<PAGE> 1
File No. 2-67464
File No. 811-3015
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
Post-Effective Amendment No. 36 / X /
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
Amendment No.
---------------
OHIO NATIONAL FUND, INC.
(Exact Name of Registrant)
One Financial Way
Cincinnati, Ohio 45242
(Address of Principal Executive Office)
Area Code (513) 794-6316
(Registrant's Telephone Number)
Ronald L. Benedict, Secretary
Ohio National Fund, Inc.
One Financial Way
Cincinnati, Ohio 45242
(Name and Address of Agent for Service)
Notice to:
W. Randolph Thompson, Esq.
Of Counsel
Jones & Blouch L.L.P.
Suite 405 West
1025 Thomas Jefferson Street, N.W.
Washington, D.C. 20007
---------------
Approximate Date of Proposed Public Offering: as soon after the effective date
of this amendment as is practicable.
It is proposed that this filing will become effective (check appropriate box):
immediately upon filing pursuant to paragraph (b)
___
X on May 1, 1998 pursuant to paragraph (b)
___
60 days after filing pursuant to paragraph (a)(1)
___
on (date) pursuant to paragraph (a)(1)
___
75 days after filing pursuant to paragraph (a)(2)
___
on (date), pursuant to paragraph (a)(3) of Rule 485.
___
If appropriate, check the following box:
___ this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
<PAGE> 2
OHIO NATIONAL FUND, INC.
CROSS REFERENCE TO ITEMS
REQUIRED BY RULE 404(a)
N-1A Item of Part A Caption in Prospectus
------------------- ---------------------
1. Cover Page
2. Not Applicable
3. Financial Highlights
4. General Description of the Fund;
Investment Objectives and Policies;
Investment Restrictions
5. Management of the Fund
6. Capital Stock, Dividends,
Distributions and Taxes
7. Purchase and Redemption of Shares
8. Purchase and Redemption of Shares
9. Not Applicable
Caption in Statement of
N-1A Item of Part B Additional Information
------------------- ----------------------
10. Cover Page
11. Table of Contents
12. The Fund
13. Investment Objectives and Policies
(Money Market Instruments);
Investment Restrictions (Hedging
Transactions, Covered Call Options
and Secured Put Options, Risk Factors
with Options, Futures Contracts,
Options on Futures Contracts and
Financial Indexes, Risk Factors with
Futures and Options on Futures, Risk
Factors with Foreign Investments);
Condensed Financial Information
(Portfolio Turnover)
14. Management of the Fund (Directors and
Officers of the Fund)
15. Management of the Fund (Controlling
Shareholders)
16. Management of the Fund (Investment
Advisory and Other Services); Experts
<PAGE> 3
Caption in Statement of
N-1A Item of Part B Additional Information
------------------- ----------------------
17. Brokerage Allocation
18. Capital Stock (in prospectus)
19. Purchase and Redemption of Shares
20. Tax Status
21. Not Applicable
22. Fund Performance
23. Financial Statements
<PAGE> 4
PART A.
INFORMATION REQUIRED IN A PROSPECTUS
<PAGE> 5
OHIO NATIONAL FUND, INC.
ONE FINANCIAL WAY
CINCINNATI, OHIO 45242
TELEPHONE (513) 794-6316
MAY 1, 1998
Ohio National Fund, Inc. (the "Fund") is a series investment company which
consists of 20 separate investment portfolios that seek the following investment
objectives:
EQUITY PORTFOLIO - long-term growth of capital by investing principally in
common stocks or other equity securities. Current income is a secondary
objective.
MONEY MARKET PORTFOLIO- maximum current income consistent with preservation of
capital and liquidity by investing in high quality money market instruments.
BOND PORTFOLIO - high level of return consistent with preservation of capital by
investing primarily in high quality intermediate and long-term debt securities.
OMNI PORTFOLIO - high level of long-term total return consistent with
preservation of capital by investing in stocks, bonds and money market
instruments.
INTERNATIONAL PORTFOLIO - long-term capital growth by investing primarily in
common stocks of foreign companies.
CAPITAL APPRECIATION PORTFOLIO - maximum capital growth by investing primarily
in common stocks that are (1) considered to be undervalued or temporarily out of
favor with investors, or (2) expected to increase in price over the short term.
SMALL CAP PORTFOLIO - maximum capital growth by investing primarily in common
stocks of small and medium size companies.
GLOBAL CONTRARIAN PORTFOLIO - long-term growth of capital by investing in
foreign and domestic securities believed to be undervalued or presently out of
favor.
AGGRESSIVE GROWTH PORTFOLIO - capital growth.
CORE GROWTH PORTFOLIO - long-term capital appreciation.
GROWTH & INCOME PORTFOLIO -long-term total return by investing in equity and
debt securities focusing on small- and mid-cap companies that offer potential
for capital appreciation, current income, or both.
S&P 500 INDEX PORTFOLIO - total return that approximates that of the Standard &
Poor's 500 Index ("S&P 500" (R)) by investing in common stocks and in stock
index futures contracts hedged by U.S. Government obligations, investment-grade
corporate bonds and cash equivalents.
SOCIAL AWARENESS PORTFOLIO - long-term capital growth by investing primarily in
common stocks and other equity securities of companies that, in the Adviser's
opinion, conduct their business in a way that enhances society's quality of
life.
STRATEGIC INCOME PORTFOLIO - high current income by investing at least 40% of
its assets in a core group of U.S. government and corporate fixed income
securities and the remainder in other income producing securities.
Continued on page 2.
- --------------------------------------------------------------------------------
THIS PROSPECTUS SETS FORTH CONCISELY THE INFORMATION ABOUT THE FUND THAT A
PROSPECTIVE PURCHASER OF A VARIABLE CONTRACT DESCRIBED IN THE ACCOMPANYING
PROSPECTUS OUGHT TO KNOW BEFORE PURCHASING SUCH A CONTRACT. THIS PROSPECTUS
SHOULD BE RETAINED FOR FUTURE REFERENCE. ADDITIONAL INFORMATION ABOUT THE FUND
HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IN A STATEMENT OF
ADDITIONAL INFORMATION, DATED MAY 1, 1998, WHICH IS INCORPORATED HEREIN BY
REFERENCE. THE STATEMENT OF ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST AND
WITHOUT CHARGE BY WRITING OR CALLING THE FUND AT THE ADDRESS SHOWN ABOVE.
INVESTMENTS IN THE MONEY MARKET PORTFOLIO ARE NEITHER INSURED NOR GUARANTEED BY
THE UNITED STATES GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE MONEY MARKET
PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $10 PER SHARE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
1
<PAGE> 6
STELLAR PORTFOLIO - maximum total return by investing in domestic and foreign
securities (equity and fixed income), real estate securities, precious metal
securities and money market securities.
RELATIVE VALUE PORTFOLIO - maximum total return consistent with reasonable risk
by investing primarily in equity securities.
SMALL CAP GROWTH PORTFOLIO - capital appreciation by investing primarily in
common stocks of emerging growth companies.
HIGH INCOME BOND PORTFOLIO - high current income by investing primarily in lower
rated corporate debt obligations commonly referred to as "junk bonds."
Investments of this type are subject to a greater risk of loss of principal and
interest than investments in higher rated bonds. Purchasers should carefully
assess the risks associated with investment in this Portfolio.
EQUITY INCOME PORTFOLIO - above-average income and capital appreciation by
investing primarily in income-producing equity securities.
BLUE CHIP PORTFOLIO - growth of capital and income by investing in securities of
high quality companies.
The Fund's shares are not offered directly to the public but are purchased
principally for the account of certain separate accounts of The Ohio National
Life Insurance Company ("ONLI"), Ohio National Life Assurance Corporation
("ONLAC") and other insurers. Some variable contracts do not permit allocations
to all portfolios of the Fund. The accompanying variable contract prospectus
identifies the portfolios available under that contract.
TABLE OF CONTENTS
Page
Financial Highlights ................................................... 2
General Description of the Fund ........................................ 6
Investment Objectives and Policies ..................................... 7
Investment Restrictions ................................................ 13
Management of the Fund ................................................. 18
Capital Stock .......................................................... 21
Dividends, Distributions and Taxes ..................................... 22
Purchase and Redemption of Shares ...................................... 22
Fund Performance ....................................................... 23
About the S&P 500 ...................................................... 23
FINANCIAL HIGHLIGHTS
OF
OHIO NATIONAL FUND, INC.
FOR THE TEN YEARS ENDED DECEMBER 31, 1997
The following information has been audited by KPMG Peat Marwick LLP, independent
certified public accountants, and is an integral part of the Fund's audited
financial statements which appear in the Statement of Additional Information
(which may be obtained by variable contract owners and prospective purchasers),
incorporated by reference herein, and should be read in conjunction with those
financial statements.
EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 32.30 $ 28.58 $ 23.20 $ 23.90 $ 21.63
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.51 0.47 0.50 0.45 0.41
Net realized and unrealized
gain (loss) on investments 5.24 4.58 5.65 (0.39) 2.57
-------- -------- -------- -------- --------
Total income from
investment operations 5.75 5.05 6.15 .06 2.98
-------- -------- -------- -------- --------
Less distributions:
Dividends from net
investment income (0.63) (0.46) (0.39) (0.44) (0.42)
Distributions from net
realized capital gains (1.98) (0.87) (0.38) (0.32) (0.29)
-------- -------- -------- -------- --------
Total distributions (2.61) (1.33) (0.77) (0.76) (0.71)
-------- -------- -------- -------- --------
Net asset value, end of period $35.44 $ 32.30 $ 28.58 $ 23.20 $ 23.90
======== ======== ======== ======== ========
Total return(a) 18.17% 18.35% 27.20% 0.25% 14.09%
Ratios/supplemental data:
Ratio of expenses to
average net assets 0.67% 0.73% 0.73% 0.62% 0.63%
Ratio of net investment
income to average
net assets 1.43% 1.60% 1.90% 1.90% 1.91%
Portfolio turnover rate 19% 11% 14% 8% 18%
Average commission rate (f) $ 0.07 $ 0.07 N/A N/A N/A
Net assets, end of period (millions) $ 288.1 $ 232.8 $ 175.7 $ 123.3 $ 109.9
</TABLE>
EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1992 1991 1990 1989 1988
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 20.61 $ 18.02 $ 20.09 $ 17.99 $ 16.82
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.50 0.60 0.86 0.71 0.66
Net realized and unrealized
gain (loss) on investments 1.02 2.97 (1.62) 3.42 1.86
-------- -------- -------- -------- --------
Total income from
investment operations 1.52 3.57 (0.76) 4.13 2.52
-------- -------- -------- -------- --------
Less distributions:
Dividends from net
investment income (0.50) (0.63) (0.87) (0.66) (0.67)
Distributions from net
realized capital gains (0.87) (0.35) (0.44) (1.37) (0..68)
-------- -------- -------- -------- --------
Total distributions (0.50) (0.98) (1.31) (2.03) (1.35)
-------- -------- -------- -------- --------
Net asset value, end of period $ 21.63 $ 20.61 $ 18.02 $ 20.09 $ 17.99
======== ======== ======== ======== ========
Total return(a) 7.55% 20.18% (3.85%) 23.21% 15.01%
Ratios/supplemental data:
Ratio of expenses to
average net assets 0.65% 0.66% 0.69% 0.70% 0.71%
Ratio of net investment
income to average
net assets 2.44% 3.12% 4.75% 3.55% 3.59%
Portfolio turnover rate 12% 23% 5% 16% 9%
Average commission rate (f) N/A N/A N/A N/A N/A
Net assets, end of period (millions) $ 87.4 $ 68.2 $ 49.2 $ 42.8 $ 33.3
</TABLE>
2
<PAGE> 7
MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.52 0.50 0.54 0.39 0.27
Less distributions:
Dividends from net
investment income (0.52) (0.50) (0.54) (0.39) (0.27)
-------- -------- -------- -------- --------
Net asset value, end of period $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
======== ======== ======== ======== ========
Total return(a) 5.37% 5.17% 5.62% 4.00% 2.71%
Ratios net of fees waived
by advisor : (c)
Ratio of expenses to
average net assets(c) 0.38% 0.44% 0.44% 0.39% 0.53%
Ratio of net investment
income to average
net assets(c) 5.11% 4.98% 5.39% 3.69% 2.71%
Ratios assuming no fees
waived by advisor: (c)
Ratio of expenses to
average net assets (c) 0.43% 0.49% 0.55% 0.59% 0.63%
Ratio of net investment
income to average net assets (c) 5.06% 4.93% 5.27% 3.51% 2.60%
Net assets, end of period (millions) $ 29.1 $ 25.6 $ 15.7 $ 13.1 $ 19.1
</TABLE>
MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1992 1991 1990 1989 1988
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.31 0.54 0.76 0.86 0.69
Less distributions:
Dividends from net
investment income (0.31) (0.54) (0.76) (0.86) (0.69)
-------- -------- -------- -------- --------
Net asset value, end of period $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
======== ======== ======== ======== ========
Total return(a) 3.12% 5.39% 7.60% 8.56% 6.89%
Ratios net of fees waived
by advisor : (c)
Ratio of expenses to
average net assets(c) 0.66% 0.67% 0.68% 0.70% 0.71%
Ratio of net investment
income to average
net assets(c) 3.16% 5.41% 7.57% 8.51% 6.87%
Ratios assuming no fees
waived by advisor: (c)
Ratio of expenses to
average net assets (c) N/A N/A N/A N/A N/A
Ratio of net investment
income to average net assets (c) N/A N/A N/A N/A N/A
Net assets, end of period (millions) $ 20.6 $ 24.2 $ 26.1 $ 23.6 $ 22.8
</TABLE>
BOND PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 10.62 $ 10.93 $ 9.70 $ 10.87 $ 10.45
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.71 0.69 0.70 0.67 0.69
Net realized and unrealized
gain (loss) on investments 0.23 (0.32) 1.08 (1.07) 0.41
-------- -------- -------- -------- --------
Total Income (loss) from
investment operations 0.94 0.37 1.78 (0.40) 1.10
-------- -------- -------- -------- --------
Less distributions:
Dividends from net
investment income (0.88) (0.68) (0.55) (0.69) (0.68)
Distributions from net
realized capital gains 0.00 0.00 0.00 (0.08) 0.00
-------- -------- -------- --------
Total distributions (0.88) (0.68) (0.55) (0.77) (0.68)
-------- -------- -------- -------- --------
Net asset value, end of period $10.68 $ $ 10.62 $ 10.93 $ 9.70 $ 10.87
======== ======== ======== ======== ========
Total return(a) 9.28% 3.71% 18.90% (3.84%) 10.69%
Ratios/supplemental data:
Ratio of expenses to
average net assets 0.78% 0.79% 0.75% 0.63% 0.62%
Ratio of net investment
income to average
net assets 6.67% 6.54% 6.76% 6.71% 6.33%
Portfolio turnover rate 10% 3% 4% 5% 13%
Net assets, end of period (millions) $ 21.8 $ 20.8 $ 18.1 $ 13.1 $ 12.0
</TABLE>
BOND PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1992 1991 1990 1989 1988
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 10.37 $ 9.89 $ 9.93 $ 9.72 $ 9.84
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.67 0.74 0.79 0.81 0.77
Net realized and unrealized
gain (loss) on investments 0.10 0.49 (0.05) 0.20 (0.13)
-------- -------- -------- -------- --------
Total Income (loss) from
investment operations 0.77 1.23 0.74 1.01 0.64
-------- -------- -------- -------- --------
Less distributions:
Dividends from net
investment income (0.69) (0.75) (0.78) (0.80) (0.76)
Distributions from net
realized capital gains 0.00 0.00 0.00 0.00 0.00
-------- -------- -------- -------- --------
Total distributions (0.69) (0.75) (0.78) (0.80) (0.76)
-------- -------- -------- -------- --------
Net asset value, end of period $10.45 $ 10.37 $ 9.89 $ 9.93 $ 9.72
======== ======== ======== ======== ========
Total return(a) 7.55% 12.96% 7.82% 10.71% 6.74%
Ratios/supplemental data:
Ratio of expenses to
average net assets 0.65% 0.65% 0.70% 0.70% 0.79%
Ratio of net investment
income to average
net assets 6.73% 7.42% 8.02% 8.21% 7.50%
Portfolio turnover rate 20% 18% 4% 0% 27%
Net assets, end of period (millions) $ 8.9 $ 5.9 $ 4.7 $ 4.0 $ 3.7
</TABLE>
3
<PAGE> 8
OMNI PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 19.40 $ 17.60 $ 14.76 $ 15.38 $ 14.14
-------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income 0.56 0.53 0.58 0.55 0.58
Net realized and unrealized
gain (loss) on investments 2.87 2.10 2.72 (0.63) 1.21
-------- -------- -------- -------- --------
Total Income (loss)
from investment operations 3.43 2.63 3.30 (0.08) 1.79
-------- -------- -------- -------- --------
Less distributions:
Dividends from net
investment income (0.69) (0.52) (0.46) (0.54) (0.55)
Distributions from net
realized capital gains (1.08) (0.31) 0.00 0.00 0.00
-------- -------- -------- -------- --------
Total distributions (1.77) (0.83) (0.46) (0.54) (0.55)
-------- -------- -------- -------- --------
Net asset value, end of period $ 21.06 $ 19.40 $ 17.60 $ 14.76 $ 15.38
======== ======== ======== ======== ========
Total return(a) 18.15% 15.54% 22.75% (0.53%) 12.85%
Ratios/supplemental data:
Ratio of expenses to
average net assets 0.71% 0.76% 0.75% 0.62% 0.62%
Ratio of net investment
income to average
net assets 2.69% 2.89% 3.56% 3.67% 3.74%
Portfolio turnover rate 18% 12% 10% 7% 17%
Average commission rate (f) $ 0.07 $ 0.07 N/A N/A N/A
Net assets, end of period (millions) $ 193.7 $ 145.5 $ 109.6 $ 85.0 $ 74.2
</TABLE>
OMNI PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1992 1991 1990 1989 1988
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 13.63 $ 12.16 $ 12.76 $ 11.89 $ 11.23
-------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income 0.63 0.65 0.78 0.75 0.67
Net realized and unrealized
gain (loss) on investments 0.51 1.49 (0.54) 1.07 0.99
-------- -------- -------- -------- --------
Total Income (loss)
from investment operations 1.14 2.14 0.24 1.82 1.66
-------- -------- -------- -------- --------
Less distributions:
Dividends from net
investment income (0.63) (0.67) (0.78) (0.73) (0.66)
Distributions from net
realized capital gains 0.00 0.00 (0.06) (0.22) (0.34)
-------- -------- -------- -------- --------
Total distributions (0.63) (0.67) (0.84) (0.95) (1.00)
-------- -------- -------- -------- --------
Net asset value, end of period $ 14.14 $ 13.63 $ 12.16 $ 12.76 $ 11.89
======== ======== ======== ======== ========
Total return(a) 8.61% 18.14% 1.92% 15.45% 15.05%
Ratios/supplemental data:
Ratio of expenses to
average net assets 0.65% 0.67% 0.69% 0.70% 0.71%
Ratio of net investment
income to average
net assets 4.66% 5.04% 6.32% 5.99% 5.40%
Portfolio turnover rate 16% 15% 7% 24% 14%
Average commission rate (f) N/A N/A N/A N/A N/A
Net assets, end of period (millions) $ 46.4 $ 36.5 $ 35.4 $ 31.9 $ 26.1
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL PORTFOLIO
------------------------------------------------------------------
1997 1996 1995 1994 1993(e)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 15.49 $ 14.38 $ 13.30 $ 12.48 $ 10.00
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.28 0.25 0.31 0.16 0.02
Net realized and unrealized
gain on investments and
foreign currency transactions 0.08 1.76 1.28 0.84 2.47
-------- -------- -------- -------- --------
Total income from investment operations 0.36 2.01 1.59 1.00 2.49
-------- -------- -------- -------- --------
Less distributions:
Dividends from net
investment income (0.37) (0.25) (0.28) (0.12) (0.01)
Distributions from net realized
capital gains and foreign
currency related transactions (2.09) (0.65) (0.23) (0.06) 0.00
-------- -------- -------- -------- --------
Total distributions (2.46) (0.90) (0.51) (0.18) (0.01)
-------- -------- -------- -------- --------
Net asset value, end of period $13.39 $ 15.49 $ 14.38 $ 13.30 $ 12.48
======== ======== ======== ======== ========
Total return(a) 2.11% 14.48% 12.10% 8.07% 24.96%
Ratios/supplemental data:
Ratio of expenses to
average net assets(d) 1.22% 1.15% 1.12% 1.05% 1.13%(b)
Ratio of net investment
income to average
net assets(d) 1.82% 1.64% 2.29% 1.23% 0.41%(b)
Portfolio turnover rate 24% 14% 7% 16% 8%
Average commission rate (f) $ 0.02 $ 0.03 N/A N/A N/A
Net assets, end of period (millions) $ 156.0 $ 137.3 $ 90.6 $ 62.9 $ 17.5
<CAPTION>
CAPITAL APPRECIATION PORTFOLIO
----------------------------------------------------
1997 1996 1995 1994(e)
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $ 12.93 $ 11.99 $ 10.25 $ 10.00
-------- -------- -------- --------
Income from investment operations:
Net investment income 0.39 0.48 0.39 0.22
Net realized and unrealized
gain on investments and
foreign currency transactions 1.48 1.31 1.85 0.23
-------- -------- -------- --------
Total income from investment operations 1.87 1.79 2.24 0.45
-------- -------- -------- --------
Less distributions:
Dividends from net
investment income (0.46) (0.44) (0.29) (0.20)
Distributions from net realized
capital gains and foreign
currency related transactions (0.81) (0.41) (0.21) 0.00
-------- -------- -------- --------
Total distributions (1.27) (0.85) (0.50) (0.20)
-------- -------- -------- --------
Net asset value, end of period $ 13.53 $ 12.93 $ 11.99 $ 10.25
======== ======== ======== ========
Total return(a) 15.19% 15.75% 22.62% 4.53%
Ratios/supplemental data:
Ratio of expenses to
average net assets(d) 0.95% 0.97% 0.96% 0.98%(b)
Ratio of net investment
income to average
net assets(d) 2.88% 3.90% 3.47% 3.24%(b)
Portfolio turnover rate 41% 37% 32% 20%
Average commission rate (f) $ 0.04 $ 0.05 N/A N/A
Net assets, end of period (millions) $ 59.8 $ 38.3 $ 19.3 $ 6.8
</TABLE>
<TABLE>
<CAPTION>
SMALL CAP PORTFOLIO
-----------------------------------------------------
1997 1996 1995 1994(e)
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $ 18.03 $ 15.85 $ 11.99 $ 10.00
-------- -------- -------- --------
Income (loss) from investment operations:
Net investment income (loss) (0.02) (0.08) (0.02) 0.18
Net realized and unrealized
gain (loss) on investments 1.54 2.80 3.95 1.94
-------- -------- -------- --------
Total income from investment operations 1.52 2.72 3.93 2.12
-------- -------- -------- --------
Less distributions:
Dividends from net
investment income 0.00 0.00 (0.07) (0.13)
Distributions from net realized
capital gains (0.83) (0.54) 0.00 0.00
-------- -------- -------- --------
Total distributions (0.83) (0.54) (0.07) (0.13)
-------- -------- -------- --------
Net asset value, end of period $ 18.72 $ 18.03 $ 15.85 $ 11.99
======== ======== ======== ========
Total return(a) 8.47% 17.71% 33.01% 21.26%
Ratios/supplemental data:
Ratio of expenses to
average net assets(d) 0.94% 0.96% 0.96% 0.91%(b)
Ratio of net investment
income to average
net assets(d) (0.11%) (0.48%) (0.11%) 3.27%(b)
Portfolio turnover rate 80% 70% 75% 222%(b)
Average commission rate (f) $ 0.05 $ 0.60 N/A N/A
Net assets, end of period (millions) $ 58.3 $ 38.5 $ 16.0 $ 3.3
</TABLE>
4
<PAGE> 9
<TABLE>
<CAPTION>
GLOBAL CONTRARIAN AGGRESSIVE GROWTH
------------------------------------ -------------------------------------
1997 1996 1995(e) 1997 1996 1995(e)
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 11.66 $ 10.80 $ 10.00 $ 10.03 $ 11.84 $ 10.00
-------- -------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income (loss) (0.02) 0.28 0.13 (0.05) 1.64 1.56
Net realized and unrealized
gain (loss) on investments 1.03 1.00 0.75 1.29 (1.59) 1.08
-------- -------- -------- -------- -------- --------
Total income from investment operations 1.32 1.28 0.88 1.24 0.05 2.64
-------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net
investment income (0.38) (0.24) (0.08) (0.14) (1.86) (0.80)
Distributions from net realized
capital gains (0.87) (0.18) 0.00 (0.04) 0.00 0.00
-------- -------- -------- -------- -------- --------
Total distributions (1.25) (0.42) (0.08) (0.18) (1.86) (0.80)
-------- -------- -------- -------- -------- --------
Net asset value, end of period $ 11.73 $ 11.66 $ 10.80 $ 11.09 $ 10.03 $ 11.84
======== ======== ======== ======== ======== ========
Total return(a) 11.67% 12.09% 8.89% 12.53% 0.76% 26.95%
Ratios/supplemental data:
Ratio of expenses to
average net assets(d) 1.32% 1.29% 1.58%(b) 0.97% 1.01% 1.02%(b)
Ratio of net investment
income to average
net assets(d) 2.33% 2.44% 1.64%(b) (0.40%) 15.81% 18.18%(b)
Portfolio turnover rate 29% 18% 6%(b) 193% 1,987% 1,488%(b)
Average commission rate (f) $0..01 $ 0.03 N/A $ 0.06 $ 0.03 N/A
Net assets, end of period (millions) $ 18.0 $ 11.3 $ 4.4 $ 19.9 $ 12.0 $ 4.0
</TABLE>
<TABLE>
<CAPTION>
CORE GROWTH GROWTH & INCOME S&P 500 INDEX
PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- ---------
1997(e) 1997(e) 1997(e)
-------- -------- --------
<S> <C> <C> <C>
Net asset value,
beginning of period $ 10.00 $ 10.00 $ 10.00
Loss from investment operations:
Net investment income (loss) (0.02) 0.11 (0.45)
Net realized and unrealized
gain (loss) on investments (0.30) 3.52 (2.70)
-------- -------- --------
Total gain (loss) from
investment operations (0.32) 3.63 (3.15)
-------- -------- --------
Less distributions:
Dividends from net
investment income 0.00 (0.11) (0.45)
Distributions from net
realized capital gains 0.00 (0.67) (0.91)
-------- -------- --------
Distributions from excess
realized capital gains 0.00 0.00 (0.06)
Total Distributions 0.00 (0.78) (1.42)
-------- -------- --------
Net asset value, end of period $ 9.68 $ 12.85 $ 11.73
======== ======== ========
Total return(a) (3.08%) 36.58% 31.75%
Ratios/supplemental data:
Ratio of expenses to
average net assets(d) 1.11% 0.95% 0.52%
Ratio of net investment
loss to average
net assets(d) (0.18%) 1.04% 5.29%
Portfolio turnover rate 65% 185% 445%
Average commission rate (f) $ 0.05 $ 0.06 $ 0.04
Net assets, end of period (millions) $ 9.5 $ 18.7 $ 22.1
<CAPTION>
SOCIAL STRATEGIC RELATIVE
AWARENESS INCOME STELLAR VALUE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- -------- --------- ---------
1997(e) 1997(e) 1997(e) 1997(e)
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $ 10.00 $ 10.00 $ 10.00 $ 10.00
Loss from investment operations:
Net investment income (loss) 0.09 0.71 0.32 0.16
Net realized and unrealized
gain (loss) on investments 2.47 0.13 0.64 2.66
-------- -------- -------- --------
Total gain (loss) from
investment operations 2.56 0.84 0.96 2.82
-------- -------- -------- --------
Less distributions:
Dividends from net
investment income (0.07) (0.67) (0.31) (0.14)
Distributions from net
realized capital gains (1.09) (0.01) 0.00 0.00
-------- -------- -------- --------
Distributions from excess
realized capital gains 0.00 0.00 0.00 0.00
Total Distributions (1.16) (0.68) (0.31) (0.14)
-------- -------- -------- --------
Net asset value, end of period $ 11.40 $ 10.16 $ 10.65 $ 12.68
======== ======== ======== ========
Total return(a) 25.63% 8.74% 9.70% 28.28%
Ratios/supplemental data:
Ratio of expenses to
average net assets(d) 0.95% 1.30% 1.54% 1.18%
Ratio of net investment
loss to average
net assets(d) 0.75% 7.04% 3.07% 1.35%
Portfolio turnover rate 40% 102% 17% 7%
Average commission rate (f) $ 0.07 $ 0.04 $ 0.18 $ 0.24
Net assets, end of period (millions) $ 4.8 $ 3.2 $ 2.8 $ 5.7
</TABLE>
FINANCIAL HIGHLIGHTS FOOTNOTES
(a) This total return information does not reflect expenses that apply to any
separate account or the related variable annuity or variable life insurance
contracts. Inclusion of those charges would reduce the total return figures
for all periods shown.
(b) Annualized.
(c) On and after June 17, 1993, the investment adviser has waived part of the
management fee with respect to the Money Market Portfolio, to the extent
such fee exceeds an annual rate of 0.25% of the Money Market Portfolio's
daily net asset value.
(d) The investment adviser reimbursed certain operating expenses of the
International Portfolio in 1993, the Capital Appreciation and Small Cap
Portfolios in 1994, and the Global Contrarian Portfolio in 1995. Had the
investment adviser not reimbursed such expenses, the annualized ratio of
expenses to average net assets would have been 1.39% and the annualized
ratio of net investment income to average net assets would have been 0.15%
for the International Portfolio in 1993. Had the investment adviser not
reimbursed such expenses of the Capital Appreciation and Small Cap
Portfolios, the annualized ratio of expenses to average net assets would
have been 1.05% and 0.95%, respectively in 1994. The annualized ratio of
net investment income to average net assets would have been 3.18% and
3.24%, respectively, for the Capital Appreciation and Small Cap Portfolios.
Had the investment adviser not reimbursed such expenses of the Global
Contrarian Portfolio, the annualized ratio of expenses to average net
assets would have been 1.90% and the annualized ratio of net investment
income to average net assets would have been 1.32% for the Global
Contrarian Portfolio in 1995.
5
<PAGE> 10
(e) Total return was calculated on an aggregate basis (not annualized) for the
International Portfolio from the commencement of its operations on April
30, 1993, through December 31, 1993, for the Capital Appreciation and Small
Cap Portfolios, from their commencement of operations, May 1, 1994, through
December 31, 1994, for the Global Contrarian and Aggressive Growth
Portfolios from their commencement of operations, March 31, 1995, through
December 31, 1995, and for the Core Growth, Growth & Income, S&P 500 Index,
Social Awareness, Strategic Income, Stellar and Relative Value Portfolios,
from the commencement of their operations, January 3, 1997, though December
31, 1997.
(f) Represents the total amount of commissions paid on equity security
transactions divided by the total number of shares purchased and sold by
the respective portfolio for which commissions were charged.
GENERAL DESCRIPTION OF THE FUND
The Fund, incorporated under the laws of Maryland on March 6, 1980, is an
open-end diversified management investment company commonly referred to as a
"mutual fund." It is a "no-load" fund which sells and redeems its shares at net
asset value without any sales or redemption charge. The Fund is organized as a
"series" company, which means that it has several different investment
portfolios. Currently there are 20 investment portfolios as listed on pages 1
and 2. Interests in each portfolio are represented by a separate class of
common stock, par value $1. Each class represents an undivided interest in the
assets of the portfolio attributable to that class.
Fund shares are currently offered only to the separate accounts of ONLI (a
mutual life insurance company organized under Ohio law) and ONLAC (a stock life
insurer organized under Ohio law and wholly owned by ONLI), but may in the
future be offered to the separate accounts of other life insurance companies
(the "separate accounts"). Such separate accounts use Fund shares as the
underlying investment medium to support certain benefits under variable annuity
and variable life insurance contracts. As is described in the accompanying
variable contract prospectus, each contract owner will select the Fund portfolio
or portfolios that will support certain benefits under his or her contract. The
value of such benefits will vary with the investment experience of the
underlying portfolio(s) of the Fund. Consequently, each prospective contract
owner should carefully review the objectives, policies and risks of each
portfolio and the operation of the Fund generally as set forth in this
prospectus.
It is conceivable that in the future it may become disadvantageous for both
variable life and variable annuity separate accounts to invest in the Fund.
Although ONLI, ONLAC and the Fund do not currently foresee any such
disadvantage, the Board of Directors of the Fund will monitor events in order to
identify any material conflict between variable life and variable annuity
contract owners and to determine what action, if any, should be taken in
response thereto. Such action could include the withdrawal of a separate account
from participation in the Fund. Material conflicts could result from such things
as (1) changes in state insurance law; (2) changes in federal income tax law;
(3) changes in the investment management of any portfolio of the Fund; or (4)
differences between voting instructions given by variable life and variable
annuity contract owners.
The Fund may be used in the future to support benefits under other types of
contracts or for other purposes. Fund shares are not now, and without a change
in applicable law will never be, offered directly to the public. Consequently,
the separate accounts will be the sole shareholders of the Fund. Fund shares
attributable to contracts participating in such separate accounts will be voted
by such separate accounts as directed by the contract owners.
The investment and reinvestment of Fund assets is managed by Ohio National
Investments Inc. (the "Adviser") directly or through sub-advisers. See
"Management of the Fund," page 17. The investment and reinvestment of the assets
of the following portfolios are managed by the firms indicated as sub-advisers:
<TABLE>
<CAPTION>
PORTFOLIO SUB-ADVISER
- --------- -----------
<S> <C>
International and Global Contrarian Societe Generale Asset Management Corp. ("SGAM")
Capital Appreciation T. Rowe Price Associates, Inc. ("TRPA")
Small Cap Founders Asset Management, LLC ("FAM ")
Aggressive Growth Strong Capital Management, Inc. ("SCM")
Core Growth Pilgrim Baxter & Associates, Ltd. ("PBA")
Growth & Income and Small Cap Growth Robertson Stephens Investment Management, L.P. ("RSIM")
Strategic Income, Stellar and Relative Value Star Bank, N.A. ("Star")
High Income Bond, Equity Income and Blue Chip Federated Investment Counseling ("FIC")
</TABLE>
6
<PAGE> 11
INVESTMENT OBJECTIVES AND POLICIES
Each portfolio has a different investment objective which it pursues through
separate investment policies as described below. The differences in objectives
and policies among the portfolios can be expected to affect the return of each
portfolio and the degree of market and financial risk to which each portfolio is
subject. Financial risk refers to the ability of an issuer of a debt security to
pay principal and interest on such security, and to the earnings stability and
overall financial soundness of an issuer of an equity security. Market risk
refers to the volatility of the price of a security in response to changes in
conditions in the securities markets in general and, particularly in the case of
debt securities, changes in the overall level of interest rates. There is no
assurance that the investment objective of any portfolio will be realized.
The investment objectives of each portfolio discussed below and in the Statement
of Additional Information may not be changed without the approval of the holders
of a majority of the outstanding shares of that portfolio. Each portfolio may
invest any portion of its assets in cash, short-term obligations and U.S.
government securities for defensive purposes during times of unusual market or
economic conditions or pending selection of securities in accordance with the
portfolio's policies. The relatively high portfolio turnover rates for the Small
Cap, Aggressive Growth, Core Growth, Growth & Income and Strategic Income
Portfolios and expected for the Small Cap Growth Portfolio will result in
correspondingly higher brokerage costs that must be borne by these portfolios.
The Statement of Additional Information provides a fuller description of the
types of financial instruments in which the Money Market Portfolio may invest
and definitions of debt ratings of nationally recognized statistical rating
organizations, and information about portfolio turnover rates for each
portfolio.
EQUITY PORTFOLIO
The principal investment objective of the Equity Portfolio is long-term growth
of capital. Current income is a secondary consideration although growth of
income may accompany growth of capital. This Portfolio will seek to attain its
objective of capital growth by investing primarily in common stocks or
securities convertible into, or which carry the right to buy, common stocks. It
may also invest to a limited degree in non-convertible preferred stocks, debt
securities and readily marketable mortgage notes.
This Portfolio will invest primarily in securities listed on national securities
exchanges, but from time to time it may also purchase securities traded in the
over-the-counter market and foreign securities. In general, investment in shares
of this Portfolio should involve greater market and financial risk than an
investment in any of the Money Market, Bond, Omni or Capital Appreciation
Portfolios, but less risk than investments in the International, Small Cap,
Global Contrarian or Aggressive Growth Portfolios.
MONEY MARKET PORTFOLIO
The objective of the Money Market Portfolio is to obtain maximum current income
consistent with preservation of principal and liquidity. This Portfolio seeks to
achieve its objective by investing in high quality money market instruments,
including:
1. obligations maturing in 13 months or less and issued or guaranteed as to
principal and interest by the United States Government, or any agency or
authority controlled or supervised by and acting as an instrumentality of
the U.S. Government pursuant to authority granted by Congress;
2. commercial paper, certificates of deposit and bankers' acceptances that
have received the highest rating by any two nationally recognized
statistical rating organizations ("NRSRO's"), or the highest rating by one
NRSRO if that is the only NRSRO having rated the security, or whose issuer
has received such a rating or ratings with respect to a class of short-term
debt obligations that is now comparable in priority and security to those
to be purchased;
3. commercial paper, certificates of deposit, bankers' acceptances or other
corporate obligations maturing in 13 months or less and which, although not
rated by any NRSRO, the Board of Directors determines to be of a quality
comparable to that of instruments receiving either of the two highest
ratings, provided, that any security determined to be comparable in quality
to the second highest rating shall be included in the 5% limitation under
item 5; and
4. repurchase agreements with respect to any of the foregoing obligations.
7
<PAGE> 12
5. as to no more than 5% of the Portfolio's assets, in commercial paper,
certificates of deposit or bankers' acceptances receiving the second
highest rating by any two NRSRO's (or by one NRSRO if (a) that is the only
NRSRO having rated the security or (b) one other NRSRO has given the
security its highest rating), or whose issuer has received such a rating or
ratings with respect to a class of short-term debt obligations that is now
comparable in priority and security to those to be purchased, provided,
that no more than $1 million (or 1% of Portfolio assets, if greater) may be
invested in such securities of any one issuer;
This Portfolio may invest up to 50% of its assets in the securities of foreign
issuers (including private issuers and foreign governments or political
subdivisions, agencies or instrumentalities of foreign governments), provided
they meet the above quality standards and they are denominated in U.S. dollars
and held in custody in the United States.
The investments of this Portfolio in such money market instruments are subject
to the terms and conditions of Rule 2a-7 under the Investment Company Act of
1940, including the requirement that they be limited to those instruments which
the Board of directors determines, present minimal credit risks.
Generally, this Portfolio will purchase money market securities with the
intention of holding them until maturity, at which time they will be redeemed.
To the extent it is able to do so, the Portfolio will not realize any gain or
loss on these securities. There may be times, however, when it may be necessary
or appropriate to sell securities prior to maturity in order to shorten the
Portfolio's average maturity, to meet redemptions, or because of a reevaluation
of an issuer's credit-worthiness.
Rule 2a-7 permits this Portfolio to value its assets on the basis of amortized
cost as a means of maintaining the net asset value of the Money Market shares at
$10 per share. Under the terms of the rule, the Portfolio may neither purchase
any debt security having a remaining maturity of more than 397 days nor maintain
a dollar-weighted average portfolio maturity of more than 90 days. Under the
amortized cost method, all such debt securities are valued at their cost on the
date of acquisition with a daily adjustment being made to accrued income to
reflect amortization of premium or accretion of discount to the maturity date.
If such method results in a deviation in excess of 1/2 of 1% from value based
on available market quotations, the Board of Directors will promptly consider
what, if any, action it should initiate. Such action may include selling
portfolio instruments; withholding dividends; recapitalizing outstanding shares;
requiring shareholders to contribute shares to capital or using available market
quotations.
An investor's rate of return will vary as short-term interest rates vary. The
rate of return will also be affected by other factors such as the operating
expenses of the Portfolio and the sales, if any, of portfolio securities prior
to maturity. On balance, however, investment in this Portfolio should involve
less market and financial risk than an investment in any other portfolio.
BOND PORTFOLIO
The principal investment objective of the Bond Portfolio is to obtain a high
level of income and opportunity for capital appreciation consistent with
preservation of capital. Investments will be made primarily in intermediate-term
and long-term fixed-income securities.
At least 80% of the total assets of this Portfolio (exclusive of cash and U.S.
government securities) will be invested in: (1) publicly traded, investment
grade, non-convertible corporate debt securities issued by United States
corporations and assigned within the four highest bond ratings by Moody's or
Standard and Poor's ("S&P"); and (2) corporate debt securities used for
short-term investment and limited to the top grade of these two rating
services.
Up to 20% of the total assets of the Portfolio may be invested in: (1)
securities having high potential for capital appreciation; (2) preferred stocks,
convertible securities and securities carrying warrants to purchase equity
securities; and (3) debt securities issued by U.S. banks and savings and loan
associations which at the date of investment have capital, surplus and undivided
profits as of the date of their most recent financial statements in excess of
$100,000,000.
This Portfolio will not invest in common stocks directly, but it may retain for
reasonable periods of time up to 10% of its total assets in common stocks
acquired upon the conversion of debt securities or upon the exercise of warrants
acquired with debt securities.
8
<PAGE> 13
It is expected that this Portfolio will include debt securities with varying
maturities selected from various industries, depending upon the Adviser's
evaluation of current and anticipated market conditions. The market values of
debt instruments will vary depending upon their respective yields; therefore,
the net asset value per share of the Portfolio will change from time to time as
the general level of interest rates changes. Consequently, an investment in the
shares of this Portfolio involves substantial market risk, but should involve
less financial risk than an investment in any of the portfolios other than the
Money Market Portfolio.
OMNI PORTFOLIO
The principal investment objective of the Omni Portfolio is to realize a high
level of long-term total rate of return consistent with prudent investment
risks. Total rate of return consists of current income including dividends,
interest and discount accruals and capital appreciation.
This Portfolio will seek to attain its objectives by investing in any of the
securities in which the Equity, Money Market and Bond Portfolios may invest. The
mix of investments will be adjusted from time to time among the various market
sectors (stocks, bonds and money market instruments) to capitalize on perceived
variations in return potential produced by the interaction of changing market
and economic conditions. The Portfolio may at times be invested in less than all
three of the market sectors. No minimum portion of the Portfolio is required to
be invested in any sector. The frequency of changes in investment mix depends
upon market and economic conditions.
The Portfolio's principal investment objective is supplemented and limited by
the investment objectives, policies and restrictions established for each of the
market sectors. Within the equity sector, the Portfolio will attempt to obtain
long-term growth of capital while current income will be a secondary
consideration. Within the bond sector, the Portfolio will attempt to obtain a
high level of income and opportunity for capital appreciation consistent with
preservation of capital. Within the money market sector, the Portfolio will
attempt to obtain maximum current income consistent with the preservation of
principal and liquidity. Investment in this Portfolio involves all of the risks
associated with investing in the other portfolios. In addition, there is the
risk that at any given time this Portfolio will invest too much or too little in
each of the respective market sectors.
INTERNATIONAL PORTFOLIO
The principal investment objective of the International Portfolio is to obtain
long-term capital growth by investing primarily in common stocks (and securities
convertible into common stocks) of foreign companies. This Portfolio may also
invest in fixed-income securities of foreign issuers. When deemed appropriate
for short-term investment or for defensive purposes, it may invest in short-term
debt instruments of U.S. or foreign issuers, in U.S. government obligations, or
in U.S. common stocks.
This Portfolio enables variable contractowners to diversify their investment by
participating in companies and economies outside the U.S. However, investing in
foreign securities may involve a greater degree of risk than investing in
domestic securities because of the possibilities of currency exchange rate
fluctuations, currency exchange controls, less publicly available information,
more volatile markets, thinner markets (less trading volume), slower settlement
of trades, greater likelihood of trade failures, less securities regulation,
less favorable tax provisions, lack of uniformity of accounting, auditing and
financial reporting standards, war and expropriation. Foreign investments also
generally involve higher brokerage commissions, higher custodian costs, and
currency conversion fees. Investment in this Portfolio will generally involve a
greater degree of market and financial risk than any of the portfolios except
for the Global Contrarian Portfolio.
CAPITAL APPRECIATION PORTFOLIO
The principal investment objective of the Capital Appreciation Portfolio is to
maximize capital growth through investment primarily in common stocks. This
Portfolio seeks to achieve capital appreciation by investing in securities of
companies that are undervalued in relation to the company's assets, earnings,
market position or breakup value; are currently out of favor in the investment
community; or have attractive growth potential in their business markets.
Securities are also sought that have been over-discounted due to adverse
operating results, deteriorating economic or industry conditions, or unfavorable
publicity.
9
<PAGE> 14
The Portfolio may also invest in fixed-income securities and money market
instruments to preserve its principal value during uncertain or declining market
conditions. The Portfolio's total return will consist principally of capital
appreciation (or depreciation) and, to a lesser extent, current income. The
Portfolio's active management may result in a higher portfolio turnover rate and
correspondingly higher brokerage costs. Investment in this Portfolio will
generally involve market and financial risks that are comparable to, or somewhat
less than, those of the Equity Portfolio.
SMALL CAP PORTFOLIO
To achieve its investment objective of capital appreciation, this Portfolio
invests primarily in the common stocks of small and medium sized companies.
Ordinarily, these companies are not listed on a national securities exchange but
will be traded over the counter. Under normal market conditions, at least 65% of
this Portfolio's assets will be invested in common stocks of companies with
market capitalizations of less than $1 billion. However it may also invest in
larger companies if they appear to present better prospects for capital
appreciation. This Portfolio may invest up to 30% of its assets in foreign
securities.
Small and medium sized companies selected for this Portfolio are generally those
that are still in the developing stages of their life cycles and are able to
achieve rapid growth in sales, earnings and share prices. Investments in such
companies involve greater volatility and risk than is customarily associated
with more established companies because such companies often have limited
product lines, markets or financial resources, and their securities may be
subject to more abrupt or erratic movements in price than securities of larger
companies or the market averages. Investment in this Portfolio generally
involves a higher degree of market and financial risks than those of the Equity
Portfolio.
GLOBAL CONTRARIAN PORTFOLIO
The objective of the Global Contrarian Portfolio is to provide long-term growth
of capital by investing in foreign and domestic securities that, in the judgment
of the portfolio manager, are undervalued or presently out of favor with other
investors but have positive prospects for eventual appreciation. While this
Portfolio will primarily invest in common stocks (and securities convertible
into common stocks), it may also invest in fixed income securities that appear
to be undervalued or out of favor.
A substantial portion (at least 25%) of this Portfolio will be invested in
foreign securities, in at least three countries, under normal market conditions.
To that extent, the risk factors described in the second paragraph under
"International Portfolio," above, will apply. In addition, "contrarian"
investing generally involves substantial risks, particularly in the short term.
Companies or markets that appear to be undervalued or are out of favor with
investors may remain so for an extended period of time or may never recover.
Therefore, this Portfolio should be considered primarily for long-term
investments. Investment in this Portfolio generally involves a high degree of
market and financial risk.
AGGRESSIVE GROWTH PORTFOLIO
The investment objective of the Aggressive Growth Portfolio is to seek capital
growth. The Portfolio invests in a diversified portfolio of securities believed
to represent attractive growth opportunities. The Portfolio normally emphasizes
equity securities, although it has the flexibility to invest in any type of
security that is believed to have the potential for capital appreciation. The
Portfolio may invest up to 100% of its assets in equity securities, including
common stocks, preferred stocks, securities that are convertible into common or
preferred stocks, such as convertible bonds, and warrants. The Portfolio may
invest up to 100% of its assets in intermediate - to long-term corporate or U.S.
government debt securities. Although the debt securities in which the Portfolio
invests will be primarily investment-grade debt securities, the Portfolio may
invest up to 5% of its total assets in non-investment-grade debt securities.
The Portfolio may invest up to 15% of its assets in foreign securities, which
involve certain risks.
10
<PAGE> 15
The Portfolio seeks to uncover emerging investment trends and attractive growth
opportunities. In its search for potential investments, the Portfolio attempts
to identify companies that are poised for accelerated earnings growth due to
innovative products or services, new management, or favorable economic or market
cycles. These companies may be small, unseasoned firms in the early stages of
development, or they may be mature organizations. The Portfolio engages in
substantial short-term trading, which involves significant risk and may be
deemed speculative. Such trading results in a higher portfolio turnover rate and
correspondingly higher brokerage costs. Investment in this Portfolio involves a
high degree of market and financial risk.
CORE GROWTH PORTFOLIO
The objective of the Core Growth Portfolio is to provide long-term capital
appreciation by investing primarily in equity securities of large, medium and
small companies that PBA believes have strong earnings growth and long-term
capital appreciation prospects. PBA seeks companies poised for rapid growth that
have a history of above-average earnings growth, demonstrate the ability to
sustain that growth, and operate in industries or markets experiencing increased
demand for their products or services.
In managing the Core Growth Portfolio, PBA uses both quantitative and
fundamental processes focusing on quality earnings growth. PBA begins by
creating a universe of rapidly growing companies having desired quality
characteristics. Using proprietary software and research models that incorporate
attributes of successful growth (such as positive earnings surprises, upward
earnings estimate revisions, and accelerating sales and earnings growth), PBA
creates a universe of growing companies. Then, using fundamental research, PBA
evaluates each company's earnings quality and assesses the sustainability of the
company's current growth trends. Through this highly disciplined process, PBA
seeks to construct an investment portfolio having strong growth characteristics.
This portfolio's investments in small and medium capitalization companies may
experience greater price volatility than portfolios investing primarily in
larger, more established companies. Because the universe of companies in which
this portfolio invests will experience stock price volatility, it is important
that investors maintain a long-term investment perspective.
GROWTH & INCOME PORTFOLIO
The Growth & Income Portfolio's investment objective is long-term total return.
The Portfolio will pursue this objective primarily by investing in equity and
debt securities, focusing on small- and mid-cap companies that offer the
potential for capital appreciation, current income, or both.
The Portfolio will normally invest the majority of its assets in common stocks,
convertible securities, bonds, and notes. Although the Portfolio is intended to
focus on companies with market capitalizations of up to $3 billion, the
Portfolio will remain flexible and may invest in securities of larger companies.
The Portfolio may also engage in short sales of securities expected to decline
in price. Small- and mid-cap companies may present greater opportunities for
investment return than do larger companies, but may also involve greater risks.
They may have limited product lines, marketing or financial resources, or may
depend on a limited management group. Their securities may trade less frequently
and in limited volume. As a result, the prices of these securities may fluctuate
more than prices of securities of larger, widely traded companies.
S&P 500 INDEX PORTFOLIO
The investment objective of the S&P 500 Index Portfolio is to seek total return
approximating that of the S&P 500, including reinvestment of dividends, at a
risk level consistent with that of the S&P 500. It will seek this objective by
investing primarily in (a) common stocks and other securities that need not be
included among the 500 stocks in the S&P 500, and/or (b) S&P 500 stock index
futures contracts which will be hedged by investing in securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities,
investment-grade corporate bonds and cash equivalents. This strategy is intended
to replicate the performance of the S&P 500. However, Portfolio expenses will
reduce the Portfolio's ability to exactly track the S&P 500 and there can be no
assurance that the Portfolio's investments will have the desired effect.
11
<PAGE> 16
The value of S&P 500 stock index futures contracts is tied directly to the
fluctuations of the S&P 500. The Portfolio's ability to use futures contracts as
a substitute for maintaining a fully-invested market position in the 500 stocks
comprising the S&P 500 obligates the Portfolio to hedge its position by
delivering a specific dollar amount equal to the difference between the value of
the S&P 500 at the time the contract was made and the closing of the contract.
The futures contracts can result in a high degree of leverage so that, were the
Portfolio's position in the contracts not to be hedged by its position in U.S.
government obligations, investment-grade corporate bonds and cash equivalents, a
relatively small decline in the S&P 500 could result in a substantial loss to
the Portfolio, including part or all of the margin deposits required on the
contracts. See "About the S&P 500" on page 35.
SOCIAL AWARENESS PORTFOLIO
The objective of the Social Awareness Portfolio is to provide long-term growth
of capital by investing primarily in the common stocks and other equity
securities of companies that, in the Adviser's opinion, conduct their business
in a way that enhances society's quality of life. The Portfolio's social concern
criteria will necessarily limit the universe of securities that may be selected
for this Portfolio. However, the Adviser believes the Portfolio's objective of
long-term capital growth can be achieved despite this limitation.
In choosing investments, the Adviser will consider a company's record in (a)
quality and safety of its products and services, (b) environmental protection
and enhancement, (c) employee relations, opportunities and safety, (d) consumer
relations and protection, (e) community involvement, and (f) expectations for
the creation of new jobs and economic development due to anticipated company
growth. In addition, each potential investment will be subject to the Adviser's
standards of investment analysis. As a matter of operating policy that may be
modified by the Board of Directors, the Portfolio will not invest in any company
substantially engaged in the manufacture of or distribution of tobacco products,
alcoholic beverages or weapons, or the operation of gambling casinos, or the
support of repressive regimes. The Adviser will attempt to monitor and respond
to changes in business practices of the companies selected for investment and,
in case of any adverse development, will consider whether or not the Portfolio's
policies would require it to sell its position in that company. Any sale under
those circumstances would, however, be subject to prudent market considerations.
STRATEGIC INCOME PORTFOLIO
The investment objective of the Strategic Income Portfolio is to generate high
current income by investing at least 80% of its assets in income producing
securities, including at least 40% of its assets in a core asset group of U.S.
government and corporate fixed income securities, and 5% to 20% of its assets in
each of the following satellite categories: (a) foreign bonds, (b) real estate
investment trusts, (c) domestic equity securities, (d) money market securities
and (e) the following structured fixed income securities: mortgage backed
securities, collateralized mortgage obligations ("CMOs"), adjustable rate
mortgage securities ("ARMS") and asset-backed securities.
The core assets are selected based on the outlook for interest rates and their
yield in relation to other fixed income securities of similar quality and
maturity and only include investment grade bonds (i.e., those rated Baa or
higher by Moody's, or BBB or higher by S&P or Fitch or which, if unrated, are
deemed by Star to be of comparable quality). The foreign bonds are of non-U.S.
companies and governments. They are investment grade, are denominated in
currencies other than U.S. dollars and may include American Depositary Receipts
and International Depositary Receipts. The Portfolio may also invest in shares
of investment companies that invest primarily in foreign bonds. Real estate
investment trusts include equity or mortgage real estate trusts integrated to
capture income diversified by sector (e.g., shopping malls, apartment buildings
and health care facilities) and by geographic location. The domestic equity
category consists of high-dividend common and preferred stocks of U.S. companies
with a history of stable earnings and/or growing dividends. The domestic equity
category may also include warrants and securities convertible into the common
stocks of these U.S. companies. The money market category includes (a)
commercial paper and Europaper (dollar-denominated commercial paper issued
outside the U.S.) having at least one rating in one of the two highest
categories of any NRSRO; (b) instruments of domestic and foreign banks and
savings and loans (such as certificates of
12
<PAGE> 17
deposit, demand and time deposits, savings shares and bankers acceptances) if
they have capital, surplus and individual profits of over $100,000,000, or if
the principal amount of the instrument is insured by a fund administered by the
Federal Deposit Insurance Corporation ("FDIC insured"), including Eurodollar
Certificates of Deposit ("ECDs"), Yankee Certificates of Deposit ("Yankee CDs")
and Eurodollar Time Deposits ("ETDs"); (c) obligations of the U.S. government or
its agencies or instrumentalities; (d) repurchase agreements, and (e) other
unrated short-term instruments deemed by Star to be of comparable quality to the
other obligations in which the Portfolio may invest. This Portfolio may also
engage in short sales from time to time. See "Risks Related to Short Sales" on
page 17.
STELLAR PORTFOLIO
The investment objective of the Stellar Portfolio is to maximize total return by
investing approximately 15% to 25% of its assets in each of the following
categories: (a) domestic equity securities which Star deems to be undervalued
relative to stocks contained in the S&P 500 Composite Stock Index; (b) domestic
fixed income securities including investment grade corporate debt obligations
and obligations of the U.S. government and its agencies and instrumentalities;
(c) foreign securities including securities of non-U.S. companies, investment
grade corporate and government fixed income securities denominated in currencies
other than U.S. dollars, and investment companies that invest primarily in
foreign securities; (d) real estate securities including publicly traded equity
and convertible debt securities of real estate related companies and real estate
investment trusts, and (e) precious metal securities and/or money market
securities. Precious metal securities include equity securities of domestic and
foreign companies that explore for, extract, process, or deal in precious metals
such as gold, silver, palladium and platinum. Up to 5% of the Portfolio may be
invested in domestic and foreign asset-based securities for which the principal
amount, redemption terms or conversion terms are related to the market price of
some precious metals. Money market securities in which the Portfolio may invest
are U.S. and foreign short-term money market instruments including commercial
paper and Europaper (dollar-denominated commercial paper issued outside the
U.S.) having at least one rating in one of the two highest categories of any
NRSRO; instruments of domestic and foreign banks and savings and loans (such as
certificates of deposit, demand and time deposits, savings shares and bankers'
acceptances) if they have capital, surplus and undivided profits of over
$100,000,000, or if the principal amount of the instrument is FDIC insured
(these may include ECDs, Yankee CDs and ETDs); obligations of the U.S.
government or its agencies or instrumentalities; repurchase agreements, or other
short-term instruments deemed by Star to be of comparable quality to the other
foregoing money market securities.
RELATIVE VALUE PORTFOLIO
The investment objective of the Relative Value Portfolio is to obtain the
highest total return as is consistent with reasonable risk by investing
primarily in stocks which Star deems to represent characteristics with low
volatility, above-average yields, and are undervalued relative to the stocks
comprising the S&P Composite Stock Index. Unless it is in a defensive position,
at least 70% of the Portfolio's assets will be invested in common stocks of
companies in the top 25% of their industries with regard to revenues. However,
other factors, such as product position or market share, will also be considered
and may outweigh revenues.
The Portfolio will also invest in fixed income securities, including convertible
securities; domestic corporate debt obligations (rated or A or higher by Moody's
or S&P or Fitch); and obligations of the U.S. government or its agencies or
instrumentalities.
SMALL CAP GROWTH PORTFOLIO
The investment objective of the Small Cap Growth Portfolio is capital
appreciation. To achieve this objective, the Portfolio invests in an actively
managed portfolio of equity securities (principally common stocks) of small cap
growth companies. These are companies that, in RSIM's opinion, have the
potential, based on superior products or services, operating characteristics,
and financing capabilities, for more rapid growth than the over-all economy.
Investments generally are held in companies in industry segments experiencing
rapid growth or in companies with proprietary advantages. In evaluating
potential investments, RSIM may consider a number of factors including the rate
of earnings growth, the quality of management, the extent of proprietary
operating advantage, the return on equity and/or the financial condition of the
company. Up to 30% of this Portfolio's assets may be invested in foreign
securities.
Smaller companies may present greater opportunities for investment return than
do larger companies, but may also involve greater risks. They may have limited
product lines, markets or financial resources, and they may depend on a limited
management group. Their securities may trade less frequently and in limited
volume. As a result, the prices of these securities may fluctuate more than
prices of larger, more widely traded companies. The Portfolio may experience
some difficulty in establishing or closing out positions in these securities at
prevailing market prices. There may be less publicly available information about
the issuers or less market interest in their securities than in the case of
larger companies, and it may take longer for prices of these securities to
reflect the full value of their issuers' underlying earnings potential or
assets. Securities of some smaller issuers may be restricted as to resale or may
otherwise be illiquid, thus limiting the Portfolio's ability to dispose of the
securities.
HIGH INCOME BOND PORTFOLIO
The objective of the High Income Bond Portfolio is to seek high current income.
The Portfolio invests primarily in lower rated corporate debt obligations
commonly referred to as "junk bonds." Some of these fixed income securities may
involve equity features. Capital growth will be considered, but only when
consistent with the objective of high current income. Under normal
circumstances, the Portfolio will not invest more than 10% of the value of its
assets in equity securities and their equivalents. Fixed income securities in
which the Portfolio invests include, but are not limited to, preferred stocks,
bonds, debentures, notes, equipment lease certificates and equipment trust
certificates. The Portfolio's investments are generally rated Baa or lower by
Moody's, or BBB or lower by S&P or Fitch, or are not rated but are determined by
FIC to be of comparable quality, and may include bonds in default. There is no
lower limit with respect to rating categories for securities in which the
Portfolio may invest. These lower rated securities have speculative
characteristics. Changes in economic conditions or other circumstances are more
likely to lead to weakened capacity to make principal and interest payments than
highly rated bonds.
The Portfolio may invest in various kinds of convertible securities that can be
exchanged for or converted into common stock. Convertible securities are often
rated below investment grade or not rated because they fall below debt
obligations and just above common stock in order of preference on the issuer's
balance sheet. The Portfolio may invest its assets in foreign securities,
including those not publicly traded in the United States. The Portfolio may also
invest in debt and equity securities issued by real estate investment trusts.
EQUITY INCOME PORTFOLIO
The investment objective of the Equity Income Portfolio is to provide
above-average income and capital appreciation. The Portfolio invests primarily
in income-producing equity securities including common stocks, preferred stocks,
real estate investment trusts and securities (including debt securities)
convertible into common stocks. The Portfolio emphasizes those common stocks in
each sector that have good value, attractive yield and dividend growth
potential. Convertible securities are used because they typically offer high
yields and good potential for capital appreciation.
The Portfolio invests in convertible securities without regard to their rating.
They are often rated below investment grade, or not rated, because they fall
below debt obligations and just above common equity in order of preference or
priority on the issuer's balance sheet. Hence, an issuer with investment grade
senior debt may issue convertible securities with ratings below investment grade
or not rated. These securities may be subject to some of the same risks as those
inherent in junk bonds as described for the High Income Bond Portfolio. This
Portfolio may invest in foreign securities, and it may also engage in short
sales from time to time.
BLUE CHIP PORTFOLIO
The investment objective of the Blue Chip Portfolio is to seek growth of capital
and income by concentrating investment decisions in securities of high quality
companies. The Portfolio pursues its investment objective by investing primarily
in a portfolio of securities issued by companies selected by FIC principally on
the basis of fundamental research techniques and standards with emphasis on
earning power, financial condition and valuation. The companies are among the
leaders in their industries in terms of sales, earnings, and/or market
capitalization. FIC places emphasis on earning power, financial condition and
valuation when making portfolio selections, and it believes that these
companies' securities represent diversified and highly marketable investments.
The securities in which the Portfolio invests include, but are not limited to,
common stocks, preferred stocks, corporate debt obligations, convertible
securities, warrants, American depository receipts and foreign securities.
Corporate debt obligations will be rated Baa or better by Moody's, or BBB or
better by S&P or Fitch, or if not rated, will be determined by FIC to be of
comparable quality. If a security loses its rating or has its rating reduced
after the Portfolio has purchased it, the Portfolio is not required to drop the
security from the Portfolio, but that will be considered. Bonds rated below Baa
or BBB have some speculative characteristics.
INVESTMENT RESTRICTIONS
The Fund is subject to a number of restrictions in implementing its investment
policies. The following is a list of certain significant restrictions for all
portfolios other than the Capital Appreciation, Aggressive Growth, High Income
Bond, Equity Income and Blue Chip Portfolios, the restrictions for which are
listed separately. The Statement of Additional Information provides a complete
list of all investment restrictions applicable to the Fund. Restriction number
8 is a fundamental policy of the Global Contratrian Portfolio, and restrictions
number 4, 7 and 8 are fundamental policies of the Equity, Money Market, Bond,
Omni and International Portfolios, and nonfundamental as to the remaining
portfolios. Nonfundamental policies may be changed by the Board of Directors.
Fundamental policies may not be changed without the affirmative vote of a
majority of the outstanding voting securities of the Fund or of a particular
portfolio, as appropriate.
13
<PAGE> 18
Each portfolio of the Fund (other than the Capital Appreciation, Aggressive
Growth, High Income Bond, Equity Income and Blue Chip Portfolios) will not:
1. invest more than 5% of the value of the total assets of such portfolio in
the securities of any one insurer (except U.S. government securities);
2. purchase more than 10% of the outstanding voting securities of any one
issuer, and the Money Market Portfolio will not acquire the voting
securities of any issuer except in connection with a merger, consolidation
or other reorganization;
3. invest more than 25% of the value of its total assets in any one industry,
except that each 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 15% of the value of its assets (10% in the case of the
Equity, Money Market, Bond, Omni and International Portfolios) 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. other than the Growth & Income, Strategic Income and Small Cap Growth
Portfolios, 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,
each portfolio may pledge, mortgage or hypothecate up to 5% of its assets.
Reverse repurchase agreements are not considered to be borrowing money for
purposes of this restriction. The Growth & Income, Strategic Income and
Small Cap Growth Portfolios may borrow money directly or through reverse
repurchase agreements in amounts up to one-third of the value of each of
their total net assets, other than the amount borrowed;
6. purchase or sell commodities or commodity contracts except that (a) each
portfolio other than the Money Market Portfolio may, for hedging purposes,
purchase and sell financial futures contracts and options thereon within
the limits of investment restriction 7 below, (b) notwithstanding
restriction 7 below, the S&P 500 Index Portfolio may purchase and sell
stock index futures contracts in accordance with its stated investment
objectives, and (c) the Stellar Portfolio may purchase or sell precious
metal securities;
7. other than the S&P 500 Index Portfolio, purchase or sell put or call
options, except that each portfolio other than the Money Market Portfolio
may, for hedging purposes, (a) write call options traded on a registered
national securities exchange if such portfolio owns the underlying
securities subject to such options, and purchase call options for the
purpose of closing out positions in options it has written, (b) purchase
put options on securities owned, and sell such options in order to close
its positions in put options, (c) purchase and sell financial futures
contracts and options thereon, and (d) purchase and sell financial index
options; provided, however, that no option or futures contract shall be
purchased or sold if, as a result, more than one-third of the total assets
of the portfolio would be hedged by options or futures contracts, and no
more than 5% of any portfolio's total assets, at market value, may be used
for premiums on open options and initial margin deposits on futures
contracts;
8. other than the International and Global Contrarian Portfolios, invest in
securities of foreign issuers except that (a) each of the Equity, Bond,
Omni, Core Growth, Growth & Income, S&P 500 Index, Social Awareness and
Relative Value Portfolios may (i) invest up to 15% of their respective
assets in securities of foreign issuers (including private issuers and
foreign governments or political subdivisions, agencies or
instrumentalities of foreign governments), American Depository Receipts,
and securities of United States domestic issuers denominated in foreign
currency, and (ii) invest up to an additional 10% of the assets of the
portfolio in securities issued by foreign governments or political
subdivisions, agencies or instrumentalities thereof, (b) each of the
Small Cap and Small Cap Growth Portfolios may invest up to 30% of its
assets in the securities of foreign issuers, (c) the Money Market
Portfolio may invest up to 50% of its assets in the securities of foreign
issuers, provided the securities are denominated in U.S. dollars and held
in custody in the United States, (d) the Strategic Income Portfolio may
invest up to 20% of its assets in foreign bonds and (e) the Stellar
Portfolio may invest up to 25% of its assets in the securities of foreign
issuers. For purposes of this restriction number 8, U.S. dollar
denominated depository receipts traded in domestic markets do not
constitute foreign securities;
14
<PAGE> 19
As nonfundamental policies of each portfolio other than the Capital
Appreciation, Aggressive Growth, High Income Bond, Equity Income and Blue Chip
Portfolios, which policies may be changed at any time by the vote of a majority
of the Board of Directors, (a) no portfolio will invest more than 20% of its
assets in securities of issuers located in any one foreign country, except that
up to an additional 5% of its assets may be invested in securities of issuers
located in each of any three of Australia, Canada, France, Germany, Japan or
the United Kingdom; and (b) each portfolio other than the Money Market
Portfolio, in order to hedge against changes in the exchange rates of foreign
currencies in relation to the U.S. dollar, may engage in forward foreign
currency contracts, foreign currency options and foreign currency futures
contracts in connection with the purchase, sale or ownership of specific
securities (but, not more than 5% of a portfolio's assets may be invested in
such currency hedging contracts).
If a percentage restriction is adhered to at the time of an investment, a later
increase or decrease in the investment's percentage of the value of a
portfolio's total assets resulting from a change in such values or assets will
not constitute a violation of the percentage restriction.
CAPITAL APPRECIATION PORTFOLIO FUNDAMENTAL POLICIES As a matter of fundamental
policy, the Portfolio may not:
C.A.1. Borrow money except that the Portfolio may (i) borrow for
non-leveraging, temporary or emergency purposes and (ii) engage in
reverse repurchase agreements and make other investments or engage in
other transactions, which may involve a borrowing, in a manner
consistent with the Portfolio's investment objective and program,
provided that the combination of (i) and (ii) shall not exceed 33 1/3%
of the value of the Portfolio's total assets (including the amount
borrowed) less liabilities (other than borrowings) or such other
percentage permitted by law. Any borrowings which come to exceed this
amount will be reduced in accordance with applicable law. The Portfolio
may borrow from banks, other portfolios managed by TRPA or other
persons to the extent permitted by applicable law;
C.A.2. Purchase or sell physical commodities; except that it may enter into
futures contracts and options thereon;
C.A.3. Purchase the securities of any issuer if, as a result, more than 25% of
the value of the Portfolio's total assets would be invested in the
securities of issuers having their principal business activities in the
same industry;
C.A.4. Make loans, although the Portfolio may (i) lend portfolio securities
and participate in an interfund lending program with other portfolios
managed by TRPA provided that no such loan may be made if, as a result,
the aggregate of such loans would exceed 33 1/3% of the value of the
Portfolio's total assets; (ii) purchase money market securities and
enter into repurchase agreements; and (iii) acquire
publicly-distributed or privately-placed debt securities and purchase
debt;
C.A.5. Purchase a security if, as a result, with respect to 75% of the value
of its total assets, more than 5% of the value of the Portfolio's total
assets would be invested in the securities of a single issuer, except
securities issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities;
C.A.6. Purchase a security if, as a result, with respect to 75% of the value
of the Portfolio's total assets, more than 10% of the outstanding
voting securities of any issuer would be held by the Fund (other than
obligations issued or guaranteed by the U.S. government, its agencies
or instrumentalities);
C.A.7. Purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the
Portfolio from investing in securities or other instruments backed by
real estate or in securities of companies engaged in the real estate
business);
C.A.8. Issue senior securities except in compliance with the Investment
Company Act of 1940; or
C.A.9. Underwrite securities issued by other persons, except to the extent
that the Portfolio may be deemed to be an underwriter within the
meaning of the Securities Act of 1933 in connection with the purchase
and sale of its portfolio securities in the ordinary course of pursuing
its investment program.
15
<PAGE> 20
With respect to investment restrictions C.A.1. and C.A.4., the Portfolio will
not borrow from or lend to any other portfolios managed by TRPA unless they
apply for and receive an exemptive order from the SEC or the SEC issues rules
permitting such transactions. The Portfolio has no current intention of engaging
in any such activity and there is no assurance the SEC would grant any order
requested by the Portfolio or promulgate any rules allowing the transactions.
With respect to investment restriction C.A.2., the Portfolio does not consider
currency contracts or hybrid investments to be commodities.
For purposes of investment restriction C.A.3., U.S., state or local governments,
or related agencies or instrumentalities, are not considered an industry.
For purposes of investment restriction C.A.4., the Portfolio will consider the
acquisition of a debt security to include the execution of a note or other
evidence of an extension of credit with a term of more than nine months.
AGGRESSIVE GROWTH PORTFOLIO FUNDAMENTAL POLICIES
As a matter of fundamental policy, the Portfolio:
A.G.1. May not with respect to 75% of its total assets, purchase the
securities of any issuer (except securities issued or guaranteed by the
U.S. government or its agencies or instrumentalities) if, as a result,
(i) more than 5% of the Portfolio's total assets would be invested in
the securities of that issuer, or (ii) the Portfolio would hold more
than 10% of the outstanding voting securities of that issuer.
A.G.2. May (i) borrow money from banks and (ii) make other investments or
engage in other transactions permissible under the Investment Company
Act of 1940 which may involve a borrowing, provided that the
combination of (i) and (ii) shall not exceed 33 1/3% of the value of
the Portfolio's total assets (including the amount borrowed), less the
Portfolio's liabilities (other than borrowings), except that the
Portfolio may borrow up to an additional 5% of its total assets (not
including the amount borrowed) from a bank for temporary or emergency
purposes (but not for leverage or the purchase of investments). The
Portfolio may also borrow money from the other mutual funds managed by
SCM or other persons to the extent permitted by applicable law.
A.G.3. May not issue senior securities, except as permitted under the
Investment Company Act of 1940.
A.G.4. May not act as an underwriter or another issuer's securities, except to
the extent that the Portfolio may be deemed to be an underwriter within
the meaning of the Securities Act of 1933 in connection with the
purchase and sale of portfolio securities.
A.G.5. May not purchase or sell physical commodities unless acquired as a
result of ownership of securities or other instruments (but this shall
not prevent the Portfolio from purchasing or selling options, futures
contracts, or other derivative instruments, or from investing in
securities or other instruments backed by physical commodities).
A.G.6. May not make loans if, as a result, more than 33 1/3% of the
Portfolio's total assets would be lent to other persons, except through
(i) purchases of debt securities or other debt instruments, or (ii)
engaging in repurchase agreements.
A.G.7. May not purchase the securities of any issuer if, as a result, more
than 25% of the Portfolio's total assets would be invested in the
securities of issuers, the principal business activities of which are
in the same industry.
A.G.8. May not purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not
prohibit the Portfolio from purchasing or selling securities or other
instruments backed by real estate or of issuers engaged in real estate
activities.
HIGH INCOME BOND, EQUITY INCOME AND BLUE CHIP PORTFOLIO FUNDAMENTAL POLICIES
As a matter of fundamental policy:
F.I.1 The portfolios will not issue senior securities, except that a
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 a portfolio's total
assets, any such borrowings will be repaid before additional
investments are made.
F.I.2. The portfolios will not purchase securities if, as a result of such
purchase, 25% or more of a portfolio's total assets would be invested
in any one industry. However, a 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.
F.I.3. The portfolios will not purchase or sell real estate, although they 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.
F.I.4. The portfolios will not lend any of their assets, except a portfolio's
securities, up to one-third of its total assets. This shall not prevent
a 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.
F.I.5. The portfolios will not underwrite any issue of securities, except as a
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.
F.I.6. With respect to 75% of its total assets, a 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, a portfolio
will not purchase more than 10% of any class of the outstanding voting
securities of any one issuer. For these purposes, the portfolios
consider common stock and all preferred stock of an issuer each as a
single class, regardless of priorities, series, designations, or other
differences.
F.I.7. The portfolios will not purchase any securities on margin, but they may
obtain such short-term credits as are necessary for clearance of
transactions. The deposit or payment by a 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.
F.I.8. The portfolios will not purchase or sell commodities, except that a
portfolio may purchase and sell financial futures contracts and related
options.
REPURCHASE AGREEMENTS
Under a repurchase agreement, the portfolio purchases a security and obtains a
simultaneous commitment from the seller (a member bank of the Federal Reserve
System or a government securities dealer recognized by the Federal Reserve
Board) to repurchase the security at a mutually agreed upon price and date. It
may also be viewed as a loan of money by the portfolio to the seller. The resale
price is normally in excess of the purchase price and reflects an agreed upon
market rate. The rate is effective for the period of time the portfolio is
invested in the agreement and unrelated to the coupon rate on the purchased
security. The period of these repurchase agreements will usually be short, from
overnight to one week, and at no time will the portfolio invest in repurchase
agreements for more than one year. These transactions afford an opportunity for
the portfolio to earn a return on temporarily available cash. Although
repurchase agreements carry certain risks not associated with direct investments
in securities, the Fund intends to enter into repurchase agreements only with
financial institutions believed by the Adviser and any sub-adviser to present
minimal credit risks in accordance with criteria established by the Fund's Board
of Directors. The Adviser or sub-adviser will review and monitor the
creditworthiness of such institutions under the Board's general supervision. The
Fund will only enter into repurchase agreements pursuant to master repurchase
agreements that provide that all transactions be fully collateralized and that
the collateral be in the actual or constructive possession of the Fund. These
agreements must also provide that the Fund will always receive as collateral
securities whose market value, including accrued interest, will be at least
equal to 100% of the dollar amount invested by the portfolio in each agreement,
and the portfolio will make payment for such securities only upon physical
delivery or evidence of book entry transfer to the account of the custodian. If
the seller were to default, the portfolio might incur a loss if the value of the
collateral securing the repurchase agreement declines and may incur disposition
costs in connection with liquidating the collateral. In addition, if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization upon the collateral by the portfolio may be delayed or limited and a
loss may be incurred if the collateral securing the repurchase agreement
declines in value during the bankruptcy proceedings.
REVERSE REPURCHASE AGREEMENTS
Under a reverse repurchase agreement, a portfolio sells a debt security and
agrees to repurchase it at an agreed upon time and at an agreed upon price. The
portfolio retains record ownership of the security and the right to receive
interest and principal payments thereon. At an agreed upon future date, the
portfolio repurchases the security by remitting the proceeds previously
received, plus interest. The difference between the amount the portfolio
receives for the security and the amount it pays on repurchase is deemed to be
payment of interest. The portfolio will maintain in a segregated custodial
account assets having an aggregate value equal to the amount of such commitment
to repurchase, including accrued interest, until payment is made. In certain
types of agreements, there is no agreed-upon repurchase date and interest
payments are calculated daily, often based on the prevailing overnight
repurchase rate. The Securities and Exchange Commission views these transactions
as collateralized borrowings by the portfolio and the portfolio will abide by
the limitations set out in the investment restrictions with respect to the
borrowing of money.
CONVERTIBLE SECURITIES
Convertible securities include a variety of instruments that can be exchanged
for or converted into common stock, including convertible bonds or debentures,
convertible preferred stock, units consisting of usable bonds and warrants, and
securities that cap or otherwise limit returns to the security holder. Examples
of these include dividend enhanced convertible stock or debt exchangeable for
common stock (DECS), liquid yield option notes (LYONS), preferred equity
redemption cumulative stock (PERCS), preferred redeemable increased dividend
securities (PRIDES) and zero coupon convertible securities.
As with all fixed-income securities, various market forces influence the market
value of convertible securities, including changes in the level of interest
rates. As the level of interest rates increases, the market value of convertible
securities may decline and, conversely, as interest rates decline, the market
value of convertible securities may increase. The unique investment
characteristic of convertible securities, the right to be exchanged for the
issuer's common stock, causes the market value of convertible securities to
increase when the underlying common stock increases. However, since securities
prices fluctuate, there can be no assurance of capital appreciation, and most
convertible securities will not reflect quite as much capital appreciation as
their underlying common stocks. When the underlying common stock is experiencing
a decline, the value of the convertible security tends to decline to a level
approximating the yield-to-maturity basis of straight nonconvertible debt of
similar quality, often called "investment value," and may not experience the
same decline as the underlying common stock.
Many convertible securities sell at a premium over their conversion values
(i.e., the number of shares of common stock to be received upon conversion
multiplied by the current market price of the stock). This premium represents
the price investors are willing to pay for the privilege of purchasing a
fixed-income security with a possibility of capital appreciation due to the
conversion privilege. If this appreciation potential is not realized, the
premium may not be recovered.
ZERO-COUPON AND PAY-IN-KIND DEBT SECURITIES
Zero-coupon securities (or "step-ups") in which a portfolio may invest are debt
obligations which are generally issued at a discount and payable in full at
maturity, and which do not provide for current payments of interest prior to
maturity. Pay-in-kind securities make periodic interest payments in the form of
additional securities (as opposed to cash). Zero-coupon and pay-in-kind
securities usually trade at a deep discount from their face or par value and are
subject to greater market value fluctuations from changing interest rates than
debt obligations of comparable maturities which make current distributions of
interest. As a result, the net asset value of shares of a portfolio investing in
zero-coupon and pay-in-kind securities may fluctuate over a greater range than
shares of other mutual funds investing in securities making current
distributions of interest and having similar maturities.
LOWER-RATED DEBT SECURITIES
Certain of the portfolios may purchase lower-rated debt securities, sometimes
referred to as "junk bonds" (those rated BB or lower by S&P or Fitch, or Ba or
lower by Moody's). See below for a description of S&P's ratings. Other ratings
are in the Appendix to the Statement of Additional Information. Under current
circumstances, only the High Income Bond Portfolio will purchase these
securities if, as a result, more than 35% of the Portfolio's assets would be
invested in securities rated below BB or Ba.
The lower ratings of certain securities held by a portfolio reflect a greater
possibility that adverse changes in the financial condition of the issuer, or in
general economic conditions, or both, or an unanticipated rise in interest
rates, may impair the ability of the issuer to make payments of interest and
principal. The inability (or perceived inability) of issuers to make timely
payment of interest and principal would likely make the values of securities
held by a portfolio more volatile and could limit the portfolio's ability to
sell its securities at prices approximating the values that portfolio had placed
on such securities. In the absence of a liquid trading market for securities
held by it, a portfolio may be unable at times to establish the fair market
value of such securities. The rating assigned to a security by Moody's, S&P or
Fitch does not reflect an assessment of the volatility of the security's market
value or of the liquidity of an investment in the security.
Like those of other fixed-income securities, the values of lower-rated
securities fluctuate in response to changes in interest rates. Thus, a decrease
in interest rates generally will result in an increase in the value of a
portfolio's fixed-income securities. Conversely, during periods of rising
interest rates, the value of a portfolio's fixed-income securities generally
will decline. In addition, the values of such securities are also affected by
changes in general economic conditions and business conditions affecting the
specific industries of their issuers. Changes by recognized rating services in
their ratings of any fixed-income security and in the ability of an issuer to
make payments of interest and principal may also affect the value of these
investments. Changes in the value of portfolio securities generally will not
affect cash income derived from such securities, but will affect the portfolio's
net asset value. A portfolio will not necessarily dispose of a security when its
rating is reduced below its rating at the time of purchase, although the Adviser
or sub-adviser will monitor the investment to determine whether continued
investment in the security will assist in meeting the portfolio's investment
objective.
Issuers of lower-rated securities are often highly leveraged, so that their
ability to service their debt obligations during an economic downturn or during
sustained periods of rising interest rates may be impaired. In addition, such
issuers may not have more traditional methods of financing available to them,
and may be unable to repay debt at maturity by refinancing. The risk of loss due
to default in payment of interest or principal by such issuers is significantly
greater because such securities frequently are unsecured and subordinated to the
prior payment of senior indebtedness. Certain of the lower-rated securities in
which the portfolios may invest are issued to raise funds in connection with the
acquisition of a company in so-called "leveraged buy-out" transactions. The
highly leveraged capital structure of such issuers may make them especially
vulnerable to adverse changes in economic conditions.
Under adverse market or economic conditions or in the event of adverse changes
in the financial condition of the issuer, a portfolio could find it more
difficult to sell lower-rated securities when the Adviser or sub-adviser
believes it advisable to do so or may be able to sell such securities only at
prices lower than if such securities were more widely held. In many cases, such
securities may be purchased in private placements and, accordingly, will be
subject to restrictions on resale as a matter of contract or under securities
laws. Under those circumstances, it may also be more difficult to determine the
fair value of the securities for purposes of computing a portfolio's net asset
value. In order to enforce its rights in the event of a default, a portfolio may
be required to take possession of and manage assets securing the issuer's
obligations on such securities, which may increase the portfolio's operating
expenses and adversely affect the portfolio's net asset value. A portfolio may
also be limited in its ability to enforce its rights and may incur greater costs
in enforcing its rights in the event an issuer becomes the subject of bankruptcy
proceedings.
Certain securities held by a portfolio may permit the issuer at its option to
"call," or redeem, its securities. If an issuer were to redeem securities held
by a portfolio during a time of declining interest rates, the portfolio may not
be able to reinvest the proceeds in securities providing the same investment
return as the securities redeemed.
S&P LOWER BOND RATINGS
Debt rated `BB,' `B,' `CC,' and `C,' is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. `BB' indicates the least degree of speculation and `C' the highest.
While such debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties of major exposures to adverse
markets.
BB Debt rated `BB' has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which
could lead to inadequate capacity to meet timely interest and principal
payments. The `BB' rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied `BBB-' rating.
B Debt rated `B' has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity
or willingness to pay interest and repay principal. The `B' rating
category is also used for debt subordinated to senior debt that is
assigned an actual or implied `BB' or `BB-' rating.
CCC Debt rated `CCC' has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial, or economic conditions, it
is not likely to have the capacity to pay interest and repay principal.
The `CCC' rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied `B' or `B-" rating.
CC The rating `CC' typically is applied to debt subordinated to senior debt
that is assigned an actual or implied `CCC' rating.
C The rating `C' typically is applied to debt subordinated to senior debt
that is assigned an actual or implied `CCC-' rating. The `C' rating may
be used to cover a situation where a bankruptcy petition has been filed,
but debt service payments are continued.
CI The rating `CI' is reserved for income bonds on which no interest is
being paid.
D Debt rated `D' is in payment default. The `D' rating category is used
when interest payments or principal payments are not made on the date due
even if the applicable grace period has not expired, unless S&P believes
that such payments will be made during such grace period. The `D' rating
will also be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.
The ratings from `BB' to `CCC' may be modified by the addition of a plus (+) or
minus (-) to show relative standing within the major rating categories.
RESTRICTED AND ILLIQUID SECURITIES
Restricted securities are securities in which a portfolio may otherwise invest
pursuant to its investment objective and policies, but which are subject to
restrictions on resale under federal securities law. Under criteria established
by the Board of Directors, certain restricted securities are deemed to be
liquid. The Directors consider the following criteria in determining the
liquidity of restricted securities: (a) the frequency of trades and quotes for
the security; (b) the number of dealers willing to purchase or sell the
security, and the number of other potential buyers; (c) dealer undertakings to
make a market in the security; and (d) the nature of the security and the nature
of the marketplace trades.
SECURITIES LENDING
A portfolio may lend its portfolio securities, provided: (1) the loan is secured
continuously by collateral consisting of U.S. Government securities, cash or
cash equivalents adjusted daily to have market value at least equal to the
current market value of the securities loaned; (2) the portfolio may at any time
call the loan and regain the securities loaned; (3) a portfolio will receive any
interest or dividend paid on the loaned securities; and (4) the aggregate market
value of any portfolio's securities loaned will not at any time exceed one-third
(or such other limit as the Board of Directors may establish) of the total
assets of the portfolio. In addition, it is anticipated that a portfolio may
share with the borrower some of the income received on the collateral for the
loan or that the portfolio will be paid a premium for the loan.
Before a portfolio enters into a loan, the Adviser or sub-adviser considers all
relevant facts and circumstances, including the creditworthiness of the
borrower. The risks in lending portfolio securities, as with other extensions of
credit, consist of possible delay in recovery of the securities or possible loss
of rights in the collateral should the borrower fail financially. Although
voting rights or rights to consent with respect to the loaned securities pass to
the borrower, a portfolio retains the right to call the loans at any time on
reasonable notice, and it will do so in order that the securities may be voted
by a portfolio if the holders of such securities are asked to vote upon or
consent to matters materially affecting the investment.
WARRANTS
Warrants basically are options to purchase common stock at a specific price
(usually at a premium above the market value of the optioned common stock at
issuance) valid for a specific period of time. Warrants may have a life ranging
from less that a year to twenty years or may be perpetual. However, warrants
have expiration dates after which they are worthless. In addition, if the market
price of the common stock does not exceed the warrant's exercise price during
the life of the warrant, the warrant will expire as worthless. Warrants have no
voting rights, pay no dividends, and have no rights with respect to the assets
of the corporation issuing them. The percentage increase or decrease in the
market price of the warrant may tend to be greater than the percentage increase
or decrease in the market price of the optioned common stock.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price or yield for a portfolio. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the portfolio
sufficient to make payment for the securities to be purchased are segregated on
the portfolio's records at the trade date. These assets are marked to market
daily and are maintained until the transaction has been settled. No portfolio
will engage in when-issued and delayed delivery transactions to an extent that
would cause the segregation of more than 20% of the total value of its assets.
RISK FACTORS WITH OPTIONS
The purchaser of an option pays the option writer a "premium" for the option. In
the case of a covered call option written by a portfolio, if the purchaser does
not exercise the call option, the premium will generate additional capital gain
to the portfolio. If the market price of the underlying security declines, the
premium received for the call option will reduce the amount of the loss the
portfolio would otherwise incur. However, if the market price of the underlying
security rises above the exercise price and the call option is exercised, the
portfolio will lose its opportunity to profit from that portion of the rise
which is in excess of the exercise price plus the option premium. Therefore, the
Fund will write call options only when the Adviser believes that the option
premium will yield a greater return to the portfolio than any capital
appreciation that might occur on the underlying security during the life of the
option.
In the case of a put option purchased by a portfolio, if the market price of the
underlying security remains or rises above the exercise price of the option, the
portfolio will not exercise the option and the premium paid for such option will
reduce the gain the portfolio would otherwise have earned. Conversely, if the
market price of the underlying security falls below the exercise price less the
premium paid for the option, the portfolio will exercise the option, thereby
reducing the loss the portfolio would have otherwise suffered. Accordingly, a
portfolio will purchase put options only when the Adviser believes that the
market price of the underlying security is more likely to decrease than
increase.
Whenever a portfolio enters into a closing transaction, the portfolio will
realize a gain (or loss) if the premium plus commission it pays for a closing
call option is less (or greater) than the premium it received on the sale of the
original call option. Conversely, the portfolio will realize a gain (or loss) if
the premium it receives, less commission, for a closing put option is greater
(or less) than the premium it paid for the original put option. The portfolio
will realize a gain if a call option it has written lapses unexercised, and a
loss if a put option it has purchased lapses unexercised.
RISK FACTORS WITH FUTURES, OPTIONS ON FUTURES AND OPTIONS ON INDEXES
One risk of entering into financial futures contracts, buying options on such
contracts and buying options on financial indexes is that there may not be
enough buyers and sellers in the market to permit the Fund to close a position
when it wants to do so. In such event, besides continuing to be subject to the
margin requirements, the Fund would experience a gain or loss to the extent that
the price movement of the securities subject to the hedge differed from the
position. To limit the risk, the Fund will invest only where there is an
established secondary market.
A risk applicable to both futures contracts and related options is that changes
in the value of the contracts or option may not correlate with changes in the
underlying financial index or with changes in the value of the securities
subject to hedge or both. This failure may be due, in part, to temporary
activity of speculators in the futures markets. To the extent there is not a
perfect correlation, changes in the value of the Fund's assets would not be
offset by change in the value of the contracts and options it had bought.
When the Fund buys an option on a futures contract or an option on a financial
index, its risk of loss is limited to the amount of the premium paid. When the
Fund enters into a futures contract, there is no such limit. However, the loss
on an options contract would exceed that of a futures contract if the change in
the value of the index does not exceed the premium paid for the option.
The success of a hedge depends upon the Adviser's ability to predict increases
or decreases in the relevant financial index. If this expectation proves
incorrect, the Fund could suffer a loss, and would be better off if those
futures contracts or options had not been purchased. The skills involved in
determining whether to enter into a futures contract or purchase or sell an
option are different from those involved in determining whether to buy or sell a
security. The Adviser has had only limited experience using financial futures
contracts, options on financial futures and options on financial indexes.
Because of the low margin deposits required, futures trading involves a high
degree of leverage. As a result, a relatively small price movement in a futures
contract may result in immediate and substantial gain or loss. A purchase or
sale of a futures contract may result in losses in excess of the amount invested
in the futures contract. However, the Fund would presumably have sustained
comparable losses if, instead of the futures contract, it had invested in the
underlying financial instrument.
Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no more
trades may be made on that day at a price beyond that limit. The daily limit
governs only price movements during a particular trading day and therefore does
not limit potential losses because the limit may prevent the liquidation of
unfavorable positions. Futures contract prices have occasionally moved to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures and subjecting some futures
traders to substantial losses.
RISK FACTORS WITH FOREIGN INVESTMENTS
Investments in foreign securities involve considerations not normally associated
with investing in domestic issuers. Such factors include changes in currency
exchange rates, currency exchange control regulations, the possibility of
seizure or nationalization of companies, political or economic instability,
imposition of unforeseen taxes, the possibility of financial information being
difficult to obtain or difficult to interpret under foreign accounting
standards, the necessity of trading in markets that in relation to U.S. markets
may be less efficient and have available less information concerning issuers, or
the imposition of other restraints that might adversely affect investments.
In selecting foreign investments, the Fund seeks to minimize these factors. It
seeks to invest in securities having investment characteristics and qualities
comparable to the kinds of domestic securities in which it invests. Securities
prices in developing countries can be significantly more volatile than in
developed countries, reflecting the greater uncertainties of investing in lesser
developed markets and economies. In particular, developing countries may have
relatively unstable governments, and may present the risk of nationalization of
businesses, expropriation, confiscatory taxation or, in certain instances,
reversion to closed market, centrally planned economies. Such countries may also
have restrictions on foreign ownership or prohibitions on the repatriation of
assets, and may have less protection of property rights than developed
countries. The economies of developing countries may be predominantly based on
only a few industries or dependent on revenues from particular commodities or on
international aid or development assistance, may be highly vulnerable to changes
in local or global trade conditions, and may suffer from extreme and volatile
debt burdens or inflation rates. In addition, securities markets in developing
countries may trade a small number of securities and may be unable to respond
effectively to increased trading volume, potentially resulting in a lack of
liquidity and in volatility in the price of securities traded on those markets.
Also, securities markets in developing countries typically offer less regulatory
protection for investors. In the past, U.S. government policies have discouraged
or restricted certain investments abroad by investors such as the Fund. Although
the Fund is unaware of any current restrictions, these policies could be
reinstituted.
Since investments in foreign securities, other than U.S. dollar denominated
securities, involve currencies of foreign countries, the value of a portfolio's
assets, as measured in U.S. dollars may be affected favorably or unfavorably by
changes in currency exchange rates and in currency exchange control regulations.
FOREIGN CURRENCY HEDGING TRANSACTIONS
In order to hedge against changes in the exchange rates of foreign currencies in
relation to the U.S. dollar, each portfolio, other than the Money Market
Portfolio, may engage in forward foreign currency contracts, foreign currency
options and foreign currency futures contracts in connection with the purchase,
sale or ownership of a specific security. A forward contract involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. In this manner, a portfolio
may obtain protection against a possible loss resulting from an adverse change
in the relationship between the U.S. dollar and the foreign currency during the
period between the date the security is purchased or sold and the date upon
which payment is made or received. Although such contracts tend to minimize the
risk of loss due to the decline in the value of the hedged currency, at the same
time they tend to limit any potential gain which might result should the value
of such currency increase.
At the consummation of a forward contract for delivery by a portfolio of a
foreign currency, the portfolio may either make delivery of the foreign currency
or terminate its contractual obligation to deliver the foreign currency by
purchasing an offsetting contract obligating it to purchase, at the same
maturity date, the same amount of the foreign currency. If the portfolio chooses
to make delivery of the foreign currency, it may be required to obtain such
currency through the sale of its securities denominated in such currency or
through conversion of other portfolio assets into such currency. It is
impossible to forecast the market value of portfolio securities at the
expiration of the forward contract. Accordingly, it may be necessary for the
portfolio to purchase additional foreign currency on the spot market (and bear
the expense of such purchase) if the market value of the security is less than
the amount of foreign currency the portfolio is obligated to deliver, and if a
decision is made to sell the security and make delivery of the foreign currency.
Conversely, it may be necessary for the portfolio to sell on the spot market
some of the foreign currency received on the sale of its hedged security if the
security's market value exceeds the amount of foreign currency the portfolio is
obligated to deliver.
Buyers and sellers of foreign currency options and futures contracts are subject
to the same risks previously described with respect to options and futures
generally (see "Risk Factors with Options" and "Risk Factors with Futures,
Options on Futures and Options on Indexes," above). In addition, settlement of
currency options and futures contracts with respect to most currencies must
occur at a bank located in the issuing nation. The ability to establish and
close out positions on such options is subject to the maintenance of a liquid
market that may not always be available. Currency rates may fluctuate based on
political considerations and governmental actions as opposed to purely economic
factors.
Predicting the movements of foreign currency in relation to the U.S. dollar is
difficult and requires different skills than those necessary to predict
movements in the securities market. There is no assurance that the use of
foreign currency hedging transactions can successfully protect a portfolio
against loss resulting from the movements of foreign currency in relation to the
U.S. dollar. These methods of protecting the value of a portfolio's securities
against a decline in the value of a currency does not eliminate fluctuations in
the underlying prices of the securities. It simply establishes a rate of
exchange which can be achieved at some future point in time.
16
<PAGE> 21
RISKS RELATED TO HEDGING TECHNIQUES. The use for hedging purposes of options and
futures contracts on securities and foreign currencies involves certain risks,
including whether the Adviser or a sub-adviser will be able to predict correctly
the direction of movement of stock prices, interest rates, currency prices and
other economic factors, whether sufficient market liquidity will exist to permit
a portfolio to close out positions taken, and whether price movements of
portfolio securities subject to a hedge follow price movements of securities or
currencies underlying options and futures contracts, none of which can be
assured. A discussion of the risks involved in the use of such hedging
techniques is contained in the Statement of Additional Information.
RISKS RELATED TO LEVERAGING. The Capital Appreciation, Aggressive Growth, Growth
& Income, Strategic Income, Small Cap Growth, High Income Bond, Equity Income
and Blue Chip Portfolios may borrow for investment purposes. This borrowing,
which is known as leveraging, generally will be unsecured, except to the extent
the Portfolios enter into the reverse repurchase agreements described below.
The Investment Company Act of 1940 requires these Portfolios to maintain
continuous asset coverage (that is, total assets including borrowings, less
liabilities exclusive of borrowings) of 300% of the amount borrowed. If the 300%
asset coverage should decline as a result of market fluctuations or other
reasons, a Portfolio may be required to sell some of its portfolio holdings
within three days to reduce the debt and restore the 300% asset coverage, even
though it may be disadvantageous from an investment standpoint to sell
securities at that time.
Borrowing creates an opportunity for increased net income to the Portfolios but,
at the same time, creates special risk considerations. For example, leveraging
may exaggerate the effect on net asset value of any increase or decrease in the
market value of a Portfolio's securities. To the extent the income derived from
securities purchased with borrowed funds exceeds the interest a Portfolio will
have to pay, that Portfolio's net income will be greater than if borrowing were
not used. Conversely, if the income from the assets retained with borrowed funds
is not sufficient to cover the cost of borrowing, the net income of that
Portfolio will be less than if borrowing were not used and , therefore, the
amount available for distribution to shareholders as dividends will be reduced.
The Portfolios also may be required to maintain minimum average balances in
connection with borrowing or to pay a commitment or other fee to maintain a line
of credit; either of these requirements would increase the cost of borrowing
over the stated interest rate.
Among the forms of borrowing in which the Capital Appreciation, Aggressive
Growth, Growth & Income, Strategic Income, Small Cap Growth, High Income Bond,
Equity Income and Blue Chip Portfolios may engage is the entry into reverse
repurchase agreements with banks, brokers or dealers. These transactions
involve the transfer by a Portfolio of an underlying debt instrument in return
for cash proceeds based on a percentage of the value of the security. The
Portfolio retains the right to receive interest and principal payments on the
security. At an agreed upon future date, the Portfolio repurchases the security
at an agreed-upon price. In certain types of agreements, there is no agreed
upon repurchase date, and interest payments are calculated daily, often based
on the prevailing U.S. government securities or other high-quality liquid debt
securities at least equal to the aggregate amount of its reverse repurchase
obligations, plus accrued interest, in certain cases, in accordance with
releases promulgated by the Securities and Exchange Commission. The Commission
views reverse repurchase transactions as collateralized borrowings by the
Portfolio. These agreements, which are treated as if reestablished each day,
can provide the Portfolios with a flexible borrowing tool.
RISKS RELATED TO SHORT SALES. From time to time, the Aggressive Growth,
Strategic Income, High Income Bond, Equity Income and Blue Chip Portfolios may
engage in short sales which are transactions in which the Portfolio sells a
security it does not own in anticipation of a decline in the market value of
that security. To complete such a transaction, the Portfolio must borrow the
security to make delivery to the buyer. The Portfolio then is obligated to
replace the security borrowed by purchasing it at the market price at the time
of replacement. The price at such time may be more or less than the price at
which the security was sold by the Portfolio. Until the security is replaced,
the Portfolio is required to pay to the lender amounts equal to any dividends or
interest which accrue during the period of the loan. To borrow the security, the
Portfolio also may be required to pay a premium, which would increase the cost
of the security sold. The proceeds of the short sale will be retained by the
broker, to the extent necessary to meet margin requirements, until the short
position is closed out.
17
<PAGE> 22
It is anticipated that the frequency of short sales will vary substantially
under different market conditions. As an operating policy of the Aggressive
Growth, Strategic Income, High Income Bond, Equity Income and Blue Chip
Portfolios which may be changed without shareholder approval, no securities
will be sold short if, after effect is given to that short sale, the total
market value of all securities sold short would exceed 25% of the value of the
Portfolio's net assets. These Portfolios may not sell short the securities of
any single issuer listed on a national securities exchange to the extent of more
than 2% of the value of the Portfolio's net assets. These Portfolios may not
sell short the securities of any class of an issuer to the extent, at the time
of the transaction, of more than 2% of the outstanding securities of that class.
The Aggressive Growth, Strategic Income, High Income Bond, Equity Income and
Blue Chip Portfolios will incur a loss as a result of a short sale if the price
of the security increases between the date of the short sale and the date on
which the Portfolio replaces the borrowed security; conversely, the Portfolio
will realize a gain if the security declines in price between those dates. This
result is the opposite of what one would expect from a cash purchase of a long
position in a security. The amount of any gain will be decreased, and the
amount of any loss increased, by the amount of any premium or amounts in lieu
of interest the Portfolio may be required to pay in connection with a short
sale.
RISKS RELATED TO REAL ESTATE SECURITIES. Although real estate investments will
be limited to securities secured by real estate or interests therein or issued
by companies that invest in real estate or interests therein, these investments
may be subject to risks associated with direct ownership of real estate. These
include declines in the value of real estate, risks related to general and local
economic conditions and increases in interest rates. Real estate investment
trusts ("REITs") are often not diversified and are, therefore, subject to the
risk of financing projects. They may also be subject to heavy cash flow
dependency, defaults by borrowers and self-liquidation. Those REITs that hold
equity positions in real estate may be affected by any changes in the value of
the underlying property. Those REITs that lend money to property developers may
be affected by the quality of any credit extended.
REITs are pooled investment vehicles which invest primarily in income producing
real estate, or real estate related loans or interests. REITs are generally
classified as equity REITs, mortgage REITs, or hybrid REITs. Equity REITs invest
the majority of their assets directly in real property and derive income
primarily from the collection of rents. Equity REITs can also realize capital
value. Mortgage REITs invest the majority of their assets in real estate
mortgages and derive income from the collection of interest payments. Hybrid
REITs invest their assets in both real property and mortgages. REITs are not
taxed on income distributed to owners provided they comply with several
requirements of the Internal Revenue Code.
REITs may subject a portfolio to certain risks associated with the direct
ownership of real estate. These risks include, among others: possible declines
in the value of real estate; possible lack of availability of mortgage funds;
extended vacancies of properties; risks related to general and local economic
conditions; overbuilding; increases in competition, property taxes and operating
expenses; changes in zoning laws; costs resulting from the clean-up of, and
liability to third parties for damages resulting from, environmental problems;
casualty or condemnation losses; uninsured damages from floods, earthquakes or
other natural disasters; limitations on and variations in rents; and changes in
interest rates.
Investing in REITs involves certain unique risks in addition to those risks
associated with investing in the real estate industry in general. Equity REITs
may be affected by changes in the value of the underlying property owned by the
REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, are not diversified, and
are subject to heavy cash flow dependency, default by borrowers,
self-liquidation and the possibilities of failing to qualify for the exemption
from tax for distributed income under the Internal Revenue Code. REITs
(especially mortgage REITs) are also subject to interest rate risk.
RISKS RELATED TO PRECIOUS METALS. The prices of precious metals and precious
metal securities have historically been subject to high volatility. The earnings
and financial condition of precious metal companies may be adversely affected by
volatile precious metal prices.
MANAGEMENT OF THE FUND
The Fund's Board of Directors is responsible for directing the management of the
business and affairs of the Fund. The Board of Directors has the power to amend
the Fund's By-laws, to elect its officers, to declare and pay dividends, and to
exercise all the powers of the Fund except those reserved to the shareholders.
The Adviser is a wholly-owned subsidiary of ONLI and is located at One Financial
Way, Cincinnati, Ohio 45242. It has served as the Fund's investment adviser
since May 1, 1996. Prior to that date, the Fund's investment adviser was O.N.
Investment Management Company, an indirect wholly-owned subsidiary of ONLI
which, like the Adviser, made use of ONLI's investment personnel and
administrative systems.
The Adviser engages sub-advisers to direct the investments and reinvestments of
certain portfolios.
SGAM, located at 1221 Avenue of the Americas, New York, NY 10020, is owned by
Societe Generale, one of the largest banks in Europe. SGAM and its predecessors
have been investment advisers to international mutual funds since 1970. It has
managed the assets of the International Portfolio since 1993, and the Global
Contrarian Portfolio since 1995.
TRPA, located at 100 East Pratt Street, Baltimore, Maryland 21202, manages
assets for various individual and institutional investors, particularly the T.
Rowe Price group of mutual funds. It is the successor to an investment firm
founded in 1937. It has managed the assets of the Capital Appreciation
Portfolio since 1994.
FAM, located at 2930 East Third Avenue, Denver, Colorado 80206, manages the
assets of the Founders group of mutual funds as well as private accounts. It was
established in 1938 and, in 1998, it became a subsidiary of Mellon Bank. It has
managed the assets of the Small Cap Portfolio since 1994.
18
<PAGE> 23
SCM, located at 100 Heritage Reserve, Milwaukee, Wisconsin 53051, manages the
assets of the Strong group of mutual funds as well as pension funds and private
accounts. It was established in 1974. It has managed the assets of the
Aggressive Growth Portfolio since 1995.
PBA, located at 825 Duportail Road, Wayne, Pennsylvania 19087, is controlled by
United Asset Management Corp. located in Boston, Massachusetts. With its
predecessors, PBA has been an investment adviser since 1982 and it manages the
PBHG mutual funds. It has managed the assets of the Core Growth Portfolio since
1997.
RSIM, located at 555 California Street, San Francisco, California 94104, has
been an investment adviser since 1978. It specializes in growth companies and
manages the Robertson Stephens mutual funds as well as private and institutional
asset pools. It became a subsidiary of BankAmerica in 1997. It has managed the
assets of the Growth & Income Portfolio since 1997, and the Small Cap Growth
Portfolio since 1998.
Star, located at 425 Walnut Street, Cincinnati, Ohio 45202, is a national bank
founded in 1863. It is the largest bank and trust organization of StarBanc
Corporation. It has managed commingled funds since 1957. It has managed the
assets of the Strategic Income, Stellar and Relative Value Portfolios since
1997.
FIC, located at Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh,
Pennsylvania 15222, is a subsidiary of Federated Investors and, together with
other Federated affiliates, it manages the assets of the Federated group of
mutual funds. FIC has been an investment adviser since 1989 and has managed the
assets of the High Income Bond, Equity Income and Blue Chip Portfolios since
1998.
The individuals primarily responsible for the day-to-day management of the
Fund's portfolios are Joseph Brom, Michael Boedeker, Stephen Williams, Douglas
Hundley, Keith Hanson, Jean-Marie Eveillard, Richard Howard, Michael Haines,
Richard Strong, James McCall, Ellen McGee, John Wallace, Randolph Bateman,
Joseph Belew, Kirk Mentzer, Peter Sorrentino, James Callinan, Mark Durbiano,
Stephanie Bachhuber, Linda Duessel, Stephen Lehman, Scott Schermerhorn and
Michael Donnelly.
Joseph Brom is president of the Adviser and senior vice president and chief
investment officer of ONLI. He oversees the management of the Equity, Money
Market, Bond, Omni, S&P 500 Index and Social Awareness Portfolios. He is a
chartered financial analyst with a bachelor's degree in economics and finance
and a law degree from the University of Wisconsin. He has been an investment
officer of ONLI since 1975 and previously had 15 years of experience in
securities management.
Michael Boedeker, a vice president of the Adviser, has managed the Bond
Portfolio since 1989. He is a chartered financial analyst with a bachelor's
degree in business and a master of business administration degree in finance
from Indiana University. He has been vice president of fixed income securities
for ONLI since 1989 and previously had over 20 years of experience in fixed
income securities and mutual fund management, most recently as senior vice
president and chief investment officer of Mutual Security Life Insurance Co. for
more than 5 years.
Stephen Williams, a vice president of the Adviser, has managed the Equity and
Omni Portfolios since 1987. He has a bachelor's degree in finance from the
University of Cincinnati. He has been vice president of equity securities for
ONLI since 1997 and was an investment analyst and director of securities for
ONLI for 20 years before that.
Douglas Hundley, a vice president of the Adviser, has been the portfolio manager
of the S&P 500 Index Portfolio since its inception in 1997, and he has managed
the Money Market Portfolio since 1996. He has a bachelor's degree in accounting
and economics from Northern Kentucky University, a master of business
administration degree in finance from the University of Texas, and is a
certified public accountant in Ohio. He has been an investment officer of ONLI
since 1995. For more than seven years prior to that he was an assistant
portfolio manager for the Metropolitan Life Insurance Co. and was a financial
analyst for Star for a year.
Keith Hanson, a vice president of the Adviser, has been the portfolio manager
of the Social Awareness Portfolio since its inception in 1997. He is a
chartered financial analyst with a bachelor's degree in business administration
from Marquette University. He has been an investment officer of ONLI since
1994. For a year prior to that he was a research analyst in the valuation of
small businesses for Blum & Colombe, SC, and for seven years before that he was
a securities analyst for Johnson Asset Management.
Jean-Marie Eveillard, president of SGAM, has managed the International Portfolio
since its inception in 1993 and the Global Contrarian Portfolio since its
inception in 1995. He is a graduate of the Ecole des Hautes Etudes Commerciales
in Paris. He has been president of SoGen International Fund since 1984 and for
21 years prior to that had been a securities analyst and mutual fund manager of
Societe Generale and SoGen International Fund.
Richard Howard, president of the T. Rowe Price Capital Appreciation Fund and a
vice president of TRPA, has been the portfolio manager of the Capital
Appreciation Portfolio since its inception in 1994. He is a chartered financial
analyst with a bachelor's degree in engineering from Millikin University and a
master of business administration degree from Harvard. He joined TRPA in 1982
and previously worked as an industry specialist for Fidelity Management and
Research and for CG Investment Management Company.
Michael Haines, senior vice president of investment of FAM, has been the
portfolio manager of the Small Cap Portfolio since its inception in 1994. He
has a bachelor's degree from the Colorado College and a master of business
administration from the University of Denver. He has been a portfolio manager
for FAM since 1990 and for 5 years prior to that was a financial analyst for
FAM.
19
<PAGE> 24
Richard Strong, chairman of the board of SCM, has been the portfolio manager of
the Aggressive Growth Portfolio since its inception in 1995. He has a
bachelor's degree from Baldwin Wallace College and a master's degree in finance
from the University of Wisconsin. He founded SCM in 1974 after 8 years of
investment experience with several other firms.
James McCall, a portfolio manager with PBA since 1994, co-manages the Core
Growth Portfolio, being primarily responsible for the Portfolio's large and mid-
cap investments. He has a bachelor's degree from the Philadelphia College of
Pharmacy and Science and masters degrees in pharmacy and business administration
from the University of Utah. Prior to joining PBA, he spent nine years as a vice
president and portfolio manager with First National Bank of Maryland and as
mutual fund portfolio manager for Provident Mutual Management Co. He spent ten
years as a pharmacist before entering the investment field.
Ellen McGee co-manages the Core Growth Portfolio, being primarily responsible
for the Portfolio's small and micro-cap investments. She is a chartered
financial analyst and has been a portfolio manager with PBA since 1997. For
three years prior to that she was a senior portfolio manager for First Union
National Bank and NationsBank, and she spent eight years before that managing
institutional portfolios for First National Bank of Maryland. Ms. McGee has a
bachelor's degree from Rutgers University.
John Wallace, a managing director of RSIM, has been the portfolio manager of
the Growth & Income Portfolio since its inception in 1997. He has a bachelor's
degree in Spanish and Anthropology from the University of Idaho and a master of
business administration degree from Pace University. He joined RSIM in 1995.
For nine years prior to that he was a mutual fund portfolio manager for
Oppenheimer Management Corp. Prior to that, he had been the co-founder, owner
and operator of an Ecuadorian export firm.
Randolph Bateman, senior vice president and chief investment officer of Star's
trust financial services group, manages the foreign bonds component of the
Strategic Income Portfolio and the foreign securities component of the Stellar
Portfolio. He oversees investment policy and research for the Star trust group's
capital management division. He is a chartered financial analyst with a
bachelor's degree in economics from North Carolina State University. He has been
an investment officer of Star since 1988. Prior to that, he had 17 years of
investment experience including serving as president of MPACT Securities.
Joseph Belew, vice president and trust officer of Star, manages the Relative
Value Portfolio. He has a bachelor's degree in business management from Belmont
College. He has been a trust officer and investment manager of Star since 1979.
Kirk Mentzer, senior trust officer and director of fixed income research for
the capital management division of Star, manages the domestic and structured
fixed income components of the Strategic Income Portfolio and the domestic
fixed income and REIT components of the Stellar Portfolio. He also manages the
money market components of the Strategic Income, Stellar and Relative Value
Portfolios. He is responsible for fixed income investment policy and strategy
for Star's capital management division. He has a bachelor's degree in finance
and insurance from the University of Cincinnati and a master's degree in
finance from Xavier University. He has been a trust officer for Star since 1989.
Peter Sorrentino, vice president and director of portfolio management and
research for the capital management division of Star, manages the domestic
equity components of the Strategic Income and Stellar Portfolios. He is a
chartered financial analyst and has bachelor's degrees in both finance and
accounting from the University of Cincinnati. He has been an investment officer
of Star since 1996 and for 9 years prior to that was a vice president and
regional director of portfolio management for Bank One Investment Advisers.
James Callinan is the portfolio manager of the Small Cap Growth Portfolio. He
joined RSIM as the portfolio manager of its Emerging Growth Fund in 1996. For
ten years before that he was employed by Putnam Investments, the last two years
of which he served as portfolio manager of the OTC Putnam Emerging Growth Fund.
He is a chartered financial analyst with a bachelor's degree in economics from
Harvard College, a master of science in accounting from New York University and
a master of business administration degree from Harvard Business School.
Mark Durbiano, a senior vice president of FIC since 1996 (and a vice president
for 8 years prior to that), co-manages the High Income Bond Portfolio. He has
been with FIC and its affiliates since 1982 and has managed the Federated High
Income Bond Fund II since 1994. He is a chartered financial analyst with a
bachelor's degree in economics from Dickinson College and a master of business
administration in finance from the University of Pittsburgh.
Stephanie Bachhuber co-manages the High Income Bond Portfolio. She has been an
assistant vice president of FIC since 1996 and was an investment analyst for
three years prior to that. Ms. Bachhuber is a chartered financial analyst with a
bachelor's degree in management from Tulane University and a master of business
administration degree in finance from Duke University.
Linda Duessel, a vice president of FIC since 1995 (and an assistant vice
president for four years prior to that), co-manages the Equity Income Portfolio.
Ms. Duessel is a chartered financial analyst with a bachelor's degree in
economics from the University of Pittsburgh and a master of science in
industrial administration from Carnegie Mellon University. She is also a
certified public accountant.
Seven Lehman, a vice president of FIC since 1997, co-manages the Equity Income
Portfolio. For twelve years prior to 1997, he served as a portfolio manager,
then vice president and senior portfolio manager, at First Chicago NBD
Investment Management Company. Mr. Lehman is a chartered financial analyst with
a bachelor's degree in economics from Ripon College and a master's degree from
the University of Chicago.
Scott Schermerhorn, a vice president of FIC since 1996, co-manages the Blue Chip
Portfolio. For six years prior to 1996, he was a senior vice president and
senior investment officer at J.W. Seligman & Co. Mr. Schermerhorn received his
bachelor's degree in finance from Boston University and a master of business
administration in finance and international business from Seton Hall University.
Michael Donnelly, a vice president of FIC since 1994 (and an investment analyst
and assistant vice president for five years prior to that), co-manages the Blue
Chip Portfolio. He is a chartered financial analyst with a bachelor's degree in
economics from Georgetown University and a master of business administration
from the University of Virginia.
Under the Investment Advisory Agreement dated May 1, 1996, and supplemented
January 2, 1997 and May 1, 1998, the Adviser provides portfolio management and
investment advice to the Fund and administers its other affairs, subject to the
supervision of the Fund's Board of Directors. As compensation for its services
to the Equity, Bond, Omni and Social Awareness Portfolios, the Adviser is paid
fees at an annual rate of 0.60% of the first $100 million of each Portfolio's
net assets, 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 net
assets over $2 billion. For the Money Market Portfolio, the Adviser is paid a
fee at an annual rate of 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 net assets over $1 billion. However, as to the Money Market
Portfolio, the Adviser is presently waiving any of its fee in excess of 0.25%.
For the International, Global Contrarian, Relative Value, Small Cap Growth and
Blue Chip Portfolios, the Adviser is paid fees at an annual rate of 0.90% of
each Portfolio's average daily net asset value.
20
<PAGE> 25
The Adviser is paid fees at an annual rate of 0.80% of the average daily net
asset value of each of the Capital Appreciation, Small Cap, Aggressive Growth
and Strategic Income Portfolios. The Adviser is paid fees at an annual rate of
0.95% of the first $150 million of the average daily net asset value of the Core
Growth Portfolio and 0.80% of net assets over $150 million. The Adviser is paid
fees at an annual rate of 0.85% of the first $200 million of the average daily
net asset value of the Growth & Income Portfolio and 0.80% of net assets over
$200 million. The Adviser is paid fees at an annual rate of 0.40% of the first
$100 million of the average daily net asset value of the S&P 500 Index
Portfolio, 0.35% of the next $150 million and 0.33% of net assets over $250
million. The Adviser is paid fees at an annual rate of 1.00% of the average
daily net asset value of the Stellar Portfolio. The Adviser is paid fees at an
annual rate of 0.75% of the average daily net asset value of each of the High
Income Bond and Equity Income Portfolios.
Pursuant to Sub-Advisory Agreements dated May 1, 1996, the Adviser (1) pays SGAM
fees at an annual rate of 0.75% of the International and Global Contrarian
Portfolios' average daily net asset value for directing the investment and
reinvestment of those Portfolios' assets, (2) pays TRPA a fee at an annual rate
of 0.70% of the first $5 million, and 0.50% of average daily net asset value in
excess of $5 million for directing the investment and reinvestment of the
Capital Appreciation Portfolio's assets and (3) pays SCM a fee at an annual
rate of 0.70% of the first $50 million and 0.50% of average daily net asset
value in excess of $50 million for directing the investment and reinvestment of
the Aggressive Growth Portfolio's assets. Pursuant to Sub-Advisory Agreements
dated January 2, 1997, the Adviser (1) pays PBA fees at an annual rate of 0.75%
of the first $50 million, 0.70% of the next $100 million, and 0.50% of average
daily net asset value in excess of $150 million for directing the investment
and reinvestment of the Core Growth Portfolio's assets, (2) pays Star a fee at
an annual rate of 0.55 % of the first $50 million and 0.50% of average daily
net asset value in excess of $50 million for directing the investment and
reinvestment of Strategic Income Portfolio assets, (3) pays Star a fee at an
annual rate of 0.75% of the first $50 million and 0.70% of average daily net
asset value in excess of $50 million for directing the investment and
reinvestment of Stellar Portfolio assets and (4) pays Star a fee at an annual
rate of 0.65% of the first $50 million and 0.60% of average daily net asset
value in excess of $50 million for directing the investment and reinvestment of
Relative Value Portfolio assets.
Pursuant to a Sub-Advisory Agreement dated October 1, 1997, the Adviser pays
RSIM a fee at an annual rate of 0.60% of the first $100 million, 0.55% of the
next $100 million, and 0.50% of average daily net asset value in excess of $200
million for directing the investment and reinvestment of the Growth & Income
Portfolio's assets. Pursuant to a Sub-Advisory Agreement dated April 1, 1998,
the Adviser pays FAM a fee at an annual rate of 0.65% of the first $75 million,
0.60% of the next $75 million, and 0.55% of average daily net asset value in
excess of $150 million for directing the investment and reinvestment of the
Small Cap Portfolio's assets. Pursuant to Sub-Advisory Agreements dated May 1,
1998, the Adviser (1) pays RSIM a fee at an annual rate of 0.64% of the first
$100 million, 0.60% of the next $100 million and 0.50% of the average daily net
asset value in excess of $200 million for directing the investment and
reinvestment of the Small Cap Growth Portfolio's assets, (2) pays FIC a fee at
an 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 asset value in
excess of $75 million for directing the investment and reinvestment of the High
Income Bond Portfolio's assets, and (3) pays FIC fees at an annual rate of 0.50%
of the first $35 million, 0.35% of the next $65 million and 0.25% of average
daily net asset value in excess of $100 million of each of the Equity Income and
Blue Chip Portfolios for directing the investment and reinvestment of those
Portfolios' assets.
Under a service agreement among the Fund, the Adviser and ONLI, the latter has
agreed to furnish the Adviser, at cost, such research facilities, services and
personnel as may be needed by the Adviser in connection with its performance
under the Investment Advisory Agreement. The Adviser reimburses ONLI for its
expenses in this regard.
The Fund also incurs other miscellaneous expenses for legal and accounting
services, registration and filing fees, custodial services and shareholder
services.
The Fund's transfer agent and Fund accounting agent is American Data Services,
Inc., 150 Motor Parkway, Suite 109, Hauppsuge, New York 11788. The custodian for
those portfolios other than the International and Global Contrarian Portfolios
is Star, which is located at 425 Walnut Street, Cincinnati, Ohio 45202. The
custodian for the International and Global Contrarian Portfolios is Investors
Fiduciary Trust Company, 801 Pennsylvania Street, Kansas City, Missouri. For
assets held outside the United States, the custodians enter into subcustodial
agreements, subject to approval by the Board of Directors.
CAPITAL STOCK
The Fund's authorized capital consists of 250 million shares of capital stock
with a par value of $1 per share; 20 million of such shares are allocated to
each of the Equity, Omni and International Portfolios, and 10 million of such
shares are allocated to each of the other portfolios. These shares may be
reallocated by the Board of Directors to another of the existing portfolios or
to any new portfolio.
All shares of all portfolios have equal voting rights, except that only shares
of a particular portfolio are entitled to vote on matters pertaining only to
that portfolio. Pursuant to the Investment Company Act of 1940 and the rules and
regulations thereunder, certain matters approved by a vote of all Fund
shareholders may not be binding on a portfolio whose shareholders have not
approved such matter.
21
<PAGE> 26
Each issued and outstanding share is entitled to one vote and to participate
equally in dividends and distributions declared by the respective portfolio and
in net assets of such portfolio remaining upon liquidation or dissolution after
satisfaction of outstanding liabilities. The shares of each portfolio, when
issued, will be fully paid and non-assessable, have no preemptive, conversion,
cumulative dividend or similar rights, and are freely transferable. Fund shares
do not have cumulative voting rights, which means that the holders of more than
half of the Fund shares voting for election of directors can elect all of the
directors if they so choose. In such event, the holders of the remaining shares
would not be able to elect any directors.
All of the outstanding Fund shares are owned of record by ONLI and ONLAC and are
held in their various separate accounts. The shares held in connection with
those separate accounts are voted by ONLI or ONLAC in accordance with
instructions received from the owners of variable contracts issued in connection
with such separate accounts and persons receiving payments under the variable
contracts. Fund shares attributable to contracts owned by ONLI and ONLAC, and
Fund shares not attributable to variable contracts, will be voted in proportion
to instructions received from all variable contract owners.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each portfolio seeks to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code. It is the Fund's policy to comply
with the provisions of the Code regarding distribution of investment income and
net realized capital gains so that the Fund will not be subject to federal
income tax on amounts distributed. Consequently, the Fund distributes to its
shareholders each year substantially all of its net investment income and net
realized capital gains (if any). For the Money Market Portfolio, all of the
undistributed net investment income is determined and paid as a dividend to
shareholders of record immediately before each computation of the net asset
value of Money Market shares. For the other portfolios, dividends representing
net investment income will normally be distributed quarterly and any net
realized capital gains will be distributed annually. However, the Fund's Board
of Directors may declare such dividends at more frequent intervals. Dividends
and distributions are automatically reinvested in additional shares of their
respective portfolios at net asset value without a sales charge unless a
shareholder requests that they be paid in cash.
PURCHASE AND REDEMPTION OF SHARES
Fund shares are sold without a sales charge and may be redeemed at their net
asset value next computed after a purchase or redemption order is received by
the Fund. (The net asset value of the Money Market Portfolio is normally $10 per
share.) Depending upon the net asset values at that time, the amount paid upon
redemption may be more or less than the cost of the shares redeemed. Payment for
shares redeemed will be made as soon as possible, but in any event within seven
days after evidence of ownership of the shares is tendered to the Fund except in
extraordinary circumstances as described in the Statement of Additional
Information.
The net asset value of the Fund's shares is determined on each day on which an
order for purchase or redemption of the Fund's shares is received and there is a
sufficient degree of trading in portfolio securities that the current net asset
value of its shares might be materially affected. Such determination is made as
of 4:00 p.m. Eastern time on each business day. The net asset value of each
portfolio is computed by dividing the value of the securities in that portfolio
plus any cash or other assets less all liabilities of the portfolio, by the
number of shares outstanding for that portfolio.
Shares of one portfolio may be exchanged for shares of another portfolio of the
Fund on the basis of the relative net asset values next computed after an
exchange order is received by the Fund.
22
<PAGE> 27
FUND PERFORMANCE
From time to time, the current yield, average annual total return and cumulative
total returns for the portfolios will be advertised. The results might be
compared to other similar mutual funds or unmanaged indices. Management's
discussion and analysis of the Fund's performance is included in the Fund's
most-recent annual report and is available free upon request.
Total return for a portfolio reflects the sum of all of its earnings plus any
changes in the value of its assets, reduced by all expenses accrued during a
measurement period. For this purpose, it is assumed that all dividends and
capital gains distributions are reinvested. The average annual total return is
expressed as a percentage of an amount invested for a one-year period. Each
portfolio's average return is computed by a formula in which a hypothetical
initial investment of $1,000 is equated to an ending redeemable value from the
inception of the portfolio for one-, five- and ten-year periods. Cumulative
total return reflects a portfolio's aggregate performance, expressed as a dollar
amount change, from the beginning to the end of the period.
Percentage changes in net asset value per share and total returns quoted for a
portfolio include the effect of deducting that portfolio's expenses, but do not
include charges and expenses attributable to any particular insurance product.
The amount by which variable annuity separate account charges and expenses would
reduce Fund's total return may be demonstrated by comparing the Fund's total
return to that of the variable annuity separate account for the same period.
Variable life insurance separate account charges vary significantly, depending
upon a variety of demographic factors (such as age, sex and health status) and
several contract-specific factors (such as stated amount of death benefit), but
in all cases would have the result of lowering the total return from the Fund.
From time to time the annualized yield and "effective" yield will be quoted for
the Money Market Portfolio. The Money Market Portfolio's yield refers to the
income generated by an investment in the Portfolio over the seven-day period
indicated. This income is then "annualized" by assuming that the same amount of
income generated by the Portfolio that week is generated over a 52-week period
and is shown as a percentage of the investment. "Effective" yield is calculated
similarly but, when annualized, the income earned by an investment in the
Portfolio is assumed to be reinvested. The effective yield will be slightly
higher than the yield because of the compounding effect of this assumed
reinvestment.
All performance quotations are based on historical investment performance and
are not intended to indicate future performance
ABOUT THE S&P 500
The S&P 500 is a widely publicized index that tracks 500 companies traded on the
New York and American Stock Exchanges and in the over-the-counter market. It is
weighted by market value so that each company's stock influences the S&P 500 in
proportions to its relative market capitalization. Most of the stocks in the S&P
500 are issued by companies that are among the 500 largest in the United States
in terms of aggregate market value. However, for diversification purposes, some
stocks of smaller companies are included in the S&P 500.
"Standard & Poor's (R)," "S&P (R)," "S&P 500 (R)" and "Standard & Poor's 500"
are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use
by the Adviser. The S&P 500 Index Portfolio is not sponsored, endorsed, sold or
promoted by Standard & Poor's ("S&P") and S&P makes no representation regarding
the advisability of investing in the S&P 500 Index Portfolio. S&P makes no
representation or warranty, express or implied, to the owners of the Portfolio
or any member of the public regarding the advisability of investing in
securities generally or in the Portfolio particularly or the ability of the S&P
500 Index to track general stock market performance. S&P's only relationship to
the Adviser is the licensing of certain trademarks and trade names of S&P and of
the S&P 500 Index which is determined, composed and calculated by S&P without
regard to the Adviser or the Portfolio. S&P has no obligation to take the needs
of the Adviser or the owners of the Portfolio into consideration in determining,
composing
23
<PAGE> 28
or calculating the S&P 500 Index. S&P is not responsible for and has not
participated in the determination of the prices and amount of the Portfolio or
the timing of the issuance or sale of the Portfolio or in the determination or
calculation of the equation by which the Portfolio is to be converted into cash.
S&P has no obligation or liability in connection with the administration,
marketing or trading of the Portfolio.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500 INDEX
OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY FOR ANY ERRORS,
OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED,
AS TO RESULTS TO BE OBTAINED BY THE ADVISER, OWNERS OF THE PORTFOLIO, OR ANY
OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500 INDEX OR ANY DATA INCLUDED
THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL
WARRANTIES OR MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH
RESPECT TO THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY
OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL,
PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF
NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
24
<PAGE> 29
PART B.
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 30
OHIO NATIONAL FUND, INC.
One Financial Way
Cincinnati, Ohio 45242
Telephone (5l3) 794-6316
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1998
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the prospectus of Ohio National Fund, Inc. (the "Fund")
dated May 1, 1998.
To obtain a free copy of the Fund's prospectus, write or call the Fund at the
above address.
Table of Contents
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
The Fund ................................................................. 3
Fund Performance ......................................................... 3
Current Yield of Money Market Portfolio
Total Return
Portfolio Turnover
Investment Objectives and Policies ....................................... 7
Money Market Instruments
Investment Restrictions .................................................. 9
Hedging Transactions
Covered Call Options and Put Options
Futures Contracts
Options on Futures Contracts and Financial Indexes
Foreign Currency Hedging Transactions
Short Sales
Borrowing Money
Zero-Coupon and Pay-in-kind Debt Securities
Precious Metals
Management of the Fund ................................................... 20
Directors and Officers
Compensation of Directors
Shareholders' Meetings
Investment Advisory and Other Services
Brokerage Allocation ..................................................... 24
Purchase and Redemption of Shares ........................................ 25
Tax Status ............................................................... 27
Experts .................................................................. 27
Legal Counsel ............................................................ 27
The S&P 500 .............................................................. 27
</TABLE>
<PAGE> 31
<TABLE>
<S> <C>
Appendix ................................................................. 31
Debt Security Ratings
Financial Statements...................................................... 36
</TABLE>
<PAGE> 32
THE FUND
The Fund is an open-end diversified management investment company which
currently consists of 20 separate portfolios - the Equity Portfolio, the Money
Market Portfolio, the Bond Portfolio, the Omni Portfolio, the International
Portfolio, the Capital Appreciation Portfolio, the Small Cap Portfolio, the
Global Contrarian Portfolio, the Aggressive Growth Portfolio, the Core Growth
Portfolio, the Growth & Income Portfolio, the S&P 500 Index Portfolio, the
Social Awareness Portfolio, the Strategic Income Portfolio, the Stellar
Portfolio, the Relative Value Portfolio, the Emerging Growth Portfolio, the High
Income Bond Portfolio, the Equity Income Portfolio and the Blue Chip Portfolio.
At present, the Fund sells its shares only to separate accounts of The Ohio
National Life Insurance Company ("ONLI") and Ohio National Life Assurance
Corporation ("ONLAC") to support certain benefits under variable contracts
issued by ONLI and ONLAC. In the future, Fund shares may be used for other
purposes, but absent a change in applicable law, will not be sold directly to
the public.
The Fund was created on November 2, 1982 as the result of a plan of
reorganization and an agreement of merger entered into by O.N. Fund, Inc. and
O.N. Market Yield Fund, Inc., both of which were Maryland corporations. O.N.
Fund, Inc. was merged into O.N. Market Yield Fund, Inc., which acquired all of
O.N. Fund's assets and assumed all of O.N. Fund's liabilities. The shares of
O.N. Fund were converted to an equal number of shares of the Equity Portfolio of
O.N. Market Yield Fund and all shares of O.N. Market Yield Fund were converted
into an equal number of shares of the Money Market Portfolio. The name of O.N.
Market Yield Fund was changed to the Fund's current name, Ohio National Fund,
Inc., and a Bond Portfolio was created. The Omni Portfolio was added in 1984,
the International Portfolio in 1993, and the Capital Appreciation and Small Cap
Portfolios in 1994, the Global Contrarian and Aggressive Growth Portfolios in
1995, the Core Growth, Growth & Income, S&P 500 Index, Social Awareness,
Strategic Income, Stellar and Relative Value Portfolios in 1997, and the
Small Cap Growth, High Income Bond, Equity Income and Blue Chip Portfolios in
1998. The investments held by each portfolio are maintained separately from
those held by the other portfolios.
The investment and reinvestment of the assets of the Equity, Money Market, Bond,
Omni, S&P 500 Index and Social Awareness Portfolios is directed by the Fund's
investment adviser, Ohio National Investments, Inc. (the "Adviser"), a
wholly-owned subsidiary of ONLI. The principal business address of ONLI, ONLAC
and the Adviser is One Financial Way, Cincinnati, Ohio 45242. The investment and
reinvestment of International and Global Contrarian Portfolio assets is managed
by Societe Generale Asset Management Corp. ("SGAM") as sub-adviser. The
principal business address of SGAM is 1221 Avenue of the Americas, New York, New
York 10020. The investment and reinvestment of Capital Appreciation Portfolio
assets is managed by T. Rowe Price Associates, Inc. ("TRPA") as sub-adviser. The
principal business address of TRPA is 100 East Pratt Street, Baltimore, Maryland
21202. The investment and reinvestment of Small Cap Portfolio assets is managed
by Founders Asset Management LLC ("FAM") as sub-adviser. The principal
business address of FAM is 2930 East Third Avenue, Denver, Colorado 80206. The
investment and reinvestment of Aggressive Growth Portfolio assets is managed by
Strong Capital Management, Inc. ("SCM") as sub-adviser. The principal business
address of SCM is 100 Heritage Reserve, Milwaukee, Wisconsin 53051. The
investment and reinvestment of Core Growth Portfolio assets is managed by
Pilgrim Baxter & Associates, Ltd. ("PBA") as sub-adviser. The principal business
address of PBA is 825 Duportail Road, Wayne, Pennsylvania 19087. The investment
and reinvestment of Growth & Income and Small Cap Growth Portfolio assets is
managed by Robertson Stephens Investment Management, L.P. ("RSIM") as
sub-adviser. The principal business address of RSIM is 555 California Street,
San Francisco, California 94104. The investment and reinvestment of Strategic
Income, Stellar and Relative Value Portfolio assets is managed by Star Bank,
N.A. ("Star") as subadviser. The principal business address of Star is 425
Walnut Street, Cincinnati, Ohio 45202. The Investment and reinvestent of High
Income Bond, Equity Income and Blue Chip Portfolio assets is managed by
Federated Investment Counseling ("FIC") as sub-adviser. The principal business
address of FIC is Federated Investors Tower, 1001 Liberty Avaenue, Pittsburgh,
Pennsylvania 15222.
FUND PERFORMANCE
The Fund may distribute sales literature comparing the percentage change in net
asset value per share for any of its portfolios against the Consumer Price Index
or such established market indices as the Dow Jones Industrial Average, the
Standard & Poor's 500 Stock Index, one or more of Lehman Brothers Bond Indices,
the Morgan Stanley Europe, Australia and Far East Index, the Morgan Stanley
World Index, the Russell 2000 Index, the New York Stock Exchange Composite
Index, the American Stock Exchange Index, the National Association of
3
<PAGE> 33
Securities Dealers Automated Quotations Composite Index, the Value Line
Composite Index, the Investors Business Daily 6000 Index, IBC's Money Fund
Reports, or other management investment companies having investment objectives
similar to the portfolio being compared. These comparisons may include graphs,
charts, tables or examples. The average annual total return and cumulative total
returns for each portfolio may also be advertised.
The Fund may also advertise the performance ratings or rankings assigned to
certain portfolios or their subadvisers by various statistical services,
including Morningstar, Inc. and Lipper Analytical Services, Inc., or as they
appear in various publications including The Wall Street Journal, Investors
Business Daily, The New York Times, Barron's, Forbes, Fortune, Business Week,
Financial Services Week, Financial World, Kiplinger's Personal Finance and
Money Magazine.
The prospectus sets forth in tabular form, under the caption "Financial
Highlights," certain information concerning the Fund and its individual
portfolios. The following discussion describes the methods of calculating the
current yield of the Money Market Portfolio and the total return of all
portfolios, and states the Fund's policy with respect to each portfolio's
turnover rate.
CURRENT YIELD OF MONEY MARKET PORTFOLIO
Current annualized yield quotations for the Money Market Portfolio are based on
the portfolio's net investment income for a seven-day period and exclude any
realized or unrealized gains or losses on portfolio securities. Current
annualized yield is computed by determining the net change (exclusive of
realized gains and losses from the sale of securities and unrealized
appreciation and depreciation) in the value of a hypothetical account having a
balance of one share at the beginning of such seven-day period, dividing such
net change in account value by the value of the account at the beginning of the
period, and annualizing this quotient on a 365-day basis. The net change in
account value reflects the value of any additional shares purchased with
dividends from the original share in the account during the seven-day period,
any dividends declared on such original share and any such additional shares
during the period, and expenses accrued during the period. The Fund may also
disclose the effective yield of the Money Market Portfolio for a seven-day
period for which the current annualized yield is computed by expressing the
unannualized return on a compounded, annualized basis.
TOTAL RETURN
Total returns quoted in advertising reflect all aspects of a portfolio's
investment return, including the effects of reinvesting dividends and capital
gain distributions as well as changes in the portfolio's net asset value per
share over the period shown. Average annual returns are calculated by
determining the growth or decline in value of a hypothetical historical
investment in a portfolio over a stated period, and then calculating the
annually compounded percentage rate that would have produced the same result had
the rate of growth or decline been constant over that period. While average
annual returns are a convenient means of comparing investment alternatives, no
portfolio will experience a constant rate of growth or decline over time.
The average annual compounded rate of return for a portfolio over a given period
is found by equating the initial amount invested to the ending redeemable value
using the following formula:
P(1 + T)n = ERV
where: P = a hypothetical initial payment of $1,000,
T = the average annual total return,
n = the number of years, and
ERV = the ending redeemable value of a hypothetical $1,000
beginning-of-period payment at the end of the period
(or fractional portion thereof).
4
<PAGE> 34
average annual total returns for each of the portfolios from the inception
of the portfolio and for the one-, five- and ten-year periods ending on December
31, 1997, are as stated below:
<TABLE>
<CAPTION>
One Five Ten From Inception
Year Years Years Inception Date
---- ----- ----- --------- ----
<S> <C> <C> <C> <C> <C>
Equity 18.17% 15.26% 13.61% 11.07% 10-06-69
Money Market 5.37% 4.57% 5.53% 7.30% 03-20-80
Bond 9.28% 7.48% 8.30% 8.70% 11-02-82
Omni 18.15% 13.47% 12.57% 12.05% 09-10-84
International 2.11% N/A N/A 13.03% 04-30-93
Capital Appreciation 15.19% N/A N/A 15.73% 05-01-94
Small Cap 8.47% N/A N/A 21.76% 05-01-94
Global Contrarian 11.67% N/A N/A 11.93% 03-31-95
Aggressive Growth 12.53% N/A N/A 14.17% 03-31-95
Core Growth N/A N/A N/A (3.08)% 01-03-97
Growth & Income N/A N/A N/A 36.58% 01-03-97
S&P 500 Index N/A N/A N/A 31.75% 01-03-97
Social Awareness N/A N/A N/A 25.63% 01-03-97
Strategic Income N/A N/A N/A 8.74% 01-03-97
Stellar N/A N/A N/A 9.70% 01-03-97
Relative Value N/A N/A N/A 28.28% 01-03-97
Small Cap Growth N/A N/A N/A N/A 05-01-98
High Income Bond N/A N/A N/A N/A 05-01-98
Equity Income N/A N/A N/A N/A 05-01-98
Blue Chip N/A N/A N/A N/A 05-01-98
</TABLE>
In addition to average annual total returns, advertising may reflect cumulative
total returns that simply reflect the change in value of an investment in a
portfolio over a period. This may be expressed as either a percentage change,
from the beginning to the end of the period, or the end-of-period dollar value
of an initial hypothetical investment. The cumulative total returns for each of
the portfolios from the inception of the portfolio and for the five- and
ten-year periods ending on December 31, 1997 (assuming a hypothetical initial
investment of $1,000) were as follows:
<TABLE>
<CAPTION>
Five Years Ten Years From Inception
---------- --------- --------------
<S> <C> <C> <C>
Equity $2,034 $3,582 $16,956
Money Market $1,250 $1,713 $ 3,413
Bond $1,434 $2,220 $ 3,543
Omni $1,881 $3,268 $ 4,542
International N/A N/A $ 1,770
Capital Appreciation N/A N/A $ 1,709
Small Cap N/A N/A $ 2,059
Global Contrarian N/A N/A $ 1,363
Aggressive Growth N/A N/A $ 1,439
Core Growth N/A N/A $ 969
Growth & Income N/A N/A $ 1,366
S&P 500 Index N/A N/A $ 1,300
Social Awareness N/A N/A $ 1,256
Strategic Income N/A N/A $ 1,087
Stellar N/A N/A $ 1,097
Relative Value N/A N/A $ 1,283
Small Cap Growth N/A N/A N/A
High Income Bond N/A N/A N/A
Equity Income N/A N/A N/A
Blue Chip N/A N/A N/A
</TABLE>
5
<PAGE> 35
PORTFOLIO TURNOVER
Each portfolio has a different expected rate of portfolio turnover. However, the
rate of portfolio turnover will not be a limiting factor when the management of
the Fund deems it appropriate to purchase or sell securities for a portfolio,
except in the following circumstances. The Fund intends to comply with the
various requirements of the Internal Revenue Code so as to qualify as a
"regulated investment company" thereunder. Among such requirements is a
limitation of less than 30% of the amount of gross income which each portfolio
may derive from gains on the sale or other disposition of securities held for
less than three months. Accordingly, the ability of any portfolio to effect
certain portfolio transactions at a given time may be limited. The Small Cap,
Aggressive Growth and Strategic Income Portfolios may engage in the purchase and
sale of securities close to the ex-dividend date in order to receive the
anticipated dividend and then sell the securities after the ex-dividend date.
This practice could substantially increase the Portfolio's turnover rate.
The Fund's policy with respect to each portfolio is as follows:
Equity Portfolio - Although this Portfolio will not normally purchase
securities with the intention of obtaining short-term capital
appreciation, purchases and sales will be made whenever deemed prudent and
consistent with the investment objectives of the Portfolio. During periods
of relatively stable market and economic conditions, it is anticipated
that the annual portfolio turnover rate of the Portfolio will be moderate.
During periods when changing market or economic conditions are foreseen,
shifts in portfolio emphasis may cause the rate of portfolio turnover to
increase. During 1997 the turnover rate for this portfolio was 19%.
Money Market Portfolio - Since the assets of this Portfolio consist of
short-term instruments, replacement of portfolio securities will occur
frequently. However, since purchases are generally effected with dealers
or issuers on a net basis, it is not expected that the Portfolio will
incur significant brokerage commissions.
Bond Portfolio - This Portfolio will engage in transactions when the
Adviser believes that they will help to achieve the overall objectives of
the Portfolio. Portfolio securities may or may not be held to maturity.
The rate of portfolio turnover will vary from time to time but is not
expected to exceed 50% annually. The turnover rate for this portfolio was
10% in 1997.
Omni Portfolio - The rate of portfolio turnover will vary from time to
time but is not expected to exceed 50% annually. The turnover rate for
this portfolio was 18% in 1997.
International Portfolio - Although this Portfolio will not normally engage
in short-term trading, purchases and sales of securities will be made
whenever deemed appropriate to achieve the Portfolio's objective of
long-term capital growth. The rate of portfolio turnover will not be a
limiting factor when portfolio changes are deemed appropriate to achieve
this Portfolio's stated objective. Under normal circumstances, the
portfolio turnover rate for this portfolio is not expected to exceed 75%
annually. The turnover rate for this portfolio was 24% in 1997.
Capital Appreciation Portfolio - Although TRPA generally seeks less
volatile securities for this Portfolio, the Portfolio may be traded fairly
aggressively. Its portfolio turnover rate is normally expected to be 50%
to 150% annually. The turnover rate for this portfolio was 41% in 1997.
Small Cap Portfolio - While this Portfolio purchases and holds securities
with the goal of meeting its investment objectives, portfolio changes are
made whenever FAM believes they are advisable, usually without reference
to the length of time a security has been held. The engagement in a
substantial number of short-term transactions is expected to result in
annual portfolio turnover rates of 100% to 300%. The turnover rate for
this portfolio was 80% in 1997.
Global Contrarian Portfolio - Because of the long-term growth objective
and the purchase of under-valued and out-of-favor securities, this
Portfolio will generally tend to hold securities for a relatively longer
time
6
<PAGE> 36
with the expectation of eventual price appreciation. As a result, the
portfolio turnover rate is not expected to exceed 50% annually, However,
it could be substantially higher at times due to repositioning of the
portfolio. The turnover rate for this portfolio was 29% in 1997.
Aggressive Growth Portfolio - The securities of this Portfolio are
generally expected to be traded more aggressively than those of the other
portfolios. Its portfolio turnover rate can normally be expected to be in
the range of 100% to 300% annually. The turnover rate for this portfolio
was 193% in 1997.
Core Growth Portfolio - Although the securities held in this Portfolio are
generally held for appreciation, PBA's disciplined response to its
analytic process will occasionally result in sales without regard to the
length of time a security has been held. The annual turnover rate is
normally expected to be in the range of 50% to 250%. The turnover rate
for this portfolio was 65% in 1997.
Growth & Income Portfolio - RSIM exercises "sell" disciplines. A stock
held in this Portfolio is likely to be sold if it declines substantially
in price (at least 15%), if it reaches its upside target price, if the
company's business fundamentals turn negative, or if a more attractive
opportunity appears. The prices of small- and mid-cap company securities
in which this Portfolio invests may be more volatile than those of larger
companies. As a result, the Portfolio's annual turnover rate is normally
expected to be in the 100% to 200% range. The turnover rate for this
portfolio was 185% in 1997.
S&P 500 Index Portfolio - Securities held in this Portfolio generally will
not be actively traded. Although it will often purchase fixed-income
securities with relatively short maturities, those transactions are not
expected to generate substantial brokerage commissions. The annual
turnover rate is not normally expected to exceed 100%. The turnover rate
for this portfolio was 445% in 1997, its start-up year.
Social Awareness Portfolio - This Portfolio will not normally purchase
securities with the intention of obtaining short-term returns. Under
normal market conditions, the annual turnover rate is not expected to
exceed 50%. The turnover rate for this portfolio was 40% in 1997.
Strategic Income Portfolio - The securities of this Portfolio will
generally be traded more frequently than those of the other income
oriented portfolios. Its portfolio turnover rate can normally be expected
to be in the range of 50% to 250% annually. The turnover rate for this
portfolio was 102% in 1997.
Stellar Portfolio - Although this Portfolio does not seek short-term
profits, its securities will be sold whenever Star believes it is
appropriate to do so in light of the Portfolio's investment objective
without regard to the length of time a particular security may have been
held. Its portfolio turnover rate is normally expected to be 50% to 150%.
The turnover rate for this portfolio was 17% in 1997.
Relative Value Portfolio - Although this Portfolio does not seek
short-term profits, its securities will be sold whenever Star believes it
is appropriate to do so in light of the Portfolio's investment objective
without regard to the length of time a particular security may have been
held. Its portfolio turnover rate is not expected to exceed 75% during
normal economic and market conditions. The turnover rate for this
portfolio was 7% in 1997.
SMALL CAP GROWTH PORTFOLIO - Securities held in this Portfolio tend to be
actively traded. Its portfolio turnover rate is normally expected to
exceed 100%.
HIGH INCOME BOND PORTFOLIO - The rate of portfolio turnover will vary from
time to time, but it is not normally expected to exceed 100% for this
Portfolio.
EQUITY INCOME PORTFOLIO - The portfolio turnover rate for this Portfolio
is normally expected to be in the range of 50% to 150% annually.
BLUE CHIP PORTFOLIO - The Portfolio will not engage in short-term trading,
but it may dispose of securities held for a short period if, after
examination of their value, the sub-adviser believes such disposition to
be advisable in order to attain the Portfolio's investment objective. The
annual turnover rate is not normally expected to exceed 100%.
INVESTMENT OBJECTIVES AND POLICIES
The following descriptions of money market instruments supplement the Fund's
"Investment Objectives and Policies" set forth in the prospectus. The Money
Market Portfolio and the Omni, Strategic Income and Stellar Portfolios, to the
extent they invest in the money market sector, will invest extensively in these
instruments. The other Portfolios may invest in such instruments to a limited
extent (to invest otherwise idle cash) or on a temporary basis for defensive
purposes. The debt security ratings referred to in the prospectus in connection
with the investment policies of the portfolios are defined in the Appendix to
this Statement of Additional Information.
7
<PAGE> 37
MONEY MARKET INSTRUMENTS
U.S. Government Obligations - Bills, notes, bonds and other debt
securities issued or guaranteed as to principal or interest by the United
States or by agencies or authorities controlled or supervised by and
acting as instrumentalities of the U.S. Government established under
authority granted by Congress, including, but not limited to, the
Government National Mortgage Association, the Tennessee Valley Authority,
the Bank for Cooperatives, the Farmers Home Administration, and Federal
Home Loan Banks. Some obligations of U.S. Government agencies, authorities
and other instrumentalities are supported by the full faith and credit of
the U.S. Treasury; others by the right of the issuer to borrow from the
Treasury; and others only by the credit of the issuer. Certain of the
foregoing may be purchased on a "when issued" basis at which time the rate
of return will not have been set.
Certificates of Deposit - Certificates issued against funds deposited in a
bank for a definite period of time, at a specified rate of return.
Normally they are negotiable.
Bankers' Acceptances - Short-term credit instruments issued by
corporations to finance the import, export, transfer or storage of goods.
They are termed "accepted" when a bank guarantees their payment at
maturity and reflect the obligation of both the bank and drawer to pay the
face amount of the instrument at maturity.
Commercial Paper - Promissory notes issued by corporations to finance
their short-term credit needs. Commercial paper obligations may include
variable amount master demand notes. Variable amount master demand notes
are obligations that permit the investment of fluctuating amounts by the
Portfolio at varying rates of interest pursuant to direct arrangements
between the Portfolio, as lender, and the borrower. These notes permit
daily changes in the amounts borrowed. The Portfolio has the right to
increase the amount under the note at any time up to the full amount
provided by the note agreement, or to decrease the amount, and the
borrower may prepay up to the full amount of the note without penalty.
Because variable amount master demand notes are direct lending
arrangements between the lender and the borrower, it is not generally
contemplated that such instruments will be traded, and there is no
secondary market for these notes, although they are redeemable (and thus
immediately repayable by the borrower) at face value, plus accrued
interest, at any time. In connection with a master demand note
arrangement, the Adviser will monitor, on an ongoing basis, the earning
power, cash flow, and other liquidity ratios of the issuer, and the
borrower's ability to pay principal and interest on demand. While master
demand notes, as such, are not typically rated by credit rating agencies,
if not so rated the Portfolio may invest in them only if at the time of an
investment the issuer meets the criteria set forth above for all other
commercial paper issuers. Such notes will be considered to have a maturity
of the longer of the demand period or the period of the interest
guarantee.
Corporate Obligations - Bonds and notes issued by corporations in order to
finance longer-term credit needs.
Repurchase Agreements - Agreements by which the Portfolio purchases a
security and obtains a simultaneous commitment from the seller (a member
bank of the Federal Reserve System or a government securities dealer
recognized by the Federal Reserve Board) to repurchase the security at a
mutually agreed upon price and date. It may also be viewed as a loan of
money by the Portfolio to the seller. The resale price is normally in
excess of the purchase price and reflects an agreed upon market rate. The
term of these repurchase agreements will usually be short, from overnight
to one week, and at no time more than one year.
8
<PAGE> 38
INVESTMENT RESTRICTIONS
The prospectus lists the most significant investment restrictions to which the
Fund is subject. The following is a complete list of the Fund's investment
restrictions. Except as otherwise specified, all of the investment restrictions
stated in the prospectus and this Statement of Additional Information are
fundamental policies. Restriction number 8 is a fundamental policy of the Global
Contrarian Portfolio and restrictions number 4, 7, 8, 12 and 13 are fundamental
policies of the Equity, Money Market, Bond, Omni and International Portfolios
and nonfundamental as to the remaining portfolios. The fundamental policies and
nonfundamental operating policies of the Capital Appreciation, Aggressive
Growth, High Income Bond, Equity Income and Blue Chip Portfolios are shown
separately below. Fundamental policies may not be changed without the
affirmative vote of the majority of the outstanding voting securities of the
Fund or a particular portfolio, as appropriate. The Investment Company Act of
l940 defines a majority vote as the vote of the lesser of (i) 67% of the shares
represented at a meeting at which more than 50% of the outstanding shares are
represented or (ii) more than 50% of the outstanding voting securities. With
respect to the submission of a change in an investment policy to the holders of
outstanding voting securities of a particular portfolio, such matter shall be
deemed to have been effectively acted upon with respect to such portfolio if a
majority of the outstanding voting securities of such portfolio vote for the
approval of such matter, notwithstanding (1) that such matter has not been
approved by the holders of a majority of the outstanding voting securities of
any other portfolio affected by such matter, and (2) that such matter has not
been approved by the vote of a majority of the outstanding voting securities of
the Fund.
The Fund may not issue senior securities and each portfolio of the Fund (other
than the Capital Appreciation, Aggressive Growth, High Income Bond, Equity
Income and Blue Chip Portfolios) will not:
l. invest more than 5% of the value of the total assets of such
portfolio in the securities of any one issuer (except U.S.
government securities);
2. purchase more than l0% of the outstanding voting securities of any
one issuer, and the Money Market Portfolio will not acquire the
voting securities of any issuer except in connection with a
merger, consolidation or other reorganization;
3. invest more than 25% of the value of its total assets in any one
industry, except that each 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 15% of the value of its assets (10% in the case
of the Equity, Money Market, Bond, Omni and International
Portfolios) 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;
9
<PAGE> 39
5. other than the Growth & Income, Strategic Income and Small Cap
Growth Portfolios, 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, each 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. The Growth & Income, Strategic
Income and Small Cap Growth Portfolios may borrow money directly
or through reverse repurchase agreements in amounts up to
one-third of the value of each of their total net assets, other
than the amount borrowed;
6. purchase or sell commodities or commodity contracts except that
(a) each portfolio other than the Money Market Portfolio may, for
hedging purposes, purchase and sell financial futures contracts
and options thereon within the limits of investment restriction 7
below, (b) the S&P 500 Index Portfolio may purchase or sell stock
index futures contracts in accordance with its stated investment
objectives, and (c) the Stellar Portfolio may purchase or sell
precious metal securities;
7. other than the S&P 500 Index Portfolio, purchase or sell put or
call options, except that each portfolio other than the Money
Market Portfolio may, for hedging purposes, (a) write call options
traded on a registered national securities exchange if such
portfolio owns the underlying securities subject to such options,
and purchase call options for the purpose of closing out positions
in options it has written, (b) purchase put options on securities
owned, and sell such options in order to close its positions in
put options, (c) purchase and sell financial futures contracts and
options thereon, and (d) purchase and sell financial index
options; provided, however, that no option or futures contract
shall be purchased or sold if, as a result, more than one-third of
the total assets of the portfolio would be hedged by options or
futures contracts, and no more than 5% of any portfolio's total
assets, at market value, may be used for premiums on open options
and initial margin deposits on futures contracts;
8. other than the International and Global Contrarian Portfolios,
invest in securities of foreign issuers except that (a) each of
the Equity, Bond, Omni, Core Growth, Growth & Income, S&P 500
Index, Social Awareness and Relative Value Portfolios may (i)
invest up to l5% of their respective assets in securities of
foreign issuers (including foreign governments or political
subdivisions, agencies or instrumentalities of foreign
governments) American Depository Receipts, and securities of
United States domestic issuers denominated in foreign currency,
and (ii) invest up to an additional l0% of the assets of the
portfolio in securities issued by foreign governments or political
subdivisions, agencies or instrumentalities thereof, (b) each of
the Small Cap and Small Cap Growth Portfolios may invest up to 30%
of its assets in the securities of foreign issuers, (c) the Money
Market Portfolio may invest up to 50% of its assets in the
securities of foreign issuers, provided the securities are
denominated in U.S. dollars and held in custody in the United
States, (d) the Strategic Income Portfolio may invest up to 20%
of its assets in foreign bonds and (e) the Stellar Portfolio may
invest up to 25% of its assets in the securities of foreign
issuers. For purposes of this restriction number 8, U.S. dollar
denominated depository receipts traded in domestic markets do not
constitute foreign securities;
9. underwrite securities of other issuers except insofar as the Fund
may be considered an underwriter under the Securities Act of l933
in selling portfolio securities;
10. purchase or sell real estate, except that each 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;
11. 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. Other than the Strategic Income
Portfolio, no more than 10% of a portfolio's total assets will be
invested in repurchase agreements maturing in more than seven
days;
10
<PAGE> 40
12. sell securities short or purchase securities on margin except such
short-term credits as are required to clear transactions, except
that the Growth & Income Portfolio may sell securities short and
the Strategic Income Portfolio may sell securities short if (i) it
owns, or has a right to acquire, an equal amount of those
securities or (ii) if it does not own the securities, it has
segregated an amount of its other assets equal to the lesser of
the market value of the securities sold short or the amount
required to acquire those securities (while in a short position,
the Portfolio will retain the securities, rights or segregated
assets);
13. as to the Equity, Money Market, Bond, Omni and International
Portfolios, 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;
14. purchase securities of other investment companies, except in
connection with a merger, consolidation or reorganization, or
except the purchase by any portfolio other than the Money Market
or Bond Portfolios of the securities of closed-end investment
companies if after the purchase: (i) a 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 such portfolio does not exceed 10% of
the value of the total assets of that 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.
As nonfundamental policies of each portfolio other than the Capital
Appreciation, Aggressive Growth, High Income Bond, Equity Income and Blue Chip
Portfolios, which policies may be changed at any time by the vote of a majority
of the Board of Directors, (a) no portfolio will invest more than 20% of its
assets in securities of issuers located in any one foreign country, except that
up to an additional 5% of its assets may be invested in securities of issuers
located in each of any three of Australia, Canada, France, Germany, Japan or
the United Kingdom; and (b) each portfolio other than the Money Market
Portfolio, in order to hedge against changes in the exchange rates of foreign
currencies in relation to the U.S. dollar, may engage in forward foreign
currency contracts, foreign currency options and foreign currency futures
contracts in connection with the purchase, sale or ownership of specific
securities (but, not more than 5% of a portfolio's assets may be invested in
such currency hedging contracts).
In addition to the above restrictions, in order to comply with Rule 2a-7 under
the Investment Company Act of 1940, no more than 5% of the assets of the Money
Market Portfolio will be invested in "second-tier" short-term debt instruments,
that is those receiving the second highest rating by any two nationally
recognized statistical rating organizations ("NRSRO's") and not receiving the
highest rating from more than one NRSRO (or receiving the second highest rating
from one NRSRO if (a) that is the only NRSRO having rated the security or (b)
one other NRSRO has given the security its highest rating), or whose issuer has
received such a rating or ratings with respect to a class of short-term debt
obligations that is now comparable in priority and security to those to be
purchased. In addition, not more than $1 million (or 1% of this portfolio's
assets, if greater) may be invested in the second-tier instruments of any one
issuer.
Under normal market conditions, at least 65% of the assets of the International
Portfolio and at least 25% of the assets of the Global Contrarian Portfolio will
be invested in foreign securities, including securities of issuers in at least
three different foreign countries. As of the date of this Statement of
Additional Information, the Board of Directors has approved investment by those
portfolios other than the Money Market Portfolio in 49 countries with developed
securities markets, including the following countries with developed economies:
Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland,
Israel, Italy, Japan, Luxembourg, Netherlands, New Zealand, Norway, Spain,
Sweden, Switzerland and the United Kingdom; and the following countries with
developing economies: Argentina, Bangla Desh, Brazil, Chile, China (Hong Kong,
Shanghai and Shenzhen Exchanges), Czech Republic, Egypt, Greece, Hungary,
Indonesia, Jordan, Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines,
Poland, Portugal, Singapore, South Africa, South Korea, Sri Lanka, Taiwan,
Thailand, Turkey, Uruguay, Venezuela and Zimbabwe.
CAPITAL APPRECIATION PORTFOLIO FUNDAMENTAL POLICIES
As a matter of fundamental policy, the Portfolio may not:
11
<PAGE> 41
C.A.1. Borrow money except that the Portfolio may (i) borrow for
non-leveraging, temporary or emergency purposes and (ii)
engage in reverse repurchase agreements and make other
investments or engage in other transactions, which may
involve a borrowing, in a manner consistent with the
Portfolio's investment objective and program, provided that
the combination of (i) and (ii) shall not exceed 33 1/3% of
the value of the Portfolio's total assets (including the
amount borrowed) less liabilities (other than borrowings)
or such other percentage permitted by law. Any borrowings
which come to exceed this amount will be reduced in
accordance with applicable law. The Portfolio may borrow
from banks, other portfolios managed by TRPA or other
persons to the extent permitted by applicable law;
C.A.2. Purchase or sell physical commodities; except that it may
enter into futures contracts and options thereon;
C.A.3. Purchase the securities of any issuer if, as a result, more
than 25% of the value of the Portfolio's total assets would
be invested in the securities of issuers having their
principal business activities in the same industry;
C.A.4. Make loans, although the Portfolio may (i) lend portfolio
securities and participate in an interfund lending program
with other portfolios managed by TRPA provided that no such
loan may be made if, as a result, the aggregate of such
loans would exceed 33 1/3% of the value of the Portfolio's
total assets; (ii) purchase money market securities and
enter into repurchase agreements; and (iii) acquire
publicly-distributed or privately-placed debt securities
and purchase debt;
C.A.5. Purchase a security if, as a result, with respect to 75% of
the value of its total assets, more than 5% of the value of
the Portfolio's total assets would be invested in the
securities of a single issuer, except securities issued or
guaranteed by the U.S. Government or any of its agencies or
instrumentalities;
C.A.6. Purchase a security if, as a result, with respect to 75% of
the value of the Portfolio's total assets, more than 10% of
the outstanding voting securities of any issuer would be
held by the Fund (other than obligations issued or
guaranteed by the U.S. Government, its agencies or
instrumentalities);
C.A.7. Purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this
shall not prevent the Portfolio from investing in
securities or other instruments backed by real estate or in
securities of companies engaged in the real estate
business);
C.A.8. Issue senior securities except in compliance with the
Investment Company Act of 1940; or
C.A.9. Underwrite securities issued by other persons, except to
the extent that the Portfolio may be deemed to be an
underwriter within the meaning of the Securities Act of
1933 in connection with the purchase and sale of its
portfolio securities in the ordinary course of pursuing its
investment program.
With respect to investment restrictions C.A.1. and C.A.4,, the Portfolio
will not borrow from or lend to any other portfolios managed by TRPA
unless they apply for and receive an exemptive order from the SEC or the
SEC issues rules permitting such transactions. The Portfolio has no
current intention of engaging in any such activity and there is no
assurance the SEC would grant any order requested by the Portfolio or
promulgate any rules allowing the transactions.
With respect to investment restriction C.A.2., the Portfolio does not
consider currency contracts or hybrid investments to be commodities.
For purposes of investment restriction C.A.3., U.S., state or local
governments, or related agencies or instrumentalities, are not considered
an industry.
12
<PAGE> 42
For purposes of investment restriction C.A.4., the Portfolio will consider
the acquisition of a debt security to include the execution of a note or
other evidence of an extension of credit with a term of more than nine
months.
CAPITAL APPRECIATION PORTFOLIO NONFUNDAMENTAL OPERATING POLICIES
As a matter of nonfundamental operating policy, the Portfolio may not:
C.A.10. Purchase additional securities when money borrowed exceeds
5% of its total assets;
C.A.11. Invest in companies for the purpose of exercising
management or control;
C.A.12. Purchase a futures contract or an option thereon if, with
respect to positions in futures or options on futures which
do not represent bona fide hedging, the aggregate initial
margin and premiums on such options would exceed 5% of the
Portfolio's net asset value;
C.A.13. Purchase illiquid securities and securities of unseasoned
issuers if, as a result, more than 15% of its net assets
would be invested in such securities, provided that the
Portfolio will not invest more than 5% of its total assets
in restricted securities and not more than 5% in securities
of unseasoned issuers. Securities eligible for resale under
Rule 144A of the Securities Act of 1933 are not included in
the 5% limitation but are subject to the 15% limitation;
C.A.14. Purchase securities of open-end or closed-end investment
companies except in compliance with the Investment Company
Act of 1940 and applicable state law;
C.A.15. Purchase securities on margin, except (i) for use of
short-term credit necessary for clearance of purchases of
portfolio securities and (ii) to make margin deposits in
connection with futures contracts or other permissible
investments;
C.A.16. Mortgage, pledge, hypothecate or, in any manner, transfer
any security owned by the Portfolio as security for
indebtedness except as may be necessary in connection with
permissible borrowings or investments and then such
mortgaging, pledging or hypothecating may not exceed 33
1/3% of the Portfolio's total assets at the time of
borrowing or investment;
C.A.17. Purchase participations or other direct interests in or
enter into leases with respect to, oil, gas, or other
mineral exploration or development programs;
C.A.18. Invest in puts, calls, straddles, spreads, or any
combination thereof, except to the extent permitted by the
prospectus and Statement of Additional Information;
C.A.19. Purchase or retain the securities of any issuer if, to the
knowledge of the Fund's management, those officers and
directors of the Fund, and of the Portfolio's investment
manager, who each owns beneficially more than 0.5% of the
outstanding securities of such issuer, together own
beneficially more than 5% of such securities;
C.A.20. Effect short sales of securities;
C.A.21. Purchase a security (other than obligations issued or
guaranteed by the U.S., any foreign, state of local
government, their agencies or instrumentalities) if, as a
result, more than 5% of the value of the Portfolio's total
assets would be invested in the securities of issuers which
at the time of purchase had been in operation for less than
three years (for this purpose, the period of operation of
any issuer shall include the period of operation of any
predecessor or unconditional guarantor of such issuer).
This restriction does not apply to securities of pooled
investment vehicles or mortgage or asset-backed securities;
or
13
<PAGE> 43
C.A.22. Invest in warrants if, as a result thereof, more than 2% of
the value of the total assets of the Portfolio would be
invested in warrants which are not listed on the New York
Stock Exchange, the American Stock Exchange, or a
recognized foreign exchange, or more than 5% of the value
of the total assets of the Portfolio would be invested in
warrants whether or not so listed. For purposes of these
percentage limitations, the warrants will be valued at the
lower of cost or market and warrants acquired by the
Portfolio in units or attached to securities may be deemed
to be without value.
AGGRESSIVE GROWTH PORTFOLIO FUNDAMENTAL POLICIES
As a matter of fundamental policy, the Portfolio:
A.G.1. May not with respect to 75% of its total assets, purchase
the securities of any issuer (except securities issued or
guaranteed by the U.S. government or its agencies or
instrumentalities) if, as a result, (i) more than 5% of the
Portfolio's total assets would be invested in the
securities of that issuer, or (ii) the Portfolio would hold
more than 10% of the outstanding voting securities of that
issuer.
A.G.2. May (i) borrow money from banks and (ii) make other
investments or engage in other transactions permissible
under the Investment Company Act of 1940 which may involve
a borrowing, provided that the combination of (i) and (ii)
shall not exceed 33 1/3% of the value of the Portfolio's
total assets (including the amount borrowed), less the
Portfolio's liabilities (other than borrowings), except
that the Portfolio may borrow up to an additional 5% of its
total assets (not including the amount borrowed) from a
bank for temporary or emergency purposes (but not for
leverage or the purchase of investments). The Portfolio may
also borrow money from the other mutual funds managed by
SCM or other persons to the extent permitted by applicable
law.
A.G.3. May not issue senior securities, except as permitted under
the Investment Company Act of 1940.
A.G.4. May not act as an underwriter of another issuer's
securities, except to the extent that the Portfolio may be
deemed to be an underwriter within the meaning of the
Securities Act of 1933 in connection with the purchase and
sale of portfolio securities.
A.G.5. May not purchase or sell physical commodities unless
acquired as a result of ownership of securities or other
instruments (but this shall not prevent the Portfolio from
purchasing or selling options, futures contracts, or other
derivative instruments, or from investing in securities or
other instruments backed by physical commodities).
A.G.6. May not make loans if, as a result, more than 33 1/3% of
the Portfolio's total assets would be lent to other
persons, except through (i) purchases of debt securities or
other debt instruments, or (ii) engaging in repurchase
agreements.
A.G.7. May not purchase the securities of any issuer if, as a
result, more that 25% of the Portfolio's total assets would
be invested in the securities of issuers, the principal
business activities of which are in the same industry.
A.G.8. May not purchase or sell real estate unless acquired as a
result of ownership of securities or other instruments (but
this shall not prohibit the Portfolio from purchasing or
selling securities or other instruments backed by real
estate or of issuers engaged in real estate activities).
14
<PAGE> 44
AGGRESSIVE GROWTH PORTFOLIO NONFUNDAMENTAL OPERATING POLICIES
As a matter of nonfundamental operating policy, the Portfolio may not:
A.G.9. Sell securities short, unless the Portfolio owns or has
the right to obtain securities equivalent in kind and
amount to the securities sold short, or unless it covers
such short sale as required by the current rules and
positions of the SEC or its staff, and provided that
transactions in options, futures contracts, options on
futures contracts, or other derivative instruments are not
deemed to constitute selling securities short.
A.G.10. Purchase securities on margin, except that the Portfolio
may obtain such short-term credits as are necessary for the
clearance of transactions; and provided that margin
deposits in connection with futures contacts, options on
futures contracts, or other derivative instruments shall
not constitute purchasing securities on margin.
A.G.11. Invest in illiquid securities if, as a result of such
investment, more than 15% of its net assets would be
invested in illiquid securities, or such other amounts as
may be permitted under the Investment Company Act of 1940.
A.G.12. Purchase securities of other investment companies except in
compliance with the Investment Company Act of 1940 and
applicable state law.
A.G.13. Purchase the securities of any issuer (other than
securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof) if, as a
result, more than 5% of its total assets would be invested
in the securities of issuers that, including predecessor or
unconditional guarantors, have a record of less than three
years of continuous operation. This policy does not apply
to securities of pooled investment vehicles or mortgage or
asset-backed securities.
A.G.14. Invest in direct interests in oil, gas, or other mineral
exploration programs or leases; however, the Portfolio may
invest in the securities of issuers that engage in these
activities.
A.G.15. Engage in futures or options on futures transactions which
are impermissible pursuant to Rule 4.5 under the Commodity
Exchange Act and, in accordance with Rule 4.5, will use
futures or options on futures transactions solely for bona
fide hedging transactions (within the meaning of the
Commodity Exchange Act), provided, however, that the
Portfolio may, in addition to bona fide hedging
transactions, use futures and options on futures
transactions if the aggregate initial margin and premiums
required to establish such positions, less the amount by
which any such options positions are in the money (within
the meaning of the Commodity Exchange Act), do not exceed
5% of the Portfolio's net assets.
In addition, (i) the aggregate value of securities
underlying call options on securities written by the
Portfolio or obligations underlying put options on
securities written by the Portfolio determined as of the
date the options are written will not exceed 50% of the
Portfolio's net assets; (ii) the aggregate premiums paid on
all options purchased by the Portfolio and which are being
held will not exceed 20% of the Portfolio's net assets;
(iii) the Portfolio will not purchase put or call options,
other than hedging positions, if, as a result thereof, more
than 5% of its total assets would be so invested; and (iv)
the aggregate margin deposits required on all futures and
options on futures transactions being held will not exceed
5% of the Portfolio's total assets.
A.G.16. Pledge, mortgage or hypothecate any assets owned by the
Portfolio except as may be necessary in connection with
permissible borrowings or investments and then such
pledging, mortgaging, or hypothecating may not exceed 33
1/3% of the Portfolio's total assets at the time of the
borrowing or investment.
15
<PAGE> 45
A.G.17. Purchase warrants, valued at the lower of cost or market
value, in excess of 5% of the Portfolio's net assets.
Included in that amount, but not to exceed 2% of the
Portfolio's net assets, may be warrants that are not listed
on the New York Stock Exchange or the American Stock
Exchange. Warrants acquired by the Portfolio in units or
attached to securities are not subject to these
restrictions.
A.G.18. Borrow money except (i) from banks or (ii) through reverse
repurchase agreements or mortgage dollar rolls, and will
not purchase securities when bank borrowings exceed 5% of
its total assets.
A.G.19. Make any loans other than loans of portfolio securities,
except through (i) purchases of debt securities or other
debt instruments, or (ii) engaging in repurchase
agreements.
HIGH INCOME BOND, EQUITY INCOME AND BLUE CHIP PORTFOLIO FUNDAMENTAL POLICIES
As a matter of fundamental policy:
F.I.1 The portfolios will not issue senior securities, except that a
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 a portfolio's total assets, any
such borrowings will be repaid before additional investments are made.
The portfolios will not borrow money or engage in reverse repurchase
agreements for investment leverage purposes.
F.I.2. The portfolios will not purchase securities if, as a result of such
purchase, 25% or more of a portfolio's total assets would be invested
in any one industry. However, a 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.
F.I.3. The portfolios will not purchase or sell real estate, although they 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.
F.I.4. The portfolios will not lend any of their assets, except a portfolio's
securities, up to one-third of its total assets. This shall not prevent
a 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.
F.I.5. The portfolios will not underwrite any issue of securities, except as a
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.
F.I.6. With respect to 75% of its total assets, a 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, a portfolio
will not purchase more than 10% of any class of the outstanding voting
securities of any one issuer. For these purposes, the portfolios
consider common stock and all preferred stock of an issuer each as a
single class, regardless of priorities, series, designations, or other
differences.
F.I.7. The portfolios will not purchase any securities on margin, but they may
obtain such short-term credits as are necessary for clearance of
transactions. The deposit or payment by a 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.
F.I.8. The portfolios will not purchase or sell commodities, except that a
portfolio may purchase and sell financial futures contracts and related
options.
HIGH INCOME BOND, EQUITY INCOME AND BLUE CHIP NONFUNDAMENTAL OPERATING POLICIES
As a matter of nonfundamental operating policy:
F.I.9. The portfolios will not pledge, mortgage or hypothecate any assets
except to secure permitted borrowings. In those cases, a 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.
F.I.10. The portfolios will not sell securities short unless during the time
the short position is open, a 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 a portfolio's net assets (taken at
current value) is held as collateral for such sales at any one time.
F.I.11. Each of the portfolios will not invest more than 15% of its net assets
in illiquid securities, including, among others, repurchase agreements
providing for settlement more than seven days after notice, and certain
restricted securities not determined by the Board of Directors to be
liquid.
HEDGING TRANSACTIONS
The purpose of hedging transactions using put and call options on individual
securities, financial futures contracts, and options on such contracts and on
financial indexes, all to the extent provided in investment restriction 7, is to
reduce the risk of fluctuation of portfolio securities values or to take
advantage of expected market fluctuations. However, while such transactions are
defensive in nature and are not speculative, some risks remain.
The use of options and futures contracts may help the Fund to gain exposure or
to protect itself from changes in market values. For example, the Fund may have
a substantial amount of cash at the beginning of a market rally. Conventional
procedures of purchasing a number of individual issues requires time and may
result in missing a significant market movement. By using futures contracts, the
Fund can obtain immediate exposure to the market.
The buying program will then proceed and, once it is completed (or as it
proceeds), the futures contracts will be closed. Conversely, in the early stages
of a market decline, market exposure can be promptly offset by selling futures
contracts, and individual securities can be sold over a longer period under
cover of the resulting short contract position.
COVERED CALL OPTIONS AND PUT OPTIONS
In writing (i.e., selling) "covered" call options on securities owned by a
portfolio, the portfolio gives the purchaser of the call option the right to
purchase the underlying securities owned by the portfolio at a specified
"exercise" price at any time prior to the expiration of the option, normally
within nine months. In purchasing put options on securities owned by a
portfolio, the portfolio pays the seller of the put option a premium for the
right of the portfolio to sell the underlying securities owned by the portfolio
at a specified exercise price prior to the expiration of the option.
Whenever a portfolio has a covered call option outstanding, the underlying
securities will be segregated by the Custodian and held in an escrow account to
assure that such securities will be delivered to the option holder if the option
is exercised. While the underlying securities are subject to the option, the
portfolio remains the record owner of the securities, entitling it to receive
dividends and to exercise any voting rights.
In order to terminate its position as the writer of a call option or the
purchaser of a put option, the portfolio may enter into a "closing" transaction,
which is the purchase of a call option or sale of a put option on the same
underlying securities and having the same exercise price and expiration date as
the option previously sold or purchased by the portfolio.
16
<PAGE> 46
FUTURES CONTRACTS
The Fund may invest in two kinds of financial futures contracts: stock index
futures contracts and interest rate futures contracts. Stock index futures
contracts are contracts developed by and traded on national commodity exchanges
whereby the buyer will, on a specified future date, pay or receive a final cash
payment equal to the difference between the actual value of the stock index on
the last day of the contract and the value of the stock index established by the
contract multiplied by the specific dollar amount set by the exchange. Futures
contracts may be based on broad-based stock indexes such as the S&P 500 or on
narrow-based stock indexes. A particular index will be selected according to the
Adviser's investment strategy for the particular portfolio. An interest rate
futures contract is an agreement whereby one party agrees to sell and another
party agrees to purchase a specified amount of a specified financial instrument
(debt security) at a specified price at a specified date, time and place.
Although interest rate futures contracts typically require actual future
delivery of and payment for financial instruments, the contracts are usually
closed out before the delivery date. A public market exists in interest rate
futures contracts covering primarily the following financial instruments: U.S.
Treasury bonds; U.S. Treasury notes; Government National Mortgage Association
(GNMA) modified pass-through mortgage-backed securities; three-month U.S.
Treasury bills; 90-day commercial paper; bank certificates of deposit; and
Eurodollar certificates of deposit. It is expected that futures contracts
trading in additional financial instruments will be authorized.
At the time the Fund enters into a contract, it sets aside a small portion of
the contract value in an account with the Fund's custodian as a good faith
deposit (initial margin) and each day during the contract period requests and
receives or pays cash equal to the daily change in the contract value (variable
margin). The Fund, its futures commission merchant and the Fund's custodian
retain control of the initial margin until the contract is liquidated.
17
<PAGE> 47
OPTIONS ON FUTURES CONTRACTS AND FINANCIAL INDEXES
Instead of entering into a financial futures contract, the Fund may buy an
option giving it the right to enter into such a contract at a future date. The
price paid for such an option is called a premium. The Fund also may buy options
on financial indexes that are traded on securities exchanges. Options on
financial indexes react to changes in the value of the underlying index in the
same way that options on financial futures contracts do. All settlements for
options on financial indexes also are for cash.
Financial futures contracts, options on such contracts and options on financial
indexes will only be used for hedging purposes and will, therefore, be
incidental to the Fund's activities in the securities market. Accordingly,
portfolio securities subject to options, or money market instruments having the
market value of any futures contracts, generally will be set aside to
collateralize the options or futures contracts.
18
<PAGE> 48
FOREIGN CURRENCY HEDGING TRANSACTIONS
In order to hedge against changes in the exchange rates of foreign currencies in
relation to the U.S. dollar, each portfolio, other than the Money Market
Portfolio, may engage in forward foreign currency contracts, foreign currency
options and foreign currency futures contracts in connection with the purchase,
sale or ownership of a specific security.
The portfolios generally conduct their foreign currency exchange transactions on
a spot (i.e., cash) basis at the spot rate prevailing in the foreign exchange
currency market. When a portfolio purchases or sells a security denominated in a
foreign currency, it may enter into a forward foreign currency contract
("forward contract") for the purchase or sale, for a fixed amount of dollars, of
the amount of currency involved in the underlying security transaction. A
forward contract involves an obligation to purchase or sell a specific currency
at a future date, which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the contract.
In this manner, a portfolio may obtain protection against a possible loss
resulting from an adverse change in the relationship between the U.S. dollar and
the foreign currency during the period between the date the security is
purchased or sold and the date upon which payment is made or received. Although
such contracts tend to minimize the risk of loss due to the decline in the value
of the hedged currency, at the same time they tend to limit any potential gain
which might result should the value of such currency increase.
Forward contracts are traded in the interbank market conducted directly between
currency traders (usually large commercial banks) and their customers. Generally
a forward contract has no deposit requirement, and no commissions are charged.
Although foreign exchange dealers do not charge a fee for conversion, they do
realize a profit based on the difference between the prices at which they buy
and sell various currencies. When the portfolio manager believes that the
currency of a particular foreign country may suffer a substantial decline
against the U.S. dollar, a portfolio may enter into a forward contract to sell,
for a fixed amount of dollars, the amount of foreign currency approximating the
value of some or all of that portfolio's securities denominated in such foreign
currency. No portfolio will enter into such forward contracts or maintain a net
exposure to such contracts where the consummation of the contracts would
obligate the portfolio to deliver an amount of foreign currency in excess of the
value of its assets denominated in that currency.
At the consummation of a forward contract for delivery by a portfolio of a
foreign currency, the portfolio may either make delivery of the foreign currency
or terminate its contractual obligation to deliver the foreign
19
<PAGE> 49
currency by purchasing an offsetting contract obligating it to purchase, at the
same maturity date, the same amount of the foreign currency. If the portfolio
chooses to make delivery of the foreign currency, it may be required to obtain
such currency through the sale of its securities denominated in such currency or
through conversion of other portfolio assets into such currency. It is
impossible to forecast the market value of portfolio securities at the
expiration of the forward contract. Accordingly, it may be necessary for the
portfolio to purchase additional foreign currency on the spot market (and bear
the expense of such purchase) if the market value of the security is less than
the amount of foreign currency the portfolio is obligated to deliver, and if a
decision is made to sell the security and make delivery of the foreign currency.
Conversely, it may be necessary for the portfolio to sell on the spot market
some of the foreign currency received on the sale of its hedged security if the
security's market value exceeds the amount of foreign currency the portfolio is
obligated to deliver.
If the portfolio retains the hedged security and engages in an offsetting
transaction, it will incur a gain or loss to the extent that there has been
movement in spot or forward contract prices. If a portfolio engages in an
offsetting transaction, it may subsequently enter into a new forward contract to
sell the foreign currency. Should forward prices decline during the period
between the portfolio's entering into a forward contract for the sale of a
foreign currency and the date it enters into an offsetting contract for the
purchase of the foreign currency, the portfolio will realize a gain to the
extent the price of the currency it has agreed to sell exceeds the price of the
currency it has agreed to purchase. Should forward prices increase, the
portfolio will suffer a loss to the extent the price of the currency it has
agreed to purchase exceeds the price of the currency it has agreed to sell.
Buyers and sellers of foreign currency options and futures contracts are subject
to the same risks previously described with respect to options and futures
generally (see "Risk Factors with Options" and "Risk Factors with Futures,
Options on Futures and Options on Indexes," above). In addition, settlement of
currency options and futures contracts with respect to most currencies must
occur at a bank located in the issuing nation. The ability to establish and
close out positions on such options is subject to the maintenance of a liquid
market that may not always be available. Currency rates may fluctuate based on
political considerations and governmental actions as opposed to purely economic
factors.
Predicting the movements of foreign currency in relation to the U.S. dollar is
difficult and requires different skills than those necessary to predict
movements in the securities market. There is no assurance that the use of
foreign currency hedging transactions can successfully protect a portfolio
against loss resulting from the movements of foreign currency in relation to the
U.S. dollar. In addition, it must be remembered that these methods of protecting
the value of a portfolio's securities against a decline in the value of a
currency does not eliminate fluctuations in the underlying prices of the
securities. It simply establishes a rate of exchange which can be achieved at
some future point in time. Additionally, although such contracts tend to
minimize the risk of loss due to the decline in the value of the hedged
currency, at the same time they tend to limit any potential gain which might
result should the value of such currency increase.
SHORT SALES
Until a borrowed security borrowed in connection with a short sale (as
described in the prospectus) is replaced, a portfolio will be required to
maintain daily a segregated account, containing cash or U.S. government
securities, at such a level that (i) the amount deposited in the account plus
the amount deposited with the broker as collateral will at all times be equal
to at least 100% of the current value of the security sold short and (ii) the
amount deposited in the segregated account plus the amount deposited with the
broker as collateral will not be less than the market value of the security at
the time it was sold short. A portfolio may purchase call options to provide a
hedge against an increase in the price of a security sold short. When a
portfolio purchases a call option, it has to pay a premium to the person
writing the option and a commission to the broker selling the option. If the
option is exercised by a portfolio, the premium and the commission paid may be
more than the amount of the brokerage commission charged if the security were
to be purchased directly. See "Hedging Transactions" and "Covered Call Options
and Put Options." In addition to the short sales discussed above, a portfolio
also may make short sales "against the box," a transaction in which a portfolio
enters into a short sale of a security which the portfolio owns. The proceeds
of the short sale are held by a broker until the settlement date, at which time
the portfolio delivers the security to close the short position. A Portfolio
receives the net proceeds from the short sale. No portfolio will, at any time,
have more than 5% of the value of its net assets in deposits on short sales
against the box.
BORROWING MONEY
The portfolios will not borrow money except as a temporary measure for
extraordinary or emergency purposes and then only in amounts not in excess of 5%
of the value of a portfolio's total assets. In addition, certain portfolios may
enter into reverse repurchase agreements and otherwise borrow up to one-third of
the value of the portfolio's total assets, including the amount borrowed, in
order to meet redemption requests without immediately selling portfolio
securities. This latter practice is not for investment leverage but solely to
facilitate management of a portfolio by enabling it to meet redemption requests
when the liquidation of portfolio instruments would be inconvenient or
disadvantageous.
Interest paid on borrowed funds will not be available for investment and will
reduce net income. A portfolio will liquidate any such borrowings as soon as
possible and may not purchase any portfolio securities while the borrowings are
outstanding. However, during the period any reverse repurchase agreements are
outstanding, but only to the extent necessary to assure completion of the
reverse repurchase agreements, the purchase of portfolio securities will be
limited to money market instruments maturing on or before the expiration date of
the reverse repurchase agreements.
ZERO-COUPON AND PAY-IN-KIND DEBT SECURITIES
Zero-coupon securities (or "step-ups") in which a portfolio may invest are debt
obligations which are generally issued at a discount and payable in full at
maturity, and which do not provide for current payments of interest prior to
maturity. Pay-in-kind securities make periodic interest payments in the form of
additional securities (as opposed to cash). Zero-coupon and pay-in-kind
securities usually trade at a deep discount from their face or par value and are
subject to greater market value fluctuations from changing interest rates than
debt obligations of comparable maturities which make current distributions of
interest. As a result, the net asset value of shares of a portfolio investing in
zero-coupon and pay-in-kind securities may fluctuate over a greater range than
shares of other mutual funds investing in securities making current
distributions of interest and having similar maturities.
When debt obligations have been stripped of their unmatured interest coupons by
the holder, the stripped coupons are sold separately. The principal or corpus is
sold at a deep discount because the buyer receives only the right to receive a
future fixed payment on the security and does not receive any rights to periodic
cash interest payments. Once stripped or separated, the corpus and coupons may
be sold separately. Typically, the coupons are sold separately or grouped with
other coupons with like maturity dates and sold in such bundled form. Purchasers
of stripped obligations acquire, in effect, discount obligations that are
economically identical to the zero-coupon securities issued directly by the
obligor.
Zero-coupon convertible securities are debt instruments issued at a discount to
their face amount and convertible to common stock (see "Convertible Securities,"
above). These securities usually have put features giving the holder the
opportunity to sell them back to the issuer at a stated price prior to maturity.
The prices of zero-coupon convertible securities are generally more sensitive to
interest rate fluctuations than are conventional convertible securities.
Zero-coupon securities allow an issuer to avoid the need to generate cash to
meet current interest payments. Even though zero-coupon securities do not pay
current interest in cash, federal income tax law requires zero-coupon holders to
recognize accrued income prior to receipt of actual cash payment (i.e., at
maturity). In order to avoid federal income tax liability and maintain its
status as a regulated investment company, a portfolio may have to sell these
securities at disadvantageous times in order to generate cash for the
distribution of accrued income.
PRECIOUS METALS
The value of the investments of the Stellar Portfolio (and of other portfolios
to the extent they might invest in precious metal securities) may be affected
by changes in the price of gold and other precious metals. Gold has been
subject to substantial price fluctuations over short periods of time and may be
affected by unpredictable international monetary and other governmental
policies, such as currency devaluations or revaluations; economic and social
conditions within a country; trade imbalances, or trade or currency
restrictions between countries. Because much of the world's known gold reserves
are located in South Africa, political and social conditions there may pose
special risks to investments in gold. For instance, social upheaval and related
economic difficulties in South Africa could cause a decrease in the share
values of South African issuers.
In addition to its investments in securities, the Stellar Portfolio may, as
described in the prospectus, invest a portion of its assets in precious metals,
such as gold, silver, platinum, and palladium, and precious metal options and
futures. The prices of precious metals are affected by broad economic and
political conditions, but are less subject to local and company-specific
factors than securities of individual companies. As a result, precious metals
and precious metal options and futures may be more or less volatile in price
than securities of companies engaged in precious metals-related businesses.
Precious metals may be purchased in any form, including bullion and coins,
provided that the Fund intends to purchase only those forms of precious metals
that are readily marketable and that can be stored in accordance with custody
regulations applicable to mutual funds. The Portfolio may incur higher custody
and transaction costs for precious metals than for securities. Also, precious
metals investments do not pay income.
Under current federal income tax law, gains for selling precious metals (and
certain other assets) may not exceed 10% of a portfolio's annual gross income.
This tax requirement could prompt the Portfolio to hold or sell precious metals,
securities, options, or futures when it would not otherwise do so.
20
<PAGE> 50
MANAGEMENT OF THE FUND
DIRECTORS AND OFFICERS OF THE FUND
The directors and officers of the Fund, together with information as to their
principal occupations during the past five years are listed below:
<TABLE>
<CAPTION>
Position with Principal Occupation
Name and address the Fund during past five years
- ---------------- -------- ----------------------
<S> <C> <C>
Ronald L. Benedict* Secretary and Corporate Vice President, Counsel and
One Financial Way Director Secretary, ONLI; Secretary of the
Cincinnati, Ohio Adviser
George E. Castrucci Director Retired; formerly President and
8355 Old Stable Rd. Chief Operating Officer of Great
Cincinnati, Ohio American Communications Co and
Chairman and Chief Executive
Officer of Great American
Broadcasting Co.; Director of Benchmark
Savings Bank; Director of Baldwin
Piano & Organ Co.
Ross Love Director President & CEO, Blue Chip Broadcasting
615 Windings Way Ltd.; Trustee, Health Alliance of Greater
Cincinnati, Ohio Cincinnati; Director, Partnership for a
Drug Free America (Chairman of African-
American Task Force); Advisory Board,
Syracuse University School of Management;
Director, Association of National Advertisers;
Until 1996 was Vice President of Advertising,
Procter & Gamble Co.
John J. Palmer* President and Senior Vice President, Strategic
One Financial Way Director Initiatives, ONLI; Prior to
Cincinnati, Ohio March, 1997, was Senior Vice
President of Life Insurance
Company of Virginia
George M. Vredeveld Director Professor of Economics, University of
University of Cincinnati of Cincinnati; Director of Center for
P.O. Box 210223 Economic Education; Private Consultant;
Cincinnati, Ohio Director of Benchmark Savings Bank
Thomas A. Barefield Vice President Senior Vice President,
One Financial Way Institutional Sales, ONLI;
Cincinnati, Ohio Prior to November, 1997,
was Senior Vice President
of Life Insurance Company of
Virginia
Michael A. Boedeker Vice President Vice President, Fixed Income
One Financial Way Securities, ONLI; Vice President
Cincinnati, Ohio and Director of Adviser
Joseph P. Brom Vice President Vice President, Investments,
One Financial Way ONLI; President and Director
Cincinnati, Ohio of the Adviser
Stephen T. Williams Vice President Vice President Equity Securities,
One Financial Way ONLI; Vice President and Director of
Cincinnati, Ohio the Adviser
Dennis R. Taney Treasurer Mutual Funds Financial Operations,
One Financial Way ONLI; Treasurer of the Adviser
Cincinnati, Ohio
</TABLE>
*Indicates Directors who are "Interested Persons" as defined by the Investment
Company Act of 1940, as amended.
21
<PAGE> 51
All directors and officers of the Fund hold similar positions with ONE Fund,
Inc. ("ONE Fund"), another mutual fund sponsored by ONLI and managed by the
Adviser.
COMPENSATION OF DIRECTORS
Directors who are not affiliated with the Adviser, ONLI, ONLAC or a sub-adviser
were compensated as follows in 1997:
<TABLE>
<CAPTION>
Aggregate Compensation Total Compensation
Director From the Fund From Fund Complex*
- -------- ------------- ------------------
<S> <C> <C>
George E. Castrucci $ 10,400 $ 15,000
Maurice H. Kirby, Jr 2,000 2,850
Ross Love 8,400 12,150
George M. Vredeveld 10,400 15,000
</TABLE>
* The "Fund Complex" consists of the Fund and ONE Fund, Inc.
Directors and officers of the Fund who are affiliated with the Adviser, ONLI or
ONLAC receive no compensation from the Fund Complex. The Fund has no pension,
retirement or deferred compensation plan for its directors or officers.
SHAREHOLDERS' MEETINGS
The Fund's by-laws provide that shareholders meetings need only be held every
three years unless matters requiring shareholder approval should occur more
frequently. It is anticipated that shareholder meetings will generally occur
every three years.
INVESTMENT ADVISORY AND OTHER SERVICES
The Adviser is an Ohio corporation organized on January 17, 1996 to provide
investment advice and management services to funds affiliated with ONLI. The
Adviser is a wholly-owned subsidiary of ONLI. The Adviser succeeded O.N.
Investment Management Company ("ONIMCO") as the Fund's investment adviser on May
1, 1996. Prior to that date, ONIMCO had been the investment adviser from the
Fund's inception. The Adviser, like ONIMCO before it, uses ONLI's investment
personnel and administrative systems.
The Adviser regularly furnishes to the Fund's Board of Directors recommendations
with respect to an investment program consistent with the investment policies of
each portfolio. Upon approval of an investment program by the Fund's Board of
Directors, the Adviser implements the program by placing the orders for the
purchase and sale of securities or, in the case of 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, by delegating that
implementation to SGAM, TRPA, FAM, SCM, PBA, RSIM, Star, or FIC as the case may
be.
The Adviser's services are provided under an Investment Advisory Agreement with
the Fund. Under the Investment Advisory Agreement, the Adviser provides
personnel, including executive officers for the Fund. The Adviser also furnishes
at its own expense or pays the expenses of the Fund for clerical and related
administrative services (other than those provided by the custodian agreements
with Star and Investors Fiduciary Trust Company and an agency agreement with
American Data Services, Inc.), office space, and other facilities. The Fund pays
corporate expenses incurred in its operations, including, among others, local
income, franchise, issuance or other taxes; certain printing costs; brokerage
commissions on portfolio transactions; custodial and transfer agent fees;
auditing and legal expenses; and expenses relating to registration of its shares
for sale and shareholders' meetings.
As compensation for its services, the Adviser receives from the Fund annual fees
on the basis of each portfolio's average daily net assets during the quarterly
period for which the fees are paid based on the following schedule: (a) for each
of the Equity, Bond, Omni and Social Awareness Portfolios, 0.60% of the first
$100 million of each Portfolio's net assets, 0.50% of the next $150 million of
net assets, 0.45% of the next $250 million of net assets,
22
<PAGE> 52
0.40% of the next $500 million of net assets, 0.30% of the next $1 billion of
net assets, and 0.25% of net assets over $2 billion; (b) for the Money Market
Portfolio, 0.30% of the first $100 million of net assets, 0.25% of the next
$150 million of net assets, 0.23% of the next $250 million of net assets, 0.20%
of the next $500 million of net assets, and 0.15% of net assets over $1
billion; (c) for the International, Global Contrarian, Relative Value, Small Cap
Growth and Blue Chip Portfolios, 0.90% of each Portfolio's net assets; (d) for
the Capital Appreciation, Small Cap, Aggressive Growth and Strategic Income
Portfolios, 0.80% of each Portfolio's net assets, (e) for the Core Growth
Portfolio, 0.95% of the first $150 million of net assets, and 0.80% of net
assets over $150 million; (f) for the Growth & Income Portfolio, 0.85% of the
first $200 million of net assets, and 0.80% of net assets over $200 million,
(g) for the S&P 500 Index Portfolio, 0.40% of the first $100 million of net
assets, 0.35% of the next $150 million of net assets, and 0.33% of net assets
over $250 million; (h) for the Stellar Portfolio, 1.00% of that Portfolio's net
assets, and (i) for the High Income Bond and Equity Income Portfolios, 0.75% of
each portfolio's net assets. However, as to the Money Market Portfolio, the
Adviser is presently waiving any of its fee in excess of 0.25%.
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, Emerging 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 SGAM,
TRPA, FAM, SCM, PBA, RSIM, Star, and FIC, as the case may be, to manage the
investment and reinvestment of those Portfolios' assets, subject to the
supervision of the Adviser. As compensation for their services, (a) SGAM
receives from the Adviser fees at the annual rate of 0.75% of the International
and Global Contrarian Portfolios' average daily net assets during the quarter
for which the fee is paid; (b) TRPA receives from the Adviser a fee at an
annual rate of 0.70% of the first $5 million, and 0.50% of average daily net
asset value in excess of $5 million, of the Capital Appreciation Portfolio; (c)
FAM receives from the Adviser a fee at an annual rate of 0.65% of the first $75
million, 0.60% of the next $75 million, and 0.55% of the average daily net
asset value in excess of $150 million of the Small Cap Portfolio; (d) SCM
receives from the Adviser a fee at an annual rate of 0.70% of the first $50
million, and 0.50% of average daily net asset value in excess of $50 million of
the Aggressive Growth Portfolio; (e) PBA receives from the Adviser a fee at an
annual rate of 0.75% of the first $50 million, 0.70% of the next $100 million,
and 0.50% of average daily net assets in excess of $150 million of the Core
Growth Portfolio; (f) RSIM receives from the Adviser fees at an annual rate of
(i) 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 (ii) 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 of the
Small Cap Growth Portfolio; (g) Star receives from the Adviser fees at an annual
rate of (i) 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, (ii) 0.75%
of the first $50 million and 0.70% of average daily net assets in excess of $50
million of the Stellar Portfolio and (iii) 0.65% of the first $50 million and
0.60% of average daily net assets in excess of $50 million of the Relative
Value Portfolio, and (h) FIC receives from the Advisor fees at an annual rate
of (i) 0.50% of the first $80 million, 0.40% of the next $20 million, 0.80% of
the next $25 million, and 0.25% of average daily net assets in excess of $75
million for directing the investment and reinvestment of the High Income Bond
Portfolio's assets, and (ii) 0.50% of the first $85 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 the Equity Income
and Blue Chip Portfolios.
For each of the indicated years, ending December 31*, the following investment
advisory fees from each of the Fund's portfolios were paid to ONIMCO and the
Adviser as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Equity $1,431,415 $1,124,431 $ 812,156
Money Market** 71,176 48,721 31,228
Bond 121,188 117,359 87,798
Omni 948,021 735,210 542,756
International 1,416,777 1,045,160 678,133
Capital Appreciation 386,595 229,794 96,082
Small Cap 378,436 212,875 69,124
Global Contrarian 130,704 70,122 21,955
Aggressive Growth 125,073 63,707 11,898
Core Growth 62,237 N/A N/A
Growth & Income 61,464 N/A N/A
S&P 500 Index 43,376 N/A N/A
Social Awareness 16,529 N/A N/A
Strategic Income 18,318 N/A N/A
Stellar 23,440 N/A N/A
Relative Value 30,639 N/A N/A
Small Cap Growth N/A N/A N/A
High Income Bond N/A N/A N/A
Equity Income N/A N/A N/A
Blue Chip N/A N/A N/A
-------- ---------- ----------
$5,265,388 $3,647,379 $2,351,130
</TABLE>
23
<PAGE> 53
* The International Portfolio commenced operations on April 30, 1993. The
Capital Appreciation and Small Cap Portfolios commenced operations on May 1,
1994. The Global Contrarian and Aggressive Growth Portfolios commenced
operations on March 31, 1995. The Core Growth, Growth & Income, S&P 500 Index,
Social Awareness, Strategic Income, Stellar and Relative Value Portfolios
commenced operations on January 3, 1997. The Small Cap Growth, High Income Bond,
Equity Income and Blue Chip Portfolios commenced operations on May 1, 1998.
** An additional $14,235, $9,697, and $14,932 was earned but waived in 1997,
1996 and 1995, respectively, as described above.
The Investment Advisory Agreement also provides that if the total expenses
applicable to any portfolio during any calendar quarter (excluding taxes,
brokerage commissions, interest and the investment advisory fee) exceed 1%, on
an annualized basis, of such portfolio's average daily net asset value, the
Adviser will pay such expenses. Under these terms, ONIMCO paid the Global
Contrarian Portfolio $8,127 in 1995. No other such amounts were paid to any
portfolio during the three years ended December 31, 1997.
Under a Service Agreement among the Fund, the Adviser and ONLI, the latter has
agreed to furnish the Adviser, at cost, such research facilities, services and
personnel as may be needed by the Adviser in connection with its performance
under the Investment Advisory Agreement. The Adviser reimburses ONLI for its
expenses in this regard.
The current Investment Advisory, Service and Sub-Advisory Agreements were
initially approved by the votes of the Board of Directors and by the
shareholders of the respective portfolios on the dates indicated below:
<TABLE>
<CAPTION>
Board of
Directors Shareholders
--------- ------------
<S> <C> <C>
Equity 01-24-96 3-28-96
Money Market 01-24-96 3-28-96
Bond 01-24-96 3-28-96
Omni 01-24-96 3-28-96
International 01-24-96 3-28-96
Capital Appreciation 01-24-96 3-28-96
Small Cap (Investment Advisory and Service) 01-24-96 3-28-96
Small Cap (Sub-Advisory) 11-19-97 2-17-98
Global Contrarian 01-24-96 3-28-96
Aggressive Growth 01-24-96 3-28-96
Core Growth 08-22-96 1-02-97
Growth & Income (Investment Advisory and Service) 08-22-96 1-02-97
Growth & Income (Sub-Advisory) 08-27-97 9-26-97
S&P 500 Index 08-22-96 1-02-97
Social Awareness 08-22-96 1-02-97
Strategic Income 08-22-96 1-02-97
Stellar 08-22-96 1-02-97
Relative Value 08-22-96 1-02-97
Small Cap Growth 02-11-98 4-30-98
High Income Bond 02-11-98 4-30-98
Equity Income 02-11-98 4-30-98
Blue Chip 02-11-98 4-30-98
</TABLE>
These agreements will continue in force from year to year hereafter, if such
continuance is specifically approved at least annually by a majority of the
Fund's directors who are not parties to such 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 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, on 60 days' written notice to
the Adviser by the Fund's Board of Directors 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. The
Agreements will automatically terminate in the event of their assignment.
BROKERAGE ALLOCATION
The Adviser buys and sells the portfolio securities for the Equity, Money
Market, Bond, Omni, S&P 500 Index and Social Awareness Portfolios and selects
the brokers and dealers to handle such transactions. Each of the sub-advisers
selects the brokers and dealers that execute the transactions for the portfolios
managed by the respective sub-adviser. It is the intention of the Adviser and of
each sub-adviser to place orders for the purchase and sale of securities with
the objective of obtaining the most favorable price consistent with good
brokerage service. The cost of securities transactions for each portfolio will
consist primarily of brokerage commissions or dealer or underwriter spreads.
Bonds and money market securities are generally traded on a net basis and do not
normally involve either brokerage commissions or transfer taxes.
24
<PAGE> 54
Occasionally, securities may be purchased directly from the issuer. For
securities traded primarily in the over-the-counter market, the Adviser and
sub-advisers will, where possible, deal directly with dealers who make a market
in the securities unless better prices and execution are available elsewhere.
Such dealers usually act as principals for their own account.
In selecting brokers or dealers through whom to effect transactions, the Adviser
and sub-advisers consider a number of factors including the quality, difficulty
and efficiency of execution, and value of research, statistical, quotation and
valuation services provided. Research services by brokers include advice, either
directly or through publications or writings, as to the value of securities, the
advisability of purchasing or selling securities, the availability of securities
or purchasers or sellers of securities, and analyses and reports concerning
issuers, industries, securities, economic factors and trends, and portfolio
strategy. In making such determination, the Adviser or sub-adviser may use a
broker whose commission in effecting a securities transaction is in excess of
that of some other broker if the Adviser or sub-adviser determines in good faith
that the amount of such commission is reasonable in relation to the value of the
research and related services provided by such broker. In effecting a
transaction for one portfolio, a broker may also offer services of benefit to
other portfolios managed by the Adviser or sub-adviser, or of benefit to its
affiliates.
Generally, it is not possible to place a dollar value on research and related
services provided by brokers to the Adviser or a sub-adviser. However, receipt
of such services may tend to reduce the expenses of the Adviser or the
sub-advisers. Research, statistical and similar information furnished by brokers
may be of incidental assistance to other clients of the Adviser or the
sub-advisers and conversely, transaction costs paid by other clients of the
Adviser or the sub-advisers may generate information which is beneficial to the
Fund.
Consistent with these policies, the sub-advisers may, with the Board of
Directors' approval and subject to its review, direct portfolio transactions to
be executed by a broker affiliated with the sub-adviser so long as the
commission paid to the affiliated broker is reasonable and fair compared to the
commission that would be charged by an unaffiliated broker in a comparable
transaction.
For each of the indicated years, ending on December 3l, the following brokerage
commission amounts were paid by each portfolio:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Equity $167,877 $ 76,647 $ 81,091
Money Market None None None
Bond None None 630
Omni 96,409 41,879 39,073
International 286,011 187,147 153,524
Capital Appreciation 40,887 33,327 16,786
Small Cap 55,034 48,973 16,688
Global Contrarian 45,153 17,514 12,257
Aggressive Growth 104,590 173,952 42,839
Core Growth 12,359 N/A N/A
Growth & Income 51,188 N/A N/A
S&P 500 Index 74,063 N/A N/A
Social Awareness 16,522 N/A N/A
Strategic Income 5,127 N/A N/A
Stellar 4,353 N/A N/A
Relative Value 11,110 N/A N/A
Small Cap Growth N/A N/A N/A
High Income Bond N/A N/A N/A
Equity Income N/A N/A N/A
Blue Chip N/A N/A N/A
-------- -------- --------
$970,683 $579,439 $362,888
</TABLE>
In l997, substantially all of such commissions were paid to brokers who
furnished statistical data and research information to the Adviser,
SGAM, TRPA, FAM, or SCM, PBA, RSIM or Star.
25
<PAGE> 55
PURCHASE AND REDEMPTION OF SHARES
Fund shares are sold without a sales charge and may be redeemed at their net
asset value next computed after a purchase or redemption order is received by
the Fund. (The net asset value for the Money Market Portfolio is normally $l0
per share.) Depending upon the net asset values at that time, the amount paid
upon redemption may be more or less than the cost of the shares redeemed.
Payment for shares redeemed will be made as soon as possible, but in any event
within seven days after evidence of ownership of the shares is tendered to the
Fund. However, the Fund may suspend the right of redemption or postpone the date
of payment beyond seven days during any period when (a) trading on the New York
Stock Exchange is restricted, as determined by the Securities and Exchange
Commission, or such Exchange is closed for other than weekends and holidays; (b)
an emergency exists, as determined by the Commission, as a result of which
disposal by the Fund of securities owned by it is not reasonably practicable, or
it is not reasonably practicable for the Fund fairly to determine the value of
its net assets; or (c) the Commission by order so permits for the protection of
security holders of the Fund.
Shares of one portfolio may be exchanged for shares of another portfolio of the
Fund on the basis of the relative net assets value next computed after an
exchange order is received by the Fund.
The net asset value of the Fund's shares is determined on each day on which an
order for purchase or redemption of the Fund's shares is received and there is a
sufficient degree of trading in portfolio securities that the current net asset
value of its shares might be materially affected. Such determination is made as
of 4:00 p.m. Eastern time on each business day. "Business day" means each
weekday (Monday through Friday) except for the following holidays: New Years
Day, Presidents Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas. The net asset value of each portfolio is
computed by dividing the value of the securities in that portfolio plus any cash
or other assets less all liabilities of the portfolio, by the number of shares
outstanding for that portfolio.
Securities which are held in a portfolio and listed on a securities exchange are
valued at the last sale price or, if there has been no sale that day, at the
last bid price reported as of 4 p.m. Eastern time. Over-the-counter securities
are valued at the last bid price as of 4 p.m. Eastern time.
Short-term debt securities in all portfolios other than the Money Market and
Omni Portfolios, with remaining maturities of 60 days or less, are valued at
amortized cost. The Fund has obtained an exemptive order from the Commission
permitting it to value all short-term debt securities in the Omni Portfolio at
amortized cost. The Fund relies on Rule 2a-7 under the Investment Company Act of
1940 to value the assets of the Money Market Portfolio on the basis of amortized
cost with a view toward stabilizing the net asset value at $l0 per share and
allowing dividend payments to reflect net interest income as earned.
Accordingly, the short-term debt assets of the Omni and Money Market Portfolios
are valued at their cost on the date of acquisition with a daily adjustment
being made to accrued income to reflect amortization of premium or accretion of
discount to the maturity date. All other assets of the Omni Portfolio and of
those portfolios other than the Money Market Portfolio, including restricted
debt securities and other investments for which market quotations are not
readily available, are valued at their fair value as determined in good faith by
the Board of Directors.
As a condition of the exemptive order, the Fund has agreed, with respect to
short-term debt securities in its Omni Portfolio, to maintain a dollar-weighted
average maturity of not more than l20 days and to not purchase any such debt
security having a maturity of more than one year. In relying on Rule 2a-7 with
respect to short-term debt securities in its Money Market Portfolio, the Fund
has agreed to maintain a dollar-weighted average portfolio maturity of not more
than 90 days and to not purchase any such debt security having a maturity of
more than 397 days. The dollar-weighted average maturity of short-term debt
securities is determined by dividing the sum of the dollar value of each such
security times the remaining days to maturity of such security by the sum of the
dollar value of all short-term debt securities. Should the disposition of a
short-term debt security result in a dollar-weighted average maturity of more
than the number of days allowed under the exemptive order or Rule 2a-7, as the
case may be, the Portfolio will invest its available cash so as to reduce such
average maturity to the required number of days or less as soon as reasonably
practicable. The Fund normally holds short-term debt
26
<PAGE> 56
securities to maturity and realizes par therefor unless an earlier sale is
required to meet redemption requirements.
In addition, the Omni and Money Market Portfolios are required to limit their
short-term debt investments, including repurchase agreements, to those United
States dollar denominated instruments which the Board of Directors determines
present minimal credit risks and which are in the top two rating categories of
any nationally recognized statistical rating organizations or, in the case of
any instrument that is not rated, of comparable quality as determined by the
Board of Directors. Although the use of amortized cost provides certainty in
valuation, it may result in periods during which value so determined is higher
or lower than the price the Fund would receive if it liquidated its securities.
The Fund's Board of Directors is obligated, as a particular responsibility
within the overall duty of care owed to Money Market Portfolio shareholders, to
establish procedures reasonably designed, taking into account current market
conditions and the investment objective of such Portfolio, to stabilize the
Portfolio's net asset value per share as computed for the purpose of
distribution, redemption and repurchase, at $l0 per share. The procedures
adopted by the Board of Directors include periodically reviewing, as it deems
appropriate and at such intervals as are reasonable in light of current market
conditions, the extent of deviation, if any, between the net asset value per
share based on available market quotations and such value based on the
Portfolio's $l0 amortized cost price. If such deviation exceeds 1/2 of 1
percent, or if there is any other deviation which the Board of Directors
believes would result in a material dilution to shareholders or purchasers, the
Board of Directors will promptly consider what action, if any, it should
initiate. Such action may include redemption in kind; selling portfolio
instruments prior to maturity to realize capital gains or losses, or to shorten
the average portfolio maturity; withholding dividends; splitting, combining or
otherwise recapitalizing outstanding shares; or using available market
quotations to determine net asset value per share. The Portfolio may reduce the
number of its outstanding shares by requiring shareholders to contribute to
capital proportionately the number of full and fractional shares as is necessary
to maintain the net asset value per share of $l0. ONLI and ONLAC, the sole
shareholders of the Money Market Portfolio, have agreed to this procedure and
contract owners who allocate purchase payments to the Money Market Portfolio
will be bound by such agreement.
TAX STATUS
At December 3l, 1997 the Fund qualified as a regulated investment company under
Subchapter M of the Internal Revenue Code (the "Code"). Under such provisions,
the Fund is not subject to federal income tax on such part of its net ordinary
income and net realized capital gains which it distributes to shareholders. Each
portfolio is treated as a separate entity for federal income tax purposes,
including determining whether it qualifies as a regulated investment company and
determining its net ordinary income (or loss) and net realized capital gains (or
losses). To qualify for treatment as a regulated investment company, each
portfolio must, among other things, derive in each taxable year at least 90% of
its gross income from dividends, interest and gains from the sale or other
disposition of securities and derive less than 30% of its gross income in each
taxable year from the gains (without deduction for losses) from the sale or
other disposition of securities held for less than three months. Each portfolio
also intends to comply with the diversification requirements or regulations
under Section 817(h) of the Code.
The foregoing is a general and abbreviated summary of the applicable provisions
of the Code and Treasury Regulations currently in effect. For the complete
provisions, reference should be made to the pertinent Code sections and the
Treasury Regulations promulgated thereunder. Since the only eligible
shareholders of the Fund are separate accounts of ONLI, ONLAC and other
insurance companies, no discussion is stated herein as to the federal income tax
consequences at the shareholder level.
EXPERTS
The financial statements of Ohio National Fund, Inc. as of December 3l, l997 and
for the earlier periods indicated herein included in this Statement of
Additional Information and the Financial Highlights included in the prospectus
have been included herein and in the prospectus in reliance upon the report of
KPMG Peat Marwick LLP,
27
<PAGE> 57
independent certified public accountants, appearing in this Statement of
Additional Information, and upon the authority of said firm as experts in
accounting and auditing. KPMG Peat Marwick LLP's business address is 201 East
Fifth Street, Cincinnati, Ohio 45202.
LEGAL COUNSEL
Messrs. Jones & Blouch L.L.P., Washington, D.C., have passed on matters
pertaining to the federal securities laws and Ronald L. Benedict, Esq.,
Secretary of the Fund and Corporate Vice President, Counsel and Secretary of
ONLI, has passed on all other legal matters relating to the legality of the
shares described in the prospectus and this Statement of Additional Information.
THE S&P 500
"Standard & Poor's (R)," "S&P (R)," "S&P 500 (R)" and "Standard & Poor's 500"
are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use
by the Adviser. The S&P 500 Index Portfolio is not sponsored, endorsed, sold or
promoted by Standard & Poor's ("S&P") and S&P makes no representation regarding
the advisability of investing in the S&P 500 Index Portfolio. S&P makes no
representation or warranty, express or implied, to the owners of the Portfolio
or any member of the public regarding the advisability of investing in
securities generally or in the Portfolio particularly or the ability of the S&P
500 Index to track general stock market performance. S&P's only relationship to
the Adviser is the licensing of certain trademarks and trade names of S&P and of
the S&P 500 Index which is determined, composed and calculated by S&P without
regard to the Adviser or the Portfolio. S&P has no obligation to take the needs
of the Adviser or the owners of the Portfolio into consideration in determining,
composing or calculating the S&P 500 Index. S&P is not responsible for and has
not participated in the determination of the prices and amount of the Portfolio
or the timing of the issuance or sale of the Portfolio or in the determination
or calculation of the equation by which the Portfolio is to be converted into
cash. S&P has no obligation or liability in connection with the administration,
marketing or trading of the Portfolio.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500 INDEX
OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY FOR ANY ERRORS,
OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED,
AS TO RESULTS TO BE OBTAINED BY THE ADVISER, OWNERS OF THE PORTFOLIO, OR ANY
OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500 INDEX OR ANY DATA INCLUDED
THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL
WARRANTIES OR MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH
RESPECT TO THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY
OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL,
PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF
NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
THE YEAR 2000 ISSUE
The Fund and the Adviser have considered the impact on the Fund of "Year 2000"
issues. They have developed a remedial plan for their computer systems and
applications. Conversion activities are presently in process and conversion
testing and implementation are expected to be completed by December 31, 1998.
While the Fund and the Adviser have been assured by suppliers of financial
services (including the custodians, the transfer agent and the accounting agent)
that their systems either are already compliant or will be so by December 31,
1998, the Fund's internal auditors intend to independently test those systems to
verify their compliance. The failure of the Fund, the Adviser or one of their
service suppliers to achieve timely and complete compliance could materially
impair the ability to conduct their business, including the ability to
accurately and timely value portfolio securities.
28
<PAGE> 58
APPENDIX
DEBT SECURITY RATINGS
The Commission has designated six nationally recognized statistical rating
organizations: Duff and Phelps, Inc. ("D & P"), Fitch Investors Service, Inc.
("Fitch"), Moody's Investors Service, Inc. (Moody's"), Standard & Poor's Corp.
("S & P"), and, with respect to bank-supported debt and debt issued by banks,
broker-dealers and their affiliates, IBCA Inc. and its British affiliate, IBCA
Limited ("IBCA") and Thompson Bankwatch, Inc. ("TBW"). The Adviser may use the
ratings of all six such rating organizations as factors to consider in
determining the quality of debt securities, although it will generally only
follow D&P, Fitch, Moody's and S&P. IBCA and TBW will only be consulted if fewer
than two of the other four rating organizations have given their top rating to a
security. Only the ratings of Moody's, S & P and Fitch will be considered in
determining the eligibility of bonds for acquisition by the Fund.
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S")
Commercial Paper:
Moody's short-term debt ratings are opinions of the ability of issuers to
punctually repay senior debt obligations having an original maturity not
exceeding one year.
P-1 The Prime-1 (P-1) rating is the highest commercial paper rating assigned
by Moody's. Issuers (or supporting institutions) rated P-1 have a superior
ability for repayment of senior short-term debt obligations. P-1 repayment
ability will often be evidenced by many of the following characteristics:
leading market positions in well-established industries, high rates of
return on funds employed, conservative capitalization structure with
moderate reliance on debt and ample asset protection, broad margins in
earnings coverage of fixed financial charges and high internal cash
generation, and well-established access to a range of financial markets
and assured sources of alternate liquidity.
P-2 Issuers (or supporting institutions) rated Prime-2 (P-2) have a strong
ability for repayment of senior short-term obligations. This will normally
be evidenced by many of the characteristics cited above for P-1, but to a
lesser degree. Earnings trends and coverage ratios, while sound, may be
more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
Bonds:
Aaa Bonds which are rated Aaa by Moody's are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a large or
by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa Bonds which are rated as Aa by Moody's are judged to be of high quality by
all standards. Together with the Aaa group, they comprise what are
generally known as high grade bonds. They are rated lower than the best
bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the long-term
risks appear somewhat larger than in Aaa securities.
A Bonds which are rated A by Moody's possess many favorable investment
attributes and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are considered adequate
but elements may be present which suggest a susceptibility to impairment
sometime in the future.
63
<PAGE> 59
Baa Bonds which are rated Baa by Moody's are considered as medium grade
obligations, that is, they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and in fact have speculative
characteristics as well.
Ba Bonds which are Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty
of position characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
C Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's applies numerical modifiers, 1, 2, and 3, in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
STANDARD & POOR'S CORP. ("S & P")
Commercial Paper:
An S & P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than one year.
A-1 This is S & P's highest category and it indicates that the degree of
safety regarding timely payment is strong. Those issues determined to
possess extremely strong safety characteristics are designated A-1+.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated as A-1.
Bonds:
AAA Bonds rated AAA by S&P are the highest grade obligations. They possess the
ultimate degree of protection as to principal and interest. Market prices
move with interest rates, and hence provide maximum safety on all counts.
AA Bonds rated AA by S&P also qualify as high grade obligations, and in the
majority of instances differ from AAA issues only in small degree. Here,
too, prices move with the long-term money market.
A Bonds rated A by S&P are regarded as upper medium grade. They have
considerable investment strength but are not entirely free from the
adverse effects of changes in economic and trade conditions. Interest and
principal are regarded as safe. They predominantly reflect money rates in
their market behavior, but to some extent, also economic conditions.
BBB The BBB or medium grade category is the borderline between definitely
sound obligations and those where the speculative element begins to
predominate. These bonds have adequate asset coverage and normally are
protected by satisfactory earnings. Their susceptibility to changing
conditions, particularly to depressions, necessitates constant watching.
Marketwise, the bonds are more responsive to business and trade conditions
than to interest rates. This is the lowest group which qualifies for
commercial bank investments.
Debt rated 'BB,' 'B,' 'CC,' and 'C,' is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. 'BB' indicates the least degree of speculation and 'C' the highest.
While such debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties of major exposures to adverse
markets.
BB Debt rated 'BB' has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which
could lead to inadequate capacity to meet timely interest and principal
payments. The 'BB' rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied 'BBB-' rating.
B Debt rated 'B' has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity
or willingness to pay interest and repay principal. The 'B' rating
category is also used for debt subordinated to senior debt that is
assigned an actual or implied 'BB' or 'BB-' rating.
CCC Debt rated 'CCC' has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial, or economic conditions, it
is not likely to have the capacity to pay interest and repay principal.
The 'CCC' rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied 'B' or 'B-" rating.
CC The rating 'CC' typically is applied to debt subordinated to senior debt
that is assigned an actual or implied 'CCC' rating.
C The rating 'C' typically is applied to debt subordinated to senior debt
that is assigned an actual or implied 'CCC-' rating. The 'C' rating may
be used to cover a situation where a bankruptcy petition has been filed,
but debt service payments are continued.
CI The rating 'CI' is reserved for income bonds on which no interest is
being paid.
D Debt rated 'D' is in payment default. The 'D' rating category is used
when interest payments or principal payments are not made on the date due
even if the applicable grace period has not expired, unless S&P believes
that such payments will be made during such grace period. The 'D' rating
will also be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.
The ratings from 'AA' to 'CCC' may be modified by the addition of a plus (+) or
minus (-) to show relative standing within the major rating categories.
DUFF & PHELPS, INC. ("D & P")
Commercial Paper:
D & P's short-term ratings have incorporated gradations of "1+" and "1-" in
recognition of quality differences within the first tier.
D-1+ Highest certainty of timely payment. Short-term liquidity, including
internal operating factors and/or access to alternative sources of
funds, is outstanding, and safety is just below risk-free U.S. Treasury
short-term obligations.
D-1 Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are
minor.
D-1- High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection.
64
<PAGE> 60
D-2 Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors
are small.
FITCH INVESTORS SERVICE, INC. ("FITCH")
Commercial Paper
Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of up to three years, including commercial paper,
certificates of deposit, medium-term notes, and municipal and investment notes.
Fitch's short-term ratings emphasize the existence of liquidity necessary to
meet the issuer's obligations in a timely manner.
F-1+ Exceptionally strong credit quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1 Very strong credit quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues
rated F-1+.
F-2 Good credit quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not
as great as the F-1+ and F-1 categories.
Bonds
AAA Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated 'AAA.' Because bonds
rated in the 'AAA' and 'AA' categories are not significantly vulnerable
to foreseeable future developments, short-term debt of these issuers is
genrally rated 'F-1+.'
A Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to
be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interst and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these
bonds, and therefore impair timely payment. The likelihood that the
rating of these bonds will fall below investment grade is higher than
for bonds with higher ratings.
BB Bonds are considered to be speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives can be
identified which could assist the obligor in satisfying its debt service
requirements.
B Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the
obligor's limited margin of safety and the need for reasonable business
and economic activity throughout the life of the issues.
CCC Bonds have certain identifiable characteristics that, if not remedied,
may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.
CC Bonds are minimally protected. Default in payment of interest and/or
principal seems probable.
C Bonds are in imminent default in payment of interest or principal.
DDD, DD and D Bonds in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of
their ultimate recovery value in liquidation or reorganization of the
obligor. 'DDD' represents the highest potential for recovery on these
bonds, and 'D' represents the lowest potential for recovery.
Note: Fitch ratings (other than 'AAA,' 'DDD,' 'DD,' or 'D' categories) may be
modified by the addition of a plus (+) or minus (-) sign to show relative
position of a credit within the rating category.
65
<PAGE> 61
PRESIDENT'S MESSAGE
John J. Palmer photo
DEAR INVESTORS:
We are Pleased to provide you with an update of Ohio National Fund's
performance and investment activity for 1997. It was a very active and exciting
year, highlighted by the addition of several new portfolios and continued
strong growth in net assets, which now total more than $911 million as of
December 31.
LOOKING BACK
Against an economic backdrop of modest growth, low unemployment, and meager
inflation, U.S. stocks posted healthy gains for the third straight year, with
large stocks again leading the way. Nearly all of that performance came in the
first seven months, however, and the year was marked by heightened market
volatility. Internationally, stock market gains were generally respectable in
Europe, mixed in the Americans and dismal throughout the Asia/ Pacific region.
Fixed-income markets fared well as falling inflation and a stronger dollar
helped bonds bounce back in 1997 after posting weak returns during the previous
year.
NEW PORTFOLIOS
We welcomed seven new portfolios and three respected investment managers to Ohio
National Fund on January 3, 1997. Besides the S&P 500 Index and Social Awareness
portfolios, both managed by Ohio National Investments, Inc., they included the
Growth & Income Portfolio, managed by Robertson Stephens; the Core Growth
Portfolio, managed by Pilgrim Baxter & Associates; and the Relative Value,
Stellar and Strategic Income portfolios, all managed by Star Bank. The addition
of these portfolios significantly broaden the Fund's investment spectrum and
offers greater opportunities for diversification for our investors. Please note
that portfolio availability varies by contract.
LOOKING AHEAD
Entering 1998, Asia's turmoil continues to cloud the future. Economic and
currency volatility has hit Asian stocks hard and cast uncertainty over growth
prospects in the U.S. and elsewhere. In addition, the unprecedented three
consecutive years of greater than 20 percent returns experienced from 1995 to
1997 has put the domestic stock market in uncharted territory. But while the
short-term course of events is unknowable, our long-term commitment to our
fundamental investment principles -- careful selection and constant professional
management -- remains unchanged.
IN CLOSING
Information on your investments is contained in the following pages. We are
proud that Ohio National Fund is able to provide its investors with the sound
results documented herein. Please note in reviewing performance results that
rates of return under variable contracts differ depending on applicable charges
for mortality and expenses. Please contact your registered representative for
additional information on the financial protection and tax-deferred
accumulation options afforded by your variable annuity or variable universal
life insurance contract. As your needs change over time, he or she stands ready
to serve you.
Thank you for the confidence you have placed in Ohio National Fund as you
pursue your wealth-building endeavors. Be assured that we will make every
effort to continue to merit that confidence.
Best regards,
/s/ John J. Palmer
John J. Palmer
<PAGE> 62
EQUITY PORTFOLIO
OHIO NATIONAL FUND, INC.
OBJECTIVE
The principal investment objective of the Equity Portfolio is long-term capital
growth. Current income is a secondary objective.
PERFORMANCE AS OF DECEMBER 31, 1997
AVERAGE ANNUAL TOTAL RETURNS:
One-year 18.17%
Three-year 21.17%
Five-year 15.26%
Ten-year 13.61%
Since inception (1/14/71) 11.07%
Returns represent past performance, which is no guarantee of future results.
Investment return and principal value will vary so that shares, when redeemed,
may be worth more or less than their original cost. Actual results for variable
annuity and variable universal life contracts will be lower due to contract
charges. Consult your contract for applicable charges for mortality and
expenses.
COMMENTS
The Equity Portfolio's performance for 1997 trailed that of the S&P 500 Index
for three primary reasons. First, the portfolio has maintained a 10% to 13% cash
position due to our concern with high stock prices (especially for large-cap
stocks) relative to expected earnings and growth. Second, even though our
largest holdings are mostly large-cap stocks, approximately two-thirds of the
portfolio's holdings consist of companies whose market capitalizations range
from $300 million to $5 billion. This area of the market has not kept pace with
the larger stocks, despite better valuations in relation to potential earnings
growth. Third, the portfolio didn't rebound from the October drop experienced by
nearly all equity markets. Although the S&P 500 Index recaptured most of its
earlier gains by year-end, a third of New York Stock Exchange issues and half of
Nasdaq Composite issues corrected 20% or more from their highs and did not
regain them. Areas that held back portfolio performance this period included
technology and energy. We expect these areas to rebound from their corrections
as their secular outlooks remain positive.
Looking forward, we expect continued volatility in the equity markets.
Continued strong cash flows into mutual funds could push markets higher.
Concerns about slowing profit growth and economic uncertainty in emerging growth
areas and its impact on the rest of the world could cause sharp sell-offs. We
expect equity returns to gravitate toward their long-term averages.
CHANGE IN VALUE OF $10,000 INVESTMENT
<TABLE>
<CAPTION>
1997
<S> <C>
Equity Portfolio $38,632
S&P 500 Index $54,170
</TABLE>
Hypothetical illustration based on past performance. Future performance will
vary. All returns reflect reinvested dividends. The portfolio's holdings may
differ significantly from the securities in the index. The index is unmanaged
and therefore does not reflect the cost of portfolio management or trading.
Neither the portfolio nor the index is open to direct investment.
TOP 10 HOLDINGS AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
% of Net Assets
<S> <C> <C>
1. General Electric Corp 2.0
2. Cisco Systems Inc 1.7
3. American International Group 1.6
4. Camco International Inc. 1.5
5. Hewlett-Packard Co. 1.3
6. Intel Corp 1.3
7. Allied Signal Inc. 1.3
8. Texas Instruments Inc. 1.3
9. Monsanto Corp 1.2
10. Owens-Illinois Inc 1.2
</TABLE>
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
Computer and Related 13.3
Oil, Energy, and Natural Gas 10.0
Electrical Equipment 6.5
Chemicals 5.5
Transportation and Equipment 4.9
</TABLE>
3
<PAGE> 63
OHIO NATIONAL FUND, INC.
EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------
<S> <C> <C>
AEROSPACE (3.1%)
94,000 Allied Signal, Inc. $3,660,125
7,632 Boeing Co. 373,491
64,000 Raytheon Co. 3,232,000
31,350 Rockwell International Corp. 1,638,038
----------------
8,903,654
----------------
AUTOMOTIVE AND RELATED (3.2%)
22,500 Arvin Industries, Inc. 749,531
45,400 Cooper Tire & Rubber 1,106,625
31,000 Chrysler Corp. 1,090,813
29,400 Eaton Corp. 2,623,950
39,184 Ford Motor Co. 1,907,771
1 Meritor Automotive 20
20,000 Magna International, Inc. 1,256,250
47,000 Walbro Corp. 631,562
----------------
9,366,522
----------------
BANKING (4.3%)
26,460 Charter One Financial Inc. 1,670,288
36,000 First International Bancorp Inc. 436,500
42,000 First Union Corp. 2,152,500
40,000 * Flagstar Bancorp 791,876
35,000 Long Island Bancorp, Inc. 1,736,875
45,000 Mellon Bank Corp. 2,728,125
19,574 Nationsbank Corp. 1,190,344
11,000 Star Banc Corp. 631,125
30,750 Susquehanna Bancshares Inc. 1,176,187
----------------
12,513,820
----------------
BUSINESS SERVICES (4.0%)
64,000 * Alternative Resources Inc. 1,476,000
110,000 First Data Corp. 3,217,500
61,000 * Lo Jack 899,750
85,000 Manpower Inc. 2,996,250
76,000 Reynolds & Reynolds CL A 1,401,250
35,000 Standard Register Co. 1,216,250
23,000 Wackenhut Corp. Class B 485,875
----------------
11,692,875
----------------
CHEMICALS (5.5%)
35,000 E I DuPont De Nemours & Co. 2,102,187
96,000 Engelhard Corp. 1,668,000
50,000 Hercules Inc. 2,503,125
38,750 Hanson Trust PLC 893,672
28,000 Lubrizol Corp. 1,032,500
35,300 Mineral Technologies Inc. 1,603,944
85,000 Monsanto Co. 3,570,000
66,000 OM Group, Inc. 2,417,250
----------------
15,790,678
----------------
COMMUNICATIONS (2.1%)
138,250 Andrew Corp. 3,318,000
20,625 Mastec Inc. 471,797
40,000 Motorola Inc. 2,282,500
----------------
6,072,297
----------------
CONSUMER PRODUCTS (0.2%)
51,500 * Acorn Products 515,000
----------------
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- --------------------------------------------------------------
<S> <C> <C>
COMPUTER AND RELATED (13.3%)
56,500 * 3Comm Corp. $1,973,969
34,500 * Banctec Inc. 925,031
90,000 Cisco Systems, Inc. 5,017,500
63,000 Computer Associates 3,331,125
30,000 * Computer Sciences Corp. 2,505,000
65,000 * Continental Circuits Corp. 905,938
60,000 Hewlett-Packard Co. 3,750,000
53,000 Intel Corp. 3,723,250
33,000 * LSI Logic 651,750
90,000 MacNeal-Schwendler Corp. 866,250
20,000 * Microsoft Corp. 2,585,000
47,058 * Seagate Technology 905,866
45,742 Solectron Corp. 1,901,152
80,000 * Sun Microsystems, Inc. 3,190,000
45,000 Symbol Technologies 1,698,750
80,000 Texas Instruments, Inc. 3,600,000
30,000 * Zebra Tech Corp., Cl. A 892,500
----------------
38,423,081
----------------
CONTAINERS (1.2%)
90,000 * Owens-Illinois, Inc. 3,414,375
----------------
DRUGS (1.1%)
61,000 * Applied Analytical Industries 1,006,500
32,000 Abbott Laboratories 2,098,000
----------------
3,104,500
----------------
ELECTRICAL EQUIPMENT (6.5%)
50,000 * Advanced Lighting 950,000
60,000 Analog Devices, Inc. 1,661,250
100,000 * Anixter Intl. Inc. 1,650,000
101,000 BMC Industries, Inc. 1,628,625
31,500 Federal Signal Corp. 681,188
80,000 General Electric Co. 5,870,000
19,000 Hubbell Inc. Class B Shares 936,937
45,000 * Richey Electronics Inc. 461,250
40,000 Varian Associates, Inc. 2,022,500
40,000 Xerox Corp. 2,952,500
----------------
18,814,250
----------------
ENTERTAINMENT AND LEISURE (0.7%)
75,000 Cedar Fair 1,940,625
----------------
FOOD AND RELATED (1.2%)
80,000 Food Lion Inc. 675,000
25,500 H.J. Heinz Co. 1,295,719
45,000 Panamerican Beverages, Inc. 1,468,125
----------------
3,438,844
----------------
FORESTRY AND PAPER PRODUCTS (0.8%)
68,000 Sonoco Products 2,358,750
----------------
HOTEL/LODGING (1.0%)
50,000 * Guest Supply Inc. 656,250
50,000 La Quinta Inns 965,625
60,000 * Mirage Resorts Inc. 1,365,000
----------------
2,986,875
----------------
</TABLE>
(continued)
4
<PAGE> 64
OHIO NATIONAL FUND, INC.
EQUITY PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- ---------------------------------------------------------------
<S> <C> <C>
HOUSING, FURNITURE & RELATED (2.4%)
150,000 Clayton Homes, Inc. $2,700,000
64,000 Newell Co. 2,720,000
100,000 Shelby Williams 1,650,000
--------------
7,070,000
--------------
INDUSTRIAL SERVICES (1.8%)
22,500 Fluor Corp. 840,938
52,000 Mapics Inc. 565,500
20,500 * Medar Inc. 110,187
50,000 Regal Beloit 1,478,125
50,000 Waste Management Inc. 1,375,000
20,000 York International, Corp. 791,250
--------------
5,161,000
--------------
INSURANCE SERVICES (4.5%)
15,119 Aegon NV 1,355,040
42,187 American International Group 4,587,836
36,000 Chubb Corp. 2,722,500
40,000 Equitable Cos., Inc. 1,990,000
26,500 St. Paul Cos. 2,174,656
--------------
12,830,032
--------------
MACHINERY (3.1%)
48,000 Caterpillar, Inc. 2,331,000
30,000 Deere & Company 1,749,375
53,500 Hardinge Inc. 1,992,875
43,000 Modine Manufacturing Inc. 1,467,375
54,000 Stewart & Stevenson 1,377,000
--------------
8,917,625
--------------
MEDIA AND PUBLISHING (0.6%)
55,000 CBS 1,619,063
--------------
MEDICAL AND RELATED (4.6%)
35,000 Allegiance Corp. 1,240,313
37,500 Baxter International 1,891,406
41,500 * Cephalon Inc. 472,063
66,000 Columbia HCA Healthcare Corp. 1,955,250
50,700 * Foundation Health Corp. 1,134,412
30,000 * Humana Inc. 622,500
15,200 * National Healthcare-LP 851,200
76,313 Quorum Health Group Inc. 1,993,664
50,000 * Sola Industries 1,625,000
28,000 United Healthcare Corp. 1,391,250
--------------
13,177,058
--------------
METALS AND MINING (1.8%)
7,000 Amcast Industrial Corp. 160,563
25,000 Crown Cork & Seal Co. 1,253,125
16,000 Phelps Dodge Corp. 996,000
89,000 Worthington Industries 1,468,500
43,800 Wolverine Tube, Inc. 1,357,800
--------------
5,235,988
--------------
OIL, ENERGY AND NATURAL GAS (10.0%)
65,000 * Belco Oil & Gas 1,222,813
65,500 Camco International, Inc. 4,171,531
27,000 Chevron Corp. 2,079,000
13,000 Coastal Corp. 805,188
40,000 Kerr-McGee Corp. 2,532,500
125,000 * Louis Dreyfus Natural Gas 2,335,938
38,000 National Propane Partners 805,125
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- ----------------------------------------------------------------
<S> <C> <C>
OIL, ENERGY AND NATURAL GAS (CONT.)
30,000 * Offshore Logistics Inc. $641,250
35,000 Pacific Gulf Properties 831,250
85,000 Santa Fe Energy Resources 956,250
40,000 Schlumberger, Ltd. 3,220,000
110,000 * Tesoro Petroleum 1,705,000
28,000 UGI Corp. 820,750
47,850 Ultramar Diamond Shamrock 1,525,218
45,000 Westcoast Energy, Inc. 1,035,000
102,000 Williams Cos. Inc. 2,894,250
92,500 Wiser Oil 1,306,562
----------------
28,887,625
----------------
REAL ESTATE AND LEASING (3.3%)
32,500 Berkshire Realty 390,000
28,000 Camden Property Trust REIT 868,000
76,000 Commercial Net Lease Realty 1,358,500
37,500 First Industrial Realty Trust 1,354,688
16,400 Great Lakes REIT 318,775
55,000 Healthcare Realty Trust 1,591,562
67,250 Liberty Property Trust 1,920,828
29,500 National Health Investors, Inc. 1,235,312
18,500 Regency Realty Corp. 512,219
----------------
9,549,884
----------------
RESTAURANTS (0.3%)
84,000 * Buffets, Inc. 787,500
----------------
RETAIL (0.1%)
35,000 * Ridgeview Inc. 218,750
----------------
TEXTILES AND RELATED (0.8%)
25,000 Oxford Industries, Inc. 812,500
47,000 Warnaco Group, Cl. A 1,474,625
----------------
2,287,125
----------------
TRANSPORTATION AND EQUIPMENT (4.9%)
44,000 * Atlas Air Inc. 1,056,000
48,000 * Avondale Industries Inc. 1,425,000
26,000 Burlington Northern, Inc. 2,416,375
30,000 CNF Transportation Inc. 1,151,250
29,649 Halter Marine Group Inc. 856,115
33,750 Illinois Central Corp. 1,149,609
75,000 Norfolk Southern Corp. 2,310,938
56,800 Trinity Industries 2,534,700
49,000 * Wisconsin Central Transportation 1,145,375
----------------
14,045,362
----------------
UTILITIES (0.6%)
27,500 FPL Group, Inc. 1,627,656
----------------
TOTAL COMMON STOCKS
(87.0%) (COST $144,544,465) $250,750,814
----------------
MARKET
SHARES WARRANTS VALUE
- ---------------------------------------------------------------------
95,000 Medar Warrants $6.86 $40,850
-------------
TOTAL WARRANTS
(0.0%) (COST $40,850) $40,850
-------------
</TABLE>
(continued)
5
<PAGE> 65
OHIO NATIONAL FUND, INC.
EQUITY PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES PREFERRED STOCK VALUE
- --------------------------------------------------------------
<S> <C> <C>
BANKING (0.3%)
30,000 National Australia Bank LTD $853,125
--------------
COMPUTER & RELATED (0.1%)
24,000 General Datacommunications 378,000
--------------
FINANCIAL SERVICES (0.1%)
11,000 Money Store 6.5% 242,688
--------------
METALS AND MINING (0.4%)
50,000 Freeport McMoRan Copper & Gold,
Series B 1,200,000
--------------
OIL AND GAS (0.3%)
15,000 Howell Corp., $3.50 Series A 828,750
--------------
REAL ESTATE (0.2%)
20,000 Oasis Residential Inc. Series A
cum., conv. 512,500
--------------
TOTAL PREFERRED STOCK
(1.4%) (COST $4,737,838) $4,015,063
--------------
<CAPTION>
FACE MARKET
AMOUNT CONVERTIBLE DEBENTURES VALUE
- ----------------------------------------------------------------
<S> <C> <C>
BANKING (0.2%)
$400,000 First State Bancorp, 7.500%
conv. debentures, due 04-30-17 $519,500
--------------
ELECTRICAL EQUIPMENT (0.4%)
1,100,000 Richey Electric, 7.000%
conv. debentures, due 03-01-06 1,083,500
--------------
INDUSTRIAL SERVICES (0.1%)
475,000 Medar Inc. 12.95%
conv. debentures, due 06-30-05 434,150
--------------
METAL FABRICATING (0.3%)
900,000 INCO, Ltd., 7.750% conv.
subordinated debentures,
due 03-15-16 878,625
--------------
OIL, ENERGY AND NATURAL GAS (0.2%)
500,000 Offshore Log, 6.000%
debentures due 12-15-06 577,500
--------------
TOTAL CONVERTIBLE
(1.2%) (COST $3,334,150) $3,493,275
--------------
<CAPTION>
FACE MARKET
AMOUNT SHORT-TERM NOTES VALUE
- ------------------------------------------------------------------
<S> <C> <C>
AUTOMOTIVE AND RELATED (3.1%)
$3,000,000 Ford Motor ST
6.000% 01-07-98 $2,997,000
3,862,000 General Motors
5.900% 01-09-98 3,856,936
2,155,000 General Motors
6.160% 01-09-98 2,152,050
------------
9,005,986
------------
ELECTRICAL EQUIPMENT (0.6%)
1,705,000 G.E. Capital
5.920% 01-05-98 1,703,879
------------
FINANCIAL SERVICES (3.6%)
3,602,000 American Express
5.850% 01-06-98 3,599,073
1,401,000 CIT Group Holdings
5.550% 01-02-98 1,400,784
1,237,000 Heller Financial
6.150% 01-09-98 1,235,309
4,025,000 Household Finance
6.080% 01-02-98 4,024,320
------------
10,259,486
------------
INSURANCE SERVICES (1.3%)
3,895,000 Prudential Funding
6.010% 01-08-98 3,890,448
------------
RETAIL (1.8%)
5,144,000 Sears Roebuck
5.900% 01-09-98 5,137,256
-----------
TOTAL SHORT-TERM NOTES
(10.4%) (COST $29,997,056) $29,997,055
-----------
TOTAL HOLDINGS
(COST $182,654,359)(a) $288,297,057
============
</TABLE>
*Non-income producing securities.
(a) Also represents cost for Federal income tax purposes.
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 66
OHIO NATIONAL FUND, INC.
EQUITY PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<S> <C>
ASSETS:
Investments in securities at market
value (note 1) (cost $182,654,359) ...... $288,297,057
Cash in bank ............................. 8,487
Receivable for fund shares sold........... 340,861
Receivable for fund securities sold....... 512,287
Dividends and accrued interest receivable 448,925
Other .................................... 16,212
-------------
Total assets ............................ 289,623,829
-------------
LIABILITIES:
Payable for securities purchased.......... 729,196
Payable for shares redeemed............... 634,602
Payable for investment management
services (note 3) ....................... 136,342
Other accrued expenses ................... 51,514
-------------
Total liabilities ....................... 1,551,654
-------------
Net assets at market value $288,072,175
=============
NET ASSETS CONSIST OF:
Par value, $1 per share .................. $8,129,279
Paid-in capital in excess of par value ... 174,223,941
Accumulated undistributed net realized
gain on investments .................... 73,823
Net unrealized appreciation on investments
(note 1)................................. 105,642,698
Undistributed net
investment income ....................... 2,434
-------------
Net assets at market value $288,072,175
=============
Shares outstanding (note 4)................ 8,129,279
Net asset value per share.................. $35.44
=============
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest............................. $1,953,815
Dividends............................ 3,627,716
-----------
Total investment income............. 5,581,531
-----------
EXPENSES:
Management fees (note 3)............. 1,431,415
Custodian fees (note 3).............. 53,800
Directors' fees (note 3) ............ 11,520
Professional fees.................... 34,560
Accounting and transfer agent fees... 195,403
Other................................ 54,729
-----------
Total expenses...................... 1,781,427
-----------
Net investment income............... $3,800,104
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from investments .. $13,144,695
Net increase in unrealized
appreciation on investments ........ 26,148,841
-----------
Net gain on investments............ 39,293,536
-----------
Net increase in net
assets from operations............. $43,093,640
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE> 67
OHIO NATIONAL FUND, INC.
EQUITY PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
12-31-97 12-31-96
---------- ----------
<S> <C> <C>
From operations:
Net investment income .............................................................. $3,800,104 $3,269,213
Realized gain on investments ....................................................... 13,144,695 2,116,393
Unrealized gain on investments ..................................................... 26,148,841 29,110,600
----------- -----------
Net increase in assets from operations............................................ 43,093,640 34,496,206
----------- -----------
Dividends and distributions to shareholders:
Dividends paid from net investment income .......................................... (4,788,921) (3,065,136)
Capital gains distributions ........................................................ (15,187,264) (5,341,756)
----------- -----------
Total dividends and distributions ................................................ (19,976,185) (8,406,892)
----------- -----------
From capital share transactions (note 4):
Received from shares sold .......................................................... 38,790,194 37,139,279
Received from dividends reinvested ................................................. 19,976,185 8,406,892
Paid for shares redeemed ........................................................... (26,588,013) (14,554,329)
----------- -----------
Increase in net assets derived from capital share transactions..................... 32,178,366 30,991,842
----------- -----------
Increase in net assets .......................................................... 55,295,821 57,081,156
Net Assets:
Beginning of period ................................................................ 232,776,354 175,695,198
----------- -----------
End of period (a) .................................................................. $288,072,175 $232,776,354
============ ============
(a) Includes undistributed net investment income of.................................. $2,434 $991,250
============ ============
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Per share data:
Net asset value, beginning of period............................. $32.30 $28.58 $23.20 $23.90 $21.63
Income from investment operations:
Net investment income........................................... 0.51 0.47 0.50 0.45 0.41
Net realized and unrealized gain (loss) on investments ......... 5.24 4.58 5.65 (0.39) 2.57
------ ------ ------ ------ ------
Total income from investment operations........................ 5.75 5.05 6.15 0.06 2.98
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income ........................... (0.63) (0.46) (0.39) (0.44) (0.42)
Distributions from net realized capital gains................... (1.98) (0.87) (0.38) (0.32) (0.29)
------ ------ ------ ------ ------
Total distributions............................................ (2.61) (1.33) (0.77) (0.76) (0.71)
------ ------ ------ ------ ------
Net asset value, end of period................................... $35.44 $32.30 $28.58 $23.20 $23.90
====== ====== ====== ====== ======
Total return..................................................... 18.17% 18.35% 27.20% 0.25% 14.09%
Ratios and supplemental data:
Ratio of expenses to average net assets ........................ 0.67% 0.73% 0.73% 0.62% 0.63%
Ratio of net investment income to average net assets ........... 1.43% 1.60% 1.90% 1.90% 1.91%
Portfolio turnover rate.......................................... 19% 11% 14% 8% 18%
Average commission rate (a) ..................................... $0.07 $0.07 NR NR NR
Net assets at end of period (millions)........................... $288.1 $232.8 $175.7 $123.3 $109.9
</TABLE>
(a) Represents the total dollar amount of commission paid on equity security
transactions divided by the total number of shares purchased and sold for
which commissions were charged.
(NR) Not required prior to 1996.
The accompanying notes are an integral part of these financial statements.
8
<PAGE> 68
OHIO NATIONAL FUND, INC.
MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT SHORT-TERM NOTES VALUE
- -----------------------------------------------------------------
<S> <C> <C>
AUTOMOTIVE AND RELATED (10.6%)
$1,080,000 Ford Motor Acceptance Corp.
5.510% 01-05-98 $1,079,339
1,021,000 General Motors Acceptance Corp.
5.580% 02-02-98 1,015,936
1,000,000 Hertz Corporation
5.530% 01-09-98 998,771
------------
3,094,046
------------
CHEMICALS (3.7%)
1,100,000 Monsanto
5.500% 04-01-98 1,084,875
------------
COMMUNICATIONS (3.4%)
1,006,000 AT&T Corp.
5.700% 01-21-98 1,002,814
------------
COMPUTER AND RELATED (3.4%)
613,000 International Business Machines
5.740% 01-26-98 610,557
380,000 International Business Machines
5.730% 02-04-98 377,944
------------
988,501
------------
CONTAINERS (1.1%)
310,000 Crown Cork & Seal
6.000% 03-12-98 306,383
------------
ELECTRICAL EQUIPMENT (11.8%)
1,250,000 Avnet, Inc.
5.780% 02-19-98 1,240,166
1,022,000 GE Capital
5.850% 01-28-98 1,017,516
1,194,000 GTE Capital
6.250% 02-06-98 1,186,394
------------
3,444,076
------------
ENTERTAINMENT AND LEISURE (2.6%)
747,000 Walt Disney
5.520% 01-02-98 746,885
------------
FOOD AND RELATED (3.8%)
1,100,000 Coca-Cola
5.660% 01-23-98 1,096,195
------------
INDUSTRIAL SERVICES (3.8%)
930,000 Fluor Corp.,
5.780% 01-30-98 925,670
190,000 Growmark Inc.
5.800% 01-05-98 189,877
------------
1,115,547
------------
<CAPTION>
FACE MARKET
AMOUNT SHORT-TERM NOTES VALUE
- -------------------------------------------------------------
<S> <C> <C>
FINANCIAL SERVICES (20.9%)
$1,200,000 American Express Credit
5.750% 01-27-98 $1,195,017
276,000 Associates Corp.
5.750% 01-16-98 275,339
665,000 Cigna Corp.
5.900% 01-29-98 661,948
1,050,000 Heller Financial Services
5.620% 01-20-98 1,046,886
400,000 Household Finance Corp.
5.800% 01-09-98 399,484
810,000 Household Finance Corp.
5.540% 01-12-98 808,629
821,000 John Deere Capital Corp.
5.510% 01-07-98 820,246
900,000 LGE Capital Corp. (b)
5.750% 03-23-98 888,356
-------------
6,095,905
-------------
INSURANCE SERVICES (11.1%)
960,000 American General Finance
5.650% 02-12-98 953,672
1,100,000 MetLife Funding
5.690% 01-22-98 1,096,349
1,198,000 Prudential Funding Corp.
5.820% 01-08-98 1,196,644
-------------
3,246,665
-------------
MEDICAL AND RELATED (6.6%)
1,000,000 Allergan Inc.
6.050% 02-17-98 992,101
933,000 Schering Corp.
5.650% 02-03-98 928,168
-------------
1,920,269
-------------
RETAIL (10.3%)
1,126,000 Sears Roebuck Acceptance Corp.
5.650% 01-14-98 1,123,703
974,000 Southland
5.780% 01-20-98 971,029
919,000 Winn-Dixie
5.500% 01-06-98 918,298
-------------
3,013,030
-------------
UTILITIES (6.9%)
900,000 Houston Industries (b)
5.800% 01-09-98 898,840
1,108,000 Interstate Power
5.840% 01-13-98 1,105,843
-------------
2,004,683
-------------
TOTAL HOLDINGS
(COST $29,159,874) (a) $29,159,874
=============
</TABLE>
(a) Also represents cost for Federal income tax purposes.
(b) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period end,
the value of these securities amounted to $1,787,196 or 6.1% of net assets.
The accompanying notes are an integral part of these financial statements.
9
<PAGE> 69
OHIO NATIONAL FUND, INC.
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<S> <C>
Assets:
Investments in securities at market
value (note 1) (cost $29,159,874)......... $29,159,874
Cash in bank .............................. 73
Receivable for fund shares sold............ 1,816,815
Other ..................................... 1,650
-------------
Total assets ............................. 30,978,412
-------------
Liabilities:
Payable for investment management
services (note 3) ........................ 6,125
Dividends payable ......................... 27
Payable for shares redeemed ............... 1,826,638
Other accrued expenses .................... 4,009
-------------
Total liabilities ........................ 1,836,799
-------------
Net assets at market value $29,141,613
=============
Net assets consist of:
Par value, $1 per share ................... $2,914,161
Paid-in capital in excess of par value .... 26,227,452
-------------
Net assets at market value $29,141,613
=============
Shares outstanding (note 4)................. 2,914,161
Net asset value per share................... $10.00
=============
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
<S> <C>
Investment income:
Interest............................ $1,331,745
-----------
Expenses:
Management fees (note 3)............ 71,176
Custodian fees (note 3)............. 5,000
Directors' fees (note 3)............ 960
Professional fees................... 2,963
Accounting and transfer agent fees.. 17,078
Other............................... 4,673
-----------
Total expenses..................... 101,850
Less fees waived (note 3) ......... (11,867)
-----------
Net expenses ..................... 89,983
-----------
Net investment income ............. $1,241,762
-----------
Net increase in net
assets from operations............ $1,241,762
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE> 70
OHIO NATIONAL FUND, INC.
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
12-31-97 12-31-96
---------- ----------
<S> <C> <C>
From operations:
Net investment income ............................................................. $1,241,762 $979,842
----------- -----------
Dividends and distributions to shareholders:
Dividends paid from net investment income ......................................... (1,241,762) (979,842)
----------- -----------
From capital share transactions (note 4):
Received from shares sold ......................................................... 40,064,944 28,544,523
Received from dividends reinvested ................................................ 1,241,762 979,842
Paid for shares redeemed .......................................................... (37,676,423) (19,728,821)
----------- -----------
Increase in net assets derived from capital share transactions.................... 3,630,283 9,795,544
----------- -----------
Increase in net assets ......................................................... 3,630,283 9,795,544
Net Assets:
Beginning of period ............................................................... 25,511,330 15,715,786
----------- -----------
End of period...................................................................... $29,141,613 $25,511,330
=========== ===========
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Per share data:
Net asset value, beginning of period................. $10.00 $10.00 $10.00 $10.00 $10.00
Income from investment operations:
Net investment income............................... 0.52 0.50 0.54 0.39 0.27
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income ............... (0.52) (0.50) (0.54) (0.39) (0.27)
------ ------ ------ ------ ------
Net asset value, end of period....................... $10.00 $10.00 $10.00 $10.00 $10.00
====== ====== ====== ====== ======
Total return......................................... 5.37% 5.17% 5.62% 4.00% 2.71%
Ratios net of fees waived by advisor (a):
Ratio of expenses to average net assets ............ 0.38% 0.44% 0.44% 0.39% 0.53%
Ratio of net investment income to average net assets 5.11% 4.98% 5.39% 3.69% 2.71%
Ratios assuming no fees waived by advisor:
Ratio of expenses to average net assets ............ 0.43% 0.49% 0.55% 0.59% 0.63%
Ratio of net investment income to average net assets 5.06% 4.93% 5.27% 3.51% 2.60%
Net assets at end of period (millions)............... $29.1 $25.6 $15.7 $13.1 $19.1
</TABLE>
(a) On and after June 17, 1993, the advisor has waived part of the management
fee to the extent such fee exceeds an annual rate of 0.25% of the Money
Market Portfolio's daily net asset value.
The accompanying notes are an integral part of these financial statements.
11
<PAGE> 71
BOND PORTFOLIO
OHIO NATIONAL FUND, INC.
OBJECTIVE
The Bond Portfolio seeks to obtain a high level of income and opportunity for
capital appreciation consistent with preservation of capital.
PERFORMANCE AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS:
<S> <C>
One-year 9.28%
Three-year 10.45%
Five-year 7.48%
Ten-year 8.30%
Since inception (11/2/82) 8.70%
</TABLE>
Returns represent past performance, which is no guarantee of future results.
Investment return and principal value will vary so that shares, when redeemed,
may be worth more or less than their original cost. Actual results for variable
annuity and variable universal life contracts will be lower due to contract
charges. Consult your contract for applicable charges for mortality and
expenses.
COMMENTS
The Bond Portfolio returned 9.28% in 1997 versus 7.87% for the Lehman Brothers
Government/Corporate Intermediate Bond Index. The portfolio has a slightly
longer maturity structure than the index and benefited from the overall decline
in interest rates during 1997.
The portfolio should perform in line with the index during 1998 if we are
correct in forecasting less volatility in interest rates than was the case in
1997. Remember that past performance is not necessarily predictive of future
results.
CHANGE IN VALUE OF $10,000 INVESTMENT
<TABLE>
<CAPTION>
1997
<S> <C>
Bond Portfolio $23,528
Lehman Bros. Government/Corp.
Index-Intermediate $24,271
</TABLE>
Hypothetical illustration based on past performance. Future performance will
vary. All returns reflect reinvested dividends. The portfolio's holdings may
differ significantly from the securities in the index. The index is unmanaged
and therefore does not reflect the cost of portfolio management or trading.
Neither the portfolio nor the index is open to direct investment.
TOP 10 HOLDINGS AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
% Net Assets
<S> <C>
1. Anixter 8.00% 09/15/2003 4.8
2. Colonial 8.05% 7/15/2006 4.5
3. Texas Utilities 7.48% 1/1/2017 3.4
4. Mississippi Chemical Corp 7.25% 11/15/2017 3.2
5. ITT Dest 6.75% 11/15/05 3.1
6. Mississippi Power & Light 8.80% 4/1/05 2.5
7. Pioneer 8.50% 08/01/2006 2.4
8. Northwest Airlines 8.07% 1/2/15 2.4
9. Great Lakes 8.90% 12/1/99 2.4
10. Mobile Energy 8.665% 1/1/17 2.4
</TABLE>
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
Utilities 15.2
Oil, Energy, and Natural Gas 11.3
Electrical Equipment 9.2
Real Estate and Leasing 7.1
Transportation and Equipment 5.2
</TABLE>
13
<PAGE> 72
OHIO NATIONAL FUND, INC.
BOND PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT LONG-TERM BONDS & NOTES VALUE
- -------------------------------------------------------------------
<S> <C> <C>
GOVERNMENT (2.4%)
$500,000 U.S. Treasury Note
7.875% 11-15-99 $519,376
-------------
AUTOMOTIVE AND RELATED (2.9%)
100,000 Arvin Industries
10.000% 08-01-00 107,533
500,000 GMAC
8.400% 10-15-99 519,699
-------------
627,232
-------------
CHEMICALS (3.2%)
700,000 Mississippi Chemical Corp.
7.250% 11-15-17 702,849
-------------
COMMUNICATIONS (2.2%)
200,000 Comcast Cable Communications
8.375% 05-01-07 223,107
250,000 Tele-Communications, Inc.
8.250% 01-15-03 267,592
-------------
490,699
-------------
COMPUTER AND RELATED (2.1%)
300,000 Apple Computer Inc.
6.500% 02-15-04 250,500
200,000 Comdisco, Inc.
7.750% 09-01-99 205,163
-------------
455,663
-------------
CONSUMER GOODS (2.5%)
200,000 RJR Nabisco Inc.
8.750% 04-15-04 215,149
300,000 RJR Nabisco Inc.
8.625% 12-01-02 319,457
-------------
534,606
-------------
ELECTRICAL EQUIPMENT (9.2%)
1,000,000 Anixter Intl.
8.000% 09-15-03 1,051,395
500,000 Pioneer
8.500% 08-01-06 530,601
400,000 Tektronix Inc.
7.500% 08-01-03 416,960
-------------
1,998,956
-------------
FINANCIAL SERVICES (3.5%)
250,000 Aristar Inc.
5.750% 07-15-98 249,831
500,000 St. Paul Bancorp Inc.
7.125% 02-15-04 509,922
-------------
759,753
-------------
FORESTRY AND PAPER PRODUCTS (3.9%)
300,000 Boise Cascade Co.
9.850% 06-15-02 338,356
250,000 Champion International
7.700% 12-15-99 257,168
250,000 ITT Rayonier Inc.
7.500% 10-15-02 262,424
-------------
857,948
-------------
FOOD AND RELATED (2.3%)
500,000 Gruma, SA de C.V.
7.625% 10-15-07 492,329
-------------
<CAPTION>
FACE MARKET
AMOUNT LONG-TERM BONDS & NOTES VALUE
- ------- -------------------------------------------------------
<S> <C> <C>
GOVERNMENT (FOREIGN) (2.2%)
$200,000 British Columbia
7.000% 01-15-03 $207,976
250,000 Province of Quebec
8.625% 01-19-05 281,493
------------
489,469
------------
HOTEL/LODGING (4.6%)
700,000 ITT Destinations
6.750% 11-15-05 674,428
300,000 Marriott International
7.875% 04-15-05 323,937
------------
998,365
------------
HOUSING, FURNITURE AND RELATED (0.8%)
140,000 Armstrong World
9.750% 04-15-08 175,282
------------
INSURANCE (3.1%)
250,000 Continental Corp.
7.250% 03-01-03 258,340
400,000 Transamerica Finance Corp.
7.500% 03-15-04 420,482
------------
678,822
------------
MEDICAL AND RELATED (2.6%)
250,000 Bergen Brunswig
7.375% 01-15-03 261,052
300,000 Cardinal Health Inc.
6.500% 02-15-04 302,808
------------
563,860
------------
METALS AND MINING (2.3%)
500,000 Cyprus Minerals
6.625% 10-15-05 499,199
------------
OIL, ENERGY AND NATURAL GAS (11.3%)
200,000 Atlantic Richfield
8.550% 03-01-12 241,529
100,000 DeKalb Energy
9.875% 07-15-00 108,120
400,000 Dresser Industries, Inc.
6.250% 06-01-00 402,562
125,000 Marathon Oil
7.000% 06-01-02 127,516
480,937 Mobile Energy Services Co.
8.665% 01-01-17 519,297
400,000 PDV America, Inc.
7.875% 08-01-03 414,481
140,000 Shell Oil Co.
6.950% 12-15-98 141,423
500,000 System Energy
7.800% 08-01-00 508,059
------------
2,462,987
------------
REAL ESTATE (7.1%)
300,000 Avalon Properties Inc.
7.375% 09-15-02 308,221
900,000 Colonial Realty
8.050% 07-15-06 977,826
250,000 Sun Communities
7.625% 05-01-03 261,225
------------
1,547,272
------------
</TABLE>
(continued)
14
<PAGE> 73
OHIO NATIONAL FUND, INC.
BOND PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT LONG-TERM BONDS & NOTES VALUE
- -----------------------------------------------------------
<S> <C> <C>
RESTAURANTS (2.3%)
$500,000 Wendy's Inc.
6.350% 12-15-05 $495,750
-------------
TRANSPORTATION (5.2%)
250,000 American President Cos., Ltd.
7.125% 11-15-03 245,663
350,000 Illinois Central Gulf Railroad
6.750% 05-15-03 356,112
495,731 Northwest Airlines
8.070% 01-02-15 528,529
-------------
1,130,304
-------------
UTILITIES (15.2%)
200,000 Cleveland Electric Illum.
7.625% 08-01-02 206,800
500,000 Great Lakes Power Inc.
8.900% 12-01-99 523,246
250,000 Kansas Gas & Electric
8.290% 03-29-16 268,628
550,000 Mississippi Power & Light
8.800% 04-01-05 552,404
375,000 New Orleans Public Service Co.
8.670% 04-01-05 378,754
200,000 Old Dominion Electric Co-op
8.760% 12-01-22 228,161
200,000 Sprint Corp.
8.125% 07-15-02 214,800
700,000 Texas Utilities Electric Co.
7.480% 01-01-17 731,224
200,000 Toledo Edison Co.
7.875% 08-01-04 209,660
-------------
3,313,677
-------------
TOTAL LONG-TERM BONDS & NOTES
(90.9%) (COST $19,074,374) $19,794,398
-------------
<CAPTION>
MARKET
SHARES WARRANTS VALUE
- ----------------------------------------------------------------------
<S> <C> <C>
500 Plastic Specialties $500
-------------
TOTAL WARRANTS
(0.0%) (COST $0) $500
-------------
<CAPTION>
MARKET
SHARES PREFERRED STOCK VALUE
- ---------------------------------------------------------------
<S> <C> <C>
UTILITIES (1.5%)
12,000 GTE Delaware, 8.750%, Series B $318,000
-------------
TOTAL PREFERRED STOCKS
(1.5%) (COST $300,000) $318,000
-------------
<CAPTION>
FACE MARKET
AMOUNT SHORT-TERM NOTES VALUE
- ---------------------------------------------------------------
<S> <C> <C>
AUTOMOTIVE AND RELATED (1.6%)
$200,000 Ford Motor Credit Co.
6.150% 01-02-98 $199,966
150,000 General Motors Acceptance
6.150% 01-06-98 149,872
-------------
349,838
-------------
FINANCE (2.9%)
378,000 American Express Credit
5.830% 01-08-98 377,571
263,000 Household Finance
6.100% 01-07-98 262,733
-------------
640,304
-------------
TOTAL SHORT-TERM NOTES
(4.5%) (COST $990,142) $990,142
-------------
TOTAL HOLDINGS
(COST $20,364,516)(A) $21,103,040
=============
</TABLE>
(a) Also represents cost for Federal income tax purposes.
The accompanying notes are an integral part of these financial statements.
15
<PAGE> 74
OHIO NATIONAL FUND, INC.
BOND PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<S> <C>
Assets:
Investments in securities at market
value (note 1) (cost $20,364,516)................. $21,103,040
Cash in bank ...................................... 1,165
Receivable for fund shares sold.................... 258,758
Dividends and accrued interest receivable ......... 420,082
Other ............................................. 1,377
-----------
Total assets ..................................... 21,784,422
-----------
Liabilities:
Payable for investment management
services (note 3) ................................ 11,513
Other accrued expenses ............................ 5,879
-----------
Total liabilities ................................ 17,392
-----------
Net assets at market value $21,767,030
===========
Net assets consist of:
Par value, $1 per share ........................... $2,038,526
Paid-in capital in excess of par value ............ 19,030,792
Accumulated undistributed net realized
loss on investments (note 1) ..................... (44,128)
Net unrealized appreciation on investments (note 1) 738,524
Undistributed net investment income ............... 3,316
------------
Net assets at market value $21,767,030
============
Shares outstanding (note 4)......................... 2,038,526
Net asset value per share........................... $10.68
============
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
<S> <C>
Investment income:
Interest................................ $1,469,892
Dividends............................... 42,699
----------
Total investment income................ 1,512,591
----------
Expenses:
Management fees (note 3)................ 121,188
Custodian fees (note 3)................. 5,000
Directors' fees (note 3)................ 840
Professional fees....................... 2,534
Accounting and transfer agent fees ..... 23,717
Other................................... 4,214
----------
Total expenses......................... 157,493
----------
Net investment income ................. $1,355,098
----------
Realized and unrealized gain on investments:
Net realized gain from investments ..... $38,573
Net increase in unrealized
appreciation on investments ........... 399,815
----------
Net gain on investments............... 438,388
----------
Net increase in net
assets from operations................ $1,793,486
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
16
<PAGE> 75
OHIO NATIONAL FUND, INC.
BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
12-31-97 12-31-96
---------- ----------
<S> <C> <C>
From operations:
Net investment income ................................................................... $1,355,098 $1,278,401
Realized gain on investments ............................................................ 38,573 2,392
Unrealized gain (loss) on investments ................................................... 399,815 (518,569)
----------- -----------
Net increase in assets from operations................................................. 1,793,486 762,224
----------- -----------
Dividends and distributions to shareholders:
Dividends paid from net investment income ............................................... (1,690,155) (1,230,887)
----------- -----------
From capital share transactions (note 4):
Received from shares sold ............................................................... 6,831,247 6,923,633
Received from dividends reinvested ...................................................... 1,690,155 1,230,887
Paid for shares redeemed ................................................................ (7,636,590) (4,971,363)
----------- -----------
Increase in net assets derived from capital share transactions.......................... 884,812 3,183,157
----------- -----------
Increase in net assets ............................................................... 988,143 2,714,494
Net Assets:
Beginning of period ..................................................................... 20,778,887 18,064,393
----------- -----------
End of period (a) ....................................................................... $21,767,030 $20,778,887
=========== ===========
(a) Includes undistributed net investment income of....................................... $3,316 $338,373
=========== ===========
</TABLE>
Financial Highlights
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1997 1996 1995 1994 1993
------ ------ ------ ----- ------
<S> <C> <C> <C> <C> <C>
Per share data:
Net asset value, beginning of period........................... $10.62 $10.93 $9.70 $10.87 $10.45
Income (loss) from investment operations:
Net investment income......................................... 0.71 0.69 0.70 0.67 0.69
Net realized and unrealized gain (loss) on investments ....... 0.23 (0.32) 1.08 (1.07) 0.41
------ ------ ------ ----- ------
Total income (loss) from investment operations............... 0.94 0.37 1.78 (0.40) 1.10
------ ------ ------ ----- ------
Less distributions:
Dividends from net investment income ......................... (0.88) (0.68) (0.55) (0.69) (0.68)
Distributions from net realized capital gains................. 0.00 0.00 0.00 (0.08) 0.00
------ ------ ------ ----- ------
Total distributions.......................................... (0.88) (0.68) (0.55) (0.77) (0.68)
------ ------ ------ ----- ------
Net asset value, end of period................................. $10.68 $10.62 $10.93 $9.70 $10.87
====== ====== ====== ===== ======
Total return................................................... 9.28% 3.71% 18.90% 3.84% 10.69%
Ratios and supplemental data:
Ratio of expenses to average net assets ...................... 0.78% 0.79% 0.75% 0.63% 0.62%
Ratio of net investment income to average net assets ......... 6.67% 6.54% 6.76% 6.71% 6.33%
Portfolio turnover rate........................................ 10% 3% 4% 5% 13%
Net assets at end of period (millions)......................... $21.8 $20.8 $18.1 $13.1 $12.0
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE> 76
OMNI PORTFOLIO
OHIO NATIONAL FUND, INC.
OBJECTIVE
The Omni Portfolio seeks a high level of long-term total rate of return
consistent with prudent investment risks. Total return consists of current
income and capital appreciation.
PERFORMANCE AS OF DECEMBER 31, 1997
AVERAGE ANNUAL TOTAL RETURNS:
One-year 18.15%
Three-year 18.78%
Five-year 13.47%
Ten-year 12.57%
Since inception (9/10/84) 12.05%
Returns represent past performance, which is no guarantee of future results.
Investment return and principal value will vary so that shares, when redeemed,
may be worth more or less than their original cost. Actual results for variable
annuity and variable universal life contracts will be lower due to contract
charges. Consult your contract for applicable charges for mortality and
expenses.
COMMENTS
The Omni Portfolio's performance for 1997 trailed that of the S&P 500 Index for
three primary reasons. First, the portfolio's investments consist of common
stocks and their equivalent, corporate and Treasury bonds and cash. This
portfolio structure will not outperform the S&P 500 Index in a strong
large-cap-led stock market. Second, the common stock portion of the portfolio
(approximately 65%) consists of small-, medium- and large-capitalization stocks.
Small- and mid-sized equities have generally not kept pace with the larger
companies. Finally, the cash position of the portfolio (approximately 17%) both
helped and hurt its performance during the fourth quarter of the year. It
cushioned the effects of the stock market correction, but also didn't
participate in the year-end stock bounce or the bond rally during the quarter.
Looking forward, we expect continued volatility in the equity markets.
Continued strong cash flows into mutual funds could push markets higher.
Concerns about slowing profit growth and economic uncertainty in emerging growth
areas and its impact on the rest of the world could cause sharp sell-offs. We
expect equity returns to gravitate toward their long-term averages. Fixed-income
instruments should continue to provide steady results.
CHANGE IN VALUE OF $10,000 INVESTMENT
<TABLE>
<CAPTION>
OMNI PORTFOLIO S&P 500 INDEX
<S> <C> <C>
'88
'87
'88
'89
'90
'91
'92
'93
'94
'95
'96
'97 $31,687 $54,169
</TABLE>
Hypothetical illustration based on past performance. Future performance will
vary. All returns reflect reinvested dividends. The portfolio's holdings may
differ significantly from the securities in the index. The index is unmanaged
and therefore does not reflect the cost of portfolio management or trading.
Neither the portfolio nor the index is open to direct investment.
TOP 10 HOLDINGS AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
1. Camco International Inc. 1.5
2. Ford Motor Corp. 1.5
3. Owens-Illinois Inc 1.4
4. American International Group 1.4
5. Cisco Systems Inc 1.3
6. Chubb Corp 1.2
7. US Treasury Note 7.75% 2/15/2001 1.1
8. General Electric Corp 1.1
9. Allied Signal Inc. 1.0
10. Hewlett-Packard Co. 1.0
</TABLE>
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
Oil, Energy, and Natural Gas 11.3
Computer and Related 7.9
Electrical Equipment 6.1
Banking 4.7
Insurance Services 4.6
</TABLE> 19
<PAGE> 77
OHIO NATIONAL FUND, INC.
OMNI PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT LONG-TERM BONDS & NOTES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
GOVERNMENT (1.8%)
$775,000 U.S. Treasury Note
6.375% 07-15-99 $783,477
500,000 U.S. Treasury Note
7.875% 11-15-99 519,376
2,005,000 U.S. Treasury Note
7.750% 02-15-01 2,122,168
----------
3,425,021
----------
AEROSPACE (0.3%)
500,000 AAR Corp.
7.250% 10-15-03 503,884
----------
BANKING (0.8%)
400,000 Citified Bancorp Inc.
8.250% 03-01-03 408,036
1,000,000 Green Tree Financial Cl. A6
8.700% 06-15-25 1,083,750
----------
1,491,786
----------
COMMUNICATIONS (1.1%)
1,600,000 Comcast Cable Communications
8.375% 05-01-07 1,784,859
300,000 Sprint
8.125% 07-15-02 322,201
----------
2,107,060
----------
COMPUTERS AND RELATED (0.3%)
700,000 Apple Computer, Inc.
6.500% 02-15-04 584,500
----------
CONSUMER GOODS (0.2%)
400,000 RJR Nabisco, Inc.
8.750% 04-15-04 430,298
----------
FOOD AND RELATED (0.4%)
740,000 Marsh Supermarkets Inc.
8.875% 04-01-07 749,250
----------
FORESTRY AND PAPER PRODUCTS (0.8%)
700,000 Boise Cascade Co.
9.850% 06-15-02 789,498
500,000 Champion International
9.875% 06-01-00 541,011
250,000 ITT Rayonier, Inc.
7.500% 10-15-02 262,424
----------
1,592,933
----------
HOUSING, FURNITURE AND RELATED (0.1%)
250,000 Armstrong World
9.750% 04-15-08 313,005
----------
INDUSTRIAL SERVICES (0.2%)
400,000 Medar Sr Sec Notes
12.950% 06-30-05 365,600
----------
INSURANCE (0.6%)
500,000 Continental Corp.
7.250% 03-01-03 516,681
600000 Transamerica Finance Corp.
7.500% 03-15-04 630,722
----------
1,147,403
----------
FACE MARKET
AMOUNT LONG-TERM BONDS & NOTES VALUE
MACHINERY (0.2%)
$500,000 ABC Rail Products Corp.
9.125% 01-15-04 $485,000
----------
MEDICAL AND RELATED (0.8%)
500,000 Bergen Brunswig
7.375% 01-15-03 522,104
1,000,000 Tenet Healthcare Corp.
8.625% 01-15-07 1,052,200
----------
1,574,304
----------
METALS AND MINING (0.2%)
500,000 Cyprus Minerals
6.625% 10-15-05 499,199
----------
OIL, ENERGY AND NATURAL GAS (1.7%)
400,000 Dekalb Energy
9.875% 07-15-00 432,480
350,000 Dresser Industries, Inc.
6.250% 06-01-00 352,242
375,000 Marathon Oil
7.00% 06-01-02 382,547
600,000 PDV America, Inc.
7.875% 08-01-03 621,722
500,000 Petroleos Mexicanos Global
8.850% 09-15-04 496,250
500,000 United Refining Company
10.750% 06-15-07 527,500
500,000 Union Texas Petroleum
8.250% 11-15-99 518,000
----------
3,330,741
----------
TRANSPORTATION (0.5%)
500,000 American President Cos., Ltd.
7.125% 11-15-03 491,327
400,000 Illinois Central Gulf Railroad
6.750% 05-15-03 406,985
----------
898,312
----------
UTILITIES (1.6%)
400,000 Cleveland Electric Illum.
7.625% 08-01-02 413,600
1,000,000 Great Lakes Power
9.000% 08-01-04 1,104,987
500,000 Mississippi Power & Light
8.800% 04-01-05 502,185
400,000 Old Dominion Elec. Co.
8.760% 12-01-22 456,322
500,000 Texas New Mexico Power Co.
9.250% 09-15-00 528,954
----------
3,006,048
----------
TOTAL LONG-TERM BONDS & NOTES
(11.6%) (COST $21,565,177) $22,504,344
----------
FACE MARKET
AMOUNT SHORT-TERM NOTES VALUE
- --------------------------------------------------------------------------------
AUTOMOTIVE AND RELATED (3.2%)
$3,283,000 General Motors Acceptance Corp.
5.900% 01-09-98 $3,277,031
2,871,000 Ford Motor
5.950% 01-12-98 2,867,236
----------
6,144,267
(continued)
</TABLE>
20
<PAGE> 78
OHIO NATIONAL FUND, INC.
OMNI PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT SHORT-TERM NOTES VALUE
- --------------------------------------------------------------------------------
FINANCE (9.5%)
<S> <C> <C>
$1,000,000 American Express Credit Corp.
6.000% 01-05-98 $999,333
2,494,000 American Express Credit Corp.
5.850% 01-05-98 2,492,379
4,234,000 CIT Group Holding
5.550% 01-02-98 4,233,347
2,500,000 General Electric Capital
6.02% 01-7-98 2,497,492
4,798,000 Heller Financial
6.150% 01-08-98 4,792,262
1,017,000 Household Finance
6.100% 01-09-98 1,015,621
2,469,000 John Deere Capital
6.080% 01-07-98 2,466,498
-----------
18,496,932
-----------
INSURANCE (1.9%)
3,697,000 Prudential Funding
5.950% 01-13-98 3,689,668
-----------
RETAIL (2.3%)
3,927,000 Sears Roebuck Acceptance Corp.
6.000% 01-06-98 3,923,728
500,000 Sears Roebuck Acceptance Corp.
6.070% 01-06-98 499,579
-----------
4,423,307
-----------
TOTAL SHORT-TERM NOTES
(16.9%) (COST $32,754,174) $32,754,174
-----------
MARKET
SHARES COMMON STOCK VALUE
- --------------------------------------------------------------------------------
AEROSPACE (2.4%)
49,000 Allied Signal, Inc. $1,907,937
16,456 Boeing Co. 805,316
21,600 Raytheon Co. 1,090,800
17,350 Rockwell International Corp. 906,538
-----------
4,710,591
-----------
AUTOMOTIVE AND RELATED (3.1%)
7,500 Arvin Industries, Inc. 249,844
11,700 Chrysler Corp. 411,694
26,000 Cooper Tire & Rubber 633,750
8,000 Eaton Corp. 714,000
58,777 Ford Motor Co. 2,861,705
10,000 Magna International, Inc. 628,125
34,000 Walbro Corp. 456,875
-----------
5,955,993
-----------
BANKING (3.6%)
14,332 Charter One Financial, Inc. 904,708
25,000 Flagstar Bancorp 494,922
36,000 First International Bank 436,500
20,000 First Union Corp. 1,025,000
17,500 Long Island Bancorp, Inc. 868,437
22,500 Mellon Bank Corp. 1,364,063
13,050 Nations Bank Corporation 793,603
7,000 Star Banc 401,625
18,750 Susquehanna Bancshares, Inc. 717,188
-----------
7,006,046
-----------
MARKET
SHARES COMMON STOCK VALUE
- --------------------------------------------------------------------------------
BUSINESS SERVICES (3.4%)
37,000 *Alternative Resources Co. $853,313
55,000 First Data Corp. 1,608,750
30,000 Hewlett-Packard Co. 1,875,000
30,000 *Lo Jack Corp. 442,500
45,000 Manpower, Inc. 1,586,250
5,000 Standard Register Co. 173,750
-----------
6,539,563
-----------
CHEMICALS (3.1%)
11,000 Chemitrol 242,000
5,000 E I DuPont DeNemours & Co. 300,312
18,000 Engelhard Corp. 312,750
25,625 Hanson Trust PLC 590,977
25,000 Hercules Inc. 1,251,563
12,000 Lubrizol Corp. 442,500
20,000 Minerals Technologies Inc. 908,750
15,000 Monsanto Co. 630,000
39,000 OM Group, Inc. 1,428,375
-----------
6,107,227
-----------
COMMUNICATIONS (0.9%)
65,000 Andrew Corp. 1,560,000
11,250 Mastec, Inc. 257,344
-----------
1,817,344
-----------
COMPUTER AND RELATED (7.5%)
28,000 *3Comm Corp. 978,250
45,000 Cisco Systems, Inc. 2,508,750
34,500 Computer Associates 1,824,188
6,600 *Computer Sciences Corp. 551,100
22,000 Intel Corp. 1,545,500
16,000 *LSI Logic 316,000
55,000 MacNeal-Schwendler Corp. 529,375
30,000 Mapics Inc. 326,250
10,000 *Microsoft Corp. 1,292,500
47,058 *Seagate Technology, Inc. 905,866
40,000 *Sun Microsystems, Inc. 1,595,000
36,000 Texas Instruments, Inc. 1,620,000
17,000 *Zebra Tech Corp. Cl. A 505,750
-----------
14,498,529
-----------
CONSUMER PRODUCTS (1.0%)
41,500 *Acorn Products 415,000
50,000 *Sola International 1,625,000
-----------
2,040,000
-----------
CONTAINERS (2.0%)
24,000 Crown Cork & Seal Co. 1,203,000
70,000 *Owens-Illinois, Inc. 2,655,625
-----------
3,858,625
-----------
DRUGS (1.2%)
32,000 *Applied Analytical 528,000
28,000 Abbott Laboratories 1,835,750
-----------
2,363,750
-----------
DURABLE GOODS (0.1%)
15,000 *Meadow Craft Inc. 176,250
-----------
ENTERTAINMENT & LEISURE (1.3%)
66,000 Cedar Fair 1,707,750
36,000 *Mirage Resorts Inc. 819,000
-----------
2,526,750
-----------
(continued)
</TABLE>
<PAGE> 79
OHIO NATIONAL FUND, INC.
OMNI PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
ELECTRICAL EQUIPMENT (5.5%)
35,000 *Advanced Lighting $665,000
33,333 *Analog Devices, Inc. 922,907
52,500 *Anixter International, Inc. 866,250
52,000 BMC Industries Inc. 838,500
26,116 Federal Signal Corp. 564,759
28,000 General Electric Co. 2,054,500
18,900 *Hubbell Inc. Cl. B 932,006
18,000 Varian Associates, Inc. 910,125
40,000 Westinghouse Electric 1,177,500
22,500 Xerox Corp. 1,660,781
-----------
10,592,328
-----------
FOOD AND RELATED (1.0%)
50,000 Food Lion Inc. Cl. A 421,875
16,500 H.J. Heinz Co. 838,406
23,000 Pan American Beverages, Inc. 750,375
-----------
2,010,656
-----------
FORESTRY AND PAPER PRODUCTS (0.7%)
38,000 Sonoco Products Inc. 1,318,125
-----------
HOTEL/LODGING (0.4%)
25,000 *Guest Supply 328,125
23,000 La Quinta Inns 444,188
-----------
772,313
-----------
HOUSING, FURNITURE & RELATED (1.9%)
71,025 Clayton Homes 1,278,450
55,000 Haverty Furniture Co. 742,500
24,000 Newell Co. 1,020,000
35,000 Shelby Williams 577,500
-----------
3,618,450
-----------
INDUSTRIAL SERVICES (0.5%)
30,000 Clarcor 888,750
4,000 *Puretec Corp. 12,375
1,600 Regal Beloit 47,300
-----------
948,425
-----------
INSURANCE (4.0%)
8,983 Aegon NV 805,101
24,187 American International Group 2,630,336
30,000 Chubb Corp. 2,268,750
6 Cincinnati Financial Corp. 844
20,000 Equitable Cos., Inc. 995,000
12,500 St. Paul Cos. 1,025,781
-----------
7,725,812
-----------
MACHINERY (1.5%)
12,000 Caterpillar, Inc. 582,750
33,000 Hardinge Inc. 1,229,250
41,000 Stewart & Stevenson 1,045,500
-----------
2,857,500
-----------
MEDICAL AND RELATED (2.7%)
20,300 Allegiance Corp. 719,381
26,500 Baxter International 1,336,594
20,000 *Cephalon 227,500
32,500 *Foundation Health Corp. 727,188
18,000 *Humana, Inc. 373,500
37,500 *Quorum Health Group Inc. 979,687
19,000 United Healthcare Corp. 944,062
-----------
5,307,912
-----------
MARKET
SHARES COMMON STOCK VALUE
- --------------------------------------------------------------------------------
METALS AND MINING (1.0%)
27,000 Amcast Industrial Corp. $619,313
4,000 Phelps Dodge Corp. 249,000
49,000 Worthington Industries 808,500
6,200 Wolverine Tube Inc. 192,200
-----------
1,869,013
-----------
OIL, ENERGY AND NATURAL GAS (8.6%)
32,500 *Belco Oil & Gas 611,406
45,500 Camco International, Inc. 2,897,781
23,000 Chevron Corp. 1,771,000
7,000 Coastal Corp. 433,562
20,000 Kerr McGee 1,266,250
60,000 *Louis Dreyfus Natural Gas 1,121,250
32,200 National Propane Partners 682,238
15,000 *Offshore Logistics Inc. 320,625
30,000 Pacific Gulf Properties 712,500
20,000 Schlumberger, Ltd. 1,610,000
60,300 *Tesoro Petroleum 934,650
24,150 Ultramar Diamond Shamrock, Inc. 769,781
23,200 WD-40 Co. 672,800
22,100 Westcoast Energy, Inc. 508,300
57,000 Williams Companies Inc. 1,617,375
46,000 Wiser Oil 649,750
-----------
16,579,268
-----------
REAL ESTATE (4.2%)
32,500 Berkshire Realty Co. 390,000
19,000 Camden Property Trust 589,000
76,300 Commercial Net Lease Realty 1,363,863
30,500 First Industrial Realty Trust 1,101,812
15,000 Great Lakes REIT 291,562
50,000 Healthcare Realty Trust 1,446,875
56,250 Liberty Property Trust 1,606,641
24,000 National Health Investors, Inc. 1,005,000
11,500 Regency Hotel Corp. 318,406
-----------
8,113,159
-----------
RESTAURANTS (0.2%)
50,000 *Buffets, Inc. 468,750
-----------
TEXTILES (0.5%)
30,000 Warnaco Group Cl. A 941,250
-----------
TRANSPORTATION AND EQUIPMENT (3.4%)
21,500 *Atlas Air Inc. 516,000
28,500 *Avondale Industries 846,094
14,000 Burlington Northern Santa Fe 1,301,125
15,000 CNF Transportation 575,625
10,962 Halter Marine Group 316,528
11,250 Illinois Central Corp. 383,203
30,000 Norfolk Southern Corp. 924,375
21,000 Trinity Industries 937,125
33,000 *Wisconsin Central Transportations 771,375
-----------
6,571,450
-----------
UTILITIES (0.8%)
15,000 FPL Group, Inc. 887,812
23,500 UGI Corp. 688,844
-----------
1,576,656
-----------
TOTAL COMMON STOCKS
(66.5%) (Cost $80,216,319) $128,871,735
-----------
(continued)
</TABLE>
22
<PAGE> 80
OHIO NATIONAL FUND, INC.
OMNI PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES WARRANTS VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
80,000 *Medar Inc. Warrants $34,400
---------
TOTAL WARRANTS (0.0%)
(Cost $34,400) $34,400
---------
MARKET
SHARES PREFERRED STOCK VALUE
- --------------------------------------------------------------------------------
AUTOMOTIVE AND RELATED (0.1%)
8,000 Walbro Cap Trust $190,000
---------
BANKING (0.4%)
30,000 National Australia Bank 853,125
---------
COMPUTERS AND RELATED (0.1%)
16,000 General Datacommunications,
9.000% Pfd. 252,000
---------
FINANCIAL SERVICES (0.1%)
11,000 Money Store 6.50% 242,688
---------
FOOD & RELATED (0.3%)
20,000 Conagra Capital LC, 9.350% cum.,
conv. Series C 540,000
---------
METALS AND MINING (0.4%)
30,000 Freeport McMoRan Copper & Gold
cum., conv. 720,000
---------
OIL, ENERGY AND NATURAL GAS (0.8%)
41,000 Consumer Energy Financing II 1,032,687
10,000 Howell Corp., $3.50 Series A 552,500
---------
1,585,187
---------
MARKET
SHARES PREFERRED STOCK VALUE
- --------------------------------------------------------------------------------
REAL ESTATE (0.2%)
15,000 Oasis Residential , Inc., 9.000%
cum., conv. Series A $ 384,375
----------
UTILITIES (0.3%)
20,000 GTE Delaware 8.750%, Series B 530,000
----------
TOTAL PREFERRED STOCKS
(2.7%) (Cost $5,631,975) $5,297,375
----------
FACE MARKET
AMOUNT CONVERTIBLE DEBENTURES VALUE
- --------------------------------------------------------------------------------
BANKING (0.3%)
$400,000 First State Bancorp, 7.500% conv.
debentures due 04-30-17 $ 519,500
----------
ELECTRICAL EQUIPMENT (0.6%)
1,100,000 Richey Electric,7.000% conv.
debentures, due 03-01-06 1,083,500
----------
METALS AND MINING (0.3%)
600,000 INCO, Ltd., 7.750% conv. subordinated
debentures, due 03-15-16 585,750
----------
OIL, ENERGY AND NATURAL GAS (0.2%)
400,000 Offshore Logistics, Inc., 6.000%
conv. debentures, due 12-15-06 462,000
----------
TOTAL CONVERTIBLE DEBENTURES
(1.4%) (Cost $2,466,124) $2,650,750
----------
TOTAL HOLDINGS
(COST $142,668,169)(A) $192,112,778
------------
</TABLE>
* Non-income producing securities.
(a) Also represents cost for Federal income tax purposes.
The accompanying notes are an integral part of these financial statements.
23
<PAGE> 81
OHIO NATIONAL FUND, INC.
OMNI PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
Assets:
Investments in securities at market
<S> <C>
value (note 1) (cost $142,668,169)......... $192,112,778
Cash in bank ............................... 7,331
Receivable for fund shares sold............. 1,049,033
Receivable for securities sold.............. 233,156
Dividends and accrued interest receivable .. 726,915
Other ...................................... 15,620
--------------------
Total assets .............................. 194,144,833
--------------------
Liabilities:
Payable for securities purchased............ 287,346
Payable for shares redeemed................. 3,715
Payable for investment management
services (note 3) ......................... 92,641
Other accrued expenses ..................... 46,085
--------------------
Total liabilities ......................... 429,787
--------------------
Net assets at market value $193,715,046
====================
Net assets consist of:
Par value, $1 per share .................... $9,196,046
Paid-in capital in excess of par value ..... 135,033,103
Accumulated undistributed net realized
gain on investments ....................... 33,599
Net unrealized appreciation on investments
(note 1)................................... 49,444,609
Undistributed net
investment income ......................... 7,689
--------------------
Net assets at market value................... $193,715,046
====================
Shares outstanding (note 4).................. 9,196,934
Net asset value per share.................... $21.06
====================
STATEMENT OF OPERATIONS
Year ended December 31, 1997
Investment income:
Interest.................................... $3,422,217
Dividends................................... 2,372,650
--------------------
Total investment income.................... 5,794,867
--------------------
Expenses:
Management fees (note 3).................... 948,021
Custodian fees (note 3)..................... 38,000
Directors' fees (note 3).................... 11,320
Professional fees........................... 33,960
Accounting and transfer agent fees ......... 122,038
Other....................................... 45,917
--------------------
Total expenses............................. 1,199,256
--------------------
Net investment income...................... $4,595,611
--------------------
Realized and unrealized gain on investments:
Net realized gain from investments ......... $7,723,290
Net increase in unrealized
appreciation on investments ............... 15,465,006
--------------------
Net gain on investments................... 23,188,296
--------------------
Net increase in net
assets from operations.................... $27,783,907
===================
</TABLE>
The accompanying notes are an integral part of these financial statements.
24
<PAGE> 82
OHIO NATIONAL FUND, INC.
OMNI PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
12-31-97 12-31-96
From operations: ------------ ------------
<S> <C> <C>
Net investment income .......................................................... $4,595,611 $3,688,175
Realized gain on investments ................................................... 7,723,290 1,460,737
Unrealized gain on investments ................................................. 15,465,006 13,387,967
------------ ------------
Net increase in assets from operations........................................ 27,783,907 18,536,879
------------ ------------
Dividends and distributions to shareholders:
Dividends paid from net investment income....................................... (5,602,347) (3,564,088)
Capital gains distributions .................................................... (9,150,428) (1,956,755)
------------ ------------
Total dividends and distributions ............................................ (14,752,775) (5,520,843)
------------ ------------
From capital share transactions (note 4):
Received from shares sold ...................................................... 35,259,039 25,730,422
Received from dividends reinvested ............................................. 14,752,775 5,520,843
Paid for shares redeemed ....................................................... (14,795,590) (8,376,827)
------------ ------------
Increase in net assets derived from capital share transactions................. 35,216,224 22,874,438
------------ ------------
Increase in net assets ...................................................... 48,247,356 35,890,474
Net Assets:
Beginning of period ............................................................ 145,467,690 109,577,216
------------ ------------
End of period (a) ..............................................................$193,715,046 $145,467,690
============ ============
(a) Includes undistributed net investment income of.............................. $7,689 $1,014,424
============ ============
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995 1994 1993
Per share data: -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............. $19.40 $17.60 $14.76 $15.38 $14.14
-------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income........................... 0.56 0.53 0.58 0.55 0.58
Net realized and unrealized gain (loss) on
investments ................................... 2.87 2.10 2.72 (0.63) 1.21
-------- -------- -------- -------- --------
Total income (loss) from investment operations. 3.43 2.63 3.30 (0.08) 1.79
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income ........... (0.69) (0.52) (0.46) (0.54) (0.55)
Distributions from net realized capital gains .. (1.08) (0.31) 0.00 0.00 0.00
-------- -------- -------- -------- --------
Total distributions............................ (1.77) (0.83) (0.46) (0.54) (0.55)
-------- -------- -------- -------- --------
Net asset value, end of period................... $21.06 $19.40 $17.60 $14.76 $15.38
======== ======== ======== ======== ========
Total return..................................... 18.15% 15.54% 22.75% 0.53% 12.85%
Ratios and supplemental data:
Ratio of expenses to average net assets ........ 0.71% 0.76% 0.75% 0.62% 0.62%
Ratio of net investment income to average net
assets ........................................ 2.69% 2.89% 3.56% 3.67% 3.74%
Portfolio turnover rate.......................... 18% 12% 10% 7% 17%
Average commission rate (a) ..................... $0.07 $0.07 NR NR NR
Net assets at end of period (millions)........... $193.7 $145.5 $109.6 $85.0 $74.2
</TABLE>
(a) Represents the total dollar amount of commission paid on equity security
transactions divided by the total number of shares purchased and sold for
which commissions were charged.
(NR) Not required prior to 1996.
The accompanying notes are an integral part of these financial statements.
25
<PAGE> 83
INTERNATIONAL PORTFOLIO
OHIO NATIONAL FUND, INC.
OBJECTIVE
The International Portfolio seeks long-term capital growth by investing
primarily in securities of foreign companies.
PERFORMANCE AS OF DECEMBER 31, 1997
AVERAGE ANNUAL TOTAL RETURNS:
One-year 2.11%
Three-year 9.43%
Since inception (5/3/93) 13.03%
Returns represent past performance, which is no guarantee of future results.
Investment return and principal value will vary so that shares, when redeemed,
may be worth more or less than their original cost. Actual results for variable
annuity and variable universal life contracts will be lower due to contract
charges. Consult your contract for applicable charges for mortality and
expenses.
COMMENTS
Over the 12 months ended December 31, 1997, the International Portfolio slightly
outperformed the MSCI EAFE Index while generating disappointing returns in a
year characterized by major turmoil in Asia and highly volatile world markets.
While European holdings (approximately 37% of net assets at year-end) rose
along with local markets, the portfolio is overweighted in small capitalization
stocks which lagged major indices. The strength of the US dollar also lowered
returns, despite partial hedges in place throughout the year. In Asia, stocks
fell sharply in the wake of the severe crisis that developed in Southeast Asia
over the summer. Japanese equities (about 18% of net assets) were extremely poor
performers, particularly in the case of small capitalization stocks. A much
weaker yen further compounded the effect of sharply lower stock prices. Direct
Southeast Asian exposure was limited to less than 4% of net assets, but sharp
losses were registered in those markets. Finally, holdings in other emerging
markets were also negatively impacted by the consequences of the financial
crisis. Throughout the year, the portfolio maintained a defensive posture with
large cash holdings and assets diversified across many different countries.
CHANGE IN VALUE OF $10,000,000 INVESTMENT
1993 1994 1995 1996 1997
International Portfolio $10,000 $17,697
Morgan Stanley Capital
Intl. EAFE Index $10,000 $14,041
Hypothetical illustration based on past performance. Future performance will
vary. All returns reflect reinvested dividends. The portfolio's holdings may
differ significantly from the securities in the index. The index is unmanaged
and therefore does not reflect the cost of portfolio management or trading.
Neither the portfolio nor the index is open to direct investment.
TOP 10 HOLDINGS AS OF DECEMBER 31, 1997
% of Net Assets
1. Secom Co., LTD 1.8
2. Fuji Photo Film-ORD 1.8
3. Buderus AG 1.7
4. Queensland Treasury 8.00% 9/14/07 1.6
5. Bank For Int'l. Settlements 1.5
6. Legrand ADP 1.5
7. Sika Finanz AG 1.3
8. Affichage 1.3
9. Kuehne & Nagel Intl AG 1.2
10. Tokio Marine Fire Ins. 1.2
TOP 5 COUNTRIES/REGIONS AS OF DECEMBER 31, 1997
% of Net Assets
Japan 16.7
France 10.6
Switzerland 7.9
Germany 5.5
United Kingdom 5.3
The risk associated with investing on a worldwide basis includes differences in
regulation of financial data and reporting and currency exchanges as well as
economic and political systems which may be different from those in the United
States. The prices of small company stocks are generally more volatile than the
prices of large company stocks.
27
<PAGE> 84
OHIO NATIONAL FUND, INC.
INTERNATIONAL PORTFOLIO
Schedule of Investments December 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------------------------
JAPAN (16.7%)
<S> <C> <C>
250,000 Aida Engineering Limited (19) $826,209
70,700 Chofu Seisakusho (9) 927,018
350,000 Dai-Tokyo Fire Marine Ins. Co. Ltd. (18) 1,202,316
300,000 Dowa Fire & Marine Ins. Co. Ltd. (18) 894,836
75,000 Fuji Photo Film Co., Ltd. (9) 2,875,436
15,000 Hitachi Ltd. ADR (11) 1,037,813
400,000 *Iino Kaiun Kaisha (5) 591,956
35,000 Ito-Yokado Co. Ltd. (28) 1,784,687
200,000 Koa Fire & Marine Ins. Co., Ltd. (18) 751,447
50,000 Makita Corp. Ltd (19) 479,239
275,000 Nichido Fire & Marine Ins. Co., Ltd. (18) 1,433,884
250,000 Nisshinbo Industries Inc. (8) 1,054,327
150,000 Nittetsu Mining Co., Ltd. (22) 609,592
45,000 Secom Co., Ltd. (29) 2,877,736
85,000 Shimano Inc. (9) 1,564,237
115,000 Shiseido Company (9) 1,569,604
127,000 Sotoh Co. (31) 744,968
155,000 Shoei Co. (27) 1,127,899
15,000 Toho Co. (20) 1,598,742
165,000 Tokyo Marine & Fire Ins. Co. Ltd. (18) 1,872,485
15,000 Tsutsumi Jewelry Co. (9) 184,029
--------------
26,008,460
--------------
FRANCE (10.6%)
2,500 *C.E.E. (Continentale d'Equipments 30,957
Electriques) (10)
7,000 Compagnie Generale des Eaux (33) 977,312
8,387 *Compagnie Generale des Eaux 5,702
Nouvelle (Warrants)(33)
8,130 Crometal (5) 445,924
8,500 Elf Aquitaine (12) 988,947
17,500 Emin Leydier (24) 1,032,577
25,000 Eramet (22) 947,395
4,500 Eurafrance (34) 1,832,461
10,000 Gaumont SA (20) 727,167
3,500 La Brosse et DuPont (9) 269,924
18,500 Legrand ADP (10) 2,333,832
16,500 Marine Wendel (34) 1,875,841
12,000 CGDE Michelin 'B' (34) 604,338
6,396 NSC Groupe (19) 838,767
2,421 Promodes C.I. (28) 726,320
6,000 SAGA (Societe Anontme de Gerance et 1,316,380
d'Armement) (32)
1,000 Sucriere de Pithiviers-le-Vieil (1) 560,126
3,500 Taittinger (13) 1,046,539
--------------
16,560,509
--------------
GERMANY (5.5%)
1,500 Axel Springer Verlag AG (20) 1,009,202
40,000 Bayer AG (7) 927,882
12,000 Bertelsmann AG D.R.C. (25) 1,427,896
5,750 Buderus AG (5) 2,580,139
50,000 Gerresheimer Glas AG (4) 1,050,905
30,000 IVG Holding AG (27) 906,892
1,500 Suedzucker AG (8) 738,136
--------------
8,641,052
--------------
SWITZERLAND (7.9%)
375 Bank of Intl. Settlements (3) 2,340,544
5,500 Edipresse SA Bearer (20) 1,595,075
3,000 Kuehne & Nagel Intl. AG (32) 1,935,021
400 Lindt & Sprungli AG PC (9) $697,674
1,000 Nestle SA (9) 1,497,264
6,500 Sika Finanz AG Bearer (7) 2,062,928
5,500 Societe Generale d'Affichage (20) 2,012,654
726 Vetropack Holding AG PC (23) 131,097
--------------
12,272,257
--------------
NEW ZEALAND (3.2%)
975,549 Carter Holt Harvey Limited (14) 1,506,375
1,000,000 *Evergreen Forests Ltd. (14) 278,640
278,500 Independent Press Comm. (20) 1,293,354
1,601,500 Shortland Properties, Ltd. (27) 818,110
1,820,310 Tasman Agriculture Limited (1) 961,588
450,000 Wrightson Ltd. (1) 208,980
--------------
5,067,047
--------------
LATIN AMERICA (2.8%)
325,000 Antofagasta Holdings plc 21) 1,771,448
40,000 Banco Latinoamericano 'Bladex' (3) 1,655,000
681,944 Ledesma SA (1) 709,357
100,000 Siderca S.A.I.C. (12) 278,053
--------------
4,413,858
--------------
CANADA (2.5%)
50,000 Canadian Pacific Ltd. (34) 1,362,500
40,000 Franco-Nevada Mining Corp. (21 786,537
100,000 Noranda, Inc. (21) 1,721,423
--------------
3,870,460
--------------
UNITED KINGDOM (2.3%)
300,000 Berisford plc (34) 929,081
450,000 *McBride plc (10) 1,323,012
375,000 Royal Doulton plc (9) 1,322,392
--------------
3,574,485
--------------
HONG KONG (2.2%)
5,727,368 CDL Hotels Intl. Ltd. (16) 1,737,291
1,850,000 Shaw Brothers (Hong Kong) Ltd.(20) 1,373,059
500,000 South China Morning Post Holdings
Corp. (25) 351,735
--------------
3,462,085
--------------
SWEDEN (1.6%)
15,000 AssiDoman AB (14) 380,005
45,000 Bylock & Nordsjofrakt AB 'B' (32) 186,032
55,000 Gorthon Lines 'B' (32) 302,933
12,000 Investor AB Class B (34) 585,322
75,000 IRO AB (31) 1,096,533
--------------
2,550,825
--------------
ITALY (1.5%)
175,000 Arnoldo Mondadori Editore SpA (25) 1,375,032
1,500,000 Montedison non-conv. Savings SpA(34) 984,426
--------------
2,359,458
--------------
SINGAPORE (1.4%)
250,000 Clipsal Industries Ltd. (10) 320,000
500,000 Del Gro Corp. (35) 612,184
700,000 Intraco Ltd. (34) 328,678
200,000 Singapore Bus Service Ltd. (32) 72,511
525,000 Times Publishing Ltd. (25) 914,264
--------------
2,247,637
--------------
SPAIN (1.4%)
225,000 Energia e Ind. Aragonesas SA (33) 1,506,350
6,500 Corporation Financiera Alba SA (34) 684,749
--------------
2,191,099
--------------
</TABLE>
(continued)
28
<PAGE> 85
OHIO NATIONAL FUND, INC.
INTERNATIONAL PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS December 31, 1997
Market
Shares Common Stock Value
- --------------------------------------------------------------------------------
<S> <C>
NETHERLANDS (1.4%)
30,000 Apothekers Cooperatie OPG (17) $895,633
55,000 European City Estates NV (27) 746,361
8,500 Philips Electronics NV ADR (11) 514,250
------------
2,156,244
------------
MEXICO (1.3%)
1,000,000 Grupo Fernandez Editores SA de CV(25) 235,674
400,000 Industrias Penoles SA de CV (21) 1,781,195
------------
2,016,869
------------
AUSTRIA (1.0%)
17,500 VAE AG (26) 1,537,822
------------
BELGIUM (0.9%)
7,500 Deceuninck Plastics Ind. SA (4) 1,473,918
------------
NORWAY (0.8%)
70,000 Schibsted AS (25) 1,201,004
------------
DENMARK (0.6%)
10,000 Carlsberg International A/S Class'B'(9) 537,234
3,500 Kobenhavns Lufthavne (32) 421,539
------------
958,773
------------
SOUTH AFRICA (0.4%)
28,000 Anglo American Platinum Corp.(22) 373,985
50,000 JCI Ltd. (22) 223,467
------------
597,452
------------
FINLAND (0.4%)
7,000 Vaisala Oy A (5) 591,075
------------
ISRAEL (0.2%
50,000 *Israel Land Development Co. Ltd. (34) 262,719
------------
AUSTRALIA (0.2%)
185,000 Eltin Ltd. (22) 139,812
100,000 Motors Holdings Ltd. (2) 51,468
------------
191,280
------------
PORTUGAL (0.1%)
10,000 Companhia de Celulose do Cairna (1) 121,283
------------
GREECE (0.1%)
48,200 H. Benrubi & Fils SA (9) 113,921
------------
MISCELLANEOUS (2.0%)
65,000 North European Oil Royalty Tr. (12) 1,048,125
50,000 Minorco ADR (34) 837,500
850,000 Lonrho plc (34) 1,305,669
------------
3,191,294
------------
Total Common Stock
(69.0%) (Cost $122,534,492) $107,632,886
------------
MARKET
SHARES PREFERRED STOCK VALUE
- -------------------------------------------------------------------------------
INDONESIA (0.9%)
11,500 Freeport McMoRan Pfd. 'B' (22) $276,000
22,500 Freeport McMoRan Pfd. 'C' (22) 511,875
30,000 Freeport McMoRan Pfd. 'D' (22) 581,250
------------
1,369,125
------------
GERMANY (0.9%)
20,000 Hornbach Holdings AG Pfd. (28) $1,378,965
------------
Total Preferred Stock
(1.8%) (Cost $3,461,265) $2,748,090
------------
MARKET
SHARES CONVERTIBLE DEBENTURES VALUE
- -------------------------------------------------------------------------------
U.S. DOLLAR (2.2%)
$1,000,000 PT Inti Indorayon Utama 7.000%
due 05-02-06 (24) $560,000
950,000 Cheil Foods & Chemicals Co 3.000%
due 12-31-06 (9) 1,003,438
250,000 Sincere Navigation 3.750%
due 05-26-03 (32) 286,250
250,000 Medya International Ltd. 10.000%
due 06-28-01 (20) 190,000
1,350,000 Scandinavian Broadcasting
7.250% due 08-01-05 (20) 1,350,000
------------
$3,389,688
------------
NON U.S. DOLLAR (2.4%)
4,000,000 FF Alcatel Alstholm 2.500%
due 01-01-04 (11) 821,075
687,150 FF Gaumont SA 3.750%
due 01-01-03 (20) 134,007
5,200,000 FF Immobiliere Hoteliere
due 01-01-01 (33) 598,355
550,000 GBPBerisford plc 5.000%
due 01-31-15 (9) 778,983
500,000 GBPBAA plc 5.750%
due 03-29-06 (32) 880,563
55,000,000 JPYNippon Yusen 2.000%
due 09-29-00 (32) 432,274
320,000 NZ Shortland Properties Inc. 7.500%
due 12-31-98 (27) 165,326
------------
$3,810,583
------------
Total Convertible Subordinated
Debentures (4.6%) (Cost $7,575,708) $7,200,271
------------
FACE MARKET
AMOUNT NON-CONVERTIBLE BONDS VALUE
- -------------------------------------------------------------------------------
U.S. DOLLAR (1.5%)
$1,250,000 Federal Republic Of Brazil 6.875%
due 04-15-24 (15) $1,028,125
216,000 Republic of Argentina 6.687%
due 03-31-05 (15) 193,374
500,000 United Mexican States 'A'
6.867% due 12-31-19 (15) 463,750
500,000 United Mexican States 'B'
6.617% 12-31-19 (15) 463,750
250,000 United Mexican States 'C'
6.718% 12-31-19 (15) 231,875
------------
$2,380,874
------------
</TABLE>
(continued)
29
<PAGE> 86
<TABLE>
<CAPTION>
OHIO NATIONAL FUND, INC.
International Portfolio (Continued)
Schedule of Investments December 31, 1997
FACE MARKET
AMOUNT NON-CONVERTIBLE BONDS VALUE
- ----------------------------------------------------------------------------------
NON-U.S. DOLLAR (2.4%)
<S> <C>
$3,500,000 AU Queensland Treasury 8.00%
due 09-14-07 (11) $2,557,802
1,000,000 NZ Republic of New Zealand 10.000%
due 03-15-02 (15) 635,740
1,000,000 NZ Trans Power Finance Ltd. 8.00%
due 03-15-02 (15) 580,394
----------
3,773,936
----------
TOTAL NON-CONVERTIBLE BONDS
(3.9%) (Cost $5,782,696) $6,154,810
----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT SHORT-TERM NOTES VALUE
- ----------------------------------------------------------------------------------
<S> <C> <C>
AUTOMOBILE AND RELATED (1.6%)
$2,536,000 Fiat Financing
6.15% 01-12-98 $2,531,234
----------
APPLIANCES (3.6%)
5,656,000 Maytag Corp.
7.000% 01-12-98 5,654,900
----------
CHEMICALS (2.2%)
3,438,000 DuPont Ei De Nemours
5.700% 01-16-98 3,429,835
----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT SHORT-TERM NOTES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
ELECTRONICS (2.6%)
$4,038,000 Motorola Inc.
5.750% 01-21-98 $4,025,101
----------
FINANCIAL (7.3%)
4,509,000 Goldman Sachs Group, LP
5.750% 01-05-98 4,506,119
2,641,000 Merrill Lynch
6.00% 01-07-98 2,638,360
4,235,000 Prudential Funding
5.800% 01-02-98 4,234,319
------------
11,378,798
TRANSPORTATION (1.9%) ------------
$3,013,000 CSX Corp
5.970% 01-06-98 3,010,502
------------
TOTAL SHORT-TERM NOTES
(19.2%) (Cost $22,413,822) $30,030,370
------------
TOTAL HOLDINGS
(COST $161,767,983) (A) $153,766,427
============
</TABLE>
(a) Also represents cost for Federal income tax purposes.
* Non-income producing securities.
Foreign Currencies
NZ - New Zealand Dollar
FF - French Franc
GBP - British Pound
JPY - Japanese Yen
AU - Austrailian Dollar
Industry Classifications
(1) Agriculture (18) Insurance
(2) Automotive (19) Machinery
(3) Banking (20) Media
(4) Building Products (21) Metal (non-ferrous)
(5) Capital Goods (22) Mining
(6) Cement (23) Packaging
(7) Chemicals (24) Paper
(8) Computer Products (25) Publishing
(9) Consumer Products (26) Rail Equipment
(10) Electrical Products (27) Real Estate
(11) Electronics (28) Retailing
(12) Energy and Oil (29) Services
(13) Food & Beverage (30) Steel
(14) Forest Products (31) Textile
(15) Governmental (32) Transportation
(16) Hotels (33) Utilities
(17) Health Care (34) Miscellaneous
(35) Holding Companies
The accompanying notes are an integral part of these financial statements.
30
<PAGE> 87
<TABLE>
<CAPTION>
OHIO NATIONAL FUND, INC.
INTERNATIONAL PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<S> <C>
Assets:
Investments in securities at market
value (note 1) (cost $161,767,983) ....................... $ 153,766,427
Cash in bank .............................................. 252,408
Unrealized gain on forward currency
contracts (note 5) ....................................... 3,033,417
Receivable for securities sold ............................ 355,716
Receivable for fund shares sold ........................... 82,918
Dividends and accrued interest receivable ................. 480,617
Other ..................................................... 1,278
-------------
Total assets ............................................. 157,972,781
-------------
Liabilities:
Unrealized loss on forward currency
contracts (note 5) ....................................... 451,032
Payable for securities purchased .......................... 31,060
Payable for shares redeemed ............................... 1,277,923
Payable for investment management
services (note 3) ........................................ 119,954
Other accrued expenses .................................... 62,710
-------------
Total liabilities ........................................ 1,942,679
-------------
Net assets at market value ................................. $ 156,030,102
=============
Net assets consist of:
Par value, $1 per share ................................... $ 11,648,458
Paid-in capital in excess of par value .................... 149,809,500
Net unrealized appreciation (depreciation) on:
Investments (note 1) ..................................... (8,001,556)
Foreign currency related transactions .................... (9,364)
Forward currency contracts (note 5) ...................... 2,582,385
Undistributed net investment income ....................... 679
-------------
Net assets at market value ................................. $ 156,030,102
=============
Shares outstanding (note 4) ................................ 11,648,458
Net asset value per share .................................. $ 13.39
=============
STATEMENT OF OPERATIONS Year ended December 31, 1997
Investment income:
Interest (net of $5,861 foreign taxes withheld) ........... $ 1,919,290
Dividends (net of $306,413 foreign taxes withheld) ........ 2,829,043
-------------
Total investment income .................................. 4,748,333
-------------
Expenses:
Management fees (note 3) .................................. 1,416,777
Custodian fees (note 3) ................................... 411,452
Directors' fees (note 3) .................................. 7,480
Professional fees ......................................... 22,440
Other ..................................................... 46,808
-------------
Total expenses ........................................... 1,904,957
-------------
Net investment income .................................... $ 2,843,376
=============
Realized and unrealized gain (loss) on
investments and foreign currency:
Net realized gain from:
Investments .............................................. $ 10,515,619
Forward currency related transactions .................... 6,742,661
Net increase (decrease) in unrealized
appreciation (depreciation) on:
Investments ............................................. (18,741,860)
Foreign currency related transactions ................... 935,907
-------------
Net loss on investments ................................. (547,673)
-------------
Net increase in net
assets from operations .................................. $ 2,295,703
=============
</TABLE>
The accompanying notes are an integral part of these financial statements.
31
<PAGE> 88
OHIO NATIONAL FUND, INC.
INTERNATIONAL PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
12-31-97 12-31-96
---------- ----------
From operations:
<S> <C> <C>
Net investment income ................................................................. $2,843,376 $1,901,178
Realized gain on investments and foreign currency transactions......................... 17,258,280 7,010,378
Unrealized gain (loss) on investments and foreign currency transactions ............... (17,805,953) 5,979,693
------------ ------------
Net increase in assets from operations............................................... 2,295,703 14,891,249
------------ ------------
Dividends and distributions to shareholders:
Dividends paid from net investment income.............................................. (3,725,344) (1,817,864)
Capital gains and foreign currency related transaction distributions .................. (21,388,818) (4,571,191)
------------ ------------
Total dividends and distributions ................................................... (25,114,162) (6,389,055)
------------ ------------
From capital share transactions (note 4):
Received from shares sold ............................................................. 37,696,255 37,362,568
Received from dividends reinvested .................................................... 25,114,162 6,389,055
Paid for shares redeemed .............................................................. (21,251,055) (5,558,345)
------------ ------------
Increase in net assets derived from capital share transactions........................ 41,559,362 38,193,278
------------ ------------
Increase in net assets ............................................................. 18,740,903 46,695,472
Net Assets:
Beginning of period ................................................................... 137,289,199 90,593,727
------------ ------------
End of period (a) .....................................................................$156,030,102 $137,289,199
============ ============
(a)Includes undistributed net investment income of...................................... $679 $882,647
============ ============
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
4-30-93
Years Ended December 31, to
1997 1996 1995 1994 12-31-94
------ ----- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Per share data:
Net asset value, beginning ..................... $15.49 $14.38 $13.30 $12.48 $10.00
Income from investment operations:
Net investment income ......................... 0.28 0.25 0.31 0.16 0.02
Net realized and unrealized gain on investments
and foreign currency transactions ............ 0.08 1.76 1.28 0.84 2.47
------ ----- ------ ------ ------
Total income from investment operations ..... 0.36 2.01 1.59 1.00 2.49
------ ----- ------ ------ ------
Less distributions:
Dividends from net investment income .......... (0.37) (0.25) (0.28) (0.12) (0.01)
Distributions from net realized capital gains
and foreign currency related transaction ..... (2.09) (0.65) (0.23) (0.06) 0.00
------ ----- ------ ------ ------
Total distributions .......................... (2.46) (0.90) (0.51) (0.18) (0.01)
------ ----- ------ ------ ------
Net asset value, end of period ................. $13.39 $15.49 $14.38 $13.30 $12.48
====== ====== ====== ====== ======
Total return ................................... 2.11% 14.48% 12.10% 8.07% 24.96%(b)
Ratios and supplemental data:
Ratio of expenses to average net assets ....... 1.22% 1.15% 1.12% 1.05% 1.13%(a,d)
Ratio of net investment income to average
net assets ................................... 1.82% 1.64% 2.29% 1.23% 0.41%(a,d)
Portfolio turnover rate ........................ 24% 14% 7% 16% 8%
Average commission rate (c) .................... $ 0.02 $ 0.03 NR NR NR
Net assets at end of period (millions).......... $156.0 137.3 $ 90.6 $ 62.9 $ 17.5
</TABLE>
(a) Annualized
(b) Calculated on an aggregate basis (not annualized)
(c) Represents the total dollar amount of commission paid on equity security
transactions divided by the total number of shares purchased and sold for
which commissions were charged.
(d) The advisor has reimbursed certain operating expenses of the International
Portfolio for the period ended December 31, 1993. Had the adviser not
reimbursed such expenses, the annualized ratio of expenses to average net
assets would have been 1.39% and the annualized ratio of net investment
income to average net assets would have been 0.15%.
(NR) Not required prior to 1996.
The accompanying notes are an integral part of these financial statements.
32
<PAGE> 89
CAPITAL APPRECIATION PORTFOLIO
OHIO NATIONAL FUND, INC.
OBJECTIVE
The Capital Appreciation Portfolio seeks maximum capital growth by investing
primarily in common stocks.
PERFORMANCE AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
<S> <C>
AVERAGE ANNUAL TOTAL RETURNS:
One-year 15.19%
Three-year 17.80%
Since inception (4/30/94) 15.73%
</TABLE>
Returns represent past performance, which is no guarantee of future results.
Investment return and principal value will vary so that shares, when redeemed,
may be worth more or less than their original cost. Actual results for variable
annuity and variable universal life contracts will be lower due to contract
charges. Consult your contract for applicable charges for mortality and
expenses.
COMMENTS
The Capital Appreciation Portfolio advanced strongly in 1997, but its cautious
strategy could not keep up with the broad market. During the year's few periods
of market difficulty, however, the performance was outstanding.
Media stocks continued as a stellar area of investment, with both New York Times
and Washington Post being important contributors to performance. They remain
large holdings, although we have substantially reduced the Times position. We
also trimmed two of our big winners, Automatic Data Processing convertible bonds
and FirstEnergy. Our biggest disappointments were the plummeting gold mining
stocks. An unusual fixed-income purchase - putable Tennessee Valley Authority
bonds - is now one of our top five holdings. In return for their favorable
risk/return characteristics we give up a portion of current income - a
reasonable tradeoff given the uncertainty and potential magnitude of possible
future interest rate changes.
While the economy still looks fine, corporate earnings growth in 1998 is
unlikely to match of 1997. We consider valuation to be the most significant
negative facing the stock market, just as it was 12 months ago. Historic
yardsticks like price/earnings ratios and dividend yields are off the charts,
and we are skeptical of the underlying accounting.
CHANGE IN VALUE OF $10,000 INVESTMENT
<TABLE>
<CAPTION>
'94 '95 '96 '97
<S> <C> <C> <C> <C>
Capital Appreciation Portfolio $22,835
S&P 500 Index $17,039
</TABLE>
Hypothetical illustration based on past performance. Future performance will
vary. All returns reflect reinvested dividends. The portfolio's holdings may
differ significantly from the securities in the index. The index is unmanaged
and therefore does not reflect the cost of portfolio management or trading.
Neither the portfolio nor the index is open to direct investment.
TOP 10 HOLDINGS AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
1. FirstEnergy Corp 5.3
2. Amerada Hess Corp 3.3
3. Genetech Com SPL 3.1
4. Automatic Data 3.0
5. Tennessee Valley Authority 5.88% 4/1/36 2.8
6. Loews Corp 2.8
7. Unicom Corp 2.6
8. Washington Post CL B 2.2
9. New York Times Co 2.1
10. Time Warner Inc. 1.9
</TABLE>
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
Oil, Energy, and Natural Gas 10.6
Media and Publishing 9.7
Government 7.6
Electrical 5.5
Industrial Services 4.9
</TABLE>
<PAGE> 90
OHIO NATIONAL FUND, INC.
CAPITAL APPRECIATION PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT LONG-TERM BONDS & NOTES VALUE
- ------------------------------------------------------------------
<S> <C> <C>
GOVERNMENT (7.6%)
$ 400,000 FNMA
6.375% 01-16-02 $ 406,395
102,000 Instit Pen CV
5.000% 06-28-01 125,460
600,000 Tennessee Valley Authority
6.235% 07-15-45 614,910
1,600,000 Tennessee Valley Authority
5.880% 04-01-36 1,643,029
125,000 U.S. Treasury Note
6.250% 06-30-98 125,547
200,000 U.S. Treasury Note
6.250% 04-30-01 203,188
250,000 U.S. Treasury Note
6.125% 07-31-00 252,578
1,000,000 U.S. Treasury Note
5.500% 02-28-99 998,438
250,000 U.S. Treasury Note
6.750% 05-31-99 253,672
----------
4,623,217
----------
COMMUNICATIONS (0.9%)
500,000 Bellsouth Telecomm
5.850% 11-15-45 502,744
----------
DRUGS (0.2%)
100,000 Merck and Company
5.760% 05-03-37 102,853
----------
FINANCE (1.0%)
100,000 Federal National Mtg. Assoc.
5.370% 02-07-01 98,639
450,000 Tennessee Valley Authority
5.980% 04-01-36 452,544
50,000 UBS Finance
2.000% 12-15-00 48,337
----------
599,520
----------
FOREIGN (0.6%)
200,000 Peninsula & Oriental
7.250% 05-19-03 383,378
----------
INSURANCE (0.4%)
150,000 Grand Metropolitan
6.500% 01-31-00 209,208
----------
TOTAL LONG-TERM BONDS & NOTES
(10.7%) (COST $6,279,229) $6,420,920
----------
FACE MARKET
AMOUNT SHORT-TERM NOTES VALUE
- ------------------------------------------------------------------
FINANCIAL SERVICES (2.5%)
$1,500,000 Bell Atlantic Financial Services
5.850% 01-27-98 $1,493,663
----------
FOOD AND RELATED (3.7%)
1,000,000 Campbell Soup Company
5.520% 01-27-98 996,013
1,250,000 Coca-Cola Co.
5.560% 02-09-98 1,242,471
----------
2,238,484
----------
FACE MARKET
AMOUNT SHORT-TERM NOTES VALUE
- ------------------------------------------------------------------
GOVERNMENT (5.4%)
$3,053,000 Federal Home Loan Mortgage
4.750% 01-02-98 $3,052,597
154,000 U.S.T-Bill
5.155% 01-22-98 153,537
----------
3,206,134
----------
MEDICAL AND RELATED (1.7%)
1,000,000 Abbot Laboratories
5.800% 01-07-98 999,033
----------
METALS AND MINING (2.1%)
1,000,000 Minnesota Mining
5.530% 01-21-98 996,928
269,000 Minnesota Mining
5.800% 01-09-98 268,653
----------
1,265,581
----------
Total Short Term Notes
(15.4%) (Cost $9,202,895) $9,202,895
----------
FACE MARKET
AMOUNT CONVERTIBLE DEBENTURES VALUE
- ------------------------------------------------------------------
AUTOMOTIVE AND RELATED (0.8%)
$ 100,000 The Pep Boys conv.
4.000% due 09-01-99 $ 98,875
700,000 The Pep Boys MM&J Lyons, zero
coupon contracts due 09-20-11 374,500
473,375
----------
BUSINESS SERVICES (3.0%)
2,225,000 Automatic Data Process, zero
coupon contracts due 02-20-12 1,766,094
----------
DRUGS (1.6%)
1,700,000 Alza Corp., zero coupon
contracts due 07-14-14 788,375
200,000 Mckesson Co., 4.500% conv.
suborinated debentures
due 03-01-04 182,110
----------
970,485
----------
ENTERTAINMENT AND LEISURE (0.1%)
50,000 Ogden Corp. conv.
5.750% due 10-20-02 48,125
----------
FOREIGN (0.5%)
200,000 Lonrho 6.000% conv. subordinated
debenture, due 02-27-04 286,300
----------
HOTEL/LODGING (0.6%)
525,000 Marriott International, zero
coupon contracts due 03-25-11 341,906
----------
INDUSTRIAL SERVICES (3.0%)
1,800,000 Roche Holdings, conv. zero
coupon contracts due 05-06-12 839,250
1,150,000 WMX Technologies
2.000% due 01-24-05 983,250
----------
1,822,500
----------
MEDICAL AND RELATED (1.0%)
675,000 Chiron Corp., conv.
1.900% due 11-17-00 617,625
----------
(continued)
</TABLE>
34
<PAGE> 91
OHIO NATIONAL FUND, INC.
CAPITAL APPRECIATION PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT CONVERTIBLE DEBENTURES VALUE
- ------------------------------------------------------------------
<S> <C> <C>
MEDIA AND PUBLISHING (2.9%)
$ 900,000 News America Hldgs Lyons
zero coupons contracts due 03-11-13 $ 420,750
50,000 Thomas Nelson Cl. B
5.750% due 11-30-99 48,125
400,000 Times Mirror New, zero coupon
contracts due 04-15-17 171,500
2,200,000 Time Warner, zero coupon
contracts due 06-22-13 1,113,750
-----------
1,754,125
-----------
METALS AND MINING (1.7%)
450,000 Homestake Mining
5.500% due 06-23-00 418,500
50,000 Inco Ltd. conv.
7.750% due 03-15-16 48,813
580,000 Inco Ltd. conv.
5.750% due 07-01-04 553,900
-----------
1,021,213
-----------
OIL, ENERGY, AND NATURAL GAS (1.1%)
630,000 Enserch Corp.
6.375% due 04-01-02 655,200
-----------
REAL ESTATE (1.1%)
625,000 Rouse Co., 5.750% conv. suborinated
debentures, due 07-23-02 654,688
-----------
RETAIL (0.4%)
375,000 Office Depot, zero coupon
contracts due 11-01-08 244,687
-----------
UTILITIES (1.3%)
250,000 Potomac Electricity & Power Co.,
5.000% conv. subordinated
debentures, due 09-01-02 245,312
1,500,000 US Cellular Lyons, zero coupon
contracts due 06-15-15 541,875
-----------
787,187
-----------
TOTAL CONVERTIBLE DEBENTURES
(19.1%) (COST $10,556,725) $11,443,510
-----------
MARKET
SHARES COMMON STOCK VALUE
- ------------------------------------------------------------------
BANKING (0.1%)
13 Bank for International Settlements $ 81,331
-----------
COMPUTER AND RELATED (0.8%)
4,800 IBM Corp. 501,900
-----------
CHEMICALS (2.0%)
21,500 Great Lakes Chemical Corp. 964,813
5,250 Hanson Trust PLC ADR 121,078
5,000 Millenium Chemicals 117,812
-----------
1,203,703
-----------
CONSUMER PRODUCTS (1.9%)
18,000 Philip Morris Cos., Inc. 815,625
6,000 Polaroid Corp. 292,125
-----------
1,107,750
-----------
MARKET
SHARES COMMON STOCK VALUE
- ------------------------------------------------------------------
DRUGS (3.6%)
31,000 *Genetech Special Common $ 1,879,375
4,000 Schering - Plough Corp. 248,500
-----------
2,127,875
-----------
DURABLE GOODS (0.1%)
3,000 A T Cross Co. 30,375
-----------
ELECTRICAL EQUIPMENT (5.5%)
4,000 Exide Corp. 103,500
110,000 *Firstenergy Corp. 3,190,000
-----------
3,293,500
-----------
FINANCE (2.1%)
2,800 American Express 249,900
3,200 Federal Nat'l Mortgage Assn. 182,600
4,500 Fund American Enterprise 544,500
8,000 Leucadia National Corp. 276,000
-----------
1,253,000
-----------
FOOD AND RELATED (0.6%)
12,500 McCormick & Company, Inc. 350,000
FOREIGN (0.7%)
275,000 Lonrho PLC 420,805
-----------
FORESTRY AND PAPER PRODUCTS (2.5%)
1,000 Deltic Timber Corp. 27,375
2,500 International Paper Co. 107,813
21,000 Johns-Manville Corp. 211,312
9,500 Louisiana Pacific Corp. 180,500
47,000 MacMillan Bloedel 499,375
9,000 Weyerhaeuser Co. 441,563
-----------
1,467,938
-----------
INDUSTRIAL SERVICES (1.9%)
8,000 Corning Inc. 297,000
51,500 Wheelabrator Technologies 827,219
-----------
1,124,219
-----------
INSURANCE (4.0%)
15,500 Loews Corp. 1,644,938
5,500 Unitrin, Inc. 355,437
31,500 Willis Corroon Group plc 387,844
-----------
2,388,219
-----------
MEDIA AND PUBLISHING (6.8%)
17,000 Chris-Craft Ind., Inc. 889,313
10,000 Meredith Corp. 356,875
19,000 New York Times Co. Class A 1,256,375
8,000 Readers Digest 195,000
2,800 Washington Post Class B 1,362,200
-----------
4,059,763
-----------
MEDICAL AND RELATED (0.6%)
1,500 Pharmacia & Upjohn 54,938
110,000 Smith & Nephew 325,789
-----------
380,727
-----------
METALS AND MINING (2.1%)
26,000 Homestake Mining Co. 230,750
29,000 Newmont Mining Corp. 851,875
29,500 Prime Resources Group 200,969
-----------
1,283,594
-----------
(continued)
</TABLE>
35
<PAGE> 92
OHIO NATIONAL FUND, INC.
CAPITAL APPRECIATION PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -----------------------------------------------------------------
<S> <C> <C>
OIL, ENERGY AND NATURAL GAS (9.5%)
36,000 Amerada Hess Corp. $ 1,975,500
6,000 Atlantic Richfield Co. 480,750
8,500 The Energy Group Pls ADR 379,313
1,500 Kerr McGee 94,969
18,700 Mitchell Energy & Development 544,637
14,000 Murphy Oil Corp. 758,625
16,330 Texaco, Inc. 887,943
28,000 Union Texas Petroleum 582,750
-----------
5,704,487
-----------
RETAIL (1.5%)
12,000 *Hill Stores Co. 38,250
8,000 Limited Inc. 204,000
150,000 *Petrie Stores- Liq. Trust Unit 448,500
2,100 *Toys R' Us 66,018
4,300 Wal-Mart Stores, Inc. 169,581
-----------
926,349
-----------
TRANSPORTATION (0.8%)
16,000 Overseas Shipholding Inc. 349,000
4,000 Ryder System, Inc. 131,000
-----------
480,000
-----------
UTILITIES (3.4%)
45,000 *Niagara Mohawk Power 472,500
50,000 Unicom Corp. 1,537,500
-----------
2,010,000
-----------
TOTAL COMMON STOCK
(50.5%) (COST $24,590,650) $30,195,535
-----------
MARKET
SHARES PREFERRED STOCK VALUE
- -----------------------------------------------------------------
FINANCE (0.6%)
7,000 Kemper Co., 5.750% Series E $ 364,000
-----------
FORESTRY AND PAPER PRODUCTS (0.1%)
500 International Paper 24,430
-----------
REAL ESTATE (1.1%)
13,000 Rouse Co. conv. Series B 650,000
-----------
MARKET
SHARES PREFERRED STOCK VALUE
- -----------------------------------------------------------------
UTILITIES (1.9%)
265 Cleveland Electric 9.000% $ 284,554
150 Cleveland Electric 8.800% 159,313
4,940 Cleveland Electric Adj. Rate 469,300
2,894 Entergy Gulf Series B 144,339
1,000 Niagara Mohawk Power Series B 23,250
3,200 Niagara Mohawk Power Series C 76,800
-----------
1,157,556
-----------
TOTAL PREFERRED STOCK
(3.7%) (COST $1,936,523) $ 2,195,986
-----------
PUT OPTION PURCHASES MARKET
SHARES STOCK/EXPIRATION/EXERCISE PRIC VALUE
- -----------------------------------------------------------------
15 Automatic Data/Feb/$55.00 $ 1,031
15 Automatic Data/May/$60.00 4,312
5 Grand Met/Jan/$45.00 3,812
10 HFS/Jan/$65.00 0
10 IBM/Jan/$95 625
15 IBM/Jan/$100 1,875
10 IBM/Jan/$105 3,750
15 IBM/Jan/$115 15,750
15 IBM/Jul/$120 28,875
10 Limited Inc/Feb/$25 1,188
15 Pharmacia & Upjohn/Apr/$40 6,188
6 Poloroid/Apr/$60 5,625
25 Schering-Plough/Feb/$55 937
10 Schering-Plough/Feb/$65 6,750
15 Schering-Plough/Aug/$65 9,375
15 Texaco/Apr/$70 15,188
15 Walmart/Jun/$42.50 8,625
-----------
TOTAL PUT OPTION PURCHASE
(0.2%) (COST $201,997) $ 113,906
-----------
TOTAL HOLDINGS
(COST $52,768,019) (a) $59,572,752
===========
</TABLE>
* Non-income producing securities.
(a) Also represents cost for Federal income tax purposes.
The accompanying notes are an integral part of these financial statements.
<PAGE> 93
OHIO NATIONAL FUND, INC.
CAPITAL APPRECIATION PORTFOLIO
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1997
<S> <C>
Assets:
Investments in securities at market
value (note 1) (cost $52,768,019) .......................... $59,572,752
Cash in bank ................................................. 1,545
Receivable for fund shares sold .............................. 490,274
Receivable for securities sold ............................... 22,599
Dividends and accrued interest receivable .................... 265,003
Other ........................................................ 2,469
-----------
Total assets ............................................... 60,354,642
-----------
Liabilities:
Payable for investment management
services (note 3) .......................................... 467,709
Payable for securities purchased ............................. 41,460
Other accrued expenses ....................................... 14,379
-----------
Total liabilities .......................................... 523,548
-----------
Net assets at market value ...................................... $59,831,094
===========
Net assets consist of:
Par value, $1 per share ...................................... $4,420,939
Paid-in capital in excess of par value ....................... 48,601,647
Net unrealized appreciation on investments (note 1)........... 6,804,733
Undistributed net
investment income .......................................... 3,775
-----------
Net assets at market value ...................................... $59,831,094
===========
Shares outstanding (note 4) ..................................... 4,420,939
Net asset value per share ....................................... $ 13.53
===========
STATEMENTS OF OPERATIONS
Year ended December 31, 1997
Investment income:
Interest ..................................................... $ 1,141,028
Dividends .................................................... 708,387
-----------
Total investment income ..................................... 1,849,415
-----------
Expenses:
Management fees (note 3) .................................... 386,595
Custodian fees (note 3) ..................................... 13,000
Directors' fees (note 3) .................................... 2,320
Professional fees ........................................... 6,960
Accounting and transfer agent fees .......................... 40,596
Other ....................................................... 9,444
-----------
Total expenses .............................................. 458,915
-----------
Net investment income ....................................... $ 1,390,500
-----------
Realized and unrealized gain on investments:
Net realized gain from investments ............................ $ 2,209,729
Net increase in unrealized
appreciation on investments .................................. 3,325,188
-----------
Net gain on investments ..................................... 5,534,917
-----------
Net increase in net
assets from operations ...................................... $ 6,925,417
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
37
<PAGE> 94
OHIO NATIONAL FUND, INC.
CAPITAL APPRECIATION PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
12-31-97 12-31-96
---------- ----------
<S> <C> <C>
From operations:
Net investment income ................................................$ 1,390,500 $ 1,121,488
Realized gain on investments ......................................... 2,209,729 1,168,575
Unrealized gain on investments ....................................... 3,325,188 2,026,474
----------- ------------
Net increase in assets from operations.............................. 6,925,417 4,316,537
----------- ------------
Dividends and distributions to shareholders:
Dividends paid from net investment income............................. (1,682,334) (969,506)
Capital gains distributions .......................................... (3,070,931) (655,102)
----------- ------------
Total dividends and distributions .................................. (4,753,265) (1,624,608)
----------- ------------
From capital share transactions (note 4):
Received from shares sold ............................................ 17,953,371 16,614,123
Received from dividends reinvested ................................... 4,753,265 1,624,608
Paid for shares redeemed ............................................. (3,328,937) (1,969,700)
----------- ------------
Increase in net assets derived from capital share transactions ......19,377,699 16,269,031
----------- ------------
Increase in net assets ........................................... 21,549,851 18,960,960
Net Assets:
Beginning of period .................................................. 38,281,243 19,320,283
----------- ------------
End of period (a) ....................................................$59,831,094 $ 38,281,243
=========== ============
(a) Includes undistributed net investment income of.....................$ 3,775 $ 295,609
=========== ============
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
5-1-94
Years Ended December 31, to
1997 1996 1995 12-31-94
---- ---- ---- --------
<S> <C> <C> <C> <C>
Per share data:
Net asset value, beginning of period.....................$12.93 $11.99 $10.25 $10.00
Income from investment operations:
Net investment income.................................. 0.39 0.48 0.39 0.22
Net realized and unrealized gain on investments ....... 1.48 1.31 1.85 0.23
------ ------ ------ ------
Total income from investment operations.............. 1.87 1.79 2.24 0.45
------ ------ ------ ------
Less distributions:
Dividends from net investment income ..................(0.46) (0.44) (0.29) (0.20)
Distributions from net realized capital gains .........(0.81) (0.41) (0.21) 0.00
------ ------ ------ ------
Total distributions..................................(1.27) (0.85) (0.50) (0.20)
------ ------ ------ ------
Net asset value, end of period...........................$13.53 $12.93 $11.99 $10.25
====== ====== ====== ======
Total return..............................................15.19% 15.75% 22.62% 4.53%(b)
Ratios and supplemental data:
Ratio of expenses to average net assets ............... 0.95% 0.97% 0.96% 0.98%(a,d)
Ratio of net investment income to average net assets .. 2.88% 3.90% 3.47% 3.24%(a,d)
Portfolio turnover rate................................... 41% 37% 32% 20%
Average commission rate (c) ............................. $ 0.04 $ 0.05 NR NR
Net assets at end of period (millions)....................$ 59.8 $ 38.3 $ 19.3 $ 6.8
</TABLE>
(a) Annualized
(b) Calculated on an aggregate basis (not annualized)
(c) Represents the total dollar amount of commission paid on equity security
transactions divided by the total number of shares purchased and sold for
which commissions were charged.
(d) The advisor has reimbursed certain operating expenses of the Capital
Apprciation Portfolio for the period ending December 31, 1994. Had the
advisor not reimbursed such expenses, the annualized ratio of expenses to
average net assets would have been 1.05% and the annualized ratio of net
investment income to average net assets would have been 3.18%.
(NR) Not required prior to 1996.
The accompanying notes are an integral part of these financial statements.
38
<PAGE> 95
SMALL CAP PORTFOLIO
OHIO NATIONAL FUND, INC.
OBJECTIVE
The Small Cap Portfolio seeks maximum capital growth by investing primarily in
common stocks of small- and medium- size companies
PERFORMANCE AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS:
<S> <C>
One-year 8.47%
Three-year 19.31%
Since inception (4/30/94) 21.76%
</TABLE>
Returns represent past performance, which is no guarantee of future results.
Investment return and principal value will vary so that shares, when redeemed,
may be worth more or less than their original cost. Actual results for variable
annuity and variable universal life contracts will be lower due to contract
charges. Consult your contract for applicable charges for mortality and
expenses.
COMMENTS
The second half of 1997 continued the trend of volatility set in the first half.
The third quarter was strong but followed by a weak fourth quarter, primarily
due to concerns over the Asian crisis and its effects on corporate profit
growth. The positives of 1997 were better than expected profits and a declining
inflation rate which led to lower interest rates. Unfortunately, the concern
over global growth resulted in investors favoring large cap investments.
We would expect 1998 to be more of the same at this point. The economies of
Europe and the Americas are healthy albeit growing slowly. Interest rates
continue to trend down as does inflation which is a good environment for
financial assets. The primary concern is the Asian crisis which will have a
deflationary effect and cause some slowdown in global growth. The uncertainty
over the magnitude of the Asian crisis and its impact will likely lead to
continued volatility across all global stock markets. We believe however that
the US is in particularly good shape with declining interest rates and a good
global competitive position. Small company stocks are at very attractive
valuations and with their higher growth rates should perform well in the current
environment.
CHANGE IN VALUE OF $10,000 INVESTMENT
<TABLE>
<CAPTION>
'94 '95 '96 '97
<S> <C> <C> <C> <C>
Small Cap Portfolio $20,684
Russell 2000 Index $18,343
</TABLE>
Hypothetical illustration based on past performance. Future performance will
vary. All returns reflect reinvested dividends. The portfolio's holdings may
differ significantly from the securities in the index. The index is unmanaged
and therefore does not reflect the cost of portfolio management or trading.
Neither the portfolio nor the index is open to direct investment.
TOP 10 HOLDINGS AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
1. JP Foodservice Inc 2.1
2. Fairfield Communities Inc 2.1
3. Watson Pharmaceuticals Inc. 2.0
4. Wolverine World Wide 1.8
5. Helen of Troy 1.6
6. HBO & Co 1.6
7. Documentum 1.6
8. HNC Software 1.6
9. US Office Products 1.5
10. Pre Paid Legal Services 1.5
</TABLE>
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1997
% of Net Assets
[S] [C]
Computer and Related 17.1
Medical and Related 10.2
Business Services 6.7
Retail 5.5
Electronics 5.0
The prices of small company stocks are generally more volatile than the prices
of large company stocks.
39
<PAGE> 96
OHIO NATIONAL FUND, INC.
SMALL CAP PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS VALUE
- -------------------------------------------------------------------------
<S> <C> <C>
FINANCIAL (14.2%)
$8,290,000 Star Bank 5.500% 01-02-98
repurchase price $8,292,533
collateralized by GNMA certificates
pool #8359
due 01-20-24 (cost $8,290,00 $8,290,000
----------
TOTAL REPURCHASE AGREEMENTS
(14.2%) (Cost $8,290,000) $8,290,000
----------
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------------------
AEROSPACE (0.7%)
14,250 *Tracor Inc. $432,844
---------
AUTOMOTIVE AND RELATED (0.5%)
10,700 OEA Inc. 309,631
---------
BUSINESS SERVICES (6.7%)
17,075 *Checkfree 461,025
20,000 *Concord EFS, Inc. 497,500
2,850 *Metzler Group 114,356
6,000 National Data Corp. 216,750
24,975 *Pre Paid Leagal Services Inc. 853,833
14,000 *Sylvan Learning Systems Inc. 546,000
44,625 *US Office Products 875,766
15,575 *Vestcom International 348,491
---------
3,913,721
---------
CHEMICALS (1.2%)
12,875 Crompton & Knowles Corp. 341,187
9,475 OM Group 347,022
---------
688,209
---------
CIRCUITS (0.6%)
12,025 Sipex Corporation 363,756
---------
COLLECTIBLES (0.5%)
7,600 *Action Performance Co. Inc. 287,850
---------
COMMUNICATIONS (4.3%)
8,100 *Cellular Communication Intl. 378,676
20,300 *Digital Microwave Corp. 294,350
9,125 *Genesys Telecomm. Labs 290,859
23,200 *Intelect Communications Inc. 118,899
11,975 *Nextlink Communications 255,217
15,400 *P-Com Inc. 265,650
5,625 *Pacific Gateway Exchange 302,695
19,225 *Periphonics Corp. 168,219
19,475 *Smartalk Teleservices 443,056
---------
2,517,621
---------
CONSUMER PRODUCTS (3.6%)
58,400 Helen of Troy 941,700
10,550 *JR Cigar 263,750
11,750 *Ocular Sciences 308,438
14,375 *Samsonite 454,609
4,950 Windmere 111,684
---------
2,080,181
---------
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------------------
COMPUTER AND RELATED (17.1%)
18,075 *Aspen Technology $ 619,069
7,275 *Avant! Corp. 121,856
16,350 *CDW Computer Centers Inc. 852,244
22,125 *Documentum 932,016
5,750 *Electronic Arts 217,422
42,350 *Geoworks 407,619
21,625 *HNC Software 929,875
20,625 Harbinger Corp. 579,991
19,987 Insight Enterprises Inc. 734,522
13,325 Keane Inc. 541,328
8,450 *MMC Networks Inc. 141,511
23,650 *Mastech Corporation 750,887
11,500 *Radisys Corp. 428,375
16,925 *SanDisk Corp. Designs 343,789
8,575 *Security Dynamics Tech. 306,556
24,125 *Simione Central 217,125
6,000 *Sterling Commerce Inc. 230,625
23,500 *Summit Design Inc. 243,812
14,825 *Transaction System Arch. 563,350
18,025 *Transition Systems 398,803
13,650 *Zebra 406,088
----------
9,966,863
----------
Drugs (3.0%)
17,400 Parexel International Corp. 643,800
33,900 *Watson Pharmaceuticals Inc. 1,099,630
----------
1,743,430
----------
ELECTRONICS (5.0%)
27,750 Berg Electronics Corp. 631,313
11,746 PRI Automation Inc. 339,166
7,275 *Powerwave Technologies 122,311
21,512 Remec Inc. 484,020
10,475 *Sanmina Corp. 709,681
11,400 *Sawtek Inc. 300,675
7,325 *Speedfam International Inc. 194,112
3,300 Vitesse Semiconductor Corp. 124,575
----------
2,905,853
----------
ENTERTAINMENT AND LEISURE (0.4%)
12,425 *Midway Games 225,980
----------
FINANCE (0.2%)
2,500 Banco Latinoamericano 103,438
----------
FOOD AND RELATED (2.1%)
32,675 *JP Foodservice Inc. 1,206,933
----------
HEALTH CARE AND RELATED (1.5%)
10,425 *Access Health Inc. 306,234
2,125 *Envoy Corporation 61,891
30,050 *Orthodontic Centers of America 499,581
----------
867,706
----------
HOTEL/LODGING (4.0%)
15,650 *Capstar Hotel Co. 536,991
6,475 *Promus Hotel Corp. 271,950
23,162 Signature Resorts Inc. 506,669
29,025 *Silverleaf Resorts Inc. 711,113
13,300 *Vistana 305,900
----------
2,332,623
----------
(continued)
</TABLE>
40
<PAGE> 97
OHIO NATIONAL FUND, INC.
SMALL CAP PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------------------
INDUSTRIAL SERVICES (2.0%)
<S> <C> <C>
14,500 *Brooks Automation $266,438
9,000 Harsco Corp. 388,125
13,350 *USA Waste 523,987
---------
1,178,550
---------
INSURANCE (1.9%)
7,375 Executive Risk Inc. 514,867
14,200 Reliastar Financial Corp. 584,863
1,099,730
---------
INVESTMENT MANAGEMENT (0.5%)
10,725 *Affiliated Managers Group Inc. 311,025
---------
MACHINERY (0.8%)
18,325 *Rental Service Corp. 450,108
---------
MEDICAL AND RELATED (10.2%)
9,300 *Advance Paradigm 295,275
15,500 *Covance 308,062
19,100 *ESC Medical Systems 740,125
28,475 *FPA Medical Management 530,347
19,470 HBO & Company 934,560
12,125 *Healthcare Compare 619,891
13,375 *Henry Schein Inc. 468,125
23,450 *Medical Manager Corp. 422,100
9,800 *NCS Healthcare Inc. 258,475
5,075 *R.P. Scherer 309,575
17,700 Rexall Sundown Inc. 534,319
12,175 *Sunrise Assisted Living Inc. 525,048
---------
5,945,902
---------
METALS AND MINING (0.7%)
10,525 IMCO Recycling 169,058
14,250 *NSS Group 244,031
---------
413,089
---------
OIL, ENERGY, AND NATURAL GAS (0.7%)
1,250 Patterson Energy 48,359
15,000 UTI Energy 388,125
---------
436,484
---------
PRINTING (0.9%)
13,000 Mail-Well Inc. 526,500
---------
REAL ESTATE (2.0%)
27,100 Fairfield Communities Inc. 1,195,788
---------
RENTAL AUTO/EQUIPMENT (0.4%)
11,800 *United Rentals Inc. 227,888
---------
RESTAURANTS (1.4%)
19,000 CKE Restaurants 800,375
---------
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------------------
RETAIL (5.5%)
12,000 Fred Meyer $ 436,500
22,700 Proffitt's Inc. 645,531
16,850 *Stage Stores 629,769
12,475 *The Men's Wearhouse Inc. 433,506
46,575 Wolverine World Wide 1,053,759
-----------
3,199,065
RETIREMENT/AGED CARE (0.8%)
42,000 *Capital Senior Living 438,375
-----------
TELECOM SERVICES (2.8%)
10,900 *Echostar Communications 182,575
33,900 *Premiere Technologies 936,542
41,625 *Westell Technologies Inc. A 532,271
-----------
1,651,388
-----------
TEXTILES (0.6%)
11,000 Warnaco Group Cl A 345,125
-----------
TRANSPORTATION (1.5%)
39,625 *Offshore Logistics 846,984
-----------
TOTAL U.S. COMMON STOCK
(84.1%) (COST $41,121,629) $49,013,015
-----------
MARKET
SHARES FOREIGN COMMON STOCK VALUE
- -------------------------------------------------------------------------
BRITIAN (1.4%)
MEDIA
39,600 *Flextech Plc $ 340,124
MISCELLANEOUS
83,770 Wetherspoon (J.D.) 458,993
-----------
TOTAL BRITIAN 799,117
-----------
NETHERLANDS (1.1%)
MISCELLANEOUS
8,160 *Hunter Douglas NV 285,789
TRANSPORTATION
7,100 *IHC Caland 368,444
-----------
TOTAL NETHERLANDS 654,233
-----------
TOTAL FOREIGN COMMON STOCK
(2.5%) (COST $968,846) $ 1,453,350
-----------
TOTAL HOLDINGS
(COST $50,380,475)(A) $58,756,365
===========
</TABLE>
*Non-income producing securities.
(a) Also represents cost for Federal income tax purposes.
The accompanying notes are an integral part of these financial statements.
41
<PAGE> 98
OHIO NATIONAL FUND, INC.
SMALL CAP PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<S> <C>
Assets:
Investments in securities at market
value (note 1) (cost $50,380,475).......... $58,756,365
Cash in bank ............................... 845
Receivable for fund shares sold............. 615,474
Receivable for securities sold ............. 583,480
Dividends and accrued interest receivable .. 3,657
Other ...................................... 2,406
-----------
Total assets .............................. 59,962,227
-----------
Liabilities:
Payable for securities purchased ........... 1,607,040
Payable for investment management
services (note 3) ......................... 39,867
Other accrued expenses ..................... 10,751
-----------
Total liabilities ......................... 1,657,658
-----------
Net assets at market value $58,304,569
===========
Net assets consist of:
Par value, $1 per share .................... $3,114,834
Paid-in capital in excess of par value ..... 46,812,884
Accumulated undistributed net realized
gain on investments (note 1)............... 961
Net unrealized appreciation on investments
(note 1)................................... 8,375,890
-----------
Net assets at market value $58,304,569
===========
Shares outstanding (note 4).................. 3,114,834
===========
Net asset value per share.................... $ 18.72
===========
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
<S> <C>
Investment income:
Interest................................ $ 100,415
-----------
Dividends............................... 293,792
-----------
Total investment income................ 394,207
-----------
Expenses:
Management fees (note 3)................ 378,436
Custodian fees (note 3)................. 10,000
Directors' fees (note 3)................ 2,120
Professional fees....................... 6,360
Fund accounting fees ................... 35,496
Other................................... 9,310
-----------
Total expenses......................... 441,722
Net investment loss ................... ($47,515)
-----------
Realized and unrealized gain on investments:
Net realized gain from investments ..... $2,695,780
Net increase in unrealized
appreciation on investments ........... 1,661,151
-----------
Net gain on investments............... 4,356,931
-----------
Net increase in net
assets from operations................ $4,309,416
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
42
<PAGE> 99
OHIO NATIONAL FUND, INC.
SMALL CAP PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
12-31-97 12-31-96
---------- ----------
<S> <C> <C>
From operations:
Net investment loss ............................................................. ($47,515) ($127,376)
Realized gain (loss) on investments ............................................. 2,695,780 (234,049)
Unrealized gain on investments .................................................. 1,661,151 4,808,722
----------- -----------
Net increase in assets from operations......................................... 4,309,416 4,447,297
----------- -----------
Dividends and distributions to shareholders:
Capital gains distributions ..................................................... (2,462,490) (542,566)
----------- -----------
From capital share transactions (note 4):
Received from shares sold ....................................................... 21,480,666 19,468,827
Received from dividends reinvested .............................................. 2,462,490 542,566
Paid for shares redeemed ........................................................ (5,950,001) (1,490,446)
----------- -----------
Increase in net assets derived from capital share transactions.................. 17,993,155 18,520,947
----------- -----------
Increase in net assets ....................................................... 19,840,081 22,425,678
Net Assets:
Beginning of period ............................................................. 38,463,709 16,038,031
----------- -----------
End of period (a) ............................................................... $58,303,790 $38,463,709
=========== ===========
(a) Includes undistributed net investment loss of................................. ($198,942) ($151,428)
=========== ===========
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION> 5-1-94
Years Ended December 31, to
1997 1996 1995 12-31-94
---- ---- ---- --------
<S> <C> <C> <C> <C>
Per share data:
Net asset value, beginning of period..............$18.03 $15.85 $11.99 $10.00
Income (loss) from investment operations:
Net investment income (loss) .................... (0.02) (0.08) (0.02) 0.18
Net realized and unrealized gain on investments . 1.54 2.80 3.95 1.94
------ ------ ------ ------
Total income from investment operations......... 1.52 2.72 3.93 2.12
------ ------ ------ ------
Less distributions:
Dividends from net investment income............. 0.00 0.00 (0.07) (0.13)
Distributions from net realized capital gains ... (0.83) (0.54) 0.00 0.00
------ ------ ------ ------
Total distributions............................. (0.83) (0.54) (0.07) (0.13)
------ ------ ------ ------
Net asset value, end of period....................$18.72 $18.03 $15.85 $11.99
====== ====== ====== ======
Total return...................................... 8.47% 17.71% 33.01% 21.26%(b)
Ratios and supplemental data:
Ratio of expenses to average net assets ......... 0.94% 0.96% 0.96% 0.91%(a,d)
Ratio of net investment income to average net
assets ........................................ (0.11%) (0.48%) (0.11%) 3.27%(a,d)
Portfolio turnover rate........................... 80% 70% 75% 22%
Average commission rate (c) ...................... $0.05 $0.06 NR NR
Net assets at end of period (millions)............ $58.3 $38.5 $16.0 $3.3
</TABLE>
(a) Annualized
(b) Calculated on an aggregate basis (not annualized)
(c) Represents the total dollar amount of commission paid on equity security
transactions divided by the total number of shares purchased and sold for
which commissions were charged.
(d) The advisor has reimbursed certain operating expenses of the Small Cap
Portfolio for the period ending December 31, 1994. Had the advisor not
reimbursed such expenses, the annualized ratio of expenses to average net
assets would have been 0.95% and the annualized ratio of net investment
income to average net assets would have been 3.24%.
(NR) Not required prior to 1996
The accompanying notes are an integral part of these financial statements.
43
<PAGE> 100
GLOBAL CONTRARIAN PORTFOLIO
OHIO NATIONAL FUND, INC.
OBJECTIVE
The Global Contrarian Portfolio seeks to provide long-term growth of capital by
investing in foreign and domestic securities that are undervalued or presently
out of favor with other investors but have positive prospects for eventual
appreciation.
PERFORMANCE AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
<S> <C>
AVERAGE ANNUAL TOTAL RETURNS:
One-year 11.67%
Since inception (3/31/95) 11.93%
</TABLE>
Returns represent past performance, which is no guarantee of future results.
Investment return and principal value will vary so that shares, when redeemed,
may be worth more or less than their original cost. Actual results for variable
annuity and variable universal life contracts will be lower due to contract
charges. Consult your contract for applicable charges for mortality and
expenses.
COMMENTS
Over the 12 months ended December 31, 1997, the Global Contrarian Portfolio
underperformed the MSCI World Index. This was due to several factors. First, a
fairly substantial percentage (approximately 17%) of net assets is invested in
various commodity-related securities (i.e., gold, forest products, base metals,
sugar) which declined markedly while the Asian crisis unfolded. Second, most
non-Asian world markets performed well in the first half of the year, but
displayed considerable volatility in the second half. While large capitalization
stocks recovered, small capitalization stocks lagged major indices. Because the
portfolio tends to be overweighted in smaller stocks, this hurt relative returns
for our US as well as foreign holdings. Third, the portfolio held a fairly large
cash position throughout the year (approximately 23% of net assets) which earned
meager returns in a low interest rate environment.
The portfolio has reduced its exposure to commodities-related securities over
the last six months as weaker global economic growth is anticipated in the
near-term following the Asian crisis. Simultaneously, the portfolio has started
cautiously buying stocks and bonds on a selective basis in a few Asian
countries. There is value to be found in certain depressed situations following
recent price collapses in that region.
CHANGE IN VALUE OF $10,000 INVESTMENT
<TABLE>
<CAPTION>
'95 '96 '97
<S> <C> <C> <C>
Global Contrarian Portfolio $10,000 $15,049
Morgan Stanley Capt. Ind. Worl Index $10,000 $13,630
</TABLE>
Hypothetical illustration based on past performance. Future performance will
vary. All returns reflect reinvested dividends. The portfolio's holdings may
differ significantly from the securities in the index. The index is unmanaged
and therefore does not reflect the cost of portfolio management or trading.
Neither the portfolio nor the index is open to direct investment.
TOP 10 HOLDINGS AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
1. Edipresse Sa Br New 1.8
2. CDL Hotels 1.7
3. Franklin Electric Co Inc 1.7
4. Rep of Argentina FRN 1.7
5. Makita Corp 1.6
6. Manpower 1.6
7. Industrias Penoles 1.5
8. San Juan Basin Royalty 1.5
9. Kaneb Services, Inc 1.4
10. Secom Co., LTD 1.4
</TABLE>
<TABLE>
<CAPTION>
TOP 5 COUNTRIES AS OF DECEMBER 31, 1997
% of Net Assets
<S> <C>
United States 33.4
Japan 6.8
Switzerland 6.5
South America 5.3
France 4.6
</TABLE>
The risk associated with investing on a worldwide basis includes differences in
regulation of financial data and reporting and currency exchanges as well as
economic and political systems which may be different from those in the United
States. The prices of small company stocks are generally more volatile than the
prices of large company stocks.
45
<PAGE> 101
OHIO NATIONAL FUND, INC.
GLOBAL CONTRARIAN PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------------
<S> <C> <C>
BUILDING MATERIALS (0.8%)
10,000 Justin Industries Inc. $136,250
----------
CAPITAL GOODS (4.9%)
3,000 Bandag Inc. Class 'A' 143,625
8,000 Blount International Inc. Cl 'A' 213,500
4,700 Franklin Electric Co., Inc. 301,975
12,000 Woodhead Industries, Inc. 225,000
----------
884,100
----------
CHEMICALS (0.6%)
10,000 Lawter International Inc. 108,750
----------
COMPUTER AND RELATED (2.8%)
5,000 NCR Corporation 139,063
8,000 Teltrend, Inc. 137,000
10,000 Wang Laboratories, Inc. 221,250
----------
497,313
----------
CONSUMER PRODUCTS (3.3%)
1,000 Allen Organ Co. Class 'B' 41,500
3,000 Dole Foods Company, Inc. 137,250
5,000 Furniture Brands International Inc. 102,500
8,000 Gibson Greetings, Inc. 175,000
10,000 Hancock Fabrics 145,000
----------
601,250
----------
ELECTRICAL EQUIPMENT (1.8%)
20,000 BEI Electronics, Inc. 82,500
20,000 BEI Technologies, Inc. 245,000
----------
327,500
----------
ENERGY AND OIL (4.1%)
50,000 Kaneb Services Inc. 259,375
8,000 North European Oil Royalty Trust 129,000
1,700 Rochester & Pittsburgh Coal Co. 75,650
30,000 San Juan Basin Royalty Trust 277,500
----------
741,525
----------
FINANCE (3.2%)
8,000 *Classic Bankshares Inc. 134,000
5,000 *East Texas Financial Services 118,750
8,000 *First Federal Financial Services 129,000
8,500 Redwood Financial Inc. 110,500
5,000 Southern Banc Co., Inc. 87,500
----------
579,750
----------
FORESTRY PRODUCTS (1.7%)
1,000 Georgia Pacific Corp. 60,750
1,000 Georgia Pacific Corp. Timber Group 22,687
5,000 Greif Brothers Corp. Class 'A' 167,500
1,500 Rayonier Inc. 63,843
----------
314,780
----------
MEDIA (0.0%)
5,000 *Integrity Music, Inc. Class 'A' 6,250
----------
METALS AND MINING (0.7%)
60 Case Pomeroy, Inc. Class A 63,000
1,000 Reynolds Metals Co. 60,000
----------
123,000
----------
REAL ESTATE (0.3%)
2,000 Alico, Inc. 46,500
----------
SERVICES (2.6%)
10,000 Borg-Warner Security Corp. $176,250
8,000 Manpower Inc. 282,000
----------
458,250
----------
TRANSPORTATION (0.7%)
3,500 Kenan Transport Company 128,187
----------
UTILITIES (0.9%)
5,000 Montana Power Co. 159,063
----------
MISCELLANEOUS (3.6%)
5,000 Chemed Corp. 207,188
15,000 *Kaiser Ventures Inc. 180,000
4,000 UniFirst Corp. 112,250
5,200 Zero Corporation 154,050
----------
653,488
----------
TOTAL U.S. COMMON STOCK
(32.0%) (COST $4,475,049) $5,765,956
----------
MARKET
SHARES FOREIGN COMMON STOCK VALUE
- -------------------------------------------------------------------
JAPAN (6.8%)
20,000 Dai Tokyo Fire & Marine Ins. Co. (18) $68,704
12,000 Dowa Fire & Marine Ins. Co. (18) 35,793
2,500 Fuji Photo Film Co. Ltd. (9) 95,848
2,500 Fuji Photo Film Co. Ltd. ADR (9) 95,469
8,000 Koekisha Co. Ltd. (29) 130,046
30,000 Makita Corp. 287,544
7,000 Nittetsu Mining Co., Ltd. (22) 28,448
4,000 Secom Co., Ltd. (29) 255,799
1,000 Toho Co. (20) 106,583
25,000 Yomeishu Seizo Co. Ltd. 129,394
----------
1,233,628
----------
SWITZERLAND (6.5%)
40 Bank of Intl. Settlements (3) 249,658
1,100 Edipresse SA, Bearer (25) 319,015
300 Kuehne & Nagel Intl. AG (32) 193,502
500 Sika Finanz AG Bearer (7) 158,687
700 Societe Generale d'Affichage DRC (20) 256,156
----------
1,177,018
----------
FRANCE (4.3%)
3,000 Emin-Leydier (14) 177,013
2,000 Eramet (14) 75,792
300 Eurafrance (34) 122,164
1,000 Legrand ADP (10) 126,153
1,000 Marine Wendel (34) 113,687
800 Groupe NSC (19) 104,911
900 Rougier SA (14) 44,877
----------
764,597
----------
LATIN AMERICA (3.0%)
10,000 Antofagasta Holdings plc (21) 54,506
62,500 Industrias Penoles, SA de CV (1) 278,312
75,000 Ledesma SA (1) 78,015
515,000 Grupo Fernandez Editors (25) 121,372
----------
532,205
----------
</TABLE>
(continued)
46
<PAGE> 102
OHIO NATIONAL FUND, INC.
GLOBAL CONTRARIAN PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES FOREIGN COMMON STOCK VALUE
- -------------------------------------------------------------------
<S> <C> <C>
HONG KONG (2.1%)
999,606 CDL Hotels Intl. Ltd. (16) $303,212
100,000 Shaw Brothers (Hong Kong) Ltd.(20) 74,219
-----------
377,431
-----------
SOUTH AFRICA (1.9%)
50,000 Avgold Ltd. (22) 39,042
22,500 Driefontein ADR (22) 149,063
35,000 Vaal Reefs Exploration Ltd. (22) 134,531
2,500 Western Areas Gold Mining Ltd. (22) 13,768
-----------
336,404
-----------
GERMANY (1.6%)
100 Axel Springer Verlag AG (20) 67,280
500 Buderus AG (5) 224,360
-----------
291,640
-----------
MALAYSIA (1.1%)
80,000 Genting Berhad 200,463
-----------
SINGAPORE (0.9%)
13,000 DelGro Corp. Ltd. 15,917
85,000 Intraco Ltd. (34) 39,911
6,500 Singapore Bus Service Ltd. (32) 2,357
200,000 Thakral Corp. Ltd. 104,000
-----------
162,185
-----------
BELGIUM (0.6%)
700 Engrais Rosier SA (34) 114,732
-----------
NEW ZEALAND (0.5%)
60,000 Carter Holt Harvey Limited (14) 92,648
-----------
CANADA (0.5%)
5,000 Noranda, Inc. (21) 86,071
-----------
SPAIN (0.4%)
12,000 Energia e Industrias Aragonesas (7) 80,339
-----------
THAILAND (0.4%)
20,000 Oriental Hotel (16) 80,258
-----------
NETHERLANDS (0.4%)
1,300 Bosch & Keuning NV (20) 40,415
2,080 German City Estates NV (27) 28,226
-----------
68,641
-----------
SWEDEN (0.3%)
5,000 Bylock & Nordsjofrakt AB 'B'(32) 20,670
5,000 Gorthon Lines (32) 27,539
-----------
48,209
-----------
PHILIPPINES (0.1%)
70,000,000 Manila Mining Corp. 'B' (22) 22,469
-----------
INDONESIA (0.1%)
200,000 PT Komatsu Rigs Tender 19,091
-----------
MISCELLANEOUS (0.9%)
100,000 Lonrho plc (34) 153,608
-----------
TOTAL FOREIGN COMMON STOCK
(32.4%) (COST $6,595,959) $5,841,637
-----------
TOTAL COMMON STOCKS
(64.4%) (COST $11,071,008) $11,607,593
-----------
MARKET
SHARES U.S. PREFERRED STOCK VALUE
- -------------------------------------------------------------------
MEDIA (0.8%)
2,000 Cowles Media Co., Non voting $ 152,000
-----------
TOTAL U.S. PREFERRED STOCK
(0.8%) (COST $46,250) $ 152,000
-----------
MARKET
SHARES FOREIGN PREFERRED STOCK VALUE
- -------------------------------------------------------------------
INDONESIA (1.3%)
6,000 Freeport McMoRan Pfd. 'C' (22) $ 136,500
5,000 Freeport McMoRan Pfd. 'D' (22) 96,876
-----------
233,376
-----------
NEW ZEALAND (0.9%)
35,000 Independent Press Communications (25) 162,540
-----------
TOTAL FOREIGN PREFERRED STOCK
(2.2%) (COST $474,511) $ 395,916
-----------
TOTAL PREFERRED STOCK
(3.0%) (COST $520,761) $ 547,916
-----------
FACE MARKET
AMOUNT CONVERTIBLE DEBENTURES VALUE
- --------------------------------------------------------------------
U.S. DOLLAR (4.0%)
$124,000 Air & Water Technology Corp.
8.000% due 05-15-15 (29) $ 101,525
50,000 Cheil Jedang
3.000% due 12-31-06 (9) 52,813
155,000 IRSA
4.500% due 08-02-03 (4) 164,881
250,000 Tipco Asphalt Co.
2.750% due 09-19-06 (6) 185,000
100,000 Samsung Electronics Co. Ltd
due 12-31-07 (11) 70,375
200,000 ICTSI
1.750% due 03-13-04 (6) 148,500
-----------
723,094
-----------
NON-U.S. DOLLAR (0.3%)
2,000 FF Immobiliere Hoteliere
5.000% due 01-01-01 (16) 59,835
-----------
TOTAL CONVERTIBLE DEBENTURES
(4.3%) (Cost $831,064) $ 782,929
-----------
(continued)
</TABLE>
47
<PAGE> 103
OHIO NATIONAL FUND, INC.
GLOBAL CONTRARIAN PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT NON-CONVERTIBLE BONDS VALUE
- --------------------------------------------------------------------
<S> <C> <C>
U.S. DOLLAR (5.0%)
$50,000 Cemex SA
9.500% due 09-20-01 (6) $ 51,485
147,000 Federal Republic Of Brazil
6.687% due 04-15-06 (15) 127,155
200,000 Grupo Televisa
13.250% due 05-15-08 (20) 149,760
336,000 Republic of Argentina FRB
6.687% due 03-31-05 (15) 300,804
238,095 Republic of Venezuela
6.812% due 12-18-07 (15) 213,690
50,000 PT Pabrik Kertas Tjiwi Kimia
13.250% due 08-01-01 (14) 50,008
-----------
892,902
-----------
TOTAL NON-CONVERTIBLE BONDS
(5.0%) (COST $772,266) $892,902
-----------
FACE MARKET
AMOUNT SHORT-TERM NOTES VALUE
- --------------------------------------------------------------------
APPLIANCES (2.8%)
$500,000 Maytag Corp.
7.00% 01-02-98 $499,903
-----------
AUTOMOTIVE AND RELATED (2.6%)
472,000 Fiat Finance Inc.
6.150% 01-12-98 471,112
-----------
FACE MARKET
AMOUNT SHORT-TERM NOTES VALUE
- --------------------------------------------------------------------
CHEMICALS (4.3%)
$769,000 DuPont Ei De Nemours
5.700% 01-16-98 $767,174
-----------
ELECTRICAL (0.5%)
100,000 Motorola, Inc.
5.750% 01-21-98 99,681
-----------
FINANCIAL (7.3%)
507,000 Merrill Lynch
6.000% 01-02-98 506,916
804,000 Prudential Funding
5.800% 01-02-98 803,870
-----------
1,310,786
-----------
TRANSPORTATION (4.0%)
722,000 CSX Corp.
5.970% 01-06-98 721,401
-----------
TOTAL SHORT-TERM NOTES
(21.5%) (COST $3,870,057) $3,870,057
-----------
TOTAL HOLDINGS
(COST $17,065,156)(a) $17,701,397
===========
</TABLE>
(a) Also represents cost for Federal Income tax purposes.
* Non-income producing securities.
Foreign Currencies
FF - French Franc
<TABLE>
<CAPTION>
Industry Classifications
<S> <C> <C>
(1) Agriculture (12) Energy and Oil (23) Packaging
(2) Automotive (13) Food & Beverage (24) Paper
(3) Banking (14) Forest Products (25) Publishing
(4) Building Products (15) Governmental (26) Rail Equipment
(5) Capital Goods (16) Hotels (27) Real Estate
(6) Cement (17) Health Care (28) Retailing
(7) Chemicals (18) Insurance (29) Services
(8) Computer Products (19) Machinery (30) Steel
(9) Consumer Products (20) Media (31) Textile
(10) Electrical Products (21) Metal (non-ferrous) (32) Transportation
(11) Electronics (22) Mining (33) Utilities
(34) Miscellaneous
</TABLE>
The accompanying notes are an integral part of these financial statements.
48
<PAGE> 104
OHIO NATIONAL FUND, INC.
GLOBAL CONTRARIAN PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<S> <C>
ASSETS:
Investments in securities at market
value (note 1) (cost $17,065,156) ......................... $ 17,701,397
Cash in bank ............................................... 37,676
Unrealized gain on forward currency
contracts (note 5) ........................................ 95,207
Receivable for fund shares sold ............................ 205,087
Receivable for securities sold ............................. 43,433
Dividends and accrued interest receivable .................. 81
------------
Total assets ............................................. 18,082,881
------------
LIABILITIES:
Unrealized loss on forward currency
contracts (note 5) ........................................ 28,959
Payable for investment management
services (note 3) ......................................... 13,139
Other accrued expenses ..................................... 17,283
------------
Total liabilities ........................................ 59,381
------------
Net assets at market value .................................. $ 18,023,500
============
Net assets consist of:
Par value, $1 per share .................................... $ 1,536,703
Paid-in capital in excess of par value ..................... 15,784,767
Net unrealized appreciation (depreciation) on:
Investments (note 1) ...................................... 636,241
Foreign currency related transactions ..................... (459)
Forward currency contracts (note 5) ....................... 66,248
------------
Net assets at market value .................................. $ 18,023,500
============
Shares outstanding (note 4) ................................. 1,536,703
Net asset value per share ................................... $ 11.73
============
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
INVESTMENT INCOME:
Interest ................................................... $ 298,935
Dividends (net of $12,353 foreign taxes withheld) .......... 230,313
------------
Total investment income ................................... 529,248
------------
EXPENSES:
Management fees (note 3) ................................... 130,704
Custodian fees (note 3) .................................... 53,119
Directors' fees (note 3) ................................... 680
Professional fees .......................................... 2,047
Other ...................................................... 4,398
------------
Total expenses ........................................... 190,948
------------
Net investment income .................................... $ 338,300
------------
Realized and unrealized gain on
investments and foreign currency:
Net realized gain from:
Investments ............................................... $ 739,161
Forward currency related transactions ..................... 184,137
Net increase in unrealized appreciation on:
Investments .............................................. 192,139
Foreign currency related transactions .................... 20,818
------------
Net gain on investments .................................. 1,136,255
------------
Net increase in net
assets from operations ................................... $ 1,474,555
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
49
<PAGE> 105
OHIO NATIONAL FUND, INC.
GLOBAL CONTRARIAN PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
12-31-97 12-31-96
---------- ----------
<S> <C> <C>
From operations:
Net investment income ....................................................................... $338,300 $189,661
Realized gain on investments and foreign currency transactions............................... 923,298 275,381
Unrealized gain on investments and foreign currency transactions ............................ 212,957 327,989
----------- -----------
Net increase in assets from operations..................................................... 1,474,555 793,031
----------- -----------
Dividends and distributions to shareholders:
Dividends paid from net investment income.................................................... (430,394) (142,005)
Capital gains and foreign currency related transaction distributions ........................ (1,126,860) (108,638)
----------- -----------
Total dividends and distributions ......................................................... (1,557,254) (250,643)
----------- -----------
From capital share transactions (note 4):
Received from shares sold ................................................................... 7,002,064 7,880,959
Received from dividends reinvested .......................................................... 1,557,254 250,643
Paid for shares redeemed .................................................................... (1,742,872) (1,804,832)
----------- -----------
Increase in net assets derived from capital share transactions........................... 6,816,446 6,326,770
----------- -----------
Increase in net assets ................................................................ 6,733,747 6,869,158
Net Assets:
Beginning of period ......................................................................... 11,289,753 4,420,595
=========== ===========
End of period (a) ........................................................................... $18,023,500 $11,289,753
=========== ===========
(a) Includes undistributed (overdistributed) net investment income of.......................... ($22) $92,072
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Year Year 4-1-95
Ended Ended to
12-31-96 12-31-96 12-31-95
-------- -------- --------
<S> <C> <C> <C>
Per share data:
Net asset value, beginning of period...................................................... $11.66 $10.80 $10.00
Income from investment operations:
Net investment income................................................................... 0.29 0.28 0.13
Net realized and unrealized gain on investments
and foreign currency transactions .................................................... 1.03 1.00 0.75
------ ------ ------
Total income from investment operations............................................. 1.32 1.28 0.88
------ ------ ------
Less distributions:
Dividends from net investment income.................................................... (0.38) (0.24) (0.08)
Distributions from net realized capital gains
and foreign currency related transactions............................................. (0.87) (0.18) 0.00
------ ------ ------
Total distributions................................................................. (1.25) (0.42) (0.08)
------ ------ ------
Net asset value, end of period............................................................ $11.73 $11.66 $10.80
====== ====== ======
Total return.............................................................................. 11.67% 12.09% 8.89%(b)
Ratios and supplemental data:
Ratio of expenses to average net assets ................................................ 1.32% 1.29% 1.58%(a,d)
Ratio of net investment income to average net assets ................................... 2.33% 2.44% 1.64%(a,d)
Portfolio turnover rate................................................................... 29% 18% 6%(a)
Average commission rate (c) .............................................................. $0.01 $ 0.03 NR
Net assets at end of period (millions).................................................... $18.0 $ 11.3 $4.4
</TABLE>
(a) Annualized
(b) Calculated on an aggregate basis (not annualized)
(c) Represents the total dollar amount of commission paid on equity security
transactions divided by the total number of shares purchased and sold for
which commissions were charged.
(d) The advisor has reimbursed certain operating expenses of the Global
Contrarian Portfolio for the period ended December 31, 1995. Had the
advisor not reimbursed such expenses, the annualized ratio of expenses to
average net assets would have been 1.90% and the annualized ratio of net
investment income to average net assets would have been 1.32%.
(NR) Not required prior to 1996.
The accompanying notes are an integral part of these financial statements.
50
<PAGE> 106
AGGRESSIVE GROWTH PORTFOLIO
OHIO NATIONAL FUND, INC.
Objective
The principal investment objective of the Aggressive Growth Portfolio is to seek
capital growth. The portfolio invests in a diversified collection of securities
believed to represent attractive growth opportunities.
Performance as of December 31, 1997
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS:
<S> <C>
One-year 12.53%
Since inception (3/31/95) 14.17%
</TABLE>
Returns represent past performance, which is no guarantee of future results.
Investment return and principal value will vary so that shares, when redeemed,
may be worth more or less than their original cost. Actual results for variable
annuity and variable universal life contracts will be lower due to contract
charges. Consult your contract for applicable charges for mortality and
expenses.
Comments
The US stock market finished the year much in the same way it began - with a
liquidity-driven rally in the large-cap, blue chip companies. We maintained our
focus on smaller growth companies, while the market experienced a "flight to
quality," mainly in large-cap and interest-sensitive issues. Our emphasis on
growth companies kept the portfolio underweighted in two outperforming sectors,
banks and utilities. In addition, a key holding, Danka Business Systems, lost
more than half of its market value with the release of unexpected disappointing
news in the fourth quarter.
Several years of utopian market conditions have been disrupted by Asian
financial crises, including severe currency devaluations necessitating IMF
bailouts. These events have raised prospects of worldwide over-capacity, price
cuts, diminished US exports and generally reduced economic growth and corporate
profits. Moreover, recent market volatility may dampen investor enthusiasm for
stocks in general.
In this environment we believe dependable growth companies will attract premium
valuations. The portfolio already emphasizes such companies, and we will
continue to upgrade our holdings with this focus in mind. Our strategy is to
proceed cautiously. Although the current environment is less certain than the
past, we believe there are ample opportunities to invest in companies that can
achieve attractive results.
Change in Value of $10,000 Investment
<TABLE>
<CAPTION>
'95 '96 '97
<S> <C> <C> <C>
Aggressive Growth Portfolio $14,396
NASDAQ Composite Index $19,216
</TABLE>
Hypothetical illustration based on past performance. Future performance will
vary. All returns reflect reinvested dividends. The portfolio's holdings may
differ significantly from the securities in the index. The index is unmanaged
and therefore does not reflect the cost of portfolio management or trading.
Neither the portfolio nor the index is open to direct investment.
Top 10 Holdings as of December 31, 1997
<TABLE>
<CAPTION>
% of Net Assets
<S> <C> <C>
1. Budget Group Inc. 3.3
2. Ocean Energy Inc. 2.7
3. Central Garden and Pet 2.6
4. Union Pacific Resources Grp Inc. 2.4
5. Sybron International Corp-Wis 2.3
6. TCF Financial Corp 2.2
7. Universal Outdoor Holdings Inc. 2.1
8. Danka 2.0
9. Black Box Corp 1.8
10. IBM 1.6
</TABLE>
Top 5 Industries as of December 31, 1997
<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
Retail 16.5
Business Services 12.2
Oil, Energy, and Natural Gas 10.6
Medical and Related 9.1
Computer and Related 6.8
</TABLE>
The prices of small company stocks are generally more volatile than the prices
of large company stocks.
51
<PAGE> 107
OHIO NATIONAL FUND, INC.
AGGRESSIVE GROWTH
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------
<S> <C> <C>
AEROSPACE (0.8%)
650 Boeing Co. $ 31,809
5,050 *Hexcel Corp. 125,934
---------
157,743
---------
AUTOMOTIVE AND RELATED (1.4%)
5,700 Harley-Davidson, Inc. 156,038
11,500 *Miller Industries Inc. 123,625
---------
279,663
---------
BANKING (4.6%)
875 BankAmerica Corp. 63,875
1,104 Chase Manhattan Corp. 120,888
1,300 Citicorp 164,369
1,200 Household International, Inc. 153,075
12,300 TCF Financial Corp. 417,431
---------
919,638
---------
BUSINESS SERVICES (12.2%)
5,673 *Accustaff Inc. 130,479
6,350 *Cendant Corp 218,281
800 *Ceridian Corporation 36,650
1,700 *Checkfree Corporation 45,900
4,300 *Consolidated Graphics, Inc. 200,488
24,400 Danka Business Systems ADR 388,875
4,250 *Equity Corporation International 98,281
975 *Fiserv Inc. 47,897
2,000 *Lamalie Associates 40,000
9,075 *Lason Holdings Inc. 241,622
1,800 *Mac-Gray Corp. 28,125
4,113 *Outdoor Systems Inc. 157,836
9,800 *Pierce Leahy Corp 200,900
4,250 Pittston Brink's Group 171,063
7,950 *Universal Outdoor Holdings 413,400
---------
2,419,797
---------
COMPUTER AND RELATED (6.8%)
925 *America Online, Inc. 82,498
1,700 *Aware Inc. 17,425
9,750 *Black Box Corp. 344,906
1,612 Computer Associates Intl. Inc. 85,235
4,275 *Hummingbird Communication Ltd. 134,930
3,100 IBM 324,144
4,400 *Phoenix International Ltd 64,900
1,400 *Sterling Commerce Inc. 53,812
3,400 *Storage Technology Corp. 210,588
500 *Tecnomatix Techno. Ltd. 16,875
1,700 *USWEB Corp. 15,937
---------
1,351,250
---------
COMMUNICATIONS (0.9%)
2,400 *Communications Central Inc. 24,150
1,000 *Mobile Telecomm. Tech. Corp. 22,000
2,400 *Sinclair Broadcasting Group 111,900
1,200 *Versant Object Tech. 16,575
---------
174,625
---------
CONSUMER PRODUCTS (3.0%)
6,100 *800-JR CIGAR INC. 152,500
2,700 Fingerhut Companies 57,713
2,600 Philip Morris Companies, Inc. 117,812
4,300 *Rocky Shoes & Boots Inc. 65,575
5,400 Service Corporation International 199,463
---------
593,063
---------
DRUGS (1.1%)
27,300 *Halsey Drug Co. Inc. 42,656
1,450 McKesson Corp. 156,872
700 *Pharmacopeia 11,200
---------
210,728
---------
DURABLE GOODS (1.1%)
3,100 Applied Power Inc. Cl. A 213,900
---------
213,900
---------
ELECTRICAL EQUIPMENT (3.6)
11,550 Berg Electronics Corp. 262,763
2,950 *General Cable Corp. 106,753
3,525 Harman International Industries Inc. 149,592
6,100 *Kent Electronics Corp. 153,263
600 Xerox Corp. 44,287
---------
716,658
---------
ENTERTAINMENT AND
LEISURE (4.3%)
3,000 *Action Performance Co. 113,625
15,800 *American Skiing Corp. 235,025
8,000 *Bally Total Fitness Holding Corp. 175,000
3,350 *Host Marriott Corp 65,744
5,600 International Game Technology 141,400
7,062 SCP Pool Corp. 135,943
---------
866,737
---------
FINANCE (2.4%)
1,550 American Express Co. 138,338
3,050 Associates First Capital Corp. 216,931
2,650 Block, H&R Inc. 118,753
---------
474,022
---------
FOOD & RELATED (0.4%)
800 *JP Foodservice, Inc. 29,550
925 Lancaster Colony Corp. 52,147
---------
81,697
---------
HOTEL/LODGING (0.7%)
4,600 *Candlewood Hotel Co. Inc. 40,250
2,205 *Promus Hotel Corp. 92,610
---------
132,860
---------
INDUSTRIAL SERVICES (1.3%)
8,000 *Coinmach Laundry Corp. 196,000
2,100 Waste Management Corp 57,750
---------
253,750
---------
INSURANCE (1.6%)
2,150 Conesco, Inc. 97,691
3,450 MGIC Investment Corp. 229,425
---------
327,116
---------
MEDIA AND PUBLISHING (1.7%)
2,700 CBS Corporation 79,481
2,000 *Clear Channel Communications 158,875
4,250 *Getty Communications PLC ADR 63,219
2,400 *Metro Goldwyn Mayer Inc. 48,000
---------
349,575
---------
MEDICAL AND RELATED (9.1%)
1,025 *Arterial Vascular Engineer, Inc. 66,625
4,050 *Boston Scientific Corp. 185,794
9,600 *Cohr Inc. 122,400
3,100 *Covance Inc. 61,612
1,500 *Datascope 38,813
2,400 Dentsply International Inc. 73,200
3,100 *Gulf South Medical Supply, Inc. 115,475
(continued)
</TABLE>
52
<PAGE> 108
OHIO NATIONAL FUND, INC.
AGGRESSIVE GROWTH PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- ---------------------------------------------------------------
<S> <C> <C>
MEDICAL AND RELATED (CONT.)
8,208 *Henry Schein Inc. $287,280
500 *Molecular Dynamics inc. 8,125
550 *Sabratek Corp. 15,812
2,850 *Steris Corp. 137,513
13,400 *Suburban Ostomy Supply Co. 155,775
9,375 *Sybron International Corp.-Wis. 440,039
4,425 *United Dental Care Inc. 47,569
2,200 *VWR Corp. 62,150
-----------
1,818,182
-----------
OIL, ENERGY AND NATURAL GAS (10.6%)
725 *Cooper Cameron Corp. 44,225
4,050 *Ensco International Inc. 135,675
2,650 *Global Marine Inc. 64,925
350 Helmerich & Payne Inc. 23,756
8,700 *Marine Drilling Company Inc. 180,525
4,200 *Nabors Industries Inc. 132,038
10,500 *Noble Drilling Corp. 321,562
10,675 *Ocean Energy Inc. 526,411
250 *Rowan Companies, Inc. 7,625
650 Santa Fe International corp. 26,447
2,050 Schlumberger Ltd. 165,025
18,250 Union Pacific Resources Group Inc. 442,563
650 Wicor Inc. 30,184
-----------
2,100,961
-----------
REAL ESTATE AND LEASING (0.5%)
5,400 Sunstone Hotel Investors Inc. 93,150
-----------
RESTAURANTS (1.5%)
2,400 *Casa Ole' Restaurants Inc. 8,400
2,400 *Logan's Roadhouse 37,200
4,800 *PJ America Inc. 72,000
5,450 *Rainforest Cafe Inc. 179,850
-----------
297,450
-----------
TRANSPORTATION & EQUIPMENT (2.6%)
1,875 Burlington Northern Sante Fe 174,258
7,300 *Hub Group Inc. Cl A 217,175
3,150 Rollins Truck Leasing Corp 56,306
3,350 *Wisconsin Central Transportation Corp 78,305
-----------
526,044
-----------
RETAIL (16.5%)
9,100 *Avis Rent A Car Inc. $290,631
18,900 *Budget Group Inc. 653,231
19,950 *Central Garden and Pet Co. 523,688
4,925 Cole National Corp. 147,442
4,000 Consolidated Stores Corp. 175,750
10,350 *Eagle Hardware & Garden Co. 200,531
2,900 *Goody's Family Clothing Co. 78,844
4,800 Hertz Corp. Cl A 193,200
3,150 *Just For Feet Inc. 41,344
2,100 *MSC Industrial Direct Co. CIA 88,988
26,000 *Movie Gallery Inc. 76,375
4,200 Regis Corp Minn RJQ 105,525
8,300 *Renters Choice Inc. 170,150
2,300 Rite Aid Corp. 134,981
4,800 *Staples Inc. 133,200
6,100 *Wilmar Industries Inc. 145,637
5,250 *Zale Corp. 120,750
-----------
3,280,267
-----------
Total Common Stock
(88.7%)
(Cost $16,775,198) $17,638,876
-----------
FACE MARKET
AMOUNT SHORT-TERM OBLIGATIONS VALUE
- -----------------------------------------------------
GOVERNMENT (0.5%)
$100,000 US Treasury Note
4.94% 01/29/1998 $ 99,664
----------
TOTAL SHORT-TERM
OBLIGATIONS
(0.5%) (COST $98,724) $ 99,664
----------
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS VALUE
- -----------------------------------------------------
FINANCIAL (0.8%)
$174,000 Star Bank 5.50% due 01-02-98
repurchase price $174,053
collateralized by GNMA certificates
pool#8359
due 01-20-24
(cost $174,000) $ 174,000
-----------
TOTAL REPURCHASE AGREEMENTS
(0.8%) (COST $174,000) $ 174,000
-----------
TOTAL HOLDINGS
(COST $17,047,922) (a) $17,912,540
===========
</TABLE>
*Non-income producing securities.
(a) Also represents cost for Federal income tax purposes.
The accompanying notes are an integral part of these financial statements.
53
<PAGE> 109
OHIO NATIONAL FUND, INC.
AGGRESSIVE GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
December 31, 1997
<S> <C>
Assets:
Investments in securities at market
value (note 1) (cost $17,047,922)...... $17,912,540
Cash in bank .............................. 367
Receivable for fund shares sold............ 453,659
Receivable for securities sold ............ 1,557,751
Dividends and accrued interest receivable . 9,709
Other ..................................... 2,108
-----------
Total assets .......................... 19,936,134
-----------
Liabilities:
Payable for investment management
services (note 3) ..................... 13,861
Payable for securities purchased .......... 24,210
Other accrued expenses .................... 5,356
-----------
Total liabilities ..................... 43,427
-----------
Net assets at market value.......................... $19,892,707
===========
Net assets consist of:
Par value, $1 per share ................... $1,794,410
Paid-in capital in excess of par value .... 17,199,380
Accumulated undistributed net realized
gain on investments (note 1) .......... 34,299
Net unrealized appreciation on investments 864,618
-----------
Net assets at market value $19,892,707
===========
Shares outstanding (note 4)......................... 1,794,410
Net asset value per share........................... $11.09
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Year ended December 31, 1997
<S> <C>
Investment income:
Interest............................... $27,656
Dividends.............................. 61,349
----------
Total investment income............. 89,005
----------
Expenses:
Management fees (note 3)............... 125,073
Custodian fees (note 3)................ 5,001
Directors' fees (note 3)............... 680
Professional fees...................... 2,240
Accounting and transfer agent fees .... 14,387
Other.................................. 3,344
----------
Total expenses...................... 150,725
----------
Net investment loss ................ ($61,720)
----------
Realized and unrealized gain on investments:
Net realized gain from investments .... $1,523,817
Net increase in unrealized
appreciation on investments ........ 318,599
----------
Net gain on investments......... 1,842,416
Net increase in net
assets from operations.......... $1,780,696
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
54
<PAGE> 110
OHIO NATIONAL FUND, INC.
AGGRESSIVE GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Year Ended Year Ended
12-31-97 12-31-96
----------- -----------
<S> <C> <C>
From operations:
Net investment income (loss) ................................................... ($61,720) $1,259,285
Realized gain (loss) on investments ............................................ 1,523,817 (1,358,319)
Unrealized gain on investments ................................................. 318,599 377,912
----------- -----------
Net increase in assets from operations........................................ 1,780,696 278,878
----------- -----------
Dividends and distributions to shareholders:
Dividends paid from net investment income ...................................... (172,523) (1,271,325)
Capital gains distributions..................................................... (65,296) 0
----------- -----------
Total dividends and distributions............................................. (237,819) (1,271,325)
----------- -----------
From capital share transactions (note 4):
Received from shares sold ...................................................... 8,136,995 8,883,382
Received from dividends reinvested ............................................. 237,819 1,271,325
Paid for shares redeemed ....................................................... (2,034,563) (1,158,142)
----------- -----------
Increase in net assets derived from capital share transactions................. 6,340,251 8,996,565
----------- -----------
Increase in net assets ...................................................... 7,883,128 8,004,118
Net Assets:
Beginning of period ............................................................ 12,009,579 4,005,461
----------- -----------
End of period (a) .............................................................. $19,892,707 $12,009,579
=========== ===========
(a) Includes undistributed net investment income (loss) of....................... ($61,720) $172,523
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
Year Year 4-1-95
Ended Ended to
12-31-97 12-31-96 12-31-95
-------- -------- --------
<S> <C> <C> <C>
Per share data:
Net asset value, beginning of period..................... $10.03 $11.84 $10.00
Income from investment operations:
Net investment income (loss) ........................... (0.05) 1.64 1.56
Net realized and unrealized gain (loss) on investments . 1.29 (1.59) 1.08
------ ------ ------
Total income from investment operations................ 1.24 0.05 2.64
------ ------ ------
Less distributions:
Dividends from net investment income ................... (0.14) (1.86) (0.80)
Distributions from net realized capital gains........... (0.04) 0.00 0.00
------ ------ ------
Total distributions................................... (0.18) (1.86) (0.80)
------ ------ ------
Net asset value, end of period........................... $11.09 $10.03 $11.84
====== ====== ======
Total return............................................. 12.53% 0.76% 26.95%(b)
Ratios and supplemental data:
Ratio of expenses to average net assets ................ 0.97% 1.01% 1.02%(a)
Ratio of net investment income to average net assets ... (0.40%) 15.81% 18.18%(a)
Portfolio turnover rate.................................. 193% 1987% 1488%
Average commission rate (c) ............................. $0.06 $0.03 NR
Net assets at end of period (millions)................... $19.9 $12.0 $4.0
</TABLE>
(a) Annualized
(b) Calculated on an aggregate basis (not annualized)
(c) Represents the total dollar amount of commission paid on equity security
transactions divided by the total number of shares purchased and sold for
which commissions were charged.
(NR) Not required prior to 1996.
The accompanying notes are an integral part of these financial statements.
55
<PAGE> 111
CORE GROWTH PORTFOLIO
OHIO NATIONAL FUND, INC.
Objective
The objective of the Core Growth Portfolio is to provide long-term capital
appreciation.
Performance as of December 31, 1997
<TABLE>
AVERAGE ANNUAL TOTAL RETURN:
<S> <C>
Since inception (1/3/97) -3.08%
</TABLE>
Returns represent past performance, which is no guarantee of future results.
Investment return and principal value will vary so that shares, when redeemed,
may be worth more or less than their original cost. Actual results for variable
annuity and variable universal life contracts will be lower due to contract
charges. Consult your contract for applicable charges for mortality and
expenses.
Comments
The top 30 companies in the Russell 3000 Growth Index represent 47% of the
index's market capitalization. While they are growing at above-average rates, we
believe that there are many smaller companies with higher earnings growth. Over
the next three to five years, we expect the Core Growth Portfolio companies to
grow earnings at 38% versus 14% for the Russell 3000 Growth Index companies.
The NMSGI Index, consisting of the 500 fastest growing small stocks, aims to
eliminate the large cap bias of the NASDAQ in which Intel and Microsoft account
for 20% of the market. The index advanced just 7.3% for 1997 despite the fact
that 75% of its companies met or beat estimates. Additionally, earnings growth
in the index registered a 58% gain for the year versus a 10% gain for the S&P
500, illustrating the point that small companies grow faster than large ones.
Except for a few months in mid-1997, investors were unwilling to pay for
high-quality, high-earnings growth companies. Currently, uncertainty centered on
Asia has kept investors at bay. We believe that steadfast investors in this
style will be rewarded. In virtually all past periods, remaining invested in
this style has proven to be beneficial when the style returns to favor.
<TABLE>
<CAPTION>
Change in Value of $10,000 Investment
1/97 12/97
<S> <C> <C>
Core Growth Portfolio $10,000 $ 9,592
Russell 2000 Index $10,000 $13,169
</TABLE>
Hypothetical illustration based on past performance. Future performance will
vary. All returns reflect reinvested dividends. The portfolio's holdings may
differ significantly from the securities in the index. The index is unmanaged
and therefore does not reflect the cost of portfolio management or trading.
Neither the portfolio nor the index is open to direct investment.
Top 10 Holdings as of December 31, 1997
<TABLE>
<CAPTION>
% of Net Assets
<S> <C> <C>
1. Clear Channel Comm 2.5
2. Apollo Group A 2.4
3. HBO & Co 2.4
4. Cambridge Technology Partners 2.1
5. Parexel International 2.1
6. Visio Software 2.1
7. Advanced Fibre Communications 2.0
8. Associates 1st Cap Co. 2.0
9. Gartner Group 1.9
10. DST Systems Inc. 1.7
</TABLE>
Top 5 Industries as of December 31, 1997
<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
Computer and Related 22.3
Business Services 11.6
Oil, Energy, and Natural Gas 7.8
Electrical Equipment 6.7
Communications 6.7
</TABLE>
The prices of small company stocks are generally more volatile than the prices
of large company stocks.
57
<PAGE> 112
OHIO NATIONAL FUND, INC.
CORE GROWTH PORTFOLIO
Schedule of Investments
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS VALUE
- ----------------------------------------------------------------
<S> <C> <C>
FINANCIAL (21.5%)
$2,051,000 Star Bank 5.500% due 01-02-98
repurchase price $2,051,627
collateralized by GNMA certificates
pool #8359
due 01-20-24 (cost $2,051,000) $2,051,000
-----------
TOTAL REPURCHASE AGREEMENTS
(21.5%) (COST $2,051,000) $2,051,000
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- ----------------------------------------------------------------
<S> <C> <C>
AUTOMOTIVE AND RELATED (1.8%)
6,000 Harley Davidson $164,250
700 *Miller Industries Inc. 7,525
-----------
171,775
-----------
BUSINESS SERVICES (11.6%)
500 *Abacus Direct 20,500
6,200 *Accustaff Inc. 142,600
4,800 *Apollo Group 226,800
1,442 *Cendant Technology Partners 49,564
4,900 *Cambridge Technology Partners 203,963
1,500 *Documentum Inc. 63,187
4,800 *Gartner Group 178,800
5,900 *RWD Technologies 106,200
5,650 US Office Products Corp. 110,881
-----------
1,102,495
-----------
COMMUNICATIONS (6.7%)
6,600 Advanced Fibre Communications 192,225
2,000 *Intl Telcomm Data 64,000
5,000 *JD Edwards & Co. 147,500
900 Level One Communications 25,425
1,700 Tekelec 51,850
3,000 *Tellabs Inc. 158,625
-----------
639,625
-----------
COMPUTER AND RELATED (22.3%)
3,200 Aspen Technology 109,600
5,400 *Bea Systems Inc. 93,488
2,000 Cadence Design 49,000
1,500 *CDW Computer Centers Inc. 78,187
5,900 *Cognex Corp. 160,775
200 Complete Business Solutions 8,700
4,300 *Daou Systems 134,375
1,800 Dell Computers 151,200
3,900 *DST Systems Inc. 166,481
800 Electronics for Imaging 13,300
2,900 *Galileo Technology 83,738
4,700 HBO & Co. 225,600
3,100 Manugistics Inc. 138,337
1,300 *McAffe Associates 68,738
2,400 *Parametric Technology Corp. 113,700
1,800 *Remedy Corp. 37,800
2,200 *Security Dynamics 78,650
3,400 *Sterling Commercial 130,687
8,600 *Summit Design 89,225
5,100 *Vision Software 195,713
-----------
2,127,294
-----------
CONSUMER PRODUCTS (1.2%)
3,950 Blyth Industries Inc. $118,253
DRUGS (3.7%)
3,300 *Dura Pharmacy 151,388
5,400 Parexel International 199,800
-----------
351,188
-----------
ELECTRICAL EQUIPMENT (6.7%)
4,300 *Helix Technologies 83,850
1,200 *Lernout and Hausp 55,800
1,700 Linear Tech 97,963
1,000 Micrel Inc. 28,750
4,300 Microchip Technology 129,000
1,700 *Powerwave Technologies Inc. 28,581
2,100 *Speed Fam Intl 55,650
1,700 *Thermo Electronics 75,650
1,000 *United Video Satellite 28,750
2,100 UTI Energy Corp. 54,337
-----------
638,331
-----------
ENTERTAINMENT AND LEISURE (1.3%)
3,600 *American Skiing Corp. 53,550
1,800 *Cinar Films Inc. 69,975
-----------
123,525
-----------
FINANCIAL SERVICES (4.8%)
2,700 Associates First Capital Co. 192,038
1,700 *Seacor Smit Inc. 102,425
7,800 The Money Store 163,800
-----------
458,263
-----------
FOOD AND RELATED (1.6%)
1,900 *Suiza Foods 113,169
800 *Whole Food Market 40,900
-----------
154,069
-----------
HOTEL/LODGING (1.7%)
3,400 *Capstar Hotel Co. 116,663
2,250 Signature Resorts 49,218
-----------
165,881
-----------
HOUSING, FURNITURE, AND RELATED (0.8%)
3,900 *Comfort Systems 77,025
-----------
INDUSTRIAL SERVICES (0.5%)
700 *Eastern Environmental Services 15,400
200 Mail-Well Inc. 8,100
700 *United States Filter Corp. 20,956
-----------
44,456
-----------
MACHINERY (2.1%)
3,200 Applied Material 96,400
1,600 Asyst Technologies Inc. 34,800
1,500 *Hanover Compress 30,656
1,300 *Lam Research 38,025
-----------
199,881
-----------
MEDIA AND PUBLISHING (4.7%)
900 *Consol Graphics 41,963
3,000 *Clear Channel Communications 238,312
3,100 *Jacor Communications 164,688
-----------
444,963
-----------
</TABLE>
(continued)
58
<PAGE> 113
OHIO NATIONAL FUND, INC.
CORE GROWTH PORTFOLIO (CONTINUED)
Schedule of Investments
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------
<S> <C> <C>
MEDICAL AND RELATED (5.5%)
6,200 *FPA Medical Management $115,475
2,800 Health Management Associates 70,700
2,600 Healthsouth Corp. 72,150
2,300 *NCS Healthcare 60,663
3,000 Omnicare Inc. 93,000
1,400 *Pediatrix Medical 59,850
900 Safeskin Corp. 51,075
-----------
522,913
-----------
OIL, ENERGY AND NATURAL GAS (7.8%)
1,400 Camco International 89,163
200 *Dril-Quip Inc. 7,025
2,800 Ensco International 93,800
1,100 EVI Inc. 56,925
2,800 Friede Goldman 83,650
1,200 *Global Industries 20,400
1,000 Helmerch and Payn 67,875
2,200 *IRI International Corp. 30,800
2,400 New Park Res Inc. 42,000
2,700 *Pool Energy Service 60,075
1,200 Sante Fe International 48,825
6,600 Varco International 141,487
-----------
742,025
-----------
RETAIL (1.3%)
1,600 *Coldwater Creek $54,000
3,400 *Hibbett Sporting Goods 74,800
-----------
128,800
-----------
TEXTILES AND RELATED (1.4%)
3,200 *Jones Apparel 137,600
-----------
TRANSPORTATION (1.9%)
700 *Coach USA Inc. 23,450
3,200 *Hvide Marine A 82,400
3,300 *Motivepower Industries 76,724
-----------
182,574
-----------
TOTAL COMMON STOCK
(89.4%) (COST $8,131,941) $8,530,936
-----------
TOTAL HOLDINGS
(COST $10,182,941) $10,581,936
===========
</TABLE>
(a) Also represents cost for Federal income tax purposes.
* Non-income producing security.
The accompanying notes are an integral part of these financial statements.
59
<PAGE> 114
OHIO NATIONAL FUND, INC.
CORE GROWTH PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
DECEMBER 31, 1997
<S> <C>
Assets:
Investments in securities at market
value (note 1) (cost $10,182,941 .......................... $ 10,581,936
Cash in bank ............................................... 920
Receivable for fund shares sold ............................ 297,999
Dividends and accrued interest receivable .................. 389
------------
Total assets .............................................. 10,881,244
------------
Liabilities:
Payable for securities purchased ........................... 1,326,150
Payable for investment management
services (note 3) ......................................... 7,677
Other accrued expenses ..................................... 3,384
------------
Total liabilities ......................................... 1,337,211
------------
Net assets at market value .................................. $ 9,544,033
============
Net assets consist of:
Par value, $1 per share .................................... $ 985,506
Paid-in capital in excess of par value ..................... 8,610,638
Accumulated undistributed net realized
loss on investments (note 1) .............................. (447,567)
Net unrealized appreciation on investments (note 1) ........ 398,995
Overdistributed net investment income ...................... (3,539)
------------
Net assets at market value .................................. $ 9,544,033
============
Shares outstanding (note 4) ................................. 985,506
Net asset value per share ................................... $ 9.68
============
STATEMENT OF OPERATIONS
JANUARY 3, 1997 TO DECEMBER 31, 1997
Investment income:
Interest ................................................... $ 3,699
Dividends .................................................. 61,000
------------
Total investment income ................................... 64,699
------------
Expenses:
Management fees (note 3) ................................... 62,237
Custodian fees (note 3) .................................... 5,000
Directors' fees (note 3) ................................... 400
Professional fees .......................................... 1,200
Accounting and transfer agent fees ......................... 6,627
Other ...................................................... 1,127
------------
Total expenses ............................................ 76,591
------------
Net investment income ..................................... ($11,892)
------------
Realized and unrealized gain (loss) on investments:
Net realized loss from investments ......................... ($447,567)
Net increase in unrealized
appreciation on investments ............................... 398,995
------------
Net loss on investments .................................. (48,572)
------------
Net decrease in net assets
from operations .......................................... ($60,464)
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
60
<PAGE> 115
OHIO NATIONAL FUND, INC.
CORE GROWTH PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD FROM JANUARY 3, 1997 TO DECEMBER 31, 1997
<S> <C>
From operations:
Net investment loss........................................................ ($11,892)
Realized loss on investments .............................................. (447,567)
Unrealized gain on investments ............................................ 398,995
----------
Net decrease in assets from operations................................... (60,464)
----------
Dividends and distributions to shareholders:
Dividends paid from net investment income.................................. (3,539)
----------
From capital share transactions (note 4):
Received from shares sold ................................................. 12,368,097
Received from dividends reinvested ........................................ 3,539
Paid for shares redeemed .................................................. (2,763,600)
----------
Increase in net assets derived from capital share transactions............ 9,608,036
----------
Increase in net assets ................................................. 9,544,033
Net Assets:
Beginning of period ....................................................... 0
----------
End of period (a) ......................................................... $9,544,033
==========
(a) Includes undistributed net investment loss of............................. ($11,892)
==========
FINANCIAL HIGHLIGHTS
FOR THE PERIOD FROM JANUARY 3, 1997 TO DECEMBER 31, 1997
Per share data:
Net asset value, beginning of period........................................ $10.00
Loss from investment operations:
Net investment loss........................................................ (0.02)
Net realized and unrealized loss on investments ........................... (0.30)
----------
Total loss from investment operations..................................... (0.32)
----------
Net asset value, end of period.............................................. $9.68
==========
Total return................................................................ (3.08%)
Ratios and supplemental data:
Ratio of expenses to average net assets.................................... 1.11%
Ratio of net investment loss to average net assets......................... (0.18%)
Portfolio turnover rate..................................................... 65%
Average commission rate (a) ................................................ $ 0.05
Net assets at end of period (millions)...................................... $ 9.5
</TABLE>
(a) Represents the total dollar amount of commissions paid on equity security
transactions divided by the total number of shares purchased and sold by
the portfolio.
The accompanying notes are an integral part of these financial statements.
61
<PAGE> 116
GROWTH & INCOME PORTFOLIO
OHIO NATIONAL FUND, INC.
Objective
The Growth & Income Portfolio's investment objective is long-term total return.
Performance as of December 31, 1997
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN:
<S> <C>
Since inception (1/3/97) 36.58%
</TABLE>
Returns represent past performance, which is no guarantee of future results.
Investment return and principal value will vary so that shares, when redeemed,
may be worth more or less than their original cost. Actual results for variable
annuity and variable universal life contracts will be lower due to contract
charges. Consult your contract for applicable charges for mortality and
expenses.
Comments
We were pleased with the Growth & Income Portfolio's performance in 1997.
Despite a terrible November, our overweighting in the oil service sector helped
our performance dramatically. We ended the year with approximately 13% of our
assets in oil service. Despite the large gains we've seen over the last two
years, we do not think the cycle is over. The cable television sector is another
of our favorites and accounted for a large portion of our summer gains. At year
end we continued to maintain a significant weighting in the group.
In our opinion, small and mid-cap stocks remain undervalued relative to the
overall market. We still believe that many small-cap stocks offer higher
earnings growth potential in 1998 with less foreign exposure than most large-cap
multinationals. The biggest economic news of 1997 was the turmoil in Asia. The
big question for 1998 is what it will mean for the US economy. In all likelihood
it may mean a flood of imports to the US by spring, a reduction in GDP growth
and pressure on corporate earnings. Pricing power has not been good in general
and should become more negative for companies exposed to Asian competition.
Change in Value of $10,000 Investment
<TABLE>
<CAPTION>
1/97 12/97
<S> <C>
Growth & Income Portfolio $13,637
Russell 2000 Index $12,226
</TABLE>
Hypothetical illustration based on past performance. Future performance will
vary. All returns reflect reinvested dividends. The portfolio's holdings may
differ significantly from the securities in the index. The index is unmanaged
and therefore does not reflect the cost of portfolio management or trading.
Neither the portfolio nor the index is open to direct investment.
Top 10 Holdings as of December 31, 1997
<TABLE>
<CAPTION>
% of Net Assets
<S> <C> <C>
1. Cooper Cameron Corp 2.1
2. Houston Industries Inc. 1.7
3. Nabors Industries Inc. 1.7
4. EVI Inc. 1.7
5. Dress Barn Inc. 1.6
6. Walter Industry Inc. 1.3
7. Perclose Inc. 1.2
8. U.S. West Media Group 1.2
9. Tele Communications TCI Group-Ser A 1.2
10. Camco International Inc. 1.2
</TABLE>
Top 5 Industries as of December 31, 1997
<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
Oil, Energy, and Natural Gas 14.7
Electrical Equipment 8.2
Computer and Related 8.0
Medical and Related 7.7
Industrial Services 5.9
</TABLE>
63
<PAGE> 117
OHIO NATIONAL FUND, INC.
GROWTH AND INCOME PORTFOLIO
Schedule of Investments
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS VALUE
- -----------------------------------------------------------
<S> <C> <C>
FINANCIAL (9.1%)
$1,705,000 Star Bank 5.50%, Due 01-02-98
repurchase price $1,705,521
collateralized by GNMA certificates
pool #8359
due 01-20-24 (cost $1,705,000) $1,705,000
----------
TOTAL REPURCHASE AGREEMENTS
(9.1%) (COST $1,705,000) $1,705,000
----------
MARKET
SHARES COMMON STOCK VALUE
- -----------------------------------------------------------
AEROSPACE (1.0%)
3,500 *Alliant Techsystems Inc. $195,125
----------
BANKING (4.0%)
5,000 Compass Bancshares Inc. 218,750
4,000 Cape Cod Bank & Trust Co. 158,000
3,000 Long Island Bancorp Inc. 148,875
2,000 Mellon Bank Corp. 121,250
3,000 TCF Financial Corp. 101,813
----------
748,688
----------
CHEMICALS (0.9%)
2,500 Imperial Chemicals Ind. 162,344
----------
COMMUNICATIONS (5.2%)
5,500 Cincinnati Bell 170,500
5,000 Comsat Corp. 121,250
10,000 *DIGI International 170,000
3,500 GTE Corp. 182,875
3,500 *LCI International Inc. 107,625
8,000 *Tele Communications TCI Grp 223,500
----------
975,750
----------
COMPUTER & RELATED (6.3%)
11,500 *Concentric Network Corp. 102,063
10,000 *Data General Corp. 174,375
18,000 *Egghead Inc. 117,000
5,000 *Filenet Corp. 150,625
9,000 *Intersolv Inc. 182,250
4,000 *Platinum Technology Inc. 113,000
5,000 Sunguard Data Systems Inc. 155,000
2,750 *Synopsis 98,313
10,250 *System Software Assoc. Inc. 89,688
----------
1,182,313
----------
CONSUMER PRODUCTS (2.4%)
3,500 Philip Morris Cos. Inc. 158,594
2,000 Ralston Purina SAILS 139,250
3,500 Sunbeam 147,437
----------
445,281
----------
ELECTRICAL EQUIPMENT (8.2%)
5,000 *Advanced Lighting Tech. 95,000
8,000 *Antec Corporation 125,000
3,000 CMS Energy Corp. 132,187
3,000 Duke Energy Corp. 166,125
4,500 GPU Inc. 189,562
12,000 Houston Industries 320,250
6,500 Southern Co. 168,187
8,000 *U.S. West Media 231,000
2,500 Union Electric Co. 108,125
----------
1,535,436
----------
ENTERTAINMENT & LEISURE (0.2%)
6,800 *Brilliant Digital Entertainment $31,875
----------
FINANCIAL SERVICES (1.6%)
3,000 Fannie Mae 171,188
4,637 *Tele Comm. New TCI A 131,285
----------
302,473
----------
FOOD & RELATED (3.6%)
3,000 Albertsons Inc. 142,125
6,000 Cadbury Schweppes PLC 60,567
5,000 International Multi-Foods Corp. 141,563
5,000 *JP Foodservice Inc. 184,687
7,750 Tasty Baking Company 149,672
----------
678,614
----------
HOUSING, FURNITURE & RELATED (2.3%)
4,000 Herman Miller 218,250
7,600 *Toll Brothers Inc. 203,300
----------
421,550
----------
INDUSTRIAL SERVICES (5.3%)
11,500 *Agribiotech Inc. 196,219
5,000 *Giant Cement Holding 115,625
5,300 Medusa Corp. 221,606
5,000 *Primark Corp. 203,438
12,000 *Walter Industry Inc. 247,500
----------
984,388
----------
INSURANCE SERVICES (1.6%)
2,500 American General Corp. 135,156
3,500 Hartford Life Inc. 158,594
----------
293,750
----------
MEDICAL & RELATED (6.2%)
8,500 *Beverly Enterprises 110,500
8,700 *Dusa Pharmaceuticals 100,050
5,000 *Guilford Pharmaceuticals 100,625
3,000 *Genentech Inc. 181,875
8,500 *Millennium Pharmaceuticals 161,500
7,000 *Neurex Corporation 97,125
128 *Pharmerica Inc. 1,328
12,000 *Perclose Inc. 231,000
3,500 *Spine-Tech Inc. 180,031
----------
1,164,034
----------
MEDIA & PUBLISHING (0.7%)
4,000 Comcast Corp. 126,250
----------
MUSIC/CLUBS (0.4%)
5,000 *N2K Inc. 73,125
----------
OIL, ENERGY & NATURAL GAS (14.7%)
7,000 AGL Resources Inc. 143,063
4,900 Artisan Corporation 37,665
30,000 *Bonus Resource Service Corp. 123,687
3,000 Burlington Resources Inc. 134,438
6,500 Cooper Cameron 396,500
3,500 Camco International 222,906
6,000 EVI Inc. 310,500
10,000 *Nabors Industries 314,375
5,000 Occidental Petroleum Corp. 146,563
3,000 *Oryx Energy Co. 76,500
4,500 Patterson Energy 174,094
</TABLE>
(continued)
64
<PAGE> 118
OHIO NATIONAL FUND, INC.
GROWTH AND INCOME PORTFOLIO (CONTINUED)
Schedule of Investments
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- --------------------------------------------------------
<S> <C> <C>
OIL, ENERGY & NATURAL GAS (CONT.)
5,000 *Rowan Companies Inc. $162,500
6,300 Southern Union Co. 150,410
10,000 Virginia Gas Co. 85,000
2,000 Western Atlas Inc. 148,000
5,000 William Companies, Inc. 141,875
-----------
2,758,076
-----------
RETAIL (2.2%)
10,500 *Dress Barn Inc. 297,938
5,000 *Gadzooks Inc. 105,000
-----------
402,938
-----------
TELECOMMUNICATIONS (0.9%)
9,000 *Nextlevel Systems Inc. 160,875
-----------
TEXTILES & RELATED (1.1%)
14,000 *Vans Inc. 211,750
-----------
TRANSPORTATION (0.7%)
3,000 *Genesee & Wyoming Inc. Cl A 70,125
2,500 *Hvide Marine Corp. 64,375
-----------
134,500
-----------
UTILITIES (0.6%)
12,120 *Citizen Utilities 116,655
-----------
TOTAL COMMON STOCK
(70.1%) (COST $12,075,897) $13,105,790
-----------
REAL ESTATE MARKET
SHARES INVESTMENT TRUSTS VALUE
- --------------------------------------------------------
8,600 CRIIMI Mae Inc. $129,000
4,000 Walden Residential 102,000
-----------
231,000
-----------
TOTAL REAL ESTATE INVESTMENT
TRUSTS (1.2%) (COST $235,856) $231,000
-----------
MARKET
SHARES PREFERRED STOCK VALUE
- --------------------------------------------------------
AEROSPACE (0.7%)
2,000 Trans World Airlines $129,500
-----------
COMMUNICATIONS (0.5%)
2,500 Cablevision Systems 8.500% 96,250
-----------
ENTERTAINMENT AND LEISURE (1.4%)
3,500 Metromedia Intl 7.25% 158,375
2,000 Royal Caribbean Cruises 106,066
-----------
264,441
-----------
FINANCIAL SERVICES (2.0%)
2,500 Conseco Fin Trust 7.0% 128,125
2,500 Merril Lynch & Co 84,688
3,200 Newell Fina Tr 5.25% 167,200
-----------
380,013
-----------
METALS & MINING (0.5%)
7,000 C'oer D'Alene Mines 84,875
-----------
TRANSPORTATION & EQUIPMENT (0.9%)
5,000 TWA 8.000% $177,500
-----------
UTILITIES (0.9%)
3,000 Houston Industries 171,187
-----------
TOTAL PREFERRED STOCK
(6.9%) (COST $1,161,926) $1,303,766
-----------
FACE MARKET
AMOUNT CONVERTIBLE DEBENTURES VALUE
- --------------------------------------------------------
BUSINESS SERVICES (0.2%)
$50,000 Corestaff Inc Note
2.94% 08-15-2004 $41,688
-----------
COMMUNICATIONS (0.9%)
175,000 P-Com Inc.
4.25% 11-15-2002 161,437
-----------
COMPUTER AND RELATED (1.7%)
50,000 Apple Computer
6.00% 06-01-01 40,563
125,000 Read-Rite Corp.
6.50% 09-01-04 105,625
200,000 System Software Associates
7.00% 09-15-02 178,500
-----------
324,688
-----------
FOOD AND RELATED (0.3%)
75,000 Boston Chicken Inc.
7.750% 05-01-04 48,281
-----------
INDUSTRIAL SERVICES (0.6%)
100,000 Alternative Living Services
5.250% 12-15-02 113,000
-----------
MEDICAL AND RELATED (1.5%)
125,000 Assisted Living Concepts
6.00% 11-01-02 135,625
100,000 American Retirement Corp.
5.75% 10-01-02 100,750
35,000 Sunrise Assisted Living
5.500% 06-15-02 46,200
-----------
282,575
-----------
METALS AND MINING (0.7%)
125,000 Loews Corp.
3.125% 09-15-07 124,375
-----------
RETAIL (0.9%)
100,000 Cellstar Corp.
5.00% 10-15-02 73,750
100,000 Charming Shoppes
7.50% 07-15-06 94,875
-----------
168,625
-----------
TOTAL CONVERTIBLE DEBENTURES
(6.8%) (COST $1,316,052) $1,264,669
-----------
TOTAL HOLDINGS
(COST $16,494,731)(a) $17,610,225
===========
</TABLE>
* Non-income producing securities.
(a) Also represents cost for Federal income tax purposes.
The accompanying notes are an integral part of these financial statements.
65
<PAGE> 119
OHIO NATIONAL FUND, INC.
GROWTH & INCOME PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<S> <C>
Assets:
Investments in securities at market
value (note 1) (cost $16,494,731) ..................................... $17,610,225
Cash in bank ........................................................... 845
Receivable for fund shares sold ........................................ 979,953
Receivable for securities sold ......................................... 397,358
Dividends and accrued interest receivable .............................. 26,897
Other .................................................................. 332
------------
Total assets .......................................................... 19,015,610
============
Liabilities:
Payable for securities purchased ....................................... 294,743
Payable for investment management
services (note 3) ..................................................... 11,978
Other accrued expenses ................................................. 2,609
------------
Total liabilities ..................................................... 309,330
------------
Net assets at market value .............................................. $ 18,706,280
============
Net assets consist of:
Par value, $1 per share ................................................ $ 1,455,364
Paid-in capital in excess of par value ................................. 16,136,858
Accumulated overdistributed net realized
income on investments ................................................. (1,436)
Net unrealized appreciation on investments (note 1) .................... 1,115,494
------------
Net assets at market value .............................................. $ 18,706,280
============
Shares outstanding (note 4) ............................................. 1,455,364
Net asset value per share ............................................... $ 12.85
============
Statement of Operations
January 3, 1997 to December 31, 1997
Investment income:
Interest ............................................................... $ 64,302
Dividends .............................................................. 95,642
------------
Total investment income ............................................... 159,944
------------
Expenses:
Management fees (note 3) ............................................... 61,464
Custodian fees (note 3) ................................................ 5,001
Directors' fees (note 3) ............................................... 400
Professional fees ...................................................... 1,200
Accounting and transfer agent fees ..................................... 6,960
Other .................................................................. 1,133
------------
Total expenses ........................................................ 76,158
------------
Net investment income ................................................. $ 83,786
------------
Realized and unrealized gain on investments:
Net realized gain from investments ..................................... $ 879,953
Net increase in unrealized
appreciation on investments ........................................... 1,115,494
------------
Net gain on investments .............................................. 1,995,447
------------
Net increase in net
assets from operations ............................................... $ 2,079,233
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
66
<PAGE> 120
OHIO NATIONAL FUND, INC.
GROWTH & INCOME PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the period from January 3, 1997 to December 31, 1997
<S> <C>
From operations:
Net investment income ......................................... $ 83,786
Realized income on investments ................................ 879,953
Unrealized gain on investments ................................ 1,115,494
------------
Net increase in assets from operations ...................... 2,079,233
------------
Dividends and distributions to shareholders:
Dividends paid from net investment income ..................... (83,966)
Capital gains distributions ................................... (881,389)
------------
Total dividends and distributions ........................... (965,355)
------------
From capital share transactions (note 4):
Received from shares sold ..................................... 17,263,935
Received from dividends reinvested ............................ 965,355
Paid for shares redeemed ...................................... (636,888)
------------
Increase in net assets derived from capital share transactions 17,592,402
------------
Increase in net assets ..................................... 18,706,280
Net Assets:
Beginning of period ........................................... 0
------------
End of period (a) ............................................. $ 18,706,280
============
(a) Includes overdistributed net investment income of .......... ($180)
============
FINANCIAL HIGHLIGHTS
FOR THE PERIOD FROM JANUARY 3, 1997 TO DECEMBER 31, 1997
Per share data:
Net asset value, beginning of period ........................... $ 10.00
Income from investment operations:
Net investment income ......................................... 0.11
Net realized and unrealized gain on investments ............... 3.52
------------
Total income from investment operations ...................... 3.63
------------
Less distributions:
Dividends from net investment income .......................... (0.11)
Distributions from net realized capital gains ................. (0.67)
------------
Total distributions .......................................... (0.78)
------------
Net asset value, end of period ................................. $ 12.85
============
Total return ................................................... 36.58%
Ratios and supplemental data:
Ratio of expenses to average net assets ....................... 0.95%
Ratio of net investment income to average net assets .......... 1.04%
Portfolio turnover rate ........................................ 185%
Average commission rate (a) .................................... $ 0.06
Net assets at end of period (millions) ......................... $ 18.7
</TABLE>
(a) Represents the total dollar amount of commissions paid on equity security
transactions divided by the total number of shares purchased and sold by
the portfolio.
The accompanying notes are an integral part of these financial statements.
67
<PAGE> 121
S&P 500 INDEX PORTFOLIO OHIO NATIONAL FUND, INC.
OBJECTIVE
- ---------
The S&P 500 Index Portfolio seeks total return approximating that of the S&P 500
Index, including reinvestment of dividends, at a risk level consistent with that
of the S&P 500 Index.
PERFORMANCE AS OF DECEMBER 31, 1997
- -----------------------------------
AVERAGE ANNUAL TOTAL RETURN:
Since inception (1/3/97) 31.75%
Returns represent past performance, which is no guarantee of future results.
Investment return and principal value will vary so that shares, when redeemed,
may be worth more or less than their original cost. Actual results for variable
annuity and variable universal life contracts will be lower due to contract
charges. Consult your contract for applicable charges for mortality and
expenses.
COMMENTS
- --------
The S&P 500 Index Portfolio began on January 3, 1997 with a few simple, but
critical goals: hold down expenses to enhance returns; invest new cash quickly;
and match the S&P 500 Index returns. Outperforming the actual index is a
difficult goal because funds incur operating expenses that an index does not.
Using regression analysis, industry weightings, market capital weightings, and
individual stock analysis, the portfolio was managed with only about 40 stock
holdings, and with S&P 500 stock index futures contracts hedged by commercial
paper and/or treasuries. This strategy did allow the portfolio to hold down
expenses, quickly invest cash and match the S&P 500 Index with very little
variance.
From January 3, 1997 through year-end the S&P 500 Index, with dividends
reinvested, rose 31.85%. Your S&P 500 Index Portfolio rose 31.75%, nearly
matching the "dividends reinvested" Index return even after portfolio expenses.
Expectations for 1998 are high, with average corporate earnings expected to grow
about 8% or better. However, the ongoing impact of the Asian recession, which
has reduced earnings forecasts for many American companies, has dampened
expectations. We look for the stock market to be flat to 10% higher in 1998.
CHANGE IN VALUE OF $10,000 INVESTMENT
- -------------------------------------
1/97 12/97
---- -----
S&P 500 Fund Portfolio $10,000 $13,175
S&P 500 Index 10,000 13,338
Hypothetical illustration based on past performance. Future performance will
vary. All returns reflect reinvested dividends. The portfolio's holdings may
differ significantly from the securities in the index. The index is unmanaged
and therefore does not reflect the cost of portfolio management or trading.
Neither the portfolio nor the index is open to direct investment.
TOP 10 HOLDINGS AS OF DECEMBER 31, 1997
- ---------------------------------------
% of Net Assets
1. S&P 500 Depository Shares 4.1
2. Merck & Co Inc. 2.7
3. Johnson & Johnson 2.2
4. Ameritech Corp 2.2
5. General Electric Corp 2.1
6. Microsoft Corp. 1.8
7. Royal Dutch Petrol. Co. NY Registry 1.8
8. Exxon Corp 1.8
9. Rayonier Timberlands Cl A LP 1.5
10. Fifth Third Bancorp 1.5
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1997
- ----------------------------------------
% of Net Assets
Computer & Related 5.8
Communications 4.9
Banking 4.2
Consumer Products 4.1
S&P 500 Depository Shares 4.1
69
<PAGE> 122
OHIO NATIONAL FUND, INC.
S&P 500 INDEX PORTFOLIO
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
FACE MARKET
AMOUNT SHORT-TERM NOTES VALUE
- --------------------------------------------------------------
<S> <C> <C>
AUTOMOTIVE & RELATED (5.7%)
$256,000 Ford Motor Credit Corp.
6.150% 01-02-98 $255,956
1,000,000 General Motors Acceptance Corp.
6.130% 01-09-98 998,638
----------
1,254,594
----------
FINANCIAL (21.3%)
297,000 American Express Credit
6.100% 01-07-98 296,698
553,000 American General Finance
5.900% 01-12-98 552,003
950,000 Associates Corp.
5.820% 01-06-98 949,232
700,000 CIT Group Holding
6.000% 01-06-98 699,417
400,000 G.E. Capital
6.020% 01-07-98 399,599
500,000 Heller Financial
6.050% 01-21-98 498,319
442,000 Heller Financial
6.050% 01-05-98 441,703
680,000 Household Finance
6.000% 01-08-98 679,207
178,000 Household Finance
6.100% 01-08-98 177,788
----------
4,693,966
----------
INSURANCE SERVICES (4.5%)
1,000,000 Prudential Funding
5.850% 01-20-98 996,913
----------
MACHINERY (4.3%)
943,000 John Deere Capital Corp.
5.750% 01-14-98 941,042
----------
OIL, ENERGY, & NATURAL GAS (4.1%)
905,000 Chevron USA Inc.
5.800% 01-14-98 902,959
----------
RETAIL (4.0%)
900,000 Sears Roebuck Acceptance Corp.
5.950% 01-13-98 898,215
----------
TOTAL SHORT-TERM NOTES
(43.9%) (COST $9,687,689) $9,687,689
----------
MARKET
SHARES COMMON STOCK VALUE
- ------------------------------------------------------------
AEROSPACE (1.4%)
3,100 Allied Signal $120,706
3,700 Boeing Co. 181,069
----------
301,775
----------
AUTOMOTIVE & RELATED (0.9%)
4,000 Ford Motor 194,750
----------
BANKING (4.2%)
3,200 BankBoston Corp. $300,600
2,600 Chase Manhattan 284,700
4,100 Fifth Third Bancorp 335,175
----------
920,475
----------
CHEMICALS (1.0%)
4,900 Monsanto Corp. 205,800
800 Solutia 21,350
----------
227,150
----------
COMMUNICATIONS (4.9%)
4,800 AT&T Corp. 294,000
4,000 *Airtouch Communications 166,250
6,000 Ameritech Corp. 483,000
2,400 Motorola Corp. 136,950
----------
1,080,200
----------
COMPUTER & RELATED (5.8%)
4,650 Cisco Systems 259,238
3,300 Compaq Computer 186,244
2,900 Intel Corp. 203,725
2,100 International Business Machine 219,581
3,100 *Microsoft Corp. 400,675
----------
1,269,463
----------
CONSUMER PRODUCTS (4.1%)
7,500 Johnson & Johnson 494,063
3,700 Philip Morris Co. 167,656
3,200 Procter & Gamble 255,400
----------
917,119
----------
DRUGS (3.0%)
1,300 *Amgen Corp. 70,363
5,500 Merck & Co. 584,375
----------
654,738
----------
ELECTRICAL EQUIPMENT (2.1%)
6,300 General Electric 462,263
----------
ENTERTAINMENT & LEISURE (0.8%)
1,700 Walt Disney 168,406
----------
FINANCIAL SERVICES (1.4%)
3,600 American Express 321,300
----------
FOOD & RELATED (3.4%)
5,600 Campbell Soup 325,500
5,000 Coca-Cola 333,125
2,000 Intl. Flavors & Fragrances Inc. 103,000
----------
761,625
----------
FORESTRY & PAPER PRODUCTS (1.9%)
32,600 Rayonier Timberlands 338,225
1,700 Weyerhaeuser 83,405
----------
421,630
----------
INSURANCE SERVICES (1.0%)
2,000 American Intl. Group 217,500
----------
MACHINERY (0.4%)
1,700 Caterpillar 82,555
----------
(continued)
</TABLE>
70
<PAGE> 123
OHIO NATIONAL FUND, INC.
S&P 500 INDEX PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
MARKET
SHARES COMMON STOCK VALUE
- ------------------------------------------------------------
<S> <C> <C>
MEDICAL & RELATED (0.5%)
1,900 *Boston Scientific $87,163
400 United Healthcare 19,874
----------
107,037
----------
OIL, ENERGY & NATURAL GAS (3.5%)
6,300 Exxon 385,481
7,300 Royal Dutch Petroleum 395,569
----------
781,050
----------
RESTAURANTS (0.3%)
1,200 McDonald's Corp. 57,300
----------
RETAIL (1.5%)
2,400 Home Depot 141,300
4,800 Wal-Mart Stores 189,300
----------
330,600
----------
TEXTILES & RELATED (0.6%)
5,000 Guilford Mills Inc. 136,876
----------
TRANSPORTATION & EQUIPMENT (0.3%)
2,400 Norfolk Southern Corp. $73,950
----------
UTILITIES (1.3%)
5,200 Duke Energy Corp. 287,950
----------
TOTAL COMMON STOCKS
(44.3%) (COST $9,552,913) $9,775,712
----------
DEPOSITARY MARKET
SHARES SHARES VALUE
- ------------------------------------------------------------
FINANCIAL (4.1%)
9,405 S&P 500 Depository Shares $911,697
----------
TOTAL DEPOSITORY SHARES
(4.1%) (COST $904,778) $911,697
----------
TOTAL HOLDINGS
(COST $20,145,380) (a) $20,375,098
===========
* Non-income producing securities.
(a) Also represents cost for Federal income tax purposes.
</TABLE>
The accompanying notes are an integral part of these financial statements.
71
<PAGE> 124
<TABLE>
<CAPTION>
OHIO NATIONAL FUND, INC.
S&P 500 PORTFOLIO
- ---------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- ---------------------------------------------------------------
DECEMBER 31, 1997
<S> <C>
Assets:
Investments in securities at market
value (note 1) (cost $20,145,380) .......... $20,375,098
Cash in bank ................................ 2,661
Receivable for fund shares sold.............. 821,755
Receivable from brokers (note 1) ............ 817,476
Dividends and accrued interest receivable ... 179,793
Other ....................................... 204
-----------
Total assets ............................... 22,196,987
-----------
Liabilities:
Payable for securities purchased ............ 113,960
Payable for investment management
services (note 3) .......................... 7,140
Other accrued expenses ...................... 3,547
-----------
Total liabilities .......................... 124,647
-----------
Net assets at market value $22,072,340
===========
Net assets consist of:
Par value, $1 per share ..................... $1,882,466
Paid-in capital in excess of par value ...... 19,954,093
Accumulated overdistributed net realized
gain on investments ........................ (108,075)
Net unrealized appreciation on:
Investments (note 1)........................ 229,718
Futures Contracts (note 1).................. 109,325
Undistributed net
investment income .......................... 4,813
-----------
Net assets at market value $22,072,340
===========
Shares outstanding (note 4)................... 1,882,466
Net asset value per share..................... $11.73
===========
- ---------------------------------------------------------------
STATEMENT OF OPERATIONS
- ---------------------------------------------------------------
JANUARY 3, 1997 TO DECEMBER 31, 1997
Investment income:
Interest....................................... $260,134
Dividends...................................... 417,795
-----------
Total investment income....................... 677,929
-----------
Expenses:
Management fees (note 3)....................... 43,376
Custodian fees (note 3)........................ 5,000
Directors' fees (note 3) ...................... 560
Professional fees.............................. 1,680
Accounting and transfer agent fees ............ 7,689
Other.......................................... 1,630
-----------
Total expenses................................ 59,935
-----------
Net investment income......................... $617,994
-----------
Realized and unrealized gain on investments and
futures contracts:
Net realized gain from:
Investments................................... $826,787
Futures contracts............................. 660,125
Net increase in unrealized appreciation on:
Investments................................... 229,718
Futures contracts............................. 109,325
-----------
Net gain on investments...................... 1,825,955
-----------
Net increase in net
assets from operations....................... $2,443,949
===========
</TABLE>
72
<PAGE> 125
<TABLE>
<CAPTION>
OHIO NATIONAL FUND, INC.
S&P 500 Portfolio
- --------------------------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD FROM JANUARY 3, 1997 TO DECEMBER 31, 1997
<S> <C>
From operations:
Net investment income ................................................................................. $617,994
Realized gain on investments and futures contracts..................................................... 1,486,912
Unrealized gain on investments and futures contracts................................................... 339,043
-----------
Net increase in assets from operations............................................................... 2,443,949
-----------
Dividends and distributions to shareholders:
Dividends paid from net investment income ............................................................. (613,181)
Capital gains distributions............................................................................ (1,486,912)
Capital gains distributions in excess of realized gains................................................ (108,075)
-----------
Total dividends and distributions.................................................................... (2,208,168)
-----------
From capital share transactions (note 4):
Received from shares sold ............................................................................. 20,644,767
Received from dividends reinvested .................................................................... 2,208,168
Paid for shares redeemed .............................................................................. (1,016,376)
-----------
Increase in net assets derived from capital share transactions ...................................... 21,836,559
-----------
Increase in net assets ............................................................................ 22,072,340
-----------
Net Assets:
Beginning of period ............................................................................... 0
-----------
End of period (a) .................................................................................$22,072,340
===========
a) Includes undistributed net investment income of....................................................... $4,813
===========
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD FROM JANUARY 3, 1997 TO DECEMBER 31, 1997
<S> <C>
Per share data:
Net asset value, beginning of period..................................................................... $10.00
Income from investment operations:
Net investment income.................................................................................. (0.45)
Net realized and unrealized gain on investments ....................................................... (2.70)
-----------
Total income from investment operations.............................................................. (3.15)
-----------
Less distributions:
Dividends from net investment income .................................................................. (0.45)
Distributions from net realized capital gains.......................................................... (0.91)
Distributions from excess realized capital gains....................................................... (0.06)
-----------
Total distributions.................................................................................. (1.42)
-----------
Net asset value, end of period........................................................................... $11.73
===========
Total return............................................................................................. 31.75%
Ratios and supplemental data:
Ratio of expenses to average net assets................................................................ 0.52%
Ratio of net investment income to average net assets................................................... 5.29%
Portfolio turnover rate.................................................................................. 445%
Average commission rate (a) ............................................................................. $0.04
Net assets at end of period (millions)................................................................... $22.1
<FN>
(a) Represents the total dollar amount of commissions paid on equity security transactions divided by the total number
of shares purchased and sold by the portfolio.
</TABLE>
The accompanying notes are an integral part of these financial statements.
73
<PAGE> 126
SOCIAL AWARENESS PORTFOLIO
OHIO NATIONAL FUND, INC.
OBJECTIVE
- ---------
The objective of the Social Awareness Portfolio is to provide long-term growth
of capital by investing primarily in the common stocks and other equity
securities of companies that, in the Adviser's opinion, conduct their business
in a way that enhances society's quality of life. The portfolio's social concern
criteria will necessarily limit the universe of securities that may be selected
for this portfolio. However, the Adviser believes the portfolio's objective of
long-term capital growth can be achieved despite this limitation.
PERFORMANCE AS OF DECEMBER 31, 1997
- -----------------------------------
AVERAGE ANNUAL TOTAL RETURN:
Since inception (1/3/97) 25.63%
Returns represent past performance, which is no guarantee of future results.
Investment return and principal value will vary so that shares, when redeemed,
may be worth more or less than their original cost. Actual results for variable
annuity and variable universal life contracts will be lower due to contract
charges. Consult your contract for applicable charges for mortality and
expenses.
COMMENTS
- --------
Financial markets displayed increasing volatility during 1997, as sentiment
shifted dramatically. The Social Awareness Portfolio outperformed the Russell
2000 Index and a peer group of funds using social criteria, aided by strong
performance in the second and third quarters of the year. The largest sector
contributions to performance came from the Consumer Cyclical, Capital Goods and
Financial Services sectors.
We expect volatility in the overall market to continue, driven by concerns over
economic turmoil and the outlook for corporate profits. Companies selected for
the Social Awareness Portfolio have strong fundamentals, pass social criteria
and sell at a discount to estimated growth rates. We will take a disciplined
approach, using heightened volatility to establish positions with favorable
risk-reward characteristics.
CHANGE IN VALUE OF $10,000 INVESTMENT
- -------------------------------------
1/97 12/97
Social Awareness Portfolio $10,000 $12,583
Russell 2000 Index 10,000 12,227
Hypothetical illustration based on past performance. Future performance will
vary. All returns reflect reinvested dividends. The portfolio's holdings may
differ significantly from the securities in the index. The index is unmanaged
and therefore does not reflect the cost of portfolio management or trading.
Neither the portfolio nor the index is open to direct investment.
TOP 10 HOLDINGS AS OF DECEMBER 31, 1997
- ---------------------------------------
% of Net Assets
1. Recycling Industries Inc. 3.7
2. Buffetts 2.6
3. Sola International 2.5
4. Atlas Air Inc. 2.5
5. First Data Corp 2.5
6. Santa Fe Energy Resources 2.4
7. Wolverine Tube Inc. 2.4
8. Tupperware 2.4
9. Alternative Resource 2.4
10. Andrew Corp. 2.4
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1997
- ----------------------------------------
% of Net Assets
Oil, Energy, and Natural Gas 14.0
Business Services 9.6
Industrial Services 8.4
Metals and Mining 7.3
Consumer Products 6.0
75
<PAGE> 127
<TABLE>
<CAPTION>
OHIO NATIONAL FUND, INC.
SOCIAL AWARENESS PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
FACE MARKET
AMOUNT SHORT-TERM NOTES VALUE
- ------------------------------------------------------------------------
<S> <C> <C>
AUTOMOTIVE AND RELATED (6.8%)
$160,000 Ford Motor Credit
6.050% 01-02-98 $159,973
171,000 General Motors Acceptance Corp.
6.000% 01-07-98 170,829
----------------
330,802
----------------
RETAIL (2.6%)
125,000 Sears Roebuck
6.000% 01-05-98 124,917
----------------
TOTAL SHORT-TERM NOTES
(9.4%) (COST $455,719) $455,719
----------------
<CAPTION>
FACE MARKET
AMOUNT LONG-TERM BONDS & NOTES VALUE
- ------------------------------------------------------------------------
<S> <C> <C>
INDUSTRIAL SERVICES (0.5%)
$25,000 Medar Inc. Sr. Sub. Notes
12.950% 06-30-05 $22,850
----------------
TOTAL LONG-TERM BONDS & NOTES
(0.5%) (COST $22,850) $22,850
----------------
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- ------------------------------------------------------------------------
<S> <C> <C>
BANKING (2.1%)
4,600 First International Bank Corp. $55,775
2,600 * Telebanc Financial 46,150
----------------
101,925
----------------
BUSINESS SERVICES (9.6%)
5,000 * Alternative Resources 115,313
4,100 First Data Corp. 119,925
7,900 * LoJack Corp. 116,525
3,200 Manpower 112,800
----------------
464,563
----------------
CHEMICALS (2.4%)
2,300 Hercules Inc. 115,144
----------------
COMMUNICATIONS (4.8%)
3,300 * 3Comm 115,294
4,800 * Andrew Corp. 115,200
----------------
230,494
----------------
COMPUTER & RELATED (4.0%)
4,800 * Continental Circuits Corp. 66,900
5,400 * Mapinfo 64,125
4,100 * Rand A Technology Can Mutual Fund 63,032
----------------
194,057
----------------
CONSUMER PRODUCTS (6.0%)
5,500 * Acorn Products 55,000
3,700 * Sola International 120,250
4,200 Tupperware 117,075
----------------
292,325
----------------
CONTAINERS (1.2%)
1,600 Sonoco Products 55,500
----------------
DRUGS (1.5%)
3,500 Mylan Laboratories 73,281
----------------
DURABLE GOODS (2.3%)
3,700 Polaris Industries 113,081
----------------
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- ------------------------------------------------------------------------
<S> <C> <C>
ELECTRICAL EQUIPMENT (5.8%)
3,000 * Advanced Lighting $57,000
6,800 * Anixter International 112,200
7,000 BMC Industries 112,875
----------------
282,075
----------------
ENTERTAINMENT AND LEISURE (1.3%)
7,000 * Livent Inc. 60,375
----------------
HOTEL/LODGING (1.3%)
4,800 * Guest Supply 63,000
----------------
HOUSING, FURNITURE & RELATED (3.3%)
6,300 Clayton Homes Inc. 113,400
3,300 Haverty Furniture Cos. Inc. 44,550
----------------
157,950
----------------
INDUSTRIAL SERVICES (7.9%)
3,500 Imco Recycling 56,219
5,900 * Medar Inc. 31,712
3,400 Millipore Corp. 115,388
30,000 * Recycling Industries 180,000
----------------
383,319
----------------
INSURANCE SERVICES (0.9%)
1,300 Blanch EW 44,769
----------------
MEDICAL & RELATED (4.2%)
4,910 * Foundation Health 109,861
700 National Healthcare 39,200
2,000 * Quorum Health 52,250
----------------
201,311
----------------
METALS & MINING (4.9%)
7,100 Worthington Industries 117,150
3,800 Wolverine Tube Inc. 117,800
----------------
234,950
----------------
OIL, ENERGY & NATURAL GAS (14.0%)
6,100 * Belco Oil & Gas Corp. 114,756
1,800 Kerr Mc Gee 113,962
6,000 * Louis Dreyfus Natural Gas 112,125
16,400 * Newstar Resources 57,400
10,500 Santa Fe Energy Resources 118,125
3,300 Ultramar Diamond Shamrock 105,188
4,100 Wizer Oil Co. 57,912
---------------
679,468
---------------
REAL ESTATE AND LEASING (1.2%)
5,200 Bando McGlocklin Capital Corp. 58,500
----------------
RESTAURANTS (4.9%)
13,500 * Buffets 126,563
13,100 * Ryan's Family Steak House 112,168
----------------
238,731
----------------
TEXTILES AND RELATED (1.2%)
9,400 * Ridgeview Inc. 58,750
----------------
TRANSPORTATION & EQUIPMENT (3.4%)
5,000 * Atlas Air Inc. 120,000
2,700 Greenbrier Cos. Inc. 46,744
----------------
166,744
----------------
TOTAL COMMON STOCK
(88.2%) (COST $4,157,951) $4,270,312
----------------
(continued)
</TABLE>
76
<PAGE> 128
<TABLE>
OHIO NATIONAL FUND, INC.
SOCIAL AWARENESS PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
<CAPTION>
MARKET
SHARES PREFERRED STOCK VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
INSURANCE SERVICES (1.1%)
900 Allstate Exchangeable Notes 6.764% $54,000
--------------------
METALS AND MINING (2.4%)
4,800 Freeport McMoran Copper & Gold 115,200
--------------------
TOTAL PREFERRED STOCK
(3.5%) (Cost $175,104) $169,200
--------------------
MARKET
SHARES WARRANTS VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
5,000 Medar Inc. Warrants @ $6.86 $2,150
--------------------
TOTAL WARRANTS
(0.0%) (COST $2,150) $2,150
--------------------
TOTAL HOLDINGS
(COST $4,813,774) (A) $4,920,231
====================
<FN>
*Non-income producing securities.
(a) Also represents cost for Federal income tax purposes.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 129
OHIO NATIONAL FUND, INC.
SOCIAL AWARENESS PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31,1997
<S> <C>
Assets:
Investments in securities at market
value (note 1) (cost $4,813,774) ............. $4,920,231
Cash in bank .................................. 507
Receivable for fund shares sold................ 156,268
Dividends and accrued interest receivable ..... 4,485
----------
Total assets ................................. 5,081,491
----------
Liabilities:
Payable for shares purchased .................. 234,419
Payable for investment management
services (note 3) ............................ 2,280
Other accrued expenses ........................ 2,962
----------
Total liabilities ............................ 239,661
----------
Net assets at market value $4,841,830
Net assets consist of:
Par value, $1 per share ....................... $424,689
Paid-in capital in excess of par value ........ 4,310,684
Net unrealized appreciation on investments
(note 1)...................................... 106,457
----------
Net assets at market value $4,841,830
Shares outstanding (note 4)..................... 424,689
Net asset value per share....................... $11.40
----------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
- ----------------------------------------------------------------
JANUARY 3, 1997 TO DECEMBER 31, 1997
<S> <C>
Investment income:
Interest....................................... $15,614
Dividends...................................... 33,280
----------
Total investment income....................... 48,894
----------
Expenses:
Management fees (note 3)....................... 16,529
Custodian fees (note 3)... .................... 5,000
Directors' fees (note 3) . .................... 183
Professional fees......... .................... 615
Accounting and transfer agent fees ............ 4,496
Other.......................................... 452
----------
Total expenses................................ 27,275
----------
Net investment income......................... $21,619
----------
Realized and unrealized gain on investments:
Net realized gain from investments............. $406,600
Net increase in unrealized
appreciation on investments .................. 106,457
----------
Net gain on investments...................... 513,057
----------
Net increase in net
assets from operations....................... $534,676
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
78
<PAGE> 130
<TABLE>
<CAPTION>
OHIO NATIONAL FUND, INC.
SOCIAL AWARENESS PORTFOLIO
- -----------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------
<S> <C>
FOR THE PERIOD FROM JANUARY 3, 1997 TO DECEMBER 31, 1997
From operations:
Net investment income ................................................ $21,619
Realized gain on investments.......................................... 406,600
Unrealized gain on investments........................................ 106,457
------------
Net increase in assets from operations........................ 534,676
------------
Dividends and distributions to shareholders:
Dividends paid from net investment income............................. (21,672)
Capital gains distributions........................................... (406,600)
------------
Total dividends and distributions............................. (428,272)
------------
From capital share transactions (note 4):
Received from shares sold ............................................ 4,461,187
Received from dividends reinvested ................................... 428,272
Paid for shares redeemed ............................................. (154,033)
------------
Increase in net assets derived from capital share transactions ... 4,735,426
------------
Increase in net assets ................................... 4,841,830
Net Assets:
Beginning of period .................................................. 0
------------
End of period (a) .................................................... $4,841,830
============
(a) Includes undistributed net investment income of................... ($53)
============
<CAPTION>
- ----------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------------------------
FOR THE PERIOD FROM JANUARY 3, 1997 TO DECEMBER 31, 1997
<S> <C>
Per share data:
Net asset value, beginning of period...................................... $10.00
Income from investment operations:
Net investment income................................................. 0.09
Net realized and unrealized gain on
investments and foreign currency transactions..................... 2.47
------------
Total income from investment operations....................... 2.56
------------
Less distributions:
Dividends from net investment income ................................. (0.07)
Distributions from net realized capital gains......................... (1.09)
------------
Total distributions........................................... (1.16)
------------
Net asset value, end of period............................................ $11.40
============
Total return.............................................................. 25.63%
Ratios and supplemental data:
Ratio of expenses to average net assets............................... 0.95%
Ratio of net investment income to average net assets.................. 0.75%
Portfolio turnover rate................................................... 40%
Average commission rate (a) .............................................. $0.07
Net assets at end of period (millions).................................... $4.8
(a) Represents the total dollar amount of commissions paid on equity security transactions
divided by the total number of shares purchased and sold by the portfolio.
The accompanying notes are an integral part of these financial statements.
</TABLE>
79
<PAGE> 131
STRATEGIC INCOME PORTFOLIO
OHIO NATIONAL FUND, INC.
OBJECTIVE
- ---------
The Strategic Income Portfolio seeks to generate high current income by
investing at least 80% of its assets in income-producing securities, including
at least 40% of assets in a core group of U.S. government and corporate
fixed-income securities, and the remainder in other income-producing securities.
PERFORMANCE AS OF DECEMBER 31, 1997
- -----------------------------------
Average Annual Total Return:
Since inception (1/3/97) 8.74%
Returns represent past performance, which is no guarantee of future results.
Investment return and principal value will vary so that shares, when redeemed,
may be worth more or less than their original cost. Actual results for variable
annuity and variable universal life contracts will be lower due to contract
charges. Consult your contract for applicable charges for mortality and
expenses.
COMMENTS
- --------
For the last half of 1997, investors were presented with strong returns and
numerous surprises across all domestic asset classes. Strong returns were
recorded in bonds, REITs and the stock market despite international turmoil.
Bonds in particular were the beneficiary of market uncertainty.
Looking ahead, we expect a slowing world economy and dampened inflation
expectations for 1998. Thus, the bond market should become the performance
leader in 1998 owing to diminished issuance and strong demand. Earnings problems
related to an economic slowdown are likely to keep equity returns sub-par. The
Strategic Income Portfolio is positioned to take advantage of this situation by
focusing on longer maturity bond investments, and corporate issuers that derive
their earnings from domestic activities, as well as utilizing risk-management
strategies to mitigate any downturn in the equity markets.
CHANGE IN VALUE OF $10,000 INVESTMENT
- -------------------------------------
1/97 12/97
Strategic Income Portfolio $10,000 $10,873
Lehman Bros. Government/Corp. 10,000 10,777
Bond Index-Intermediate
Hypothetical illustration based on past performance. Future performance will
vary. All returns reflect reinvested dividends. The portfolio's holdings may
differ significantly from the securities in the index. The index is unmanaged
and therefore does not reflect the cost of portfolio management or trading.
Neither the portfolio nor the index is open to direct investment.
TOP 10 HOLDINGS AS OF DECEMBER 31, 1997
- ---------------------------------------
% of Net Assets
1. FNMA 9.00% 4/01/16 8.7
2. Occidental Petroleum 10.125% 9/15/09 4.0
3. Noble Affiliates 8.00% 4/01/27 3.5
4. Lockheed Corp 7.875% 3/15/23 3.3
5. Merrill Lynch 7.00% 4/27/08 3.2
6. Phillip Morris 7.125% 8/15/02 3.2
7. Lehman Bros 7.125% 9/15/03 3.2
8. Duke Power 7.875% 5/01/24 3.2
9. FNMA 7.5% 7/15/21 3.1
10. FNMA 7.00% 9/01/27 3.1
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1997
- ----------------------------------------
% of Net Assets
US Government 16.8
Oil, Energy, and Natural Gas 14.6
REIT's 14.0
Financial Services 9.9
Utilities 6.2
81
<PAGE> 132
<TABLE>
<CAPTION>
OHIO NATIONAL FUND, INC.
STRATEGIC INCOME PORTFOLIO
- -----------------------------------------------------------
SCHEDULE OF INVESTMENTS December 31, 1997
- -----------------------------------------------------------
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS VALUE
- -----------------------------------------------------------
<S> <C> <C>
FINANCIAL (5.6%)
$181,000 Star Bank 5.500% due 01-02-98
repurchase price 181,055
collateralized by GNMA certificates
pool #8359
due 01-20-24 (Cost $181,000) $181,000
---------
TOTAL REPURCHASE AGREEMENTS
(5.6%) (COST $181,000) $181,000
---------
<CAPTION>
Face Market
Amount Long-Term Bonds & Notes Value
- -----------------------------------------------------------
<S> <C> <C>
GOVERNMENT (16.8%)
$267,011 FNMA 9.000% 04-01-16 $284,032
59,629 FNMA 7.250% 02-25-17 59,726
100,000 FNMA 7.500% 07-15-21 101,998
99,767 FNMA 7.000% 09-1-27 100,577
---------
546,333
---------
BANKING (1.4%)
45,000 Nationsbank Corp.
6.375% 02-21-06 44,819
---------
CONSUMER PRODUCTS (3.2%)
100,000 Phillip Morris Co.
7.125% 08-15-02 102,924
---------
FINANCIAL SERVICES (7.9%)
50,000 Donaldson Lufkin
6.875% 11-01-05 50,765
100,000 Lehman Brothers Holdings
7.125% 09-15-03 102,736
100,000 Merrill Lynch & Co.
7.000% 04-27-08 103,567
---------
257,068
---------
FORESTRY & PAPER PRODUCTS (1.0%)
30,000 International Paper Co.
7.625% 01-15-07 32,557
---------
INDUSTRIAL SERVICES (4.0%)
25,000 Fort James Corp. NT
6.625% 09-15-04 25,095
100,000 Lockheed Corp.
7.875% 03-15-23 106,559
---------
131,654
---------
MEDICAL & RELATED (4.6%)
50,000 Columbia/HCA Healthcare
8.700% 02-10-10 55,563
90,000 Manor Care Inc.
7.500% 06-15-16 95,824
---------
151,387
---------
OIL, ENERGY & NATURAL GAS (10.5%)
100,000 Noble Affiliates, Inc.
8.000% 04-01-27 112,208
100,000 Occidental Petroleum
10.125% 09-15-09 129,205
75,000 Transcanada Pipeline
9.875% 01-01-21 99,750
---------
341,163
---------
REAL ESTATE & LEASING (3.0%)
$95,000 Meditrust NT
7.600% 07-15-01 $98,288
---------
RETAIL (2.5%)
75,000 JC Penny Inc.
9.450% 07-15-02 80,734
---------
UTILITIES (4.8%)
100,000 Duke Power Co.
7.875% 05-01-24 102,685
50,000 GTE Corp.
7.830% 05-01-23 52,420
---------
155,105
---------
TOTAL LONG-TERM BONDS & NOTES
(59.7%) (COST $1,901,646) $1,942,032
---------
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -----------------------------------------------------------
<S> <C> <C>
CHEMICALS (1.6%)
2,000 Lyondell Petrochemicals $53,000
---------
OIL, ENERGY, AND NATURAL GAS (0.9%)
1,000 Occidental Pete. Corp. 29,313
---------
UTILITIES (1.4%)
1,000 Central & South West Corp. 27,062
500 DTE Energy 17,343
---------
44,405
---------
TOTAL COMMON STOCK
(3.9%) (COST $113,415) $126,718
---------
<CAPTION>
MARKET
SHARES PREFERRED STOCK VALUE
- -----------------------------------------------------------
<S> <C> <C>
FINANCIAL SERVICES (2.0%)
2,500 Travelers Cap Pfd. $65,313
---------
OIL, ENERGY & NATURAL GAS (3.2%)
3,000 Enron Capital Trust 1 78,563
1,000 Transcanada Pipeline 8.5% 25,937
---------
104,500
---------
REAL ESTATE & LEASING (2.0%)
2,500 Kimco Realty Corp. Pfd. 8.500% 64,062
---------
TOTAL PREFERRED STOCK
(7.2%) (COST $227,595) $233,875
---------
<CAPTION>
CLOSED-END MARKET
SHARES INVESTMENT COMPANIES VALUE
- -----------------------------------------------------------
<S> <C> <C>
6,900 First Commonwealth Fund $83,231
11,000 Kleinwort Benson Australian Fund 84,563
---------
167,794
---------
TOTAL INVESTMENT COMPANIES
(5.2%) (COST $184,077) $167,794
---------
</TABLE>
(continued)
82
<PAGE> 133
<TABLE>
<CAPTION>
OHIO NATIONAL FUND, INC.
STRATEGIC INCOME PORTFOLIO (CONTINUED)
- -------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
- -------------------------------------------------------------------
DECEMBER 31, 1997
REAL ESTATE MARKET
SHARES INVESTMENT TRUSTS VALUE
- --------------------------------------------------------
<S> <C> <C>
1,000 Capstead Mortgage Corp. $19,938
2,000 Dynex Cap Inc. 26,625
190 Hospitality Properties Trust 6,246
500 INMC Mortgage Holdings 11,719
2,544 Imperial Credit Mortgage Hold. 45,465
3,300 LTC Properties Inc. 68,475
2,300 Omega Healthcare Investments 88,837
644 Pennsylvania Real Estate Inv. 15,818
3,400 Summit Properties Inc. 71,825
2,500 Thornburg Mtg. Asset Corp. 41,250
4,600 Winston Hotels Inc. 60,662
----------
456,860
----------
TOTAL REAL ESTATE INVEST. TRUSTS
(14.0%) (COST $468,327) $456,860
----------
TOTAL HOLDINGS
(COST $3,076,060) (a) $3,108,279
==========
<FN>
(a) Also represents cost for Federal income tax purposes.
The accompanying notes are an integral part of these financial statements.
</TABLE>
83
<PAGE> 134
<TABLE>
<CAPTION>
OHIO NATIONAL FUND, INC.
STRATEGIC INCOME PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- -----------------------------------------------------------------------------
<S> <C>
DECEMBER 31, 1997
Assets:
Investments in securities at market
value (note 1) (cost $3,076,060) ................. $3,108,279
Cash in bank .......................................... 923
Receivable for fund shares sold........................ 5,345
Receivable for securities sold......................... 98,252
Dividends and accrued interest receivable ............. 43,383
----------
Total assets ..................................... 3,256,182
----------
Liabilities:
Payable for investment management
services (note 3) ................................ 2,158
Other accrued expenses ................................ 3,533
----------
Total liabilities ................................ 5,691
----------
Net assets at market value $3,250,491
==========
Net assets consist of:
Par value, $1 per share ............................... $319,915
Paid-in capital in excess of par value ................ 2,896,524
Accumulated undistributed net realized
gain on investments .............................. 1,157
Net unrealized appreciation on investments (note 1).... 32,219
Undistributed net investment income.................... 676
----------
Net assets at market value $3,250,491
==========
Shares outstanding (note 4)................................. 319,915
Net asset value per share................................... $10.16
==========
<CAPTION>
- -----------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- -----------------------------------------------------------------------------
<S> <C>
JANUARY 3, 1997 TO
DECEMBER 31, 1997
Investment income:
Interest............................................... $107,663
Dividends.............................................. 89,380
----------
Total investment income........................... 197,043
----------
Expenses:
Management fees (note 3)............................... 18,318
Custodian fees (note 3)................................ 5,001
Directors' fees (note 3) .............................. 306
Professional fees...................................... 1,026
Accounting and transfer agent fees .................... 5,261
Other.................................................. 685
Total expenses.................................... 30,597
----------
Net investment income............................. $166,446
----------
Realized and unrealized gain on investments:
Net realized gain from investments ................... $3,690
Net increase in unrealized
appreciation on investments ...................... 32,219
----------
Net gain on investments........................... 35,909
----------
Net increase in net
assets from operations............................ $202,355
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
84
<PAGE> 135
<TABLE>
<CAPTION>
OHIO NATIONAL FUND, INC.
STRATEGIC INCOME PORTFOLIO
- ----------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------------------
FOR THE PERIOD FROM JANUARY 3, 1997 TO DECEMBER 31, 1997
<S> <C>
From operations:
Net investment income ............................................... $166,446
Realized gain on investments......................................... 3,690
Unrealized gain on investments....................................... 32,219
-----------
Net increase in assets from operations............................. 202,355
-----------
Dividends and distributions to shareholders:
Dividends paid from net investment income............................ (165,770)
Capital gains distributions.......................................... (2,533)
-----------
Total dividends and distributions.................................. (168,303)
-----------
From capital share transactions (note 4):
Received from shares sold ........................................... 3,110,382
Received from dividends reinvested .................................. 168,303
Paid for shares redeemed ............................................ (62,246)
-----------
Increase in net assets derived from capital share transactions ..... 3,216,439
-----------
Increase in net assets ........................................... 3,205,491
Net Assets:
Beginning of period ................................................. 0
-----------
End of period (a) ................................................... $3,205,491
===========
(a) Includes undistributed net investment income of................... $676
===========
- ----------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- ----------------------------------------------------------------------------------
FOR THE PERIOD FROM JANUARY 3, 1997 TO DECEMBER 31, 1997
<S> <C>
Per share data:
Net asset value, beginning of period.................................. $10.00
Income from investment operations:
Net investment income................................................ 0.71
Net realized and unrealized gain on investments...................... 0.13
-----------
Total income from investment operations............................. 0.84
-----------
Less distributions:
Dividends from net investment income ................................ (0.67)
Distributions from net realized capital gains........................ (0.01)
-----------
Total distributions................................................ (0.68)
-----------
Net asset value, end of period........................................ $10.16
===========
Total return.......................................................... 8.74%
Ratios and supplemental data:
Ratio of expenses to average net assets.............................. 1.30%
Ratio of net investment income to average net assets................. 7.04%
Portfolio turnover rate............................................... 102%
Average commission rate (a) .......................................... $0.04
Net assets at end of period (millions)................................ $3.2
(a) Represents the total dollar amount of commissions paid on equity security
transactions divided by the total number of shares purchased and sold by the portfolio.
</TABLE>
The accompanying notes are an integral part of these financial statements.
85
<PAGE> 136
STELLAR PORTFOLIO
OHIO NATIONAL FUND, INC.
OBJECTIVE
- ---------
The Stellar Portfolio seeks to maximize total return by investing approximately
15% to 25% of its assets in each of the following categories: domestic equities,
domestic bonds, foreign securities, real estate securities, and precious metal
and/or money market securities.
PERFORMANCE AS OF DECEMBER 31, 1997
- -----------------------------------
Average Annual Total Return:
Since inception (1/3/97) 9.70%
Returns represent past performance, which is no guarantee of future results.
Investment return and principal value will vary so that shares, when redeemed,
may be worth more or less than their original cost. Actual results for variable
annuity and variable universal life contracts will be lower due to contract
charges. Consult your contract for applicable charges for mortality and
expenses.
COMMENTS
- --------
The latter half of 1997 was an ideal environment for the Stellar Portfolio. The
stock market advance stalled in early August, giving way to the formation of a
trading range in the broad indices. The Stellar Portfolio's asset mix served to
insulate investors from much of the volatility which enveloped the market. This
is the type of market for which the portfolio was intended. The REIT, bond and
cash-equivalent segments of the portfolio generated positive returns for the
period which served to offset the weakness in the domestic and international
equity holdings. The portfolio's allocation to fixed-income instruments rose the
second half of the year at the expense of international securities and cash
equivalents.
CHANGE IN VALUE OF $10,000 INVESTMENT
- -------------------------------------
1/97 12/97
Stellar Portfolio $10,000 $10,969
Lehman Bros. Government/Corp.
Index-Intermediate $10,000 10,777
Hypothetical illustration based on past performance. Future performance will
vary. All returns reflect reinvested dividends. The portfolio's holdings may
differ significantly from the securities in the index. The index is unmanaged
and therefore does not reflect the cost of portfolio management or trading.
Neither the portfolio nor the index is open to direct investment.
TOP 10 HOLDINGS AS OF DECEMBER 31, 1997
- ---------------------------------------
% of Net Assets
1. FNMA 6.21% 11/07/07 3.6
2. Duke Energy Capital Trust Pfd 7.20% 2.4
3. John Hancock Patriot Premium
Dividend Fund II 2.1
4. US Treasury 7.5% 11/15/16 2.1
5. US Treasury 7.25% 5/15/04 1.9
6. US Treasury 6.75% 5/31/99 1.8
7. US Treasury 6.25% 7/31/98 1.8
8. American Express 1.4
9. Merrill Lynch Capital Trust II PFD 8% 1.4
10. New Jersey Economic Development
Auth. PFD. 7.6% 1.4
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1997
- ----------------------------------------
% of Net Assets
REIT's 20.3
US Treasuries 11.2
Closed-End Investment Companies 7.6
Utilities 4.6
Banking 4.0
87
<PAGE> 137
<TABLE>
<CAPTION>
OHIO NATIONAL FUND, INC.
STELLAR PORTFOLIO
- ----------------------------------------------------------
SCHEDULE OF INVESTMENTS December 31, 1997
- ----------------------------------------------------------
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS VALUE
- ----------------------------------------------------------
<S> <C> <C>
FINANCIAL (19.8%)
$555,000 Star Bank 5.50% 01-02-98
repurchase price $555,170
collateralized by GNMA certificates
pool #8359
due 01-20-24 (Cost $555,000) $555,000
-----------
TOTAL REPURCHASE AGREEMENTS
(19.8%) (COST $555,000) $555,000
-----------
FACE MARKET
AMOUNT LONG-TERM BONDS & NOTES VALUE
- ----------------------------------------------------------
GOVERNMENT (11.2%)
$100,000 FNMA
6.210% 11-07-07 $101,100
50,000 US Treasury Bond
7.500% 11-15-16 58,344
50,000 US Treasury Note
6.250% 07-31-98 50,219
50,000 US Treasury Note
6.750% 05-31-99 50,734
50,000 US Treasury Note
7.250% 05-15-04 53,986
-----------
314,383
-----------
TOTAL LONG-TERM BONDS & NOTES
(11.2%) (COST $307,165) $314,383
-----------
- ----------------------------------------------------------
MARKET
SHARES U.S. COMMON STOCK VALUE
- ----------------------------------------------------------
<S> <C> <C>
AEROSPACE (0.3%)
150 BOEING CO. $7,341
-----------
AUTOMOTIVE AND RELATED (0.4%)
200 Paccar Inc. 10,500
-----------
BANKING (2.2%)
116 Banc One Corp. 6,300
100 Bankamerica Corp. 7,300
100 Bankboston Corp. 9,394
105 Charter One Financial Inc. 6,628
165 First Financial Bancorp 7,961
130 Fleet Financial 9,742
125 Popular Inc. 6,187
75 US Bancorp 8,395
-----------
61,907
-----------
BUSINESS SERVICES (0.2%)
150 Deluxe Corp. 5,175
-----------
CHEMICALS (0.5%)
100 Dow Chemical Co. 10,150
125 Lyondell Petro Chemical Co. 3,312
-----------
13,462
-----------
COMMUNICATIONS (0.2%)
150 MCI Communications Corp. 6,421
-----------
CONSUMER PRODUCTS (0.4%)
200 Alberto Culver Co. Cl. B 6,412
130 Snap On Inc. 5,671
-----------
12,083
-----------
<CAPTION>
- ----------------------------------------------------------
SHARES U.S. COMMON STOCK VALUE
- ----------------------------------------------------------
<S> <C> <C>
COMPUTER AND RELATED (2.3%)
450 *Cisco Systems Inc. $25,087
400 *Continental Circuits Corp. 5,575
100 Honeywell Inc. 6,850
300 Intel Corp. 21,075
100 *Seagate Technology 1,925
300 *Sybase Inc. 3,994
-----------
64,506
-----------
CONTAINERS (0.3%)
100 Aluminum Co. Amer. 7,037
-----------
DRUGS (0.3%)
75 Warner Lambert Co. 9,300
-----------
DURABLE GOODS (0.9%)
225 Nabisco Holdings Corp. CL A 10,898
300 Parker Hannifin Corp. 13,763
-----------
24,661
-----------
ELECTRICAL EQUIPMENT (0.9%)
150 *Altera Corporation 4,969
100 Johnson Controls Inc. 4,775
125 Sony Corp. 11,344
100 Thomas & Betts Corp. 4,725
-----------
25,813
-----------
FINANCIAL SERVICES (2.0%)
450 American Express Co. 40,162
50 Household Financial 6,378
150 Dean Whitter Discover 8,869
-----------
55,409
-----------
FOOD AND RELATED (0.7%)
300 Flemming Cos. 4,031
75 General Mills Inc. 5,372
150 Pepsico Inc. 5,466
100 Sara Lee Corp. 5,631
-----------
20,500
-----------
200 HOTELS/LODGING (0.2%)
Hilton Hotels Corp. 5,950
-----------
HOUSING, FURNITURE & RELATED (0.2%)
200 Sherwin Williams Co. 5,550
-----------
INDUSTRIAL SERVICES (0.3%)
130 Ecolab Inc. 7,207
-----------
INSURANCE SERVICES (0.6%)
112 AON Corp. 6,566
75 ITT Hartford 7,017
100 Ohio Casualty Corp. 4,463
-----------
18,046
-----------
MEDIA AND PUBLISHING (0.2%)
100 Times Mirror Co. 6,150
-----------
MEDICAL AND RELATED (0.9%)
300 *Quorum Health Group 7,837
150 *Sofamore/Danek Group Inc. 9,759
225 *Tenet Healthcare Corp. 7,453
-----------
25,049
-----------
METALS AND MINING (0.2%)
350 AK Steel Holding Corp. 6,191
-----------
</TABLE>
(continued)
88
<PAGE> 138
<TABLE>
<CAPTION>
OHIO NATIONAL FUND, INC.
STELLAR PORTFOLIO (CONTINUED)
- -------------------------------------------------------------
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
- -------------------------------------------------------------
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------
<S> <C> <C>
OIL, ENERGY AND NATURAL GAS (2.9%)
475 *BJ Services Co. $34,170
100 Diamond Offshore Drilling 4,813
200 Ensco International Inc. 6,700
300 *Global Marine Inc. 7,350
200 *Rowan Cos. Inc. 6,100
150 Santa Fe Pacific Pipeline LP 6,862
200 Texaco Inc. 10,875
125 Unocal Corp. 4,852
-----------
81,722
-----------
RESTAURANTS (0.0%)
15 *Tricon Global Restaurants 436
-----------
RETAIL (1.8%)
200 American Stores Co. 4,113
125 Dayton Hudson Corp. 8,437
188 Gap Inc. 6,644
548 Pier 1 Imports Inc. 12,387
6,500 *Roberds Inc. 19,500
-----------
51,081
-----------
TRANSPORTATION (0.6%)
700 *Genesee & Wyoming Inc. 16,363
-----------
TOTAL COMMON STOCK
(19.5%) (COST $488,369) $ 547,860
-----------
- -------------------------------------------------------------
REAL ESTATE MARKET
SHARES INVESTMENT TRUSTS VALUE
- -------------------------------------------------------------
<S> <C> <C>
650 Avalon Properties Inc. $20,109
750 Bay Apartment Communities 29,250
500 Camden Property 15,500
700 Centerpoint Properties Corp. 24,588
600 Federal Realty Investments 15,450
1,000 Glimcher Realty 22,562
900 Highwoods Property 33,469
800 Kilroy Realty Corp. 23,000
700 Kimco Realty Corp. 24,675
675 Liberty Property 19,280
900 LTC Properties Inc. 18,675
525 Mack Cali Realty Corp. 21,525
850 Manufactured Home Communities 22,950
450 Meditrust 16,481
800 New Plan Realty 20,400
550 Omega Healthcare Investments 21,244
800 Reckson Assoc. Realty Corp. 20,300
1,050 RFS Hotel Investments 20,934
885 Security Capital Pacific Trust 21,461
700 Simon DeBartolo Group Inc. 22,881
1,200 Sizeler Property Investments 12,600
600 Starwood Lodging 34,725
650 Storage Trust Realty 17,103
350 Storage USA Inc. 13,978
800 Summit Property Inc. 16,900
600 Sun Communities 21,563
400 Weingarten Realty Investments 17,925
-----------
569,528
-----------
TOTAL REAL ESTATE INVESTMENT TRUSTS
(20.3%) (COST $511,888) $ 569,528
-----------
- -------------------------------------------------------------
CLOSED-END MARKET
SHARES INVESTMENT COMPANIES VALUE
- -------------------------------------------------------------
<S> <C> <C>
500 Argentina Fund Inc. $6,531
300 Brazil Fund Inc. 6,300
800 Chile Fund Inc. 14,250
875 First Commonwealth Fund Inc. 10,555
5,000 Hancock Patriot Prem. Div. Fd. II 59,062
2,200 *Japan Webs Index Series 21,725
5,000 Kleinworth Benson Austral. Inc. Fd. 38,437
650 Mexico Fund Inc. 13,366
300 Templeton Emerging Mkts. Fd. 5,119
5,000 Templeton Global Govts. Fund 36,562
-----------
211,907
-----------
TOTAL CLOSED END INVESTMENT CO.
(7.6%) (COST $226,200) $211,907
-----------
<CAPTION>
- -------------------------------------------------------------
MARKET
SHARES FOREIGN COMMON STOCK VALUE
- -------------------------------------------------------------
<S> <C> <C>
ARGENTINA (0.2%)
200 YPF Sociedad Anonima Spon ADR $6,838
-----------
AUSTRALIA (0.9%)
350 Nat'l. Australia Bank LTD ADR 24,719
-----------
CANADA (1.9%)
500 Alcan Aluminum Ltd. 13,813
775 Canadian Pacific Ltd. 21,119
550 Seagram Co. Ltd. 17,772
-----------
52,704
-----------
DENMARK (1.3%)
500 Novo-Nordisk AS ADR 36,188
-----------
FINLAND (0.2%)
100 Nokia Corp. Sponsored ADR 7,000
-----------
GERMANY (0.6%)
250 Daimler Benz AG Spon ADR 18,062
-----------
GREAT BRITAIN (1.3%)
850 Cable & Wireless Pub. Ltd. 23,109
175 Vodafone Group Spon. ADR 12,688
-----------
35,797
-----------
HOLLAND (2.1%)
350 Phillips NV 21,175
700 Royal Dutch Petroleum Co. 37,931
-----------
59,106
-----------
ITALY (0.4%)
175 Luxottica Group ADR 10,938
-----------
JAPAN (0.3%)
100 Hitachi Ltd. ADR 6,919
-----------
NORWAY (0.6%)
350 Norsk Hydro AS Spon ADR 17,850
-----------
SPAIN (1.6%)
250 Banco de Santander ADR 8,141
850 Repsol SA Spon. ADR 36,178
-----------
44,319
-----------
(continued)
</TABLE>
89
<PAGE> 139
<TABLE>
<CAPTION>
OHIO NATIONAL FUND, INC.
STELLAR PORTFOLIO (CONTINUED)
- -----------------------------------------------------------
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
- -----------------------------------------------------------
MARKET
SHARES FOREIGN COMMON STOCK VALUE
- -----------------------------------------------------------
<S> <C> <C>
Sweden (0.7%)
737 Volvo Aktiebolaget Ser B ADR $19,899
----------
TOTAL FOREIGN COMMON STOCK
(12.1%) (COST $302,115) $340,339
----------
MARKET
SHARES PREFERRED STOCK VALUE
- ----------------------------------------------------------
<S> <C> <C>
BANKING (1.8%)
1,000 Banco Bilbao Vizcaya 8.000% $26,000
1,000 BankUnited Cap II 9.600% 26,188
----------
52,188
----------
FINANCIAL SERVICES (1.4%)
1,500 Merrill Lynch Cap Trust II 8.000% 40,125
----------
GOVERNMENT (1.4%)
1,500 New Jersey Economic Dev. 7.600% 39,000
----------
MARKET
SHARES PREFERRED STOCK VALUE
- ----------------------------------------------------------
<S> <C> <C>
UTILITIES (4.6%)
2,600 Duke Energy Cap Trust I $66,300
1,200 HL&P Cap Trust I 8.125% 30,975
1,200 Northern States Power 7.875% 31,200
----------
128,475
----------
TOTAL PREFERRED STOCK
(9.2%) (COST $250,000) $259,788
----------
<CAPTION>
- ----------------------------------------------------------
MARKET
SHARES WARRANTS VALUE
- ----------------------------------------------------------
<S> <C> <C>
46 Security Cap GRP-B $242
----------
TOTAL WARRANTS
(0.0%) (COST $242) $242
----------
TOTAL HOLDINGS
(COST $2,640,979) $2,799,049
==========
<FN>
*Non-income producing securities.
(a) Also represents cost for Federal income tax purposes.
</TABLE>
The accompanying notes are an integral part of these financial statements.
90
<PAGE> 140
<TABLE>
<CAPTION>
OHIO NATIONAL FUND, INC.
STELLAR PORTFOLIO
- ---------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- ---------------------------------------------------------------------
DECEMBER 31, 1997
<S> <C>
Assets:
Investments in securities at market
value (note 1) (cost $2,640,979) ....................... $2,799,047
Cash in bank ............................................ 574
Dividends and accrued interest receivable ............... 12,993
----------
Total assets ........................................... 2,812,614
----------
Liabilities:
Payable for investment management
services (note 3) ...................................... 2,497
Other accrued expenses .................................. 3,569
----------
Total liabilities ...................................... 6,066
----------
Net assets at market value $2,806,548
==========
Net assets consist of:
Par value, $1 per share ................................. $263,528
Paid-in capital in excess of par value .................. 2,396,631
Accumulated undistributed net realized
loss on investments (note 1) ........................... (11,917)
Net unrealized appreciation on investments (note 1)...... 158,068
Undistributed net investment income ..................... 238
----------
Net assets at market value $2,806,548
==========
Shares outstanding (note 4)............................... 263,528
Net asset value per share................................. $10.65
==========
<CAPTION>
- ---------------------------------------------------------------------
STATEMENT OF OPERATIONS
- ---------------------------------------------------------------------
<S> <C>
JANUARY 3, 1997 TO
DECEMBER 31, 1997
Investment income:
Interest................................................ $42,646
Dividends............................................... 67,220
----------
Total investment income................................ 109,866
----------
Expenses:
Management fees (note 3)................................ 23,440
Custodian fees (note 3)................................. 5,001
Directors' fees (note 3) ............................... 306
Professional fees....................................... 1,026
Accounting and transfer agent fees ..................... 6,261
Other................................................... 676
----------
Total expenses......................................... 36,710
----------
Net investment income ................................. $73,156
----------
Realized and unrealized gain (loss) on investments:
Net realized loss from investments ..................... ($11,917)
Net increase in unrealized
appreciation on investments ........................... 158,068
----------
Net gain on investments............................... 146,151
----------
Net increase in net
assets from operations................................ $219,307
==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
91
<PAGE> 141
<TABLE>
<CAPTION>
OHIO NATIONAL FUND, INC.
STELLAR PORTFOLIO
- ---------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------------------
FOR THE PERIOD FROM JANUARY 3, 1997 TO DECEMBER 31, 1997
<S> <C>
From operations:
Net investment income ............................................. $73,156
Realized loss on investments....................................... (11,917)
Unrealized gain on investments..................................... 158,068
------------
Net increase in assets from operations........................... 219,307
------------
Dividends and distributions to shareholders:
Dividends paid from net investment income.......................... (72,918)
------------
From capital share transactions (note 4):
Received from shares sold ......................................... 2,644,507
Received from dividends reinvested ................................ 72,918
Paid for shares redeemed .......................................... (57,267)
------------
Increase in net assets derived from capital share transactions ... 2,660,158
------------
Increase in net assets ......................................... 2,806,548
Net Assets:
Beginning of period ............................................... 0
------------
End of period (a) ................................................. $2,806,548
============
(a) Includes undistributed net investment income of................... $238
============
<CAPTION>
- ---------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------------------
FOR THE PERIOD FROM JANUARY 3, 1997 TO DECEMBER 31, 1997
<S> <C>
Per share data:
Net asset value, beginning of period................................ $10.00
Income from investment operations:
Net investment income.............................................. 0.32
Net realized and unrealized gain on investments ................... 0.64
------------
Total income from investment operations........................... 0.96
------------
Less distributions:
Dividends from net investment income .............................. (0.31)
------------
Net asset value, end of period...................................... $10.65
============
Total return........................................................ 9.70%
Ratios and supplemental data:
Ratio of expenses to average net assets............................ 1.54%
Ratio of net investment income to average net assets............... 3.07%
Portfolio turnover rate............................................. 17%
Average commission rate (a)......................................... $0.18
Net assets at end of period (millions).............................. $2.8
(a) Represents the total dollar amount of commissions paid on equity security
transactions divided by the total number of shares purchased and sold by
the portfolio.
The accompanying notes are an integral part of these financial statements.
</TABLE>
92
<PAGE> 142
RELATIVE VALUE PORTFOLIO
OHIO NATIONAL FUND, INC.
OBJECTIVE
- ---------
The Relative Value Portfolio seeks the highest total return as is consistent
with reasonable risk by investing in stocks deemed to represent characteristics
with low volatility, above-average yields and are undervalued relative to the
stocks comprising the S&P Composite Stock Index.
PERFORMANCE AS OF DECEMBER 31, 1997
- -----------------------------------
Average Annual Total Return:
Since inception (1/3/97) 28.28%
Returns represent past performance, which is no guarantee of future results.
Investment return and principal value will vary so that shares, when redeemed,
may be worth more or less than their original cost. Actual results for variable
annuity and variable universal life contracts will be lower due to contract
charges. Consult your contract for applicable charges for mortality and
expenses.
COMMENTS
- --------
The Relative Value Portfolio posted performance in line with the S&P 500 Index
during the latter half of 1997. This was achieved despite the stock market
turmoil caused by economic events in Asia. The most notable effect on the
portfolio's holdings were sharp price declines in technology and energy related
issues.
The portfolio is well positioned for the market conditions prevailing at the
start of 1998 as investors are displaying a distinct preference for large,
stable companies with visible earnings potential for the current year. The
portfolio continues to focus on the successful themes of the last two years,
consolidation trends in financial services and the impact of an aging population
on health care and services spending.
CHANGE IN VALUE OF $10,000 INVESTMENT
- -------------------------------------
1/97 12/97
Relative Value Portfolio $10,000 $12,828
S&P 500 Index $10,000 $13,336
Hypothetical illustration based on past performance. Future performance will
vary. All returns reflect reinvested dividends. The portfolio's holdings may
differ significantly from the securities in the index. The index is unmanaged
and therefore does not reflect the cost of portfolio management or trading.
Neither the portfolio nor the index is open to direct investment.
TOP 10 HOLDINGS AS OF DECEMBER 31, 1997
- ---------------------------------------
% of Net Assets
1. Proctor & Gamble 4.6
2. IBM 4.6
3. Intel 4.5
4. Dow Chemical 4.4
5. Smithkline Beecham 3.6
6. Texaco 3.3
7. AT&T 3.2
8. Phillip Morris 3.0
9. Bristol Myers Squibb 3.0
10. Merck & Co. Inc 3.0
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1997
- ----------------------------------------
% of Net Assets
Oil, Energy, and Natural Gas 12.9
Drugs 11.9
Consumer Products 10.9
Computer and Related 10.5
Communications 9.3
93
<PAGE> 143
<TABLE>
<CAPTION>
OHIO NATIONAL FUND, INC.
RELATIVE VALUE PORTFOLIO
- ----------------------------------------------------------------
SCHEDULE OF INVESTMENTS DECEMBER 31, 1997
- ----------------------------------------------------------------
Face Market
Amount Repurchase Agreements Value
- ----------------------------------------------------------------
<S> <C> <C>
Financial (14.6%)
$836,000 Star Bank 5.50% due 01-02-98
repurchase price $836,255
collateralized by GNMA certificates
pool #8359
due 01-20-24 (cost $836,000) $836,000
-----------
TOTAL REPURCHASE AGREEMENTS
(14.6) (COST $836,000) $836,000
-----------
<CAPTION>
- ----------------------------------------------------------------
MARKET
SHARES COMMON STOCK VALUE
- ----------------------------------------------------------------
<S> <C> <C>
AEROSPACE (5.3%)
2,000 Allied Signal Inc. $77,875
1,500 Lockheed Martin Corp. 147,750
1,500 Raytheon Co. Class B 75,469
-----------
301,094
-----------
AUTOMOTIVE & RELATED (4.4%)
1,500 Ford Motor Co. 73,031
1,000 General Motors Corp. 60,625
1,900 Goodyear Tire & Rubber Co. 120,887
-----------
254,543
-----------
BANKING (4.5%)
250 Citicorp 31,609
440 First Financial Bancorp 21,230
1,000 Mellon Bank Corp. 60,861
250 National Australia Bank Ltd. ADR 17,656
1,000 Nationsbank Corp. 60,813
2,000 TCF Financial Corp. 67,875
-----------
260,044
-----------
CHEMICALS (5.8%)
2,500 Dow Chemical Co. 253,750
3,000 Lyondell Petrochemical Co. 79,500
-----------
333,250
-----------
COMMUNICATIONS (9.3%)
3,000 AT&T Corp. 183,750
4,500 Cincinnati Bell Inc. 139,500
800 Cable & Wireless Co. ADR 21,750
500 Lucent Technologies Inc. 39,938
2,000 Motorola Inc. 114,083
500 Vodafone Group PLC ADR 36,250
-----------
535,271
-----------
COMPUTER & RELATED (10.5%)
1,200 Honeywell Inc. 82,082
3,700 Intel Corp. 259,925
2,500 International Business Machines 261,406
-----------
603,413
-----------
<CAPTION>
- ----------------------------------------------------------------
MARKET
SHARES COMMON STOCK VALUE
- ----------------------------------------------------------------
<S> <C> <C>
CONSUMER PRODUCTS (10.9%)
1,000 Fortune Brands $37,062
1,400 Gillette Co. 150,228
3,800 Philip Morris Cos. Inc. 172,188
3,300 Procter & Gamble Co. 263,381
-----------
622,859
-----------
DRUGS (11.9%)
1,800 American Home Products Corp. 137,700
1,800 Bristol Myers Squibb Co. 170,325
1,600 Merck & Co. Inc. 170,000
4,000 Smithkline Beecham PLC ADR 205,750
-----------
683,775
-----------
ELECTRICAL EQUIPMENT (3.3%)
1,900 General Electric Co. 139,595
1,000 Johnson Controls Inc. 47,750
64 Raytheon Co. Class A 3,157
-----------
190,502
-----------
FINANCIAL SERVICES (3.5%)
1,100 American Express Co. 98,175
2,000 Lehman Brothers Holdings Inc. 102,000
-----------
200,175
-----------
INSURANCE SERVICES (5.7%)
1,500 American Bankers Ins. Group Inc. 68,906
450 Cincinnati Financial Corp. 63,337
1,700 Ohio Casualty Corp. 75,862
2,200 Travelers Group Inc. 118,525
-----------
326,630
-----------
OIL, ENERGY & NATURAL GAS (12.9%)
2,500 Ashland Inc. 134,219
2,600 Halliburton Co. 135,038
2,000 Mobil Corp. 144,375
2,500 Royal Dutch Petroleum 135,469
3,500 Texaco Inc. 190,312
-----------
739,413
-----------
RETAIL (4.6%)
2,500 JC Penny Inc. 150,781
2,500 Sears Roebuck & Co. 113,125
-----------
263,906
-----------
TRANSPORTATION & EQUIPMENT (1.0%)
200 Burlington Northern Santa Fe Corp. 18,587
1,500 Comair Holdings Inc. 36,187
-----------
54,774
-----------
UTILITIES (4.1%)
2,500 GPU Inc. 105,313
2,200 GTE Corp. 114,950
300 Ohio Gas Corp. 13,406
-----------
233,669
-----------
TOTAL COMMON STOCK
(97.7%) (COST $4,839,264) $5,603,318
-----------
TOTAL HOLDINGS
(COST $5,675,264) (a) $6,439,318
===========
(a) Also represents cost for Federal income tax purposes.
</TABLE>
The accompanying notes are an integral part of these financial statements.
94
<PAGE> 144
<TABLE>
<CAPTION>
OHIO NATIONAL FUND, INC.
RELATIVE VALUE PORTFOLIO
- --------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------
DECEMBER 31, 1997
<S> <C>
Assets:
Investments in securities at market
value (note 1) (cost $5,675,264) ....................... $6,439,318
Cash in bank ............................................ 520
Receivable for fund shares sold.......................... 5,240
Dividends and accrued interest receivable ............... 8,756
----------
Total assets ........................................... 6,453,834
----------
Liabilities:
Payable for securities purchased......................... 713,206
Payable for investment management
services (note 3) ...................................... 4,408
Other accrued expenses .................................. 2,923
----------
Total liabilities ...................................... 720,537
----------
Net assets at market value $5,733,297
==========
Net assets consist of:
Par value, $1 per share ................................. $452,268
Paid-in capital in excess of par value .................. 4,519,245
Accumulated undistributed net realized
loss on investments (note 1) ........................... (2,446)
Net unrealized appreciation on investments (note 1)...... 764,054
Undistributed net investment income ..................... 176
----------
Net assets at market value $5,733,297
==========
Shares outstanding (note 4)............................... 452,268
Net asset value per share................................. $12.68
==========
<CAPTION>
- --------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------
JANUARY 3, 1997 TO DECEMBER 31, 1997
<S> <C>
Investment income:
Interest............................................. $27,295
Dividends............................................ 62,497
----------
Total investment income............................. 89,792
----------
Expenses:
Management fees (note 3)............................. 30,639
Custodian fees (note 3).............................. 5,001
Directors' fees (note 3) ............................ 306
Professional fees.................................... 1,026
Accounting and transfer agent fees .................. 4,261
Other................................................ 718
----------
Total expenses...................................... 41,951
----------
Net investment income............................... $47,841
----------
Realized and unrealized gain (loss) on investments:
Net realized loss from investments .................. ($2,446)
Net increase in unrealized
appreciation on investments ........................ 764,054
----------
Net gain on investments............................ 761,608
----------
Net increase in net
assets from operations............................. $ 809,449
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
95
<PAGE> 145
<TABLE>
<CAPTION>
OHIO NATIONAL FUND, INC.
RELATIVE VALUE PORTFOLIO
- ---------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------------------
FOR THE PERIOD FROM JANUARY 3, 1997 TO DECEMBER 31, 1997
<S> <C>
From operations:
Net investment income ................................................ $47,841
Realized loss on investments.......................................... (2,446)
Unrealized gain on investments........................................ 764,054
------------
Net increase in assets from operations.............................. 809,449
------------
Dividends and distributions to shareholders:
Dividends paid from net investment income............................. (47,665)
------------
From capital share transactions (note 4):
Received from shares sold ............................................ 5,066,632
Received from dividends reinvested ................................... 47,665
Paid for shares redeemed ............................................. (142,784)
------------
Increase in net assets derived from capital share transactions ...... 4,971,513
------------
Increase in net assets ............................................ 5,733,297
Net Assets:
Beginning of period .................................................. 0
------------
End of period (a) .................................................... $5,733,297
============
(a) Includes undistributed net investment income of...................... $176
============
<CAPTION>
- ---------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------------------
FOR THE PERIOD FROM JANUARY 3, 1997 TO DECEMBER 31, 1997
<S> <C>
Per share data:
Net asset value, beginning of period..................................... $10.00
Income from investment operations:
Net investment income................................................. 0.16
Net realized and unrealized gain on investments....................... 2.66
------------
Total income from investment operations.............................. 2.82
------------
Less distributions:
Dividends from net investment income ................................. (0.14)
------------
Net asset value, end of period........................................... $12.68
============
Total return............................................................. 28.28%
Ratios and supplemental data:
Ratio of expenses to average net assets............................... 1.18%
Ratio of net investment income to average net assets.................. 1.35%
Portfolio turnover rate.................................................. 7%
Average commission rate (a) ............................................. $0.24
Net assets at end of period (millions)................................... $5.7
(a) Represents the total dollar amount of commissions paid on equity security
transactions divided by the total number of shares purchased and sold by
the portfolio.
</TABLE>
The accompanying notes are an integral part of these financial statements.
96
<PAGE> 146
OHIO NATIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
(1) BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Ohio National Fund, Inc. (Fund) is registered under the Investment Company
Act of 1940 as amended (the "1940 Act"), as a diversified, open-end
management investment company. The Fund is a series investment company which
consists of sixteen separate investment portfolios that seek the following
investment objectives:
EQUITY PORTFOLIO - long-term growth of capital by investing principally in
common stocks or other equity securities. Current income is a secondary
objective.
MONEY MARKET PORTFOLIO - maximum current income consistent with preservation
of capital and liquidity by investing in high quality money market
instruments.
BOND PORTFOLIO - high level of return consistent with preservation of
capital by investing primarily in high quality intermediate and long-term
debt securities.
OMNI PORTFOLIO - high level of long-term total return consistent with
preservation of capital by investing in stocks, bonds, and money market
instruments.
INTERNATIONAL PORTFOLIO - long-term capital growth by investing primarily in
common stocks of foreign companies.
CAPITAL APPRECIATION PORTFOLIO - maximum capital growth by investing
primarily in common stocks that are (1) considered to be undervalued or
temporarily out of favor with investors, or (2) expected to increase in
price over the short term.
SMALL CAP PORTFOLIO - maximum capital growth by investing primarily in
common stocks of small- and medium-sized companies.
GLOBAL CONTRARIAN PORTFOLIO - long-term growth of capital by investing in
foreign and domestic securities believed to be undervalued or presently out
of favor.
AGGRESSIVE GROWTH PORTFOLIO - capital growth.
The following portfolios commenced operations on January 3, 1997:
CORE GROWTH PORTFOLIO - long-term capital appreciation.
GROWTH & INCOME PORTFOLIO - long-term total return by investing in equity
and debt securities focusing on small- and mid-cap companies that offer
potential for capital appreciation, current income, or both.
S&P 500 INDEX PORTFOLIO - total return that approximates that of the
Standard & Poor's 500 Index ("S&P 500") by investing in common stocks and in
stock index futures contracts hedged by U.S. Government obligations,
investment grade corporate bonds and cash equivalents.
SOCIAL AWARENESS PORTFOLIO - long-term capital growth by investing primarily
in common stocks and other equity securities of companies that, in the
Advisor's opinion, conduct their business in a way that enhances society's
quality of life.
STRATEGIC INCOME PORTFOLIO - high current income by investing at least 40%
of its assets in a core group of U.S. government and corporate fixed income
securities and the remainder in other income producing securities.
STELLAR PORTFOLIO - maximum total return by investing in domestic and
foreign securities (equity and fixed income), real estate, precious metal
securities, and money market securities.
RELATIVE VALUE PORTFOLIO - maximum total return consistent with reasonable
risk by investing primarily in equity securities.
The following is a summary of significant accounting policies:
Investments in the Money Market Portfolio are valued at amortized cost in
accordance with Rule 2a-7, which approximates market value. All net
investment income of the Money Market Portfolio is declared and paid daily
as a dividend to shareholders immediately before the computation of the net
asset value of Money Market Portfolio shares. Dividends are automatically
reinvested in additional Money Market Portfolio shares at the net asset
value immediately following such computation. Distributions arising from net
investment income from the remaining portfolios are declared and paid to
shareholders quarterly and are recorded on the ex-dividend date.
Distributions arising from accumulated net realized capital gains are
recorded on the ex-dividend date and are distributed to shareholders at
least once a year.
For all other portfolios, securities which are traded on U.S. and foreign
stock exchanges or in the over-the-counter markets are valued at the last
sale price or, if there has been no sale that day, at the last bid reported
as of 4:00 p.m. Eastern time on each day the New York Stock Exchange is open
for unrestricted trading. Over-the-counter securities are valued at the last
bid price as of the close of trading on the Exchange. Short-term investments
(investments with remaining maturities of 60 days or less) are valued at
amortized cost and fixed income securities are valued by using market
quotations, or independent pricing services which use prices provided by
market makers or estimates of market value obtained
97
<PAGE> 147
OHIO NATIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1997
from yield data relating to instruments or securities with similar
characteristics. All investments and cash quoted in foreign currencies are
valued daily in U.S. dollars on the basis of the foreign currency exchange rates
prevailing at the time of such valuation.
Foreign currency exchange rates are generally determined prior to 4:00 p.m.
Eastern time. Occasionally, events affecting the value of foreign investments
and such exchange rates occur between the time at which they are determined and
the time of valuation, which in the case of the International, Small Cap, Global
Contrarian, Aggressive Growth, and Stellar Portfolios, would not be reflected in
the computation of the portfolios' net asset value. If events materially
affecting the value of such securities or currency exchange rates occurred
during such time period, the securities are valued at their fair value as
determined in good faith by or under the direction of the Fund's Board of
Directors.
In connection with purchases and sales of securities denominated in foreign
currencies, the Fund may enter into forward foreign currency exchange contracts
(forward contracts). A forward contract is a commitment to purchase or sell a
foreign currency at a future date, at a negotiated rate. Additionally, the Fund
may enter into such contracts to hedge certain other foreign currency
denominated investments. These contracts are recorded at market value, and the
related realized and unrealized foreign exchange gains and losses are included
in the statement of operations. In the event that counterparties fail to settle
these currency contracts or the related foreign security trades, the Fund could
be exposed to foreign currency fluctuations.
Each portfolio other than the Money Market Portfolio may (a) write call options
traded on a registered national securities exchange if such portfolio owns the
underlying securities subject to such options, and purchase call options for the
purpose of closing out positions 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 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 any portfolio's total assets, at market value,
may be used for premiums on open options and initial margin deposits on futures
contracts. Options are recorded at market value, and the related realized and
unrealized gains and losses are included in the statement of operations. The
portfolios making use of options bear the market risk of an unfavorable change
in the price of any security underlying the options.
The Fund may invest in two kinds of financial futures contracts: stock index
futures contracts and interest rate futures contracts. Stock index futures
contracts are contracts developed by and traded on national commodity exchanges
whereby the buyer will, on a specified future date, pay or receive a final cash
payment equal to the difference between the actual value of the stock index on
the last day of the contract and the value of the stock index established by the
contract multiplied by the specific dollar amount set by the exchange. Futures
contracts may be based on broad-based stock indexes such as the Standard &
Poor's 500 Index or on narrow-based stock indexes. A particular index will be
selected according to Ohio National Investments, Inc.'s ("ONI's"), the
investment advisor to the Fund, investment strategy for the particular
portfolio. The Fund may enter into such contracts to reduce the risk of
fluctuation of portfolio securities values or to take advantage of expected
market fluctuations.
The S&P 500 Index Portfolio currently holds investments in S&P 500 Index Futures
Contracts. The contracts in the S&P 500 Index Portfolio are fully hedged with
commercial paper and/or US Treasuries. The futures contracts in the S&P 500
Index Portfolio at December 31, 1997 are as follows:
<TABLE>
<CAPTION>
EXPIRATION UNDERLYING FACE UNREALIZED CASH DEPOSITED
PURCHASED DATE AMOUNT AT VALUE GAIN AS MARGIN REQUIREMENT
--------- ---- --------------- ---- ---------------------
<S> <C> <C> <C> <C>
45 S&P 500 Index Contracts March `98 $11,014,875 $109,325 $452,250
</TABLE>
Securities transactions are recorded on a trade date basis. Dividend income is
recognized on the ex-dividend date (except in the case of foreign securities in
the International, Small Cap, Global Contrarian, Aggressive Growth, and Stellar
Portfolios, in which dividends are recorded as soon after the ex-dividend date
as the fund becomes aware of such dividends), and interest income is accrued
daily as earned. Net realized gain or loss on investments and foreign exchange
transactions are determined using the first-in, first-out method except in the
case of the Aggressive Growth and Growth and Income Portfolios in which the
identified cost basis is used.
98
<PAGE> 148
OHIO NATIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31,1997
The books and records of all the portfolios are maintained in U.S. dollars.
Foreign currency amounts in the International, Small Cap, Global Contrarian,
Aggressive Growth and Stellar Portfolios are translated into U.S. dollars on the
following basis:
(1) market value of investments, other assets and liabilities--at exchange rates
prevailing at the end of the period.
(2) purchases and sales of investments, income and expenses--at the rates of
exchange prevailing on the respective dates of such transaction.
Although the net assets and the market value of the portfolios are presented at
the foreign exchange rates at the end of the period, the portfolios do not
generally isolate the effect of fluctuations in foreign exchange rates from the
effect of changes in the market price of the investments. However, for tax
purposes, the portfolios do isolate the effect of fluctuations in foreign
exchange rates when determining the gain or loss upon sale or maturity of
foreign-currency denominated debt obligations pursuant to Federal income tax
regulations.
Foreign investment and currency transactions may involve certain considerations
and risks not typically associated with investing in U.S. companies and the U.S.
Government. These risks, including re-evaluation of currency and future adverse
political and economic developments, could cause investments and their markets
to be less liquid and prices more volatile than those of comparable U.S.
companies and the U.S. Government.
Each portfolio may acquire repurchase agreements from member banks of the
Federal Reserve System which ONI deems creditworthy under guidelines approved by
the Board of Directors, subject to the seller's agreement to repurchase such
securities at a mutually agreed upon date and price. The repurchase price
generally equals the price paid by the portfolio plus interest negotiated on the
basis of current short-term rates, which may be more or less than the rate on
the underlying portfolio securities. The seller, under a repurchase agreement,
is required to maintain as collateral for the repurchase transaction securities
in which the portfolio has a perfected security interest with a value not less
than 100% of the repurchase price (including accrued interest). Securities
subject to repurchase agreements are held by the Fund's custodian or another
qualified custodian or in the Federal Reserve/Treasury book-entry system.
Repurchase agreements are considered to be loans by the portfolio under the 1940
Act.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily due to wash sales and net
operating losses. The character of distributions made during the period from net
investment income or net realized gains, if any, may differ from their ultimate
characterization for federal income tax purposes. On the statement of assets and
liabilities, as a result of permanent book-to-tax differences, the following
reclassifications were made in the Small Cap, Aggressive Growth, and Core Growth
Portfolios: accumulated net investment loss has been decreased by $47,515,
$61,720, and $11,892, respectively, resulting in a reclassification adjustment
to decrease Paid-in capital in excess of par value by $47,515, $61,720, $11,892
respectively. This reclassification has no effect on net assets or net asset
value per share.
For Federal income tax purposes, the Bond, Core Growth, Stellar, and Relative
Value Portfolios had capital loss carryovers of $44,128, $447,567, $11,917, and
$2,446 respectively, at December 31, 1997. If not offset by capital gains,
$44,128 will expire in 2003 in the Bond Portfolio and $447,567, $11,917 and
$2,446 will expire in 2005 in the Core Growth , Stellar, and Relative Value
Portfolios, respectively. The Board of Directors does not intend to authorize a
distribution of any net realized gain for a portfolio until the capital loss
carryover has been offset or expires.
It is the policy of the Fund to distribute to its shareholders substantially all
of its taxable income, thus gaining relief from Federal income taxes under
provisions of current tax regulations applicable to investment companies of this
type. Accordingly, no provision for Federal income taxes has been made.
Most expenses of the Fund can be directly attributed to a portfolio. Expenses
which cannot be directly attributed are allocated among the portfolios in the
Fund based on average net assets.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of increases and decreases in net assets from operations
during the reporting period. Actual results could differ from those estimates.
99
<PAGE> 149
OHIO NATIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1997
The gross unrealized appreciation and depreciation on investments in each
portfolio as of December 31, 1997 were as follows:
<TABLE>
<CAPTION>
CAPITAL
EQUITY BOND OMNI INTERNATIONAL APPRECIATION
------ ---- ---- ------------- ------------
Gross unrealized:
<S> <C> <C> <C> <C> <C>
Appreciation ................ $ 112,741,538 $ 867,745 $ 53,608,168 $ 12,386,726 $ 8,034,627
Depreciation ................ (7,098,840) (129,221) (4,163,559) (20,388,282) (1,229,894)
Net Unrealized:
Appreciation (Depreciation) 105,642,698 738,524 49,444,609 (8,001,556) 6,804,733
<CAPTION>
SMALL GLOBAL AGGRESSIVE CORE GROWTH &
CAP CONTRARIAN GROWTH GROWTH INCOME
--- ---------- ------ ------ ------
Gross unrealized:
Appreciation ................ $ 10,883,929 $ 1,963,452 $ 2,090,950 $ 965,041 $ 1,538,146
Depreciation ................ (2,508,818) (1,327,211) (1,226,332) (566,046) (422,652)
Net Unrealized:
Appreciation .............. 8,375,111 636,241 864,618 398,995 1,115,494
<CAPTION>
SOCIAL STRATEGIC RELATIVE
S&P 500 AWARENESS INCOME STELLAR VALUE
------- --------- ------ ------- -----
Gross unrealized:
<S> <C> <C> <C> <C> <C>
Appreciation ................ $ 551,681 $ 373,344 $ 83,912 $ 235,848 $ 773,749
Depreciation ................ (321,963) (266,887) (51,693) (77,780) (9,695)
Net Unrealized:
Appreciation .............. 229,718 106,457 32,219 158,068 764,054
</TABLE>
100
<PAGE> 150
OHIO NATIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1997
(2) INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term
securities) for the year ended December 31, 1997 were as follows:
<TABLE>
<CAPTION>
CAPITAL
EQUITY BOND OMNI INTERNATIONAL APPRECIATION
------ ---- ---- ------------- ------------
<S> <C> <C> <C> <C> <C>
Stocks & Bonds:
Purchases ................... $ 59,212,911 $ 1,893,703 $ 44,555,591 $ 35,070,994 $ 28,652,383
Sales ....................... 43,527,581 174,282 25,737,517 31,113,950 16,673,986
U.S. Government
Obligations:
Purchases ................... -- -- -- -- 325,518
Sales ....................... -- 500,000 -- -- 200,000
<CAPTION>
SMALL GLOBAL AGGRESSIVE CORE GROWTH &
CAP CONTRARIAN GROWTH GROWTH INCOME
--- ---------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Stocks & Bonds:
Purchases ................... $ 40,854,656 $ 7,779,954 $ 33,548,156 $ 12,743,178 $ 28,887,177
Sales ....................... 33,177,017 3,014,504 29,031,056 4,163,673 14,975,341
U.S. Government
Obligations:
Purchases ................... -- -- 152,392 -- 27,891
Sales ....................... -- -- 53,918 -- 31,597
<CAPTION>
SOCIAL STRATEGIC RELATIVE
S&P 500 AWARENESS INCOME STELLAR VALUE
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Stocks & Bonds:
Purchases ................... $ 42,242,336 $ 5,887,582 $ 4,555,901 $ 3,526,140 $ 4,916,888
Sales ....................... 32,912,078 1,939,957 2,238,696 314,967 244,172
U.S. Government
Obligations:
Purchases ................... -- -- 714,609 721,054 --
Sales ....................... -- -- 140,399 -- --
</TABLE>
(3) INVESTMENT ADVISORY AGREEMENT, SUB-ADVISORY AGREEMENTS AND
TRANSACTIONS WITH AFFILIATED PERSONS
The Fund has an investment advisory agreement with Ohio National
Investments, Inc. ("ONI") a wholly owned subsidiary of Ohio National Life
Insurance Company (ONLIC), under the terms of which ONI provides portfolio
management and investment advice to the Fund and administers its other
affairs, subject to the supervision of the Fund's Board of Directors. As
compensation for its services, ONI receives from the Fund annual fees on the
basis of each portfolio's average daily net assets based on the following
schedule: (a) for each of the Equity, Bond, Omni and Social Awareness
Portfolios, 0.60% of the first $100 million of each Portfolio's net assets,
0.50% of the next $150 million of net assets, 0.45% of the next $250 million
of net assets, 0.40% of the next $500 million of net assets, 0.30% of the
next $1 billion of net assets, and 0.25% of net assets over $2 billion; (b)
for the Money Market Portfolio, 0.30% of the first $100 million of net
assets, 0.25% of the next $150 million of net assets, 0.23% of the net $250
million of net assets, 0.20% of the next $500 million of net assets, and
0.15% of net assets over $1 billion; (c) for the International, Global
Contrarian, and Relative Value Portfolios, 0.90% of each Portfolio's net
assets; (d) for the Capital Appreciation, Small Cap, Aggressive Growth and
Strategic Income Portfolios, 0.80% of each Portfolio's net assets, (e) for
the Core Growth Portfolio, 0.95% of the first $150 million of net assets,
and 0.80% of net assets over $150 million; (f) for the Growth & Income
Portfolio, 0.85% of the first $200 million of net assets and 0.80% of net
assets over $200 million, (g) for the S&P 500 Index Portfolio, 0.40% of the
first $100 million of
101
<PAGE> 151
OHIO NATIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1997
net assets, 0.35% of the next $150 million of net assets, and 0.33% of net
assets over $250 million; and (h) for the Stellar Portfolio, 1.00% of that
Portfolio's net assets. However, as to the Money Market Portfolio, the
Advisor is presently waiving any of its fee in excess of 0.25%.
Under the Investment Advisory Agreement, the Fund authorizes ONI to retain
sub-advisors for the International, Capital Appreciation, Small Cap, Global
Contrarian, Aggressive Growth, Core Growth, Growth & Income, Strategic
Income, Stellar and Relative Value Portfolios, subject to the approval of
the Fund's Board of Directors. ONI has entered into Sub-Advisory Agreements
with Societe Generale Asset Management Corp. ("SGAM"), T. Rowe Price
Associates, Inc. ("TRPA"), Founders Asset Management, Inc. ("FAM"), Strong
Capital Management, Inc. ("SCM"), Pilgrim Baxter & Associates, Ltd. ("PBA"),
Robertson Stephens Investment Management, L.P. ("RSIM"), and Star Bank, N.A.
("Star"), respectively, to manage the investment and reinvestment of those
Portfolios' assets, subject to the supervision of ONI. As compensation for
their services, (a) SGAM receives from ONI fees at the annual rate of 0.75%
of the International and Global Contrarian Portfolios' average daily net
assets during the quarter for which the fee is paid, (b) TRPA receives from
ONI a fee at an annual rate of 0.70% of the first $5 million, and 0.50% over
average daily net asset value in excess of $5 million, of the Capital
Appreciation Portfolio, (c) FAM receives from ONI a fee at an annual rate of
0.65% of the first $75 million, 0.60% of the next $75 million, and 0.55% of
the average daily net asset value in excess of $150 million of the Small Cap
Portfolio; (d) SCM receives from ONI a fee at an annual rate of 0.70% of the
first $50 million, and 0.50% of average daily net asset value in excess of
$50 million of the Aggressive Growth Portfolio; (e) PBA receives from ONI a
fee at an annual rate of 0.75% of the first $50 million, 0.70% of the next
$100 million, and 0.50% of average daily net assets in excess of $150
million of the Core Growth Portfolio: (f) RSIM receives from ONI a fee at an
annual rate of 0.60% of the first $100 million, 0.55% of the next $100
million, and 0.50% of average daily net assets in excess of $200 million of
the Growth & Income Portfolio; and (g) Star receives from ONI fees at an
annual rate of (i) 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, (ii)
0.75% of the $50 million and 0.70% of average daily net assets in excess of
$50 million of the Stellar Portfolio and (iii) 0.65% of the first $50
million and 0.60% of average daily net assets in excess of $50 million of
the Relative Value Portfolio.
Each director who is not an officer of the Fund or an employee of ONI or its
corporate affiliates is paid a quarterly retainer fee of $2,000 plus $400
for each meeting attended.
The Fund's transfer agent and dividend paying agent is American Data
Services, Inc., The Hauppauge Corporate Center, 150 Motor Parkway, Suite
109, Hauppauge, New York. The Fund's custodian for those portfolios other
than the International and Global Contrarian Portfolios is Star Bank, N.A.,
425 Walnut Street, Cincinnati. Ohio. The custodian for the International and
Global Contrarian Portfolios is Investors Fiduciary Trust Company, 801
Pennsylvania, Kansas City, Missouri. For International and Global Contrarian
Portfolio assets held outside the United States, Star Bank and Investors
Fiduciary Trust Company enter into subcustodial agreements, subject to
approval by the Board of Directors.
(4) CAPITAL SHARE TRANSACTIONS Capital share transactions for the years ended
December 31, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
EQUITY MONEY MARKET BOND
------ ------------ ----
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Capital shares
issued on sales................ 1,099,809 1,251,722 4,006,494 2,854,453 644,662 654,067
Capital shares issued
on reinvested dividends ....... 574,786 296,586 124,176 97,983 161,245 118,018
Capital shares redeemed ......... 752,158 488,195 3,767,642 1,972,882 723,200 469,144
<CAPTION>
OMNI INTERNATIONAL CAPITAL APPRECIATION
---- ------------- --------------------
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Capital shares
issued on sales ............... 1,691,998 1,421,502 2,422,039 2,498,593 1,350,471 1,370,341
Capital shares issued
on reinvested dividends ....... 715,507 312,746 1,742,189 437,139 359,011 137,455
Capital shares redeemed ......... 709,824 461,070 1,377,360 372,436 249,388 158,593
</TABLE>
102
<PAGE> 152
OHIO NATIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1997
<TABLE>
<CAPTION>
SMALL CAP GLOBAL CONTRARIAN AGGRESSIVE GROWTH
--------- ----------------- -----------------
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Capital shares
issued on sales ....... 1,170,240 1,175,931 579,754 694,759 767,314 849,211
Capital shares issued
on reinvested dividends 131,550 35,538 132,202 22,442 23,559 124,213
Capital shares redeemed . 320,642 89,525 143,586 158,086 193,560 114,532
<CAPTION>
CORE GROWTH & SOCIAL STRATEG. RELATIVE
GROWTH INCOME S&P 500 AWARE. INCOME STELLAR VALUE
------ ------ ------- ------ ------ ------- -----
1997 1997 1997 1997 1997 1997 1997
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Capital shares
issued on sales ....... 1,272,254 1,436,044 1,782,577 399,740 309,296 262,250 460,646
Capital shares issued
on reinvested dividends 419 75,471 187,990 37,565 16,810 6,971 3,973
Capital shares redeemed . 287,167 56,151 88,101 12,616 6,191 5,693 12,351
</TABLE>
The Fund is authorized to issue 250,000,000 of its capital shares.
20,000,000 shares each have been allocated to the Equity, Omni, and
International Portfolios, and 10,000,000 are allocated to each of the other
portfolios. The remaining 60,000,000 are unallocated at this time.
(5) COMMITMENTS
As of December 31, 1997, the International and Global Contrarian Portfolios
had entered into forward currency contracts, as set forth below, summarized
by currency:
INTERNATIONAL PORTFOLIO
<TABLE>
<CAPTION>
SETTLE CURRENCY TO BE DELIVERED U.S. $ VAL. CURRENCY TO BE RECEIVED U.S. $ VAL. UNREALIZED
DATES AMOUNT TYPE AT 12/31/97 AMOUNT TYPE AT 12/31/97 GAIN LOSS
----- ------ ---- ----------- ------ ---- ----------- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
06/11/98 3,628,000 Australian Dollar 2,355,660 2,469,382 U.S. Dollar 2,469,382 $113,722
01/08/98 8,021,000 Swiss Franc 5,487,446 5,635,892 U.S. Dollar 5,635,892 148,446
06/10/98 713,000 Swiss Franc 496,276 497,854 U.S. Dollar 497,854 1,578
01/15/98 12,626,000 Deutsche Mark 7,024,396 7,528,828 U.S. Dollar 7,528,828 504,432
01/15/98 1,423,901 U.S. Dollar 1,423,901 2,499,000 Deutsche Mark 1,390,303 $(33,598)
06/17/98 2,012,000 Deutsche Mark 1,128,973 1,173,986 U.S. Dollar 1,173,986 45,013
01/22/98 18,411,000 French Franc 3,063,089 3,238,292 U.S. Dollar 3,238,292 175,203
01/22/98 507,800 U.S. Dollar 507,800 3,001,000 French Franc 499,285 (8,515)
06/03/98 60,730,000 French Franc 10,177,473 9,793,922 U.S. Dollar 9,793,922 (383,551)
01/29/98 706,997,000 Japanese Yen 5,438,648 6,304,748 U.S. Dollar 6,304,748 866,100
01/29/98 274,593 U.S. Dollar 274,593 32,398,000 Japanese Yen 249,225 (25,368)
06/24/98 1,383,471,000 Japanese Yen 10,878,482 11,752,072 U.S. Dollar 11,752,072 873,590
04/03/98 6,571,000 New Zld Dollar 3,840,092 4,145,425 U.S. Dollar 4,145,425 305,333
------------- ------------- ------------- -------------
52,096,829 54,679,214 $3,033,417 $(451,032)
============== ============= ============= =============
</TABLE>
103
<PAGE> 153
OHIO NATIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1997
GLOBAL CONTRARIAN PORTFOLIO
<TABLE>
<CAPTION>
SETTLE CURRENCY TO BE DELIVERED U.S. $ VAL. CURRENCY TO BE RECEIVED U.S. $ VAL. UNREALIZED
DATES AMOUNT TYPE AT 12/31/97 AMOUNT TYPE AT 12/31/97 GAIN LOSS
----- ------ ---- ----------- ------ ---- ----------- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
01/08/98 34,000 Swiss Franc 23,261 23,690 U.S. Dollar 23,690 $429
01/08/98 24,119 U.S. Dollar 24,119 34,000 Swiss Franc 23,261 $(858)
06/10/98 564,000 Swiss Franc 392,566 410,152 U.S. Dollar 410,152 17,586
01/15/98 220,000 Deutsche Mark 122,396 131,595 U.S. Dollar 131,595 9,199
01/15/98 129,465 U.S. Dollar 129,465 220,000 Deutsche Mark 122,396 (7,069)
06/17/98 140,000 Deutsche Mark 78,557 78,873 U.S. Dollar 78,873 316
06/03/98 1,756,000 French Franc 294,280 281,604 U.S. Dollar 281,604 (12,676)
06/24/98 79,012,000 Japanese Yen 621,285 675,841 U.S. Dollar 675,841 54,556
06/24/98 153,668 U.S. Dollar 153,668 18,480,000 Japanese Yen 145,312 (8,356)
11/13/98 18,480,000 Japanese Yen 163,663 173,147 U.S. Dollar 173,147 9,484
01/08/98 125,000 Dutch Guilder 61,692 65,329 U.S. Dollar 65,329 3,637
---------------- -------------- ------------ -----------
2,064,952 2,131,200 $95,207 $(28,959)
================ ============== ============ ===========
</TABLE>
104
<PAGE> 154
OHIO NATIONAL FUND, INC. December 31, 1997
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Ohio National Fund, Inc.:
We have audited the accompanying statements of assets and liabilities and the
schedules of investments of Ohio National Fund, Inc. (comprising, respectively,
the Equity, Money Market, Bond, Omni, International, Capital Appreciation, Small
Cap, Global Contrarian, Aggressive Growth, Core Growth, Growth & Income, S&P 500
Index, Social Awareness, Stategic Income, Stellar and Relative Value Portfolios)
as of December 31, 1997, and the related statements of operations, statements of
changes in net assets and the financial highlights for each of the periods
indicated herein. These financial statements and financial highlights are the
responsibility of the funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1997, by correspondence with
the custodian and brokers, and where replies are not received, we carried out
other appropriate auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the portfolios comprising Ohio National Fund, Inc. as of December 31, 1997,
and the results of their operations, the changes in their net assets and their
financial highlights for each of the periods indicated herein, in conformity
with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Cincinnati, Ohio
January 30, 1998
Directors and Officers of Ohio National Fund, Inc.
- --------------------------------------------------------------------------------
John J. Palmer, President and Director
Ronald L. Benedict, Secretary and Director
George E. Castrucci, Director
Ross Love, Director
George M. Vredeveld, Director
Joseph P. Brom, Vice President
Michael A. Boedeker, Vice President
Stephen T. Williams, Vice President
Dennis R. Taney, Treasurer
Theresa M. Brunsman, Assistant Secretary
This report may be used as sales literature only when accompanied or preceded by
an effective prospectus of Ohio National Fund, Inc. which relates sales expense
and other pertinent information.
105
<PAGE> 155
OHIO NATIONAL FUND, INC.
Form N-1A
PART C.
OTHER INFORMATION
<PAGE> 156
FINANCIAL STATEMENTS AND EXHIBITS
The following audited financial statements are included in Part B of this
registration statement:
Statements of Assets and Liabilities as of December 31, 1997
Statements of Operations for the Year Ended December 31, 1997
Statements of Changes in Net Assets for the Years Ended December
31, 1997 and 1996
Schedule of Investments at December 31, 1997 -- Equity Portfolio
Schedule of Investments at December 31, 1997 -- Money Market
Portfolio
Schedule of Investments at December 31, 1997 -- Bond Portfolio
Schedule of Investments at December 31, 1997 -- Omni Portfolio
Schedule of Investments at December 31, 1997 -- International
Portfolio
Schedule of Investments at December 31, 1997 -- Capital
Appreciation Portfolio
Schedule of Investments at December 31, 1997 -- Small Cap
Portfolio
Schedule of Investments at December 31, 1997 -- Global Contrarian
Portfolio
Schedule of Investments at December 31, 1997 -- Aggressive Growth
Portfolio
Schedule of Investments at December 31, 1997 -- Core Growth
Portfolio
Schedule of Investments at December 31, 1997 -- Growth & Income
Portfolio
Schedule of Investments at December 31, 1997 -- S&P 500 Index
Portfolio
Schedule of Investments at December 31, 1997 -- Social Awareness
Portfolio
Schedule of Investments at December 31, 1997 -- Strategic Income
Portfolio
Schedule of Investments at December 31, 1997 -- Stellar Portfolio
Schedule of Investments at December 31, 1997 -- Relative Value
Portfolio
Notes to Financial Statements for December 31, 1997
Independent Auditors' Report of KPMG Peat Marwick LLP dated
January 30, 1998
The following audited financial information is included in Part A of this
registration statement:
Financial Highlights (Ten years ended December 31, 1997)
Written Consents of the Following Persons:
KPMG Peat Marwick LLP
Ronald L. Benedict, Esq. as Legal Counsel to the Registrant
Jones & Blouch L.L.P. as Legal Counsel to the Registrant
Exhibits:
(1)(e) Articles Supplementary of the Registrant, effective March 17,
1998
(10)(c) Opinion and consent of Ronald L. Benedict, Esq., as to the
shares of the Registrant's Small Cap Growth, High Income Bond,
Equity Income and Blue Chip Portfolios.
(13)(c) Investment letter for the initial subscription of stock of the
Registrant's Small Cap Growth, High Income Bond, Equity Income
and Blue Chip Portfolios.
-1-
<PAGE> 157
All other relevant exhibits, which have previously been filed with the
Commission and are incorporated herein by reference, are as follows:
(1) Articles of Incorporation of the Registrant (amended as
of November 2, 1982) were filed as Exhibit (1) of the
Registrant's Form N-1, Post-effective Amendment No. 6,
on August 3, 1982.
(1)(a) Articles Supplementary of the Registrant, effective
December 30, 1992, were filed as Exhibit (1)(a) of the
Registrant's Form N-1A, Post-effective amendment No. 21,
on February 26, 1993.
(1)(b) Articles Supplementary of the Registrant, effective
March 1, 1994, were filed as Exhibit (1)(b) of the
Registrant's Form N-1A, Post-effective Amendment No. 24,
on March 2, 1994.
(1)(c) Articles Supplementary of the Registrant, effective
December 15, 1994 were filed as Exhibit (1)(c) of the
Registrant's Form N-1A, Post-effective Amendment No. 27,
on December 30, 1994.
(1)(d) Articles Supplementary of the Registrant, effective
September 16, 1996 were filed as Exhibit no. (1)(d) of
the Registrant's Form N-1A, Post-effective Amendment
no. 32, on October 21, 1996.
(2) By-laws of the Registrant (as amended March 16, 1989)
were filed as Exhibit (2) of the Registrant's Form N-1A,
Post-effective Amendment No. 17, on March 27, 1989.
(4) Specimen of certificated securities of the Registrant's
International Portfolio was filed as Exhibit (4) of the
Registrant's Form N-1A, Post-effective Amendment No. 21,
on February 26, 1993.
(4)(a) Specimen of certificated securities of the Registrant's
Capital Appreciation Portfolio was filed as Exhibit
(4)(a) of the Registrant's Form N-1A, Post-effective
Amendment No. 25, on March 25, 1994.
(4)(b) Specimen of certificated securities of the Registrant's
Small Cap Portfolio was filed as Exhibit (4)(b) of the
Registrant's Form N-1A, Post-effective Amendment No. 25,
on March 25, 1994.
(4)(c) Specimens of certificated securities of the Registrant's
Global Contrarian and Aggressive Growth Portfolios were
filed as Exhibit (4)(c) of the Registrant's Form N-1A,
Post-effective Amendment No. 27, on December 30, 1994.
(4)(d) Specimens of certificated securities of the Registrant's
Core Growth, Growth & Income, S&P 500 Index, Social
Awareness, Strategic Income, Stellar and Relative Value
Portfolios were filed as Exhibit no. (4)(d) of the
Registrant's Form N-1A, Post-effective Amendment no.
32, on October 21, 1996.
(5)(a) Investment Advisory Agreement between the Registrant and
Ohio National Investments, Inc., dated May 1, 1996, was
filed as Exhibit (5)(a) of the Registrant's Form N-1A,
Post-effective Amendment No. 31, on March 1, 1996.
(5)(a)(1) Schedule A, amended effective May 1, 1998, to the
Investment Advisory Agreement dated May 1, 1996,
between the Registrant and Ohio National Investments,
Inc. was filed as Exhibit (5)(a)(1) of the Registrant's
Form N-1A, Post-effective Amendment no. 35 on February
13, 1998.
-2-
<PAGE> 158
(5)(b) Sub-Advisory Agreement (for the International and Global
Contraian Portfolios) between Ohio National Investments,
Inc. and Societe Generale Asset Management Corp., dated
May 1, 1996, was filed as Exhibit (5)(b) of the
Registrant's Form N-1A, Post-effective Amendment No. 31,
on March 1, 1996.
(5)(b)(1) Amendment, effective January 1, 1998, to the
Sub-Advisory Agreement dated May 1, 1996 (for the
International and Global Contrarian Portfolios) between
Ohio National Investments, Inc. and Societe Generale
Asset Management Corp. was filed as Exhibit 5(b)(1)
of the Registrant's Form N-1A, Post-effective Amendment
no. 35 on February 13, 1998.
(5)(c) Sub-Advisory Agreement (for the Capital Appreciation
Portfolio) between Ohio National Investments, Inc. and
T. Rowe Price Associates, Inc. dated May 1, 1996, was
filed as Exhibit 5(c) of the Registrant's Form N-1A,
Post-effective Amendment No. 31, on March 1, 1996.
(5)(c)(1) Amendment, effective January 1, 1998, to the
Sub-Advisory Agreement dated May 1, 1996 (for the
Capital Appreciation Portfolio) between Ohio National
Investments, Inc. and T. Rowe Price Associates, Inc. was
filed as Exhibit (5)(c)(1) of the Registrant's Form
N-1A, Post-effective Amendment no. 35 on February 13,
1998.
(5)(d) Sub-Advisory Agreement dated April 1, 1998 (for the
Small Cap Portfolio) between Ohio National Investments,
Inc. and Founders Asset Management LLC was filed as
Exhibit (5)(d) of the Registrant's Form N-1A,
Post-effective Amendment no. 35 on February 13, 1998.
(5)(e) Sub-Advisory Agreement (for the Aggressive Growth
Portfolio) between Ohio National Investments, Inc. and
Strong Capital Management, Inc., dated May 1, 1996, was
filed as Exhibit (5)(e) of the Registrant's Form N-1A,
Post-effective Amendment No. 31, on March 1, 1996.
(5)(f) Sub-Advisory Agreement (for the Core Growth Portfolio)
between Ohio National Investments, Inc. and Pilgrim
Baxter & Associates, Ltd., dated January 3, 1997
was filed as Exhibit no. (5)(f) of the Registrant's
Form N-1A, Post-effective Amendment no. 32, on
October 21, 1996.
(5)(g) Sub-Advisory Agreement dated October 1, 1997 (for the
Growth & Income Portfolio) between Ohio National
Investments, Inc. and Robertson Stephens Investment
Management, L.P. was filed as Exhibit (5)(g) of the
Registrant's Form N-1A, Post-effective Amendment no. 35
on February 13, 1998.
(5)(h) Sub-Advisory Agreement (for the Strategic Income,
Stellar and Relative Value Portfolios) between Ohio
National Investments, Inc. and Star Bank, N.A., dated
January 3, 1997 was filed as Exhibit no. (5)(h) of the
Registrant's Form N-1A, Post-effective Amendment
no. 32, on October 21, 1996.
(5)(i) Sub-Advisory Agreement dated May 1, 1998 (for the Small
Cap Growth Portfolio) between Ohio National Investments,
Inc. and Robertson Stephens Investment Management, L.P.
was filed as Exhibit (5)(i) of the Registrant's Form
N-1A, Post-effective Amendment no. 35 on February 13,
1998.
(5)(j) Sub-Advisory Agreement dated May 1, 1998 (for the High
Income Bond, Equity Income and Blue Chip Portfolios)
between Ohio National Investments, Inc. and Federated
Investment Counseling was filed as Exhibit (5)(j) of the
Registrant's Form N-1A Post-effective Amendment no. 35
on February 13, 1998.
(8) Custody Agreement between the Registrant and Star Bank,
N.A. was filed as Exhibit (8) of the Registrant's Form
N-1A, Post-effective Amendment no. 33, on April 25,
1997.
(8)(a) Custody Agreement (for the International Portfolio)
between the Registrant and Investors Fiduciary Trust
Company was filed as Exhibit (8)(a) of the Registrant's
Form N-1A, Post-effective Amendment No. 22, on April 22,
1993.
(8)(a)(i) First Amendment of Custody Agreement (adding the Global
Contrarian Portfolio) between the Registrant and
Investors Fiduciary Trust Company was filed as Exhibit
(8)(a)(i) of the Registrant's Form N-1A, Post-effective
Amendment No. 27, on December 30, 1994.
(9) Fund Accounting Services Agreement between the
Registrant and American Data Services, Inc. was filed as
Exhibit (9) of the Registrant's Form N-1A,
Post-effective Amendment no. 33, on April 25, 1997.
(9)(a) Transfer Agency and Service Agreement between the
Registrant and American Data Services, Inc. was filed
as Exhibit (9)(a) of the Registrant's Form N-1A,
Post-effective Amendment no. 33, on April 25, 1997.
(9)(b) Service Agreement among the Registrant, Ohio National
Investments, Inc. and The Ohio National Life Insurance
Company, dated May 1, 1996, was filed as Exhibit (9)(b)
of the Registrant's Form N-1A, Post-effective Amendment
No. 31, on March 31, 1996.
(9) (c) Master Repurchase Agreement between the Registrant and
Star Bank, N.A. was filed as Exhibit (9)(c) of the
Registrant's Form N-1A, Post-effective Amendment
no. 33, on April 25, 1997.
(9)(d) Joint Insured Agreement among the Registrant, ONE Fund,
Inc. and Ohio National Investments, Inc., dated May 1,
1996, was filed as Exhibit (9)(d) of the Registrant's
Form N-1A, Post-effective Amendment No. 31, on March 1,
1996.
(9)(e) Services Agreement (for the International Portfolio)
between the Registrant and Interactive Data Corporation
was filed as Exhibit (9)(e) of the Registrant's Form
N-1A, Post-effective Amendment No. 23, on October 29,
1993.
-3-
<PAGE> 159
(10) Opinion and consent of Ronald L. Benedict, Esq., as to
the shares of the Registrant's International Portfolio
was filed as Exhibit (10) of the Registrant's Form N-1A,
Post-effective Amendment No. 21, on February 26, 1993.
(10)(a) Opinion and consent of Ronald L. Benedict, Esq., as to
the shares of the Registrant's Capital Appreciation,
Small Cap, Global Contrarian and Aggressive Growth
Portfolios was filed as Exhibit (10)(a) of the
Registrant's Form N-1A, Post-effective Amendment No. 27,
on December 30, 1994.
(10)(b) Opinion and consent of Ronald L. Benedict, Esq., as to
the shares of the Registrant's Core Growth, Growth &
Income, S&P 500 Index, Social Awareness, Strategic
Income, Stellar and Relative Value Portfolios was filed
as Exhibit no. (10)(b) of the Registrant's Form N-1A,
Post-effective Amendment no. 32, on October 21, 1996.
(13) Investment letter for the initial subscription of
capital stock of the Registrant's International
Portfolio was filed as Exhibit (13) of the Registrant's
Form N-1A, Post-effective Amendment No. 22, on April 22,
1993.
(13)(a) Investment letters for the initial subscriptions of
capital stock of the Registrant's Capital Appreciation,
Small Cap, Global Contrarian and Aggressive Growth
Portfolios were filed as Exhibit (13)(a) of the
Registrant's Form N-1A, Post-effective Amendment No. 27,
on December 30, 1994.
(13)(b) Investment letter for the initial subscription of stock
of the Registrant's Core Growth, Growth & Income, S&P
500 Index, Social Awareness, Strategic Income, Stellar
and Relative Value Portfolios was filed as Exhibit
(13)(b) of the Registrant's Form N-1A Post-effective
Amendment no. 33, on April 25, 1997.
(16) Computation of Performance Data was filed as exhibits
(16) of the Registrant's Form N-1A, Post-effective
Amendments No. 18 on March 2, 1990, No. 19 on April 18,
1991, No. 20 on April 29, 1992, No. 21 on February 26,
1993, No. 24 on March 2, 1994, No. 28 on February 17,
1995, No. 31 on March 1, 1996, and No. 33 on April 25,
1997, and Exhibit (13) of Form N-4, Pre-effective
Amendment no. 1 of Ohio National Variable Account A
(File no. 333-43511) on April 10, 1998.
PERSONS UNDER COMMON CONTROL WITH REGISTRANT
The Registrant is an affiliate of The Ohio National Life Insurance Company
("ONLI"). The diagram on page 4A shows all persons under common control with the
Registrant. ONLI is a mutual life insurer and it owns 100% of the voting
securities of each of its subsidiaries. As of February 1, 1998, it also owned
91.7% of the voting securities of the Registrant, which are held of record in
the separate accounts of ONLI. The remaining 8.3% of the Registrant's voting
securities were owned by Ohio National Life Assurance Corporation ("ONLAC") and
held of record in ONLAC's separate account. ONLI owns 100% of the voting
securities of Ohio National Investments, Inc. (the "Adviser"). ONLI also owned
42.0% of the voting shares of ONE Fund, Inc. ("ONE Fund") as of that date.
NUMBER OF HOLDERS OF SECURITIES
As of April 1, 1998, the securities of the Registrant were held as follows:
<TABLE>
<CAPTION>
Title of Class Number of Record Holders
-------------- ------------------------
<S> <C>
Equity 5
Money Market 5
Bond 5
Omni 5
International 5
Capital Appreciation 5
Small Cap 5
Global Contrarian 5
Aggressive Growth 5
Core Growth 5
Growth & Income 5
S&P 500 Index 5
Social Awareness 5
Strategic Income 1
Stellar 1
Relative Value 1
Emerging Growth 0
High Income Bond 0
Equity Income 0
Blue Chip 0
</TABLE>
-4-
<PAGE> 160
INDEMNIFICATION
Under Section 2-418 of the Maryland General Corporation Law, with respect to any
proceedings against a present or former director, officer, agent or employee (a
"corporate representative") of the Registrant (a Maryland corporation), except a
proceeding brought by or on behalf of the Registrant, the Registrant may
indemnify the corporate representative against expenses, including attorneys'
fees, and judgments, fines, penalties, and amounts paid in settlement, if such
expenses were actually and reasonably incurred by the corporate representative
in connection with the proceeding, if: (i) he or she acted in good faith; (ii)
in the case of conduct in his or her official capacity he or she reasonably
believed that his or her conduct was in the best interests of the Registrant,
and in all other cases he or she reasonably believed that his or her conduct was
not opposed to the best interests of the Registrant; and (iii) with respect to
any criminal proceeding, he or she had no reasonable cause to believe his or her
conduct was unlawful. The Registrant is also authorized under Section 2-418 of
the Maryland General Corporation Law to indemnify a corporate representative
under certain circumstances against reasonable expenses incurred in connection
with the defense of a suit or action by or in the right of the Registrant except
where the corporate representative has been adjudged liable to the Registrant.
Under Article 11 of the Registrant's By-laws, directors and officers of
Registrant are entitled to indemnification by the Registrant to the fullest
extent permitted under Maryland law and the Investment Company Act of 1940.
Reference is made to Article 11 of Registrant's By-laws and Section 2-418 of the
Maryland General Corporation Law.
BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Ohio National Investments, Inc. (the "Adviser") is engaged in providing
investment management services to the Registrant and to ONE Fund. The Adviser is
also authorized to provide such services to others. The Adviser has not engaged
in any other business of a substantial nature during the past two fiscal years.
The names of each director and officer of the Adviser and the business of a
substantial nature of each during the past two fiscal years are as follows:
<TABLE>
<CAPTION>
Position with Business of a Substantial
Name the Adviser Nature During Past Two Years
- ---- ----------- ----------------------------
<S> <C> <C>
Joseph P. Brom Director and Senior Vice President and Chief
President Investment Officer of ONLI; Vice President of
Registrant; Senior Vice President of ONLAC; Vice
President of ONE Fund; Until 1997 was Director and
President of ONIMCO
Michael A. Boedeker Director and Vice President, Fixed Income Securities
Vice President of ONLI; Vice President of ONLAC; Vice President of
Registrant; Vice President of ONE Fund; Until 1997
was Director and Vice President of ONIMCO
Stephen T. Williams Director and Vice President, Equity Investments of ONLI; Vice
Vice President President of Registrant; Vice President of ONE
Fund; Until 1997 was Director and Vice President of ONIMCO
Michael D. Stohler Director and Vice President, Mortgages & Real Estate ONLI;
Vice President Director and President Enterprise Park, Inc.
Keith O. Hanson Vice President Investment Officer and Portfolio Manager of ONLI.
R. Douglas Hundley Vice President Investment Officer and Portfolio Manager of ONLI.
Jed R. Martin Vice President Investment Officer and portfolio Manager of ONLI.
</TABLE>
-5-
<PAGE> 161
<TABLE>
<CAPTION>
Position with Business of a Substantial
Name the Adviser Nature During Past Two Years
- ---- ----------- ----------------------------
<S> <C> <C>
Ronald L. Benedict Secretary Corporate Vice President, Counsel and Secretary of ONLI;
Director and Secretary of Registrant; Director and Secretary
of ONE Fund; Secretary of ONLAC; Secretary of ONE, Inc.;
Until 1997 was Secretary of ONIMCO and ONESCO
Dennis R. Taney Treasurer Mutual Fund Financial Operations Director of ONLI;
Treasurer of Registrant; Treasurer of ONE Fund;
Until 1997 was Treasurer of ONIMCO
</TABLE>
BUSINESS AND OTHER CONNECTIONS OF SGAM
Societe Generale Asset Management Corp. ("SGAM") provides investment management
services to the International and Global Contrarian Portfolios of the Registrant
and of ONE Fund. SGAM's primary business is managing SoGen International Fund,
Inc. and SoGen Funds, Inc. ("SoGen"), diversified investment companies of the
management type registered under the 1940 Act. The officers and directors of
SGAM and their business of a substantial nature during the past two fiscal years
are as follows:
<TABLE>
<CAPTION>
Position Business of a Substantial
Name with SGAM Nature During Past Two Years
- ---- --------- ----------------------------
<S> <C> <C>
Philip J. Bafundo Secretary and VicePresident, Secretary and
Treasurer Treasurer of SoGen
Jean-Marie Eveillard President and President and Director of
Director SoGen
Philippe Collas Chairman of the Chairman of the Board and
Board and Director Director of SoGen; Head of Asset
Management of Societe Generale
Jean-Roger Huet Director President of New York Branch
of Societe Generale.
Christian d'Allest Director Director of Foreign Affiliates
of SGAM
</TABLE>
BUSINESS AND OTHER CONNECTIONS OF TRPA
T. Rowe Price Associates, Inc. ("TRPA") provides investment management services
to the Capital Appreciation Portfolio of the Registrant. TRPA's primary business
is the management of assets for individual and institutional investors,
particularly the T. Rowe Price group of mutual funds. The officers and directors
of TRPA and their business of a substantial nature during the past two fiscal
years are as follows:
-6-
<PAGE> 162
<TABLE>
<CAPTION>
Position Business of a Substantial
Name with TRPA Nature during Past Two Years
- ---- --------- ----------------------------
<S> <C> <C>
George J. Collins Director Director of Rowe Price-
Fleming International, Inc.
("Price-Fleming"); Director of
T. Rowe Price Retirement Plan
Services, Inc. ("RPS");
Director of T. Rowe Price
Trust Company ("Trust Co.");
Chairman of the Board of T.
Rowe Price mutual funds
("Price Funds")
James S. Riepe Vice Chairman, Director Chairman of the Board of T.
and Managing Director Rowe Price Services, Inc.
("Price Services"); Chairman
of the Board of RPS; Chairman
of the Board of Trust Co.;
President and Director of
T. Rowe Price Investment
Services, Inc. ("Investment
Services"); Vice President and
Trustee of Price Funds
Henry H. Hopkins Director and Vice President and Director of
Managing Director Investment Services; Vice
President and Director of
Price Services; Vice President
and Director of Trust Co.;
Vice President of Price-
Fleming; Vice President of
RPS; Director of ICI Mutual
Insurance Company; Vice
President of Price Funds
James W. Halbkat, Jr. Director President of U.S. Monitor
Corp.
John W. Rosenblum Director Taylor Murphy Professor of Darden Graduate
School of Business Administration,
University of Virginia; Director of Chesapeake
Corporation; Director of Cadmus
Communications Corp.; Director of Comdial
Corp.; Director of Cone Mills Corp.
Robert L. Strickland Director Chairman of Lowe's Companies, Inc.
Philip C. Walsh Director Consultant to and Director of Cyprus
Minerals Corp.; Director of Piedmont Mining
Co., Inc.
George A. Roche Chairman of the Vice President and Director of Price-Fleming
Board, President and
Director
</TABLE>
-7-
<PAGE> 163
<TABLE>
<CAPTION>
Position Business of a Substantial
Name with TRPA Nature during Past Two Years
- ---- --------- ----------------------------
<S> <C> <C>
M. David Testa Vice Chairman of the Board,
Chief Investment Officer,
Director and Managing
Director
Charles P. Smith Managing Director Vice President of Price-Fleming
Peter Van Dyke Managing Director Vice President of Price-Fleming
Richard L. Menschel Director Limited Partner of Goldman Sachs
Group L.P.
Anne Marie Whittemore Director Partner of McGuire, Woods, Battle &
Booth; Director of Owens & Minor,
Inc.; Director of USF&G Corp.; Director
of Albemarle Corp.; Director of James
River Corp.
James A.C. Kennedy III Director and President and Director of T. Rowe
Managing Director Price Strategic Partners Inc.;
Vice President and Director of T. Rowe
Price Threshold Fund Associates, Inc.
John H. LaPort, Jr. Director and
Managing Director
William T. Reynolds Director and Chairman of T. Rowe Price
Managing Director Stable Asset Management, and
Director of TRP Finance, Inc.
Brian C. Rogers Director and Vice President of Trust Co.
Managing Director
</TABLE>
-8-
<PAGE> 164
Wholly-owned subsidiaries of TRPA include the following:
Investment Services, a Maryland corporation, is the principal
underwriter and distributor of the Price Funds;
Price Services, a Maryland corporation, provides transfer agent,
dividend disbursing and shareholder services to the Price Funds;
RPS, a Maryland corporation, provides administrative,
recordkeeping and subaccounting services to administrators of
employee benefit plans;
Trust Co., a Maryland limited purpose trust company, provides
fiduciary and custodial services to employee benefit plans and
common trust funds;
T. Rowe Price Real Estate Group, Inc., a Maryland corporation,
provides real estate services and is the investment manager of
several real estate investment trusts, funds and limited
partnerships;
T. Rowe Price Stable Asset Management, Inc., a Maryland
corporation, is an investment adviser specializing in management
of portfolios seeking stable and consistent returns;
T. Rowe Price Recovery Fund Associates, Inc., a Maryland
corporation, is the general partner of T. Rowe Price Recovery
Fund, LP, a Delaware limited partnership that invests in
financially distressed companies;
T. Rowe Price (Canada), Inc., a Maryland corporation, is an
investment adviser which may register as such under the Securities
Act of Ontario.
Tower Venture, Inc., a Maryland corporation, serves as a general
partner of 100 East Pratt Street, LP, a Maryland limited
partnership (whose limited partners include TRPA) formed to
improve TRPA's headquarters property;
TRP Suburban, Inc., a Maryland corporation, is involved in the
construction of an office building to house certain administrative
functions of TRPA in Owings Mills, MD;
TRP Finance, Inc. and TRP Finance MRT, Inc., are Delaware
corporations managing passive corporate investments and other
intangible assets.
TRP Distribution, Inc., a Maryland corporation, is a wholly-owned subsidiary of
Investment Services and engages in the sale of investment products prepared by
Investment Services.
Price-Fleming, a Maryland corporation, is a joint venture 50% owned by TRP
Finance, Inc., and provides investment counsel service with respect to foreign
securities for U.S. institutional investors.
BUSINESS AND OTHER CONNECTIONS OF FAM
Founders Asset Management LLC ("FAM"), a 90%-owned subsidiary of Mellon Bank,
provides investment management services to the Small Cap Portfolio of the
Registrant. FAM's primary business is the management of the Founders group of
mutual funds. It also serves as investment adviser to other mutual funds and
private accounts. The officers and directors of FAM and their business of a
substantial nature during the past two fiscal years are as follows:
<TABLE>
<CAPTION>
Position Business of a Substantial
Name with FAM Nature During Past Two Years
- ---- -------- ----------------------------
<S> <C> <C>
Jonathan F. Zeschin President and Chief N/A
Executive Officer; Member,
Board of Managers
</TABLE>
-9-
<PAGE> 165
<TABLE>
<CAPTION>
Position Business of a Substantial
Name with FAM Nature During Past Two Years
- ---- -------- ----------------------------
<S> <C> <C>
Kenneth R. Christoffersen Vice President, General N/A
Counsel and Secretary
Gregory P. Contillo Senior Vice President; N/A
Member, Board of Managers
Frank Gaffney Vice President N/A
Roberto Galindo, Jr. Assistant Vice President N/A
Laurine Garrity Vice President N/A
Michael W. Gerding Vice President; Member, Portfolio manager for Founders
Board of Managers Passport and Worldwide Growth Funds
Michael K. Haines Senior Vice President Portfolio manager for Founders
Frontier Fund.
Edward F. Keely Vice President Portfolio manager for Founders Growth
Fund.
Brian F. Kelly Vice President Portfolio manager for Founders Blue Chip and
Balanced Funds.
Paul LaRocco Vice President Portfolio manager for Founders Special Fund
since March 1998; previously, Vice President
and portfolio manager of Oppenheimer Funds, Inc.
James P. Rankin Vice President N/A
David L. Ray Vice President, Treasurer N/A
and Assistant Secretary
Linda M. Ripley Vice President N/A
Steven Shapiro Vice President N/A
Christopher M. Condron Chairman, Board of Managers Vice Chairman, Mellon Bank Corp.; Vice
Chairman, Boston Co.; Deputy Director, Mellon
Trust; Chief Executive Officer, Boston Co.
Asset Management, Inc.; Chief Executive
Officer, Dreyfus Corp.; President, Boston Safe
Deposit and Trust Co.; President, Dreyfus
Corp.; Chief Operating Officer, Mellon Bank
Corp.; Chief Operating Officer, Dreyfus Corp.;
Director, Dreyfus Corp.
Stephen E. Canter Member, Board of Director, Dreyfus Corp.; Corp.;
Managers Director, Dreyfus Trust Co.; Formerly, Chairman
and Chief Executive Officer, Kleinwort
Benson Investment Management Americas,
Inc.; Vice Chairman and Chief Investment
Officer, Dreyfus Co.
Lawrence S. Kash Member, Board of Chairman, President and Chief Executive
Managers Officer, Boston Co. Advisors, Inc.;
Executive Vice President and Director,
Dreyfus Service Organization, Inc.;
Director, Dreyfus America Fund; Director,
The Dreyfus Consumer Credit Corp.;
Director, Dreyfus Trust Co.; Director,
Dreyfus Service Corp.; President, Boston
Co.; President, Laurel Capital Advisors;
President, Boston Group Holdings, Inc.;
Executive Vice President, Mellon Bank,
N.A.; Executive Vice President, Boston
Safe Deposit and Trust Co.; Vice Chairman-
Distribution, Dreyfus Corp.
W. Keith Smith Member, Board of Managers Senior Vice Chairman, Mellon Bank Corp.;
Senior Vice Chairman, Mellon Bank, NA;
Chairman, Dreyfus Corp.; Chairman, Boston
Co.
</TABLE>
BUSINESS AND OTHER CONNECTIONS OF SCM
Strong Capital Management, Inc. ("SCM") provides investment management services
to the Aggressive Growth Portfolio of the Registrant. SCM's primary business is
the management of the Strong group of mutual funds ("Strong Funds"). It also
serves as investment adviser to individual and institutional accounts. The
officers and directors of SCM and their business of a substantial nature during
the past two fiscal years are as follows:
<TABLE>
<CAPTION>
Position Business of a Substantial
Name with SCM Nature During Past Two Years
- ---- -------- ----------------------------
<S> <C> <C>
Richard S. Strong Director; Chairman; Chairman and Director of Strong Funds
Chief Investment Officer; Distributors, Inc.; Chairman and Director
Portfolio Manager of Strong Holdings, Inc.; Chairman and
Director of Fussville Development LLC;
Chairman and Director of Fussville Real
Estate Holding LLC; President, Treasurer
and Director of Heritage Reserve Holding
LLC; Chairman and Director of Heritage
Reserve Development Corporation; Chairman
and Director of Sherwood Development LLC,
Chairman and Director of Strong Service
Corporation.
Richard T. Weiss Director; Director of Strong Funds Distributors,
Portfolio Manager Inc.; Director of Strong Holdings, Inc.;
Director of Heritage Reserve Development
Corporation; Director of Strong Service
Corporation.
Thomas P. Lemke Senior Vice President; Chief Operating Officer, Vice President
Chief Operating Officer; and Chief Compliance Officer of Strong
Secretary; General Counsel; Funds Distributors, Inc.; Vice President
Chief Compliance Officer of Strong Holdings, Inc.; Vice President
of Fussville Development LLC; Vice
President of Fussville Real Estate Holding
LLC; Vice President of Heritage Reserve
Development Corporation; Vice President of
Sherwood Development LLC; and Vice
President of Strong Service Corporation.
Stephen J. Shenkenberg Vice President; Vice President, Deputy Chief Compliance
Assistant Secretary; Officer and Secretary of Strong Funds
Acting General Counsel; Distributors, Inc.; Secretary of Strong
Deputy Chief Compliance Holdings, Inc.; Secretary of Fussville
Officer Development LLC; Secretary of Fussville
Real Estate Holding LLC; Vice President
and Assistant Secretary of Heritage
Reserve Holding LLC; Secretary of Heritage
Reserve Development Corporation; Secretary
of Sherwood Development LLC; and Secretary
of Strong Service Corporation.
</TABLE>
-10-
<PAGE> 166
<TABLE>
<CAPTION>
Position Business of a Substantial
Name with SCM Nature During Past Two Years
- ---- -------- ----------------------------
<S> <C> <C>
Joseph R. DeMartine Senior Vice President; Vice President of Strong
Chief Marketing Officer; Funds Distributors, Inc.
Managing Director -
Strong Retail Services
Michael E. Fisher Senior Vice President; N/A
Managing Director -
Institutional Business Group
Kenneth M. Landis Senior Vice President; Until December 1996, was
Chief Information Officer Partner at Coopers &
Lybrand, Boston, MA.
John A. Flanagan Senior Vice President Until May 1997, was Partner
at Coopers & Lybrand, LLP,
New York, NY.
Jeffrey L. Kubik Senior Vice President Until June 1997, was
Director of Human Resources
at Allen-Bradley, Milwaukee,
WI.
Thomas M. Zoeller Senior Vice President; Treasurer and Chief Financial Officer of
Chief Financial Officer; Strong Funds Distributors, Inc.; Treasurer
Treasurer; Controller of Strong Holdings, Inc.; Treasurer of
Fussville Development LLC; Treasurer of
Fussville Real Estate Holding LLC;
Treasurer of Heritage Reserve Development
Corporation; Treasurer of Sherwood
Development LLC; and Treasurer of Strong
Service Corporation.
</TABLE>
Strong Holdings, Inc., a Wisconsin corporation, is a subsidiary of SCM, Strong
Funds Distributors, Inc., a Wisconsin corporation, is a subsidiary of Strong
Holdings, Inc. Heritage Reserve Development Corporation, a Wisconsin
corporation, is a subsidiary of Strong Holdings, Inc. Heritage Reserve Holding
LLC, a Wisconsin limited liability company, is a subsidiary of SCM. Fussville
Real Estate Holdings LLC, Fussville Development LLC and Sherwood Development
LLC, Wisconsin limited liability companies, are subsidiaries of Heritage Reserve
Holdings LLC. Strong Service Corporation is a subsidiary of Strong Holdings,
Inc.
BUSINESS AND OTHER CONNECTIONS OF PBA
Pilgrim Baxter & Associates, Ltd. ("PBA") provides investment management
services to the Core Growth Portfolios of the Registrant and of ONE Fund. PBA
also serves as investment adviser to the PBHG Funds, Inc., investment companies
registered under the 1940 Act. PBA also provides investment advisory services to
pension and profit-sharing plans, charitable institutions, corporations and
other investment companies. PBA is wholly owned by United Asset Management Corp.
The officers and directors of PBA and their business of a substantial nature
during the past two fiscal years are as follows:
<TABLE>
<CAPTION>
Position Business of a Substantial
Name with PBA Nature During Past Two Years
- ---- -------- ----------------------------
<S> <C> <C>
Harold J. Baxter Director, Chairman Director and Chairman of PBHG
and Chief Executive Funds, Inc.
Officer
Paul J. Hondros President and Chief Until September, 1997 was
Operating Officer President and Chief Executive
Officer of Fidelity Investment
Retail Group
Gary L. Pilgrim Director and Chief President of PBHG Funds, Inc.
Investment Officer
Eric C. Schneider Chief Financial Officer
and Treasurer
Amy S. Yuter Chief Compliance Officer N/A
John M. Zerr General Counsel and Formerly Vice President of
Secretary Delaware Management Group
</TABLE>
-11-
<PAGE> 167
BUSINESS AND OTHER CONNECTIONS OF RSIM
Robertson Stephens Investment Management, L.P. ("RSIM"), a wholly-owned
subsidiary of BankAmerica Corporation, provides investment management services
to the Growth & Income Portfolio of the Registrant. RSIM, a California limited
partnership, also serves as investment adviser to the Robertson Stephens group
of mutual funds as well as private and institutional asset pools. The principal
officers of RSIM and their business of a substantial nature during the past two
fiscal years are as follows:
<TABLE>
<CAPTION>
Position Business of a Substantial
Name with RSIM Nature During Past Two Years
- ---- --------- ----------------------------
<S> <C> <C>
G. Randy Hecht President Chief Operating Officer
and Executive Vice President
of Robertson Stephens Funds
Andrew P. Pilara, Jr. Chief Investment Portfolio Manager of Robertson
Officer Stephens Partners, Global Value
and Global Natural Resources
Funds
John L. Wallace Portfolio Manager N/A
James L. Callinan Portfolio Manager N/A
</TABLE>
BUSINESS AND OTHER CONNECTIONS OF STAR
Star Bank, N.A. ("Star") provides investment management services to the
Strategic Income, Stellar and Relative Value Portfolios of the Registrant. Star
is a national bank and trust organization which has a substantial business in
managing commingled funds including registered investment companies. Star also
serves as the custodian of the Registrant's assets other than those in the
Registrant's International and Global Contrarian Portfolios. The directors and
principal officers of Star and their business of a substantial nature during the
last two fiscal years are as follows:
<TABLE>
<CAPTION>
Position Business of a Substantial
Name with Star Nature During Past Two Years
- ---- --------- ----------------------------
<S> <C> <C>
Jerry A. Grundhofer Chairman, President, Chairman, President, Chief
Chief Executive Officer Executive Officer and Director of
and Director Star Banc Corp.
James R. Bridgeland, Jr. Director Partner of Taft, Stettinius &
Hollister
Laurance L. Browning, Jr. Director Formerly Vice Chairman, Emerson
Electric Co.
Victoria B. Buyniski Director President & Chief Executive
Officer, United Medical Resouces, Inc.
</TABLE>
<TABLE>
<CAPTION>
Position Business of a Substantial
Name with Star Nature During Past Two Years
- ---- --------- ----------------------------
<S> <C> <C>
Samuel M. Cassidy Director Formerly President & Chief
Executive Office of Star
V. Anderson Coombe Director Chairman of Wm. Powell Co.
John C. Dannemiller Director Chairman & Chief Executive
Officer of Bearings, Inc.
J.P. Hayden, Jr. Director Chairman & Chief Executive
Officer of The Midland Co.
Roger L. Howe Director Chairman of U.S. Precision Lens, Inc.
Thomas J. Klinedinst, Jr. Director Chairman, President, Chief Executive
Officer & Chief Operating Officer of
Thomas E. Wood, Inc.
Charles S. Mechem, Jr. Director Chairman, Cincinnati Bell
Daniel J. Meyer Director Chairman & Chief Executive
Officer of Cincinnati Milacron, Inc.
David B. O'Maley Director Chairman, President & Chief
Executive Officer of ONLI
O'dell M. Owens Director Senior VP, Franciscan Hospital System
Thomas E. Petry Director Chairman & Chief Executive Officer
of Eagle-Picher Industries, Inc.
Oliver W. Waddell Director Formerly Chairman of Star Banc
Corp. and Vice Chairman of Star
Daniel B. Benhase Executive Vice President N/A
Joseph A. Campanella Executive Vice President N/A
Richard K. Davis Executive Vice President N/A
S. Kay Geiger Executive Vice President N/A
Timothy J. Fogarty Executive Vice President N/A
Jerome C. Kohlhepp Executive Vice President N/A
Thomas J. Lakin Executive Vice President N/A
David M. Moffett Executive Vice President N/A
& Chief Financial Officer
David R. Noe Executive Vice President N/A
Andrew E. Randall Executive Vice President N/A
Wayne J. Shircliff Executive Vice President N/A
Stephen E. Smith Executive Vice President N/A
</TABLE>
BUSINESS AND OTHER CONNECTIONS OF FIC
Federated Investment Counseling and other subsidiaries of Federated Investors
serve as investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services to a
number of investment companies. With over $120 billion invested across more than
300 funds under management and/or administration by its subsidiaries, as of
December 31, 1997, Federated Investors is one of the largest mutual fund
investment managers in the United States. The Trustees of the Sub-Adviser, their
position with the Sub-Adviser, and in parentheses, their principal occupations
are as follows: John F. Donahue, Trustee (Trustee, Chairman and Chief Executive
Officer, Federated Investors; Director and Chairman, Federated Research Corp.;
Trustee and Chairman, Federated Advisers, Federated Management, Federated
Research, and Federated Global Research Corp.; Director, Federated Investors,
Inc. and Federated Investors Building Corp.; Trustee, Federated Investment
Counseling and Federated Investors Management Company; Chairman, Passport
Research, Ltd.); J. Christopher Donahue, Trustee, (Trustee, President, chief
Executive Officer and Chief Operating Officer, Federated Advisers, Federated
Global Research corp., Federated Management and Federated Research; Director,
President, Chief Executive Officer and Chief Operating Officer, Federated
Research Corp.; Trustee, President and Chief Operating Officer, Federated
Investors; Director, chairman and Chief Executive Officer, Federated Investors,
Inc.; President, Passport Research Ltd.; Trustee, Federated Investment
Counseling, Federated Investors Management Company, Federated Shareholder
Services Company, Federated Administrative Services, Federated International
Management, Ltd., Federated Shareholder Services, Retirement Plan Service
Company of America, Advanced Information Systems, Federated Services Company and
Federated Bank and Trust; Director, Federated Administrative Services, Inc.,
Federated Financial Services, Inc. Federated Investors Building Corp., FFSI
Insurance Agency, Inc. and FS Holdings, Inc.); John W. McGonigle, Trustee,
(Director and president, Federated Financial Services, Inc., FII Holdings, Inc.,
FFSI Insurance Agency, Inc.; Directors, President and Chief Executive Officer,
Federated Investors Building Corp.; Director, President, Chief Operating
Officer and Secretary, Federated Investors, Inc.; Trustee, Chairman, President
and Chief Executive Officer, Federated Shareholder Services; Director, Executive
Vice President and Secretary, Federated Investors, Inc. Trustee, Executive Vice
President and Secretary, Federated Investors; Trustee and President, Federated
Investors Management Company, Trustee, Federated Advisers, Federated Global
Research Corp., Federated Management, Federated Research, Federated
International Management, Ltd., Federated Investment Counseling; Director,
Federated Research Corp.); Mark D. Olson, Trustee (Trustee, Federated Advisers,
Federated Management, Federated Research, Federated Administrative Services,
Federated Investment Counseling, Advanced Information Systems, Federated
Investors, Federated Shareholder Services, Federated Shareholder Services
Company, Retirement Plan Service Company of America; Partner, Wilson, Halbrook &
Baynard, 107 W. Market Street, Georgetown, Delaware 19947). The business address
of the Trustees, with the exception of Mark D. Olson, is Federated Investors
Tower, Pittsburgh, Pennsylvania 15222-3779.
-12-
<PAGE> 168
The remaining Officers of FIC are:
John B. Fisher President
Executive Vice Presidents: William D. Dawson, III
Henry A. Frantzen
J. Thomas Madden
Senior Vice Presidents: Drew J. Collins
Johnathan C. Conley
Deborah A. Cunningham
Mark E. Durbiano
J. Alan Minteer
Susan M. Nason
Mary Jo Ochson
Robert J. Ostrowski
Charles A. Ritter
Vice Presidents: J. Scott Albrecht
Joseph M. Balestrino
Randall S. Bauer
David A. Briggs
Kenneth J. Cody
Alexandre de Bethmann
Michael P. Donnelly
Linda A. Duessel
Donald T. Ellenberger
Kathleen M. Foody-Malus
Thomas M. Franks
Edward C. Gonzales
James E. Grefenstette
Susan R. Hill
Stephen A. Keen
Robert K. Kinsey
Robert M. Kowit
Jeff A. Kozemchak
Steven Lehman
Marian R. Marinack
Sandra L. McInerney
Scott B. Schermerhorn
Frank Semack
Aash M. Shah
Christopher Smith
William F. Stotz
Tracy P. Stouffer
Edward J. Tiedge
Paige M. Wilhelm
Jolanta M. Wysocka
Assistant Vice Presidents: Todd A. Abraham
Stefanie L. Bachhuber
Arthur J. Barry
Micheal W. Casey
Robert E. Cauley
Salvatore A. Esposito
Donna M. Fabiano
John T. Gentry
William R. Jamison
Constantine Kartsonsas
Joseph M. Natoli
Keith J. Sabol
Michael W. Sirianni
Gregg S. Tenser
<PAGE> 169
Secretary: Stephen A. Keen
Treasurer: Thomas R. Donahue
Assistant Secretaries: Thomas R. Donahue
Christine I. McGonigle
Assistant Treasurer: Richard B. Fisher
The business address of each of the Officers of the investment adviser is
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779. These
individuals are also officers of a majority of the investment advisers to the
funds listed in Part B of this Registration Statement.
<PAGE> 170
PRINCIPAL UNDERWRITERS
Not Applicable
LOCATION OF ACCOUNTS AND RECORDS
The books and records required under Section 31(a) and Rules thereunder are
maintained and in the possession of the following persons:
(a) Journals and other records of original entry:
For those portfolios other than the International and Global
Contrarian Portfolio:
Star
425 Walnut Street
Cincinnati, Ohio 45202
and
American Data Services, Inc. ("ADS")
150 Motor Parkway, Suite 109
Hauppauge, NY 11788
For the International and Global Contrarian Portfolios:
Investors Fiduciary Trust Co. ("IFTC")
801 Pennsylvania Street
Kansas City, Missouri 64105
(b) General and auxiliary ledgers:
ADS and IFTC
(c) Securities records for portfolio securities:
ADS and IFTC
(d) Corporate charter (Articles of Incorporation), By-Laws and Minute
Books:
Ronald L. Benedict, Secretary
Ohio National Fund, Inc.
One Financial Way
Cincinnati, Ohio 45242
-14-
<PAGE> 171
(e) Records of brokerage orders:
The Adviser
(f) Records of other portfolio transactions:
The Adviser
(g) Records of options:
The Adviser
(h) Records of trial balances:
ADS and The Adviser
(i) Quarterly records of allocation of brokerage orders and
commissions:
The Adviser
(j) Records identifying persons or group authorizing portfolio
transactions:
The Adviser
(k) Files of advisory materials
The Adviser
MANAGEMENT SERVICES
Not Applicable
UNDERTAKINGS
-15-
<PAGE> 172
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, Ohio National Fund, Inc. certifies that it meets the
requirements of Securities Act Rule 485(b) for effectiveness of this
registration statement and has duly caused this post-effective amendment to the
registration statement to be signed on its behalf by the undersigned thereunto
duly authorized in the City of Cincinnati and the State of Ohio on the 27th day
of April, 1998.
OHIO NATIONAL FUND, INC.
By /s/John J. Palmer
------------------------------
John J. Palmer, President
Attest /s/Ronald L. Benedict
--------------------------------
Ronald L. Benedict, Secretary
Pursuant to the requirements of the Securities Act of 1933, this post-effective
amendment to the registration statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/John J. Palmer
- ------------------------- President and Director April 27, 1998
John J. Palmer (Principal Executive Officer)
/s/Dennis R. Taney
- ------------------------- Treasurer (Principal Financial April 27, 1998
Dennis R. Taney and Accounting Officer)
/s/Ronald L. Benedict
- ------------------------- Director April 27, 1998
Ronald L. Benedict
/s/George E. Castrucci
- ------------------------- Director April 27, 1998
George E. Castrucci
/s/Ross Love
- ------------------------- Director April 27, 1998
Ross Love
/s/George M. Vredeveld
- ------------------------- Director April 27, 1998
George M. Vredeveld
</TABLE>
<PAGE> 173
INDEX OF CONSENTS AND EXHIBITS
<TABLE>
<CAPTION>
Page Number in
Exhibit Sequential Numbering
Number Description System Where Located
- ------ ----------- --------------------
<S> <C> <C>
Consent of Ronald L. Benedict, Esq.
Consent of Jones & Blouch L.L.P.
Consent of KPMG Peat Marwick LLP
</TABLE>
(1)(e) Articles Supplementary of the Registrant, effective March
17, 1998.
(10)(c) Opinion and consent of Ronald L. Benedict, Esq., as to the
shares of Registrant's Small Cap Growth, High Income Bond,
Equity Income and Blue Chip Portfolios.
(13)(c) Investment letter for the initial subscription of stock of
the Registrant's Small Cap Growth, High Income Bond, Equity
Income and Blue Chip Portfolios.
<PAGE> 174
CONSENTS
<PAGE> 175
[Letterhead]
April 27, 1998
The Board of Directors
Ohio National Fund, Inc.
237 William Howard Taft Road
Cincinnati, Ohio 452l9
Re: Ohio National Fund, Inc. Registration Statement
File Nos. 2-67464 and 811-3015
Gentlemen:
The undersigned hereby consents to the use of my name under the caption of
"Legal Counsel" in the registration statement on Form N-lA of the above
captioned registrant.
As required by paragraph (b)(4) of Rule 485 under the Securities Act of 1933,
the registrant has certified that the above captioned post-effective amendment
to the Registrant's Form N-1A meets all the requirements for effectiveness
pursuant to paragraph (b) of that Rule. Having reviewed the amendment, the
undersigned confirms that the amendment does not contain any material that would
render it ineligible to become effective pursuant to paragraph (b).
Sincerely,
/s/ Ronald L. Benedict
----------------------
Ronald L. Benedict
Secretary and Legal Counsel
RLB/nh
<PAGE> 176
Jones & Blouch L.L.P.
Suite 405-West
1025 Thomas Jefferson St., N.W.
Washington, DC 20007
(202) 223-3500
April 27, 1998
Board of Directors
Ohio National Fund, Inc.
One Financial Way
Cincinnati, OH 45242
Re: Ohio National Fund, Inc.
Registration Statement on Form N-1A
File No. 2-67464
-----------------------------------
Dear Sirs:
We hereby consent to the reference to this firm under the caption
"Legal Counsel" in the Statement of Additional Information included in
Post-Effective Amendment No. 36 under the Securities Act of 1933 to the
Registration Statement for Ohio National Fund, Inc. (File No. 2-67464).
Very truly yours,
/s/ JONES & BLOUCH L.L.P.
--------------------
Jones & Blouch L.L.P.
<PAGE> 177
Independent Auditors' Consent
The Board of Directors
Ohio National Fund, Inc.:
We consent to the inclusion of our report included herein and to the reference
to our firm under the headings "Financial Highlights" in the prospectus and
"Experts" in the Statement of Additional Information.
KPMG Peat Marwick LLP
Cincinnati, Ohio
April 27, 1998
<PAGE> 1
ARTICLES SUPPLEMENTARY
OHIO NATIONAL FUND, INC.
These Articles Supplementary are filed for record in connection with
the classification of certain unissued and heretofore unclassified shares of
stock of Ohio National Fund, Inc., a Maryland corporation, as follows:
FIRST: Pursuant to resolutions duly adopted at a meeting held
on February 11, 1998, the Board of Directors has classified and
designated (a) ten million (10,000,000) of the unissued and heretofore
unclassified shares of the common stock of the corporation as
comprising the Emerging Growth class of the common stock of
corporation, (b) ten million (10,000,000) of the unissued and
heretofore unclassified shares of the common stock of the corporation
as comprising the High Income Bond class of the common stock of the
corporation, (c) ten million (10,000,000) of the unissued and
heretofore unclassified shares of the common stock of the corporation
as comprising the Equity Income class of the common stock of the
corporation, and (d) ten million (10,000,000) of the unissued and
heretofore unclassified shares of the common stock of the corporation
as comprising the Blue Chip class of the common stock of the
corporation, and has provided that all the preferences, rights, voting
powers, restrictions, limitations as to dividends, qualifications, and
terms and conditions of redemption of shares classified and designated
as each of the foregoing classes shall be the same as those of the
Equity, Money Market, Bond, Omni, International, Capital Appreciation,
Small Cap, Global Contrarian, Aggressive Growth, Core Growth, Growth &
Income, S&P 500 Index, Social Awareness, Strategic Income, Stellar and
Relative Value classes as set forth in Article SIXTH of the Articles of
Incorporation as amended and supplemented to date.
SECOND: The Emerging Growth, High Income Bond, Equity Income
and Blue Chip classes of common stock of the corporation have been so
classified by the Board of Directors under the authority contained in
Article FIFTH of the Articles of Incorporation.
WHEREFORE, Ohio National Fund, Inc. has caused these Articles
Supplementary to be executed in Montgomery, Ohio by its authorized
officers this 6th day of March, 1998.
<PAGE> 2
OHIO NATIONAL FUND, INC.
<TABLE>
<S> <C>
By Attest:
--------------------------------- --------------------------------
John J. Palmer, President Ronald L. Benedict, Secretary
</TABLE>
STATE OF OHIO )
) SS.
COUNTY OF HAMILTON )
I hereby certify that on the 6th day of March, 1998 before me, the subscriber, a
Notary Public of the State of Ohio in and for the County aforesaid, personally
appeared John J. Palmer, President of Ohio National Fund, Inc., a Maryland
corporation, and acknowledged the foregoing Articles Supplementary to be the act
and deed of said corporation, and that the matters set forth in said Articles
Supplementary with respect to authorization and approval are true to the best of
his knowledge, information and belief.
WITNESS my hand and Notarial Seal the day and year last above written.
----------------------------------
Notary Public
<PAGE> 1
[OHIO NATIONAL FINANCIAL SERVICES LETTERHEAD]
April 27, 1998
Board of Directors
Ohio National Fund, Inc.
One Financial Way
Cincinnati, Ohio 45242
Re: Registration of Ohio National Fund, Inc.
Small Cap Growth, High Income Bond,
Equity Income and Blue Chip Portfolio Shares
Opinion of Counsel
Gentlemen:
In my capacity as legal counsel for Ohio National Fund, Inc. (the "Fund"), I
have supervised the organization and lawful operation of the Fund and the
issuance of the Fund's capital shares, including those for the Fund's Small Cap
Growth, High Income Bond, Equity Income and Blue Chip Portfolios. In such
capacity I have also participated in the preparation of the Fund's Registration
Statement on Form N-1A and the filing of such Registration Statement under the
Securities Act of 1933 and with respect to the capital shares of the Fund,
including those of its Small Cap Growth, High Income Bond, Equity Income and
Blue Chip Portfolios.
Based upon such examination of law and such corporation records and other
documents as in my judgment are necessary or appropriate, I am of the opinion
that all necessary and required corporate proceedings have been taken in
connection with the issuance of the shares of the Small Cap Growth, High Income
Bond, Equity Income and Blue Chip Portfolios being registered, and all such
shares, when sold, will be legally issued, fully paid and nonassessable.
I hereby consent to the filing of this letter as an exhibit to the Registration
Statement for the Fund.
Sincerely,
/s/Ronald L. Benedict
Ronald L. Benedict
Secretary and Legal Counsel
RLB/nh
<PAGE> 1
[OHIO NATIONAL FINANCIAL SERVICES LETTERHEAD]
April 24, 1998
John J. Palmer, President
Ohio National Fund, Inc.
One Financial Way
Cincinnati, Ohio 45242
Re: Subscription of Capital Stock of
Ohio National Fund, Inc. Portfolios
Dear John:
The Ohio National Life Insurance Company, an Ohio domiciled mutual life insurer,
hereby subscribes to (i) 100 shares of the Small Cap Growth Portfolio of Ohio
National Fund, Inc. (the "Fund") for a consideration of $1,000, and (ii) 100
shares of the High Income Bond Portfolio of the Fund for a consideration of
$1,000, and (iii) 100 shares of the Small Cap Growth Portfolio of the Fund for a
consideration of $1,000, and (iv) 100 shares of the Blue Chip Portfolio of the
Fund for a consideration of $1,000. The consideration for such shares is hereby
tendered.
The undersigned subscriber declares its intentions to purchase the said shares
of the Fund for investment purposes only, with no present intention to resell,
redistribute or redeem such securities, subject however, to any requirements of
applicable law that the disposition of the undersigned's properly shall be and
remain in its control at all times.
THE OHIO NATIONAL LIFE INSURANCE COMPANY
By: /s/Joseph P. Brom
-----------------------------------------
Joseph P. Brom, Senior Vice President and
Chief Investment Officer
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000315754
<NAME> OHIO NATIONAL FUND, INC.
<SERIES>
<NUMBER> 01
<NAME> EQUITY
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 0
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 32.30
<PER-SHARE-NII> .51
<PER-SHARE-GAIN-APPREC> 5.24
<PER-SHARE-DIVIDEND> (.63)
<PER-SHARE-DISTRIBUTIONS> (1.98)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 35.44
<EXPENSE-RATIO> .67
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000315754
<NAME> OHIO NATIONAL FUND, INC.
<SERIES>
<NUMBER> 02
<NAME> MONEY MARKET
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 0
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .52
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.52)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> .43
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000315754
<NAME> OHIO NATIONAL FUND, INC.
<SERIES>
<NUMBER> 03
<NAME> BOND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 0
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 10.62
<PER-SHARE-NII> .71
<PER-SHARE-GAIN-APPREC> .23
<PER-SHARE-DIVIDEND> (.88)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.68
<EXPENSE-RATIO> .78
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000315754
<NAME> OHIO NATIONAL FUND, INC.
<SERIES>
<NUMBER> 04
<NAME> OMNI
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 0
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 19.40
<PER-SHARE-NII> .56
<PER-SHARE-GAIN-APPREC> 2.87
<PER-SHARE-DIVIDEND> (.69)
<PER-SHARE-DISTRIBUTIONS> (1.08)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 21.06
<EXPENSE-RATIO> .71
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000315754
<NAME> OHIO NATIONAL FUND, INC.
<SERIES>
<NUMBER> 05
<NAME> INTERNATIONAL
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 0
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 15.49
<PER-SHARE-NII> .28
<PER-SHARE-GAIN-APPREC> .08
<PER-SHARE-DIVIDEND> (.37)
<PER-SHARE-DISTRIBUTIONS> (2.09)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.39
<EXPENSE-RATIO> 1.22
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000315754
<NAME> OHIO NATIONAL FUND, INC.
<SERIES>
<NUMBER> 06
<NAME> CAPITAL APPRECIATION
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 0
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 12.93
<PER-SHARE-NII> .39
<PER-SHARE-GAIN-APPREC> 1.48
<PER-SHARE-DIVIDEND> (.46)
<PER-SHARE-DISTRIBUTIONS> (.81)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.53
<EXPENSE-RATIO> .95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000315754
<NAME> OHIO NATIONAL FUND, INC.
<SERIES>
<NUMBER> 07
<NAME> SMALL CAP
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 0
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 18.03
<PER-SHARE-NII> (.02)
<PER-SHARE-GAIN-APPREC> 1.54
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.83)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.72
<EXPENSE-RATIO> .94
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000315754
<NAME> OHIO NATIONAL FUND, INC.
<SERIES>
<NUMBER> 08
<NAME> GLOBAL CONTRARIAN
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 0
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 11.66
<PER-SHARE-NII> .29
<PER-SHARE-GAIN-APPREC> 1.03
<PER-SHARE-DIVIDEND> (.38)
<PER-SHARE-DISTRIBUTIONS> (.87)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.73
<EXPENSE-RATIO> 1.32
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000315754
<NAME> OHIO NATIONAL FUND, INC.
<SERIES>
<NUMBER> 09
<NAME> AGGRESSIVE GROWTH
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 0
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 10.03
<PER-SHARE-NII> (.05)
<PER-SHARE-GAIN-APPREC> 1.29
<PER-SHARE-DIVIDEND> (.14)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.09
<EXPENSE-RATIO> .97
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000315754
<NAME> OHIO NATIONAL FUND, INC.
<SERIES>
<NUMBER> 10
<NAME> CORE GROWTH
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 0
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (.02)
<PER-SHARE-GAIN-APPREC> (.30)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.68
<EXPENSE-RATIO> 1.11
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000315754
<NAME> OHIO NATIONAL FUND, INC.
<SERIES>
<NUMBER> 11
<NAME> GROWTH & INCOME
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 0
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .11
<PER-SHARE-GAIN-APPREC> 3.52
<PER-SHARE-DIVIDEND> (.11)
<PER-SHARE-DISTRIBUTIONS> (.67)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.85
<EXPENSE-RATIO> .95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000315754
<NAME> OHIO NATIONAL FUND, INC.
<SERIES>
<NUMBER> 12
<NAME> S&P 500 INDEX
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 0
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (.45)
<PER-SHARE-GAIN-APPREC> (2.70)
<PER-SHARE-DIVIDEND> (.45)
<PER-SHARE-DISTRIBUTIONS> (.91)
<RETURNS-OF-CAPITAL> (.06)
<PER-SHARE-NAV-END> 11.73
<EXPENSE-RATIO> .52
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000315754
<NAME> OHIO NATIONAL FUND, INC.
<SERIES>
<NUMBER> 13
<NAME> SOCIAL AWARENESS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 0
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .09
<PER-SHARE-GAIN-APPREC> 2.47
<PER-SHARE-DIVIDEND> (.07)
<PER-SHARE-DISTRIBUTIONS> (1.09)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.40
<EXPENSE-RATIO> .95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000315754
<NAME> OHIO NATIONAL FUND, INC.
<SERIES>
<NUMBER> 14
<NAME> STRATEGIC INCOME
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 0
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .71
<PER-SHARE-GAIN-APPREC> .13
<PER-SHARE-DIVIDEND> (.67)
<PER-SHARE-DISTRIBUTIONS> (.01)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.16
<EXPENSE-RATIO> 1.30
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000315754
<NAME> OHIO NATIONAL FUND, INC.
<SERIES>
<NUMBER> 15
<NAME> STELLAR
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 0
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .32
<PER-SHARE-GAIN-APPREC> .64
<PER-SHARE-DIVIDEND> (.31)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.65
<EXPENSE-RATIO> 1.54
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000315754
<NAME> OHIO NATIONAL FUND, INC.
<SERIES>
<NUMBER> 16
<NAME> RELATIVE VALUE
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 0
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .16
<PER-SHARE-GAIN-APPREC> 2.66
<PER-SHARE-DIVIDEND> (.14)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.68
<EXPENSE-RATIO> 1.18
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
