EXHIBIT (d)(7)
FORM OF
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of _______, 2006 between BB&T Funds, a Massachusetts
business trust (hereinafter called the "Trust"), and Sterling Capital Management
LLC, a subsidiary of BB&T Corporation (hereinafter called the "Investment
Adviser").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, the Trust desires to retain the Investment Adviser to furnish
certain investment advisory and related services described below in connection
with the management of each of the investment portfolios of the Trust identified
on Schedule A hereto (the "Funds"), and the Investment Adviser represents that
it is willing and possesses legal authority under the Xxxxx-Xxxxxxxx Act to so
furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Trust hereby appoints the Investment Adviser to act as
investment adviser to the Funds for the period and on the terms set forth in
this Agreement. The Investment Adviser accepts such appointment and agrees to
furnish the services herein set forth for the compensation herein provided.
2. Delivery of Documents. The Trust has furnished the Investment Adviser
with copies properly certified or authenticated of each of the following
documents:
(a) the Trust's Agreement and Declaration of Trust, dated October 1,
1987, as amended, and filed with the Secretary of State of The Commonwealth of
Massachusetts, and all amendments thereto or restatements thereof (such
Agreement and Declaration of Trust, as presently in effect and as it shall from
time to time be amended or restated, is herein called the "Declaration of
Trust");
(b) the Trust's Bylaws and amendments thereto;
(c) resolutions of the Trust's Board of Trustees authorizing the
appointment of the Investment Adviser and approving this Agreement;
(d) the Trust's original Notification of Registration on Form N-8A
under the 1940 Act as filed with the Securities and Exchange Commission on June
30, 1992 and all amendments thereto;
(e) the Trust's current Registration Statement on Form N-lA under the
Securities Act of 1933, as amended ("1933 Act"), and under the 1940 Act as filed
with the Securities and Exchange Commission; and
(f) the Funds' most recent prospectuses and the Trust's Statement of
Additional Information relating to the Funds (such prospectuses and Statement of
Additional Information, as presently in effect, and all amendments and
supplements thereto are herein collectively called the "Prospectus").
The Trust will promptly furnish the Investment Adviser with copies of all
amendments of or supplements to the foregoing documents.
3. Management. Subject to the supervision of the Trust's Board of Trustees,
the Investment Adviser will provide or cause to be provided a continuous
investment program for each Fund identified on Schedule A hereto, including
investment research and management with respect to all securities and
investments and cash equivalents in such Funds. The Investment Adviser will
determine or cause to be determined from time to time what securities and other
investments will be purchased, retained or sold by the Trust with respect to
each Fund identified on Schedule A hereto and will place or cause to be placed
orders for purchase and sale on behalf of the Trust with respect to such Fund.
The Investment Adviser will provide the services under this Agreement in
accordance with each Fund's investment objective, policies and restrictions as
stated in the Prospectuses, resolutions of the Trust's Board of Trustees, and
any undertakings with state or other regulatory authorities which are provided
by the Trust to the Investment Adviser. The Investment Adviser further agrees
that it:
(a) 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;
(b) will comply in all material respects with all applicable Rules and
Regulations of the Securities and Exchange Commission under the Investment
Company Act of 1940 and in addition will conduct its activities under this
Agreement in accordance with any applicable regulations pertaining to the
investment advisory activities of the Investment Adviser;
(c) will not make loans to any person to purchase or carry units of
beneficial interest ("shares") in the Trust or make loans to the Trust;
(d) will place or cause to be placed orders for the Funds identified
on Schedule A hereto either directly with the issuer or with any broker or
dealer and, in placing orders with brokers and dealers, the Investment Adviser
will attempt to obtain prompt execution of orders in an effective manner at the
most favorable price. Consistent with this obligation, when the execution and
price offered by two or more brokers or dealers are comparable, the Investment
Adviser may, in its discretion, purchase and sell portfolio securities to and
from brokers and dealers who provide the Investment Adviser with research advice
and other services. In no instance will portfolio securities be purchased from
or sold to BISYS Fund Services, Inc., the
Investment Adviser, or any affiliated person (as defined in the Investment
Company Act of 1940) of either the Trust, BISYS Fund Services, Inc., the
Investment Adviser.
(e) will treat confidentially and as proprietary information of the
Trust all records and other information relative to the Trust and prior,
present, or potential shareholders of the Trust learned by, or disclosed to, the
Investment Adviser in the course of its performance of its responsibilities and
duties under this Agreement, 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
Investment Adviser may be exposed to civil, regulatory, or criminal sanctions
for failure to comply when requested to divulge such information by duly
constituted authorities, or when so requested by the Trust; and
(f) will maintain its policy and practice of conducting its fiduciary
functions independently. In making investment recommendations for the Trust, the
Investment Adviser's personnel will not inquire or take into consideration
whether the issuers of securities proposed for purchase or sale for the Trust's
account are customers of the Investment Adviser, or the parents or subsidiaries
or affiliates of the Investment Adviser unless so required by applicable law. In
dealing with its customers, the Investment Adviser and its parents,
subsidiaries, and affiliates will not inquire or take into consideration whether
securities of those customers are held by the Trust.
4. Use of Sub-Investment Adviser. The Investment Adviser may, subject to
the approvals required under the 1940 Act, employ a sub-investment adviser to
assist the Investment Adviser in the performance of its duties under this
Agreement. Such use does not relieve the Investment Adviser of any duty or
liability it would otherwise have under this Agreement. Compensation of any such
sub-investment adviser for services provided and expenses assumed under any
agreement between the Investment Adviser and such sub-investment adviser
permitted under this paragraph is the sole responsibility of the Investment
Adviser.
5. Compliance Certification. The Investment Adviser shall provide a
certification that its policies and procedures are reasonably designed to
prevent violations of the Advisers Act, as is reasonably requested by the Trust.
In addition, the Investment Adviser will provide annually a written report of
its policies and procedures reasonably designed to prevent violations of the
Advisers Act to enable the Trust to fulfill its obligations under Rule 38a-1 of
the 1940 Act. The summary report will describe the Investment Adviser's policies
and procedures as they relate to the services it provides to the Funds, the
types of compliance risks material to the Funds, and will discuss the adequacy
of the Investment Adviser's compliance controls.
6. Services Not Exclusive. The investment management services furnished by
the Investment Adviser hereunder are not to be deemed exclusive. Except to the
extent necessary to perform the Investment Adviser's obligations under this
Agreement, nothing herein shall be deemed to limit or restrict the right of the
Investment Adviser, or any subsidiary or affiliate of the Investment Adviser, or
any employee of the Investment Adviser, to engage in any other business or to
devote time and attention to any other business, whether of a similar or
dissimilar nature, or to render services of any kind to any other person. The
Investment Adviser acts as
adviser to other clients and may give advice, and take action, with respect to
any of those which may differ from the advice given, or the timing or nature of
action taken, with respect to the Funds. The Investment Adviser shall have no
obligation to recommend the purchase or sale of any securities on the basis of
any information known to it or any of its officers or employees where the
utilization of such information, might, in the Investment Adviser's opinion,
constitute a violation of any federal or state laws, rules or regulations. The
Trust acknowledges that transactions in a specific security may not be
accomplished for all client accounts at the same time or at the same price.
7. Books and Records. In compliance with the requirements of Rule 3la-3
under the 1940 Act, the Investment 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 of such records upon the Trust's request.
The Investment Adviser further agrees to preserve for the periods prescribed by
Rule 3la-2 under the 1940 Act the records required to be maintained by Rule
3la-1 under the 1940 Act.
8. Expenses. During the term of this Agreement, the Investment Adviser will
pay all expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities (including brokerage commissions or
charges, if any) purchased for the Trust. The Trust will be responsible for all
of the Trust's expenses and liabilities.
9. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, each of the Funds will pay the Investment Adviser
and the Investment Adviser will accept as full compensation therefor a fee
computed daily and paid monthly on the first business day of each month equal to
the lesser of (i) the fee at the applicable annual rate set forth on Schedule A
hereto or (ii) such fee as may from time to time be agreed upon in writing by
the Trust and the Investment Adviser. If the fee payable to the Investment
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.
If in any fiscal year the aggregate expenses (as defined under the
securities regulations of any state having jurisdiction over the Trust) of any
of the Funds of the Trust exceed the expense limitations of any such state, the
Investment Adviser will make payment to the Trust for a portion of such excess
expenses equal to such excess times the ratio of the aggregate fees otherwise
payable by the Fund to the Investment Adviser under this Investment Advisory
Agreement to the aggregate fees otherwise payable by the Fund (1) to the
Investment Adviser under this Investment Advisory Agreement with the Trust and
(2) to BISYS Fund Services, Inc. under the Management and Administration
Agreement between BISYS Fund Services, Inc., and the Trust. The obligation of
the Investment Adviser to make payment to the Trust hereunder is limited in any
fiscal year to the amount of the fee received by the Investment Adviser from the
Fund for investment advisory or consulting services for such fiscal year,
provided, however, that notwithstanding the foregoing, the Investment Adviser
shall make payment to the Trust for such proportion of such excess expenses
regardless of the amount of fees received by it during such fiscal year to the
extent that the securities regulations of any state having jurisdiction over the
Trust so require. Such expense reimbursement, if any, will be estimated daily
and reconciled and paid on a monthly basis.
10. Limitation of Liability. The Investment Adviser shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the Funds in
connection with the performance of this Agreement, except a loss resulting from
a breach of fiduciary duty under the Investment Company Act of 1940 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 the Investment Adviser
in the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement. In no case shall the Investment
Adviser be liable for actions taken or nonactions with respect to the
performance of services under this Agreement based upon specific information,
instructions, or requests given or made to the Investment Adviser by an officer
of the Trust thereunto duly authorized. Any suggested limitations on liability
shall not relieve the Adviser from any responsibility or liability the Adviser
may have under federal statutes.
11. Duration and Termination. This Agreement will become effective as to a
particular Fund as of the date first written above, provided that it shall have
been approved by vote of a majority of the outstanding voting securities of such
Fund, in accordance with the requirements under the 1940 Act, and, unless sooner
terminated as provided herein, shall continue in effect until October 31, 2007.
Thereafter, if not terminated, this Agreement shall continue in effect as to a
particular Fund for successive periods of twelve months each ending on October
31 of each year, provided such continuance is specifically approved at least
annually (a) by the vote of a majority of those members of the Trust's Board of
Trustees who are not parties to this Agreement or interested persons of any
party to this Agreement, cast in person at a meeting called for the purpose of
voting on such approval, and (b) by the vote of a majority of the Trust's Board
of Trustees or by the vote of a majority of the outstanding voting securities of
such Fund. Notwithstanding the foregoing, this Agreement may be terminated as to
a particular Fund at any time on sixty days' written notice, without the payment
of any penalty, by the Trust (by vote of the Trust's Board of Trustees or by
vote of a majority of the outstanding voting securities of such Fund) or by the
Investment Adviser. This Agreement will immediately terminate in the event of
its assignment. (As used in this Agreement, the terms "majority of the
outstanding voting securities", "interested persons" and "assignment" shall have
the same meaning of such terms in the 1940 Act.)
12. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
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 upon and shall inure to the benefit of the
parties hereto and their respective successors and shall be governed by the laws
of The Commonwealth of Massachusetts.
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, as amended, 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 Funds
By:
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Title:
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Sterling Capital Management LLC
By:
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Title:
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______, 2006
Schedule A
to the
Investment Advisory Agreement between
BB&T Funds
and Sterling Capital Management LLC
dated _______, 2006
Name of Fund Compensation*
------------ -------------
Sterling Capital Small Cap Value Fund Annual rate of one percent (1.00%) of the
Sterling Capital Small Cap Value Fund's
average daily assets.
BB&T FUNDS
By:
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Title:
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STERLING CAPITAL MANAGEMENT LLC
By:
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Title:
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* All fees are computed daily and paid monthly.
