INTERIM SUB-ADVISORY AGREEMENT
TOUCHSTONE MICRO CAP VALUE FUND
TOUCHSTONE STRATEGIC TRUST
This INTERIM SUB-ADVISORY AGREEMENT (the "Agreement") is
made as of January 16, 2013, between TOUCHSTONE ADVISORS,
INC., an Ohio corporation (the "Advisor"), and ▇▇▇▇▇▇▇
IMPLEMENTATION SERVICES INC., a Washington corporation (the
"Interim Sub-Advisor").
WHEREAS, the Advisor is an investment adviser registered
under the Investment Advisers Act of 1940, as amended (the
"Advisers Act") and has been retained by Touchstone Strategic
Trust (the "Trust"), a Massachusetts business trust organized
pursuant to an Agreement and Declaration of Trust dated May
19, 1993, as amended, and registered as an open-end 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 Micro Cap Value Fund (the
"Fund"); and
WHEREAS, the Interim Sub-Advisor also is an investment
adviser registered under the Advisers Act and a broker-dealer
registered under the Securities Exchange Act of 1934, as
amended (the "1934 Act"); and
WHEREAS, the Advisor desires to retain the Interim 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 Interim 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. Appointment of the Interim 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 Interim
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 Investment
Guidelines attached as Schedule A to this Agreement and
subject to the Fund's currently effective prospectus and
statement of additional information, as amended (the
"Disclosure Documents"), 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 Interim 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 Interim Sub-Advisor shall
at all times maintain its registration as an investment
adviser under the Advisers Act and shall otherwise comply in
all material respects with all applicable laws and
regulations, both state and federal. The Interim 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 Interim Sub-Advisor. The Interim Sub-
Advisor will provide the following services and undertake the
following duties:
a. The Advisor shall provide Interim Sub-Advisor
with a statement of the investment objectives and
policies of the Fund Assets and any specific investment
restrictions applicable thereto, as amended from time to
time (the "Investment Guidelines"), and with the
investment restrictions, objectives, strategies and
policies set forth in the Fund's Disclosure Documents.
The Investment Guidelines, as may be amended, are hereby
incorporated into this Agreement. The Interim Sub-Advisor
will manage the investment and reinvestment of the Fund
Assets, subject to and in accordance with the Investment
Guidelines, as set forth in Schedule A, and in conformity
with the Fund's Disclosure Documents and any directions
which the Advisor or the Trust's Board may give with
respect to the Fund. In furtherance of the foregoing,
the Interim 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 Interim 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 Interim Sub-
Advisor will render regular reports to the Trust's 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 Interim Sub-
Advisor). Such reports shall be made in such form and
manner and with respect to such matters regarding the
Fund and the Interim Sub-Advisor as the Trust or the
Advisor shall request; provided, however, that in the
absence of extraordinary circumstances, the individual
primarily responsible for management of Fund Assets for
the Interim Sub-Advisor will not be required to attend
in-person more than one meeting per year with the Trust's
Board. The Interim Sub-Advisor may utilize the services
of a third-party to research and vote proxies on its
behalf and on behalf of the Fund. The Interim Sub-
Advisor shall not have custody of any of the assets of
the Fund, is not authorized to provide the Fund with
legal or tax advice, and is not authorized to engage the
Fund in any legal proceedings, including responding to
class action claims; provided, however, that the Interim
Sub-Advisor shall promptly forward any notices it
receives relating to class action claims to the Fund's
custodian or other duly designated Fund agent. The
Interim Sub-Advisor shall assist the custodian or
other duly designated Fund agent in evaluating
such securities litigation claims, as reasonably
requested in writing, but the Interim Sub-Advisor will
not be responsible for filing such claims. The Advisor
acknowledges that the Fund's custodian or other duly
designated Fund agent will be responsible for evaluating
and making all decisions regarding securities litigation
claims involving securities presently or formerly held
by the Fund.
b. The Interim Sub-Advisor has full discretion and
authority, to the extent required or permitted by
applicable law, and further subject to the additional
terms, policies, objectives, and restrictions set forth
in this Agreement and the applicable Schedules, to do any
or all of the following: (i) to establish brokerage
accounts in the Fund's name with the Interim Sub-Advisor
or other unaffiliated brokers or counterparties to effect
securities transactions in connection with the services
hereunder, and to exercise full discretionary authority
over such accounts; and (ii) to purchase or sell,
securities held in the Fund's investment accounts.
In connection with these transactions, the Interim Sub-
Advisor may (i) negotiate, amend, execute and deliver any
agreements or documents the Interim Sub-Advisor considers
necessary or desirable for the purpose of entering into
these securities transactions; and (ii) deliver to
counterparties, on the behalf of the Fund
representations, warranties, and covenants, along with
such financial information regarding the Fund as such
counterparties may reasonably request.
c. All transactions will be conducted in the
manner described in the Interim Sub-Advisor's Trading
Practices, attached as Schedule B. In addition, the
Interim Sub-Advisor may, to the extent permitted by
applicable law and regulations, aggregate purchase and
sale orders of securities placed with respect the Fund
Assets with similar orders being made simultaneously
for other accounts managed by the Interim Sub-Advisor or
its affiliates, if, in the Interim Sub-Advisor's
reasonable judgment, such aggregation shall result in an
overall economic benefit to the Fund, taking into
consideration the selling or purchase price, brokerage
commissions, and other expenses. In the event that a
purchase or sale the Fund Assets occurs as part of any
aggregate sale or purchase order, the objective of the
Interim Sub-Advisor and any of its affiliates involved in
such transaction shall be to allocate the securities so
purchased or sold, as well as expenses incurred in the
transaction, among the Fund and other accounts in a fair
and equitable manner. Whenever the Fund and one or
more other investment advisory clients of the Interim
Sub-Advisor have available funds for investment,
investments suitable and appropriate for each will be
allocated in a manner believed by the Interim Sub-Advisor
to be equitable to each. Moreover, it is possible that
due to differing investment objectives or for other
reasons, the Interim Sub-Advisor and its affiliates may
purchase securities of an issuer for one client and at
approximately the same time recommend selling or sell the
same or similar types of securities for another client,
including the Fund.
d. The Interim Sub-Advisor will not arrange
purchases or sales of securities between the Fund and
other accounts advised by the Interim Sub-Advisor or
its affiliates unless (a) such purchases or sales are
in accordance with applicable law and regulation
(including Rule 17a-7 under the ▇▇▇▇ ▇▇▇) and the
Fund's policies and procedures, (b) the Interim Sub-
Advisor determines the purchase or sale is in the best
interests of the Fund, and (c) the Fund's Board of
Trustees has approved these types of transactions.
e. The Interim Sub-Advisor shall promptly
notify the Advisor if the Interim Sub-Advisor reasonably
believes that the value of any security held by the Fund
may not reflect fair value. The Interim Sub-Advisor
agrees to provide any pricing information of which the
Interim 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. The parties
hereto recognize that the Interim Sub-Advisor is not an
official pricing source.
f. Regulatory Compliance.
(i) The Interim Sub-Advisor agrees to comply with
the requirements of the 1940 Act, the Advisers Act, the
Securities Act of 1933, as amended (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 Interim Sub-Advisor's obligations
hereunder, the Interim 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 Interim 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 Interim Sub-Advisor's full
responsibility for any of the foregoing.
(ii) The Interim 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 Interim
Sub-Advisor shall ensure that its Access Persons (as
defined in the Interim Sub-Advisor's Code of Ethics)
comply in all material respects with the Interim Sub-
Advisor's Code of Ethics, as in effect. Upon request,
the Interim Sub-Advisor shall provide the Fund with (i) a
copy of the Interim Sub-Advisor's current Code of Ethics,
as in effect, and (ii) a certification that it has
adopted procedures reasonably necessary to prevent Access
Persons from engaging in any conduct prohibited by the
Interim Sub-Advisor's Code of Ethics. No less frequently
than annually, the Interim Sub-Advisor shall furnish a
written report, which complies with the requirements of
Rule 17j-1, concerning the Interim Sub-Advisor's Code of
Ethics to the Fund and the Advisor. The Interim 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 Interim Sub-
Advisor. The Interim 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 Interim 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. In addition, the Interim Sub-
Advisor shall provide a quarterly report regarding its
compliance with the Fund's 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 Interim Sub-Advisor's obligations under
this Agreement. The Interim Sub-Advisor acknowledges and
agrees that the Advisor may, in its discretion, provide
such quarterly compliance certifications to the Board.
The Interim 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 Interim 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 ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002, as amended.
The Interim Sub-Advisor will promptly notify the Trust in
the event (i) the Interim 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 Interim
Sub-Advisor with the federal or state securities laws in
connection with the services provided to the Fund under
this Agreement or (ii) the controlling stockholder of the
Interim 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.
(iv) The Interim Sub-Advisor shall maintain
separate books and detailed records of all matters
pertaining to the Fund Assets advised by the Interim 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, at the Advisor's
expense, upon the termination of this Agreement and shall
be available for telecopying without delay during any day
the Fund is open for business. The Interim Sub-Advisor
may retain a copy of the Fund Books and Records for its
own recordkeeping purposes.
g. The Interim 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
Interim Sub-Advisor's name as provided in Section 5; (ii)
permission to use the past performance and investment
history of the Interim Sub-Advisor with respect to a
composite of other funds managed by the Interim 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; and
(iv) permission to use biographical and historical data
of the Interim Sub-Advisor and individual manager(s).
h. The Interim 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 Fund's Disclosure Documents.
When placing orders with brokers and dealers, the Interim
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 Interim 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, and subject to
seeking most favorable price and execution and compliance
with Rule 12b-1(h) under the 1940 Act, the Interim Sub-
Advisor may select brokers and dealers to execute
portfolio transactions of the Fund that promote or sell
shares of the Fund. The Interim 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 Interim 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 Interim
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 Interim 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 Interim 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.
i. The Interim 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 changes in its insurance policies or
insurance coverage; or (ii) if any material claims will
be made on its insurance policies related to the services
provided to the Trust under this Agreement. Furthermore,
the Interim 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.
j. In the event of any reorganization or other change
in the Interim Sub-Advisor, its investment principals,
supervisors, or members of its investment (or comparable)
committee, the Interim 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.
k. The Interim 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 Fund.
3. Compensation of the Interim Sub-Advisor.
a. As compensation for the services to be rendered and
duties undertaken hereunder by the Interim Sub-Advisor,
the Advisor will pay to the Interim Sub-Advisor a monthly
fee equal on an annual basis to X.XX% of the average
daily net assets of the Fund without regard to any total
expense limitation of the Fund or the Advisor. Such fee
shall be computed and accrued daily. If the Interim Sub-
Advisor serves in such capacity for less than the whole
of any period specified in Section 12a, the compensation
to the Interim Sub-Advisor shall be prorated. For
purposes of calculating the Interim 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 Interim Sub-Advisor reserves the right to waive
all or a part of its fees hereunder.
4. Activities of the Interim Sub-Advisor. The Interim
Sub-Advisor will report to the Trust's 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) 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 (ii) such
other information as the Board shall reasonably request
regarding the Fund, the Fund's performance, the services
provided by the Interim Sub-Advisor to the Fund as compared to
its other accounts, and the plans and capability of the
Interim Sub-Advisor with respect to providing future services
to the Fund and its other accounts. The Interim 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 Interim Sub-Advisor has supplied to the Advisor and the
Trust copies of its Form ADV with all exhibits and attachments
thereto (including the Interim 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. Representations of the Advisor and the Trust. The
Advisor represents that: (a) the Advisor has been duly
appointed by the Board to provide investment services to the
Fund Assets as contemplated in this Agreement; (b) the Advisor
has all necessary power and authority to execute, deliver, and
perform this Agreement on behalf of the Trust, and such
execution, delivery and performance will not violate any
applicable law, regulation, organizational document, policy or
agreement binding on the Trust or its property; (c) the Trust
has the full power and authority to enter into all
transactions contemplated under this Agreement, to perform its
obligations under such transactions and to authorize the
Advisor to procure the Interim Sub-Advisor to enter into such
transactions on the Trust's and Fund's behalf; (d) the
Advisor's decision to appoint the Interim Sub-Advisor was made
in a manner consistent with its fiduciary duties under
applicable law and the governing documents, contracts, or
other material agreements or instruments governing the Fund's
investment or trading activities; (e) the Advisor will deliver
to the Interim Sub-Advisor a true and complete copy of the
Fund's current Disclosure Documents as effective from time to
time, such other documents or instruments governing the
investments of Fund Assets, and such other information as is
necessary for the Interim Sub-Advisor to carry out its
obligations under this Agreement; (f) the Trust is a "United
States person" within the meaning of Section 7701(a)(30) of
the U.S. Internal Revenue Code of 1986, as amended (the
"Code"); (g) Information provided by the Advisor to the
Interim Sub-Advisor pursuant to this Agreement, including but
not limited to Investment Guidelines, policies, restrictions,
and identifying information provided to establish accounts
with the Interim Sub-Advisor is accurate and complete in every
material respect, and (i) the Advisor acknowledges that
various members of ▇▇▇▇▇▇▇ Investments provide other services,
including consulting advice and recommendations with respect
to investment strategies and service providers, and that as a
matter of policy, such consulting services do not include
evaluations, advice or recommendations to use ▇▇▇▇▇▇▇
Investments products or services. If the Trust has or will
receive such services, the Advisor represents that (i) it did
not rely upon, and was not influenced by, this investment
advice as the primary basis for selecting the Interim
Investment Advisor to provide the services hereunder; and (ii)
it will not rely on such investment advice in considering
whether or not to continue the services provided hereunder.
The Advisor will promptly notify the Interim Sub-Advisor if
any representation ceases to be accurate or complete in any
material respect, and will provide the Interim Sub-Advisor
with such other documents or certificates as the Interim Sub-
Advisor may reasonably request in connection with the
services. For purposes of this Agreement, "▇▇▇▇▇▇▇
Investments" shall mean ▇▇▇▇▇ ▇▇▇▇▇▇▇ Company and its
subsidiaries.
6. Use of Names. Neither the Advisor nor the Trust
shall use the name of the Interim 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 Interim Sub-Advisor; provided, however, that the
Interim 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
(the "SEC") or a state securities commission; and provided
further, that in no event shall such approval be unreasonably
withheld. The Interim Sub-Advisor shall not use the name of
the Advisor or the Trust in any material relating to the
Interim 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 will each approve all
uses of their respective names which merely refer in accurate
terms to the appointment of the Interim 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.
7. Liability of the Interim Sub-Advisor. The Interim
Sub-Advisor shall indemnify and hold harmless the Trust and
all affiliated persons thereof (within the meaning of Section
2(a)(3) of the ▇▇▇▇ ▇▇▇) and all controlling persons (as
described in Section 15 of the 1933 Act) (collectively, the
"Interim Sub-Advisor Indemnitees") against any and all direct
losses, claims, damages, or liabilities (including reasonable
legal and other expenses) (collectively, "Losses") incurred by
reason of or arising out of: (a) the Interim 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 Fund's Disclosure Documents or any written
guidelines or instruction provided in writing by the Board, or
(b) the Interim 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.
8. Liability of the Advisor. The Advisor
shall indemnify and hold harmless the Interim Sub-Advisor
and all affiliated persons thereof (within the meaning of
Section 2(a)(3) of the ▇▇▇▇ ▇▇▇) and all controlling persons
(as described in Section 15 of the 1933 Act) (collectively,
the "Advisor Indemnitees") against any and all direct Losses
incurred by reason of or arising out of: (a) the
Advisor being in material violation of any applicable
federal or state law, rule, or regulation, or (b) the
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.
9. Limitation of Trust's Liability. The Interim 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 Interim Sub-Advisor agrees
that (i) the Trust's obligations to the Interim Sub-Advisor
under this Agreement (or indirectly under the Advisory
Agreement) shall be limited in any event to the Fund Assets
and (ii) the Interim 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.
10. Force Majeure. The Interim 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 Interim Sub-Advisor shall take all reasonable
steps to minimize service interruptions but shall have no
liability with respect thereto.
11. Confidentiality. Each party expressly undertakes to
protect and to preserve the confidentiality of all information
and know-how made available under or in connection with this
Agreement, or the parties' activities hereunder that is either
designated as being confidential, or which, by the nature of
the circumstances surrounding the disclosure, ought in good
faith be treated as proprietary or confidential (the
"Confidential Information"). Each party shall take reasonable
security precautions, at least as great as the precautions it
takes to protect its own confidential information but in any
event using a reasonable standard of care, to keep
confidential the Confidential Information. Neither party shall
disclose Confidential Information except: (a) to its
employees, directors, officers, legal advisors, or auditors
having a need to know such Confidential Information; (b) in
accordance with a judicial or other governmental order or when
such disclosure is required by law, provided that prior to
such disclosure the receiving party shall provide the
disclosing party with written notice and shall comply with any
protective order or equivalent; or (c) in accordance with a
regulatory audit or inquiry, without prior notice to the
disclosing party, provided that the receiving party shall
obtain a confidentiality undertaking from the regulatory
agency where possible.
Neither party will make use of any Confidential Information
except as expressly authorized in this Agreement or as agreed
to in writing between the parties. However, the receiving
party shall have no obligation to maintain the confidentiality
of information that: (a) it received rightfully from another
party prior to its receipt from the disclosing party; (b) the
disclosing party discloses generally without any obligation of
confidentiality; (c) is or subsequently becomes publicly
available without the receiving party's breach of any
obligation owed the disclosing party; or (d) is independently
developed by the receiving party without reliance upon or use
of any Confidential Information. Each party's obligations
under this clause shall survive for a period of three (3)
years following the expiration or termination of this
Agreement.
Notwithstanding anything herein to the contrary, each party to
this Agreement may disclose any information with respect to
the United States federal income tax treatment and tax
structure (and any fact that may be relevant to understanding
the purported or claimed federal income tax treatment of the
transaction) of the transactions contemplated hereby.
12. Renewal, Termination and Amendment.
a. This Agreement shall be effective as of January 16,
2013 and shall remain in effect for the lesser of 150
days or until the effective date of a sub-advisory
agreement approved by an affirmative vote of (i) the
shareholders of the Fund, or (ii) the Board in reliance
on the Trust's SEC exemptive order from certain
requirements of Section 15(a) and Rule 18f-2 of the 1940
Act; except that under no circumstances will it continue
more than 150 days from the date on which the Fund's
previous sub-advisory agreement terminated. The 150 day
period will expire on Saturday, June 15, 2013.
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 Interim Sub-Advisor; (ii)
by the Interim 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, without the payment of any penalty, upon either
(y) the majority vote of the 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, except that the Interim
Sub-Advisor may amend Schedule B (▇▇▇▇▇▇▇ Trading
Practices) by written notice to the Advisor, and the
Advisor may amend Schedule C (Authorized Persons) by
written notice to the Interim Sub-Advisor.
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.
13. 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.
14. 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 Interim Sub-Advisor shall be ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
15. 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. 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.
16. Entire Agreement. This Agreement, including the
attached Schedules, constitutes the sole and entire agreement
of the parties hereto with respect to the subject matter
expressly set forth herein.
17. Authorized Persons. A list of persons duly
authorized to act on the Trust's behalf concerning this
Agreement is attached as Schedule C.
18. Customer Notification. By executing this Agreement,
the Advisor acknowledges receipt of Part 2 of the Interim Sub-
Advisor's Form ADV prior to signing, as required by the
Advisers Act. Otherwise, the Advisor's rights under federal
law allow termination of this contract without penalty within
five (5) business days after entering into this contract.
U.S. law also requires the Interim Sub-Advisor to obtain,
verify, and record information that identifies each person or
entity that opens an account. The Interim Sub-Advisor will
ask for the Trust's legal name, principal place of business
address, and Taxpayer ID or other identification number, and
may ask for other identifying information.
19. Counterparts. This Agreement may be executed by
facsimile signature and it may be executed in one or more
counterparts, each of which will be deemed an original, but
all of which taken together will constitute one and the same
instrument.
THE REMAINDER OF THIS PAGE HAS BEEN LEFT INTENTIONALLY BLANK
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.
BY:
BY:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name:
President
Title:
▇▇▇▇▇▇▇ IMPLEMENTATION SERVICES INC.
BY:
Name:
Title:
Schedule A
INVESTMENT GUIDELINES
INTERIM MANAGEMENT SERVICES PROGRAM
This Schedule describes the Interim Management Services
program (the "Program") to be provided under the Agreement.
The Program includes a combination of administrative
coordination, cash and transaction management, and "overlay"
investment advisory services using securities and other
instruments designed to keep the Fund's assets aligned with
investment policy or an otherwise specified target for a
specified period.
INVESTMENT OBJECTIVE
▇▇▇▇▇▇▇ will manage the Fund to achieve returns similar to the
Fund's benchmark index based on ex ante tracking error while
controlling transaction-related expenses through reduced
trading. The goal will be to manage the Fund's risk relative
to the Fund's benchmark index, as measured by the annualized
ex ante tracking error, to the ▇▇▇▇▇▇▇ Micro Cap Value
Index("The Target"); targeting 2.0% tracking error and
rebalancing the Fund if tracking error exceeds 2.25%. The
Target is determined through various risk optimization models
to target the 2.0% tracking error and is also designed to
mitigate and reduce other risk, but not all associated risk
factors. ▇▇▇▇▇▇▇ does not conduct specific research,
fundamental analysis, or have an opinion as to the quality of
any specific security or investment instrument. Should the
Fund's tracking error exceed 2.25% as measured, at a minimum,
on a weekly basis, ▇▇▇▇▇▇▇ will re-optimize the Fund back to
the 2.0% annualized target under the limitation that any
securities purchased are within the ▇▇▇▇▇▇▇ Micro Cap Value
Index's universe. The minimum number of names to be held will
be 300 with a maximum of 800 names.
TIMEFRAME
The expected timeframe of the interim assignment is
approximately four months. The Interim Sub-Advisor reserves
the right to resign from the interim assignment by providing
30 days advanced written notice.
FEES
There will be a monthly investment management fee of 2 basis
points (0.02%) based on the actual number of days
(actual/actual) which begins on January 16, 2013. This fee
will be assessed monthly.
It is understood that the above pricing is based on our
agreement that the Interim Sub-Advisor will conduct the
transition at the conclusion of the interim portfolio
management assignment.
INTERIM MANAGEMENT SERVICES
The Interim Sub-Advisor will monitor the tracking error __[X]
weekly ___[ ] monthly.
The Interim Sub-Advisor will rebalance, if necessary, ___[X]
weekly ___[ ] monthly when the measured portfolio tracking
error exceeds 25 basis points (0.25%) from the target
portfolio level tracking error outlined above.
The Interim Sub-Advisor's interim portfolio management process
utilizes various risk models and optimization techniques with
the primary goal of reducing portfolio level tracking error as
measured versus the specified published benchmark index. This
process further attempts to mitigate and reduce other but not
all associated risk factors. While providing interim
portfolio management services, the Interim Sub-Advisor does
not conduct specific research, fundamental analysis, or have
an opinion as to the investment quality of any specific
security or investment instrument. While the optimization
process seeks to reduce portfolio level tracking error, it
does not eliminate the risk associated with security specific
events.
During the interim portfolio management timeframe, the Interim
Sub-Advisor will be responsible for corporate actions
including proxy materials. Unless otherwise instructed, the
Interim Sub-Advisor's default for proxy voting is to vote in
line with ▇▇▇▇▇▇▇ Investments Guidelines.
CONSTRAINTS
[X] __ Limit purchases to securities contained within the
benchmark universe (Interim Sub-Advisor default)
[X] __ Limit purchases to not exceed the benchmark weight
(Interim Sub-Advisor default)
Cash and cash equivalents should be limited to 5 % of the
total portfolio value.
Will the interim assignment include the use of financial
futures? ___[ ] Yes ___[X] No
Are any residual cash balances to be equalized? ___[ ] Yes
___[X] No
For multi-currency portfolios are any currency exposures to be
hedged? ___[ ] Yes ___[X] No
If yes, please detail below:
REPORTING REQUIREMENTS
[ ]__ Monthly portfolio appraisal detailing the holdings
[ ]__ Monthly performance report
[ ]__ Monthly risk analysis
[ ]__ Monthly reconciliation of account(s) with custodian
ELIGIBLE SECURITIES AND INVESTMENTS
The Program can invest in short-term Government securities,
short-term cash vehicles, and individual equity, fixed income,
or other securities.
RESTRICTIONS
The Program may not:
Use futures for any purpose.
Engage in commodity transactions.
Schedule B
TRADING PRACTICES
▇▇▇▇▇▇▇ Implementation Services Inc. ("▇▇▇▇▇▇▇") is a
registered investment adviser under the Investment Advisers
act of 1940, as amended, and a registered broker dealer under
the Securities Exchange Act of 1934, as amended. The
following describes the terms, conditions and trading
practices that apply when ▇▇▇▇▇▇▇ has been engaged by a client
(the "Client") to effect transactions in securities, futures,
currency, swaps and related instruments.
BEST EXECUTION. ▇▇▇▇▇▇▇ seeks "best execution" in performing
all of its trading services. Best execution is a term of art
that does not have a single industry accepted definition.
▇▇▇▇▇▇▇ defines best execution as:
The process that is most likely, in ▇▇▇▇▇▇▇'▇ good faith
judgment, to preserve the value of investment decisions within
the Client's stated investment objectives and constraints.
Best execution requires evaluation and management of
probabilistic factors that cannot be predicted or controlled
effectively on a trade-by-trade basis. As such, ▇▇▇▇▇▇▇'▇
process is designed to minimize total expected costs and risks
across the distribution of events in an investment cycle.
ORDER AGGREGATION AND ALLOCATION. ▇▇▇▇▇▇▇ may in some cases
aggregate sales and purchase orders of securities and other
investments for Clients with concurrent trades managed by
▇▇▇▇▇▇▇ or its affiliates. ▇▇▇▇▇▇▇ is not obligated to
aggregate orders, and will only do so if ▇▇▇▇▇▇▇ reasonably
believes such aggregation will result in an overall benefit to
its Clients, taking into consideration the objective of best
execution as defined above. Aggregated orders are allocated
among ▇▇▇▇▇▇▇ Clients such that Clients are treated on a fair
and equitable basis, and that the interests of some Clients
are not placed over those of others.
SECURITIES TRANSACTIONS. ▇▇▇▇▇▇▇ effects transactions in
securities including stocks and bonds as follows:
Agency Basis. ▇▇▇▇▇▇▇ acts as agent for its Clients for all
transactions. ▇▇▇▇▇▇▇ may consider trades with independent
broker-dealers or counterparties who are themselves acting as
principal or agent, but ▇▇▇▇▇▇▇ will always act in an agency
capacity. ▇▇▇▇▇▇▇ may arrange agency cross-transactions where
permitted and where such transactions are consistent with the
overall implementation strategy. An arranged agency cross-
trade is a trade where ▇▇▇▇▇▇▇ presents both sides of the
trade, as agent, to an external crossing network, exchange or
market place where the price is determined independently.
Broker-Dealers. ▇▇▇▇▇▇▇ has arrangements with a wide network
of non-affiliated correspondent broker-dealers and
counterparties (collectively, "Broker-Dealers") and may use
any one or more of such Broker-Dealers to perform execution,
clearing or other services in relation to trades executed
under its Client agreements. ▇▇▇▇▇▇▇ selects and evaluates
Broker-Dealers for trading services based on processes
designed to achieve best execution as defined above. These
due diligence processes include evaluation of several factors,
including quality of execution (measured in terms of net price
versus stated benchmarks), market access, technology, and
ability to accommodate special transaction needs and Client
service.
FUTURES TRANSACTIONS. ▇▇▇▇▇▇▇ manages futures transactions
for Clients in several contexts, including Overlay Services,
Transition Services and various interim portfolio management
and other assignments. The terms and strategies applied will
vary depending on the type of service and the contract,
investment guidelines and special restrictions established
with the Client, but the following general practices apply:
Designated Brokers. As an agent, ▇▇▇▇▇▇▇ effects all futures
transactions in accounts established with a clearing broker
selected by agreement of ▇▇▇▇▇▇▇ and the Client (the
"Designated Broker"). To establish these account(s), ▇▇▇▇▇▇▇
will provide the Client with materials developed by the
Designated Broker, including certain disclosure materials
related to the risks of futures. Accounts may be established
either directly by the Client, or by ▇▇▇▇▇▇▇ on behalf of the
Client if the Client executes a Power of Attorney (in the form
prescribed by the Designated Broker) authorizing ▇▇▇▇▇▇▇ to
execute customer agreements and establish such accounts.
▇▇▇▇▇▇▇ may also use execution-only brokers for futures
transactions. ▇▇▇▇▇▇▇ manages and maintains the required
give-up agreements between clearing and execution-only firms
necessary to effect such transactions.
The Designated Broker is responsible for the timely payment of
amounts owed to Clients and for the payment of any penalties
and interest due to any default by the Designated Broker. The
Client is responsible for ensuring the timely payment of any
amounts owed by the Client to the Designated Broker upon
instruction from ▇▇▇▇▇▇▇ and for payment of any penalties and
interest due to any such default on the part of the Client.
Collateral. The Designated Broker may require initial,
variation, maintenance and other required margin in the form
of monies, securities or otherwise ("Collateral") in
connection with the Client account. As provided in the Client
agreement, ▇▇▇▇▇▇▇ will from time to time execute Collateral
transactions and provide (or direct the Client to provide) the
Designated Broker with the necessary Collateral. The
collateral will be held in an account at the Designated Broker
in the name of the Client. All interest and earnings on the
Collateral belong to the Client and will be delivered to the
Client on a periodic basis.
CURRENCY AND SWAP TRANSACTIONS. ▇▇▇▇▇▇▇ effects transactions
in currency and swaps as follows:
Counterparty Banks and Prime Brokers. ▇▇▇▇▇▇▇ has
arrangements with a wide network of non-affiliated
counterparty banks and prime brokers (collectively
"Counterparties") and may use any one or more of such
Counterparties to perform execution, clearing or other
services in relation to trades executed under Client
agreements. ▇▇▇▇▇▇▇ selects and evaluates Counterparties for
trading services based on processes designed to achieve best
execution. These due diligence processes include evaluation
of several factors, including creditworthiness, quality of
execution (measured in terms of proximity to the
contemporaneous market price), Client service, market access,
technology and ability to accommodate special transaction
needs.
Alternative Execution Outlets. ▇▇▇▇▇▇▇ may employ a variety
of alternative execution outlets in pursuit of best execution
and individual counterparty trade execution systems.
Currency and Swap Collateral. The Counterparties may require
margin in the form of monies, securities or otherwise ("OTC
Collateral") in connection with the Client account. As
provided in the Client agreement, ▇▇▇▇▇▇▇ will from time to
time execute OTC Collateral transactions and provide (or
direct the Client to provide) the Counterparties with the
necessary OTC Collateral. All interest and earnings on the
OTC Collateral belong to the Client and will be delivered to
the Client on a periodic basis.
FEES AND OTHER CHARGES. ▇▇▇▇▇▇▇ fees related to securities,
futures, currency, swap or other transactions, will be on
terms separately agreed with the Client for the assignment and
may be collected by brokers, counterparties or charged
directly. For securities transactions, brokerage fees include
charges for execution, clearing or other services, if any,
imposed by the Broker-Dealers, exchanges, ECN's or other
execution venues. For futures transactions, brokerage fees
include charges imposed by the Designated Broker and, if
applicable, the execution-only broker, for execution, clearing
and other services. For currency transactions, trading costs
and fees are generally reflected in the currency exchange
rate. For swap transactions, fees and charges are generally
included in the price of the swap. For all transactions, fees
for taxes, exchange fees, settlement, prime brokerage,
transfer, custodial fees and other similar items are borne by
the Client.
Schedule C
AUTHORIZED PERSONS
The Advisor hereby certifies that the persons named below have
authority to provide instructions in respect to this
Agreement.
Interim Sub-Advisor may rely on this authorization until it
receives written notice to the contrary.
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: President and CEO of IFS Financial Services, Inc.
Signature: _____________________________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: President of Touchstone Advisors, Inc.
Signature: _____________________________________________
Name: ▇▇▇ ▇▇▇▇▇▇
Title: Vice President of Touchstone Advisors, Inc.
Signature: _____________________________________________
Certified this 15 day of January, 2013.
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