EXHIBIT Q1
FORM OF SUB-ADVISORY AGREEMENT
AGREEMENT dated as of June ______, 2008, between BB&T Asset
Management, Inc., a North Carolina corporation with an office in
Raleigh, North Carolina (herein called the "Investment Adviser") and
Artio Global Management LLC (formerly Xxxxxx Xxxx Investment Management
LLC), a Delaware limited liability company with an office in New York,
New York (such company 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.
