SUB-ADVISORY AGREEMENT
AGREEMENT dated as of August 1, 2007, between BB&T Asset
Management, Inc., a North Carolina corporation with an office in
Raleigh, North Carolina (herein called the "Investment Adviser")
and Xxxxxx Xxxx Investment Management LLC, a Delaware limited
liability company with an office in New York, New York (herein
called the "Sub-Adviser").
WHEREAS, the Investment Adviser is the investment adviser
to BB&T Funds, a Massachusetts business trust (herein called the
"Trust"), an open-end management investment company registered
under the Investment Company Act of 1940, as amended ("40 Act");
and
WHEREAS, the Investment Adviser wishes to retain the Sub-
Adviser to assist the Investment Adviser in providing investment
advisory services in connection with such portfolios of the
Trust as now or hereafter may be identified on Schedule A hereto
as such Schedule may be amended from time to time with the
consent of the parties hereto (each herein called a "Fund").
WHEREAS, the Sub-Adviser is willing to provide such
services to the Investment Adviser upon the terms and conditions
and for the compensation set forth below.
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, and intending to be legally bound
hereby, it is agreed between the parties hereto as follows:
1. Appointment. the Investment Adviser hereby appoints
the Sub-Adviser its sub-adviser with respect to the Fund as
provided for in the Investment Advisory Agreement between the
Investment Adviser and the Trust dated as of February 1, 2001,
as amended and restated May 23, 2003 (such Agreement or the most
recent successor advisory agreement between such parties is
herein called the "Advisory Agreement"). The Sub-Adviser
accepts such appointment and agrees to render the services
herein set forth for the compensation herein provided.
2. Delivery of Documents. The Investment Adviser shall
provide to the Sub-Adviser copies of the Trust's most recent
prospectus and statement of additional information (including
supplement thereto) which relate to any class of shares
representing interests in the Fund (each such prospectus and
statement of additional information as presently in effect, and
as they shall from time to time be amended and supplemented, is
herein respectively called a "Prospectus" and a "Statement of
Additional Information").
3. Sub-Advisory Services to the Funds.
(a) Subject to the supervision of the Investment
Adviser, the Sub-Adviser will supervise the day-to-day
operations of the Fund and perform the following services: (i)
provide investment research and credit analysis concerning the
Fund's investments; (ii) conduct a continual program of
investment of the Fund's assets; (iii) place orders for all
purchases and sales of the investments made for the Fund; (iv)
maintain the books and records required in connection with its
duties hereunder; and (v) keep the Investment Adviser informed
of developments materially affecting the Fund.
(b) The Sub-Adviser will use the same skill and care
in providing such services as it uses in providing services to
fiduciary accounts for which it has investment responsibilities;
provided that, notwithstanding this Paragraph 3(b), the
liability of the Sub-Adviser for actions taken and non-actions
with respect to the performance of services under this Agreement
shall be subject to the limitations set forth in Paragraph 11(a)
of this Agreement.
(c) The Sub-Adviser will communicate to the
Investment Adviser and to the Trust's custodian and Fund
accountants as instructed by the Investment Adviser on each day
that a purchase or sale of a security is effected for the Fund
(i) the name of the issuer, (ii) the amount of the purchase or
sale, (iii) the name of the broker or dealer, if any, through
which the purchase or sale will be affected, (iv) the CUSIP
number of the security, if any, and (v) such other information
as the Investment Adviser may reasonably require for purposes of
fulfilling its obligations to the Trust under the Advisory
Agreement.
(d) The Sub-Adviser will provide the services
rendered by it hereunder in accordance with the Sub-Adviser's
Investment Guidelines described in Exhibit A hereto subject at
all times to the terms of this Agreement and the Fund's
investment objectives, policies and restrictions as stated in
the Prospectus and Statement of Additional Information.
(e) The Sub-Adviser will not make loans, other than
margin loans, to any person to purchase or carry shares in the
Trust or make loans to the Trust.
(f) The Sub-Adviser will maintain records of the
information set forth in Paragraph 3(c) hereof with respect to
the securities transactions of the Fund and will furnish the
Trust's Board of Trustees with such periodic and special reports
as the Board may reasonably request.
(g) The Sub-Adviser will promptly review all (1)
reports of current security holdings in the Fund, (2) summary
reports of transactions and pending maturities (including the
principal, cost and accrued interest on each portfolio security
in maturity date order) and (3) current cash position reports
(including cash available from portfolio sales and maturities
and sales of the Fund's shares less cash needed for redemptions
and settlement of portfolio purchases), all within a reasonable
time after receipt thereof from the Trust and will report any
errors or discrepancies in such reports to the Trust or its
designee within three (3) business days after discovery of such
discrepancies.
(h) To the extent that exchange-traded futures
and over-the-counter derivatives transactions are permissible
investments for the BB&T International Equity Fund as set forth
in the Fund's Prospectus and Statement of Additional Information
and in accordance with the 40 Act, the Investment Adviser, on
behalf of the BB&T International Equity Fund, authorizes the
Sub-Adviser to enter into brokerage agreements with one or more
futures brokers and to enter into master netting agreements with
one or more professional counterparties as agent on behalf of
the BB&T International Equity Fund. In connection with such
transactions, the Sub-Adviser is authorized to pledge collateral
or margin in accordance with the BB&T International Equity
Fund's applicable requirements and restrictions as set forth in
the Fund's Prospectus and Statement of Additional Information
and in accordance with the 40 Act.
4. Brokerage. The Sub-Adviser may place orders
pursuant to its investment determinations for the Fund either
directly with the issuer or with any broker or dealer. In
placing orders, the Sub-Adviser will consider the experience and
skill of the firm's securities traders, as well as the firm's
financial responsibility and administrative efficiency. The
Sub-Adviser will attempt to obtain the best price and the most
favorable execution of its orders. Consistent with these
obligations, the Sub-Adviser may, subject to the approval of the
Board of Trustees of the Trust, select brokers on the basis of
the research, statistical and pricing services they provide to
the Fund. 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-Adviser
determines in good faith that such transaction is reasonable in
terms either of the transaction or the overall responsibility of
the Sub-Adviser to the Fund and its other clients and that the
total commissions paid by the Fund will be reasonable in
relation to the benefits in the Fund over the long term. In no
instance will portfolio securities be purchased from or sold to
the Trust's principal distributor, the Investment Adviser or any
affiliate thereof (as the term "affiliate" is defined in the 40
Act), except to the extent permitted under the 40 Act.
5. Compliance with Laws: Confidentiality: Conflicts of
Interest.
(a) The Sub-Adviser agrees that it will comply with
all applicable laws, rules and regulations of all federal and
state regulatory agencies having jurisdiction over the Sub-
Adviser in performance of its duties hereunder (herein called
the "Rules").
(b) The Sub-Adviser will treat confidentially and as
proprietary information of the Trust all records and information
relative to the Trust and prior, present 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-
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.
(c) The Sub-Adviser will maintain a policy and
practice of conducting sub-advisory services hereunder
independently of its broker-dealer operations or banking
operations of its affiliates. In making investment
recommendations for the Fund, the Sub-Adviser's personnel will
not inquire or take into consideration whether the issuers of
securities proposed for purchase or sale for the Fund's account
are its customers or bank customers of the Sub-Adviser's
affiliates unless so required by applicable law. In dealing
with their customers, affiliates of Sub-Adviser will not inquire
or take into consideration whether securities of those customers
are held by the Fund.
6. Control by Trust's Board of Trustees. Any
recommendations concerning the Fund's investment program
proposed by the Sub-Adviser to the Fund and the Investment
Adviser pursuant to this Agreement, as well as any other
activities undertaken by the Sub-Adviser on behalf of the Fund
pursuant thereto shall at all times be subject to any applicable
directives of the Board of Trustees of the Trust.
7. Services Not Exclusive. The Sub-Adviser's services
hereunder are not deemed to be exclusive, and the Sub-Adviser
shall be free to render similar or dissimilar services to others
so long as its services under this Agreement are not impaired
thereby. The Investment Adviser recognizes that the Sub-Adviser
remains bound by certain non-compete clauses that restrict the
Sub-Adviser from providing advice to funds that are offered or
otherwise sold or distributed through certain broker-dealers.
The Sub-Adviser may terminate this Agreement upon 90 days
written notice upon Sub-Adviser's sole determination that there
exists (a) a wholesale distribution arrangement involving this
Fund or (b) that the Fund is actively marketed or sold through
broker-dealers to persons who are otherwise non-clients of BB&T
Funds.
8. Books and Records. In compliance with the
requirements of Rule 31a-3 of the Rules, and any other
applicable Rule, the Sub-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 Sub-Adviser further
agrees to preserve for the periods prescribed by Rule 31a-2 and
any other applicable Rule, the records required to be maintained
by the Sub-Adviser hereunder pursuant to Rule 31a-1 and any
other applicable Rule.
9. Expenses. During the term of this Agreement, the Sub-
Adviser will bear all expenses incurred by it in connection with
the performance of its services under this Agreement other than
the cost of securities (including brokerage commissions, if any)
purchased for the Fund. Notwithstanding the foregoing, the Sub-
Adviser shall not bear expenses related to the operation of the
Trust or any Fund including, but not limited to, taxes,
interest, brokerage fees and commissions and any extraordinary
expense items.
10. Compensation.
(a) For the services provided and the expenses
assumed pursuant to this Agreement, the Investment Adviser will
pay the Sub-Adviser and the Sub-Adviser will accept as full
compensation therefor a fee computed daily and paid monthly in
arrears on the first business day of each month equal to the
lesser of (i) the fee at the applicable annual rates set forth
on Schedule A hereto or (ii) such fee as may from time to time
be agreed upon in writing by the Investment Adviser and the Sub-
Adviser. If the fee payable to the Sub-Adviser pursuant to this
paragraph begins to accrue after the beginning of any month or
if this Agreement terminates before the end of any month, the
fee for the period from such date to the end of such month or
from the beginning of such month to the date of termination, as
the case may be, shall be prorated according to the proportion
which such period bears to the full month in which such
effectiveness or termination occurs. For purposes of
calculating fees, the value of a Fund's net assets shall be
computed in the manner specified in the Prospectus and the
Trust's Declaration of Trust for the computation of the value of
the Fund's net assets in connection with the determination of
the net asset value of the Fund's shares. Payment of said
compensation shall be the sole responsibility of the Investment
Adviser and shall in no way be an obligation of the Fund or of
the Trust.
(b) The obligation of the Investment Adviser to pay
the above described fee to the Sub-Adviser will begin as of the
date of the initial public sale of shares of the Fund.
11. Limitation of Liability.
(a) The Sub-Adviser shall not be liable for any error
of judgement or mistake of law or for any loss suffered by the
Investment Adviser, the Trust or the Fund in connection with the
matters to which Agreement relates, except that Sub-Adviser
shall be liable to the Investment Adviser for a loss resulting
from a breach of fiduciary duty by Sub-Adviser under the 40 Act
with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith or gross
negligence on the part of Sub-Adviser in the performance of its
duties or from reckless disregard by it of its obligations or
duties under this Agreement. In no case shall the Sub-Adviser
be liable for actions taken or non-actions with respect to the
performance of services under this Agreement based upon specific
information, instructions or requests given or made to the Sub-
Adviser by the Investment Adviser.
(b) The Investment Adviser shall be responsible at
all times for supervising the Sub-Adviser, and this Agreement
does not in any way limit the duties and responsibilities that
the Investment Adviser has agreed to under the Advisory
Agreement.
12. Duration and Termination. This Agreement shall
become effective as of the date hereof provided that it shall
have been approved by vote of a majority of the outstanding
voting securities of the Fund and, unless sooner terminated as
provided herein, shall continue with respect to the Fund until
October 31, 2008. Thereafter, if not terminated, this Agreement
shall continue in effect for successive 12-month periods ending
on October 31st of each year, provided such continuance is
specifically approved at least annually (a) by the vote of a
majority of those members of the Board of Trustees of the Trust
who are not parties to this Agreement or interested persons of
the Trust or any such party, cast in person at a meeting called
for the purpose of voting on such approval, and (b) by the Board
of Trustees of the Trust or by vote of a majority of the
outstanding voting securities of the Fund; provided, however,
that this Agreement may be terminated with respect to the Fund
(i) by the Trust at any time without the payment of any penalty
by the Board of Trustees of the Trust, (ii) by vote of a
majority of the outstanding voting securities of the Fund, (iii)
by the Investment Adviser on 60 days written notice to the Sub-
Adviser or (iv) by the Sub-Adviser on 60 days written notice to
the Investment 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 meaning as such terms have in the 40 Act.)
13. Amendment of this Agreement. No provision of this
Agreement may be changed, discharged or terminated orally, but
only by an instrument in writing signed by the party against
which enforcement of the change, discharge or termination is
sought.
14. Miscellaneous. The captions in this Agreement are
included for convenience of reference only and in no way define
or delimit any 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
effected thereby. This Agreement shall be binding upon and
shall inure to the benefit of the parties herein and their
respective successors and shall be governed by Massachusetts
law.
The names "BB&T Funds" and "Trustees of BB&T Funds" refer
respectively to the Trust created and the Trustees, as trustees
but not individually or personally, acting from time to time
under an Agreement and Declaration of Trust dated as of October
1, 1987 to which reference is hereby made and a copy of which is
on file at the office of the Secretary of State of The
Commonwealth of Massachusetts and elsewhere as required by law,
and to any and all amendments thereto so filed or hereafter
filed. The obligations of "BB&T Funds" entered into in the name
or on behalf thereof by any of the Trustees, representatives or
agents are made not individually, but in such capacities, and
are not binding upon any of the Trustees, shareholders or
representatives of the Trust personally, but bind only the
assets of the Trust, and all persons dealing with any series of
shares of the Trust must look solely to the assets of the Trust
belonging to such series for the enforcement of any claims
against the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below as
of the day and year first above written.
BB&T ASSET MANAGEMENT, INC.
By: __/s/ Xxxxx Karlawish_____________
Name:__Keith Karlawish _____________
Title:___President___________________
XXXXXX XXXX INVESTMENT MANAGEMENT LLC
By: __/s/ Xxxxxxx X. Xxxxxxxx _________
Name:__Douglas W. Doucette__________
Title: __SVP_______________________
SCHEDULE A
To Sub-Advisory Agreement
Dated as of August 1, 2007
Between
BB&T Asset Management, Inc. and Xxxxxx Xxxx Investment
Management LLC
Name Of Fund Annual Rate Of Compensation
BB&T International Equity Fund 0.80% per annum of the
first $20 million of the
Fund's average daily net assets
0.60% per annum of the next $20
million of the Fund's average
daily net assets
0.50% per annum of the next
$60 million of the Fund's
average daily net assets
0.40% per annum thereafter
Consented to by:
Date: August 1, 2007 BB&T ASSET MANAGEMENT, INC.
By: __/s/ Xxxxx Karlawish_____
Date: August 1, 2007 XXXXXX XXXX INVESTMENT MANAGEMENT
LLC
By: __/s/ Xxxxxxx X. Xxxxxxxx
A-1
