INTERIM SUB-ADVISORY AGREEMENT
TOUCHSTONE TOTAL RETURN BOND FUND
TOUCHSTONE FUNDS GROUP TRUST
This SUB-ADVISORY AGREEMENT is made as of April 19, 2011 (this
"Agreement"), by and between TOUCHSTONE ADVISORS, INC., an Ohio corporation (the
"Advisor"), and ▇▇▇▇▇▇▇ PARTNERS, LLC, a Delaware limited liability company (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 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 Total Return Bond Fund (the "Fund"); and
WHEREAS, the Sub-Advisor also is an investment advisor registered under
the Advisers Act; 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 services 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 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.
2. DUTIES OF THE SUB-ADVISOR. The Sub-Advisor will provide the following
services and undertake the following duties:
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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 Prospectus and Statement of Additional
Information and any written directions which the Advisor or the Board may
give to the Sub-Advisor 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 will, unless and until
otherwise directed by the Advisor, exercise all rights of security holders
with respect to securities held by the Fund, including, but not limited
to, voting proxies in accordance with the Sub-Advisor's then-current proxy
voting policies. The Sub-Advisor shall not be responsible for acting on
behalf of the Fund in legal matters such as class actions, settlements and
related proofs of claim, or bankruptcies, involving securities purchased
or held by the Fund. Should the Sub-Advisor receive notices or related
materials for the Fund involving securities purchased by the Sub-Advisor
for the Fund, the Sub-Advisor shall transmit copies of such notices to the
Fund's current sub-administrator within a commercially reasonable period
of time. 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 reasonably 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 Securities Act of 1933 Act, 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 and regulations 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
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 Sub-Advisor's Code of
Ethics 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 Sub-Advisor's Code of Ethics, 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 Advisor's policies, guidelines or procedures
related to the Fund. 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. 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
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 the 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.
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(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, as 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. The Sub-Advisor may retain copies of Fund Books and Records
as required by applicable law.
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)
reasonable 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 1933 Act, 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
the 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 shall not be responsible for any loss incurred
by reason of any act or omission of any broker or dealer, except to the
extent that such loss is attributable to the Sub-Advisor's negligence, bad
faith or willful misfeasance; provided, however, that the Sub-Advisor will
make commercially reasonable efforts, or as required by law, to require
that brokers and dealers selected by the Sub-Advisor perform their
obligations with respect to 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.
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f. The Sub-Advisor shall maintain errors and omissions insurance
coverage in an appropriate amount and shall provide prior written notice
to the Trust (i) of any material decrease in its 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 material 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 Board 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.
i. The Sub-Advisor shall not be responsible for any loss incurred by
reason of any act or omission of any custodian, including but not limited
to any loss arising from, on account of or in connection with any
custodian failing to timely notify the Sub-Advisor of any corporate action
or similar transaction, except to the extent of the Sub-Advisor's
negligence, bad faith or willful misfeasance.
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.
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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. The Sub-Advisor will report to the Board
(at regular quarterly meetings and at such other times as the Board reasonably
shall request, subject to the limitation on personal attendance at such meetings
set forth in Section 2.a): (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 securities 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 at least 48 hours prior to
the effective date of this Agreement pursuant to Rule 204-3 under the Advisers
Act (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 Securities and Exchange Commission ("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 ▇▇▇▇ ▇▇▇) (collectively, the "Sub-Advisor Indemnitees")
against any and all actual losses, claims, damages, or liabilities (including
reasonable legal expenses) caused by or arising out of ("Sub-Advisor
Violations"): (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 Funds' Prospectus or Statement of Additional Information or any
written guidelines or instruction provided in writing by the Board, 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. 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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Except as may otherwise be provided by the 1940 Act or any other federal
securities law, neither the Sub-Advisor nor any of its officers, affiliates,
employees or consultants (its "Affiliates") shall be liable for any losses,
claims, damages, liabilities or litigation (including reasonable legal and other
expenses) incurred or suffered by the Advisor, the Fund or the Trust as a result
of any error of judgment or for any action or inaction taken in good faith by
the Sub-Advisor or its Affiliates with respect to the Fund, except that nothing
in this Agreement shall operate or purport to operate in any way to exculpate,
waive or limit the liability of the Sub-Advisor or its Affiliates for any
losses, claims, damages, liabilities or litigation (including reasonable legal
and other expenses) to which the Advisor, its Affiliates and controlling persons
may become subject under the 1933 Act, the 1940 Act, the Advisers Act, or under
any other statute, or common law or otherwise arising out of or based on any
Sub-Advisor Violations.
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, 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 be effective as of April __, 2011 and shall
remain in effect for the lesser of 150 days, or until (i) the shareholders
of the Fund vote to approve or disapprove a Sub-Advisory Agreement at a
meeting called for such purpose, or (ii) the Board approves a Sub-Advisory
Agreement in reliance on the Trust's SEC exemptive order from certain
requirements of Section 15(a) and Rule 18f-2 of the 1940 Act.
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 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.
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 ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ and that
the address of the Sub-Advisor shall be ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇.
12. 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.
THE REMAINDER OF THIS PAGE HAS BEEN LEFT INTENTIONALLY BLANK
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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: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
President
Name:
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Title:
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▇▇▇▇▇▇▇ PARTNERS, LLC
Attest:
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
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Name: Name:
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Title: Title: CEO
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