SUB-ADVISORY AGREEMENT
Exhibit (d)(3)
AGREEMENT dated as of October 1, 2010 between Sterling Capital Management LLC, a North
Carolina limited liability company with an office in Raleigh, North Carolina (herein called the
“Investment Adviser”) and Xxxxx & Xxxxxxxxxxxx, LLC, a Virginia limited liability company with an
office in Richmond, Virginia (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 October 1, 2010 (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
supplements 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
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.
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
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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.
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.
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
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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
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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, 2011. 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.
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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 June 2, 2007 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.
| STERLING CAPITAL MANAGEMENT LLC | ||||||
| By: | /s/ Xxxxxxx X. Xxxxxx | |||||
| Name: | Xxxxxxx X. Xxxxxx | |||||
| Title: | Executive Director | |||||
| XXXXX & XXXXXXXXXXXX, INC. | ||||||
| By: | /s/ Xxxxxx X. Xxxxxx | |||||
| Name: | Xxxxxx X. Xxxxxx | |||||
| Title: | Managing Director | |||||
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SCHEDULE A
Sterling Capital Management LLC and Xxxxx & Xxxxxxxxxxxx, Inc.
| Name Of Fund | Annual Rate Of Compensation | |
BB&T Special Opportunities Equity Fund
|
0.48% of the Fund’s average daily net assets | |
BB&T Equity Income Fund
|
0.42% of the Fund’s average daily net assets |
Consented to by: |
||||||
| Date: October 1, 2010 | STERLING CAPITAL MANAGEMENT LLC | |||||
| By: | /s/ Xxxxxxx X. Xxxxxx | |||||
| Date: October 1, 2010 | XXXXX & XXXXXXXXXXXX, INC. | |||||
| By: | /s/ Xxxxxx X. Xxxxxx | |||||
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