurred in connection with its duties hereunder and
shall bear the costs of any salaries or trustees fees of any officers or
trustees of the Trust who are affili-
3
ated persons (as defined in the Act) of the Adviser except that the Board of
Trustees of the Trust may approve reimbursement to the Adviser 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) of all personnel employed by the Adviser who
devote substantial time to Trust operations or the operations of other
investment companies advised by the Adviser;
5. Compensation of the Adviser.
---------------------------
(a) The Trust agrees to pay to the Adviser and the Adviser
agrees to accept as full compensation for all services rendered by the Adviser
as such, a monthly fee in arrears at an annual rate equal to 1.05% of the
average weekly value of the Trust's Managed Assets. "Managed Assets" means the
total assets of the Trust minus the sum of accrued liabilities (other than the
aggregate indebtedness constituting financial leverage). 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 Trust
shall be calculated pursuant to the procedures adopted by resolutions of the
Trustees of the Trust for calculating the net asset value of the Trust's shares
or delegating such calculations to third parties.
6. Books and Records. In compliance with the requirements of Rule 31a-3
-----------------
under the Act, the Adviser 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 Adviser further
agrees to preserve for the periods prescribed by Rule 31a-2 under the Act the
records required to be maintained by Rule 31a-1 under the Act.
7. Agency Cross Transactions.
-------------------------
[From time to time, the Adviser 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 Adviser'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 Adviser 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 Adviser is
making the investment decision (as opposed to a brokerage client who makes his
own investment decisions), and the Adviser or an affiliate is receiving
commissions from one or both sides of the transaction, there is a potential
conflicting division of loyalties and responsi-
4
bilities on the Adviser's part regarding the advisory client. The Securities and
Exchange Commission has adopted a rule under the Investment Advisers Act of
1940, as amended which permits the Adviser 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 Adviser 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 Adviser.]
8. Indemnity
---------
(a) The Trust hereby agrees to indemnify the Adviser, any sub-
adviser and each of the Adviser's or sub-adviser'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 Adviser's or sub-adviser'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
corporate 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.
5
(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 Act) 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.
9. Limitation on Liability. The Adviser will not be liable for any error
-----------------------
of judgment or mistake of law or for any loss suffered by Adviser 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 obligations or duties under this Agreement.
10. Duration and Termination
------------------------
This Agreement shall become effective as of the date hereof, unless sooner
terminated with respect to the Trust as provided herein, and shall continue in
effect for a period of two years. Thereafter, if not terminated, this Agreement
shall continue in effect
6
with respect to the Trust for successive annual periods ending [December 31],
provided such continuance is specifically approved at least annually (a) by the
vote of a majority of those members of the Trust'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, or (b) by a vote of a
majority of the outstanding voting securities of the Trust. Notwithstanding the
foregoing, this Agreement may be terminated by the Trust at any time, without
the payment of any penalty, upon giving the Adviser 60 days' notice (which
notice may be waived by the Adviser), provided that such termination by the
Trust 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"
(as defined in the Act) of the voting securities of the Trust at the time
outstanding and entitled to vote, or by the Adviser on 60 days' written notice
(which notice may be waived by the Trust), and will terminate automatically upon
any termination of the Sub-Investment Advisory Agreement between the Trust, the
Adviser and the Sub-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 of such terms in the 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. 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 Act.
13. Governing Law
-------------
This Agreement shall be 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 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.
7
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.
[End of Text]
8
IN WITNESS WHEREOF, the parties hereto have caused the foregoing instrument
to be executed by their duly authorized officers, all as of the day and the year
first above written.
THE BLACKROCK HIGH YIELD TRUST
By:_________________________________
Name:
Title:
BLACKROCK ADVISORS, INC.
By:_________________________________
Name:
Title:
9
BlackRock Advisors, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
December , 1998
The BlackRock High Yield Trust
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Gentlemen:
We are writing to confirm our understanding that The BlackRock High
Yield Trust (the "Trust") has a nonexclusive, revocable license to use the word
"BlackRock" in its name and that if BlackRock Advisors, Inc. (the "Adviser")
ceases to be the investment adviser to the Trust, the Trust will cease using
such name as promptly as practicable, making all reasonable efforts to remove
"BlackRock" from its name including calling a special meeting of stockholders.
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, counsel to the Trust, has
informed us that the provision described above is implied in the Trust's
investment advisory agreement, and that continued use of the name "BlackRock" if
the Adviser ceases to be the investment adviser would probably violate those
provisions of the Investment Company Act of 1940 that require that the Trust's
name not be misleading.
Execution of this letter agreement on behalf of the Trust will signify
that the Trust understands that it has a nonexclusive, revocable license to the
use of the name "BlackRock."
BLACKROCK ADVISORS, INC.
By:_________________________________________
Name:
Title:
THE BLACKROCK HIGH YIELD TRUST
By:______________________________
Name:
Title: