SUB-ADVISORY AGREEMENT
TOUCHSTONE INTERNATIONAL FIXED INCOME FUND
TOUCHSTONE FUNDS GROUP TRUST
This SUB-ADVISORY AGREEMENT is made as of October 1, 2009, by and between
TOUCHSTONE ADVISORS, INC., an Ohio corporation (the "Advisor"), and AUGUSTUS
ASSET MANAGERS LIMITED, a limited company incorporated in England and Wales (the
"Sub-Advisor").
WHEREAS, the Advisor is an investment advisor registered under the
Investment Advisers Act of 1940, as amended (the "Advisers Act"), and has been
retained by Touchstone Funds Group Trust (the "Trust"), a Delaware business
trust organized pursuant to an Agreement and Declaration of Trust dated October
25, 1993 (as amended), and registered as an open-end diversified management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), to provide investment advisory services with respect to certain
assets of the Touchstone International Fixed Income Fund (the "Fund"); and
WHEREAS, the Sub-Advisor also is an investment advisor registered under
the Advisers Act and is authorized and regulated by the Financial Services
Authority (whose address is 00 Xxx Xxxxx Xxxxxxxxx, Xxxxxx Xxxxx, X00 0XX) for
the provision of investment services in the United Kingdom; 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.
a. 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 (the "Board"), 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 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.
b. The Advisor represents and warrants that:
(i). The Advisor has been duly authorized by the Board to
delegate to the Sub-Advisor the provision of investment
services to the Fund as contemplated hereby; and
(ii). The Advisor is in compliance in all material respects
with the requirements of the 1940 Act, Advisers Act, the
Securities Act of 1933, as amended (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.
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 written directions which the
Advisor or the Board may give from time to time with respect to the Fund
(collectively, the "Disclosure Documents"). 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, or will not, be
exercised. The Sub-Advisor will render regular reports to the Board 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. The Advisor agrees to supply the
Sub-Advisor with all Disclosure Documents and to notify the Sub-Advisor
promptly of any relevant changes to the Disclosure Documents.
2
b. The Sub-Advisor shall promptly 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 represents and warrants that it is in
compliance in all material respects with, and agrees to comply with, the
requirements of the 1940 Act, the Advisers Act, the 1933 Act, 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-Advisor'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.
(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 promptly notify the Advisor of any material violation of the Code by
any employee involved in the management of the Fund, 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 any 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 Advisor's policies, guidelines or procedures,
provided that such policies, guidelines and procedures had previously been
provided to the Sub-Advisor. 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 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) the controlling stockholder of the Sub-Advisor changes or an actual
change in control resulting in an "assignment" (as defined in the 1940
Act) has occurred or is otherwise proposed to occur.
3
(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 on reasonable notice within the Sub-Advisor's business
hours and the Board at any time upon request shall be delivered copies of
the Fund Books and Records to the Trust upon the termination of this
Agreement and shall be available for telecopying without delay during any
day the Sub-Advisor is open for business.
d. The Sub-Advisor shall provide reasonable 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. The Advisor acknowledges and agrees that it shall be
responsible for ensuring any marketing activity with respect to the Fund
is carried out in compliance with applicable law and regulation; provided,
however, that Advisor shall be entitled to rely on the accuracy and
truthfulness of written information and material provided by Sub-Advisor,
and Sub-Advisor agrees to be responsible and hold Advisor harmless to the
extent that such written information and material is inaccurate or not
true.
4
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 1933 Act, as such registration
statements may be in effect from time to time and which have been provided
to the Sub Advisor. 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, 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 reasonably shall request.
f. The Sub-Advisor shall maintain both "errors and omissions" and
"directors and officers" 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.
5
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, which, in each case, would
reasonably be expected to have a material effect upon the management of
the Fund Assets, the Sub-Advisor shall give the Advisor and the Board
written notice of such reorganization or change within a reasonable time
(but no later than other investors similarly affected are notified) 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. Following the first full fiscal year of the
Fund, the Sub-Advisor will thereafter be paid a minimum annual
sub-advisory fee of $100,000. To the extent that sub-advisory fees paid to
the Sub-Advisor in the second and any subsequent full fiscal year of the
Fund do not equal or exceed $100,000, then the Advisor shall, within a
reasonable period following the close of the Fund's fiscal year, pay the
Sub-Advisor the difference between the aggregate sub-advisory fees paid
during the fiscal year and $100,000 from the Advisor's own assets. If,
following the first full fiscal year of the Fund, the Fund is liquidated
or reorganized or the Sub-Advisor is terminated for any reason, then the
guaranteed $100,000 payment shall be prorated as of the date of
liquidation, reorganization or termination.
b. The Sub-Advisor reserves the right to waive all or a part of its
fees hereunder.
4. ACTIVITIES OF THE SUB-ADVISOR. The Sub-Advisor will report to the Board
(at regular quarterly meetings and at such other times as such Board 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 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.
6
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, if applicable) and will hereafter supply to
the Advisor, promptly upon the preparation thereof, copies of all amendments or
restatements of such document.
The services of the Sub-Advisor hereunder are not to be deemed exclusive
(except as provided under the letter agreement between the Advisor and the
Sub-Advisor dated October 1, 2009) and the Sub-Advisor shall otherwise be free
to render services to others so long as its services hereunder are not impaired
thereby and to retain for its own use and benefit all fees or other monies
payable thereby. Sub-Advisor shall not be deemed to be affected with notice of
or to be under any duty to disclose to the Advisor any fact or thing which comes
to its notice or that of its directors, officers, employees or agents in the
course of the Sub-Advisor rendering services to others or in the course of its
business in any other capacity or in any manner whatsoever otherwise than in the
course of carrying out its services, obligations or duties hereunder, except to
the extent that any such fact or thing could reasonably be understood to affect
the provision of its services, obligations or duties hereunder or as otherwise
provided in this Agreement.
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 U.S. Securities and Exchange Commission (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 investment policy or restriction set forth
in the Disclosure Documents, 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
the absence of 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, the Sub-Advisor shall not be
subject to liability to the Trust, the Advisor, the Fund or to any shareholder
of the Trust or Fund for any act or omission in the course of, or connected
with, rendering services hereunder or for any losses that may be sustained in
the purchase, holding or sale of any security hereunder.
7
7. 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.
8. 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, terrorism,
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.
9. RENEWAL, TERMINATION AND AMENDMENT.
a. This Agreement shall continue in effect, unless sooner terminated
as hereinafter provided, until September 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 Board and (ii) by the vote of a
majority of the Board 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.
c. This Agreement may be amended at any time by the parties hereto,
subject to approval by the Board 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.
8
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.
10. 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.
11. 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 00 Xx. Xxxxx'x Xxxxx, Xxxxxx XX0X 0XX,
Xxxxxx Xxxxxxx or facsimile number x00 (0) 00 0000 0000.
12. MISCELLANEOUS. Each party agrees to perform such further actions and
execute such further documents as are reasonably 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.
THE REMAINDER OF THIS PAGE HAS BEEN LEFT INTENTIONALLY BLANK
9
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 /s/ Xxxx X. XxXxxxxx
------------------------------------- ----------------------------
Xxxx X. XxXxxxxx
Name: Chief Executive Officer
--------------------------------
Title:
-------------------------------
AUGUSTUS ASSET MANAGERS LIMITED
Attest:
BY
------------------------------------- ----------------------------
Name:
Name: Title:
--------------------------------
Title: BY
------------------------------- ----------------------------
Name:
Title:
10
