SUB-ADVISORY AGREEMENT
TOUCHSTONE AGGRESSIVE ETF FUND
TOUCHSTONE MODERATE ETF FUND
TOUCHSTONE CONSERVATIVE ETF FUND
TOUCHSTONE ENHANCED ETF FUND
TOUCHSTONE VARIABLE SERIES TRUST
This SUB-ADVISORY AGREEMENT is made as of May 1, 2009, by and between
TOUCHSTONE ADVISORS, INC., an Ohio corporation (the "Advisor"), and XXXX/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
Variable Series Trust (the "Trust"), a Massachusetts business trust organized
pursuant to an Amended and Restated Declaration of Trust dated November 21,
2002, 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 Aggressive
ETF Fund, Touchstone Moderate ETF Fund, Touchstone Conservative ETF Fund, and
Touchstone Enhanced ETF Fund (each, a "Fund", and collectively, the "Funds");
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 Funds, and the Sub-Advisor is willing to
furnish such services to the Advisor and the Funds;
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 each 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 any 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 respective Funds and in
conformity with the Funds' 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 a 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 Funds 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
Funds 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
Funds' valuation procedures for the purpose of calculating each 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 each Fund's portfolio securities and performing the
Sub-Adviser's obligations hereunder, the Sub-Advisor shall cause the Funds
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 Funds 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 Funds 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
Funds.
(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 subject to this Agreement in
accordance with its investment objectives and policies or any applicable
law; or (ii) any material breach of any of the Funds' 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 each Fund's compliance with its investment objectives and
policies and applicable law, including, but not limited to the 1940 Act,
the Code, and the Funds' 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 each Fund's
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.
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(iv) The Sub-Advisor shall maintain separate books and
detailed records of all matters pertaining to each 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 Funds) relating to its responsibilities provided
hereunder with respect to the Funds, and shall preserve such records for
the periods and in a manner prescribed therefore by Rule 31a-2 under the
1940 Act (collectively, 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 Funds are open for business.
d. The Sub-Advisor shall provide support to the Advisor with respect
to the marketing of the Funds, 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 Funds, (iii) access to the individual(s) responsible for day-to-day
management of the Funds for marketing conferences, teleconferences and
other activities involving the promotion of the Funds, 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 Funds, 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
Funds, 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 Funds (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 Funds that promote or
sell shares of the Funds. 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 each 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 Funds 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 0.10% the first $50
million of average daily net assets of each Fund, 0.09% of the next $50
million of average daily net assets of each Fund, and 0.08% of the next
$100 million of average daily net assets of each Fund, subject to an
annual minimum of $10,000 for each Fund 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 3.a, 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 Funds for purposes of purchases and redemptions of
shares thereof.
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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.
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
Funds 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 Funds and to its other
accounts, and (iv) such other information as the Board of Trustees shall
reasonably request regarding the Funds, the Funds' performance, the services
provided by the Sub-Advisor and affiliates of the Sub-Advisor to the Funds 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 Funds 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 Funds 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.
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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 each 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.
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 Funds, 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
each 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.
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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 any
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 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 any 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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XXXX/VEREDUS ASSET MANAGENT LLC
Attest:
BY
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Name: Name:
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Title: Title:
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