OHIO NATIONAL FUND INC
PRES14A, 1997-12-18
Previous: HALF ROBERT INTERNATIONAL INC /DE/, S-8, 1997-12-18
Next: EXCO RESOURCES INC, SC 13D, 1997-12-18



<PAGE>   1
  
================================================================================
 
                                  SCHEDULE 14A
                                   (RULE 14a)
                    INFORMATION REQUIRED IN PROXY STATEMENT
                            SCHEDULE 14A INFORMATION
          PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
                              EXCHANGE ACT OF 1934
                             (AMENDMENT NO.      )
 
Filed by the Registrant  [X]
 
Filed by a Party other than the Registrant  [ ]
 
Check the appropriate box:
 
<TABLE>
<S>                                             <C>
[X]  Preliminary Proxy Statement                [ ]  CONFIDENTIAL, FOR USE OF THE COMMISSION
                                                     ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[ ]  Definitive Proxy Statement
[ ]  Definitive Additional Materials
[ ]  Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
 
                           OHIO NATIONAL FUND, INC.
                (NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
                           OHIO NATIONAL FUND, INC.
                  (NAME OF PERSON(S) FILING PROXY STATEMENT)
 
Payment of Filing Fee (Check the appropriate box):
[X]  No fee required.
[ ]  Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
 
     (1) Title of each class of securities to which transaction applies: .......
 
     (2) Aggregate number of securities to which transaction applies: ..........
 
     (3) Per unit price or other underlying value of transaction computed
         pursuant to Exchange Act Rule 0-11 ....................................
 
     (4) Proposed maximum aggregate value of transaction: ......................
 
     (5) Total fee paid: .......................................................
 
[ ]  Fee paid previously with preliminary materials.
 
[ ]  Check box if any part of the fee is offset as provided by Exchange Act Rule
     0-11(a)(2) and identify the filing for which the offsetting fee was paid
     previously. Identify the previous filing by registration statement number,
     or the Form or Schedule and the date of its filing.
 
     (1) Amount Previously Paid: ...............................................
 
     (2) Form, Schedule or Registration Statement No.: .........................
 
     (3) Filing Party: .........................................................
 
     (4) Date Filed: ...........................................................
 
================================================================================
<PAGE>   2
[Ohio National Fund Services Letterhead]


January 6, 1998


Dear Ohio National Variable Contract Owner:


Enclosed are information and voting instructions from your Ohio National Fund
Board of Directors regarding the proposed approval of a new sub-advisory
agreement for the Small Cap Portfolio. The new agreement with Founders Asset
Management LLC ("New Founders") is essentially identical to the present
agreement, except for its effective and termination dates. It does not
contemplate any change in your portfolio management team, investment advisory
fees, investment objectives and policies, or the way the Small Cap Portfolio is
managed.

This new agreement is necessary because Founders Asset Management, Inc.
("Founders") has agreed to be acquired by Mellon Bank, N.A. ("Mellon") and to be
merged into New Founders, a newly-created subsidiary of Mellon.

The new agreement will be voted upon at a meeting of shareholders to be held on
February 17, 1998. Your Board of Directors believes approval of the new
sub-advisory agreement will serve your best interests. They recommend you vote
FOR the proposal.

Please complete, sign and return the instructions promptly in the envelope
provided. No postage is required if mailed within the United States. Your
instructions are important! As always, we thank you for your confidence and
support.

Sincerely,


/s/John J. Palmer
- -----------------
John J. Palmer
President

<PAGE>   3
                            OHIO NATIONAL FUND, INC.
                                One Financial Way
                             Montgomery, Ohio 45242


         --------------------------------------------------------------
                              SMALL CAP PORTFOLIO
                    NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
         --------------------------------------------------------------


                               FEBRUARY 17, 1998


A special meeting of the shareholders of the Small Cap Portfolio (the
"Portfolio") of Ohio National Fund, Inc. (the "Fund") will be held at the Fund's
offices at One Financial Way, Montgomery, Ohio on February 17, 1998, at 10:00
a.m. for the purpose of approving a new Sub-Advisory Agreement between Ohio
National Investments, Inc. and Founders Asset Management LLC and to transact
such other business as may properly come before the meeting.

Shareholders of the Portfolio of record at the close of business on November 21,
1997 are entitled to notice of, and to vote at, the meeting.

For reasons given in the attached Proxy Statement, your Board of Directors
RECOMMENDS A VOTE FOR THE PROPOSAL.



                                                              Ronald L. Benedict
                                                              Secretary



Montgomery, Ohio
January 6, 1998







<PAGE>   4

                            OHIO NATIONAL FUND, INC.
                                ONE FINANCIAL WAY
                             MONTGOMERY, OHIO 45242

                                 PROXY STATEMENT

                     SPECIAL MEETING OF SHAREHOLDERS OF THE
                              SMALL CAP PORTFOLIO
                               FEBRUARY 17, 1998


     This Statement is furnished in connection with the solicitation of proxies
by the Board of Directors (the "Board") of Ohio National Fund, Inc. (the
"Fund"), for use at the special meeting of shareholders of the Small Cap
Portfolio (the "Portfolio") of the Fund to be held on February 17, 1998, and at
any and all adjournments thereof. This statement is being mailed on or about
January 6, 1998 to shareholders of, and contractowners with values allocated
to, the Portfolio as of November 21, 1997.

     Proxies will be solicited primarily by delivering this statement and its
enclosures to the shareholders of record and to contractowners with values
allocated to the Portfolio. Printing, mailing and legal costs of this
solicitation will be borne by the Portfolio's sub-adviser, Founders Asset
Management, Inc. ("Founders") all other costs will be borne by the Fund's
investment adviser, Ohio National Investments, Inc. ("the Adviser"). No extra
compensation will be paid to employees of the Fund for soliciting proxies.
     Each proxy may be revoked at any time prior to being voted by giving
written notice to the Secretary of the Fund, or by the shareholder's appearing
in person at the meeting and notifying the Secretary of his or her intent to
revoke the proxy. Any later dated proxy will revoke an earlier one. All proxies
which are properly executed and received in time and not so revoked will be
voted at the meeting in accordance with the instructions thereon, if any. If a
proxy is returned and no specification is made, the proxy will be voted in favor
of the proposal. Interests of variable contractowners for which no voting
instructions are received will be voted in proportion with the instructions that
are timely received.
     Each shareholder of record at the close of business on November 21, 1997 is
entitled to one vote for each share held. As of November 21, 1997, 100% of the
issued and outstanding shares of the Fund were owned of record by The Ohio
National Life Insurance Company ("ONLI") and Ohio National Life Assurance
Corporation ("ONLAC") (collectively, "Ohio National Life") and allocated to the
separate accounts of ONLI and ONLAC as shown below.

<TABLE>
<CAPTION>

<S>                        <C>                                         <C>    
                  ONLI     Variable Account A                        1,017,991
                  ONLI     Variable Account B                          400,492
                  ONLI     Variable Account C                        1,086,001
                  ONLI     Variable Account D                           64,835
                  ONLAC    Variable Account R                          309,594

                  Total Portfolio Shares                             2,878,913
</TABLE>


                               SUMMARY OF PROPOSAL

     The purpose of the meeting is for shareholders to vote on the proposal to
approve a new Sub-Advisory Agreement between the Adviser and Founders Asset
Management LLC ("New Founders").
     Approval with respect to this issue requires approval by a majority vote of
the eligible shareholders. Under the Investment Company Act of 1940 (the "1940
Act"), a majority vote means the concurrence of the lesser of (a) 67% of the
shares represented in person or by


                                       1
<PAGE>   5

proxy at a meeting where more than 50% of the outstanding shares are so
represented or (b) 50% of all the outstanding shares.

     THE FUND BOARD RECOMMENDS APPROVAL BY THE SHAREHOLDERS.


                          INVESTMENT ADVISORY SERVICES

     The Adviser is a wholly-owned subsidiary of ONLI. Under the Investment
Advisory Agreement between the Adviser and the Fund, the Adviser regularly
furnishes to the Board recommendations with respect to an investment program
consistent with the Fund's investment policies. Upon approval of an investment
program by the Board, the Adviser implements the program by placing orders for
the purchase and sale of securities. The Adviser also provides the Fund with
office space, necessary clerical personnel (other than those provided by
agreements between the Fund and Star Bank (Cincinnati, Ohio), which serves as
custodian, and American Data Services, Inc. (Huntington, NY) which serves as
transfer agent and servicing agent for the Fund), and services of executive and
administrative personnel.
     The Adviser is the investment adviser to the following portfolios of the
Fund (assets shown as of November 21, 1997):
<TABLE>
<CAPTION>

<S>                                              <C>         
            Equity                               $285,340,300
            Money Market                           23,534,207
            Bond                                   20,955,198
            Omni                                  187,143,660
            International                         159,507,300
            Capital Appreciation                   56,114,632
            Small Cap                              55,773,157
            Global Contrarian                      16,929,146
            Aggressive Growth                      19,168,411
            Core Growth                             9,017,839
            Growth & Income                        14,340,777
            S&P 500 Index                          18,444,709
            Social Awareness                        4,024,763
            Strategic Income                        2,821,838
            Stellar                                 2,746,555
            Relative Value                          5,063,717
</TABLE>

     Under a Service Agreement among the Fund, the Adviser and ONLI, ONLI has
agreed to furnish the Adviser, at cost, such research facilities, services and
personnel as may be needed by the Adviser in connection with its performance
under the Investment Advisory Agreement. The Adviser has agreed to reimburse
ONLI for its expenses in this regard. The Fund has not paid to the Adviser, or
to any of its affiliates, any compensation for services other than under the
Investment Advisory Agreement during the last fiscal year. The address of the
Adviser, ONLI, ONLAC and the Fund is One Financial Way, Montgomery, Ohio 45242.
     The president of the Adviser is Joseph P. Brom. The Adviser's directors are
Mr. Brom, Michael A. Boedeker, Michael D. Stohler and Stephen T. Williams.
Messrs. Brom, Boedeker, Stohler and Williams are principally employed as
investment officers of ONLI. Messrs. Brom, Boedeker and Williams are also vice
presidents of the Fund. The Adviser's secretary, Ronald L. Benedict, is also the
secretary and a director of the Fund. The business address of each of these
individuals is One Financial Way, Montgomery, Ohio 45242.
     The Investment Advisory Agreement and Service Agreement were both entered
into as of May 1, 1996. They were submitted to and approved by the shareholders
of the Equity, Money Market, Bond, Omni, International, Capital Appreciation,
Small Cap, Global Contrarian and Aggressive Growth Portfolios on March 28, 1996
and by the shareholders of


                                       2
<PAGE>   6

the Core Growth, Growth & Income, S&P 500 Index, Social Awareness, Strategic
Income, Stellar and Relative Value Portfolios on January 2, 1997.
     As compensation for its services, the Adviser receives from the Fund annual
fees on the basis of each portfolio's average daily net assets during the
quarterly period for which the fees are paid based on the following schedule:
(a) for each of the Equity, Bond, Omni and Social Awareness Portfolios, 0.60% of
the first $100 million of each Portfolio's net assets, 0.50% of the next $150
million of net assets, 0.45% of the next $250 million of net assets, 0.40% of
the next $500 million of net assets, 0.30% of the next $1 billion of net assets,
and 0.25% of net assets over $2 billion; (b) for the Money Market Portfolio,
0.30% of the first $100 million of net assets, 0.25% of the next $150 million of
net assets, 0.23% of the next $250 million of net assets, 0.20% of the next $500
million of net assets, and 0.15% of net assets over $1 billion; (c) for the
International, Global Contrarian and Relative Value Portfolios, 0.90% of each
Portfolio's net assets; (d) for the Capital Appreciation, Small Cap, Aggressive
Growth and Strategic Income Portfolios, 0.80% of each Portfolio's net assets;
(e) for the Core Growth Portfolio, 0.95% of the first $150 million of net
assets, and 0.80% of net assets over $150 million; (f) for the Growth & Income
Portfolio, 0.85% of the first $200 million of net assets, and 0.80% of net
assets over $200 million; (g) for the S&P 500 Index Portfolio, 0.40% of the
first $100 million of net assets, 0.35% of the next $150 million of net assets,
and 0.33% of net assets over $250 million; and (h) for the Stellar Portfolio,
1.00% of that Portfolio's net assets. However, as to the Money Market Portfolio,
the Adviser is presently waiving any of its fee in excess of 0.25%. During 1996,
the Adviser received $5,567,076 in fees from the Fund.
     Under the Investment Advisory Agreement, the Fund authorizes the Adviser to
retain sub-advisers for the International, Capital Appreciation, Small Cap,
Global Contrarian, Aggressive Growth, Core Growth, Growth & Income, Strategic
Income, Stellar and Relative Value Portfolios, subject to the approval of the
Fund's Board of Directors. The Adviser has entered into Sub-advisory Agreements
with sub-advisers, to manage the investment and reinvestment of those
Portfolios' assets, subject to the supervision of the Adviser. As compensation
for their sub-advisory services, (a) Societe Generale Asset Management Corp.
receives from the Adviser fees at the annual rate of 0.75% of the International
and Global Contrarian Portfolios' average daily net assets during the quarter
for which the fee is paid; (b) T. Rowe Price Associates, Inc. receives from the
Adviser a fee at an annual rate of 0.70% of the first $5 million, and 0.50% of
average daily net asset value in excess of $5 million, of the Capital
Appreciation Portfolio; (c) Founders receives from the Adviser a fee at an
annual rate of 0.65% of the first $75 million, 0.60% of the next $75 million,
and 0.55% of the average daily net asset value in excess of $150 million, of the
Small Cap Portfolio; (d) Strong Capital Management, Inc. receives from the
Adviser a fee at an annual rate of 0.70% of the first $50 million, and 0.50% of
average daily net asset value in excess of $50 million, of the Aggressive Growth
Portfolio; (e) Pilgrim Baxter & Associates, Ltd. receives from the Adviser a fee
at an annual rate of 0.75% of the first $50 million, 0.70% of the next $100
million, and 0.50% of the average daily net assets in excess of $150 million of
the Core Growth Portfolio; (f) Robertson Stephens Investment Management L.P.
receives from the Adviser a fee at an annual rate of 0.60% of the first $100
million, 0.55% of the next $100 million, and 0.50% of average daily net assets
in excess of $200 million of the Growth & Income Portfolio; and (g) Star Bank,
N.A. receives from the Adviser fees at an annual rate of (i) 0.55% of the first
$50 million and 0.50% of the average daily net assets in excess of $50 million
of the Strategic Income Portfolio, (ii) 0.75% of the first $50 million and 0.70%
of average daily net assets in excess of $50 million of the Stellar Portfolio,
and (iii) 0.65% of the first $50 million and 0.60% of average daily net assets
in excess of $50 million of the Relative Value Portfolio.
     The Sub-Advisory Agreements were approved by the shareholders of the
applicable portfolios on the same dates as listed above for approval of the
Investment Advisory Agreement.
     All of these agreements are reviewed and approved for continuance by the
Board of Directors each year. The agreements were most recently reviewed by the
Board and approved for continuance on August 27, 1997, by unanimous votes of all
the Directors cast in


                                       3
<PAGE>   7

person at a Board meeting called for the purpose of voting on that continuance
and approval. Each of these agreements provides for automatic termination in the
event of its assignment.
     In addition to the Fund, the Adviser is also the investment adviser to ONE
Fund, which presently consists of the following portfolios:

<TABLE>
<CAPTION>

            ONE FUND PORTFOLIO                         ASSETS (11/21/97)
            ------------------                         -----------------

<S>                                                       <C>        
                Money Market                              $14,324,545
                Tax-Free Income                             7,098,958
                Income                                      6,823,984
                Income & Growth                            14,152,584
                Growth                                     14,107,291
                Small Cap                                   6,065,967
                International                              17,467,050
                Global Contrarian                           6,130,824
                Core Growth                                 5,579,008
</TABLE>

     As compensation for its services to ONE Fund, the Adviser receives from ONE
Fund annual fees on the basis of each portfolio's average daily net assets
during the quarterly period for which the fees are paid based on the following
schedule: (a) for those assets held in the Income, Income & Growth and Growth
Portfolios, the fee is at an annual rate of 0.50% of the first $100 million of
those assets in each portfolio, 0.40% of the next $150 million and 0.30% of
assets over $250 million; (b) as to assets held in the Money Market Portfolio,
the fee is at an annual rate of 0.30% of the first $100 million of such assets,
0.25% of the next $150 million, and 0.20% of assets over $250 million; (c) for
assets held in the Tax-Free Income Portfolio, the fee is at an annual rate of
0.60% of the first $100 million of those assets, 0.50% of the next $150 million,
and 0.40% of assets over $250 million; (d) for assets held in the Small Cap
Portfolio, the fee is at an annual rate of 0.65% of the first $100 million,
0.55% of the next $150 million, and 0.45% of assets over $250 million; (e) for
assets held in the International and Global Contrarian Portfolios, the fee is at
an annual rate of 0.90% of assets in each portfolio; and (f) for assets held in
the Core Growth Portfolio, the fee is at an annual rate of 0.95% of the first
$150 million of assets and 0.80% of assets over $150 million. However, the
Adviser is presently voluntarily waiving 0.15% of its fees in connection with
the Money Market, Tax-Free Income, Income, Income & Growth, Growth, and Small
Cap Portfolios of ONE Fund.


                           NEW SUB-ADVISORY AGREEMENT

     Shareholders of the Portfolio are being asked to approve a new Sub-Advisory
Agreement between the Adviser and New Founders. This "New Agreement" (See
Exhibit A) is identical in every respect to the present Sub-Advisory Agreement
except that the New Agreement will take effect at the time of the merger of
Founders into New Founders, a newly-formed subsidiary of Mellon Bank, N.A.
("Mellon"). That contemplated merger is expected to take place during the first
quarter of 1998. The merger will result in a change of control of Founders
which, by the terms of the Sub-Advisory Agreement, results in the termination of
the Sub-Advisory Agreement.

     THE MERGER. Under an Agreement and Plan of Reorganization (the "Merger
Agreement"), dated December 11, 1997, by and among Mellon, New Founders,
Founders and Founders' controlling shareholder, Bjorn K. Borgen, Founders has
agreed to merge into New Founders, a newly-created subsidiary of Mellon.
Following the merger, the separate existence of Founders will cease, and New
Founders will assume all of its assets, liabilities, business and operations. 
New Founders will be headquartered at Founders' current offices at 2930 East 
Third Avenue, Denver, Colorado 80206.


                                       4
<PAGE>   8
     The Merger Agreement does not prescribe any changes in the management or
operations of Founders, including any changes in the personnel managing the
Portfolio or other services or business activities relating to the Portfolio.
Founders has advised the Fund's Board that it does not anticipate that the
merger will cause any reduction in the quality of services now provided to the
Portfolio, or have any adverse effect on New Founders' ability to fulfill its
obligations to the Portfolio.
     MELLON. Mellon is a subsidiary of Mellon Bank Corporation ("MBC"), a
publicly owned multibank holding company incorporated under Pennsylvania law in
1971 and registered under the Federal Bank Holding Company Act of 1956, as
amended. Mellon and MBC are located at One Mellon Bank Center, Pittsburgh,
Pennsylvania 15258. MBC provides a comprehensive range of financial products and
services in domestic and selected international markets. MBC's banking
subsidiaries are located in Pennsylvania, Massachusetts, Delaware, Maryland and
New Jersey, while other subsidiaries are located in key business centers
throughout the United States and abroad. MBC currently ranks among the nation's
largest bank holding companies based on market capitalization.
     MBC's principal wholly-owned subsidiaries are Mellon, The Boston Company,
Inc., Mellon Bank (DE) National Association, Mellon Bank (MD) National
Association, and a number of companies known as Mellon Financial Services
Corporation. MBC also owns a federal savings bank headquartered in Pennsylvania,
Mellon Bank, F.S.B. The Dreyfus Corporation, one of the nations's largest mutual
fund companies, is a wholly-owned subsidiary of Mellon. MBC's banking
subsidiaries engage in retail financial services, commercial banking, trust and
investment management services, residential real estate loan financing, mortgage
servicing, equipment leasing, mutual fund activities and various
securities-related activities. Through its subsidiaries, MBC managed more than
$299 billion in assets as of September 30, 1997, including approximately $102
billion in proprietary mutual fund assets. As of September 30, 1997, various
subsidiaries of MBC provided non-investment services, such as custodial or
administration services, for approximately $1.488 trillion assets, including $60
billion in mutual fund assets.
     THE NEW AGREEMENT. The existing Sub-Advisory Agreement between the Adviser
and Founders will terminate upon the consummation of the merger, because the
merger will constitute a change of control of Founders for purposes of the
Investment Company Act of 1940, as amended. Your Fund management is proposing
that you approve the New Agreement between the same parties, to become effective
immediately upon consummation of the merger. The New Agreement is identical to
the existing Sub-Advisory Agreement, other than its effective and termination
dates.
     Evaluation and Recommendation of the Board. At a meeting of the Board of
Directors of the Fund held on November 19, 1997, at which all of the directors
were present, the directors evaluated the New Agreement. Prior to and during the
meeting, the directors requested, received and reviewed information and
documents that they deemed necessary to enable them to determine if the New
Agreement is in the best interests of the Portfolio and its shareholders. The
directors also conferred by teleconference with Founders' vice president and
general counsel who reviewed the merger and its effects upon Founders and its
operations with particular attention to New Founders' prospects for continuing
the services that have been provided to the Portfolio by Founders. The Board
considered the nature, quality and extent of those services and the directors
viewed as significant the fact that, after the merger, the management team of
Founders will continue as employees of New Founders and that Michael Haines, the
portfolio manager of the Portfolio, has signed a long term-employment agreement
to remain with New Founders. The Board also took note of the fact that the New
Agreement will not affect the Portfolio's investment objective and policies.
     At their meeting, the Board discussed and reviewed the terms and
provisions of the New Agreement. They noted that its terms are identical, in
all material respects, to the terms of the present Sub-Advisory Agreement
except that the sub-adviser will be New Founders instead of Founders and the
New Agreement's execution, effectiveness and termination dates are different.
The Board noted particularly that the fees and other expenses payable by the
Portfolio under the New Agreement are identical to those payable under the
present Sub-Advisory Agreement.
     Based upon their review and evaluation of all the factors deemed relevant
to them, the directors, at their meeting on November 19, 1997, determined that
the New Agreement is fair, reasonable and in the best interests of the
Portfolio and its shareholders. By unanimous vote at that meeting, the Board of
Directors approved the New Agreement and recommends that you also vote to
approve the New Agreement.


                                       5
<PAGE>   9
 
                   OTHER MATTERS WHICH MAY COME BEFORE MEETING

     Management is not aware of any other matters which may come before the
meeting. If, however, any other matter properly comes before the meeting, it is
the intention of the persons named in the accompanying form of proxy to vote the
proxy in accordance with their judgment on such matters.

                              FINANCIAL STATEMENTS

     THE FUND'S ANNUAL AND SEMI-ANNUAL REPORTS ARE SENT TO THE SHAREHOLDERS AND
ALL VARIABLE CONTRACT OWNERS. THE FUND'S MOST RECENT ANNUAL AND SEMI-ANNUAL
REPORTS ARE ALSO AVAILABLE FREE UPON REQUEST BY CONTACTING OHIO NATIONAL FUND,
INC., P.O. BOX 237, CINCINNATI, OHIO 45201 (TELEPHONE 1-800-578-8078).


                              SHAREHOLDER PROPOSALS

     As a registered investment company incorporated under Maryland law, the
Fund is not required to hold annual meetings of shareholders. The Fund generally
intends to hold a meeting of shareholders every three years for the purpose of
electing Directors and it will hold special meetings as required or deemed
desirable. The date of the next meeting for the purpose of electing Directors
cannot be stated with certainty, but it is anticipated to be during the first
quarter of 1999. A shareholder may have included in the proxy statement for the
next meeting of shareholders certain proposals for shareholder action which he
or she intends to introduce at such meeting. Notice of any shareholder proposal
must be received by the Fund no later than 120 days prior to a meeting of
shareholders in order for the proposal to be included in the proxy solicitation
materials for that meeting.



                                       6
<PAGE>   10

EXHIBIT A


                             SUB-ADVISORY AGREEMENT


This Agreement is made as of the        day of       , 1998 by and between 
OHIO NATIONAL INVESTMENTS, INC., an Ohio corporation (the "Adviser"), and
FOUNDERS ASSET MANAGEMENT LLC, a Delaware limited liability company (the
"Sub-Adviser").

WHEREAS, OHIO NATIONAL FUND, INC. (the "Fund"), is a Maryland corporation that
is registered under the Investment Company Act of 1940, as amended, (together
with the regulations promulgated pursuant thereto, the "1940 Act"); and

WHEREAS, the Adviser is a registered investment adviser under the Investment
Advisers Act of 1940, as amended, (together with the regulations promulgated
pursuant thereto, the "Advisers Act"); and

WHEREAS, the Adviser has been appointed as investment adviser to the Fund in
accordance with the 1940 Act and the Advisers Act; and

WHEREAS, the Sub-Adviser is registered as an investment adviser under the
Advisers Act and engages in the business of providing investment advisory
services; and

WHEREAS, the Fund has authorized the Adviser to appoint the Sub-Adviser, subject
to the requirements of the 1940 Act and the Advisers Act, as a sub-adviser with
respect to that portion of the assets of the Fund designated as the SMALL CAP
PORTFOLIO of the Fund on the terms and conditions set forth below;

NOW, THEREFORE, IT IS HEREBY AGREED as follows:

SECTION 1.     INVESTMENT ADVISORY SERVICES
               ----------------------------

(a) The Adviser hereby retains the Sub-Adviser, and the Sub-Adviser hereby
accepts engagement by the Adviser, to supervise and manage on a
fully-discretionary basis the cash, securities and other assets of the Small Cap
Portfolio that the Adviser shall from time to time place under the supervision
of the Sub-Adviser (such cash, securities and other assets initially and as same
shall thereafter be increased or decreased by the investment performance thereof
and by additions thereto and withdrawals therefrom by the Adviser shall
hereinafter be referred to as the "Portfolio"). 

(b) All activities by the Sub-Adviser on behalf of the Adviser and the Portfolio
shall be in accordance with the investment objectives, policies and restrictions
set forth in the 1940 Act and in the Fund's prospectus and statement of
additional information, as amended from time to time (together, the
"Prospectus") and as interpreted from time to time by the Board of Directors of
the Fund and by the Adviser. All activities of the Sub-Adviser on behalf of the
Adviser and the Portfolio shall also be subject to the due diligence oversight
and direction of the Adviser.

(c) Subject to the supervision of the Adviser, the Sub-Adviser shall have the
sole and exclusive responsibility and discretion to select members of securities
exchanges, brokers, dealers and futures commission merchants for the execution
of transactions of the Portfolio and, when applicable, shall


                                       7
<PAGE>   11

negotiate commissions in connection therewith. All such selections shall be made
in accordance with the Fund's policies and restrictions regarding brokerage
allocation set forth in the Prospectus.

(d) In carrying out its obligations to manage the investments and reinvestments
of the assets of the Portfolio, the Sub-Adviser shall: (1) obtain and evaluate
pertinent economic, statistical, financial and other information affecting the
economy generally and individual companies or industries the securities of which
are included in the Portfolio or are under consideration for inclusion therein;
(2) formulate and implement a continuous investment program for the Portfolio
consistent with the investment objectives and related investment policies and
restrictions for such Portfolio as set forth in the Prospectus; and (3) take
such steps as are necessary to implement the aforementioned investment program
by placing orders for the purchase and sale of securities.

(e) In connection with the purchase and sale of securities of the Portfolio, the
Sub-Adviser shall arrange for the transmission to the Adviser and the
Portfolio's custodian on a daily basis such confirmation, trade tickets and
other documents as may be necessary to enable them to perform their
administrative responsibilities with respect to the Portfolio. With respect to
Portfolio securities to be purchased or sold through the Depository Trust
Company, the Sub-Adviser shall arrange for the automatic transmission of the
I.D. confirmation of the trade to the Portfolio's custodian.

(f) In connection with the placement of orders for the execution of the
Portfolio's securities transactions, the Sub-Adviser shall create and maintain
all necessary records of the Portfolio as are required of an investment adviser
of a registered investment company including, but not limited to, records
required by the 1940 Act and the Advisers Act. All such records pertaining to
the Portfolio shall be the property of the Fund and shall be available for
inspection and use by the Securities and Exchange Commission, any other
regulatory authority having jurisdiction, the Fund, the Adviser or any person
retained by the Fund or the Adviser. Where applicable, such records shall be
maintained by the Sub-Adviser for the period and in the place required by Rule
31a-2 under the 1940 Act.

(g) The Sub-Adviser shall render such reports to the Adviser and/or to the Board
of Directors of the Fund concerning the investment activity and composition of
the Portfolio in such form and at such intervals as the Adviser or the Board may
from time to time reasonably require.

(h) In acting under this Agreement, the Sub-Adviser shall be an independent
contractor and not an agent of the Adviser or the Fund.

SECTION 2.     EXPENSES
               --------

(a) The Sub-Adviser shall assume and pay all of its own costs and expenses,
including those for furnishing such office space, office equipment, office
personnel and office services as the Sub-Adviser may require in the performance
of its duties under this Agreement.

(b) The Fund shall bear all expenses of the Portfolio's organization and
registration, and the Fund and Adviser shall bear all of their respective
expenses of their operations and businesses not expressly assumed or agreed to
be paid by the Sub-Adviser under this Agreement. In particular, but without
limiting the generality of the foregoing, the Fund shall pay any fees due to the
Adviser, all interest, taxes, governmental charges or duties, fees, brokerage
and commissions of every kind arising hereunder or in connection herewith,
expenses of transactions with shareholders of the Portfolio, expenses of
offering interests in the Portfolio for sale, insurance, association membership
dues, all charges of custodians (including fees as custodian and for keeping
books, performing portfolio valuations and rendering other services to the
Fund), independent auditors and legal counsel, expenses of preparing, printing
and distributing all prospectuses, proxy material, reports and notices to
shareholders of the Fund, and all other costs incident to the Portfolio's
existence.


                                       8
<PAGE>   12

SECTION 3.     USE OF SERVICES OF OTHERS
               -------------------------

The Sub-Adviser may (at its expense except as set forth in Section 2 hereof)
employ, retain or otherwise avail itself of the services or facilities of other
persons or organizations for the purpose of providing the Sub-Adviser with such
statistical or factual information, such advice regarding economic factors and
trends or such other information, advice or assistance as the Sub-Adviser may
deem necessary, appropriate or convenient for the discharge of the Sub-Adviser's
obligations hereunder or otherwise helpful to the Fund and the Portfolio.

SECTION 4.     SUB-ADVISORY FEES
               -----------------

In consideration of the Sub-Adviser's services to the Fund hereunder, the
Sub-Adviser shall be entitled to a sub-advisory fee, payable quarterly, at the
annual rate of 0.65% of the first seventy-five million dollars ($75,000,000) of
the average daily net assets of the Portfolio during the quarter preceding each
payment, 0.6% of the next seventy-five million dollars ($75,000,000), and 0.55%
of the average daily net assets of the Portfolio in excess of one hundred and
fifty million dollars ($150,000,000) (the "Sub-Advisory Fee"). The Sub-Advisory
Fee shall be accrued for each calendar day and the sum of the daily
Sub-Advisory Fee accruals shall be paid quarterly to the Sub-Adviser on or
before the fifth business day of the next succeeding quarter. The daily fee
accruals will be computed on the basis of the valuations of the total net
assets of the Portfolio as of the close of business each day. The Sub-Advisory
Fee shall be payable solely by the Adviser, and the Fund shall not be liable to
the Sub-Adviser for any unpaid Sub-Advisory Fee.

SECTION 5.     LIMITATION OF LIABILITY OF SUB-ADVISER
               --------------------------------------

(a) The Sub-Adviser shall be liable for losses resulting from its own acts or
omissions caused by the Sub-Adviser's willful misfeasance, bad faith or gross
negligence in the performance of its duties hereunder or its reckless disregard
of its duties under this Agreement, and nothing herein shall protect the
Sub-Adviser against any such liability to the shareholders of the Fund or to the
Adviser. The Sub-Adviser shall not be liable to the Fund or to any shareholder
of the Fund or to the Adviser for any claim or loss arising out of any
investment or other act or omission in the performance of the Sub-Adviser's
duties under this Agreement, or for any loss or damage resulting from the
imposition by any government of exchange control restrictions which might affect
the liquidity of the Fund's assets maintained with custodians or securities
depositories in foreign countries, or from any political acts of any foreign
governments to which such assets might be exposed, or for any tax of any kind,
including without limitation any statutory, governmental, state, provincial,
regional, local or municipal imposition, duty, contribution or levy imposed by
any government or governmental agency upon or with respect to such assets or
income earned with respect thereto (collectively "Taxation").

(b) In the event the Sub-Adviser is assessed any Taxation in respect of the
assets, income or activities of the Portfolio, the Adviser and the Fund jointly
will indemnify the Sub-Adviser for all such amounts wherever imposed, together
with all penalties, charges, costs and interest relating thereto and all
expenditures, including reasonable attorney's fees, incurred by the Sub-Adviser
in connection with the defense or settlement of any such assessment. The
Sub-Adviser 


                                       9
<PAGE>   13

shall undertake and control the defense or settlement of any such assessment,
including the selection of counsel or other professional advisers, provided that
the selection of such counsel and advisers and the settlement of any assessment
shall be subject to the approval of the Adviser and the Fund, which approvals
shall not be unreasonably withheld. The Adviser and the Fund shall have the
right to retain separate counsel and assume the defense or settlement on behalf
of the Adviser and the Fund, as the case may be, of any such assessment if
representation of the Adviser and the Fund by counsel selected by the
Sub-Adviser would be inappropriate due to actual or potential conflicts of
interest.

SECTION 6.     SERVICES TO OTHER CLIENTS AND THE FUND
               --------------------------------------

(a) Subject to compliance with the 1940 Act, nothing contained in this Agreement
shall be deemed to prohibit the Sub-Adviser or any of its affiliated persons
from acting, and being separately compensated for acting, in one or more
capacities on behalf of the Fund. The Adviser and the Fund understand that the
Sub-Adviser may act as investment manager or in other capacities on behalf of
other customers including other entities registered under the 1940 Act. While
information, recommendations and actions which the Sub-Adviser supplies to and
does on behalf of the Portfolio shall in the Sub-Adviser's judgment be
appropriate under the circumstances in light of the investment objectives and
policies of the Fund, as set forth in the Prospectus delivered to the
Sub-Adviser from time to time, it is understood and agreed that they may be
different from the information, recommendations and actions the Sub-Adviser or
its affiliated persons supply to or do on behalf of other clients. The
Sub-Adviser and its affiliated persons shall supply information, recommendations
and any other services to the Portfolio and to any other client in an impartial
and fair manner in order to seek good results for all clients involved. As used
herein, the term "affiliated person" shall have the meaning assigned to it in
the 1940 Act.

(b) On occasions when the Sub-Adviser deems the purchase or sale of a security
to be in the best interest of the Portfolio as well as other customers, the
Sub-Adviser may, to the extent permitted by applicable law, aggregate the
securities to be so sold or purchased in order to obtain the best execution, or
lower brokerage commissions, if any. The Sub-Adviser may also on occasion
purchase or sell a particular security for one or more customers in different
amounts. On either occasion, and to the extent permitted by applicable law and
regulations, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Sub-Adviser in the
manner it considers to be the most equitable and consistent with its fiduciary
obligations to the Fund and to such other customers. 

                                       10
<PAGE>   14

(c) The Sub-Adviser agrees to use the same skill and care in providing services
to the Fund as it uses in providing services to other similar accounts for which
it has investment responsibility. The Sub-Adviser will conform with all
applicable rules and regulations of the Securities and Exchange Commission.

SECTION 7.     REPORTS TO THE SUB-ADVISER
               --------------------------

The Adviser shall furnish to the Sub-Adviser the Prospectus, proxy statements,
reports and other information relating to the business and affairs of the Fund
as the Sub-Adviser may, at any time or from time to time, reasonably require in
order to discharge the Sub-Adviser's duties under this Agreement.

SECTION 8.     TERM OF AGREEMENT
               -----------------

Provided that this Agreement shall have first been approved by the Board of
Directors of the Fund, including a majority of the members thereof who are not
interested persons (as defined in the 1940 Act) of either party, by a vote cast
in person at a meeting called for the purpose of voting such approval, then this
Agreement shall be effective on the date hereof. Unless earlier terminated as
hereinafter provided, this Agreement shall continue in effect for an initial
term ending September 30, 1999. Thereafter, this Agreement shall continue in
effect from year to year, subject to approval annually by the Board of Directors
of the Fund or by vote of a majority of the voting securities of the Portfolio
and also, in either event, by the vote, cast in person at a meeting called for
the purpose of voting on such approval, of a majority of the Directors of the
Fund who are not parties to this Agreement or interested persons (as defined in
the 1940 Act) of any such person.

SECTION 9.   TERMINATION OF AGREEMENT; ASSIGNMENT
             ------------------------------------

(a) This Agreement may be terminated by either party hereto without the payment
of any penalty, upon 90 days' prior notice in writing to the other party and to
the Fund, or upon 60 days' written notice by the Fund to the two parties;
provided, that in the case of termination by the Fund such action shall have
been authorized by resolution of a majority of the Board of Directors of the
Fund or by vote of a majority of the voting securities of the Portfolio. In
addition, this Agreement shall terminate upon the later of (1) the termination
of the Adviser's agreement to provide investment advisory services to the Fund
or (2) notice to the Sub-Adviser that the Adviser's agreement to provide
investment advisory services to the Fund has terminated.

(b) This Agreement shall automatically terminate in the event of its assignment
(as defined in the 1940 Act).

(c) Termination of this Agreement for any reason shall not affect rights of the
parties that have accrued prior thereto.


                                       11
<PAGE>   15

SECTION 10.    NOTICES
               -------

(a) The Sub-Adviser agrees to promptly notify the Adviser of the occurrence of
any of the following events: (1) any change in any of the Sub-Advisor's officers
or any portfolio manager who is providing advisory services pursuant to this
Agreement; (2) the Sub-Adviser fails to be registered as an investment adviser
under the Advisers Act or under the laws of any jurisdiction in which the
Sub-Adviser is required to be registered as an investment adviser in order to
perform its obligations under this Agreement; (3) the Sub-Adviser is the subject
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
Portfolio; or (4) any change in control of the Sub-Adviser.

(b) Any notice given hereunder shall be in writing and may be served by being
sent by telex, facsimile or other electronic transmission or sent by registered
mail or by courier to the address set forth below for the party for which it is
intended. A notice served by mail shall be deemed to have been served seven days
after mailing and in the case of telex, facsimile or other electronic
transmission twelve hours after dispatch thereof. Addresses for notice may be
changed by written notice to the other party.

         If to the Adviser:

         Ohio National Investments, Inc.
         P.O. Box 237
         Cincinnati, Ohio  45201
         Fax No.  (513) 794-4506


         With a copy to:

         Joseph P. Brom, President
         Ohio National Investments, Inc.
         P.O. Box 237
         Cincinnati, Ohio  45201

         If to the Sub-Adviser:

         Gregory P. Contillo, Vice President
         Founders Asset Management LLC
         2930 East Third Avenue
         Denver, Colorado 80206
         Fax No. (303) 329-3848

         With a copy to:

         David L. Ray, Vice President, Treasurer & Chief Financial Officer
         Founders Asset Management LLC
         2930 East Third Avenue
         Denver, Colorado 80206


                                       12
<PAGE>   16

SECTION 11.    GOVERNING LAW
               -------------

This Agreement shall be governed by and subject to the requirements of the laws
of the State of Ohio without reference to the choice of law provisions thereof.

SECTION 12.    APPLICABLE PROVISIONS OF LAW
               ----------------------------

The Agreement shall be subject to all applicable provisions of law, including,
without limitation, the applicable provisions of the 1940 Act, and to the extent
that any provisions herein contained conflict with any such applicable
provisions of law, the latter shall control.


                                       13
<PAGE>   17

SECTION 13.    COUNTERPARTS
               ------------ 

This Agreement may be entered into in any number of counterparts, each of which
when so executed and delivered shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.

IN WITNESS WHEREOF this Agreement has been executed by the parties hereto as of
the day and year first above written.

                         OHIO NATIONAL INVESTMENTS, INC.



                         By:__________________________________
                            Joseph P. Brom, President

                         FOUNDERS ASSET MANAGEMENT LLC



                         By:_______________________________
                            David L. Ray, Vice President, Treasurer & Chief 
                            Financial Officer

Accepted and Agreed:
OHIO NATIONAL FUND, INC.



By:_________________________
   John J. Palmer, President


EXHIBIT B

          SMALL CAP MUTUAL FUNDS ADVISED OR SUB-ADVISED BY FOUNDERS



<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Type of Fund          Investment         Advisor       Sub-Advisor   Advisory Fee Rate        Sub-Advisory Fee    Net Assets as of
                      Objective                                      (based on average       (based on average   September 30, 1997
                                                                        net assets)             net assets)      
- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------
<S>              <C>                     <C>             <C>         <C>                     <C>                    <C>
Founders         Capital appreciation    Founders        None        1.00% to $250 million   None                      $303,026,945
Discovery Fund                                                       0.80% next $250 million
                                                                     0.70% thereafter      
- -----------------------------------------------------------------------------------------------------------------------------------
Founders         Capital appreciation    Founders        None        1.00% to $250 million   None                      $266,447,329
Frontier Fund                                                        0.80% next $250 million
                                                                     0.70% thereafter      
- -----------------------------------------------------------------------------------------------------------------------------------
American         Capital appreciation    American        Founders    0.90%                   0.65% to $75 million      $308,356,657
Scandia Trust                            Skandia                                             0.60% next $75 million 
Founders                                 Investment                                          0.55% thereafter       
Capital                                  Services,                  
Appreciation                             Incorporated               
Portfolio                                                           
- -----------------------------------------------------------------------------------------------------------------------------------
American         Capital growth          American        Founders    0.90%                  0.50% to $250 million          $369,902
Scandia                                  Skandia                                            0.45% thereafter
Advisors Funds,                          Investment                 
Inc. - ASAF                              Services,                  
Founders Small                           Incorporated               
Capitalization                                                      
Fund                                                                
- -----------------------------------------------------------------------------------------------------------------------------------
Ohio National     Maximum capital        Ohio National   Founders    0.80%                  0.65% to $75 million        $58,587,915
Fund, Inc.-Small  growth                 Investments,                                       0.60% next $75 million 
Cap Portfolio                            Inc.                                               0.55% thereafter       
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
                                                                    

                                       14
<PAGE>   18
                               VOTING INSTRUCTIONS

                            OHIO NATIONAL FUND, INC.
                              SMALL CAP PORTFOLIO


I (we) acknowledge receipt of a copy of the Notice of Shareholders' Meeting and
Proxy Statement, and instruct Ohio National Life to vote the Ohio National Fund,
Inc., shares attributable to my (our) variable contract at the special meeting
of shareholders to be held on February 17, 1998, and at any adjournments
thereof, as specified below, and in accordance with its best judgment on any
other business that may properly come before the meeting. These instructions
relate to a solicitation by the Board of Directors.

<TABLE>
<CAPTION>

- ---------------------------------------------------------------------------------------
  To approve a new Sub-Advisory Agreement between Ohio National Investments, Inc.
  and Founders Asset Management LLC:
  <S>      <C>      <C>        <C>            <C>     <C>           <C>
                    ---                       ---                   ---
           For      ___        Against        ___     Abstain       ___
- ---------------------------------------------------------------------------------------
</TABLE>






Dated ____________________, 1998         ______________________________________
                                              Signature of Contractowner(s)





Please sign your name as it appears on the back of this form. If signing for an
estate, trust or corporation, state your title or capacity. If joint owners,
each should sign. PLEASE RETURN THIS PROXY IN THE ENVELOPE PROVIDED.



© 2022 IncJournal is not affiliated with or endorsed by the U.S. Securities and Exchange Commission