<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>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] 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, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(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
One Financial Way
Cincinnati, Ohio
45242
Post Office Box 237
Cincinnati, Ohio
45201-0237
Telephone:
Ohio National FundSM 513-794-6100
June 24, 1999
Dear Ohio National Variable Contract Owner:
Enclosed are information and voting instructions from your Ohio National Fund
Board of Directors regarding proposals related to the Fund's portfolio. A
special shareholders meeting will be held on July 22, 1999 to seek your approval
of a new subadvisory agreement for the Equity portfolio:
At the same time we will be asking you to approve some changes to the investment
policies for the Equity portfolio. An increase in the investment advisory fee
for the Equity portfolio is also on the agenda.
Your Board of Directors believes that each of the proposals is in your best
interests. We recommend that you vote FOR each proposal.
Although you are not a Fund shareholder, it is your right to instruct us how to
vote the Fund shares attributed to your variable contract.
Please complete, sign and return the voting instructions promptly in the
envelope provided. No postage is needed if you mail it in 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
[OHIO NATIONAL FINANCIAL SERVICES LOGO]
<PAGE> 3
OHIO NATIONAL FUND, INC.
One Financial Way
Montgomery, Ohio 45242
------------------------
EQUITY PORTFOLIO
------------------------
NOTICE OF MEETING OF SHAREHOLDERS
July 22, 1999
A special meeting of the shareholders of the Equity portfolio of Ohio
National Fund, Inc. will be held at the Fund's office at One Financial Way in
Montgomery, Ohio. The meeting will begin at 10:00 a.m. eastern time on July 22,
1999. The reason for the meeting is for you to act on these proposals:
1. To approve a new subadvisory agreement for the Equity portfolio
with Legg Mason Fund Adviser, Inc.
2. To approve certain changes in the fundamental investment policies
for the Equity portfolio.
3. To approve an increase in the investment advisory fee for the
Equity portfolio
4. To transact any other business that may properly come before the
meeting.
You are entitled to receive this notice and to vote at the special meeting
if you were a shareholder of record of the Equity portfolio at the close of
business on June 1, 1999.
FOR THE REASONS GIVEN IN THE ATTACHED PROXY STATEMENT, WE (THE FUND'S
MANAGEMENT AND BOARD OF DIRECTORS) RECOMMEND THAT YOU VOTE FOR THE PROPOSALS.
/s/ RONALD L. BENEDICT
Ronald L. Benedict
Secretary
June 24, 1999
<PAGE> 4
OHIO NATIONAL FUND, INC.
ONE FINANCIAL WAY
MONTGOMERY, OHIO 45242
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS OF THE
EQUITY PORTFOLIO
July 22, 1999
We (the management and Board of Directors of Ohio National Fund, Inc.) are
soliciting proxies for a special meeting of the shareholders of the Equity
portfolio. The meeting will be held at 10:00 a.m. eastern time on July 22, 1999.
We are sending you this proxy statement and its enclosures if you are a
shareholder of the Equity portfolio or if you have a variable contract with
values allocated to the portfolio. We are mailing the statement on or about June
24, 1999. Each shareholder of record as of the close of business on June 1, 1999
is entitled to one vote for each share owned at that time.
You may revoke your proxy before the meeting by giving written notice to
the Secretary of the Fund or by appearing in person at the meeting and notifying
the Secretary that you intend to revoke your proxy. Your latest proxy revokes
any earlier ones. All proxies that are properly signed and received in time and
not revoked will be voted as marked. If you sign and return a proxy but do not
show how you want to vote, we will vote it in favor of the proposals. We will
vote the interests of any variable contract owners from whom we receive no
voting instructions in proportion with the instructions that we do receive
before the meeting.
The Fund will pay the printing, mailing and legal costs for soliciting the
proxies. The investment adviser, Ohio National Investments, Inc. (the "Adviser")
will pay all other costs. The proposed subadviser may reimburse the Fund and the
Adviser for some or all of the proxy solicitation expenses. Employees of the
Fund and the Adviser will not get any extra compensation for soliciting proxies.
As of June 1, 1999, 100% of the issued and outstanding shares of the Equity
portfolio were owned of record by The Ohio National Life Insurance Company
("ONLI") and Ohio National Life Assurance Corporation ("ONLAC") (together called
"Ohio National Life"). Ohio National Life is located at One Financial Way,
Montgomery, Ohio 45242. Each share represents one vote. These shares were
allocated to Ohio National Life's separate accounts as follows:
<TABLE>
<CAPTION>
NUMBER PERCENT
OF SHARES OF CLASS
--------- --------
<S> <C> <C>
ONLI Variable Account A................................. 2,877,048 39.0%
ONLI Variable Account B................................. 1,261,219 17.1%
ONLI Variable Account C................................. 2,337,631 31.7%
ONLI Variable Account D................................. 57,620 0.8%
ONLAC Variable Account R................................ 838,897 11.4%
--------- ------
Total Equity Portfolio Shares...................... 7,372,415 100.0%
</TABLE>
We will send you, upon request, a copy of the Fund's Annual Report as of
December 31, 1998. To request a copy, contact our Treasurer, Dennis Taney, at
the above address or call him at (513) 794-6251.
SUMMARY OF PROPOSALS
The purpose of the special meeting is for you to vote on these proposals
related to the Equity portfolio:
1. We have approved a new Subadvisory Agreement between the Adviser and
Legg Mason Fund Adviser, Inc. ("LMFA") and we are now asking you to approve the
agreement.
1
<PAGE> 5
2. We have approved certain changes in the portfolio's fundamental
investment policies and restrictions and we are now asking you to approve those
changes.
3. We have approved an increase in the investment advisory fee and we are
now asking you to approve the new fee.
A majority vote of the eligible shareholders of the portfolio is required
for each issue to be approved. Under the Investment Company Act of 1940 (the
"1940 Act"), a majority vote requires at least:
- 67% of the shares represented at a meeting (by proxy or in person)
where more than half of the outstanding shares are represented, or
- More than half of all the outstanding shares.
WE RECOMMEND THAT YOU APPROVE THESE PROPOSALS.
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
recommends an investment program consistent with the Fund's investment policies.
Once the Board of Directors approves an investment program, 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
Firstar Bank, N.A. (Cincinnati, Ohio), which serves as custodian, and American
Data Services, Inc. (Hauppauge, New York) 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 June 1, 1999):
<TABLE>
<S> <C>
Equity......................................... $270,656,103
Money Market................................... 48,079,934
Bond........................................... 26,611,139
Omni........................................... 199,161,891
International.................................. 113,484,797
Capital Appreciation........................... 74,991,928
Small Cap...................................... 89,667,686
International Small Company.................... 19,578,176
Aggressive Growth.............................. 24,719,730
Core Growth.................................... 16,269,078
Growth & Income................................ 66,048,325
S&P 500 Index.................................. 159,059,760
Social Awareness............................... 3,570,012
Strategic Income............................... 3,578,766
Firstar Growth & Income........................ 3,412,855
Relative Value................................. 11,015,088
Small Cap Growth............................... 4,639,807
High Income Bond............................... 11,338,664
Equity Income.................................. 2,819,611
Blue Chip...................................... 3,626,006
</TABLE>
2
<PAGE> 6
Under a Service Agreement among the Fund, the Adviser and ONLI, ONLI has
agreed to furnish the Adviser, at cost, the research facilities, services and
personnel the Adviser may need to perform its duties 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, Ohio National Life 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.
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 month
for which the fees are paid based on the following schedule:
- for each of the Equity, Bond, Omni and Social Awareness portfolios,
0.60% of the first $100 million, 0.50% of the next $150 million, 0.45%
of the next $250 million, 0.40% of the next $500 million, 0.30% of the
next $1 billion, and 0.25% of average daily net assets over $2
billion;
- for the Money Market portfolio, 0.30% of the first $100 million, 0.25%
of the next $150 million, 0.23% of the next $250 million, 0.20% of the
next $500 million, and 0.15% of average daily net assets over $1
billion;
- for each of the International, Relative Value, Small Cap Growth, Blue
Chip and Firstar Growth & Income portfolios, 0.90% of each portfolio's
daily net assets;
- for each of the Capital Appreciation, Small Cap, Aggressive Growth and
Strategic Income portfolios, 0.80% of each portfolio's average daily
net assets;
- for the Core Growth portfolio, 0.95% of the first $150 million, and
0.80% of average daily net assets over $150 million;
- for the Growth & Income portfolio, 0.85% of the first $200 million,
and 0.80% of average daily net assets over $200 million;
- for the S&P 500 Index portfolio, 0.40% of the first $100 million,
0.35% of the next $150 million, and 0.33% of average daily net assets
over $250 million;
- for the International Small Company portfolio, 1.00% of that
portfolio's average daily net assets, and
- for each of the High Income Bond and Equity Income portfolios, 0.75%
of each portfolio's average daily net assets.
However, as to the Money Market portfolio, the Adviser is presently waiving
any of its fee in excess of 0.25%, and as to the International portfolio, the
Adviser is presently waiving any of its fee in excess of 0.85%.
During 1998, the Adviser received $6,567,012 in fees from the Fund. This
included $1,550,392 in fees from the Equity portfolio. Had the proposed new
investment advisory fees been in effect in 1998, the Adviser would have received
$2,340,200 from the Equity portfolio.
Under the Investment Advisory Agreement, the Fund authorizes the Adviser to
retain subadvisers for the International, International Small Company, Capital
Appreciation, Small Cap, Aggressive Growth, Core Growth, Growth & Income,
Strategic Income, Firstar Growth & income, Relative Value, Small Cap Growth,
High Income Bond, Equity Income and Blue Chip portfolios, subject to the
approval of the Fund's Board of Directors. The Adviser has entered into
Subadvisory Agreements with subadvisers, to manage the investment and
reinvestment
3
<PAGE> 7
of those portfolios' assets, subject to supervision by the Adviser. As
compensation for their subadvisory services the Adviser pays:
- Federated Global Investment Management Corp. ("FGIM") fees at the annual
rate of
- 0.45% of the first $200 million, and 0.40% of average daily net assets
in excess of $200 million of the International portfolio, and
- 0.75% of the first $100 million, and 0.65% of average daily net assets
in excess of $100 million of the International Small Company
portfolio;
- T. Rowe Price Associates, Inc. a fee at the annual rate of 0.50% of the
average daily net assets of the Capital Appreciation portfolio;
- Founders Asset Management LLC a fee at the annual rate of 0.625% of the
first $75 million, 0.55% of the next $75 million, 0.50% of the next $150
million, and 0.40% of average daily net assets in excess of $300 million
of the Small Cap portfolio;
- Strong Capital Management, Inc. a fee at the annual rate of 0.55% of the
first $50 million, and 0.45% of average daily net assets in excess of $50
million of the Aggressive Growth portfolio;
- Pilgrim Baxter & Associates, Ltd. a fee at the annual rate of 0.65% of
the first $50 million, 0.60% of the next $100 million, and 0.50% of
average daily net assets in excess of $150 million of the Core Growth
portfolio;
- RS Investment Management, L.P. ("RSIM") fees at the 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
- 0.64% of the first $100 million, 0.60% of the next $100 million, and
0.50% of average daily net assets in excess of $200 million in the
Small Cap Growth portfolio.
- Firstar Investment Research & Management Company, LLC ("FIRMCO") fees at
the annual rate of 0.65% of the first $50 million and 0.60% of the
average daily net assets in excess of $50 million of the Firstar Growth &
Income portfolio.
- Firstar Bank, N.A. ("Firstar") fees at the annual rate of
- 0.55% of the first $50 million and 0.50% of average daily net assets
in excess of $50 million of the Strategic Income portfolio, and
- 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, and
- Federated Investment Counseling fees at the annual rate of
- 0.50% of the first $30 million, 0.40% of the next $20 million, 0.30%
of the next $25 million, and 0.25% of average daily net assets in
excess of $75 million of the High Income Bond portfolio, and
- 0.50% of the first $35 million, 0.35% of the next $65 million, and
0.25% of average daily net assets in excess of $100 million for
directing the investment and reinvestment of the assets of each of the
Equity Income and Blue Chip portfolios.
The Board of Directors and shareholders of each portfolio initially voted
to approve the current Investment Advisory, Service and Subadvisory Agreements
on the dates listed below:
<TABLE>
<CAPTION>
BOARD OF
DIRECTORS SHAREHOLDERS
--------- ------------
<S> <C> <C>
Equity...................................................... 1-24-96 3-28-96
Money Market................................................ 1-24-96 3-28-96
</TABLE>
4
<PAGE> 8
<TABLE>
<CAPTION>
BOARD OF
DIRECTORS SHAREHOLDERS
--------- ------------
<S> <C> <C>
Bond........................................................ 1-24-96 3-28-96
Omni........................................................ 1-24-96 3-28-96
International (Investment Advisory and Service)............. 1-24-96 3-28-96
International (Subadvisory)................................. 12-09-98 4-05-99
Capital Appreciation........................................ 1-24-96 3-28-96
Small Cap (Investment Advisory and Service)................. 1-24-96 3-28-96
Small Cap (Sub-Advisory).................................... 11-19-97 2-17-98
International Small Company (Investment Advisory and
Service).................................................. 1-24-96 3-28-96
International Small Company (Subadvisory)................... 12-09-98 4-05-99
Aggressive Growth........................................... 1-24-96 3-28-96
Core Growth................................................. 8-22-96 1-02-97
Growth & Income (Investment Advisory and Service)........... 8-22-96 1-02-97
Growth & Income (Subadvisory)............................... 2-24-99 4-05-99
S&P 500 Index............................................... 8-22-96 1-02-97
Social Awareness............................................ 8-22-96 1-02-97
Strategic Income............................................ 8-22-96 1-02-97
Firstar Growth & Income (Investment Advisory and Service)... 8-22-96 1-02-97
Firstar Growth & Income (Subadvisory)....................... 2-24-99 4-05-99
Relative Value.............................................. 8-22-96 1-02-97
Small Cap Growth (Investment Advisory and Service).......... 2-11-98 4-30-98
Small Cap Growth (Subadvisory).............................. 2-24-99 4-05-99
High Income Bond............................................ 2-11-98 4-30-98
Equity Income............................................... 2-11-98 4-30-98
Blue Chip................................................... 2-11-98 4-30-98
</TABLE>
These agreements will continue in force from year to year if they are
approved at least annually by (a) a majority of the Fund's directors who are not
parties to the agreements or interested persons of any such party, with votes to
be cast in person at a meeting called for the purpose of voting on such
continuance, and also by (b) a majority of the Board of Directors or by a
majority of the outstanding voting securities of each portfolio voting
separately. The Board of Directors has approved the continuance of each
agreement at least once a year following the dates shown above. The dates
indicated for initial approvals by the shareholders also represent the most
recent times those agreements were submitted to the shareholders.
The Investment Advisory, Service and Subadvisory Agreements may be
terminated at any time, without the payment of any penalty, if we give 60 days'
written notice to the Adviser or, as to any portfolio, by a vote of the majority
of the portfolio's outstanding voting securities. The Investment Advisory
Agreement may be terminated by the Adviser on 90 days' written notice to the
Fund. The Service Agreement may be terminated, without penalty, by the Adviser
or ONLI on 90 days' written notice to the Fund and the other party. The
Sub-Advisory Agreements may be terminated, without penalty, by the Adviser or
the sub-adviser on 90 days' written notice to the Fund and the other party. An
Agreement will automatically terminate if it is assigned.
5
<PAGE> 9
In addition to being the investment adviser to the Fund, the Adviser is
also the investment adviser to ONE Fund, Inc. ("ONE Fund") and Dow Target
Variable Fund LLC ("Dow Target"). ONE Fund presently consists of the following
portfolios:
<TABLE>
<CAPTION>
ONE FUND PORTFOLIO NET ASSETS (6/1/99)
------------------ -------------------
<S> <C>
Money Market................................. $16,519,301
Tax-Free Income.............................. 6,987,323
Income....................................... 6,421,226
Income & Growth.............................. 12,874,095
Growth....................................... 10,263,814
Small Cap.................................... 3,657,346
International................................ 6,992,823
Global Contrarian............................ 3,016,720
Core Growth.................................. 4,209,884
</TABLE>
Dow Target presently consists of the following portfolios:
<TABLE>
<CAPTION>
DOW TARGET PORTFOLIO NET ASSETS (6/1/99)
-------------------- -------------------
<S> <C>
Dow Target 10 January........................ $ 559,345
Dow Target 10 February....................... 1,557,707
Dow Target 10 March.......................... 1,451,636
Dow Target 10 April.......................... 1,826,362
Dow Target 10 May............................ 1,047,336
Dow Target 10 June........................... 235,171
</TABLE>
As compensation for its services to ONE Fund, the Adviser receives from ONE
Fund fees on the basis of each portfolio's average daily net assets during the
month for which the fees are paid based on the following schedule:
- for each of the Income, Income & Growth and Growth portfolios, the fee
is at an annual rate of 0.50% of the first $100 million of the average
daily net assets in each portfolio, 0.40% of the next $150 million,
and 0.30% of the average daily net assets in each portfolio over $250
million;
- as to the Money Market portfolio, the fee is at an annual rate of
0.30% of the first $100 million, 0.25% of the next $150 million, and
0.20% of the average daily net assets over $250 million;
- for the Tax-Free Income portfolio, the fee is at an annual rate of
0.60% of the first $100 million, 0.50% of the next $150 million, and
0.40% of the average daily net assets over $250 million;
- for 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
the average daily net assets over $250 million;
- for each of the International and Global Contrarian portfolios, the
fee is at the annual rate of 0.90% of the average daily net assets in
each portfolio;
- for the Core Growth portfolio, the fee is at an annual rate of 0.95%
of the first $150 million, and 0.80% of the average daily net 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.
During 1998, the Adviser received $348,357 in fees from ONE Fund.
6
<PAGE> 10
As compensation for its services to Dow Target, the Adviser receives from
Dow Target a fee at an annual rate of 0.60% of the average daily net assets of
Dow Target during the month for which the fee is paid. Dow Target first began
business in January, 1999.
The Adviser is a wholly-owned subsidiary of The Ohio National Life
Insurance Company. Both are located at One Financial Way, Montgomery, Ohio
45242.
EQUITY PORTFOLIO PROPOSALS
NEW SUBADVISORY AGREEMENT
The Equity portfolio has never had a subadviser. Since May 1, 1996, its
assets have been managed by the Adviser, a wholly-owned subsidiary of ONLI. From
the portfolio's inception in 1970 through April 30, 1996, the portfolio's assets
were managed by O.N. Investment Management Company ("ONIMCO"), an indirect
subsidiary of ONLI. Both the Adviser and ONIMCO before it have made use of the
investment personnel, administrative systems and related services of ONLI. ONLI
provides these personnel, systems and services to the Adviser at cost. This is
done under the Service Agreement described previously.
At a special meeting on May 20, 1999 the Board of Directors voted
unanimously to approve the proposed Sub-Advisory Agreement between the Adviser
and LMFA. LMFA was selected primarily because we believe that, based on its
history of excellent equity fund investment results, it is capable of providing
better long-term total returns for the Equity portfolio than are likely to be
experienced under the continued direct portfolio management by the Adviser. Past
performance is no guarantee of future results.
LMFA was founded in 1982. It is located at 100 Light Street, Baltimore,
Maryland. LMFA is one of several investment management firms wholly-owned by
Legg Mason, Inc. LMFA specializes in the management of domestic equity mutual
funds. The funds managed by LMFA presently have total net assets of
approximately $20 billion.
The directors and principal executive officers of LMFA are as follows:
<TABLE>
<CAPTION>
OFFICERS AND DIRECTORS POSITION WITH LMFA OTHER PRINCIPAL OCCUPATION
---------------------- ------------------ --------------------------
<S> <C> <C>
Edward A. Taber III*...... Director and Chairman Director and Senior Executive Vice
President of Legg Mason Wood Walker, Inc.
("LMWW")
William H. Miller III*.... Director, CEO and President Portfolio Manager of Legg Mason Capital
Management, Inc. ("LMCM")
Raymond A. Mason*......... Director Director and Chairman of LMWW
Timothy C. Sheve*......... Director Treasurer, Vice President and CFO of LMWW
Jennifer W. Murphy*....... Senior Vice President, COO N/A
and CFO
Nancy T. Dennin*.......... Senior Vice President and N/A
Portfolio Manager
David E. Nelson*.......... Senior Vice President and Portfolio Manager of LMCM
Portfolio Manager
Marie K. Karpinski*....... Treasurer Vice President of LMWW
</TABLE>
- ---------------
* The business address of each is 100 Light Street, Baltimore, Maryland 21202.
One of the primary reasons we selected LMFA to be the Equity portfolio's
subadviser is because, if you approve the Subadvisory Agreement, the portfolio
manager will be William H. Miller, III. Mr. Miller is LMFA's president. He is a
chartered financial analyst with an economics degree from Washington and Lee
University and graduate studies in the Ph.D. program at Johns Hopkins
University. Mr. Miller has been the portfolio manager of Legg Mason Value Trust,
Inc. ("Value Trust") since November, 1990 and before that had been the
co-manager of
7
<PAGE> 11
Value Trust from its inception in 1982. Before that, he was a corporate
treasurer. Value Trust is an equity mutual fund seeking long-term growth of
capital using the "value" approach to investing. It purchases securities that
appear to be undervalued and therefore offer above-average potential for capital
appreciation. It then tends to hold those companies for a long time, thus
minimizing portfolio turnover and brokerage expenses. Value Trust presently has
approximately $12 billion of total net assets.
William Miller works with a team of investment research analysts who assist
him in reviewing and analyzing financial data of the companies he considers for
investment. Although past performance is no guarantee of future results, the
success of Mr. Miller's investment management is noteworthy. Value Trust is the
only mutual fund that has performed better than the Standard & Poor's 500 Index
in each of the years from 1991 through 1998.
If you approve the Subadvisory Agreement and the proposed changes to the
fundamental investment policies, Mr. Miller intends to manage the Equity
portfolio in a style similar to that of Value Trust. However, it is not possible
for one mutual fund to duplicate another because of differences in asset size
and timing of portfolio transactions. The Equity portfolio and Value Trust will
not necessarily own stocks of all the same companies at the same time.
The Subadvisory Agreement calls for the payment by the Adviser to LMFA of a
subadvisory fee. This fee will be at the annual rate of 0.45% of the first $500
million of the Equity portfolio's average daily net assets and 0.40% of its
average daily net assets in excess of $500 million. Because of this fee, the
Board of Directors has unanimously approved, and is recommending that you
approve, the increased investment advisory fee described below.
A copy of the proposed Subadvisory Agreement is attached as Exhibit A.
We recommend that you approve the Subadvisory Agreement.
INVESTMENT POLICIES
LMFA intends to manage the Equity portfolio in a style similar to that of
Value Trust. This fund, which is managed by the Equity portfolio's proposed
portfolio manager, has the distinction of being the only mutual fund to have
higher total returns than the Standard & Poor's 500 Index during each of the 8
years from 1991 through 1998. William Miller has been Value Trust's portfolio
manager since November 1990.
Although past performance does not predict future performance and it is not
possible for one mutual fund portfolio to exactly duplicate another, we believe
it is in the best interests of Equity portfolio shareholders that certain
changes be made in the portfolio's fundamental investment polices to more
closely align the Equity portfolio's investment style with that of Value Trust.
These changes have been approved unanimously by the Board of Directors. They
must also be approved by your vote.
We recommend that the statement that "current income is a secondary
consideration although growth of income may accompany growth of capital" be
removed from the portfolio's primary objectives. The portfolio's primary
objective will continue to be long-term growth of capital.
The following investment restrictions are presently fundamental policies of
the Equity portfolio. This means they can not be changed unless the change is
approved by a majority vote of shareholders. In order to more closely align the
management of the Equity portfolio with that of Value Trust, the Board of
Directors has unanimously approved the changes described below. We recommend
that you also approve these changes. (The numbers for the items below correspond
to the numbers in the portfolio's list of restrictions.)
1. The portfolio will not invest more than 5% of the value of the total
assets of such portfolio in the securities of any one issuer (except U.S.
government securities).
We recommend that the portfolio's restriction #1 be changed to insert the
following words at the beginning of the restriction: "As to 75% of its assets."
4. The portfolio will not invest more than 10% of its assets in securities
or other investments, including repurchase agreements maturing in more than
seven days, that are subject to legal or contractual restrictions upon resale or
are otherwise not readily marketable.
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We recommend that the "10%" in the portfolio's restriction #4 be changed to
"15%." We also recommend that this restriction be made a nonfundamental policy
of the Equity portfolio.
The Board can change nonfundamental policies without your approval.
However, we will still have to notify you before any material change by the
Board takes effect for a nonfundamental policy.
8. The portfolio will not invest in foreign issuers except that it may (i)
invest up to 15% of its assets in securities of foreign issuers (including
foreign governments or political subdivisions, agencies or instrumentalities of
foreign governments), American Depository Receipts, and securities of United
States domestic issuers denominated in foreign currency, and (ii) invest up to
an additional 10% of the assets of the portfolio in securities issued by foreign
governments or political subdivisions, agencies or instrumentalities thereof.
We recommend that the portfolio's restriction #8 be amended to provide that
the portfolio may invest up to 30% of its assets in foreign issuers. We also
recommend that this restriction be made a nonfundamental policy of the Equity
portfolio.
We also recommend that each of the following fundamental policies be
classified as nonfundamental:
7. The portfolio will not purchase or sell put or call options, except that
it may, for hedging purposes, (a) write call options traded on a registered
national securities exchange if such portfolio owns the underlying securities
subject to such options, and purchase call options for the purpose of closing
out positions in options it has written, (b) purchase put options on securities
owned, and sell such options in order to close its positions in put options, (c)
purchase and sell financial futures contracts and options thereon, and (d)
purchase and sell financial index options; provided, however, that no option or
futures contract shall be purchased or sold if, as a result, more than one third
of the total assets of the portfolio would be hedged by options or futures
contracts, and no more than 5% of the portfolio's total assets, at market value,
may be used for premiums on open options and initial margin deposits on futures
contracts.
12. The portfolio will not sell securities short or purchase securities on
margin except such short-term credits as are required to clear transactions.
13. The portfolio will not participate on a joint or joint and several
basis in any trading account in securities, or purchase securities for the
purpose of exercising control or management.
We recommend that you vote to approve these changes.
The remaining investment restrictions that are presently designated as
fundamental polices of the Equity portfolio will continue as such.
INVESTMENT ADVISORY FEE
As indicated above, the Subadvisory Agreement with LMFA will include a
subadvisory fee of 0.45% of the first $500 million and 0.40% of the Equity
portfolio's average daily net assets in excess of $500 million. The subadvisory
fee is paid by the Adviser out of its investment advisory fee. Because of the
added expense of the proposed subadvisory fee, the Board of Directors has
unanimously approved an increase in the portfolio's investment advisory fee.
The investment advisory fee for the Equity portfolio is presently at the
annual rate of 0.60% of the first $100 million, 0.50% of the next $150 million,
0.45% of the next $250 million, 0.40% of the next $500 million, 0.30% of the
next $1 billion, and 0.25% of average daily net assets over $2 billion. During
1998, the actual fees paid were at the effective rate of 0.53%.
The proposed new investment advisory fee is at the annual rate of 0.80% of
the first $500 million and 0.75% of average daily net assets in excess of $500
million.
We believe that the new fee structure is in your best interests because it
enables the Adviser to engage the services of LMFA as subadviser while still
meeting its other financial objectives and expenses connected with the Equity
portfolio. We believe that your interests will be served by the investment
experience and performance of LMFA.
We recommend that you vote to approve this increase in the investment
advisory fee.
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EXHIBIT A
SUBADVISORY AGREEMENT
This Agreement is made as of the second day of August, 1999 by and between
OHIO NATIONAL INVESTMENTS, INC., an Ohio corporation (the "Adviser"), and LEGG
MASON FUND ADVISER, INC., a Maryland corporation (the "Subadviser").
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 Subadviser 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 Subadviser,
subject to the requirements of the 1940 Act and the Advisers Act, as a
subadviser with respect to that portion of the assets of the Fund designated as
the EQUITY 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 Subadviser, and the Subadviser
hereby accepts engagement by the Adviser, to supervise and manage on a
fully-discretionary basis the cash, securities and other assets of the
Equity Portfolio that the Adviser shall from time to time place under the
supervision of the Subadviser (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"). The Fund is the owner of all cash, securities and other
assets in the Portfolio, and there are no restrictions on the pledge,
hypothecation, transfer or sale of such cash, securities or assets. To
enable the Subadviser to exercise fully its discretion hereunder, the
Adviser hereby appoints the Subadviser as agent and attorney-in-fact for
the Portfolio with full authority to buy, sell and otherwise deal in
securities and other intangible investments and contracts relating to the
same for the Portfolio.
(b) All activities by the Subadviser 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
Subadviser 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 Subadviser 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 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. The Adviser
specifically agrees that to the extent consistent with the Fund's policies
and restrictions regarding brokerage allocation set forth in the Prospectus
and with the Subadviser's responsibility for executing transactions through
brokers or dealers that the Subadviser reasonably believes will provide the
best qualitative execution, the Subadviser may choose to execute
transactions through its affiliate, Legg Mason Wood Walker, Incorporated.
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(d) In carrying out its obligations to manage the investments and
reinvestments of the assets of the Portfolio, the Subadviser shall: (1) in
its discretion, 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 it deems necessary, in its sole discretion, 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 Subadviser 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 Subadviser 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 Subadviser 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 Subadviser for the
period and in the place required by Rule 31a-2 under the 1940 Act.
(g) The Subadviser 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 Subadviser shall be an
independent contractor and not an agent of the Adviser or the Fund.
SECTION 2. Expenses
(a) The Subadviser 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 Subadviser 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 Subadviser 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, settlement charges 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.
SECTION 3. Use of Services of Others
The Subadviser 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 Subdviser with such
statistical or factual information, such advice regarding economic factors and
trends or such other information, advice or assistance as the Subadviser may
deem necessary, appropriate or convenient for the discharge of the Subadviser's
obligations hereunder or otherwise helpful to the Fund and the Portfolio.
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SECTION 4. Subadvisory Fees
In consideration of the Subadviser's services to the Fund hereunder, the
Subadviser shall be entitled to a Subadvisory Fee, payable quarterly, at the
annual rate of 0.45% of the first five hundred million dollars ($500,000,000) of
the average daily net assets of the Portfolio during the quarter preceding each
payment, and 0.40% of the average daily net assets of the Portfolio in excess of
five hundred million dollars ($500,000,000) (the "Subadvisory Fee") provided,
however, that if the Adviser shall enter into any investment advisory or
subadvisory relationship for any other registered investment company that is the
funding vehicle for variable annuities or variable life insurance at any time
within the earlier of one year from the date hereof or upon the Portfolio's
attaining total net assets of at least five hundred million dollars
($500,000,000) then the Subadvisory Fee shall be 0.40% of all of the average
daily net assets of the Portfolio beginning on the date hereof and continuing
throughout the term of this Agreement. The Subadvisory Fee shall be accrued for
each calendar day and the sum of the daily Subadvisory Fee accruals shall be
paid quarterly to the Subadviser 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 net market value of securities held short by the Portfolio shall
be treated as a liability of the account and, together with the amount of any
margin or other loans owed by the account, shall be subtracted in determining
net market value. If this Agreement begins on a date other than the first day of
a quarter or terminates on a date other than the last day of a quarter, the
Subadvisory Fee payable with respect to either such quarter shall be prorated.
The Subadvisory Fee shall be payable solely by the Adviser, and the Fund shall
not be liable to the Subadviser for any unpaid Subadvisory Fee.
SECTION 5. Limitation of Liability of Subadviser
(a) The Subadviser shall be liable for losses resulting from its own
acts or omissions caused by the Subadviser'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 Subadviser against any such liability to the shareholders
of the Fund or to the Adviser. The Subadviser 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 Subadviser's duties under this Agreement, including, but
not limited to, any error in judgment with respect to buying or selling
securities for the Portfolio, 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 (other than taxes on the Subadviser's income), 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").
Notwithstanding the foregoing sentence, the Subadviser shall be liable for
taxes or tax penalties incurred by the Fund for any failure of the
Portfolio to qualify as a regulated investment company under Subchapter M
of the Internal Revenue Code of 1986 as amended as a result of the
Subadviser's management of the Portfolio.
(b) In the event the Subadviser is assessed any Taxation in respect of
the assets, income or activities of the Portfolio, the Adviser and the Fund
jointly will indemnify the Subadviser 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 Subadviser in connection with the defense or settlement of
any such assessment as such expenditures are incurred. The Subadviser 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 Subadviser would be inappropriate due to actual or
potential conflicts of interest.
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(c) The Subadviser shall have no responsibility for and shall incur no
liability to the Fund, any shareholder of the Fund or the Adviser relating
to (1) the selection or establishment by the Fund of its investment
objectives, fundamental policies and restrictions, (2) the Fund's
registration or duty to register with any government or agency, (3) the
administration of any plans, trusts or accounts investing through the Fund,
or (4) the Fund's compliance with the requirements of the 1940 Act or
Subchapter M of the Internal Revenue Code except as otherwise specified in
subsection (a) of this Section 5. The Adviser shall indemnify and defend
the Subadviser and its partners and employees and hold them harmless from
and against any and all claims, losses, damages, liabilities and expenses,
as they are incurred, by reason of any act or omission of the Adviser or
any custodian, broker, agent or other party selected by the Adviser, except
such as arise from the Subadviser's breach of this contract or of the
Subadviser's fiduciary duty to the Adviser or the Fund.
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 Subadviser 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 Subadviser may act as investment manager or in
other capacities on behalf of other customers including other entities
registered under the 1940 Act. This may create conflicts of interest with
the Portfolio over the Subadviser's time devoted to managing the Portfolio
and the allocation of investment opportunities among accounts (including
the Portfolio) managed by the Subadviser. The Subadviser shall use its best
efforts to resolve all such conflicts in a manner that is generally fair to
all of its clients without prejudice to the Portfolio. While information,
recommendations and actions which the Subadviser supplies to and does on
behalf of the Portfolio shall in the Subadviser'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 Subadviser
from time to time, it is understood and agreed that they may be different
from the information, recommendations and actions the Subadviser or its
affiliated persons supply to or do on behalf of other clients. The
Subadviser shall, to the extent practicable, allocate investment
opportunities to the Portfolio over a period of time on a fair and
equitable basis relative to its other clients. Nothing in this Agreement
shall be deemed to obligate the Subadviser to acquire for the Portfolio any
security that the Subadviser or its partners, employees or affiliated
persons may acquire for its or their own accounts or for the account of any
other client if, in the absolute discretion of the Subadviser, it is not
practical or desirable to acquire a position in that security for the
Portfolio. As used herein, the term "affiliated person" shall have the
meaning assigned to it in the 1940 Act.
(b) On occasions when the Subadviser deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as other
customers of the Subadviser, the Subadviser may, to the extent permitted by
applicable law, aggregate the securities to be so sold or purchased in
order to obtain the best execution, beneficial timing of transactions or
lower brokerage commissions, if any. The Subadviser 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 Subadviser in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to the Fund and to such other
customers. The purchase or sale of securities for the Portfolio may, in
many instances, be effected substantially simultaneously with the purchase
or sale of like securities for the accounts of other clients of the
Subadviser and its affiliated persons. Such transactions may be made at
slightly different prices due to the volume of securities purchased or
sold. In that event, the average price of all securities purchased or sold
in such transactions may be determined and the Portfolio may be charged or
credited, as the case may be, the average transaction price.
(c) The Subadviser 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 Subadviser will
conform with all applicable rules and regulations of the Securities and
Exchange Commission.
(d) The Subadviser may refrain from rendering any advice or services
concerning securities of Legg Mason, Inc., or of companies of which any of
the officers, directors or employees of the Subadviser or its
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affiliates are officers, directors or employees, or of companies for which
the Subadviser or any of its affiliates act as financial adviser or as to
which such entities have material non-public information.
SECTION 7. Proxies
Unless the Adviser instructs the Subadviser otherwise in writing, the
Subadviser will vote proxies for securities held by the Fund in accordance with
the Subadviser's policies for proxy voting. The Subadviser is authorized to
instruct the custodian to forward to the Subadviser copies of all proxies and
shareholder communications relating to securities held by the Portfolio (other
than materials relating to legal proceedings). The Adviser agrees that the
Subadviser will not be liable for failing to vote any proxies where it has not
received such proxies or related shareholder communications on a timely basis.
SECTION 8. Reports to the Subadviser
The Adviser shall furnish to the Subadviser the Prospectus, proxy
statements, reports and other information relating to the business and affairs
of the Fund as the Subadviser may, at any time or from time to time, reasonably
require in order to discharge the Subadviser's duties under this Agreement.
SECTION 9. 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 until approved by
a majority vote of the voting securities of the Portfolio, at a meeting to take
place not more than one year after the effective date of the Fund's registration
statement relating to the Portfolio. 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 10. Confidentiality
Except as required by law, the Adviser agrees to maintain in strict
confidence all investment advice and information furnished to the Adviser or the
Fund by the Subadviser.
SECTION 11. 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 Subadviser
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.
SECTION 12. Notices
(a) The Subadviser agrees to promptly notify the Adviser of the
occurrence of any of the following events: (1) any change in the
Portfolio's portfolio manager; (2) the Subadviser fails to be registered as
an investment adviser under the Advisers Act or under the laws of any
jurisdiction in which the Subadviser is required to be registered as an
investment adviser in order to perform its obligations under this
Agreement;
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(3) the Subadviser 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 Subadviser.
(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 Subadviser:
Jennifer W. Murphy, Senior Vice President, COO & CFO
Legg Mason Fund Adviser, Inc.
100 Light Street
Baltimore, Maryland 21203
Fax No. (410) 454-3284
With a copy to:
Andrew J. Bowden, Esq.
Legg Mason Wood Walker, Incorporated
100 Light Street
Baltimore, Maryland 21203
SECTION 13. Arbitration
The parties waive their right to seek remedies in court, including any
right to a jury trial. The parties agree that any dispute between the parties
arising out of, relating to, or in connection with, this Agreement, shall be
resolved exclusively by arbitration to be conducted only in the county and state
of the principal office of the Adviser at the time of such dispute in accordance
with the rules of the American Arbitration Association ("AAA") applying the laws
of Ohio. The parties agree that such arbitration shall be conducted by a retired
judge who is experienced in dispute resolution regarding the securities
industry, that discovery shall not be permitted except as required by the rules
of AAA, that the arbitration award shall not include factual findings or
conclusions of law, and that no punitive damages shall be awarded. The parties
understand that any party's right to appeal or to seek modification of any
ruling or award of the arbitrator is severely limited. Any award rendered by the
arbitrator shall be final and binding, and judgment may be entered upon it in
any court of competent jurisdiction in the county and state of the principal
office of the Adviser at the time the award is rendered or as otherwise provided
by law.
SECTION 14. Delivery of Documents
(a) The Adviser acknowledges that it has received the Subadviser's
brochure required to be delivered under the Advisers Act (including the
information in Part II of the Subadviser's Form ADV). If the Adviser
received such information less than forty-eight hours prior to signing this
Agreement, this Agreement may be terminated by the Adviser without penalty
within five business days from the effective date. The
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Subadviser agrees to deliver annually without charge the Subadviser's
brochure required by the Advisers Act and any and all amendments to its
Form ADV whenever filed. The Subadviser shall also, upon request by the
Adviser, furnish the Adviser with a copy of the Subadviser's code of
ethics.
(b) The Subadviser acknowledges that it has received copies properly
certified or authenticated of each of the following:
1) The Fund's Articles of Incorporation, as filed with the State
Department of Assessments and Taxation of the State of Maryland and all
amendments thereto:
2) The Fund's By-Laws and all amendments thereto;
3) Resolutions of the Fund's Board of Directors authorizing the
appointment of the Adviser as investment adviser to the Fund and
approving the Investment Advisory Agreement between the Adviser and the
Fund;
4) The Fund's Registration Statement on Form N-1A as filed with the
Securities and Exchange Commission, including all exhibits thereto;
5) The Fund's most recent prospectus; and
6) The Fund's most recent statement of additional information.
The Adviser will furnish the Subadviser from time to time with copies of
all amendments of or supplements to the foregoing.
SECTION 15. Use of Name
The Subadviser hereby agrees that the Adviser may use the Subadviser's name
and logo in its marketing or advertising materials, provided that the Subadviser
has reviewed and approved any such materials prior to their use.
SECTION 16. Entire Agreement; Severability
This Agreement is the entire agreement of the parties and supersedes all
prior or contemporaneous written or oral negotiations, correspondence,
agreements and understandings regarding the subject matter hereof. The
invalidity or unenforceability of any provision hereof shall in no way affect
the validity or enforceability of any and all other provisions hereof.
SECTION 17. No Third-Party Beneficiaries
Neither party intends for this Agreement to benefit any third-party not
expressly named in this Agreement.
SECTION 18. 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 19. 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.
SECTION 20. 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.
A-7
<PAGE> 20
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: /s/ JOSEPH P. BROM
------------------------------------
Joseph P. Brom, President
LEGG MASON FUND ADVISER, INC.
By: /s/ WILLIAM H. MILLER III
------------------------------------
William H. Miller III
CEO & President
Accepted and Agreed:
OHIO NATIONAL FUND, INC.
By: /s/ JOHN J. PALMER
--------------------------------------------------------
John J. Palmer, President
A-8
<PAGE> 21
VOTING INSTRUCTIONS
OHIO NATIONAL FUND, INC.
I (we) acknowledge receipt of a copy of the Notice of Shareholders' Meeting,
Proxy Statement and annual report. I (we) 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 July 22, 1999, (and at any
adjournments of that meeting) as specified below, and in accordance with their
best judgment on any other business that may properly come before the meeting.
THESE INSTRUCTIONS RELATE TO A SOLICITATION BY THE BOARD OF DIRECTORS.
- --------------------------------------------------------------------------------
You may check one of these boxes instead of voting on each of the numbered items
below:
<TABLE>
<C> <C> <S> <C> <C> <C> <C>
For or Against or Abstain on all the Board of Directors recommendations.
[ ] [ ] [ ]
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<C> <C> <S> <C> <C> <C> <C> <C>
1. To approve the new Subadvisory Agreement: For or Against or Abstain
[ ] [ ] [ ]
2. To approve new fundamental investment policies:
a. Remove the secondary objective of current income For or Against or Abstain
[ ] [ ] [ ]
b. Permit the portfolio to limit diversification to For or Against or Abstain
75% of assets [ ] [ ] [ ]
c. Increase the limit on restricted securities to 15% For or Against or Abstain
of assets and make this a nonfundamental policy [ ] [ ] [ ]
d. Permit the portfolio to invest up to 30% of its For or Against or Abstain
assets in foreign securities and make this a [ ] [ ] [ ]
nonfundamental policy
e. Reclassify the restriction on options as a For or Against or Abstain
nonfundamental policy [ ] [ ] [ ]
f. Reclassify the restriction on short sales and For or Against or Abstain
margin purchases as a nonfundamental policy [ ] [ ] [ ]
g. Reclassify the restriction on joint or joint and For or Against or Abstain
several participations and exercise of control or [ ] [ ] [ ]
management as a nonfundamental policy
3. To approve the new investment advisory fee: For or Against or Abstain
[ ] [ ] [ ]
</TABLE>
<TABLE>
<S> <C>
Dated: ---------------------, 1999
----------------------------------------------------------
Signature of Contract Owner(s)
</TABLE>
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 these voting instructions in the
envelope provided.
<PAGE> 22
OHIO NATIONAL FUND, INC.
PARTICIPANT'S INSTRUCTIONS
TO PLAN TRUSTEE OR ADMINISTRATOR
I request that you vote the Ohio National Fund, Inc. shares attributable to my
interest in the variable contract at the special meeting of Fund shareholders to
be held on July 22, 1999, as specified below. THESE INSTRUCTIONS RELATE TO A
SOLICITATION BY THE BOARD OF DIRECTORS.
- --------------------------------------------------------------------------------
You may check one of these boxes instead of voting on each of the numbered items
below:
<TABLE>
<C> <C> <S> <C> <C> <C> <C>
For or Against or Abstain on all the Board of Directors recommendations.
[ ] [ ] [ ]
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<C> <C> <S> <C> <C> <C> <C> <C>
1. To approve the new Subadvisory Agreement: For or Against or Abstain
[ ] [ ] [ ]
2. To approve new fundamental investment policies:
a. Remove the secondary objective of current income For or Against or Abstain
[ ] [ ] [ ]
b. Permit the portfolio to limit diversification to For or Against or Abstain
75% of assets [ ] [ ] [ ]
c. Increase the limit on restricted securities to 15% For or Against or Abstain
of assets and make this a nonfundamental policy [ ] [ ] [ ]
d. Permit the portfolio to invest up to 30% of its For or Against or Abstain
assets in foreign securities and make this a [ ] [ ] [ ]
nonfundamental policy
e. Reclassify the restriction on options as a For or Against or Abstain
nonfundamental policy [ ] [ ] [ ]
f. Reclassify the restriction on short sales and For or Against or Abstain
margin purchases as a nonfundamental policy [ ] [ ] [ ]
g. Reclassify the restriction on joint or joint and For or Against or Abstain
several participations and exercise of control or [ ] [ ] [ ]
management as a nonfundamental policy
3. To approve the new investment advisory fee: For or Against or Abstain
[ ] [ ] [ ]
</TABLE>
<TABLE>
<S> <C>
Dated: ---------------------, 1999
----------------------------------------------------------
Signature of Participant
</TABLE>
