<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. 40 / X /
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
Amendment No. 25
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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
Montgomery, 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, 2000 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
PART A.
INFORMATION REQUIRED IN A PROSPECTUS
<PAGE> 3
OHIO NATIONAL FUND, INC.
One Financial Way
Montgomery, Ohio 45242
Telephone 1-800-366-6654
Ohio National Fund, Inc. is a mutual fund with 21 separate investment
portfolios. The Fund's investment adviser is Ohio National Investments, Inc.
(the "Adviser"). Fund shares are offered only to separate accounts of The Ohio
National Life Insurance Company ("ONLI") and Ohio National Life Assurance
Corporation ("ONLAC"). The separate accounts use Fund shares as the underlying
investments for variable annuities issued by ONLI and variable life insurance
contracts issued by ONLAC. Some variable contracts do not permit allocations to
all the portfolios. Your variable contract prospectus identifies the portfolios
available under your contract.
The Fund's portfolios are:
<TABLE>
<CAPTION>
SEE
PAGE
----
<S> <C>
EQUITY PORTFOLIO 3
MONEY MARKET PORTFOLIO 4
BOND PORTFOLIO 6
OMNI PORTFOLIO 7
INTERNATIONAL PORTFOLIO 8
INTERNATIONAL SMALL COMPANY PORTFOLIO 9
CAPITAL APPRECIATION PORTFOLIO 10
SMALL CAP PORTFOLIO 11
AGGRESSIVE GROWTH PORTFOLIO 12
CORE GROWTH PORTFOLIO 13
GROWTH & INCOME PORTFOLIO 14
</TABLE>
<TABLE>
<CAPTION>
SEE
PAGE
----
<S> <C>
CAPITAL GROWTH PORTFOLIO 15
S&P 500 INDEX PORTFOLIO 16
HIGH INCOME BOND PORTFOLIO 18
EQUITY INCOME PORTFOLIO 19
BLUE CHIP PORTFOLIO 20
SOCIAL AWARENESS PORTFOLIO 21
STRATEGIC INCOME PORTFOLIO 22
FIRSTAR GROWTH & INCOME PORTFOLIO 24
RELATIVE VALUE PORTFOLIO 25
NASDAQ 100 INDEX PORTFOLIO 26
</TABLE>
- --------------------------------------------------------------------------------
THIS PROSPECTUS SETS FORTH CONCISELY THE INFORMATION ABOUT THE FUND YOU NEED TO
KNOW BEFORE YOU PURCHASE AN OHIO NATIONAL VARIABLE CONTRACT. KEEP THIS
PROSPECTUS FOR FUTURE REFERENCE.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
MAY 1, 2000
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Policies and Primary
Risks................................ 2
Risks................................ 2
Risks of Certain Investments........... 27
Small Capitalization Companies....... 27
Foreign Investments.................. 27
Convertible Securities............... 28
Hedging Techniques................... 28
Options.............................. 29
Futures, Options on Futures and
Options on Indexes................ 29
Foreign Currency Hedging
Transactions...................... 30
Lower-Rated Debt Securities.......... 31
S&P Lower Bond Ratings............... 32
Special Situations................... 33
Short Sales.......................... 33
Real Estate Securities............... 33
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Other Investment Risks................. 34
Repurchase Agreements................ 34
Warrants............................. 35
Restricted and Illiquid Securities... 35
Zero-Coupon and Pay-in-kind Debt
Securities........................ 35
Reverse Repurchase Agreements........ 35
Leveraging (Borrowing for Investment
Purposes)......................... 36
Securities Lending................... 36
Mixed and Shared Funding............. 37
Fund Management........................ 37
Investment Advisory Fees............. 37
Management of Portfolios............. 38
Subadvisory Fees..................... 42
Purchase and Redemption of Fund
Shares............................... 43
Dividends, Distributions and Taxes..... 43
Financial Highlights of Ohio National
Fund, Inc............................ 44
Additional Information................. 52
</TABLE>
INVESTMENT POLICIES AND PRIMARY RISKS
Each portfolio has its own investment objective which it seeks through its
separate investment policies. The differences in objectives and policies among
the portfolios affect the risks and returns of each portfolio. We can never be
sure that any portfolio will meet its investment objectives.
The investment objectives of each portfolio discussed below and in the Statement
of Additional Information may only be changed if approved by a majority vote of
that portfolio's shareholders. Each portfolio may invest 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,
Capital Growth and Strategic Income portfolios result in correspondingly higher
brokerage costs for 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. It also defines the debt ratings of
nationally recognized statistical rating organizations. It also gives
information about portfolio turnover rates for each portfolio.
RISKS
YOU COULD LOSE MONEY, OR HAVE LESS RETURN THAN THE MARKET IN GENERAL, IN ANY OF
THE PORTFOLIOS. ALL OF THE PORTFOLIOS ARE SUBJECT TO THESE RISKS:
Market risk refers to how much a security's price is likely to change in
response to changes in conditions in securities markets in general. Markets tend
to move in cycles with periods of rising prices and periods of falling prices.
They can decline for many reasons, including adverse political or economic
developments here or abroad, changes in investor psychology, or heavy
institutional selling. In the case of debt securities, changes in the overall
level of interest rates affect the security's price.
2
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Financial risk refers to the ability of an issuer of a debt security, such as a
bond, to pay principal and/or interest on that security when due. It also refers
to the earnings stability and overall financial soundness of an issuer of an
equity security.
Sector risk is the possibility that a certain group or category of securities
may not perform as well as companies in other sectors or the market as a whole.
When a portfolio concentrates its investments in a limited range of securities,
it is more susceptible to any adverse economic, business or other developments
generally affecting companies in that sector.
Additional significant risks affect each portfolio to the extent it might invest
in certain kinds of securities. These include the following, which are further
described later in the prospectus:
Small capitalization companies generally have a market capitalization of less
than $1.5 billion. Their stock prices tend to be more volatile than those of
larger, better established companies and smaller companies are sometimes more
subject to failure. See page 29.
Foreign investments involve risks not normally encountered with domestic
securities. These include political, regulatory and economic instability in some
countries, changes in currency rates and market inefficiencies. See page 29.
Convertible securities can be exchanged for or converted into a company's common
stock. In addition to being subject to the risks of investing in stock, the
value of these securities can be adversely affected by fixed income market
forces such as rising interest rates. See page 30.
Hedging techniques use options, futures contracts and other derivative
investments to attempt to reduce the risk of loss from falling stock prices or
lower foreign currency valuations, increased interest rates or other adverse
market developments. There can be no assurance that a hedging technique will
work as intended. Portfolio performance might also be diminished by the added
cost of the derivative investments. See "Hedging Techniques," "Options,"
"Futures, Options on Futures and Options on Indexes," and "Foreign Currency
Hedging Transactions" beginning on page 31.
Lower rated debt securities, sometimes called "junk bonds," are bonds rated
below "investment grade." These securities have investment characteristics
similar to common stock in that their values are sensitive to changes in the
issuer's financial condition. Lower rated bond issuers are sometimes unable to
pay interest and principal on time. See page 33.
Special situations arise when a portfolio manager believes that a development in
a company or its market might have a significant favorable influence on the
company's securities prices. If the development does not meet those
expectations, the price of the company's securities could lag the overall market
and reduce portfolio performance. See page 35.
Short sales occur when a portfolio sells a security it does not then own. While
this can profit the portfolio if the price of the security declines before the
delivery date, any increase in the security's price will likely result in a loss
to the portfolio. See page 35.
Real estate securities may include the risks of direct ownership of real estate.
These include declines in real estate values, changing economic conditions and
increasing interest rates. See page 35.
Other investment risks that might be encountered by a portfolio are described
beginning on page 36.
EQUITY PORTFOLIO
The objective of the Equity portfolio is long-term growth of capital. This
portfolio invests primarily in common stocks or securities that may be converted
into, or carry the right to buy, common stocks. It may also invest in
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<PAGE> 6
preferred stocks, debt securities and readily marketable mortgage notes. This
portfolio invests primarily in securities listed on national securities
exchanges. From time to time it may also purchase securities traded in the
over-the-counter market and foreign securities.
This portfolio is managed by Legg Mason Fund Adviser, Inc. ("Legg Mason") under
a subadvisory agreement with the Adviser.
Legg Mason seeks long-term growth of capital using the "value" approach to
investing. It purchases securities that appear to be under-priced and thus
appear to offer above-average potential for capital appreciation. It then tends
to hold those companies for a long time in order to reduce portfolio turnover
and brokerage expenses.
Primary risks: This portfolio's primary risks are the market, financial and
sector risks described above.
The following bar chart and table indicate the risks of investing in the Equity
portfolio. They show changes in the portfolio's performance for each of the last
ten years and the portfolio's average annual returns for the last one year, five
years and ten years compared to those of a broad-based securities market index.
The portfolio's past performance does not necessarily indicate how it will
perform in the future. Variable contract charges are not reflected in the chart
or table. If they were, the returns would be less than those shown. Note that
the Adviser managed this portfolio until August 1999.
<TABLE>
<CAPTION>
<S> <C>
90 -3.86%
91 20.18%
92 7.54%
93 14.09%
94 0.25%
95 27.20%
96 18.35%
97 18.17%
98 5.72%
99 19.87%
</TABLE>
During the period shown in the bar chart, the portfolio's highest return for a
quarter was 19.07%. That was the quarter ending on December 31, 1999. The lowest
return for a quarter was -12.47%. That was the quarter ending on September 30,
1998
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS ONE FIVE TEN
AS OF DECEMBER 31, 1999 YEAR YEARS YEARS
---------------------------- ----- ----- -----
<S> <C> <C> <C>
Equity Portfolio 19.87% 17.65% 12.35%
S&P 500 Index 21.04% 28.54% 18.20%
</TABLE>
MONEY MARKET PORTFOLIO
The objective of the Money Market portfolio is maximum current income consistent
with preservation of principal and liquidity. This portfolio invests in high
quality money market instruments, including:
- - obligations maturing in 13 months or less and issued or guaranteed as to
principal and interest by the U.S. government, or any agency or authority
controlled or supervised by and acting as an instrumentality of the U.S.
government as authorized by Congress;
4
<PAGE> 7
- - 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;
- - 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 below;
- - repurchase agreements with respect to any of these obligations;
- - 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; and
- - 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 portfolio may only invest in instruments that the Board of Directors
determines present minimal credit risks. Generally, this portfolio holds its
money market securities until maturity. They are then redeemed. The portfolio
normally will not realize any gain or loss on these securities. There may be
times when it is necessary or appropriate to sell securities before they mature
in order to shorten the portfolio's average maturity. This might be necessary to
meet redemptions or because of a reevaluation of an issuer's credit-worthiness.
Primary risks: The portfolio's rate of return varies as short-term interest
rates vary. The rate of return will also be affected by other factors such as
the portfolio's operating expenses and any sales of portfolio securities before
they mature. Generally, investment in this portfolio involves less market and
financial risk than an investment in any other portfolio of the Fund. However,
it is possible to lose money in this portfolio.
An investment in the Money Market portfolio is not a deposit of any bank. It is
not insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency.
The following bar chart and table indicate the risks of investing in the Money
Market portfolio. They show changes in the portfolio's performance for each of
the last ten years and the portfolio's average annual returns for the last one
year, five years and ten years. The portfolio's past performance does not
necessarily indicate how it will perform in the future. Variable contract
charges are not reflected in the chart or table. If they were, the returns would
be less than those shown.
5
<PAGE> 8
<TABLE>
<CAPTION>
<S> <C>
90 7.89%
91 5.54%
92 3.17%
93 2.74%
94 4.00%
95 5.62%
96 5.17%
97 5.37%
98 5.39%
99 5.02%
</TABLE>
During the period shown in the bar chart, the portfolio's highest return for a
quarter was 1.94%. That was the quarter ending on December 31, 1990. The lowest
return for a quarter was 0.64%. That was the quarter ending on June 30,1993. The
Money Market Portfolio's seven day yield ending December 31, 1999 was 5.72%.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS ONE FIVE TEN
AS OF DECEMBER 31, 1999 YEAR YEARS YEARS
---------------------------- ---- ----- -----
<S> <C> <C> <C>
Money Market Portfolio 5.02% 5.31% 4.98%
</TABLE>
BOND PORTFOLIO
The objective of the Bond portfolio is a high level of income and opportunity
for capital appreciation consistent with preservation of capital. Investments
are primarily in intermediate-term and long-term fixed-income securities. These
generally have a remaining maturity of 5 years or more when purchased.
At least 80% of the portfolio's assets (other than cash and U.S. government
securities) will be invested in:
- - 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
- - corporate debt securities used for short-term investment and limited to the
top grade of these two rating services.
Up to 20% of the portfolio's assets may be invested in:
- - securities having high potential for capital appreciation;
- - preferred stocks, convertible securities and securities carrying warrants to
purchase equity securities; and
- - 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 million.
This portfolio does not invest in common stocks directly. It may retain for
reasonable periods of time up to 10% of its total assets in common stocks
acquired by converting debt securities or exercising warrants acquired with debt
securities.
This portfolio normally includes debt securities with varying maturities
selected from various industries, depending upon the Adviser's evaluation of
current and anticipated market conditions.
Primary risks: The market values of debt instruments vary depending upon their
respective yields. Therefore, the portfolio's net asset value per share changes
from time to time as the general level of interest rates changes. Consequently,
an investment in this portfolio involves substantial market risk, but should
involve less financial risk than an investment in any of the portfolios that
invest primarily in common stocks.
6
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The following bar chart and table indicate the risks of investing in the Bond
portfolio. They show changes in the portfolio's performance for each of the past
ten years and the portfolio's average annual returns for the last one year, five
years and ten years compared to those of a broad based securities market index.
The portfolio's past performance does not necessarily indicate how it will
perform in the future. Variable contract charges are not reflected in the chart
or table. If they were, the returns would be less than those shown.
<TABLE>
<CAPTION>
<S> <C>
90 7.82%
91 12.96%
92 7.54%
93 10.69%
94 -3.84%
95 18.90%
96 3.71%
97 9.28%
98 5.22%
99 0.58%
</TABLE>
During the period shown in the bar chart, the portfolio's highest return for a
quarter was 6.68%. That was the quarter ending on June 30, 1995. The lowest
return for a quarter was -3.46% That was the quarter ending on March 31, 1994.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS ONE FIVE TEN
AS OF DECEMBER 31, 1999 YEAR YEARS YEARS
---------------------------- ---- ----- -----
<S> <C> <C> <C>
Bond Portfolio 0.58% 7.35% 7.11%
Lehman Brothers Government/Corporate 0.39% 7.09% 7.26%
Bond Index -- Intermediate
</TABLE>
OMNI PORTFOLIO
The objective of the Omni portfolio is a high level of long-term total return
consistent with preservation of capital by investing in stocks, bonds and money
market instruments. Total rate of return consists of current income including
dividends, interest and discount accruals and capital appreciation.
The Adviser adjusts the mix of investments from time to time among the various
market sectors (stocks, bonds and money market instruments) to capitalize on
perceived variations in return potential of changing market and economic
conditions. Sometimes the portfolio may not be invested in all three of the
market sectors.
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 stock sector, the Adviser seeks long-term growth of
capital. Current income is a secondary goal for the stock sector. Within the
bond sector, the Adviser seeks a high level of income. Capital appreciation,
consistent with capital preservation is a secondary goal of the bond sector.
Within the money market sector, the Adviser seeks maximum current income
consistent with the preservation of principal and liquidity.
Primary risks: Investment in this portfolio involves all of the risks associated
with investing in portfolios concentrating in each of the three sectors. There
is also the risk that at any given time this portfolio will invest too much or
too little in each sector. On the other hand, since the risk factors affecting
each sector are different, the risks of each sector often offset one another. As
a result, this portfolio is sometimes less volatile than a portfolio investing
only in stocks or bonds.
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<PAGE> 10
The following bar chart and table indicate the risks of investing in the Omni
portfolio. They show changes in the portfolio's performance for each of the past
ten years and the portfolio's average annual returns for the last one year, five
years and ten years compared to those of a broad-based securities market index.
The portfolio's past performance does not necessarily indicate how it will
perform in the future. Variable contract charges are not reflected in the chart
or table. If they were, the returns would be less than those shown.
<TABLE>
<CAPTION>
<S> <C>
90 1.91%
91 18.15%
92 8.60%
93 12.85%
94 -0.53%
95 22.75%
96 15.54%
97 18.15%
98 4.53%
99 11.36%
</TABLE>
During the period shown in the bar chart, the portfolio's highest return for a
quarter was 10.78%. That was the quarter ending on June 30, 1997. The lowest
return for a quarter was -16.16% That was the quarter ending on September 30,
1998.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS ONE FIVE TEN
AS OF DECEMBER 31, 1999 YEAR YEARS YEARS
---------------------------- ----- ----- -----
<S> <C> <C> <C>
Omni Portfolio 11.36% 14.30% 11.09%
S&P 500 Index 21.04% 28.54% 18.20%
</TABLE>
INTERNATIONAL PORTFOLIO
The objective of the International portfolio is total return on assets by
investing primarily in securities of foreign companies. A substantial part of
the portfolio's assets are stocks of established companies in economically
developed countries. Normally, most of its investments are in stocks denominated
in foreign currencies. It may invest in depository receipts. It may invest in
investment grade fixed-income securities and foreign government securities. It
may enter into forward commitments and foreign currency transactions. It may
maintain reserves in foreign or U.S. money market instruments. This portfolio is
managed by Federated Global Investment Management Corp. ("Federated Global")
under a subadvisory agreement with the Adviser.
In selecting portfolio securities, Federated Global uses its own quantitative
process to rank the future performance potential of companies. Federated Global
evaluates each company's earnings potential in light of its current valuation.
It then evaluates management quality. It may examine a company's suppliers,
customers and competitors. It also reviews the company's financial statements
and earnings forecasts. It evaluates the sustainability of the company's current
growth trends.
This portfolio enables you to diversify your investment by participating in
developed foreign economies and markets. If you also invest in domestic
portfolios, the International portfolio may reduce the overall volatility of
your investments because foreign countries often have business cycles, economic
policies and securities markets that do not move in harmony with those in the
United States.
Primary risks: In addition to financial risk, market risk and sector risk, this
portfolio is subject to the special risks of Foreign Investments described
following these brief summaries of each portfolio's investment policies. Those
risks
8
<PAGE> 11
include political, regulatory and economic instability in some countries,
changes in currency rates and market inefficiencies.
The following bar chart and table indicate the risks of investing in the
International portfolio. They show changes in the portfolio's performance for
each of the complete calendar years since the portfolio's inception and the
portfolio's average annual returns for the last one year, five years and since
inception compared to those of a broad-based market index. The portfolio's past
performance does not necessarily indicate how it will perform in the future.
Variable contract charges are not reflected in the chart or table. If they were,
the returns would be less than those shown. Note that the subadviser for this
portfolio was Societe Generale Asset Management Corp. until the end of 1998.
<TABLE>
<S> <C>
94 8.07%
95 12.10%
96 14.48%
97 2.11%
98 3.88%
99 67.40%
</TABLE>
During the period shown in the bar chart, the portfolio's highest return for a
quarter was 57.21%. That was the quarter ending on December 31, 1999. The lowest
return for a quarter was -11.05% That was the quarter ending on September 30,
1998.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS ONE FIVE SINCE
AS OF DECEMBER 31, 1999 YEAR YEARS 4/30/93
---------------------------- ----- ----- -------
<S> <C> <C> <C>
International Portfolio 67.40% 17.91% 18.39%
Morgan Stanley Capital International 26.96% 12.83% 12.02%
Europe, Australia, Far East Index
</TABLE>
INTERNATIONAL SMALL COMPANY PORTFOLIO
The objective of the International Small Company portfolio is long-term growth
of capital by investing primarily in equity securities of foreign companies
having a market capitalization at time of purchase of $1.5 billion or less. Any
income received from investments is incidental. The portfolio invests in
companies located throughout the world, in both developed economies and emerging
markets. Investments will also include interests in entities such as limited
partnerships, limited liability companies and business trusts. These foreign
entities often issue securities comparable to common or preferred stock. This
portfolio is managed by Federated Global under a subadvisory agreement with the
Adviser.
Investments in foreign small companies enable you to further diversify the
investments you have in foreign markets. Price changes of small companies do not
always follow those of larger companies.
Primary risks: Generally, the prices of small company securities tend to be more
volatile and present more risk than those of larger companies. This is
especially true in the short term. Foreign investment risks include political,
regulatory and economic instability in some countries, changes in currency rates
and market inefficiencies. In addition to financial risk, market risk and sector
risk, this portfolio is subject to the special risks of Foreign
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<PAGE> 12
Investments and Small Capitalization Companies described following these brief
summaries of each portfolio's investment policies.
In selecting portfolio securities, Federated Global uses its own quantitative
process to rank the future performance potential of companies. Federated Global
evaluates each company's earnings potential in light of its current valuation.
It then evaluates management quality. It may examine a company's suppliers,
customers and competitors. It also reviews the company's financial statements
and earnings forecasts. It evaluates the sustainability of the company's current
growth trends.
The following bar chart and table indicate the risks of investing in the
International Small Company portfolio. They show changes in the portfolio's
performance for each of the complete calendar years since the portfolio's
inception and the portfolio's average annual returns for the last year and since
inception compared to those of a broad-based market index. The portfolio's past
performance does not necessarily indicate how it will perform in the future.
Variable contract charges are not reflected in the chart or table. If they were,
the returns would be less than those shown. Note that the subadviser for this
portfolio was Societe Generale Asset Management Corp. until the end of 1998. In
1999, the portfolio's investment policies were substantially changed and its
name was changed from the "Global Contrarian" portfolio.
<TABLE>
<S> <C>
96 10.52%
97 11.67%
98 3.53%
99 108.51%
</TABLE>
During the period shown in the bar chart, the portfolio's highest return for a
quarter was 46.35%. That was the quarter ending on December 31, 1999. The lowest
return for a quarter was -11.62% That was the quarter ending on September 30,
1998.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS ONE SINCE
AS OF DECEMBER 31, 1999 YEAR 3/31/95
---------------------------- ------ -------
<S> <C> <C>
International Small Company Portfolio 108.51% 25.53%
Morgan Stanley Capital International
Europe, Australia, Far East Index 26.96% 13.11%
</TABLE>
CAPITAL APPRECIATION PORTFOLIO
The objective of the Capital Appreciation portfolio is to seek long-term growth
of capital. Current income is a secondary objective. This portfolio is managed
by Jennison Associates LLC ("Jennison") under a subadvisory agreement with the
Adviser.
This portfolio invests primarily in common stocks of established companies with
either current or emerging earnings growth not fully appreciated or recognized
by the market. Jennison seeks companies having an attractive trade-off between
good earnings, growth prospects and low valuation characteristics.
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<PAGE> 13
The portfolio's focus is on mid-sized and large companies with two distinct
characteristics:
(1) Stocks of companies out of favor with investors, but expected by
Jennison to experience a dynamic earnings cycle over the next 12 to 18
months because of -
- corporate restructuring
- new product development
- industry cycle turns
- management's increased focus on shareholder value and/or
(2) Companies currently delivering good growth characteristics but which
are, in Jennison's view, under-priced by the market because of --
- short-term earnings disappointments relative to the market's
expectations and/or
- market uncertainty that the company can sustain its current
earnings growth.
Primary risks: In addition to market risk, described above, a particular risk of
this portfolio's approach is that some stocks that Jennison perceives to be
under-valued by the market may not sufficiently appreciate in price during the
time those stocks are held by the portfolio.
The following bar chart and table indicate the risks of investing in the Capital
Appreciation portfolio. They show changes in the portfolio's performance for
each of the complete calendar years since the portfolio's inception and the
portfolio's average annual returns for the last year and since inception
compared to those of a broad-based market index. The portfolio's past
performance does not necessarily indicate how it will perform in the future.
Variable contract charges are not reflected in the chart or table. If they were,
the returns would be less than those shown. Note that the subadviser for this
portfolio was T. Rowe Price Associates, Inc. until the end of 1999.
<TABLE>
<S> <C>
95 20.90%
96 14.13%
97 15.19%
98 5.91%
99 6.46%
</TABLE>
During the period shown in the bar chart, the portfolio's highest return for a
quarter was 10.57%. That was the quarter ending on June 30, 1999. The lowest
return for a quarter was -2.64% That was the quarter ending on September 30,
1998.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS ONE FIVE SINCE
AS OF DECEMBER 31, 1999 YEAR YEARS 5/1/94
- ---------------------------- ------ ------ ------
<S> <C> <C> <C>
Capital Appreciation
Portfolio 6.46% 13.01% 12.27%
S&P 500 Index 21.04% 28.54% 25.66%
</TABLE>
SMALL CAP PORTFOLIO
The objective of the Small Cap portfolio is maximum capital growth. The
portfolio invests primarily in the common stocks of small and medium sized
companies. Ordinarily, these companies are not listed on a national securities
11
<PAGE> 14
exchange but will be traded over the counter. Under normal market conditions, at
least 65% of the portfolio's assets invested in common stocks of
small-capitalization companies. However it may also invest in larger companies
if they appear to present better prospects for capital growth. This portfolio
may invest up to 30% of its assets in foreign securities. This portfolio is
managed by Founders Asset Management LLC ("Founders") under a subadvisory
agreement with the Adviser.
Investments in both this portfolio and one or more portfolios investing
primarily in larger companies enable you to diversify your investments. Price
changes of small companies do not always follow those of larger companies.
Primary risks: Generally, the prices of small company securities tend to be more
volatile and present more risk than those of large companies. This is especially
true in the short term. These special risks of investing in Small Capitalization
Companies are described following these brief summaries of each portfolio's
investment policies.
The following bar chart and table indicate the risks of investing in the Small
Cap portfolio. They show changes in the portfolio's performance for each of the
complete calendar years since the portfolio's inception and the portfolio's
average annual returns for the last year and since inception compared to those
of a broad-based market index. The portfolio's past performance does not
necessarily indicate how it will perform in the future. Variable contract
charges are not reflected in the chart or table. If they were, the returns would
be less than those shown.
<TABLE>
<S> <C>
95 31.15%
96 16.06%
97 8.47%
98 10.57%
99 106.46%
</TABLE>
During the period shown in the bar chart, the portfolio's highest return for a
quarter was 44.53%. That was the quarter ending on December 31, 1999. The lowest
return for a quarter was -27.98% That was the quarter ending on September 30,
1998.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS ONE FIVE SINCE
AS OF DECEMBER 31, 1999 YEAR YEARS 5/1/94
- ---------------------------- -------- ------ ------
<S> <C> <C> <C>
Small Cap Portfolio 106.46% 31.13% 31.40%
Russell 2000 Index 21.26% 16.70% 14.65%
</TABLE>
AGGRESSIVE GROWTH PORTFOLIO
The objective of the Aggressive Growth portfolio is long-term capital growth.
The portfolio invests in a variety of securities that the subadviser believes
have attractive growth opportunities. The portfolio normally emphasizes equity
securities selected for their growth potential. However, it may invest in any
type of security that the subadviser believes has the potential for capital
appreciation. The portfolio may invest most or all of its assets in common
stocks, preferred stocks, securities that are convertible into common or
preferred stocks, and warrants. At times, the portfolio may have a substantial
exposure to foreign securities. The portfolio may also invest up to 35% of its
assets in non-investment grade bonds (known as junk bonds). The portfolio may
also invest in options, futures, forwards or other
12
<PAGE> 15
types of derivatives for hedging purposes or to seek to enhance total return, or
in special situations. This portfolio is managed by Janus Capital Corporation
("Janus") under a subadvisory agreement with the Adviser.
Janus generally uses a "bottom up" approach in selecting investments for the
portfolio. Janus seeks to identify individual companies with earnings growth
potential that may not yet be recognized by the market at large. It makes this
assessment by looking at companies one at a time, regardless of size, country of
organization, place of business activities or other similar selection criteria.
Janus does not try to allocate foreign investments among particular countries or
geographic regions. Realization of income is not a significant consideration in
choosing the portfolio's investments.
Primary risks: The portfolio's main risk is that the value of its investments
might decrease in response to the activities of individual companies or in
response to general market and/or economic conditions. The special risks of
investing in Small Capitalization Companies, Foreign Investments, Options,
Futures and Options on Futures, Lower-Rated Debt Securities, and Special
Situations are described following these brief summaries of each portfolio's
investment policies.
The following bar chart and table indicate the risks of investing in the
Aggressive Growth portfolio. They show changes in the portfolio's performance
for each of the complete calendar years since the portfolio's inception and the
portfolio's average annual returns for the last year and since inception
compared to those of a broad-based market index. The portfolio's past
performance does not necessarily indicate how it will perform in the future.
Variable contract charges are not reflected in the chart or table. If they were,
the returns would be less than those shown.
NOTE THAT THE SUBADVISER FOR THIS PORTFOLIO WAS STRONG CAPITAL MANAGEMENT, INC.
UNTIL THE END OF 1999.
<TABLE>
<S> <C>
96 -0.65%
97 12.53%
98 7.84%
99 5.76%
</TABLE>
During the period shown in the bar chart, the portfolio's highest return for a
quarter was 26.19%. That was the quarter ending on December 31, 1999. The lowest
return for a quarter was -17.01% That was the quarter ending on September 30,
1998.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS ONE SINCE
AS OF DECEMBER 31, 1999 YEAR 3/31/95
---------------------------- ----- -------
<S> <C> <C>
Aggressive Growth Portfolio 5.76% 11.00%
Russell 2500 Index 24.15% 18.94%
</TABLE>
CORE GROWTH PORTFOLIO
The objective of the Core Growth portfolio is long-term capital appreciation.
The portfolio invests primarily in stocks of large, medium and small companies
that the subadviser believes have strong business momentum, earnings growth
13
<PAGE> 16
and long-term capital appreciation. This portfolio is managed by Pilgrim Baxter
& Associates, Ltd. ("Pilgrim Baxter") under a subadvisory agreement with the
Adviser.
In managing this portfolio, Pilgrim Baxter uses both quantitative and
fundamental processes. They focus on business momentum, as demonstrated by such
things as earnings or revenues and sales growth. Pilgrim Baxter begins by making
a list of rapidly growing companies having desired quality characteristics.
Pilgrim Baxter derives this list of companies by using its proprietary software
and research models. These models incorporate attributes of successful growth
(such as positive earnings surprises, upward earnings estimate revisions, and
accelerating sales and earnings growth). Then, using fundamental research,
Pilgrim Baxter evaluates each company's business momentum, earnings quality and
assesses the sustainability of the company's current growth trends. Through this
highly disciplined process, Pilgrim Baxter tries to find investments with strong
growth characteristics.
Primary risks: This portfolio's investments in small and medium capitalization
companies may experience greater price volatility than portfolios investing
primarily in larger, more established companies. The special risks of investing
in Small Capitalization Companies are described following these brief summaries
of each portfolio's investment policies. If you consider investing in this
portfolio, you need to maintain a long-term investment perspective because the
companies in which this portfolio invests will experience stock price
volatility.
The following bar chart and table indicate the risks of investing in the Core
Growth portfolio. They show changes in the portfolio's performance for each of
the complete calendar years since the portfolio's inception and the portfolio's
average annual returns for the last year and since inception compared to those
of a broad-based market index. The portfolio's past performance does not
necessarily indicate how it will perform in the future. Variable contract
charges are not reflected in the chart or table. If they were, the returns would
be less than those shown.
<TABLE>
<S> <C>
97 -3.08%
98 8.82%
99 104.95%
</TABLE>
During the period shown in the bar chart, the portfolio's highest return for a
quarter was 56.29%. That was the quarter ending on December 31, 1999. The lowest
return for a quarter was -21.47% That was the quarter ending on September 30,
1998.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS ONE SINCE
AS OF DECEMBER 31, 1999 YEAR 1/3/97
---------------------------- ------- ------
<S> <C> <C>
Core Growth Portfolio 104.95% 29.40%
Russell 3000 Index 20.89% 25.52%
</TABLE>
GROWTH & INCOME PORTFOLIO
The objective of the Growth & Income portfolio is long-term total return. The
portfolio invests primarily in equity and debt securities, focusing on small-and
mid-cap companies that offer the potential for capital appreciation, current
14
<PAGE> 17
income, or both. This portfolio is managed by RS Investment Management Co. LLC
("RSIM") under a subadvisory agreement with the Adviser.
The portfolio normally invests the majority of its assets in common stocks,
convertible securities, bonds, and notes. Although the portfolio focuses on
companies with market capitalizations of up to $5 billion, it may invest in
larger companies. The portfolio may engage in short sales of securities expected
to decline in price.
Primary risks: Small- and mid-cap companies may present greater opportunities
for investment return than do larger companies, but may also involve greater
risks. The special risks of investing in Small Capitalization Companies are
described following these brief summaries of each portfolio's investment
policies. To a large extent the same risk factors apply to investments in
mid-cap companies.
The following bar chart and table indicate the risks of investing in the Growth
& Income portfolio. They show changes in the portfolio's performance for each of
the complete calendar years since the portfolio's inception and the portfolio's
average annual returns for the last year and since inception compared to those
of a broad-based market index. The portfolio's past performance does not
necessarily indicate how it will perform in the future. Variable contract
charges are not reflected in the chart or table. If they were, the returns would
be less than those shown.
<TABLE>
<S> <C>
97 36.58%
98 7.09%
99 62.25%
</TABLE>
During the period shown in the bar chart, the portfolio's highest return for a
quarter was 40.44%. That was the quarter ending on December 31, 1999. The lowest
return for a quarter was -13.33% That was the quarter ending on September 30,
1998.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS ONE SINCE
AS OF DECEMBER 31, 1999 YEAR 1/3/97
---------------------------- ------ ------
<S> <C> <C>
Growth & Income Portfolio 62.25% 33.50%
Russell 2000 Index 21.26% 13.08%
</TABLE>
CAPITAL GROWTH PORTFOLIO
The objective of the Capital Growth portfolio is capital appreciation. It is
managed by RSIM under a subadvisory agreement with the Adviser. It invests in an
actively managed portfolio of equity securities (principally common stocks) of
small cap and mid 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.
15
<PAGE> 18
Primary risks: Investments in small and mid-size companies may present greater
risks than investments in large companies. The stock prices of small and
mid-size companies tend to be more volatile and the companies are more subject
to failure. Up to 30% of this portfolio's assets may be invested in foreign
securities. The special risks of Foreign Investments and Small Capitalization
Companies are described following these brief summaries of each portfolio's
investment policies.
The following bar chart and table indicate the risks of investing in the Capital
Growth portfolio. They show changes in the portfolio's performance for each of
the complete calendar years since the portfolio's inception and the portfolio's
average annual returns for the last year and since inception compared to those
of a broad-based market index. The portfolio's past performance does not
necessarily indicate how it will perform in the future. Variable contract
charges are not reflected in the chart or table. If they were, the returns would
be less than those shown.
<TABLE>
<CAPTION>
<S> <C>
99 202.38%
</TABLE>
During the period shown in the bar chart, the portfolio's highest return for a
quarter was 62.90%. That was the quarter ending on December 31, 1999. The lowest
return for a quarter was 4.22%. That was the quarter ending on September 30,
1999.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS ONE SINCE
AS OF DECEMBER 31, 1999 YEAR 5/1/98
---------------------------- ------- -------
<S> <C> <C>
Capital Growth Portfolio.................................... 202.38% 107.06%
Russell 2000 Index.......................................... 21.26% 4.02%
</TABLE>
S&P 500 INDEX PORTFOLIO
The objective of the S&P 500 Index portfolio is total return approximating that
of the Standard & Poor's 500 Index ("S&P 500"(R)) including reinvestment of
dividends, at a risk level consistent with that of the S&P 500. It seeks this
objective by investing primarily in:
- - common stocks and other securities that need not be included among the 500
stocks in the S&P 500, and/or
- - S&P 500 stock index futures contracts hedged by investing in securities issued
or guaranteed by the U.S. government, its agencies or instrumentalities,
investment-grade corporate bonds and money market instruments.
This strategy is intended to replicate the performance of the S&P 500. However,
portfolio expenses reduce the portfolio's ability to exactly track the S&P 500.
There can be no assurance that the portfolio's investments will have the desired
effect.
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.
16
<PAGE> 19
The futures contracts can result in a high degree of leverage so that 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. The portfolio seeks to offset that risk by maintaining its
investments in U.S. government obligations, investment-grade corporate bonds and
money market instruments. The income from these investments tends to offset the
costs of the futures contracts.
Primary risks: The risks involved with Hedging Techniques are described
following these brief summaries of each portfolio's investment policies. This
portfolio is subject to significant sector risk.
"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 S&P 500 Index 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. The Statement of
Additional Information contains more information about the S&P 500 Index.
The following bar chart and table indicate the risks of investing in the S&P 500
Index portfolio. They show changes in the portfolio's performance for each of
the complete calendar years since the portfolio's inception and the portfolio's
average annual returns for the last year and since inception compared to those
of a broad-based market index. The portfolio's past performance does not
necessarily indicate how it will perform in the future. Variable contract
charges are not reflected in the chart or table. If they were, the returns would
be less than those shown.
<TABLE>
<S> <C>
97 31.75%
98 30.00%
99 25.63%
</TABLE>
During the period shown in the bar chart, the portfolio's highest return for a
quarter was 22.27%. That was the quarter ending on December 31,1998 The lowest
return for a quarter was -9.78% That was the quarter ending on September 30,
1998.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS ONE SINCE
AS OF DECEMBER 31, 1999 YEAR 1/3/97
---------------------------- ----- -------
<S> <C> <C>
S&P 500 Index Portfolio 25.63% 29.20%
S&P 500 Index 21.04% 24.55%
</TABLE>
17
<PAGE> 20
HIGH INCOME BOND PORTFOLIO
The objective of the High Income Bond portfolio is 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. Normally, the portfolio will not
invest more than 10% of its assets in equity securities. Lower rated debt
securities are subject to a greater risk of loss of principal and interest than
investments in higher rated bonds. You should carefully assess the risks
associated with this portfolio before investing.
This portfolio is managed by Federated Investment Counseling ("Federated
Investment") under a subadvisory agreement with the Adviser.
Low-rated debt securities have higher yields because of their greater
uncertainty of default. Federated Investment seeks to reduce this financial risk
through careful security selection and diversification by both company and
industry. Federated Investment looks for bonds offering superior potential
returns for the financial risk assumed. Federated Investment's analysis focuses
on the issuer's financial condition, competitive position and management
expertise. Federated Investment also considers current economic, market and
industry factors affecting the issuer. Federated Investment typically does not
consider interest rate risks because the prices of high yield bonds are
influenced much more by financial risks, including potential default, than by
changes in the general level of interest rates.
Fixed income securities in which the portfolio invests include 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
Federated Investment 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 likely to make it more difficult for the companies issuing the
bonds to make principal and interest payments than is the case with companies
issuing 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 real estate investment trusts.
Primary risks: The special risks of investing in Lower Rated Debt Securities,
Convertible Securities and Real Estate Securities are described following these
brief summaries of each portfolio's investment policies. There is a relatively
higher risk that an issuer of low rated bonds will default by failing to pay
interest or principal when due. If that happens, the portfolio loses money.
Low-grade bonds are usually uncollateralized and they are subordinate to the
issuer's other outstanding debt.
The following bar chart and table indicate the risks of investing in the High
Income Bond portfolio. They show changes in the portfolio's performance for each
of the complete calendar years since the portfolio's inception and the
portfolio's average annual returns for the last year and since inception
compared to those of a broad-based market index. The portfolio's past
performance does not necessarily indicate how it will perform in the future.
Variable contract charges are not reflected in the chart or table. If they were,
the returns would be less than those shown.
18
<PAGE> 21
<TABLE>
<CAPTION>
<S> <C>
99 1.95%
</TABLE>
During the period shown in the bar chart, the portfolio's highest return for a
quarter was 2.80%. That was the quarter ending on December 31, 1999. The lowest
return for a quarter was -2.70%. That was the quarter ending on September 30,
1999.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS ONE SINCE
AS OF DECEMBER 31, 1999 YEAR 5/1/98
---------------------------- ---- ------
<S> <C> <C>
High Income Bond Portfolio.................................. 1.95% 1.10%
First Boston High Yield Index............................... 3.28% 0.10%
</TABLE>
EQUITY INCOME PORTFOLIO
The objective of the Equity Income portfolio is 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. The portfolio is
managed by Federated Investment under a subadvisory agreement with the Adviser.
Federated Investment performs a technical review of potential issuers. It
examines mostly companies with market capitalization over $1 billion which it
believes are trading at low valuation in relation to their historic market
prices and projected earnings. The portfolio's equity securities generally have
a history and expectation of paying increasing dividends.
Federated Investment performs traditional fundamental analysis to select
securities promising long-term value. It focuses on the current financial
condition of the issuer. It examines the issuer's product strength, competitive
position and management expertise. Federated Investment also considers current
economic, market and industry factors affecting the issuer. Federated Investment
uses the "value" style of investing. It selects securities with a comparatively
low volatility in share price relative to the overall market and which may
provide relatively high dividend income. With this style of investing, the
prices of portfolio securities may not always increase as rapidly as stocks
selected for their growth characteristics because Federated Investment's
investment approach is sector-neutral.
The portfolio invests in convertible securities without regard to their rating.
Convertible securities are used because they typically offer high yields and
good potential for capital appreciation. 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.
Primary risks: Convertible 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
19
<PAGE> 22
in short sales from time to time. The special risks of investing in Convertible
Securities and Foreign Investments, and engaging in Short Sales, are described
following these brief summaries of each portfolio's investment policies.
The following bar chart and table indicate the risks of investing in the Equity
Income portfolio. They show changes in the portfolio's performance for each of
the complete calendar years since the portfolio's inception and the portfolio's
average annual returns for the last year and since inception compared to those
of a broad-based market index. The portfolio's past performance does not
necessarily indicate how it will perform in the future. Variable contract
charges are not reflected in the chart or table. If they were, the returns would
be less than those shown.
<TABLE>
<CAPTION>
<S> <C>
99 18.58%
</TABLE>
During the period shown in the bar chart, the portfolio's highest return for a
quarter was 14.12%. That was the quarter ending on December 31, 1999. The lowest
return for a quarter was -5.79%. That was the quarter ending on September 30,
1999.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS ONE SINCE
AS OF DECEMBER 31, 1999 YEAR 5/1/98
---------------------------- ----- ------
<S> <C> <C>
Equity Income Portfolio..................................... 18.58% 15.50%
S&P 500 Index............................................... 21.04% 19.85%
</TABLE>
BLUE CHIP PORTFOLIO
The objective of the Blue Chip portfolio is growth of capital and income by
investing primarily in securities of high quality companies. The portfolio is
managed by Federated Investment under a subadvisory agreement with the Adviser.
Federated Investment selects investments for this portfolio 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 sales, earnings, and/or market capitalization.
Federated Investment performs traditional fundamental analysis to select
securities promising long-term value. It focuses on the current financial
condition of the issuer. It examines the issuer's product strength, competitive
position and management expertise. Federated Investment also considers current
economic, market and industry factors affecting the issuer. Federated Investment
uses the "value" style of investing. It selects securities that are trading at
low valuation in relation to their historic market prices and projected growth.
With this style of investing, the prices of portfolio securities may not always
increase as rapidly as stocks selected for their growth attributes.
The portfolio invests in 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 Federated Investment to be of
20
<PAGE> 23
comparable quality. If a security loses its rating or has its rating reduced
after the portfolio has purchased it, Federated Investment does not need to drop
the security from the portfolio, but that will be considered. Bonds rated Baa,
BBB or better are considered investment grade. Those rated below that have some
speculative characteristics.
Primary risks: This portfolio's primary risks are market risk and sector risk,
described on page 2.
The following bar chart and table indicate the risks of investing in the Blue
Chip portfolio. They show changes in the portfolio's performance for each of the
complete calendar years since the portfolio's inception and the portfolio's
average annual returns for the last year and since inception compared to those
of a broad-based market index. The portfolio's past performance does not
necessarily indicate how it will perform in the future. Variable contract
charges are not reflected in the chart or table. If they were, the returns would
be less than those shown.
<TABLE>
<CAPTION>
<S> <C>
99 5.86%
</TABLE>
During the period shown in the bar chart, the portfolio's highest return for a
quarter was 9.68%. That was the quarter ending on June 30, 1999. The lowest
return for a quarter was -10.54%. That was the quarter ending on September 30,
1999.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS ONE SINCE
AS OF DECEMBER 31, 1999 YEAR 5/1/98
---------------------------- ----- ------
<S> <C> <C>
Blue Chip Portfolio......................................... 5.86% 5.19%
S&P 500 Index............................................... 21.04% 19.85%
</TABLE>
SOCIAL AWARENESS PORTFOLIO
The objective of the Social Awareness portfolio is long-term growth of capital.
It invests 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 considers a company's record in:
- - quality and safety of its products and services,
- - environmental protection and enhancement,
- - employee relations, opportunities and safety,
- - consumer relations and protection,
- - community involvement, and
- - expectations for the creation of new jobs and economic development due to
anticipated company growth.
21
<PAGE> 24
Each potential investment is also subject to the Adviser's standards of
investment analysis. As a matter of operating policy, 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. This policy
may be modified by the Board of Directors.
The Adviser monitors and responds to changes in business practices of the
companies selected for investment. In case of any adverse development, the
Adviser considers whether or not the portfolio's policies require it to sell its
position in that company. Any sale under those circumstances is, however,
subject to prudent market considerations.
Primary risks: This portfolio is susceptible to sector risk, described on page
2.
The following bar chart and table indicate the risks of investing in the Social
Awareness portfolio. They show changes in the portfolio's performance for each
of the complete calendar years since the portfolio's inception and the
portfolio's average annual returns for the last year and since inception
compared to those of a broad-based market index. The portfolio's past
performance does not necessarily indicate how it will perform in the future.
Variable contract charges are not reflected in the chart or table. If they were,
the returns would be less than those shown.
<TABLE>
<S> <C>
97 25.63%
98 -22.41%
99 17.69%
</TABLE>
During the period shown in the bar chart, the portfolio's highest return for a
quarter was 18.74%. That was the quarter ending on June 30, 1997. The lowest
return for a quarter was -27.95% That was the quarter ending on September 30,
1998.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS ONE SINCE
AS OF DECEMBER 31, 1999 YEAR 1/3/97
---------------------------- ------ -------
<S> <C> <C>
Social Awareness Portfolio 17.69% 4.72%
Russell 2000 Index 21.26% 13.08%
</TABLE>
STRATEGIC INCOME PORTFOLIO
The objective of the Strategic Income portfolio is high current income by
investing at least 80% of its assets in income producing securities. At least
40% of its assets are invested in a core asset group of U.S. government and
corporate fixed income securities, and 5% to 20% of its assets are invested in
each of the following sectors:
- - foreign bonds,
- - real estate investment trusts (REITs),
- - domestic equity securities,
- - money market instruments, and
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<PAGE> 25
- - the following structured fixed income securities:
- mortgage backed securities
- collateralized mortgage obligations (CMOs),
- adjustable rate mortgage securities (ARMS), and
- asset-backed securities.
This portfolio is managed by Firstar Investment Research & Management Company,
LLC ("FIRMCO") under a subadvisory agreement with the Adviser. FIRMCO selects
the core assets based on the outlook for interest rates and their yield in
relation to other fixed income securities of similar quality and maturity. They
only include investment grade bonds. These are bonds rated Baa or higher by
Moody's, or BBB or higher by S&P or Fitch or which, if unrated, are deemed by
FIRMCO to be of comparable quality.
The foreign bonds are issued by non-U.S. companies and governments. They are
investment grade, are denominated in currencies other than U.S. dollars and may
include American Depository Receipts and International Depository Receipts. The
portfolio may also invest in shares of investment companies that invest
primarily in foreign bonds.
REITs include equity or mortgage REITs 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:
- - 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 individual profits of over $100
million, 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");
- - obligations of the U.S. government or its agencies or instrumentalities;
- - repurchase agreements, and
- - other unrated short-term instruments deemed by Firstar 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.
Primary risks: The special risks of investing in Foreign Investments and Real
Estate Securities, and engaging in Short Sales, are described following these
brief summaries of each portfolio's investment policies. This portfolio is
particularly susceptible to sector risks, described on page 2.
The following bar chart and table indicate the risks of investing in the
Strategic Income portfolio. They show changes in the portfolio's performance for
each of the complete calendar years since the portfolio's inception and the
portfolio's average annual returns for the last year and since inception
compared to those of a broad-based market index. The portfolio's past
performance does not necessarily indicate how it will perform in the future.
Variable contract charges are not reflected in the chart or table. If they were,
the returns would be less than those shown.
23
<PAGE> 26
<TABLE>
<S> <C>
97 9.02%
98 -1.42%
99 -4.81%
</TABLE>
During the period shown in the bar chart, the portfolio's highest return for a
quarter was 4.68%. That was the quarter ending on June 30, 1997. The lowest
return for a quarter was -2.28% That was the quarter ending on December 31,
1999.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS ONE SINCE
AS OF DECEMBER 31, 1999 YEAR 1/3/97
---------------------------- ------ -------
<S> <C> <C>
Strategic Income Portfolio -4.81% 0.68%
Lehman Brothers Government/Corporate 0.39% 5.49%
Bond Index -- Intermediate
</TABLE>
FIRSTAR GROWTH & INCOME PORTFOLIO
The objective of the Firstar Growth & Income portfolio is both reasonable income
and long-term capital appreciation. The portfolio invests in income producing
securities including dividend-paying common and preferred stocks as well as
fixed-income securities in order to generate reasonable income. Capital
appreciation is sought through investments in common stocks, particularly those
of medium to large sized domestic companies whose stock is paying dividends. No
more than 25% of the portfolio will be invested in foreign securities and,
during normal market conditions, no more than 20% of the portfolio will be
invested in securities that do not pay dividends. The portfolio is managed by
FIRMCO under a subadvisory agreement with the Adviser.
Primary risks: The primary risks of this portfolio are market risk, financial
risk and sector risk.
The following bar chart and table indicate the risks of investing in the Firstar
Growth & Income portfolio. They show changes in the portfolio's performance for
each of the complete calendar years since the portfolio's inception and the
portfolio's average annual returns for the last year and since inception
compared to those of a broad-based market index. The portfolio's past
performance does not necessarily indicate how it will perform in the future.
Variable contract charges are not reflected in the chart or table. If they were,
the returns would be less than those shown. Note that, until May 1999, the
subadviser for this portfolio was Firstar, an affiliate of FIRMCO. The portfolio
was called the Stellar portfolio when managed by Firstar and its investment
policies were substantially different at that time.
24
<PAGE> 27
<TABLE>
<S> <C>
97 9.70%
98 2.92%
99 1.76%
</TABLE>
During the period shown in the bar chart, the portfolio's highest return for a
quarter was 8.50%. That was the quarter ending on December 31, 1999. The lowest
return for a quarter was -9.27% That was the quarter ending on September 30,
1999.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS ONE SINCE
AS OF DECEMBER 31, 1999 YEAR 1/3/97
---------------------------- ----- ------
<S> <C> <C>
Firstar Growth & Income Portfolio 1.76% 4.75%
S&P 500 Index 21.04% 27.55%
</TABLE>
RELATIVE VALUE PORTFOLIO
The objective of the Relative Value portfolio is to obtain the highest total
return that is consistent with reasonable risk. The portfolio invests primarily
in stocks which FIRMCO believes will have low volatility, above-average yields,
and are undervalued relative to the stocks comprising the S&P 500. Unless it is
in a defensive position, at least 70% of the portfolio's assets will be invested
in common stocks of companies whose revenues are in the top 25% of their
industries. However, other factors, such as product position or market share,
will also be considered and may outweigh revenues.
The portfolio also invests in fixed income securities. These include:
- - convertible securities;
- - investment grade domestic corporate debt obligations that are rated or A or
higher by Moody's, S&P or Fitch; and
- - obligations of the U.S. government or its agencies or instrumentalities.
This portfolio is managed by FIRMCO under a subadvisory agreement with the
Adviser.
Primary risks: The primary risks of this portfolio are market risk, financial
risk and sector risk.
The following bar chart and table indicate the risks of investing in the
Relative Value portfolio. They show changes in the portfolio's performance for
each of the complete calendar years since the portfolio's inception and the
portfolio's average annual returns for the last year and since inception
compared to those of a broad-based market index. The portfolio's past
performance does not necessarily indicate how it will perform in the future.
Variable contract charges are not reflected in the chart or table. If they were,
the returns would be less than those shown.
25
<PAGE> 28
<TABLE>
<S> <C>
97 28.28%
98 20.72%
99 7.43%
</TABLE>
During the period shown in the bar chart, the portfolio's highest return for a
quarter was 21.27%. That was the quarter ending on December 31, 1998. The lowest
return for a quarter was -10.16% That was the quarter ending on September 30,
1998.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS ONE SINCE
AS OF DECEMBER 31, 1999 YEAR 1/3/97
---------------------------- ----- ------
<S> <C> <C>
Relative Value Portfolio 7.43% 18.54%
S&P 500 Index 21.04% 27.55%
</TABLE>
NASDAQ 100 INDEX PORTFOLIO
The objective of the Nasdaq 100 Index portfolio is long-term growth of capital.
The portfolio invests primarily in stocks that are included in the Nasdaq 100(R)
Index. It may also invest in other securities whose performance is expected to
correlate to that of the Nasdaq 100 Index, including "Qubes." Qubes are
derivatives issued by the Nasdaq 100 Trust.
The portfolio does not attempt to hold all of the stocks represented in the
Nasdaq 100 Index. The Index is a modified capitalization-weighted index. That
means the stocks of larger companies count for more in the Index than do the
stocks of smaller companies. While it is composed of 100 of the largest
non-financial companies listed on the National Association of Securities Dealers
Automated Quotation system, its capitalization weighting gives a small number
(less than 10) of the 100 stocks a majority of the market value of the Index.
Thus, the Adviser believes the portfolio can replicate the Index without owning
all 100 stocks. It is the Adviser's policy generally to not invest more than 20%
of the portfolio's assets in the stock and other securities of any single
issuer, even if that issuer represents more than 20% of the Index.
The Nasdaq 100(R), Nasdaq 100 Index(R) and Nasdaq(R) are trade or service marks
of The Nasdaq Stock Market, Inc. ("Nasdaq"). The Adviser has licensed these
marks for the portfolio's use. Nasdaq has not passed on the portfolio's legality
or suitability. Nasdaq does not sponsor, endorse, sell or promote the portfolio.
NASDAQ MAKES NO WARRANTIES AND BEARS NO LIABILITY WITH RESPECT TO THE PORTFOLIO.
Primary risks: Unlike the other portfolios, THE NASDAQ 100 INDEX PORTFOLIO IS A
NON-DIVERSIFIED FUND. This portfolio is not limited by the diversification
standards that restrict the other portfolios (as to at least 75% of their
assets) to not invest more than 5% of assets in the securities of any one
issuer. Several individual stocks represented in the Nasdaq 100 Index each
comprise substantially more than 5% of the market value of the Index. The
diversification standards of the other portfolios also prevent them from
investing more than 25% of their assets in any one industry. The Nasdaq 100
Index is predominated by issuers in the technology sector.
26
<PAGE> 29
The portfolio's concentration among relatively few companies and its
concentration largely within a narrow range of related industries renders the
portfolio vulnerable to greater volatility than is likely to be experienced by
diversified portfolios. Changes in the prices of one or a few stocks can greatly
affect the net asset value of the portfolio, either up or down. For this reason,
investors should consider limiting their investments in this portfolio.
The portfolio invests mostly in small and mid-sized companies. The special risks
of investing in Small Capitalization Companies are described following these
brief summaries of each portfolio's investment policies.
This portfolio began its operations in May 2000.
RISKS OF CERTAIN INVESTMENTS
The kinds of investments described on the following pages can be made by most of
the portfolios. These risk considerations and others are further explained in
the Statement of Additional Information.
SMALL CAPITALIZATION COMPANIES
Small capitalization companies generally have a market capitalization of less
than $1.5 billion. (Market capitalization is the number of shares outstanding
for a company multiplied times the price per share.) These companies are often
still in their developing stage. Small companies are often selected for
investment in a portfolio because the Adviser or subadivser believes the
companies can achieve rapid growth in sales, earnings and share prices. They
often do not pay dividends.
Small companies usually present more share price volatility and risk than do
larger, more established companies. Smaller and newer companies often have
limited product lines, markets and financial resources. Their management often
depends on one or a few key people. Their securities may be subject to more
abrupt or erratic price changes than those of larger companies or the market
averages. Often, there is less publicly available information for smaller
companies than for larger ones. Small company securities are sometimes less
liquid than those of larger companies. This is because they have fewer shares
outstanding and they trade less often. That might make it harder for a portfolio
to buy or sell significant amounts of a small company's shares, or those
transactions might impact the shares' market prices unfavorably.
All of the portfolios except Money Market and Blue Chip can invest in small
companies. The International Small Company, Small Cap, Aggressive Growth, Core
Growth, Growth & Income, Capital Growth and Nasdaq 100 Index portfolios may
concentrate their investments in these securities
FOREIGN INVESTMENTS
Investments in foreign securities involve risks not normally associated with
investing in domestic issuers. These include:
- - changes in currency rates
- - currency exchange control regulations
- - seizure or nationalization of companies
- - political or economic instability
- - unforeseen taxes
- - difficulty of obtaining or interpreting financial information under foreign
accounting standards
- - trading in markets that are less efficient than in the U.S.
- - lack of information regarding securities issuers
27
<PAGE> 30
- - imposition of legal restraints affecting investments
- - reversion to closed markets or controlled economies
- - national economies based on a few industries or dependent on revenue from
certain commodities
- - local economies and/or markets vulnerable to global conditions
- - volatile inflation rates and debt burdens
- - less regulatory protection.
Many of these factors are more likely to occur in emerging or developing
countries and may cause abrupt and severe price declines. These factors are
generally less typical of the developed counties.
In selecting foreign investments, the Adviser and subadvisers seek to minimize
these risks. They select investments in securities appearing to have
characteristics and qualities comparable to the kinds of domestic securities in
which the portfolio may invest.
All of the portfolios can invest in foreign securities, although foreign
securities purchased by the Money Market portfolio must be denominated in U.S.
dollars and held in custody in the United States. The International and
International Small Company portfolios may be invested entirely in foreign
securities.
CONVERTIBLE SECURITIES
Convertible securities can be exchanged for or converted into common stock.
These include 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. Conversely, as interest rates decline, the market value
of convertible securities may increase. The unique investment characteristic of
convertible securities is the right to be exchanged for the issuer's common
stock. This 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. Most convertible
securities will not reflect quite as much capital appreciation as their
underlying common stocks. When the underlying common stock price goes down, the
value of the convertible security tends to decline to about the level of
straight nonconvertible debt of similar quality. This is often called
"investment value." The convertible security then may not experience the same
decline as the underlying common stock.
Many convertible securities sell at a premium over their conversion values. The
conversion value is the number of shares of common stock to be received upon
conversion multiplied by the current market price of the stock. This premium is
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. The premium may not be recovered if this appreciation
potential is not realized.
All of the portfolios other than the Money Market portfolio can purchase
convertible securities.
HEDGING TECHNIQUES
Each portfolio (other than the Money Market portfolio) may, primarily for
hedging purposes, buy and sell various kinds of put and call options, financial
futures contracts, index futures contracts, forward foreign currency contracts,
28
<PAGE> 31
foreign currency options and foreign currency futures contracts. The use for
hedging purposes of options and futures contracts on securities and foreign
currencies involves certain risks. These include:
- - whether the Adviser or subadviser can predict correctly the direction of
changes in stock prices, interest rates, currency prices and other economic
factors,
- - whether there is enough market liquidity to permit a portfolio to close out
positions taken, and
- - whether price changes in portfolio securities subject to a hedge follow price
changes in securities or currencies underlying options and futures contracts.
None of these can be assured. A more complete discussion of the risks involved
with hedging techniques is contained in the Statement of Additional Information.
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, a
portfolio may write call options when the Adviser or subadviser believes that
the option premium will yield a greater return to the portfolio than 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 that 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. This will
reduce the loss the portfolio would have otherwise suffered. Therefore, a
portfolio may purchase put options when the Adviser or subadviser believes that
the market price of the underlying security is more likely to decrease than
increase or as a hedge against a decrease in the price of a security held by the
portfolio.
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.
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 a portfolio to close a
position when it wants to do so. Then, besides continuing to be subject to the
margin requirements, the portfolio would have a gain or loss to the extent that
the price change in the securities subject to the hedge differed from the
position. To limit this risk, a portfolio 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 partly due to temporary activity
of speculators in the futures markets. To the extent there is not a perfect
correlation, changes in the value of the portfolio's assets would not be offset
by a change in the value of the contracts and options it had bought.
29
<PAGE> 32
When a portfolio 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.
There is no such limit when a portfolio enters into a futures contract. However,
the loss on an options contract would exceed that of a futures contract if the
change in the value of the index is not more than the premium paid for the
option.
The success of a hedge depends upon the Adviser's or subadviser's ability to
predict increases or decreases in the relevant financial index. If this
expectation proves incorrect, the portfolio could suffer a loss and it 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 change in a futures
contract may result in an immediate big 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 portfolio 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. 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. It does not limit potential losses because the limit may
prevent the liquidation of unfavorable positions. Futures contract prices
sometimes move to the daily limit for several consecutive trading days with
little or no trading. When this happens, futures cannot be liquidated promptly
and some futures traders have big losses.
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. Buyers and sellers of foreign currency
options and futures contracts are subject to the same risks previously described
for options and futures generally.
A forward contract involves an obligation to purchase or sell a specific
currency at a future date. This may be any fixed number of days from the date of
the contract as agreed upon by the parties. The price is set at the time of the
contract. This way a portfolio may protect against a possible loss 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. These contracts tend to
minimize the risk of loss due to the decline in the value of the hedged
currency. On the other hand, they tend to limit potential gains if the value of
that currency increases.
When a forward contract's delivery date arrives, the portfolio may either
deliver of the foreign currency or end its 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
has to deliver the foreign currency, it may have to obtain the currency by
selling securities.
It is impossible to forecast the market value of portfolio securities at the
expiration of the forward contract. Therefore, the portfolio may have to buy
more foreign currency on the spot market (and bear the expense of that purchase)
if the market value of the security is less than the amount of foreign currency
the portfolio is obligated to deliver.
30
<PAGE> 33
Conversely, the portfolio may have to sell some currency on the spot market when
its hedged security is sold if the security's market value exceeds the amount of
foreign currency the portfolio is obligated to deliver.
Settlement of currency options and futures contracts for most currencies must
occur at a bank in the issuing nation. The ability to establish and close out
positions on such options requires 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. The use of foreign currency hedging
transactions might not 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 do not eliminate fluctuations in the underlying prices
of the securities. They simply establish a rate of exchange for a future time.
LOWER-RATED DEBT SECURITIES
Certain portfolios may purchase lower-rated debt securities, sometimes referred
to as "junk bonds." These are rated BB or lower by S&P or Fitch, or Ba or lower
by Moody's). As an example, the S&P lower bond ratings are described below.
Other ratings are in the Appendix to the Statement of Additional Information.
Only the High Income Bond portfolio invests more than 35% of its assets in junk
bonds. The Capital Appreciation, Aggressive Growth and Equity Income portfolios
may invest more than 10% of their assets in these securities.
When bonds have lower ratings it is more likely that adverse changes in the
issuer's financial condition and/or in general economic conditions, or an
unanticipated rise in interest rates, may impair the issuer's ability to pay the
bond's interest and principal. If an issuer cannot pay interest and principal on
time, it is likely to make the bond's values more volatile and it could limit
the portfolio's ability to sell its securities at prices approximating the
values that portfolio had placed on such securities. If there is no liquid
trading market for its securities, a portfolio may not be able to establish the
fair market value of such securities. The rating assigned to a security by
Moody's, S&P or Fitch does not necessarily reflect an assessment of the
volatility of the security's market value or liquidity.
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 changes in the ability of an
issuer to pay 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. The Adviser or
subadviser will monitor the investment to determine if continuing to hold the
security will meet the portfolio's investment objective.
Issuers of lower-rated securities are often highly leveraged. During an economic
downturn or during sustained periods of rising interest rates, issuers may be
unable to service their debt obligations. 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. Sometimes lower-rated securities are issued to
raise funds in connection with the acquisition of a company in a "leveraged
buy-out" transaction. The highly leveraged capital structure of those issuers
may make them especially vulnerable to adverse changes in economic conditions.
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<PAGE> 34
Under adverse market or economic conditions or adverse changes in the issuer's
financial condition it may be harder for a portfolio to sell lower-rated
securities or the portfolio may have to sell the securities at a loss. In many
cases, such securities may be purchased in private placements. Then they are
subject to restrictions on resale as a matter of contract or under securities
laws. Then it may also be harder to determine the fair value of the securities
or to compute a portfolio's net asset value. In order to enforce its rights in
the event of a default, a portfolio may have to take possession of and manage
assets securing the issuer's obligations on such securities. This might increase
the portfolio's operating expenses and adversely affect the portfolio's net
asset value. A portfolio may also be unable to enforce its rights and it may
incur greater costs in enforcing its rights if an issuer enters bankruptcy.
Trading opportunities are more limited for low rated securities. This may make
it more difficult for a portfolio to sell or buy these securities at a favorable
price or time. This lack of liquidity also increases the risk of price
volatility.
A portfolio may hold securities that give the issuer the option to "call," or
redeem, its securities. If an issuer redeems 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.
<TABLE>
<S> <C>
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.
</TABLE>
The ratings from "BB" to "CCC" may be modified by adding a plus (+) or minus (-)
to show relative standing within the major rating categories.
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<PAGE> 35
SPECIAL SITUATIONS
Portfolios may invest in special situations. These arise when the portfolio
manager believes the securities of a particular issuer are likely to appreciate
in value because of a development that will give the issuer an advantage over
its competitors. Developments creating a special situation might include a new
product or new process, a technological breakthrough, a management change or
other extraordinary corporate event, or difference in market supply of and
demand for the security. The portfolio's performance could suffer if the
anticipated development in a special situation investment does not occur or if
it does not attract the expected attention of later investors.
SHORT SALES
The Aggressive Growth, Strategic Income, High Income Bond, Equity Income and
Blue Chip portfolios may engage in short sales. In these transactions, the
portfolio sells a security it does not own because the subadviser expects the
market value of that security to decline. To complete such a transaction, the
portfolio must borrow the security to make delivery to the buyer. The portfolio
then has to replace the borrowed security by purchasing it at the current market
price. The price may then be more or less than the price at which the portfolio
sold the security. Until the security is replaced, the portfolio has to pay the
lender amounts equal to any dividends or interest that accrue during the period
of the loan. The portfolio also may have to pay a premium to borrow the
security. This increases the cost of the security sold. The broker keeps the
proceeds of the short sale to the extent necessary to meet margin requirements
until the portfolio closes its short position.
The frequency of short sales that the portfolios engage in varies under
different market conditions. 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 a portfolio's net assets. This is a
nonfundamental operating policy and it may be changed without shareholder
approval.
A portfolio 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, a portfolio will realize a
gain if the security declines in price between those dates. This result is the
opposite of what you 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 a
portfolio may have to pay in a short sale.
REAL ESTATE SECURITIES
Real estate investments generally represent a substantial portion of the
Strategic Income portfolio. The High Income Bond portfolio may also have
significant amounts of real estate investments. The real estate investments are
limited to securities secured by real estate or interests therein and securities
issued by companies that invest in real estate or interests therein. These
investments may have risks associated with direct ownership of real estate.
These risks 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 pooled investment vehicles that invest
primarily in income producing real estate, or real estate related loans or
interests. REITs are often not diversified. They are subject to the risk of
financing projects. They may also be subject to heavy cash flow dependency,
defaults by borrowers and self-liquidation. REIT's often depend upon the skills
of property managers.
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.
A REIT is not taxed on income distributed to owners if the REIT complies with
Internal Revenue Code requirements.
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<PAGE> 36
REITs may subject a portfolio to certain risks associated with the direct
ownership of real estate. These risks include:
- - 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. Mortgage REITs may be affected by the quality of any credit extended or
changes in interest rates.
OTHER INVESTMENT RISKS
Some portfolios might engage in the following types of investments. To that
extent, they will incur the risks described below.
REPURCHASE AGREEMENTS
Under a repurchase agreement, a portfolio purchases a security and obtains a
simultaneous commitment from the seller to repurchase the security at a mutually
agreed upon price and date. The seller is a member bank of the Federal Reserve
System or a government securities dealer recognized by the Federal Reserve
Board. This may also be viewed as a loan of money by the portfolio to the
seller. The resale price is normally greater than the purchase price and
reflects an agreed upon interest rate. The rate is effective for the period of
time the portfolio is invested in the agreement. It is not related to the coupon
rate on the purchased security.
Although repurchase agreements carry certain risks not associated with direct
investments in securities, the Fund enters into repurchase agreements only with
financial institutions believed by the Adviser or subadviser to present minimal
credit risks in accordance with criteria established by the Fund's Board of
Directors. The Adviser and subadvisers review and monitor the creditworthiness
of sellers under the Board's general supervision. The Fund only enters into
repurchase agreements under master repurchase agreements that require that all
transactions are fully collateralized and that the Fund have possession of the
collateral. 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 amount invested in each
agreement. The portfolio only pays for such securities upon physical delivery or
evidence of book entry transfer to the account of the Fund's custodian.
If the seller were to default, the portfolio might incur a loss if the value of
the collateral securing the repurchase agreement declines. A portfolio might
also incur disposition costs when liquidating the collateral. If the seller goes
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<PAGE> 37
bankrupt, the portfolio might have a delay in obtaining its collateral. The
portfolio would then have a loss if the collateral declines in value.
All of the portfolios may invest in repurchase agreements. The period of these
repurchase agreements is usually short, from overnight to one week. At no time
will a portfolio invest in repurchase agreements for more than one year. These
transactions enable a portfolio to earn a return on temporarily available cash.
The Strategic Income portfolio may invest more than 10% of its assets in
agreements maturing in more than seven days.
WARRANTS
Warrants are options to purchase common stock at a specific price. They are
valid for a specific period of time. They usually sell at a premium above the
market value of the optioned common stock. Warrants may have a life ranging from
less that a year to twenty years or they may even be perpetual. However, after
they expire they are worthless. 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 in 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.
All of the portfolios other than the Money Market portfolio can purchase
warrants.
RESTRICTED AND ILLIQUID SECURITIES
Restricted securities are subject to restrictions on resale under federal
securities law. Each of the Money Market, Bond and Omni portfolios may invest up
to 10% of its assets in illiquid securities. Each of the other portfolios may
invest up to 15% in illiquid securities. 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:
- - the frequency of trades and quotes for the security;
- - the number of dealers willing to purchase or sell the security, and the number
of other potential buyers;
- - dealer undertakings to make a market in the security; and
- - the nature of the security and the nature of the marketplace trades.
ZERO-COUPON AND PAY-IN-KIND DEBT SECURITIES
Zero-coupon securities (or "step-ups") in which a portfolio may invest are debt
obligations. They are generally issued at a discount and payable in full at
maturity. They generally 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. They
are subject to greater market value fluctuations from changing interest rates
than interest-paying debt obligations of comparable maturities which make
current distributions of interest. As a result, the net asset value of a
portfolio investing in zero-coupon and pay-in-kind securities may fluctuate more
than shares of other mutual funds investing in interest-paying securities with
similar maturities.
All of the portfolios other than the Money Market portfolio can invest in these
securities. The Capital Appreciation and High Income Bond portfolios may invest
more than 10% of their assets in these.
REVERSE REPURCHASE AGREEMENTS
Under a reverse repurchase agreement, a portfolio sells a debt security to a
bank or broker-dealer. The portfolio 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 its interest and principal payments on the
security. At the agreed future date, the portfolio repurchases the security by
paying back the proceeds previously received, plus interest. The difference
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<PAGE> 38
between the amount the portfolio receives for the security and the amount it
pays on repurchase is deemed to be payment of interest. Until the portfolio pays
back the full amount, it maintains in a segregated custodial account assets with
a value equal to the amount of the commitment to repurchase, including interest.
In some agreements, there is no agreed-upon repurchase date and interest
payments are calculated daily. These are often based on the prevailing overnight
repurchase rate. The Securities and Exchange Commission views these transactions
as collateralized borrowings by the portfolio. The portfolios must abide by
their investment restrictions for borrowing money.
All of the portfolios other than the Money Market portfolio may invest in
reverse repurchase agreements. Only the International, International Small
Company, Capital Appreciation, Aggressive Growth, High Income Bond, Equity
Income, Blue Chip and Strategic Income portfolios may invest more than 10% of
their assets in reverse repurchase agreements.
LEVERAGING (BORROWING FOR INVESTMENT PURPOSES)
The Capital Appreciation, Aggressive Growth, Growth & Income, Strategic Income,
Capital Growth, High Income Bond, Equity Income and Blue Chip portfolios may
borrow for investment purposes. This is generally unsecured, except to the
extent the portfolios enter into reverse repurchase agreements. The Investment
Company Act of 1940 requires these portfolios to maintain continuous asset
coverage three times the amount borrowed. Asset coverage means total assets
including borrowings less liabilities exclusive of borrowings. If the asset
coverage declines as a result of market fluctuations or other reasons, a
portfolio may have to sell some of its holdings within three days to reduce the
debt and restore the asset coverage to the required three times. From an
investment standpoint, it may hurt the portfolio to sell securities then.
Borrowing may increase a portfolio's net income. However, it also adds risk. For
example it 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 it had not borrowed. Conversely, if the income from the assets
retained with borrowed funds does not cover the cost of borrowing, the net
income of that portfolio will be less than if borrowing were not used.
Therefore, the amount available for distribution as dividends will be reduced.
The portfolios also may have to maintain minimum average balances in connection
with borrowing or they may have 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.
SECURITIES LENDING
A portfolio (other than the Money Market portfolio) may increase its total
return by lending its securities. It may do this if:
- - the loan is secured 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;
- - the portfolio may at any time call the loan and regain the securities loaned;
- - the portfolio will receive any interest or dividend paid on the loaned
securities; and
- - the aggregate market value of any securities loaned never exceeds one-third
(or such other limit as the Board of Directors may establish) of the total
assets of the portfolio.
The risks in lending portfolio securities include the possible delay in
recovering the securities or possible loss of rights in the collateral if the
borrower fails financially. Before a portfolio enters into a loan, the Adviser
or subadviser considers all relevant facts and circumstances. These include the
creditworthiness of the borrower. Voting rights on the loaned securities pass to
the borrower. However, the portfolio retains the right to call the loans at any
time on
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reasonable notice. The portfolio will do so if the holders of such securities
are asked to vote upon or consent to matters materially affecting the
investment.
MIXED AND SHARED FUNDING
In the future, it could possibly be disadvantageous for both variable life and
variable annuity separate accounts to invest in the Fund. ONLI, ONLAC and the
Fund do not currently foresee any such disadvantage. The Board of Directors will
monitor events to identify any material conflict between variable life and
variable annuity contract owners. If that happens, the Board will determine what
action, if any, should be taken. This action could include the withdrawal of a
separate account from participation in the Fund. Material conflicts could result
from such things as:
- - changes in state insurance law;
- - changes in federal income tax law;
- - changes in the investment management of any portfolio; or
- - 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. ONLI's and
ONLAC's separate accounts are the sole Fund shareholders. ONLI and ONLAC will
vote the Fund shares attributable to your contracts as you direct.
FUND MANAGEMENT
The Adviser is a wholly-owned subsidiary of ONLI. The Adviser uses ONLI's
investments personnel and administrative systems. It is located at One Financial
Way, Montgomery, Ohio 45242. It has served as the Fund's investment adviser
since May 1996. Before that, the Fund's investment adviser was O.N. Investment
Management Company, an indirect wholly-owned subsidiary of ONLI.
ONLI provides its investment personnel, systems and related services to the
Adviser at cost. This is done under a service agreement among ONLI, the Adviser
and the Fund. These services are paid for by the Adviser, not the Fund. The
Adviser provides portfolio management, investment advice and administrative
services to the Fund. This is done under an investment advisory agreement.
INVESTMENT ADVISORY FEES
As compensation for the Adviser's services, the Fund pays the Adviser annual
fees on the basis of each portfolio's average daily net assets during the month
for which the fees are paid. The fees are based on the following schedule:
- - for the Equity portfolio, 0.80% of the first $500 million, and 0.75% of
average daily net assets over $500 million;
- - for each of the Bond, Omni and Social Awareness portfolios, 0.60% of the first
$100 million, 0.50% of the next $150 million, 0.45% of the next $250 million,
0.40% of the next $500 million, 0.30% of the next $1 billion, and 0.25% of
average daily net assets over $2 billion;
- - for the Money Market portfolio, 0.30% of the first $100 million, 0.25% of the
next $150 million, 0.23% of the next $250 million, 0.20% of the next $500
million, and 0.15% of average daily net assets over $1 billion; (The Adviser
is presently waiving any of its fees for the Money Market portfolio in excess
of 0.25%)
- - for each of the International, Relative Value, Capital Growth, Blue Chip and
Firstar Growth & Income portfolios, 0.90% of each portfolio's average daily
net assets; (The Adviser is presently waiving any of its fees for the
International portfolio in excess of 0.85%)
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- - for each of the Capital Appreciation, Small Cap, Aggressive Growth and
Strategic Income portfolios, 0.80% of each portfolio's average daily net
assets;
- - for the Core Growth portfolio, 0.95% of the first $150 million, and 0.80% of
average daily net assets over $150 million;
- - for the Growth & Income portfolio, 0.85% of the first $200 million, and 0.80%
of average daily net assets over $200 million;
- - for the S&P 500 Index portfolio 0.40% of the first $100 million, 0.35% of the
next $150 million, and 0.33% of average daily net assets over $250 million;
- - for the International Small Company portfolio, 1.00% of that portfolio's
average daily net assets, and
- - for each of the High Income Bond, Equity Income and Nasdaq 100 Index
portfolios, 0.75% of each portfolio's average daily net assets.
In 1999, the Fund paid the Adviser at the following effective rates:
<TABLE>
<S> <C> <C> <C>
Equity Portfolio....................... 0.64% Growth & Income Portfolio.............. 0.85%
*Money Market Portfolio................. 0.25% Capital Growth Portfolio............... 0.90%
Bond Portfolio......................... 0.60% S&P 500 Index Portfolio................ 0.38%
Omni Portfolio......................... 0.54% High Income Bond Portfolio............. 0.75%
*International Portfolio................ 0.85% Equity Income Portfolio................ 0.75%
International Small Company 0.90% Blue Chip Portfolio.................... 0.90%
Portfolio............................
Capital Appreciation Portfolio......... 0.80% Social Awareness Portfolio............. 0.60%
Small Cap Portfolio.................... 0.80% Strategic Income Portfolio............. 0.80%
Aggressive Growth Portfolio............ 0.80% Firstar Growth & Income Portfolio...... 0.90%
Core Growth Portfolio.................. 0.95% Relative Value Portfolio............... 0.90%
Nasdaq 100 Index Portfolio............. N/A
</TABLE>
* Without the voluntary fee waiver, the rate would have been 0.30% for the Money
Market portfolio and 0.90% for the International portfolio.
MANAGEMENT OF PORTFOLIOS
The Adviser's president is Christopher Carlson. He is a vice president and
senior investment officer of ONLI. He oversees the management of the Money
Market, Bond, Omni, S&P 500 Index, Social Awareness and Nasdaq 100 Index
portfolios. Mr. Carlson has a bachelor's degree in psychology from the
University of Richmond and a master of business administration degree in finance
from the University of Cincinnati. He has been an investment officer of ONLI
since 1993. For twelve years before that he was involved in developing
commercial real estate.
Michael Boedeker is a vice president of the Adviser. He 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,
both from Indiana University. Mr. Boedeker is vice president and senior
investment officer of ONLI. He has been responsible for fixed income securities
for ONLI since 1989. Before that, he 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 Komrska is a vice president of the Adviser. He has been the portfolio
manager of the Omni and Social Awareness portfolios since 1999. He has been an
investment officer of ONLI and has managed equity securities for ONLI and the
Adviser since 1997. For six years before that he was a fixed income securities
analyst and high yield
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bond portfolio manager for Ohio Casualty Insurance Company. Mr. Komrska is a
chartered financial analyst with a bachelor of business administration degree in
finance and marketing from the University of Michigan and a master of business
administration degree in management from the University of Cincinnati.
Bret Parrish is a vice president of the Adviser. He has managed the S&P 500
Index and Nasdaq 100 Index portfolios since 2000. He has been an investment
officer of ONLI since 2000. For four years before that he was a fixed income
portfolio manager for the Ohio Casualty Group. For two years before that he was
in a financial management training program for Ohio Casualty while also teaching
finance courses at Miami University. Mr. Parrish is a chartered financial
analyst with a bachelor of arts degree in economics from Denison University and
a master of business administration degree in finance from Miami University.
The Adviser uses other investment adviser firms as subadvisers to direct the
investments of certain portfolios. The subadvisers are:
LEGG MASON FUND ADVISER, INC. (Legg Mason) has managed the EQUITY portfolio
since August 1999. Legg Mason is located at 100 Light Street, Baltimore,
Maryland 21202. It was founded in 1982 to manage equity mutual funds. Legg Mason
is wholly owned by Legg Mason, Inc. Before August 1999, the Equity portfolio was
managed by the Adviser.
The portfolio manager of the Equity portfolio is William Miller. He is Legg
Mason's chief executive officer and president. He is a chartered financial
analyst with an economics degree from Washington and Lee University and graduate
studies in the Ph.D. program at John Hopkins University. Mr. Miller has been the
portfolio manager of the Legg Mason Value Trust, Inc. since 1990. Until then, he
served as that fund's co-manager from its inception in 1982. Before that he was
a corporate treasurer.
FEDERATED GLOBAL INVESTMENT MANAGEMENT CORP. (Federated Global) has managed the
INTERNATIONAL and INTERNATIONAL SMALL COMPANY portfolios since January 1999.
Federated Global is located at 175 Water Street, New York, New York 10038. It is
affiliated with Federated Investors, Inc. Federated Global was formed in 1995 to
manage mutual funds and other pooled investment accounts consisting primarily of
foreign securities. Before 1999, Societe Generale Asset Management Corp. managed
the International and International Small Company portfolios. The International
Small Company portfolio then had different investment objectives and its name
was the Global Contrarian portfolio.
The portfolio managers of the International portfolio are Alexandre de Bethmann
and Henry Frantzen. Mr. de Bethmann has been a vice president and senior
portfolio manager for Federated Global since 1995. Before that, he had been
assistant vice president and portfolio manager for Japanese and Korean equities
at the College Retirement Equities Fund. Mr. de Bethmann is a chartered
financial analyst. He has a bachelor of science degree from the Universite Paris
X, Nanterre, and a master of business administration degree in finance from Duke
University.
Henry Frantzen is the chief investment officer, international, of Federated
Global. He joined Federated Global as its executive vice president when it was
established in 1995. For four years prior to that, he served as chief investment
officer of international securities at Brown Brothers Harriman & Co., and for
three years before that he was the executive vice president and director of
equities at Oppenheimer Management Corporation. He is a financial analyst
fellow. He has a bachelor of science degree from the University of North Dakota.
The portfolio managers of the International Small Company portfolio are Leonardo
Vila and Henry Frantzen. Mr. Vila has been an assistant vice president and
senior investment analyst with Federated Global since 1998. For three years
before that, he was a quantitative analyst for Federated Investment Counseling.
He held earlier positions as an equity research manager for the American Stock
Exchange, a systems analyst for Kemper Group, a senior programming analyst for
Manufacturers Hanover Trust and an associate of J.P. Morgan & Co. Mr. Vila has a
bachelor of science degree from Arizona State University and a master of
business administration degree emphasizing quantitative research from St. John's
University.
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JENNISON ASSOCIATES LLC (Jennison) has managed the CAPITAL APPRECIATION
portfolio since 2000. Jennison is located at 466 Lexington Avenue, New York, New
York 10017. It is an investment adviser that has managed large pools of assets
for tax-free institutions since 1969. It is wholly owned by The Prudential
Insurance Company of America. Before 2000, T. Rowe Price Associates, Inc.
managed the Capital Appreciation portfolio.
The portfolio manager of the Capital Appreciation portfolio is Bradley Goldberg.
He is a director, executive vice president, balanced portfolio manager and
chairman of the asset allocation committee of Jennison. Before joining Jennison
in 1974, Mr. Goldberg was vice president and group head in the investment
research division of Bankers Trust Company. Mr. Goldberg is a chartered
financial analyst with a bachelor of science degree from the University of
Illinois and a master of business administration degree from New York
University.
FOUNDERS ASSET MANAGEMENT LLC (Founders) has managed the SMALL CAP portfolio
since 1994. Founders is located at 2930 East Third Avenue, Denver, Colorado
80206. It manages the Dreyfus Founders group of mutual funds and private
investment accounts. Founders was established in 1938. In 1998 it became a
subsidiary of Mellon Bank.
The portfolio manager of the Small Cap portfolio is Robert Ammann. Robert Ammann
is vice president of investments of Founders. He has managed the Small Cap
portfolio since 1999. He has been a portfolio manager for Founders since 1997
and for four year before that he was a securities research analyst for Founders.
Before that he was a financial statistician for S&P Compustat Services, Inc. Mr.
Ammann is a chartered financial analyst. He has a bachelor's degree in finance
from Colorado State University.
JANUS CAPITAL CORPORATION (Janus) has managed the AGGRESSIVE GROWTH portfolio
since 2000. Janus is located at 100 Fillmore Street, Denver, Colorado 80206. It
has been an investment adviser since 1970. It manages all the Janus mutual
funds; it is the subadviser for several private label mutual funds, and it also
manages institutional accounts. Janus is controlled by Stilwell Financial, Inc.,
a subsidiary of Kansas City Southern Industries. Before 2000, Strong Capital
Management, Inc. managed the Aggressive Growth portfolio.
The portfolio manager of the Aggressive Growth portfolio is Claire Young. She
has been executive vice president and portfolio manager of the Janus Olympus
Fund since 1997. Prior to that, she served as assistant portfolio manager of the
Janus Growth & Income Fund and the Janus Twenty Fund. Ms. Young joined Janus in
January 1992. Ms. Young is a chartered financial analyst with a bachelor of
science degree in electrical engineering from Yale University.
PILGRIM BAXTER & ASSOCIATES, LTD. (Pilgrim Baxter) has managed the Core Growth
portfolio since 1997. Pilgrim Baxter is located at 825 Duportail Road, Wayne,
Pennsylvania 19087. It is controlled by United Asset Management Corp. located in
Boston, Massachusetts. With its predecessors, Pilgrim Baxter has been an
investment adviser since 1982. It manages the PBHG mutual funds.
The portfolio manager of the Core Growth portfolio is Jeffrey Wrona. He is also
the portfolio manager of the PBHG Growth II portfolio, co-manager of the PBHG
Technology & Communications Fund and has managed other small and mid cap
portfolios for Pilgrim Baxter since 1997. He was a senior portfolio manager at
Munder Capital Management for seven years. He has also been a securities analyst
for Drexel Burnham Lambert and a design engineer for Ford Motor Company. Mr.
Wrona is a chartered financial analyst. He has a bachelor's degree in
engineering and a master of business administration degree from the University
of Michigan.
RS INVESTMENT MANAGEMENT CO. LLC (RSIM) has managed the GROWTH & INCOME
portfolio since 1997 and the CAPITAL GROWTH portfolio since 1998. RSIM is
located at 555 California Street, San Francisco, California 94104. It has been
an investment adviser since 1978. RSIM specializes in growth companies. It
manages the Robertson Stephens mutual funds plus private and institutional
investment pools.
The portfolio manager of the Growth & Income portfolio is John Wallace. He is a
managing director of RISM. He has managed the Growth & Income portfolio since
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
40
<PAGE> 43
in 1995. For nine years before 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.
The portfolio manager of the Capital Growth portfolio is James Callinan. He
joined RSIM as the portfolio manager of its Small Cap 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.
Mr. Callinan is a chartered financial analyst. He has 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.
FEDERATED INVESTMENT COUNSELING (Federated Investment) has managed the HIGH
INCOME BOND, EQUITY INCOME and BLUE CHIP portfolios since 1998. Federated
Investment is located at 1001 Liberty Avenue, Pittsburgh, Pennsylvania 15222.
FIC has been an investment adviser since 1989. It is a subsidiary of Federated
Investors, Inc. Together with other Federated affiliates, Federated Investment
manages the Federated group of mutual funds.
The portfolio manager of the High Income Bond portfolio is Mark Durbiano. Mark
Durbiano has been a senior vice president of Federated Investment since 1996 and
he was a vice president for 8 years before that. He has been with Federated
Investment and its affiliates since 1982 and has managed the Federated High
Income Bond Fund II since 1994. He is a chartered financial analyst. He has a
bachelor's degree in economics from Dickinson College and a master of business
administration in finance from the University of Pittsburgh.
The portfolio managers of the Equity Income portfolio are Linda Duessel and
Steven Lehman. Linda Duessel has been a vice president of Federated Investment
since 1995. She was an assistant vice president for four years before that. Ms.
Duessel is a chartered financial analyst. She has 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.
Steven Lehman has been a vice president of Federated Investment since 1997. For
twelve years before that 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. He has a bachelor's degree
in economics from Ripon College and a master's degree from the University of
Chicago.
The portfolio managers of the Blue Chip portfolio are Michael Donnelly and
Arthur Barry. Michael Donnelly has been a vice president of Federated Investment
since 1994. He was an investment analyst and assistant vice president of
Federated Investment for five years prior to that. He is a chartered financial
analyst. He has a bachelor's degree in economics from Georgetown University and
a master of business administration from the University of Virginia.
Arthur Barry joined an affiliate of Federated Investment in 1994 as an
investment analyst. He has been a vice president of Federated Investment since
July 1998. He is a chartered financial analyst. He has a master of science
degree in finance and accounting from Carnegie Mellon University.
FIRSTAR INVESTMENT RESEARCH & MANAGEMENT COMPANY, LLC (FIRMCO) has managed the
FIRSTAR GROWTH & INCOME portfolio since 1999 and it has managed the STRATEGIC
INCOME and RELATIVE VALUE portfolios since 2000. FIRMCO is located at 777 East
Wisconsin Avenue, Milwaukee, Wisconsin 53202. FIRMCO is an affiliate of Firstar
Bank, N.A. (Firstar). It is the investment adviser to the Firstar Funds family
of mutual funds. Firstar previously managed these portfolios. Prior to May 1999,
the Firstar Growth & Income portfolio had different investment objectives and
its name was the Stellar portfolio.
The portfolio managers of the Firstar Growth & Income portfolio are Marian
Zentmyer and David Lettenberger. Marian Zentmyer has been chief equity
investment officer of FIRMCO since 1998. She became an equity fund manager of
FIRMCO in 1989 after having joined Firstar as a financial planning and research
analyst seven years earlier. She was a financial planner with a brokerage firm
for four years before that. Ms. Zentmyer is a chartered financial analyst. She
has a bachelor's degree from Stanford University.
41
<PAGE> 44
David Lettenberger is vice president and portfolio manager of FIRMCO. He has
been a portfolio manager and research analyst with Firstar since 1999. For four
years before that, he managed a small cap growth fund for M&I Investment
Management, an affiliate of Marshall & Ilsley Bank. Mr. Lettenberger is a
chartered financial analyst and he has a bachelor's degree in finance and
economics from Marquette University.
The portfolio manager of the Relative Value portfolio is Joseph Belew. He is a
vice president and trust officer of Firstar. He has been a trust officer and
investment manager of Firstar since 1979. He has a bachelor's degree in business
management from Belmont College.
The portfolio manager of the Strategic Income portfolio is Kirk Mentzer. Kirk
Mentzer is senior trust officer and director of fixed income research for the
capital management division of Firstar. He manages the REIT, structured fixed
income and money market components of the Strategic Income portfolio. He is
responsible for fixed income investment policy and strategy for Firstar'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 Firstar since 1989.
SUBADVISORY FEES
As compensation for their subadvisory services the Adviser (and not the Fund)
pays:
- - Legg Mason a fee at the annual rate of 0.45% of the first $500 million, and
0.40% of average daily net assets in excess of $500 million of the Equity
portfolio;
- - Federated Global fees at the annual rate of
- 0.40% of the first $200 million, and 0.35% of average daily net assets in
excess of $200 million of the International portfolio, and
- 0.75% of the first $100 million, and 0.65% of average daily net assets in
excess of $100 million of the International Small Company portfolio;
- - Jennison a fee at the annual rate of 0.75% of the first $10 million, 0.50% of
the next $30 million, 0.35% of the next $25 million, 0.25% of the next $335
million, 0.22% of the next $600 million, and 0.20% of average daily net assets
in excess of $1 billion of the Capital Appreciation portfolio;
- - Founders a fee at the annual rate of 0.55% of the first $150 million, 0.50% of
the next $150 million, and 0.40% of average daily net assets in excess of $300
million of the Small Cap portfolio;
- - Janus a fee at the annual rate of 0.55% of the first $100 million, 0.50% of
the next $400 million, and 0.45% of average daily net assets in excess of $500
million of the Aggressive Growth portfolio;
- - Pilgrim Baxter a fee at the annual rate of 0.65% of the first $50 million,
0.60% of the next $100 million, and 0.50% of average daily net assets in
excess of $150 million of the Core Growth portfolio;
- - RSIM fees at the annual rate of
- 0.60% of the first $100 million, 0.55% of the next $100 million, and
0.50% of average daily net assets in excess of $200 million of the Growth
& Income portfolio, and
- 0.64% of the first $100 million, 0.60% of the next $100 million, and
0.55% of average daily net assets in excess of $200 million of the
Capital Growth portfolio;
- - Federated Investment fees at the annual rate of
- 0.50% of the first $30 million, 0.40% of the next $20 million. 0.30% of
the next $25 million, 0.25% of average daily net assets in excess of $75
million of the High Income Bond portfolio, and
42
<PAGE> 45
- 0.50% of the first $35 million, 0.35% of the next $65 million, and 0.25%
of average daily net assets in excess of $100 million of the assets of
each of the Equity Income and Blue Chip portfolios; and
- - FIRMCO fees at the annual rate of
- 0.65% of the first $50 million, and 0.60% of average daily net assets in
excess of $50 million of the Firstar Growth & Income portfolio, and
- 0.55% of the first $50 million and 0.50% of average daily net assets in
excess of $50 million of the Strategic Income portfolio, and
- 0.65% of the first $50 million, and 0.60% of average daily net assets in
excess of $50 million of the Relative Value portfolio.
PURCHASE AND REDEMPTION OF FUND SHARES
Fund shares are offered only to separate accounts of ONLI and ONLAC in
connection with ONLI's variable annuities and ONLAC's variable life insurance.
You may select Fund portfolios as described in your variable contract
prospectus. The value of your variable benefits will vary with the investment
experience of the portfolios you select.
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.
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
enough trading in portfolio securities that the current net asset value of its
shares might be materially affected. The values are determined as of 4:00 p.m.
eastern time on each day the New York Stock Exchange is open for unrestricted
trading.
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. Each year the Fund distributes to its
shareholders 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 immediately before
each daily computation of the portfolio's net asset value. For the other
portfolios, dividends representing net investment income are normally
distributed quarterly. Any net realized capital gains are distributed annually.
However, the Board of Directors may declare dividends at other times. Dividends
and distributions are automatically reinvested in additional portfolio shares
(at net asset value without a sales charge).
43
<PAGE> 46
FINANCIAL HIGHLIGHTS OF OHIO NATIONAL FUND, INC.
FOR THE FIVE YEARS ENDED DECEMBER 31, 1999
The financial highlights tables are intended to help you understand the
portfolios' financial performance for the years shown. Certain information
reflects financial results for a single Fund share. The total returns reflect
the rates an investment in each portfolio would have earned (or lost), assuming
reinvestment of all dividends and distributions. This information has been
audited by KPMG LLP, independent certified public accountants. It is an integral
part of the Fund's audited financial statements contained in the Statement of
Additional Information (which you may obtain), incorporated by reference herein.
This should be read in conjunction with those financial statements.
<TABLE>
<CAPTION>
EQUITY PORTFOLIO
----------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $36.31 $35.44 $32.30 $28.58 $23.20
------ ------ ------ ------ ------
Income from investment operations:
Net investment income 0.12 0.45 0.51 0.47 0.50
Net realized and unrealized gain (loss) on
investments 6.85 1.56 5.24 4.58 5.65
------ ------ ------ ------ ------
Total income from
investment operations 6.97 2.01 5.75 5.05 6.15
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income (0.11) (0.45) (0.63) (0.46) (0.39)
Distributions from net realized capital gains (16.68) (0.69) (1.98) (0.87) (0.38)
Return of capital (0.01) 0.00 0.00 0.00 0.00
------ ------ ------ ------ ------
Total distributions (16.80) (1.14) (2.61) (1.33) (0.77)
------ ------ ------ ------ ------
Net asset value, end of period $26.48 $36.31 $35.44 $32.30 $28.58
====== ====== ====== ====== ======
Total return(a) 19.87% 5.72% 18.17% 18.35% 27.20%
Ratios/supplemental data:
Net assets, end of period (millions) $329.6 $296.9 $288.1 $232.8 $175.7
Ratio of expenses to average net assets 0.76% 0.64% 0.67% 0.73% 0.73%
Ratio of net investment income to average net
assets 0.31% 1.25% 1.43% 1.60% 1.90%
Portfolio turnover rate 124% 25% 19% 11% 14%
</TABLE>
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
----------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<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 0.49 0.52 0.52 0.50 0.54
Less distributions:
Dividends from net investment income (0.49) (0.52) (0.52) (0.50) (0.54)
------ ------ ------ ------ ------
Net asset value, end of period $10.00 $10.00 $10.00 $10.00 $10.00
====== ====== ====== ====== ======
Total return(a) 5.02% 5.39% 5.37% 5.17% 5.62%
Ratios/supplemental data:
Net assets, end of period (millions) $ 67.2 $ 44.4 $ 29.1 $ 25.6 $ 15.7
Ratio of expenses to average net assets(c) 0.41% 0.41% 0.43% 0.49% 0.55%
Ratio of net investment income to average
net assets 4.90% 5.26% 5.11% 4.98% 5.39%
Ratio of expenses to average net assets..... 0.36 0.36 0.38 0.44 0.44
</TABLE>
44
<PAGE> 47
FINANCIAL HIGHLIGHTS OF OHIO NATIONAL FUND, INC. -- (CONTINUED)
<TABLE>
<CAPTION>
BOND PORTFOLIO
----------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.56 $10.68 $10.62 $10.93 $ 9.70
------ ------ ------ ------ ------
Income from investment operations:
Net investment income 0.68 0.67 0.71 0.69 0.70
Net realized and unrealized gain (loss) on
investments (0.62) (0.12) 0.23 (0.32) 1.08
------ ------ ------ ------ ------
Total Income (loss) from
investment operations 0.06 0.55 0.94 0.37 1.78
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income (0.68) (0.67) (0.88) (0.68) (0.55)
Distributions from net realized capital gains 0.00 0.00 0.00 0.00 0.00
------ ------ ------ ------ ------
Total distributions (0.68) (0.67) (0.88) (0.68) (0.55)
------ ------ ------ ------ ------
Net asset value, end of period $ 9.94 $10.56 $10.68 $10.62 $10.93
====== ====== ====== ====== ======
Total return(a) 0.58% 5.22% 9.28% 3.71% 18.90%
Ratios/supplemental data:
Net assets, end of period (millions) $ 26.0 $ 28.4 $ 21.8 $ 20.8 $ 18.1
Ratio of expenses to average net assets 0.77% 0.72% 0.78% 0.79% 0.75%
Ratio of net investment income to average net
assets 6.57% 6.21% 6.67% 6.54% 6.76%
Portfolio turnover rate 8% 12% 10% 3% 4%
</TABLE>
<TABLE>
<CAPTION>
OMNI PORTFOLIO
----------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $21.44 $21.06 $19.40 $17.60 $14.76
------ ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income 0.48 0.58 0.56 0.53 0.58
Net realized and unrealized gain (loss) on
investments 1.91 0.38 2.87 2.10 2.72
------ ------ ------ ------ ------
Total Income (loss) from investment operations 2.39 0.96 3.43 2.63 3.30
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income (0.48) (0.58) (0.69) (0.52) (0.46)
Distributions from net realized capital gains (0.80) 0.00 (1.08) (0.31) 0.00
------ ------ ------ ------ ------
Total distributions (1.28) (0.58) (1.77) (0.83) (0.46)
------ ------ ------ ------ ------
Net asset value, end of period $22.55 $21.44 $21.06 $19.40 $17.60
====== ====== ====== ====== ======
Total return(a) 11.36% 4.53% 18.15% 15.54% 22.75%
Ratios/supplemental data:
Net assets, end of period (millions) $190.0 $214.4 $193.7 $145.5 $109.6
Ratio of expenses to average net assets 0.67% 0.65% 0.71% 0.76% 0.75%
Ratio of net investment income to average net
assets 2.18% 2.71% 2.69% 2.89% 3.56%
Portfolio turnover rate 41% 18% 18% 12% 10%
</TABLE>
45
<PAGE> 48
FINANCIAL HIGHLIGHTS OF OHIO NATIONAL FUND, INC. -- (CONTINUED)
<TABLE>
<CAPTION>
INTERNATIONAL PORTFOLIO
----------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $12.86 $13.39 $15.49 $14.38 $13.30
------ ------ ------ ------ ------
Income from investment operations:
Net investment income (0.02) 0.32 0.28 0.25 0.31
Net realized and unrealized gain on
investments and foreign currency
transactions 8.67 0.24 0.08 1.76 1.28
------ ------ ------ ------ ------
Total income from investment operations 8.65 0.55 0.36 2.01 1.59
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income 0.00 (0.32) (0.37) (0.25) (0.28)
Distributions from net realized capital gains
and foreign currency related transactions 0.00 (0.76) (2.09) (0.65) (0.23)
------ ------ ------ ------ ------
Total distributions 0.00 (1.08) (2.46) (0.90) (0.51)
------ ------ ------ ------ ------
Net asset value, end of period $21.51 $12.86 $13.39 $15.49 $14.38
====== ====== ====== ====== ======
Total return(a) 67.40% 3.88% 2.11% 14.48% 12.10%
Ratios/supplemental data:
Net assets, end of period (millions) $173.0 $140.3 $156.0 $137.3 $ 90.6
Ratio of expenses to average net assets(c) 1.26% 1.17% 1.22% 1.15% 1.12%
Ratio of net investment income (loss) to
average net assets (0.15%) 2.31% 1.82% 1.64% 2.29%
Portfolio turnover rate 338% 22% 24% 14% 7%
</TABLE>
<TABLE>
<CAPTION>
CAPITAL APPRECIATION PORTFOLIO
----------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $12.92 $13.53 $12.93 $11.99 $10.25
------ ------ ------ ------ ------
Income from investment operations:
Net investment income 0.39 0.34 0.39 0.48 0.39
Net realized and unrealized gain on
investments and foreign currency
transactions 0.42 0.46 1.48 1.31 1.85
------ ------ ------ ------ ------
Total income from investment operations 0.81 0.80 1.87 1.79 2.24
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income (0.39) (0.34) (0.46) (0.44) (0.29)
Distributions from net realized capital gains
and foreign currency related transactions (1.23) (1.07) (0.81) (0.41) (0.21)
------ ------ ------ ------ ------
Total distributions (1.62) (1.41) (1.27) (0.85) (0.50)
------ ------ ------ ------ ------
Net asset value, end of period $12.11 $12.92 $13.53 $12.93 $11.99
====== ====== ====== ====== ======
Total return(a) 6.46% 5.91% 15.19% 15.75% 22.62%
Ratios/supplemental data:
Net assets, end of period (millions) $ 64.6 $ 76.5 $ 59.8 $ 38.3 $ 19.3
Ratio of expenses to average net assets 0.95% 0.93% 0.95% 0.97% 0.96%
Ratio of net investment income to average net
assets 2.94% 2.52% 2.88% 3.90% 3.47%
Portfolio turnover rate 34% 45% 41% 37% 32%
</TABLE>
46
<PAGE> 49
FINANCIAL HIGHLIGHTS OF OHIO NATIONAL FUND, INC. -- (CONTINUED)
<TABLE>
<CAPTION>
SMALL CAP PORTFOLIO
----------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $20.70 $18.72 $18.03 $15.85 $11.99
------ ------ ------ ------ ------
Income from investment operations:
Net investment income (0.16) (0.06) (0.02) (0.08) (0.02)
Net realized and unrealized gain on
investments and foreign currency
transactions 21.96 2.04 1.54 2.80 3.95
------ ------ ------ ------ ------
Total income from investment operations 21.80 1.98 1.52 2.72 3.93
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income 0.00 0.00 0.00 0.00 (0.07)
Distributions from net realized capital gains
and foreign currency related transactions (10.88) 0.00 (0.83) (0.54) 0.00
------ ------ ------ ------ ------
Total distributions (10.88) 0.00 (0.83) (0.54) (0.07)
------ ------ ------ ------ ------
Net asset value, end of period $31.62 $20.70 $18.72 $18.03 $15.85
====== ====== ====== ====== ======
Total return(a) 106.46% 10.57% 8.47% 17.71% 33.01
Ratios/supplemental data:
Net assets, end of period (millions) $167.9 $ 75.6 $ 58.3 $ 38.5 $ 16.0
Ratio of expenses to average net assets 0.89% 0.91% 0.94% 0.96% 0.96%
Ratio of net investment income (loss) to
average net assets (0.61%) (0.30%) (0.11%) (0.48%) (0.11%)
Portfolio turnover rate 166% 99% 80% 70% 75%
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL SMALL COMPANY PORTFOLIO
-------------------------------------------------
1999 1998 1997 1996 1995(E)
------ ------ ------ ------ --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.76 $11.73 $11.66 $10.80 $10.00
------ ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income (loss) (0.20) 0.29 0.29 0.28 0.13
Net realized and unrealized gain (loss) on
investments 11.81 0.12 1.03 1.00 0.75
------ ------ ------ ------ ------
Total income from investment operations 11.61 0.42 1.32 1.28 0.88
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income 0.00 (0.29) (0.38) (0.24) (0.08)
Distributions from net realized capital gains (2.12) (1.10) (0.87) (0.18) 0.00
------ ------ ------ ------ ------
Total distributions (2.12) (1.39) (1.25) (0.42) (0.08)
------ ------ ------ ------ ------
Net asset value, end of period $20.25 $10.76 $11.73 $11.66 $10.80
====== ====== ====== ====== ======
Total return(a) 108.51% 3.53% 11.67% 12.09% 8.89%
Ratios/supplemental data:
Net assets, end of period (millions) $ 38.1 $ 19.8 $ 18.0 $ 11.3 $ 4.4
Ratio of expenses to average net assets(d) 2.06% 1.30% 1.32% 1.29% 1.58%(b)
Ratio of net investment income (loss) to
average net assets(d) (1.44%) 2.48% 2.33% 2.44% 1.64%(b)
Portfolio turnover rate 314% 55% 29% 18% 6%(b)
</TABLE>
47
<PAGE> 50
FINANCIAL HIGHLIGHTS OF OHIO NATIONAL FUND, INC. -- (CONTINUED)
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH PORTFOLIO
------------------------------------------------
1999 1998 1997 1996 1995(e)
------ ------ ------ ------ --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $11.15 $11.09 $10.03 $11.84 $10.00
------ ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income (loss) (0.03) (0.01) (0.05) 1.64 1.56
Net realized and unrealized gain (loss) on
investments 0.67 0.88 1.29 (1.59) 1.08
------ ------ ------ ------ ------
Total income from investment operations 0.64 0.87 1.24 0.05 2.64
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income 0.00 0.00 (0.14) (1.86) (0.80)
Distributions from net realized capital gains 0.00 (0.81) (0.04) 0.00 0.00
------ ------ ------ ------ ------
Total distributions 0.00 (0.81) (0.18) (1.86) (0.80)
------ ------ ------ ------ ------
Net asset value, end of period $11.79 $11.15 $11.09 $10.03 $11.84
====== ====== ====== ====== ======
Total return(a) 5.76% 7.84% 12.53% 0.76% 26.95%
Ratios/supplemental data:
Net assets, end of period (millions) $ 23.3 $ 26.4 $ 19.9 $ 12.0 $ 4.0
Ratio of expenses to average net assets 0.95% 0.94% 0.97% 1.01% 1.02%(b)
Ratio of net investment income (loss) to
average net assets (0.32%) (0.09%) (0.40%) 15.81% 18.18%(b)
Portfolio turnover rate 241% 203% 193% 1,987% 1,488%(b)
</TABLE>
<TABLE>
<CAPTION>
CORE GROWTH PORTFOLIO GROWTH & INCOME PORTFOLIO
--------------------------- ----------------------------
1999 1998 1997(e) 1999 1998 1997(e)
------ ------ ------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.54 $ 9.68 $10.00 $13.63 $12.85 $10.00
------ ------ ------ ------ ------ ------
Loss from investment operations:
Net investment income (loss) (0.10) (0.06) (0.02) 0.02 0.14 0.11
Net realized and unrealized gain
(loss) on investments 11.05 0.92 (0.30) 8.33 0.77 3.52
------ ------ ------ ------ ------ ------
Total gain (loss) from investment
operations 10.95 0.86 (0.32) 8.35 0.91 3.63
------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income (4.51) 0.00 0.00 (0.03) (0.13) (0.11)
Distributions from net realized capital
gains 0.00 0.00 0.00 (3.17) 0.00 (0.67)
Distributions from excess realized
capital gains 0.00 0.00 0.00 0.00 0.00 0.00
------ ------ ------ ------ ------ ------
Total Distributions (4.51) 0.00 0.00 (3.20) (0.13) (0.78)
------ ------ ------ ------ ------ ------
Net asset value, end of period $16.98 $10.54 $ 9.68 $18.78 $13.63 $12.85
====== ====== ====== ====== ====== ======
Total return(a) 104.95% 8.82% (3.08%) 62.25% 7.09% 36.58%
Ratios/supplemental data:
Net assets, end of period (millions) $ 31.5 $ 11.8 $ 9.5 $113.0 $ 51.4 $ 18.7
Ratio of expenses to average net
assets 1.06% 1.13% 1.11% 0.95% 0.97% 0.95%
Ratio of net investment income (loss)
to average net assets (0.75%) (0.62%) (0.18%) 0.15% 1.09% 1.04%
Portfolio turnover rate 264% 134% 65% 417% 286% 185%
</TABLE>
48
<PAGE> 51
FINANCIAL HIGHLIGHTS OF OHIO NATIONAL FUND, INC. -- (CONTINUED)
<TABLE>
<CAPTION>
S&P 500 INDEX PORTFOLIO SOCIAL AWARENESS PORTFOLIO
--------------------------- ----------------------------
1999 1998 1997(e) 1999 1998 1997(e)
------ ------ ------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $14.23 $11.73 $10.00 $ 8.80 $11.40 $10.00
------ ------ ------ ------ ------ ------
Loss from investment operations:
Net investment income (loss) 0.40 0.38 (0.45) 0.04 0.05 0.09
Net realized and unrealized gain
(loss) on investments 3.28 3.09 (2.70) 1.51 (2.60) 2.47
------ ------ ------ ------ ------ ------
Total gain (loss) from investment
operations 3.68 3.47 (3.15) 1.55 (2.55) 2.56
------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income (0.44) (0.33) (0.45) (0.04) (0.05) (0.07)
Distributions from net realized capital
gains (1.30) (0.64) (0.91) 0.00 0.00 (1.09)
Distributions from excess realized
capital gains 0.00 0.00 (0.06) 0.00 0.00 0.00
------ ------ ------ ------ ------ ------
Total Distributions (1.74) (0.97) (1.42) (0.04) (0.05) (1.16)
------ ------ ------ ------ ------ ------
Net asset value, end of period $16.17 $14.23 $11.73 $10.31 $ 8.80 $11.40
====== ====== ====== ====== ====== ======
Total return(a) 25.63% 30.00% 31.75% 17.69% (22.41%) 25.63%
Ratios/supplemental data:
Net assets, end of period (millions) $216.6 $ 94.2 $ 22.1 $ 3.6 $ 6.6 $ 4.8
Ratio of expenses to average net
assets 0.49% 0.49% 0.52% 0.93% 0.81%% 0.95%
Ratio of net investment income to
average net assets 2.62% 2.89% 5.29% 0.47% 0.55%% 0.75%
Portfolio turnover rate 68% 115% 445% 122% 71% 40%
</TABLE>
49
<PAGE> 52
FINANCIAL HIGHLIGHTS OF OHIO NATIONAL FUND, INC. -- (CONTINUED)
<TABLE>
<CAPTION>
STRATEGIC INCOME FIRSTAR GROWTH & INCOME RELATIVE VALUE
PORTFOLIO PORTFOLIO PORTFOLIO
--------------------------- --------------------------- ---------------------------
1999 1998 1997(e) 1999 1998 1997(e) 1999 1998 1997(e)
------ ------ ------- ------ ------ ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 9.34 $10.16 $10.00 $10.56 $10.65 $10.00 $15.02 $12.68 $10.00
------ ------ ------ ------ ------ ------ ------ ------ ------
Loss from investment
operations:
Net investment
income (loss) 0.65 0.68 0.71 0.12 0.37 0.32 0.13 0.15 0.16
Net realized and
unrealized gain
(loss) on
investments (1.07) (0.82) 0.13 0.06 (0.07) 0.64 1.01 2.48 2.66
------ ------ ------ ------ ------ ------ ------ ------ ------
Total gain (loss) from
investment
operations (0.42) (0.14) 0.84 0.18 0.30 0.96 1.14 2.63 2.82
------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income (0.63) (0.68) (0.67) (0.12) (0.35) (0.31) (0.18) (0.15) (0.14)
Distributions from net
realized capital
gains 0.00 0.00 (0.01) 0.00 (0.04) 0.00 0.00 (0.14) 0.00
Distributions from
excess realized
capital gains 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
------ ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions (0.63) (0.68) (0.68) (0.12) (0.39) (0.31) (0.18) (0.29) (0.14)
------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end
of period $ 8.29 $ 9.34 $10.16 $10.62 $10.56 $10.65 $15.98 $15.02 $12.68
====== ====== ====== ====== ====== ====== ====== ====== ======
Total return(a) (4.81%) (1.42%) 8.74% 1.76% 2.92% 9.70% 7.43% 20.72% 28.28%
Ratios/supplemental
data:
Net assets, end of
period (millions) $ 3.1 $ 4.0 $ 3.2 $ 3.3 $ 3.6 $ 2.8 $ 11.9 $ 10.0 $ 5.7
Ratio of expenses to
average net assets 1.27% 1.18% 1.30% 1.39% 1.43% 1.54% 1.06% 1.08% 1.18%
Ratio of net
investment income
to average net
assets 7.23% 7.12 7.04% 1.16% 3.53% 3.07% 0.84% 1.19% 1.35%
Portfolio turnover
rate 53% 104% 102% 197% 81% 17% 9% 54% 7%
</TABLE>
50
<PAGE> 53
FINANCIAL HIGHLIGHTS OF OHIO NATIONAL FUND, INC. -- (CONTINUED)
<TABLE>
<CAPTION>
HIGH INCOME
CAPITAL GROWTH BOND EQUITY INCOME BLUE CHIP
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------------- ---------------- ---------------- ----------------
1999 1998(e) 1999 1998(e) 1999 1998(e) 1999 1998(e)
------ ------- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $10.47 $10.00 $ 9.59 $10.00 $10.53 $10.00 $10.22 $10.00
------ ------ ------ ------ ------ ------ ------ ------
Loss from investment operations:
Net investment income (loss) (0.12) (0.09) 0.57 0.38 0.11 0.07 0.05 0.00
Net realized and unrealized gain (loss) on
investments 21.25 0.56 (0.38) (0.40) 1.85 0.53 0.56 0.23
------ ------ ------ ------ ------ ------ ------ ------
Total gain (loss) from investment operations 21.13 0.47 0.19 (0.02) 1.96 0.60 0.61 0.23
------ ------ ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income 0.00 0.00 (0.56) (0.37) (0.11) (0.07) (0.05) (0.01)
Distributions from net realized capital gains (3.59) 0.00 0.00 (0.02) 0.00 0.00 (0.12) 0.00
Distributions from excess realized capital
gains 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
------ ------ ------ ------ ------ ------ ------ ------
Total Distributions (3.59) 0.00 (0.56) (0.39) (0.11) (0.07) (0.17) (0.01)
------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of period $28.01 $10.47 $ 9.22 $ 9.59 $12.38 $10.53 $10.66 $10.22
====== ====== ====== ====== ====== ====== ====== ======
Total return(a) 202.38% 4.62% 1.95% (0.20%) 18.58% 5.92% 5.86% 2.34%
Ratios/supplemental data:
Net assets, end of period (millions) $ 20.3 $ 2.3 $ 12.6 $ 10.4 $ 4.4 $ 2.2 $ 4.8 $ 2.9
Ratio of expenses to average net assets 1.09% 1.96% 1.13% 1.20% 1.28% 1.77% 1.35% 1.84%
Ratio of net investment income (loss) to
average net assets (0.61%) (1.47%) 6.19% 5.79% 1.05% 1.04% 0.53% 0.25%
Portfolio turnover rate 185% 121% 31% 11% 50% 38% 29% 32%
Ratios assuming fees reimbursed by advisor:
Ratios of expenses to average net assets 1.09 2.72 -- -- 1.28 2.41 1.35 2.26
</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. Including of those charges would reduce the total return figures
for all periods shown.
(b) Annualized.
(c) The Adviser has waived part of the management fee for 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. As a result, the ratios of
expenses to average net assets were 0.36% in 1999, 0.36% in 1998, 0.38% in
1997, 0.44% in 1996 and 0.44% in 1995. On and after January 1, 1999, the
Adviser has waived part of the management fee for the International
portfolio, to the extent that fee exceeds an annual rate of 0.85% of the
International portfolio's daily net asset value. As a result, the ratio of
expenses to average net assets was 1.21% in 1999.
(d) The Adviser reimbursed certain operating expenses of the International Small
Company portfolio in 1995. Had the Adviser not reimbursed such expenses of
the International Small Company 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
International Small Company portfolio in 1995.
(e) Total return was calculated on an aggregate basis (not annualized) for the
International Small Company and Aggressive Growth portfolios from their
commencement of operations, March 31, 1995, through December 31, 1995; for
the Core Growth, Growth & Income, S&P 500 Index, Social Awareness, Strategic
Income, Firstar Growth & Income and Relative Value portfolios, from the
commencement of their operations, January 3, 1997, through December 31,
1997, and for the Capital Growth, High Income Bond, Equity Income and Blue
Chip portfolios, from the commencement of their operations, May 1, 1998,
through December 31, 1998.
51
<PAGE> 54
ADDITIONAL INFORMATION
Additional information about Ohio National Fund has been filed with the
Securities and Exchange Commission in a Statement of Additional Information
(SAI), dated May 1, 2000, which is incorporated herein by reference.
In addition, information about the Fund's investments is available in the annual
and semi-annual reports to shareholders. In the Fund's annual report, you will
find a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during the last fiscal year.
The SAI, annual reports, and semi-annual reports are available upon request and
without charge by calling 1-800-366-6654 or writing to the Fund at One Financial
Way, Montgomery, Ohio 45242.
Information about the Fund can also be reviewed and copied at the Public
Reference Room of the Securities and Exchange Commission in Washington, D.C.
Information about the SEC's Public Reference Room is available at
1-800-SEC-0330. Reports and other information are also available in the
Securities Exchange Commission's Internet Site at http://www.sec.gov. and copies
of the information may be obtained, upon payment of a duplicating fee, by
writing the Public Reference Section of the Securities and Exchange Commission,
Washington, D.C. 20549-6009.
Ohio National Fund, Inc.
Investment Company Act file number: 811-3015
52
<PAGE> 55
PART B.
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 56
OHIO NATIONAL FUND, INC.
One Financial Way
Montgomery, Ohio 45242
Telephone (800) 366-6654
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 2000
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, 2000.
To obtain a free copy of the Fund's prospectus, write or call the Fund at the
above address.
Table of Contents
-----------------
Page
----
The Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Fund Performance. . . . . . . . . . . . . . . . . . . . . . . . . .4
Current Yield of Money Market Portfolio
Total Return
Portfolio Turnover
Investment Objectives and Policies. . . . . . . . . . . . . . . . .9
Money Market Instruments
Investment Restrictions. . . . . . . . . . . . . . . . . . . . . . 10
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
Management of the Fund. . . . . . . . . . . . . . . . . . . . . . .22
Directors and Officers
Compensation of Directors
Shareholders' Meetings
Investment Advisory and Other Services
Brokerage Allocation. . . . . . . . . . . . . . . . . . . . . . . .27
Purchase and Redemption of Shares. . . . . . . . . . . . . . . . . 29
Tax Status. . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . 31
Legal Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
The S&P 500 . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
The Nasdaq 100. . . . . . . . . . . . . . . . . . . . . . . . . . .31
1
<PAGE> 57
Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
Debt Security Ratings
Financial Statements. . . . . . . . . . . . . . . . . . . . . . . .38
2
<PAGE> 58
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
International Small Company 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 Firstar
Growth & Income portfolio, the Relative Value portfolio, the Capital 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 unless there is a change in applicable law, they will not be
sold directly to the public.
The Fund is a Maryland corporation. It was created on November 2, 1982 when O.N.
Fund, Inc. was merged into O.N. Market Yield Fund, Inc. The shares of O.N. Fund,
Inc. were converted to an equal number of shares of the Equity portfolio, all
shares of O.N. Market Yield Fund, Inc. were converted into an equal number of
shares of the Money Market portfolio, and the Bond portfolio was created. The
Omni portfolio was added in 1984, the International portfolio in 1993, the
Capital Appreciation and Small Cap portfolios in 1994, the International Small
Company and Aggressive Growth portfolios in 1995, the Core Growth, Growth &
Income, S&P 500 Index, Social Awareness, Strategic Income, Firstar Growth &
Income and Relative Value portfolios in 1997, the Capital Growth, High Income
Bond, Equity Income and Blue Chip portfolios in 1998, and the Nasdaq 100 Index
portfolio in 2000. 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 Money Market, Bond, Omni,
S&P 500 Index, Social Awareness and Nasdaq 100 Index 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, Montgomery, Ohio 45242.
The investment and reinvestment of Equity portfolio assets is managed by Legg
Mason Fund Adviser, Inc. ("Legg Mason") as sub-adviser. The principal business
address of Legg Mason is 100 Light Street, Baltimore, Maryland 21202.
The investment and reinvestment of International and International Small Company
portfolio assets is managed by Federated Global Investment Management Corp.
("Federated Global") as sub-adviser. The principal business address of Federated
Global is 175 Water Street, New York, New York 10038.
The investment and reinvestment of Capital Appreciation portfolio assets is
managed by Jennison Associates LLC ("Jennison") as sub-adviser. The principal
business address of Jennison is 466 Lexington Avenue, New York, New York 10017.
The investment and reinvestment of Small Cap portfolio assets is managed by
Founders Asset Management LLC ("Founders") as sub-adviser. The principal
business address of Founders is 2930 East Third Avenue, Denver, Colorado 80206.
The investment and reinvestment of Aggressive Growth portfolio assets is managed
by Janus Capital Corporation ("Janus") as sub-adviser. The principal business
address of Janus is 100 Fillmore Street, Denver, Colorado 80206.
The investment and reinvestment of Core Growth portfolio assets is managed by
Pilgrim Baxter & Associates, Ltd. ("Pilgrim Baxter") as sub-adviser. The
principal business address of Pilgrim Baxter is 825 Duportail Road, Wayne,
Pennsylvania 19087.
3
<PAGE> 59
The investment and reinvestment of Growth & Income and Capital Growth portfolio
assets is managed by RS Investment Management Co. LLC. ("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 and Relative Value portfolio
assets is managed by Firstar Bank, N.A. ("Firstar") as sub-adviser. The
principal business address of Firstar is 425 Walnut Street, Cincinnati, Ohio
45202.
The investment and reinvestment of Firstar Growth & Income portfolio assets is
managed by Firstar Investment Research & Management Company, LLC ("FIRMCO") as
sub-adviser. The principal business address of FIRMCO is 615 East Michigan
Street, Milwaukee, Wisconsin 53201.
The investment and reinvestment of High Income Bond, Equity Income and Blue Chip
portfolio assets is managed by Federated Investment Counseling ("Federated
Investment") as sub-adviser. The principal business address of Federated
Investment is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh,
Pennsylvania 15222.
Interests in each portfolio are represented by a separate class of the Fund's
capital stock, par value $1. Each class represents an undivided interest in the
assets of the portfolio corresponding to that class. All shares of each
portfolio have one vote per share and are freely transferable. When matters
arise that affect only one portfolio, shares of just that portfolio are entitled
to vote on those matters. Approval of certain matters by a vote of all Fund
shareholders may not bind a portfolio whose shareholders did not approve that
matter.
Each share of each portfolio may participate equally in the portfolio's
dividends, distributions and net assets. 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. This means the holders of more than half
of the Fund shares voting to elect directors can elect all the directors if they
so choose. In that event, the holders of the remaining shares could not 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.
American Data Services, Inc. is the Fund's transfer agent and fund accounting
agent. It is located at 150 Motor Parkway, Suite 109, Hauppauge, New York 11788.
Firstar is custodian for those portfolios other than the International and
International Small Company portfolios. The custodian for the International and
International Small Company portfolios is State Street Bank and Trust Company.
It is located at 801 Pennsylvania Street, Kansas City, Missouri. For assets
held outside the United States, the custodians enter into subcustodial
agreements. The Board of Directors approves all these relationships.
FUND PERFORMANCE
From time to time, we advertise the current yield, average annual total return
and cumulative total returns for the portfolios. We might compare the results 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
4
<PAGE> 60
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 the 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.
The Fund may distribute sales literature comparing the performance of its
portfolios against the Consumer Price Index or such established market indices
as the Dow Jones Industrial Average, the Standard & Poor's 500, 400, 600 or 1500
Indices, one or more of Lehman Brothers Bond Indices, the Morgan Stanley Capital
International Europe, Australia and Far East Index, the Morgan Stanley Capital
International World Index, the Russell 2000, 2500 or 3000 Indices, the New York
Stock Exchange Composite Index, the American Stock Exchange Index, the National
Association of Securities Dealers Automated Quotations Composite Index, the
Nasdaq 100 Index, the Value Line Composite Index, the Investors Business Daily
6000 Index, the Wilshire 5000 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
5
<PAGE> 61
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).
The 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, 1999, are as stated below:
<TABLE>
<CAPTION>
One Five Ten From Inception
Year Years Years Inception Date
---- ------ ----- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Equity* 19.87% 17.65% 12.35% 11.18% 10-06-1969
Money Market 5.02% 5.31% 4.98% 7.09% 03-20-1980
Bond 0.58% 7.35% 7.11% 8.01% 11-02-1982
Omni 11.36% 14.30% 11.09% 11.50% 09-10-1984
International* 67.40% 17.91% N/A 18.39% 04-30-1993
Capital Appreciation* 6.46% 13.01% N/A 12.27% 05-01-1994
Small Cap 106.46% 31.13% N/A 31.40% 05-01-1994
International Small Company* 108.51% N/A N/A 25.53% 03-31-1995
Aggressive Growth* 5.76% N/A N/A 11.00% 03-31-1995
Core Growth 104.95% N/A N/A 29.40% 01-03-1997
Growth & Income 62.25% N/A N/A 33.50% 01-03-1997
S&P 500 Index 25.63% N/A N/A 29.20% 01-03-1997
Social Awareness 17.69% N/A N/A 4.72% 01-03-1997
Strategic Income (4.81%) N/A N/A 0.68% 01-03-1997
Firstar Growth & Income* 1.76% N/A N/A 4.75% 01-03-1997
Relative Value 7.43% N/A N/A 18.54% 01-03-1997
Capital Growth 202.38% N/A N/A 107.07% 05-01-1998
High Income Bond 1.95% N/A N/A 1.10% 05-01-1998
Equity Income 18.58% N/A N/A 15.50% 05-01-1998
Blue Chip 5.86% N/A N/A 5.19% 05-01-1998
Nasdaq 100 Index N/A N/A N/A N/A 05-01-2000
</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
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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, 1999 (assuming a hypothetical initial investment of
$1,000) were as follows:
Five Years Ten Years From Inception
Equity* $2,254 $3,204 $ 24,239
Money Market $1,295 $1,629 $ 3,778
Bond $1,426 $1,988 $ 3,749
Omni $1,951 $2,863 $ 5,287
International* $2,279 N/A $ 3,077
Capital Appreciation* $1,843 N/A $ 1,856
Small Cap $3,877 N/A $ 4,527
International Small Company* N/A N/A $ 2,870
Aggressive Growth* N/A N/A $ 1,602
Core Growth N/A N/A $ 2,162
Growth & Income N/A N/A $ 2,373
S&P 500 Index N/A N/A $ 2,152
Social Awareness N/A N/A $ 1,147
Strategic Income N/A N/A $ 1,020
Firstar Growth & Income* N/A N/A $ 1,149
Relative Value N/A N/A $ 1,664
Capital Growth N/A N/A $ 2,117
High Income Bond N/A N/A $ 1,017
Equity Income N/A N/A $ 1,256
Blue Chip N/A N/A $ 1,083
Nasdaq 100 Index N/A N/A N/A
*Prior to January 1, 1999, the sub-adviser of the International and
International Small Company portfolios was Societe Generale Asset Management
Corp. and the investment policies of the International Small Company portfolio
were substantially different. Prior to May 1, 1999, the Firstar Growth & Income
Portfolio's investment policies were substantially different and its sub-adviser
was Firstar Bank, N.A. Prior to August 2, 1999, the Equity portfolio was managed
by the Adviser. Prior to January 3, 2000, the Capital Appreciation portfolio was
managed by T. Rowe Price Associates, Inc. and the Aggressive Growth portfolio
was managed by Strong Capital Management, Inc.
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.
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. Higher turnover rates are often reflected in higher portfolio
brokerage expenses. 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 low.
During periods when changing market or economic conditions are foreseen,
shifts in portfolio emphasis may cause the rate of portfolio turnover to
increase. During 1999, the turnover rate for this portfolio was 124%.
MONEY MARKET PORTFOLIO - Since the assets of this portfolio consist of
short-term instruments, replacement of portfolio securities occurs
frequently. However, since purchases are generally made through dealers or
issuers on a net basis, the portfolio does not normally incur significant
brokerage commissions.
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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 portfolio turnover rate will vary from time to time but is not
expected to exceed 50% annually. The turnover rate for this portfolio was
8% in 1999.
OMNI PORTFOLIO - The portfolio turnover rate will vary from time to time
but generally is not expected to exceed 100% annually. The turnover rate
for this portfolio was 41% in 1999.
INTERNATIONAL PORTFOLIO - Federated Global will not attempt to set or meet
a portfolio turnover rate because turnover is incidental to transactions
made in an attempt to achieve the portfolio's investment objective.
Securities will be sold whenever Federated Global believes it is
appropriate, regardless of how long they have been held. The turnover rate
for this portfolio was 338% in 1999.
CAPITAL APPRECIATION PORTFOLIO - Although Jennison 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 34% in 1999.
SMALL CAP PORTFOLIO - While this portfolio purchases and holds securities
with the goal of meeting its investment objectives, portfolio changes are
made whenever Founders 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 166% in 1999.
INTERNATIONAL SMALL COMPANY PORTFOLIO - Federated Global will not attempt
to set or meet a portfolio turnover rate because turnover is incidental to
transactions made in an attempt to achieve the portfolio's investment
objective. Securities will be sold whenever Federated Global believes it
is appropriate, regardless of how long they have been held. The turnover
rate for this portfolio was 314% in 1999.
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 241% in 1999.
CORE GROWTH PORTFOLIO - Although the securities held in this portfolio are
generally held for appreciation, Pilgrim Baxter'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 excess of 100%. The turnover rate for this
portfolio was 264% in 1999.
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 excess of 100%. The turnover rate for this portfolio was
417% in 1999.
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 68% in 1999.
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 generally is not
expected to exceed 150%. The turnover rate for this portfolio was 122% in
1999.
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STRATEGIC INCOME PORTFOLIO - The securities of this portfolio will
generally be traded more frequently than those of 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 53% in 1999.
FIRSTAR GROWTH & INCOME PORTFOLIO - Although this portfolio does not seek
short-term profits, its securities will be sold whenever FIRMCO 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
100% to 200%. The turnover rate for this portfolio was 197% in 1999.
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 9% in 1999.
CAPITAL GROWTH PORTFOLIO - Securities held in this portfolio tend to be
actively traded. Its portfolio turnover rate is normally expected to
exceed 100%. The turnover rate was 185% in 1999.
HIGH INCOME BOND PORTFOLIO - The portfolio turnover rate will vary from
time to time, but it is not normally expected to exceed 100% for this
portfolio. The turnover rate was 31% in 1999.
EQUITY INCOME PORTFOLIO - The portfolio turnover rate for this portfolio
is normally expected to be in the range of 50% to 150% annually. The
turnover rate was 50% in 1999.
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%. The turnover
rate was 29% in 1999.
NASDAQ 100 INDEX PORTFOLIO. Securities held in this portfolio are
generally only replaced when changes occur in the make-up of the Index or
in order to more closely replicate the Index. The annual turnover rate is
not expected to exceed 100%.
INVESTMENT OBJECTIVES AND POLICIES
The following descriptions of money market instruments supplement the
"Investment Objectives and Policies" set forth for each portfolio in the
prospectus. The Money Market portfolio and the Omni and Strategic Income
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.
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.
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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 generally be short, from
overnight to one week, and at no time more than one year.
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, investment restrictions stated in
the prospectus and this Statement of Additional Information are fundamental
policies. Restrictions number 4, 7, 8, 12 and 13 are fundamental policies of the
Money Market, Bond and Omni portfolios and nonfundamental as to the remaining
portfolios. The fundamental policies and nonfundamental operating policies of
the International, International Small Company, 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.
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The Fund may not issue senior securities and each portfolio of the Fund (other
than the International, International Small Company, 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) (this restriction does not apply to the
Nasdaq 100 Index portfolio and it only applies as to 75% of the
Equity portfolio's assets);
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 (this
restriction does not apply to the Nasdaq 100 Index portfolio);
4. invest more than 15% of the value of its assets (10% in the case of
the Money Market, Bond and Omni 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 Capital 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 Capital
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 Nasdaq 100 Index portfolio may purchase or
sell derivative securities designed to replicate the Nasdaq 100
Index;
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. invest in securities of foreign issuers except that (a) each of the
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
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<PAGE> 67
Cap and Capital 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) each of the Equity, Firstar Growth & Income, and Nasdaq 100
Index portfolios 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;
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 Money Market, Bond and Omni 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 a nonfundamental policy of each portfolio other than the Money Market,
International, International Small Company, 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,
each 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
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<PAGE> 68
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
and International Small Company Portfolios will be invested in securities of
issuers in at least three different foreign countries. The Board of Directors
has determined that each of State Street Bank and Trust Company and Bankers
Trust Company has established a system to monitor the appropriateness of the
Fund's assets held in foreign countries. The Board has delegated to State
Street Bank and to Bankers Trust the selection of foreign custodians for the
Fund's assets that are held outside the United States. In so doing the Board
requires that these delegates determine that the Fund's assets will be subject
to reasonable care based on the standards applying to custodians in the relevant
markets after considering all factors related to the safekeeping of such assets.
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 Jennison 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 Jennison 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
13
<PAGE> 69
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 Jennison
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.
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 (including securities eligible for
resale under Rule 144A of the Securities Act of 1933) and
securities of unseasoned issuers if, as a result, more than 15%
of its net assets would be invested in such securities;
C.A.14. Purchase securities of open-end or closed-end investment
companies except in compliance with the Investment Company Act
of 1940;
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;
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<PAGE> 70
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 if as a result more than 5%
of the value of the total assets of the portfolio would be
invested in such 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. Effect short sales of securities;
C.A.20. Purchase any warrants if as a result the portfolio will have
more than 5% of its total assets invested in warrants; provided
that this restriction does not apply to warrants acquired as a
result of the purchase of another security; or
C.A.21. Invest more than 25% of the portfolio's total assets (excluding
reserves) in foreign securities.
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
Janus 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.
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<PAGE> 71
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).
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.
A.G.13. 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.14. 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; and (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.
A.G.15. 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.
A.G.16. 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.
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A.G.17. 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.
INTERNATIONAL, INTERNATIONAL SMALL COMPANY, 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.
INTERNATIONAL, INTERNATIONAL SMALL COMPANY, HIGH INCOME BOND, EQUITY INCOME AND
BLUE CHIP PORTFOLIO NONFUNDAMENTAL OPERATING POLICIES
As a matter of nonfundamental operating policy:
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<PAGE> 73
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.
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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 Index 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.
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 primarily 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.
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
or exposed to 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
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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 or exposed to
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 or exposed to 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 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.
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HYBRID INSTRUMENTS
Hybrid instruments are potentially high-risk derivatives. They can combine the
characteristics of securities, futures and options. For example, the principal
amount, redemption or conversion terms of a security could be related to the
market price of some commodity, currency or futures index. Hybrid instruments
may bear interest or pay dividends at or below market or even relatively
nominal rates. Under certain conditions, the redemption value of an investment
could be zero.
SWAPS
Swaps are contracts in which two parties agree to pay each other (swap) the
returns derived from underlying assets with differing characteristics. Most
swaps do not involve the delivery of the underlying assets by either party, and
the parties might not even own the assets underlying the swap. The payments are
usually made on a net basis so that, on any given day, the portfolio would
receive (or pay) only the amount by which its payment under the contract is
less than (or exceeds) the amount of the other party's payment. Swap agreements
are sophisticated derivative instruments that can take many forms. They are
known by a variety of names including caps, floors and collars.
Interest rate swaps are contracts in which one party agrees to make regular
payments equal to a fixed or floating interest rate times a stated principal
amount of fixed income securities in return for payments equal to a different
fixed or floating rate, times the same principal amount, for a specified
period. For example, a $10 million LIBOR swap would require one party to pay to
the other party the equivalent of the London Interbank Offer Rate of interest
(which fluctuates) on $10 million principal amount in exchange for the right to
receive the equivalent of a stated fixed rate of interest on a $10 million
principal amount.
Currency swaps are contracts which provide for interest payments in different
currencies. The parties might agree to exchange the notional principal amount as
well.
Caps and Floors are contracts in which one party agrees to make payments only if
an interest rate or index goes above (Cap) or below (Floor) a certain level
in return for a fee from the other party.
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.
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. There are no fees or other expenses, other than
normal transaction costs. However, the portfolio must set aside enough of its
liquid assets to pay for the securities to be purchased. 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 the portfolio would have to set aside more than 20% of the total
value of its assets. The Money Market portfolio does not engage in these
transactions.
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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.
MANAGEMENT OF THE FUND
DIRECTORS AND OFFICERS OF THE FUND
The Fund's Board of Directors is responsible for the Fund's management. The
Board of Directors can amend the Fund's By-laws, elect its officers, declare and
pay dividends, and exercise all the Fund's powers except those reserved to the
shareholders.
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
Cincinnati, Ohio the Adviser
James E. Bushman Director President & CEO, Cast-Fab
3040 Forrer Street Technologies, Inc.
Cincinnati, Ohio
Ross Love Director President & CEO, Blue Chip
615 Windings Way Broadcasting Ltd.; Trustee, Health
Cincinnati, Ohio Alliance of Greater 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 Initiatives,
One Financial Way Director ONLI; Prior to March 1997 was Senior Vice
Cincinnati, Ohio 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
</TABLE>
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<TABLE>
<S> <C> <C>
Thomas A. Barefield Vice President Senior Vice President, Institutional Sales,
One Financial Way ONLI; Prior to November 1997 was Senior
Cincinnati, Ohio Vice President of Life Insurance Company
of Virginia
Michael A. Boedeker Vice President Vice President, Senior Investment Officer,
One Financial Way ONLI; Vice President and Director of
Cincinnati, Ohio the Adviser
Christopher A. Carlson Vice President Vice President, Senior Investment Officer,
One Financial Way ONLI; President and Director of the
Cincinnati, Ohio Adviser
Dennis R. Taney Treasurer Assistant Vice President, Mutual Fund
One Financial Way Operations, ONLI; Treasurer of the
Cincinnati, Ohio Adviser
</TABLE>
*Indicates Directors who are "Interested Persons" as defined by the Investment
Company Act of 1940, as amended.
All directors and officers of the Fund hold similar positions with ONE Fund,
Inc. ("ONE Fund") and Dow Target Variable Fund LLC ("Dow Target"), other
investment companies 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 1999:
<TABLE>
<CAPTION>
Compensation Aggregate Compensation Total
Director From the Fund From Fund Complex*
- -------- ------------- ------------------
<S> <C> <C>
James E. Bushman None None
George E. Castrucci $11,200 $18,950
Ross Love 10,800 18,100
George M. Vredeveld 11,200 18,950
</TABLE>
* The "Fund Complex" consists of the Fund, ONE Fund and Dow Target.
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 do not require that shareholders meetings need be held except
when matters occur that require shareholder approval. Such matters include
election of directors, approval of investment advisory and sub-advisory
agreements, and approval of fundamental investment policies and restrictions.
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.
23
<PAGE> 79
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 Equity, International,
Capital Appreciation, Small Cap, International Small Company, Aggressive Growth,
Core Growth, Growth & Income, Strategic Income, Firstar Growth & Income,
Relative Value, Capital Growth, High Income Bond, Equity Income and Blue Chip
Portfolios, by delegating that implementation to Legg Mason, Federated Global,
Jennison, Founders, Janus, Pilgrim Baxter, RSIM, Federated Investment, Firstar
or FIRMCO 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 Firstar 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 month for
which the fees are paid based on the following schedule:
(a) for each of the Bond, Omni and Social Awareness portfolios, 0.60% of the
first $100 million of each portfolio's average daily 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 average daily net assets
over $2 billion;
(b) for the Money Market portfolio, 0.30% of the first $100 million of average
daily net assets, 0.25% of the next $150 million, 0.23% of the next $250
million, 0.20% of the next $500 million, and 0.15% of average daily net assets
over $1 billion;
(c) for the International, Relative Value, Capital Growth, Blue Chip and Firstar
Growth & Income portfolios, 0.90% of each portfolio's average daily net assets;
(d) for the Capital Appreciation, Small Cap, Aggressive Growth and Strategic
Income portfolios, 0.80% of each portfolio's average daily net assets,
(e) for the Core Growth portfolio, 0.95% of the first $150 million of average
daily net assets, and 0.80% of average daily net assets over $150 million;
(f) for the Growth & Income portfolio, 0.85% of the first $200 million of
average daily net assets, and 0.80% of average daily net assets over $200
million,
(g) for the S&P 500 Index portfolio, 0.40% of the first $100 million of average
daily net assets, 0.35% of the next $150 million, and 0.33% of average daily net
assets over $250 million;
(h) for the High Income Bond, Equity Income and Nasdaq 100 Index portfolios,
0.75% of each portfolio's average daily net assets;
(i) for the International Small Company portfolio, 1.00% of the first $100
million of average daily net assets, and 0.90% of average daily net assets over
$100 million, and
(j) for the Equity portfolio, 0.80% of the first $500 million of average daily
net assets, and 0.75% of average daily net assets over $500 million.
However, as to the Money Market portfolio, the Adviser is presently waiving any
of its fee in excess of 0.25%, and as to the International portfolio, the
Adviser is presently waiving any of its fee in excess of 0.85%.
24
<PAGE> 80
The Fund also incurs other miscellaneous expenses for legal and accounting
services, registration and filing fees, custodial services and shareholder
services.
Under the Investment Advisory Agreement, the Fund authorizes the Adviser to
retain sub-advisers for the Equity, International, Capital Appreciation, Small
Cap, International Small Company, Aggressive Growth, Core Growth, Growth &
Income, Strategic Income, Firstar Growth & Income, Relative Value, Capital
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 Legg Mason, Federated Global, Jennison, Founders,
Janus, Pilgrim Baxter, RSIM, Firstar, FIRMCO and Federated Investment, 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 the Adviser pays:
(a) Federated Global fees at the annual rate of
(i) 0.40% of the first $200 million and 0.35% of average daily net
assets in excess of $200 million of the International portfolio, and
(ii) 0.75% of the first $100 million and 0.65% of average daily net
assets in excess of $100 million of the International Small Company
portfolio;
(b) Jennison a fee at the annual rate of 0.75% of the first $10 million, 0.50%
of the next $30 million, 0.35% of the next $25 million, 0.25% of the next $335
million, 0.22% of the next $600 million, and 0.20% of the average daily net
asset value in excess of $1 billion of the Capital Appreciation portfolio;
(c) Founders a fee at an annual rate of 0.55% of the first $150 million, 0.50%
of the next $150 million, and 0.40% of the average daily net asset value in
excess of $300 million of the Small Cap portfolio;
(d) Janus a fee at the annual rate of 0.55% of the first $100 million, 0.50% of
the next $400 million, and 0.45% of average daily net asset value in excess of
$500 million of the Aggressive Growth portfolio;
(e) Pilgrim Baxter a fee at an annual rate of 0.65% of the first $50 million,
0.60% of the next $100 million, and 0.50% of average daily net assets in excess
of $150 million of the Core Growth portfolio;
(f) RSIM 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
0.55% of average daily net assets in excess of $200 million of the
Capital Growth portfolio;
(g) Firstar 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, and
(ii) 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;
(h) Federated Investment fees at an annual rate of
(i) 0.50% of the first $30 million, 0.40% of the next $20 million,0.30%
of the next $25 million, and 0.25% of average daily net assets in excess
of $75 million of the High Income Bond portfolio, and
(ii) 0.50% of the first $35 million, 0.35% of the next $65 million and
0.25% of average daily net assets in excess of $100 million for
directing the investment and reinvestment of the assets of each of the
Equity Income and Blue Chip portfolios;
25
<PAGE> 81
(i) FIRMCO a fee at an annual rate of 0.65% of the first $50 million and 0.60%
of average daily net assets in excess of $50 million of the Firstar Growth
& Income portfolio, and
(j) Legg Mason a fee at an annual rate of 0.45% of the first $500 million and
0.40% of average daily net assets in excess of $500 million of the Equity
portfolio.
The following investment advisory fees from each of the Fund's portfolios were
paid to the Adviser for each of the indicated years, ending December 31*:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Equity $1,848,965 $1,550,392 $1,431,415
Money Market** 130,264 94,306 71,176
Bond 160,182 150,300 121,188
Omni 1,070,139 1,116,792 948,021
International** 1,010,896 1,346,274 1,416,777
Capital Appreciation 574,228 559,341 386,595
Small Cap 826,722 490,439 378,436
International Small Company 239,451 175,546 130,704
Aggressive Growth 186,707 182,408 125,073
Core Growth 180,739 96,330 62,237
Growth & Income 607,062 323,909 61,464
S&P 500 Index 618,602 212,478 43,376
Social Awareness 24,814 40,259 16,529
Strategic Income 28,913 30,384 18,318
Firstar Growth & Income 32,117 32,977 23,440
Relative Value 100,255 80,506 30,639
Capital Growth 64,947 10,726 N/A
High Income Bond 86,401 50,117 N/A
Equity Income 22,667 9,909 N/A
Blue Chip 33,744 13,619 N/A
Nasdaq 100 Index N/A N/A N/A
------------ ------------- -------------
$7,848,175 $6,567,012 $5,265,388
</TABLE>
* The Core Growth, Growth & Income, S&P 500 Index, Social Awareness,
Strategic Income, Firstar Growth & Income and Relative Value portfolios
commenced operations on January 3, 1997. The Capital Growth, High Income Bond,
Equity Income and Blue Chip portfolios commenced operations on May 1, 1998. The
Nasdaq 100 Index portfolio commenced operations on May 1, 2000.
** For the Money Market portfolio, an additional $26,125, $15,718, and $14,235
was earned but waived in 1999, 1998 and 1997 respectively, as described above.
For the International portfolio, an additional $59,465 was earned but waived in
1999 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 l%, on
an annualized basis, of such portfolio's average daily net asset value, the
Adviser will pay such expenses. No such amounts were paid to any portfolio
during the three years ended December 31, 1999.
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 Board of Directors and the shareholders of the respective portfolios
initially voted to approve the current Investment Advisory, Service and
Sub-Advisory Agreements on the dates indicated below:
26
<PAGE> 82
<TABLE>
<CAPTION>
Board of
Directors Shareholders
--------- ------------
<S> <C> <C>
Equity (Investment Advisory and Service) 01-24-1996 03-28-1996
Equity (Sub-Advisory) 05-20-1999 07-22-1999
Money Market 01-24-1996 03-28-1996
Bond 01-24-1996 03-28-1996
Omni 01-24-1996 03-28-1996
International (Investment Advisory and Service) 01-24-1996 03-28-1996
International (Sub-Advisory) 12-09-1998 04-05-1999
Capital Appreciation (Investment Advisory and Service) 01-24-1996 03-28-1996
Capital Appreciation (Sub-Advisory) 11-02-1999 04-03-2000
Small Cap (Investment Advisory and Service) 01-24-1996 03-28-1996
Small Cap (Sub-Advisory) 11-19-1997 02-17-1998
International Small Company (Investment Advisory and Service) 01-24-1996 03-28-1996
International Small Company (Sub-Advisory) 12-09-1998 04-05-1999
Aggressive Growth (Investment Advisory and Service) 01-24-1996 03-28-1996
Aggressive Growth (Sub-Advisory) 11-19-1999 04-03-2000
Core Growth 08-22-1996 01-02-1997
Growth & Income (Investment Advisory and Service) 08-22-1996 01-02-1997
Growth & Income (Sub-Advisory) 02-24-1999 04-05-1999
S&P 500 Index 08-22-1996 01-02-1997
Social Awareness 08-22-1996 01-02-1997
Strategic Income 08-22-1996 01-0219-97
Firstar Growth & Income (Investment Advisory and Service) 08-22-1996 01-02-1997
Firstar Growth & Income (Sub-Advisory) 02-24-1999 04-05-1999
Relative Value 08-22-1996 01-02-1997
Capital Growth (Investment Advisory and Service) 02-11-1998 04-30-1998
Capital Growth (Sub-Advisory) 02-24-1999 04-05-1999
High Income Bond 02-11-1998 04-30-1998
Equity Income 02-11-1998 04-30-1998
Blue Chip 02-1119-98 04-30-1998
Nasdaq 100 Index 03-08-2000 05-01-2000
</TABLE>
These agreements will continue in force from year to year if 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 Money Market, Bond,
Omni, S&P 500 Index, Social Awareness and Nasdaq 100 Index 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
27
<PAGE> 83
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.
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:
1999 1998 1997
---- ---- ----
Equity $ 817,693 $ 249,512 $167,877
Money Market None None None
Bond None None None
Omni 224,752 130,934 96,409
International 2,225,000 253,718 286,011
Capital Appreciation 50,971 63,490 40,887
Small Cap 113,023 78,359 55,034
International Small Company 560,000 101,032 45,153
Aggressive Growth 195,628 118,001 104,590
Core Growth 50,123 17,204 12,359
Growth & Income 581,431 270,046 51,188
S&P 500 Index 81,560 48,797 74,063
Social Awareness 41,407 39,951 16,522
Strategic Income 11,024 6,613 5,127
Firstar Growth & Income 13,856 16,648 4,353
Relative Value 5,690 28,388 11,110
Capital Growth 9,804 3,000 N/A
High Income Bond 114 None N/A
Equity Income 3,954 2,017 N/A
28
<PAGE> 84
Blue Chip 3,649 4,014 N/A
Nasdaq 100 Index N/A N/A N/A
---------- ---------- ---------
$4,989,679 $1,431,724 $970,683
In l999, substantially all of such commissions were paid to brokers who
furnished statistical data and research information to the Adviser or a
sub-adviser.
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 day the New York Stock Exchange is open for
unrestricted trading. 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.
The Board of Directors is ultimately responsible for determining the current net
asset values of each portfolio. The Board has authorized the Adviser and its
service providers to use the following sources to determine the current daily
prices of securities owned by the portfolios: Interactive Data Corporation (and
related "Fundrun" services), Reuters, Bloomberg and any brokers making a market
in a particular security.
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
29
<PAGE> 85
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 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, 1999 the Fund and each portfolio 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. 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.
30
<PAGE> 86
INDEPENDENT AUDITORS
The financial statements of Ohio National Fund, Inc. as of December 31, 1999 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 LLP, 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 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
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 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 NASDAQ 100 INDEX
The Nasdaq 100 Index portfolio is not sponsored, endorsed, sold or promoted by
The Nasdaq Stock Market, Inc. (including its affiliates). The Nasdaq Stock
Market, Inc. and its affiliates are referred to
31
<PAGE> 87
herein as "Nasdaq." Nasdaq has not passed on the legality or suitability of, or
the accuracy or adequacy of descriptions and disclosures relating to, the Nasdaq
100 Index portfolio. Nasdaq makes no representation or warranty, express or
implied to investors in the portfolio or any member of the public regarding the
advisability of investing in securities generally or the portfolio particularly,
or the ability of the Nasdaq 100 Index(R) to track general stock market
performance. Nasdaq's only relationship to the Adviser (the licensee) is in the
licensing of the Nasdaq 100(R), Nasdaq 100 Index(R), and Nasdaq(R) trademarks or
service marks, and certain trade names of Nasdaq aND the use of the Nasdaq 100
Index(R) which is determined, composed and calculated by Nasdaq without regard
to the Adviser or the portfolio. Nasdaq has no obligation to take the needs of
the Adviser or investors in the portfolio into consideration in determining,
composing or calculating the Nasdaq 100 Index(R). Nasdaq is not responsible for
and has not participated in the determination of the timing of, prices at, or
quantities of the portfolio to be issued or in the determination or calculation
of the equation by which the portfolio is to be converted into cash. Nasdaq has
no liability in connection with the administration, marketing or trading of the
portfolio.
NASDAQ DOES NOT GUARANTEE THE ACCURACY AND/OR UNINTERRUPTED CALCULATION OF THE
NASDAQ 100 INDEX(R) OR ANY DATA INCLUDED THEREIN. NASDAQ MAKES NO WARRANTY,
EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE ADVISER, INVESTORS IN
THE PORTFOLIO, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE NASDAQ 100
INDEX(R) OR ANY DATA INCLUDED THEREIN. NASDAQ MAKES NO EXPRESS OR IMPLIED
WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE NASDAQ 100 INDEX(R) OR ANY
DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL
NASDAQ HAVE ANY LIABILITY FOR ANY LOST PROFITS OR SPECIAL, INCIDENTAL, PUNITIVE,
INDIRECT, OR CONSEQUENTIAL DAMAGES, EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH
DAMAGES.
32
<PAGE> 88
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.
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
33
<PAGE> 89
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
34
<PAGE> 90
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.
35
<PAGE> 91
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
generally 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 interest 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.
36
<PAGE> 92
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.
37
<PAGE> 93
OHIO NATIONAL FUND, INC.
EQUITY PORTFOLIO
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, 1999
AVERAGE ANNUAL TOTAL RETURNS:
<TABLE>
<S> <C>
One-year 19.87%
Three-year 14.41%
Five-year 17.65%
Ten-year 12.35%
Since inception (1/14/71) 11.17%
</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
Your fund had a good fourth quarter, rising 19.01%. This outpaced both the S&P
500 and the Dow, which rose 14.88% and 11.66% respectively. Our objective is to
provide investment results in excess of those achievable by investing in an
index fund over a multi-year period; it is not to beat the index every day,
week, quarter, or year.
Investment success last year was determined almost exclusively by how heavily
weighted one was in technology. As you probably know, the technology heavy
NASDAQ index rose over 85% in 1999, the largest single increase of any broad
based index in history.
We believe that the dramatic price gains achieved by the major technology
companies have removed most of the undervaluation present a few years ago.
Accordingly, the risk of owning these securities has increased substantially.
Our experience has been that most investor's psychological assessment of risk is
inversely proportional to the most recent price action in their holdings. If a
stock has gone up a lot, they feel more confident about it and perceive its risk
to be lower than it was prior to the price rise. If a stock has dropped a lot,
they believe it is riskier because of its decline. The opposite is typically the
case.
We have written in the past about enantiodromia, the tendency for things to
swing back and forth. We think many of the securities which have performed
poorly for us in the last year or so are likely to do much better this year,
while many of our heretofore strongest performers are more vulnerable than they
have been.
The market's rocky start has clipped some of our financials, a group which
lagged the market badly last year as interest rates rose. We think rising rates
are the biggest risk to the equity market this year. The Federal Reserve
recently raised rates 25 basis points and the market expects further increases.
If rates peak this year, and start down or even stabilize, then our financials
should do quite well.
Portfolio activity was predictably modest in the quarter. We bought one stock:
Albertsons, a supermarket chain which has had some integration issues with their
purchase of American Stores, and earnings have suffered as a result. Trading now
at under 12x this year's earnings, we think Albertsons is a bargain. We sold
several issues, mostly smaller positions in a variety of industries. The money
from these sales was recycled into stocks whose prospects we deemed greater than
those of the companies sold.
CHANGE IN VALUE OF $10,000 INVESTMENT
<TABLE>
<CAPTION>
EQUITY PORTFOLIO (COMMENCED
OPERATIONS JANUARY 14, 1971) S&P 500 INDEX
---------------------------- -------------
<S> <C> <C>
10000.00 10000.00
'87' 10751.40 10318.00
12236.00 11645.00
'88' 12367.00 12052.80
14124.00 14034.00
'89' 15237.50 15847.50
15798.00 16335.00
'90' 14649.70 15345.70
15814.00 17543.00
'91' 17606.10 20032.60
17370.00 19904.00
'92' 18935.20 21568.40
20016.00 22607.00
'93' 21605.00 23722.50
20916.00 22911.00
'94' 21659.00 24033.90
25247.00 28876.00
'95' 27550.50 33029.20
30211.00 36398.00
'96' 32607.70 40653.10
36592.00 48986.00
'97' 38531.80 54169.80
41934.00 63763.00
'98' 40734.80 69648.60
44510.00 78271.10
'99' 48828.50 84305.80
</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 EQUITY HOLDINGS AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. America Online Inc. 15.42
2. Gateway Inc. 5.75
3. Dell Computer 4.69
4. Nextel 4.68
5. Nokia Corp - Spon ADR 4.19
6. WPP Group PLC 3.57
7. Citigroup Inc. 2.90
8. MGIC Investment Corp 2.88
9. Amgen Inc. 2.74
10. Chase Manhattan 2.63
</TABLE>
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Computer Services 15.42
2. Computer Hardware 13.56
3. Computer and Related 13.56
4. Telecommunications & Cellular 12.71
5. Banking 11.42
</TABLE>
3
<PAGE> 94
OHIO NATIONAL FUND, INC.
EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
AUTOMOTIVE & RELATED (1.6%)
72,688 General Motors Corp. ............. $ 5,283,509
------------
BANKING (9.9%)
229,016 Bank One Corp. ................... 7,342,825
79,756 Bank of America Corp. ............ 4,002,754
111,682 Chase Manhattan Corp. ............ 8,676,295
181,574 Fleet Boston Financial Corp. ..... 6,321,045
242,293 Washington Mutual Inc. ........... 6,299,618
------------
32,642,537
------------
BUSINESS SERVICES (0.8%)
50,882 First Data Corp. ................. 2,509,119
------------
COMPUTER & RELATED (13.6%)
303,439 *Dell Computer Corp. ............. 15,475,389
263,014 *Gateway Inc. .................... 18,953,446
61,911 International Business Machines... 6,686,388
193,834 *Storage Technology Corp. ........ 3,573,814
------------
44,689,037
------------
COMPUTER SOFTWARE (15.4%)
673,573 *America Online Inc. ............. 50,812,663
------------
CONSUMER PRODUCTS (2.7%)
102 *Berkshire Hathaway Inc. CL A..... 5,722,200
231,426 Mattel Inc. ...................... 3,037,466
------------
8,759,666
------------
ENTERTAINMENT & LEISURE (0.8%)
108,832 *Metro-Goldwyn-Mayer Inc. ........ 2,564,354
------------
FINANCIAL SERVICES (8.4%)
80,302 Bear Stearns Co. Inc. ............ 3,432,911
172,028 Citigroup Inc. ................... 9,558,306
121,394 Fannie Mae........................ 7,579,538
62,256 Freddie Mac....................... 2,929,923
155,384 MBNA Corp. ....................... 4,234,214
------------
27,734,892
------------
FOOD & RELATED (2.0%)
130,177 Albertson's Inc. ................. 4,198,208
131,105 *Kroger Co. ...................... 2,474,607
------------
6,672,815
------------
HOTEL/LODGING (3.1%)
37,614 MGM Grand Inc. ................... 1,892,454
169,605 *Mandalay Resort Group............ 3,413,301
215,500 Starwood Hotels & Resorts
Worldwide........................ 5,064,250
------------
10,370,005
------------
INSURANCE SERVICES (4.8%)
110,145 Aetna Inc. ....................... 6,147,468
157,812 MGIC Investment Corp. ............ 9,498,310
------------
15,645,778
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
MANUFACTURING (0.8%)
57,467 Danaher Corp. .................... $ 2,772,783
------------
MEDICAL & RELATED (7.8%)
150,221 *Amgen Inc. ...................... 9,022,649
268,946 *Foundation Health Systems
Inc. ............................ 2,672,651
244,715 McKesson HBOC Inc. ............... 5,521,382
1 *Quorum Health Group Inc. ........ 5
162,667 United Healthcare Corp. .......... 8,641,684
------------
25,858,371
------------
RETAIL (3.4%)
76,322 *Amazon.com Inc. ................. 5,810,012
373,657 *Toys 'R' Us Inc. ................ 5,347,966
------------
11,157,978
------------
TELECOMMUNICATIONS & CELLULAR (7.2%)
156,279 *MCI Worldcom Inc. ............... 8,292,555
149,463 *Nextel Communications Inc. ...... 15,413,372
------------
23,705,927
------------
WASTE DISPOSAL (2.3%)
437,283 Waste Management Inc. ............ 7,515,801
------------
TOTAL U.S. COMMON STOCK (84.6%)
(COST $255,982,424).............. $278,695,235
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES FOREIGN COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
FINLAND (4.2%)
TELECOMMUNICATIONS & CELLULAR (4.2%)
72,687 Nokia Corp. SP-ADR................ $ 13,810,530
------------
MEXICO (1.3%)
TELECOMMUNICATIONS & CELLULAR (1.3%)
38,766 Telefonos de Mexico SP-ADR........ 4,361,175
------------
NETHERLANDS (2.3%)
ELECTRICAL EQUIPMENT (2.3%)
56,284 Koninklijke Philips Electronics... 7,598,340
------------
UNITED KINGDOM (5.1%)
ADVERTISING (3.6%)
744,666 *WPP Group PLC.................... 11,773,765
BANKING (1.5%)
401,180 *Lloyds TSB Group PLC............. 5,007,770
------------
TOTAL UNITED KINGDOM.............. 16,781,535
------------
TOTAL FOREIGN COMMON STOCK (12.9%)
(COST $27,507,365)............... $ 42,551,580
------------
TOTAL COMMON STOCK (97.5%) (COST
$283,489,789).................... $321,246,815
------------
</TABLE>
(continued)
4
<PAGE> 95
OHIO NATIONAL FUND, INC.
EQUITY PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS VALUE
- -------------------------------------------------------------
<C> <S> <C>
FINANCIAL (1.5%)
$2,578,781 Banc of America 3.100% 01/03/00
repurchase price $2,579,438
collateralized by FNMA
certificates pool #C00652 due
09/01/28 (Cost $2,578,781)....... $ 2,578,781
2,578,781 Morgan Stanley Dean Witter 2.250%
01/03/00 repurchase price
$2,579,258 collateralized by U.S.
Treasury due 05/15/05 (Cost
$2,578,781)...................... 2,578,781
------------
TOTAL REPURCHASE AGREEMENTS (1.5%)
(COST $5,157,562)................ $ 5,157,562
------------
TOTAL HOLDINGS (99.0%) (COST
$288,647,351) (A)................ $326,404,377
------------
CASH & RECEIVABLES, NET OF
LIABILITIES (1.0%)............... 3,209,890
------------
TOTAL NET ASSETS (100.0%)......... $329,614,267
============
</TABLE>
<TABLE>
<S> <C>
* Non-income producing securities.
ADR (American depository receipt) represents ownership of
foreign securities.
(a) Represents cost for financial reporting and federal income
tax purposes. See Note 1.
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 96
OHIO NATIONAL FUND, INC.
EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
Assets:
Investments in securities at market value
(note 1) (cost $288,647,351)........... $326,404,377
Cash in bank............................. 26,830
Receivable for securities sold........... 4,036,326
Receivable for fund shares sold.......... 676,325
Dividends and accrued interest
receivable............................. 228,699
Other.................................... 16,986
------------
Total assets........................... 331,389,543
------------
Liabilities:
Payable for securities purchased......... 975,005
Payable for fund shares redeemed......... 469,693
Payable for investment management
services (note 3)...................... 217,046
Other accrued expenses................... 113,532
------------
Total liabilities...................... 1,775,276
------------
Net assets at market value................. $329,614,267
============
Net assets consist of:
Par value, $1 per share.................. $ 12,448,440
Paid-in capital in excess of par value... 278,303,882
Accumulated undistributed net realized
gain on investments.................... 1,104,919
Net unrealized appreciation on
investments (note 1)................... 37,757,026
------------
Net assets at market value................. $329,614,267
============
Shares outstanding (note 4)................ 12,448,440
Net asset value per share.................. $ 26.48
============
</TABLE>
STATEMENT OF OPERATIONS
Year Ended December 31, 1999
<TABLE>
<S> <C>
Investment income:
Interest................................. $ 753,305
Dividends................................ 2,324,291
------------
Total investment income................ 3,077,596
------------
Expenses:
Management fees (note 3)................. 1,848,965
Custodian fees (note 3).................. 55,594
Directors' fees (note 3)................. 8,748
Professional fees........................ 39,954
Accounting and transfer agent fees....... 181,204
Other.................................... 61,372
------------
Total expenses......................... 2,195,837
------------
Net investment income.................. $ 881,759
------------
Realized and unrealized gain (loss) on
investments:
Net realized gain from investments....... $127,818,941
Net decrease in unrealized appreciation
on investments......................... (74,881,941)
------------
Net gain on investments................ 52,937,000
------------
Net increase in net assets from
operations........................... $ 53,818,759
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 97
OHIO NATIONAL FUND, INC.
EQUITY PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEARS ENDED
----------------------------
1999 1998
------------- ------------
<S> <C> <C>
From operations:
Net investment income..................................... $ 881,759 $ 3,676,480
Realized gain on investments.............................. 127,818,941 5,493,034
Unrealized appreciation (depreciation) on investments..... (74,881,941) 6,996,269
------------- ------------
Net increase in net assets from operations............ 53,818,759 16,165,783
------------- ------------
Dividends and distributions to shareholders:
Dividends paid from net investment income................. (882,082) (3,678,591)
Capital gains distributions............................... (126,714,022) (5,566,857)
Return of capital......................................... (48,644) 0
------------- ------------
Total dividends and distributions..................... (127,644,748) (9,245,448)
------------- ------------
From capital share transactions (note 4):
Received from shares sold................................. 37,074,219 24,773,079
Received from dividends reinvested........................ 127,644,748 9,245,448
Paid for shares redeemed.................................. (58,181,642) (32,108,106)
------------- ------------
Increase in net assets derived from capital share
transactions......................................... 106,537,325 1,910,421
------------- ------------
Increase in net assets............................. 32,711,336 8,830,756
Net Assets:
Beginning of period....................................... 296,902,931 288,072,175
------------- ------------
End of period (a)......................................... $ 329,614,267 $296,902,931
============= ============
(a) Includes undistributed net investment income of......... $ 0 $ 323
============= ============
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------
1999 1998 1997 1996 1995
---- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Per share data:
Net asset value, beginning of period........................ $36.31 $35.44 $32.30 $28.58 $23.20
Income from investment operations:
Net investment income..................................... 0.12 0.45 0.51 0.47 0.50
Net realized & unrealized gain on investments............. 6.85 1.56 5.24 4.58 5.65
------ ------ ------ ------ ------
Total income from investment operations................. 6.97 2.01 5.75 5.05 6.15
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income...................... (0.11) (0.45) (0.63) (0.46) (0.39)
Distributions from net realized capital gains............. (16.68) (0.69) (1.98) (0.87) (0.38)
Return of capital......................................... (0.01) 0.00 0.00 0.00 0.00
------ ------ ------ ------ ------
Total distributions..................................... (16.80) (1.14) (2.61) (1.33) (0.77)
------ ------ ------ ------ ------
Net asset value, end of period.............................. $26.48 $36.31 $35.44 $32.30 $28.58
====== ====== ====== ====== ======
Total return................................................ 19.87% 5.72% 18.17% 18.35% 27.20%
Ratios and supplemental data:
Ratio of expenses to average net assets................... 0.76% 0.64% 0.67% 0.73% 0.73%
Ratio of net investment income to average net assets...... 0.31% 1.25% 1.43% 1.60% 1.90%
Portfolio turnover rate..................................... 124% 25% 19% 11% 14%
Net assets at end of period (millions)...................... $329.6 $296.9 $288.1 $232.8 $175.7
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE> 98
OHIO NATIONAL FUND, INC.
MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
FACE AMORTIZED
AMOUNT SHORT-TERM NOTES COST
- -------------------------------------------------------------
<C> <S> <C>
AUTOMOTIVE & RELATED (12.4%)
$1,900,000 American Honda 5.850% 02/07/00..... $ 1,888,576
800,000 Ford Motor Credit Corp. 5.250%
01/04/00.......................... 799,650
800,000 Ford Motor Credit Corp. 5.260%
01/05/00.......................... 799,532
1,601,000 General Motors Acceptance Corp.
5.990% 01/24/00................... 1,594,873
1,251,000 General Motors Acceptance Corp.
5.950% 02/11/00................... 1,242,523
1,000,000 Hertz Corp. 5.900% 01/07/00........ 999,017
1,000,000 Hertz Corp. 5.900% 01/06/00........ 999,181
-----------
8,323,352
-----------
BUSINESS SERVICES (2.6%)
1,750,000 PHH Corp. 6.650% 01/19/00.......... 1,744,181
-----------
COMMUNICATIONS (8.2%)
3,200,000 AT&T 5.860% 02/16/00............... 3,176,039
2,309,000 SBC Communications (144A) 5.820%
01/20/00.......................... 2,301,907
-----------
5,477,946
-----------
COMPUTER & RELATED (4.2%)
1,200,000 General Dynamics (144A) 6.020%
01/31/00.......................... 1,193,980
1,658,000 IBM Credit 5.780% 01/20/00......... 1,652,942
-----------
2,846,922
-----------
CONSUMER PRODUCTS (0.8%)
550,000 Johnson & Johnson (144A) 5.850%
03/13/00.......................... 543,565
-----------
FINANCE (29.7%)
324,000 American Express Credit 5.730%
01/18/00.......................... 323,123
688,000 American Express Credit 5.730%
01/19/00.......................... 686,029
1,000,000 American Express Credit 5.840%
01/18/00.......................... 997,242
600,000 American Express Credit 5.840%
01/19/00.......................... 598,248
2,734,000 American General Finance 5.700%
03/01/00.......................... 2,708,027
2,196,000 Associates Corp. 5.900% 01/27/00... 2,186,643
805,000 CIT Group 5.850% 02/04/00.......... 800,552
2,886,000 GTE Funding Inc. 6.050% 03/14/00... 2,850,594
1,119,000 GE Capital 5.710% 02/10/00......... 1,111,901
1,100,000 GE Capital 6.040% 01/28/00......... 1,095,017
1,301,000 Heller Financial 6.000% 01/26/00... 1,295,579
1,500,000 Household Finance 5.800%
01/14/00.......................... 1,496,858
1,611,000 Household Finance 5.820%
01/11/00.......................... 1,608,396
2,203,000 Merrill Lynch 5.930% 02/03/00...... 2,191,025
-----------
19,949,234
-----------
FOOD & RELATED (1.8%)
1,212,000 Coca Cola 5.800% 01/13/00.......... 1,209,657
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE AMORTIZED
AMOUNT SHORT-TERM NOTES COST
- -------------------------------------------------------------
<C> <S> <C>
INDUSTRIAL (4.8%)
$ 500,000 Cooper Industries 6.020%
02/08/00.......................... $ 496,823
1,100,000 Flour Corp. (144A) 5.800%
02/02/00.......................... 1,094,329
1,652,000 Flour Corp. (144A) 5.800%
01/21/00.......................... 1,646,677
-----------
3,237,829
-----------
INSURANCE (14.2%)
1,000,000 Aetna Services 5.700% 03/07/00..... 989,550
1,000,000 Aetna Services 5.970% 03/07/00..... 989,055
1,300,000 Aetna Services 6.400% 01/13/00..... 1,297,227
2,206,000 Allstate (144A) 5.750% 02/01/00.... 2,195,077
2,788,000 Prudential Funding 5.650%
02/14/00.......................... 2,768,747
1,328,000 Prudential Funding 5.940%
01/10/00.......................... 1,326,028
-----------
9,565,684
-----------
MACHINERY & EQUIPMENT (4.0%)
2,648,000 John Deere Capital 5.650%
01/12/00.......................... 2,643,429
-----------
MEDICAL & RELATED (4.2%)
2,831,000 Schering Plough 6.000% 02/08/00.... 2,813,070
-----------
OIL, ENERGY & NATURAL GAS (8.5%)
3,040,000 Chevron USA 5.900% 02/29/00........ 3,010,605
2,691,000 (EI) De Nemours Dupont 5.880%
01/25/00.......................... 2,680,451
-----------
5,691,056
-----------
RETAIL (4.7%)
3,200,000 Sears Roebuck Acceptance 5.250%
02/15/00.......................... 3,179,000
-----------
TOTAL SHORT-TERM NOTES (100.1%)
(COST $67,224,925)................ $67,224,925
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE AMORTIZED
AMOUNT REPURCHASE AGREEMENTS COST
- -------------------------------------------------------------
<C> <S> <C>
FINANCIAL (2.2%)
$1,503,000 Firstar 1.000% 01/03/00 repurchase
price $1,503,124 collateralized by
GNMA certificates pool # 8375 due
02/20/24 (Cost $1,503,000)........ $ 1,503,000
-----------
TOTAL REPURCHASE AGREEMENTS (2.2%)
(COST $1,503,000).................. $ 1,503,000
-----------
TOTAL HOLDINGS (102.3%)
(COST $68,727,925) (a)............. $68,727,925
-----------
LIABILITIES, NET OF CASH &
RECEIVABLES (-2.3%)................ (1,569,844)
-----------
TOTAL NET ASSETS (100.0%).......... $67,158,081
===========
</TABLE>
- ---------------
(144A) 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 buyers. At the period end, the value
of these securities amounted to $9,434,494 or 14.0% of net assets. These
securities were deemed liquid pursuant to procedures approved by the
Board of Directors.
(a) Represents cost for financial reporting and federal income tax purposes.
See Note 1.
The accompanying notes are an integral part of these financial statements.
8
<PAGE> 99
OHIO NATIONAL FUND, INC.
MONEY MARKET PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
Assets:
Investments in securities at value (note
1) (cost $68,727,925)................... $68,727,925
Cash in bank.............................. 341
Receivable for fund shares sold........... 604,931
Other..................................... 1,785
-----------
Total assets............................ 69,334,982
-----------
Liabilities:
Payable for fund shares redeemed.......... 2,148,331
Payable for investment management services
(note 3)................................ 13,676
Other accrued expenses.................... 14,868
Dividends payable......................... 26
-----------
Total liabilities....................... 2,176,901
-----------
Net assets at market value.................. $67,158,081
===========
Net assets consist of:
Par value, $1 per share................... $ 6,715,830
Paid-in capital in excess of par value.... 60,442,251
-----------
Net assets at market value.................. $67,158,081
===========
Shares outstanding (note 4)................. 6,715,830
Net asset value per share................... $ 10.00
===========
</TABLE>
STATEMENT OF OPERATIONS
Year Ended December 31, 1999
<TABLE>
<S> <C>
Investment income:
Interest.................................. $ 2,765,741
-----------
Expenses:
Management fees (note 3).................. 156,749
Custodian fees (note 3)................... 8,665
Directors' fees (note 3).................. 1,300
Professional fees......................... 4,796
Accounting and transfer agent fees........ 32,954
Other..................................... 8,826
-----------
Total expenses.......................... 213,290
Less fees waived (note 3)............... (26,125)
-----------
Net expenses.......................... 187,165
-----------
Net investment income................... $ 2,578,576
-----------
Net increase in net assets from
operations............................ $ 2,578,576
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE> 100
OHIO NATIONAL FUND, INC.
MONEY MARKET PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEARS ENDED
----------------------------
1999 1998
------------- ------------
<S> <C> <C>
From operations:
Net investment income from operations................. $ 2,578,576 $ 1,645,134
------------- ------------
Dividends and distributions to shareholders:
Dividends paid from net investment income................. (2,578,576) (1,645,134)
------------- ------------
From capital share transactions (note 4):
Received from shares sold................................. 223,206,883 61,020,166
Received from dividends reinvested........................ 2,578,576 1,645,134
Paid for shares redeemed.................................. (203,029,030) (47,405,261)
------------- ------------
Increase in net assets derived from capital share
transactions......................................... 22,756,429 15,260,039
------------- ------------
Increase in net assets............................. 22,756,429 15,260,039
Net Assets:
Beginning of period....................................... 44,401,652 29,141,613
------------- ------------
End of period............................................. $ 67,158,081 $ 44,401,652
============= ============
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<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..................................... 0.49 0.52 0.52 0.50 0.54
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income...................... (0.49) (0.52) (0.52) (0.50) (0.54)
------ ------ ------ ------ ------
Net asset value, end of period.............................. $10.00 $10.00 $10.00 $10.00 $10.00
====== ====== ====== ====== ======
Total return................................................ 5.02% 5.39% 5.37% 5.17% 5.62%
Ratios net of fees waived by advisor:
Ratio of expenses to average net assets................... 0.36% 0.36% 0.38% 0.44% 0.44%
Ratio of net investment income to average net assets...... 4.90% 5.26% 5.11% 4.98% 5.39%
Ratios assuming no fees waived by advisor:
Ratio of expenses to average net assets................... 0.41% 0.41% 0.43% 0.49% 0.55%
Net assets at end of period (millions)...................... $ 67.2 $ 44.4 $ 29.1 $ 25.6 $ 15.7
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE> 101
OHIO NATIONAL FUND, INC.
BOND PORTFOLIO
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, 1999
AVERAGE ANNUAL TOTAL RETURNS:
<TABLE>
<S> <C>
One-year 0.58%
Three-year 4.96%
Five-year 7.35%
Ten-year 7.11%
Since inception (11/2/82) 8.01%
</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 .58% in 1999 versus .39 for the Lehman Brothers
Government/Corporate Bond Index. The year was the most difficult in a long time
for the fixed income investors and the great majority of fixed income funds
provided investors with negative returns. We are pleased with the relative
performance of our fund versus that of competitors as our returns were in the
top 10%-15% by most comparisons.
CHANGE IN VALUE OF $10,000 INVESTMENT
<TABLE>
<CAPTION>
LEHMAN BROS. GOVT./CORP. INDEX -
BOND PORTFOLIO INTERMEDIATE
-------------- --------------------------------
<S> <C> <C>
10000.00 10000.00
'87' 10599.00 10896.10
10954.10 11376.70
'88' 11313.40 11634.90
11962.80 12540.10
'89' 12525.00 13119.50
12914.50 13520.90
'90' 13503.40 14322.70
14104.30 14944.30
'91' 15253.90 16416.30
15777.00 16910.50
'92' 16403.40 17593.60
17673.00 18675.60
'93' 18157.30 19127.60
17343.80 18622.60
'94' 17460.00 18754.80
19541.30 20553.40
'95' 20760.60 21624.30
20463.80 21578.90
'96' 21529.90 22500.30
22266.20 23137.00
'97' 23528.70 24270.70
24189.90 25103.20
'98' 24755.90 26305.70
24676.70 26153.10
'99' 24898.80 26406.80
</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, 1999
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Franchise Finance Corp. of
Amer. 8.25% 10/30/2003 3.82
2. Anixter 8.00% 09/15/03 3.76
3. US Industries, Inc. 144A 7.125%
04/15/2005 3.75
4. Dial Corp. 6.5% 9/15/2008 3.54
5. Thermo Electron Corporation
4.25% 1/1/2003 3.38
6. Abitibi-Consolidated Inc. 7.40%
4/1/18 3.38
7. Colonial Realty 8.05% 07/15/06 3.32
8. Delta Airlines 144A 7.70%
12/15/2005 2.65
9. Texas Utilities 7.48% 0/01/17 2.59
10. Watson Pharmaceuticals, Inc.
7.125% 5/15/08 2.51
</TABLE>
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Electrical Equipment 8.96
2. Oil, Energy, and Natural Gas 8.54
3. Utilities 7.78
4. Industrial Services 7.09
5. Real Estate and Leasing 6.83
</TABLE>
11
<PAGE> 102
OHIO NATIONAL FUND, INC.
BOND PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT LONG-TERM BONDS & NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
AIR COURIER (1.6%)
$ 450,578 Federal Express Inc. 7.020%
01/15/16.......................... $ 404,711
-----------
AUTOMOTIVE & RELATED (0.4%)
100,000 Arvin Industries 10.000%
08/01/00.......................... 101,398
-----------
BUILDING & CONSTRUCTION (1.8%)
500,000 Owens Corning 7.500% 05/01/05...... 475,326
-----------
BUSINESS SERVICES (1.9%)
500,000 Cendant Corp. 7.750% 12/01/03...... 499,678
-----------
CHEMICALS (2.4%)
700,000 Mississippi Chemical Corp. 7.250%
11/15/17.......................... 613,282
-----------
COMMUNICATIONS (1.8%)
200,000 Comcast Cable Communications 8.375%
05/01/07.......................... 207,017
250,000 Tele-Communications, Inc. 8.250%
01/15/03.......................... 257,954
-----------
464,971
-----------
COMPUTER & RELATED (1.1%)
300,000 Apple Computer Inc. 6.500%
02/15/04.......................... 279,375
-----------
CONSUMER GOODS (3.5%)
1,000,000 Dial Corp. 6.500% 09/15/08......... 920,390
-----------
ELECTRICAL EQUIPMENT (9.0%)
1,000,000 Anixter Intl. 8.000% 09/15/03...... 977,991
500,000 Great Lakes Power 8.300%
03/01/05.......................... 489,767
500,000 Pioneer 8.500% 08/01/06............ 459,868
400,000 Tektronix Inc. 7.500% 08/01/03..... 401,573
-----------
2,329,199
-----------
ENTERTAINMENT & LEISURE (2.3%)
700,000 Mirage Resorts Inc. 6.750%
02/01/08.......................... 607,568
-----------
FOOD & RELATED (1.7%)
500,000 Gruma, SA de C.V. (Mexico) 7.625%
10/15/07.......................... 436,250
-----------
FINANCIAL SERVICES (5.7%)
1,000,000 Franchise Finance Corp. of America
8.250% 10/30/03................... 991,976
500,000 St. Paul Bancorp Inc. 7.125%
02/15/04.......................... 487,583
-----------
1,479,559
-----------
FOREIGN GOVERNMENT (1.8%)
200,000 British Columbia (United Kingdom)
7.000% 01/15/03................... 200,806
250,000 Province of Quebec (Canada) 8.625%
01/19/05.......................... 265,648
-----------
466,454
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT LONG-TERM BONDS & NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
FORESTRY & PAPER PRODUCTS (5.5%)
$1,000,000 Abitibi Consolidated Inc. 7.400%
04/01/18.......................... $ 877,531
300,000 Boise Cascade Co. 9.850%
06/15/02.......................... 310,138
250,000 ITT Rayonier Inc. 7.500%
10/15/02.......................... 252,559
-----------
1,440,228
-----------
HOTEL/LODGING (2.3%)
700,000 ITT Destinations 6.750% 11/15/05... 601,010
-----------
HOUSING, FURNITURE & RELATED (0.6%)
140,000 Armstrong World 9.750% 04/15/08.... 156,323
-----------
INDUSTRIAL SERVICES (7.1%)
400,000 R&B Falcon Corp. Series B 6.750%
04/15/05.......................... 361,000
500,000 Tenaska Georgia Partners LP 9.500%
02/01/30.......................... 507,945
1,000,000 US Industries Inc. (144A) 7.125%
10/15/03.......................... 973,733
-----------
1,842,678
-----------
INSURANCE (2.5%)
250,000 Continental Corp. 7.250%
03/01/03.......................... 245,400
400,000 Transamerica Finance Corp. 7.500%
03/15/04.......................... 397,802
-----------
643,202
-----------
MACHINERY (3.4%)
1,000,000 Thermo Electron (144A) 4.250%
01/01/03.......................... 879,420
-----------
METALS & MINING (1.7%)
500,000 Cyprus Minerals 6.625% 10/15/05.... 447,589
-----------
MEDICAL & RELATED (4.6%)
250,000 Bergen Brunswig 7.375% 01/15/03.... 240,605
300,000 Cardinal Health Inc. 6.500%
02/15/04.......................... 289,767
700,000 Watson Pharmaceuticals 7.125%
05/15/08.......................... 652,181
-----------
1,182,553
-----------
OIL, ENERGY & NATURAL GAS (8.5%)
200,000 Atlantic Richfield 8.550%
03/01/12.......................... 215,355
100,000 DeKalb Energy 9.875% 07/15/00...... 101,457
400,000 Dresser Industries, Inc. 6.250%
06/01/00.......................... 400,470
500,000 Husky Oil Ltd. 8.900% 08/15/28..... 500,845
125,000 Marathon Oil 7.000% 06/01/02....... 123,943
400,000 PDV America Inc. 7.875% 08/01/03... 376,911
500,000 System Energy 7.800% 08/01/00...... 500,783
-----------
2,219,764
-----------
REAL ESTATE & LEASING (6.8%)
300,000 Avalon Properties Inc. 7.375%
09/15/02.......................... 296,798
900,000 Colonial Realty 8.050% 07/15/06.... 861,791
500,000 Security Capital US Realty 2.500%
05/22/03.......................... 368,750
250,000 Sun Communities 7.625% 05/01/03.... 246,363
-----------
1,773,702
-----------
</TABLE>
(continued)
12
<PAGE> 103
OHIO NATIONAL FUND, INC.
BOND PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT LONG-TERM BONDS & NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
TRANSPORTATION (6.5%)
$ 250,000 American President Cos. Ltd. 7.125%
11/15/03.......................... $ 174,763
700,000 Delta Air Lines 7.700% 12/15/05.... 689,240
350,000 Illinois Central Gulf Railroad
6.750% 05/15/03................... 346,242
481,406 Northwest Airlines 8.070%
01/02/15.......................... 467,954
-----------
1,678,199
-----------
RESTAURANTS (1.8%)
500,000 Wendy's Inc. 6.350% 12/05/05....... $ 471,227
-----------
UTILITIES (6.6%)
200,000 Cleveland Electric Illum. 7.625%
08/01/02.......................... 199,687
250,000 Kansas City Gas & Electric 8.290%
03/29/16.......................... 242,982
200,000 Old Dominion Electric 8.760%
12/01/22.......................... 203,843
200,000 Sprint Corp. 8.125% 07/15/02....... 204,279
700,000 Texas Utilities 7.480% 01/01/17.... 673,123
200,000 Toledo Edison Co. 7.875%
08/01/04.......................... 200,391
-----------
1,724,305
-----------
TOTAL LONG-TERM BONDS & NOTES
(92.9%) (COST $25,104,240)........ $24,138,361
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES PREFERRED STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
UTILITIES (1.2%)
12,000 GTE Delaware, 8.750%, Series B..... $ 297,000
-----------
TOTAL PREFERRED STOCKS (1.2%) (COST
$300,000)......................... $ 297,000
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT SHORT-TERM NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
FINANCE (4.1%)
$1,072,000 American Express Credit 1.000%
01/03/00.......................... $ 1,071,940
-----------
TOTAL SHORT-TERM NOTES (4.1%) (COST
$1,071,940)....................... $ 1,071,940
-----------
TOTAL HOLDINGS (98.2%) (COST
$26,476,180) (a).................. $25,507,301
-----------
CASH & RECEIVABLES, NET OF
LIABILITIES (1.8%)................ 476,367
-----------
TOTAL NET ASSETS (100.0%).......... $25,983,668
===========
</TABLE>
- ---------------
(144A) 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 buyers. At the period end, the value
of these securities amounted to $1,853,153 or 7.1% of net assets. These
securities were deemed liquid pursuant to procedures approved by the
Board of Directors.
(a) Represents cost for financial reporting and federal income tax purposes.
See Note 1.
The accompanying notes are an integral part of these financial statements.
13
<PAGE> 104
OHIO NATIONAL FUND, INC.
BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
Assets:
Investments in securities at market value
(note 1) (cost $26,476,180)............. $25,507,301
Cash in bank.............................. 701
Receivable for fund shares sold........... 36,759
Dividends and accrued interest
receivable.............................. 524,084
Other..................................... 1,360
-----------
Total assets............................ 26,070,205
-----------
Liabilities:
Payable for fund shares redeemed.......... 57,164
Payable for investment management services
(note 3)................................ 13,329
Other accrued expenses.................... 16,044
-----------
Total liabilities....................... 86,537
-----------
Net assets at market value.................. $25,983,668
===========
Net assets consist of:
Par value, $1 per share................... $ 2,614,946
Paid-in capital in excess of par value.... 24,624,973
Accumulated net realized loss on
investments (note 1).................... (305,798)
Net unrealized depreciation on investments
(note 1)................................ (968,879)
Undistributed net investment income....... 18,426
-----------
Net assets at market value.................. $25,983,668
===========
Shares outstanding (note 4)................. 2,614,946
Net asset value per share................... $ 9.94
===========
</TABLE>
STATEMENT OF OPERATIONS
Year Ended December 31, 1999
<TABLE>
<S> <C>
Investment income:
Interest................................... $1,937,988
Dividends.................................. 26,250
----------
Total investment income.................. 1,964,238
----------
Expenses:
Management fees (note 3)................... 160,182
Custodian fees (note 3).................... 5,108
Directors' fees (note 3)................... 1,050
Professional fees.......................... 4,795
Accounting and transfer agent fees......... 26,474
Other...................................... 7,309
----------
Total expenses........................... 204,918
----------
Net investment income.................... $1,759,320
----------
Realized and unrealized loss on investments:
Net realized loss from investments......... $ (31,297)
Net increase in unrealized depreciation on
investments.............................. (1,582,737)
----------
Net loss on investments.................. (1,614,034)
----------
Net increase in net assets from
operations............................. $ 145,286
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE> 105
OHIO NATIONAL FUND, INC.
BOND PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEARS ENDED
-------------------------
1999 1998
----------- -----------
<S> <C> <C>
From operations:
Net investment income..................................... $ 1,759,320 $ 1,603,360
Realized loss on investments.............................. (31,297) (230,373)
Unrealized depreciation on investments.................... (1,582,737) (124,666)
----------- -----------
Net increase in net assets from operations............ 145,286 1,248,321
----------- -----------
Dividends and distributions to shareholders:
Dividends paid from net investment income................. (1,743,554) (1,604,016)
----------- -----------
From capital share transactions (note 4):
Received from shares sold................................. 5,505,101 10,579,517
Received from dividends reinvested........................ 1,743,554 1,604,016
Paid for shares redeemed.................................. (8,047,905) (5,213,682)
----------- -----------
Increase (decrease) in net assets derived from capital
share transactions................................... (799,250) 6,969,851
----------- -----------
Increase (decrease) in net assets.................. (2,397,518) 6,614,156
Net Assets:
Beginning of period....................................... 28,381,186 21,767,030
----------- -----------
End of period (a)......................................... $25,983,668 $28,381,186
=========== ===========
(a) Includes undistributed net investment income of......... $ 18,426 $ 2,660
=========== ===========
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Per share data:
Net asset value, beginning of period........................ $10.56 $10.68 $10.62 $10.93 $ 9.70
Income (loss) from investment operations:
Net investment income..................................... 0.68 0.67 0.71 0.69 0.70
Net realized and unrealized gain (loss) on investments.... (0.62) (0.12) 0.23 (0.32) 1.08
------ ------ ------ ------ ------
Total income from investment operations................. 0.06 0.55 0.94 0.37 1.78
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income...................... (0.68) (0.67) (0.88) (0.68) (0.55)
------ ------ ------ ------ ------
Net asset value, end of period.............................. $ 9.94 $10.56 $10.68 $10.62 $10.93
====== ====== ====== ====== ======
Total return................................................ 0.58% 5.22% 9.28% 3.71% 18.90%
Ratios and supplemental data:
Ratio of expenses to average net assets................... 0.77% 0.72% 0.78% 0.79% 0.75%
Ratio of net investment income to average net assets...... 6.57% 6.21% 6.67% 6.54% 6.76%
Portfolio turnover rate..................................... 8% 12% 10% 3% 4%
Net assets at end of period (millions)...................... $ 26.0 $ 28.4 $ 21.8 $ 20.8 $ 18.1
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE> 106
OHIO NATIONAL FUND, INC.
OMNI PORTFOLIO
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, 1999
AVERAGE ANNUAL TOTAL RETURNS:
<TABLE>
<S> <C>
One-year 11.36%
Three-year 11.21%
Five-year 14.30%
Ten-year 11.09%
Since inception (9/10/84) 11.50%
</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 Omni fund achieved double digit returns in 1999, finishing the year up
11.36%. Approximately half that return occurred during December 1999, when
Omni's value increased by 5.87%. With the recent change in fund managers, I feel
it is important to discuss the goals and strategies for the Omni fund.
Omni will be invested in approximately 80% equities and 20% fixed income (bonds
and commercial paper). The equities will be invested primarily in mid to large
market capital companies. Equities will be diversified into about 5
industries/classifications the manager has identified as growth industries:
financials; computer related; communications related; drug/healthcare related;
and a final category for all "other."
Interest rate risk and credit risk are being reduced in the 20% fixed income
portion of Omni; longer maturity bonds and weaker credits are being eliminated
from the fund. The goal of the fixed income portion of the Omni is to bring a
source of steady income to the fund, and to reduce the volatility of the fund
(i.e. the 20% of fixed income related holdings will retain a steady value, while
stock prices fluctuate), thereby reducing the risk of the fund.
The 20% fixed income related holdings will fluctuate, depending upon the
manager's perception of buying opportunities in equities (may reduce fixed
income to approximately 15% or less of the fund) and selling opportunities in
equities (may increase fixed income to 25% or more). Material changes in the
percent of fixed income held are expected to be infrequent.
The objective of the Omni portfolio is a high level of long-term total return
consistent with preservation of capital by investing in stock, bonds and money
market instruments. Total rate of return consists of current income including
dividends, interest and discount accruals and capital appreciation. We look
forward to making money for you in the Omni Fund, during the year 2000.
CHANGE IN VALUE OF $10,000 INVESTMENT
<TABLE>
<CAPTION>
OMNI PORTFOLIO S&P INDEX
-------------- ---------
<S> <C> <C>
10000.00 10000.00
'87' 9698.97 10318.30
10796.90 11645.20
'88' 11157.50 12052.80
12261.00 14034.30
'89' 12882.60 15847.50
13307.70 16335.60
'90' 13128.10 15345.70
14011.60 17543.20
'91' 15510.90 20032.60
15735.80 19904.30
'92' 16845.10 21568.30
17990.60 22608.00
'93' 19010.70 23722.50
18413.70 22911.20
'94' 18909.10 24033.90
21456.10 28876.70
'95' 23213.40 33029.10
24875.50 36398.10
'96' 26820.70 40653.10
29728.10 48986.90
'97' 31687.20 54169.80
34165.10 63763.20
'98' 33123.10 69648.60
35113.70 78271.10
'99' 36883.50 84305.80
</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, 1999
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Cisco Systems Inc. 7.33
2. Texas Instruments 3.24
3. Sun Microsystems Inc. 3.06
4. Nasdaq 100 Shares 2.99
5. S & P 500 Depository 2.49
6. Microsoft Corp. 2.46
7. EMC Corporation 2.30
8. General Electric Company 2.28
9. American International Group 2.28
10. Intel Corp 1.91
</TABLE>
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Computer and Related 27.70
2. Telecommunications & Cellular 6.70
3. Oil, Energy, and Natural Gas 5.79
4. Banking 5.70
5. Electrical Equipment 4.92
</TABLE>
16
<PAGE> 107
OHIO NATIONAL FUND, INC.
OMNI PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
AEROSPACE (2.5%)
44,200 Globalstar Telecommunications..... $ 1,944,800
49,000 Honeywell Intl Inc................ 2,826,687
------------
4,771,487
------------
AUTOMOTIVE & RELATED (2.5%)
21,000 Eaton Corp. ...................... 1,525,125
58,777 Ford Motor Co. ................... 3,140,896
------------
4,666,021
------------
BANKING (3.6%)
45,050 Bank of America Corp. ............ 2,260,947
33,200 Chase Manhattan Corp. ............ 2,579,225
76,320 Firstar Corp. (b) ................ 1,612,260
52,500 Sovereign Bancorp Inc. ........... 391,289
------------
6,843,721
------------
BROADCAST RADIO & TV (0.8%)
40,000 Infinity Broadcasting............. 1,447,500
------------
BUSINESS SERVICES (3.7%)
30,000 Hewlett-Packard Co. .............. 3,418,125
54,500 Manpower Inc. .................... 2,050,562
67,000 Reynolds & Reynolds............... 1,507,500
------------
6,976,187
------------
CHEMICALS (0.7%)
40,000 Monsanto Co. ..................... 1,425,000
------------
COMMUNICATIONS (5.7%)
36,000 *ADC Telecommunications Inc. ..... 2,612,250
20,000 *Associated Group Inc. CL B....... 1,840,000
39,000 Bell Atlantic Corp. .............. 2,400,938
64,875 *MCI Worldcom Inc. ............... 3,442,430
16,000 *Williams Communication Group
Inc. ............................ 463,000
------------
10,758,618
------------
COMPUTER & RELATED (21.4%)
130,000 *Cisco Systems Inc. .............. 13,926,250
39,300 *Dell Computer Corp. ............. 2,004,300
40,000 *EMC Corp. ....................... 4,370,000
44,000 Intel Corp. ...................... 3,621,750
25,000 Intl Business Machines Corp. ..... 2,700,000
46,000 *NCR Corp......................... 1,742,250
75,000 *Sun Microsystems Inc. ........... 5,807,813
67,000 Texas Instruments Inc. ........... 6,490,625
------------
40,662,988
------------
COMPUTER SOFTWARE (4.3%)
51,000 Computer Associates............... 3,566,813
40,000 *Microsoft Corp. ................. 4,670,000
------------
8,236,813
------------
COMPUTER SERVICES (1.0%)
58,092 *Unisys Corp. .................... 1,855,320
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
DRUGS (4.8%)
56,000 Abbott Laboratories............... $ 2,033,500
90,000 *Catalytica Inc. ................. 1,220,625
30,000 Lilly (Eli) & Co. ................ 1,995,000
30,000 Merck & Co. Inc. ................. 2,011,875
53,000 *Watson Pharmaceutical............ 1,898,063
------------
9,159,063
------------
ELECTRICAL EQUIPMENT (5.6%)
47,000 *American Power Conversion
Corp. ........................... 1,239,625
33,333 *Analog Devices Inc. ............. 3,099,969
30,000 CBS Corp. ........................ 1,918,125
28,000 General Electric Co. ............. 4,333,000
------------
10,590,719
------------
FINANCIAL SERVICES (2.5%)
60,810 Associates First Capital CL A..... 1,668,474
50,000 MGIC Investment Corp. ............ 3,009,375
------------
4,677,849
------------
HOUSING & RELATED (0.6%)
139,781 Clayton Homes Inc. ............... 1,284,238
------------
INSURANCE SERVICES (3.2%)
50,000 AXA Financial Inc. ............... 1,693,750
39,999 American Intl Group............... 4,324,892
------------
6,018,642
------------
MEDICAL & RELATED (0.9%)
26,500 Baxter International.............. 1,664,531
------------
OIL, ENERGY & NATURAL GAS (3.2%)
53,630 Schlumberger Ltd. ................ 3,016,688
86,000 *Tesoro Petroleum................. 994,375
10,404 Transocean Sedco Forex Inc. ...... 350,492
235,000 USEC Inc. ........................ 1,645,000
------------
6,006,555
------------
PROTECTION/SAFETY (1.1%)
52,000 Tyco Intl. Ltd. .................. 2,021,500
------------
REAL ESTATE & LEASING (0.6%)
48,000 Commercial Net Lease Realty....... 477,000
50,000 JDN Realty Corp. ................. 806,250
------------
1,283,250
------------
RETAIL (0.8%)
20,400 Dayton Hudson Corp. .............. 1,498,125
------------
TEXTILES (0.3%)
58,000 Warnaco Group CL A................ 714,125
------------
TRANSPORTATION & EQUIPMENT (1.2%)
24,000 CNF Transfer Inc. ................ 828,000
22,000 United Parcel Services CL B....... 1,518,000
------------
2,346,000
------------
TOTAL COMMON STOCKS (71.0%) (COST
$70,162,595)..................... $134,908,252
------------
</TABLE>
(continued)
17
<PAGE> 108
OHIO NATIONAL FUND, INC.
OMNI PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES DEPOSITORY SHARES VALUE
- -------------------------------------------------------------
<C> <S> <C>
31,100 NASDAQ 100 Shares................. $ 5,683,525
32,250 S&P 500 Depository Receipt........ 4,736,719
------------
TOTAL DEPOSITORY UNITS (5.5%)
(COST $9,833,849)................ $ 10,420,244
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES PREFERRED STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
BANKING (1.5%)
46,000 Flagstar Bancorp Inc. ............ $ 862,500
30,000 National Australia Bank Conv. .... 828,750
25,000 *Sovereign Bancorp Conv. ......... 1,259,375
------------
2,950,625
------------
FINANCIAL SERVICES (0.3%)
30,000 Provident Capital TR II 8.750%.... 600,000
------------
FOOD & RELATED (0.3%)
20,000 Conagra Capital 9.350% Series C... 490,000
------------
OIL, ENERGY & NATURAL GAS (0.4%)
41,000 Consumer Energy II................ 845,625
------------
UTILITIES (0.3%)
20,000 GTE Delaware 8.750% Series B...... 495,000
------------
TOTAL PREFERRED STOCKS (2.8%)
(COST $5,963,837)................ $ 5,381,250
------------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT LONG-TERM BONDS & NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
GOVERNMENT (1.1%)
$2,005,000 U.S. Treasury Note 7.750%
02/15/01......................... $ 2,040,088
------------
AEROSPACE (0.2%)
500,000 AAR Corp. 7.250% 10/15/03......... 489,842
------------
BANKING (0.5%)
1,000,000 Green Tree Financial CL A 8.700%
06/15/25......................... 1,043,056
------------
CHEMICALS (0.8%)
1,750,000 Geon Company 7.500% 12/15/98...... 1,531,023
------------
COMMUNICATIONS (1.0%)
1,600,000 Comcast Cable Communications
8.375% 05/01/07.................. 1,656,136
300,000 Sprint 8.125% 07/15/02............ 306,418
------------
1,962,554
------------
COMPUTERS & RELATED (0.3%)
700,000 Apple Computer Inc. 6.500%
02/15/04......................... 651,875
------------
CONSUMER PRODUCTS (1.0%)
1,400,000 Owens Corning 7.500% 05/01/05..... 1,330,911
500,000 Playtex Family Products 9.000%
12/15/03......................... 497,500
------------
1,828,411
------------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT LONG-TERM BONDS & NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
FINANCIAL SERVICES (0.9%)
$1,000,000 Fertinitro Finance Inc. 8.290%
04/01/20......................... $ 572,597
500,000 Litchfield Financial Corp. 9.250%
12/01/03 Ser. B.................. 522,950
500,000 RBF Finance 11.000% 03/15/06...... 535,000
------------
1,630,547
------------
FOOD & RELATED (0.4%)
740,000 Marsh Supermarkets Inc. 8.875%
04/01/07......................... 684,500
------------
FORESTRY & PAPER PRODUCTS (0.8%)
700,000 Boise Cascade Co. 9.850%
06/15/02......................... 723,656
500,000 Champion International 9.875%
06/01/00......................... 506,433
250,000 ITT Rayonier Inc. 7.500%
10/15/02......................... 252,559
------------
1,482,648
------------
HOUSING, FURNITURE & RELATED (0.7%)
250,000 Armstrong World 9.750% 04/15/08... 279,149
2,000,000 Oakwood Homes Corp. 8.125%
03/10/09......................... 1,030,000
------------
1,309,149
------------
INSURANCE (0.6%)
500,000 Continental Corp. 7.250%
03/01/03......................... 490,801
600,000 Transamerica Finance Corp. 7.500%
03/15/04......................... 596,704
------------
1,087,505
------------
MACHINERY (0.2%)
500,000 ABC Rail Products Corp. 9.125%
01/15/04......................... 432,500
------------
MEDICAL & RELATED (0.8%)
500,000 Bergen Brunswig 7.375% 01/15/03... 481,209
1,000,000 Tenet Healthcare Corp. 8.625%
01/15/07......................... 970,000
------------
1,451,209
------------
METALS & MINING (0.2%)
500,000 Cyprus Minerals 6.625% 10/15/05... 447,589
------------
OIL, ENERGY & NATURAL GAS (3.1%)
400,000 Dekalb Energy 9.875% 07/15/00..... 405,828
350,000 Dresser Industries, Inc. 6.250%
06/01/00......................... 350,411
375,000 Marathon Oil 7.000% 06/01/02...... 371,830
500,000 Petroleos Mexicanos Global 8.850%
09/15/04......................... 480,000
600,000 PVD America, Inc. 7.875%
08/01/03......................... 565,367
1,500,000 R & B Falcon Corp. Series B 6.750%
04/15/05......................... 1,353,750
500,000 United Refining Company 10.750%
06/15/07......................... 317,500
2,500,000 Windsor Petroleum Transport Corp.
7.840% 01/15/21.................. 1,975,000
------------
5,819,686
------------
</TABLE>
(continued)
18
<PAGE> 109
OHIO NATIONAL FUND, INC.
OMNI PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT LONG-TERM BONDS & NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
TRANSPORTATION (0.4%)
$ 500,000 American President Cos., Ltd.
7.125% 11/15/03.................. $ 349,526
400,000 Illinois Central Gulf Railroad
6.750% 05/15/03.................. 395,705
------------
745,231
------------
RESTAURANTS (1.0%)
1,900,000 Tricon Global Restaurants 7.450%
05/15/05......................... 1,828,801
------------
UTILITIES (1.9%)
400,000 Cleveland Electric Illumination
7.625% 08/01/02.................. 399,373
700,000 ESI Tractebel 7.990% 12/30/11..... 626,286
1,000,000 Great Lakes Power 9.000%
08/01/04......................... 1,021,619
700,000 Niagra Mohawk Power Corp. 7.750%
10/01/08......................... 700,749
400,000 Old Dominion Electric Co. 8.760%
12/01/22......................... 407,686
500,000 Texas New Mexico Power Co. 9.250%
09/15/00......................... 506,105
------------
3,661,818
------------
TOTAL LONG-TERM BONDS & NOTES
(15.9%) (COST $32,904,353)....... $ 30,128,032
------------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT SHORT-TERM NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
FINANCE (3.8%)
$3,777,000 American Express Credit Corp.
1.000% 01/03/00.................. $ 3,776,790
1,200,000 General Motors Acceptance Corp.
6.600% 01/07/00.................. 1,198,680
1,200,000 General Motors Acceptance Corp.
6.610% 01/12/00.................. 1,197,576
1,200,000 Household Finance 6.450%
01/04/00......................... 999,463
------------
7,172,509
------------
INSURANCE SERVICES (1.2%)
1,019,000 Prudential Funding 6.330%
01/10/00......................... 1,017,387
1,346,000 Prudential Funding 6.460%
01/11/00......................... 1,343,584
------------
2,360,971
------------
TOTAL SHORT-TERM NOTES (5.0%)
(COST $9,533,481)................ $ 9,533,480
------------
TOTAL HOLDINGS (100.2%) (COST
$128,398,115)(a)................. $190,371,258
------------
LIABILITIES, NET OF CASH &
RECEIVABLES (-0.2%).............. (322,208)
------------
TOTAL NET ASSETS (100.0%)......... $190,049,050
============
</TABLE>
- ---------------
* Non-income producing securities.
(a) Represents cost for financial reporting and federal income tax purposes. See
Note 1.
(b) Security of an affiliate of the fund.
The accompanying notes are an integral part of these financial statements.
19
<PAGE> 110
OHIO NATIONAL FUND, INC.
OMNI PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
Assets:
Investments in securities at market value
(note 1) (cost $125,662,216)........... $187,896,498
Investment in an affiliate at market
value (cost $2,735,899)................ 2,474,760
Cash in bank............................. 964
Receivable for securities sold........... 3,370,875
Receivable for fund shares sold.......... 114,466
Dividends and accrued interest
receivable............................. 720,623
Other.................................... 10,775
------------
Total assets........................... 194,588,961
------------
Liabilities:
Payable for securities purchased......... 4,021,906
Payable for fund shares redeemed......... 349,876
Payable for investment management
services (note 3)...................... 86,430
Other accrued expenses................... 81,699
------------
Total liabilities...................... 4,539,911
------------
Net assets at market value................. $190,049,050
============
Net assets consist of:
Par value, $1 per share.................. $ 8,429,643
Paid-in capital in excess of par value... 119,306,542
Accumulated net realized gain on
investments (note 1)................... 249,611
Net unrealized appreciation on
investments
(note 1)............................... 61,973,143
Undistributed net investment income...... 90,111
------------
Net assets at market value................. $190,049,050
============
Shares outstanding (note 4)................ 8,429,643
Net asset value per share.................. $ 22.55
============
</TABLE>
STATEMENT OF OPERATIONS
Year Ended December 31, 1999
<TABLE>
<S> <C>
Investment income:
Interest.................................. $ 3,662,974
Dividends................................. 1,999,076
-----------
Total investment income................. 5,662,050
-----------
Expenses:
Management fees (note 3).................. 1,070,139
Custodian fees (note 3)................... 40,400
Directors' fees (note 3).................. 6,292
Professional fees......................... 28,751
Accounting and transfer agent fees........ 138,128
Other..................................... 44,139
-----------
Total expenses.......................... 1,327,849
-----------
Net investment income................... $ 4,334,201
-----------
Realized and unrealized gain on investments:
Net realized gain from investments........ $ 7,456,237
Net increase in unrealized appreciation on
investments............................. 8,982,511
-----------
Net gain on investments................. 16,438,748
-----------
Net increase in net assets from
operations............................ $20,772,949
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
20
<PAGE> 111
OHIO NATIONAL FUND, INC.
OMNI PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEARS ENDED
----------------------------
1999 1998
------------ ------------
<S> <C> <C>
From operations:
Net investment income..................................... $ 4,334,201 $ 5,640,411
Realized gain (loss) on investments....................... 7,456,237 (681,856)
Unrealized appreciation on investments.................... 8,982,511 3,546,023
------------ ------------
Net increase in net assets from operations............ 20,772,949 8,504,578
------------ ------------
Dividends and distributions to shareholders:
Dividends paid from net investment income................. (4,249,788) (5,642,402)
Capital gains distributions............................... (6,524,769) (33,599)
------------ ------------
Total dividends and distributions.................. (10,774,557) (5,676,001)
------------ ------------
From capital share transactions (note 4):
Received from shares sold................................. 7,966,478 30,642,850
Received from dividends reinvested........................ 10,774,557 5,676,001
Paid for shares redeemed.................................. (53,110,394) (18,442,457)
------------ ------------
Increase (decrease) in net assets derived from capital
share transactions................................... (34,369,359) 17,876,394
------------ ------------
Increase (decrease) in net assets.................. (24,370,967) 20,704,971
Net Assets:
Beginning of period....................................... 214,420,017 193,715,046
------------ ------------
End of period (a)......................................... $190,049,050 $214,420,017
============ ============
(a) Includes undistributed net investment income of......... $ 90,111 $ 5,698
============ ============
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Per share data:
Net asset value, beginning of period........................ $21.44 $21.06 $19.40 $17.60 $14.76
Income from investment operations:
Net investment income..................................... 0.48 0.58 0.56 0.53 0.58
Net realized & unrealized gain on investments............. 1.91 0.38 2.87 2.10 2.72
------ ------ ------ ------ ------
Total income from investment operations............ 2.39 0.96 3.43 2.63 3.30
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income...................... (0.48) (0.58) (0.69) (0.52) (0.46)
Distributions from net realized capital gains............. (0.80) 0.00 (1.08) (0.31) 0.00
------ ------ ------ ------ ------
Total distributions................................ (1.28) (0.58) (1.77) (0.83) (0.46)
------ ------ ------ ------ ------
Net asset value, end of period.............................. $22.55 $21.44 $21.06 $19.40 $17.60
====== ====== ====== ====== ======
Total return................................................ 11.36% 4.53% 18.15% 15.54% 22.75%
Ratios and supplemental data:
Ratio of expenses to average net assets................... 0.67% 0.65% 0.71% 0.76% 0.75%
Ratio of net investment income to average net assets...... 2.18% 2.71% 2.69% 2.89% 3.56%
Portfolio turnover rate..................................... 41% 18% 18% 12% 10%
Net assets at end of period (millions)...................... $190.0 $214.4 $193.7 $145.5 $109.6
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
<PAGE> 112
OHIO NATIONAL FUND, INC.
INTERNATIONAL PORTFOLIO
OBJECTIVE
The International Portfolio seeks long-term capital growth by investing
primarily in securities of foreign companies.
PERFORMANCE AS OF DECEMBER 31, 1999
<TABLE>
<S> <C>
AVERAGE ANNUAL TOTAL RETURNS:
One-year 67.40%
Three-year 21.10%
Five-year 17.91%
Since inception (5/3/93) 18.39%
</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
Markets in Asia and Europe rallied, led primarily by technology, media and
telecommunication stocks. Specifically in Asia, the technology rally finally
rolled into such bourses as Hong Kong, Korea and Singapore in the second half as
investors assessed the significant valuation discrepancy relative to the United
States. The year-to-date performance ending December 31, 1999 for the Ohio
National International Portfolio stood at 67.40%. This can be compared with
25.27% for the Morgan Stanley International Europe, Australia, and Far East
Index. Our investment discipline is driven by security selection where we are
looking for well-positioned companies with strong bottom line growth that are
trading at reasonable valuations. The fund's strong relative outperformance can
be attributable to being overweight technology, media and telecommunication
names throughout the international equity markets. Moreover, the fund continued
to benefit from remaining overweight Japan, as the economy continued to improve.
Finally, some of our top holdings included, Softbank, a leading Japanese-based
software and media company; JDS Uniphase, a leading provider of components for
telecommunication equipment; and ASM Lithography, a leading maker of
semi-conductor production equipment.
CHANGE IN VALUE OF $10,000 INVESTMENT
<TABLE>
<CAPTION>
INTERNATIONAL PORTFOLIO (COMMENCED MORGAN STANLEY CAPTL. INTL. EAFE
OPERATIONS MAY 3, 1993) INDEX
---------------------------------- --------------------------------
<S> <C> <C>
10000.00 10000.00
9936.00 10052.00
'94' 13504.30 11698.70
14287.50 12021.40
'95' 15139.10 13049.20
16812.00 13658.60
'96' 17331.40 13879.90
19366.20 15456.70
'97' 17696.80 14040.80
19367.40 16298.60
'98' 18383.50 16741.90
18188.60 17406.60
'99' 30773.30 21256.90
</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 INTERNATIONAL HOLDINGS AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Sony Corp. 2.564
2. Furukawa Electric Co 2.055
3. Descartes Systems Group, Inc. 2.051
4. Intershop Communications AG 2.043
5. Telesystem International
Wireless, Inc. 1.779
6. ARM Holdings plc, ADR 1.668
7. Tf1 Television Francaise 1.619
8. ASM Lithography Holding NV, ADR 1.503
9. Murata Manufacturing Co. Ltd. 1.490
10. Sharp Corp. 1.461
</TABLE>
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Electronic Components,
Instruments 17.01
2. Business & Public Services 12.52
3. Telecommunications 12.00
4. Electrical & Electronics 10.44
5. Broadcasting & Publishing 6.26
</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.
22
<PAGE> 113
OHIO NATIONAL FUND, INC.
INTERNATIONAL PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES FOREIGN COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
JAPAN (33.4%)
6,000 Alpha Systems Inc. (9)........... $ 1,261,490
27,000 Bandai Co. Ltd. (13)............. 858,107
23,000 Canon Inc. (2)................... 913,163
28,100 Capcom Co. Ltd. (9).............. 1,497,604
8,200 Csk Corp. (28)................... 1,331,117
127,000 Daiwa Securities Co. Ltd. (14)... 1,985,850
36,000 Daiwabo Info. System Co. Ltd.
(9)............................. 807,941
54,000 Fujitec Co. (20)................. 541,267
26,000 Fujitsu Ltd. (9)................. 1,184,823
235,000 Furukawa Electric Co. (11)....... 3,561,999
23,000 Hosiden Corp. (11)............... 1,475,455
2,000 *InterQ Inc. (28)................ 1,153,921
42,000 Japan Airport Terminal (32)...... 390,182
30 Japan Telecom Co. Ltd. (29)...... 1,202,816
6,200 Kokusai Den (KDD) (29)........... 858,518
10,000 *Komatsu Electronic Metals Co.
Ltd. (11)....................... 80,188
5,500 Kyocera Corp. (11)............... 1,425,288
236,000 Marubeni Corp. (34).............. 990,065
1,500 Matsushita Communication (11).... 396,049
17,000 Megachips Corp. (11)............. 1,087,229
15 Mobilephone Telecommunications
International Ltd. (29)......... 1,496,186
11,000 Murata Manufacturing Co. Ltd.
(11)............................ 2,581,655
58,000 NEC Corp. (11)................... 1,381,087
97,000 *New Japan Securities Co. (14)... 241,883
188,000 Nikko Securities Co. Ltd. (14)... 2,377,117
74,000 Nikon Corp. (11)................. 2,170,937
6,000 Nintendo Corp. Ltd. (13)......... 996,284
13,000 Nippon Broadcasting System
(22)............................ 1,131,430
1,300 Nippon Television Network (22)... 1,525,523
38 NTT Mobile Communication Network
Inc. (29)....................... 1,460,395
2,000 Obic Co. Ltd. (9)................ 1,415,998
13,200 Paris Miki Inc. (35)............. 947,467
45,300 Sega Enterprises (13)............ 1,439,713
99,000 Sharp Corp. (2).................. 2,531,635
2,100 Softbank Corp. (28).............. 2,008,410
15,000 Sony Corp. (3)................... 4,444,553
570 Sotoh Co. Ltd. (31).............. 2,659
50,000 Suruga Bank Ltd. (4)............. 696,753
33,000 Taiyo Yuden Co. (11)............. 1,955,603
170,000 Toho Bank Ltd. (4)............... 783,004
103,000 Toyo Trust & Banking (4)......... 423,039
447,000 Wako Securities Co. Ltd. (14).... 1,184,598
9,000 Yamada Denki (27)................ 976,922
27,000 Yokowo Co. Ltd. (11)............. 673,284
------------
57,849,207
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES FOREIGN COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
CANADA (8.6%)
31,200 *Canfor Corp. (16)............... $ 364,900
17,800 *CGI Group Inc. CL A (28)........ 760,658
36,800 *Cyberplex Inc. (28)............. 464,775
162,300 *Descartes Systems Group Inc.
(28)............................ 3,566,107
54,600 *Intl. Forest Products Ltd. CL A
(16)............................ 149,253
12,152 *JDS Uniphase Corp. (29)......... 1,960,270
119,000 *Mosaic Group Inc. (28).......... 922,353
18,600 Nortel Networks Corp. (11)....... 1,877,377
23,100 Onex Corp. (28).................. 835,277
15,950 *Research in Motion Ltd. (11).... 736,239
84,189 *Telesystem Intl. Wireless Inc.
(29)............................ 3,093,727
22,700 *Ulster Petroleums Ltd. (12)..... 201,865
------------
14,932,801
------------
GERMANY (8.6%)
4,131 Aixtron (11)..................... 581,845
37,350 Baader Wertpapierhandelsbank AG
(4)............................. 1,196,638
13,760 *Consors Discount Broker AG
(14)............................ 1,150,646
3,400 DIS Deutsche Industries Service
(14)............................ 280,891
16,100 *Epcos AG (11)................... 1,200,336
4,170 *GFK AG (28)..................... 172,252
12,605 *Intershop Communications AG
(28)............................ 3,606,669
5,534 Mannesmann AG (29)............... 1,340,352
13,400 Medion AG (34)................... 1,197,494
14,650 Siemens AG (30).................. 1,874,504
12,700 *Singulus Technologies AG (11)... 799,703
24,200 *Telegate AG (29)................ 1,409,251
------------
14,810,581
------------
UNITED KINGDOM (8.1%)
15,080 *ARM Holdings PLC ADR (11)....... 2,887,820
62,700 British Sky Broadcasting Grp PLC
(22)............................ 1,011,505
20,500 Eidos PLC (13)................... 1,807,822
26,650 *Energis PLC (29)................ 1,279,441
80,700 Enterprise Oil (12).............. 543,869
7,800 Filtronic PLC (11)............... 266,307
283,700 *Imagination Technologies Grp PLC
(28)............................ 1,863,763
106,000 Inverses PLC (30)................ 574,587
73,666 Prudential Corp. PLC (19)........ 1,448,267
12,600 Psion PLC (9).................... 527,643
94,100 Reckitt Benckiser PLC (10)....... 889,217
1 Securicor PLC (28)............... 3
90,525 *Shire Pharmaceuticals Grp PLC
(23)............................ 905,969
296 SmithKline Beecham PLC (10)...... 3,769
------------
14,009,982
------------
</TABLE>
(continued)
23
<PAGE> 114
OHIO NATIONAL FUND, INC.
INTERNATIONAL PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES FOREIGN COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
NETHERLANDS (7.4%)
22,880 *ASM Lithography Holding ADR (11)
2,602,600
9,200 *BE Semiconductor Industries
(11)............................ $ 132,083
12,007 *Equant ADR (28)................. 1,344,784
5,200 Koninklijke (Royal) Philips
Electronics (2)................. 707,265
10,250 *KPNQUEST (28)................... 653,437
2,000 *OpenTV Corp. ADR (35)........... 160,500
15,410 *STMicroelectronics (11)......... 2,372,308
34,100 *Toolex Alpha (11)............... 566,870
7,900 *United Pan-Europe Communications
(29)............................ 1,010,825
15,872 *United Pan-Europe Communications
ADR (29)........................ 2,023,680
22,800 VNU -- Verenigde Nederlandse
Uitgeversbedrijven Verenigd
Bezit(22)....................... 1,198,627
------------
12,772,979
------------
FRANCE (6.2%)
9,800 Alcatel (11)..................... 2,251,158
4,100 Canal Plus (22).................. 596,893
8,400 Ciments Francais Ord A (5)....... 570,829
13,200 Lagardere S.C.A. (35)............ 718,146
700 M6 Metropole Television (22)..... 346,983
5,380 Tf1 Television Francaise (22).... 2,818,582
31,400 Thomson-CSF (1).................. 1,037,328
27,737 *Wavecom S.A. (11)............... 2,445,190
------------
10,785,109
------------
SOUTH KOREA (3.1%)
2,520 DaeDuck Industries (11).......... 27,741
504 *DaeDuck Industries Rights
(11)............................ 383
54,600 *Haansoft Inc. (35).............. 2,529,247
20,283 *Hyundai Electronics Ind. Co.
(11)............................ 117,893
2,300 *Korea Thrunet Co. Ltd. CL A
(29)............................ 156,113
4,000 Samsung Electronics Co. (11)..... 937,032
21,500 SK Corp. (12).................... 651,343
32,300 *Turbo Tek Co. Ltd. (20)......... 1,014,086
------------
5,433,838
------------
HONG KONG (2.6%)
188,000 *China Telecommunications (29)... 1,175,378
4,172,000 *E-New Media Co. Ltd. (30)....... 2,039,442
265,000 *Pacific Century CyberWorks Ltd.
(26)............................ 617,032
100,500 Television Broadcasts Ltd.
(22)............................ 685,213
------------
4,517,065
------------
SINGAPORE & MALAYSIAN (2.3%)
657,000 DBS Land Ltd. (26)............... 1,293,882
669,000 GES International Ltd. (11)...... 723,026
212,000 Natsteel Electronics Ltd. (11)... 1,120,144
548,000 OMNI Industries (16)............. 993,672
------------
4,130,724
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES FOREIGN COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
SWEDEN (2.0%)
20,900 Allgon AB CL B (11).............. $ 415,058
12,800 *Modern Times Group CL B (22).... 634,743
48,370 *Readsoft AB (11)................ 881,015
22,800 Telefonaktiebolaget LM Ericsson
(11)............................ 1,465,540
------------
3,396,356
------------
SWITZERLAND (1.5%)
240 *Agefi Groupe SA (28)............ 92,035
2,400 *Charles Voegele Holding AG
(27)............................ 431,508
2,157 Publicitas Holding SA (22)....... 2,135,711
------------
2,659,254
------------
AUSTRALIA (1.3%)
666,000 *Davnet Ltd. (29)................ 1,005,857
106,100 E.R.G. Ltd. (11)................. 595,683
277,500 *LibertyOne Ltd. (29)............ 306,130
682,400 Westel Group Ltd. (29)........... 367,440
------------
2,275,110
------------
ISRAEL (1.1%)
57,400 *Orckit Communications Inc.
(29)............................ 1,969,538
------------
ITALY (1.1%)
79,800 Bulgari SPA (13)................. 717,155
48,250 Pininfarina SPA (3).............. 1,171,546
------------
1,888,701
------------
FINLAND (1.1%)
2,700 *Comptel Oyj (29)................ 189,982
4,500 Nokia OYJ (11)................... 816,075
22,200 *Perlos OYJ (11)................. 782,828
6,585 *Sanitec Oyj (5)................. 86,247
------------
1,875,132
------------
SPAIN (0.6%)
1,200 *Jazztel PLC ADR (29)............ 78,150
14,600 *Sogecable (22).................. 932,582
------------
1,010,732
------------
BELGIUM (0.5%)
22,800 *Global TeleSystems Grp Inc.
(29)............................ 792,300
473 *Telinfo SA-Strip VVPR (29)...... 5
------------
792,305
------------
THAILAND (0.4%)
152,800 *Hana Microelectronics Co. Ltd.
(11)............................ 733,440
------------
DENMARK (0.4%)
4,800 Novo-Nordisk CL B (22)........... 636,380
------------
NORWAY (0.2%)
24,300 *Tandberg Television (29)........ 335,673
------------
TAIWAN (0.2%)
12,000 *Advanced Semiconductor
Engineering Inc. GDR (11)....... 232,800
3,550 *Macronix Intl. Co. Ltd. ADR
(35)............................ 67,893
------------
300,693
------------
</TABLE>
(continued)
24
<PAGE> 115
OHIO NATIONAL FUND, INC.
INTERNATIONAL PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES FOREIGN COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
GREECE (0.1%)
8,520 *Tiletipos S.A. (29)............. $ 210,909
------------
BRAZIL (0.1%)
35,600 Usinas Siderurgicas de M
Preference (25)................. 193,392
------------
IRELAND (0.1%)
1,600 *Ryanair Holdings PLC ADR (32)... 88,200
------------
TOTAL FOREIGN COMMON STOCK
(91.0%) (COST $92,593,004)...... $157,608,101
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES US COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
TELECOMMUNICATIONS (0.5%)
4,300 *Infonet Services Corp. CL B..... $ 112,875
15,000 *Global Crossing Ltd............. 750,000
------------
862,875
------------
TOTAL US COMMON STOCK
(0.5%) (COST $873,939).......... $ 862,875
------------
TOTAL COMMON STOCK (91.5%)
(COST $93,466,943).............. $158,470,976
------------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS VALUE
- -------------------------------------------------------------
<C> <S> <C>
FINANCIAL SERVICES (5.8%)
$10,008,000 State Street Bank 2.500% due
01/03/00 repurchase price
$10,010,256 collateralized by
U.S. Treasury Bond due 05/15/04
(Cost $8,260,000)............... $ 10,008,000
------------
TOTAL REPURCHASE AGREEMENTS
(5.8%) (COST $10,008,000)....... $ 10,008,000
------------
TOTAL HOLDINGS (97.3%)
(COST $103,474,943)(A).......... $168,478,976
------------
CASH & RECEIVABLES, NET OF
LIABILITIES (2.7%).............. 4,561,552
------------
TOTAL NET ASSETS (100.0%)........ $173,040,528
============
</TABLE>
- ---------------
<TABLE>
<S> <C>
* Non-income producing securities.
ADR (American depository receipt) represents ownership of
foreign securities.
PLC Public Limited Company
(a) Represents cost for financial reporting purposes and differs
from cost for federal income tax purposes. See Note 1.
</TABLE>
Industry Classifications
<TABLE>
<C> <S>
(1) Aerospace
(2) Appliances & Household
Durables
(3) Automotive
(4) Banking
(5) Building/Construction
(6) Cement
(7) Chemicals
(8) Communications
(9) Computer Products
(10) Consumer Products
(11) Electrical & Electronics
(12) Energy and Oil
(13) Entertainment & Leisure
(14) Finance
(15) Food & Beverage
(16) Forest & Paper Products
(17) Governmental
(18) Hotels
(19) Insurance
(20) Machinery
(21) Manufacturing
(22) Media & Publishing
(23) Medical & Health Care
(24) Metal & Mining
(25) Plastics
(26) Real Estate
(27) Retailing
(28) Services
(29) Telecommunications
(30) Diversified
(31) Textile
(32) Transportation
(33) Utilities
(34) Wholesale
(35) Miscellaneous
</TABLE>
The accompanying notes are an integral part of these financial statements.
25
<PAGE> 116
OHIO NATIONAL FUND, INC.
INTERNATIONAL PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
Assets:
Investments in securities at market value
(note 1) (cost $103,474,943)........... $168,478,976
Cash..................................... 816,612
Receivable for securities sold........... 4,894,861
Receivable for fund shares sold.......... 72,668
Dividends and accrued interest
receivable............................. 193,600
Other.................................... 980
------------
Total assets........................... 174,457,697
------------
Liabilities:
Unrealized loss on forward currency
contracts (note 5)..................... 191,991
Payable for securities purchased......... 880,810
Payable for fund shares redeemed......... 148,659
Payable for investment management
services (note 3)...................... 112,947
Other accrued expenses................... 82,762
------------
Total liabilities...................... 1,417,169
------------
Net assets at market value................. $173,040,528
============
Net assets consist of:
Par value, $1 per share.................. $ 8,043,715
Paid-in capital in excess of par value... 99,793,758
Net unrealized appreciation
(depreciation) on:
Investments (note 1)................... 65,004,033
Foreign currency related
transactions......................... (39,653)
Forward currency contracts (note 5).... (191,991)
Accumulated net realized gain on
investments (note 1)................... 430,666
------------
Net assets at market value................. $173,040,528
============
Shares outstanding (note 4)................ 8,043,715
Net asset value per share.................. $ 21.51
============
</TABLE>
STATEMENT OF OPERATIONS
Year Ended December 31, 1999
<TABLE>
<S> <C>
Investment income:
Interest (net of $6,323 foreign taxes
withheld).............................. $ 203,119
Dividends (net of $114,482 foreign taxes
withheld).............................. 1,334,278
------------
Total investment income................ 1,537,397
------------
Expenses:
Management fees (note 3)................. 1,133,323
Accounting, custody, and transfer agent
fees (note 3).......................... 402,644
Directors' fees (note 3)................. 4,166
Professional fees........................ 19,031
Printing, proxy, and postage fees........ 38,362
Other.................................... 193,830
------------
Total expenses......................... 1,791,356
Less fees waived (note 3).............. (62,962)
------------
Net expenses........................... 1,728,394
------------
Net investment loss.................... $ (190,997)
------------
Realized and unrealized gain (loss) on
investments and foreign currency:
Net realized gain (loss) from:
Investments............................ $ 705,774
Forward currency related
transactions......................... (4,921,476)
Net increase in unrealized appreciation
on:
Investments............................ 73,800,124
Foreign currency related
transactions......................... 1,419,304
------------
Net gain on investments................ 71,003,726
------------
Net increase in net assets from
operations........................... $ 70,812,729
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
26
<PAGE> 117
OHIO NATIONAL FUND, INC.
INTERNATIONAL PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEARS ENDED
---------------------------
1999 1998
------------ ------------
<S> <C> <C>
From operations:
Net investment income (loss).............................. $ (190,997) $ 3,449,743
Realized gain (loss) on investments and foreign currency
transactions............................................ (4,215,702) 7,812,947
Unrealized appreciation (depreciation) on investments and
foreign currency transactions........................... 75,219,428 (5,018,504)
------------ ------------
Net increase in net assets from operations............ 70,812,729 6,244,186
------------ ------------
Dividends and distributions to shareholders:
Dividends paid from net investment income................. 0 (3,450,422)
Capital gains and foreign currency related transaction
distributions........................................... 0 (8,013,258)
Distributions in excess of capital gains and foreign
currency related transactions........................... 0 (74,797)
------------ ------------
Total dividends and distributions..................... 0 (11,538,477)
------------ ------------
From capital share transactions (note 4):
Received from shares sold................................. 13,371,176 11,643,429
Received from dividends reinvested........................ 0 11,538,477
Paid for shares redeemed.................................. (51,458,009) (33,603,085)
------------ ------------
Decrease in net assets derived from capital share
transactions........................................... (38,086,833) (10,421,179)
------------ ------------
Increase (decrease) in net assets..................... 32,725,896 (15,715,470)
Net Assets:
Beginning of period....................................... 140,314,632 156,030,102
------------ ------------
End of period............................................. $173,040,528 $140,314,632
============ ============
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Per share data:
Net asset value, beginning of period........................ $12.86 $13.39 $15.49 $14.38 $13.30
Income (loss) from investment operations:
Net investment income (loss).............................. (0.02) 0.32 0.28 0.25 0.31
Net realized and unrealized gain on investments and
foreign currency transactions........................... 8.67 0.24 0.08 1.76 1.28
------ ------ ------ ------ ------
Total income from investment operations................. 8.65 0.55 0.36 2.01 1.59
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income...................... 0.00 (0.32) (0.37) (0.25) (0.28)
Distributions from net realized capital gains and foreign
currency related transaction............................ 0.00 (0.75) (2.09) (0.65) (0.23)
Distributions in excess of net realized capital gains and
foreign currency related transaction.................... 0.00 (0.01) 0.00 0.00 0.00
------ ------ ------ ------ ------
Total distributions..................................... 0.00 (1.08) (2.46) (0.90) (0.51)
------ ------ ------ ------ ------
Net asset value, end of period.............................. $21.51 $12.86 $13.39 $15.49 $14.38
====== ====== ====== ====== ======
Total return................................................ 67.40% 3.88% 2.11% 14.48% 12.10%
Ratios and supplemental data:
Ratios net of fees waived by Adviser:
Ratio of expenses to average net assets................. 1.21% 1.17% 1.22% 1.15% 1.12%
Ratio of net investment income (loss) to average net
assets................................................ (0.15)% 2.31% 1.82% 1.64% 2.29%
Ratios assuming no fees waived by Adviser:
Ratio of expenses to average net assets................. 1.26% 1.17% 1.22% 1.15% 1.12%
Portfolio turnover rate..................................... 338% 22% 24% 14% 7%
Net assets at end of period (millions)...................... $173.0 $140.3 $156.0 $137.3 $ 90.6
</TABLE>
The accompanying notes are an integral part of these financial statements.
27
<PAGE> 118
OHIO NATIONAL FUND, INC.
CAPITAL APPRECIATION PORTFOLIO(a)
OBJECTIVE
The Capital Appreciation Portfolio seeks maximum capital growth by investing
primarily in common stocks.
PERFORMANCE AS OF DECEMBER 31, 1999
AVERAGE ANNUAL TOTAL RETURNS:
<TABLE>
<S> <C>
One-year 6.46%
Three-year 9.11%
Five-year 13.01%
Since inception (4/30/94) 12.27%
</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
MARKET ENVIRONMENT
Robust economic growth and consumer confidence formed the backdrop for a rise in
stock prices during the century's final quarter- with a notable surge on the
very last day. As was true all year, technology stocks powered the advance along
with other companies expected to maintain strong earnings momentum. After
trailing larger issues earlier in the year small- and mid-cap growth stocks
advanced smartly to surpass the large-cap S&P 500 Stock Index for the quarter.
Not all stocks participated in the rally. For income- and value-oriented stocks,
which include many holdings in the fund, the quarter was extremely
disappointing. Investors largely shunned companies of all sizes that lacked
robust earnings prospects of operated in areas far from the so-called "new
economy." Natural resources stocks had been an exception to this trend for much
of the year, but lagged in the fourth quarter as oil prices leveled off.
PERFORMANCE REVIEW
The fund's return was slightly negative for the final quarter as the technology
rally largely bypassed our holdings. Our best holdings for the period included
CHRIS-CRAFT, NEW YORK TIMES, and WASHINGTON POST in the media and communications
group; MACMILLAN BLOEDEL (now merged into WEYERHAEUSER), and DOMTAR in forest
products; and MOTOROLA in the technology sector -- new position. Holdings that
were disappointing included LOEWS, a diversified holding company, PHILIP MORRIS,
hurt by continued tobacco litigation, and ROUSE, a real estate investment trust
with major shopping mall holdings. Nevertheless, we see much value in these
beaten-down shares and may add to them in the future.
OUTLOOK
We are generally optimistic about the portfolio, since our holdings are cheap
and the underlying companies have significant value. Our bonds and convertibles
meet rational criteria designed to maximize returns over time versus the risks
we take. All wild bull markets come to an end, some in a painful fashion. When
the pendulum swings, this conservative portfolio will still be here seeking to
help investors increase their wealth with minimal risk.
CHANGE IN VALUE OF $10,000 INVESTMENT
- ---------------
(a) Prior to 8/1/99 the portfolio was known as the Small Cap Growth Portfolio.
<TABLE>
<CAPTION>
CAPITAL APPRECIATION PORTFOLIO S&P 500 INDEX
(COMMENCED OPERATIONS APRIL 30, -------------
1994)
-------------------------------
<S> <C> <C>
10000.00 10000.00
9975.00 9658.00
'95' 12816.50 13923.10
13688.10 15343.30
'96' 14835.10 17136.90
16014.50 20650.00
'97' 17089.10 22834.70
18032.40 26878.80
'98' 18099.10 29359.70
19621.30 32994.40
'99' 19268.10 35538.30
</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 LONG TERM HOLDINGS AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Amerada Hess Corporation 4.94
2. Tennessee Valley Authority 4.07
3. Loews Corporation 3.68
4. Niagara Mohawk Holdings Inc. 3.36
5. Chris-Craft Industries, Inc. 3.32
6. The Washington Post Company Cl
B 2.84
7. Newmont Mining Corporation 2.73
8. Inco Ltd. CV 2.40
9. New York Times Co. 2.36
10. Times Mirror CV LYON New 2.33
</TABLE>
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Oil, Energy, and Natural Gas 11.90
2. Media and Publishing 11.49
3. Metals and Mining 8.88
4. Insurance Services 8.25
5. Municipal 6.96
</TABLE>
28
<PAGE> 119
OHIO NATIONAL FUND, INC.
CAPITAL APPRECIATION PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
CHEMICALS (3.7%)
23,500 Cabot Corp. ....................... $ 478,813
20,000 Englehard Corp. ................... 377,500
24,000 Great Lakes Chemical Corp. ........ 916,500
60,000 *Octel Corp. ...................... 622,500
-----------
2,395,313
-----------
CONSUMER PRODUCTS (1.9%)
27,000 Philip Morris Cos. Inc. ........... 626,063
15,000 Polaroid Corp. .................... 282,187
35,000 *Reebok International Ltd. ........ 286,562
-----------
1,194,812
-----------
ELECTRICAL EQUIPMENT (1.5%)
43,000 FirstEnergy Corp. ................. 975,562
-----------
ENTERTAINMENT & LEISURE (1.3%)
42,000 *Mandalay Resort Group ............ 845,250
-----------
FINANCIAL SERVICES (1.1%)
30,000 Leucadia National Corp. ........... 693,750
-----------
FOOD & RELATED (0.4%)
9,300 McCormick & Co. Inc. .............. 276,675
-----------
FORESTRY & PAPER PRODUCTS (2.3%)
34,000 Johns Manville Corp. .............. 476,000
14,000 Weyerhaeuser Co. .................. 1,005,375
-----------
1,481,375
-----------
INSURANCE SERVICES (6.7%)
3,000 Aenta Inc. ........................ 167,438
5,000 Berkley (WR) Corp. ................ 104,375
10,000 Cigna Corp. ....................... 805,625
39,200 Loews Corp. ....................... 2,378,950
8,500 Unitrin Inc. ...................... 319,812
4,500 White Mountains Ins. Group Ltd. ... 542,250
-----------
4,318,450
-----------
MEDIA & PUBLISHING (9.2%)
29,700 *Chris Craft Industries Inc. ...... 2,142,113
10,000 Meredith Corp. .................... 416,875
31,000 New York Times Co. CL A ........... 1,522,875
3,300 Washington Post CL B .............. 1,834,387
-----------
5,916,250
-----------
MEDICAL & RELATED (1.5%)
25,000 American Home Products Corp. ...... 985,938
-----------
METALS & MINING (3.3%)
50,000 Homestake Mining Co. .............. 390,625
72,000 Newmont Mining Corp. .............. 1,764,000
-----------
2,154,625
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
OIL, ENERGY & NATURAL GAS (11.6%)
56,200 Amerada Hess Corp. ................ $ 3,189,350
50,000 Mitchell Energy & Dev. CL B ....... 1,078,125
25,000 Murphy Oil Corp. .................. 1,434,375
4,500 Questar Corp. ..................... 67,500
22,500 Texaco Inc. ....................... 1,222,031
15,000 Unocal Corp. ...................... 503,438
-----------
7,494,819
-----------
REAL ESTATE & LEASING (0.8%)
24,000 Rouse Co. ......................... 510,000
-----------
RETAIL (1.7%)
9,500 J.C. Penny Co. Inc. ............... 189,406
194,000 *Petrie Stores Liq. Trust Unit .... 472,875
32,500 *Toys 'R' Us Holding Co. .......... 465,156
-----------
1,127,437
-----------
TRANSPORTATION & EQUIPMENT (1.0%)
41,500 Overseas Shipholding Group Inc. ... 614,719
-----------
UTILITIES (5.2%)
25,500 Kansas City Power & Light Co. ..... 562,594
156,000 *Niagara Mohawk Holding Inc. ...... 2,174,250
55,000 Unisource Energy Corp.. Holding
Co. .............................. 615,312
-----------
3,352,156
-----------
TOTAL U.S. COMMON STOCKS (53.2%)
(COST $33,284,485) ............... $34,337,131
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES FOREIGN COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
UNITED KINGDOM (1.1%)
CHEMICALS (1.1%)
17,000 Imperial Chemical Ind. ADR ........ $ 723,563
-----------
CANADA (1.8%)
FORESTRY & PAPER PRODUCTS (1.0%)
56,000 Abitibi Consolidated Inc. ......... 665,000
-----------
TRANSPORTATION & EQUIPMENT (0.8%)
23,500 Canadian Pacific Ltd. ............. 506,719
-----------
TOTAL CANADA ...................... 1,171,719
-----------
TOTAL FOREIGN STOCKS (2.9%)
(COST $1,770,780) ................ $ 1,895,282
-----------
TOTAL COMMON STOCKS (56.1%)
(COST $35,055,265) ............... $36,232,413
-----------
</TABLE>
(continued)
29
<PAGE> 120
OHIO NATIONAL FUND, INC.
CAPITAL APPRECIATION PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES PREFERRED STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
CONTAINERS (0.4%)
7,500 Owens-Illinois Inc. 4.750% CV...... $ 234,375
-----------
FINANCIAL SERVICES (0.6%)
7,000 Kemper Series E 5.750% (144A)...... 366,520
-----------
REAL ESTATE & LEASING (2.1%)
41,000 Rouse Co. Series B $3 CV........... 1,337,625
-----------
TRANSPORTATION & EQUIPMENT (1.7%)
27,000 Union Pacific Capital Trust CV
6.250% 04/01/28 (144A)............ 1,123,875
-----------
TOTAL PREFERRED STOCKS (4.8%) (COST
$3,787,910)....................... $ 3,062,395
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT LONG-TERM BONDS & NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
GOVERNMENT (2.6%)
$ 400,000 FNMA 6.375% 01/16/02............... $ 398,547
100,000 FNMA 5.370% 02/07/01............... 98,934
200,000 U.S. Treasury Note 6.250%
04/30/01.......................... 200,250
400,000 U.S. Treasury Note 6.250%
10/31/01.......................... 400,125
620,000 U.S. Treasury Note 5.875%
09/30/02.......................... 613,607
-----------
1,711,463
-----------
COMMUNICATIONS (0.8%)
500,000 Bell South Telecommunications Inc.
5.850% 11/15/45................... 497,226
-----------
MUNICIPAL (7.0%)
450,000 Tennessee Valley Authority. 5.980%
04/01/36.......................... 425,913
1,450,000 Tennessee Valley Authority Ser. B
6.235% 07/15/45................... 1,440,837
2,810,000 Tennessee Valley Authority 5.800%
04/01/36.......................... 2,628,112
-----------
4,494,862
-----------
TOTAL LONG-TERM BONDS & NOTES
(10.4%) (COST $7,026,721).......... $ 6,703,551
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT CONVERTIBLE DEBENTURES VALUE
- -------------------------------------------------------------
<C> <S> <C>
AUTOMOTIVE & RELATED (0.6%)
$ 785,000 *Pep Boys MM&J Lyon, zero Coupon
Contracts due 09/20/11............ $ 416,050
-----------
DRUGS (1.3%)
1,660,000 *Roche Holdings Inc. (144A) zero
Coupon Contracts due 05/06/12..... 837,271
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT CONVERTIBLE DEBENTURES VALUE
- -------------------------------------------------------------
<C> <S> <C>
ENTERTAINMENT & LEISURE (0.1%)
$ 50,000 Ogden Corp Euro 5.750% 10/20/02.... $ 38,327
-----------
HOTEL/LODGING (1.9%)
1,650,000 Hilton Hotels 5.000% 05/15/06...... 1,260,188
-----------
INSURANCE SERVICES (1.6%)
1,235,000 Loews Corp. 3.125% 09/15/07........ 1,012,700
-----------
MEDIA & PUBLISHING (2.3%)
3,085,000 *Times Mirror zero Coupon Contracts
due 04/15/17...................... 1,507,794
-----------
MEDICAL & RELATED (1.4%)
865,000 Healthsouth Corp. 3.250% 04/01/03 671,456
450,000 PhyCor Inc. 4.500% 02/15/03........ 208,125
-----------
879,581
-----------
METALS & MINING (5.6%)
490,000 Homestake Mining Euro 5.500%
06/23/00.......................... 481,695
915,000 Homestake Mining HM (144A) 5.500%
06/23/00.......................... 890,981
1,625,000 InCo Ltd. 5.750% 07/01/04.......... 1,547,813
900,000 Teck Corp. 3.750% 07/15/06......... 666,000
-----------
3,586,489
-----------
OIL, ENERGY & NATURAL GAS (0.3%)
200,000 Texaco Capital 3.500% 08/05/04..... 195,028
-----------
RETAIL (0.1%)
115,000 Rite Aid Corp. 5.250% 09/15/02..... 78,487
-----------
WASTE DISPOSAL (1.7%)
1,275,000 Waste Management 4.000% 02/01/02... 1,122,00
-----------
TOTAL CONVERTIBLE DEBENTURES
(16.9%)
(COST $11,357,302)................. $10,993,915
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT SHORT-TERM NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
FINANCE (0.8%)
$ 517,000 AIG Funding Inc. 4.800% 01/05/00... $ 516,724
METALS & MINING (2.9%)
1,900,000 Alcoa Inc. 4.100% 01/06/00......... 1,898,918
-----------
MEDIA & PUBLISHING (1.7%)
1,100,000 Knight Ridder Inc. 5.000%
01/06/00.......................... 1,099,236
-----------
DRUGS (4.9%)
3,200,000 Merck & Co. Inc. 4.000% 01/06/00... 3,198,223
COMPUTER & RELATED (1.9%)
1,200,000 IBM Credit Corp. 4.000% 01/06/00... 1,199,333
-----------
TOTAL SHORT-TERM NOTES (12.2%)
(COST $7,912,434).................. $ 7,912,434
-----------
</TABLE>
(continued)
30
<PAGE> 121
OHIO NATIONAL FUND, INC.
CAPITAL APPRECIATION PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
PUT OPTION PURCHASES MARKET
SHARES STOCK/EXPIRATION/EXERCISE PRICE VALUE
- -------------------------------------------------------------
<C> <S> <C>
15(b) Motorola Inc./Jan/$95.............. $ 281
15(b) Motorola Inc./Jan/$110............. 750
20(b) Weyerhaeuser Co./Jan/$75........... 8,250
-----------
TOTAL OPTIONS (0.0%)
(COST $75,837).................... $ 9,281
-----------
TOTAL HOLDINGS (100.4%)
(COST $65,215,469) (a)............ $64,853,989
-----------
LIABILITIES, NET OF CASH &
RECEIVABLES (-0.4%)............... (235,307)
-----------
TOTAL NET ASSETS (100.0%).......... $64,618,682
===========
</TABLE>
- ---------------
<TABLE>
<S> <C>
* Non-income producing securities.
(a) Represents cost for financial reporting purposes and differs
from cost basis for federal income tax purposes. See Note 1.
(b) 100 share lots.
(144A) 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
buyers. At the period end, the value of these securities
amounted to $3,218,647 or 5.0% of net assets. These
securities were deemed liquid pursuant to procedures
approved by the Board of Directors.
</TABLE>
The accompanying notes are an integral part of these financial statements.
31
<PAGE> 122
OHIO NATIONAL FUND, INC.
CAPITAL APPRECIATION PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
Assets:
Investments in securities at market value
(note 1) (cost $65,215,469)............. $64,853,989
Receivable for fund shares sold........... 28,426
Dividends and accrued interest
receivable.............................. 324,476
Other..................................... 2,032
-----------
Total assets............................ 65,208,923
-----------
Liabilities:
Payable for fund shares redeemed.......... 513,799
Payable for investment management services
(note 3)................................ 43,843
Other accrued expenses.................... 32,599
-----------
Total liabilities....................... 590,241
-----------
Net assets at market value.................. $64,618,682
===========
Net assets consist of:
Par value, $1 per share................... $ 5,337,541
Paid-in capital in excess of par value.... 59,599,021
Accumulated net realized income on
investments (note 1).................... 35,933
Net unrealized depreciation on investments
(note 1)................................ (361,480)
Undistributed net investment income....... 7,667
-----------
Net assets at market value.................. $64,618,682
===========
Shares outstanding (note 4)................. 5,337,541
Net asset value per share................... $ 12.11
===========
</TABLE>
STATEMENT OF OPERATIONS
Year Ended December 31, 1999
<TABLE>
<S> <C>
Investment income:
Interest................................... $1,479,300
Dividends.................................. 1,312,217
----------
Total investment income.................. 2,791,517
----------
Expenses:
Management fees (note 3)................... 574,228
Custodian fees (note 3).................... 22,070
Directors' fees (note 3)................... 2,449
Professional fees.......................... 11,187
Accounting and transfer agent fees......... 53,824
Other...................................... 17,849
----------
Total expenses........................... 681,607
----------
Net investment income.................... $2,109,910
----------
Realized and unrealized gain (loss) on
investments:
Net realized gain from investments......... $6,044,556
Net increase in unrealized depreciation on
investments.............................. (3,470,618)
----------
Net gain on investments.................. 2,573,938
----------
Net increase in net assets from
operations............................. $4,683,848
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
32
<PAGE> 123
OHIO NATIONAL FUND, INC.
CAPITAL APPRECIATION PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEARS ENDED
--------------------------
1999 1998
------------ -----------
<S> <C> <C>
From operations:
Net investment income..................................... $ 2,109,910 $ 1,755,709
Realized gain on investments.............................. 6,044,556 5,789,990
Unrealized depreciation on investments.................... (3,470,618) (3,695,595)
------------ -----------
Net increase in net assets from operations............ 4,683,848 3,850,104
------------ -----------
Dividends and distributions to shareholders:
Dividends paid from net investment income................. (2,102,848) (1,758,879)
Capital gains distributions............................... (5,994,413) (5,804,200)
Distributions in excess of capital gains.................. 0 (30,044)
------------ -----------
Total dividends and distributions..................... (8,097,261) (7,593,123)
------------ -----------
From capital share transactions (note 4):
Received from shares sold................................. 8,091,987 18,944,729
Received from dividends reinvested........................ 8,097,261 7,593,123
Paid for shares redeemed.................................. (24,674,975) (6,108,105)
------------ -----------
Increase (decrease) in net assets derived from capital
share transactions................................... (8,485,727) 20,429,747
------------ -----------
Increase (decrease) in net assets.................. (11,899,140) 16,686,728
Net Assets:
Beginning of period....................................... 76,517,822 59,831,094
------------ -----------
End of period (a)......................................... $ 64,618,682 $76,517,822
============ ===========
(a) Includes undistributed net investment income of......... $ 7,667 $ 605
============ ===========
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Per share data:
Net asset value, beginning of period........................ $12.92 $13.53 $12.93 $11.99 $10.25
Income from investment operations:
Net investment income..................................... 0.39 0.34 0.39 0.48 0.39
Net realized and unrealized gain on investments........... 0.42 0.46 1.48 1.31 1.85
------ ------ ------ ------ ------
Total income from investment operations................. 0.81 0.80 1.87 1.79 2.24
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income...................... (0.39) (0.34) (0.46) (0.44) (0.29)
Distributions from net realized capital gains............. (1.23) (1.06) (0.81) (0.41) (0.21)
Distributions in excess of capital gains.................. 0.00 (0.01) 0.00 0.00 0.00
------ ------ ------ ------ ------
Total distributions..................................... (1.62) (1.41) (1.27) (0.85) (0.50)
------ ------ ------ ------ ------
Net asset value, end of period.............................. $12.11 $12.92 $13.53 $12.93 $11.99
====== ====== ====== ====== ======
Total return................................................ 6.46% 5.91% 15.19% 15.75% 22.62%
Ratios and supplemental data:
Ratio of expenses to average net assets................... 0.95% 0.93% 0.95% 0.97% 0.96%
Ratio of net investment income to average net assets...... 2.94% 2.52% 2.88% 3.90% 3.47%
Portfolio turnover rate..................................... 34% 45% 41% 37% 32%
Net assets at end of period (millions)...................... $ 64.6 $ 76.5 $ 59.8 $ 38.3 $ 19.3
</TABLE>
The accompanying notes are an integral part of these financial statements.
33
<PAGE> 124
OHIO NATIONAL FUND, INC.
SMALL CAP PORTFOLIO
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, 1999
AVERAGE ANNUAL TOTAL RETURNS:
<TABLE>
<S> <C>
One-year 106.46%
Three-year 35.29%
Five-year 31.13%
Since inception (4/30/94) 31.40%
</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 fourth quarter brought strong performance for growth stocks as a group, and
many small companies participated in this surge. Thanks to our bottom-up,
growth-oriented approach, the Small Cap Fund posted a strong return for the
quarter. Moreover, the Fund's 1999 returns helped vault its long-term
performance well ahead of its peer group.
TECHNOLOGY LEADING THE WAY
As it has for some time, technology continues to be the dominant sector in the
market, and the Fund benefited from strong stock selection within the category.
We continued to see promise in companies that are part of what we call the
"digital consumer electronics theme." As consumers are rapidly adopting new
high-performance electronics, we believe many stocks stand to benefit.
One such company is RAVISENT TECHNOLOGIES, INC. (1.98% of the Fund). Ravisent
provides software solutions that help manage digital video and audio streams for
personal computer systems and consumer electronics devices. These software
solutions enable playback and recording of multimedia formats such as DVD, DBS
(direct broadcast satellite), and HDTV (high definition television) on existing
PC and consumer electronic formats. We have owned this company since its initial
public offering earlier this year, and our recent meetings with management gave
us increased confidence in the company's business fundamentals.
We have also seen significant performance in other technology areas, such as
Internet professional service companies. BRAUN CONSULTING, 1.52% of the Fund,
one of our holdings in this sector, returned more 60% in the month of October
alone as the market realized how significantly undervalued this stock was
relative to many the other companies in this sector.
CONSTANT SEARCH FOR GROWTH
The Fund's overweighting in technology companies is largely the result of strong
performance by our carefully chosen holdings in the sector. We continue to
search for strong prospects in other traditional growth segments of the market,
such as healthcare and consumer goods. We remain committed to our growth
philosophy, searching for the market's best small companies in whatever sector
they may be found.
CHANGE IN VALUE OF $10,000 INVESTMENT
<TABLE>
<CAPTION>
CAPITAL APPRECIATION PORTFOLIO S&P 500 INDEX
(COMMENCED OPERATIONS APRIL 30, -------------
1994)
-------------------------------
<S> <C> <C>
10000.00 10000.00
9975.00 9658.00
'95' 12816.50 13923.10
13688.10 15343.30
'96' 14835.10 17136.90
16014.50 20650.00
'97' 17089.10 22834.70
18032.40 26878.80
'98' 18099.10 29359.70
19621.30 32994.40
'99' 19268.10 35538.30
</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, 1999
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Digital Microwave Corp 3.18
2. Cree Research, Inc. 2.44
3. USWeb Corporation 2.28
4. Rex Stores Corp 2.00
5. Ravisent Tech, Inc. 1.98
6. EMCORE Corporation 1.89
7. US Freightways Corp. 1.84
8. Insight Enterprises 1.80
9. Peregrine Systems 1.67
10. Fossil, Inc. 1.59
</TABLE>
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Electrical Equipment 14.85
2. Computer and Related 14.34
3. Retail 10.74
4. Computer Software 6.77
5. Computer Services 4.93
</TABLE>
The prices of small company stocks are generally more volatile than the price of
large company stocks.
34
<PAGE> 125
OHIO NATIONAL FUND, INC.
SMALL CAP PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
AEROSPACE (1.3%)
44,950 *The Titan Corp. ................. $ 2,118,269
------------
BANKING (0.7%)
24,625 *Silicon Valley Banc. ............ 1,218,937
------------
BROADCAST RADIO & TV (0.4%)
24,300 *Radio Unica Corp. ............... 701,662
------------
BUSINESS SERVICES (2.7%)
6,000 *Aether Systems Inc. ............. 429,750
17,650 *Corp Executive Board ............ 986,194
49,750 *Management Network Group Inc. ... 1,623,094
32,500 *Remedy Corp. .................... 1,539,688
------------
4,578,726
------------
CHEMICALS (1.4%)
60,725 *Albany Molecular Research ....... 1,852,112
56,275 *U.S. Plastic Lumber Co. ......... 432,614
------------
2,284,726
------------
COLLECTIBLES (1.0%)
157,475 *The Topps Co. ................... 1,633,803
------------
COMMERCIAL SERVICES (0.5%)
21,300 *Pfsweb Inc. ..................... 798,750
------------
COMMUNICATIONS (5.1%)
12,550 *Allegiance Telecom Inc. ......... 1,157,738
10,775 *Cox Radio Inc. .................. 1,074,806
227,500 *Digital Microwave Corp. ......... 5,332,031
25,175 *Telecorp PCS Inc. ............... 956,650
------------
8,521,225
------------
COMPUTER & RELATED (16.4%)
28,550 *Bindview Development Corp. ...... 1,418,578
13,800 *CDW Computer Centers Inc. ....... 1,085,025
78,075 *Dendrite International .......... 2,644,791
31,650 *Documentum Inc. ................. 1,895,044
33,200 *Entrust Technologies Inc. ....... 1,989,925
22,200 *Exchange Application Inc. ....... 1,240,425
74,320 *Insight Enterprises Inc. ........ 3,019,250
24,275 *Macromedia Inc. ................. 1,775,109
12,375 *Mercury Interactive Corp. ....... 1,335,727
9,500 *NetIQ Corp. ..................... 494,594
86,304 *Ravisent Tech Inc. .............. 3,317,310
23,000 *SanDisk Corp. Designs ........... 2,213,750
18,125 *SmartDisk Corp. ................. 593,594
60,025 *TenFold Corp. ................... 2,397,248
102,775 *The 3DO Co. ..................... 934,610
72,550 *Zamba Corp. ..................... 1,260,556
------------
27,615,536
------------
COMPUTER SERVICES (4.9%)
35,650 *Braun Consulting Inc. ........... 2,548,975
22,800 *Digital River Inc. .............. 759,525
34,775 *Sykes Enterprises Inc. .......... 1,525,753
16,800 *Tanning Technology Corp. ........ 990,150
54,325 *Zomax Optical Media Inc. ........ 2,458,206
------------
8,282,609
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
COMPUTER SOFTWARE (5.7%)
32,050 *Aspect Development Inc. ......... $ 2,195,425
8,050 *Digex Inc. ...................... 553,438
81,550 *InfoCure Corp. .................. 2,543,341
33,850 *Peregrine Systems ............... 2,796,856
11,600 *Puma Technologies ............... 1,515,250
------------
9,604,310
------------
CONSUMER PRODUCTS (4.4%)
115,600 *Fossil Inc. ..................... 2,673,250
92,062 *Jakks Pacific Inc. .............. 1,720,409
49,125 *Pinnacle Systems Inc. ........... 1,998,773
63,875 *Yankee Candle Inc. .............. 1,041,961
------------
7,434,393
------------
DRUGS (0.7%)
21,037 *King Pharmaceuticals Inc. ....... 1,179,415
------------
EDUCATION/SCHOOLS (0.4%)
47,600 *ITT Educational Services Inc. ... 734,825
------------
ELECTRONIC COMPONENTS (14.5%)
17,275 *Advanced Energy Ind. ............ 850,794
88,450 *American Xtal Technology Inc. ... 1,542,347
14,425 *Applied Micro Circuits Corp. .... 1,835,581
18,500 *Astropower Inc. ................. 259,000
48,450 *Brooks Automation Inc. .......... 1,577,653
47,900 *Cree Research Inc. .............. 4,089,463
93,275 *Emcore Corp. .................... 3,171,350
43,950 *Gentex Corp. .................... 1,219,613
36,650 *Kopin Corp. ..................... 1,539,300
59,925 Methode Electronics .............. 1,925,091
48,525 *Pericom Semiconductor ........... 1,276,814
19,300 *PRI Automation Inc. ............. 1,295,512
21,800 *Sawtek Inc. ..................... 1,451,062
39,825 *Zoran Corp. ..................... 2,220,244
------------
24,253,824
------------
ELECTRICAL EQUIPMENT (1.8%)
3,775 Optical Coating Lab .............. 1,117,400
77,137 *Remec Inc. ...................... 1,966,994
------------
3,084,394
------------
ELECTRICAL SERVICES (2.1%)
38,312 *Dycom Industries ................ 1,688,122
64,975 *Quanta Services Inc. ............ 1,835,544
------------
3,523,666
------------
ENTERTAINMENT & LEISURE (2.0%)
97,475 Callaway Golf Co. ................ 1,724,089
72,675 *Station Casinos Inc. ............ 1,630,645
------------
3,354,734
------------
FIBER OPTICS (0.2%)
2,925 *Finisar Corp. ................... 262,884
------------
FINANCIAL SERVICES (2.7%)
61,700 *CompuCredit Corp. ............... 2,375,450
16,425 *NCO Group Inc. .................. 494,803
*Profit Recovery group Intl.
65,737 Inc. ............................ 1,746,139
------------
4,616,392
------------
</TABLE>
(continued)
35
<PAGE> 126
OHIO NATIONAL FUND, INC.
SMALL CAP PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
HOTEL/LODGING (0.5%)
65,400 *Sunterra ........................ $ 752,100
------------
HOUSING, FURNITURE & RELATED (0.5%)
28,475 *Trex Co. Inc. ................... 761,706
------------
INDUSTRIAL SERVICES (0.8%)
47,875 *Insituform Technologies ......... 1,352,469
------------
INTERNET SOFTWARE (4.8%)
11,450 *Andover.Net Inc. ................ 407,906
14,975 *ITXC Corp. ...................... 503,534
28,475 *Liquid Audio Inc. ............... 747,469
22,675 *National Information ............ 725,600
35,850 *PC-Tel Inc. ..................... 1,882,125
86,012 *USWeb Corp. ..................... 3,822,158
------------
8,088,792
------------
MACHINERY (0.8%)
31,325 *Astec Industries ................ 589,302
46,950 *National Oilwell Inc. ........... 736,528
------------
1,325,830
------------
MEDICAL & RELATED (2.5%)
28,025 *Accredo Health Inc. ............. 861,769
*Orthodontic Centers of America
45,050 Inc. ............................ 537,784
20,000 *Patterson Dental ................ 852,500
86,925 *PolyMedica Corp. ................ 2,010,141
------------
4,262,194
------------
MOTION PICTURE & SERVICE (0.6%)
13,625 *Macrovision Corp. ............... 1,008,250
------------
NETWORK PRODUCTS (1.0%)
5,650 *JNI Corp. ....................... 372,900
12,225 *Proxim Inc. ..................... 1,344,750
------------
1,717,650
------------
REAL ESTATE & LEASING (0.7%)
104,850 *Fairfield Communities Inc. ...... 1,127,138
------------
RETAIL (10.7%)
34,650 *99 Cents Only Stores ............ 1,325,363
26,950 *American Eagle Outfitters ....... 1,212,750
40,925 *Ames Department Stores .......... 1,179,151
46,300 *Bebe Stores Inc. ................ 1,250,100
9,200 *Chemdex Corp. ................... 1,021,200
55,825 *Pacific Sunwear of California ... 1,796,867
95,800 *Rex Stores Corp. ................ 3,353,000
94,625 *Sharper Image Corp. ............. 1,200,555
66,725 *The Mens Wearhouse Inc. ......... 1,960,047
*Tweeter Home Entertainment
38,950 Group ........................... 1,382,725
71,025 *Ultimate Electronics Inc. ....... 1,757,869
12,800 *Williams-Sonoma Inc. ............ 588,800
------------
18,028,427
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
TRANSPORTATION SERVICE & EQUIPMENT (3.8%)
29,150 C.H. Robinson World .............. $ 1,158,712
93,875 Circle International ............. 2,088,719
64,625 US Freightways Corp. ............. 3,093,922
------------
6,341,353
------------
TOTAL U.S. COMMON STOCK (95.6%)
(COST $104,650,391) ............. $160,568,989
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES FOREIGN COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
CANADA (1.0%)
COMPUTER SOFTWARE (1.0%)
47,525 *Optimal Robotics Corp. .......... $ 1,770,306
------------
NETHERLANDS (1.2%)
ELECTRONIC COMPONENTS (1.2%)
85,000 ... *ASM International ............... 1,955,000
------------
NORWAY (0.6%)
OIL, ENERGY & NATURAL GAS (0.6%)
85,525 *Stolt Comex Seaway .............. 946,120
------------
TOTAL FOREIGN COMMON STOCK (2.8%)
(COST $3,490,289)................ $ 4,671,426
------------
TOTAL COMMON STOCK (98.4%) (COST
$108,140,680).................... $165,240,415
------------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS VALUE
- -------------------------------------------------------------
<C> <S> <C>
FINANCIAL (2.3%)
$3,908,000 Firstar 1.000% 01/03/00 repurchase
price $3,908,321 collateralized
by GNMA certificates pool #8375
due 02/20/24 (Cost $3,908,000)... $ 3,908,000
------------
TOTAL REPURCHASE AGREEMENTS (2.3%)
(COST $3,908,000)................ $ 3,908,000
------------
TOTAL HOLDINGS (100.7%) (COST
$112,048,680) (a)................ $169,148,415
------------
LIABILITIES, NET OF CASH &
RECEIVABLES (-0.7%).............. (1,230,541)
------------
TOTAL NET ASSETS (100.0%)......... $167,917,874
============
</TABLE>
- ---------------
* Non-income producing securities.
(a) Represents cost for financial reporting purposes and differs from cost basis
for federal income tax purposes. See Note 1.
The accompanying notes are an integral part of these financial statements.
36
<PAGE> 127
OHIO NATIONAL FUND, INC.
SMALL CAP PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
Assets:
Investments in securities at market value
(note 1) (cost $112,048,680)........... $169,148,415
Cash in bank............................. 406
Receivable for securities sold........... 2,131,112
Receivable for fund shares sold.......... 78,512
Dividends and accrued interest
receivable............................. 5,256
Other.................................... 2,661
------------
Total assets........................... 171,366,362
------------
Liabilities:
Payable for securities purchased......... 3,243,761
Payable for fund shares redeemed......... 73,662
Payable for investment management
services (note 3)...................... 104,929
Other accrued expenses................... 26,136
------------
Total liabilities...................... 3,448,488
------------
Net assets at market value................. $167,917,874
============
Net assets consist of:
Par value, $1 per share.................. $ 5,311,232
Paid-in capital in excess of par value... 103,472,734
Accumulated net realized gain on
investments (note 1)................... 2,034,173
Net unrealized appreciation on
investments (note 1)................... 57,099,735
------------
Net assets at market value................. $167,917,874
============
Shares outstanding (note 4)................ 5,311,232
Net asset value per share.................. $ 31.62
============
</TABLE>
STATEMENT OF OPERATIONS
Year Ended December 31, 1999
<TABLE>
<S> <C>
Investment income:
Interest.................................. $ 247,410
Dividends................................. 39,204
-----------
Total investment income................. 286,614
-----------
Expenses:
Management fees (note 3).................. 826,722
Custodian fees (note 3)................... 17,148
Directors' fees (note 3).................. 2,107
Professional fees......................... 9,629
Accounting and transfer agent fees........ 57,698
Other..................................... 15,215
-----------
Total expenses.......................... 928,519
-----------
Net investment loss..................... $ (641,905)
-----------
Realized and unrealized gain on investments:
Net realized gain from investments........ $49,188,742
Net increase in unrealized appreciation on
investments............................. 36,969,442
-----------
Net gain on investments................. 86,158,184
-----------
Net increase in net assets from
operations............................ $85,516,279
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
37
<PAGE> 128
OHIO NATIONAL FUND, INC.
SMALL CAP PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEARS ENDED
---------------------------
1999 1998
------------ -----------
<S> <C> <C>
From operations:
Net investment loss....................................... $ (641,905) $ (187,071)
Realized gain (loss) on investments....................... 49,188,742 (4,198,422)
Unrealized appreciation on investments.................... 36,969,442 11,754,403
------------ -----------
Net increase in net assets from operations............ 85,516,279 7,368,910
------------ -----------
Dividends and distributions to shareholders:
Capital gains distributions............................... (42,956,147) (961)
------------ -----------
From capital share transactions (note 4):
Received from shares sold................................. 22,600,298 16,824,812
Received from dividends reinvested........................ 42,956,147 961
Paid for shares redeemed.................................. (15,774,683) (6,922,311)
------------ -----------
Increase in net assets derived from capital share
transactions......................................... 49,781,762 9,903,462
------------ -----------
Increase in net assets............................. 92,341,894 17,271,411
Net Assets:
Beginning of period....................................... 75,575,980 58,304,569
------------ -----------
End of period............................................. $167,917,874 $75,575,980
============ ===========
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Per share data:
Net asset value, beginning of period........................ $20.70 $18.72 $18.03 $15.85 $11.99
Income (loss) from investment operations:
Net investment loss....................................... (0.16) (0.06) (0.02) (0.08) (0.02)
Net realized & unrealized gain on investments............. 21.96 2.04 1.54 2.80 3.95
------ ------ ------ ------ ------
Total income from investment operations................. 21.80 1.98 1.52 2.72 3.93
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income...................... 0.00 0.00 0.00 0.00 (0.07)
Distributions from net realized capital gains............. (10.88) 0.00 (0.83) (0.54) 0.00
------ ------ ------ ------ ------
Total distributions..................................... (10.88) 0.00 (0.83) (0.54) (0.07)
------ ------ ------ ------ ------
Net asset value, end of period.............................. $31.62 $20.70 $18.72 $18.03 $15.85
====== ====== ====== ====== ======
Total return................................................ 106.46% 10.57% 8.47% 17.71% 33.01%
Ratios and supplemental data:
Ratio of expenses to average net assets................... 0.89% 0.91% 0.94% 0.96% 0.96%
Ratio of net investment loss to average net assets........ (0.61)% (0.30)% (0.11)% (0.48)% (0.11)%
Portfolio turnover rate..................................... 166% 99% 80% 70% 75%
Net assets at end of period (millions)...................... $167.9 $ 75.6 $ 58.3 $ 38.5 $ 16.0
</TABLE>
The accompanying notes are an integral part of these financial statements.
38
<PAGE> 129
OHIO NATIONAL FUND, INC.
INTERNATIONAL SMALL COMPANY PORTFOLIO (a)
OBJECTIVE
The International Small Company seeks to provide long-term capital growth of
capital by investing primarily in equity securities of foreign companies having
a market capitalization at the time of purchase of $1.5 billion or less.
PERFORMANCE AS OF DECEMBER 31, 1999
AVERAGE ANNUAL TOTAL RETURNS:
<TABLE>
<S> <C>
One-year 108.51%
Three-year 34.08%
Since inception (3/31/95) 25.53%
</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
This was a very good year for international small cap funds. We are pleased to
report that the Ohio National International Small Company Portfolio returned
108.51% for the year. According to Lipper, the 1999 average return for the
international small cap investment objective was 74.8%. Hence, the fund
continues to provide one of the best returns in its asset class.
The fund derived its excellent performance principally from its investments in
Asia at the beginning of the year. The Asian recovery process in its infancy
presented some compelling reasons and investment opportunities in the region.
Japan, the largest Asian economy, largely accounted for nearly 30% of the fund
throughout the year while Europe largely underperformed because of the decrease
in global demand for goods produced in Germany and the weakness or uncertainty
in the Euro, the new European currency.
Looking forward, we expect Germany to lead Europe's recovery in 2000. Good
economic indicators point to our optimistic outlook: industrial production
orders up, business confidence levels up and unemployment down. In fact, Europe
is expected to grow 3% this year, up from 2% in 1999.
CHANGE IN VALUE OF $10,000 INVESTMENT
<TABLE>
<CAPTION>
INTERNATIONAL SMALL COMPANY EAFE
PORTFOLIO (COMMENCED OPERAITONS ----
MARCH 31, 1995)
-------------------------------
<S> <C> <C>
10000.00 10000.00
10421.00 10073.00
'96 12206.80 11630.30
13407.90 12951.50
'97 13630.50 11765.10
14466.00 13657.00
'98 14110.20 14028.40
17531.90 14585.40
'99 29422.00 17811.60
</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, 1999
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Baltimore Technologies PLC 2.18
2. Intershop Communications AG 1.77
3. Datacraft Asia Ltd. 1.72
4. Trafficmaster PLC 1.71
5. Secure Network Solutions Ltd. 1.65
6. Solution 6 Holdings Ltd. 1.61
7. ARM Holdings plc, ADR 1.56
8. Framtidsfabriken AB 1.44
9. Pacific Century Regional
Developments Ltd. 1.35
10. Matalan 1.30
</TABLE>
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Business & Public Services 26.19
2. Electronic Components,
Instruments 14.45
3. Telecommunications 8.67
4. Electrical & Electronics 7.87
5. Broadcasting & Publishing 4.96
</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.
- ---------------
(a) Prior to 5/1/99 the portfolio was known as The Global Contrarian Portfolio.
39
<PAGE> 130
OHIO NATIONAL FUND, INC.
INTERNATIONAL SMALL COMPANY PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES FOREIGN COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
JAPAN (20.7%)
6,500 Aoi Advertising Promotion Inc.
(22).............................. $ 116,321
700 Avex Inc. (13)..................... 174,555
1,000 Drake Beam Morin Japan Inc. (28)... 325,641
1,000 Fast Retailing Co. Ltd. (31)....... 406,806
500 Funai Electric Co. Ltd. (11)....... 294,348
1,300 Hokuto Corp. (15).................. 69,793
18,000 Japan Asia Investment Co. Ltd.
(14).............................. 295,717
22,000 Japan Radio Co. (29)............... 212,987
600 Kadokawa Shoten Publishing Co.
(22).............................. 201,838
5,000 Kinseki (11)....................... 53,051
1,000 Kobayashi Pharmaceutical Co. Ltd.
(23).............................. 78,232
3,800 Koei Co. Ltd. (9).................. 136,006
5 *Liquid Audio Japan Inc. (28)...... 317,328
6,000 Meiki Co. Ltd. (20)................ 143,751
3,000 Misumi Corp. (34).................. 236,163
4,000 Mitsumi Electric (11).............. 125,171
1,200 Moshi Moshi Hotline Inc. (29)...... 165,461
1,900 Mycal Card Inc. (14)............... 60,385
1,590 Nichii Gakkan Co. (28)............. 310,817
24,000 Nippon Thompson (11)............... 198,083
3,600 Nissin Co. Ltd. (14)............... 147,858
8,000 Nitori Co. (34).................... 320,751
9,000 Nitto Kohki Co. Ltd. (20).......... 188,783
2,000 Pasona Softbank Inc. (14).......... 158,811
2,200 Plaza Create (28).................. 225,895
3,000 Q' sai Co. Ltd. (15)............... 187,757
2,000 Right On Co. (13).................. 195,580
3,000 Rock Field Co. (15)................ 115,881
10,000 Sailor Pen Co. Ltd. (13)........... 205,359
4,000 Shinkawa (20)...................... 142,773
4,000 Sumisho Computer Systems Corp.
(9)............................... 275,377
16,000 Toyo Communication Equipment
(29).............................. 297,281
900 Trans Cosmos (9)................... 383,728
1,700 Trend Micro Inc. (9)............... 428,907
2,000 Venture Link Co. Ltd. (28)......... 173,088
4,000 Yamada Denki (27).................. 434,187
3,000 Yokowo Co. Ltd. (11)............... 74,809
-----------
7,879,279
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES FOREIGN COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
UNITED KINGDOM (13.7%)
3,100 *ARM Holdings PLC ADR (11)......... $ 593,650
2,200 *Autonomy Corp. (29)............... 106,700
10,050 *Baltimore Technologies PLC (28)... 833,423
1,500 *EBookers.com PLC ADR (28)......... 25,969
3,400 Eidos PLC (13)..................... 299,824
9,000 FI Group PLC (28).................. 111,770
4,000 Filtronic PLC (11)................. 136,568
12,600 Guardian IT (28)................... 195,420
8,000 *Imagination Technologies Group PLC
(28).............................. 52,556
2,000 *Independent Energy Hldgs PLC ADR
(12).............................. 66,625
8,000 Kewill Systems PLC (20)............ 202,586
7,000 *Kingston Communication (Hull) PLC
(29).............................. 86,366
18,100 Matalan (31)....................... 498,622
7,000 Nestor Healthcare Group PLC (23)... 73,057
10,000 Pace Micro Technology PLC (29)..... 85,355
16,500 RM PLC (9)......................... 228,941
51,000 Saatchi & Saatchi PLC (28)......... 307,399
100,000 *Scoot.com PLC (22)................ 243,524
23,000 Securicor PLC (28)................. 59,174
8,000 *Shire Pharmaceuticals Grp PLC
(23).............................. 80,064
53,000 Taylor Nelson (28)................. 234,552
44,416 *Trafficmaster PLC (28)............ 655,809
7,000 Ultraframe (5)..................... 57,483
-----------
5,235,437
-----------
SWEDEN (8.3%)
7,000 *A-Com AB (22)..................... 159,579
3,900 *Connecta AB (28).................. 132,904
3,050 *Framtidsfabriken AB (28).......... 551,945
13,000 *Icon Medialab Intl. AB (28)....... 452,179
4,000 *Industrial & Financial Systems
(11).............................. 86,958
1,400 *Information Highway AB (11)....... 231,965
2,000 Linne Group AB (9)................. 55,700
5,900 *Modern Times Group CL B (22)...... 292,577
10,000 *Readsoft AB (9)................... 182,141
81,000 Rotternos AB (16).................. 107,557
2,800 Sigma AB CL B (11)................. 59,883
10,000 *SwitchCore AB (29)................ 408,936
3,500 *Telelogic AB (11)................. 185,901
15,650 *Teligent AB (29).................. 266,660
-----------
3,174,885
-----------
</TABLE>
(continued)
40
<PAGE> 131
OHIO NATIONAL FUND, INC.
INTERNATIONAL SMALL COMPANY PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES FOREIGN COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
HONG KONG (7.8%)
54,000 Asia Satellite Telecom Hldgs Ltd.
(29).............................. $ 170,541
157,000 China Everbright Ltd. (27)......... 129,260
39,400 *China Pharmaceutical Enterprise &
Investment Corp. Ltd. (23)........ 710
222,000 City Telecom Ltd. (29)............. 215,617
112,000 Cosco Pacific Ltd. (32)............ 92,931
86,000 Esprit Asia Holdings Ltd. (27)..... 92,931
190,000 *Founder Hong Kong Ltd. (9)........ 232,199
223,800 Giordano International Ltd. (27)... 230,321
119,000 *Great Wall Technology Co. (11).... 115,579
300,000 Hanny Holdings Ltd. (9)............ 283,656
215,000 Hong Kong Construction Hldgs Ltd.
(5)............................... 78,134
108,000 Legend Holdings Ltd. (9)........... 268,142
114,000 Li & Fung Ltd. (34)................ 285,972
360,000 *Quality Healthcare (23)........... 138,934
164,000 Shaw Brothers Ltd. (13)............ 190,931
620,000 *Stone Electronic Technology
(11).............................. 438,670
-----------
2,964,528
-----------
GERMANY (7.6%)
1,000 *ADVA AG Optical Networking (29)... 189,410
600 *Brokat Infosystems AG (9)......... 119,691
1,150 CE Consumer Electronic AG (11)..... 152,939
3,200 *GFK AG (28)....................... 132,184
1,000 *GFT Ges Fuer Technologiecon AG
(9)............................... 102,765
2,400 *Intershop Communications AG (9)... 686,712
5,126 Kamps AG (15)...................... 356,347
3,584 Kamps AG -- New (15)............... 240,124
1,408 Medion AG (34)..................... 125,826
6,052 *Steag Hamatech AG (20)............ 220,116
4,935 *Tecis Holding AG (14)............. 202,610
1,000 *Tiscon Infosystems (9)............ 62,062
9,600 *Zapf Creation AG (13)............. 319,176
-----------
2,909,962
-----------
AUSTRALIA (5.9%)
39,500 APN News & Media Ltd. (22)......... 86,891
10,509 Aristocrat Leisure Ltd. (13)....... 151,126
51,680 Challenger International Ltd.
(14).............................. 139,815
8,400 IXLA Ltd.( CALL-Option ) Strike
Price: 0.2; Expiration
Date:3-31-2000 (9)................ 7,391
55,500 *LibertyOne Ltd. (11).............. 61,226
47,610 One Tel Ltd. (29).................. 73,468
168,000 *PowerLan Ltd. (29)................ 163,270
2,000 *Protel International Ltd. (29).... 7,355
83,670 *Sausage Software Ltd. (9)......... 285,698
139,500 *Secure Network Solutions Ltd.
(28).............................. 632,059
56,500 *Solution 6 Holdings Ltd. (9)...... 615,872
10,000 *Techniche Ltd. (29)............... 34,474
-----------
2,258,645
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES FOREIGN COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
CANADA (4.7%)
1,350 *Biovail Corp. Intl. (23).......... $ 126,563
54,000 *Breakwater Resources Ltd. (24).... 149,107
8,400 *Canadian Hunter Exploration Ltd.
(12).............................. 138,062
18,400 *Canfor Corp. (16)................. 215,197
3,000 *Certicom Corp. (11)............... 178,547
4,000 *Cinar Corp. (22).................. 98,000
2,000 *Clearnet Communications Inc.
(29).............................. 68,720
5,200 *Clearnet Communications Inc.
(29).............................. 178,750
6,000 *Corel Corp. (9)................... 90,750
6,000 *Cyberplex Inc. (9)................ 75,779
7,900 *Descartes Systems Grp Inc. (9).... 173,581
5,800 *Microforum Inc. Warrants (9)...... 2,890
15,200 Newfoundland Capital Corp. Ltd.
(22).............................. 104,401
4,000 *Precision Drilling Corp. (12)..... 102,422
1,500 *Research in Motion Ltd. (11)...... 69,239
-----------
1,772,008
-----------
SINGAPORE & MALAYSIAN (4.6%)
5,000 Creative Technology Ltd. (9)....... 86,875
79,000 Datacraft Asia Ltd. (28)........... 655,700
80,000 Flextech Holdings Ltd. (11)........ 89,823
130,000 GES International Ltd. (11)........ 140,498
93,000 Keppel Telecom & Transport (29).... 151,324
36,000 *Pacific Century Regional
Developments Ltd. (26)............ 516,602
26,000 *Sembcorp Logistics Ltd. (32)...... 105,374
-----------
1,746,196
-----------
FRANCE (4.0%)
600 *Alten (29)........................ 103,490
900 *Avenir Telecom (29)............... 170,650
2,000 *Business Objects SA ADR (9)....... 267,250
2,200 *Consodata SA (28)................. 99,743
915 *Infogrames Entertainment (13)..... 151,186
400 *Integra -- Net SA (11)............ 58,193
906 *Intercall (28).................... 35,599
3,500 *Ipsos (11)........................ 289,505
400 NRJ SA (22)........................ 275,451
1,000 *Valtech (28)...................... 82,565
-----------
1,533,632
-----------
SWITZERLAND (3.9%)
500 4M Technologies Holding SA (11).... 150,563
35 Disetronic Holdings AG (23)........ 163,702
500 Distefora Holding AG (27).......... 121,645
179 Edipresse SA-Bearer (22)........... 99,026
700 Gretag Imaging Group (28).......... 101,543
43 *Kudelski SA (11).................. 256,805
450 *Micronas Semiconductor Hldg AG
(12).............................. 121,645
37 Phonak Holding AG (11)............. 63,268
400 SEZ Holding AG (11)................ 224,052
600 Swisslog Holding AG (35)........... 175,394
-----------
1,477,643
-----------
</TABLE>
(continued)
41
<PAGE> 132
OHIO NATIONAL FUND, INC.
INTERNATIONAL SMALL COMPANY PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES FOREIGN COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
FINLAND (3.5%)
47,320 JOT Automation Group OYJ (11)...... $ 440,993
6,000 Metsa-Serla Oy CL B (16)........... 69,820
1,000 Nokian Renkaat (3)................. 38,084
13,500 Perlos OYJ (11).................... 476,044
7,000 PMJ Automec Oyj (11)............... 82,303
3,464 Rapala Normark (13)................ 16,752
8,900 Talentum (22)...................... 216,099
-----------
1,340,095
-----------
SOUTH AFRICA (1.9%)
38,990 Iscor Ltd. (24).................... 147,778
216,200 Metro Cash and Carry Ltd. (34)..... 246,181
7,800 Nasionale Pers Beperk CL N (22).... 74,225
222,500 Profurn Ltd. (27).................. 241,049
-----------
709,233
-----------
GREECE (1.8%)
3,850 Arcadia Metal Industrial C. Rokas
S.A. (20)......................... 84,331
3,850 Arcadia Metal Industrial C. Rokas
S.A. Rights (20).................. 69,073
930 Chipita International (15)......... 14,431
4,200 *Interamerican Life Ins. Co. S.A.
(19).............................. 138,860
2,000 Maillis (35)....................... 75,178
5,700 Sarantis SA (23)................... 197,490
1,035 Tiletipos S.A. (29)................ 25,621
3,500 *Warehouse S.A. (28)............... 73,303
-----------
678,287
-----------
ISRAEL (1.6%)
5,000 *Geo Interactive Media Grp PLC
(9)............................... 140,370
2,000 *Gilat Satellite Networks (11)..... 237,500
2,800 *NICE-Systems Ltd. ADR (28)........ 137,725
5,500 *Taro Pharmaceutical Ind. Ltd.
(23).............................. 79,750
-----------
595,345
-----------
DENMARK (1.2%)
1,000 Falck A/S (28)..................... 104,846
2,000 *Vestas Wind Systems A/S (11)...... 354,447
-----------
459,293
-----------
SOUTH KOREA (1.1%)
1,000 Cheil Communications Inc. (28)..... 75,649
9,000 Comtec System Co. Ltd. (11)........ 122,061
100 *Handysoft Corp. (11).............. 81,990
15,500 Mirae Co. (28)..................... 120,536
-----------
400,236
-----------
NETHERLANDS (0.9%)
8,650 *BE Semiconductor Ind. (11)........ 124,187
4,090 *Detron Group (29)................. 88,182
3,850 *Versatel Telecom Intl. (29)....... 135,761
-----------
348,130
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES FOREIGN COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
IRELAND (0.6%)
5,000 *Trintech Group PLC ADR (9)........ $ 247,500
-----------
TURKEY (0.6%)
580,000 Hurriyet Gazetecilik ve Matbaacilik
A.S. (22)......................... 106,932
500,000 *Tat Konserve Sanayii A.S. (15).... 124,447
-----------
231,379
-----------
ITALY (0.5%)
12,000 Class Editori SPA (22)............. 209,157
-----------
SPAIN (0.5%)
8,550 NH Hoteles S.A. (18)............... 96,306
5,000 Zeltia S.A. (23)................... 88,156
-----------
184,462
-----------
AUSTRIA (0.2%)
2,400 DO & CO Restaurants & Catering AG
(15).............................. 90,191
-----------
NORWAY (0.2%)
6,000 *Tandberg ASA (29)................. 78,402
-----------
PHILIPPINES (0.1%)
44,000 *ABS-CBN Broadcasting Corp. (22)... 54,591
-----------
HUNGRY (0.1%)
2,359 *North American Bus Ind. (3)....... 49,520
-----------
TOTAL FOREIGN COMMON STOCK (96.0%)
(COST $19,830,093)................ $36,628,036
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS VALUE
- -------------------------------------------------------------
<C> <S> <C>
FINANCIAL SERVICES (6.4%)
$2,446,000 State Street Bank 2.500% due
01/03/00 repurchase price
$2,446,503 collateralized by U.S.
Treasury Bond due 05/15/04 (Cost
$2,020,000)....................... $ 2,446,000
-----------
TOTAL REPURCHASE AGREEMENTS (6.4%)
(COST $2,446,000)................. $ 2,446,000
-----------
TOTAL HOLDINGS (102.4%) (COST
$22,276,093)(A)................... $39,074,036
-----------
LIABILITIES, NET OF CASH &
RECEIVABLES (-2.4%)............... (927,409)
-----------
TOTAL NET ASSETS (100.0%).......... $38,146,627
===========
</TABLE>
- ---------------
<TABLE>
<S> <C>
* Non-income producing securities.
ADR (American depository receipt) represents ownership of
foreign securities.
PLC Public Limited Company.
(a) Represents cost for financial reporting purposes and differs
from cost basis for federal income tax purposes. See Note 1.
</TABLE>
42
<PAGE> 133
OHIO NATIONAL FUND, INC.
INTERNATIONAL SMALL COMPANY PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
Industry Classifications
<TABLE>
<C> <S>
(1) Aerospace
(2) Appliances & Household
Durables
(3) Automotive
(4) Banking
(5) Building/Construction
(6) Cement
(7) Chemicals
(8) Communications
(9) Computer Products
(10) Consumer Products
(11) Electrical & Electronics
(12) Energy and Oil
(13) Entertainment & Leisure
(14) Finance
(15) Food & Beverage
(16) Forest & Paper Products
(17) Governmental
(18) Hotels
(19) Insurance
(20) Machinery
(21) Manufacturing
(22) Media & Publishing
(23) Medical & Health Care
(24) Metal & Mining
(25) Plastics
(26) Real Estate
(27) Retailing
(28) Services
(29) Telecommunications
(30) Diversified
(31) Textile
(32) Transportation
(33) Utilities
(34) Wholesale
(35) Miscellaneous
</TABLE>
The accompanying notes are an integral part of these financial statements.
43
<PAGE> 134
OHIO NATIONAL FUND, INC.
INTERNATIONAL SMALL COMPANY PORTFOLIO (A)
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
Assets:
Investments in securities at market value
(note 1) (cost $22,276,093)............. $39,074,036
Cash in bank.............................. 196,075
Unrealized gain on forward currency
contracts (note 5)...................... 11,864
Receivable for securities sold............ 247,736
Receivable for fund shares sold........... 11,111
Dividends and accrued interest
receivable.............................. 15,526
Other..................................... 81
-----------
Total assets............................ 39,556,429
-----------
Liabilities:
Unrealized loss on forward currency
contracts (note 5)...................... 16,752
Payable for securities purchased.......... 1,303,740
Payable for fund shares redeemed.......... 21,674
Payable for investment management services
(note 3)................................ 32,457
Other accrued expenses.................... 35,179
-----------
Total liabilities....................... 1,409,802
-----------
Net assets at market value.................. $38,146,627
===========
Net assets consist of:
Par value, $1 per share................... $ 1,884,191
Paid-in capital in excess of par value.... 19,314,839
Accumulated net realized gain on
investments (note 1).................... 163,454
Net unrealized appreciation (depreciation)
on:
Investments (note 1).................... 16,797,943
Foreign currency related transactions... (8,913)
Forward currency contracts (note 5)..... (4,887)
-----------
Net assets at market value.................. $38,146,627
===========
Shares outstanding (note 4)................. 1,884,191
Net asset value per share................... $ 20.25
===========
</TABLE>
STATEMENT OF OPERATIONS
Year Ended December 31, 1999
<TABLE>
<S> <C>
Investment income:
Interest.................................. $ 42,799
Dividends (net of $8,047 foreign taxes
withheld)............................... 156,165
-----------
Total investment income................. 198,964
-----------
Expenses:
Management fees (note 3).................. 239,451
Accounting, custody, and transfer agent
fees (note 3)........................... 256,654
Directors' fees (note 3).................. 694
Professional fees......................... 3,172
Printing, postage, and proxy fees......... 7,371
Other..................................... 47,574
-----------
Total expenses.......................... 554,916
-----------
Net investment loss..................... $ (355,952)
-----------
Realized and unrealized gain (loss) on
investments and foreign currency:
Net realized gain (loss) from:
Investments............................. $ 3,970,825
Forward currency related transactions... (377,055)
Net increase (decrease) in unrealized
appreciation (depreciation) on:
Investments........................... 17,788,741
Foreign currency related
transactions....................... 4,835
-----------
Net gain on investments............... 21,387,346
-----------
Net increase in net assets from
operations......................... $21,031,394
===========
</TABLE>
- ---------------
(a) Prior to 5/1/99 the portfolio was known as the Global Contrarian Portfolio.
The accompanying notes are an integral part of these financial statements.
44
<PAGE> 135
OHIO NATIONAL FUND, INC.
INTERNATIONAL SMALL COMPANY PORTFOLIO (D)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEARS ENDED
-------------------------
1999 1998
----------- -----------
<S> <C> <C>
From operations:
Net investment income (loss).............................. $ (355,952) $ 479,653
Realized gain on investments and foreign currency
transactions............................................ 3,593,770 1,799,973
Unrealized appreciation (depreciation) on investments and
foreign currency transactions........................... 17,793,576 (1,711,464)
----------- -----------
Net increase in net assets from operations............ 21,031,394 568,162
----------- -----------
Dividends and distributions to shareholders:
Dividends paid from net investment income................. 0 (479,631)
Capital gains and foreign currency related transaction
distributions........................................... (3,775,161) (1,831,630)
----------- -----------
Total dividends and distributions..................... (3,775,161) (2,311,261)
----------- -----------
From capital share transactions (note 4):
Received from shares sold................................. 6,574,950 4,215,794
Received from dividends reinvested........................ 3,775,161 2,311,261
Paid for shares redeemed.................................. (9,277,931) (2,989,242)
----------- -----------
Increase in net assets derived from capital share
transactions......................................... 1,072,180 3,537,813
----------- -----------
Increase in net assets............................. 18,328,413 1,794,714
Net Assets:
Beginning of period....................................... 19,818,214 18,023,500
----------- -----------
End of period............................................. $38,146,627 $19,818,214
=========== ===========
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, APRIL 1,
------------------------------------ 1995 TO
1999 1998 1997 1996 DEC. 31, 1995
------ ------ ------ ------ -------------
<S> <C> <C> <C> <C> <C>
Per share data:
Net asset value, beginning of period........................ $10.76 $11.73 $11.66 $10.80 $10.00
Income from investment operations:
Net investment income (loss).............................. (0.20) 0.29 0.29 0.28 0.13
Net realized & unrealized gain on investments & foreign
currency transactions................................... 11.81 0.12 1.03 1.00 0.75
------ ------ ------ ------ ------
Total income from investment operations................. 11.61 0.42 1.32 1.28 0.88
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income...................... 0.00 (0.29) (0.38) (0.24) (0.08)
Distributions from net realized capital gains & foreign
currency related transactions........................... (2.12) (1.10) (0.87) (0.18) 0.00
------ ------ ------ ------ ------
Total distributions..................................... (2.12) (1.39) (1.25) (0.42) (0.08)
------ ------ ------ ------ ------
Net asset value, end of period.............................. $20.25 $10.76 $11.73 $11.66 $10.80
====== ====== ====== ====== ======
Total return................................................ 108.51% 3.53% 11.67% 12.09% 8.89%(b)
Ratios and supplemental data:
Ratio of expenses to average net assets................... 2.06% 1.30% 1.32% 1.29% 1.58%(a,c)
Ratio of net investment income (loss) to average net
assets.................................................. (1.44)% 2.48% 2.33% 2.44% 1.64%(a,c)
Portfolio turnover rate..................................... 314% 55% 29% 18% 6%
Net assets at end of period (millions)...................... $ 38.1 $ 19.8 $ 18.0 $ 11.3 $ 4.4
</TABLE>
- ---------------
(a) Annualized.
(b) Calculated on an aggregate basis (not annualized).
(c) The advisor has reimbursed certain operating expenses of the International
Small Company 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%.
(d) Prior to 5/1/99 the portfolio was known as the Global Contrarian Portfolio.
The accompanying notes are an integral part of these financial statements.
45
<PAGE> 136
OHIO NATIONAL FUND, INC.
AGGRESSIVE GROWTH PORTFOLIO
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, 1999
<TABLE>
<S> <C>
TOTAL RETURNS:
One-year 5.76%
Three-year 8.67%
Since inception (3/31/95) 11.00%
</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 stock market surged to the upside in the fourth quarter despite the Federal
Reserve's decision to hike short-term interest rates in the face of a global
economic strength. The absence of inflation and the Fed's resolve to keep
inflation contained gave investors the confidence to move back into stocks after
a six-month period of market consolidation. Although the stock market's advance
was very narrow, companies generating superior revenue growth performed
extremely well throughout the period, particularly technology issues.
The Russell 2500 Index has replaced the NASDAQ Composite Index as the benchmark
for the Aggressive Growth Portfolio because it more closely matches the
investment style and objectives of the portfolio. The Fund had good relative
performance with the Russell 2500 benchmark during the period. The improved
relative and absolute performance came primarily from a mid-year decision to
boost the fund's exposure to technology stocks. Our telecommunications, Internet
infrastructure beneficiaries, and real estate selections led the relative
outperformance of the Fund. An overweight in media also assisted relative
performance for the period. The market's advance benefited from strong corporate
profits and subsiding concerns over Y2K.
We remain overweight in the consumer cyclical, retail, and technology (with
emphasis on telecommunications and Internet infrastructure beneficiaries)
sectors. Given the current interest rate environment, we will continue to
maintain our underweights within financial industries.
The growth of the Internet and its acceptance as an important source of
competitive advantage should continue to enhance the prospects of companies
engaged in business to business commerce, wireless connectivity, Internet
content, bandwidth expansion, the building of new brands and a host of other
applications. The successful implementation of technology remains an essential
source of global competitiveness with superior returns on capital and market
share gains the principal result.
Our outlook is mixed. The economy and corporate profits remain strong, but
rising interest rates and technology valuations are points of concern. Our
strategy in this environment is to stay the course with the successful portfolio
we have had over the past few months with a slightly reduced risk profile.
Should the main areas of risk prove to be a problem, our relatively small size
gives us a flexibility advantage compared to our larger competitors.
During the next six months, we expect the U.S. economy to continue to grow at a
more moderate pace. We expect the Fed to remain vigilant, poised to nudge
interest rates preemptively higher to offset signs of inflationary pressure. In
our view, companies able to generate unit growth will continue to be the big
winners (without pricing, unit growth supports the higher revenue run rates
needed to offset cost pressures) in this environment.
As growth investors, our investment team is constantly on the look out for
investments exhibiting sustainable fundamental improvement regardless of market
capitalization or industry in order to consistently outperform the broader
market averages.
CHANGE IN VALUE OF $10,000 INVESTMENT
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH PORTFOLIO NASDAQ COMPOSITE INDEX RUSSELL 2500 INDEX
(COMMENCED OPERATIONS ---------------------- ------------------
MARCH 31, 1995)
---------------------------
<S> <C> <C> <C>
10000.00 10000.00 10000.00
11027.00 11422.00 10891.00
'96' 12792.60 15797.40 14597.70
13448.80 17645.70 16240.00
'97' 14395.60 19216.20 18153.00
15547.30 23186.20 19180.50
'98' 15524.00 26833.40 18359.60
14740.00 32871.00 20357.10
'99' 16417.40 49796.20 22793.80
</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, 1999
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Pinnacle Holdings 3.52
2. Oracle Corporation 3.51
3. Microsoft Corp 2.72
4. Central Garden & Pet 2.69
5. Cisco Systems Inc 2.62
6. DoubleClick Inc 2.58
7. AMFM Inc 2.54
8. Infinity 2.36
9. Microcell 2.22
10. Viacom Inc Cl. B 2.22
</TABLE>
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Computer and Related 16.32
2. Computer Software 10.36
3. Communications 8.84
4. Broadcast Radio & TV 7.98
5. Oil, Energy and Natural Gas 7.39
</TABLE>
The prices of small company stocks are generally more volatile than the prices
of large company stocks.
46
<PAGE> 137
OHIO NATIONAL FUND, INC.
AGGRESSIVE GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
ADVERTISING (3.3%)
2,375 *DoubleClick Inc. ................. $ 601,023
1,000 *Lamar Advertising Co. CL A........ 60,563
2,625 *Valassis Communications Inc. ..... 110,906
-----------
772,492
-----------
AUTOMOTIVE & RELATED (1.1%)
9,000 Oshkosh Truck Corp. ............... 263,813
-----------
BANKING (1.4%)
12,800 TCF Financial Corp. ............... 318,400
-----------
BROADCAST RADIO & TV (9.5%)
7,575 *AMFM Inc. ........................ 592,744
4,900 *Clear Channel Communications...... 437,325
2,800 *Emmis Communications CL A......... 348,994
15,216 *Infinity Broadcasting Corp A...... 550,629
3,650 *MediaOne Group Inc. .............. 280,365
-----------
2,210,057
-----------
BUSINESS SERVICES (1.1%)
1,100 *CSG Systems Intl. Inc. ........... 43,863
1,950 *Consolidated Graphics Inc. ....... 29,128
4,225 *Pierce Leahy Corp. ............... 182,731
-----------
255,722
-----------
CABLE TELEVISION (0.3%)
1,200 *Adelphia Communications CL A...... 78,750
-----------
COMMUNICATIONS (5.3%)
1,800 *BroadWing Inc. ................... 66,375
400 *Ciena Corp. ...................... 23,000
1,000 *Globalstar Telecommunications..... 44,000
3,100 Lucent Technologies Inc. .......... 231,919
700 *Nextel Communications Inc. ....... 72,188
19,350 *Pinnacle Holdings Inc. ........... 819,956
-----------
1,257,438
-----------
COMPUTER & RELATED (13.4%)
750 *Ariba Inc. ....................... 133,031
5,700 *Cisco Systems Inc. ............... 610,612
3,680 *Dell Computer Corp. .............. 187,680
3,400 *EMC Corp. ........................ 371,450
2,225 Hewlett-Packard Co. ............... 253,511
3,250 *Intel Corp. ...................... 267,516
3,025 Intl. Business Machines............ 326,700
2,100 *Lexmark Intl. Group Inc. CL A..... 190,050
3,050 *Microchip Technology Inc. ........ 208,734
1,325 *Sandisk Corp. .................... 127,531
575 *VerticalNet Inc. ................. 94,300
835 *Yahoo! Inc. ...................... 361,294
-----------
3,132,409
-----------
COMPUTER SOFTWARE (10.4%)
400 *Braun Consulting.................. 28,600
1,500 *Legato Systems Inc. .............. 103,219
5,425 *Microsoft Corp. .................. 633,369
7,300 *Oracle Corp. ..................... 818,056
2,500 *Pinnacle Systems Inc. ............ 101,719
5,400 *USinternetworking Inc. ........... 377,325
2,175 *Vignette Corp. ................... 354,525
-----------
2,416,813
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
CONSUMER PRODUCTS (0.5%)
850 Motorola Inc. ..................... $ 125,162
-----------
DRUGS (0.4%)
2,250 Jones Pharma Inc. ................. 97,734
-----------
DURABLE GOODS (0.6%)
3,900 Applied Power Inc. CL A............ 143,325
-----------
EDUCATION/SCHOOLS (1.2%)
17,900 *ITT Educational Services Inc. .... 276,331
-----------
ELECTRICAL EQUIPMENT (6.1%)
1,300 *Agilent Technologies Inc. ........ 100,506
750 *Applied Material Inc. ............ 95,016
4,800 *Atmel Corp. ...................... 141,900
600 *JDS Uniphase Corp. ............... 96,788
6,650 *Kent Electronics Corp. ........... 151,287
4,400 Methods Electronics CL A........... 141,350
950 *Rambus Inc. ...................... 64,066
7,225 *Rayovac Corp. .................... 136,372
1,100 *SDL Inc. ......................... 239,800
1,350 Texas Instruments Inc. ............ 130,781
4,100 *Vishay Intertechnology Inc. ...... 129,663
-----------
1,427,529
-----------
ENTERTAINMENT & LEISURE (4.7%)
5,725 *Bally Total Fitness Corp. ........ 152,786
27,000 *Movie Gallery Inc. ............... 116,437
13,300 *Park Place Entertainment.......... 166,250
5,193 *SCP Pool Corp. ................... 134,693
8,550 *Viacom Inc. CL B.................. 516,741
-----------
1,086,907
-----------
FIBER OPTICS (0.3%)
425 *E-Tek Dynamics Inc. .............. 57,216
-----------
FINANCIAL SERVICES (2.2%)
4,276 Citigroup.......................... 237,585
960 Household Intl. Inc. .............. 35,760
2,050 *Nova Corp. ....................... 64,703
6,100 Waddell & Reed Financial CL A...... 165,463
-----------
503,511
-----------
INSURANCE SERVICES (0.6%)
4,600 Protective Life.................... 146,338
-----------
INTERNET SOFTWARE & SERVICES (3.3%)
12,125 *Alloy Online Inc. ................ 190,969
5,950 *America Online Inc. .............. 448,853
800 *Internet Capital Group Inc. ...... 136,000
-----------
775,822
-----------
MEDIA & PUBLISHING (0.3%)
1,200 *CBS Corp. ........................ 76,725
-----------
MEDICAL & RELATED (2.8%)
400 *Hanger Orthopedic Group Inc. ..... 4,000
1,600 *Medimmune Inc. ................... 265,400
2,500 *Priority Healthcare Corp. ........ 72,344
12,150 *Syborn Intl. Corp. ............... 299,953
-----------
641,697
-----------
</TABLE>
(continued)
47
<PAGE> 138
OHIO NATIONAL FUND, INC.
AGGRESSIVE GROWTH PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
NETWORK PRODUCTS (0.9%)
5,500 *Cabletron Systems................. $ 143,000
225 *Juniper Networks Inc. ............ 76,500
-----------
219,500
-----------
OIL, ENERGY & NATURAL GAS (7.4%)
6,100 *BJ Services Co. .................. 255,056
2,650 *Cooper Cameron Corp. ............. 129,684
4,300 Devon Energy Corp. ................ 141,362
4,900 *Marine Drilling Co. Inc. ......... 109,944
9,700 *Nabors Industries Inc. ........... 300,094
7,325 *Noble Drilling Corp. ............. 239,894
42,500 *Ocean Energy Inc. ................ 329,375
17,200 Union Pacific Resources Group...... 219,300
-----------
1,724,709
-----------
PERSONAL SERVICES (2.1%)
1,300 *Carriage Services Inc. CL A....... 7,719
44,500 *Coinmach Laundry Corp. ........... 472,812
-----------
480,531
-----------
RENTAL & LEASING (1.2%)
3,950 Hertz Corp. ....................... 197,994
4,025 *Rent-A-Center Inc. ............... 79,745
-----------
277,739
-----------
RETAIL (6.8%)
850 *Amazon.com Inc. .................. 64,706
60,575 *Central Garden & Pet Co. ......... 628,466
3,800 *Insight Enterprises Inc. ......... 154,375
11,900 Regis Corp Minn. RJQ .............. 224,612
4,100 *Stamps.com Inc. .................. 170,662
30,050 *Sunglass Hut International........ 338,063
-----------
1,580,884
-----------
THERAPEUTICS (0.8%)
400 *Abgenix Inc. ..................... 53,000
5,300 *Neurocrine Biosciences Inc. ...... 131,175
-----------
184,175
-----------
TELECOMMUNICATIONS & CELLULAR (2.1%)
750 *Powertel Inc. .................... 75,281
4,600 *Sonera Corp. ..................... 318,550
1,600 *Tut Systems Inc. ................. 85,800
-----------
479,631
-----------
TRANSPORTATION & EQUIPMENT (0.4%)
6,400 *Wisconsin Central Trans. Corp. ... 86,000
-----------
TOTAL U.S. COMMON STOCK (90.5%)
(COST $17,245,624)................ $21,097,360
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES FOREIGN COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
CANADA (2.2%)
TELECOMMUNICATIONS & CELLULAR (2.2%)
15,750 *Microcell Telecommunications...... $ 517,781
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES FOREIGN COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
FINLAND (2.9%)
COMMUNICATIONS (1.9%)
2,375 Nokia Corp-Spon ADR................ $ 451,250
-----------
TELECOMMUNICATIONS & CELLULAR (1.0%)
3,300 *Sonera OYJ........................ 225,082
-----------
TOTAL FINLAND...................... 676,332
-----------
GERMANY (0.5%)
COMMUNICATIONS (0.5%)
3 NTT Mobile......................... 115,187
-----------
LUXEMBOURG (0.1%)
TELECOMMUNICATIONS & CELLULAR (0.1%)
425 *Millicom Intl. Cellular SA........ 26,509
-----------
SWEDEN (0.6%)
TELECOMMUNICATIONS & CELLULAR (0.6%)
2,200 Ericsson (LM) Tel-SP............... 144,513
-----------
UNITED KINGDOM (2.0%)
COMMUNICATIONS (1.0%)
4,825 *Vodafone Airtouch PLC-SP ADR...... 238,838
COMPUTER & RELATED (1.0%)
5,200 *Psion PLC......................... 226,283
-----------
TOTAL UNITED KINGDOM............... 465,121
-----------
TOTAL FOREIGN COMMON STOCK (8.3%)
(COST $1,381,894)................. $ 1,945,443
-----------
TOTAL COMMON STOCK (98.8%)
(COST $18,627,518)................ $23,042,803
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT SHORT-TERM NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
GOVERNMENT (0.1%)
$ 30,000 U.S. T-Bill 5.070% 02/10/00........ $ 29,831
TOTAL SHORT-TERM NOTES (0.1%)
(COST $29,831).................... $ 29,831
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT REPURCHASE AGREEMENTS VALUE
- -------------------------------------------------------------
<C> <S> <C>
FINANCIAL (1.2%)
$ 277,000 Firstar 1.000% 01/03/00 repurchase
price $277,023 collateralized by
GNMA certificates pool #8375 due
02/20/24 (Cost $277,000).......... $ 277,000
-----------
TOTAL REPURCHASE AGREEMENTS (1.2%)
(COST $277,000)................... $ 277,000
-----------
TOTAL HOLDINGS (100.1%)
(COST $18,934,349) (A)............ $23,349,634
-----------
LIABILITIES, NET OF CASH &
RECEIVABLES (-0.1%)............... (25,554)
-----------
TOTAL NET ASSETS (100.0%).......... $23,324,080
===========
</TABLE>
- ---------------
* Non-income producing securities.
ADR (American depository receipt) represents ownership of foreign securities.
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes. See Note 1.
The accompanying notes are an integral part of these financial statements.
48
<PAGE> 139
OHIO NATIONAL FUND, INC.
AGGRESSIVE GROWTH PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
Assets:
Investments in securities at market value
(note 1) (cost $18,934,349)............. $23,349,634
Cash in bank.............................. 341
Receivable for fund shares sold........... 18,730
Dividends and accrued interest
receivable.............................. 2,029
Other..................................... 735
-----------
Total assets............................ 23,371,469
-----------
Liabilities:
Payable for fund shares redeemed.......... 15,374
Payable for investment management services
(note 3)................................ 14,917
Other accrued expenses.................... 17,098
-----------
Total liabilities....................... 47,389
-----------
Net assets at market value.................. $23,324,080
===========
Net assets consist of:
Par value, $1 per share................... $ 1,978,164
Paid-in capital in excess of par value.... 19,479,071
Accumulated net realized loss on
investments (note 1).................... (2,548,440)
Net unrealized appreciation on investments
(note 1)................................ 4,415,285
-----------
Net assets at market value.................. $23,324,080
===========
Shares outstanding (note 4)................. 1,978,164
Net asset value per share................... $ 11.79
===========
</TABLE>
STATEMENT OF OPERATIONS
Year Ended December 31, 1999
<TABLE>
<S> <C>
Investment income:
Interest.................................. $ 27,796
Dividends................................. 119,691
-----------
Total investment income................. 147,487
-----------
Expenses:
Management fees (note 3).................. 186,707
Custodian fees (note 3)................... 4,849
Directors' fees (note 3).................. 1,050
Professional fees......................... 4,791
Accounting and transfer agent fees........ 18,327
Other..................................... 7,455
-----------
Total expenses.......................... 223,179
-----------
Net investment loss..................... $ (75,692)
-----------
Realized and unrealized loss on investments:
Net realized loss from:
Investments............................. $(1,569,512)
Futures contracts....................... (671,692)
Net increase (decrease) in unrealized
appreciation (depreciation) on:
Investments............................. 3,209,009
Futures contracts....................... (33,150)
-----------
Net gain on investments................. 934,655
-----------
Net increase in net assets from
operations............................ $ 858,963
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
49
<PAGE> 140
OHIO NATIONAL FUND, INC.
AGGRESSIVE GROWTH PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEARS ENDED
-------------------------
1999 1998
----------- -----------
<S> <C> <C>
From operations:
Net investment loss....................................... $ (75,692) $ (21,640)
Realized gain (loss) on investments and futures
contracts............................................... (2,241,204) 1,441,462
Unrealized appreciation on investments and futures
contracts............................................... 3,175,859 374,808
----------- -----------
Net increase in net assets from operations............ 858,963 1,794,630
----------- -----------
Dividends and distributions to shareholders:
Dividends paid from net investment income................. 0 0
Capital gains distributions............................... 0 (1,782,997)
----------- -----------
Total dividends and distributions..................... 0 (1,782,997)
----------- -----------
From capital share transactions (note 4):
Received from shares sold................................. 3,879,661 7,546,285
Received from dividends reinvested........................ 0 1,782,997
Paid for shares redeemed.................................. (7,861,693) (2,786,473)
----------- -----------
Increase (decrease) in net assets derived from capital
share transactions................................... (3,982,032) 6,542,809
----------- -----------
Increase (decrease) in net assets.................. (3,123,069) 6,554,442
Net Assets:
Beginning of period....................................... 26,447,149 19,892,707
----------- -----------
End of period............................................. $23,324,080 $26,447,149
=========== ===========
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, APRIL 1,
--------------------------------------- 1995 TO
1999 1998 1997 1996 DEC. 31, 1995
------ ------ ------ ------ -------------
<S> <C> <C> <C> <C> <C>
Per share data:
Net asset value, beginning of period........................ $11.15 $11.09 $10.03 $11.84 $10.00
Income (loss) from investment operations:
Net investment income (loss).............................. (0.03) (0.01) (0.05) 1.64 1.56
Net realized and unrealized gain (loss) on investments.... 0.67 0.88 1.29 (1.59) 1.08
------ ------ ------ ------ ------
Total income from investment operations................. 0.64 0.87 1.24 0.05 2.64
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income...................... 0.00 0.00 (0.14) (1.86) (0.80)
Distributions from net realized capital gains............. 0.00 (0.81) (0.04) 0.00 0.00
------ ------ ------ ------ ------
Total distributions..................................... 0.00 (0.81) (0.18) (1.86) (0.80)
------ ------ ------ ------ ------
Net asset value, end of period.............................. $11.79 $11.15 $11.09 $10.03 $11.84
====== ====== ====== ====== ======
Total return................................................ 5.76% 7.84% 12.53% 0.76% 26.95%(b)
Ratios and supplemental data:
Ratio of expenses to average net assets................... 0.95% 0.94% 0.97% 1.01% 1.02%(a)
Ratio of net investment income (loss) to average net
assets.................................................. (0.32)% (0.09)% (0.40)% 15.81% 18.18%(a)
Portfolio turnover rate..................................... 241% 203% 193% 1987% 1488%
Net assets at end of period (millions)...................... $ 23.3 $ 26.4 $ 19.9 $ 12.0 $ 4.0
</TABLE>
- ---------------
(a) Annualized.
(b) Calculated on an aggregate basis (not annualized).
The accompanying notes are an integral part of these financial statements.
50
<PAGE> 141
OHIO NATIONAL FUND, INC.
CORE GROWTH PORTFOLIO
OBJECTIVE
The objective of the Core Growth Portfolio is to provide long-term capital
appreciation.
PERFORMANCE AS OF DECEMBER 31, 1999
TOTAL RETURN:
<TABLE>
<S> <C>
One-year 104.95%
Since inception (1/3/97) 29.40%
</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 Ohio National Fund Core Growth Portfolio returned 69.57% for the second
half, 1999 and 106.90% for the full year ending December 31, 1999. This compares
with the Russell Mid Cap Growth Index returns of 32.51% and 51.31% respectively
for the same periods.
The key factors that led to the favorable results in the second half were
evident throughout the year. First, growth stocks significantly outperformed
value stocks across all capitalizations. This is evidenced by the full year,
1999 return of the Russell Mid Cap Growth Index of 51.31% vs. -0.10% for the
Russell Mid Cap Value Index. Second, we were overweighted in the technology
sector when technology had, by far, the best returns in the market. And third,
the individual stocks in each major sector of the Fund outperformed the stocks
held in the benchmark. This was especially true in the technology sector where
the Fund's technology holdings significantly outperformed those technology
stocks represented in the Russell Mid Cap Growth Index. In addition, the Fund's
holdings in the Consumer, Health Care, Industrial and Services sectors well
exceeded those of the benchmark.
Throughout all of 1999, consumers continued to spend, the manufacturing sector
continued to grow, corporate profits remained strong, jobs were plentiful and
inflation remained low. During the year, foreign economies began to recover. By
the end of the year, the strength and length of the bull market has surpassed
most expectations. And now, computer-related Y2K worries appear to be over. Few
economists are predicting the economy will slow significantly in 2000. During
the second half of 1999, the Fed raised interest rates three times to absorb the
additional liquidity it injected into the market in 1998. While many predicted
that the third increase would be disruptive, the stock market barely missed a
beat. The question for the new year is whether the Fed will raise interest rates
beyond reversing what it had done in 1998, with the intention of slowing the
economy. Some economists are already predicting that the Fed will raise rates
one of more time in early 2000. In response, worried investors sent the market
down sharply in early January believing that Alan Greenspan would indeed take
the millennium punchbowl away.
Although equity mutual funds overall experienced net inflows for 1999, small-cap
funds actually experienced net outflows for the year. And according to L. Keith
Mullins of Salomon Smith Barney, he predicts a "significant rotation by
institutional capital" into small- and mid-cap stocks. If Institutional
investors begin to rotate more assets out of large-caps and retail investors
continue their shift begun at the end of last year, we believe small- and
mid-cap stocks could enjoy a second year of strong performance.
CHANGE IN VALUE OF $10,000 INVESTMENT
<TABLE>
<CAPTION>
CORE GROWTH PORTFOLIO (COMMENCED
OPERATIONS JANUARY 3, 1997) RUSSELL 3000 INDEX
-------------------------------- ------------------
<S> <C> <C>
'97' 9691.92 13169.10
11069.10 15145.80
'98' 10546.70 16312.00
12823.70 18165.00
'99' 21615.60 21959.70
</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, 1999
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Infospace.com 2.86
2. VERISIGN, INC. 2.85
3. Triquint Semiconductor, Inc. 2.76
4. Medimmune, Inc. 2.69
5. JDS Uniphase 2.67
6. MicroStrategy Inc. 2.60
7. Emulex Corp 2.57
8. Lycos Inc. 2.30
9. GETTY IMAGES, INC. 2.30
10. Lamar Advertising 2.27
</TABLE>
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Computer and Related 17.58
2. Retail 9.04
3. Medical and Related 8.09
4. Internet Service Providers 8.05
5. Internet Software 7.94
</TABLE>
51
<PAGE> 142
OHIO NATIONAL FUND, INC.
CORE GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
ADVERTISING (6.6%)
14,800 *Getty Images Inc. ................... $ 723,350
11,800 *Lamar Advertising Co. ............... 714,638
6,500 Omnicom Group ........................ 650,000
-----------
2,087,988
-----------
BROADCAST RADIO & TV (2.1%)
18,750 *Infinity Broadcasting Corp. ......... 678,516
-----------
COMMUNICATIONS (6.8%)
4,300 *Ciena Corp. ......................... 247,250
7,300 *Commscope Inc. ...................... 294,281
6,600 *Exodus Communications Inc. .......... 586,163
5,200 *JDS Uniphase Corp. .................. 838,825
500 *MCK Communications Inc. ............. 11,250
3,000 *Powerwave Technologies Inc. ......... 175,125
-----------
2,152,894
-----------
COMPUTER & RELATED (9.9%)
4,600 *Bea Systems.......................... 321,713
7,200 *Emulex Corp. ........................ 810,000
3,400 *Redback Networks..................... 603,500
4,700 *Verisign Ubc......................... 896,525
3,300 *Veritas Software Corp. .............. 472,312
-----------
3,104,050
-----------
COMPUTER SOFTWARE (6.0%)
2,000 *Active Software Inc. ................ 184,000
1,300 *Broadbase Software................... 146,250
500 *Intertrust Technologies.............. 58,812
4,100 *Informatica Corp. ................... 436,138
3,900 *MicroStrategy Inc. .................. 819,000
1,200 *VA Linux Systems Inc. ............... 247,950
-----------
1,892,150
-----------
CONSULTING SERVICES (1.8%)
13,100 *USWeb Corp. ......................... 582,131
-----------
CONSUMER PRODUCTS (1.2%)
5,200 *Gemstar Intl. Group.................. 370,500
-----------
ELECTRONIC COMPONENTS/SEMICONDUCTORS (8.3%)
11,000 *Atmel Electronic Co. ................ 325,188
9,300 *Cypress Semiconductor Corp. ......... 301,087
6,800 *Fairchild Semiconductor Intl......... 202,300
5,400 *Integrated Device Technology Inc. ... 156,600
3,700 *LSI Logic Corp. Designs.............. 249,750
3,500 *Microchip Technologies............... 239,531
1,600 *QLogic Corp. ........................ 255,800
7,800 *Triqunit Semiconductor............... 867,750
-----------
2,598,006
-----------
ENTERTAINMENT & LEISURE (1.0%)
10,400 *Premier Parks........................ 300,300
-----------
FIBER OPTICS (1.9%)
3,100 *C-Cor.Net Corp. ..................... 237,538
800 *Finisar Corp. ....................... 71,900
900 *Sycamore Networks Inc. .............. 277,200
-----------
586,638
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
FINANCIAL SERVICES (1.8%)
10,200 *Ameritrade Holdings.................. $ 221,213
13,500 *E Trade Group........................ 352,687
-----------
573,900
-----------
FOOD & RELATED (0.5%)
3,200 *Whole Food Market.................... 148,400
-----------
INTERNET CONTENT (1.2%)
10,900 *Rare Medium Group.................... 371,963
-----------
INTERNET SERVICE PROVIDER (8.1%)
3,600 *Ariba Inc. .......................... 638,550
4,200 *Infospace.com........................ 898,800
9,100 *Lycos Inc. .......................... 724,019
5,900 *Verio Inc. .......................... 272,506
-----------
2,533,875
-----------
INTERNET SOFTWARE (7.8%)
900 *Akamai Technologies.................. 294,863
3,900 *Art Tech Group....................... 507,000
2,200 *Broadvision Inc. .................... 374,137
2,100 *Commerce One Inc. ................... 412,650
2,000 *F5 Networks Inc. .................... 228,000
2,600 *Viant Corp. ......................... 257,400
2,600 *Vignette Corp. ...................... 423,800
-----------
2,497,850
-----------
MEDICAL & RELATED (6.5%)
10,700 *Allscripts Inc. ..................... 470,800
4,600 *Celgene Corp. ....................... 322,000
9,200 *Medics Pharmaceutical................ 391,575
5,100 *Medimmune Inc. ...................... 845,963
-----------
2,030,338
-----------
NETWORK PRODUCTS (1.1%)
1,000 *Juniper Networks Inc. ............... 340,000
-----------
OIL, ENERGY & NATURAL GAS (3.3%)
11,700 *Cooper Cameron Corp. ................ 572,569
9,500 Diamond Offshore Drilling............. 290,344
9,600 EOG Resources Inc. ................... 168,600
-----------
1,031,513
-----------
RENTAL & LEASING (0.3%)
5,800 *United Rentals Inc. ................. 99,325
-----------
RETAIL (9.0%)
14,800 *American Eagle Outfitters............ 666,000
3,300.. Circuit City Stores................... 148,706
7,400 *Insight Enterprises.................. 300,625
7,800 Tandy Corp. .......................... 383,663
7,200 Tiffany & Co. ........................ 642,600
14,500 *Zale Corp. .......................... 701,437
-----------
2,843,031
-----------
</TABLE>
(continued)
52
<PAGE> 143
OHIO NATIONAL FUND, INC.
CORE GROWTH PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
SCIENTIFIC & TECHNICAL INSTRUMENTS (4.7%)
4,200 *Cytyc Corp. ......................... $ 256,463
17,100 *Mettler-Toledo Intl.................. 653,006
2,900 PE Corp-PE Biosystem.................. 348,906
5,000 PerkinElmer Inc. ..................... 208,437
-----------
1,466,812
-----------
TELECOMMUNICATIONS & CELLULAR (2.8%)
1,500 *Ditech Communications Corp. ......... 140,250
6,900 *MRV Communications................... 433,837
2,900 *Univision Communications-A........... 296,342
-----------
870,429
-----------
TOTAL U.S. COMMON STOCK (92.7%)
(COST $19,666,025)................... $29,160,609
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES FOREIGN COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
ISRAEL (3.4%)
COMPUTER & RELATED (1.7%)
2,700 *Check Point Software................ $ 536,626
MEDICAL & RELATED (1.7%)
7,200 Teva Pharmaceutical.................. 516,150
-----------
TOTAL ISRAEL......................... 1,052,776
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES FOREIGN COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
SINGAPORE (1.0%)
ELECTRONIC COMPONENTS/SEMICONDUCTOR (1.0%)
7,000 *Flextronics Intl. Ltd. ............. $ 322,000
-----------
TOTAL FOREIGN COMMON STOCK (4.4%)
(COST $758,992)..................... $ 1,374,776
-----------
TOTAL COMMON STOCK (97.1%)
(COST $20,425,017).................. $30,535,385
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS VALUE
- -------------------------------------------------------------
<C> <S> <C>
FINANCIAL SERVICES (2.1%)
$657,000 Firstar 1.000% 01/03/00 repurchase
price $657,054 collateralized by
GNMA certificates pool #8375 due
02/20/24 (Cost $657,000)............ $ 657,000
-----------
TOTAL REPURCHASE AGREEMENTS (2.1%)
(COST $657,000)..................... $ 657,000
-----------
TOTAL HOLDINGS (99.2%)
(COST $21,082,017) (a).............. $31,192,385
-----------
CASH & RECEIVABLES, NET OF
LIABILITIES (0.8%).................. 270,087
-----------
TOTAL NET ASSETS (100.0%)............ $31,462,472
===========
</TABLE>
- ---------------
* Non-income producing securities.
(a) Represents cost for financial reporting purposes and differs from cost basis
for federal income tax purposes. See Note 1.
The accompanying notes are an integral part of these financial statements.
53
<PAGE> 144
OHIO NATIONAL FUND, INC.
CORE GROWTH PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
Assets:
Investments in securities at market value
(note 1) (cost $21,082,017)............. $31,192,385
Cash in bank.............................. 348
Receivable for securities sold............ 759,581
Receivable for fund shares sold........... 55,646
Dividends and accrued interest
receivable.............................. 2,342
-----------
Total assets............................ 32,010,302
-----------
Liabilities:
Payable for securities purchased.......... 484,703
Payable for fund shares redeemed.......... 33,987
Payable for investment management services
(note 3)................................ 22,403
Other accrued expenses.................... 6,737
-----------
Total liabilities....................... 547,830
-----------
Net assets at market value.................. $31,462,472
===========
Net assets consist of:
Par value, $1 per share................... $ 1,853,161
Paid-in capital in excess of par value.... 18,807,483
Accumulated net realized gain on
investments (note 1).................... 691,460
Net unrealized appreciation on investments
(note 1)................................ 10,110,368
-----------
Net assets at market value.................. $31,462,472
===========
Shares outstanding (note 4)................. 1,853,161
Net asset value per share................... $ 16.98
===========
</TABLE>
STATEMENT OF OPERATIONS
Year Ended December 31, 1999
<TABLE>
<S> <C>
Investment income:
Interest.................................. $ 39,508
Dividends................................. 18,845
-----------
Total investment income................. 58,353
-----------
Expenses:
Management fees (note 3).................. 180,739
Custodian fees (note 3)................... 4,849
Directors' fees (note 3).................. 350
Professional fees......................... 1,598
Accounting and transfer agent fees........ 11,981
Other..................................... 2,456
-----------
Total expenses.......................... 201,973
-----------
Net investment loss..................... $ (143,620)
-----------
Realized and unrealized gain on investments:
Net realized gain from investments........ $ 8,876,766
Net increase in unrealized appreciation on
investments............................. 7,472,326
-----------
Net gain on investments................. 16,349,092
-----------
Net increase in net assets from
operations............................ $16,205,472
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
54
<PAGE> 145
OHIO NATIONAL FUND, INC.
CORE GROWTH PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEARS ENDED
--------------------------
1999 1998
----------- -----------
<S> <C> <C>
From operations:
Net investment loss....................................... $ (143,620) $ (62,638)
Realized gain (loss) on investments....................... 8,876,766 (1,185,242)
Unrealized appreciation on investments.................... 7,472,326 2,239,047
----------- -----------
Net increase in net assets from operations............ 16,205,472 991,167
----------- -----------
Dividends and distributions to shareholders:
Capital gain distributions................................ (6,552,496) 0
----------- -----------
From capital share transactions (note 4):
Received from shares sold................................. 9,907,186 4,380,111
Received from dividends reinvested........................ 6,552,496 0
Paid for shares redeemed.................................. (6,431,773) (3,133,724)
----------- -----------
Increase in net assets derived from capital share
transactions......................................... 10,027,909 1,246,387
----------- -----------
Increase in net assets............................. 19,680,885 2,237,554
Net Assets:
Beginning of period....................................... 11,781,587 9,544,033
----------- -----------
End of period............................................. $31,462,472 $11,781,587
=========== ===========
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Per share data:
Net asset value, beginning of period........................ $10.54 $ 9.68 $10.00
Income (loss) from investment operations:
Net investment loss....................................... (0.10) (0.06) (0.02)
Net realized and unrealized gain (loss) on investments.... 11.05 0.92 (0.30)
------ ------ ------
Total income (loss) from investment operations.......... 10.95 0.86 (0.32)
------ ------ ------
Less distributions:
Distributions from net realized capital gains............. (4.51) 0.00 0.00
------ ------ ------
Net asset value, end of period.............................. $16.98 $10.54 $ 9.68
====== ====== ======
Total return................................................ 104.95% 8.82% 3.08%
Ratios and supplemental data:
Ratio of expenses to average net assets..................... 1.06% 1.13% 1.11%
Ratio of net investment loss to average net assets........ (0.75)% (0.62)% (0.18)%
Portfolio turnover rate..................................... 264% 134% 65%
Net assets at end of period (millions)...................... $ 31.5 $ 11.8 $ 9.5
</TABLE>
The accompanying notes are an integral part of these financial statements.
55
<PAGE> 146
OHIO NATIONAL FUND, INC.
GROWTH & INCOME PORTFOLIO
OBJECTIVE
The Growth & Income Portfolio's investment objective is long-term total return.
PERFORMANCE AS OF DECEMBER 31, 1999
TOTAL RETURN:
<TABLE>
<S> <C>
One-year 62.25%
Three-year 33.38%
Since inception (1/3/97) 33.50%
</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 Ohio National Growth & Income portfolio finished the fourth quarter with
strong performance increasing 40.45% against a 17.23% return in the benchmark
Russell Midcap index. This fourth quarter return helped propel the portfolio to
a calendar year return of 62.25% against the Russell Midcap index return of
18.23%.
Investors began to show real interest in midcap securities last year,
particularly late in the year. In the fourth quarter the Russell Midcap index
outperformed the S&P 500, which is dominated by large cap stocks.
While most market indices all produced positive performance in 1999, the indices
somewhat mask the performance of the broad market. According to Jarrett
Investment Research, of 4,900 actively traded stocks, only 49% had stock prices
higher at the close of the calendar year 1999 than they did 12 months earlier on
December 31, 1998. So while the indices increased, more than half the stocks in
this study lay flat or declined during the year. The stocks that increased went
up on average 135%, while those stocks that declined dropped an average of 31%.
It was a year of modest breadth, where the strong stocks got stronger and the
rest of the market went ignored.
We maintained our yearlong overweight to technology through the fourth quarter,
which contributed to our positive returns. We achieved positive returns from a
broad range of technology stocks in the semiconductor, software, and Internet
sectors.
We also maintained significant weighting to telecommunications companies, many
of which are categorized as utilities, in the Russell index. We see great
opportunity in this area fueled by the spread of the Internet and wireless
communications. Primus Telecommunications is a facilities based global
telecommunications company offering long distance, Internet, and data access.
The market viewed Primus largely as a wholesale international long distance
provider, and as such, the company maintained a low P/E multiple, typical of
these types of companies. However, we came to understand that Primus was in the
process of transitioning its business toward providing full service voice and
data services to customers on a global basis. Primus has deployed a global
network that will enable it to migrate its traffic onto its own network. We
believe this will result in a lower cost structure leading to higher margins,
more predictable revenue growth, and ultimately, a higher multiple for the
stock.
For much of the year, we have maintained an overweighed allocation to the energy
service sector. Our results from this investment have been mixed this year, and
dampened our returns in the fourth quarter. However, we continue to hold these
stocks and believe they will provide long strong returns to the portfolio long
term.
Looking ahead we are cautiously optimistic about the next year. We expect the
markets to remain volatile, particularly if investors continue to focus on the
small and midcap sectors. With this in mind, we want to remind our clients that
we seek upside returns but keep a close eye on risk management as well.
CHANGE IN VALUE OF $10,000 INVESTMENT
<TABLE>
<CAPTION>
GROWTH & INCOME PORTFOLIO RUSSELL 2000 INDEX
(COMMENCED OPERATIONS JANUARY 3, ------------------
1997)
--------------------------------
<S> <C> <C>
'97' 13657.50 12226.70
14452.30 12871.00
'98' 14625.80 11953.30
17752.80 13062.60
'99' 23730.10 14494.30
</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, 1999
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Primus Telecommunica 3.87
2. Administaff Inc 2.21
3. Valuevision Intl Inc 2.15
4. Startec Global 2.05
5. Montana Power Co 1.74
6. United Global Com 1.73
7. Viatel Inc 1.59
8. Verify Inc 1.58
9. Symantec Corp 1.56
10. Network Solutions 1.54
</TABLE>
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
1. Computer and Related 16.40
2. Communications 12.99
3. Oil, Energy, and Natural Gas 7.78
4. Broadcast Radio & TV 5.86
5. Retail 5.63
</TABLE>
56
<PAGE> 147
OHIO NATIONAL FUND, INC.
GROWTH & INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
ADVERTISING (1.0%)
23,500 *Getty Images Inc. ............... $ 1,148,562
------------
BANKING (0.9%)
22,500 *Knight/Trimark Group Inc. ....... 1,035,000
------------
BROADCAST RADIO & TV (5.9%)
23,500 *AT&T Corp. Liberty Media Group... 1,333,625
24,000 *CBS Corp. ....................... 1,534,500
30,000 *Infinity Broadcasting Corp. ..... 1,085,625
27,700 *United Global Com Inc. CL A...... 1,956,312
7,000 *Univision Communications CL A.... 715,312
------------
6,625,374
------------
BUILDING & CONSTRUCTION (2.0%)
23,000 Florida Rock Industries........... 792,063
30,000 *Maverick Tube Corp. ............. 740,625
16,000 Texas Industries.................. 681,000
------------
2,213,688
------------
BUSINESS SERVICES (3.4%)
82,500 *Administaff Inc. ................ 2,495,625
40,000 *Teletech Holdings Inc. .......... 1,348,125
------------
3,843,750
------------
CABLE TELEVISION (0.2%)
10,000 *Lodgenet Entertainment Corp. .... 248,750
------------
CHEMICALS (1.2%)
223,600 *Seminis Inc. .................... 1,411,475
------------
COMMUNICATIONS (13.0%)
11,500 *America Online Inc. ............. 867,531
35,000 *American Tower Corp. ............ 1,069,688
40,000 *BroadWing Inc. .................. 1,475,000
40,000 *Dset Corp. ...................... 1,495,000
114,500 *Primus Telecom. Group Inc. ...... 4,379,625
15,000 *RF Micro Devices Inc. ........... 1,026,562
2,500 *Sprint Corp. PCS Group........... 256,250
108,300 *Startec Global Communications
Corp. ........................... 2,314,913
33,500 *Viatel Inc. ..................... 1,796,437
------------
14,681,006
------------
COMPUTER & RELATED (5.8%)
10,000 *Checkfree Holdings Corp. ........ 1,045,000
8,000 *Network Solutions Inc. CL A...... 1,740,500
8,000 *RSA Security Inc. ............... 620,000
20,000 *Seagate Technology Inc. ......... 931,250
30,000 *Symantec Corp. .................. 1,758,750
25,000 *Ziff-Davis Inc. - ZDNet.......... 525,000
------------
6,620,500
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
COMPUTER SOFTWARE (12.9%)
8,500 *Broadbase Software Inc. ......... $ 956,250
25,000 *Commtouch Software Ltd. ......... 1,214,063
30,000 *Concentric Network Corp. ........ 924,375
25,000 *Hyperion Solutions Corp. ........ 1,087,500
70,000 *Informix Corp. .................. 796,250
20,000 *Intuit Inc. ..................... 1,198,750
20,000 *JD Edwards & Co. ................ 597,500
24,000 *Legato Systems Inc. ............. 1,651,500
15,000 *Pinnacle Systems Inc. ........... 610,313
17,000 *Project Software & Dev. Inc. .... 943,500
30,000 *Sterling Software................ 945,000
14,500 *TSI Intl. Software Ltd. ......... 821,062
42,000 *Verity Inc. ..................... 1,787,625
27,500 *Wind River Systems............... 1,010,625
------------
14,544,313
------------
ELECTRONIC COMPONENTS/SEMICONDUCTORS (6.1%)
8,500 *Applied Micro Circuits Corp. .... 1,081,625
28,000 *Atmel Corp. ..................... 827,750
9,000 *LSI Logic Corp................... 607,500
12,500 *Lam Research Corp. .............. 1,394,531
23,100 *Sawtek Inc. ..................... 1,537,594
20,000 *Transwitch Corp. ................ 1,451,250
------------
6,900,250
------------
FINANCIAL SERVICES (4.4%)
6,000 American Express Co. ............. 997,500
25,000 A.G. Edwards, Inc. ............... 801,563
40,000 *First Health Group Corp. ........ 1,075,000
65,000 *Internet Capital Group Inc. ..... 850,000
14,000 Lehman Brothers Holdings Inc. .... 1,185,625
------------
4,909,688
------------
INDUSTRIAL SERVICES (0.4%)
11,300 *Cognex Corp. .................... 440,700
------------
INSURANCE SERVICES (0.8%)
17,500 *United Healthcare Corp. ......... 929,688
------------
INTERNET SOFTWARE (5.4%)
10,000 *24/7 Media Inc. ................. 562,500
14,000 *CNET Inc. ....................... 794,500
19,100 *Covad Communications Group
Inc. ............................ 1,068,406
8,500 *E-Stamp Corp. ................... 189,125
20,500 *E-Gain Communications Corp. ..... 773,875
20,000 *S1 Corp. ........................ 1,562,500
30,000 *StarMedia Network Inc. .......... 1,201,875
------------
6,152,781
------------
MEDIA & PUBLISHING (0.9%)
17,200 Knight Ridder Inc. ............... $ 1,023,400
------------
</TABLE>
(continued)
57
<PAGE> 148
OHIO NATIONAL FUND, INC.
GROWTH & INCOME PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
MEDICAL & RELATED (4.3%)
22,500 *Amgen Inc. ...................... $ 1,351,406
87,450 *Endocardial Solutions Inc. ...... 765,188
40,000 *Ivax Corp. ...................... 1,030,000
10,000 *Medimmune Inc. .................. 1,658,750
------------
4,805,344
------------
MOTION PICTURES (1.0%)
46,000 *Metro-Goldwyn-Mayer.............. 1,083,875
------------
OIL, ENERGY & NATURAL GAS (7.6%)
20,000 *BJ Services Co. ................. 836,250
300,000 *Bonus Resource Service........... 485,763
22,500 *Cooper Cameron Corp. ............ 1,101,094
32,000 Devon Energy Corp. ............... 1,052,000
75,900 EOG Resources Corp. .............. 1,332,994
65,000 Ensco International Inc. ......... 1,486,875
40,500 *Marine Drilling Cos. Inc. ....... 908,719
12,500 Murphy Oil Corp. ................. 717,187
20,000 Unocal Corp. ..................... 671,250
------------
8,592,132
------------
RETAIL (5.6%)
35,000 *Abercrombie & Fitch Co. CL A..... 934,063
15,000 *Federated Department Stores...... 758,437
25,000 *Shop At Home Inc. ............... 248,438
39,000 *Stamps.com Inc. ................. 1,623,375
42,500 *Valuevision Intl Inc. CL A....... 2,435,781
40,000 *VitaminShoppe.com................ 365,000
------------
6,365,094
------------
SCIENTIFIC & TECHNICAL INSTRUMENTS (2.8%)
20,000 *Mettler-Toledo Intl. ............ 763,750
25,000 PerkinElmer Inc. ................. 1,042,188
35,000 Tektronix Inc. ................... 1,360,625
------------
3,166,563
------------
SECURITY SYSTEMS & SERVICES (1.0%)
65,000 *Sensormatic Electronics Corp. ... 1,133,438
------------
TELECOMMUNICATIONS (3.5%)
12,500 *Aware Inc. ...................... 454,687
30,000 *Digital Microwave Corp. ......... 703,125
8,000 *General Motors CL H.............. 768,000
12,500 *Level 3 Communications Inc. ..... 1,023,437
22,500 *Qwest Communications Intl.
Inc. ............................ 967,500
------------
3,916,749
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
UTILITIES (1.7%)
54,500 Montana Power Co. ................ $ 1,965,406
------------
TOTAL COMMON STOCK (91.8%)
(COST $78,206,755)............... $103,757,526
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES PREFERRED STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
MEDICAL & RELATED (1.3%)
15,000 Cephalon Inc. 7.25% Conv. (144A).... $ 1,518,750
------------
TRANSPORTATION & EQUIPMENT (0.4%)
11,000 TWA 8% Ser.A Conv. ................. 115,500
1,500 Trans World Airlines 8% CV (144A)... 15,750
15,000 Trans World Airlines 4.625% CV
(144A)............................. 300,000
------------
431,250
------------
TOTAL PREFERRED STOCK (1.7%)
(COST $1,788,576).................. $ 1,950,000
------------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT CONVERTIBLE DEBENTURES VALUE
- -------------------------------------------------------------
<C> <S> <C>
COMPUTER & RELATED (0.7%)
$1,000,000 Silicon Graphics Inc. 5.250%
09/01/04......................... $ 751,250
------------
ELECTRONIC COMPONENTS/SEMICONDUCTORS (0.6%)
1,000,000 Check Point Systems Inc. 5.250%
11/01/05......................... 706,250
------------
OIL, ENERGY & NATURAL GAS (0.2%)
250,000 Offshore Logistics Inc. 6.000%
12/15/03......................... 203,750
------------
TOTAL CONVERTIBLE DEBENTURES
(1.5%)
(COST $1,625,469)................ $ 1,661,250
------------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS VALUE
- -------------------------------------------------------------
<C> <S> <C>
FINANCIAL SERVICES (3.1%)
$3,501,000 Firstar 1.000% 01/03/00 repurchase
price $3,501,288 collateralized
by GNMA certificates pool #8375
due 02/20/24 (Cost $3,501,000)... $ 3,501,000
------------
TOTAL REPURCHASE AGREEMENTS (3.1%)
(COST $3,501,000)................ $ 3,501,000
------------
TOTAL HOLDINGS (98.1%)
(COST $85,121,800) (A)........... $110,869,776
------------
CASH & RECEIVABLES, NET OF
LIABILITIES (1.9%)............... 2,178,649
------------
TOTAL NET ASSETS (100.0%)......... $113,048,425
============
</TABLE>
- ---------------
* Non-income producing securities.
(a) Represents cost for financial reporting purposes and differs from cost for
federal income tax purposes. See Note 1.
(144A) 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 buyers. At the period end, the value
of these securities amounted to $1,834,500 or 1.4% of net assets. These
securities were deemed liquid pursuant to procedures approved by the
Board of Directors.
The accompanying notes are an integral part of these financial statements.
58
<PAGE> 149
OHIO NATIONAL FUND, INC.
GROWTH & INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
Assets:
Investments in securities at market value (note 1)
(cost $85,121,800)..................... $110,869,776
Cash in bank............................. 456
Receivable for securities sold........... 6,518,550
Receivable for fund shares sold.......... 217,595
Dividends and accrued interest
receivable............................. 30,765
Other.................................... 294,043
------------
Total assets........................... 117,931,185
------------
Liabilities:
Payable for securities purchased......... 4,780,155
Payable for fund shares redeemed......... 11,003
Payable for investment management
services (note 3)...................... 74,159
Other accrued expenses................... 17,443
------------
Total liabilities...................... 4,882,760
------------
Net assets at market value................. $113,048,425
============
Net assets consist of:
Par value, $1 per share.................. $ 6,020,558
Paid-in capital in excess of par value... 79,596,666
Accumulated net realized income on
investments (note 1)................... 1,683,225
Net unrealized appreciation on
investments (note 1)................... 25,747,976
------------
Net assets at market value................. $113,048,425
============
Shares outstanding (note 4)................ 6,020,558
Net asset value per share.................. $ 18.78
============
</TABLE>
STATEMENT OF OPERATIONS
Year Ended December 31, 1999
<TABLE>
<S> <C>
Investment income:
Interest.................................. $ 319,506
Dividends................................. 471,848
-----------
Total investment income................. 791,354
-----------
Expenses:
Management fees (note 3).................. 607,062
Custodian fees (note 3)................... 12,070
Directors' fees (note 3).................. 2,000
Professional fees......................... 6,393
Accounting and transfer agent fees........ 45,249
Other..................................... 13,831
-----------
Total expenses.......................... 686,605
-----------
Net investment income................... $ 104,749
-----------
Realized and unrealized gain on investments:
Net realized gain from investments........ $20,934,796
Net increase in unrealized appreciation on
investments............................. 19,500,116
-----------
Net gain on investments................. 40,434,912
-----------
Net increase in net assets from
operations............................ $40,539,661
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
59
<PAGE> 150
OHIO NATIONAL FUND, INC.
GROWTH & INCOME PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEARS ENDED
--------------------------
1999 1998
------------ -----------
<S> <C> <C>
From operations:
Net investment income..................................... $ 104,749 $ 410,653
Realized gain (loss) on investments....................... 20,934,796 (3,005,094)
Unrealized appreciation on investments.................... 19,500,116 5,132,366
------------ -----------
Net increase in net assets from operations............ 40,539,661 2,537,925
------------ -----------
Dividends and distributions to shareholders:
Dividends paid from net investment income................. (104,749) (411,458)
Capital gains distributions............................... (16,246,477) 0
Return of capital......................................... (53,900) 0
------------ -----------
Total dividends and distributions..................... (16,405,126) (411,458)
------------ -----------
From capital share transactions (note 4):
Received from shares sold................................. 29,440,102 35,505,173
Received from dividends reinvested........................ 16,405,126 411,458
Paid for shares redeemed.................................. (8,304,844) (5,375,872)
------------ -----------
Increase in net assets derived from capital share
transactions......................................... 37,540,384 30,540,759
------------ -----------
Increase in net assets............................. 61,674,919 32,667,226
Net Assets:
Beginning of period....................................... 51,373,506 18,706,280
------------ -----------
End of period............................................. $113,048,425 $51,373,506
============ ===========
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Per share data:
Net asset value, beginning of period........................ $13.63 $12.85 $10.00
Income from investment operations:
Net investment income..................................... 0.02 0.14 0.11
Net realized and unrealized gain on investments........... 8.33 0.77 3.52
------ ------ ------
Total income from investment operations................. 8.35 0.91 3.63
------ ------ ------
Less distributions:
Dividends from net investment income...................... (0.02) (0.13) (0.11)
Distributions from net realized capital gains............. (3.17) 0.00 (0.67)
Return of capital......................................... (0.01) 0.00 0.00
------ ------ ------
Total distributions..................................... (3.20) (0.13) (0.78)
------ ------ ------
Net asset value, end of period.............................. $18.78 $13.63 $12.85
====== ====== ======
Total return................................................ 62.25% 7.09% 36.58%
Ratios and supplemental data:
Ratio of expenses to average net assets................... 0.95% 0.97% 0.95%
Ratio of net investment income to average net assets...... 0.15% 1.09% 1.04%
Portfolio turnover rate..................................... 417% 286% 185%
Net assets at end of period (millions)...................... $113.0 $ 51.4 $ 18.7
</TABLE>
The accompanying notes are an integral part of these financial statements.
60
<PAGE> 151
OHIO NATIONAL FUND, INC.
S&P 500 INDEX PORTFOLIO
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, 1999
<TABLE>
<S> <C>
TOTAL RETURN:
One-year 25.63%
Three-year 29.10%
Since inception (1/3/97) 29.20%
</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 Ohio National S&P 500 Index Fund completed its third year of existence with
its third straight year of outstanding performance. During a volatile, but yet
good year for the S&P 500 Index, the Ohio National Index Fund returned -- after
fund expenses -- 25.63%, or over 4.5% more than the actual S&P 500 Index. The
actual Index returned, with dividends reinvested, 21.04% for 1999.
Although another outstanding year for the S&P 500 Index, the Nasdaq 100 index
and the Dow Jones Industrial Average both outperformed the S&P 500 for 1999. The
Nasdaq had another outstanding year, led by technology stocks, returning 102%
for 1999. The DJIA had its best year out of the past 5 years, with a return of
27%. The 3 year average returns for the three indexes are:
<TABLE>
<S> <C>
12/31/96 THROUGH 12/31/99 AVERAGE ANNUAL
RETURNS
S&P 500 Index 27.6%
Dow Jones Industrial Average 23.4%
Nasdaq 100 65.4%
</TABLE>
Although less volatile, and therefore less risky than the 30 stocks that make up
the Dow Jones Industrial Average, the S&P 500 index has returned more than the
Dow in each of the past three years. The Nasdaq has had a remarkable run up in
value over that same time period, which resulted in technology and internet
stocks currently near record high valuations.
We are looking forward to yet another year of earnings growth for the year 2000.
With Y2K scares out of the way, earnings growth remaining strong around 20% for
US companies, Fed Funds interest rate hikes nearing an end, inflation remaining
mild and overseas economies recovering, I expect to report another year of
double digit stock index returns to you in approximately 12 months.
CHANGE IN VALUE OF $10,000 INVESTMENT
<TABLE>
<CAPTION>
S&P INDEX PORTFOLIO (COMMENCED
OPERATIONS JANUARY 3, 1997) S&P 500 INDEX
------------------------------ -------------
<S> <C> <C>
10000.00 10000.00
'97' 12058.00 12060.00
13174.60 13336.00
'98' 15524.90 15697.70
17127.10 17146.70
19247.40 19269.40
'99' 21516.70 20755.10
</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, 1999
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Cisco Systems, Inc. 3.96
2. Microsoft Corporation 2.53
3. Oracle Corporation 2.12
4. General Electric Co 1.93
5. SBC Communications 1.91
6. American Express Co 1.90
7. Intel Corp 1.79
8. MediaOne Group Inc 1.62
9. Dell Computer Corp 1.48
10. Merck & Co Inc 1.41
</TABLE>
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Computer & Related 12.75
2. Electrical Equipment 5.07
3. Communications 4.19
4. Consumer Products 4.02
5. Financial Services 3.63
</TABLE>
61
<PAGE> 152
OHIO NATIONAL FUND, INC.
S&P 500 INDEX PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
AEROSPACE (0.9%)
28,000 Boeing Co. ....................... $ 1,163,750
14,700 Honeywell Intl. Inc. ............. 848,006
------------
2,011,756
------------
AUTOMOTIVE & RELATED (0.5%)
20,300 Ford Motor Co. ................... 1,084,781
------------
BANKING (2.3%)
40,000 Bank One Corp. ................... 1,282,500
29,500 Chase Manhattan Corp. ............ 2,291,781
19,100 Fifth Third Bancorp............... 1,401,462
------------
4,975,743
------------
CABLE TELEVISION (1.6%)
45,700 MediaOne Group Inc. .............. 3,510,331
------------
CHEMICALS (0.5%)
32,700 Monsanto Co. ..................... 1,164,937
------------
COMMUNICATIONS (4.2%)
36,000 AT&T Corp. ....................... 1,827,000
18,750 MCI Worldcom Inc. ................ 994,922
12,000 Qualcomm Inc. .................... 2,115,000
85,000 SBC Communications Inc. .......... 4,143,750
------------
9,080,672
------------
COMPUTER & RELATED (7.6%)
80,000 Cisco Systems Inc. ............... 8,570,000
63,000 Dell Computer Corp. .............. 3,213,000
22,100 Hewlett-Packard Co. .............. 2,518,019
19,000 Intl. Business Machines........... 2,052,000
------------
16,353,019
------------
COMPUTER SOFTWARE (5.2%)
17,000 Computer Associates............... 1,188,937
47,000 Microsoft Corp. .................. 5,487,250
41,000 Oracle Corp. ..................... 4,594,562
------------
11,270,749
------------
CONSUMER PRODUCTS (4.0%)
31,000 Edison International.............. 811,812
12,000 Gillette Co. ..................... 494,250
28,000 Johnson & Johnson................. 2,607,500
24,000 Philip Morris Cos. Inc. .......... 556,500
20,000 Procter & Gamble Co. ............. 2,191,250
25,000 Warner-Lambert Co. ............... 2,048,438
------------
8,709,750
------------
DRUGS (2.5%)
21,000 Amgen Inc. ....................... 1,261,313
45,500 Merck & Co. Inc. ................. 3,051,344
28,000 Schering-Plough................... 1,181,250
------------
5,493,907
------------
ELECTRICAL EQUIPMENT (2.5%)
27,000 General Electric Co. ............. 4,178,250
30,500 Thomas & Betts Corp. ............. 972,188
14,000 Xerox Corp. ...................... 317,625
------------
5,468,063
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
ELECTRONIC COMPONENTS/SEMICONDUCTOR (2.6%)
13,000 Applied Materials................. $ 1,646,938
47,200 Intel Corp. ...................... 3,885,150
------------
5,532,088
------------
ENTERTAINMENT & LEISURE (0.9%)
65,000 Walt Disney Co. .................. 1,901,250
------------
FINANCIAL SERVICES (3.6%)
24,800 American Express Co. ............. 4,123,000
40,000 Associates First Capital Corp. CL
A................................ 1,097,500
42,000 FleetBoston Financial Corp. ...... 1,462,125
14,000 Lehman Brothers Holding Inc. ..... 1,185,625
------------
7,868,250
------------
FOOD & RELATED (1.7%)
17,000 Campbell Soup Co. ................ 657,688
31,000 Coca-Cola Co. .................... 1,805,750
24,000 Kroger Co. ....................... 453,000
38,000 Sara Lee Corp. ................... 838,375
------------
3,754,813
------------
FORESTRY & PAPER PRODUCTS (0.3%)
8,000 Weyerhauser Co. .................. 574,500
------------
INSURANCE SERVICES (0.9%)
17,000 American Intl. Group Inc. ........ 1,838,125
------------
INTERNET SOFTWARE (0.4%)
12,000 America Online Inc. .............. 905,250
------------
MEDICAL & RELATED (0.5%)
47,900 Boston Scientific Corp. .......... 1,047,813
------------
OIL, ENERGY & NATURAL GAS (2.8%)
36,000 Exxon Mobil Corp. ................ 2,900,250
32,000 Royal Dutch Pete Co.
(Netherlands).................... 1,934,000
9,000 Schlumberger Ltd. ................ 506,250
1,746 Transocean Sedco Forex Inc. ...... 58,818
30,000 USX-Marathon Group................ 740,625
------------
6,139,943
------------
RESTAURANTS (0.3%)
14,800 McDonalds Corp. .................. 596,625
------------
RETAIL (3.3%)
22,400 Dayton Hudson Corp. .............. 1,645,000
43,500 Home Depot Inc. .................. 2,982,469
16,250 The Gap Inc. ..................... 747,500
27,000 Wal-Mart Stores Inc. ............. 1,866,375
------------
7,241,344
------------
SECURITY SYSTEMS & SERVICES (0.3%)
15,000 Tyco Intl. Ltd. .................. 583,125
------------
TRANSPORTATION & EQUIPMENT (0.2%)
18,000 Norfolk Southern Corp. ........... 369,000
------------
UTILITIES (0.5%)
20,000 Duke Energy Corp. ................ 1,002,500
------------
TOTAL COMMON STOCK (50.1%) (COST
$84,416,979)..................... $108,478,334
------------
</TABLE>
(continued)
62
<PAGE> 153
OHIO NATIONAL FUND, INC.
S&P 500 INDEX PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES DEPOSITORY SHARES VALUE
- -------------------------------------------------------------
<C> <S> <C>
UNIT INVESTMENT TRUST (0.8%)
11,400 S&P 500 Depository Receipts........ $ 1,674,375
-----------
TOTAL DEPOSITORY RECEIPTS (0.8%)
(COST $1,633,694)................. $ 1,674,375
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT SHORT-TERM NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
AUTOMOTIVE & RELATED (5.9%)
$1,098,000 American Honda 5.950% 01/11/00.... $ 1,096,185
1,200,000 Ford Motor Credit 5.280%
01/03/00......................... 1,199,648
1,331,000 Ford Motor Credit 5.280%
01/04/00......................... 1,330,414
2,290,000 General Motors Acceptance 5.760%
01/28/00......................... 2,280,107
1,829,000 General Motors Acceptance 5.900%
02/24/00......................... 1,812,813
3,000,000 General Motors Acceptance 5.960%
01/27/00......................... 2,987,087
983,000 General Motors Acceptance 6.610%
01/13/00......................... 980,834
1,041,000 Hertz Corp. 5.780% 01/06/00....... 1,040,164
------------
12,727,252
------------
COMMUNICATIONS (0.8%)
1,678,000 SBC Communications 5.820% 01/20/00 1,672,846
------------
CONSUMER PRODUCTS (0.7%)
1,584,000 Johnson & Johnson 5.850% 03/13/00 $ 1,565,467
------------
COMPUTERS & RELATED (1.3%)
1,821,000 IBM Credit 5.900% 02/07/00........ 1,809,958
1,050,000 IBM Credit 5.820% 02/09/00........ 1,043,380
------------
2,853,338
------------
ENTERTAINMENT & LEISURE (1.9%)
4,160,000 Walt Disney Co. 5.660% 01/07/00... 4,156,076
------------
FINANCIAL SERVICES (15.0%)
1,168,000 American Express 5.970%
01/25/00......................... 1,163,351
1,676,000 American Express 5.900%
02/18/00......................... 1,662,816
1,350,000 American Express 5.900%
03/06/00......................... 1,335,618
862,000 American General Corp. 5.920%
02/15/00......................... 855,621
3,000,000 American General Finance 5.720%
01/20/00......................... 2,990,943
2,185,000 American General Finance 5.900%
02/11/00......................... 2,170,318
1,000,000 Associates Corp. 5.100%
01/05/00......................... 999,433
1,773,000 Associates Corp. 5.670%
01/14/00......................... 1,769,370
2,476,000 CIT Group 6.180% 01/25/00......... 2,465,799
1,365,000 CIT Group 5.980% 02/10/00......... 1,355,930
1,921,000 G E Capital 6.000% 01/21/00....... 1,914,597
749,000 G E Capital 5.920% 02/17/00....... 743,211
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT SHORT-TERM NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
$1,795,000 G E Capital 6.060% 03/03/00....... $ 1,776,266
1,417,000 GTE Funding Inc. 6.040%
03/08/00......................... 1,401,072
1,455,000 GTE Funding Inc. 6.040%
03/14/00......................... 1,437,179
3,411,000 Heller Financial 6.000%
02/04/00......................... 3,391,671
1,503,000 Heller Financial 6.050%
02/08/00......................... 1,493,402
1,360,000 Heller Financial 6.000%
02/22/00......................... 1,348,213
1,030,000 Household Finance 6.200%
01/14/00......................... 1,027,694
1,300,000 Household Finance 5.900%
02/14/00......................... 1,290,626
------------
32,593,130
------------
FOOD & RELATED (0.8%)
1,776,000 Coca Cola 5.800% 01/11/00......... 1,773,139
------------
INDUSTRIAL SERVICES (4.7%)
2,000,000 Allied Signal 5.770% 02/01/00..... 1,990,063
2,191,000 Allied Signal 5.770% 02/02/00..... 2,179,763
2,556,000 Dupont (EI) De Nemours & Co.
5.740% 01/26/00.................. 2,545,811
2,109,000 Flour Corp. 5.800% 01/19/00....... 2,102,884
1,472,000 PHH Corp. 6.650% 01/21/00......... 1,466,562
------------
10,285,083
------------
INSURANCE SERVICES (6.0%)
1,610,000 Aetna Services 6.030% 02/03/00.... 1,601,101
4,579,000 Aetna Services 5.700% 03/07/00.... 4,531,149
2,428,000 Prudential Funding 5.750%
01/10/00......................... 2,424,510
4,363,000 Prudential Funding 5.780%
01/24/00......................... 4,346,888
------------
12,903,648
------------
MACHINERY (3.8%)
2,732,000 General Dynamics 6.020%
01/31/00......................... 2,718,294
2,034,000 General Dynamics 6.000%
02/29/00......................... 2,013,999
3,424,000 John Deere Capital 5.650%
01/12/00......................... 3,418,089
------------
8,150,382
------------
RETAIL (2.9%)
1,739,000 Sears Roebuck Acceptance 6.050%
01/13/00......................... 1,735,493
2,600,000 Sears Roebuck Acceptance 5.600%
01/18/00......................... 2,593,125
2,000,000 Sears Roebuck Acceptance 6.100%
02/16/00......................... 1,984,411
------------
6,313,029
------------
TOTAL SHORT-TERM NOTES (43.8%)
(COST $94,993,390)............... $ 94,993,390
------------
TOTAL HOLDINGS (94.7%) (COST
$181,044,063) (A)................ $205,146,099
------------
CASH & RECEIVABLES, NET OF
LIABILITIES (5.3%)............... 11,422,828
------------
TOTAL NET ASSETS (100.0%)......... $216,568,927
============
</TABLE>
- ---------------
(a) Represents cost for financial reporting purposes and differs from cost for
federal income tax purposes. See Note 1.
The accompanying notes are an integral part of these financial statements.
63
<PAGE> 154
OHIO NATIONAL FUND, INC.
S&P 500 INDEX PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
Assets:
Investments in securities at market value
(note 1) (cost $181,044,063)........... $205,146,099
Cash in bank............................. 131
Receivable for securities sold........... 600,937
Receivable for fund shares sold.......... 1,213,387
Variation margin on futures contracts
(note 1)............................... 10,075,591
Dividends and accrued interest
receivable............................. 93,060
------------
Total assets........................... 217,129,205
------------
Liabilities:
Payable for securities purchased......... 454,257
Payable for fund shares redeemed......... 5,104
Payable for investment management
services (note 3)...................... 66,118
Other accrued expenses................... 34,799
------------
Total liabilities...................... 560,278
------------
Net assets at market value................. $216,568,927
============
Net assets consist of:
Par value, $1 per share.................. $ 13,396,954
Paid-in capital in excess of par value... 174,131,728
Accumulated net realized income on
investments (note 1)................... 264,918
Net unrealized appreciation on:
Investments (note 1)................... 24,102,036
Futures contracts (note 1)............. 4,583,200
Undistributed net investment income...... 90,091
------------
Net assets at market value................. $216,568,927
============
Shares outstanding (note 4)................ 13,396,954
Net asset value per share.................. $ 16.17
============
</TABLE>
STATEMENT OF OPERATIONS
Year Ended December 31, 1999
<TABLE>
<S> <C>
Investment income:
Interest.................................. $ 4,122,240
Dividends................................. 878,457
-----------
Total investment income................. 5,000,697
-----------
Expenses:
Management fees (note 3).................. 618,602
Custodian fees (note 3)................... 26,279
Directors' fees (note 3).................. 3,498
Professional fees......................... 12,678
Accounting and transfer agent fees........ 95,739
Other..................................... 24,166
-----------
Total expenses.......................... 780,962
-----------
Net investment income................... $ 4,219,735
-----------
Realized and unrealized gain on investments:
Net realized gain from:
Investments............................. $ 7,880,014
Futures contracts....................... 8,244,114
Net increase in unrealized appreciation
on:
Investments............................. 16,284,388
Futures contracts....................... 2,492,700
-----------
Net gain on investments................. 34,901,216
-----------
Net increase in net assets from
operations............................ $39,120,951
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
64
<PAGE> 155
OHIO NATIONAL FUND, INC.
S&P 500 PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEARS ENDED
--------------------------
1999 1998
------------ -----------
<S> <C> <C>
From operations:
Net investment income..................................... $ 4,219,735 $ 1,535,339
Realized gain on investments and futures contracts........ 16,124,128 3,954,160
Unrealized appreciation on investments and futures
contracts............................................... 18,777,088 9,569,105
------------ -----------
Net increase in net assets from operations............ 39,120,951 15,058,604
------------ -----------
Dividends and distributions to shareholders:
Dividends paid from net investment income................. (4,150,432) (1,519,364)
Capital gains distributions............................... (15,896,517) (4,001,278)
------------ -----------
Total dividends and distributions..................... (20,046,949) (5,520,642)
------------ -----------
From capital share transactions (note 4):
Received from shares sold................................. 103,721,037 61,751,546
Received from dividends reinvested........................ 20,046,949 5,520,642
Paid for shares redeemed.................................. (20,430,472) (4,725,079)
------------ -----------
Increase in net assets derived from capital share
transactions......................................... 103,337,514 62,547,109
------------ -----------
Increase in net assets............................. 122,411,516 72,085,071
Net Assets:
Beginning of period....................................... 94,157,411 22,072,340
------------ -----------
End of period (a)......................................... $216,568,927 $94,157,411
============ ===========
(a) Includes undistributed net investment income of......... $ 90,091 $ 20,788
============ ===========
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1999 1998 1997
------- ------ ------
<S> <C> <C> <C>
Per share data:
Net asset value, beginning of period........................ $ 14.23 $11.73 $10.00
Income (loss) from investment operations:
Net investment income (loss).............................. 0.40 0.38 (0.45)
Net realized and unrealized gain (loss) on investments.... 3.28 3.09 (2.70)
------- ------ ------
Total income (loss) from investment operations.......... 3.68 3.47 (3.15)
------- ------ ------
Less distributions:
Dividends from net investment income...................... (0.44) (0.33) (0.45)
Distributions from net realized capital gains............. (1.30) (0.64) (0.91)
Distributions in excess realized capital gains............ 0.00 0.00 (0.06)
------- ------ ------
Total distributions..................................... (1.74) (0.97) (1.42)
------- ------ ------
Net asset value, end of period.............................. $ 16.17 $14.23 $11.73
======= ====== ======
Total return................................................ 25.63% 30.00% 31.75%
Ratios and supplemental data:
Ratio of expenses to average net assets................... 0.49% 0.49% 0.52%
Ratio of net investment income to average net assets...... 2.62% 2.89% 5.29%
Portfolio turnover rate..................................... 68% 115% 445%
Net assets at end of period (millions)...................... $ 216.6 $94.20 $22.10
</TABLE>
The accompanying notes are an integral part of these financial statements.
65
<PAGE> 156
OHIO NATIONAL FUND, INC.
SOCIAL AWARENESS PORTFOLIO
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, 1999
TOTAL RETURN:
<TABLE>
<S> <C>
One-year 17.69%
Three-year 4.69%
Since inception (1/3/97) 4.72%
</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
1999 turned out to be another year of high returns for stock indices across the
board. Volatility has continued at extreme levels and we see this as a regular
market factor for the foreseeable future. The Social Awareness Fund has gone
through a major transformation over the last six months. Due to unacceptable
portfolio performance, new management was engaged to direct the fund beginning
at mid-year. The fund has progressed into a more growth-oriented portfolio and
has taken sizable positions in larger and more liquid securities. Fortunately,
this has had a positive impact on the fund's performance. Under old management,
the fund trailed the S & P 500 Index by 754 basis points halfway through the
year. Under current management, the fund outperformed the S & P 500 Index by 494
basis points during the second half of 1999. For 1999, the portfolio ended up
trailing the S & P 500 by 333 basis points. However, we are confident that the
changes we have made will continue to improve the fund's relative performance.
The improved performance of the fund is directly related to increased positions
in technology and faster-growing companies. We feel that the best areas for
continued performance lie in these growth areas and continue to hold large
weightings in them. We will continue to search for superior companies that have
outstanding fundamentals. Cash positions will continue to be a small weighting
within the fund.
In summary, we thank you for your continued support and patience. The Social
Awareness Portfolio is positioning itself to benefit from the vagaries of the
market and we look to report more positive news in the future.
CHANGE IN VALUE OF $10,000 INVESTMENT
<TABLE>
<CAPTION>
SOCIAL AWARENESS PORTFOLIO RUSSELL 2000 INDEX
(COMMENCED OPERATIONS JANUARY 3, ------------------
1997)
--------------------------------
<S> <C> <C>
10000.00 10000.00
'97' 11321.00 11020.00
12563.00 12227.00
'98' 12462.00 12871.00
9748.00 11953.00
10181.90 13062.60
'99' 11473.00 14494.30
</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, 1999
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Citrix Systems 5.14
2. The Home Depot, Inc. 4.58
3. General Electric Company 4.31
4. ADC Telecommunications Inc. 4.04
5. American International Group 3.76
6. Sun Microsystems 3.45
7. Solectron 3.44
8. CTS Corporation 3.15
9. MCI WorldCom, Inc. 3.10
10. Citigroup Inc. 3.09
</TABLE>
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Computer & Related 20.47
2. Communications 17.07
3. Electrical Equipment 8.86
4. Retail 6.97
5. Oil, Energy and Natural Gas 6.04
</TABLE>
66
<PAGE> 157
OHIO NATIONAL FUND, INC.
SOCIAL AWARENESS PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
AEROSPACE (2.1%)
1,300 Honeywell Intl. Inc. ................. $ 74,994
----------
BANKING (1.8%)
3,000 Firstar Corp. (b) .................... 63,375
----------
BROADCAST RADIO & TV (4.9%)
1,700 *CBS Corp. ........................... 108,694
2,000 *Infinity Broadcast................... 72,375
----------
181,069
----------
BUSINESS SERVICES (4.0%)
2,000 *A C Nielsen Corp. ................... 49,250
2,500 Manpower.............................. 94,063
----------
143,313
----------
COMMUNICATIONS (14.4%)
2,000 *ADC Telecommunication................ 145,125
1,700 Bell Atlantic Corp. .................. 104,656
2,100 *MCI Worldcom Inc. ................... 111,431
1,500 *McleodUSA Inc. ...................... 88,312
1,400 *SBC Communications Inc. ............. 68,250
----------
517,774
----------
COMPUTER & RELATED (20.5%)
1,000 *Cisco Systems Inc. .................. 107,125
1,500 *Citrix Systems....................... 184,500
1,000 *EMC Corp. ........................... 109,250
800 Intl. Business Machines............... 86,400
1,300 *Solectron............................ 123,663
1,600 *Sun Microsystems..................... 123,900
----------
734,838
----------
CONSUMER PRODUCTS (2.6%)
1,000 Johnson & Johnson 93,125
----------
DIVERSIFIED MANUFACTURING (4.3%)
1,000 General Electric Co. ................. 154,750
----------
DRUGS (1.4%)
300 *Medimunne Inc. ...................... 49,763
----------
ELECTRONIC COMPONENTS/SEMICONDUCTORS (8.9%)
1,000 *Altera Corp. ........................ 49,563
1,500 CTS Corp. ............................ 113,063
1,300 Intel Corp. .......................... 107,006
500 Texas Instruments Inc. ............... 48,437
----------
318,069
----------
FIBER OPTICS (1.6%)
2,000 *Williams Communications Group........ 57,875
----------
FINANCIAL SERVICES (4.6%)
2,000 Associates First Capital.............. 54,875
2,000 Citigroup Inc. ....................... 111,125
----------
166,000
----------
FOOD & RELATED (1.5%)
2,400 Conagra Inc. ......................... 54,150
----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
INSURANCE SERVICES (3.8%)
1,250 American Intl. Group.................. $ 135,156
----------
MEDICAL & RELATED (0.6%)
500 *Genzyme Corp. ....................... 22,500
----------
OIL, ENERGY & NATURAL GAS (7.0%)
1,000 Coastal Corp. ........................ 35,438
1,400 Kerr McGee............................ 86,800
1,100 Schlumberger Ltd. .................... 61,875
213 Transocean Sedco Forex Inc. .......... 7,189
2,000 Williams Cos. Inc. ................... 61,125
----------
252,427
----------
RETAIL (7.0%)
1,900 Circuit City Stores................... 85,618
2,400 The Home Depot Inc. .................. 164,550
----------
250,168
----------
SECURITY SYSTEMS & SERVICES (2.5%)
2,300 Tyco Intl. Ltd. ...................... 89,412
----------
TOTAL U.S. COMMON STOCK (93.5%) (COST
$2,708,968).......................... 3,358,758
----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES FOREIGN COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
FINLAND (2.7%)
COMMUNICATIONS (2.7%)
500 Nokia Corp. ADR....................... $ 95,000
----------
CANADA (0.7%)
MEDICAL & RELATED (0.7%)
1,200 *Biochem Pharm Inc. .................. 26,100
----------
TOTAL FOREIGN COMMON STOCK (3.4%)
(COST $69,949)....................... $ 121,100
----------
TOTAL COMMON STOCK (96.9%) (COST
$2,778,917).......................... $3,479,858
----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT SHORT-TERM NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
FINANCIAL SERVICES (3.2%)
$113,000 American Express 1.000% 01/03/00...... $ 112,993
----------
TOTAL SHORT-TERM NOTES (3.2%) (COST
$112,993)............................ $ 112,993
----------
TOTAL HOLDINGS (100.1%) (COST
$2,891,910) (A)...................... $3,592,851
----------
LIABILITIES, NET OF CASH & RECEIVABLES
(-0.1%).............................. (2,918)
----------
TOTAL NET ASSETS (100.0%)............. $3,589,933
==========
</TABLE>
- ---------------
* Non-income producing securities.
(a) Represents cost for financial reporting purposes and differs from cost for
federal income tax purposes. See Note 1.
(b) Security of an affiliate of the fund.
The accompanying notes are an integral part of these financial statements.
67
<PAGE> 158
OHIO NATIONAL FUND, INC.
SOCIAL AWARENESS PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
Assets:
Investments in securities at market value
(note 1) (cost $2,810,917)............... $ 3,529,476
Investment in an affiliate at market value
(cost $80,993)........................... 63,375
Cash in bank............................... 240
Receivable for fund shares sold............ 4,899
Dividends and accrued interest
receivable............................... 2,199
-----------
Total assets............................. 3,600,189
-----------
Liabilities:
Payable for fund shares redeemed........... 13
Payable for investment management services
(note 3)................................. 1,773
Other accrued expenses..................... 8,470
-----------
Total liabilities........................ 10,256
-----------
Net assets at market value................... $ 3,589,933
===========
Net assets consist of:
Par value, $1 per share.................... $ 348,274
Paid-in capital in excess of par value..... 4,976,023
Accumulated net realized loss on
investments (note 1)..................... (2,434,474)
Net unrealized appreciation on investments
(note 1)................................. 700,941
Overdistributed net investment income...... (831)
-----------
Net assets at market value................... $ 3,589,933
===========
Shares outstanding (note 4).................. 348,274
Net asset value per share.................... $ 10.31
===========
</TABLE>
STATEMENT OF OPERATIONS
Year Ended December 31, 1999
<TABLE>
<S> <C>
Investment income:
Interest.................................. $ 14,126
Dividends................................. 45,131
-----------
Total investment income................. 59,257
-----------
Expenses:
Management fees (note 3).................. 24,814
Custodian fees (note 3)................... 4,824
Directors' fees (note 3).................. 350
Professional fees......................... 1,598
Accounting and transfer agent fees........ 5,410
Other..................................... 2,445
-----------
Total expenses.......................... 39,441
-----------
Net investment income................... $ 19,816
-----------
Realized and unrealized gain (loss) on
investments:
Net realized loss from investments........ $(1,812,454)
Net increase in unrealized appreciation on
investments............................. 2,093,387
-----------
Net gain on investments................. 280,933
-----------
Net increase in net assets from
operations............................ $ 300,749
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
68
<PAGE> 159
OHIO NATIONAL FUND, INC.
SOCIAL AWARENESS PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEARS ENDED
-------------------------
1999 1998
----------- -----------
<S> <C> <C>
From operations:
Net investment income..................................... $ 19,816 $ 36,638
Realized loss on investments.............................. (1,812,454) (622,020)
Unrealized appreciation (depreciation) on investments..... 2,093,387 (1,498,903)
----------- -----------
Net increase (decrease) in net assets from
operations........................................... 300,749 (2,084,285)
----------- -----------
Dividends and distributions to shareholders:
Dividends paid from net investment income................. (19,816) (36,718)
Dividend paid in excess of net investment income.......... (831) 0
----------- -----------
Total dividends....................................... (20,647) (36,718)
From capital share transactions (note 4):
Received from shares sold................................. 876,492 5,521,237
Received from dividends reinvested........................ 20,647 36,718
Paid for shares redeemed.................................. (4,178,575) (1,687,515)
----------- -----------
Increase (decrease) in net assets derived from capital
share transactions................................... (3,281,436) 3,870,440
----------- -----------
Increase (decrease) in net assets.................. (3,001,334) 1,749,437
Net Assets:
Beginning of period....................................... 6,591,267 4,841,830
----------- -----------
End of period............................................. $ 3,589,933 $ 6,591,267
=========== ===========
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1999 1998 1997
------- ------ ------
<S> <C> <C> <C>
Per share data:
Net asset value, beginning of period........................ $ 8.80 $11.40 $10.00
Income (loss) from investment operations:
Net investment income..................................... 0.04 0.05 0.09
Net realized and unrealized gain (loss) on investments.... 1.51 (2.60) 2.47
------- ------ ------
Total income (loss) from investment operations.......... 1.55 (2.55) 2.56
------- ------ ------
Less distributions:
Dividends from net investment income...................... (0.04) (0.05) (0.07)
Distributions from net realized capital gains............. 0.00 0.00 (1.09)
------- ------ ------
Total distributions..................................... (0.04) (0.05) (1.16)
------- ------ ------
Net asset value, end of period.............................. $ 10.31 $ 8.80 $11.40
======= ====== ======
Total return................................................ 17.69% (22.41)% 25.63%
Ratios and supplemental data:
Ratio of expenses to average net assets................... 0.93% 0.81% 0.95%
Ratio of net investment income to average net assets...... 0.47% 0.55% 0.75%
Portfolio turnover rate..................................... 122% 71% 40%
Net assets at end of period (millions)...................... $ 3.6 $ 6.6 $ 4.8
</TABLE>
The accompanying notes are an integral part of these financial statements.
69
<PAGE> 160
OHIO NATIONAL FUND, INC.
STRATEGIC INCOME PORTFOLIO
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, 1999
TOTAL RETURN:
<TABLE>
<S> <C>
One-year (4.81%)
Three-year 0.68%
Since inception (1/3/97) 0.68%
</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
For bond investors, 1999 was a year that most would like to simply forget.
Domestic fixed income markets registered one of their worst total return over
the past 25 years, second only to 1994. Treasury yields across the maturity
spectrum rose steadily throughout the year by 140 to 180 basis points depending
on the bond's maturity date. The investment objective for the Strategic Income
portfolio is to "generate high current income." We uniquely invest the portfolio
in these five asset classes: corporate bonds, mortgage-backed, international,
equity and real estate investment trusts (REIT's) securities. Within these broad
asset types, the Fund was highly diversified by issuer, geographic location, and
industry.
Last year, we took steps to improve the fund's total return (income and price).
Our decision to limit exposure to higher risk asset classes, remain diversified
across industries, and closely monitor fundamental trends helped to limit
portfolio volatility We believe our longer-term focus helps to reduce volatility
and leads to competitive long-term results.
CHANGE IN VALUE OF $10,000 INVESTMENT
[STRATEGIC INCOME PORTFOLIO CHART]
<TABLE>
<CAPTION>
STRATEGIC INCOME PORTFOLIO
(COMMENCED OPERATIONS JANUARY 3, LEHMAN BROS. GOVT./CORP. BOND INDEX
1997) -INTERMEDIATE
-------------------------------- -----------------------------------
<S> <C> <C>
10000.00 10000.00
'97' 10296.00 10274.00
10902.40 10777.40
'98' 10962.40 11147.10
10747.50 11681.00
'99' 10711.00 11613.30
10231.10 11725.90
</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, 1999
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. GNMA Pool #436197X, 7.00%
02/15/2008 4.78
2. Federated Dept. Stores 8 1/2%
6/15/03 3.33
3. Lehman Bros Holdings 7.75%
5/15/23 3.19
4. ABM-AMRO Bank N.V 7.75%
05/15/2023 3.18
5. Philip Morris 7.125% 8/15/02 3.18
6. Duke Power Co 7.875% 5/01/24 3.15
7. Zurich Cap Trust 8.376% 6/1/37 3.15
8. NB CAP TRUST 8.25%, 04/15/2027 3.14
9. Merrill Lynch & Co. NT 7.00%
4/27/08 3.11
10. SPIEKER PPTYS LP 7.125% 12/1/06 3.06
</TABLE>
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. REIT 19.44
2. Government 18.06
3. Retail 10.41
4. Financial Services 9.46
5. Banking 8.75
</TABLE>
70
<PAGE> 161
OHIO NATIONAL FUND, INC.
STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT LONG-TERM BONDS & NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
GOVERNMENT (18.1%)
$ 86,588 FNMA 9.000% 04/01/16.................. $ 90,287
21,844 FNMA 7.500% 07/15/21.................. 21,965
70,836 FNMA 7.500% 10/01/24.................. 70,117
100,000 FNMA 6.500% 04/18/25.................. 92,953
56,441 FNMA 7.000% 09/01/27.................. 54,605
29,436 FNMA 7.500% 09/01/28.................. 29,137
52,406 GNMA 7.500% 06/15/27.................. 51,877
153,107 GNMA 7.000% 02/15/28.................. 148,004
----------
558,945
----------
AEROSPACE (2.8%)
100,000 Lockhead Corp.
7.875% 03/15/23....................... 88,070
----------
AUTOMOTIVE & RELATED (2.3%)
75,000 Ford Motor Co
7.500% 08/01/26....................... 72,479
----------
BANKING (8.7%)
100,000 ABM-AMRO Bank N.V.
7.750% 05/15/23....................... 98,536
75,000 Banc One Corp. 8.000% 04/29/27........ 74,959
100,000 NB Capital Trust 8.250% 04/15/27...... 97,218
----------
270,713
----------
COMMUNICATIONS (1.5%)
50,000 GTE Corp. 7.830% 05/01/23............. 47,837
----------
CONSUMER PRODUCTS (3.3%)
100,000 Phillip Morris Co.
7.125% 08/15/02....................... 98,439
----------
FINANCIAL SERVICES (9.5%)
100,000 Lehman Brothers Holdings 7.125%
09/15/03 98,823
100,000 Merrill Lynch & Co. NT 7.000%
04/27/08............................. 96,394
100,000 Zurich Capital Trust (144A) 8.376%
06/01/37............................. 97,581
----------
292,798
----------
FORESTRY & PAPER PRODUCTS (1.7%)
25,000 Fort James Corp. 6.625% 09/15/04...... 24,164
30,000 International Paper Co. 7.625%
01/15/07............................. 29,661
----------
53,825
----------
OIL ENERGY & NATURAL GAS (2.8%)
75,000 Transcanada Pipeline 9.875%
01/01/21............................. 87,199
----------
REAL ESTATE & LEASING (5.2%)
100,000 Spieker Properties Inc. 7.125%
12/01/06............................. 94,744
75,000 Spieker Properties Inc. 7.350%
12/01/17............................. 65,857
----------
160,601
----------
RETAIL (10.4%)
100,000 Federated Dept. Stores 8.500%
06/15/03............................. 103,187
50,000 May Department Stores Co. 7.625%
08/15/13............................. 50,119
75,000 JC Penny Inc. 9.450% 07/15/02......... 74,146
100,000 Sears Roebuck Acceptance Global 7.000%
06/15/07............................. 94,598
----------
322,050
----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT LONG-TERM BONDS & NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
UTILITIES (3.2%)
$100,000 Duke Power Co. 7.875% 05/01/24........ $ 97,624
----------
TOTAL LONG-TERM BONDS & NOTES (69.5%)
(COST $2,305,514).................... $2,150,580
----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES REAL ESTATE INVESTMENT TRUSTS VALUE
- -------------------------------------------------------------
<C> <S> <C>
5,000 Bedford Property Invs. Inc. .......... $ 85,312
2,000 Brandywine Realty Trust............... 32,750
2,000 Developers Divers Realty Corp. ....... 25,750
603 Healthcare Realty Trust Inc. ......... 9,422
190 Hospitality Properties Trust.......... 3,622
2,000 Koger Equity Inc. .................... 33,750
3,581 LTC Properties Inc. .................. 30,215
2,000 Lasalle Hotel Properties.............. 23,375
2,000 Lexington Corp. Properties Trust...... 18,375
2,500 Liberty Property Trust................ 60,625
2,000 New Plan Excel Realty Trust........... 31,625
6,000 Sizeler Property Investors Inc. ...... 48,750
4,600 Winston Hotels Inc. .................. 37,375
----------
440,946
----------
TOTAL REAL ESTATE INVEST. TRUSTS
(14.2%) (COST $535,568).............. $ 440,946
----------
</TABLE>
<TABLE>
<CAPTION>
6,900 First Commonwealth Fund Inc. . $ 63,393
<C> <S> <C>
----------
TOTAL INVESTMENT COMPANIES (2.0%)
(COST $83,397)....................... $ 63,393
----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
HOTEL/LODGING (2.4%)
7,000 RFS Hotels Invs. Inc. ............... $ 73,063
-----------
UTILITIES (1.8%)
1,000 Central & South West Corp. .......... 20,000
1,000 Texas Utilities Co. ................. 35,563
-----------
55,563
-----------
TOTAL COMMON STOCK (4.2%) (COST
$151,615)........................... $ 128,626
-----------
</TABLE>
(continued)
71
<PAGE> 162
OHIO NATIONAL FUND, INC.
STRATEGIC INCOME PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES PREFERRED STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
COMMUNICATIONS (1.8%)
2,500 MCI Capital 8.00% Series A........... $ 55,313
-----------
FINANCIAL SERVICES (2.6%)
1,500 Citigroup Cap I 8.00% 9/30/36........ 35,062
2,000 PLC Capital Trust I 8.25%............ 44,000
-----------
79,062
-----------
OIL, ENERGY & NATURAL GAS (1.4%)
2,000 Enron Capital Trust I 8.30%.......... 43,750
-----------
REAL ESTATE & LEASING (1.2%)
2,000 Kimco Realty Corp. 8.50%............. 37,625
-----------
UTILITIES (1.7%)
2,500 Alabama Power Capital Tr. 7.60%...... 52,969
-----------
TOTAL PREFERRED STOCK (8.7%) (COST
$313,495)........................... $ 268,719
-----------
TOTAL HOLDINGS (98.6%) (COST
$3,389,589) (A)..................... $ 3,052,264
-----------
CASH & RECEIVABLES, NET OF
LIABILITIES (1.4%).................. 42,783
-----------
TOTAL NET ASSETS (100.0%)............ $ 3,095,047
===========
</TABLE>
- ---------------
(144A) 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 buyers. At the period end, the value
of these securities amounted to $97,581 or 3.2% of net assets. These
securities were deemed liquid pursuant to procedures approved by the
Board of Directors.
(a) Represents cost for financial reporting purposes and differs from cost for
federal income tax purposes. See Note 1.
The accompanying notes are an integral part of these financial statements.
72
<PAGE> 163
OHIO NATIONAL FUND, INC.
STRATEGIC INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
Assets:
Investments in securities at market value
(note 1) (cost $3,389,589)............... $ 3,052,264
Dividends and accrued interest
receivable............................... 41,728
Other...................................... 12,161
-----------
Total assets............................. 3,106,153
-----------
Liabilities:
Payable for fund shares redeemed........... 51
Payable for investment management services
(note 3)................................. 2,127
Other accrued expenses..................... 8,928
-----------
Total liabilities........................ 11,106
-----------
Net assets at market value................... $ 3,095,047
===========
Net assets consist of:
Par value, $1 per share.................... $ 373,469
Paid-in capital in excess of par value..... 3,432,166
Accumulated net realized loss on
investments (note 1)..................... (388,726)
Net unrealized depreciation on investments
(note 1)................................. (337,325)
Undistributed net investment income........ 15,463
-----------
Net assets at market value................... $ 3,095,047
===========
Shares outstanding (note 4).................. 373,469
Net asset value per share.................... $ 8.29
===========
</TABLE>
STATEMENT OF OPERATIONS
Year Ended December 31, 1999
<TABLE>
<S> <C>
Investment income:
Interest.................................... $ 182,953
Dividends................................... 124,186
---------
Total investment income................... 307,139
---------
Expenses:
Management fees (note 3).................... 28,913
Custodian fees (note 3)..................... 4,809
Directors' fees (note 3).................... 350
Professional fees........................... 1,599
Accounting and transfer agent fees.......... 7,669
Other....................................... 2,429
---------
Total expenses............................ 45,769
---------
Net investment income..................... $ 261,370
---------
Realized and unrealized loss on investments:
Net realized loss from investments.......... $(291,696)
Net increase in unrealized depreciation on
investments............................... (139,474)
---------
Net loss on investments................... (431,170)
---------
Net decrease in net assets from
operations.............................. $(169,800)
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
73
<PAGE> 164
OHIO NATIONAL FUND, INC.
STRATEGIC INCOME PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEARS ENDED
-------------------------
1999 1998
----------- ----------
<S> <C> <C>
From operations:
Net investment income..................................... $ 261,370 $ 268,867
Realized loss on investments.............................. (291,696) (97,030)
Unrealized depreciation on investments.................... (139,474) (230,070)
----------- ----------
Net decrease in net assets from operations............ (169,800) (58,233)
----------- ----------
Dividends and distributions to shareholders:
Dividends paid from net investment income................. (245,907) (269,685)
Capital gains distributions............................... 0 (1,157)
----------- ----------
Total dividends and distributions..................... (245,907) (270,842)
----------- ----------
From capital share transactions (note 4):
Received from shares sold................................. 262,247 1,160,301
Received from dividends reinvested........................ 245,907 270,842
Paid for shares redeemed.................................. (1,016,913) (333,046)
----------- ----------
Increase (decrease) in net assets derived from capital
share transactions................................... (508,759) 1,098,097
----------- ----------
Increase (decrease) in net assets.................. (924,466) 769,022
Net Assets:
Beginning of period....................................... 4,019,513 3,250,491
----------- ----------
End of period (a)......................................... $ 3,095,047 $4,019,513
=========== ==========
(a) Includes undistributed net investment income of......... $ 15,463 $ 0
=========== ==========
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Per share data:
Net asset value, beginning of period........................ $ 9.34 $10.16 $10.00
Income (loss) from investment operations:
Net investment income..................................... 0.65 0.68 0.71
Net realized and unrealized gain (loss) on investments.... (1.07) (0.82) 0.13
------ ------ ------
Total income (loss) from investment operations.......... (0.42) (0.14) 0.84
------ ------ ------
Less distributions:
Dividends from net investment income...................... (0.63) (0.68) (0.67)
Distributions from net realized capital gains............. 0.00 0.00 (0.01)
------ ------ ------
Total distributions..................................... (0.63) (0.68) (0.68)
------ ------ ------
Net asset value, end of period.............................. $ 8.29 $ 9.34 $10.16
====== ====== ======
Total return................................................ (4.81)% (1.42)% 8.74%
Ratios and supplemental data:
Ratio of expenses to average net assets................... 1.27% 1.18% 1.30%
Ratio of net investment income to average net assets...... 7.23% 7.12% 7.04%
Portfolio turnover rate..................................... 53% 104% 102%
Net assets at end of period (millions)...................... $ 3.1 $ 4.0 $ 3.2
</TABLE>
The accompanying notes are an integral part of these financial statements.
74
<PAGE> 165
OHIO NATIONAL FUND, INC.
FIRSTAR GROWTH & INCOME(a)
OBJECTIVE
The Firstar Growth & Income seeks to provide both reasonable income and
long-term capital appreciation by investing in income producing securities,
including dividend paying common and preferred stock as well as fixed income
securities.
PERFORMANCE AS OF DECEMBER 31, 1999
TOTAL RETURN:
<TABLE>
<S> <C>
One-year 1.76%
Three-year 4.24%
Since inception (1/3/97) 4.75%
</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
Aided by a 14.9% jump in the fourth quarter, the Standard & Poor's 500 Index
finished 1999 with an impressive +21.0% gain completing an unprecedented fifth
consecutive year of 20%+ returns. The Standard & Poor's MidCap 400 and SmallCap
600 Indexes both rebounded in the final quarter of the year bringing their
full-year results to +14.7% and +12.4% respectively. However, the indexes'
strong results mask an extreme divergence in performance across stocks and among
sectors. In particular, the stocks making up the technology sector within the
S&P 500 surged a breathtaking 79% in 1999. This gain is made even more
spectacular considering the technology sector was up 72% in 1998. Technology
stocks accounted for almost 80% of the S&P 500's 1999 return. In fact, market
breadth was narrower in 1999 than in all but one of the past eleven years. Seven
"mega stocks" accounted for half of the Index's performance. Ranked in order of
their contribution to the S&P 500's return, the "Magnificent Seven" are
Microsoft, Cisco Systems, General Electric, Wal-Mart, Oracle, Nortel and America
Online.
In contrast to the stock market's record-setting performance, the bond market
was under pressure throughout 1999. The thirty-year US Treasury bond ended the
year with a 6.5% yield, up from 5.1% at the beginning of the year. Taxable bonds
as measured by the Lehman Brothers Government/ Corporate Bond Index, delivered a
- -0.4% fourth quarter total return bringing the full-year result to -2.2%. For
tax-exempt fixed income investors, the news was only slightly better with the
Lehman Brothers State General Obligation Bond Index posting a -0.4% total return
for the quarter and a 1.1% return for the year.
Mid-year adjustments to our equity funds (highlighted by improved technology
stock selection) led to more competitive portfolio performance in the final
months of the year.
CHANGE IN VALUE OF $10,000 INVESTMENT
<TABLE>
<CAPTION>
LEHMAN BROS. GOVT./CORP. INDEX -
FIRSTAR GROWTH & INCOME INTERMEDIATE
----------------------- --------------------------------
<S> <C> <C>
10000.00 10000.00
'97' 10531.00 12060.00
10969.10 13336.00
'98' 11253.20 15697.70
11289.20 17146.70
'99' 11670.80 19269.40
11488.70 20755.10
</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, 1999
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Tyco International 2.59
2. Northern Trust 2.57
3. McGraw-Hill 2.42
4. Bristol-Myers Squibb 2.33
5. Enron Corp. 2.28
6. ALLTEL Corporation 2.25
7. Pepsico Inc 2.08
8. Citigroup Inc 2.02
9. Intel Corp 1.99
10. Bank of New York 1.94
</TABLE>
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Oil, Energy, and Natural Gas 8.13
2. Consumer Products 7.88
3. Banking 7.86
4. Drugs 7.15
5. Telecommunications and Cellular 6.62
</TABLE>
- ---------------
(a) Prior to 5/1/99 the portfolio was known as The Stellar Portfolio.
75
<PAGE> 166
OHIO NATIONAL FUND, INC.
FIRSTAR GROWTH & INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
ADVERTISING (1.9%)
1,100 Interpublic Group of Cos. Inc......... $ 63,456
----------
BANKING (7.9%)
1,600 Bank of New York Inc.................. 64,000
1,600 Mellon Bank Corp...................... 54,500
1,600 Northern Trust Corp................... 84,800
1,400 Wells Fargo Co........................ 56,612
----------
259,912
----------
BROADCAST RADIO & TV (2.4%)
650 *CBS Corp............................. 41,559
500 Timer Warner Inc...................... 36,219
----------
77,778
----------
BUILDING & CONSTRUCTION (1.1%)
900 Vulcan Materials Co................... 35,944
----------
BUSINESS SERVICES (4.0%)
800 Automatic Data Processing Inc......... 43,100
300 First Data Corp....................... 14,794
1,000 Manpower Inc.......................... 37,625
1,300 Viad Corp............................. 36,237
----------
131,756
----------
COMMUNICATIONS (3.0%)
700 Bell Atlantic Corp.................... 43,094
200 True North Communications............. 8,937
700 Sprint Corp........................... 47,119
----------
99,150
----------
COMPUTER & RELATED (5.2%)
100 Electronic Data Systems Corp.......... 6,694
100 Hewlett-Packard Co.................... 11,394
800 Intel Corp............................ 65,850
300 Intl. Business Machines............... 32,400
600 Lucent Technologies Inc............... 44,887
100 Microsoft Corp........................ 11,675
----------
172,900
----------
CONSUMER PRODUCTS (7.9%)
800 Avery Dennison Corp................... 58,300
1,000 Estee Lauder Cos. Inc................. 50,438
600 Johnson & Johnson..................... 55,875
800 Kimberly-Clark Corp................... 52,200
400 Procter & Gamble Co................... 43,825
----------
260,638
----------
CONTAINERS (0.3%)
100 Aloca Inc............................. 8,300
----------
CRUISE LINES (0.2%)
100 Carnival Corp CL A.................... 4,781
----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
DRUGS (7.2%)
800 American Home Products Corp........... $ 31,550
1,200 Bristol-Myers Squibb Co............... 77,025
700 Lilly (Eli) & Co...................... 46,550
600 Merck & Co. Inc....................... 40,237
500 Warner Lambert Co..................... 40,969
----------
236,331
----------
DURABLE GOODS (1.0%)
900 Pentair Inc........................... 34,650
----------
ELECTRICAL EQUIPMENT (2.0%)
600 Molex Inc............................. 27,150
400 Texas Instruments Inc................. 38,750
----------
65,900
----------
FINANCIAL SERVICES (2.6%)
1,200 Citigroup Inc......................... 66,675
600 Franklin Resources.................... 19,238
----------
85,913
----------
FOOD & RELATED (4.7%)
700 Anheuser-Busch Cos. .................. 49,612
200 Coors (Adolph) CL B................... 10,500
1,950 PepsiCo Inc........................... 68,737
700 Sysco Corp............................ 27,694
----------
156,543
----------
FORESTRY & PAPER PRODUCTS (1.0%)
400 Consolidated Papers Inc............... 12,725
300 Weyerhaeuser Co....................... 21,544
----------
34,269
----------
INDUSTRIAL SERVICES (1.4%)
1,200 Ecolab Inc............................ 46,950
----------
INSTRUMENT-SCIENTIFIC (0.9%)
800 Millipore Corp........................ 30,900
----------
INSURANCE SERVICES (2.9%)
1,100 Hartford Life CL A.................... 48,400
500 Marsh & McLennan Cos. Inc............. 47,844
----------
96,244
----------
MEDIA & PUBLISHING (5.7%)
600 Houghton Mifflin Co................... 25,312
300 Knight Ridder Inc..................... 17,850
1,300 McGraw-Hill Cos. Inc.................. 80,113
1,300 New York Times Co..................... 63,863
----------
187,138
----------
MEDICAL & RELATED (1.5%)
1,400 Medtronic Inc......................... 51,013
----------
</TABLE>
(continued)
76
<PAGE> 167
OHIO NATIONAL FUND, INC.
FIRSTAR GROWTH & INCOME PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
OIL, ENERGY & NATURAL GAS (8.1%)
1,700 Enron Corp............................ $ 75,437
1,500 Enron Corp. Notes 2002................ 28,125
660 Exxon Mobil Corp...................... 53,171
900 Phillips Petroleum Co................. 42,300
600 Schlumberger Ltd...................... 33,750
116 Transocean Sedco Forex Inc............ 3,805
1,300 USX-Marathon Group.................... 32,094
----------
268,682
----------
RETAIL (4.8%)
1,500 CVS Corp.............................. 59,906
825 Gap Inc............................... 37,950
200 W.W. Grainger, Inc.................... 9,563
200 Wal-Mart Stores Inc................... 13,825
1,300 Walgreen Co........................... 38,025
----------
159,269
----------
SECURITY SYSTEMS & SERVICES (2.6%)
2,200 Tyco International Ltd................ 85,525
----------
TELECOMMUNICATIONS & CELLULAR (4.9%)
900 Alltel Corp........................... 74,419
700 *BroadWing Inc........................ 25,812
100 Corning Inc........................... 12,894
1,000 SBC Communications Inc................ 48,750
----------
161,875
----------
TRANSPORTATION & EQUIPMENT (0.1%)
100 Expeditors Intl. Washington Inc....... 4,381
----------
UTILITIES (1.6%)
300 General Electric Co................... 46,425
400 Nisource Inc.......................... 7,150
----------
53,575
----------
TOTAL COMMON STOCK (86.9%) (COST
$2,736,637).......................... $2,873,773
----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES FOREIGN COMMON STOCKS VALUE
- -------------------------------------------------------------
<C> <S> <C>
CANADA (1.5%)
COMMUNICATIONS (1.5%)
500 Nortel Networks Corp.................. $ 50,500
----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES FOREIGN COMMON STOCKS VALUE
- -------------------------------------------------------------
<C> <S> <C>
FINLAND (1.7%)
TELECOMMUNICATIONS (1.7%)
300 Nokia Corp. SP-ADR.................... $ 57,000
----------
107,500
----------
TOTAL FOREIGN COMMON STOCK (3.2%)
(COST $64,063)....................... 107,500
----------
TOTAL COMMON STOCK (90.1%) (COST
$2,800,700).......................... $2,981,273
----------
</TABLE>
<TABLE>
<CAPTION>
REAL ESTATE MARKET
SHARES INVESTMENT TRUSTS VALUE
- -------------------------------------------------------------
<C> <S> <C>
900 AMB Property Corp..................... $ 17,944
200 Post Properties....................... 7,650
----------
25,594
----------
TOTAL REAL ESTATE INVESTMENT TRUSTS
(0.8%) (COST $27,785)................ $ 25,594
----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES PREFERRED STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
FOOD & RELATED (1.0%)
700 Seagram LTD 7.5% Conv................. $ 31,500
----------
TOTAL PREFERRED STOCK (1.0%) (COST
$35,088)............................. $ 31,500
----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS VALUE
- -------------------------------------------------------------
<C> <S> <C>
FINANCIAL (9.1%)
$301,000 Firstar Bank 1.000% 01/03/00
repurchase price $301,025
collateralized by GNMA certificates
pool # 8375 due 02/20/24 (Cost
$301,000)............................ $ 301,000
----------
TOTAL REPURCHASE AGREEMENTS (9.1%)
(COST $301,000)...................... $ 301,000
----------
TOTAL HOLDINGS (101.0%) (COST
$3,164,573) (A)...................... $3,339,367
----------
LIABILITIES, NET OF CASH & RECEIVABLES
(-1.0%).............................. (33,206)
----------
TOTAL NET ASSETS (100.0%)............. $3,306,161
==========
</TABLE>
- ---------------
* Non-income producing securities.
(a) Represents cost for financial reporting purposes and differs from cost for
federal income tax purposes. See Note 1.
The accompanying notes are an integral part of these financial statements.
77
<PAGE> 168
OHIO NATIONAL FUND, INC.
FIRSTAR GROWTH & INCOME PORTFOLIO (A)
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
Assets:
Investments in securities at market value
(note 1) (cost $3,164,573)............... $3,339,367
Cash in bank............................... 409
Receivable for securities sold............. 33,555
Dividends and accrued interest
receivable............................... 2,593
----------
Total assets............................. 3,375,924
----------
Liabilities:
Payable for securities purchased........... 55,537
Payable for fund shares redeemed........... 3,830
Payable for investment management services
(note 3)................................. 2,482
Other accrued expenses..................... 7,914
----------
Total liabilities........................ 69,763
----------
Net assets at market value................... $3,306,161
==========
Net assets consist of:
Par value, $1 per share.................... $ 311,449
Paid-in capital in excess of par value..... 2,877,569
Accumulated net realized loss on
investments (note 1)..................... (57,572)
Net unrealized appreciation on investments
(note 1)................................. 174,794
Overdistributed net investment income...... (79)
----------
Net assets at market value................... $3,306,161
==========
Shares outstanding (note 4).................. 311,449
Net asset value per share.................... $ 10.62
==========
</TABLE>
STATEMENT OF OPERATIONS
Year Ended December 31, 1999
<TABLE>
<S> <C>
Investment income:
Interest..................................... $ 26,958
Dividends.................................... 60,747
--------
Total investment income.................... 87,705
--------
Expenses:
Management fees (note 3)..................... 32,127
Custodian fees (note 3)...................... 4,809
Directors' fees (note 3)..................... 350
Professional fees............................ 1,599
Accounting and transfer agent fees........... 6,077
Other........................................ 2,869
--------
Total expenses............................. 47,831
--------
Net investment income...................... $ 39,874
--------
Realized and unrealized gain (loss) on
investments:
Net realized loss from investments........... $(51,251)
Net increase in unrealized appreciation on
investments................................ 71,069
--------
Net gain on investments.................... 19,818
--------
Net increase in net assets from
operations............................... $ 59,692
========
</TABLE>
- ---------------
(a) Prior to 5/1/99 the portfolio was known as the Stellar Portfolio.
The accompanying notes are an integral part of these financial statements.
78
<PAGE> 169
OHIO NATIONAL FUND, INC.
FIRSTAR GROWTH & INCOME PORTFOLIO (A)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEARS ENDED
-----------------------
1999 1998
---------- ----------
<S> <C> <C>
From operations:
Net investment income..................................... $ 39,874 $ 115,681
Realized gain (loss) on investments....................... (51,251) 20,231
Unrealized appreciation (depreciation) on investments..... 71,069 (54,343)
---------- ----------
Net increase in net assets from operations............ 59,692 81,569
---------- ----------
Dividends and distributions to shareholders:
Dividends paid from net investment income................. (41,725) (114,147)
Capital gains distributions............................... 0 (14,635)
---------- ----------
Total Distributions................................... (41,725) (128,782)
---------- ----------
From capital share transactions (note 4):
Received from shares sold................................. 437,571 1,063,702
Received from dividends reinvested........................ 41,725 128,782
Paid for shares redeemed.................................. (796,078) (346,843)
---------- ----------
Increase (decrease) in net assets derived from capital
share transactions................................... (316,782) 845,641
---------- ----------
Increase (decrease) in net assets.................. (298,815) 798,428
Net Assets:
Beginning of period....................................... 3,604,976 2,806,548
---------- ----------
End of period (a)......................................... $3,306,161 $3,604,976
========== ==========
(a) Includes undistributed net investment income of......... $ 0 $ 1,772
========== ==========
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Per share data:
Net asset value, beginning of period........................ $10.56 $10.65 $10.00
Income from investment operations:
Net investment income..................................... 0.12 0.37 0.32
Net realized and unrealized gain (loss) on investments.... 0.06 (0.07) 0.64
------ ------ ------
Total income from investment operations................. 0.18 0.30 0.96
------ ------ ------
Less distributions:
Dividends from net investment income...................... (0.12) (0.35) (0.31)
Distributions from net realized capital gains............. 0.00 (0.04) 0.00
------ ------ ------
Total distributions..................................... (0.12) (0.39) (0.31)
------ ------ ------
Net asset value, end of period.............................. $10.62 $10.56 $10.65
====== ====== ======
Total return................................................ 1.76% 2.92% 9.70%
Ratios and supplemental data:
Ratio of expenses to average net assets................... 1.39% 1.43% 1.54%
Ratio of net investment income to average net assets...... 1.16% 3.53% 3.07%
Portfolio turnover rate..................................... 197% 81% 17%
Net assets at end of period (millions)...................... $ 3.3 $ 3.6 $ 2.8
</TABLE>
- ---------------
(a) Prior to 5/1/99 the portfolio was known as the Stellar Portfolio.
The accompanying notes are an integral part of these financial statements.
79
<PAGE> 170
OHIO NATIONAL FUND, INC.
RELATIVE VALUE PORTFOLIO
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, 1999
<TABLE>
<S> <C>
TOTAL RETURN:
One-year 7.43%
Three-year 18.49%
Since inception (1/3/97) 18.54%
</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
During the past twelve months the equity market continued its upward trend
despite significant market volatility. In this environment the portfolio
performed better than its peers, producing a return through November 30, 1999 of
12.2% on a net asset value basis. This compares to a return of 11.6% for the
average comparable fund as reported by Lipper Analytical Service, Inc. The
portfolio's "value" based investment strategy traditionally identifies companies
with below average volatility, low price-to-earnings ratio and above average
dividend yields. This strategy has produced consistent returns, and no changes
are planned.
As we look towards the future and 2000 in particular, we see a U.S. economy that
will continue to grow, but at a somewhat slower pace than in past years.
Consumer confidence is high but consumers also face a heavy debt burden. We
expect further Fed tightening, which combined with rising energy prices makes
likely a fairly sharp slowdown in the rate of consumer spending growth as we
progress through the year.
CHANGE IN VALUE OF $10,000 INVESTMENT
[RELATIVE VALUE LINE GRAPH]
<TABLE>
<CAPTION>
RELATIVE VALUE PORTFOLIO (COMMENCED
OPERATIONS JANUARY 3, 1997) S&P 500 INDEX
----------------------------------- -------------
<S> <C> <C>
10000.00 10000.00
'97' 11628.00 12060.00
12828.00 13336.00
'98' 14213.40 15697.70
15485.50 17146.70
'99' 16959.80 19269.40
16635.80 20755.10
</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, 1999
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Intel Corporation 6.93
2. Broadwing Inc 6.52
3. International Business Machines
Corporation 5.82
4. The Procter & Gamble Company 5.07
5. Lucent Technologies Inc. 4.41
6. General Electric Company 4.30
7. Citigroup Inc 3.68
8. Texaco Inc 2.74
9. Smithkline Beecham 2.71
10. Bristol-Myers Squibb Company 2.70
</TABLE>
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Communications 14.96
2. Computer & Related 12.74
3. Oil, Energy, and Natural Gas 11.18
4. Consumer Products 9.76
5. Drugs 9.28
</TABLE>
80
<PAGE> 171
OHIO NATIONAL FUND, INC.
RELATIVE VALUE PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
AEROSPACE (2.3%)
4,812 Honeywell International Inc. ..... $ 277,592
------------
APPLIANCES (1.1%)
2,000 Whirlpool Corp. .................. 130,125
------------
AUTOMOTIVE & RELATED (2.8%)
2,500 Ford Motor Co. ................... 133,594
1,500 General Motors Corp. ............. 109,031
3,000 Goodyear Tire & Rubber Co. ....... 84,563
------------
327,188
------------
BANKING (9.2%)
5,613 Amsouth Bancorporation............ 108,401
6,000 Bank of New York Inc. ............ 240,000
3,000 Bank America Corp. ............... 150,563
6,000 First Financial Bancorp........... 128,250
4,500 First Tennessee National.......... 128,250
4,000 Mellon Bank Corp. ................ 136,250
3,500 North Fork Bancorp................ 61,250
2,000 PNC Bank Corp. ................... 89,000
2,000 TCF Financial Corp. .............. 49,750
------------
1,091,714
------------
COMMUNICATIONS (13.1%)
5,000 AT&T Corp. ....................... 253,750
21,000 BroadWing Inc. ................... 774,375
7,000 Lucent Technologies Inc. ......... 523,688
------------
1,551,813
------------
COMPUTER & RELATED (12.7%)
10,000 Intel Corp. ...................... 823,125
6,400 Intl. Business Machines Corp. .... 691,200
------------
1,514,325
------------
CONSUMER PRODUCTS (9.8%)
2,500 Eastman Kodak Co. ................ 165,625
5,000 Gillette Co. ..................... 205,937
8,000 Philip Morris Cos. Inc. .......... 185,500
5,500 Procter & Gamble Co. ............. 602,594
------------
1,159,656
------------
DRUGS (6.6%)
4,000 American Home Products Corp. ..... 157,750
5,000 Bristol Myers Squibb Co. ......... 320,938
4,500 Merck & Co. Inc. ................. 301,780
------------
780,468
------------
ELECTRICAL EQUIPMENT (4.8%)
3,300 General Electric Co. ............. 510,675
1,000 Johnson Controls Inc. ............ 56,875
------------
567,550
------------
FOOD & RELATED (1.8%)
6,000 Monsanto Co. ..................... 213,750
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
FINANCIAL SERVICES (7.8%)
1,500 American Express Co. ............. $ 249,375
7,875 Citigroup Inc. ................... 437,555
6,000 Union Planters Corp. ............. 236,625
------------
923,555
------------
INSURANCE SERVICES (3.1%)
5,000 Cincinnati Financial Corp. ....... 155,937
13,000 Ohio Casualty Corp. .............. 208,813
------------
364,750
------------
OIL, ENERGY & NATURAL GAS (9.6%)
3,000 Atlantic Richfield Co. ........... 259,500
2,000 Duke Energy Corp. ................ 100,250
3,960 Exxon Mobil Corp. ................ 319,028
6,000 Texaco Inc. ...................... 325,875
4,000 Texas Utilities Co. .............. 142,250
------------
1,146,903
------------
RETAIL (1.7%)
4,000 Federated Department Stores 202,250
------------
UTILITIES (3.7%)
6,000 Cinergy Corp. .................... 144,750
3,000 GPU Inc. ......................... 89,812
3,000 GTE Corp. ........................ 211,687
------------
446,249
------------
TOTAL U.S. COMMON STOCK (90.1%)
(COST $8,357,797)................ $ 10,697,888
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES FOREIGN COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
UNITED KINGDOM (4.6%)
COMMUNICATIONS (1.9%)
1,000 Cable & Wireless Pub Co. Ltd.
ADR.............................. $ 52,937
3,500 Vodafone Group PLC ADR............ 173,250
------------
226,187
------------
DRUGS (2.7%)
5,000 SmithKline Beecham PLC ADR CL A... 322,188
------------
TOTAL UNITED KINGDOM.............. 548,375
------------
NETHERLANDS (1.5%)
OIL, ENERGY & NATURAL GAS (1.5%)
3,000 Royal Dutch Pete Co. NY Reg.
1.25............................. 181,313
------------
TOTAL FOREIGN COMMON STOCK (6.1%)
(COST $483,597).................. $ 729,688
------------
TOTAL COMMON STOCK (96.2%) (COST
$8,841,394)...................... $ 11,427,576
------------
</TABLE>
(continued)
81
<PAGE> 172
OHIO NATIONAL FUND, INC.
RELATIVE VALUE PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS VALUE
- -------------------------------------------------------------
<C> <S> <C>
FINANCIAL (3.8%)
$ 455,000 Firstar 1.000% 01/03/00 repurchase
price $455,037 collateralized by
GNMA certificates pool # 8375 due
02/20/24 (cost $455,000).......... $ 455,000
-----------
TOTAL REPURCHASE AGREEMENTS (3.8%)
(COST $455,000)................... $ 455,000
-----------
TOTAL HOLDINGS (100.0%) (COST
$9,296,394) (A)................... $11,882,576
-----------
LIABILITIES, NET OF CASH &
RECEIVABLES (0.0%)................ (752)
-----------
TOTAL NET ASSETS (100.0%).......... $11,881,824
===========
</TABLE>
- ---------------
(a) Represents cost for financial reporting and federal income tax purposes. See
Note 1.
The accompanying notes are an integral part of these financial statements.
82
<PAGE> 173
OHIO NATIONAL FUND, INC.
RELATIVE VALUE PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
Assets:
Investments in securities at market value
(note 1) (cost $9,296,394).............. $11,882,576
Cash in bank.............................. 533
Dividends and accrued interest
receivable.............................. 18,464
-----------
Total assets............................ 11,901,573
-----------
Liabilities:
Payable for fund shares redeemed.......... 3,651
Payable for investment management services
(note 3)................................ 9,087
Other accrued expenses.................... 7,011
-----------
Total liabilities....................... 19,749
-----------
Net assets at market value.................. $11,881,824
===========
Net assets consist of:
Par value, $1 per share................... $ 743,411
Paid-in capital in excess of par value.... 8,731,876
Accumulated net realized loss on
investments (note 1).................... (179,592)
Net unrealized appreciation on investments
(note 1)................................ 2,586,182
Return of capital......................... (53)
-----------
Net assets at market value.................. $11,881,824
===========
Shares outstanding (note 4)................. 743,411
Net asset value per share................... $ 15.98
===========
</TABLE>
STATEMENT OF OPERATIONS
Year Ended December 31, 1999
<TABLE>
<S> <C>
Investment income:
Interest.................................... $ 15,639
Dividends................................... 194,521
---------
Total investment income................... 210,160
---------
Expenses:
Management fees (note 3).................... 100,255
Custodian fees (note 3)..................... 4,819
Directors' fees (note 3).................... 350
Professional fees........................... 1,599
Accounting and transfer agent fees.......... 7,952
Other....................................... 2,443
---------
Total expenses............................ 117,418
---------
Net investment income..................... $ 92,742
---------
Realized and unrealized gain (loss) on
investments:
Net realized loss from investments.......... $(169,231)
Net increase in unrealized appreciation on
investments............................... 842,413
---------
Net gain on investments................... 673,182
---------
Net increase in net assets from
operations.............................. $ 765,924
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
83
<PAGE> 174
OHIO NATIONAL FUND, INC.
RELATIVE VALUE PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEARS ENDED
-------------------------
1999 1998
----------- -----------
<S> <C> <C>
From operations:
Net investment income..................................... $ 92,742 $ 105,388
Realized gain (loss) on investments....................... (169,231) 83,624
Unrealized appreciation on investments.................... 842,413 979,715
----------- -----------
Net increase in assets from operations................ 765,924 1,168,727
----------- -----------
Dividends and distributions to shareholders:
Dividends paid from net investment income................. (92,742) (105,730)
Capital gains distributions............................... 0 (91,539)
Return of capital......................................... (53) 0
----------- -----------
Total dividends and distributions..................... (92,795) (197,269)
----------- -----------
From capital share transactions (note 4):
Received from shares sold................................. 2,841,978 6,696,273
Received from dividends reinvested........................ 92,795 197,269
Paid for shares redeemed.................................. (1,735,051) (3,589,324)
----------- -----------
Increase in net assets derived from capital share
transactions......................................... 1,199,722 3,304,218
----------- -----------
Increase in net assets............................. 1,872,851 4,275,676
Net Assets:
Beginning of period....................................... 10,008,973 5,733,297
----------- -----------
End of period............................................. $11,881,824 $10,008,973
=========== ===========
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Per share data:
Net asset value, beginning of period........................ $15.02 $12.68 $10.00
Income from investment operations:
Net investment income..................................... 0.13 0.15 0.16
Net realized and unrealized gain on investments........... 1.01 2.48 2.66
------ ------ ------
Total income from investment operations................. 1.14 2.63 2.82
------ ------ ------
Less distributions:
Dividends from net investment income...................... (0.18) (0.15) (0.14)
Distributions from net realized capital gains............. 0.00 (0.14) 0.00
------ ------ ------
Total distributions..................................... (0.18) (0.29) (0.14)
------ ------ ------
Net asset value, end of period.............................. $15.98 $15.02 $12.68
====== ====== ======
Total return................................................ 7.43% 20.72% 28.28%
Ratios and supplemental data:
Ratio of expenses to average net assets................... 1.06% 1.08% 1.18%
Ratio of net investment income to average net assets...... 0.84% 1.19% 1.35%
Portfolio turnover rate..................................... 9% 54% 7%
Net assets at end of period (millions)...................... $ 11.9 $ 10.0 $ 5.7
</TABLE>
The accompanying notes are an integral part of these financial statements.
84
<PAGE> 175
OHIO NATIONAL FUND, INC.
BLUE CHIP PORTFOLIO
OBJECTIVE
The Blue Chip Portfolio seeks growth of capital and income by investing in
securities of high quality companies.
PERFORMANCE AS OF DECEMBER 31, 1999
<TABLE>
<S> <C>
TOTAL RETURN:
One-Year 5.86%
Since inception (5/1/98) 5.19%
</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 great bull market of the 1990s rolled on in 1999 as the S&P 500 returned
21.0%. This was an unprecedented fifth consecutive year of 20+% returns for the
S&P 500. However, like 1998, the market's advance was narrow as a handful of
Technology stocks led the market. 1999 was an extremely difficult year for value
managers. Across the entire capitalization spectrum, growth stocks ruled on the
strength of the Technology sector. The Large-Cap Russell 1000 Growth Index
returned 33.1% while the Russell 1000 Value Index returned 7.3%, the Russell
Midcap Growth Index returned 51.2% while the Midcap Value Index returned -0.1%
and the Russell 2000 Growth Index returned 43.1% while Value Index returned
- -1.5%. Eleven stocks, nine of which were Technology related, provided two-thirds
of the S&P 500's return of 21.0%. The year-end run-up by Technology was
awe-inspiring. During the last 52 trading days of the year, the NASDAQ 100 Index
returned 57% and the Goldman Sachs Internet Index returned 63%. The market's
obsession with the Internet and the build-out of the Internet infrastructure has
created one of the most challenging market environments of the century. For
those companies which appear to be positioned correctly for the "new" economy,
valuation does not matter and no price is high enough to pay to participate. On
the other side of the ledger, there appears in the market no price low enough to
own those stocks which are out of favor. Over one-third of the stocks in the
Ohio National Blue Chip Portfolio are now trading at less than 11 times next
year's earnings. The S&P 500 currently trades at 30 times next year's earnings.
The Ohio National Blue Chip Portfolio returned 5.86% for the year,
underperforming our peer Lipper Multi-Cap Value Funds which returned 7.78%. The
fund's performance was impacted by an underweight in the Technology sector as
well as disappointing performances from a number of our Capital Goods and
Financial holdings. In those sectors our value disciplines led us to some of the
attractively valued second tier names which did not perform as well as the
ultra-large but less attractively valued leaders. We are obviously not pleased
with this year's performance but we maintain faith in the value disciplines
which have served us well over the long term -- identifying leading companies
which are temporarily out of favor and appear inexpensive relative to their
history relative to the market, as well as to their expected growth.
Our stock market outlook remains basically unchanged -- the market appears
overvalued by all traditional measures, but no visible catalyst is positioned to
change this. The recent parabolic run-up in the Technology and Internet areas of
the market definitely make us nervous as the speculation present in a large
portion of these names is unprecedented in our lifetimes. However, valuations
and fundamentals outside this area of the market seem reasonable and sustainable
given the healthy global economic environment as well as the muted inflationary
pressures in our own economy. In the financial and cyclical segments of the
market, valuations are extremely compelling, with many names trading between 7
and 11 times next year's earnings. Given the valuation disparities between the
"haves" and "have nots", combined with the speculative bubble which continues to
grow in the areas of the market mentioned above, we believe that there is a high
probability of the market rotating back towards more reasonably valued stocks
despite what happens to the market directionally. We believe that the Ohio
National Blue Chip Portfolio is well positioned if such a rotation were to
occur.
85
<PAGE> 176
OHIO NATIONAL FUND, INC.
BLUE CHIP PORTFOLIO
CHANGE IN VALUE OF $10,000 INVESTMENT
<TABLE>
<CAPTION>
BLUE CHIP PORTFOLIO (COMMENCED
OPERATIONS MAY 1, 1998) S&P 500 INDEX
------------------------------ -------------
<S> <C> <C>
'5/98' 10000.00 10000.00
'6/98' 10024.00 10143.00
'12/98' 10254.50 11079.20
'6/99' 11456.40 12450.80
'12/99' 10860.60 13410.80
</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, 1999
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Sun Microsystems Inc 2.75
2. GTE Corporation 1.92
3. Motorola Inc 1.85
4. U.S. West Inc 1.81
5. A T & T CORP 1.80
6. Kimberly-Clark Corp 1.77
7. First Data Corp 1.75
8. Exxon Mobil Corp 1.68
9. Novell Inc 1.66
10. Viacom Inc Cl A 1.64
</TABLE>
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Computer & Related 12.28
2. Oil, Energy, and Natural Gas 6.57
3. Consumer Products 6.37
4. Financial Services 5.58
5. Insurance Services 5.46
</TABLE>
86
<PAGE> 177
OHIO NATIONAL FUND, INC.
BLUE CHIP PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
AEROSPACE (2.7%)
1,600 Boeing Company........................ $ 66,500
1,100 Honeywell Intl. Inc. ................. 63,456
----------
129,956
----------
AUTOMOTIVE & RELATED (3.2%)
889 Delphi Automotive Systems............. 14,002
900 Ford Motor Co. ....................... 48,094
700 General Motors Corp. ................. 50,881
700 Johnson Controls Inc. ................ 39,812
----------
152,789
----------
BANKING (2.9%)
1,000 Bank of America Corp. ................ 50,188
1,200 First Union Corp. .................... 39,375
1,900 Washington Mutual Inc. ............... 49,400
----------
138,963
----------
BROADCAST RADIO & TV (1.6%)
1,215 *CBS Corp. ........................... 77,684
----------
BUSINESS SERVICES (1.8%)
1,700 First Data Corp. ..................... 83,831
----------
COMMUNICATIONS (4.6%)
600 Motorola Inc. ........................ 88,350
900 SBC Communications Inc. .............. 43,875
1,200 U.S. West Inc. ....................... 86,400
----------
218,625
----------
COMPUTER & RELATED (12.3%)
800 *Computer Sciences Corp. ............. 75,700
1,100 Electronic Data Systems Corp. ........ 73,631
700 Intl. Business Machines Co. .......... 75,600
2,000 *Novell Inc. ......................... 79,625
1,300 *Seagate Technology Inc. ............. 60,531
2,500 *Storage Technology Corp. ............ 46,094
1,700 *Sun Microsystems Inc. ............... 131,644
1,400 *Unisys Corp. ........................ 44,712
----------
587,537
----------
CONSUMER PRODUCTS (6.4%)
1,200 Deere & Co. .......................... 52,050
600 Eastman Kodak Co. .................... 39,750
1,300 Kimberly-Clark Corp. ................. 84,825
800 Liz Claiborne Inc. ................... 30,100
1,400 Phillip Morris Co. Inc. .............. 32,462
2,600 UST Inc. ............................. 65,488
----------
304,675
----------
CONTAINERS (0.4%)
2,000 *Pactiv Corp. ........................ 21,250
----------
DRUGS (3.3%)
1,300 Abbott Laboratories................... 47,206
700 Merck & Co. Inc. ..................... 46,944
1,400 Pharmacia & Upjohn Inc. .............. 63,000
----------
157,150
----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
ELECTRICAL EQUIPMENT (2.6%)
800 FPL Group Inc. ....................... $ 34,250
1,300 Peco Energy Co. ...................... 45,175
2,000 Reliant Energy Inc. .................. 45,750
----------
125,175
----------
ENTERTAINMENT & LEISURE (2.0%)
800 Brunswick Corp. ...................... 17,800
1,300 *Viacom Inc. CL A..................... 78,569
----------
96,369
----------
FINANCIAL SERVICES (5.6%)
1,302 Bear Stearns Co. Inc. ................ 55,661
3,000 CIT Group Inc. CL A................... 63,375
700 CIGNA Corp. .......................... 56,394
1,000 H & R Block Inc. ..................... 43,750
900 MBIA Inc. ............................ 47,531
----------
266,711
----------
FOOD & RELATED (3.7%)
700 Anheuser Busch Co. Inc. .............. 49,613
1,800 Corn Products Intl. Inc. ............. 58,950
1,500 Nabisco Group Holdings................ 15,937
2,400 *Sara Lee Corp. ...................... 52,950
----------
177,450
----------
INDUSTRIAL SERVICES (3.7%)
2,600 Archer-Daniels Midland Co. ........... 31,688
700 *Lexmark Intl. Group CL A............. 63,350
1,100 Nucor Corp. .......................... 60,294
1,352 Waste Management Inc. ................ 23,237
----------
178,569
----------
INSURANCE SERVICES (5.5%)
1,400 Allstate Corp. ....................... 33,600
4,124 Conseco Inc. ......................... 73,717
1,200 Lincoln National Corp. ............... 48,000
800 Loews Corp. .......................... 48,550
600 Marsh & McLennan Co. Inc. ............ 57,412
----------
261,279
----------
MACHINERY (1.0%)
900 Ingersoll-Rand Co. ................... 49,556
----------
MANUFACTURING (4.9%)
800 PPG Industries Inc. .................. 50,050
1,300 Parker Hannifin Corp. ................ 66,706
800 Textron Inc. ......................... 61,350
1,466 Tyco International Ltd. .............. 56,991
----------
235,097
----------
MEDIA & PUBLISHING (1.0%)
800 Knight Ridder Inc. ................... 47,600
----------
</TABLE>
(continued)
87
<PAGE> 178
OHIO NATIONAL FUND, INC.
BLUE CHIP PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
MEDICAL & RELATED (4.5%)
900 Baxter International Inc. ............ $ 56,531
800 Bristol-Myers Squibb Co. ............. 51,350
4,200 Healthsouth Corp. .................... 22,575
2,000 *Oxford Health Plans Inc. ............ 25,375
1,100 United Healthcare Corp. .............. 58,438
----------
214,269
----------
OIL, ENERGY & NATURAL GAS (5.4%)
1,200 Ashland Inc. ......................... 39,525
1,000 Diamond Offshore Drilling............. 30,563
996 Exxon Mobil Corp. .................... 80,240
900 Schlumberger Ltd. .................... 50,625
1,000 Sunoco Inc. .......................... 23,500
174 Transocean Sedco Forex Inc. .......... 5,882
1,200 USX-Marathon Group.................... 29,625
----------
259,960
----------
RESTAURANTS (0.7%)
800 *Tricon Global Restaurants Inc. ...... 30,900
----------
RETAIL (4.0%)
700 Federated Department Stores........... 35,394
2,300 *K Mart Corp. ........................ 23,144
1,600 Sherwin-Williams Co. ................. 33,600
3,000 *Toys 'R' Us Inc. .................... 42,937
800 Wal-Mart Stores Inc. ................. 55,300
----------
190,375
----------
RUBBER-TIRES (0.4%)
1,200 Cooper Tire & Rubber.................. 18,675
----------
TELECOMMUNICATIONS & CELLULAR (2.9%)
1,700 AT&T Corp. ........................... 86,275
1,100 Bellsouth Corp. ...................... 51,494
----------
137,769
----------
TRANSPORTATION & EQUIPMENT (0.9%)
1,000 Union Pacific Corp. .................. 43,625
----------
TRAVEL & VACATIONS (0.8%)
1,300 Galileo International Inc. ........... 38,918
----------
UTILITIES (4.2%)
1,600 Entergy Corp. ........................ 41,200
1,300 GTE Corp. ............................ 91,731
1,300 PG&E Corp. ........................... 26,650
1,200 Public Service Enterprises Group 41,775
----------
201,356
----------
TOTAL U.S. COMMON STOCK (93.0%) (COST
$4,304,341).......................... $4,446,113
----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES FOREIGN COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
NETHERLANDS (2.7%)
ELECTRICAL EQUIPMENT (1.6%)
568 Philips Electronics................... $ 76,680
OIL, ENERGY & NATURAL GAS (1.1%)
900 Royal Dutch Petroleum Co. ADR 54,394
----------
TOTAL NETHERLANDS..................... 131,074
----------
TOTAL FOREIGN COMMON STOCK (2.7%)
(COST $97,513) $ 131,074
----------
TOTAL COMMON STOCK (95.7%) (COST
$4,401,854).......................... $4,577,187
----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES FOREIGN PREFERRED STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
AUSTRALIA (1.6%)
MEDIA & PUBLISHING
2,300 News Corp. Ltd. ADR................... $ 76,906
----------
TOTAL FOREIGN PREFERRED STOCK (1.6%)
(COST $56,441)....................... $ 76,906
----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS VALUE
- -------------------------------------------------------------
<C> <S> <C>
FINANCIAL (4.3%)
$206,000 Firstar 1.00% due 01/03/00 repurchase
price $206,017 collateralized by GNMA
certificates pool # 8375 due 02/20/24
(cost $206,000) $ 206,000
----------
TOTAL REPURCHASE AGREEMENTS (4.3%)
(COST $206,000)...................... $ 206,000
----------
TOTAL HOLDINGS (101.6%) (COST
$4,664,295) (A) $4,860,093
----------
LIABILITIES, NET OF CASH & RECEIVABLES
(-1.6%).............................. (76,119)
----------
TOTAL NET ASSETS (100.0%)............. $4,783,974
==========
</TABLE>
- ---------------
* Non-income producing securities.
ADR (American depository receipt) represents ownership of foreign securities.
(a) Represents cost for financial reporting purposes and differs from cost for
federal income tax purposes. See Note 1.
The accompanying notes are an integral part of these financial statements.
88
<PAGE> 179
OHIO NATIONAL FUND, INC
BLUE CHIP PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
Assets:
Investments in securities at market value
(note 1) (cost $4,664,295)............... $4,860,093
Cash in bank............................... 866
Receivable for securities sold............. 2,025
Receivable for fund shares sold............ 33
Dividends and accrued interest
receivable............................... 5,668
----------
Total assets............................. 4,868,685
----------
Liabilities:
Payable for fund shares redeemed........... 72,050
Payable for investment management services
(note 3)................................. 3,533
Other accrued expenses..................... 9,128
----------
Total liabilities........................ 84,711
----------
Net assets at market value................... $4,783,974
==========
Net assets consist of:
Par value, $1 per share.................... $ 448,944
Paid-in capital in excess of par value..... 4,128,142
Accumulated net realized gain on
investments (note 1)..................... 11,077
Net unrealized appreciation on investments
(note 1)................................. 195,798
Undistributed net investment income........ 13
----------
Net assets at market value................... $4,783,974
==========
Shares outstanding (note 4).................. 448,944
Net asset value per share.................... $ 10.66
==========
</TABLE>
STATEMENT OF OPERATIONS
Year Ended December 31, 1999
<TABLE>
<S> <C>
Investment income:
Interest..................................... $ 5,941
Dividends.................................... 64,604
--------
Total investment income.................... 70,545
--------
Expenses:
Management fees (note 3)..................... 33,744
Custodian fees (note 3)...................... 4,793
Directors' fees (note 3)..................... 347
Professional fees............................ 1,494
Accounting and transfer agent fees........... 8,122
Other........................................ 2,084
--------
Total expenses............................. 50,584
--------
Net investment income...................... $ 19,961
--------
Realized and unrealized gain on investments:
Net realized gain from investments........... $ 82,632
Net increase in unrealized appreciation on
investments................................ 85,697
--------
Net gain on investments.................... 168,329
--------
Net increase in net assets from
operations............................... $188,290
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
89
<PAGE> 180
OHIO NATIONAL FUND, INC
BLUE CHIP PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED MAY 1, 1998 TO
1999 DECEMBER 31, 1998
----------- -----------------
<S> <C> <C>
From operations:
Net investment income..................................... $ 19,961 $ 3,914
Realized gain (loss) on investments....................... 82,632 (18,271)
Unrealized appreciation on investments.................... 85,697 110,101
----------- ----------
Net increase in net assets from operations............ 188,290 95,744
----------- ----------
Dividends and distributions to shareholders:
Dividends paid from net investment income................. (19,948) (4,115)
Capital gains distributions............................... (53,285) 0
----------- ----------
Total dividends and distributions..................... (73,233) (4,115)
----------- ----------
From capital share transactions (note 4):
Received from shares sold................................. 3,047,439 2,842,759
Received from dividends reinvested........................ 73,233 4,115
Paid for shares redeemed.................................. (1,330,868) (59,390)
----------- ----------
Increase in net assets derived from capital share
transactions......................................... 1,789,804 2,787,484
----------- ----------
Increase in net assets............................. 1,904,861 2,879,113
----------- ----------
Net Assets:
Beginning of period....................................... 2,879,113 0
----------- ----------
End of period............................................. $ 4,783,974 $2,879,113
=========== ==========
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED MAY 1, 1998 TO
1999 DECEMBER 31, 1998
----------- -----------------
<S> <C> <C>
Per share data:
Net asset value, beginning of period........................ $ 10.22 $ 10.00
Income from investment operations:
Net investment income..................................... 0.05 0.00
Net realized and unrealized gain on investments........... 0.56 0.23
----------- ----------
Total income from investment operations................. 0.61 0.23
----------- ----------
Less distributions:
Dividends from net investment income...................... (0.05) (0.01)
Distributions from net realized capital gains............. (0.12) 0.00
----------- ----------
Total distributions................................... (0.17) (0.01)
----------- ----------
Net asset value, end of period.............................. $ 10.66 $ 10.22
=========== ==========
Total return................................................ 5.86% 2.34%(b)
Ratios and supplemental data:
Ratios net of fees reimbursed by advisor:
Ratio of expenses to average net assets................. 1.35% 1.84%(a,c)
Ratio of net investment income to average net assets.... 0.53% 0.25%(a,c)
Ratios assuming no fees reimbursed by advisor:
Ratios of expenses to average net assets................ 1.35% 2.26%(a,c)
Portfolio turnover rate..................................... 29% 32%
Net assets at end of period (millions)...................... $ 4.8 $ 2.9
</TABLE>
- ---------------
(a) Annualized.
(b) Calculated since inception, May 1, 1998. (not annualized).
(c) The advisor has elected to reimburse certain operating expenses of the Blue
Chip portfolio.
The accompanying notes are an integral part of these financial statements.
90
<PAGE> 181
OHIO NATIONAL FUND, INC.
EQUITY INCOME PORTFOLIO
OBJECTIVE
The Equity Income Portfolio seeks above-average income and capital appreciation
by investing primarily in income-producing equity securities
PERFORMANCE AS OF DECEMBER 31, 1999
<TABLE>
<S> <C>
TOTAL RETURN:
One Year 18.58%
Since inception (5/1/98) 15.50%
</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
After a third quarter correction which began in mid-July and ended in
mid-October, the market enjoyed a very strong performance to complete the year.
Including a rise of 14.5% in the fourth quarter, the S&P 500 has just completed
its fifth consecutive year of 20%+ gains. Much like last year, however, this
remarkable performance was attributed to a relatively small number of stocks.
Merrill Lynch reports that just 15 companies provided 100% of the S&P 500's
return in 1999. Nearly 60% of the stocks in the Index had negative returns for
the year. It was also the second consecutive year in which "growth" stocks
dramatically outperformed "value" stocks. According to Ned Davis Research, Inc.,
large-capitalization growth stocks outperformed large-capitalization value
stocks by 25.9% in 1999.
Your Ohio National Equity Income Portfolio had an outstanding year, returning
18.58% compared to the 3.34% return of the average equity income fund, as
reported by Lipper Analytical Services.
This performance has been achieved by consistently choosing market-leading
companies within a strategy of sector weightings similar to that of the S&P 500.
During the late summer/early fall stock market correction, the Ohio National
Equity Income Portfolio outperformed the S&P 500 with it's conservative
strategy. Income is achieved through the use of convertible bonds and preferred
stocks; further, approximately 30% of the fund's holdings is in common stocks
which have raised their dividends in at least each of the last ten years.
The U.S. economy continues to be very strong and international economies are
improving. Such strength has led to inflation fears, as reflected in the rising
yield on the 30-year Treasury bond. The Federal Reserve is expected to increase
short-term interest rates early in the new year, in an effort to cool the
economy and prevent inflation. A "soft landing" with continued low inflation
could allow this longest bull market on record to continue into the new
millennium.
CHANGE IN VALUE OF $10,000 INVESTMENT
[EQUITY INCOME PORTFOLIO]
<TABLE>
<CAPTION>
EQUITY INCOME PORTFOLIO (COMMENCED
OPERATIONS MAY 1, 1998) S&P 500 INDEX
---------------------------------- -------------
<S> <C> <C>
5/98 10000.00 10000.00
6/98 9993.00 10143.00
12/98 10549.60 11079.20
'6/99' 11642.50 12450.80
'12/99' 12516.90 13410.80
</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, 1999
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. EMC Corp. Cnv Bond 3.25%
3/15/02 3.31
2. Motorola Inc 3.03
3. Vertias Software Corp Conv
1.856% 8/13/06 2.77
4. Exxon Mobil 2.51
5. Sun Microsystems Inc 2.48
6. General Electric Co 2.12
7. The Home Depot, Inc., Sub. Note
3.25% 10/01/01 2.00
8. International Business Machines
Corporation 1.98
9. Morgan Stanley 1.96
10. America Online Conv 4.0%
11/15/02 1.84
</TABLE>
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Computer & Related 17.26
2. Communications 12.24
3. Electrical Equipment 5.55
4. Drugs 5.11
5. Finance 4.95
</TABLE>
91
<PAGE> 182
OHIO NATIONAL FUND, INC.
EQUITY INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
AEROSPACE (1.0%)
600 Textron Inc. ......................... $ 46,013
----------
APPLIANCES (0.6%)
400 Whirlpool Corp. ...................... 26,025
----------
AUTOMOTIVE & RELATED (2.1%)
1,300 Cooper Tire and Rubber Co. ........... 20,231
1,300 Ford Motor Co. ....................... 69,469
----------
89,700
----------
BANKING (3.5%)
700 Bank of America Corp. ................ 35,131
600 Chase Manhattan Corp. ................ 46,613
900 First Union Corp. .................... 29,531
1,200 Mellon Financial Corp. ............... 40,875
----------
152,150
----------
BROADCAST RADIO & TV (0.6%)
500 *AT&T Corp.-Liberty Media-A........... 28,375
----------
CHEMICALS (1.6%)
1,092 Duponte (EI) DE Nemours & Co. ........ 71,936
----------
COMMUNICATIONS (10.4%)
900 AT&T Corp. ........................... 45,675
800 *Decs Trust VI 37,200
900 GTE Corp. ............................ 63,506
1,195 *MCI Worldcom Inc. ................... 63,436
900 Motorola Inc. ........................ 132,525
600 Sprint Corp. ......................... 40,388
1,100 *Tellabs Inc. ........................ 70,606
----------
453,336
----------
COMPUTER & RELATED (8.5%)
627 *Apple Computer Inc. ................. 64,463
700 Amdocs Automatic...................... 22,487
400 *Cisco Systems Inc. .................. 42,850
800 Intl. Business Machines Corp. ........ 86,400
500 *Lexmark Intl. Group Inc. CL A........ 45,250
1,400 *Sun Microsystems Inc. ............... 108,413
----------
369,863
----------
CONSUMER PRODUCTS (4.2%)
700 Johnson & Johnson..................... 65,188
1,000 Kimberly Clark Corp. ................. 65,250
500 Procter & Gamble Co................... 54,781
----------
185,219
----------
DRUGS (5.1%)
1,400... Abbott Laboratories................... 50,837
1,000 Bristol-Myers Squibb Co. ............. 64,188
1,000 Pharmacia & Upjohn Inc. .............. 45,000
1,500 Schering-Plough Corp. ................ 63,281
----------
223,306
----------
ELECTRICAL EQUIPMENT (4.0%)
700 Emerson Electric Co. ................. 40,163
600 General Electric Co. ................. 92,850
500 Intel Corp. .......................... 41,156
----------
174,169
----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
ENTERTAINMENT LEISURE (1.2%)
1,800 Walt Disney Co. ...................... $ 52,650
----------
FINANCIAL SERVICES (5.0%)
200 Chubb Corp. .......................... 11,263
500 Citigroup Inc. ....................... 27,781
900 Freddie Mac Federal Home Loan......... 42,356
200 Lincoln National...................... 8,000
500 Merrill Lynch & Co. .................. 41,750
600 Morgan Stanley Dean Witter............ 85,650
----------
216,800
----------
FOOD & RELATED (3.3%)
1,700 General Mills Inc. ................... 60,775
1,000 HJ Heinz Co. ......................... 39,813
1,200 PepsiCo Inc. ......................... 42,300
----------
142,888
----------
FOREIGN (1.2%)
900 British Petro-Amoco ADR............... 53,381
----------
INSURANCE SERVICES (3.1%)
700 Allstate Corp. ....................... 16,800
1,300 Citigroup Inc. ....................... 72,231
500 Marsh & McLennan Co. Inc. ............ 47,844
----------
136,875
----------
MACHINERY (0.5%)
400 Ingersoll-Rand Co. ................... 22,025
MEDICAL & RELATED (2.3%)
700 Baxter International Inc. ............ 43,969
700 Warner-Lambert........................ 57,356
----------
101,325
----------
OFFICE EQUIPMENT (1.4%)
1,300 Pitney Bowes Inc...................... 62,806
----------
OIL, ENERGY & NATURAL GAS (4.5%)
500 Chevron Corp. ........................ 43,312
1,713 Conoco Inc. CL B...................... 42,611
1,360 Exxon Mobil Corp. .................... 109,565
----------
195,488
----------
PUBLISHING & NEWSPAPERS (1.5%)
1,300 New York Times Co. CL A............... 63,862
----------
REAL ESTATE INVESTMENT TRUST (0.4%)
400 Post Properties Inc. ................. 15,300
----------
RETAIL (2.9%)
1,276 Home Depot Inc. ...................... 87,520
2,000 TJX Cos. Inc. ........................ 40,875
----------
128,395
----------
UTILITIES (2.8%)
1,600 Enron Corp. .......................... 71,000
1,052 SBC Communications Inc. .............. 51,285
----------
122,285
----------
TOTAL COMMON STOCK (71.7%)
(COST $2,691,244) $3,134,172
----------
</TABLE>
(continued)
92
<PAGE> 183
OHIO NATIONAL FUND, INC.
EQUITY INCOME PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES PREFERRED STOCKS VALUE
- -------------------------------------------------------------
<C> <S> <C>
BROADCAST RADIO & TV (1.1%)
400 Cox Communications Inc. Conv. Prides
$8.75................................ $ 27,200
200 Cox Communications Conv. Sprint PCS
$7.75................................ 19,450
----------
46,650
----------
CHEMICALS (1.2%)
1,600 Monsanto Co. Conv. $2.60.............. 53,000
----------
COMMUNICATIONS (1.6%)
200 Nextlink Communications Conv. ........ 38,375
300 Sprint PCS Conv. ..................... 29,944
----------
68,319
----------
COMPUTER & RELATED (1.4%)
600 PSINet Inc. Conv. C................... 35,025
500 Verio Inc. Conv. (144A)............... 28,250
----------
63,275
----------
CONSUMER PRODUCTS (0.4%)
500 Ralston Purina Co. 7% Conv. .......... 18,281
----------
CONTAINERS (0.8%)
1,800 Crown Cork & Seal Conv. .............. 37,350
----------
FOOD & RELATED (0.6%)
300 Suiza Foods Corp. $2.75............... 10,350
400 Suiza Foods Corp. Conv. (144A)........ 13,700
----------
24,050
----------
INSURANCE SERVICES (1.3%)
200 Jefferson Pilot 5.25% Conv. .......... 16,750
600 Lincoln Natl. Corp. Prides $1.94...... 13,200
1,200 Conseco Inc. Prides Series F.......... 28,050
----------
58,000
----------
MACHINERY (0.9%)
1,500 Ingersoll Rand Co. 6.75% Conv. ....... 38,250
----------
TRANSPORTATION & EQUIPMENT (0.8%)
800 Union Pacific Cibv.................... 33,300
----------
UTILITIES (0.9%)
900 Texas Utilities Co. Prides $4.62...... 39,263
----------
TOTAL PREFERRED STOCKS
(11.0%) (COST $539,488) $ 479,738
----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES CONVERTIBLE DEBENTURES VALUE
- -------------------------------------------------------------
<C> <S> <C>
COMMUNICATIONS (2.7%)
7,000 America On-line 4.000% 11/15/02....... $ 80,509
5,000 Exodus Communications I 5.000%
03/15/06............................. 38,925
----------
119,434
----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES CONVERTIBLE DEBENTURES VALUE
- -------------------------------------------------------------
<C> <S> <C>
COMPUTER & RELATED (8.5%)
70,000 Citrix Systems Inc. Reg. Shares zero
coupon contracts due 03/22/19........ $ 62,125
50,000 Citrix Systems Inc. (144A) zero coupon
contracts due 03/22/19............... 44,375
15,000 EMC Corp. 3.250% due 03/15/02......... 144,863
45,000 Vertias Software Corp. 1.856%
08/13/06............................. 121,331
----------
372,694
----------
ELECTRONICS/SEMICONDUCTORS (1.6%)
20,000 ASM Lithography (144A) 4.250%
11/30/04............................. 23,125
15,000 LSI Logic Corp. (144A) 4.250%
03/15/04............................. 34,069
5,000 LSI Logic Corp. 4.250% 03/15/04....... 11,356
----------
68,550
----------
INDUSTRIAL SERVICES (0.8%)
5,000 Omnicom Group Inc. 4.250% 01/03/07.... 15,925
10,000 Omnicom Group Inc. 2.250% 01/06/13.... 20,462
----------
36,387
----------
MEDIA & PUBLISHING (0.6%)
20,000 Liberty Media Group (144A) 4.000%
11/15/29............................. 25,200
----------
TOTAL CONVERTIBLE DEBENTURES
(14.2%) (COST $294,944) $ 622,265
----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS VALUE
- -------------------------------------------------------------
<C> <S> <C>
FINANCIAL (3.8%)
$166,000 Firstar 1.000% 01/03/00 repurchase
price $166,014 collateralized by GNMA
certificates pool #8375 due 02/20/24
(cost $166,000)...................... $ 166,000
----------
TOTAL REPURCHASE AGREEMENTS
(3.8%) (COST $166,000)............... $ 166,000
----------
TOTAL HOLDINGS (100.7%)
(COST $3,691,676)(a)................. $4,402,175
----------
LIABILITIES, NET OF CASH &
RECEIVABLES (-0.7%).................. (28,500)
----------
TOTAL NET ASSETS (100.0%)............. $4,373,675
==========
</TABLE>
- ---------------
* Non-income producing securities.
(a) Represents cost for financial reporting and federal income tax purposes. See
Note 1.
(144A) 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 buyers. At the period end, the value
of these securities amounted to $168,719 or 3.9% of net assets. These
securities were deemed liquid pursuant to procedures approved by the
Board of Directors.
The accompanying notes are an integral part of these financial statements.
93
<PAGE> 184
OHIO NATIONAL FUND, INC.
EQUITY INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
Assets:
Investments in securities at market value
(note 1) (cost $3,691,676)............... $4,402,175
Cash in bank............................... 602
Dividends and accrued interest
receivable............................... 4,723
----------
Total assets............................. 4,407,500
----------
Liabilities:
Payable for securities purchased........... 10,925
Payable for fund shares redeemed........... 11,409
Payable for investment management services
(note 3)................................. 2,620
Other accrued expenses..................... 8,871
----------
Total liabilities........................ 33,825
----------
Net assets at market value................... $4,373,675
==========
Net assets consist of:
Par value, $1 per share.................... $ 353,422
Paid-in capital in excess of par value..... 3,386,029
Accumulated net realized loss on
investments (note 1)..................... (76,309)
Net unrealized appreciation on investments
(note 1)................................. 710,499
Undistributed net investment income........ 34
----------
Net assets at market value................... $4,373,675
==========
Shares outstanding (note 4).................. 353,422
Net asset value per share.................... $ 12.38
==========
</TABLE>
STATEMENT OF OPERATIONS
Year Ended December 31, 1999
<TABLE>
<S> <C>
Investment income:
Interest.................................... $ 7,419
Dividends................................... 64,001
--------
Total investment income................... 71,420
--------
Expenses:
Management fees (note 3).................... 22,667
Custodian fees (note 3)..................... 4,767
Directors' fees (note 3).................... 345
Professional fees........................... 1,485
Accounting and transfer agent fees.......... 7,842
Other....................................... 2,074
--------
Total expenses............................ 39,180
--------
Net investment income..................... $ 32,240
--------
Realized and unrealized gain (loss) on
investments:
Net realized loss from investments.......... $(70,596)
Net increase in unrealized appreciation on
investments............................... 592,478
--------
Net gain on investments................... 521,882
--------
Net increase in net assets from
operations.............................. $554,122
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
94
<PAGE> 185
OHIO NATIONAL FUND, INC.
EQUITY INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED MAY 1, 1998 TO
1999 DECEMBER 31, 1998
----------- -----------------
<S> <C> <C>
From operations:
Net investment income..................................... $ 32,240 $ 13,678
Realized loss on investments.............................. (70,596) (5,714)
Unrealized appreciation on investments.................... 592,478 118,021
----------- ----------
Net increase in net assets from operations............ 554,122 125,985
----------- ----------
Dividends and distributions to shareholders:
Dividends paid from net investment income................. (32,206) (13,781)
----------- ----------
From capital share transactions (note 4):
Received from shares sold................................. 2,198,205 2,160,574
Received from dividends reinvested........................ 32,206 13,781
Paid for shares redeemed.................................. (598,466) (66,745)
----------- ----------
Increase in net assets derived from capital share
transactions......................................... 1,631,945 2,107,610
----------- ----------
Increase in net assets............................. 2,153,861 2,219,814
Net Assets:
Beginning of period....................................... 2,219,814 0
----------- ----------
End of period............................................. $ 4,373,675 $2,219,814
=========== ==========
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED MAY 1, 1998 TO
1999 DECEMBER 31, 1998
----------- -----------------
<S> <C> <C>
Per share data:
Net asset value, beginning of period........................ $ 10.53 $ 10.00
Income from investment operations:
Net investment income..................................... 0.11 0.07
Net realized and unrealized gain on investments........... 1.85 0.53
----------- ----------
Total income from investment operations................. 1.96 0.60
----------- ----------
Less distributions:
Dividends from net investment income...................... (0.11) (0.07)
----------- ----------
Net asset value, end of period.............................. $ 12.38 $ 10.53
=========== ==========
Total return................................................ 18.58% 5.92%(b)
Ratios and supplemental data:
Ratios net of fees reimbursed by advisor:
Ratio of expenses to average net assets................. 1.28% 1.77%(a,c)
Ratio of net investment income to average net assets.... 1.05% 1.04%(a,c)
Ratios assuming no fees reimbursed by advisor:
Ratio of expenses to average net assets................. 1.28% 2.41%(a,c)
Portfolio turnover rate..................................... 50% 38%
Net assets at end of period (millions)...................... $ 4.4 $ 2.2
</TABLE>
- ---------------
(a) Annualized.
(b) Calculated since inception, May 1, 1998, (not annualized).
(c) The advisor has elected to reimburse certain operating expenses of the
Equity Income portfolio.
The accompanying notes are an integral part of these financial statements.
95
<PAGE> 186
OHIO NATIONAL FUND, INC.
HIGH INCOME BOND PORTFOLIO
OBJECTIVE
The High Income Bond Portfolio seeks high current income by investing primarily
in lower rated corporate debt obligations.
PERFORMANCE AS OF DECEMBER 31, 1999
TOTAL RETURNS:
<TABLE>
<S> <C>
One-year 1.95%
Since inception (5/1/98) 1.10%
</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
High yield bonds generated attractive relative returns in 1999 although absolute
returns were tempered by the general rise in interest rates and increasing
default rates. The spread between the First Boston High Yield Index and US
Treasury securities narrowed approximately 75 basis points as 1998's emerging
market problems did not dampen domestic economic growth in 1999. In fact, strong
economic growth and the resilience of emerging market economies were the primary
drivers in the roughly 175 basis point rise in the yield on 10-year Treasuries,
which dampened the performance of most fixed income securities. Default rates,
which reached their highest level since 1991, also negatively impacted returns
for high yield securities. The rise in default rates, despite a strong economy,
was the result of 1998's decline in energy prices which impacted many energy
companies in early 1999, and the high level of issuance in the 1996-1998 time
period. Historically, there is a correlation between periods of heavy issuance
and defaults on a lagged basis. For the year as a whole, spread tightening
coupled with the higher coupon returns available on high yield securities more
than offset the increase in default losses as the Lehman Brothers High Yield
Bond Index returned 2.39%, outperforming the Lehman Brothers Aggregate Bond
Index, a measure of high quality bond performance, which returned -0.82%.
The fund (adjusted for expenses) outperformed the Lehman Brothers High Yield
Bond Index in 1999. The fund's overweight in the telecommunication sector
positively impacted performance. Strong performers would include Telesystem
International, Triton PCS, Nextel, Teligent and Millicom. The fund's overweight
in cable TV and broadcasting also aided performance. The fund also had a much
lower default rate than the approximately 4% rate for the market as a whole.
Merger and acquisition activity positively impacted total returns as companies
such as Fox Liberty Media and Metronet engaged in transactions which benefited
bondholders. On the negative side, the fund's underweight in energy hurt
performance given the strong rebound in oil prices. Also, positions in Paging
Network, Ameriserve, Pillowtex, Dialog and Revlon negatively impacted
performance based on disappointing financial performance.
Looking into 2000, we believe that strong economic growth worldwide, coupled
with attractive yield spreads, will lead to good relative performance for high
yield bonds. However, possible Fed rate increases to slow the domestic economy
may temper absolute returns. We believe default rates, which increased in 1999
to their highest level in 8 years, will remain above average for the next few
quarters. However, given the high percentage of securities currently trading at
distressed levels, the performance impact of these defaults have, to some
degree, already been felt.
From a portfolio perspective, we continue to like the telecommunications sector
as strong operating gains and consolidation activity provide opportunities for
strong relative returns. We also think that cable TV plant upgrades in both the
US and western Europe will lead to strong performance by fund holdings in
companies such as UPC/United Pan European, NTL and Charter Communications. We
also believe that specific fund holdings in healthcare and chemicals, which
underperformed in 1999, are poised to rebound in 2000.
CHANGE IN VALUE OF $10,000 INVESTMENT
<TABLE>
<CAPTION>
HIGH INCOME BOND PORTFOLIO
(COMMENCED OPERATIONS MAY 1, 1998) MERRILL LYNCH HIGH-YIELD BOND INDEX
---------------------------------- -----------------------------------
<S> <C> <C>
5/98 10000.00 10000.00
6/98 10090.00 10118.00
12/98 9958.83 10036.00
6/99 10172.00 10312.00
12/99 10157.70 10312.00
</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.
96
<PAGE> 187
OHIO NATIONAL FUND, INC.
HIGH INCOME BOND PORTFOLIO
TOP 10 HOLDINGS AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Chancellor Media Corp. 8.125%
12/15/07 2.39
2. Tenet Healthcare Corporation,
Sr Sub 144a 8.125% 12/01/08 1.89
3. NTL Incorporated, Sr Deferred
0% Coupon until 4/1/03 then
9.75% 4/1/08 1.82
4. Premier Parks, Inc. 0% Coupon
until 4/1/03 then 10.00% 4/1/08 1.79
5. Level 3 Communications, Inc.,
Sr Note 9.125% 5/01/08 1.70
6. Polymer Group, Inc. 8.75%
3/1/08 1.53
7. Sinclair Broadcast Group, Inc.
8.75% 12/15/07 1.48
8. McLeodusa Inc. 0% Cpn until
3/1/02 then 10.50% 3/1/07 1.47
9. Intermedia Communication Sr
Note 8.60% 6/1/08 1.47
10. Allied Waste North Ameri Sr
Note Series 7 7.625% 11/1/06 1.44
</TABLE>
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
Telecommunications &
1. Cellular 25.09
2. Broadcast Radio & TV 9.04
3. Cable Television 8.13
4. Consumer Products 6.23
5. Medical & Related 6.14
</TABLE>
97
<PAGE> 188
OHIO NATIONAL FUND, INC.
HIGH INCOME BOND PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT LONG-TERM BONDS & NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
ADVERTISING (0.4%)
$ 50,000 Lamar Advertising Co. 8.625%
09/15/07............................ $ 49,250
-----------
AEROSPACE (0.7%)
50,000 Anteon Corp. 12.000% 05/15/09........ 46,750
50,000 Fairchild Corp. 10.750% 04/15/09..... 42,750
-----------
89,500
-----------
AUTOMOTIVE & RELATED (2.8%)
50,000 Aftermarket Technology Series D
12.000% 08/01/04.................... 50,375
100,000 American Axle & Manufacture 9.750%
03/01/09............................ 101,250
50,000 Collins & Aikman Products 11.500%
04/15/06............................ 49,750
50,000 HDA Parts System Inc. 12.00%
08/01/05............................ 45,750
50,000 J.L. French Automotive C 11.500%
06/01/09 (144A)..................... 51,375
50,000 Transportation Mfg. Operation 11.250%
05/01/09............................ 51,500
-----------
350,000
-----------
BANKING (0.4%)
50,000 GS Escrow Corp. 7.125% 08/01/05...... 45,384
-----------
BROADCAST RADIO & TV (9.0%)
100,000 ACME Television 10.875% 09/30/04..... 90,500
50,000 *Big City Radio Inc. due 03/15/05 0%
till 3/15/01 then 11.250%........... 32,500
300,000 Chancellor Media Corp. 8.125%
12/15/07............................ 301,875
100,000 Chancellor Media Corp. 9.000%
10/01/08............................ 104,500
150,000 Echostar DBS Corp. 9.375% 02/01/09... 151,875
150,000 *Fox/Liberty Networks LLC due
08/15/07 0% till 08/01/02 then
9.750%.............................. 121,500
50,000 Orion Network Systems 11.250%
01/15/07............................ 37,750
200,000 Sinclair Broadcast Group 8.750%
12/15/07............................ 187,000
175,000 *United Intl. Holdings Series B due
02/15/08 0% till 02/15/03 then
10.750%............................. 112,875
-----------
1,140,375
-----------
BUILDING & CONSTRUCTION (0.7%)
50,000 Formica Corp. 10.875% 03/01/09....... 46,000
50,000 Juno Lighting Inc. 11.875%
07/01/09............................ 46,750
-----------
92,750
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT LONG-TERM BONDS & NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
BUSINESS SERVICES (3.1%)
$ 50,000 Buhrmann US Inc 12.250% 11/01/09
(144A).............................. $ 52,250
75,000 Dialog Corp. PLC 11.000% 11/15/07.... 36,375
100,000 Fisher Scientific Intl. 9.000%
02/01/08............................ 96,250
100,000 Sitel Corp. NT 9.250% 03/15/06....... 94,625
50,000 URS Corp. 12.250% 05/01/09 (144A).... 52,625
100,000 US Office Products Co. 9.750%
06/15/08............................ 52,500
-----------
384,625
-----------
CABLE TV (9.3%)
175,000 CSC Holdings Inc. 9.250% 11/01/05.... 179,813
100,000 *Charter Communications H due
04/01/11 0% till 04/01/04 then
9.920%.............................. 59,125
125,000 *Diamond Cable Comm. PLC due 02/15/07
0% till 02/15/02 then 10.750%....... 103,125
100,000 Lenfest Communication 8.375%
11/01/05............................ 102,500
325,000 *NTL Inc. due 04/01/08 0% till
04/01/03 then 9.750%................ 229,125
75,000 *NTL Inc. due 10/01/08 0% till
10/01/03 then 12.375%............... 53,063
100,000 Pegasus Communication Series B 9.625%
10/15/05............................ 101,500
50,000 *RCN Corp. Ser. B due 02/15/08 0%
till 02/15/03 then 9.800%........... 32,875
175,000 *Telewest Communication PLC due
10/01/07 0% till 10/01/00 then
11.000%............................. 164,500
200,000 *United Pan-Europe Communications due
08/01/09 0% till 08/01/04 then
12.500%............................. 114,000
50,000 *United Pan-Europe Communications due
11/01/09 0% till 11/01/04 then
13.375% (144A)...................... 28,750
-----------
1,168,376
-----------
CHEMICALS (5.4%)
50,000 General Chemical Ind. Products
10.625% 05/01/09.................... 49,750
50,000 Georgia Gulf Corp. 10.375% 11/01/07
(144A).............................. 52,437
50,000 Huntsman Corp. 9.500% 07/01/07
(144A).............................. 47,750
50,000 Huntsman ICI Chemicals 10.125%
07/01/09 (144A)..................... 51,500
150,000 Lyondell Chemical Co. 10.875%
05/01/09............................ 159,000
200,000 Polymer Group Inc. 8.750% 03/01/08... 193,000
50,000 Sterling Chemicals Inc. 11.750%
08/15/06............................ 37,750
</TABLE>
(continued)
98
<PAGE> 189
OHIO NATIONAL FUND, INC.
HIGH INCOME BOND PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT LONG-TERM BONDS & NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
CHEMICALS (CONTINUED)
$ 50,000 Texas Petrochemicals Corp. 11.125%
07/01/06............................ $ 43,750
50,000 United Industries Corp. 9.875%
04/01/09............................ 46,000
-----------
680,937
-----------
CONSUMER PRODUCTS (6.2%)
75,000 Albecca Inc. 10.750% 08/15/08........ 51,375
100,000 Amscan Holdings Inc. 9.875%
12/15/07............................ 85,000
100,000 Chattem Inc. Series B 8.875%
04/01/08............................ 94,000
100,000 NBTY Inc. 8.625% 09/15/07............ 93,500
100,000 Playtex Family Products Corp. 9.000%
12/15/03............................ 99,750
150,000 Revlon Consumer Products Corp. 8.625%
02/01/08............................ 77,250
50,000 Scotts Co. 8.620% 01/15/09 (144A).... 49,000
125,000 *Sealy Mattress Co. Series B due
12/05/07 0% till 12/15/02 then
10.875%............................. 88,125
50,000 Sleepmaster L.L.C. 11.000% 05/15/09
(144A).............................. 50,312
50,000 True Temper Sports Inc. Ser.B 10.875%
12/01/08............................ 48,000
50,000 Volume Services America 11.250%
03/01/09............................ 49,500
-----------
785,812
-----------
DIVERSIFIED MANUFACTURING (0.4%)
50,000 *Blout Inc. 13.000% 08/01/09
(144A).............................. 53,000
-----------
CONTAINERS (1.2%)
50,000 Packaging Corp. of America 9.625%
04/01/09............................ 51,500
50,000 Russell Stanley Holdings 10.875%
02/15/09............................ 43,750
50,000 Tenki-Plex Inc. 9.250% 03/01/08...... 51,000
-----------
146,250
-----------
ECOLOGICAL SERVICES & EQUIPMENT (2.2%)
200,000 Allied Waste N.A. 7.625% 01/01/06.... 181,000
100,000 Allied Waste N.A. 10.000% 08/01/09
(144A).............................. 89,500
-----------
270,500
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT LONG-TERM BONDS & NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
ELECTRICAL EQUIPMENT (2.7%)
$100,000 Amphenol Corp. 9.875% 05/15/07....... $ 104,500
50,000 SCG Holding Corp. 12.000% 08/01/09
(144A).............................. 53,375
100,000 Telecommunications Techniques 9.750%
05/15/08............................ 91,500
100,000 Wesco Distribution Inc. 9.125%
06/01/08............................ 94,500
-----------
343,875
-----------
ENTERTAINMENT & LEISURE (2.7%)
100,000 *Amf Bowling Worldwide Inc. due
03/15/06 0% till 03/15/01 then
12.250%............................. 33,500
325,000 *Premier Parks Inc. due 04/01/08 0%
till 04/01/03 then 10.000%.......... 225,875
100,000 Regal Cinemas Inc. 9.500% 06/01/08... 78,000
-----------
337,375
-----------
FOOD & RELATED (3.8%)
50,000 Agrilink Foods Inc. 11.875%
11/01/08............................ 50,500
150,000 Ameriserve Food Distribution Inc.
10.125% 07/15/07.................... 51,750
100,000 Aurora Foods Inc. 9.875% 02/15/07.... 101,750
50,000 Dominos Inc. 10.375% 01/15/09........ 48,375
100,000 Eagle Family Foods 8.750% 01/15/08... 76,500
100,000 International Home Foods 10.375%
11/01/06............................ 104,250
50,000 Triarc Consumer Products 10.250%
01/15/09 (144A)..................... 48,125
-----------
481,250
-----------
FIBER OPTICS (1.2%)
50,000 Metromedia Fiber Network 10.000%
12/15/09............................ 51,250
100,000 Williams Communications 10.875%
10/01/09............................ 105,250
-----------
156,500
-----------
FINANCIAL SERVICES (0.4%)
50,000 RBF Finance Co. 11.375% 03/15/09..... 54,000
-----------
HOTELS & LODGING (1.3%)
50,000 Florida Panthers RST 9.875%
04/15/09............................ 48,750
125,000 HMH Properties Inc. Series B 7.875%
08/01/08............................ 113,125
-----------
161,875
-----------
</TABLE>
(continued)
99
<PAGE> 190
OHIO NATIONAL FUND, INC.
HIGH INCOME BOND PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT LONG-TERM BONDS & NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
INTERNET SOFTWARE (1.6%)
$100,000 Psinet Inc. 10.000% 02/15/05......... $ 99,500
50,000 Psinet Inc. 11.000% 08/01/09......... 51,500
50,000 Verio Inc. 10.625% 11/15/09 (144A)... 51,250
-----------
202,250
-----------
MEDICAL & RELATED (6.1%)
125,000 Columbia HCA Healthcare 6.910%
06/15/05............................ 113,785
100,000 Conmed Corp. 9.000% 03/15/08......... 94,000
50,000 Dade Intl. Inc. Series B 11.125%
05/01/06............................ 49,250
50,000 Genesis Health Ventures 9.250%
10/01/06............................ 20,750
50,000 Hanger Orthopedic Group 11.250%
06/15/09............................ 51,625
100,000 Hudson Respiratory Care Inc. 9.125%
04/15/08............................ 80,500
100,000 Kinetic Concepts Corp. 9.625%
11/01/07............................ 74,500
250,000 Tenet Health Corp. 8.125% 12/01/08... 238,125
50,000 Unilab Corp. 12.750% 10/01/09
(144A).............................. 52,250
-----------
774,785
-----------
METAL & MINING (1.0%)
75,000 AEI Resources Inc. 11.500% 12/15/06
(144A).............................. 49,125
50,000 Neenah Corp. 11.125% 05/01/07........ 46,500
50,000 Republic Technologies 13.750%
07/15/09 (144A)..................... 33,250
-----------
128,875
-----------
OIL, ENERGY & NATURAL GAS (2.1%)
100,000 Pride Petroleum Services 9.375%
05/01/07............................ 100,500
50,000 *R&B Falcon Corp. 12.250% 03/15/06... 55,500
50,000 *RCN Corp. due 10/15/07 0% till
10/15/02 then 11.125%............... 35,750
75,000 Triton Energy Ltd. 8.750% 04/15/02... 75,563
-----------
267,313
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT LONG-TERM BONDS & NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
RENTAL AUTO/EQUIPMENT (1.5%)
$ 50,000 Nationsrent Inc. 10.375% 12/15/08.... $ 49,125
50,000 United Rentals Inc. 9.250%
01/15/09............................ 48,125
100,000 United Rentals Inc. 9.000%
04/01/09............................ 94,500
-----------
191,750
-----------
TELECOMMUNICATIONS & CELLULAR (22.9%)
50,000 American Cellular Corp. 10.500%
05/15/08............................ 55,375
50,000 Arch Communications Group 12.750%
07/01/07............................ 39,750
TELECOMMUNICATIONS & CELLULAR (CONTINUED)
150,000 *Call-Net Enterprises Inc. due
08/15/07 0% till 8/15/02 then
9.270%.............................. 83,625
100,000 *Call-Net Enterprises Inc. due
05/15/09 0% till 05/15/04 then
10.800%............................. 48,500
50,000 Centennial Cellular Corp. 10.750%
12/15/08............................ 53,875
100,000 *Crown Castle Intl. Corp. due
05/15/11 0% till 05/15/04 then
10.375%............................. 63,000
100,000 *Crown Castle Intl. Corp. due
08/01/11 0% till 08/01/04 then
11.250%............................. 63,000
175,000 Global Crossing 9.500% 11/15/09
(144A).............................. 173,906
50,000 Hermes Europe Railtel B.V. 10.375%
01/15/09............................ 49,625
50,000 Hermes Europe Railtel B.V. 11.500%
08/15/07............................ 51,625
200,000 Intermedia Communications 8.600%
06/01/08............................ 185,500
100,000 *Level 3 Communication Inc. due
12/01/08 0% till 12/01/03 then
10.500%............................. 61,250
225,000 Level 3 Communication Inc. 9.125%
05/01/08............................ 214,031
225,000 *McLeod USA Inc. due 03/01/07 0% till
03/01/02 then 10.500%............... 185,625
100,000 *Millicom International due 06/01/06
0% till 06/01/01 then 13.500%....... 83,000
225,000 *Nextel Communications due 02/15/08
0% till 02/15/03 then 9.950%........ 160,875
175,000 Nextel Communications 9.375% 11/15/09
(144A).............................. 172,813
225,000 *Nextlink Communications due 04/15/08
0% 04/15/03 then 9.450%............. 142,875
100,000 Nexlink Communications 10.750%
06/01/09............................ 104,250
50,000 Paging Network 10.125% 08/01/07...... 15,750
125,000 *Qwest Communications Intl. due
10/15/07 0% 10/15/02 then 9.470%.... 101,250
100,000 Rogers Cantel 8.800% 10/01/07........ 101,500
</TABLE>
(continued)
100
<PAGE> 191
OHIO NATIONAL FUND, INC.
HIGH INCOME BOND PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT LONG-TERM BONDS & NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
TELECOMMUNICATIONS & CELLULAR (CONTINUED)
$150,000 *Telesystem Intl. Wireless Ser. B due
06/30/07 0% till 06/30/02 then
13.250%............................. $ 96,750
75,000 Teligent Inc. 11.500% 12/01/07....... 73,875
50,000 Teligent Inc. 11.500% 03/01/08....... 30,250
100,000 *Triton PCS Inc. due 05/01/08 0% till
05/01/03 then 11.000%............... 71,500
50,000 US Exchange L.L.C. 15.000%
07/01/08............................ 48,125
50,000 US Unwired Inc. 13.375% 11/01/09
(144A).............................. 29,250
225,000 *Viatel Inc. due 04/15/08 0% till
04/15/03 then 12.500%............... 142,875
125,000 *VoiceStream Wireless Holdings due
11/15/09 0% till 11/15/04 then
11.875% (144A)...................... 75,938
100,000 *Winstar Communications I due
03/15/08 0% till 09/15/03 then
11.000%............................. 102,500
-----------
2,882,063
-----------
TEXTILES & RELATED (0.8%)
50,000 GFSI Inc. Series B 9.625% 03/01/07... 31,250
75,000 Glenoit Corp. 11.000% 04/15/07....... 19,125
100,000 Pillowtex Corp. 10.000% 11/15/06..... 46,500
-----------
96,875
-----------
TRANSPORTATION & EQUIPMENT (2.2%)
50,000 Allied Holdings Inc. 8.625%
10/01/07............................ 44,500
50,000 Gearbulk Holding Ltd. 11.250%
12/01/04............................ 51,625
50,000 Johnstown America Inc. 11.75%
08/15/05............................ 51,125
50,000 Railworks Corp. 11.500% 04/15/09..... 50,875
125,000 Stena Line AB 10.625% 06/01/08....... 75,625
-----------
273,750
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT LONG-TERM BONDS & NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
UTILITIES (0.7%)
$ 50,000 Caithness Coso Fund Corp. 9.050%
12/15/09............................ $ 50,000
50,000 *Niagara Mohawk Power Series H due
07/01/10 0% till 07/01/03 then
8.500%.............................. 37,456
-----------
87,456
-----------
TOTAL LONG-TERM BONDS & NOTES (92.8%)
(COST $12,392,694).................. $11,696,751
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES PREFERRED STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
MEDIA & PUBLISHING (0.9%)
1,300 Primedia Inc. Series H 8.625%
04/01/10............................ 113,425
-----------
OIL, ENERGY & NATURAL GAS (0.4%)
51 R&B Falcon Corp. 13.875%............. 54,838
-----------
TELECOMMUNICATIONS (0.3%)
50 Benedek Communications 11.500%
05/18/08............................ 40,250
-----------
TOTAL PREFERRED STOCKS (1.6%) (COST
$228,650)........................... $ 208,513
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS VALUE
- -------------------------------------------------------------
<C> <S> <C>
$475,000 Firstar Bank 1.000% due 01/03/00
repurchase price $475,039
collateralized by GNMA certificates,
pool # 8375 due 02/20/24 (cost
$475,000)........................... $ 475,000
-----------
TOTAL REPURCHASE AGREEMENTS (3.8%)
(COST $475,000)..................... $ 475,000
-----------
TOTAL HOLDINGS (98.2%) (COST
$13,096,344) (a).................... $12,380,264
-----------
CASH & RECEIVABLES, (1.8%) NET OF
LIABILITIES......................... 230,227
-----------
TOTAL NET ASSETS (100.0%)............ $12,610,491
===========
</TABLE>
- ---------------
* Non-income producing securities.
(144A) 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 buyers. At the period end, the value
of these securities amounted to $1,163,469 or 9.2% of net assets. These
securities were deemed liquid pursuant to procedures approved by the
Board of Directors.
(a) Represents cost for financial reporting and federal income tax purposes.
See Note 1.
The accompanying notes are an integral part of these financial statements.
101
<PAGE> 192
OHIO NATIONAL FUND, INC.
HIGH INCOME BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
Assets:
Investments in securities at market value
(note 1)(cost $13,096,344).............. $12,380,264
Cash in bank.............................. 976
Receivable for fund shares sold........... 21,314
Dividends and accrued interest
receivable.............................. 233,755
Other..................................... 27
-----------
Total assets............................ 12,636,336
-----------
Liabilities:
Payable for fund shares redeemed.......... 988
Payable for investment management services
(note 3)................................ 7,997
Other accrued expenses.................... 16,860
-----------
Total liabilities....................... 25,845
-----------
Net assets at market value.................. $12,610,491
===========
Net assets consist of:
Par value, $1 per share................... $ 1,367,917
Paid-in capital in excess of par value.... 12,141,837
Accumulated net realized loss on
investments (note 1).................... (196,803)
Net unrealized depreciation on investments
(note 1)................................ (716,080)
Undistributed net investment income....... 13,620
-----------
Net assets at market value.................. $12,610,491
===========
Shares outstanding (note 4)................. 1,367,917
Net asset value per share................... $ 9.22
===========
</TABLE>
STATEMENT OF OPERATIONS
Year Ended December 31, 1999
<TABLE>
<S> <C>
Investment income:
Interest.................................... $ 831,914
Dividends................................... 11,211
---------
Total investment income................... 843,125
---------
Expenses:
Management fees (note 3).................... 86,401
Custodian fees (note 3)..................... 13,727
Directors' fees (note 3).................... 348
Professional fees........................... 1,512
Accounting and transfer agent fees.......... 26,401
Other....................................... 2,144
---------
Total expenses............................ 130,533
---------
Net investment income..................... $ 712,592
---------
Realized and unrealized loss on investments:
Net realized loss from investments.......... $(196,803)
Net increase in unrealized depreciation on
investments............................... (299,814)
---------
Net loss on investments................... (496,617)
---------
Net increase in net assets from
operations.............................. $ 215,975
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
102
<PAGE> 193
OHIO NATIONAL FUND, INC.
HIGH INCOME BOND PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED MAY 1, 1998 TO
1999 DECEMBER 31, 1998
------------ -----------------
<S> <C> <C>
From operations:
Net investment income..................................... $ 712,592 $ 385,649
Realized gain (loss) on investments....................... (196,803) 18,061
Unrealized depreciation on investments.................... (299,814) (416,266)
------------ -----------
Net increase (decrease) in net assets from
operations........................................... 215,975 (12,556)
------------ -----------
Dividends and distributions to shareholders:
Dividends paid from net investment income................. (698,972) (386,035)
Capital gains distributions............................... 0 (18,061)
------------ -----------
Total dividends and distributions..................... (698,972) (404,096)
------------ -----------
From capital share transactions (note 4):
Received from shares sold................................. 2,977,591 10,451,643
Received from dividends reinvested........................ 698,972 404,096
Paid for shares redeemed.................................. (1,013,822) (8,340)
------------ -----------
Increase in net assets derived from capital share
transactions......................................... 2,662,741 10,847,399
------------ -----------
Increase in net assets............................. 2,179,744 10,430,747
Net Assets:
Beginning of period....................................... 10,430,747 0
------------ -----------
End of period (a)......................................... $ 12,610,491 $10,430,747
============ ===========
(a) Includes undistributed net investment income of......... $ 13,620 $ 0
============ ===========
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED MAY 1, 1998 TO
1999 DECEMBER 31, 1998
---------- -----------------
<S> <C> <C>
Per share data:
Net asset value, beginning of period........................ $ 9.59 $10.00
Income (loss) from investment operations:
Net investment income..................................... 0.57 0.38
Net realized and unrealized loss on investments........... (0.38) (0.40)
------ ------
Total Income (loss) from investment operations.......... 0.19 (0.02)
------ ------
Less distributions:
Dividends from net investment income...................... (0.56) (0.37)
Distributions from net realized capital gains............. 0.00 (0.02)
------ ------
Total distributions..................................... (0.56) (0.39)
------ ------
Net asset value, end of period.............................. $ 9.22 $ 9.59
====== ======
Total return................................................ 1.95% 0.20%(b)
Ratios and supplemental data:
Ratio of expenses to average net assets................... 1.13% 1.20%(a)
Ratio of net investment income to average net assets...... 6.19% 5.79%(a)
Portfolio turnover rate..................................... 31% 11%
Net assets at end of period (millions)...................... $ 12.6 $ 10.4
</TABLE>
- ---------------
(a) Annualized.
(b) Calculated since inception, May 1, 1998. (not annualized).
The accompanying notes are an integral part of these financial statements.
103
<PAGE> 194
OHIO NATIONAL FUND, INC.
CAPITAL GROWTH PORTFOLIO (a)
OBJECTIVE
The Capital Growth Portfolio seeks capital appreciation by investing primarily
in common stocks of emerging growth companies.
PERFORMANCE AS OF DECEMBER 31, 1999
<TABLE>
<S> <C>
TOTAL RETURN:
One-Year 202.38%
Since inception (5/1/98) 107.06%
</TABLE>
A substantial portion of the Capital Growth portfolio's investments have been in
initial public offerings or recent issues of technology companies that were
purchased during a period favorable for those stocks. There can be no assurance
that such investments will continue to be as available or that they will
continue to have so positive an effect on the portfolio's future performance.
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 concluded a memorable year of performance in 1999 with very strong 4th
quarter performance, as investors flocked to fast growth stocks in both the
Russell 2000 Growth and the NASDAQ indices.
The Ohio National Capital Growth portfolio rose 62.91% in the fourth quarter,
against a gain of 33.39% in the benchmark Russell 2000 Growth. We managed to
outperform the benchmark in every quarter this year, leading to a calendar year
return of 202.38% for the Ohio National Capital Growth portfolio, against a
43.09% rise in the Russell 2000 Growth.
Investors' interest in small stocks broadened in the fourth quarter, fueling the
strong rally in the Russell 2000 Growth. In the fourth quarter, eight of the 11
Russell sectors produced positive performance. While we continued to emphasize
technology, our results were bolstered by strong performance from other sectors
as well.
We enjoyed strong returns from a number of stocks in the healthcare sector where
technology is merging into traditional healthcare and biotech to create emerging
growth investment opportunities. The focus of much of this new work is towards
prediction and prevention of illness rather than the traditional detection and
treatment of disease. Companies like Medarex Incorporated and Abgenix, Inc. are
pioneering new techniques in applying the study of DNA within a technology
framework. Typically these companies work closely with large drug companies to
accelerate their research and testing capabilities as the drug companies look to
create and rollout the next blockbuster drug.
Cytyc Corporation has applied new technology to cervical cancer screening.
Historically this test has had a high margin of error. Cytyc has introduced a
new technology that has made their version of the test more dependable. This
enhanced reliability has made Cytyc's ThinPrep System very popular among
healthcare providers. In turn, most HMO's are now providing partial or full
reimbursement on the ThinPrep Test, helping to fuel it's growth in the
marketplace.
We began accumulating the stock in late spring of this year when the stock was
reasonably undiscovered and had a market capitalization under $500 million.
Since then Cytyc has announced triple digit revenue and earnings increases for
the last two quarters, dramatically increasing visibility of the companies
fundamental story. The stock has moved up strongly in the third and fourth
quarters, finishing the year with a market cap over $1 billion.
Investor's appetite for fast growing stocks that are powering technology growth
seemed nearly insatiable in the quarter. The tech heavy NASDAQ rose 48.18% in
the fourth quarter alone! Gains in technology stocks also drove the strong
33.39% return in the benchmark, the Russell 2000 Growth. This strong performance
also helped to expand the technology sector weighting of the Russell 2000 Growth
from 22% at the beginning of the year to 34% at year-end.
Throughout the fourth quarter we maintained our yearlong emphasis on technology
companies. We continue to find many exciting companies that are creating change
in various sectors of the economy including telecommunications, media, hardware,
software, and above all, how businesses leverage the Internet.
Forrester Research estimates the market for internet and e-commerce services to
grow from $5.4 billion in 1998 to $32.7 billion in 2002, creating a business
opportunity with a compounded annual growth rate of 57%. The struggle for most
traditional, large companies is how to make their business more Web friendly,
and then how to integrate these new internet based applications with their
existing "legacy" systems. The supply of systems professionals with these
technical skills is constrained, and corporate America is thin
- ---------------
(a) Prior to 8/1/99 the portfolio was known as the Small Cap Growth Portfolio.
(continued)
104
<PAGE> 195
OHIO NATIONAL FUND, INC.
CAPITAL GROWTH PORTFOLIO (a) (CONTINUED)
on this expertise. This creates a major opportunity for small, fast moving
consulting firms to fill the void.
We owned a broad number of companies that provide internet system integration
and consulting services. Earlier in the year, we sensed that Fortune 1000
companies would spend significantly and quickly to get Internet capabilities
built. We took significant positions in companies like Sapient Corporation. We
have known these companies for a long time and believe they are well positioned
to gain in this internet spending race. We also invested in newcomers like
Proxicom and Scient Corporation, and were rewarded with strong performance
through the third and fourth quarters from these stocks as well.
Many of the stocks came public this year. We often participated in the Initial
Public Offering of these companies, and added to our positions over time.
Valuation of these stocks is not easy as the companies have short operating
histories, and valuations based on revenue multiples accelerated quickly.
Nonetheless, we developed metrics based on factors such as gross margins,
revenue per billable personnel, average engagement size, and sales force growth
and productivity. In addition we found it useful to build our own, more
realistic revenue and earnings models rather than rely solely on Street models,
which we find are often built to focus on large quarterly outperformance.
Nearly all the stocks have produced meaningful returns to the portfolio, as
investors have been attracted to the companies rapid revenue growth opportunity,
and as investors seeking internet exposure rotated out of more consumer based
internet investment opportunities.
1999 was a banner year for IPO volume as more than $75 billion (though mid
December) of new equity was issued, surpassing the previous record set in 1997.
We aggressively mined the IPO universe for new Emerging Growth investment
supply, participating in over 150 IPOs in calendar 1999. And we held onto to
many of these issues as we continued our research process on the companies as
they matured. Interestingly, the IPO position's impact on performance was not
that significant. We calculate that IPOs contributed only about 22% of the
portfolio's total return for 1999.
Two of our largest contributors to return, Network Solutions and Knight/Trimark
Group, were companies that came public in 1997 and 1998. We participated in
those companies IPOs and had built a strong knowledge base on the companies,
giving us the edge to own them in a meaningful way in 1999. This provides a
confirmation that our emerging growth research process pays off for investors
over time.
While we enjoyed a banner year in 1999, we remain optimistic as we enter a new
year. At the fundamental level, we see many companies with very compelling
growth opportunities, and with the capabilities in place to succeed in their
respective market. The volume of IPO's has provided us ample supply of
investment ideas. However, we are somewhat concerned about the flood of investor
money into this emerging growth space. It is reasonable to expect continued
volatility. As always, we will seek to take advantage of these periods of
volatility to improve the portfolio for the long term.
CHANGE IN VALUE OF $10,000 INVESTMENT
<TABLE>
<CAPTION>
CAPITAL GROWTH PORTFOLIO RUSSELL 2000 INDEX
------------------------ ------------------
<S> <C> <C>
5/98 10000.00 10000.00
6/98 9706.00 9450.00
12/98 10339.80 8776.22
6/99 18424.50 9590.65
12/99 31281.10 10641.80
</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, 1999
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Network Solutions 3.11
2. BEA Systems Inc. 2.48
3. Knight/Trimark Group 1.75
4. NETIQ Corp. 1.52
5. Infospace.COM Inc. 1.37
6. Exchange Application 1.27
7. 24/7 MEDIA Inc. 1.25
8. Infinity 1.21
9. ISS Group, Inc. 1.09
10. Silknet Software 1.06
</TABLE>
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Computer and Related 22.23
2. Internet Software 11.79
3. Radio 5.54
4. Internet Content 5.47
5. Telecommunication Services 4.20
</TABLE>
(continued)
105
<PAGE> 196
OHIO NATIONAL FUND, INC.
CAPITAL GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
ADVERTISING (0.7%)
2,300 *Lamar Advertising Co. ........... $ 139,294
-----------
APPLICATION SOFTWARE (1.9%)
1,200 *HNC Software Inc. ............... 126,900
50 *Ondisplay Inc. .................. 4,544
900 *Sapient Corp. ................... 126,844
1,400 *Siebel Systems Inc. ............. 117,600
-----------
375,888
-----------
AUTO/VIDEO EQUIPMENT (0.4%)
1,200 *Gemstar Intl. Group Ltd. ........ 85,500
-----------
BROADCAST RADIO & TV (5.6%)
1,500 *AMFM Inc. ....................... 117,375
2,350 *Citadel Communications Corp. .... 152,456
1,500 *Cox Radio Inc. CL A ............. 149,625
350 *Cumulus Media Inc. .............. 17,763
2,400 *EnteCorp. om Communications
Inc. ............................ 158,400
1,400 *Hispanic Broadcasting Corp. ..... 129,106
6,800 *Infinity Broadcasting Corp. ..... 246,075
3,800 *Spanish Broadcasting System
Inc. ............................ 152,950
200 *Wink Communications Inc. ........ 12,012
250 *XM Satellite Radio Holdings ..... 9,531
-----------
1,145,293
-----------
BUSINESS SERVICES (1.6%)
4,500 *Acxiom Corp. .................... 108,000
300 *Ebenx Inc. ...................... 13,575
1,100 *Fiserv Inc. ..................... 42,144
800 *Hotjobs.com Ltd. ................ 34,950
1,800 *Memberworks Inc. ................ 59,737
2,000 *On Assignment Inc. .............. 59,750
-----------
318,156
-----------
CHEMICALS (0.7%)
4,700 *Surmodics Inc. .................. 141,000
-----------
COMMUNICATIONS (2.4%)
1,900 *Echostar Communications ......... 185,250
900 *Emmis Broadcasting Corp CL A .... 112,176
1,500 *Filenet Corp. ................... 38,250
1,600 *Intraware Inc. .................. 126,400
700 *Research In Motion .............. 32,331
-----------
494,407
-----------
COMPUTER DATA SECURITY (1.9%)
500 *Check Point Software Tech
Ltd. ............................ 99,375
3,100 *ISS Group Inc. .................. 220,487
800 *RSA Security Inc. ............... 62,000
-----------
381,862
-----------
COMPUTER & RELATED (6.2%)
2,500 *Covad Communications Group ...... 139,844
350 *Immersion Corp. ................. 13,431
2,900 *Network Solutions ............... 630,931
1,050 *Primus Knowledge Solutions ...... 47,578
500 *Sandisk Corp. ................... 48,125
2,900 *Silicon Storage Technology ...... 119,625
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
COMPUTER & RELATED CONTINUED
2,300 *TSI Intl. Software Ltd. ......... $ 130,237
950 *Vertias Software Corp. .......... 135,969
-----------
1,265,740
-----------
COMPUTER SERVICES (0.5%)
1,200 *Bisys Group Inc. ................ 78,300
700 *Seue Software Inc. .............. 17,500
-----------
95,800
-----------
COMPUTER SOFTWARE (13.9%)
11,200 *Activision Inc. ................. 171,500
2,200 *Aspect Development Inc. ......... 150,700
7,200 *Bea Systems Inc. ................ 503,550
1,600 *Bluestone Software .............. 184,000
1,500 *Broadbase Software Inc. ......... 168,750
1,500 *Business Objects SA ............. 200,437
2,600 *Digex Inc. ...................... 178,750
4,600 *Exchange Applications Inc. ...... 257,025
700 *Extended Systems Inc. ........... 33,512
1,200 *Informatica Corp. ............... 127,650
2,600 *Interactive Intelligence ........ 69,225
1,400 *Mercury Interactive Corp. ....... 151,113
5,900 *Netiq Corp. ..................... 307,169
4,000 Sagent Technology Inc. ........... 119,750
2,250 *Scientific Learning Corp. ....... 82,125
650 *Tibico Software Inc. ............ 99,450
50 *VA Linux Systems Inc. ........... 10,331
50 *Vitria Technology Inc. .......... 11,700
-----------
2,826,737
-----------
DIRECT MARKETING (0.6%)
2,100 *Valuevision Intl. Inc. .......... 120,356
-----------
ELECTRONIC COMPONENTS/SEMICONDUCTORS (4.6%)
500 *Applied Micro Circuits .......... 63,625
2,500 *Conexnat Systems ................ 165,938
2,100 *Cree Research Inc. .............. 179,288
3,300 *Integrated Device ............... 95,700
1,400 *Lattice Semiconductor Corp. ..... 65,975
1,900 *Mips Technologies Inc. .......... 98,800
100 *Metalink Ltd. ................... 2,037
2,400 *Power Integrations Inc. ......... 115,050
2,000 *Sawtek Inc. ..................... 133,125
350 *Zoran Corp. ..................... 19,513
-----------
939,051
-----------
FINANCIAL SERVICES (2.4%)
3,100 *Financial Federal Corp. ......... 70,719
7,700 *Knight/Trimark Group Inc. ....... 354,200
1,950 *Nextcard Inc. ................... 56,306
-----------
481,225
-----------
FIBER OPTICS (0.4%)
1,800 *Metromedia Fiber Network ........ 86,288
-----------
HOTEL/LODGING (0.6%)
2,400 *Four Seasons Hotels Inc. ........ 127,800
-----------
</TABLE>
(continued)
106
<PAGE> 197
OHIO NATIONAL FUND, INC.
CAPITAL GROWTH PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
INTERNET CONTENT (5.5%)
4,500 *24/7 Media Inc. ................ $ 253,125
6,900 *Autoweb.com Inc. ................ 75,038
1,400 *About.com Inc. .................. 125,650
200 *CMG Information Services Inc. ... 55,375
300 *El Sitio Inc. ................... 11,025
50 *Egreetings Network Inc. ......... 506
1,300 *Infospace.com Inc. .............. 278,200
50 *Medialogic Inc. ................. 1,050
300 *Mypoints.com Inc. ............... 22,200
700 *NBC Internet Inc. ............... 54,075
300 *Netcreations Inc. ............... 13,200
4,200 *Sportsline USA Inc. ............. 210,525
500 *Webstakes.com Inc. .............. 9,875
-----------
1,109,844
-----------
INTERNET SOFTWARE (11.8%)
1,100 *Applied Theory Corp. ............ 30,525
1,100 *Broadvsion Inc. ................. 187,069
100 *C-Bridge Internet So ............ 4,862
1,500 *Clarent Corp. ................... 116,625
800 *Cybersource Corp. ............... 41,400
4,700 *Concentric Network Corp. ........ 144,819
3,050 *DSL.net Inc. .................... 44,034
1,300 *Earthlink Network Inc. .......... 55,250
100 *ECollege.com Inc. ............... 1,094
450 *Espeed Inc. CL A ................ 16,003
250 *Gric Communications ............. 6,344
550 *Internap Network Services ....... 95,150
2,550 *ITXC Corp. ...................... 85,744
750 *Keynote Systems Inc. ............ 55,313
2,800 *Liquid Audio Inc. ............... 73,500
2,600 *National Info Consortium Inc. ... 83,200
1,100 *Netopia Inc. .................... 59,744
1,700 *Navisite Inc. ................... 170,000
900 *Netcentives Inc. ................ 56,081
2,000 *PC-Tel Inc. ..................... 105,000
1,500 *Pcorder.com Inc. ................ 76,500
1,450 *Proxicom Inc. ................... 180,253
1,500 *Psinet Inc. ..................... 92,625
4,400 *Ramp Networks Inc. .............. 67,100
900 *Scient Corp. .................... 77,794
1,300 *Silknet Software Inc. ........... 215,475
2,800 *Verio Inc. ...................... 129,325
700 *Vignette Corp. .................. 114,100
150 *Xpedior Inc. .................... 4,312
-----------
2,389,241
-----------
MEDIA & PUBLISHING (1.6%)
2,800 *Macromedia Inc. ................. 204,750
1,100 *Univision Communications Inc. ... 112,406
-----------
317,156
-----------
MEDICAL & RELATED (4.5%)
2,700 *Cytyc Corp. ..................... 164,869
2,600 *Medarex Inc. .................... 96,850
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
MEDICAL & RELATED CONTINUED
1,100 *Medimmune Inc. .................. $ 182,463
1 *Medtronic Inc. .................. 15
1,900 *Pharamacyclics Inc. ............. 78,375
1,500 *Protein Design Labs Inc. ........ 105,000
3,300 *Resmed Inc. ..................... 137,775
4,800 *Visible Genetics Inc. ........... 144,000
-----------
909,347
-----------
MOTION PICTURES & SERVICES (0.4%)
1,200 *Macrovision Corp. ............... 88,800
-----------
NETWORKING PRODUCTS (2.9%)
50 *Cobalt Networks Inc. ............ 5,419
1,200 *Extreme Networks Inc. ........... 100,200
300 *Foundry Networks Inc. ........... 90,506
2,000 *Legato Systems Inc. ............. 137,625
4,850 *Netscout Systems Inc. ........... 150,350
1,200 *Network Appliance Inc. .......... 99,675
-----------
583,775
-----------
PERSONAL SERVICES (0.7%)
6,050 *Student Advantage Inc. .......... 134,234
-----------
PRE-PACKAGED SOFTWARE (2.2%)
3,000 *Brio Technology Inc. ............ 126,000
2,500 *Peregrine Systems Inc. .......... 206,563
1,000 *Realnetworks Inc. ............... 121,187
-----------
453,750
-----------
RETAIL (2.4%)
2,000 *American Eagle Outfitters
Inc. ............................ 90,000
3,200 *Bed Bath & Beyond Inc. .......... 111,200
1,100 *Expedia Inc. CL A ............... 38,500
3,200 *Factory 2-U Stores Inc. ......... 90,800
250 *Mothernature.com ................ 1,828
2,900 *Ticketmaster Online City Search
Inc. ............................ 111,469
3,750 *VitaminShoppe.com ............... 34,219
-----------
478,016
-----------
TELECOMMUNICATIONS EQUIPMENT (3.1%)
2,900 *Aware Inc. ...................... 105,488
1,900 *Digital Lightwave Inc. .......... 121,600
1,250 *Ditech Communication Corp. ...... 116,875
1,300 *Efficient Networks .............. 88,400
2,500 *Primus Telecommunications ....... 95,625
1,800 *Viatel Inc. ..................... 96,525
-----------
624,513
-----------
TELECOMMUNICATIONS SERVICES (4.6%)
2,200 *Allegiance Telecom Inc. ......... 202,950
2,600 *Caprock Communication Corp. ..... 84,338
3,400 Copper Mountain Networks Inc. .... 165,750
2,800 *Crown Castle Intl. Corp. ........ 89,950
5,400 *Electric Lightwave Inc. CL A .... 101,250
100 *Ibasis Inc. ..................... 2,875
100 *Infonet Services ................ 2,625
</TABLE>
(continued)
107
<PAGE> 198
OHIO NATIONAL FUND, INC.
CAPITAL GROWTH PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
TELECOMMUNICATIONS SERVICES CONTINUED
2,800 *McLeodUSA Inc. CL A ............. $ 164,850
1,700 *Panamsat Corp. .................. 100,937
650 *Z-Tel Technologies .............. 26,244
-----------
941,769
-----------
TRANSPORTATION & EQUIPMENT (0.5%)
2,100 *Forward Air Corp. ............... 91,087
-----------
WIRELESS EQUIPMENT (1.7%)
6,000 *American Tower Corp. ............ 183,375
2,700 *Pinacle Holdings ................ 114,413
700 *RF Micro Devices Inc. ........... 47,906
-----------
345,694
-----------
TOTAL COMMON STOCK (86.3%) (COST
$10,064,019)..................... $17,491,623
-----------
<CAPTION>
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS VALUE
- -------------------------------------------------------------
<C> <S> <C>
$ 2,559,000 Firstar 1.000% 01/03/00 repurchase
price $2,559,210 collateralized
by GNMA certificates pool # 8375
due 02/20/24 (cost $2,559,000)... $ 2,559,000
-----------
TOTAL SHORT-TERM NOTES
(12.6%) (COST $2,559,000)........ $ 2,559,000
-----------
TOTAL HOLDINGS (98.9%)
(COST $12,623,019) (A)........... $20,050,623
-----------
CASH & RECEIVABLES,
NET OF LIABILITIES (1.1%)........ 220,851
-----------
TOTAL NET ASSETS (100.0%)......... $20,271,474
===========
</TABLE>
- ---------------
* Non-income producing securities.
(a) Represents cost for financial reporting purposes and differs from cost for
federal income tax purposes. See Note 1.
The accompanying notes are an integral part of these financial statements.
108
<PAGE> 199
OHIO NATIONAL FUND, INC.
CAPITAL GROWTH PORTFOLIO (A)
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
Assets:
Investments in securities at market value
(note 1) (cost $12,623,019)............. $20,050,623
Cash in bank.............................. 567
Receivable for fund shares sold........... 239,832
Dividends and accrued interest
receivable.............................. 183
Other..................................... 761
-----------
Total assets............................ 20,291,966
-----------
Liabilities:
Payable for investment management services
(note 3)................................ 13,481
Other accrued expenses.................... 7,011
-----------
Total liabilities....................... 20,492
-----------
Net assets at market value.................. $20,271,474
===========
Net assets consist of:
Par value, $1 per share................... $ 723,656
Paid-in capital in excess of par value.... 12,120,214
Net unrealized appreciation on investments
(note 1)................................ 7,427,604
-----------
Net assets at market value.................. $20,271,474
===========
Shares outstanding (note 4)................. 723,656
Net asset value per share................... $ 28.01
===========
</TABLE>
STATEMENT OF OPERATIONS
Year Ended December 31, 1999
<TABLE>
<S> <C>
Investment income:
Interest................................... $ 2,527
Dividends.................................. 33,179
----------
Total investment income.................. 35,706
----------
Expenses:
Management fees (note 3)................... 64,947
Custodian fees (note 3).................... 4,793
Directors' fees (note 3)................... 347
Professional fees.......................... 1,493
Accounting and transfer agent fees......... 8,305
Other...................................... 2,086
----------
Total expenses........................... 81,971
----------
Net investment loss...................... $ (46,265)
----------
Realized and unrealized gain on investments:
Net realized gain from investments......... $2,648,384
Net increase in unrealized appreciation on
investments.............................. 6,870,977
----------
Net gain on investments.................. 9,519,361
----------
Net increase in net assets from
operations............................. $9,473,096
==========
</TABLE>
- ---------------
(a) Prior to 8/1/99 the portfolio was known as the Small Cap Growth Portfolio.
The accompanying notes are an integral part of these financial statements.
109
<PAGE> 200
OHIO NATIONAL FUND, INC.
CAPITAL GROWTH PORTFOLIO(D)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED MAY 1, 1998 TO
1999 DECEMBER 31, 1998
----------- -----------------
<S> <C> <C>
From operations:
Net investment loss....................................... $ (46,265) $ (17,592)
Realized gain (loss) on investments....................... 2,648,384 (414,923)
Unrealized appreciation on investments.................... 6,870,977 556,627
----------- ----------
Net increase in net assets from operations............ 9,473,096 124,112
----------- ----------
Dividends and distributions to shareholders:
Capital gain distributions................................ (2,233,461) 0
From capital share transactions (note 4):
Received from shares sold................................. 18,417,413 2,148,414
Received from dividends reinvested........................ 2,233,461 0
Paid for shares redeemed.................................. (9,890,108) (1,453)
----------- ----------
Increase in net assets derived from capital share
transactions......................................... 10,760,766 2,146,961
----------- ----------
Increase in net assets............................. 18,000,401 2,271,073
Net Assets:
Beginning of period....................................... 2,271,073 0
----------- ----------
End of period............................................. $20,271,474 $2,271,073
=========== ==========
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED MAY 1, 1998 TO
1999 DECEMBER 31, 1998
---------- -----------------
<S> <C> <C>
Per share data:
Net asset value, beginning of period........................ $ 10.47 $10.00
Income from investment operations:
Net investment loss....................................... (0.12) (0.09)
Net realized and unrealized gain on investments........... 21.25 0.56
------- ------
Total income from investment operations................. 21.13 0.47
------- ------
Less distributions:
Distributions from net realized capital gains............. (3.59) 0.00
------- ------
Net asset value, end of period.............................. $ 28.01 $10.47
======= ======
Total return................................................ 202.38% 4.62%(b)
Ratios and supplemental data:
Ratios net of fees reimbursed by advisor:
Ratio of expenses to average net assets................. 1.09% 1.96%(a,c)
Ratio of net investment income (loss) to average net
assets................................................. (0.61)% 1.47%(a,c)
Ratios assuming no fees reimbursed by advisor:
Ratio of expenses to average net assets................. 1.09% 2.72%(a,c)
Portfolio turnover rate..................................... 185% 121%
Net assets at end of period (millions)...................... $ 20.3 $ 2.3
</TABLE>
- ---------------
(a) Annualized.
(b) Calculated since inception, May 1, 1998. (not annualized).
(c) The advisor has elected to reimburse certain operating expenses of the
Capital Growth portfolio.
(d) Prior to 8/1/99 the portfolio was known as the Small Cap Growth portfolio.
The accompanying notes are an integral part of these financial statements.
110
<PAGE> 201
OHIO NATIONAL FUND, INC. December 31, 1999
NOTES TO FINANCIAL STATEMENTS
(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 twenty 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.
- International Small Company Portfolio -- long-term growth of capital by
investing primarily in equity securities of foreign companies having a
market capitalization at time of purchase of $1.5 billion or less.
- 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") 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.
- Firstar Growth and Income Portfolio -- reasonable income and long-term
capital appreciation by investing in income producing securities including
dividend-paying common, preferred stocks and fixed-income securities.
- Relative Value Portfolio -- maximum total return consistent with reasonable
risk by investing primarily in equity securities.
- Blue Chip Portfolio -- growth of capital and income by concentrating
investment decisions in securities of high quality companies.
- Equity Income Portfolio -- above average income and capital appreciation by
investing primarily in high quality income producing equity securities
including common stock, preferred stock, REIT's, and securities convertible
into common stock.
- High Income Bond Portfolio -- seek high current income by investing
primarily in lower rated corporate debt obligations commonly referred to as
"junk bonds". The portfolio's investments are generally rated Baa or lower
by Moody's, or BBB or lower by S&P or Fitch.
(continued)
111
<PAGE> 202
OHIO NATIONAL FUND, INC. December 31, 1999
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- Capital Growth -- capital appreciation by investing in and actively
managing equity securities in emerging growth companies.
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 but the Money Market Portfolio, 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 from yield data
relating to instruments or securities with similar characteristics.
Restricted securities and securities for which market quotations are not
readily available, if any, are valued at fair value using methods approved by
the Board of Directors. The differences between cost and market values of
such investments are reflected as unrealized appreciation or depreciation.
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,
International Small Company, Aggressive Growth, Firstar Growth & Income, Blue
Chip, and Small Cap Growth 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 and S&P 500 Index
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.
(continued)
112
<PAGE> 203
OHIO NATIONAL FUND, INC. December 31, 1999
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 Aggressive Growth
Portfolio currently holds investments in S&P 500 Index Future Contracts. The
futures contracts in the S&P 500 Index Portfolio at December 31, 1999 are as
follows:
<TABLE>
<CAPTION>
EXPIRATION UNDERLYING FACE UNREALIZED CASH DEPOSITED AS
PORTFOLIO PURCHASED DATE AMOUNT AT VALUE GAIN/LOSS MARGIN REQUIREMENT
--------- --------- ---------- --------------- ---------- ------------------
<S> <C> <C> <C> <C> <C>
S&P 500 284 S&P 500 Index Contracts March '00 $105,378,200 $4,583,200 $5,492,391
</TABLE>
The Growth & Income Portfolio wrote the following option contracts during 1999:
<TABLE>
<CAPTION>
NUMBER
AMOUNT OF OF CONTRACTS
PREMIUMS OPTIONED
---------- ------------
<S> <C> <C>
Options outstanding 12/31/98................................ $ 0 0
Options written............................................. $ 371,247 575
Options expired............................................. ($ 102,022) (295)
Options exercised........................................... $ 0 0
Options Closed.............................................. ($ 269,225) (280)
---------- ----
Options outstanding 12/31/99................................ $ 0 0
========== ====
</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, International Small Company,
Aggressive Growth, Firstar Growth & Income, Blue Chip, and Small Cap Growth
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.
The books and records of all the portfolios are maintained in U.S. dollars.
Foreign currency amounts in the International, Small Cap, International Small
Company, Aggressive Growth, Firstar Growth & Income, Blue Chip and Small Cap
Growth 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.
(continued)
113
<PAGE> 204
OHIO NATIONAL FUND, INC. December 31, 1999
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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). At December 31, 1999 certain of the portfolios
invested in repurchase agreements in which the aggregate amounted to
$15,043,000. These securities are collateralized by various GNMA certificates
with a market value of $15,459,983. 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 net operating and wash
sales 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 International, Small Cap,
International Small Company, Aggressive Growth, Core Growth and Capital
Growth Portfolios: accumulated net investment loss has been decreased by
$5,037,676, $641,905, $733,007, $75,692, $143,620 and $46,265 respectively,
resulting in a reclassification adjustment to decrease Paid-in capital in
excess of par value by $5,037,676, $641,905, $733,007, $75,692, $143,620 and
$46,265 respectively. This reclassification has no effect on net assets or
net asset value per share. The amount of losses recognized for financial
reporting purposes in excess of federal income tax reporting purposes in the
International, Capital Appreciation, Small Cap, International Small Company,
Aggressive Growth, Core Growth, Growth & Income, S&P 500 Index, Social
Awareness, Strategic Income, Firstar Growth & Income, Blue Chip and Capital
Growth Portfolios were $693,803, $74,111, $271,961, $32,794, $489,046,
$83,836, $260,863, $8,625, $543, $12,900, $334, $14,108 and $23,883
respectively. Cost for federal income tax purposes differs from value by net
unrealized appreciation (depreciation) of securities as follows:
<TABLE>
<CAPTION>
CAPITAL
EQUITY BOND OMNI INTERNATIONAL APPRECIATION
------------ ------------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Gross unrealized:
Appreciation............................. $ 61,093,308 $ 161,959 $68,412,201 $66,661,007 $ 5,468,219
Depreciation............................. (23,336,283) (1,130,838) (6,439,058) (963,171) (5,755,588)
Net Unrealized:
Appreciation (Depreciation).............. 37,757,025 (968,879) 61,973,143 65,697,836 (287,369)
</TABLE>
<TABLE>
<CAPTION>
SMALL INTERNATIONAL AGGRESSIVE CORE GROWTH &
CAP SMALL COMPANY GROWTH GROWTH INCOME
------------ ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Gross unrealized:
Appreciation............................. $ 59,863,916 $17,182,885 $ 5,997,068 $10,536,910 $28,773,514
Depreciation............................. (2,492,220) (352,148) (1,092,737) (342,706) (2,764,675)
Net Unrealized:
Appreciation............................. 57,371,696 16,830,737 4,904,331 10,194,204 26,008,839
</TABLE>
(continued)
114
<PAGE> 205
OHIO NATIONAL FUND, INC. December 31, 1999
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
FIRSTAR
SOCIAL STRATEGIC GROWTH RELATIVE
S&P 500 AWARENESS INCOME & INCOME VALUE
------------ ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Gross unrealized:
Appreciation............................. $ 28,927,674 $ 838,442 $ 16,525 $ 275,001 $ 3,258,043
Depreciation............................. (4,816,013) (136,958) (340,950) (99,873) (671,862)
Net Unrealized:
Appreciation (Depreciation).............. 24,111,661 701,484 (324,425) 175,128 2,586,181
</TABLE>
<TABLE>
<CAPTION>
EQUITY HIGH INCOME CAPITAL
BLUE CHIP INCOME BOND GROWTH
------------ ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Gross unrealized:
Appreciation............................. $ 695,359 $ 931,657 $ 354,483 $ 7,549,617
Depreciation............................. (485,453) (221,157) (1,070,563) (98,130)
Net Unrealized:
Appreciation (Depreciation).............. 209,906 710,500 (716,080) 7,451,487
</TABLE>
For Federal income tax purposes, the Bond, Aggressive Growth, Social
Awareness, Strategic Income, Firstar Growth & Income, Relative Value, Equity
Income and High Income Bond Portfolios had capital loss carryovers of
$305,798, $1,752,158, $2,433,931 $375,826, $50,917, $169,231, $76,310 and
$196,803 respectively, at December 31, 1999. If not offset by capital gains,
$41,235 will expire in 2003 and $2,893 in 2005 in the Bond Portfolio,
$230,373, $622,020, $97,030 and $5,714 will expire in 2006 in the Bond,
Social Awareness, Strategic Income and Equity Income Portfolios, respectively
and $31,297, $1,752,158, $1,811,911, $278,796, $50,917, $169,231, $70,596 and
$196,803 will expire in 2007 in the Bond, Aggressive Growth, Social
Awareness, Strategic Income, Firstar Growth & Income, Relative Value, Equity
Income and High Income Bond 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.
Expenses directly attributable to a portfolio are charged to that portfolio.
Expenses not directly attributed to a portfolio are allocated on the basis of
relative 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.
(2) INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term
securities) for the year ended December 31, 1999 were as follows:
<TABLE>
<CAPTION>
CAPITAL
EQUITY BOND OMNI INTERNATIONAL APPRECIATION
------------ ------------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Stocks & Bonds:
Purchases............................... $339,032,461 $ 2,075,823 $73,768,287 $416,649,551 $ 21,875,422
Sales................................... 342,273,276 3,062,866 92,715,064 449,551,906 33,594,817
U.S. Government Obligations
Purchases............................... -- -- -- -- 632,836
Sales................................... -- 500,000 1,275,000 -- 2,938,055
</TABLE>
(continued)
115
<PAGE> 206
OHIO NATIONAL FUND, INC. December 31, 1999
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
SMALL INTERNATIONAL AGGRESSIVE CORE GROWTH &
CAP SMALL COMPANY GROWTH GROWTH INCOME
------------ ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Stocks & Bonds:
Purchases............................... $169,768,467 $78,920,047 $54,843,583 $ 50,981,138 $304,708,563
Sales................................... 164,571,666 72,922,749 57,414,856 47,352,429 286,401,809
U.S. Government Obligations
Purchases............................... -- -- -- -- --
Sales................................... -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
SOCIAL STRATEGIC FIRSTAR GROWTH RELATIVE
S&P 500 AWARENESS INCOME & INCOME VALUE
------------ ------------- ----------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Stocks & Bonds:
Purchases............................... $ 92,702,727 $ 4,735,735 $ 1,893,058 $ 5,676,834 $ 2,425,215
Sales................................... 56,811,197 8,048,175 2,283,150 5,565,717 969,221
U.S. Government Obligations
Purchases............................... -- -- -- -- --
Sales................................... -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
HIGH INCOME EQUITY CAPITAL
BLUE CHIP BOND INCOME GROWTH
------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Stocks & Bonds:
Purchases............................... $ 2,760,701 $ 5,828,367 $ 3,025,659 $ 17,743,903
Sales................................... 1,052,403 3,324,379 1,489,016 11,966,813
U.S. Government Obligations:
Purchases............................... -- -- -- --
Sales................................... -- -- -- --
</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 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, Firstar Growth & Income, Relative Value, Capital 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 International Small Company Portfolio, 1.00%
of that Portfolio's net assets; (i) for the High Income Bond and Equity
Income, 0.75% of each Portfolio's net assets; and (j) for the Equity
Portfolio, 0.80% of the first $500 million of the Portfolio's net assets, and
0.75% of net assets over $500 million. However, as to the Money Market
Portfolio, the Advisor is presently waiving any of its fee in excess of
0.25%. In addition, after January 1, 1999, the advisor began waiving any fees
in excess of 0.85% in the International Portfolio.
Under the Investment Advisory Agreement, the Fund authorizes ONI to retain
sub-advisors for the International, Capital Appreciation, Small Cap,
International Small Company, Aggressive Growth, Core Growth, Growth & Income,
Capital Growth,
(continued)
116
<PAGE> 207
OHIO NATIONAL FUND, INC. December 31, 1999
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Strategic Income, Firstar Growth & Income, Relative Value, High Income Bond,
Equity Income, Blue Chip, and Equity Portfolios subject to the approval of
the Fund's Board of Directors. ONI has entered into Sub-Advisory Agreements
with 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"), Firstar Bank, N.A. ("Firstar"), Firstar Investment Research and
Management Co., L.L.C. ("Firmco"), Federated Investment Counseling ("FIC"),
and Legg Mason Fund Advisers, Inc. ("LM") respectively, to manage the
investment and reinvestment of those Portfolios' assets, subject to the
supervision of ONI. As compensation for their services, (a) TRPA receives
from ONI a fee at an annual rate of 0.50% of average daily net assets of the
Capital Appreciation Portfolio, (b) FAM receives from ONI a fee at an annual
rate of 0.625% of the first $75 million, 0.55% of the next $75 million, 0.50%
between $150 and $300 million, and 0.40% of the average daily net asset value
in excess of $300 million of the Small Cap Portfolio; (c) SCM receives from
ONI a fee at an annual rate of 0.55% of the first $50 million, and 0.45% of
average daily net asset value in excess of $50 million of the Aggressive
Growth Portfolio; (d) PBA receives from ONI a fee at an annual rate of 0.65%
of the first $50 million, 0.60% of the next $100 million, and 0.50% of
average daily net assets in excess of $150 million of the Core Growth
Portfolio: (e) RSIM receives from ONI a fee 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
0.55% of the average daily net assets in excess of $200 million of the Small
Cap Growth Portfolio; (f) Firstar 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) 0.65% of the
first $50 million and 0.60% of average daily net assets in excess of $50
million of the Relative Value Portfolio; (g) Firmco receives from ONI fees at
an annual rate of 0.65% of the first $50 million and 0.60% of average daily
assets in excess of $50 million of the First Growth & Income Portfolio; (h)
FIC receives from ONI fees at an annual rate of (i) 0.50% of the first $35
million, 0.35% of the next $65 million, and 0.25% of the average daily net
assets in excess of $100 million of each of the Equity Income and Blue Chip
Portfolios, (ii) 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 the average daily net
assets in excess of $75 million of the High Income Bond Portfolio, (iii)
0.40% of the first $200 million and 0.35% of average daily net assets in
excess of $200 million of the International Portfolio, and (iv) 0.75% of the
first $100 million and 0.65% of average daily net assets in excess of $100
million of the International Small Company Portfolio; and (i) LM receives
from ONI fees at the annual rate of 0.45% of the first $500 million and 0.40%
of the average daily net assets in excess of $500 million of the Equity
Portfolio.
Prior to January 1, 1999 Societe Generale Asset Management Corp. sub-advised
the International and International Small Company Portfolios. Effective
August 1, 1999 LM replaced ONI (adviser) as the sub-adviser for the Equity
Portfolio.
Effective January 3, 2000 Jennison Associates LLC replaced T. Rowe Price
Associates, Inc. as the sub-adviser for the Capital Appreciation Portfolio
and Janus Capital Corp. replaced Strong Capital Management, Inc. as the
sub-adviser for the Aggressive Growth Portfolio. As compensation for their
services Jennison will receive from ONI fees at an annual rate of 0.50% of
the average net assets of the Capital Appreciation Portfolio and Janus will
receive from ONI fees at an annual rate of 0.55% of the first $50 million of
the average net assets and 0.45% of average net assets in excess of $50
million of the Aggressive Growth 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 International Small Company Portfolios is Firstar Bank,
N.A., 425 Walnut Street, Cincinnati. Ohio. The custodian for the
International and International Small Company Portfolios is State Street
Bank-Kansas City, 801 Pennsylvania, Kansas City, Missouri. For assets held
outside the United States, Firstar Bank and State Street Bank-Kansas City
enter into subcustodial agreements, subject to approval by the Board of
Directors.
(continued)
117
<PAGE> 208
OHIO NATIONAL FUND, INC. December 31, 1999
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(4) CAPITAL SHARE TRANSACTIONS
Capital share transactions for the six months ended December 31, 1999 and the
year ended December 31, 1998 were as follows:
<TABLE>
<CAPTION>
EQUITY MONEY MARKET BOND
---------------------- ----------------------- ----------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
12-31-99 12-31-98 12-31-99 12-31-98 12-31-99 12-31-98
--------- --------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Capital shares issued on sales............. 957,794 675,941 22,320,710 6,102,024 532,591 986,062
Capital shares issued on reinvested
dividends................................ 4,875,492 254,451 257,858 164,506 171,315 150,778
Capital shares redeemed.................... 1,560,827 883,690 20,302,903 4,740,526 777,574 486,752
</TABLE>
<TABLE>
<CAPTION>
OMNI INTERNATIONAL CAPITAL APPRECIATION
---------------------- ----------------------- ----------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
12-31-99 12-31-98 12-31-99 12-31-98 12-31-99 12-31-98
--------- --------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Capital shares issued on sales............. 366,349 1,413,338 908,052 848,791 611,576 1,366,055
Capital shares issued on reinvested
dividends................................ 488,865 264,859 -- 855,911 658,894 580,235
Capital shares redeemed.................... 2,428,393 872,309 3,773,197 2,444,300 1,857,003 443,155
</TABLE>
<TABLE>
<CAPTION>
SMALL CAP INT'L SMALL COMPANY AGGRESSIVE GROWTH
---------------------- ----------------------- ----------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
12-31-99 12-31-98 12-31-99 12-31-98 12-31-99 12-31-98
--------- --------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Capital shares issued on sales............. 873,277 918,465 444,549 346,731 381,709 667,591
Capital shares issued on reinvested
dividends................................ 1,388,684 47 191,099 211,017 -- 159,625
Capital shares redeemed.................... 602,086 381,989 593,735 252,173 775,957 249,214
</TABLE>
<TABLE>
<CAPTION>
CORE GROWTH GROWTH & INCOME S&P 500
---------------------- ----------------------- ----------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
12-31-99 12-31-98 12-31-99 12-31-98 12-31-99 12-31-98
--------- --------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Capital shares issued on sales............. 781,709 447,717 1,882,536 2,697,893 6,848,877 4,704,361
Capital shares issued on reinvested
dividends................................ 395,539 -- 905,619 31,748 1,258,144 394,979
Capital shares redeemed.................... 442,104 315,206 536,400 416,202 1,325,233 366,640
</TABLE>
<TABLE>
<CAPTION>
SOCIAL AWARENESS STRATEGIC INCOME FIRSTAR GROWTH & INCOME
---------------------- ----------------------- ------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
12-31-99 12-31-98 12-31-99 12-31-98 12-31-99 12-31-98
--------- --------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Capital shares issued on sales............. 99,912 491,246 28,748 116,213 41,852 98,689
Capital shares issued on reinvested
dividends................................ 2,521 3,763 28,040 27,950 4,000 12,199
Capital shares redeemed.................... 503,237 170,620 113,496 33,901 75,846 32,973
</TABLE>
<TABLE>
<CAPTION>
RELATIVE VALUE BLUE CHIP EQUITY INC.
---------------------- ----------------------- ----------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
12-31-99 12-31-98 12-31-99 12-31-98 12-31-99 12-31-98
--------- --------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Capital shares issued on sales............. 181,502 486,057 282,532 287,536 192,426 216,229
Capital shares issued on reinvested
dividends................................ 5,881 13,803 6,959 403 2,831 1,309
Capital shares redeemed.................... 110,451 285,649 122,210 6,276 52,654 6,719
</TABLE>
(continued)
118
<PAGE> 209
OHIO NATIONAL FUND, INC. December 31, 1999
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
HIGH INCOME CAPITAL GROWTH
---------------------- -----------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
12-31-99 12-31-98 12-31-99 12-31-98
--------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Capital shares issued on sales............. 314,320 1,046,722 876,365 217,195
Capital shares issued on reinvested
dividends................................ 74,356 42,369 81,368 --
Capital shares redeemed.................... 108,995 855 451,086 186
</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 20,000,000 are unallocated at this time.
(5) COMMITMENTS
As of December 31, 1999, the International and International Small Company
Portfolios had entered into forward currency contracts, as set forth below,
summarized by currency:
INTERNATIONAL PORTFOLIO
<TABLE>
<CAPTION>
CURRENCY TO BE DELIVERED CURRENCY TO BE RECEIVED UNREALIZED
SETTLE -------------------------- U.S. $ VAL. -------------------------- U.S. $ VAL. --------------------
DATES AMOUNT TYPE AT 12/31/99 AMOUNT TYPE AT 12/31/99 GAIN LOSS
------ ---------- -------------- ----------- ---------- -------------- ----------- -------- ---------
<C> <S> <C> <C> <C> <C> <C> <C> <C>
10/05/01 3,650,000 New Zld Dollar 1,910,958 1,750,175 U.S. Dollar 1,750,175 $(160,783)
10/05/01 1,942,166 U.S. Dollar 1,942,166 3,650,000 New Zld Dollar 1,910,958 (31,208)
---------- ---------- -------- ---------
$3,853,124 $3,661,133 $ 0 $(191,991)
========== ========== ======== =========
</TABLE>
INTERNATIONAL SMALL COMPANY
<TABLE>
<CAPTION>
CURRENCY TO BE DELIVERED CURRENCY TO BE RECEIVED UNREALIZED
SETTLE -------------------------- U.S. $ VAL. -------------------------- U.S. $ VAL. --------------------
DATES AMOUNT TYPE AT 12/31/99 AMOUNT TYPE AT 12/31/99 GAIN LOSS
------ ---------- -------------- ----------- ---------- -------------- ----------- -------- ---------
<C> <C> <S> <C> <C> <C> <C> <C> <C>
11/13/00 18,480,000 Japanese Yen 189,899 173,147 U.S. Dollar 173,147 $(16,752)
11/13/00 178,035 U.S. Dollar 178,035 18,480,000 Japanese Yen 189,899 $ 11,864
---------- ---------- -------- ---------
$ 367,934 $ 363,046 $ 11,864 $(16,752)
========== ========== ======== =========
</TABLE>
(continued)
119
<PAGE> 210
OHIO NATIONAL FUND, INC.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
Ohio National Fund, Inc.:
We have audited the accompanying statements of assets and liabilities of Ohio
National Fund, Inc. -- Equity Portfolio, Money Market Portfolio, Bond Portfolio,
Omni Portfolio, International Portfolio, Capital Appreciation Portfolio
(formerly Small Cap Growth Portfolio), Small Cap Portfolio, International Small
Company Portfolio (formerly Global Contrarian Portfolio), Aggressive Growth
Portfolio, Core Growth Portfolio, Growth & Income Portfolio, S&P 500 Index
Portfolio, Social Awareness Portfolio, Strategic Income Portfolio, Firstar
Growth & Income Portfolio (formerly Stellar Portfolio), Relative Value
Portfolio, Blue Chip Portfolio, Equity Income Portfolio, High Income Bond
Portfolio, Capital Growth Portfolio (formerly the Small Cap Growth Portfolio)
(collectively, the Funds), including the schedules of investments, as of
December 31, 1999 and the related statements of operations, statements of
changes in net assets and the financial highlights for 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
verification of securities owned as of December 31, 1999, by confirmation with
the custodians and brokers and other appropriate audit 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 the
Funds at December 31, 1999, the results of their operations, the changes in
their net assets and the financial highlights for the periods indicated herein,
in conformity with generally accepted accounting principles.
KPMG LLP
Cincinnati, Ohio
February 11, 2000
120
<PAGE> 211
OHIO NATIONAL FUND, INC.
Form N-1A
PART C.
OTHER INFORMATION
<PAGE> 212
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, 1999
Statements of Operations for the Year or Periods Ended December
31, 1999
Statements of Changes in Net Assets for the Years Ended December
31, 1999 and 1998
Schedule of Investments at December 31, 1999 -- Equity Portfolio
Schedule of Investments at December 31, 1999 -- Money Market
Portfolio
Schedule of Investments at December 31, 1999 -- Bond Portfolio
Schedule of Investments at December 31, 1999 -- Omni Portfolio
Schedule of Investments at December 31, 1999 -- International
Portfolio
Schedule of Investments at December 31, 1999 -- Capital
Appreciation Portfolio
Schedule of Investments at December 31, 1999 -- Small Cap
Portfolio
Schedule of Investments at December 31, 1999 -- International
Small Company Portfolio
Schedule of Investments at December 31, 1999 -- Aggressive Growth
Portfolio
Schedule of Investments at December 31, 1999 -- Core Growth
Portfolio
Schedule of Investments at December 31, 1999 -- Growth & Income
Portfolio
Schedule of Investments at December 31, 1999 -- S&P 500 Index
Portfolio
Schedule of Investments at December 31, 1999 -- Social Awareness
Portfolio
Schedule of Investments at December 31, 1999 -- Strategic Income
Portfolio
Schedule of Investments at December 31, 1999 -- Firstar Growth &
Income Portfolio
Schedule of Investments at December 31, 1999 -- Relative Value
Portfolio
Schedule of Investments at December 31, 1999 -- High Income Bond
Portfolio
Schedule of Investments at December 31, 1999 -- Equity Income
Portfolio
Schedule of Investments at December 31, 1999 -- Blue Chip
Portfolio
Schedule of Investments at December 31, 1999 -- Capital Growth
Portfolio
Notes to Financial Statements for December 31, 1999
Independent Auditors' Report of KPMG LLP dated February 11, 2000
The following audited financial information is included in Part A of this
registration statement:
Financial Highlights (Ten years ended December 31, 1999)
Written Consents of the Following Persons:
KPMG LLP
Ronald L. Benedict, Esq. as Legal Counsel to the Registrant
Jones & Blouch L.L.P. as Legal Counsel to the Registrant
Exhibits:
(p) The Registrant's Code of Ethics
<PAGE> 213
All other relevant exhibits, which have previously been filed with the
Commission and are incorporated herein by reference, are as follows:
(a) 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.
(a)(1) 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.
(a)(2) 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.
(a)(3) 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.
(a)(4) Articles Supplementary of the Registrant, effective
September 16, 1996 were filed as Exhibit (1)(d) of
the Registrant's Form N-1A, Post-effective Amendment
no. 32, on October 21, 1996.
(a)(5) Articles Supplementary of the Registrant, effective
March 17, 1998, were filed as Exhibit (1)(e) of the
Registrant's Form N-1A, Post-effective Amendment no. 36,
on April 24, 1998.
(b) 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.
(c)(1) 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.
(c)(2) 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.
(c)(3) 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.
(c)(4) 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.
(c)(5) 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.
(c)(6) Specimen of certificated securities of the Registrant's
Nasdaq 100 Index portfolio was filed as Exhibit (c)(6)
of the Registrant's Form N-1A, Post-effective
Amendment no. 39, on February 4, 2000.
(d) 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, and
Schedule A, thereto effective May 1, 1998, was filed as
Exhibit (5)(a)(1) of the Registrant's Form N-1A,
Post-effective Amendment no. 35 on February 13, 1998.
(d)(1) Sub-Advisory Agreement (for the Capital Appreciation
portfolio) between Ohio National Investments, Inc. and
Jennison Associates LLC dated January 3, 2000 was
filed as Exhibit (d)(1) of the Registrant's Form N-1A,
Post-effective Amendment no. 39, on February 4, 2000.
<PAGE> 214
(d)(2) 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
with an amendment filed as Exhibit (d)(2)(i) under Post-
effective Amendment no. 37 on February 25, 1999.
(d)(3) Sub-Advisory Agreement (for the Aggressive Growth
portfolio) between Ohio National Investments, Inc. and
Janus Capital Corporation dated January 19, 2000 was
filed as Exhibit (d)(3) of the Registrant's Form N-1A,
Post-effective Amendment No. 39, on February 4, 2000.
(d)(4) Sub-Advisory Agreement (for the Core Growth Portfolio)
between Ohio National Investments, Inc. and Pilgrim
Baxter & Associates, Ltd., date 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 with an amendment filed as Exhibit
(d)(4)(i) under Post-effective Amendment no. 37 on
February 25, 1999.
(d)(5) Sub-Advisory Agreement (for the Strategic Income 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.
(d)(6) 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.
(d)(7) Subadvisory Agreement (for the International and
International Small Company Portfolios) between Ohio
National Investments, Inc. and Federated Global Research
Corp. was filed as Exhibit (d)(7) of the Registrant's
Form N-1A, Post-effective Amendment no. 37 on February
25, 1999.
(d)(8) Subadvisory Agreement (for the Growth & Income and
Capital Growth Portfolios) between Ohio National
Investments, Inc. and Robertson Stephens Investment
Management, L.P. was filed as Exhibit no. (d)(8) of the
Registrant's Form N-1A, Post-effective Amendment no. 37
on February 25, 1999.
(d)(9) Subadvisory Agreement (for the Firstar Growth & Income
Portfolio) between Ohio National Investments, Inc. and
Firstar Investment Research & Management Company, LLC
was filed as Exhibit (d)(9) of the Registrant's Form
N-1A, Post-effective Amendment no. 37 on February 25,
1999.
(g) 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.
(g)(1) 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, and the First Amendment thereto (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.
(h)(1) 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.
(h)(2) 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.
(h)(3) 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.
(h)(4) 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.
(h)(5) 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.
(h)(6) Joint Insured Agreement among the Registrant, ONE Fund,
Inc., Dow Target Variable Fund LLC and Ohio National
Investments, Inc. was filed as Exhibit no. (h)(6) of the
Registrant's Form N-1A, Post-effective Amendment no. 37
on February 25, 1999.
<PAGE> 215
(i)(1) 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.
(i)(2) 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.
(i)(3) 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.
(i)(4) 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 was
filed as Exhibit (10)(c) of the Registrant's Form N-1A,
Post-Effective Amendment no. 36 on April 24, 1998.
(i)(5) Opinion and consent of Ronald L. Benedict, Esq., as to
the shares of the Registrant's Nasdaq 100 Index
portfolio was filed as Exhibit (i)(5) of the
Registrant's Form N-1A, Post-effective Amendment
no. 39, on February 4, 2000.
(j)(1) 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.
(j)(2) 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.
(j)(3) 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.
(j)(4) Investment letter for the initial subscription of stock
of the Registrant's Small Cap Growth, High Income Bond,
Equity Income and Blue Chip Portfolios was filed as
Exhibit (13)(c) of the Registrant's Form N-1A
Post-Effective Amendment no. 36 on April 24, 1998.
(j)(5) Investment letter for the initial subscription of
stock of the Registrant's Nasdaq 100 Index portfolio
was filed as Exhibit (j)(5) of the Registrant's Form
N-1A, Post-effective Amendment no. 39, on February 4,
2000.
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 April 5, 2000, it also owned
89.4% of the voting securities of the Registrant, which are held of record in
the separate accounts of ONLI. The remaining 10.6% 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
49.6% of the voting shares of ONE Fund, Inc. ("ONE Fund") as of that date.
NUMBER OF HOLDERS OF SECURITIES
As of April 3, 2000, 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
International Small Company 5
Aggressive Growth 5
Core Growth 5
Growth & Income 5
S&P 500 Index 5
Social Awareness 5
Strategic Income 5
Firstar Growth & Income 5
Relative Value 5
Capital Growth 5
High Income Bond 5
Equity Income 5
Blue Chip 5
Nasdaq 100 Index 0
</TABLE>
<PAGE> 216
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 AND SUBADVISERS
Information related to the Registrant's investment adviser (Ohio National
Investments, Inc.) and each of the subadvisers retained by the investment
adviser for the management of the Registrant's portfolios is contained in the
registration statement currently on file with the Commission for each such
entity on Form ADV and is incorporated herein by reference. The file numbers of
the investment adviser and each subadviser are listed below:
Investment Adviser or Subadviser File No.
- -------------------------------- --------
Ohio National Investments, Inc. 801-51396
Federated Global Investment Management Corp. 801-49470
Federated Investment Counseling 801-34611
Jennison Associates LLC 801-05608
Founders Asset Management LLC 801-55220
Janus Capital Corporation 801-13991
Pilgrim Baxter & Associates, Ltd. 801-48872
RS Investment Management Co. LLC 801-29888
Firstar Investment Research & Management Company, LLC 801-28084
Legg Mason Fund Adviser, Inc. 801-16958
-5-
<PAGE> 217
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
International Small Company Portfolios:
Firstar
425 Walnut Street
Cincinnati, Ohio 45202
and
American Data Services, Inc. ("ADS")
150 Motor Parkway, Suite 109
Hauppauge, NY 11788
For the International and International Small Company
Portfolios:
State Street Bank and Trust Company
("State Street")
801 Pennsylvania Street
Kansas City, Missouri 64105
(b) General and auxiliary ledgers:
ADS and State Street
(c) Securities records for portfolio securities:
ADS and State Street
(d) Corporate charter (Articles of Incorporation), By-Laws and Minute
Books:
Ronald L. Benedict, Secretary
Ohio National Fund, Inc.
One Financial Way
Montgomery, Ohio 45242
-14-
<PAGE> 218
(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
Not Applicable
-15-
<PAGE> 219
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 Montgomery and the State of Ohio on the 25th day
of April, 2000.
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 25, 2000
John J. Palmer (Principal Executive Officer)
/s/Dennis R. Taney
- ------------------------- Treasurer (Principal Financial April 25, 2000
Dennis R. Taney and Accounting Officer)
/s/Ronald L. Benedict
- ------------------------- Director April 25, 2000
Ronald L. Benedict
/s/James E. Bushman
- ------------------------- Director April 25, 2000
James E. Bushman
/s/Ross Love
- ------------------------- Director April 25, 2000
Ross Love
/s/George M. Vredeveld
- ------------------------- Director April 25, 2000
George M. Vredeveld
</TABLE>
<PAGE> 220
INDEX OF CONSENTS AND EXHIBITS
<TABLE>
<CAPTION>
Page Number in
Exhibit Sequential Numbering
Number Description System Where Located
- ------ ----------- --------------------
<S> <C> <C>
Consent of KPMG LLP
Consent of Ronald L. Benedict, Esq.
Consent of Jones & Blouch L.L.P.
</TABLE>
Exhibits:
(p) The Registrant's Code of Ethics
<PAGE> 221
CONSENTS
<PAGE> 222
[Letterhead]
April 25, 2000
The Board of Directors
Ohio National Fund, Inc.
One Financial Way
Montgomery, Ohio 45242
Re: Ohio National Fund, Inc. Registration Statement
File Nos. 2-67464 and 811-3015
Post-effective Amendment no. 40
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 this amendment, the
undersigned legal counsel to the registrant hereby confirms that the amendment
does not contain any material that would render it ineligible to become
effective pursuant to paragraph (b).
The amendment is being made to add 1999 financial data and other immaterial
changes.
Sincerely,
/s/ Ronald L. Benedict
----------------------
Ronald L. Benedict
Secretary and Legal Counsel
RLB/nh
<PAGE> 223
Jones & Blouch L.L.P.
Suite 405-West
1025 Thomas Jefferson St., N.W.
Washington, DC 20007
(202) 223-3500
April 11, 2000
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. 40 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> 224
INDEPENDENT AUDITORS' CONSENT
We consent to the use of our report for the Ohio National Fund, Inc. dated
February 11, 2000 and to the use of our name under the heading "Financial
Highlights of Ohio National Fund, Inc." in the Prospectus and "Experts" in the
Statement of Additional Information in Post-Effective Amendment No. 40 to File
No. 2-67464.
April 14, 2000
Cincinnati, Ohio
<PAGE> 1
Exhibit (p)
OHIO NATIONAL FUND, INC.
CODE OF ETHICS
Revised August 26, 1998
l. Definitions
-----------
(a) "Access Person" means any director, officer or Advisory Person of the
Fund.
(b) "Advisory Person" means:
(1) any employee of the Fund, Ohio National, ONI or any other company in
a control relationship to the Fund, who, in connection with his or
her regular duties, makes, participates in or obtains information
regarding the purchase or sale of a security by the Fund, or whose
functions relate to the making of any recommendations with respect to
such purchases or sales; and
(2) any natural person in a control relationship to the Fund who obtains
information concerning recommendations made to the Fund with regard
to the purchase or sale of a security.
(c) "Being considered," with respect to the purchase or sale of a security,
means:
(1) that a recommendation or order to purchase or sell such security has
been made and communicated by a portfolio manager of the Fund or
another Advisory Person; or
(2) with respect to a person who makes such recommendations, that such
person is seriously considering making such a recommendation.
(d) "Beneficial ownership" shall be interpreted in the same manner as in
determining if a person is subject to the provisions of Section 16 of the
Securities Exchange Act of 1934 and the rules and regulations thereunder,
except that the determination of direct or indirect beneficial ownership
shall apply to all securities which an Access Person has or acquires.
(e) "Compliance Director" shall be the compliance director of the Fund or
another individual designated by the Fund's board of directors.
(f) "Control" has the same meaning as set forth in Section 2(a)(9) of the
Investment Company Act of 1940.
<PAGE> 2
(g) "Fund" means Ohio National Fund, Inc.
(h) "Ohio National" means The Ohio National Life Insurance Company.
(i) "ONI" means Ohio National Investments, Inc.
(j) "Outside Director" means a director of the Fund who is not an "interested
person" of the Fund within the meaning of Section 2(a)(19) of the
Investment Company Act of 1940.
(k) "Purchase or sale" includes the writing of an option to purchase or sell
a security.
(l) "Security" has the meaning set forth in Section 2(a)(36) of the
Investment Company Act of 1940, except that it shall not include
securities issued by the government of the United States, bankers'
acceptances, bank certificates of deposit or commercial paper.
2. Prohibited Transactions
-----------------------
(a) No Access Person shall accept, from any person or entity that does
business with the Fund or with ONI, any gift of securities of any value
or any gift of any other things, from all such persons or entities during
a calendar year, having an aggregate value in excess of $100. For
purposes of this prohibition, business-oriented meals paid for by such a
person or entity shall not be considered to be "gifts."
(b) No Advisory Person shall serve on the board of directors of any publicly
traded corporation other than the Fund and its affiliates unless such
service has been specifically agreed to and approved by the Fund's board
of directors.
(c) Except as provided in Section 3, no Access Person shall purchase or sell,
directly or indirectly, any security in which he or she has or acquires
any direct or indirect beneficial ownership, and which to his or her
actual knowledge at the time of such purchase or sale:
(1) is being considered for purchase or sale by the Fund;
(2) is being purchased or sold by the Fund within 7 days before or after
the Access Person's transaction;
(3) is an initial public offering unless the issuer is an affiliate of
the Fund;
(4) is a derivative instrument or other security related to, but not
necessarily the same as, a security held by or being considered for
purchase by the Fund;
(5) will result in trading profits from securities held by the Access
Person for fewer than 61 days; or
2
<PAGE> 3
(6) is a private placement of securities offered by an entity having
publicly- traded securities.
(d) Advisory Persons shall not purchase or sell any Security (unless exempted
under Section 3) for the account of any person or entity other than the
Fund or its corporate affiliates without having first received written
approval from the Compliance Director.
(1) In the absence of the Compliance Director, or in the case of a
transaction by the Compliance Director, the written approval shall be
given by any one of the following, provided that the approval may not
be given by the Advisory Person seeking pre-clearance nor by anyone
reporting to him or her: the Fund's President, Vice President,
Treasurer or Secretary.
(2) Any pre-clearance approval shall expire after seven calendar days.
3. Exempted Transactions
---------------------
The prohibitions of Section 2 shall not apply to the following:
(a) Purchases or sales effected in any account over which the Access Person
has no direct or indirect influence or control.
(b) Purchases or sales of securities which are not eligible for purchase or
sale by the Fund.
(c) Purchases or sales which are non-volitional on the part of either the
Access Person or the Fund.
(d) Purchases or redemptions of open-end mutual fund shares or variable
contracts.
(e) Purchases which are part of an automatic dividend reinvestment plan.
(f) Purchases effected upon the exercise of rights issued by an issuer
PRO RATA to all holders of a class of its securities, to the extent such
rights were acquired from such issuer, and sales of such rights so
acquired.
(g) Purchases or sales of a security if the transactions of both the Access
Person and the Fund are so small, in relation to the daily volume traded
in such security, as to have a DE MINIMIS effect upon the market price of
such security and if both the Fund and the Access Person, as a result,
beneficially owns or controls a DE MINIMIS amount of the class of
security.
(h) Purchases or sales which receive the prior approval of the Fund's board
of directors because
3
<PAGE> 4
(1) their potential harm to the Fund is remote because they would be very
unlikely to affect a highly institutional market, and
(2) they clearly are not related economically to the securities to be
purchased, sold or held by the Fund.
(i) Gifts of securities having a market value, on the day of transfer, of
less than $3,000 (provided that such gift is not from a person or entity
that does business with the Fund or with ONI).
4. Reporting
---------
(a) Every Access Person shall report to the Fund the information described in
Section 4(d) with respect to transactions in any security in which such
Access Person has, or by reason of such transaction acquires, any direct
or indirect beneficial ownership in the security. An Access Person shall
not be required to make a report with respect to Investment Company
Securities, Securities obtained through automatic dividend reinvestment
plans or transactions effected for any account over which he or she does
not have any direct or indirect influence or control.
(b) An Outside Director of the Fund need only report a transaction if he or
she, at the time of that transaction, knew or, in the ordinary course of
fulfilling his or her official duties as a director should have known
that, during the 15 days immediately preceding the date of the Outside
Director's transactions, such security is or was purchased or sold by the
Fund or was being considered for purchase or sale by the Fund or ONI.
(c) Every report shall be made to the Compliance Director not later than 10
days after the end of the calendar quarter in which the transaction to
which the report relates was effected.
(d) Each report shall contain the following information:
(1) The date of the transaction (trade date, not settlement date);
(2) The name (including class or issue) of the securities;
(3) The principal amount of each security involved;
(4) The nature of the transaction (i.e., purchase, sale or other type of
acquisition or disposition);
(5) The price at which the transaction was effected; and
(6) The name of the broker, dealer or bank through which the transaction
was effected.
4
<PAGE> 5
(e) Any such report may also contain a statement that the report shall not be
construed as an admission by the person making such report that he or she
has any direct or indirect beneficial ownership in the security to which
the report relates.
(f) Every Advisory Person shall, within 30 days after becoming an Advisory
Person, submit to the Compliance Director a list of all securities owned
by the Advisory Person as of the date the individual became an Advisory
Person.
(g) Every Advisory Person shall, on or before the last day of January each
year, submit to the Compliance Director a list of all securities owned by
the Advisory Person as of the December 31 preceding, together with a
certification that he or she has read and understands this Code of
Ethics, and that he or she has, to the best of his or her knowledge and
belief, complied with the requirements of this Code of Ethics.
(h) Every Advisory Person shall direct his or her securities broker to supply
the Compliance Director a duplicate copy of the confirmation of each
personal securities transaction and copies of periodic statements from
all personal securities accounts controlled by the Advisory Person.
However, such duplicate copies shall not be required on the following:
(1) Investment Company Securities, or
(2) securities obtained through an automatic dividend reinvestment plan.
5. Sanctions
---------
Upon discovering a violation of this Code of Ethics, the Fund's board of
directors may impose such sanctions as it deems appropriate. Such sanctions
could include:
(a) A letter of warning or censure;
(b) suspension or termination of the relationship of the violator with the
Fund; or
(c) in the case of trading profits from any securities held for fewer than 61
days, disgorgement of such profits to the Fund.
5
<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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<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> 36.31
<PER-SHARE-NII> .12
<PER-SHARE-GAIN-APPREC> 6.85
<PER-SHARE-DIVIDEND> (.11)
<PER-SHARE-DISTRIBUTIONS> (16.68)
<RETURNS-OF-CAPITAL> (.01)
<PER-SHARE-NAV-END> 26.48
<EXPENSE-RATIO> .76
</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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<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
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<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> .49
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.49)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> .41
</TABLE>
<TABLE> <S> <C>
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<NAME> OHIO NATIONAL FUND, INC.
<SERIES>
<NUMBER> 03
<NAME> BOND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<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> 10.56
<PER-SHARE-NII> .68
<PER-SHARE-GAIN-APPREC> (.62)
<PER-SHARE-DIVIDEND> (.68)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.94
<EXPENSE-RATIO> .77
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000315754
<NAME> OHIO NATIONAL FUND, INC.
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000315754
<NAME> OHIO NATIONAL FUND, INC.
<SERIES>
<NUMBER> 14
<NAME> STRATEGIC INCOME
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000315754
<NAME> OHIO NATIONAL FUND, INC.
<SERIES>
<NUMBER> 15
<NAME> FIRSTAR GROWTH & INCOME
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000315754
<NAME> OHIO NATIONAL FUND, INC.
<SERIES>
<NUMBER> 16
<NAME> RELATIVE VALUE
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000315754
<NAME> OHIO NATIONAL FUND, INC.
<SERIES>
<NUMBER> 17
<NAME> BLUE CHIP
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000315754
<NAME> OHIO NATIONAL FUND, INC.
<SERIES>
<NUMBER> 18
<NAME> EQUITY INCOME
<S> <C>
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<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
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<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 0
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<PER-SHARE-NAV-BEGIN> 10.53
<PER-SHARE-NII> .11
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<PER-SHARE-NAV-END> 12.38
<EXPENSE-RATIO> 1.28
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000315754
<NAME> OHIO NATIONAL FUND, INC.
<SERIES>
<NUMBER> 19
<NAME> HIGH INCOME BOND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
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<EXPENSE-RATIO> 1.13
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000315754
<NAME> OHIO NATIONAL FUND, INC.
<SERIES>
<NUMBER> 20
<NAME> CAPITAL GROWTH
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
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<PER-SHARE-NAV-BEGIN> 10.47
<PER-SHARE-NII> (.12)
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<PER-SHARE-DISTRIBUTIONS> (3.59)
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<EXPENSE-RATIO> 1.30
</TABLE>
