SCHEDULE 14C
(Rule14c-101)
Information Required in Information Statement
Schedule 14C Information
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934
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| ☐ | Confidential, for Use of the Commission Only (as permitted by Rule14c-5(d)(2)) |
| ☐ | Definitive Information Statement |
Ohio National Fund, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Information Statement if other than the Registrant)
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Ohio National Fund, Inc.
| One Financial Way Cincinnati, Ohio 45242
Post Office Box 237 Cincinnati, Ohio 45201-0237
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June [ ], 2018
Dear Variable Contract or Policy Owner:
As a variable contract or policy owner with contract or policy values allocated to Ohio National Fund’s ON Janus Henderson Enterprise Portfolio, you are receiving this Information Statement relating to recent changes approved by the Board of Directors of the Fund.
At anin-person meeting on November 15, 2017, the Board approved a change insub-adviser and a newsub-advisory agreement between Ohio National Investments, Inc. and Janus Capital Management LLC appointing Janus as the newsub-adviser for the ON Janus Henderson Enterprise Portfolio. These changes became effective on May 1, 2018.
This statement is being sent for your information only and you are not required to take any action.
As always, we thank you for your confidence and support.
Sincerely,
Michael J. DeWeirdt
President
INFORMATION STATEMENT
OHIO NATIONAL FUND, INC.
(the “Fund”)
One Financial Way
Montgomery, Ohio 45242
ON Janus Henderson Enterprise Portfolio
(formerly known as Mid Cap Opportunity Portfolio)
(the “Portfolio”)
This Information Statement provides information concerning the ON Janus Henderson Enterprise
Portfolio. WE ARE NOT ASKING YOU FOR A PROXY, AND YOU ARE REQUESTED NOT
TO SEND US A PROXY. This document is for informational purposes only and you are not
required to take any action.
This Information Statement is being distributed in connection with the following change approved by the Board of Directors (the “Board”) of Ohio National Fund, Inc. (the “Fund”) at anin-person meeting on November 15, 2017 (the “Meeting”): a change insub-adviser and a newsub-advisory agreement between Ohio National Investments, Inc. (the “Adviser”) and Janus Capital Management LLC (“Janus” or the“Sub-Adviser”) appointing Janus as the newsub-adviser for the ON Janus Henderson Enterprise Portfolio (the“Sub-Advisory Agreement”). These changes became effective on May 1, 2018.
Pursuant to an Exemptive Order received by the Fund from the Securities and Exchange Commission (“SEC”), the Adviser may changesub-advisers or hire newsub-advisers for the Fund’s portfolios without obtaining shareholder approval if thesub-advisers are not affiliates of the Adviser (the “Exemptive Order”). On April 30, 2002, shareholders of the Fund generally authorized the Adviser to enter intosub-advisory agreements pursuant to the Exemptive Order. As a condition of such order, the Adviser must furnish shareholders of the affected portfolio(s) with certain information about new advisory andsub-advisory agreements. This Information Statement is intended to comply with that condition. The Information Statement is first being sent on or about June [ ], 2018 to shareholders of record of the ON Janus Henderson Enterprise Portfolio as of the close of business on May 1, 2018.
I. Background
At the Meeting, the Board, including a majority of the Directors who are not “interested persons” of the Fund (the “Independent Directors”) within the meaning of that term under the Investment Company Act of 1940, as amended (the “Act”), approved the termination of thesub-advisory agreement between the Adviser and the Portfolio’s priorsub-adviser, Goldman Sachs Asset Management L.P., effective April 30, 2018 (based on the Adviser’s recommendation because the priorsub-adviser was not performing up to the Adviser’s expectations). At the Meeting, the Board, including a majority of the Independent Directors, also approved theSub-Advisory Agreement, effective May 1, 2018. The appointment of Janus assub-adviser to the ON Janus Henderson Enterprise Portfolio was made in accordance with the Exemptive Order and does not require shareholder approval. The Adviser is not affiliated with Janus.
II. NewSub-Advisory Agreement
The following is a brief summary of the material terms of theSub-Advisory Agreement, which is attached as Appendix A. You should read Appendix A for a complete understanding of theSub-Advisory Agreement. TheSub-Advisory Agreement was approved by the Board, including a majority of the Independent Directors, at the Meeting.
The material terms of theSub-Advisory Agreement are substantially similar to thesub-advisory agreement with the priorsub-adviser, which was approved by the Board effective November 19, 2009 without submission to shareholders. It provides that theSub-Adviser will, among other things:
| (1) | provide investment advice and recommendations to the Portfolio with respect to the Portfolio’s investments, consistent with the Portfolio’s investment policies and restrictions; |
| (2) | arrange for the purchase and sale of the Portfolio’s securities; |
| (3) | provide, at its expense, all necessary investment and management facilities; and |
| (4) | provide periodic reports regarding the investment activity and composition of the Portfolio. |
In connection with the change insub-adviser to Janus, there is no change in the advisory fee structure. As compensation for its services to the Portfolio, the Adviser receives monthly fees from the Portfolio at the following annual rates (on the basis of the Portfolio’s average daily net assets during the month for which the fees are paid):
ON Janus Henderson Enterprise Portfolio |
0.85% of first $100 million 0.80% of next $100 million 0.75% of next $300 million 0.70% over $500 million |
For the fiscal year ended December 31, 2017, the Adviser received $639,236 in advisory fees for management of the Portfolio, which was 0.85% of the Portfolio’s average daily net assets.
In connection with the change insub-adviser to Janus, there is also no change in thesub-advisory fee structure. Thesub-advisory fees under the newSub-Advisory Agreement for the Portfolio are paid by the Adviser at the following effective annualized rates (of the Portfolio’s average daily net assets):
ON Janus Henderson Enterprise Portfolio |
0.60% of first $100 million 0.55% of next $100 million 0.50% over $200 million |
For the fiscal year ended December 31, 2017, the Adviser paid $451,324 insub-advisory fees, which was 0.60% of the Portfolio’s average daily net assets.
III. Information About theSub-Adviser
Janus Capital Management LLC
Janus is a Delaware limited liability company located at 151 Detroit Street, Denver, Colorado 80206. Janus is an indirect subsidiary of Janus Henderson Group plc (“JHG”), a publicly-traded independent asset management firm, which was formed in May 2017 from the merger of Janus’ then-parent company, Janus Capital Group Inc., with Henderson Group plc.
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Janus (together with its predecessors) has served as an investment adviser since 1969 and currently serves as investment adviser, orsub-adviser, to separately managed accounts, mutual funds, as well as commingled pools or private funds, and wrap fee accounts. As of March 31, 2018, JHG had approximately $371.9 billion in assets under management.
The following are the names and principal occupations of the principal executive officers and directors of Janus.
| Name | Principal Occupation | |
Bruce Koepfgen | President | |
Brennan Hughes | Chief Financial Officer | |
Kristin Mariani | Chief Compliance Officer | |
Enrique Chang | Chief Investment Officer | |
Michelle R. Rosenberg | Deputy General Counsel | |
Michael D. Elder | Senior Vice President, Head of North American Distribution | |
IV. Board Approval of theSub-Advisory Agreement
At the Meeting, the Board, including a majority of the Independent Directors, approved theSub-Advisory Agreement. The Directors noted that they had determined to replace the Portfolio’s then currentsub-adviser upon the identification and approval of a newsub-adviser for the Portfolio.
In considering the approval of theSub-Advisory Agreement, the Board requested and reviewed a significant amount of information relating to the Portfolio, including the following: (1) proposed advisory andsub-advisory fee information, including a comparison to existing fees for the Portfolio; (2) comparative advisory fee and expense ratio information for a peer group of funds, as well as advisory fee andsub-advisory fee peer comparison charts showing where the Portfolio’s proposed advisory fee andsub-advisory fee were located in the dispersion of its peer funds’ advisory fees andsub-advisory fees; (3) performance data for Janus funds employing similar strategies to that of the Portfolio; (4) estimated Adviser profitability information; and (5) other information regarding the nature, extent and quality of services anticipated to be provided by theSub-Adviser.
The Directors met with representatives of the Janus portfolio management team that would be responsible for providingsub-advisory services to the Portfolio. The Janus representatives reviewed the strategy and performance history of the Janus Henderson Enterprise Fund (the “Janus Fund”) indicating that the Janus Fund’s strategy was proposed to be employed for the Portfolio.
The Directors, including all of the Independent Directors, were assisted by experienced independent legal counsel throughout the contract review process. The Independent Directors discussed the proposedSub-Advisory Agreement in private session with such counsel at which no representatives of management, the Adviser or Janus were present. The Directors, including all of the Independent Directors, relied upon the advice of independent legal counsel and their own business judgment in determining the material factors to be considered in evaluating theSub-Advisory Agreement and the weight to be given to each such factor. The conclusions reached by the Directors were based on a comprehensive evaluation of all of the information provided and were not the result of any one factor. Moreover, each Director may have afforded different weight to the various factors in reaching his or her conclusions with respect to theSub-Advisory Agreement.
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Nature, Extent and Quality of Services
The Board evaluated the nature, extent and quality of the advisory services anticipated to be provided by Janus, noting that they had experience with Janus because it serves as asub-adviser to three other portfolios of the Fund. As part of its review, the Board reviewed information regarding theSub-Adviser’s operations, procedures and personnel. The Directors considered the capabilities and resources that theSub-Adviser is expected to dedicate to performing services on behalf of the Portfolio, as well as the quality of its administrative and other services. The Directors also considered the quality of the compliance program of theSub-Adviser, and reviewed information on theSub-Adviser’s portfolio management and brokerage practices, including any soft dollar benefits received. It was the Directors’ conclusion that overall, they were satisfied with the nature, extent and quality of services anticipated to be provided to the Portfolio by theSub-Adviser.
Investment Performance
The Board considered the performance of the Janus Fund, which utilizes a strategy similar to that of the Portfolio, relative to that of the Portfolio’s Morningstar peer group and benchmark index. The Directors noted that the Janus Fund outperformed the Portfolio’s Morningstar peer group average and benchmark index for theyear-to-date,1-,3- and5-year periods ended September 30, 2017. A representative of the Adviser indicated that the Adviser is recommending Janus because Janus is asub-adviser that has a repeatable process with a reasonable likelihood of success. They indicated that Janus has been managing the style effectively since 1989, noting that its3- and5-year performance was in the 2nd and 4th percentile, respectively, of its peer group, and that itsyear-to-date and1-year returns were in the 26th percentile of its peers. The Directors also reviewed materials comparing the Janus Fund performance with that of the Portfolio and its benchmark index for the5-year period ended September 30, 2017. The Directors noted that the Janus Fund demonstrated lower risk (as measured by standard deviation), higher alpha and better upside/downside capture ratios and risk adjusted returns that the Portfolio and its benchmark index. The Directors concluded that Janus has the ability to manage the Portfolio effectively.
Fees and Expenses, Profitability, & Economies of Scale
The Directors noted that the advisory andsub-advisory fees would remain unchanged from the current fees.
The Board reviewed charts showing how the Portfolio’s proposed advisory andsub-advisory fees compared to the advisory andsub-advisory fees of the funds in its peer group. The charts showed the number of funds in the peer group within each defined range of advisory fees orsub-advisory fees, and the range that included the Portfolio. The Directors also noted that the Adviser, and not the Portfolio, is responsible for payingsub-advisory fees to theSub-Adviser. The Board also considered the reasonableness of the proposedsub-advisory fees to be paid by the Adviser to theSub-Adviser. The Directors relied on the ability of the Adviser to negotiate the terms of theSub-Advisory Agreement, including thesub-advisory fee, atarm’s-length, noting that the Adviser is not affiliated with theSub-Adviser.
The Directors remarked that because thesub-advisory fees were paid by the Adviser and not by a Portfolio, the Adviser was incentivized to negotiate a favorable fee. Accordingly, the cost of services provided by theSub-Adviser and the profitability of theSub-Adviser in connection with its relationship with the Portfolio were not material factors in the Board’s deliberations. For similar reasons, the Board concluded that the potential realization of economies of scale by the Portfolio from thesub-advisory arrangement with theSub-Adviser should not be a material factor in its deliberations.
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After consideration of the foregoing, the Board reached the following conclusions regarding the proposedSub-Advisory Agreement, in addition to the conclusions set forth above: (a) theSub-Adviser possesses the capability and resources to perform the duties required of it under theSub-Advisory Agreement; (b) the investment philosophy, strategies and techniques of theSub-Adviser are appropriate for pursuing the Portfolio’s investment objective; (c) theSub-Adviser is likely to execute its investment philosophy, strategies and techniques consistently over time; and (d) theSub-Adviser maintains appropriate compliance programs. Based on all of the above-mentioned factors and their related conclusions, with no single factor or conclusion being determinative and with each Director not necessarily attributing the same weight to each factor, the Directors unanimously approved theSub-Advisory Agreement.
V. Other Information
The Adviser and Administrator. The Adviser serves as investment adviser for the Fund and all of its portfolios. The Adviser is wholly-owned by The Ohio National Life Insurance Company (“ONLIC”), which serves as the principal administrator for the Fund. The Adviser and ONLIC are located at One Financial Way, Montgomery, Ohio 45242.
Annual and Semi-Annual Reports. The Fund has previously sent its most recent Annual Report and Semi-Annual Report to its shareholders. Copies of them are available, without charge, by writing to the Fund at One Financial Way, Montgomery, Ohio 45242 or by calling 877.665.6642.
Outstanding Shares.The Portfolio has one class of shares, 100% of which are owned of record by ONLIC, Ohio National Life Assurance Corporation (“ONLAC”) (together with ONLIC called “Ohio National”) and National Security Life and Annuity Company (“NSLAC”). The address of Ohio National and NSLAC is One Financial Way, Montgomery, Ohio 45242.
As of March 31, 2018, there were 1,930,732.79 shares of the Portfolio issued and outstanding. ONLIC owned 87.9% of these shares; ONLAC owned 11.5% and NSLAC owned 0.6%. These shares were allocated to Ohio National and National Security’s separate accounts as follows:
Separate Account | Shares | Percent of Class | ||||||
Ohio National Variable Account A | 1,456,199.055 | 75.4% | ||||||
Ohio National Variable Account B | 21,006.615 | 1.1% | ||||||
Ohio National Variable Account C | 209,508.117 | 10.8% | ||||||
Ohio National Variable Account D | 11,081.103 | 0.6% | ||||||
Ohio National Variable Account R | 221,860.921 | 11.5% | ||||||
National Security Variable Account L | 0.000 | 0.0% | ||||||
National Security Variable Account N | 11,076.979 | 0.6% | ||||||
None of the Directors of the Fund directly owns shares of the Fund. With the exception of Mr. Palmer and Mr. Grypp, the Directors owned no variable contracts issued by Ohio National that would entitle them to give voting instructions with respect to any of the outstanding shares of the Fund. As of March 31, 2018, the Directors owned variable contracts that entitled them to give voting instructions with respect to less than 1% of the outstanding shares of the Portfolio.
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Appendix A
SUB-ADVISORY AGREEMENT
This Agreement is made as of May 1, 2018 by and betweenOhio National Investments,Inc., an Ohio corporation (the “Adviser”), andJanus Capital Management LLC, a Delaware limited liability company (the“Sub-Adviser”).
WHEREAS,Ohio National Fund, Inc. (the “Fund”), is a Maryland corporation that is registered under the Investment Company Act of 1940, as amended, (together with the regulations promulgated pursuant thereto, the “1940 Act”); and
WHEREAS, the Adviser is a registered investment adviser under the Investment Advisers Act of 1940, as amended, (together with the regulations promulgated pursuant thereto, the “Advisers Act”); and
WHEREAS, the Adviser has been appointed as investment adviser to the Fund in accordance with the 1940 Act and the Advisers Act; and
WHEREAS, theSub-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 theSub-Adviser, subject to the requirements of the 1940 Act and the Advisers Act, as asub-adviser with respect to that portion of the assets of the Fund designated as theON Janus Henderson Enterprise Portfolio (formerly known as Mid Cap Opportunity Portfolio) (“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 theSub-Adviser, and theSub-Adviser hereby accepts engagement by the Adviser, to supervise and manage on a fully-discretionary and exclusive basis the cash, securities and other assets of the Portfolio. The Fund is the owner of all cash, securities and other assets in the Portfolio, and there are no restrictions on the pledge, hypothecation, transfer or sale of such cash, securities or assets. To enable theSub-Adviser to exercise fully its discretion hereunder, the Adviser herby appoints theSub-Adviser as agent andattorney-in-fact for the Portfolio with full authority to buy, sell and otherwise deal in securities and other intangible investments and contracts relating to the same for the Portfolio. Adviser acknowledges that Sub-Adviser has the authority to trade every day the market is open.
(b) All activities by theSub-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 by the Board of Directors of the Fund and by the Adviser (as communicated to theSub-Adviser in writing by the Fund or the Adviser). All activities of theSub-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, theSub-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 and trading agreements 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 and Statement of Additional Information and in accordance with theSub-Adviser’s best execution policies. TheSub-Adviser may, on behalf of the Portfolio, pay
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brokerage commissions to a broker which provides brokerage and research services to theSub-Adviser in excess of the amount another broker would have charged for effecting the transaction, provided (i) theSub-Adviser determines in good faith that the amount is reasonable in relation to the value of the brokerage and research services provided by the executing broker in terms of the particular transaction or in terms of theSub-Adviser’s overall responsibilities with respect to the Portfolio and the accounts as to which theSub-Adviser exercises investment discretion, (ii) such payment is made in compliance with Section 28(e) of the Securities Exchange Act of 1934, as amended, and any other applicable laws and regulations, and (iii) in the opinion of theSub-Adviser, the total commissions paid by the Portfolio will be reasonable in relation to the benefits to the Portfolio over the long term. It is recognized that the services provided by such brokers may be useful to theSub-Adviser in connection with theSub-Adviser’s services to other clients. The Adviser shall provide such assistance in setting up brokerage or other accounts as theSub-Adviser may reasonably request.
(d) In carrying out its obligations to manage the investments and reinvestments of the assets of the Portfolio, theSub-Adviser shall:
(1) obtain and evaluate pertinent economic, statistical, financial and other information affecting the economy generally and individual companies or industries the securities of which are included in the Portfolio or are under consideration for inclusion therein;
(2) formulate and implement a continuous investment program for the Portfolio consistent with the investment objectives and related investment policies and restrictions for such Portfolio as set forth in the Prospectus;
(3) take such steps as are necessary to implement the aforementioned investment program by placing orders for the purchase and sale of securities; and
(4) coordinate with the Adviser to assure compliance with the Prospectus, qualification of the Portfolio as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”) and compliance with the diversification requirements of Section 817(h) of the Code.
(e) In connection with the purchase and sale of securities of the Portfolio, theSub-Adviser shall arrange for the transmission to the Adviser and the Portfolio’s custodian on a daily basis such confirmation, trade tickets and other documents as may be necessary to enable them to perform their administrative responsibilities with respect to the Portfolio. With respect to Portfolio securities to be purchased or sold through the Depository Trust Company, theSub-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, theSub-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 theSub-Adviser for the period and in the place required by Rule 31a-2 under the 1940 Act.
(g) TheSub-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, other than proprietary information and provided that theSub-Adviser shall not be responsible for portfolio accounting (including but not limited to the preparation of the daily net asset value of the Portfolio) nor shall it be required to generate information derived from Portfolio accounting data.
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(h) In acting under this Agreement, theSub-Adviser shall be an independent contractor and not an agent of the Adviser, the othersub-adviser or the Fund.
(i) The Portfolio assets shall be maintained in the custody of its custodian. Any assets added to the Portfolio shall be delivered directly to such custodian. TheSub-Adviser shall have no liability for the acts or omissions of any custodian of the Portfolio’s assets. TheSub-Adviser shall have no responsibility for the segregation requirement of the 1940 Act or other applicable law.
(j)Sub-Adviser agrees that it will not consult with any othersub-adviser engaged by Adviser with respect to transactions in securities or other assets concerning the Portfolio or another subadvised fund, except to the extent permitted by certain exemptive rules under the 1940 Act that permit certain transactions with a sub-adviser or its affiliates.
(k) TheSub-Adviser makes no representation or warranty, express or implied, that any level of performance or investment results will be achieved by the Portfolio or that the Portfolio will perform comparably with any standard of index, including other clients of theSub-Adviser, whether public or private.
SECTION 2. Expenses
(a) TheSub-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 theSub-Adviser may require in the performance of its duties under this Agreement.
(b) The Fund shall bear all expenses of the Portfolio’s organization and registration, and the Fund and Adviser shall bear all of their respective expenses of their operations and businesses not expressly assumed or agreed to be paid by theSub-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 and class action material, reports and notices to shareholders of the Fund, and all other costs incident to the Portfolio’s existence. Any reimbursement of management fees required by any expense limitation provision and any liability arising out of a violation of Section 36(b) of the 1940 Act shall be the sole responsibility of the Adviser.
SECTION 3. Use of Services of Others
TheSub-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 theSub-Adviser with such statistical or factual information, such advice regarding economic factors and trends or such other information, advice or assistance as theSub-Adviser may deem necessary, appropriate or convenient for the discharge of theSub-Adviser’s obligations hereunder or otherwise helpful to the Fund and the Portfolio.
SECTION 4. Sub-Advisory Fees
In consideration of theSub-Adviser’s services to the Fund hereunder, theSub-Adviser shall be entitled to an advisory fee, payable monthly, at the annual rate of (a) 0.60% of the first one hundred million dollars ($100,000,000) of the average daily net assets of the Portfolio, and (b) 0.55% of the average daily net assets of the Portfolio of the next one hundred million dollars ($100,000,000) and (c) 0.50% of the average daily net assets of the Portfolio in excess of two hundred million dollars ($200,000,000) during the month preceding each payment (the“Sub-Advisory Fee”) TheSub-Advisory Fee shall be accrued for each calendar day and the sum of
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the dailySub-Advisory Fee accruals shall be paid monthly to theSub-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 the Portfolio as of the close of business each day. TheSub-Advisory Fee shall be payable solely by the Adviser, and the Fund shall not be liable to the Sub-Adviser for any unpaidSub-Advisory Fee.
SECTION 5. Limitation of Liability ofSub-Adviser
(a) TheSub-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 theSub-Adviser against any such liability to the shareholders of the Fund or to the Adviser. Except as provided in the previous sentence, theSub-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 theSub-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 theSub-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 and the provisions of Section 5(b), theSub-Adviser shall be liable for taxes or tax penalties incurred by the Fund for, and shall indemnify the Fund and hold it harmless from and against, any failure of the Portfolio to qualify as a regulated investment company under Subchapter M, or to meet the diversification requirements of Section 817(h), of the Internal Revenue Code of 1986, as amended, to the extent resulting from theSub-Adviser’s management of the Balanced Component of the Portfolio.
(b) In the event theSub-Adviser is assessed any Taxation in respect of the assets, income or activities of the Portfolio, the Adviser and the Fund jointly and severally will indemnify theSub-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 theSub-Adviser in connection with the defense or settlement of any such assessment. TheSub-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.
The obligations contained in this Section 5 shall survive termination of this Agreement.
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 theSub-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 theSub-Adviser may act as investment manager or in other capacities on behalf of other customers including entities registered under the 1940 Act.
(b) While information, recommendations and actions which theSub-Adviser supplies to and does on behalf of the Portfolio shall in theSub-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 theSub-Adviser from time to time, it is understood and agreed that they may be different from the information, recommendations and
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actions theSub-Adviser or its affiliated persons supply to or do on behalf of other clients. TheSub-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.
(c) On occasions when theSub-Adviser deems the purchase or sale of a security to be in the best interest of the Portfolio as well as other customers, theSub-Adviser may, but shall be under no obligation, 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. TheSub-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 theSub-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.
(d) TheSub-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. TheSub-Adviser will comply with all applicable rules and regulations of the Securities and Exchange Commission.
SECTION 7. Reports to theSub-Adviser
The Adviser shall furnish to theSub-Adviser the Prospectus, proxy statements, reports and other information relating to the business and affairs of the Fund as theSub-Adviser may, at any time or from time to time, reasonably require in order to discharge theSub-Adviser’s duties under this Agreement. The Adviser shall forward to theSub-Adviser drafts of all amendments to the Fund’s registration statement that are related to the Portfolio, and the Adviser shall afford theSub-Adviser an opportunity to comment thereon prior to filing with the Securities and Exchange Commission.
SECTION 8. Proxies and Class Actions
The Adviser shall vote proxies for securities held by the Fund in accordance with the Adviser’s policies for proxy voting. The Adviser agrees it shall provide theSub-Adviser a copy of the Adviser’s policies upon written request.
The Adviser acknowledges and agrees that theSub-Adviser shall not be responsible for taking any action or rendering advice with respect to any class action claim relating to any assets held in the Portfolio. The Adviser will instruct the applicable service providers not to forward to theSub-Adviser any information concerning such actions. TheSub-Adviser will, however, forward to the Adviser any information it receives regarding any legal matters involving any asset held in the Portfolio.
SECTION 9. Term of Agreement
Provided that this Agreement shall have first been approved by the Board of Directors of the Fund, including a majority of the members thereof who are not interested persons (as defined in the 1940 Act) of either party, by a vote cast in person at a meeting called for the purpose of voting such approval, then this Agreement shall be effective on the date hereof for an initial terms of two (2) years. Thereafter, this Agreement shall continue in effect from year to year, subject to approval annually by the Board of Directors of the Fund, 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. A vote by a majority of the Fund’s outstanding voting securities (within the meaning of the 1940 Act), is not required as the Adviser has authority to enter into this Agreement pursuant to exemptive relief from the SEC without a vote of the Fund’s outstanding voting securities.
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SECTION 10. Termination of Agreement; Assignment
(a) This Agreement may be terminated by the Adviser orSub-Adviser 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. 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 Portfolio or (2) notice to theSub-Adviser that the Adviser’s agreement to provide investment advisory services to the Portfolio 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) TheSub-Adviser agrees to promptly notify the Adviser of the occurrence of any of the following events: (1) any change in the portfolio manager of the Portfolio; (2) theSub-Adviser fails to be registered as an investment adviser under the Advisers Act or under the laws of any jurisdiction in which theSub-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 proposed change in control of theSub-Adviser.
(b) Any notice given hereunder shall be in writing and may be served by being sent by telex, facsimile or other electronic transmission or sent by registered mail or by courier to the address set forth below for the party for which it is intended. A notice served by mail shall be deemed to have been served seven days after mailing and in the case of telex, facsimile or other electronic transmission twelve hours after dispatch thereof. Addresses for notice may be changed by written notice to the other party.
If to the Adviser:
Ohio National Investments, Inc.
P.O. Box 237
Cincinnati, Ohio 45201
Fax No. (513)794-4507
With a copy to:
Ohio National Investments, Inc.
P.O. Box 237
Cincinnati, Ohio 45201
Attention: General Counsel
If to theSub-Adviser:
Janus Capital Management LLC
151 Detroit Street
Denver, CO 80206
Attention: General Counsel
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SECTION 12. 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 13. 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. The parties agree to comply with all applicable law in connection with the performance of this Agreement.
SECTION 14. 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.
SECTION 15. Representations and Warranties ofSub-Adviser
TheSub-Adviser represents and warrants to the Adviser and the Fund as follows:
(a) TheSub-Adviser is registered as an investment adviser under the Advisers Act;
(b) TheSub-Adviser is a limited liability company duly organized and validly existing under the laws of the State of Delaware with the power to own and possess its assets and carry on its business as it is now being conducted;
(c) The execution, delivery and performance by theSub-Adviser of this Agreement are within theSub-Adviser’s powers and have been duly authorized, and no action by or in respect of, or filing with, any governmental body, agency or official is required on the part of theSub-Adviser for the execution, delivery and performance by theSub-Adviser of this Agreement, and the execution, delivery and performance by theSub-Adviser of this Agreement do not contravene or constitute a default under (i) any provision of applicable law, rule or regulation, (ii) theSub-Adviser’s governing instruments, or (iii) any agreement, judgment, injunction, order, decree or other instrument binding upon theSub-Adviser;
(d) This Agreement is a valid and binding agreement of theSub-Adviser;
(e) A trueand complete copy of the Form ADV of theSub-Adviser, as amended to the date hereof and filed with the Commission has been furnished to the Adviser, and the information contained therein is accurate and complete in all material respects and does not omit to state any material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading;
(f) TheSub-Adviser agrees to observe and comply with Rule17j-1 under the 1940 Act and theSub-Adviser’s Code of Ethics, as may be amended from time to time. TheSub-Adviser shall not be subject to any other code of ethics, including that of the Adviser, unless specifically adopted by theSub-Adviser.
SECTION 16. Representations and Warranties of Adviser.
The Adviser represents and warrants to theSub-Adviser as follows:
(a) The Adviser is registered as an investment adviser under the Advisers Act;
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(b) Either (i) it is not a member of the National Futures Association (“NFA”) and is not required to be registered with the NFA or under the Commodity Exchange Act, as amended (the “CEA”), or (ii) if it is a member of the NFA or registered under the CEA, it has notifiedSub-Adviser in writing of its status; in any such case, Adviser agrees to promptly notifySub-Adviser of any change in its NFA membership status or if it becomes required to become a member of the NFA or register under the CEA;
(c) The Adviser is a corporation duly organized and validly existing under the laws of the State of Ohio with the power to own and possess its assets and carry on its business as it is now being conducted;
(d) The execution, delivery and performance by the Adviser of this Agreement are within the Adviser’s powers and have been duly authorized, and no action by or in respect of, or filing with, any governmental body, agency or official is required on the part of the Adviser for the execution, delivery and performance by the Adviser of this Agreement, and the execution, delivery and performance by the Adviser of this Agreement do not contravene or constitute a default under (i) any provision of applicable law, rule or regulation, (ii) the Adviser’s governing instruments, or (iii) any agreement, judgment, injunction, order, decree or other instrument binding upon the Adviser;
(e) This Agreement is a valid and binding agreement of the Adviser;
(f) A true and complete copy of the Form ADV of the Adviser, as amended to the date hereof and filed with the Commission has been furnished to theSub-Adviser, and the information contained therein is accurate and complete in all material respects and does not omit to state any material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading;
(g) The Adviser acknowledges that it received a copy of theSub-Adviser’s Form ADV at least 48 hours prior to the execution of this Agreement;
(h) The Adviser agrees to observe and comply with Rule 17j-1 under the 1940 Act and the Adviser’s Code of
Ethics as may be amended from time to time;
(i) The Adviser shall be responsible for setting up and maintaining brokerage accounts and other accounts theSub-Adviser deems advisable to allow for the purchase or sale of various forms of securities pursuant to this Agreement;
(j) As permitted under the Shareholder Communications Act of 1985, as amended, the Adviser has elected Objecting Beneficial Owner status (restricting custodian from disclosing Portfolio holdings to third parties) with respect to its relationship with the custodian. Throughout the term of this Agreement, the Adviser shall maintain Objecting Beneficial Owner status and, upon written request of theSub-Adviser, shall provide written confirmation of such status;
(k) The Adviser hereby represents it is in compliance with all currently applicable anti-money laundering laws, rules and regulations including, but not limited to, the U.S.A. PATRIOT Act of 2001, P.L.107-56.
SECTION 17. Survival of Representations and Warranties: Duty to Update Information.
All representations and warranties made by theSub-Adviser and the Adviser pursuant to Sections 15 and 16 hereof shall survive for the duration of this Agreement and the Parties hereto shall immediately notify, but in no event later than five (5) business days, each other in writing upon becoming aware that any of the foregoing representations and warranties are no longer true. In addition, theSub-Adviser will deliver to the Adviser and the Fund copies of any amendments, supplements or updates to any of the information provided to the Adviser and attached as exhibits hereto within fifteen (15) days after becoming available.
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SECTION 18. Confidentiality
Subject to the duties of the Adviser, the Fund and theSub-Adviser to comply with applicable law, including any demand of any regulatory or taxing authority having jurisdiction, the parties hereto shall treat as confidential all information pertaining to the Fund and the actions of theSub-Adviser, the Adviser and the Fund in respect thereof.
The Adviser will not, directly or indirectly, and will not permit its affiliates, employees, officers, directors, agents, contractors, or the Portfolio to, in any form or by any means, use, disclose, or furnish, to any person or entity, records or information concerning the business of theSub-Adviser, except as necessary for the performance of its duties under this Agreement or its agreement to provide investment advisory services to the Fund, or as required by law upon prior written notice to theSub-Adviser. TheSub-Adviser is the sole owner of the name and mark “Janus.” The Adviser shall not, and shall not permit its affiliates, employees, officers, directors, agents, contractors or the Portfolio to, without prior written consent of theSub-Adviser, use the name or mark “Janus” or make representations regarding theSub-Adviser or its affiliates. Upon termination of this Agreement for any reason, the Adviser shall immediately cease, and the Adviser shall cause the Portfolio to immediately cease, all use of the Janus name or any Janus mark.
The Adviser and theSub-Adviser will not use any information concerning the Portfolio’s holdings, including, without limitation, the names of the portfolio holdings and the values thereof for purposes of making any decision about whether to purchase or redeem shares of the Portfolio or to execute any other securities transactions.
SECTION 19. Non-Exclusivity
Adviser acknowledges and agrees that this Agreement and the arrangements described herein are intended to benon-exclusive and thatSub-Adviser is free to enter into similar agreements and arrangements with other entities.
SECTION 20. Amendment
This Agreement may be amended only in accordance with applicable law, and only by a written instrument signed by all the parties to this Agreement.
SECTION 21. General
(a) This Agreement constitutes the entire understanding of the parties with respect to its subject matter, shall supersede all prior understandings agreements, contracts or other documents, and shall continue in full force and effect until terminated.
(b) If any provision of this Agreement is held to be invalid or unenforceable to any extent, the remainder of this Agreement shall be enforced to the greatest extent permitted by law.
IN WITNESS WHEREOF this Agreement has been executed by the parties hereto as of the day and year first above written.
Ohio National Investment, Inc.
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By: | /s/ Gary Rodmaker | |
Janus Capital Management LLC
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By: | /s/ Russell P. Shipman | |
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