SUB-ADVISORY AGREEMENT
TOUCHSTONE LARGE CAP CORE EQUITY FUND
TOUCHSTONE STRATEGIC TRUST
This SUB-ADVISORY AGREEMENT is made as of May 1, 2009, by and between
TOUCHSTONE ADVISORS, INC., an Ohio corporation (the "Advisor"), and TODDO
VEREDUS ASSET MANAGEMENT LLC, a Kentucky limited liability corporation (the
"Sub-Advisor").
WHEREAS, the Advisor is an investment advisor registered under the
Investment Advisers Act of 1940, as amended, and has been retained by Touchstone
Strategic Trust (the "Trust"), a Massachusetts business trust organized pursuant
to an Agreement and Declaration of Trust dated November 18, 1982 and registered
as an open-end diversified management investment company under the Investment
Company Act of 1940 (the "1940 Act"), to provide investment advisory services
with respect to certain assets of the Touchstone Large Cap Core Equity Fund (the
"Fund"); and
WHEREAS, the Sub-Advisor also is an investment advisor registered under
the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Advisor desires to retain the Sub-Advisor to furnish it
with portfolio management services in connection with the Advisor's investment
advisory activities on behalf of the Fund, and the Sub-Advisor is willing to
furnish such services to the Advisor and the Fund;
NOW THEREFORE, in consideration of the terms and conditions hereinafter
set forth, it is agreed as follows:
1. EMPLOYMENT OF THE SUB-ADVISOR. In accordance with and subject to the
Investment Advisory Agreement between the Trust and the Advisor, attached hereto
as Exhibit A (the "Advisory Agreement"), the Advisor hereby appoints the
Sub-Advisor to manage the investment and reinvestment of that portion of the
assets of the Fund allocated to it by the Advisor (the "Fund Assets"), in
conformity with the Fund's currently effective Registration Statement,
prospectus and Statement of Additional Information and subject to the control
and direction of the Advisor and the Trust's Board of Trustees, for the period
and on the terms hereinafter set forth. The Sub-Advisor hereby accepts such
employment and agrees during such period to render the services and to perform
the duties called for by this Agreement for the compensation herein provided.
The Sub-Advisor shall at all times maintain its registration as an investment
advisor under the Investment Advisers Act of 1940 (the "Advisers Act") and shall
otherwise comply in all material respects with all applicable laws and
regulations, both state and federal. The Sub-Advisor shall for all purposes
herein be deemed an independent contractor and shall, except as expressly
provided or authorized (whether herein or otherwise), have no authority to act
for or represent the Trust in any way or otherwise be deemed an agent of the
Trust or the Fund.
2. DUTIES OF THE SUB-ADVISOR. The Sub-Advisor will provide the
following services and undertake the following duties:
a. The Sub-Advisor will manage the investment and reinvestment
of the Fund Assets, subject to and in accordance with the investment
objectives, policies and restrictions of the Fund and in conformity
with the Fund's currently effective Registration Statement, prospectus
and Statement of Additional Information and any directions which the
Advisor or the Trust's Board of Trustees may give from time to time
with respect to the Fund. In furtherance of the foregoing, the
Sub-Advisor will make all determinations with respect to the investment
of the Fund Assets and the purchase and sale of portfolio securities
and shall take such steps as may be necessary or advisable to implement
the same. The Sub-Advisor also will determine the manner in which
voting rights, rights to consent to corporate action and any other
rights pertaining to the portfolio securities will be exercised. The
Sub-Advisor will render regular reports to the Trust's Board of
Trustees and to the Advisor (or such other advisor or advisors as the
Advisor shall engage to assist it in the evaluation of the performance
and activities of the Sub-Advisor). Such reports shall be made in such
form and manner and with respect to such matters regarding the Fund and
the Sub-Advisor as the Trust or the Advisor shall from time to time
request; provided, however, that in the absence of extraordinary
circumstances, the individual primarily responsible for management of
Fund Assets for the Sub-Advisor will not be required to attend in
person more than one meeting per year with the trustees of the Trust.
b. The Sub-Advisor shall immediately notify the Advisor if the
Sub-Advisor reasonably believes that the value of any security held by
the Fund may not reflect fair value. The Sub-Advisor agrees to provide
any pricing information of which the Sub-Advisor is aware to the
Advisor and/or any Fund pricing agent to assist in the determination of
the fair value of any Fund holdings for which market quotations are not
readily available or as otherwise required in accordance with the 1940
Act or the Fund's valuation procedures for the purpose of calculating
the Fund's net asset value in accordance with procedures and methods
established by the Board.
c. Regulatory Compliance.
(i) The Sub-Advisor agrees to comply with the
requirements of the 1940 Act, the Advisers Act, the 1933 Act, the
Securities Exchange Act of 1934, as amended (the "1934 Act"), the
Commodity Exchange Act and the respective rules and regulations
thereunder, as applicable, as well as with all other applicable federal
and state laws, rules, regulations and case law that relate to the
services and relationships described hereunder and to the conduct of
its business as a registered investment adviser. In selecting the
Fund's portfolio securities and performing the Sub-Adviser's
obligations hereunder, the Sub-Advisor shall cause the Fund to comply
with the diversification and source of income requirements of
Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), for qualification as a regulated investment company. The
Sub-Advisor shall maintain compliance procedures that it reasonably
believes are adequate to ensure the compliance with the foregoing. No
supervisory activity undertaken by the Advisor shall limit the
Sub-Advisor's full responsibility for any of the foregoing.
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(ii) The Sub-Advisor has adopted a written code of
ethics that it reasonably believes complies with the requirements of
Rule 17j-1 under the 1940 Act, which it will provide to the Advisor and
the Fund. The Sub-Advisor shall ensure that its Access Persons (as
defined in the Sub-Advisor's Code of Ethics) comply in all material
respects with the Sub-Advisor's Code of Ethics, as in effect from time
to time. Upon request, the Sub-Advisor shall provide the Fund with (i)
a copy of the Sub-Advisor's current Code of Ethics, as in effect from
time to time, and (ii) a certification that it has adopted procedures
reasonably necessary to prevent Access Persons from engaging in any
conduct prohibited by the Sub-Advisor's Code of Ethics. No less
frequently than annually, the Sub-Advisor shall furnish a written
report, which complies with the requirements of Rule 17j-1, concerning
the Sub-Advisor's Code of Ethics to the Fund and the Advisor. The
Sub-Advisor shall respond to requests for information from the Advisor
as to violations of the Code by Access Persons and the sanctions
imposed by the Sub-Advisor. The Sub-Advisor shall immediately notify
the Advisor of any material violation of the Code, whether or not such
violation relates to a security held by any Fund.
(iii) The Sub-Advisor shall notify the Trust's Chief
Compliance Officer and Advisor immediately upon detection of (i) any
material failure to manage the Fund in accordance with its investment
objectives and policies or any applicable law; or (ii) any material
breach of any of the Fund's or the Adviser's policies, guidelines or
procedures as described in the Fund's Registration Statement or as
applicable to the Sub-Advisor's obligations under this Agreement. In
addition, the Sub-Advisor shall provide a quarterly report regarding
the Fund's compliance with its investment objectives and policies and
applicable law, including, but not limited to the 1940 Act, the Code,
and the Fund's and the Advisor's policies, guidelines or procedures as
applicable to the Sub-Advisor's obligations under this Agreement. The
Sub-Advisor acknowledges and agrees that the Advisor may, in its
discretion, provide such quarterly compliance certifications to the
Board. The Sub-Advisor agrees to correct any such failure promptly and
to take any action that the Board and/or the Advisor may reasonably
request in connection with any such breach. The Sub-Advisor shall also
provide the officers of the Trust, as reasonably requested, with
supporting certifications in connection with such certifications of
Fund financial statements and disclosure controls pursuant to the
Xxxxxxxx-Xxxxx Act. The Sub-Advisor will promptly notify the Trust in
the event (i) the Sub-Advisor is served or otherwise receives notice of
any action, suit, proceeding, inquiry or investigation, at law or in
equity, before or by any court, public board, or body, involving the
affairs of the Trust (excluding class action suits in which a Fund is a
member of the plaintiff class by reason of the Fund's ownership of
shares in the defendant) or the compliance by the Sub-Advisor with the
federal or state securities laws or (ii) an actual change in control
resulting in an "assignment" (as defined in the 1940 Act) has occurred
or is otherwise proposed to occur.
(iv) The Sub-Advisor shall maintain separate books
and detailed records of all matters pertaining to the Fund's assets
advised by the Sub-Advisor required by Rule 31a-1 under the 1940 Act
(other than those records being maintained by the Advisor, custodian or
transfer agent appointed by the Fund) relating to its responsibilities
provided hereunder with respect to the Fund, and shall preserve such
records for the periods and in a manner prescribed therefore by Rule
31a-2 under the 1940 Act (the "Fund Books and Records" ). The Fund
Books and Records shall be available to the Advisor and the Board at
any time upon request, shall be delivered to the Trust upon the
termination of this Agreement and shall be available for telecopying
without delay during any day the Fund is open for business.
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d. The Sub-Advisor shall provide support to the Advisor with
respect to the marketing of the Fund, including but not limited to: (i)
permission to use the Sub-Advisor's name as provided in Section 5, (ii)
permission to use the past performance and investment history of the
Sub-Advisor with respect to a composite of other funds managed by the
Sub-Advisor that are comparable, in investment objective and
composition, to the Fund, (iii) access to the individual(s) responsible
for day-to-day management of the Fund for marketing conferences,
teleconferences and other activities involving the promotion of the
Fund, subject to the reasonable request of the Advisor, (iv) permission
to use biographical and historical data of the Sub-Advisor and
individual manager(s), and (v) permission to use the names of those
clients pre-approved by the Sub-Advisor to which the Sub-Advisor
provides investment management services, subject to receipt of the
consent of such clients to the use of their names.
e. The Sub-Advisor will, in the name of the Fund, place orders
for the execution of all portfolio transactions in accordance with the
policies with respect thereto set forth in the Trust's registration
statements under the 1940 Act and the Securities Act of 1933, as such
registration statements may be in effect from time to time. When
placing orders with brokers and dealers, the Sub-Advisor's primary
objective shall be to obtain the most favorable price and execution
available for the Fund, and in placing such orders the Sub-Advisor may
consider a number of factors, including, without limitation, the
overall direct net economic result to the Fund (including commissions,
which may not be the lowest available but ordinarily should not be
higher than the generally prevailing competitive range), the financial
strength and stability of the broker, the efficiency with which the
transaction will be effected, the ability to effect the transaction at
all where a large block is involved and the availability of the broker
or dealer to stand ready to execute possibly difficult transactions in
the future. Consistent with the Conduct Rules of the Financial Industry
Regulatory Authority (FINRA), and subject to seeking most favorable
price and execution and compliance with Rule 12b-1(h) under the 1940
Act, the Sub-Advisor may select brokers and dealers to execute
portfolio transactions of the Fund that promote or sell shares of the
Fund. The Sub-Advisor is specifically authorized, to the extent
authorized by law (including, without limitation, Section 28(e) of the
1934 Act), to pay a broker or dealer who provides research services to
the Sub-Advisor an amount of commission for effecting a portfolio
transaction in excess of the amount of commission another broker or
dealer would have charged for effecting such transaction, in
recognition of such additional research services rendered by the broker
or dealer, but only if the Sub-Advisor determines in good faith that
the excess commission is reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer
viewed in terms of the particular transaction or the Sub-Advisor's
overall responsibilities with respect to discretionary accounts that it
manages, and that the Fund derives or will derive a reasonable benefit
from such research services. The Sub-Advisor will present a written
report to the Board of Trustees of the Trust, at least quarterly,
indicating total brokerage expenses, actual or imputed, as well as the
services obtained in consideration for such expenses, broken down by
broker-dealer and containing such information as the Board of Trustees
reasonably shall request.
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f. The Sub-Adviser shall maintain errors and omissions
insurance coverage in an appropriate amount and shall provide prior
written notice to the Trust (i) of any material changes in its
insurance policies or insurance coverage; or (ii) if any material
claims will be made on its insurance policies. Furthermore, the
Sub-Advisor shall, upon reasonable request, provide the Trust with any
information it may reasonably require concerning the amount of or scope
of such insurance.
g. In the event of any reorganization or other change in the
Sub-Advisor, its investment principals, supervisors or members of its
investment (or comparable) committee, the Sub-Advisor shall give the
Advisor and the Trust's Board of Trustees written notice of such
reorganization or change within a reasonable time (but not later than
30 days) after such reorganization or change.
h. The Sub-Advisor will bear its expenses of providing
services to the Fund pursuant to this Agreement except such expenses as
are expressly undertaken by the Advisor or the Trust.
3. COMPENSATION OF THE SUB-ADVISOR.
a. As compensation for the services to be rendered and duties
undertaken hereunder by the Sub-Advisor, the Advisor will pay to the
Sub-Advisor a monthly fee equal on an annual basis to _____________,
without regard to any total expense limitation of the Trust or the
Advisor. Such fee shall be computed and accrued daily. If the
Sub-Advisor serves in such capacity for less than the whole of any
period specified in this Section 3a, the compensation to the
Sub-Advisor shall be prorated. For purposes of calculating the
Sub-Advisor's fee, the daily value of the Fund Assets shall be computed
by the same method as the Trust uses to compute the net asset value of
the Fund for purposes of purchases and redemptions of shares thereof.
b. The Sub-Advisor reserves the right to waive all or a part
of its fees hereunder.
4. ACTIVITIES OF THE SUB-ADVISOR. It is understood that the Sub-Advisor
may perform investment advisory services for various other clients, including
other investment companies. The Trust and the Advisor further acknowledge that
the Sub-Advisor may serve as an investment advisor or sub-advisor to future
funds, which have the same, similar, or overlapping investment objectives.
Provided, however, that the Sub-Advisor represents and warrants that it has no
arrangement or understanding with any party, other than the Trust, that would
inappropriately influence the decision of the Sub-Advisor with respect to its
selection of securities for the Fund, and that all selections shall be done in
accordance with what is in the best interest of the Fund in a manner consistent
with the Sub-Advisor's fiduciary duty.
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The Sub-Advisor will report to the Board of Trustees of the Trust (at
regular quarterly meetings and at such other times as such Board of Trustees
reasonably shall request, subject to the limitation on personal attendance at
such meetings set forth in Section 2a) (i) the financial condition and prospects
of the Sub-Advisor, (ii) the nature and amount of transactions affecting the
Fund that involve the Sub-Advisor and affiliates of the Sub-Advisor, (iii)
information regarding any potential conflicts of interest arising by reason of
its continuing provision of advisory services to the Fund and to its other
accounts, and (iv) such other information as the Board of Trustees shall
reasonably request regarding the Fund, the Fund's performance, the services
provided by the Sub-Advisor and affiliates of the Sub-Advisor to the Fund as
compared to its other accounts and the plans of, and the capability of, the
Sub-Advisor with respect to providing future services to the Fund and its other
accounts. The Sub-Advisor agrees to submit to the Trust a statement defining its
policies with respect to the allocation of business among the Fund and its other
clients.
The Sub-Advisor has supplied to the Advisor and the Trust copies of its
Form ADV with all exhibits and attachments thereto (including the Sub-Advisor's
statement of financial condition) and will hereafter supply to the Advisor,
promptly upon the preparation thereof, copies of all amendments or restatements
of such document.
5. USE OF NAMES. Neither the Advisor nor the Trust shall use the name
of the Sub-Advisor in any prospectus, sales literature or other material
relating to the Advisor or the Trust in any manner not approved in advance by
the Sub-Advisor; provided, however, that the Sub-Advisor will approve all uses
of its name which merely refer in accurate terms to its appointment hereunder or
which are required by the SEC or a state securities commission; and provided
further, that in no event shall such approval be unreasonably withheld. The
Sub-Advisor shall not use the name of the Advisor or the Trust in any material
relating to the Sub-Advisor in any manner not approved in advance by the Advisor
or the Trust, as the case may be; provided, however, that the Advisor and the
Trust shall each approve all uses of their respective names which merely refer
in accurate terms to the appointment of the Sub-Advisor hereunder or which are
required by the SEC or a state securities commission; and, provided further,
that in no event shall such approval be unreasonably withheld.
6. LIABILITY OF THE SUB-ADVISOR. The Sub-Advisor shall indemnify and
hold harmless the Trust and all affiliated persons thereof (within the meaning
of Section 2(a)(3) of the 0000 Xxx) and all controlling persons (as described in
Section 15 of the 1933 Act) (collectively, the "Sub-Advisor Indemnitees")
against any and all losses, claims, damages, liabilities or litigation
(including reasonable legal and other expenses) by reason of or arising out of:
(a) the Sub-Advisor being in material violation of any applicable federal or
state law, rule or regulation, or any written investment policies, restrictions,
guidelines or instructions set forth in the Fund's Registration Statement or
provided by the Trust's Board of Trustees from time to time with reasonable
advance notice to the Sub-Advisor, or (b) the Sub-Advisor's willful misfeasance,
bad faith or gross negligence generally in the performance of its duties
hereunder or its reckless disregard of its obligations and duties under this
Agreement. In no case shall the Sub-Advisor be liable for actions taken or
non-actions with respect to the performance of its services under this Agreement
based upon specific written instructions made to the Sub-Advisor by an officer
of the Trust. As used in this Section 6, the term "Sub-Advisor" shall include
the Sub-Advisor and/or any of its affiliates and the directors, officers and
employees of the Sub-Advisor and/or any of its affiliates.
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7. LIABILITY OF THE ADVISOR. The Advisor agrees to hold harmless and
indemnify the Sub-Advisor from and against any loss or damages arising out of
the Advisor's breach of this Agreement or arising out of the willful
misfeasance, bad faith or gross negligence on the Advisor's part in the
performance of its duties, or from reckless disregard of its obligations and
duties, under this Agreement.
8. LIMITATION OF TRUST'S LIABILITY. The Sub-Advisor acknowledges that
it has received notice of and accepts the limitations upon the Trust's liability
set forth in its Declaration of Trust. The Sub-Advisor agrees that (i) the
Trust's obligations to the Sub-Advisor under this Agreement (or indirectly under
the Advisory Agreement) shall be limited in any event to the Fund Assets and
(ii) the Sub-Advisor shall not seek satisfaction of any such obligation from the
holders of shares of the Fund, other than the Advisor, nor from any Trustee,
officer, employee or agent of the Trust.
9. FORCE MAJEURE. The Sub-Advisor shall not be liable for delays or
errors occurring by reason of circumstances beyond its control, including but
not limited to acts of civil or military authority, national emergencies, work
stoppages, fire, flood, catastrophe, acts of God, insurrection, war, riot, or
failure of communication or power supply. In the event of equipment breakdowns
beyond its control, the Sub-Advisor shall take all reasonable steps to minimize
service interruptions but shall have no liability with respect thereto.
10. RENEWAL, TERMINATION AND AMENDMENT.
a. This Agreement shall continue in effect, unless sooner
terminated as hereinafter provided, until April 30, 2011; and it shall
continue thereafter provided that such continuance is specifically
approved by the parties and, in addition, at least annually by (i) the
vote of the holders of a majority of the outstanding voting securities
(as herein defined) of the Fund or by vote of a majority of the Trust's
Board of Trustees and (ii) by the vote of a majority of the Trustees
who are not parties to this Agreement or interested persons of either
the Advisor or the Sub-Advisor, cast in person at a meeting called for
the purpose of voting on such approval.
b. This Agreement may be terminated at any time, without
payment of any penalty, (i) by the Advisor upon not more than sixty
(60) days' nor less than thirty (30) days' written notice delivered or
mailed by registered mail, postage prepaid, to the Sub-Advisor; (ii) by
the Sub-Advisor upon not less than sixty (60) days' written notice
delivered or mailed by registered mail, postage prepaid, to the
Advisor; or (iii) by the Trust upon either (y) the majority vote of its
Board or (z) the affirmative vote of a majority of the outstanding
voting securities of the Fund. This Agreement shall terminate
automatically in the event of its assignment.
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c. This Agreement may be amended at any time by the parties
hereto, subject to approval by the Trust's Board of Trustees and, if
required by applicable SEC rules and regulations, a vote of the
majority of the outstanding voting securities of the Fund affected by
such change.
d. The terms "assignment," "interested persons" and "majority
of the outstanding voting securities" shall have the meaning set forth
for such terms in the 1940 Act.
11. SEVERABILITY. If any provision of this Agreement shall become or
shall be found to be invalid by a court decision, statute, rule or otherwise,
the remainder of this Agreement shall not be affected thereby.
12. NOTICE. Any notices under this Agreement shall be in writing
addressed and delivered personally (or by telecopy) or mailed postage-paid, to
the other party at such address as such other party may designate in accordance
with this paragraph for the receipt of such notice. Until further notice to the
other party, it is agreed that the address of the Trust and that of the Advisor
for this purpose shall be 000 Xxxxxxxx, Xxxxx 0000, Xxxxxxxxxx, Xxxx 00000 and
that the address of the Sub-Advisor shall be 000 Xxxxx 0xx Xxxxxx, Xxxxx 0000,
Xxxxxxxxxx, XX 00000.
13. MISCELLANEOUS. Each party agrees to perform such further actions
and execute such further documents as are necessary to effectuate the purposes
hereof. This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Ohio and the Sub-Advisor consents to the
jurisdiction of courts, both state or federal, in Ohio, with respect to any
dispute under this Agreement.. The captions in this Agreement are included for
convenience only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered in their names and on their behalf by the undersigned, thereunto
duly authorized, all as of the day and year first above written.
TOUCHSTONE ADVISORS, INC.
Attest:
BY
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Xxxx X. XxXxxxxx
Name: Chief Executive Officer
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Title:
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TODDoVEREDUS ASSET MANAGENT LLC
Attest:
BY
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Name: Name:
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Title: Title:
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