<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, 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
March 2, 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 five of the Fund's portfolios.
A special shareholders meeting will be held on April 5 to seek your approval of
new subadvisory agreements for these portfolios:
International
Global Contrarian
Growth & Income
Small Cap Growth
Stellar
At the same time we will be asking you to approve changes to the investment
policies for the International, Global Contrarian and Stellar portfolios. An
increase in the investment advisory fee for the Global Contrarian 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 affecting your
portfolios.
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
President
[OHIO NATIONAL FINANCIAL SERVICES LOGO]
<PAGE> 3
OHIO NATIONAL FUND, INC.
One Financial Way
Montgomery, Ohio 45242
------------------------
INTERNATIONAL PORTFOLIO
GLOBAL CONTRARIAN PORTFOLIO
GROWTH & INCOME PORTFOLIO
SMALL CAP GROWTHPORTFOLIO
STELLAR PORTFOLIO
------------------------
NOTICE OF MEETING OF SHAREHOLDERS
April 5, 1999
A special meeting of the shareholders of the International, Global
Contrarian, Growth & Income, Small Cap Growth and Stellar Portfolios 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 April 5,
1999. The reason for the meeting is for you to act on these proposals:
1. To approve new subadvisory agreements as follows:
a. For the International and Global Contrarian Portfolios with
Federated Global Investment Management Corp.
b. For the Growth & Income and Small Cap Growth Portfolios with
Robertson Stephens Investment Management, L.P.
c. For the Stellar Portfolio with Firstar Investment Research &
Management Company, L.L.C.
2. To approve certain changes in the fundamental investment policies
for the International, Global Contrarian and Stellar Portfolios.
3. To approve an increase in the investment advisory fee for the
Global Contrarian 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 any of these portfolios at the close of
business on December 31, 1998.
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.
RONALD L. BENEDICT
Secretary
March 2, 1999
1
<PAGE> 4
OHIO NATIONAL FUND, INC.
ONE FINANCIAL WAY
MONTGOMERY, OHIO 45242
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS OF THE
INTERNATIONAL PORTFOLIO
GLOBAL CONTRARIAN PORTFOLIO
GROWTH & INCOME PORTFOLIO
SMALL CAP GROWTH PORTFOLIO
STELLAR PORTFOLIO
April 5, 1999
We (the management and Board of Directors of Ohio National Fund, Inc.) are
soliciting proxies for a special meeting of the shareholders of these five
portfolios. The meeting will be held at 10:00 a.m. eastern time on April 5,
1999. We are sending you this proxy statement and its enclosures if you are a
shareholder of one of the portfolios or if you have a variable contract with
values allocated to one of the portfolios. We are mailing the statement on or
about March 2, 1999. Each shareholder of record as of the close of business on
December 31, 1998 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. Subadvisers may reimburse the Fund and the Adviser for
some or all of the proxy solicitation expenses related to portfolios that they
manage. Employees of the Fund and the Adviser will not get any extra
compensation for soliciting proxies.
As of December 31, 1998, 100% of the issued and outstanding shares of the
five portfolios were owned of record by The Ohio National Life Insurance Company
("ONLI") and Ohio National Life Assurance Corporation ("ONLAC") (together called
"Ohio National Life"). These shares were allocated to Ohio National Life's
separate accounts as follows:
INTERNATIONAL PORTFOLIO
<TABLE>
<S> <C>
ONLI Variable Account A............................. 3,802,676
ONLI Variable Account B............................. 2,187,809
ONLI Variable Account C............................. 3,493,877
ONLI Variable Account D............................. 112,432
ONLAC Variable Account R............................ 1,312,066
----------
Total International Portfolio Shares........... 10,908,860
</TABLE>
<PAGE> 5
GLOBAL CONTRARIAN PORTFOLIO
<TABLE>
<S> <C>
ONLI Variable Account A............................. 500,585
ONLI Variable Account B............................. 400,838
ONLI Variable Account C............................. 734,601
ONLI Variable Account D............................. 16,098
ONLAC Variable Account R............................ 190,156
----------
Total Global Contrarian Portfolio Shares....... 1,842,278
</TABLE>
GROWTH & INCOME PORTFOLIO
<TABLE>
<S> <C>
ONLI Variable Account A............................. 1,420,106
ONLI Variable Account B............................. 521,128
ONLI Variable Account C............................. 1,340,047
ONLI Variable Account D............................. 75,071
ONLAC Variable Account R............................ 412,451
----------
Total Growth & Income Portfolio Shares......... 3,768,803
</TABLE>
SMALL CAP GROWTH PORTFOLIO
<TABLE>
<S> <C>
ONLI Variable Account A............................. 16,909
ONLI Variable Account C............................. 200,100
----------
Total Small Cap Growth Portfolio Shares........ 217,009
</TABLE>
STELLAR PORTFOLIO
<TABLE>
<S> <C>
ONLI Variable Account A............................. 127,465
ONLI Variable Account C............................. 213,978
----------
Total Stellar Portfolio Shares................. 341,443
</TABLE>
SUMMARY OF PROPOSALS
The purpose of the special meeting is for you to vote on these proposals
related to your portfolios:
INTERNATIONAL PORTFOLIO
1. We have approved a new Subadvisory Agreement between the Adviser and
Federated Global Investment Management Corp. ("FGIM") and we are now asking you
to approve the agreement.
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.
GLOBAL CONTRARIAN PORTFOLIO
1. We have approved a new Subadvisory Agreement between the Adviser and
Federated Global Investment Management Corp. ("FGIM") and we are now asking you
to approve the new agreement.
2. We have approved a change in the portfolio's fundamental investment
policies and we are now asking you to approve that change.
3. We have approved an increase in the investment advisory fee and we are
now asking you to approve the new fee.
GROWTH & INCOME PORTFOLIO
We have approved a new Subadvisory Agreement between the Adviser and
Robertson Stephens Investment Management, L.P. ("RSIM") and we are now asking
you to approve the new agreement.
2
<PAGE> 6
SMALL CAP GROWTH PORTFOLIO
We have approved a new Subadvisory Agreement between the Adviser and
Robertson Stephens Investment Management, L.P. ("RSIM") and we are now asking
you to approve the new agreement.
STELLAR PORTFOLIO
1. We have approved a new Subadvisory Agreement between the Adviser and
Firstar Investment Research & Management Company, LLC ("FIRMCO") and we are now
asking you to approve the new agreement.
2. We have approved certain changes in the portfolio's fundamental
investment policies and we are now asking you to approve those changes.
A majority vote of the eligible shareholders of each of the portfolios
affected by an issue is required for that 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.
3
<PAGE> 7
The Adviser is the investment adviser to the following portfolios of the
Fund (assets shown as of December 31, 1998):
<TABLE>
<S> <C>
Equity....................................... $301,502,088
Money Market................................. 44,416,893
Bond......................................... 28,496,639
Omni......................................... 216,413,398
International................................ 143,086,292
Capital Appreciation......................... 76,915,652
Small Cap.................................... 76,419,779
Global Contrarian............................ 19,881,023
Aggressive Growth............................ 26,611,506
Core Growth.................................. 11,923,888
Growth & Income.............................. 54,310,896
S&P 500 Index................................ 96,393,000
Social Awareness............................. 6,646,823
Strategic Income............................. 4,029,750
Stellar...................................... 3,613,461
Relative Value............................... 10,021,424
Small Cap Growth............................. 2,279,536
High Income Bond............................. 10,491,455
Equity Income................................ 2,228,912
Blue Chip.................................... 2,941,456
</TABLE>
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 it 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;
4
<PAGE> 8
- for each of the International, Global Contrarian, Relative Value,
Small Cap Growth and Blue Chip 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 Stellar 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.
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, 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 Sub-Advisory Agreements with
sub-advisers, to manage the investment and reinvestment of those Portfolios'
assets, subject to supervision by the Adviser. As compensation for their
sub-advisory 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 Global Contrarian 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;
- Robertson Stephens 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.
5
<PAGE> 9
- 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;
- 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
- 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 Sub-Advisory 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
Bond........................................................ 1-24-96 3-28-96
Omni........................................................ 1-24-96 3-28-96
International............................................... 1-24-96 3-28-96
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
Global Contrarian........................................... 1-24-96 3-28-96
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 (Sub-Advisory).............................. 8-27-97 9-26-97
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
Stellar..................................................... 8-22-96 1-02-97
Relative Value.............................................. 8-22-96 1-02-97
Small Cap Growth............................................ 2-11-98 4-30-98
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
6
<PAGE> 10
(b) a majority of the Board of Directors or by a majority of the outstanding
voting securities of each portfolio voting separately.
The Investment Advisory, Service and Sub-Advisory 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.
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"). Dow Target did not begin business until
January 1999. ONE Fund presently consists of the following portfolios:
<TABLE>
<CAPTION>
ONE FUND PORTFOLIO NET ASSETS (12/31/98)
------------------ ---------------------
<S> <C>
Money Market............................. $18,048,418
Tax-Free Income.......................... 7,398,507
Income................................... 6,660,793
Income & Growth.......................... 13,721,726
Growth................................... 11,060,819
Small Cap................................ 4,203,019
International............................ 10,142,387
Global Contrarian........................ 3,506,690
Core Growth.............................. 4,529,488
</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.
7
<PAGE> 11
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.
INTERNATIONAL PORTFOLIO PROPOSALS
NEW SUBADVISORY AGREEMENT
From the portfolio's inception in 1993 until December 31, 1998, Societe
Generale Asset Management Corp. ("SGAM") was the portfolio's subadviser.
However, because of the purchase of SGAM by a competitor of Ohio National Life,
we believe that SGAM should no longer serve as subadviser. At a special meeting
on December 9, 1998, the Board of Directors voted unanimously to terminate the
subadvisory agreement with SGAM as of the close of business on December 31,
1998. At that same meeting, the Board of Directors voted unanimously to approve
a new subadvisory agreement with FGIM (the "FGIM Agreement") to take effect on
January 1, 1999. By its terms, the FGIM Agreement will only continue in effect
for this portfolio for more than 120 days if it is approved by your vote.
Before selecting and recommending FGIM, we researched and received
competitive bids from several leading investment advisers specializing in
foreign securities. We selected FGIM because of the strength and experience of
its professional and support staff, the investment performance of international
mutual funds managed by FGIM, and its low subadvisory fees.
The FGIM Agreement provides for substantially lower subadvisory fees for
this portfolio than the fees the Adviser paid SGAM. Under the Investment
Advisory Agreement, the Adviser is entitled to receive from the portfolio a fee
at the annual rate of 0.90% of the portfolio's average daily net assets. From
this source of income, the Adviser paid SGAM a fee at the annual rate of 0.65%
of the average daily net assets of the portfolio. Under the FGIM Agreement, the
Adviser pays FGIM at the annual rate of 0.45% of the first $200 million, and
0.40% of any average daily net assets in excess of $200 million. (The
portfolio's total net assets are presently less than $200 million.) Because of
this substantial savings, the Adviser is voluntarily waiving 0.05% of its 0.90%
fee for the portfolio.
Other than the FGIM Agreement's lower rate for the subadvisory fee, the
FGIM Agreement is substantially the same as the SGAM Agreement. A copy of the
FGIM Agreement is attached to this proxy statement as Exhibit A.
FGIM has been managing the portfolio under the terms of the FGIM Agreement
since January 1, 1999. If the FGIM Agreement is approved by your vote, it will
remain in effect until January 1, 2001. It will only continue in effect after
that if it is approved at least annually by (a) the vote, cast in person at a
meeting called for that purpose, of a majority of those directors who are not
"interested persons" of the Fund or the Adviser (these are called the
"independent directors") and also (b) the vote of either a majority of all the
directors or the vote of a majority of the portfolio's shareholders.
FGIM is located at 175 Water Street in New York, NY. It is affiliated with
Federated Investors, Inc. located at 1001 Liberty Avenue, Pittsburgh, PA.
Federated Investors, Inc. is one of the leading mutual fund advisory firms. It
formed FGIM in 1995 for the purpose of managing mutual funds and other pooled
investment accounts consisting primarily of foreign securities. FGIM presently
manages more than $1.5 billion of international assets. Its portfolio managers
have an average of 19 years each of investment experience.
The portfolio managers of this portfolio under the FGIM Agreement are Drew
J. Collins and Henry A. Frantzen.
Drew Collins is a senior vice president of FGIM. He has directed portfolio
management and investment research for FGIM since its establishment in 1995. For
one year prior to that he was vice president and international portfolio manager
of Arnhold and S. Bleichroeder, Inc., and for eight years before that he was a
portfolio manager for College Retirement Equities Fund. Mr. Collins is a
chartered financial analyst with a bachelor's degree from Oberlin College and a
master of business administration degree in finance from the Wharton School of
the University of Pennsylvania.
8
<PAGE> 12
Henry Frantzen is the chief investment officer, international, of FGIM. He
joined FGIM as its executive vice president when it was established in 1995. For
four years prior to that, he served as chief investment officer of international
securities at Brown Brothers Harriman & Co. and for three years before that he
was the executive vice president and director of equities at Oppenheimer
Management Corporation. He is a financial analyst fellow.
We recommend that you vote to approve the FGIM Agreement.
INVESTMENT POLICIES
FGIM intends to manage the International Portfolio in a style similar to
that of the Federated International Equity Fund and Federated International
Equity Fund II. These funds, which are also managed by Drew Collins and Henry
Frantzen, have experienced excellent net total returns over the last one- and
three-year periods in comparison with other funds in Lipper's "international
equity" category of mutual funds. Lipper has ranked both of the Federated funds
among the top 10% in their respective categories for these periods. We cannot be
assured that the portfolio will duplicate the performance of the Federated
International Equity Funds. Past performance does not predict future
performance.
In order to increase investment flexibility and more closely align the
portfolio with the investment style of the Federated International Equity Funds,
we have approved certain changes in the portfolio's fundamental investment
policies and restrictions. These changes must also be approved by your vote.
The investment objective of the portfolio is presently defined as
"long-term capital growth by investing primarily in common stocks of foreign
companies." We recommend that this be changed to "total return on assets by
investing primarily in securities of foreign companies."
The investment restrictions following this paragraph have, until now, been
included among the fundamental policies of the portfolio. That means they can
only be changed if approved by your vote. We recommend that certain of these
restrictions be classified as "nonfundamental" policies. 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.
The portfolio will not:
1. invest more than 5% of its total assets in the securities of any
one issuer (except U.S. government securities);
2. purchase more than 10% of the outstanding voting securities of any
one issuer;
3. invest more than 25% of the value of its total assets in any one
industry, except that the portfolio may invest more than 25% of the value
of its total assets in obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities or in certificates of
deposit, bankers' acceptances, bank time deposits or other obligations of
banks or financial institutions. However, it is the intention of management
not to invest in time deposits which involve any penalty or other
restriction on withdrawal;
4. invest more than 10% of the value 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;
5. borrow money, except for temporary or emergency purposes from
banks, in which event the aggregate amount borrowed shall not exceed 5% of
the value of the assets of the portfolio; in the case of such borrowing,
the portfolio may pledge, mortgage or hypothecate up to 5% of its assets;
(Reverse repurchase agreements are not considered to be borrowed money for
purposes of this restriction.)
6. purchase or sell commodities or commodity contracts except that the
portfolio may, for hedging purposes, purchase and sell financial futures
contracts and options thereon within the limits of investment restriction 7
below;
7. purchase or sell put or call options, except that the portfolio
may, for hedging purposes, (a) write call options traded on a registered
national securities exchange if the portfolio owns the underlying
securities
9
<PAGE> 13
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.
8. underwrite securities of other issuers except insofar as the Fund
may be considered an underwriter under the Securities Act of 1933 in
selling portfolio securities;
9. purchase or sell real estate, except that the portfolio may invest
in securities secured by real estate or interests therein or securities
issued by companies which invest in real estate or interests therein. For
purposes of this restriction, "real estate" does not include investments in
readily marketable notes or other evidence of indebtedness secured by
mortgages or deeds of trust relating to real property;
10. lend money to other persons except by the purchase of obligations
in which the portfolio is authorized to invest and by entering into
repurchase agreements; no more than 10% of the portfolio's total assets
will be invested in repurchase agreements maturing in more than seven days;
11. sell securities short or purchase securities on margin except such
short-term credits as are required to clear transactions;
12. 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;
13. purchase securities of other investment companies, except in
connection with a merger, consolidation or reorganization, or except the
purchase of the securities of closed-end investment companies if after the
purchase: (i) the portfolio does not own more than 3% of the total
outstanding voting stock of the other investment company or (ii) the value
of the securities of all investment companies held by the portfolio does
not exceed 10% of the value of the total assets of the portfolio. Purchases
of investment company securities will be made (a) only on the open market
or through dealers or underwriters receiving the customary sales loads, or
(b) as part of a merger, consolidation or plan or reorganization.
We recommend that you approve the following new fundamental policies for
the International portfolio:
1. The portfolio will not issue senior securities, except that the
portfolio may borrow money directly or through reverse repurchase
agreements in amounts not in excess of one-third of the value of its total
assets; provided that, while borrowings and reverse repurchase agreements
outstanding exceed 5% of the portfolio's total assets, any such borrowings
will be repaid before additional investments are made.
2. The portfolio will not purchase securities if, as a result of such
purchase, 25% or more of the portfolio's total assets would be invested in
any one industry. However, the portfolio may at any time invest 25% or more
of its total assets in cash or cash items and securities issued and/or
guaranteed by the U.S. government, its agencies or instrumentalities.
3. The portfolio will not purchase or sell real estate, although it
may invest in securities of companies whose business involves the purchase
or sale of real estate or in securities secured by real estate or interests
in real estate.
4. The portfolio will not lend any of its assets, except the
portfolio's securities, up to one-third of its total assets. This shall not
prevent the portfolio from purchasing or holding corporate or U.S.
government bonds, debentures, notes, certificates of indebtedness or other
debt securities of an issuer, entering into repurchase agreements, or
engaging in other transactions which are permitted by the portfolio's
investment objectives and policies.
5. The portfolio will not underwrite any issue of securities, except
as the portfolio may be deemed to be an underwriter under the Securities
Act of 1933 in connection with the sale of securities in accordance with
its investment objectives, policies, and limitations.
10
<PAGE> 14
6. With respect to 75% of its total assets, the portfolio will not
purchase the securities of any one issuer (other than cash, cash items, or
securities issued and/or guaranteed by the U.S. government, its agencies or
instrumentalities, and repurchase agreements collateralized by such
securities) if, as a result, more than 5% of its total assets would be
invested in the securities of that issuer. Also, the portfolio will not
purchase more than 10% of any class of the outstanding voting securities of
any one issuer. For these purposes, the portfolio considers common stock
and all preferred stock of an issuer each as a single class, regardless of
priorities, series, designations, or other differences.
7. The portfolio will not purchase any securities on margin, but it
may obtain such short-term credits as are necessary for clearance of
transactions. The deposit or payment by the portfolio of initial or
variation margin in connection with financial futures contracts or related
options transactions is not considered the purchase of a security on
margin.
8. The portfolio will not purchase or sell commodities, except that
the portfolio may purchase and sell financial futures contracts and related
options.
The following new nonfundamental policies have been approved by the
Board of Directors:
9. The portfolio will not pledge, mortgage or hypothecate any assets
except to secure permitted borrowings. In those cases, the portfolio may
pledge, mortgage or hypothecate assets having a market value not exceeding
the lesser of the dollar amounts borrowed or 15% of the value of its total
assets at the time of borrowing.
10. The portfolio will not sell securities short unless during the
time the short position is open, the portfolio owns an equal amount of the
securities sold or securities readily and freely convertible into or
exchangeable, without payment of additional consideration, for securities
of the same issue as, and equal in amount to, the securities sold short;
and not more than 10% of the portfolio's net assets (taken at current
value) is held as collateral for such sales at any one time.
11. The portfolio will not invest more than 15% of its net assets in
illiquid securities, including, among others, repurchase agreements
providing for the settlement more than seven days after notice, and certain
restricted securities not determined by the Board of Directors to be
liquid.
We recommend that you vote to approve the new investment policies.
GLOBAL CONTRARIAN PROPOSALS
NEW SUBADVISORY AGREEMENT
From the portfolio's inception in 1995 until December 31, 1998, Societe
Generale Asset Management Corp. ("SGAM") was the portfolio's subadviser.
However, because of the purchase of SGAM by a competitor of Ohio National Life,
we believe that SGAM should no long serve as subadviser. At a special meeting on
December 9, 1998, the Board of Directors voted unanimously to terminate the
subadvisory agreement with SGAM as of the close of business on December 31,
1998. At that same meeting, the Board of Directors voted unanimously to approve
a new subadvisory agreement with FGIM (the "FGIM Agreement") to take effect on
January 1, 1999. By its terms, the FGIM Agreement will only continue in effect
for this portfolio for more than 120 days if it is approved by your vote.
Before selecting and recommending FGIM, we researched and received
competitive bids from several leading investment advisers specializing in
foreign securities. We selected FGIM because of the strength and experience of
its professional and support staff, the investment performance of international
small company mutual funds managed by FGIM, and our belief that you would prefer
a portfolio primarily invested in equity securities of smaller foreign companies
instead of a portfolio investing in undervalued securities of both foreign and
U.S. domestic companies. (See "Investment Policies," below.)
The subadvisory fee to be paid by the Adviser to FGIM under the FGIM
Agreement is somewhat higher than the most recent subadvisory fee charged by
SGAM. The SGAM subadvisory fee was at an annual rate of 0.65% of the average
daily net assets of this portfolio. (Prior to February 1998, SGAM had been
charging a rate
11
<PAGE> 15
of 0.75%). Under the FGIM Agreement, FGIM will charge the Adviser at an annual
rate of 0.75% of the first $100 million, and 0.65% of the portfolio's average
daily net assets in excess of $100 million. (The portfolio's total net assets
are presently less than $100 million.) The reasons for the increased fee are
that (a) this portfolio is still relatively small in assets as compared to the
International Portfolio and (b) the proposed new investment policies call for
the portfolio to invest primarily in foreign small companies. Generally, a
higher level of investment management effort is required for these types of
investments.
The subadvisory fee is paid entirely by the Adviser and does not directly
affect the portfolio's expenses. However, because of the increased rate for the
subadvisory fee as to the first $100 million of the portfolio's assets, we have
agreed to increase the investment advisory fee for the first $100 million of the
portfolio's average daily net assets. (See "Investment Advisory Fee," below.)
Other than the subadvisory fee, the FGIM Agreement is substantially the
same as the SGAM Agreement. In the FGIM Agreement, this portfolio is called the
"International Small Company portfolio." After you approve these proposals, we
will then change the name of the Global Contrarian portfolio to the
International Small Company portfolio. This new name will more accurately
reflect the portfolio's investment policies. A copy of the FGIM Agreement is
attached to this proxy statement as Exhibit A.
FGIM has been managing the portfolio under the terms of the FGIM Agreement
since January 1, 1999. If the FGIM Agreement is approved by your vote, it will
remain in effect until January 1, 2001. It will only continue in effect after
that if it is approved at least annually by (a) the vote, cast in person at a
meeting called for that purpose, of a majority of the independent directors and
also (b) the vote of either a majority of all the directors or the vote of a
majority of the portfolio's shareholders.
FGIM is located at 175 Water Street in New York, NY. It is affiliated with
Federated Investors, Inc. located at 1001 Liberty Avenue, Pittsburgh, PA.
Federated Investors, Inc. is one of the leading mutual fund advisory firms. It
formed FGIM in 1995 for the purpose of managing mutual funds and other pooled
investment accounts consisting primarily of foreign securities. FGIM presently
manages more than $1.5 billion of international assets. Its portfolio managers
have an average of 19 years each of investment experience.
The portfolio managers, of this portfolio under the FGIM Agreement are
Tracy P. Stouffer and Drew J. Collins.
Tracy Stouffer is a vice president of FGIM. She has been a portfolio
manager of international mutual funds for FGIM since 1995. For seven years
before that she was vice president and portfolio manager of international equity
funds at Clariden Asset Management. Ms. Stouffer is a chartered financial
analyst with a bachelor's degree from Cornell University and a master of
business administration degree in marketing from the University of Western
Ontario.
Drew Collins is a senior vice president of FGIM. He has directed portfolio
management and investment research for FGIM since its establishment in 1995. For
one year prior to that he was vice president and international portfolio manager
of Arnhold and S. Bleichroeder, Inc., and for eight years before that he was a
portfolio manager for College Retirement Equities Fund. Mr. Collins is a
chartered financial analyst with a bachelor's degree from Oberlin College and a
master of business administration degree in finance from the Wharton School of
the University of Pennsylvania.
We recommend that you vote to approve the FGIM Agreement.
INVESTMENT POLICIES
FGIM intends to manage the portfolio in a style similar to that of the
Federated International Small Company Fund, which is also managed by Ms.
Stouffer and Mr. Collins. Since its beginning in February, 1996, this Federated
fund has consistently experienced a higher total return than either of its
benchmarks, the Financial Times/Standard & Poor's -- Actuaries World, ex - U.S.,
Medium and Small Cap Index and the Lipper International Small Company Average.
We cannot be assured that the portfolio will duplicate the performance of the
Federated International Small Company Fund. Past performance does not predict
future performance.
12
<PAGE> 16
To more closely align this portfolio with the investment style of the
Federated International Small Company Fund, we have approved a change in the
portfolio's fundamental investment policies. This change must also be approved
by your vote.
The investment objective of the portfolio is presently defined as
"long-term growth of capital by investing in foreign and domestic securities
believed to be undervalued or presently out of favor." We recommend that this be
changed to "long-term growth of capital by investing primarily in equity
securities of foreign companies having a market capitalization at time of
purchase of $1.5 billion or less."
The portfolio is presently classed as "global." This means that, while at
least 25% of its assets will normally be invested in foreign securities, the
rest of its assets can be invested in U.S. domestic securities. With the change
in policy, the portfolio will be invested primarily in foreign securities; that
is, at least 65% (and normally substantially all) of its assets will be invested
in foreign companies.
The portfolio's investment policy presently calls for the portfolio manager
to seek securities perceived to be undervalued or out of favor. This
"contrarian" or "value" investment style will no longer be required if the
change in investment policy is approved. The portfolio manager will then have
the flexibility to seek growth-type securities as well as those considered
value-type.
The proposed new policy calls for the portfolio to invest primarily in
small foreign companies, that is, those with market capitalizations less than
$1.5 billion. This is intended to provide a complement to the International
Portfolio, which invests primarily in larger foreign companies. As managed by
SGAM, the foreign securities held in the Global Contrarian portfolio were mostly
the same as those held in the International portfolio. The result was a
diminished degree of diversification if you invested in both portfolios. With
the new policy, there will be very little overlap between the two portfolios.
We believe you will be better served by approving the new policy for this
portfolio. As discussed above, the new policy will provide for greater
diversification of investments if you invest in both this portfolio and the
International portfolio. In addition, a substantial domestic component is
unnecessary for the portfolio. Ohio National Life's variable contracts now offer
a broad selection of domestic portfolios. You may allocate part of your contract
values among these to the extent you want to invest in U.S. markets of various
kinds.
We have also amended the nonfundamental investment restrictions and we are
recommending changes to the fundamental restrictions for this portfolio. This
will make the portfolio's investment restrictions the same as those of the
International portfolio and other mutual funds managed by FGIM and its Federated
affiliates.
The portfolio's fundamental policies can only be changed if approved by
your vote. The Board can change nonfundamental policies without your approval.
However, we still have to notify you before any material change by the Board
takes effect.
The portfolio's fundamental investment restrictions are now as follows:
1. invest more than 5% of its total assets in the securities of any
one issuer (except U.S. government securities);
2. purchase more than 10% of the outstanding voting securities of any
one issuer;
3. invest more than 25% of the value of its total assets in any one
industry, except that the portfolio may invest more than 25% of the value
of its total assets in obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities or in certificates of
deposit, bankers' acceptances, bank time deposits or other obligations of
banks or financial institutions. However, it is the intention of management
not to invest in time deposits which involve any penalty or other
restriction on withdrawal;
4. borrow money, except for temporary or emergency purposes from
banks, in which event the aggregate amount borrowed shall not exceed 5% of
the value of the assets of the portfolio; in the case of such borrowing,
the portfolio may pledge, mortgage or hypothecate up to 5% of its assets;
(Reverse repurchase agreements are not considered to be borrowed money for
purposes of this restriction.)
13
<PAGE> 17
5. purchase or sell commodities or commodity contracts except that the
portfolio may, for hedging purposes, purchase and sell financial futures
contracts and options thereon within the limits of its investment
restrictions;
6. underwrite securities of other issuers except insofar as the Fund
may be considered an underwriter under the Securities Act of 1933 in
selling portfolio securities;
7. purchase or sell real estate, except that the portfolio may invest
in securities secured by real estate or interests therein or securities
issued by companies which invest in real estate or interests therein. For
purposes of this restriction, "real estate" does not include investments in
readily marketable notes or other evidence of indebtedness secured by
mortgages or deeds of trust relating to real property;
8. lend money to other persons except by the purchase of obligations
in which the portfolio is authorized to invest and by entering into
repurchase agreements; no more than 10% of the portfolio's total assets
will be invested in repurchase agreements maturing in more than seven days;
9. purchase securities of other investment companies, except in
connection with a merger, consolidation or reorganization, or except the
purchase of the securities of closed-end investment companies if after the
purchase: (i) the portfolio does not own more than 3% of the total
outstanding voting stock of the other investment company or (ii) the value
of the securities of all investment companies held by the portfolio does
not exceed 10% of the value of the total assets of the portfolio. Purchases
of investment company securities will be made (a) only on the open market
or through dealers or underwriters receiving the customary sales loads, or
(b) as part of a merger, consolidation or plan of reorganization.
The portfolio's nonfundamental investment restrictions are now as follows:
10. invest more than 15% of the value 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;
11. purchase or sell put or call options, except that the portfolio
may, for hedging purposes, (a) write call options traded on a registered
national securities exchange if the 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 it
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. sell securities short or purchase securities on margin except such
short-term credits as are required to clear transactions;
13. 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 approve the following new fundamental policies for
the Global Contrarian portfolio. (These are the same as the new policies for the
International Portfolio):
1. The portfolio will not issue senior securities, except that the
portfolio may borrow money directly or through reverse repurchase
agreements in amounts not in excess of one-third of the value of its total
assets; provided that, while borrowings and reverse repurchase agreements
outstanding exceed 5% of the portfolio's total assets, any such borrowings
will be repaid before additional investments are made.
2. The portfolio will not purchase securities if, as a result of such
purchase, 25% or more of the portfolio's total assets would be invested in
any one industry. However, the portfolio may at any time invest 25% or more
of its total assets in cash or cash items and securities issued and/or
guaranteed by the U.S. government, its agencies or instrumentalities.
14
<PAGE> 18
3. The portfolio will not purchase or sell real estate, although it
may invest in securities of companies whose business involves the purchase
or sale of real estate or in securities secured by real estate or interests
in real estate.
4. The portfolio will not lend any of its assets, except the
portfolio's securities, up to one-third of its total assets. This shall not
prevent the portfolio from purchasing or holding corporate or U.S.
government bonds, debentures, notes, certificates of indebtedness or other
debt securities of an issuer, entering into repurchase agreements, or
engaging in other transactions which are permitted by the portfolio's
investment objectives and policies.
5. The portfolio will not underwrite any issue of securities, except
as the portfolio may be deemed to be an underwriter under the Securities
Act of 1933 in connection with the sale of securities in accordance with
its investment objectives, policies, and limitations.
6. With respect to 75% of its total assets, the portfolio will not
purchase the securities of any one issuer (other than cash, cash items, or
securities issued and/or guaranteed by the U.S. government, its agencies or
instrumentalities, and repurchase agreements collateralized by such
securities) if, as a result, more than 5% of its total assets would be
invested in the securities of that issuer. Also, the portfolio will not
purchase more than 10% of any class of the outstanding voting securities of
any one issuer. For these purposes, the portfolio considers common stock
and all preferred stock of an issuer each as a single class, regardless of
priorities, series, designations, or other differences.
7. The portfolio will not purchase any securities on margin, but it
may obtain such short-term credits as are necessary for clearance of
transactions. The deposit or payment by the portfolio of initial or
variation margin in connection with financial futures contracts or related
options transactions is not considered the purchase of a security on
margin.
8. The portfolio will not purchase or sell commodities, except that
the portfolio may purchase and sell financial futures contracts and related
options.
The following new nonfundamental policies have been approved by the Board
of Directors:
9. The portfolio will not pledge, mortgage or hypothecate any assets
except to secure permitted borrowings. In those cases, the portfolio may
pledge, mortgage or hypothecate assets having a market value not exceeding
the lesser of the dollar amounts borrowed or 15% of the value of its total
assets at the time of borrowing.
10. The portfolio will not sell securities short unless during the
time the short position is open, the portfolio owns an equal amount of the
securities sold or securities readily and freely convertible into or
exchangeable, without payment of additional consideration, for securities
of the same issue as, and equal in amount to, the securities sold short;
and not more than 10% of the portfolio's net assets (taken at current
value) is held as collateral for such sales at any one time.
11. The portfolio will not invest more than 15% of its net assets in
illiquid securities, including, among others, repurchase agreements
providing for the settlement more than seven days after notice, and certain
restricted securities not determined by the Board of Directors to be
liquid.
We recommend that you vote to approve the new investment policies for this
portfolio.
INVESTMENT ADVISORY FEE
As indicated above, the subadvisory fee negotiated with FGIM for managing
this portfolio is somewhat higher than the fee under the SGAM Agreement. As a
result, we have approved an increase in the investment advisory fee from 0.90%
to 1.00% of the first $100 million of the portfolio's average daily net assets.
For those assets in excess of $100 million, the fee will remain at 0.90%.
Presently, the portfolio's net assets are less than $100 million. The investment
advisory fee is paid by the portfolio to the Adviser. It represents a major
element of the portfolio's total operating expenses.
15
<PAGE> 19
We believe that the increased fee is justified because of the increased
costs of managing a portfolio consisting of essentially all foreign securities
and smaller issuing companies. We also believe that the increased fee is
justified by the increase in types of investment options and diversification
afforded by the new investment policy, plus the strength of the FGIM investment
team.
We recommend that you vote to approve this increase in the investment
advisory fee.
GROWTH & INCOME AND SMALL CAP GROWTH PORTFOLIOS PROPOSALS
We have approved a new Subadvisory Agreement between the Adviser and
Robertson Stephens Investment Management, L.P. ("RSIM"). The Board of Directors
voted unanimously to approve this "New RSIM Agreement" on February 24, 1999. A
copy of the New RSIM Agreement is attached to this proxy statement as Exhibit B.
RSIM has managed the investment of these two portfolios since the inception
of each portfolio. The New RSIM Agreement is identical in every respect to the
current subadvisory agreements with RSIM except that the New RSIM Agreement's
effective date will be the same day that members of senior management of RSIM
conclude their purchase of RSIM from its parent, BankAmerica Corporation. The
subadvisory fees under the New RSIM Agreement are identical to those under the
existing agreements.
The purchase of RSIM by its senior management is not expected to result in
any change in the portfolio managers of these two portfolios, nor will it result
in any other change in RSIM's management or operations. Until October 1, 1997,
RSIM was an independent investment adviser. On that date, RSIM and its
affiliates were purchased by BankAmerica Corporation. In a later merger,
BankAmerica Corporation acquired other investment advisory firms and then agreed
to sell RSIM. RSIM is located at 555 California Street, San Francisco,
California.
Although the New RSIM Agreement is identical to the existing subadvisory
agreements with RSIM, you must vote to approve the new agreement because, under
the 1940 Act, the change of control of RSIM automatically terminates the
existing agreements.
Being pleased with the services rendered by RSIM under the existing
agreements, we recommend that these services be continued and that you vote to
approve the New RSIM Agreement.
STELLAR PORTFOLIO
NEW SUBADVISORY AGREEMENT
Since the inception of this portfolio in January 1997, Star Bank, N.A.
("Star") has been its subadviser. Star recently purchased Firstar Bank, N.A.
("old Firstar") and merged old Firstar into Star. As a consequence of
integrating the business of the two banks, Star is adopting the name Firstar
Bank, N.A. ("new Firstar"). An affiliate of old Firstar, Firstar Investment
Research & Management Company, LLC ("FIRMCO") is the investment adviser to
Firstar Funds, Inc., a family of mutual fund presently consisting of 18 funds
offering a variety of investment objectives to institutional and individual
investors. FIRMCO is located at 615 East Michigan Avenue, Milwaukee, Wisconsin.
The Board of Directors, on February 24, 1999, unanimously approved a new
subadvisory agreement for this portfolio. A copy of the new agreement (the
"FIRMCO Agreement") is attached to this proxy statement as Exhibit C.
The FIRMCO Agreement differs from the current subadvisory agreement (the
"Star Agreement") in three significant respects:
- FIRMCO will replace Star as the subadviser,
- the subadvisory fee will be substantially lower under the FIRMCO
Agreement than it has been under the Star Agreement, and
- the FIRMCO Agreement reflects a new name for the portfolio (see
"Investment Policies," below).
16
<PAGE> 20
In all other respects, the two agreements are identical. As presently
constituted, this portfolio seeks a balance of five different types of
investments. As a result of this complexity, the portfolio's investment advisory
fee is a relatively high annual rate of 1.00% of average daily net assets. We
have agreed that, if you approve both the FIRMCO Agreement and the proposed new
investment policies, the Investment Advisory Agreement will be amended to reduce
the portfolio's investment advisory fee from an annual rate of 1.00% to 0.85% of
average daily net assets.
By approving both the FIRMCO Agreement and the proposed new investment
policies, you are also approving the reduction of the investment advisory fee
from 1.00% to 0.85%. This fee reduction will only happen if you approve both
proposals.
From its investment advisory fee, the Adviser presently pays new Firstar a
subadvisory fee at the annual rate of 0.75% of the first $50 million and 0.70%
of average daily net assets of the portfolio in excess of $50 million. Under the
FIRMCO Agreement, if approved by your vote, the Adviser will pay FIRMCO a
subadvisory fee of 0.60% of the first $50 million and 0.55% of the portfolio's
average daily net assets in excess of $50 million.
The portfolio managers of this portfolio under the FIRMCO Agreement will be
Marian Zentmyer and Walter Dewey.
Marian Zentmyer has been chief equity investment officer, senior vice
president and senior portfolio manager of FIRMCO since 1998. She became an
equity fund manager in 1989 after having joined Firstar as a financial planning
and research analyst seven years earlier. She was a financial planner with a
brokerage firm for four years before that. Ms. Zentmyer is a chartered financial
analyst. She has a bachelor's degree from Stanford University.
Walter Dewey is vice president and senior portfolio manager of FIRMCO. He
has been in various investment management positions with Firstar since 1986. For
three years before that he was the senior financial analyst for a utility
company. Mr. Dewey is a chartered financial analyst. He has a bachelor's degree
from the University of Wisconsin.
We recommend that you vote to approve the FIRMCO Agreement.
INVESTMENT POLICIES
FIRMCO intends to manage the portfolio in a style similar to that of the
Firstar Funds' Growth & Income Fund which has been managed by FIRMCO since June
1993. Under FIRMCO's management, the Growth & Income Fund experienced total
returns of % for the full year of 1998 and average annual returns of %
for the five years ending December 31, 1998.
To more closely align the Stellar portfolio with the investment style of
the Growth & Income Fund, we have approved substantial changes in the
portfolio's fundamental investment policies. These changes must also be approved
by your vote.
The investment objective of the portfolio is presently defined as "maximum
total return by investing in domestic and foreign securities (equity and fixed
income), real estate securities, precious metal securities and money market
securities." We recommend that this be changed to "seeks both reasonable income
and long-term capital appreciation."
To obtain its present objective, Firstar has sought to invest about 15% to
25% of the portfolio's assets in each of five different market segments:
(a) U.S. domestic stocks thought to be undervalued relative to the
Standard & Poor's 500 Index,
(b) U.S. domestic fixed income securities including investment grade
corporate bonds and U.S. government securities,
(c) stocks and bonds of foreign companies and foreign government
securities,
(d) real estate securities, and
17
<PAGE> 21
(e) precious metal securities and/or money market instruments.
This market segmentation has resulted in a highly diversified portfolio.
However, we believe that this does not serve most of you well because there is
very little flexibility in the portfolio's segmentation. We believe that a
portfolio patterned after the Growth & Income Fund of the Firstar Fund will meet
many of the objectives you had when investing in the Stellar portfolio. In
addition, Ohio National Life's variable contracts now offer a variety of other
investment options enabling you to better match your investments to your own
specific objectives.
If you approve the new investment policy, FIRMCO will seek to meet the
investment objective of "reasonable income" by investing in income-producing
securities including dividend-paying stocks as well as fixed-income securities.
Capital appreciation will be sought through investments in common stocks,
particularly those of medium to large-sized domestic companies whose stock is
paying dividends. No more than 25% of the portfolio will be invested in foreign
securities.
In the FIRMCO Agreement, the portfolio is called the "Firstar Growth &
Income portfolio." After you approve the new investment policies, we will change
the name of the Stellar portfolio to the Firstar Growth & Income portfolio to
more accurately reflect its investment policies.
If you approve the FIRMCO Agreement and the new investment policies, we
expect to make them effective on or about May 1, 1999. We will then reduce the
portfolio's investment advisory fee at that same time.
We recommend that you vote to approve the new investment policies.
18
<PAGE> 22
EXHIBIT A
SUBADVISORY AGREEMENT
This Subadvisory Agreement (this "Agreement") is entered into as of the
first day of January, 1999, by and between Ohio National Investments, Inc., an
Ohio corporation(the "Adviser") and FEDERATED GLOBAL RESEARCH CORP., a Delaware
corporation ("FGR").
WHEREAS, the Adviser has entered into advisory agreements dated May 1,
1996, (the "Advisory Agreements") with OHIO NATIONAL FUND, INC. and ONE FUND,
INC., Maryland corporations (the "Companies"), pursuant to which the Adviser
provides portfolio management services to the INTERNATIONAL PORTFOLIO, and
INTERNATIONAL SMALL COMPANY PORTFOLIO (presently designated as the Global
Contrarian Portfolio) of Ohio National Fund, Inc. and the INTERNATIONAL
PORTFOLIO and GLOBAL CONTRARIAN PORTFOLIO of ONE Fund, Inc. (said Portfolios
being referred to herein as the "Funds");
WHEREAS, the Advisory Agreements provide that the Adviser may delegate any
or all of its portfolio management responsibilities under the Advisory
Agreements to one or more subadvisers; and
WHEREAS, the Adviser and the Boards of Directors (the "Board") of the
Companies desire to retain FGR to render portfolio management services in the
manner and on the terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, the Adviser and FGR agree as follows:
1. Appointment of Subadviser. The Adviser hereby appoints FGR as subadviser
for each of the Funds and authorizes FGR, in its discretion and without prior
consultation with the Adviser, to buy, sell, lend and otherwise trade in any
stocks, bonds, instruments, financial contracts and other investment assets
("Securities") on behalf of the Funds. Subject to the supervision of the Adviser
and the Board, FGR will manage the investment operations of the Funds and the
composition of the Funds' respective portfolios, including the purchase,
retention and disposition of, and exercise of all rights pertaining to, the
Securities comprising the Funds. FGR may invest the Funds in such proportions of
stocks, bonds, instruments, financial contracts, cash and other investment
assets as FGR shall determine, and may dispose of Securities without regard to
the length of time the Securities have been held, the resulting rate of
portfolio turnover or any tax considerations, provided that all investments
shall conform with:
(a) the Funds' investment objectives, policies, limitations,
procedures and guidelines set forth in the documents listed on Schedule 1
to this Agreement;
(b) any additional objectives, policies or guidelines established by
the Adviser or by the Board that have been furnished in writing to FGR;
(c) the provisions of Section 851 of the Internal Revenue Code ("IRC")
applicable to "regulated investment companies";
(d) the diversification requirements specified in Section 817(h) of
the IRC, and the regulations thereunder; and
(e) the provisions of the Investment Company Act of 1940 (the "1940
Act") and the rules and regulations thereunder applicable to the Funds.
2. Representations and Warranties.
(a) FGR hereby represents and warrants to the Adviser that: (i) it is
a corporation duly formed and validly existing under the laws of Delaware,
(ii) it is duly authorized to execute and deliver this Agreement and to
perform its obligations hereunder and has taken all necessary action to
authorize such execution, delivery and performance, (iii) it is registered
with the Securities and Exchange Commission ("SEC") as an investment
adviser under the Investment Advisers Act of 1940 (the "Advisers Act") and
is registered or licensed as an investment adviser under the laws of all
jurisdictions in which its activities require it to be so registered or
licensed, except where the failure to be so licensed would not have a
material adverse effect on
A-1
<PAGE> 23
its business and (iv) it has furnished to the Adviser true and complete
copies of all the documents listed on Schedule 2 to this Agreement.
(b) The Adviser hereby represents and warrants to FGR that: (i) it is
a corporation duly formed and validly existing under the laws of Ohio, (ii)
it is duly authorized to execute and deliver this Agreement and to perform
its obligations hereunder and has taken all necessary action to authorize
such execution, delivery and performance, (iii) it is registered with the
SEC as an investment adviser under the Advisers Act and is registered or
licensed as an investment adviser under the laws of all jurisdictions in
which its activities require it to be so registered or licensed, except
where the failure to be so licensed would not have a material adverse
effect on its business and (iv) it has furnished to FGR true and complete
copies of all the documents listed on Schedule 1 to this Agreement.
3. Information and Reports.
(a) The Adviser will promptly notify FGR of any material change in any
of the documents listed on Schedule 1 to this Agreement and will provide
FGR with copies of any such modified document. The Adviser will also
provide FGR with a list, to the best of the Adviser's knowledge, of all
affiliated persons of Adviser (and any affiliated person of such an
affiliated person) and will promptly update the list whenever the Adviser
becomes aware of any additional affiliated persons.
(b) FGR will maintain books and records relating to its management of
the Funds under its customary procedures and in compliance with applicable
regulations under the 1940 Act and the Advisers Act. All such records
pertaining to the Funds shall be the property of the Companies and FGR will
permit the Adviser, the Companies and the SEC to inspect such books and
records at all reasonable times during normal business hours, upon
reasonable notice. Prior to each Board meeting, FGR will provide the
Adviser and the Board with reports regarding its management of the Funds
during the interim period, in such form as may be mutually agreed upon by
FGR and the Adviser. FGR will also provide the Adviser with any information
regarding its management of the Fund required for any shareholder report,
amended registration statement or prospectus supplement filed by the
Company with the SEC.
4. Conditions to Agreement. FGR's and the Adviser's obligations under this
Agreement are subject to the satisfaction of the following conditions precedent:
(a) Receipt by FGR of a certificate of an officer of each of the
Companies stating that (i) this Agreement and the Advisory Agreement have
been approved by the vote of a majority of the directors, who are not
interested persons of FGR or the Adviser, cast in person at a meeting of
the Board called for the purpose of voting on such approval, and (ii) this
Agreement and the Advisory Agreement have been approved by the vote of a
majority of the outstanding voting securities of each of the Funds;
(b) Receipt by FGR of certified copies of instructions from the
Companies to their custodian designating the persons specified by FGR as
"Authorized Persons" under each Company's custody agreement;
(c) The Companies' execution and delivery of limited powers of
attorney in favor of FGR, in a form mutually agreeable to FGR, the Adviser
and the Board;
(d) Receipt by FGR of Board resolutions, certified by an officer of
each Company, adopting all procedures and guidelines required by any
exemptive order listed on Schedule 2 to this Agreement; and
(e) Any other documents, certificates or other instruments that FGR or
the Adviser may reasonable request from either Company.
5. Compensation. For the services provided under this Agreement, the
Adviser will pay to FGR a fee at an annual rate of 0.40% of the first $200
million and 0.35% of each of the International Portfolios' average daily net
assets in excess of $200 million, and 0.75% of the first $100 million and 0.65%
of the Global Contrarian and International Small Company Portfolios' average
daily net assets in excess of $100 million. Such fees will accrue daily and will
be paid monthly. If this Agreement is effective for only a portion of a month,
the fees will be prorated for the portion of such month during which this
Agreement is in effect.
A-2
<PAGE> 24
6. Allocation of Transactions and Brokerage.
(a) To the extent consistent with applicable law, FGR may aggregate
purchase or sell orders for each of the Funds with contemporaneous purchase
or sell orders of the other Funds or of other clients of FGR or its
affiliated persons. In such event, allocation of the Securities so
purchased or sold, as well as the expenses incurred in the transaction,
will be made by FGR in the manner FGR considers to be the most equitable
and consistent with its and its affiliates' fiduciary obligations to the
Funds and to such other clients. The Adviser hereby acknowledges that such
aggregation of orders may not result in a more favorable price or lower
brokerage commissions in all instances.
(b) FGR will place purchase and sell orders for the Funds with or
through such banks, brokers, dealers, futures commission merchants or other
firms dealing in Securities ("Brokers") as it determines, which may include
Brokers that are affiliated persons of FGR, provided such orders are exempt
from the provisions of Section 17(a), (d) and (e) of the 1940 Act. FGR will
use its best efforts to obtain execution of transactions for the Funds at
prices which are advantageous to the Funds and at commission rates that are
reasonable in relation to the services received. FGR may, however, select
Brokers on the basis that they provide brokerage or research services or
research products to the Funds and/or other advisory clients of FGR and its
affiliated investment advisers as to which FGR and those affiliated
investment advisers exercise investment discretion. In selecting Brokers,
FGR may also consider the reliability, integrity and financial condition of
the Broker, and the size of and difficulty in executing the order.
(c) To the extent consistent with applicable law, and subject to
review by the Board, FGR may pay a Broker an amount of commission for
effecting a Securities transaction in excess of the amount of commission or
dealer spread another Broker would have charged for effecting that
transaction, if FGR determines in good faith that such amount of commission
was reasonable in relation to the value of the brokerage and research
products and/or research services provided by such Broker to the Funds
and/or other clients of FGR and its affiliated investment advisers as to
which FGR and those affiliated investment advisers exercise investment
discretion. This determination, with respect to brokerage and research
services or research products, may be viewed in terms of either that
particular transaction or the overall responsibilities which FGR and its
affiliates have with respect to the Funds or their other clients as to
which FGR and its affiliates exercise investment discretion, and may
include services or products that FGR does not use in managing the Funds.
7. Nonexclusive Agreement. The investment management services provided by
FGR hereunder are not to be deemed to be exclusive, and FGR shall be free to
render similar services to other advisers, investment companies, and other types
of clients.
8. Limitation of Liability. In the absence of willful misfeasance, bad
faith or gross negligence on the part of FGR, or of reckless disregard by FGR of
its obligations and duties hereunder, FGR, shall not be subject to any liability
to the Adviser, the Funds, the Companies, any shareholder of the Funds, or to
any person, firm or organization. Subject to the above-stated standard of care,
FGR shall be liable for any taxes or tax penalties incurred by a Fund for any
failure of a Fund to qualify as a regulated investment company under Section 851
of the IRC as a result of FGR's management of the Funds. The Adviser, the
Companies and the Funds are hereby expressly put on notice of the limitation of
liability as set forth in the Certificate of Incorporation of FGR and each
agrees that the obligations assumed by FGR pursuant to this Agreement will be
limited in any case to FGR and its assets and the Adviser, the Companies and the
Funds shall not seek satisfaction of any such obligations from the shareholders
of FGR, the trustees of FGR, officers, employees or agents of FGR, or any of
them.
FGR shall have no liability for any investment losses incurred by the Funds
or arising from transactions by the Funds prior to the effective date of this
Agreement.
The Adviser, the Companies and the Funds hereby acknowledge that FGR is not
responsible for foreign custody registration or foreign custody.
9. Pricing. The Adviser, the Companies and the Funds hereby acknowledge
that FGR is not responsible for pricing portfolio Securities, and that the
Adviser, the Companies, the Funds and FGR will rely on the pricing agent chosen
by the Board for prices of Securities, for any purposes.
A-3
<PAGE> 25
10. Limited Power of Attorney. Subject to any other written instructions of
the Adviser or the Companies, FGR is hereby appointed the Companies' agent and
attorney-in-fact for the limited purposes of executing account documentation,
agreements, contracts and other documents as FGR shall be requested by brokers,
dealers, counter parties and other persons in connection with its management of
the Funds' assets. The Adviser and the Companies hereby ratify and confirm as
good and effectual, at law or in equity, all that FGR and its officers and
employees, may do in its capacity as attorney-in-fact. However, nothing herein
shall be construed as imposing a duty on FGR to act or assume responsibility for
any matters in its capacity as attorney-in-fact for the Companies. Any person,
partnership, corporation or other legal entity dealing with FGR in its capacity
as attorney-in-fact hereunder for the Companies is hereby expressly put on
notice that FGR is acting solely in the capacity as an agent of the Companies
and that any such person, partnership, corporation or other legal entity must
look solely to the Companies for enforcement of any claim against the Companies
as FGR assumes no personal liability whatsoever for obligations of the Companies
entered into by FGR in its capacity as attorney-in-fact for the Companies. FGR
agrees to provide the Adviser and the Companies with copies of any such
agreements executed on behalf of the Companies.
11. Term. This Agreement shall begin as of the date first above written
and, provided that it shall have been approved by a majority vote of the voting
securities of each of the Funds not more than one hundred and twenty days after
the effective date hereof, this Agreement shall continue in effect for a period
of two years from the date hereof and thereafter for successive periods of one
year, subject to the provisions for termination and all of the other terms and
conditions hereof if such continuance is specifically approved at least annually
in conformity with the requirements of the 1940 Act; provided, however, that
this Agreement may be terminated by one or more of the Funds at any time,
without the payment of any penalty, by the Board or by vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of one or more of the
Funds, or by the Adviser or FGR at any time, without the payment of any penalty,
on not more than 60 days' nor less that 30 days' written notice to the other
party. This Agreement will terminate automatically as to any Fund in the event
of its assignment (as defined in the 1940 Act) or upon the termination of the
Adviser's Advisory Agreement as to that Fund.
12. Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
13. Governing Law and Construction. This Agreement will be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania. Any
terms defined in 1940 Act, and not otherwise defined in this Agreement, are used
with the same meaning in this Agreement.
14. Use of FGR's Name. FGR hereby agrees that the Adviser, the Companies,
their affiliated broker-dealers and affiliated life insurance companies may use
FGR's name and logo in advertising and marketing materials for the Companies and
any variable insurance products through which one or more of the Funds may be
offered as funding vehicles, provided, that FGR has reviewed and approved any
such materials prior to their use.
15. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby.
A-4
<PAGE> 26
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
signed on their behalf by their duly authorized officers to be effective as of
the dates written below.
<TABLE>
<S> <C>
For Ohio NATIONAL INVESTMENTS, INC.: For FEDERATED GLOBAL RESEARCH CORP.:
/s/ JOSEPH P. BROM /s/ HENRY FRANTZEN
- -------------------------------------------- --------------------------------------------
Joseph P. Brom, President Henry Frantzen
Chief Financial Officer, International
Date: Date:
December 29, 1998 December 28, 1998
- -------------------------------------------- --------------------------------------------
Accepted and Agreed by Accepted and Agreed by
OHIO NATIONAL FUND, INC.: ONE FUND, INC.:
/s/ JOHN J. PALMER /s/ JOHN J. PALMER
- -------------------------------------------- --------------------------------------------
John J. Palmer, President John J. Palmer, President
Date: Date:
January 4, 1999 January 4, 1999
- -------------------------------------------- --------------------------------------------
</TABLE>
A-5
<PAGE> 27
EXHIBIT B
SUB-ADVISORY AGREEMENT
This Agreement is made as of the twenty-sixth day of February, 1999 by and
between OHIO NATIONAL INVESTMENTS, INC., an Ohio corporation (the "Adviser"),
and ROBERTSON STEPHENS INVESTMENT MANAGEMENT, L.P., a California limited
partnership (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 those portions of the assets of the Fund designated
as the GROWTH & INCOME PORTFOLIO and the SMALL CAP GROWTH 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
Growth & Income and Small Cap Growth Portfolios 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 "Portfolios"). The Fund is the owner of
all cash, securities and other assets in the Portfolios, and there are no
restrictions on the pledge, hypothecation, transfer or sale of such cash,
securities or assets. To enable the Sub-Adviser to exercise fully its
discretion hereunder, the Adviser hereby appoints the Sub-Adviser as agent
and attorney-in-fact for the Portfolios with full authority to buy, sell
and otherwise deal in securities and other intangible investments and
contracts relating to the same for the Portfolios.
(b) All activities by the Sub-Adviser on behalf of the Adviser and the
Portfolios 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 Portfolios 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 Portfolios 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.
B-1
<PAGE> 28
(d) In carrying out its obligations to manage the investments and
reinvestments of the assets of the Portfolios, the Sub-Adviser 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 Portfolios or are under consideration for inclusion
therein;
(2) formulate and implement a continuous investment program for the
Portfolios consistent with the investment objectives and related
investment policies and restrictions for each 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
Portfolios, the Sub-Adviser shall arrange for the transmission to the
Adviser and the Portfolios' 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
Portfolios. 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
Portfolios' custodian.
(f) In connection with the placement of orders for the execution of
the Portfolios' securities transactions, the Sub-Adviser shall create and
maintain all necessary records of the Portfolios 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 Portfolios 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 Portfolios 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 Portfolios' 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, settlement charges and commissions of
every kind arising hereunder or in connection herewith, expenses of
transactions with shareholders of the Portfolios, expenses of offering
interests in the Portfolios 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 Portfolios' existence.
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-
B-2
<PAGE> 29
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 Portfolios.
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 monthly, at the
annual rates of (a) 0.60% of the first one hundred million dollars
($100,000,000) of the average daily net assets of the Growth & Income Portfolio
during the month preceding each payment, 0.55% of the next one hundred million
dollars ($100,000,000), and 0.50% of the average daily net assets of the Growth
& Income Portfolio in excess of two hundred million dollars ($200,000,000), and
(b) 0.64% of the first one hundred million dollars ($100,000,000) of the average
daily net assets of the Small Cap Growth Portfolio during the month preceding
each payment, 0.60% of the next one hundred million dollars ($100,000,000), and
0.55% of the average daily net assets of the Small Cap Growth Portfolio in
excess of two hundred million dollars ($200,000,000) (the "Sub-Advisory Fees").
The Sub-Advisory Fees shall be accrued for each calendar day and the sum of the
daily Sub-Advisory Fee accruals shall be paid monthly to the Sub-Adviser on or
before the fifth business day of the next succeeding month. The daily fee
accruals will be computed on the basis of the valuations of the total net assets
of each Portfolio as of the close of business each day. The net market value of
securities held short by each 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 month or terminates on a date
other than the last day of a month, the Sub-Advisory Fees payable with respect
to either such month shall be prorated. 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 Fees.
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,
including, but not limited to, any error in judgment with respect to buying
or selling securities for the Portfolios, 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
Sub-Adviser'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
Sub-Adviser shall be liable for taxes or tax penalties incurred by the Fund
for any failure of a 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 Sub-Adviser's management of that Portfolio.
(b) In the event the Sub-Adviser is assessed any Taxation in respect
of the assets, income or activities of the Portfolios, 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 as such expenditures are incurred. The Sub-Adviser
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
B-3
<PAGE> 30
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.
(c) The Sub-Adviser 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 Sub-Adviser 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 Sub-Adviser's breach of this contract or of the
Sub-Adviser'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 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. This may create conflicts of interest with
the Portfolio over the Sub-Adviser's time devoted to managing the
Portfolios and the allocation of investment opportunities among accounts
(including the Portfolios) managed by the Sub-Adviser. The Sub-Adviser
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
Portfolios. While information, recommendations and actions which the
Sub-Adviser supplies to and does on behalf of the Portfolios 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 shall, to the extent practicable,
allocate investment opportunities to the Portfolios 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 Sub-Adviser to acquire for
the Portfolios any security that the Sub-Adviser 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
Sub-Adviser, it is not practical or desirable to acquire a position in that
security for the Portfolios. 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 a Portfolio as well as other
customers of the Sub-Adviser, 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, beneficial timing of transactions 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. The purchase or sale of securities for the Portfolios may, in
many instances, be effected substantially simultaneously with the purchase
or sale of like securities for the accounts of other clients of the
Sub-Adviser 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 Portfolios may be charged or
credited, as the case may be, the average transaction price.
B-4
<PAGE> 31
(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 until approved by
a majority vote of the voting securities of each Portfolio, at a meeting to take
place not more than 120 days after the date above first written. 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 each 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. 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 Sub-Adviser.
SECTION 10. 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, as to either Portfolio, by vote of a majority
of the voting securities of that 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.
SECTION 11. Notices
(a) The Sub-Adviser agrees to promptly notify the Adviser of the
occurrence of any of the following events: (1) any change in a Portfolio's
portfolio manager; (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 a 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
B-5
<PAGE> 32
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) 794-4645
With a copy to:
Joseph P. Brom, President
Ohio National Investments, Inc.
P.O. Box 237
Cincinnati, Ohio 45201
If to the Sub-Adviser:
David M. Elliott, Vice President
Robertson Stephens & Company
555 California Street
San Francisco, California 94104
Fax No. (415) 676-2574
With a copy to:
Dana K. Welch, Esq.
Robertson Stephens & Company
555 California Street
San Francisco, California 94104
SECTION 12. 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 13. Delivery of Information
The Adviser acknowledges that it has received the Sub-Adviser's brochure
required to be delivered under the Advisers Act (including the information in
Part II of the Sub-Adviser'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 Sub-Adviser agrees to deliver annually without charge the
Sub-Adviser's brochure required by the Advisers Act and any and all amendments
to its Form ADV whenever filed.
B-6
<PAGE> 33
SECTION 14. Use of Name
The Sub-Adviser hereby agrees that the Adviser may use the Sub-Adviser's
name and logo in its marketing or advertising materials, provided that the
Sub-Adviser has reviewed and approved any such materials prior to their use.
SECTION 15. 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 16. No Third-Party Beneficiaries
Neither party intends for this Agreement to benefit any third-party not
expressly named in this Agreement.
SECTION 17. 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 18. 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 19. 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: /s/ JOSEPH P. BROM
-------------------------------------------------
Joseph P. Brom, President
ROBERTSON STEPHENS INVESTMENT MANAGEMENT, L.P.
By: /s/ GEORGE R. HECHT
-------------------------------------------------
George R. Hecht, President
Accepted and Agreed:
OHIO NATIONAL FUND, INC.
By /s/ JOHN J. PALMER
-------------------------------------------------------------
John J. Palmer, President
B-7
<PAGE> 34
EXHIBIT C
SUB-ADVISORY AGREEMENT
This Agreement is made as of the first day of May, 1999 by and between OHIO
NATIONAL INVESTMENTS, INC. , an Ohio corporation (the "Adviser"), and FIRSTAR
INVESTMENT RESEARCH & MANAGEMENT COMPANY, LLC (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 authorized to engage in the business of
providing investment advisory services to registered investment companies; 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 FIRSTAR GROWTH & INCOME 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
Firstar Growth & Income 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 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.
(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
continuous investment programs for the Portfolio consistent with the
investment objectives and related investment policies and restrictions for
the Portfolio as set forth in the Prospectus; and (3) take any steps
necessary to implement the aforementioned investment programs by placing
orders for the purchase and sale of securities.
C-1
<PAGE> 35
(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 securities of the Portfolio 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 organizing and registering the
Portfolio, 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 existence of the Portfolio.
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 Fee
In consideration of the Sub-Adviser's services to the Fund hereunder,
the Sub-Adviser shall be entitled to sub-advisory fees, payable monthly, at
the annual rate of 0.65% of the first fifty million dollars ($50,000,000)
of the average daily net assets of the Portfolio during the month preceding
each payment and 0.60% of the average daily net assets of the Portfolio in
excess of fifty million dollars (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 monthly to the Sub-Adviser on or
before the fifth business day of the next
C-2
<PAGE> 36
succeeding month. 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 Fees.
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 (other than
taxes on the Sub-Adviser'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 Sub-Adviser 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 Sub-Adviser's management
of the Portfolio.
(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 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 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, with the consent of the Adviser and 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
C-3
<PAGE> 37
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.
(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 fiduciary 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 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 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.
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-Adviser's officers or portfolio managers; (2) the Sub-Adviser fails to
be legally qualified as an investment adviser to investment companies 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 ownership or 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
C-4
<PAGE> 38
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) 794-4645
With a copy to:
Joseph P. Brom, President
Ohio National Investments, Inc.
P.O. Box 237
Cincinnati, Ohio 45201
If to the Sub-Adviser:
FIRMCO
615 East Michigan Street
Milwaukee, Wisconsin 53202
With a copy to:
Daniel B. Benhase
Executive Vice President
Firstar Corporation
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
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.
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.
C-5
<PAGE> 39
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
FIRSTAR INVESTMENT RESEARCH &
MANAGEMENT COMPANY, LLC
By: /s/ DANIEL B. BENHASE
------------------------------------
Daniel B. Benhase
Executive Vice President
Accepted and Agreed:
OHIO NATIONAL FUND, INC.
By: /s/ JOHN J. PALMER
--------------------------------------------------------
John J. Palmer, President
C-6
<PAGE> 40
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 April 5, 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>
<S> <C> <C> <C> <C>
For or Against or Abstain on all the Board of Directors
recommendations.
[ ] [ ] [ ]
- ---------------------------------------------------------------------------------------------------
1. a. To approve the new Subadvisory Agreement with Federated Global Investment Management
Corp.:
For or Against or Abstain as to the International Portfolio
[ ] [ ] [ ]
For or Against or Abstain as to the Global Contrarian Portfolio
[ ] [ ] [ ]
b. To approve the new Subadvisory Agreement with Robertson Stephens Investment Management,
L.P.
For or Against or Abstain as to the Growth & Income Portfolio
[ ] [ ] [ ]
For or Against or Abstain as to the Small Cap Growth Portfolio
[ ] [ ] [ ]
c. To approve the new Subadvisory Agreement with Firstar Investment Research & Management
Company, L.L.C. for the Stellar Portfolio
For or Against or Abstain
[ ] [ ] [ ]
2. To approve new fundamental investment policies:
a. For or Against or Abstain as to the International Portfolio
[ ] [ ] [ ]
b. For or Against or Abstain as to the Global Contrarian Portfolio
[ ] [ ] [ ]
c. For or Against or Abstain as to the Stellar Portfolio
[ ] [ ] [ ]
3. To approve the new investment advisory fee for the Global Contrarian Portfolio:
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.
C-7
<PAGE> 41
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 April 5, 1999, as specified below. These instructions related 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>
<S> <C> <C> <C> <C>
For or Against or Abstain on all the Board of Directors
recommendations.
[ ] [ ] [ ]
- ---------------------------------------------------------------------------------------------------
1. a. To approve the new Subadvisory Agreement with Federated Global Investment Management
Corp.:
For or Against or Abstain as to the International Portfolio
[ ] [ ] [ ]
For or Against or Abstain as to the Global Contrarian Portfolio
[ ] [ ] [ ]
b. To approve the new Subadvisory Agreement with Robertson Stephens Investment Management,
L.P.
For or Against or Abstain as to the Growth & Income Portfolio
[ ] [ ] [ ]
For or Against or Abstain as to the Small Cap Growth Portfolio
[ ] [ ] [ ]
c. To approve the new Subadvisory Agreement with Firstar Investment Research & Management
Company, L.L.C. for the Stellar Portfolio
For or Against or Abstain
[ ] [ ] [ ]
2. To approve new fundamental investment policies:
a. For or Against or Abstain as to the International Portfolio
[ ] [ ] [ ]
b. For or Against or Abstain as to the Global Contrarian Portfolio
[ ] [ ] [ ]
c. For or Against or Abstain as to the Stellar Portfolio
[ ] [ ] [ ]
3. To approve the new investment advisory fee for the Global Contrarian Portfolio:
For or Against or Abstain
[ ] [ ] [ ]
</TABLE>
<TABLE>
<S> <C>
Dated: ---------------------, 1999
---------------------------------------------------
Signature of Participant
</TABLE>
C-8
