BlackRock Funds (the "Registrant"): BlackRock Global Long/Short Equity Fund
(the "Fund")
77Q1(e):
Copies of any new or amended Registrant investment advisory contracts
Attached please find as an exhibit to Sub-Item 77Q1(e) of Form N-SAR, a copy of
the Sub-Advisory Agreement between BlackRock Advisors, LLC and BlackRock
International Limited with respect to the Fund.
EXHIBIT 77Q1(E)
SUB-INVESTMENT ADVISORY AGREEMENT
AGREEMENT dated , 2016, between BlackRock Advisors, LLC, a
Delaware limited liability company (the "Advisor"), and BlackRock International
Limited, a corporation organized under the laws of Scotland (the "Sub-Advisor").
WHEREAS, the Advisor has agreed to furnish investment advisory services to
BlackRock Global Long/Short Equity Fund (the "Fund"), a series of BlackRock
Funds/SM/, a Massachusetts business trust (the "Trust"), which is an open-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 Fund;
WHEREAS, the amended investment advisory agreement between the Advisor and
the Trust, dated September 29, 2006 (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 Fund
to a sub-advisor; 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 Fund and the Sub-Advisor accepts such
appointment and agrees to render the services herein set forth for the
compensation herein provided. For the purposes of the rules of the Financial
Conduct Authority of the United Kingdom and based on information obtained in
respect of the Advisor, the Advisor will be treated by the Sub-Advisor as a
professional client. The Advisor acknowledges and accepts this categorization.
The Advisor has the right to request a different categorization at any time
from the Sub-Advisor, however the Sub-Advisor only provides the services to
professional clients and will no longer be able to provide services to the
Advisor in the event of a request for a change in categorization.
2. Services of the Sub-Advisor. Subject to the succeeding provisions of this
section, the oversight and supervision of the Advisor and the Trust's Board of
Trustees, the Sub-Advisor will perform certain of the day-to-day operations of
the Fund, 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 Fund 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 Fund and in
voting, exercising consents and
exercising all other rights appertaining to such securities and other assets on
behalf of the Fund; (b) arranging, subject to the provisions of Section 3
hereof, for the purchase and sale of securities and other assets of the Fund;
(c) providing investment research and credit analysis concerning the Fund's
investments, (d) assisting the Advisor in determining what portion of the
Fund'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 Fund, and (f) maintaining the books and records as are required to
support Fund investment operations. At the request of the Advisor, the
Sub-Advisor will also, subject to the oversight and supervision of the Advisor
and 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 4 of the Advisory Agreement. In addition, the Sub-Advisor will keep the
Trust and the Advisor informed of developments materially affecting the Fund
and shall, on its own initiative, furnish to the Fund 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 Fund, 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 will be 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 Fund's investment objectives, policies and
restrictions as stated in the Fund's Prospectus and Statement of Additional
Information (as currently in effect and as they may be amended or supplemented
from time to time) and the resolutions of the Trust's Board of Trustees.
The Sub-Advisor represents, warrants and covenants that it is authorized and
regulated by the Financial Conduct Authority ("FCA" and the applicable rules
promulgated by the FCA, the "FCA Rules").
References in this Agreement to the "Supplemental Disclosures" means any
document of that title provided to potential clients of the Sub-Advisor and its
delegates prior to investment that contains the Sub-Advisor's disclosures, as
amended and notified to the Advisor from time to time.
3. Covenants.
(a) 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: (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 Declaration of
Trust and Amended and Restated Code of Regulations of the Trust, as such
documents are amended from time to time; (iv) the investment objectives and
policies of the Fund as set forth in the Fund's Registration Statement on Form
N-1A and/or the resolutions of the Board of Trustees; and (v) any policies and
determinations of the Board of Trustees of the Trust.
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(b) In addition, the Sub-Advisor will:
(i) 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. The Advisor has been provided
with the Supplemental Disclosures which contain a copy of the Sub-Advisor's
order execution policy and hereby confirms that it has read and understood the
information in the order execution policy and agrees to it. In particular, the
Advisor agrees that the Sub-Advisor may trade outside of the regulated market
or multilateral trading facility. 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 Fund 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 Fund and their other clients and that the total commissions
paid by the Fund will be reasonable in relation to the benefits to the Fund
over the long-term. Subject to the foregoing and the provisions of the
1940 Act, the Securities Exchange Act of 1934, as amended, and other applicable
provisions of law, the Sub-Advisor may select brokers and dealers with which it
or the Fund is affiliated;
(ii) maintain books and records with respect to the Fund'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;
(iii) 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 Fund, its investment advisory personnel will not inquire or take into
consideration whether the issuer of securities proposed for purchase or sale
for the Fund's account are customers of the commercial department of its
affiliates; and
(iv) treat confidentially and as proprietary information of the Fund all
records and other information relative to the Fund, and the Fund's prior,
current or potential shareholders, and will not use such records and
information for any purpose other than performance of its responsibilities and
duties hereunder, except after prior notification to and approval in writing by
the Fund, which approval shall not be unreasonably withheld and may not be
withheld where 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 Fund.
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(c) In addition, the Advisor:
(i) agrees that the Sub-Advisor may, to the extent permitted by the
FCA Rules, aggregate transactions for the Fund with transactions for other
clients and/ or its own account, but shall be under no obligation to
aggregate transactions for the Fund. In relation to a particular order,
aggregation may operate on some occasions to the advantage of the Advisor
and on other occasions to the Advisor's disadvantage. However, it must be
unlikely that the aggregation of orders and transactions will work overall
to the disadvantage of the Advisor before transactions will be aggregated;
and
(ii) instructs the Sub-Advisor not to make or book client limit
orders (being a specific instruction from the Advisor to buy or sell a
financial instrument at a specified price limit or better and for a
specified size) in respect of securities admitted to trading on a regulated
market which are not immediately executed under prevailing market conditions.
(d) The Advisor acknowledges that the Sub-Advisor does not hold
"client money" and/or "safe custody assets" for the Advisor under the Client
Asset Rules (the "CASS Rules") of the FCA.
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 Fund 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. 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 Fund operations
(including, without limitation, compliance matters) (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 Fund operations or the operations of other investment companies advised
or sub-advised by the Sub-Advisor.
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7. 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 the
amount set forth in Schedule A hereto. For any period less than a month during
which this Agreement is in effect, the fee shall be prorated according to the
proportion which such period bears to a full month of 28, 29, 30 or 31 days, as
the case may be.
(b) For purposes of this Agreement, the net assets of the Fund shall be
calculated pursuant to the procedures adopted by resolutions of the Trustees of
the Trust for calculating the value of the Fund's assets or delegating such
calculations to third parties.
(c) If Advisor waives any or all of its advisory fee payable under the
Advisory Agreement, or reimburses the Trust pursuant to Section 8(b) of that
Agreement or an expense limitation agreement or other advisory fee waiver
agreement, with respect to the Fund, Sub-Advisor will bear its share of the
amount of such waiver or reimbursement by waiving fees otherwise payable to it
hereunder on a proportionate basis to be determined by comparing the aggregate
fees that would otherwise be paid to it hereunder with respect to the Fund to
the aggregate fees that would otherwise be paid by the Trust to Advisor under
the Advisory Agreement with respect to the Fund. Advisor shall inform
Sub-Advisor prior to waiving any advisory fees.
8. Indemnity.
(a) The Fund may, in the discretion of the Board of Trustees of the
Trust, 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
Fund 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 Fund 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
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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 Fund 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 Fund 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 Fund shall make advance payments in connection with the expenses
of defending any action with respect to which indemnification might be sought
hereunder if the Fund 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 Fund 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's undertaking, (B) the Fund shall be insured
against losses arising by reason of any unlawful 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 the standards for 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.
(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 or the
Fund 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. As used in this
Section 9(a), the term "Sub-Advisor" shall include any affiliates of the
Sub-Advisor performing services for the Fund contemplated hereby and partners,
directors, officers and employees of the Sub-Advisor and such affiliates.
6
(b) Notwithstanding anything to the contrary contained in this
Agreement, the parties hereto acknowledge and agree that, as provided in
Article Seven of the Declaration of Trust, 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.
10. Duration and Termination. This Agreement shall become effective as of
the date hereof and, unless sooner terminated with respect to the Fund 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 Fund 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 Fund 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 outstanding voting securities of the Fund 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.)
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. This Agreement may be amended by the
parties only if such amendment is specifically approved by the vote of the
Board of Trustees of the Trust, including a majority of those Trustees who are
not parties to this Agreement or interested persons of any such party cast in
person at a meeting called for the purpose of voting on such approval and,
where required by the 1940 Act, by a vote of a majority of the outstanding
voting securities of the Fund.
13. 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.
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14. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware for contracts to be performed
entirely therein without reference to choice of law principles thereof and in
accordance with the applicable provisions of the 1940 Act. To the extent that
the applicable laws of the State of Delaware, or any of the provisions,
conflict with the applicable provisions of the 1940 Act, the latter shall
control.
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.
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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, LLC
By. /s/ Xxxx X. Xxxxxxx
--------------------------------------
Name: Xxxx X. Xxxxxxx
Title: Managing Director
BLACKROCK INTERNATIONAL LIMITED
By. /s/ Xxx Xxxxxx
--------------------------------------
Name: Xxx Xxxxxx
Title: Managing Director
BLACKROCK INTERNATIONAL LIMITED
By. /s/ Xxxxx Xxxxx
--------------------------------------
Name: Xxxxx Xxxxx
Title: Managing Director
AGREED AND ACCEPTED
as of the date first set forth above
BLACKROCK FUNDS/SM/, on behalf of BlackRock Global Long/Short Equity Fund
By. /s/ Xxxx X. Xxxxxxxxx
---------------------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: President and Chief Executive Officer
Schedule A
Sub-Investment Advisory Fee
Pursuant to Section 7, for that portion of the Fund for which the
Sub-Advisor acts as sub-advisor, Advisor shall pay a fee to Sub-Advisor equal
to % of the advisory fee received by the Advisor from the Fund with
respect to such portion, net of: (i) expense waivers and reimbursements, (ii)
expenses relating to distribution and sales support activities borne by the
Advisor, and (iii) administrative, networking, recordkeeping, sub-transfer
agency and shareholder services expenses borne by the Advisor.
Schedule A-1
