EXHIBIT (d)(3)
Form of Sub-Advisory Agreement between BB&T Asset Management, Inc. and UBS
Global Asset Management (Americas) Inc.
FORM OF SUB-ADVISORY CONTRACT
This agreement (the "Contract"), dated as of _______________, 2003, is
between BB&T Asset Management, Inc., a North Carolina corporation with an office
in Raleigh, North Carolina (the "Manager"), and UBS Global Asset Management
(Americas) Inc., a Delaware corporation (the "Sub-Adviser").
RECITALS
(1) Manager has entered into an Investment Advisory Contract,
dated as of February 1, 2001 ("Advisory Contract"), with BB&T
Funds (the "Trust"), an open-end investment company registered
under the Investment Company Act of 1940, as amended (the
"1940 Act") with respect to the series of the Trust designated
as the International Equity Fund (the "Series");
(2) Manager wishes to retain the Sub-Adviser to furnish certain
investment advisory services to Manager and the Series; and
(3) The Sub-Adviser is willing to furnish such services upon the
terms and conditions and for the compensation set forth below.
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained, Manager and the Sub-Adviser agree as follows:
1. Appointment. Manager hereby appoints the Sub-Adviser as an
investment sub-adviser with respect to the Series for the period and on the
terms set forth in this Contract. The Sub-Adviser accepts that appointment and
agrees to render the services herein set forth, in exchange for the compensation
herein provided. The Sub-Adviser shall, for all purposes herein, be deemed to be
an independent contractor and shall not, except as expressly provided or
authorized, have the authority to act for or to represent the Series or the
Manager in any way or otherwise be deemed an agent of the Series or the Manager.
2. Duties as Sub-Adviser.
(a) Subject to the supervision and direction of the Trust's Board
of Trustees (the "Board") and review by Manager, and any written guidelines
adopted by the Board or Manager and furnished to the Sub-Adviser, the
Sub-Adviser will provide a continuous investment program for all or a designated
portion of the assets ("Segment") of the Series, including investment research
and discretionary management with respect to all securities and investments and
cash equivalents in the Series or Segment. The Sub-Adviser will determine from
time to time what investments will be purchased, retained or sold by the Series
or Segment. The Sub-Adviser will be responsible for placing purchase and sell
orders with broker-dealers, which may include broker-dealers affiliated with
Sub-Adviser, subject to compliance with Rule 17e-1 under the 1940 Act for
investments and for other related transactions for the Series or Segment.
Manager delegates to Sub-Adviser and Sub-Adviser shall have the responsibility
and authority to vote proxies solicited by, or with respect to, the issuers of
securities held in the Series or the Sub-Adviser's Segment of the Series.
Manager shall provide (or cause the Series' custodian to provide) to Sub-Adviser
all proxy solicitation materials and shall assist Sub-Adviser in its efforts to
conduct the proxy voting process. The Sub-Adviser will provide services under
this Contract in accordance with the Series' investment objective, policies and
restrictions as stated in the Trust's currently effective registration statement
under the 1940 Act, and any amendments or supplements thereto (the "Registration
Statement"). Manager agrees that Sub-Adviser shall not be charged with knowledge
of any of the foregoing until such information is received (in written form) by
Sub-Adviser.
(b) The Sub-Adviser agrees that, in placing orders with
broker-dealers, it will seek to obtain the best net result in terms of price and
execution; provided that, on behalf of the Series, the Sub-Adviser may, in its
discretion, use broker-dealers that provide the Sub-Adviser with research,
analysis, advice and similar services to execute portfolio transactions on
behalf of the Series or Segment, and the Sub-Adviser may pay to those
broker-dealers in return for brokerage and research services a higher commission
than may be charged by other broker-dealers, subject to the Sub-Adviser's
determining in good faith that such
commission is reasonable in terms either of the particular transaction or of the
overall responsibility of the Sub-Adviser and its affiliates to the Series or
its other clients over which they have investment discretion and that the total
commissions paid by the Series or Segment will be reasonable in relation to the
benefits to the Series over the long term. In no instance will portfolio
securities be purchased from or sold to the Manager, the Trust or the
Sub-Adviser, or any affiliated person thereof, except in accordance with the
federal securities laws and the rules and regulations thereunder. The
Sub-Adviser may aggregate sales and purchase orders with respect to the assets
of the Series or Segment with similar orders being made simultaneously for other
accounts advised by the Sub-Adviser or its affiliates. Whenever the Sub-Adviser
simultaneously places orders to purchase or sell the same security on behalf of
the Series and one or more other accounts advised by the Sub-Adviser, the orders
will be allocated as to price and amount among all such accounts over a period
of time on a fair and equitable basis relative to each account. Manager
recognizes that in some cases this procedure may adversely affect the results
obtained for the Series or Segment.
(c) The Sub-Adviser will maintain, in connection with the
Sub-Adviser's investment advisory obligations provided to the Series, all books
and records required to be maintained pursuant to the 1940 Act and the rules and
regulations promulgated thereunder with respect to transactions by the
Sub-Adviser on behalf of the Series or Segment, and will furnish the Board and
Manager with such periodic and special reports as the Board or Manager
reasonably may request. In compliance with the requirements of Rule 31a-3 under
the 1940 Act, the Sub-Adviser hereby agrees that all records that it maintains
for the Series are the property of the Trust, agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act any records that it maintains for
the Trust and that are required to be maintained by Rule 31a-1 under the 1940
Act, and further agrees to surrender promptly to the Trust any records or copies
thereof that it maintains for the Series upon request by the Trust or Manager;
provided, however, that Sub-Adviser may retain copies of any records to the
extent required for it to comply with applicable law. Notwithstanding the
foregoing, the Sub-Adviser has no responsibility for the maintenance of the
Trust's records, except insofar as directly related to the services provided to
the Series.
(d) At such times as shall be reasonably requested by the Board or
Manager, the Sub-Adviser will provide the Board and Manager with economic and
investment analyses and reports as well as quarterly reports setting forth the
performance of the Series or Segment and make available to the Board and Manager
any economic, statistical and investment services that the Sub-Adviser normally
makes available to its institutional or other customers.
(e) The Sub-Adviser will not make loans to any person to purchase
or carry shares in the Trust or make loans to the Trust.
(f) During the term of this Contract, the Sub-Adviser will bear
all expenses incurred by it in connection with the performance of its services
under this Contract, other than: the cost of securities (including brokerage
commissions, if any) purchased for the Series. Notwithstanding the foregoing,
the Sub-Adviser shall not bear expenses related to the operation of the Trust or
any Series including, but not limited to, taxes, interest, brokerage fees and
commissions and any extraordinary expense items.
(g) By SWIFT messaging, the Sub-Adviser will communicate to the
Manager and to the Trust's custodian and fund accountants as instructed by
Manager on each day that a purchase or sale of a security is effected for the
Series (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 was effected, (iv) the CUSIP number of the security, if any, and (v) such
other information as the Manager may reasonably require for purposes of
fulfilling its obligations to the Trust under the Advisory Contract.
(h) The Sub-Adviser will promptly review all (i) reports of
security holdings in the Series, (ii) summary reports of transactions and
pending maturities (including the principal, cost and accrued interest on each
portfolio security in maturity date order) and (iii) current cash position
reports (including cash available from portfolio sales and maturities and sales
of the Series' shares less cash needed for redemptions and settlement of
portfolio purchases), all within a reasonable time after receipt thereof from
the Trust (or the Series' custodian) and will report any material errors or
discrepancies in such reports to the Series' custodian within three (3) business
days after discovery of such discrepancies. Manager agrees
that Sub-Adviser shall not be charged with knowledge of any of the foregoing
until such information is received (in written form) by Sub-Adviser.
3. Further Duties. In all matters relating to the performance of
this Contract, the Sub-Adviser will (a) act in conformity with the Series'
investment strategies and restrictions as stated in the Trust's Registration
Statement and with the written instructions and written directions of the Board
or the Manager, subject to receipt of such additional information as may be
required from the Manager in accordance with this Contract, and (b) comply, in
connection with the Sub-Adviser's investment advisory obligations provided to
the Series, with the requirements of the 1940 Act and the Investment Advisers
Act of 1940, as amended ("Advisers Act") and with the rules under each, (c)
manage the Series so that, to the extent within the control of Sub-Adviser, the
Series will qualify at all times as a regulated investment company under
Subchapter M of the Internal Revenue Code ("Code"), as applicable to regulated
investment companies; and (d) comply with all other federal and state laws and
regulations applicable to the Trust and the Series.
Sub-Adviser does not represent or warrant that it will achieve the
investment objective of the Series.
4. Duties of Manager. Manager agrees to provide to the
Sub-Adviser copies of the Trust's current Registration Statement, written
instructions and directions of the Board and Manager, and any written policies
or procedures adopted by the Board applicable to the Series and any amendments,
revisions or supplements to any of these materials as soon as practicable after
such materials become available. Manager further agrees to identify to the
Sub-Adviser (in writing) any broker-dealers that are affiliated with the Manager
or the Trust. Manager shall provide (or cause the Series' custodian to provide)
timely information to Sub-Adviser regarding such matters as the composition of
assets of the Series, cash requirements and cash available for investment in the
Series, and all other reasonable information as may be necessary for Sub-Adviser
to perform its duties and responsibilities herein. Manager agrees that
Sub-Adviser shall not be charged with knowledge of any of the foregoing until
such information is received (in written form) by Sub-Adviser.
5. Compensation.
(a) For the services provided and the expenses assumed by the Sub-Adviser
pursuant to this Contract in respect of the Series, Manager will pay to the
Sub-Adviser a sub-advisory fee, specified in Exhibit A to this Contract. If the
Sub-Adviser is managing a Segment, its fees will be based on the value of assets
of the Series within the Sub-Adviser's Segment.
(b) If this Contract becomes effective or terminates as to the Series
before the calendar end of any month, the fee for the period from the effective
date to the end of the month or from the beginning of such month to the date of
termination, as the case may be, shall be pro-rated according to the proportion
that such period bears to the full month in which such effectiveness or
termination occurs with respect to such Series.
6. Limitation of Liability. Neither the Sub-Adviser, nor any of
its directors, officers, employees, agents, or affiliates shall be liable for
any error of judgment or mistake of law or for any loss suffered by the Series,
the Trust, the Manager or their shareholders, in connection with the matters to
which this Contract relates, except for losses resulting from the Sub-Adviser's
(a) willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties, or (b) from the reckless disregard of its obligations
and duties under this Contract. Nothing in this paragraph shall be deemed a
limitation or waiver of any obligation or duty that may not by law be limited or
waived.
7. Representations of the Sub-Adviser.
(a) The Sub-Adviser (i) is registered as an investment adviser
under the Advisers Act; (ii) is not prohibited by the 1940 Act, the Advisers
Act, or any other applicable federal, state, regulatory, or industry
self-regulatory agency's requirements, from performing the investment advisory
services contemplated by this Contract; (iii) has the authority to enter into
and perform the services contemplated by this Contract; and (iv) will promptly
notify Manager of any event that would disqualify the Sub-Adviser from providing
investment advisory services as a sub-adviser of an investment company pursuant
to Section 9(a) of the 1940 Act or a provision of the Advisers Act.
(b) The Sub-Adviser has adopted a written code of ethics and
appropriate procedures complying with the requirements of Rule 17j-1 under the
1940 Act and has provided Manager with a copy of such code of ethics. Manager
acknowledges receipt of Sub-Adviser's current code of ethics. Within thirty days
of the end of the last calendar quarter of each full or partial year that this
Contract is in effect, the appropriate compliance person of Sub-Adviser shall
provide to Manager any certifications required by Rule 17j-1 that the
Sub-Adviser has complied with the requirements of Rule 17j-1 during the previous
year and that there has been no material violation of the Sub-Adviser's code of
ethics or, if such a violation has occurred, that appropriate action was taken
in response to such violation.
(c) The Sub-Adviser has provided Manager with a copy of its Form
ADV (including Part II thereof), as most recently filed with the SEC.
8. Services Not Exclusive. The services furnished by the
Sub-Adviser hereunder are not to be deemed exclusive and the Sub-Adviser and its
affiliates shall be free to furnish similar services to others (including other
investment companies) so long as its services under this Contract are not
impaired thereby or unless otherwise agreed to by the parties hereunder in
writing. Nothing in this Contract shall limit or restrict the right of any
trustee, director, officer or employee of the Sub-Adviser, who may also be a
Trustee, officer, or employee of the Trust, to engage in any other business or
to devote his or her time and attention in part to the management or other
aspects of any other business, whether of a similar nature or a dissimilar
nature. Manager acknowledges that Sub-Adviser and its affiliates may give advice
and take actions in the performance of its duties to clients which differ from
the advice, or the timing and nature of actions taken, with respect to other
clients' accounts or employee accounts which may invest in some of the same
securities recommended to advisory clients. In addition, advice provided by the
Sub-Adviser may differ from advice given by its affiliates.
9. Duration and Termination.
(a) This Contract shall become effective as to the Series upon the
latest of (i) the date of its execution by both parties, (ii) the date of its
approval by a vote of a majority of those Trustees of the Trust who are not
parties to this Contract or interested persons of any such party ("Independent
Trustees"), cast in person at a meeting called for the purpose of voting on such
approval or (iii) if required by the 1940 Act, the date of its approval by a
majority of the respective Series' outstanding voting securities, unless in the
case of (iii), the Trust complies with the terms of any SEC exemptive order or
rule permitting it to enter into or modify the Contract without such vote.
(b) Unless sooner terminated as provided herein as to the Series,
this Contract shall continue until September 30, 2004. Thereafter, if not
terminated as to the Series, this Contract shall automatically renew and
continue thereafter for successive periods of 12 consecutive months each;
subject to the condition that such continuance is specifically approved at least
annually: (i) by a vote of a majority of Independent Trustees, cast in person at
a meeting called for the purpose of voting on such approval, and (ii) by either
the Board or by a vote of a majority of the outstanding voting securities of
such Series.
(c) Notwithstanding the foregoing, with respect to the Series,
this Contract may be terminated at any time, without the payment of any penalty,
by vote of the Board or by a vote of a majority of the outstanding voting
securities of the Series on not more than 60 days' written notice to the
Sub-Adviser. The Manager, after providing 60 days' prior written notice to
Sub-Adviser, may also terminate the Contract, without payment of penalty (i) in
the event of a material breach by the Sub-Adviser of any of the representations
and warranties set forth in Paragraph 7 of this Contract if such breach is not
cured within a 20 day period after written notice from Manager to Sub-Adviser of
such breach, or (ii) if, in the reasonable judgment of Manager, the Sub-Adviser
becomes unable to discharge its duties and obligations under this Contract. The
Sub-Adviser may terminate this Contract at any time, without payment of any
penalty, on 60 days' written notice to Manager. This Contract will terminate
automatically in the event of its assignment or upon termination of the Advisory
Contract as it relates to the Series, as applicable, except to the extent
permitted by Paragraph 16 hereof.
10. Amendment of this Contract. This Contract may not be waived,
modified, or amended without such waiver, modification, or amendment written in
an instrument signed by all parties hereto. No
amendment of this Contract as to the Series shall be effective until approved by
vote of (i) a majority of the Independent Trustees and (ii) a majority of the
Series' outstanding voting securities unless in the case of (ii), the Trust
complies with the terms of any SEC exemptive order or rule permitting it to
modify to the Contract without such vote. A party's failure to insist at any
time upon strict compliance with this Contract will not constitute a waiver by
either party of any of its rights.
11. Governing Law. This Contract shall be construed in accordance
with the 1940 Act and the laws of the State of Illinois, without giving effect
to the conflicts of laws principles thereof. To the extent that the applicable
laws of the State of Illinois conflict with the applicable provisions of the
1940 Act, the latter shall control.
12. Miscellaneous. (a) This Contract, including any Exhibits,
contains the entire understanding between Manager and the Sub-Adviser, with
respect to its subject matter and supercedes all prior and contemporaneous oral
and written understandings and agreements. The captions in this Contract 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 Contract shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Contract shall not
be affected thereby. This Contract shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors. As used in this
Contract, the terms "majority of the outstanding voting securities," "affiliated
person," "interested person," "assignment," "broker," "dealer," "investment
adviser," "net assets," "sale," "sell" and "security" shall have the same
meaning as such terms have in the 1940 Act, subject to such exemption as may be
granted by the SEC by any rule, regulation or order. Where the effect of a
requirement of the federal securities laws reflected in any provision of this
Contract is made less restrictive by a rule, regulation or order of the SEC,
whether of special or general application, such provision shall be deemed to
incorporate the effect of such rule, regulation or order. This Contract may be
signed in counterpart.
(b) Sub-Adviser acknowledges that it will provide its services
hereunder in accordance with its fiduciary obligations and will manage the
Series only in the best interests of the Series.
13. Notices. Any notice herein required is to be in writing and is
deemed to have been given to the Sub-Adviser or Manager upon receipt of the same
at their respective addresses set forth below. All written notices required or
permitted to be given under this Contract will be delivered by personal service,
by postage mail - return receipt requested, or by facsimile machine or a similar
means of same day delivery which provides evidence of receipt (with a confirming
copy by mail as set forth herein). All notices provided to Manager will be sent
to the attention of Xxxxx Xxxxxxxxx, at 000 Xxxxxxxxxxxx Xxxxxx Xxxx, Xxxxxxx,
Xxxxx Xxxxxxxx 00000. All notices provided to the Sub-Adviser will be sent to
the attention of Xxxx Xxxxx, UBS Global Asset Management, 00 X. 00xx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000.
14. Use of Name of Sub-Adviser. Without the prior express written
consent of the Sub-Adviser, Manager agrees that it shall not (i) use the name,
logo, insignia, or other identifying xxxx of Sub-Adviser or any affiliated
person of Sub-Adviser or any derivative of any logo or trade or service xxxx
thereof, or (ii) describe Sub-Adviser, or any affiliated person of Sub-Adviser,
or disclose information related to the business of the Sub-Adviser or any of its
affiliates, in any manner, in any materials, including registration statements
and marketing and sales materials, without (a) providing such materials to
Sub-Adviser within a reasonable time prior to such proposed use, and providing
Sub-Adviser reasonable time to approve, modify or reject such materials; and (b)
Sub-Adviser's written prior approval thereof. Sub-Adviser agrees that it shall
not unreasonably withhold approval of any such materials. Manager and
Sub-Adviser agree that, as between the parties, the Sub-Adviser owns all rights,
title, and interest to (and shall remain the exclusive owner of) all
intellectual property rights related to "UBS".
15. Disclosure. Manager acknowledges receipt of the Sub-Adviser's
Form ADV, Part II, more than forty-eight (48) hours prior to execution of this
Contract.
16. Supplemental Services. The Sub-Adviser may enter into
arrangements with other persons affiliated with the Sub-Adviser, or with
unaffiliated third parties, to better enable the Sub-Adviser to fulfill its
obligations under this Contract for the provision of certain personnel and
facilities to the Sub-Adviser.
17. Confidentiality.
Each party to this Contract shall keep confidential any nonpublic
information concerning the other party and will not use or disclose such
information for any purpose other than the performance of its responsibilities
and duties hereunder, unless the non-disclosing party has authorized in writing
such disclosure or if such disclosure is expressly required by applicable
federal or state regulatory authorities. Nonpublic information shall not include
information a party to this Contract can clearly establish was (a) known to the
party prior to this Contract and in possession of the receiving party who in
good faith believes that such information is without any obligation of
confidentiality; (b) rightfully acquired by the party from third parties whom
the party reasonably believes are not under an obligation of confidentiality to
the other party to this Contract; (c) placed in public domain without fault of
the party or its affiliates; or (d) independently developed by the party without
reference or reliance upon the nonpublic information.
18. Representations of the Manager.
The Manager represents that it (i) has obtained all approvals required
under the 1940 Act, (ii) is not prohibited by any contract, or by the 1940 Act,
the Advisers Act, or any other applicable federal, state, regulatory, or
industry self-regulatory agency's requirements, from entering this Contract,
(iii) is registered as an investment adviser under the Advisers Act; (iv) has
the authority to enter into this Contract; and (v) will promptly notify
Sub-Adviser upon termination of the Advisory Contract as it relates to the
Series.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their duly authorized signatories as of the dates written below.
BB&T Asset Management, Inc. UBS Global Asset Management (Americas) Inc.
By:____________________________ By:____________________________
Name:__________________________ Name:__________________________
Title:_________________________ Title:_________________________
Date:__________________________ Date:__________________________
By:____________________________
Name:__________________________
Title:_________________________
EXHIBIT A
FEE SCHEDULE
For the services provided by Sub-Adviser pursuant to the attached Sub-Advisory
Contract, the Manager will pay the Sub-Adviser a fee, computed daily and payable
monthly, based on the average daily net assets at the following annual rates.
ANNUAL ADVISORY FEE
PAYABLE BY MANAGER
FUND TO SUB-ADVISER
---- ------------------
BB&T International Equity Fund On the first $50,000,000 0.45%
On the next $50,000,000 0.43%
On the next $100,000,000 0.38%
On the next $300,000,000 0.38%
