<PAGE> 1
President's Message
- --------------------------------------------------------------------------------
[John J. Palmer Photo]
Dear Investor:
First, I want to thank you for being an investor in the Ohio National Fund. All
of us here appreciate your support. We are pleased to provide you with an update
of Ohio National Fund's performance and investment activity for the year ended
December 31, 1998.
Looking Back
For some time now we have enjoyed an economic climate of reasonable growth, low
unemployment, modest interest rates, subdued inflation and stable corporate
earnings. Over the past year, however, while the overall direction has continued
to be favorable, the journey has not been an especially smooth one for many
investors. As a recent industry headline indicated, 1998's market "had it all."
Stock prices surged, swooned, and soared once more. As you would expect, Ohio
National's subaccounts followed similar patterns. A number of our funds did
well, including our S&P 500 Index portfolio, which had the best results of all
insurance company S&P Index funds, according to Lipper Analytical.
For some of our funds, results were not as we hoped. For those funds, we have
made adjustments in investment strategies which are already proving to get the
funds back on track. And to help our clients continue to pursue investment
diversification, plans are underway to provide more investment options in many
of our existing variable products.
Starting January 1999, we were also pleased to introduce Federated Global
Research Corp., as manager (on an interim basis, pending shareholder approval)
of the International and Global Contrarian portfolios of the Ohio National Fund.
Federated Investment Counseling (FIC) already manages the Blue Chip, Equity
Income and High Income Bond portfolios of Ohio National Fund. Both are part of
Pittsburgh-based Federated Investors, an investment manager founded in 1955
which now has more than $110 billion in managed assets.
The Importance of Diversification
After a year like 1998, it's important to continue to value the importance of
diversification. As a company, we certainly do not recommend investing solely in
the "style of the moment" or basing investment decisions strictly on market
timing. We remain dedicated to staying in step with -- and in some cases, even
ahead of -- other insurance companies and financial service providers when it
comes to improving our investment selections. We've always kept a strong focus
on providing our clients with diversified and innovative portfolio choices, and
we will continue this strategy in 1999.
Our focus on investment style choices and strong professional investment
managers means that we're working hard to provide even better products and
services for you.
The Market in General
The past year was one of unusual volatility for the stock market. The first
quarter saw double digit gains in major indices; the second quarter saw the
start of a meltdown in the mid- and small-cap sectors, but large caps managed to
push the S&P 500 Index to record levels. In the third quarter, the market
crumbled, with the month of August seeing declines of 14.5% or more in all
domestic indices, as well as a decline in both developed and emerging overseas
markets. September saw a general upturn in the markets, led by small-cap stocks,
only to see early October bring another wave of sell-offs to drive the indices
back down. The situation was reversed following three reductions in the Fed
Funds rate, easing a potential credit crunch and calming deflation fears. Since
then, the market has generally trended up, but the ground lost by small- and
mid-cap stocks in the second and third quarters has not been regained.
<PAGE> 2
As noted, this market had it all -- and then some. At Ohio National, you have
our commitment to focus on long-term perspectives and make carefully reasoned
judgments about our investment decisions.
In Closing
Information on your investments is contained in the following pages. Please note
in reviewing performance results that rates of return under variable contracts
differ from those of the underlying portfolios because of applicable charges for
mortality and expenses. Please contact your registered representative for
additional information on the financial protection and tax-deferred accumulation
options afforded by your variable annuity or variable universal life insurance
contract. As your needs change over time, he or she stands ready to serve you.
Thank you again for the confidence you have placed in Ohio National Fund as you
pursue your wealth-building endeavors. You can be assured that we will make
every effort to continue to merit that confidence.
Best regards,
/s/ JOHN J. PALMER
John J. Palmer
Directors and Officers of Ohio National Fund, Inc.
- --------------------------------------------------------------------------------
John J. Palmer, President and Director
Ronald L. Benedict, Secretary and Director
George E. Castrucci, Director
Ross Love, Director
George M. Vredeveld, Director
Thomas A. Barefield, Vice President
Joseph P. Brom, Vice President
Michael A. Boedeker, Vice President
Stephen T. Williams, Vice President
Dennis R. Taney, Treasurer
Theresa M. Brunsman, Assistant Secretary
William J. Hilbert, Jr., Compliance Director and Assistant Treasurer
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the fund. This report is not
authorized for distribution to prospective investors in the fund unless preceded
or accompanied by an effective prospectus of Ohio National Fund, Inc. For a
prospectus. containing more complete information, including charges and
expenses, please contact Ohio National Equities, Inc. (Member NASD/SIPC) One
Financial Way, Cincinnati, Ohio 45242, telephone 513.794.6100. 2/99
<PAGE> 3
EQUITY PORTFOLIO
OHIO NATIONAL FUND, INC.
OBJECTIVE
The principal investment objective of the Equity Portfolio is long-term capital
growth. Current income is a secondary objective.
PERFORMANCE AS OF DECEMBER 31, 1998
AVERAGE ANNUAL TOTAL RETURNS:
<TABLE>
<S> <C>
One-year 5.72%
Three-year 13.92%
Five-year 13.52%
Ten-year 12.66%
Since inception (1/14/71) 10.87%
</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 Equity Portfolio return was 5.72% for 1998. Although the large
capitalization stock portion of the portfolio provided returns consistent with
the major indices, the portfolio's exposure to small and mid-capitalization
stocks pulled the overall return down considerably. We were invested in these
areas because the valuations relative to the large capitalization stocks were
very attractive. Unfortunately, these areas corrected far more than the large
capitalization stocks and the major indices during the stock market downturn.
Even though the portfolio's returns were consistent with the major indices from
the October 8th market bottom through the end of the year, the performance
during the mid year market correction caused the portfolio to lag for the 1998
year.
We expect the stock market to continue in a volatile manner. We expect the U.S.
economy and economic activity around the world to slow somewhat during 1999. We
feel that growth will be rewarded and thus we will attempt to increase the
growth aspects of the portfolio.
CHANGE IN VALUE OF $10,000 INVESTMENT
[GRAPH]
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, 1998
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Cisco Systems Inc 4.2
2. General Electric Corp 2.7
3. Texas Instruments Inc. 2.3
4. Sun Microsystems 2.3
5. Intel Corp 2.1
6. American International Group 2.0
7. Microsoft Corp 1.8
8. Xerox Corp 1.5
9. Symbol Technologies Inc 1.4
10. Manpower Inc 1.4
</TABLE>
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
Computer and Related 20.6
Medical and Related 6.3
Oil, Energy, and Natural Gas 6.4
Electrical Equipment 5.9
Banking 5.6
Insurance Services 4.3
</TABLE>
3
<PAGE> 4
OHIO NATIONAL FUND, INC.
EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
AEROSPACE (3.0%)
94,000 Allied Signal Inc................. $ 4,165,375
64,000 Raytheon Co....................... 3,408,000
31,350 Rockwell International Corp....... 1,522,434
------------
9,095,809
------------
AUTOMOTIVE & RELATED (2.8%)
22,500 Arvin Industries Inc.............. 937,969
19,328 *Daimlerchrysler................... 1,856,696
29,400 Eaton Corp........................ 2,078,212
39,184 Ford Motor Co..................... 2,299,611
1 Meritor Automotive................ 21
20,000 Magna International Inc........... 1,240,000
------------
8,412,509
------------
BANKING (6.4%)
19,574 Bankamerica Corp.................. 1,176,887
142,066 Charter One Financial Inc......... 3,942,331
23,880 First Star Bancorp................ 495,510
35,320 Firstar Corp...................... 3,293,590
47,921 First Union Corp.................. 2,914,196
40,000 Flagstar Bancorp.................. 1,045,000
45,000 Mallon Bank Corp.................. 3,093,750
------------
15,961,264
------------
BUSINESS SERVICES (4.1%)
132,500 *Alternative Resources Inc......... 1,407,813
110,000 First Data Corp................... 3,485,625
61,000 *Lo Jack........................... 724,375
170,000 Manpower Inc...................... 4,281,875
101,000 Reynolds & Reynolds CL A.......... 2,316,687
------------
12,216,375
------------
CHEMICALS (4.3%)
98,000 Engelhard Corp.................... 1,872,000
50,000 Hercules Inc...................... 1,368,750
38,750 Hanson Trust PLC.................. 1,511,250
35,300 Mineral Technologies Inc.......... 1,445,094
85,000 Monsanto Co....................... 4,037,500
66,000 OM Group, Inc..................... 2,409,000
------------
12,643,594
------------
COMMUNICATIONS (1.1%)
17,000 *Infinity Broadcasting Corp........ 465,375
20,625 *Mastec Inc........................ 433,125
40,000 Motorola Inc...................... 2,442,500
------------
3,341,000
------------
COMPUTER & RELATED (20.6%)
56,500 *3Comm Corp........................ 2,531,906
135,000 *Cisca Systems, Inc................ 12,529,688
63,000 Computer Associates............... 2,685,375
28,000 *Computer Sciences Corp............ 1,804,250
60,000 Hewlett-Packard Co................ 4,098,750
53,000 Intel Corp........................ 6,283,813
52,000 *Mapics Inc........................ 858,000
40,000 *Microsoft Corp.................... 5,547,500
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
COMPUTER & RELATED, CONTINUED
47,058 *Seagate Technology................ $ 1,423,504
45,742 *Solectron Corp.................... 4,251,147
80,000 *Sun Microsystems, Inc............. 6,850,000
67,500 Symbol Technologies............... 4,315,781
80,000 Texas Instruments Inc............. 6,845,000
40,400 *Zebra Tech Corp., CL A............ 1,161,500
------------
61,186,214
------------
CONTAINERS (1.3%)
125,000 *Owens-Illinois Inc............... 3,828,125
------------
DRUGS (2.5%)
86,000 *Applied Analytical Industries..... 1,494,250
64,000 Abbott Laboratories............... 3,136,000
85,000 Mylan Laboratories................ 2,677,500
------------
7,307,750
------------
ELECTRICAL EQUIPMENT (5.9%)
60,000 *Analog Devices Inc................ 1,882,500
100,000 *Anixter Intl. Inc................. 2,031,250
31,500 Federal Signal Corp............... 862,313
80,000 General Electric Co............... 8,165,000
40,000 Xerox Corp........................ 4,720,000
------------
17,661,063
------------
ENTERTAINMENT & LEISURE (1.7%)
75,000 Cedar Fair........................ 1,950,000
------------
FINANCIAL SERVICES (1.4%)
100,538 Associates 1st Capital Corp....... 4,260,298
------------
FOOD & RELATED (1.5%)
80,000 Food Lion Inc. CL A............... 850,000
128,700 Food Lion Inc..................... 1,295,044
25,500 H.J. Heinz Co..................... 1,443,938
45,000 Panamerican Beverages Inc......... 981,562
------------
4,570,544
------------
FORESTRY & PAPER PRODUCTS (0.7%)
66,000 Boise Cascade Corp................ 2,046,000
------------
HOTEL/LODGING (0.5%)
50,000 *Guest Supply Inc.................. 596,875
60,000 *Mirage Resorts Inc................ 896,250
------------
1,493,125
------------
HOUSING, FURNITURE & RELATED (2.7%)
297,500 Clayton Homes Inc................. 4,109,219
64,000 Newell Co......................... 2,640,000
100,000 Shelby Williams................... 1,200,000
------------
7,949,219
------------
INDUSTRIAL SERVICES (0.4%)
20,500 *Medar Inc......................... 23,063
50,000 Regal Beloit...................... 1,150,000
------------
1,123,063
------------
</TABLE>
(continued)
4
<PAGE> 5
OHIO NATIONAL FUND, INC.
EQUITY PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
INSURANCE SERVICES (4.3%)
63,280 American International Group...... $ 6,114,430
40,000 Equitable Cos. Inc................ 2,315,000
81,000 MGIC Investment Corp.............. 3,224,813
89,000 State Auto Financial Corp......... 1,101,375
------------
12,755,618
------------
MACHINERY (1.6%)
60,000 Hardinge Inc...................... 1,106,250
43,000 Modine Manufacturing Inc.......... 1,558,750
64,000 Pall Corp......................... 1,620,000
54,000 Steward & Stevenson............... 526,500
------------
4,811,500
------------
MEDIA & PUBLISHING (1.0%)
95,000 CBS Corp.......................... 3,111,250
------------
MEDICAL & RELATED (6.3%)
70,000 Allegiance Corp................... 3,263,750
37,500 Baxter International.............. 2,411,719
114,200 *Capital Senior Living Corp........ 1,591,663
69,200 *Foundation Health Sys. Inc........ 826,075
46,900 *HCR Manor Care.................... 1,377,687
140,000 *Healthsouth Corp.................. 2,161,250
30,000 *Humana Inc........................ 534,375
77,000 *Kendle International Inc.......... 1,799,875
23,800 *National Healthcare Corp.......... 368,900
97,813 *Quorum Health Group Inc........... 1,265,449
31,200 *Sola Industries................... 538,200
58,000 United Healthcare Corp............ 2,497,625
------------
18,636,568
------------
METALS & MINING (1.5%)
47,000 Amcast Industrial Corp............ 898,875
89,000 Worthington Industries............ 1,112,500
92,000 *Wyman-Gordon Co................... 943,000
73,500 *Wolverine Tube Inc................ 1,543,500
------------
4,497,875
------------
OIL, ENERGY & NATURAL GAS (8.4%)
27,000 Chevron Corp...................... 2,239,313
155,000 *Louis Dreyfus Natural Gas......... 2,208,750
100,000 *Matrix Services Co................ 475,000
104,000 *Offshore Logistics Inc............ 1,235,000
35,000 Pacific Gulf Properties........... 702,188
77,170 Schlumberger Ltd.................. 3,559,466
170,000 *Tesoro Petroleum.................. 2,061,250
95,000 Transocean Petroleum Corp......... 2,547,187
28,000 UGI Corp.......................... 665,000
102,000 Williams Cos. Inc................. 3,181,125
------------
18,874,279
------------
REAL ESTATE & LEASING (2.7%)
28,000 Camden Property Trust REIT........ 728,000
60,000 Corporate Office Properties....... 427,500
76,000 Commercial Net Lease Realty....... 1,007,000
37,500 First Industrial Realty Trust..... 1,005,499
55,000 Healthcare Realty Trust........... 1,227,188
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
REAL ESTATE & LEASING, CONTINUED
44,000 JDN Realty Corp................... $ 948,750
67,250 Liberty Property Trust............ 1,656,031
29,500 National Health Investors Inc..... 728,281
18,500 Regency Realty Corp............... 411,625
------------
8,139,844
------------
RESTAURANTS (1.0%)
84,000 *Buffets Inc....................... 1,002,750
90,250 Consolidated Products Inc......... 1,861,406
------------
2,864,156
------------
TEXTILES & RELATED (1.3%)
45,500 Oxford Industries Inc............. 1,285,375
98,000 Warnaco Group CL A................ 2,474,500
------------
3,759,875
------------
TRANSPORTATION & EQUIPMENT (4.3%)
44,000 *Atlas Air Inc..................... 2,153,250
73,000 *Avondale Industries Inc........... 2,117,000
100,000 Burlington Northern Santa Fe...... 3,375,000
45,000 CNF Transportation Inc............ 1,690,312
56,800 Trinity Industries................ 2,186,800
70,000 *Wisconsin Central Transportation.. 1,203,125
------------
12,725,487
------------
UTILITIES (0.6%)
27,500 FPL Group Inc..................... 1,694,686
------------
TOTAL COMMON STOCK (89.9%)
(COST $152,224,511).............. $266,967,090
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES PREFERRED STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
BANKING (0.3%)
30,000 National Australia Bank LTD
Conv............................. $ 836,250
------------
COMPUTER & RELATED (0.1%)
24,000 General Datacommunications 9% C... 252,000
------------
METALS & MINING (0.2%)
50,000 Freeport McMoran Copper & Gold,
Series B......................... 743,750
------------
OIL, ENGERGY & NATURAL GAS (0.1%)
15,000 Howell Corp. $3.50 Series A
Conv............................. 225,000
------------
REAL ESTATE (0.2%)
20,000 Camden Property Tr. 9% Series A... 473,750
------------
TOTAL PREFERRED STOCK (0.9%)
(COST $4,446,337)................ $ 2,530,750
------------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT CONVERTIBLE DEBENTURES VALUE
- -------------------------------------------------------------
<C> <S> <C>
INDUSTRIAL SERVICES (0.2%)
$ 475,000 Medar Inc. 12.95% due 06/30/05.... $ 475,000
------------
METAL FABRICATING (0.3%)
900,000 INCO, Ltd. 7.75% due 03/15/16..... 810,000
------------
</TABLE>
(continued)
5
<PAGE> 6
OHIO NATIONAL FUND, INC.
EQUITY PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT CONVERTIBLE DEBENTURES VALUE
- -------------------------------------------------------------
<C> <S> <C>
OIL, ENGERGY & NATURAL GAS (0.2%)
$ 800,000 Offshore Logistics 6.00% due
12/15/06......................... $ 692,000
------------
TOTAL CONVERTIBLE (0.7%)
(COST $2,165,025)................ $ 1,977,000
------------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT SHORT-TERM NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
AUTOMOTIVE & RELATED (3.7%)
$5,132,000 General Motors 5.660% 01/05/99.... $ 5,128,773
6,000,000 Ford Motors 5.670% 01/06/99....... 5,995,275
------------
11,124,048
------------
ELECTRICAL EQUIPMENT (1.4%)
4,173,000 G.E. Capital 5.600% 01/07/99...... 4,169,105
------------
FINANCIAL SERVICES (3.1%)
2,000,000 American Express 5.250%
01/11/98......................... 1,997,083
2,352,000 American General 4.750%
01/12/99......................... 2,348,586
4,873,000 Household Finance 5.790%
01/04/99......................... 4,870,649
------------
9,216,318
------------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT SHORT-TERM NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
RETAIL (1.5%)
$4,340,000 Sears Roebuck 6.000% 01/08/99..... $ 4,334,937
------------
TOTAL SHORT-TERM NOTES (9.7%)
(COST $28,844,408)............... $ 28,844,408
------------
TOTAL HOLDINGS (101.2%)
(COST $187,680,281)(a)........... $300,319,248
------------
CASH & RECEIVABLE, NET OF
LIABILITIES (-1.2%).............. (3,416,317)
------------
TOTAL NET ASSETS (100.0%)......... $296,902,931
============
</TABLE>
- ---------------
* Non-income producing securities.
(a) Also represents cost for Federal income tax purposes.
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 7
OHIO NATIONAL FUND, INC.
EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<S> <C>
Assets:
Investments in securities at market value
(note 1) (cost $187,680,281)........... $300,319,248
Cash in bank............................. 4,380
Receivable for securities sold........... 737,857
Receivable for fund shares sold.......... 8,797
Dividends and accrued interest
receivable............................. 413,521
Other.................................... 18,285
------------
Total assets........................... 301,502,088
------------
Liabilities:
Payable for securities purchased......... 3,715,836
Payable for shares redeemed.............. 684,548
Payable for investment management
services (note 3)...................... 128,870
Other accrued expenses................... 69,903
------------
Total liabilities...................... 4,599,157
------------
Net assets at market value................. $296,902,931
============
Net assets consist of:
Par value, $1 per share.................. $ 8,175,981
Paid-in capital in excess of par value... 176,087,660
Net unrealized appreciation on
investments (note 1)................... 112,638,967
Undistributed net investment income...... 323
------------
Net assets at market value................. $296,902,931
============
Shares Outstanding (note 4)................ 8,175,981
Net asset value per share.................. $ 36.31
============
</TABLE>
STATEMENT OF OPERATIONS
Year ended December 31, 1998
<TABLE>
<S> <C>
Investment income:
Interest.................................. $ 1,673,184
Dividends................................. 3,893,653
-----------
Total investment income................. 5,566,837
-----------
Expenses:
Management fees (note 3).................. 1,550,392
Custodian fees (note 3)................... 58,400
Directors' fees (note 3).................. 10,170
Professional fees......................... 42,157
Accounting and transfer agent fee......... 171,039
Other..................................... 58,199
-----------
Total expenses.......................... 1,890,357
-----------
Net investment income................... $ 3,676,480
-----------
Realized and unrealized gain on investments:
Net realized gain from investments........ $ 5,493,034
Net increase in unrealized appreciation on
investments............................. 6,996,269
-----------
Net gain on investments................. 12,489,303
-----------
Net increase in net assets from
operations............................ $16,165,783
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE> 8
OHIO NATIONAL FUND, INC.
EQUITY PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
From operations:
Net investment income..................................... $ 3,676,480 $ 3,800,104
Realized gain on investments.............................. 5,493,034 13,144,695
Unrealized gain on investments............................ 6,996,269 26,148,841
------------ ------------
Net increase in net assets from operations............ 16,165,783 43,093,640
------------ ------------
Dividends and distributions to shareholders:
Dividends paid from net investment income................. (3,678,591) (4,788,921)
Capital gains distributions............................... (5,566,857) (15,187,264)
------------ ------------
Total dividends and distributions..................... (9,245,448) (19,976,185)
------------ ------------
From capital share transactions (note 4):
Received from shares sold................................. 24,773,079 38,790,184
Received from dividends reinvested........................ 9,245,448 19,976,185
Paid for shares redeemed.................................. (32,108,106) (26,588,013)
------------ ------------
Increase in net assets derived from capital share
transactions......................................... 1,910,421 32,178,366
------------ ------------
Increase in net assets............................. 8,830,756 55,295,821
------------ ------------
Net Assets:
Beginning of period....................................... 288,072,175 232,776,354
------------ ------------
End of period (a)......................................... $296,902,931 $288,072,175
============ ============
(a) Includes undistributed net investment income of......... $ 323 $ 2,434
============ ============
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Per share data:
Net asset value, beginning of period........................ $35.44 $32.30 $28.58 $23.20 $23.90
Income from investment operations:
Net investment income..................................... 0.45 0.51 0.47 0.50 0.45
Net realized and unrealized gain (loss) on investments.... 1.56 5.24 4.58 5.65 (0.39)
------ ------ ------ ------ ------
Total income from investment operations................. 2.01 5.75 5.05 6.15 0.06
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income...................... (0.45) (0.63) (0.46) (0.39) (0.44)
Distributions from net realized capital gains............. (0.69) (1.98) (0.87) (0.38) (0.32)
------ ------ ------ ------ ------
Total distributions..................................... (1.14) (2.61) (1.33) (0.77) (0.76)
------ ------ ------ ------ ------
Net asset value, end of period.............................. $36.31 $35.44 $32.30 $28.58 $23.20
====== ====== ====== ====== ======
Total return................................................ 5.72% 18.17% 18.35% 27.20% 0.25%
Ratios and supplemental data:
Ratio of expenses to average net assets................... 0.64% 0.67% 0.73% 0.73% 0.62%
Ratio of net investment income to average net assets...... 1.25% 1.43% 1.60% 1.90% 1.90%
Portfolio turnover rate..................................... 25% 19% 11% 14% 8%
Net assets at end of period (millions)...................... $296.9 $288.1 $232.8 $175.7 $123.3
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE> 9
OHIO NATIONAL FUND, INC.
MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT SHORT-TERM NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
AEROSPACE (3.3%)
$1,461,000 Allied Signal 5.750% 01/13/99...... $ 1,458,200
-----------
AUTOMOTIVE & RELATED (19.1%)
1,698,000 American Honda 5.550% 01/28/99..... 1,690,932
1,678,000 Ford Motor Credit Corp. 5.300%
01/08/99.......................... 1,676,271
229,000 General Motors 5.190% 01/11/99..... 228,670
1,600,000 General Motors 5.350% 01/21/99..... 1,595,244
1,611,000 Hertz Corp. 5.500% 01/07/99........ 1,609,523
1,700,000 TRW Inc. 5.220% 01/06/99........... 1,698,767
-----------
8,499,407
-----------
CABLE TV (2.3%)
1,000,000 Cox Communications 5.620
01/11/99.......................... 998,439
-----------
ELECTRICAL EQUIPMENT (2.9%)
1,284,000 Avent Inc. 5.300% 01/22/98......... 1,280,030
-----------
FINANCE (16.0%)
1,965,000 CIT Group 5.750% 01/21/99.......... 1,958,723
2,010,000 Heller Financial 5.500% 01/26/99... 2,002,323
1,650,000 Household Finance 5.360%
01/12/99.......................... 1,647,298
1,500,000 USAA Capital 5.350% 01/27/99....... 1,494,204
-----------
7,102,548
-----------
FOOD & RELATED (3.8%)
1,700,000 Winn-Dixie 5.100% 01/05/99......... 1,699,037
-----------
INDUSTRIAL (4.2%)
295,000 BAT Capital 5.800% 01/06/99........ 294,762
1,585,000 BAT Capital 5.600% 01/13/99........ 1,582,041
-----------
1,876,803
-----------
MACHINERY & EQUIPMENT (0.7%)
312,000 John Deere Capital 6.000%
01/05/99.......................... 311,792
-----------
INSURANCE (7.5%)
1,743,000 Aetna Services 5.200% 01/04/99..... 1,742,245
1,427,000 Prudential Funding 5.170%
01/08/99.......................... 1,425,565
143,000 Prudential Funding 5.300%
01/14/99.......................... 142,726
-----------
3,310,536
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT SHORT-TERM NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
MEDICAL & RELATED (6.6%)
$1,081,000 Allergan Inc. 5.600% 01/06/99...... $ 1,080,159
1,119,000 Amgen Inc. 5.200% 01/12/99......... 1,117,222
755,000 Amgen Inc. 5.410% 01/19/99......... 752,958
-----------
2,950,339
-----------
OIL, ENERGY & NATURAL GAS (10.1%)
1,500,000 Dixie Pipeline 5.280% 01/29/99..... 1,493,840
1,561,000 (El) De Nemours Dupont 5.200%
01/20/99.......................... 1,556,716
1,428,000 Questar Corp. 5.380% 01/15/99...... 1,425,012
-----------
4,475,588
-----------
RETAIL (4.0%)
770,000 Sears Roebuck 5.310% 01/11/99...... 768,864
1,030,000 Sears Roebuck 5.330% 01/14/99...... 1,028,018
-----------
1,796,882
-----------
TRANSPORTATION & EQUIPMENT (1.7%)
740,000 CSX Corp. 6.120% 01/19/99.......... 737,736
-----------
UTILITIES (14.5%)
1,500,000 Carolina Power & Light 5.370%
01/25/99.......................... 1,494,630
2,001,000 Cincinnati Bell 5.200% 01/04/99.... 2,000,133
1,188,000 GTE Funding 5.000% 01/20/99........ 1,184,865
1,784,000 Michigan Consolidated Gas 5.500%
01/15/99.......................... 1,780,185
-----------
6,459,813
-----------
TOTAL HOLDINGS (96.7%)
(COST $42,957,130)(a)............. $42,957,130
-----------
CASH & RECEIVABLES, NET OF
LIABILITIES (3.3%)................ 1,444,522
-----------
TOTAL NET ASSETS (100.0%).......... $44,401,552
===========
</TABLE>
- ---------------
(a) Also represents cost for Federal income tax purposes.
The accompanying notes are an integral part of these financial statements.
9
<PAGE> 10
OHIO NATIONAL FUND, INC.
MONEY MARKET PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<S> <C>
Assets:
Investments in securities at market value
(note 1) (cost $42,957,130)............. $42,957,130
Cash in bank.............................. 1,457,900
Other..................................... 1,863
-----------
Total assets............................ 44,416,893
-----------
Liabilities:
Payable for investment management services
(note 3)................................ 8,419
Other accrued expenses.................... 6,822
-----------
Total liabilities....................... 15,241
-----------
Net assets at market value.................. $44,401,652
===========
Net assets consist of:
Par value, $1 per share................... $ 4,440,165
Paid-in capital in excess of par.......... 39,961,487
-----------
Net assets at market value.................. $44,401,652
===========
Shares outstanding (note 4)................. 4,440,165
Net asset value per share................... $ 10.00
===========
</TABLE>
STATEMENT OF OPERATIONS
Year ended December 31, 1998
<TABLE>
<S> <C>
Investment income:
Interest.................................. $ 1,757,475
-----------
Expenses:
Management fees (note 3).................. 94,306
Custodian fees (note 3)................... 6,050
Directors' fees (note 3).................. 908
Professional fees......................... 3,935
Accounting and transfer agent fee......... 16,587
Other..................................... 6,273
-----------
Total expenses.......................... 128,059
Less fees waived (note 3)............... (15,718)
-----------
Net expenses.......................... 112,341
-----------
Net investment income..................... $ 1,645,134
-----------
Net increase in net assets from
operations............................ $ 1,645,134
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE> 11
OHIO NATIONAL FUND, INC.
MONEY MARKET PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
From operations:
Net increase in net assets from operations................ $ 1,645,134 $ 1,241,762
----------- -----------
Dividends and distributions to shareholders:
Dividends paid from net investment income................. (1,645,134) (1,241,762)
----------- -----------
From capital share transactions (note 4):
Received from shares sold................................. 61,020,166 40,064,944
Received from dividends reinvested........................ 1,645,134 1,241,762
Paid for shares redeemed.................................. (47,405,261) (37,676,423)
----------- -----------
Increase in net assets derived from capital share
transactions........................................... 15,260,039 3,630,283
----------- -----------
Increase in net assets................................ 15,260,039 3,630,283
Net Assets:
Beginning of period....................................... 29,141,613 25,511,330
----------- -----------
End of period............................................. $44,401,652 $29,141,613
=========== ===========
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Per share data:
Net asset value, beginning of period........................ $10.00 $10.00 $10.00 $10.00 $10.00
Income from investment operations:
Net investment income..................................... 0.52 0.52 0.50 0.54 0.39
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income...................... (0.52) (0.52) (0.50) (0.54) (0.39)
------ ------ ------ ------ ------
Net asset value, end of period.............................. $10.00 $10.00 $10.00 $10.00 $10.00
====== ====== ====== ====== ======
Total return............................................ 5.39% 5.37% 5.17% 5.62% 4.00%
Ratios net of fees waived by advisor (a):
Ratio of expenses to average net assets................... 0.36% 0.38% 0.44% 0.44% 0.39%
Ratio of net investment income to average net assets...... 5.26% 5.11% 4.98% 5.39% 3.69%
Ratios assuming no fees waived by advisor:
Ratio of expenses to average net assets................... 0.41% 0.43% 0.49% 0.55% 0.59%
Ratio of net investment income to average net assets...... 5.21% 5.06% 4.93% 5.27% 3.51%
Net assets at end of period (millions)...................... $ 44.4 $ 29.1 $ 25.6 $ 15.7 $ 13.1
</TABLE>
- ---------------
(a) On and after June 17, 1993, the advisor has waived part of the management
fee to the extent such fee exceeds an annual rate of 0.25% of the Money
Market Portfolios daily net asset value.
The accompanying notes are an integral part of these financial statements.
11
<PAGE> 12
THIS PAGE INTENTIONALLY LEFT BLANK
12
<PAGE> 13
BOND PORTFOLIO
OHIO NATIONAL FUND, INC.
OBJECTIVE
The Bond Portfolio seeks to obtain a high level of income and opportunity for
capital appreciation consistent with preservation of capital.
PERFORMANCE AS OF DECEMBER 31, 1998
AVERAGE ANNUAL TOTAL RETURNS:
<TABLE>
<S> <C>
One-year 5.22%
Three-year 6.04%
Five-year 6.40%
Ten-year 8.15%
Since inception (11/2/82) 8.48%
</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 5.22% in 1998 versus 8.44% for the Lehman Brothers
Government/Corporate Intermediate Bond Index. With a lesser percentage of U.S.
Treasury bonds in the portfolio versus the index, the performance of our fund
suffered during a year in which corporate spreads of all types widened
significantly. In particular, our fund has a large number of "Baa-rated"
corporates which experienced poor performance because of liquidity and credit
concerns which overtook the bond market in the last half of the year.
So far in 1999 through January, corporate bonds in the "Baa" category are
performing better than U.S. Treasury bonds because credit spreads are tightening
and we are more optimistic on the relative performance of the fund this year.
CHANGE IN VALUE OF $10,000 INVESTMENT
[GRAPH]
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, 1998
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Anixter 8.00% 09/15/03 3.8
2. Franchise Finance Corp of Amer.
8.25% 10/30/03 3.6
3. Dial Corp 6.5% 09/15/08 3.5
4. U.S. Industries Inc. 144A
7.125% 10/15/03 3.5
5. Dole Foods Co 6.375% 10/01/05 3.3
6. Abitibi Consolidated Inc 7.40%
04/01/18 3.2
7. Colonial 8.05% 07/15/06 3.1
8. Thermo Electron Conv. 4.25%
01/01/03 3.1
9. Texas Utilities 7.48% 01/01/17 2.8
10. Watson Pharmeceuticals 7.125%
05/15/08 2.6
</TABLE>
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
Utilities 9.8
Oil, Energy, and Natural Gas 8.7
Electrical Equipment 7.0
Forestry & Paper Products 6.3
Financial Services 5.4
</TABLE>
13
<PAGE> 14
OHIO NATIONAL FUND, INC.
BOND PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT LONG-TERM BONDS & NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
GOVERNMENT (1.8%)
$ 500,000 U.S. Treasury Note 7.875%
11/15/99.......................... $ 513,594
-----------
AIR COURIER (1.9%)
500,000 Federal Express Inc. 7.020%
01/15/16.......................... 529,863
-----------
AUTOMOTIVE & RELATED (2.2%)
100,000 Arvin Industries 10.000%
08/01/00.......................... 105,773
500,000 General Motors Automobile Corp.
8.400% 10/15/99................... 511,241
-----------
617,014
-----------
BUSINESS SERVICES (1.8%)
500,000 Cendent Corp. 7.750% 12/01/03...... 511,508
-----------
BUILDING & CONSTRUCTION (1.8%)
500,000 Owens Corning 7.500% 05/01/05...... 514,717
-----------
CHEMICALS (2.4%)
700,000 Mississippi Chemical Corp. 7.250%
11/15/17.......................... 688,283
-----------
COMMUNICATIONS (1.8%)
200,000 Comcast Cable Communications 8.375%
05/01/07.......................... 231,841
250,000 Tele-Communications, Inc. 8.250%
01/15/03.......................... 274,638
-----------
506,479
-----------
COMPUTER & RELATED (1.7%)
300,000 Apple Computer Inc. 6.500%
02/15/04.......................... 277,500
200,000 Comdisco, Inc. 7.750% 09/01/99..... 201,988
-----------
479,488
-----------
CONSUMER GOODS (5.3%)
1,000,000 Dial Corp. 6.500% 09/15/08......... 1,004,166
200,000 RJR Nabisco Inc. 8.750% 04/15/04... 203,505
300,000 RJR Nabisco Inc. 8.625% 12/01/02... 305,648
-----------
1,513,319
-----------
ELECTRICAL EQUIPMENT (7.0%)
1,000,000 Anixter Intl. 8.000% 09/15/03...... 1,079,316
500,000 Pioneer 8.500% 08/01/06............ 489,957
400,000 Tektronix Inc. 7.500% 08/01/03..... 428,167
-----------
1,997,440
-----------
ENTERTAINMENT & LEISURE (2.4%)
700,000 Mirage Resorts Inc. 6.750%
02/01/08.......................... 682,451
-----------
FINANCIAL SERVICES (5.4%)
1,000,000 Franchise Finance Corp of America
8.250% 10/30/03................... 1,017,076
500,000 St. Paul Bancorp Inc. 7.125%
02/15/04.......................... 522,979
-----------
1,540,055
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT LONG-TERM BONDS & NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
FOOD & RELATED (5.0%)
$1,000,000 Dole Foods Co. 6.375% 10/01/05..... $ 988,106
500,000 Gruma, SA de C.V. 7.625%
10/15/07.......................... 440,000
-----------
1,428,106
-----------
FORESTRY & PAPER PRODUCTS (6.3%)
1,000,000 Abitibi Consolidated Inc. 7.400%
04/01/18.......................... 941,898
300,000 Boise Cascade Co. 9.850%
06/15/02.......................... 323,493
250,000 Champion International 7.700%
12/15/99.......................... 254,274
250,000 ITT Rayonier Inc. 7.500%
10/15/02.......................... 266,372
-----------
1,786,037
-----------
FOREIGN (1.8%)
200,000 British Columbia 7.000% 01/15/03... 212,216
250,000 Province of Quebec 8.625%
01/19/05.......................... 287,853
-----------
500,069
-----------
HOTEL/LODGING (2.3%)
700,000 ITT Destinations 6.750% 11/15/05... 646,516
-----------
HOUSING, FURNITURE & RELATED (0.6%)
140,000 Armstrong World 9.750% 04/15/08.... 175,958
-----------
INDUSTRIAL SERVICES (4.8%)
400,000 R&B Falcon Corp. Series B 6.750%
04/15/05.......................... 365,054
1,000,000 US Industries Inc. 144A 7.125%
10/15/03.......................... 1,001,222
-----------
1,366,276
-----------
INSURANCE (2.4%)
250,000 Continental Corp. 7.250%
03/01/03.......................... 256,203
400,000 Transamerica Finance Corp. 7.500%
03/15/04.......................... 422,088
-----------
678,291
-----------
MACHINERY (3.1%)
1,000,000 Thermo Electron 4.250% 01/01/03.... 876,046
-----------
MEDICAL & RELATED (4.6%)
250,000 Bergen Brunswig 7.375% 01/15/03.... 265,986
300,000 Cardinal Health Inc. 6.500%
02/15/04.......................... 312,180
700,000 Watson Pharmaceuticals 7.125%
05/15/08.......................... 726,650
-----------
1,304,816
-----------
METALS AND MINING (1.8%)
500,000 Cyprus Minerals 6.625% 10/15/05.... 513,209
-----------
OIL, ENERGY & NATURAL GAS (8.0%)
200,000 Atlantic Richfield 8.550%
03/01/12.......................... 244,971
100,000 DeKalb Energy 9.875% 07/15/00...... 106,517
400,000 Dresser Industries, Inc. 6.250%
06/01/00.......................... 405,038
500,000 Husky Oil Ltd. 8.900% 08/15/28..... 478,125
125,000 Marathon Oil 7.000% 06/01/02....... 129,522
400,000 PDV America, Inc. 7.875%
08/01/03.......................... 404,145
500,000 System Energy 7.800% 08/01/00...... 511,755
-----------
2,280,073
-----------
</TABLE>
(continued)
14
<PAGE> 15
OHIO NATIONAL FUND, INC.
BOND PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT LONG-TERM BONDS & NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
REAL ESTATE & LEASING (5.2%)
$ 300,000 Avalon Properties Inc. 7.375%
09/15/02.......................... $ 305,206
900,000 Colonial Realty 8.050% 07/15/06.... 916,664
250,000 Sun Communities 7.625% 05/01/03.... 251,959
-----------
1,473,829
-----------
TRANSPORTATION (3.9%)
250,000 American President Cos., Ltd.
7.125% 11/15/03................... 203,896
350,000 Illinois Central Gulf Railroad
6.750% 05/15/03................... 366,405
490,233 Northwest Airlines 8.070%
01/02/15.......................... 525,091
-----------
1,095,392
-----------
RESTAURANTS (1.8%)
500,000 Wendy's Inc. 6.350% 12/15/05....... 514,192
-----------
UTILITIES (8.7%)
200,000 Cleveland Electric Illum. 7.625%
08/01/02.......................... 208,677
500,000 Great Lakes Power Inc. 8.900%
12/01/99.......................... 514,498
250,000 Kansas Gas & Electric 8.290%
03/29/16.......................... 270,805
200,000 Old Dominion Electric Co-op 8.760%
12/01/22.......................... 244,667
200,000 Sprint Corp. 8.125% 07/15/02....... 218,083
700,000 Texas Utilities Electric Co. 7.480%
01/01/17.......................... 785,694
200,000 Toledo Edison Co. 7.875% 08/01/04 215,347
-----------
2,457,771
-----------
TOTAL LONG-TERM BONDS & NOTES
(95.8%) (COST $26,589,684)........ $27,190,792
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES PREFERRED STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
UTILITIES (1.1%)
12,000 GTE Delaware, 8.750%, Series B $ 312,750
-----------
TOTAL PREFERRED STOCKS (1.1%) (COST
$300,000)......................... $ 312,750
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT SHORT-TERM NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
FINANCE (1.6%)
$ 447,000 American General Corp. 4.700%
01/04/99.......................... $ 446,825
-----------
TOTAL SHORT-TERM NOTES (1.6%)
(COST $446,825)................... $ 446,825
-----------
TOTAL HOLDINGS (98.5%)
(COST $27,336,509)(a)............. $27,950,367
-----------
CASH & RECEIVABLES,
NET OF LIABILITIES (1.5%)......... 430,819
-----------
TOTAL NET ASSETS (100.0%).......... $28,381,186
===========
</TABLE>
- ---------------
(a) Also represents cost for Federal income tax purposes.
The accompanying notes are an integral part of these financial statements.
15
<PAGE> 16
OHIO NATIONAL FUND, INC.
BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<S> <C>
Assets:
Investments in securities at market value
(note 1) (cost $27,336,509)............. $27,950,367
Cash in bank.............................. 566
Receivable for fund shares sold........... 1,041
Dividends and accrued interest
receivable.............................. 543,206
Other..................................... 1,459
-----------
Total assets............................ 28,496,639
-----------
Liabilities:
Payable for shares redeemed............... 93,626
Payable for investment management services
(note 3)................................ 14,701
Other accrued expenses.................... 7,126
-----------
Total liabilities....................... 115,453
-----------
Net assets at market value.................. $28,381,186
===========
Net assets consist of:
Par value, $1 per share................... $ 2,688,614
Paid-in capital in excess of par value.... 25,350,555
Accumulated net realized loss on
investments (note 1).................... (274,501)
Net unrealized appreciation on investments
(note 1)................................ 613,858
Undistributed net investment income....... 2,660
-----------
Net assets at market value.................. $28,381,186
===========
Shares outstanding (note 4)................. 2,688,614
Net asset value per share................... $ 10.56
===========
</TABLE>
STATEMENT OF OPERATIONS
Year ended December 31, 1998
<TABLE>
<S> <C>
Investment income:
Interest................................... $1,762,368
Dividends.................................. 26,250
----------
Total investment income.................. 1,788,618
----------
Expenses:
Management fees (note 3)................... 150,300
Custodian fees (note 3).................... 5,050
Directors' fees (note 3)................... 653
Professional fees.......................... 2,828
Accounting and transfer agent fees......... 22,210
Other...................................... 4,217
----------
Total expenses........................... 185,258
----------
Net investment income.................... $1,603,360
----------
Realized and unrealized gain on investments:
Net realized loss from investments......... $ (230,373)
Net decrease in unrealized appreciation on
investments.............................. (124,666)
----------
Net loss on investments.................. (355,039)
----------
Net increase in net assets from
operations............................. $1,248,321
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
16
<PAGE> 17
OHIO NATIONAL FUND, INC.
BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
From operations:
Net investment income..................................... $ 1,603,360 $ 1,355,098
Realized gain (loss) on investments....................... (230,373) 38,573
Unrealized gain (loss) on investments..................... (124,666) 399,815
----------- -----------
Net increase in net assets from operations............ 1,248,321 1,793,486
----------- -----------
Dividends and distributions to shareholders:
Dividends paid from net investment income................. (1,604,016) (1,690,155)
----------- -----------
From capital share transactions (note 4):
Received from shares sold................................. 10,579,517 6,831,247
Received from dividends reinvested........................ 1,604,016 1,690,155
Paid for shares redeemed.................................. (5,213,682) (7,636,590)
----------- -----------
Increase in net assets derived from capital share
transactions......................................... 6,969,851 884,812
----------- -----------
Increase in net assets............................. 6,614,156 988,143
Net Assets:
Beginning of period....................................... 21,767,030 20,778,887
----------- -----------
End of period (a)......................................... $28,381,186 $21,767,030
=========== ===========
(a) Includes undistributed net investment income of......... $ 2,660 $ 3,316
=========== ===========
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Per share data:
Net asset value, beginning of period........................ $10.68 $10.62 $10.93 $ 9.70 $10.87
Income (loss) from investment operations:
Net investment income..................................... 0.67 0.71 0.69 0.70 0.67
Net realized and unrealized gain (loss) on investments.... (0.12) 0.23 (0.32) 1.08 (1.07)
------ ------ ------ ------ ------
Total income (loss) from investment operations.......... 0.55 0.94 0.37 1.78 (0.40)
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income...................... (0.67) (0.88) (0.68) (0.55) (0.69)
Distributions from net realized capital gains............. 0.00 0.00 0.00 0.00 (0.08)
------ ------ ------ ------ ------
Total distributions..................................... (0.67) (0.88) (0.68) (0.55) (0.77)
------ ------ ------ ------ ------
Net asset value, end of period.............................. $10.56 $10.68 $10.62 $10.93 $ 9.70
====== ====== ====== ====== ======
Total return................................................ 5.22% 9.28% 3.71% 18.90% (3.84%)
Ratios and supplemental data:
Ratio of expenses to average net assets................... 0.72% 0.78% 0.79% 0.75% 0.63%
Ratio of net investment income to average net assets...... 6.21% 6.67% 6.54% 6.76% 6.71%
Portfolio turnover rate..................................... 12% 10% 3% 4% 5%
Net assets at end of period (millions)...................... $ 28.4 $ 21.8 $ 20.8 $ 18.1 $ 13.1
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE> 18
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18
<PAGE> 19
OMNI PORTFOLIO
OHIO NATIONAL FUND, INC.
OBJECTIVE
The Omni Portfolio seeks a high level of long-term total rate of return
consistent with prudent investment risks. Total return consists of current
income and capital appreciation.
PERFORMANCE AS OF DECEMBER 31, 1998
AVERAGE ANNUAL TOTAL RETURNS:
<TABLE>
<S> <C>
One-year 4.53%
Three-year 12.58%
Five-year 11.75%
Ten-year 11.50%
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 portfolio return was 4.53% for 1998. Although the large capitalization
stock portion of the portfolio provided returns consistent with the major
indices, the portfolio's exposure to small and mid-capitalization stocks pulled
the overall return down. We were invested in these areas because the valuations
relative to the large capitalization stocks were very attractive. Unfortunately,
these areas corrected far more than the large capitalization stocks and the
major indices during the stock market downturn. The fixed income portion of the
portfolio consists primarily of investment grade corporate bonds. This portion
of the fixed income market did not perform as well as the Government Security
portion of the market. This was caused by investors' concern with worldwide
economic issues and political uncertainties; the result was a flight to safety.
We expect the stock market to continue in a volatile manner. We expect the U.S.
economy and economic activity around the world to slow somewhat during 1999. We
will focus our efforts on investing more in growth issues and companies growing
their dividends at least two to three times GDP. We expect the corporate bond
sector of the fixed income market to perform more favorably. Asset allocations
will remain near current levels.
CHANGE IN VALUE OF $10,000 INVESTMENT
[GRAPH]
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, 1998
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Cisco Systems Inc 2.9
2. American International Group 1.6
3. Ford Motor Corp 1.6
4. Sun Microsystems 1.6
5. Texas Instruments 1.4
6. General Electric Corp 1.3
7. Owens-Illinois Inc 1.3
8. Microsoft Corp 1.3
9. Abbott Laboratories 1.3
10. Xerox 1.2
</TABLE>
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
Computer and Related 11.9
Oil, Energy, and Natural Gas 9.7
Medical & Related 6.3
Banking 5.6
Business Services 4.0
</TABLE>
19
<PAGE> 20
OHIO NATIONAL FUND, INC.
OMNI PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
AEROSPACE (1.9%)
49,000 Allied Signal Inc. .................. $ 2,171,313
21,600 Raytheon Co. ........................ 1,150,200
17,350 Rockwell International Corp. ........ 842,559
------------
4,164,072
------------
AUTOMOTIVE & RELATED (2.6%)
7,500 Arvin Industries Inc. ............... 312,656
7,294 *DaimlerChrysler AG................... 700,680
8,000 Eaton Corp. ......................... 565,500
58,777 Ford Motor Co. ...................... 3,449,475
10,000 Magna Intl. Inc. CL A................ 620,000
------------
5,648,311
------------
BANKING (4.2%)
13,050 Bank America Corp. .................. 784,631
67,597 Charter One Financial Inc. .......... 1,875,817
23,880 First State Bancorp.................. 495,510
25,921 First Union Corp. ................... 1,576,321
21,440 Firstar Corp. ....................... 1,999,280
25,000 Flagstar Bancorp..................... 653,125
22,500 Mellon Bank Corp. ................... 1,546,875
------------
8,931,559
------------
BUSINESS SERVICES (4.0%)
70,000 *Alternative Resources Co. ........... 743,750
55,000 First Data Corp. .................... 1,742,813
30,000 Hewlett-Packard Co. ................. 2,049,375
30,000 *Lo Jack Corp. ....................... 356,250
81,500 Manpower Inc. ....................... 2,052,781
67,000 Reynolds & Reynolds.................. 1,536,813
------------
8,481,782
------------
CHEMICALS (2.4%)
18,000 Engelhard Corp. ..................... 351,000
25,625 Hanson Trust PLC..................... 999,375
7,500 Hawkins Chemical Inc. ............... 75,000
25,000 Hercules Inc. ....................... 684,375
20,000 Minerals Technologies Inc. .......... 818,750
15,000 Monsanto Co. ........................ 712,500
39,000 OM Group Inc. ....................... 1,423,500
------------
5,064,500
------------
COMMUNICATIONS (0.1%)
11,250 *Mastec Inc. ......................... 236,250
------------
COMPUTER & RELATED (11.1%)
28,000 *3Comm Corp. ......................... 1,254,750
67,500 *Cisco Systems Inc. .................. 6,264,844
34,500 Computer Associates.................. 1,470,563
5,200 *Computer Sciences Corp. ............. 335,075
22,000 Intel Corp. ......................... 2,608,375
30,000 *Mapics Inc. ......................... 495,000
20,000 *Microsoft Corp. ..................... 2,773,750
47,058 *Seagate Technology Inc. ............. 1,423,504
40,000 *Sun Microsystems Inc. ............... 3,425,000
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
COMPUTER & RELATED, CONTINUED
36,000 Texas Instruments Inc. .............. $ 3,080,250
21,000 *Zebra Tech Corp. CL. A............... 603,750
------------
23,734,861
------------
CONSUMER PRODUCTS (0.1%)
7,000 *Sola International................... 120,750
------------
CONTAINERS (1.3%)
90,000 *Owens-Illinois Inc. ................. 2,756,250
------------
DRUGS (2.4%)
56,000 Abbott Laboratories.................. 2,744,000
57,000 *Applied Analytical Ind. ............. 990,375
45,000 Mylan Laboratories................... 1,417,500
------------
5,151,875
------------
ELECTRICAL EQUIPMENT (3.9%)
33,333 *Analog Devices Inc. ................. 1,045,823
52,500 *Anixter International Inc. .......... 1,066,406
26,116 Federal Signal Corp. ................ 714,926
28,000 General Electric Co. ................ 2,857,750
22,500 Xerox Corp. ......................... 2,655,000
------------
8,339,905
------------
ENTERTAINMENT & LEISURE (1.0%)
66,000 Cedar Fair........................... 1,716,000
36,000 *Mirage Resorts Inc. ................. 537,750
------------
2,253,750
------------
FINANCIAL SERVICES (2.2%)
60,810 Associates First Capital............. 2,576,824
55,000 MGIC Investment Corp. ............... 2,189,687
------------
4,766,511
------------
FOOD & RELATED (1.2%)
50,000 Food Lion Inc. CL A.................. 531,250
54,600 Food Lion Inc. CL B.................. 549,413
16,500 H.J.Heinz Co. ....................... 934,312
23,000 Pan American Beverages Inc........... 501,687
------------
2,516,662
------------
FORESTRY & PAPER PRODUCTS (0.5%)
34,000 Boise Cascade........................ 1,054,000
------------
HOTEL/LODGING (0.1%)
25,000 *Guest Supply......................... 298,437
------------
HOUSING, FURNITURE & RELATED (2.1%)
139,781 Clayton Homes Inc. .................. 1,930,725
55,000 Haverty Furniture Co. ............... 1,155,000
24,000 Newell Co. .......................... 990,000
35,000 Shelby Williams...................... 420,000
------------
4,495,725
------------
INDUSTRIAL SERVICES (0.8%)
45,000 Clarcor Inc. ........................ 900,000
31,000 Pall Corp. .......................... 784,687
1,600 Regal Beloit......................... 36,800
------------
1,721,487
------------
</TABLE>
(continued)
20
<PAGE> 21
OHIO NATIONAL FUND, INC.
OMNI PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
MACHINERY (0.5%)
37,000 Hardinge Inc. ....................... $ 682,188
41,000 Stewart & Stevenson.................. 399,750
------------
1,081,938
------------
INSURANCE (2.5%)
36,280 American International Group......... 3,505,555
18 Cincinnati Financial Corp. .......... 659
20,000 Equitable Cos. Inc. ................. 1,157,500
47,000 State Auto Financial Corp. .......... 581,625
------------
5,245,339
------------
MEDIA & PUBLISHING (0.9%)
60,000 CBS Corp. ........................... 1,965,000
------------
MEDICAL & RELATED (5.1%)
40,600 Allegiance Corp. .................... 1,892,975
26,500 Baxter International................. 1,704,281
57,000 Capital Senior Living Corp. ......... 794,438
40,000 *Foundation Health Corp. ............. 477,500
30,000 *HCR Manor Care....................... 881,250
100,000 *Healthsouth Corp. ................... 1,543,750
18,000 *Humana Inc. ......................... 320,625
54,500 *Kendle International................. 1,273,937
47,000 *Quorum Health Group Inc. ............ 608,063
34,000 United Healthcare Corp. ............. 1,464,125
------------
10,960,944
------------
METALS & MINING (0.9%)
32,000 Amcast Industrial Corp. ............. 612,000
36,700 *Wolverine Tube Inc. ................. 770,700
49,000 Worthington Industries............... 612,500
------------
1,995,200
------------
OIL, ENERGY & NATURAL GAS (6.0%)
23,000 Chevron Corp. ....................... 1,907,562
74,500 *Louis Dreyfus Natural Gas............ 1,061,625
100,000 *Matrix Services Co. ................. 475,000
30,000 *Offshore Logistics Inc. ............. 356,250
30,000 Pacific Gulf Properties.............. 601,875
53,630 Schlumberger Ltd. ................... 2,473,684
86,000 *Tesoro Petroleum..................... 1,042,750
50,000 Transocean Offshore Inc. ............ 1,340,625
90,000 USEC Inc. ........................... 1,248,750
23,200 WD-4 Co. ............................ 664,100
57,000 Williams Companies Inc. ............. 1,777,688
------------
12,949,909
------------
REAL ESTATE & LEASING (3.6%)
19,000 Camden Property Trust................ 494,000
76,300 Commercial Net Lease Realty.......... 1,010,975
60,000 Corporate Office Properties.......... 427,500
30,500 First Industrial Realty Trust........ 817,781
33,000 HRPT Properties Trust................ 464,063
50,000 Healthcare Realty Trust.............. 1,115,625
50,000 JDN Realty Corp. .................... 1,078,125
56,250 Liberty Property Trust............... 1,385,156
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
REAL ESTATE & LEASING, CONTINUED
24,000 National Health Investors Inc. ...... $ 592,500
11,500 Regency Hotel Corp. ................. 255,875
------------
7,641,600
------------
RESTAURANTS (1.0%)
50,000 *Buffets, Inc. ....................... 596,875
71,625 Consolidated Product................. 1,477,266
------------
2,074,141
------------
TEXTILES (0.7%)
58,000 Warnaco Group CL A................... 1,464,500
------------
TRANSPORTATION & EQUIPMENT (3.3%)
21,500 *Atlas Air Inc. ...................... 1,052,156
39,500 *Avondale Industries.................. 1,145,500
65,000 Burlington Northern Santa Fe......... 2,193,750
24,000 CNF Transportation Inc. ............. 901,500
21,000 Trinity Industries................... 808,500
50,000 *Wisconsin Central Transportations.... 859,375
------------
6,960,781
------------
UTILITIES (0.7%)
15,000 FPL Group Inc. ...................... 924,375
23,500 UGI Corp. ........................... 558,125
------------
1,482,500
------------
TOTAL COMMON STOCKS (67.0%)
(COST $89,496,896).................. $143,558,539
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES PREFERRED STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
AUTOMOTIVE AND RELATED (0.1%)
8,000 Walbro Capital Trust Conv. ........ $ 106,000
-----------
BANKING (0.9%)
46,000 Flagstar Bancorp Inc. ............. 1,104,000
30,000 National Australia Bank Conv....... 836,250
-----------
1,940,250
-----------
COMPUTERS & RELATED (0.5%)
16,000 General Datacommunications 9.000%
(144A)............................ 168,000
15,500 Unisys Corp. Conv. $3.75 Series
A................................. 910,625
-----------
1,078,625
-----------
FOOD & RELATED (0.2%)
20,000 Conagra Capital 9.35% Series C..... 516,250
-----------
METALS & MINING (0.2%)
30,000 Freeport McMoran Copper & Gold
Series C.......................... 446,250
-----------
OIL, ENERGY & NATURAL GAS (0.6%)
41,000 Consumer Energy II Conv. .......... 1,050,625
10,000 Howell Corp. $3.50 Series A
Conv. ............................ 150,000
-----------
1,200,625
-----------
REAL ESTATE & LEASING (0.2%)
15,000 Camden Property Tr. Conv. ......... 355,313
-----------
</TABLE>
(continued)
21
<PAGE> 22
OHIO NATIONAL FUND, INC.
OMNI PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES PREFERRED STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
RETAIL (0.4%)
14,000 Kmart Conv. 7.75%.................. $ 811,125
-----------
UTILITIES (0.2%)
20,000 GTE Delaware 8.75% Series B........ 521,250
-----------
TOTAL PREFERRED STOCKS (3.3%)
(COST $8,136,934)................. $ 6,975,688
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT LONG-TERM BONDS & NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
GOVERNMENT (1.6%)
$ 775,000 U.S. Treasury Note 6.375%
07/15/99.......................... $ 782,508
500,000 U.S. Treasury Note 7.875%
11/15/99.......................... 513,594
2,005,000 U.S. Treasury Note 7.750%
02/15/01.......................... 2,129,059
-----------
3,425,161
-----------
AEROSPACE (0.2%)
500,000 AAR Corp. 7.250% 10/15/03.......... 521,168
-----------
BANKING (0.5%)
1,000,000 Green Tree Financial CL A 8.700%
06/15/25.......................... 1,095,179
-----------
CHEMICALS (0.8%)
1,750,000 GEON Company 7.500% 12/15/98....... 1,679,673
-----------
COMMUNICATIONS (1.0%)
1,600,000 Comcast Cable Communications 8.375%
05/01/07.......................... 1,854,725
300,000 Sprint 8.125% 07/15/02............. 327,125
-----------
2,181,850
-----------
COMPUTERS & RELATED (0.3%)
700,000 Apple Computer, Inc. 6.500%
02/15/04.......................... 647,500
-----------
CONSUMER GOODS (0.9%)
1,400,000 Owens Corning 7.500% 05/01/05...... 1,441,208
400,000 RJR Nabisco, Inc. 8.750%
04/15/04.......................... 407,009
-----------
1,848,217
-----------
FINANCIAL SERVICES (0.4%)
1,000,000 Fertinitro Finance Inc. 8.290%
04/01/20.......................... 876,525
-----------
FOOD & RELATED (0.4%)
740,000 Marsh Supermarkets Inc. 8.875%
04/01/07.......................... 777,000
-----------
FORESTRY & PAPER PRODUCTS (0.7%)
700,000 Boise Cascade Co. 9.850%
06/15/02.......................... 754,817
500,000 Champion International 9.875%
06/01/00.......................... 526,801
250,000 ITT Rayonier, Inc. 7.500%
10/15/02.......................... 266,371
-----------
1,547,989
-----------
HOUSING, FURNITURE & RELATED (0.2%)
250,000 Armstrong World 9.750% 04/15/08.... 314,211
-----------
INDUSTRIAL SERVICES (0.2%)
400,000 Medar Sr. Sub. notes 12.950%
06/30/05.......................... 400,000
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT LONG-TERM BONDS & NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
INSURANCE (0.5%)
$ 500,000 Continental Corp. 7.250%
03/01/03.......................... $ 512,405
600,000 Transamerica Finance Corp. 7.500%
03/15/04.......................... 633,132
-----------
1,145,537
-----------
MACHINERY (0.2%)
500,000 ABC Rail Products Corp. 9.125%
01/15/04.......................... 477,500
-----------
MEDICAL & RELATED (1.2%)
500,000 Bergen Brunswig 7.375% 01/15/03.... 531,972
1,000,000 Centocor Inc. 4.750% 02-15-05...... 1,058,750
1,000,000 Tenet Healthcare Corp. 8.625%
01/15/07.......................... 1,050,000
-----------
2,640,722
-----------
METALS & MINING (0.2%)
500,000 Cyprus Minerals 6.625% 10/15/05.... 513,210
-----------
OIL, ENERGY & NATURAL GAS (2.8%)
400,000 Dekalb Energy 9.875% 07/15/00...... 426,066
350,000 Dresser Industries, Inc. 6.250%
06/01/00.......................... 354,408
375,000 Marathon Oil 7.00% 06/01/02........ 388,569
600,000 PVD America, Inc. 7.875%
08/01/03.......................... 606,218
500,000 Petroleos Mexicanos Global 8.850%
09/15/04.......................... 441,250
1,500,000 R & B Falcon Corp. Series B 6.750%
04/15/05.......................... 1,368,951
500,000 Union Texas Petroleum 8.250%
11/15/99.......................... 511,794
500,000 United Refining Company 10.750%
06/15/07.......................... 337,500
2,000,000 Windsor Petroleum Transport Corp.
7.840% 01/15/21................... 1,500,000
-----------
5,934,756
-----------
TRANSPORTATION (0.4%)
500,000 American President Cos., Ltd.
7.125% 11/15/03................... 407,793
400,000 Illinois Central Gulf Railroad
6.750% 05/15/03................... 418,748
-----------
826,541
-----------
RESTAURANTS (0.9%)
1,900,000 Tricon Global Restaurants 7.450%
05/15/05.......................... 1,960,808
-----------
UTILITIES (1.9%)
400,000 Cleveland Electric Illum. 7.625%
08/01/02.......................... 417,355
700,000 ESI Tractebel 7.990% 12/30/11...... 691,118
1,000,000 Great Lakes Power 9.000%
08/01/04.......................... 1,138,072
700,000 Niagara Mohawk Power Corp. 7.750%
10/01/08.......................... 769,187
400,000 Old Dominion Elec. Co. 8.760%
12/01/22.......................... 489,335
500,000 Texas New Mexico Power Co. 9.250%
09/15/00.......................... 528,166
-----------
4,033,233
-----------
TOTAL LONG-TERM BONDS & NOTES
(15.3%) (COST $32,562,295)........ $32,846,780
-----------
</TABLE>
(continued)
22
<PAGE> 23
OHIO NATIONAL FUND, INC.
OMNI PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT CONVERTIBLE DEBENTURES VALUE
- --------------------------------------------------------------
<C> <S> <C>
METALS & MINING (0.3%)
$ 600,000 INCO, Ltd. 7.750% due 03/15/16.... $ 540,000
------------
OIL, ENERGY & NATURAL GAS (0.3%)
750,000 Offshore Logistics, Inc. 6.000%
due 12/15/06..................... 648,750
------------
TOTAL CONVERTIBLE DEBENTURES
(0.6%) (COST $1,383,000)......... $ 1,188,750
------------
AUTOMOTIVE & RELATED (4.5%)
$ 5,125,000 General Motors Acceptance Corp.
5.660% 01/05/99.................. $ 5,121,777
4,468,000 Ford Motor 5.110% 01/11/99........ 4,461,658
------------
9,583,435
------------
FINANCE (7.2%)
4,000,000 American Express Credit Corp.
5.400% 01/07/99.................. 3,996,400
3,425,000 American General Finance 4.770%
01/13/99......................... 3,419,554
3,567,000 G.E. Capital 5.950% 01/04/99...... 3,565,231
4,685,000 Household Finance 6.100%
01/08/99......................... 4,679,443
------------
15,660,628
------------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT CONVERTIBLE DEBENTURES VALUE
- --------------------------------------------------------------
<C> <S> <C>
RETAIL (2.4%)
$ 5,090,000 Sears Roebuck Acceptance Corp.
5.800% 01/06/99.................. $ 5,085,900
------------
TOTAL SHORT-TERM NOTES (14.1%)
(COST $30,329,963)............... $ 30,329,963
------------
TOTAL HOLDINGS (100.3%)
(COST $161,909,088)(a)........... $214,899,720
------------
CASH & RECEIVABLES, NET OF
LIABILITIES (-0.3%).............. (479,703)
------------
TOTAL NET ASSETS (100.0%)......... $214,420,017
============
</TABLE>
- ---------------
* Non-income producing securities.
(a) Also represents cost for Federal income tax purposes.
(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 $168,000 or 0.1% 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.
23
<PAGE> 24
OHIO NATIONAL FUND, INC.
OMNI PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<S> <C>
Assets:
Investments in securities at market value
(note 1) (cost $161,909,088)........... $214,899,720
Cash in bank............................. 6,739
Receivable for securities sold........... 525,619
Receivable for fund shares sold.......... 53,516
Dividends and accrued interest........... 915,313
Other.................................... 12,491
------------
Total assets........................... 216,413,398
------------
Liabilities:
Payable for securities purchase.......... 1,744,590
Payable for shares redeemed.............. 107,459
Payable for investment management
services (note 3)...................... 94,833
Other accrued expenses................... 46,499
------------
Total liabilities...................... 1,993,381
------------
Net assets at market value................. $214,420,017
============
Net assets consist of:
Par value, $1 per share.................. $ 10,002,822
Paid-in capital in excess of par value... 152,102,721
Accumulated net realized loss on
investments (note 1)................... (681,856)
Net unrealized appreciation on
investments
(note 1)............................... 52,990,632
Undistributed net investment income...... 5,698
------------
Net assets at market value................. $214,420,017
============
Shares outstanding (note 4)................ 10,002,822
Net asset value per share.................. $ 21.44
============
</TABLE>
STATEMENT OF OPERATIONS
Year ended December 31, 1998
<TABLE>
<S> <C>
Investment income:
Interest.................................. $ 4,196,276
Dividends................................. 2,806,568
-----------
Total investment income................. 7,002,844
-----------
Expenses:
Management fees (note 3).................. 1,116,792
Custodian fees (note 3)................... 41,300
Directors' fees (note 3).................. 6,952
Professional fees......................... 30,124
Accounting and transfer agent fees........ 127,077
Other..................................... 40,188
-----------
Total expenses.......................... 1,362,433
-----------
Net investment income................... $ 5,640,411
-----------
Realized and unrealized gain (loss)on
investments:
Net realized loss from investments........ $ (681,856)
Net increase in unrealized appreciation on
investments............................. 3,546,023
-----------
Net gain on investments................. 2,864,167
-----------
Net increase in net assets from
operations............................ $ 8,504,578
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
24
<PAGE> 25
OHIO NATIONAL FUND, INC.
OMNI PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
From operations:
Net investment income..................................... $ 5,640,411 $ 4,595,611
Realized gain (loss) on investments....................... (681,856) 7,723,290
Unrealized gain on investments............................ 3,546,023 15,465,006
------------ ------------
Net increase in net assets from operations............ 8,504,578 27,783,907
------------ ------------
Dividends and distributions to shareholders:
Dividends paid from net investment income................. (5,642,402) (5,602,347)
Capital gains distributions............................... (33,599) (9,150,428)
------------ ------------
Total dividends and distributions.................. (5,676,001) (14,752,775)
------------ ------------
From capital share transactions (note 4):
Received from shares sold................................. 30,642,850 35,259,039
Received from dividends reinvested........................ 5,676,001 14,752,775
Paid for shares redeemed.................................. (18,442,457) (14,795,590)
------------ ------------
Increase in net assets derived from capital share
transactions....................................... 17,876,394 35,216,224
------------ ------------
Increase in net assets............................. 20,704,971 48,247,356
Net Assets:
Beginning of period....................................... 193,715,046 145,467,690
------------ ------------
End of period (a)......................................... $214,420,017 $193,715,046
============ ============
(a) Includes undistributed net investment income of......... $ 5,698 $ 7,689
============ ============
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Per share data:
Net asset value, beginning of period........................ $21.06 $19.40 $17.60 $14.76 $15.38
Income (loss) from investment operations:
Net investment income..................................... 0.58 0.56 0.53 0.58 0.55
Net realized and unrealized gain (loss) on investments.... 0.38 2.87 2.10 2.72 (0.63)
------ ------ ------ ------ ------
Total income (loss) from investment operations..... 0.96 3.43 2.63 3.30 (0.08)
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income...................... (0.58) (0.69) (0.52) (0.46) (0.54)
Distributions from net realized capital gains............. 0.00 (1.08) (0.31) 0.00 0.00
------ ------ ------ ------ ------
Total distributions................................ (0.58) (1.77) (0.83) (0.46) (0.54)
------ ------ ------ ------ ------
Net asset value, end of period.............................. $21.44 $21.06 $19.40 $17.60 $14.76
====== ====== ====== ====== ======
Total return................................................ 4.53% 18.15% 15.54% 22.75% 0.53%
Ratios and supplemental data:
Ratio of expenses to average net assets................... 0.65% 0.71% 0.76% 0.75% 0.62%
Ratio of net investment income to average net assets...... 2.71% 2.69% 2.89% 3.56% 3.67%
Portfolio turnover rate..................................... 18% 18% 12% 10% 7%
Net assets at end of period (millions)...................... $214.4 $193.7 $145.5 $109.6 $ 85.0
</TABLE>
The accompanying notes are an integral part of these financial statements.
25
<PAGE> 26
THIS PAGE INTENTIONALLY LEFT BLANK
26
<PAGE> 27
INTERNATIONAL PORTFOLIO
OHIO NATIONAL FUND, INC.
OBJECTIVE
The International Portfolio seeks long-term capital growth by investing
primarily in securities of foreign Companies.
PERFORMANCE AS OF DECEMBER 31, 1998
<TABLE>
<S> <C>
AVERAGE ANNUAL TOTAL RETURNS:
One-year 3.88%
Three-year 6.69%
Five-year 8.03%
Since inception (5/3/93) 11.36%
</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
Despite continued concerns over the impact of the Asian crisis on global
economies, European indices surged ahead until mid-July. At that time, Russia
devalued its currency and defaulted on its Ruble denominated obligations, the
outlook in Latin American markets worsened as Brazil became an area of increased
worries, and a large U.S. hedge fund collapsed in September. Within a few weeks,
mature markets lost 20 to 30% while emerging markets were once again decimated.
In Asia, Japanese equities weakened farther as additional evidence of
deteriorating economic conditions and slow progress made toward the
implementation of long-awaited banking reforms. Global market developments
placed other Asian markets under pressure. Meanwhile, in Latin America, the
possibility of additional currency devaluations continued to weigh on local
stock markets.
In such an environment, small capitalization stocks fared even worse than large
capitalization stocks and suffered steep losses. Smaller stocks account for the
large majority of the Fund's holdings: while world markets stabilized later in
the year. Blue chips gained and reversed most of their losses, many of the small
issues did not recover. The performance of the Funds was therefore negatively
impacted by those developments.
CHANGE IN VALUE OF $10,000 INVESTMENT
[GRAPH]
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, 1998
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Secom Co., LTD 2.6
2. Bank for International
Settlements 2.2
3. Queensland Treasury 8.00%
09/14/07 2.2
4. Sagem ADP 2.0
5. Fuji Photo Film-ORD 1.9
6. Buderus AGLegrand ADP 1.9
7. Shimano Inc 1.8
8. Kuehne & Nagel Intl AG 1.8
9. Ito Yakado Co 1.7
10. Toho Co 1.6
</TABLE>
TOP 5 COUNTRIES/REGIONS AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
Japan 21.4
France 11.5
Switzerland 9.4
Germany 6.5
New Zealand 4.7
</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.
27
<PAGE> 28
OHIO NATIONAL FUND, INC.
INTERNATIONAL PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
JAPAN (21.4%)
325,000 Aida Engineering Ltd (19)......... $ 1,162,811
25,000 Benesse Corp (29)................. 1,346,111
85,000 Chofu Seisakusho (9).............. 943,820
500,000 Dai-Tokyo Fire Marine Ins Co Ltd
(18)............................. 1,762,503
350,000 Dowa Fire & Marine Ins Co Ltd
(18)............................. 1,295,439
75,000 Fuji Photo Film Co Ltd (9)........ 2,775,942
15,000 Hitachi Ltd ADR (11).............. 906,562
425,000 Iino Kaiun Kaisha (32)............ 711,610
35,000 Ito-Yokado Co Ltd (28)............ 2,436,660
300,000 Koa Fire & Marine Ins Co Ltd
(18)............................. 927,958
375,000 Nichido Fire & Marine Ins Co Ltd
(18)............................. 1,834,104
425,000 Nisshinbo Industries Inc (31)..... 1,475,655
150,000 Nittetsu Mining Co Ltd (22)....... 387,310
50,000 Nitto Kohki Co Ltd (5)............ 409,782
45,000 Secom Co Ltd (29)................. 3,711,831
100,000 Shimano Inc (9)................... 2,568,848
35,000 Shiseido Company (9).............. 447,852
175,000 Shoei Co (31)..................... 852,831
175,570 Sotoh Co (31)..................... 928,328
166,000 Tachi-S Co Ltd (2)................ 626,111
16,500 Toho Co. (20)..................... 2,250,892
35,000 Yomeishu Seizo Co Ltd (13)........ 222,383
------------
29,985,343
------------
FRANCE (11.5%)
12,000 CGDE Michelin 'B' (34)............ 479,807
3,000 Carbone Lorraine (10)............. 142,225
8,130 Crometal (5)...................... 510,511
4,450 Didot-Bottin (25)................. 644,841
8,500 Elf Aquitaine (12)................ 982,334
20,000 Emin Leydier (24)................. 865,870
2,500 Eurafrance (35)................... 1,737,556
10,000 Gaumont SA (20)................... 679,816
10,000 Legrand ADP (10).................. 1,592,200
6,500 NSC Groupe (19)................... 802,361
2,000 Promodes C.I. (28)................ 894,494
7,000 Sagem (11)........................ 2,880,272
2,000 Sucriere de Pithiviers-le-Vieil
(1).............................. 966,054
3,500 *Taittinger (13)................... 2,078,805
3,500 Vivendi (33)...................... 907,912
------------
16,165,058
------------
SWITZERLAND (9.4%)
485 Bank of Intl. Settlements (3)..... 3,088,610
6,500 Edipresse SA Bearer (25).......... 1,868,632
3,000 Kuehne & Nagel Intl AG (32)....... 2,510,917
250 Lindt & Sprungli AG PC (13)....... 655,022
500 *Nestle SA (9)..................... 1,088,064
6,500 Sika Finanz AG Bearer (7)......... 1,949,054
5,500 Societe Generale d'Affichage
(20)............................. 2,025,473
------------
13,185,772
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
GERMANY (6.5%)
2,000 Axel Springer Verlag AG (25)...... $ 1,681,732
18,000 Bayer AG (7)...................... 756,239
12,000 *Bertelsmann AG D.R.C. (25)........ 1,618,067
7,500 Buderus AG (5).................... 2,770,353
65,000 Gerresheimer Glas AG (9).......... 956,485
3,000 Suedzucker AG (13)................ 1,360,401
------------
9,143,277
------------
NEW ZEALAND (4.7%)
2,000,549 Carter Holt Harvey Ltd (14)....... 1,789,571
1,000,000 Evergreen Forests Ltd (14)........ 236,790
150,000 Independent Newpaper Ltd (25)..... 592,764
500,000 *Independent Press Comm. (25)...... 1,973,250
2,750,000 Shortland Properties Ltd (27)..... 969,523
2,550,000 Tasman Agriculture Ltd (1)........ 1,073,448
------------
6,635,346
------------
SINGAPORE (2.9%)
1,000,000 Clipsal Industries Ltd. (10)...... 1,000,000
1,000,000 Del Gro Corp. (34)................ 1,296,184
500,000 Intraco Ltd. (34)................. 172,623
1,000,000 Thakral Corp (34)................. 511,811
700,000 Times Publishing Ltd. (25)........ 1,093,882
------------
4,074,500
------------
HONG KONG (2.6%)
7,666,107 CDL Hotels Intl Ltd (16).......... 1,969,094
2,650,000 Shaw Brothers Ltd (20)............ 1,145,853
1,000,000 South China Morning Post Hdgs
Corp. (25)....................... 513,069
------------
3,628,016
------------
LATIN AMERICA (2.3%)
500,000 *Antofagasta Holdings plc (34)..... 1,471,697
70,000 Banco Latinoamericano 'Bladex'
(3).............................. 1,163,750
681,944 Ledesma SA (1).................... 430,027
99,999 Siderca SAIC (12)................. 114,104
------------
3,179,578
------------
UNITED KINGDOM (2.2%)
650,000 Lonrho Africa plc (34)............ 598,214
225,000 Lonrho plc (34)................... 1,193,940
367,500 McBride plc (9)................... 609,407
525,000 Royal Doulton plc (9)............. 687,759
------------
3,089,320
------------
CANADA (2.0%)
10,000 Canadian Hunter Explr. (12)....... 65,317
50,000 Canadian Pacific Ltd (32)......... 943,750
40,000 Franco-Nevada Mining Corp (21).... 766,819
125,000 Legacy Hotels Real Estate (27).... 522,534
17,440 Nexfor Inc (24)................... 68,917
40,000 Noranda Inc (21).................. 398,432
------------
2,765,769
------------
</TABLE>
(continued)
28
<PAGE> 29
OHIO NATIONAL FUND, INC.
INTERNATIONAL PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
SOUTH KOREA (1.8%)
10,000 Dong AH Tires (34)................ $ 399,834
7,000 Daeduck (11)...................... 407,315
55,000 *Fursys Inc (9).................... 1,316,708
5,000 Nam Yang Dairy Product (13)....... 332,502
------------
2,456,359
------------
NETHERLANDS (1.7%)
37,500 Apothekers Cooperatie OPG (17).... 1,075,247
55,000 European City Estates NV (27)..... 684,647
8,500 Philips Electronics NV ADR (11)... 575,344
------------
2,335,238
------------
MEXICO (1.1%)
1,000,000 Grupo Fernandez Editores de (25).. 79,253
500,000 Industrias Penoles de (21)........ 1,514,387
------------
1,593,640
------------
SWEDEN (1.1%)
45,000 Bylock & Nordsjofrakt AB 'B'
(32)............................. 90,833
55,000 Gorthon Lines 'B' (32)............ 230,161
10,000 Investor AB Class B (35).......... 450,475
81,300 IRO AB (34)....................... 820,530
------------
1,591,999
------------
DENMARK (1.1%)
20,000 Carlsberg Intl A/S CL B (13)...... 1,156,460
3,000 Kobenhavns Lufthavne (32)......... 372,393
------------
1,528,853
------------
BELGIUM (1.0%)
4,500 Deceuninck Plastics Ind. SA (4)... 1,461,400
------------
NORWAY (0.8%)
75,000 Schibsted AS (25)................. 947,562
25,000 Smedvig ASA-A (12)................ 210,569
------------
1,158,131
------------
SPAIN (0.8%)
2,500 Corporacion Financiera Alba SA
(34)............................. 417,445
100,000 Energia e Ind. Aragonesas SA
(34)............................. 679,889
------------
1,097,334
------------
THAILAND (0.5%)
100,000 Oriental Hotel (16)............... 510,316
350,000 *United Broadcasting Corp (20).... 166,093
------------
676,409
------------
PORTUGAL (0.4%)
15,000 Espirito Santo Finance (3)........ 293,437
20,000 Companhia de Celulose do Cairna
(1).............................. 242,779
------------
536,216
------------
ITALY (0.3%)
500,000 Montedison Savings Spa (34)....... 499,490
------------
FINLAND (0.3%)
6,000 Vaisala Oy A (11)................. 494,219
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
TURKEY (0.2%)
20,000 USAS UCAK Servisi (29)............ $ 285,352
------------
AUSTRALIA (0.1%)
200,000 Spotless Services Ltd (29)........ 136,976
------------
MISCELLANEOUS (1.1%)
55,000 North European Oil Royalty Tr.
(12)............................. 752,813
50,000 Minorco ADR (34).................. 759,375
------------
1,512,188
------------
TOTAL COMMON STOCK (77.8%)
(COST $115,864,140).............. $109,215,783
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES PREFERRED STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
INDONESIA (1.1%)
30,500 Freeport McMoRan Pfd. 'B' (22)..... $ 453,687
40,000 Freeport McMoRan Pfd. 'C' (22)..... 490,000
50,000 Freeport McMoRan Pfd. 'D' (22)..... 587,500
-----------
1,531,187
-----------
GERMANY (0.9%)
20,500 Hornbach Holdings AG (28).......... 1,225,112
-----------
TOTAL PREFERRED STOCK (2.0%)
(COST $4,443,618)................. $ 2,756,299
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
AMOUNT CONVERTIBLE DEBENTURES VALUE
- -------------------------------------------------------------
<C> <S> <C>
U.S. DOLLAR (1.7%)
$1,000,000 PT Inti Indorayon Utama 7.00% due
05/02/06 (24)..................... $ 190,000
500,000 Danka Business 6.75% due 04/01/02
(5)............................... 170,000
350,000 Medya International Ltd. 10.00% due
06/28/01 (20)..................... 236,250
1,750,000 Scandinavian Broadcasting 7.25% due
08/01/05 (20)..................... 1,835,313
-----------
2,431,563
-----------
NON U.S. DOLLAR (2.1%)
1,527 FF Gaumont SA 3.750% due 01/01/03
(20).............................. 142,053
25,000 FF Immobiliere Hoteliere 5.000% due
01/01/01 (16)..................... 827,184
450,000 GBP Berisford plc 5.000% due
01/31/15 (9)...................... 598,835
250,000 GBP BAA plc 5.750% due 03/29/06
(32).............................. 542,047
500,000 GBP Lonmin Finance Public Co. 6.00%
due 02/27/04 (3).................. 715,120
320,000 NZ Shortland Properties Inc. 7.50%
due 12/31/98 (27)................. 112,817
-----------
2,938,056
-----------
TOTAL CONVERTIBLE SUBORDINATED
DEBENTURES (3.8%)
(COST $5,770,436)................. $ 5,369,619
-----------
</TABLE>
(continued)
29
<PAGE> 30
OHIO NATIONAL FUND, INC.
INTERNATIONAL PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT NON-CONVERTIBLE BONDS VALUE
- -------------------------------------------------------------
<C> <S> <C>
U.S. DOLLAR (1.9%)
$1,500,000 Bangkok Public Co. 8.375% due
01/15/27 (1)...................... $ 915,000
1,250,000 Federal Republic Of Brazil 6.125%
due 04/15/24 (15)................. 746,875
500,000 United Mexican States 'A' 6.115%
due 12/31/19 (15)................. 408,125
500,000 United Mexican States 'B' 6.038%
12/31/19 (15)..................... 408,125
250,000 United Mexican States 'C' 6.200%
12/31/19 (15)..................... 204,063
-----------
$ 2,682,188
-----------
NON-U.S. DOLLAR (4.1%)
4,250,000 AU Queensland Treasury 8.00% due
09/14/07 (11)..................... $ 3,075,015
350,000 DE Carlberg Finance 7.00% due
02/26/13 (15)..................... 619,564
1,000,000 NZ Republic of New Zealand 10.00%
due 03/15/02 (15)................. 597,930
2,500,000 NZ Trans Power Finance Ltd. 8.00%
due 03/15/02 (15)................. 1,390,696
-----------
5,683,205
-----------
TOTAL NON-CONVERTIBLE BONDS (6.0%)
(COST $8,424,991)................. $ 8,365,393
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT SHORT-TERM NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
ELECTRICAL EQUIPMENT (3.2%)
$4,507,000 Emerson Electric Inc. 5.320%
01/13/99......................... $ 4,499,007
------------
FINANCE (8.5%)
6,073,000 American Express 5.700%
01/04/99......................... 6,070,115
5,876,000 Prudential Fundind Corp 4.000%
01/06/99......................... 5,872,736
------------
11,942,851
------------
TOTAL SHORT-TERM NOTES (11.7%)
(COST $16,411,858)............... $ 16,441,858
------------
TOTAL HOLDINGS (101.3%)
(COST $150,945,043) (a).......... $142,148,952
------------
CASH & RECEIVABLES, NET OF
LIABILITIES (-1.3%).............. (1,834,320)
------------
TOTAL NET ASSETS (100.0%)......... $140,314,632
============
</TABLE>
- ---------------
* Non-income producing securities.
(a) Also represents cost for Federal income tax purposes.
FOREIGN CURRENCIES
NZ -- New Zealand Dollar
FF -- French Franc
GBP -- British Pound
AU -- Australian Dollar
DE -- Denmark Dollar
INDUSTRY CLASSIFICATIONS
(1) Agriculture
(2) Automotive
(3) Banking
(4) Building Products
(5) Capital Goods
(6) Cement
(7) Chemicals
(8) Computer Products
(9) Consumer Products
(10) Electrical Products
(11) Electronics
(12) Energy and Oil
(13) Food & Beverage
(14) Forest Products
(15) Governmental
(16) Hotels
(17) Health Care
(18) Insurance
(19) Machinery
(20) Media
(21) Metal (non-ferrous)
(22) Mining
(23) Packaging
(24) Paper
(25) Publishing
(26) Rail Equipment
(27) Real Estate
(28) Retailing
(29) Services
(30) Steel
(31) Textile
(32) Transportation
(33) Utilities
(34) Miscellaneous
(35) Investment Companies
The accompanying notes are an integral part of these financial statements.
30
<PAGE> 31
OHIO NATIONAL FUND, INC.
INTERNATIONAL PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<S> <C>
Assets:
Investments in securities at market value
(note 1) (cost $150,945,043)........... $142,148,952
Unrealized gain on forward currency
contracts (note 5)..................... 121,710
Receivable for fund shares sold.......... 27,033
Dividends and accrued interest
receivable............................. 662,350
Other.................................... 1,300
------------
Total assets........................... 142,961,345
------------
Liabilities:
Payable for securities purchased......... 461,966
Unrealized loss on forward currency
contracts (note 5)..................... 1,787,428
Payable for shares redeemed.............. 235,113
Payable for investment management
services (note 3)...................... 106,322
Other accrued expenses................... 55,884
------------
Total liabilities...................... 2,646,713
------------
Net assets at market value................. $140,314,632
============
Net assets consist of:
Par value, $1 per share.................. $ 10,908,860
Paid-in capital in excess of par value... 140,053,122
Net unrealized appreciation
(depreciation) on:
Investments (note 1)................... (8,796,091)
Foreign currency related
transactions......................... 14,770
Forward currency contracts (note 5).... (1,665,718)
Accumulated net realized loss on
investments and foreign currency
related transactions (note 1).......... (200,311)
------------
Net assets at market value................. $140,314,632
============
Shares outstanding (note 4)................ 10,908,860
Net asset value per share.................. $ 12.86
============
</TABLE>
STATEMENT OF OPERATIONS
Year ended December 31, 1998
<TABLE>
<S> <C>
Investment income:
Interest (net of $22,667 foreign taxes
withheld)............................... $ 2,423,603
Dividends (net of $262,576 foreign taxes
withheld)............................... 2,773,386
-----------
Total investment income................. 5,196,989
-----------
Expenses:
Management fees (note 3).................. 1,346,274
Accounting, custody, and transfer agent
fees (note 3)........................... 338,677
Directors' fees (note 3).................. 5,561
Professional fees......................... 21,518
Printing, proxy, and postage fees......... 24,408
Other..................................... 10,808
-----------
Total expenses.......................... 1,747,246
-----------
Net investment income................... $ 3,449,743
-----------
Realized and unrealized gain (loss) on
investments and foreign currency:
Net realized gain from:
Investments............................. $ 5,767,926
Forward currency related transactions... 2,045,021
Net increase (decrease) in unrealized
appreciation (depreciation) on:
Investments........................... (794,535)
Foreign currency related
transactions....................... (4,223,969)
-----------
Net gain on investments............... 2,794,443
-----------
Net increase in net assets from
operations......................... $ 6,244,186
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
31
<PAGE> 32
OHIO NATIONAL FUND, INC.
INTERNATIONAL PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
From operations:
Net investment income..................................... $ 3,449,743 $ 2,843,376
Realized gain on investments and foreign currency
transactions............................................ 7,812,947 17,258,280
Unrealized loss on investments and foreign currency
transactions............................................ (5,018,504) (17,805,953)
------------ ------------
Net increase in net assets from operations............ 6,244,186 2,295,703
------------ ------------
Dividends and distributions to shareholders:
Dividends paid from net investment income................. (3,450,422) (3,725,344)
Capital gains and foreign currency related transaction
distributions........................................... (8,013,258) (21,388,818)
Distributions in excess of capital gains and foreign
currency related transactions........................... (74,797) 0
------------ ------------
Total dividends and distributions..................... (11,538,477) (25,114,162)
------------ ------------
From capital share transactions (note 4):
Received from shares sold................................. 11,643,429 37,696,255
Received from dividends reinvested........................ 11,538,477 25,114,162
Paid for shares redeemed.................................. (33,603,085) (21,251,055)
------------ ------------
Increase (decrease) in net assets derived from capital
share transactions..................................... (10,421,179) 41,559,362
------------ ------------
Increase (decrease) in net assets..................... (15,715,470) 18,740,903
Net Assets:
Beginning of period....................................... 156,030,102 137,289,199
------------ ------------
End of period (a)......................................... $140,314,632 $156,030,102
============ ============
(a) Includes undistributed net investment income of......... $ 0 $ 679
============ ============
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Per share data:
Net asset value, beginning.................................. $13.39 $15.49 $14.38 $13.30 $12.48
Income from investment operations:
Net investment income..................................... 0.32 0.28 0.25 0.31 0.16
Net realized and unrealized gain on investments and
foreign currency transactions........................... 0.24 0.08 1.76 1.28 0.84
------ ------ ------ ------ ------
Total income from investment operations................. 0.55 0.36 2.01 1.59 1.00
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment............................. (0.32) (0.37) (0.25) (0.28) (0.12)
Distributions from net realized capital gains and foreign
currency related transaction............................ (0.75) (2.09) (0.65) (0.23) (0.06)
Distributions in excess of net realized capital gains and
foreign currency related transaction.................... (0.01) 0.00 0.00 0.00 0.00
------ ------ ------ ------ ------
Total distributions..................................... (1.08) (2.46) (0.90) (0.51) (0.18)
------ ------ ------ ------ ------
Net asset value, end of period.............................. $12.86 $13.39 $15.49 $14.38 $13.30
====== ====== ====== ====== ======
Total return................................................ 3.88% 2.11% 14.48% 12.10% 8.07%
Ratios and supplemental data:
Ratio of expenses to average net assets................... 1.17% 1.22% 1.15% 1.12% 1.05%
Ratio of net investment income to average net assets...... 2.31% 1.82% 1.64% 2.29% 1.23%
Portfolio turnover rate..................................... 22% 24% 14% 7% 16%
Net assets at end of period (millions)...................... $140.3 $156.0 $137.3 $ 90.6 $ 62.9
</TABLE>
The accompanying notes are an integral part of these financial statements.
32
<PAGE> 33
CAPITAL APPRECIATION PORTFOLIO
OHIO NATIONAL FUND, INC.
OBJECTIVE
The Capital Appreciation Portfolio seeks maximum capital growth by investing
primarily in common stocks
PERFORMANCE AS OF DECEMBER 31, 1998
AVERAGE ANNUAL TOTAL RETURNS:
<TABLE>
<S> <C>
One-year 5.91%
Three-year 12.19%
Since inception (4/30/94) 13.55%
</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 first six months of 1998 was a period of surging stock market gains -- not
the kind of environment in which this conservative portfolio outperforms. While
the portfolio participated in the market's advance, its asset allocation and
value approach to security selection meant that it had much less exposure than
many large-cap stock funds to the classic types of stocks that were leading the
market, primarily blue chip growth companies. When the bull market turned
bearish in the summer of 1998, the portfolio's defensive stance served
shareholders well. During the quarter ended September 30, for example, the
portfolio held up significantly better than the broad market. When the S&P 500
fell almost 15% in August, the portfolio was down less than 5%.
As of this writing the stock market has roared back, recovering lost ground in
record time. As a result, stock valuations seem high to us, just as they
appeared last summer before the steep sell-off. The difference is that all signs
now seem to point to a definite slowing in the economy next year; demand for US
production is dropping, and corporate pricing power is under pressure around the
world, hurting profits. On the positive side, low interest rates could provide
some cushion for consumer spending. Nevertheless, the stock market has
traditionally followed profit trends, which suggest another correction could be
in the offing. If this occurs, the Capital Appreciation portfolio should weather
the storm better than the overall market. Our investment approach will remain
the same regardless of what unfolds. We seek to provide attractive total returns
over time for investors who prefer not to be exposed to the full blast of stock
market volatility.
CHANGE IN VALUE OF $10,000 INVESTMENT
[GRAPH]
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, 1998
<TABLE>
<CAPTION>
% OF NET ASSETS
---------------
<C> <S> <C>
1. Loews Corp 4.4
2. Amerada Hess Corp 4.0
3. Tennessee Valley Authority
5.88% 04/01/36 3.0
4. Washington Post CL B 2.9
5. Niagra Mohawk Power Co 2.6
6. FirstEnergy Corp 2.3
7. Times Mirror CV LYON Zero
Coupon 04/14/17 2.2
8. Rouse Co Ser B Pfd CV 2.2
9. Tennessee Valley Authority
6.235% 07/15/45 2.0
10. US Treasury Notes 5.875%
02/15/00 1.9
</TABLE>
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
Media and Publishing 10.5
Oil, Energy, and Natural Gas 9.4
Utilities 8.4
Municipal 6.2
Insurance 5.4
</TABLE>
33
<PAGE> 34
OHIO NATIONAL FUND, INC.
CAPITAL APPRECIATION PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
CHEMICALS (2.4%)
26,200 Great Lakes Chemical Corp. ........ $ 1,048,000
56,500 *Octel Corp. ....................... 783,937
-----------
1,831,937
-----------
CONSUMER PRODUCTS (2.7%)
1,100 *Nine West Group Inc. .............. 17,119
25,500 Philip Morris Cos., Inc. .......... 1,364,250
16,000 Polaroid Corp. .................... 299,000
24,000 *Reebok International............... 357,000
-----------
2,037,369
-----------
DRUGS (0.2%)
2,400 Schering-Plough Corp. ............. 132,600
-----------
DURABLE GOODS (0.0%)
3,000 A T Cross Co. ..................... 16,125
-----------
ELECTRICAL EQUIPMENT (2.4%)
5,000 Exide Corp. ....................... 81,250
55,000 Firstenergy Corp. ................. 1,790,937
-----------
1,872,187
-----------
ENTERTAINMENT & LEISURE (0.6%)
38,500 *Circus Circus Enterprise........... 440,343
-----------
FINANCE (1.9%)
4,800 Fund American Enterprise........... 672,300
24,000 Leucadia National Corp. ........... 756,000
-----------
1,428,300
-----------
FOOD & RELATED (0.6%)
13,000 McCormick & Co. Inc. .............. 439,563
-----------
FORESTRY & PAPER PRODUCTS (3.5%)
91,000 Domtar Inc. ....................... 534,625
6,500 Georgia-Pacific Timber............. 154,781
21,000 Johns-Manville Corp. .............. 345,188
120,500 MacMillan Bloedel.................. 1,205,000
9,000 Weyerhaeuser Co. .................. 457,312
-----------
2,696,906
-----------
INDUSTRIAL SERVICES (0.9%)
16,000 Corning Inc. ...................... 720,000
-----------
INSURANCE (5.4%)
4,000 Aetna Inc. ........................ 314,500
34,000 Loews Corp. ....................... 3,340,500
6,500 Unitrin, Inc. ..................... 466,375
-----------
4,121,375
-----------
MEDIA & PUBLISHING (7.7%)
29,000 Chris-Craft Ind., Inc. ............ 1,397,437
11,000 Meredith Corp. .................... 416,625
40,500 New York Times Co. CL A............ 1,404,844
6,500 Readers Digest CL A................ 163,719
9,300 Readers Digest CL B................ 224,362
3,900 Washington Post CL B............... 2,253,956
-----------
5,860,943
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
METALS & MINING (2.2%)
64,800 Homestake Mining Co. .............. $ 595,350
59,000 Newmont Mining Corp. .............. 1,065,688
-----------
1,661,038
-----------
OIL, ENERGY & NATURAL GAS (9.5%)
62,000 Amerada Hess Corp. ................ 3,084,500
8,000 Atlantic Richfield Co. ............ 522,000
4,800 Kerr McGee......................... 183,600
61,000 Mitchell Energy/Development CL B... 709,125
1,500 Mitchell Energy/Development CL A... 17,156
27,500 Murphy Oil Corp. .................. 1,134,375
19,600 *Oryx Energy Co. ................... 263,375
20,250 Texaco, Inc. ...................... 1,070,719
10,500 Unocal Corp. ...................... 306,469
-----------
7,291,319
-----------
RETAIL (1.6%)
7,500 JC Penney Co. ..................... 351,563
188,000 *Petrie Stores -- Liq. Trust
Unit.............................. 387,750
27,000 *Toys R' Us......................... 455,625
-----------
1,194,938
-----------
TRANSPORTATION (0.5%)
25,500 Overseas Shipholding Inc. ......... 409,594
-----------
UTILITIES (4.8%)
32,000 Kansas City Power & Light Co. ..... 948,000
4,000 Nevada Power Co. .................. 104,000
123,000 *Niagara Mohawk Power.............. 1,983,375
17,400 Unicom Corp. ...................... 670,988
-----------
3,706,363
-----------
TOTAL U.S. COMMON STOCK (46.9%)
(COST $33,276,101)................ $35,860,900
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES FOREIGN COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
CANADA (0.6%)
TRANSPORTATION & EQUIPMENT
25,000 Canadian Pacific Ltd. ............. $ 471,875
-----------
UNITED KINGDOM (2.7%)
BUSINESS SERVICES (0.1%)
42,000 Lonrho Africa plc.................. 39,014
-----------
CHEMICALS (1.3%)
15,500 English China Clays Plc............ 41,907
9,500 Hanson Trust plc ADR............... 370,500
17,000 Imperial Chemical Industries....... 593,938
-----------
1,006,345
-----------
INDUSTRIAL SERVICES (0.1%)
15,438 BTR plc Ord. 30.769 Par............ 31,752
-----------
MEDICAL & RELATED (0.8%)
214,000 Smith & Nephew..................... 663,785
-----------
</TABLE>
(continued)
34
<PAGE> 35
OHIO NATIONAL FUND, INC.
CAPITAL APPRECIATION PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES FOREIGN COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
METALS & MINING (0.4%)
60,000 Lonrho plc......................... $ 327,426
-----------
TOTAL UNITED KINGDOM............... 2,068,322
-----------
SWITZERLAND (0.2%)
BANKING
20 Bank for International
Settlements....................... $ 126,942
-----------
TOTAL FOREIGN STOCK (3.5%)
(COST $2,661,994)................. $ 2,667,139
-----------
TOTAL COMMON STOCK (50.4%)
(COST $35,938,094)................ $38,528,039
===========
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES PREFERRED STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
BUSINESS SERVICES (0.4%)
5,600 Sealed Air $2 Conv. Series A $ 290,500
-----------
FINANCE (0.5%)
7,000 Kemper Co. 5.75% Series E (144A)... 366,625
2,800 Reckson Assoc. 7.625% Conv......... 59,150
-----------
425,775
-----------
INDUSTRIAL SERVICES (0.1%)
1,000 Unocal Corp. 6.25% Conv............ 48,625
-----------
REAL ESTATE (2.2%)
39,000 Rouse Co. $3 Series B Conv......... 1,691,625
-----------
TRANSPORTATION (1.3%)
21,500 Union Pacific Capital Trust 6.25%
Conv. (144A)...................... 997,625
-----------
UTILITIES (1.3%)
4,940 Cleveland Electric adj. rate Ser.
L................................. 495,235
265 Cleveland Electric 9.% Ser. S...... 282,225
2,632 Entergy Gulf Series B.............. 132,258
971 Niagara Mohawk Power Ser. B........ 24,457
3,200 Niagara Mohawk Power Ser. C........ 80,200
-----------
1,014,375
-----------
TOTAL PREFERRED STOCK (5.8%)
(COST $4,338,970)................. $ 4,468,525
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT US CONVERTIBLE DEBENTURES VALUE
- -------------------------------------------------------------
<C> <S> <C>
AUTOMOTIVE & RELATED (0.7%)
$ 375,000 The Pep Boys MM&J Lyons, zero
coupon contracts due 09/20/11..... $ 196,406
375,000 The Pep Boys MM & J 4.000% due
09/01/99.......................... 369,375
-----------
565,781
-----------
CONSUMER PRODUCTS (0.4%)
420,000 Nine West Group Inc. 5.50% due
07/15/03.......................... 331,275
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT US CONVERTIBLE DEBENTURES VALUE
- -------------------------------------------------------------
<C> <S> <C>
DRUGS (0.2%)
$ 200,000 McKesson Corp. 4.500% due
03/01/04.......................... $ 187,145
-----------
ELECTRICAL EQUIPMENT (1.1%)
180,000 Exide Corp. (144A) 2.900% due
12/15/05.......................... 106,425
300,000 Motorola Inc. zero coupon contract
due 09/27/13...................... 225,000
565,000 National Semiconductor 6.500% due
10/01/02.......................... 498,613
-----------
830,038
-----------
ENTERTAINMENT & LEISURE (0.1%)
50,000 Ogden Corp. Euro 5.750% due
10/20/02.......................... 48,981
-----------
HOTEL/LODGING (1.4%)
610,000 Hilton Hotels 5.000% due
05/15/06.......................... 552,812
740,000 Marriott Intl., zero coupon
contracts due 03/25/11............ 481,000
-----------
1,033,812
-----------
INDUSTRIAL SERVICES (0.6%)
890,000 Roche Holdings (144A) zero coupon
contracts due 05/06/12............ 475,598
-----------
INSURANCE SERVICES (1.2%)
1,100,000 Loews Corp. 3.125% 09/15/07........ 880,000
-----------
MEDIA & PUBLISHING (2.9%)
125,000 Clear Channel Communications 2.625%
due 04/01/03...................... 133,906
355,000 News America Hldgs, zero coupons
contracts due 03/11/13............ 205,456
150,000 Thomas Nelson CL B (144A) 5.750%
due 11/30/99...................... 151,500
3,775,000 Times Mirror, zero coupon contracts
due 04/15/17...................... 1,722,344
-----------
2,213,206
-----------
MEDICAL & RELATED (2.0%)
165,000 Centocor Inc. 4.750% due
02/15/05.......................... 174,694
1,075,000 Chiron Corp. 1.900% due 11/17/00... 1,097,844
475,000 Phycor Inc. 4.500% due 02/15/03.... 287,375
-----------
1,559,913
-----------
OIL, ENERGY & NATURAL GAS (0.1%)
50,000 Oryx Energy Co. 7.500% due
05/15/14.......................... 49,250
-----------
REAL ESTATE & LEASING (0.8%)
620,000 Rouse Co. 5.750% due 07/23/02...... 631,682
-----------
METALS & MINING (3.5%)
1,260,000 Homestake Mining (144A) 5.500% due
06/23/00.......................... 1,209,750
300,000 Inco Ltd. 7.750% due 03/15/16...... 270,000
1,350,000 Inco Ltd. 5.750% due 07/01/04...... 1,171,125
-----------
2,650,875
-----------
</TABLE>
(continued)
35
<PAGE> 36
OHIO NATIONAL FUND, INC.
CAPITAL APPRECIATION PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT US CONVERTIBLE DEBENTURES VALUE
- -------------------------------------------------------------
<C> <S> <C>
UTILITIES (2.3%)
$ 500,000 Potomac Electricity & Power Co.
5.000% due 09/01/02............... $ 485,625
3,160,000 US Cellular Lyons, zero coupon
contracts due 06/15/15............ 1,299,550
-----------
1,785,175
-----------
TOTAL US CONVERTIBLE DEBENTURES
(17.3%) (COST $12,982,917)........ $13,242,731
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT FOREIGN CONVERTIBLE DEBENTURES VALUE
- -------------------------------------------------------------
<C> <S> <C>
CANADA (0.7%)
FORESTRY & PAPER PRODUCTS
$ 200,000 Weston Ltd. George 3.000% due
06/30/23.......................... $ 122,566
-----------
METALS & MINING
700,000 Teck Corp. 3.750% due 07/15/06..... 456,750
-----------
TOTAL CANADA....................... 579,316
-----------
FRANCE (1.2%)
COMMUNICATIONS
820,000 France Telecommunications 2.000%
due 01/01/04...................... 887,650
-----------
NETHERLANDS (0.1%)
INDUSTRIAL SERVICES
68,000 Nedlloyd 4.250% due 03/15/01....... 39,082
-----------
UNITED KINGDOM (1.3%)
FINANCIAL SERVICES
590,000 Lonmin Finance Public Ltd. 6.000%
due 02/27/04...................... 845,294
-----------
MISCELLANEOUS
80,000 Peninsula & Orient 7.250% due
05/19/03.......................... 146,629
-----------
TOTAL UNITED KINGDOM............... 991,923
-----------
TOTAL FOREIGN CONVERTIBLE
DEBENTURES (3.3%) (COST
$2,414,860)....................... $ 2,497,971
-----------
TOTAL CONVERTIBLE DEBENTURES
(20.6%)
(COST $2,414,860)................. $15,740,702
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT LONG-TERM BONDS & NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
GOVERNMENT (5.3%)
$ 400,000 FNMA 6.375% 01/16/02............... $ 414,516
100,000 FNMA 5.370% 02/07/01............... 100,797
200,000 U.S. Treasury Note 6.250%
04/30/01.......................... 207,125
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT LONG-TERM BONDS & NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
$1,400,000 U.S. Treasury Note 5.875%
02/15/00.......................... $ 1,418,375
400,000 U.S. Treasury Note 6.250%
10/31/01.......................... 416,750
250,000 U.S. Treasury Note 6.125%
07/31/00.......................... 255,547
1,000,000 U.S. Treasury Note 5.500%
02/28/99.......................... 1,001,563
250,000 U.S. Treasury Note 6.750%
05/31/99.......................... 252,109
-----------
4,066,782
-----------
MUNICIPAL (6.2%)
400,000 California State 5.250% 10/01/11... 434,428
450,000 Tennessee Valley Authority PR
5.980% 04/01/36................... 472,561
2,200,000 Tennessee Valley Authority Ser. C
5.880% 04/01/36................... 2,309,338
1,450,000 Tennessee Valley Authority Ser. B
6.235% 07/15/45................... 1,521,460
-----------
4,737,787
-----------
COMMUNICATIONS (0.7%)
500,000 Bellsouth Telecomm 5.850%
11-15-45.......................... 510,232
-----------
TOTAL LONG-TERM BONDS & NOTES
(12.2%)
(COST $9,154,762)................. $ 9,314,801
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT SHORT-TERM NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
CHEMICALS (3.9%)
$3,025,000 Dupont (EI) De Nemours Co. 5.140%
02/05/99.......................... $ 3,009,883
-----------
COMMUNICATIONS (3.3%)
2,500,000 Motorola Inc. 5.120% 01/26/99...... 2,491,111
-----------
ELECTRICAL EQUIPMENT (2.8%)
2,140,000 GE Capital Inc. 5.200% 01/21/99.... 2,133,818
-----------
METALS & MINING (0.4%)
330,000 Aluminum Co. of America 5.250%
02/04/99.......................... 328,364
-----------
TOTAL SHORT TERM NOTES (10.4%)
(COST $7,963,176)................. $ 7,963,176
-----------
</TABLE>
(continued)
36
<PAGE> 37
OHIO NATIONAL FUND, INC.
CAPITAL APPRECIATION PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
PUT OPTION PURCHASES MARKET
SHARES STOCK/EXPIRATION/EXERCISE PRICE VALUE
- -------------------------------------------------------------
<C> <S> <C>
1,400.... Clear Channel/Jan/$55.............. $ 3,587
600...... Clear Channel/Jan/$60.............. 3,675
1,500.... IBM/Jan/$130....................... 94
1,600.... MCI Worlcom Inc./Jan/$55........... 100
1,500.... Pharmacia & Upjohn/Jan/$50......... 187
2,000.... Reebok Intl/Jan/$35................ 39,750
1,500.... Schering PloughCorp./Feb/$105...... 2,438
13,000... Timer Warner Inc./Mar/$50.......... 7,313
TOTAL PUT OPTION PURCHASE (0.1%)
(COST $170,470)................... $ 57,144
------------
TOTAL HOLDINGS (99.5%).
(COST $72,963,249) (a)............ $ 76,072,387
------------
CASH & RECEIVABLES, NET OF
LIABILITIES (0.5%)................ 445,435
------------
TOTAL NET ASSETS (100.0%).......... $ 76,517,822
============
</TABLE>
- ---------------
* Non-income producing securities.
(a) Also represents cost for Federal income tax purposes.
(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 $3,307,523 or 4.3% 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.
37
<PAGE> 38
OHIO NATIONAL FUND, INC.
CAPITAL APPRECIATION PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<S> <C>
Assets:
Investments in securities at market value
(note 1) (cost $72,963,249)............. $76,072,387
Cash in bank.............................. 135,399
Receivable for securities sold............ 255,843
Receivable for fund shares sold........... 27,845
Dividends and accrued interest
receivable.............................. 421,152
Other..................................... 3,026
-----------
Total assets............................ 76,915,652
-----------
Liabilities:
Payable for securities purchased.......... 312,720
Payable for shares redeemed............... 14,659
Payable for investment management services
(note 3)................................ 51,379
Other accrued expenses.................... 19,072
-----------
Total liabilities....................... 397,830
-----------
Net assets at market value.................. $76,517,822
===========
Net assets consist of:
Par value, $1 per share................... $ 5,924,074
Paid-in capital in excess of par value.... 67,498,215
Accumulated net realized loss on
investments (note 1).................... (14,210)
Net unrealized appreciation on investments
(note 1)................................ 3,109,138
Undistributed net investment income....... 605
-----------
Net assets at market value.................. $76,517,822
===========
Shares outstanding (note 4)................. 5,924,074
Net asset value per share................... $ 12.92
===========
</TABLE>
STATEMENT OF OPERATIONS
Year ended December 31, 1998
<TABLE>
<S> <C>
Investment income:
Interest.................................. $ 1,590,305
Dividends................................. 813,657
-----------
Total investment income................. 2,403,962
-----------
Expenses:
Management fees (note 3).................. 559,341
Custodian fees (note 3)................... 16,510
Directors' fees (note 3).................. 2,320
Professional fees......................... 9,836
Accounting and transfer agent fees........ 47,000
Other..................................... 13,246
-----------
Total expenses.......................... 648,253
-----------
Net investment income................... $ 1,755,709
-----------
Realized and unrealized gain on investments:
Net realized gain from investments........ $ 5,789,990
Net decrease in unrealized appreciation on
investments............................. (3,695,595)
-----------
Net gain on investments................. 2,094,395
-----------
Net increase in net assets from
operations............................ $ 3,850,104
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
38
<PAGE> 39
OHIO NATIONAL FUND, INC.
CAPITAL APPRECIATION PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
From operations:
Net investment income..................................... $ 1,755,709 $ 1,390,500
Realized gain on investments.............................. 5,789,990 2,209,729
Unrealized gain (loss) on investments..................... (3,695,595) 3,325,188
----------- -----------
Net increase in net assets from operations.............. 3,850,104 6,925,417
----------- -----------
Dividends and distributions to shareholders:
Dividends paid from net investment income................. (1,758,879) (1,682,334)
Capital gains distributions............................... (5,804,200) (3,070,931)
Distributions in excess of capital gains.................. (30,044) 0
----------- -----------
Total dividends and distributions....................... (7,593,123) (4,753,265)
----------- -----------
From capital share transactions (note 4):
Received from shares sold................................. 18,944,729 17,953,371
Received from dividends reinvested........................ 7,593,123 4,753,265
Paid for shares redeemed.................................. (6,108,105) (3,328,937)
----------- -----------
Increase in net assets derived from capital share
transactions........................................... 20,429,747 19,377,699
----------- -----------
Increase in net assets................................ 16,686,728 21,549,851
Net Assets:
Beginning of period....................................... 59,831,094 38,281,243
----------- -----------
End of period (a)......................................... $76,517,822 $59,831,094
=========== ===========
(a) Includes undistributed net investment income of......... $ 605 $ 3,775
=========== ===========
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------- MAY 1, 1994 TO
1998 1997 1996 1995 DECEMBER 31, 1994
------ ------ ------ ------ -----------------
<S> <C> <C> <C> <C> <C>
Per share data:
Net asset value, beginning of period........................ $13.53 $12.93 $11.99 $10.25 $10.00
Income from investment operations:
Net investment income..................................... 0.34 0.39 0.48 0.39 0.22
Net realized and unrealized gain on investments........... 0.46 1.48 1.31 1.85 0.23
------ ------ ------ ------ ------
Total income from investment operations................. 0.80 1.87 1.79 2.24 0.45
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income...................... (0.34) (0.46) (0.44) (0.29) (0.20)
Distributions from net realized capital gains............. (1.06) (0.81) (0.41) (0.21) 0.00
Distributions in excess of capital gains.................. (0.01) 0.00 0.00 0.00 0.00
------ ------ ------ ------ ------
Total distributions..................................... (1.41) (1.27) (0.85) (0.50) (0.20)
------ ------ ------ ------ ------
Net asset value, end of period.............................. $12.92 $13.53 $12.93 $11.99 $10.25
====== ====== ====== ====== ======
Total return................................................ 5.91% 15.19% 15.75% 22.62% 4.53%(b)
Ratios and supplemental data:
Ratio of expenses to average net assets................... 0.93% 0.95% 0.97% 0.96% 0.98%(a,c)
Ratio of net investment income to average net assets...... 2.52% 2.88% 3.90% 3.47% 3.24%(a,c)
Portfolio turnover rate..................................... 45% 41% 37% 32% 20%
Net assets at end of period (millions)...................... $ 76.5 $ 59.8 $ 38.3 $ 19.3 $ 6.8
</TABLE>
(a) Annualized.
(b) Calculated on an aggregate basis (not annualized).
(c) The advisor has reimbursed certain operating expenses of the Capital
Appreciation Portfolio for the period ending December 31, 1994. Had the
advisor not reimbursed such expenses, the annualized ratio of expenses to
average net assets would have been 1.05% and the annualized ratio of net
investment income to average net assets would have been 3.18%.
39
<PAGE> 40
THIS PAGE INTENTIONALLY LEFT BLANK
40
<PAGE> 41
SMALL CAP PORTFOLIO
OHIO NATIONAL FUND, INC.
OBJECTIVE
The Small Cap Portfolio seeks maximum capital growth by investing primarily in
common stocks of small- and medium-size companies.
PERFORMANCE AS OF DECEMBER 31, 1998
AVERAGE ANNUAL TOTAL RETURNS:
<TABLE>
<S> <C>
One-year 10.57%
Three-year 12.18%
Since inception (4/30/94) 19.28%
</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
While 1998 has been a volatile year with many cross-currents, there remains a
generally positive environment for most investors: low inflation, low
unemployment, and steady but moderate economic growth.
International financial crises, particularly in Asia, stalled many economies
around the world and affected corporate growth globally. This backdrop favored
large companies for most of the year, but from the bottom of the October
correction, small-cap performance has improved significantly. From October 8
through December 4, the benchmark Russell 2000 outperformed both the S&P 500 and
the DJIA by more than 6% and 9%, respectively.
The Ohio National Small-Cap Fund has benefited from this upswing in
small-company stocks. It has dramatically outperformed the Russell 2000, gaining
more than 46.0% from its low, versus 30% for the index since October. Using our
disciplined, bottom-up process, we continue to find companies with strong
fundamentals and innovative products. The valuation differential, which favors
small companies, is encouraging, and we are optimistic that as the economic
environment remains subdued, the superior growth characteristics of small-caps
stocks will be realized.
We enter 1999 with a generally positive economic setting. It is expected that
interest rates around the world will continue to fall, with expectations that
inflation will remain low. Economic growth in the United States continues at a
slow, but positive pace, and Europe should benefit from the cross-border
business brought by the new euro. Although the worst of the crisis in Asia may
be behind us, we believe the weakness in Asia will be measured in years, not
months.
These factors should provide a favorable environment overall for financial
assets, particularly stocks of smaller companies. We believe the growth in
communications and global commerce should continue to provide opportunities for
many companies. We are excited about the opportunities being created in the
small-cap market, and we are confident that on a long-term basis, small
companies will provide superior returns.
CHANGE IN VALUE OF $10,000 INVESTMENT
LOGO
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, 1998
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. King Pharmaceuticals 2.5
2. Medics Pharmaceutical CI A 2.3
3. Gemstar International 1.9
4. Insight Enterprises 1.9
5. USWeb Corp 1.9
6. HNC Software 1.9
7. Global Imaging Systems Inc 1.7
8. Concord EFS Inc 1.7
9. Viatel Inc 1.7
10. Watson Pharmaceutical 1.6
</TABLE>
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
Computer and Related 15.7
Medical and Related 12.3
Electronics 8.8
Retail 7.7
Drugs 7.6
</TABLE>
The prices of small company stocks are generally more volatile than the price of
large company stocks.
41
<PAGE> 42
OHIO NATIONAL FUND, INC.
SMALL CAP PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
BUSINESS SERVICES (7.0%)
30,175 *Concord EFS Inc...................... $ 1,278,666
21,900 *IT Group Inc......................... 243,638
6,825 *Lason Inc............................ 397,130
12,825 *Metzler Group........................ 624,417
28,200 *Personal Group of America Inc........ 493,500
6,650 *Probusiness Services Inc............. 302,575
14,000 *Pre Paid Legal Services Inc.......... 462,000
55,088 *US Web Corp.......................... 1,452,933
-----------
5,254,859
-----------
COMMUNICATIONS (6.6%)
40,000 *Allegiance Telecom Inc............... 485,000
31,525 *Com21 Inc............................ 662,025
97,175 *Digital Microwave Corp............... 665,041
9,875 *Pegasus Communications Corp.......... 247,492
12,000 *RF Micro Devices Inc................. 556,500
*Terayon Communications Systems
13,550 Inc.................................. 501,350
8,175 *Uniphase Corp........................ 567,141
55,600 *Viatel Inc........................... 1,271,850
-----------
4,956,399
-----------
COMPUTER & RELATED (15.7%)
13,100 *Avant! Corp.......................... 209,600
12,675 *Bindview Development................. 348,562
51,225 *Brio Technology Inc.................. 906,042
19,200 *Brooktrout Technology Inc............ 328,800
11,850 *Check Point Software Tech Ltd........ 542,878
13,050 *Documentum Inc....................... 697,359
5,750 *Electronic Arts...................... 322,719
30,425 *Exchange Application Inc............. 597,091
35,525 *HNC Software......................... 1,436,542
36,050 *IMRglobal Corp....................... 1,061,222
19,800 *MMC Networks Inc..................... 262,350
26,950 *Macromedia Inc....................... 907,878
9,800 *Microchip Technology Inc............. 362,600
21,025 *Pinnacle Systems Inc................. 751,644
11,175 *Sapient Systems Inc.................. 625,800
45,650 *Software AG Systems Inc.............. 827,406
10,900 *Transaction System Architects........ 545,000
12,675 *Veritas Software..................... 759,708
8,600 *Wind River Systems................... 404,200
-----------
11,897,401
-----------
COMPUTER SERVICES (5.2%)
39,300 *Checkfree Holdings Corp.............. 918,637
11,250 *Complete Business Solutions.......... 381,094
30,000 *Computer Horizons Corp............... 798,750
28,025 *Mastech Corporation.................. 802,216
34,250 *Sykes Enterprises Inc................ 1,044,625
-----------
3,945,322
-----------
CONSUMER PRODUCTS (4.3%)
34,750 *Action Performance Co. Inc........... 1,229,281
69,200 *American Bank Note Holographics...... 1,211,000
52,550 *Helen of Troy........................ 771,828
-----------
3,212,109
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
DRUGS (7.6%)
23,575 Jones Pharmaceuticals Inc............. $ 860,487
73,700 *King Pharmaceuticals Inc............. 1,925,413
29,125 *Medicis Pharmaceutical CL A.......... 1,736,578
19,675 *Watson Pharmaceuticals Inc........... 1,237,066
-----------
5,759,544
-----------
EDUCATIONAL SERVICES (0.3%)
7,025 *Sylvan Learning Systems Inc.......... 214,263
-----------
ELECTRONICS (8.8%)
17,000 *Applied Micro Circuits Corp.......... 577,469
39,400 *Brooks Automation Inc................ 576,225
9,625 *Dycom Industries..................... 549,828
55,387 *Remec Inc............................ 996,966
22,800 *SDL Inc.............................. 903,450
12,350 *Sanmina Corp......................... 771,875
40,850 *Sawtek Inc........................... 714,875
22,075 *Sipex Corporation.................... 775,384
6,500 *Veeco Instruments Inc................ 345,313
9,900 *Vitesse Semiconductor Corp........... 451,687
-----------
6,663,072
-----------
ENTERTAINMENT & LEISURE (1.5%)
23,625 *Family Golf Centers Inc.............. 466,594
66,000 *Loews Cineplex Entertainment......... 668,250
-----------
1,134,844
-----------
FINANCIAL SERVICES (0.4%)
21,700 Cash America Investments Inc.......... 329,569
-----------
FOOD & RELATED (0.9%)
13,600 *U.S. Foodservice Inc................. 666,400
-----------
HOTEL/LODGING (0.4%)
29,025 *Silverleaf Resorts Inc............... 270,295
-----------
INDUSTRIAL SERVICES (2.1%)
0 *Allied Waste Industries Inc.......... 6
8,050 *Eastern Environmental Services....... 238,481
35,106 *Safety-Kleen Corp.................... 495,872
43,825 *Superior Services Inc................ 879,239
-----------
1,613,598
-----------
INSURANCE (2.6%)
31,450 *Annuity & Life....................... 849,150
19,350 HCC Insurance Holdings Inc............ 341,044
55,400 Scottish Annuity & Life Hldgs. Ltd.... 761,750
-----------
1,951,944
-----------
MACHINERY (0.6%)
19,525 *Advanced Energy Industries........... 488,125
-----------
MEDIA & PUBLISHING (3.6%)
26,200 *Gemstar Intl. Group Ltd.............. 1,499,950
74,175 *Zomax Optical Media Inc.............. 1,205,344
-----------
2,705,294
-----------
</TABLE>
(continued)
42
<PAGE> 43
OHIO NATIONAL FUND, INC.
SMALL CAP PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
MEDICAL & RELATED (12.3%)
22,100 *Andrx Corp. ......................... $ 1,132,625
78,625 *Capital Senior Living................ 1,095,836
3,454 Cardinal Health Inc. ................. 262,072
21,300 *Cerner Corp. ........................ 569,775
43,000 *Concentra Managed Care Inc. ......... 459,563
4,650 *Envoy Corp. ......................... 270,863
30,978 HBO & Company......................... 888,667
8,075 *Idexx Laboratories Inc. ............. 217,268
25,000 *Kendle Intl. Inc. ................... 584,375
37,800 *Laser Vision Centers Inc. ........... 837,506
16,175 *Medical Manager Corp. ............... 507,491
9,800 *NCS Healthcare Inc. ................. 232,750
45,050 *Orthodontic Centers of America....... 875,659
15,350 *Parexel Intl. Corp. ................. 383,750
8,450 *Perclose Inc. ....................... 279,906
13,925 *Sunrise Assisted Living Inc. ........ 722,359
-----------
9,320,465
-----------
OIL, ENERGY & NATURAL GAS (0.7%)
23,225 *KTI Inc.............................. 502,241
-----------
REAL ESTATE & LEASING (0.7%)
46,175 *Fairfield Communities Inc............ 510,811
-----------
RENTAL AUTO/EQUIPMENT (1.4%)
41,200 *National Equipment Services.......... 473,800
17,800 *Rental Service Corp.................. 279,237
9,750 *United Rentals Inc................... 322,969
-----------
1,076,006
-----------
RESTAURANTS (1.6%)
41,745 CKE Restaurants....................... 1,228,868
-----------
RETAIL (7.7%)
15,600 *American Eagle Outfitters............ 1,039,350
23,725 Burlington Coat Factory Warehouse..... 387,014
17,250 *Elder-Beerman Stores................. 199,453
54,200 *Global Imaging Systems Inc........... 1,314,350
14,300 *Linens N Things...................... 566,638
7,650 *Saks Inc............................. 241,453
9,925 *Select Comfort Corp.................. 262,392
10,625 *The Men's Wearhouse Inc.............. 337,344
21,975 *The Wet Seal, Inc.................... 663,370
42,725 *Transworld Entertainment Corp........ 814,445
-----------
5,825,809
-----------
TRAVEL & VACATION SERVICES (1.1%)
11,625 *Pegasus Systems...................... 418,500
14,200 *Travel Services Itnl. ............... 433,100
-----------
851,600
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
WHOLESALE (3.5%)
12,250 *CDW Computer Centers Inc............. $ 1,175,234
28,480 *Insight Enterprises Inc.............. 1,448,920
-----------
2,624,154
-----------
TOTAL U.S. COMMON STOCK (96.6%)
(COST $53,021,698)................... $73,002,992
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES FOREIGN COMMON STOCK VALUE
- -------------------------------------------------------------
<S> <C> <C>
BRITAIN (0.7%)
MEDIA
33,600 *Flextech Plc......................... $ 339,968
-----------
MISCELLANEOUS
49,670 Wetherspoon (J.D.).................... 147,475
-----------
TOTAL BRITAIN......................... 487,443
-----------
NETHERLANDS (0.5%)
MISCELLANEOUS
3,085 *Hunter Douglas NV.................... 101,644
TRANSPORTATION
7,100 *IHC Caland........................... 293,353
-----------
TOTAL NETHERLANDS..................... 394,997
-----------
TOTAL FOREIGN COMMON STOCK (1.2%)
(COST $733,441)....................... $ 882,440
-----------
TOTAL COMMON STOCK (97.8%)
(COST $53,755,139).................... $73,885,432
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS VALUE
- -------------------------------------------------------------
<C> <S> <C>
FINANCIAL (3.3%)
$2,523,000 Star Bank 3.500% 01/04/99
repurchase price $2,523,968
collateralized by GNMA
certificates pool #8375 due
02/20/24 (Cost $2,523,000)........ $ 2,523,000
-----------
TOTAL REPURCHASE AGREEMENTS (3.3%)
(COST $2,523,000)................. $ 2,523,000
-----------
TOTAL HOLDINGS (101.1%)
(COST $56,278,139) (a)............ $76,408,432
-----------
CASH & RECEIVABLES, NET OF
LIABILITIES
(-1.1%)........................... (832,452)
-----------
TOTAL NET ASSETS (100.0%).......... $75,575,980
===========
</TABLE>
- ---------------
* Non-income producing securities.
(a) Also represents cost for Federal income tax purposes.
The accompanying notes are an integral part of these financial statements.
43
<PAGE> 44
OHIO NATIONAL FUND, INC.
SMALL CAP PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<S> <C>
Assets:
Investments in securities at market value
(note 1) (cost $56,278,139)............. $ 76,408,432
Cash in bank.............................. 275
Receivable for fund shares sold........... 3,903
Dividends and accrued interest
receivable.............................. 4,207
Other..................................... 2,962
------------
Total assets............................ 76,419,779
------------
Liabilities:
Payable for securities purchased.......... 696,825
Payable for shares redeemed............... 83,846
Payable for investment management services
(note 3)................................ 45,389
Other accrued expenses.................... 17,739
------------
Total liabilities....................... 843,799
------------
Net assets at market value.................. $ 75,575,980
============
Net assets consist of:
Par value, $1 per share................... $ 3,651,357
Paid-in capital in excess of par value.... 55,992,752
Accumulated net realized loss on
investments (note 1).................... (4,198,422)
Net unrealized appreciation on investments
(note 1)................................ 20,130,293
------------
Net assets at market value.................. $ 75,575,980
------------
Shares outstanding (note 4)................. 3,651,357
Net asset value per share................... $ 20.70
============
</TABLE>
STATEMENT OF OPERATIONS
Year ended December 31, 1998
<TABLE>
<S> <C>
Investment income:
Interest................................... $ 334,356
Dividends.................................. 46,390
-----------
Total investment income.................. 380,746
-----------
Expenses:
Management fees (note 3)................... 490,439
Custodian fees (note 3).................... 14,100
Directors' fees (note 3)................... 2,270
Professional fees.......................... 9,836
Fund accounting fees....................... 37,286
Other...................................... 13,886
-----------
Total expenses........................... 567,817
-----------
Net investment loss...................... $ (187,071)
-----------
Realized and unrealized gain on investments:
Net realized loss from investments......... $(4,198,422)
Net increase in unrealized appreciation on
investments.............................. 11,754,403
-----------
Net gain on investments................ 7,555,981
-----------
Net increase in net assets from
operations.......................... $ 7,368,910
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
44
<PAGE> 45
OHIO NATIONAL FUND, INC.
SMALL CAP PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
From operations:
Net investment loss....................................... $ (187,071) $ (47,515)
Realized gain (loss) on investments....................... (4,198,422) 2,695,780
Unrealized gain on investments............................ 11,754,403 1,661,151
----------- -----------
Net increase in net assets from operations............ 7,368,910 4,309,416
----------- -----------
Dividends and distributions to shareholders:
Capital gains distributions............................... (961) (2,462,490)
----------- -----------
From capital share transactions (note 4):
Received from shares sold................................. 16,824,812 21,480,666
Received from dividends reinvested........................ 961 2,462,490
Paid for shares redeemed.................................. (6,922,311) (5,950,001)
----------- -----------
Increase in net assets derived from capital share
transactions......................................... 9,903,462 17,993,155
----------- -----------
Increase in net assets............................. 17,271,411 19,840,081
Net Assets:
Beginning of period....................................... 58,304,569 38,463,709
----------- -----------
End of period............................................. $75,575,980 $58,303,790
=========== ===========
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------- MAY 1, 1994 TO
1998 1997 1996 1995 DECEMBER 31, 1994
------ ------ ------ ------ -----------------
<S> <C> <C> <C> <C> <C>
Per share data:
Net asset value, beginning of period........................ $18.72 $18.03 $15.85 $11.99 $10.00
Income (loss) from investment operations:
Net investment income (loss).............................. (0.06) (0.02) (0.08) (0.02) 0.18
Net realized & unrealized gain on investments............. 2.04 1.54 2.80 3.95 1.94
------ ------ ------ ------ ------
Total income from investment operations................. 1.98 1.52 2.72 3.93 2.12
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income...................... 0.00 0.00 0.00 (0.07) (0.13)
Distributions from net realized capital gains............. 0.00 (0.83) (0.54) 0.00 0.00
------ ------ ------ ------ ------
Total distributions..................................... 0.00 (0.83) (0.54) (0.07) (0.13)
------ ------ ------ ------ ------
Net asset value, end of period.............................. $20.70 $18.72 $18.03 $15.85 $11.99
====== ====== ====== ====== ======
Total return................................................ 10.57% 8.47% 17.71% 33.01% 21.26%(b)
Ratios and supplemental data:
Ratio of expenses to average net assets................... 0.91% 0.94% 0.96% 0.96% 0.91%(a,c)
Ratio of net investment income to average net assets...... (0.30%) (0.11%) (0.48%) (0.11%) 3.27%(a,c)
Portfolio turnover rate..................................... 99% 80% 70% 75% 22%
Net assets at end of period (millions)...................... $ 75.6 $ 58.3 $ 38.5 $ 16.0 $ 3.3
</TABLE>
- ---------------
(a) Annualized.
(b) Calculated on an aggregate basis (not annualized).
(c) The advisor has reimbursed certain operating expenses of the Small Cap
Portfolio for the period ending December 31, 1994. Had the advisor not
reimbursed such expenses, the annualized ratio of expenses to average net
assets would have been 0.95% and the annualized ratio of net investment
income to average net assets would have been 3.24%.
The accompanying notes are an integral part of these financial statements.
45
<PAGE> 46
THIS PAGE INTENTIONALLY LEFT BLANK
46
<PAGE> 47
GLOBAL CONTRARIAN PORTFOLIO
OHIO NATIONAL FUND, INC.
OBJECTIVE
The Global Contrarian Portfolio seeks to provide long-term growth of capital by
investing in foreign and domestic securities that are undervalued or presently
out of favor with other investors but have positive prospects for eventual
appreciation.
PERFORMANCE AS OF DECEMBER 31, 1998
AVERAGE ANNUAL TOTAL RETURNS:
<TABLE>
<S> <C>
One-year 3.53%
Three-year 9.02%
Since inception (3/31/95) 9.64%
</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 Global Contrarian Portfolio contains mostly small and obscure stocks which
we believe are neglected. They also have exposure to commodity and/or "hard
asset" related stocks in U.S. as well as foreign markets. Finally, they hold
emerging market debt instruments, both corporate and sovereign. Stock markets
fell sharply around the world during the third quarter and then rebounded
sharply during the fourth quarter. Small stocks and commodity related stocks
continued to fare poorly, especially compared to the big growth stocks.
The portfolio has been reducing its exposure to commodities-related securities
over the last eighteen months as weaker global economic growth is anticipated in
the medium-term following the Asian crisis. Exposure to certain Latin American
debt instruments has also been reduced. Simultaneously, the portfolio recently
started buying selected stocks and bonds that appear depresses significantly in
a few Asian countries, as well as in Australia, the U.S., and Europe.
CHANGE IN VALUE OF $10,000 INVESTMENT
[GRAPH]
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, 1998
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Edipresse Sa Br New 2.9
2. Manpower Inc 2.5
3. Shaw Brothers (Hong Kong)
Limited 2.2
4. Kuhne & Nagel International AG 2.1
5. Sagem ADP 2.1
6. Chemed Corp 2.0
7. Independent Press Comm 2.0
8. CDL Hotels 2.0
9. San Juan Basin Royalty 1.9
10. Kaneb Services, Inc 1.5
</TABLE>
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
United States 32.6
Switzerland 8.5
France 7.6
New Zealand 4.8
Hong Kong 4.2
</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.
47
<PAGE> 48
OHIO NATIONAL FUND, INC.
GLOBAL CONTRARIAN PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
CAPITAL GOODS (1.7%)
4,000 Bandag Inc. CL A..................... $ 139,500
3,000 Franklin Electric Co. Inc. .......... 202,500
-----------
342,000
-----------
CHEMICALS (1.2%)
20,000 Lawter International Inc. ........... 232,500
-----------
CONSUMER PRODUCTS (0.9%)
1,000 Allen Organ Co. CL B................. 38,000
5,000 Jostens Inc. ........................ 130,938
-----------
168,938
-----------
ELECTRICAL EQUIPMENT (0.5%)
5,000 *UCAR International Inc. ............ 89,062
-----------
ENERGY, OIL & NATURAL GAS (4.8%)
75,000 *Kaneb Services Inc. ................ 304,688
30,000 Matrix Service Co. .................. 142,500
70,000 *San Juan Basin Royalty Trust........ 380,625
6,000 *Weatherford Intl. .................. 116,250
-----------
944,063
-----------
FINANCE (1.4%)
7,500 East Texas Financial Services........ 60,938
8,000 *First Federal Financial Services.... 100,000
8,500 *Redwood Financial Inc. ............. 121,125
-----------
282,063
-----------
FOOD & RELATED (1.2%)
20,000 *Seneca Food Corp. CL A.............. 245,000
-----------
FORESTRY PRODUCTS (1.2%)
1,000 Georgia Pacific Corp. ............... 58,563
1,000 Georgia Pacific Corp. Timber Group... 23,812
3,000 *Greif Brothers CL A................. 87,562
1,500 Rayonier Inc. ....................... 68,906
-----------
238,843
-----------
METALS & MINING (1.1%)
150 Case Pomeroy Inc. Class A............ 168,750
1,000 Reynolds Metals Co. ................. 52,688
-----------
221,438
-----------
REAL ESTATE (0.2%)
2,000 Alico Inc. .......................... 36,000
-----------
RETAIL (0.4%)
10,000 Hancock Fabrics...................... 83,750
-----------
SERVICES (5.0%)
12,000 Chemed Corp. ........................ 402,000
20,000 Manpower Inc. ....................... 503,750
4,000 UniFirst Corp. ...................... 91,250
-----------
997,000
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
TECHNOLOGY (1.8%)
20,000 *BEI Medical Systems Inc. ........... $ 38,750
10,000 BEI Technologies Inc. ............... 93,750
8,000 *Evans & Sutherland Corp. ........... 141,000
4,575 *Teltrend Inc. ...................... 87,497
-----------
360,997
-----------
TOTAL U.S. COMMON STOCK (21.4%) (COST
$4,422,331)......................... $ 4,241,654
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES FOREIGN COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
SWITZERLAND (8.5%)
40 *Bank of Intl. Settlements (3)..... $ 254,731
2,000 Edipresse SA Bearer (25)........... 574,964
500 Kuehne & Nagel Intl. AG (32)....... 418,486
500 Sika Finanz AG Bearer (7).......... 149,927
700 *Socit Generale d'Affichage (2).... 257,787
-----------
1,655,895
-----------
FRANCE (7.6%)
1,000 Didot-Bottin (25).................. 144,908
5,000 Emin-Leydier (24).................. 216,468
300 Eurafrance (35).................... 208,507
800 *Groupe NSC (19)................... 98,752
900 Rougier SA (14).................... 44,632
1,490 Sabeton (35)....................... 202,585
1,000 Sagem (8).......................... 411,467
400 Sucriere Pithiviers (1)............ 193,211
-----------
1,520,530
-----------
HONG KONG (4.2%)
1,524,287 CDL Hotels Intl. Ltd (16).......... 391,524
1,000,000 Shaw Brothers Ltd (20)............. 432,397
-----------
823,921
-----------
JAPAN (3.7%)
30,000 *Dai Tokyo Fire & Marine Ins Co
(18).............................. 105,750
25,000 Dowa Fire & Marine Ins Co (18)..... 92,531
2,500 Fuji Photo Film Co. Ltd (9)........ 92,531
2,500 Fuji Photo Film Co. Ltd ADR (9).... 91,562
20,000 Nittetsu Mining Co. Ltd (22)....... 51,641
1,000 Toho Co. (20)...................... 136,418
25,000 Yomeishu Seizo Co. Ltd (13)........ 158,846
-----------
729,279
-----------
SINGAPORE (3.5%)
200,000 Clipsal Ind. Inc. (10)............. 200,000
200,000 DelGro Corp. Ltd (34).............. 259,237
85,000 Intraco Ltd (34)................... 29,346
400,000 Thakral Corp. Ltd (34)............. 204,724
-----------
693,307
-----------
</TABLE>
(continued)
48
<PAGE> 49
OHIO NATIONAL FUND, INC.
GLOBAL CONTRARIAN PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES FOREIGN COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
NEW ZEALAND (2.8%)
200,000 Carter Holt Harvey Ltd (14)........ $ 178,908
200,000 Mainfreight Ltd (29)............... 162,070
600,000 Shortland Properties (27).......... 211,532
-----------
552,510
-----------
SOUTH AFRICA (1.8%)
7,000 Anglogold Ltd ADR (22)............. 136,938
22,500 *Driefontein ADR (22).............. 90,000
25,000 *Gold Fields Ltd (22).............. 137,940
-----------
364,878
-----------
GERMANY (1.7%)
100 *Axel Springer Verlag AG (20)...... 84,087
700 Buderus AG (5)..................... 258,566
-----------
342,653
-----------
AUSTRALIA (1.2%)
100,000 Amalgamated Holdings (35).......... 246,435
-----------
NETHERLANDS (1.2%)
3,000 Bosch & Keuning NV (20)............ 90,967
12,080 European City Estates NV (27)...... 150,373
-----------
241,340
-----------
MEXICO (1.2%)
515,000 Grupo Fernandez Editors (25)....... 40,815
62,500 *Industrias Penoles SA de CV
(21).............................. 189,298
-----------
230,113
-----------
THAILAND (0.5%)
20,000 Oriental Hotel (16)................ 102,063
-----------
BELGIUM (0.4%)
700 Engrais Rosier SA (34)............. 79,336
-----------
LATIN AMERICA (0.4%)
10,000 *Antofagasta Holdings plc (35)..... 29,434
75,000 *Ledesma SA (1).................... 47,294
-----------
76,728
-----------
CANADA (0.3%)
1,250 *Canadian Hunter Exploration
(12).............................. 8,164
2,180 Nexfor Inc. (24)................... 8,615
5,000 Noranda Inc. (21).................. 49,804
-----------
66,583
-----------
TOTAL FOREIGN COMMON STOCK (39.0%)
(COST $8,237,812)................. $ 7,725,571
-----------
TOTAL COMMON STOCKS (60.4%) (COST
$12,660,143)...................... $11,967,225
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES FOREIGN PREFERRED STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
INDONESIA (1.5%)
10,000 Freeport McMoRan Pfd. 'C' (22)..... $ 122,500
15,000 Freeport McMoRan Pfd. 'D' (22)..... 176,250
-----------
298,750
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES FOREIGN PREFERRED STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
NEW ZEALAND (2.0%)
100,000 Independent Press Comm. (25)....... $ 394,650
-----------
TOTAL FOREIGN PREFERRED STOCK
(3.5%) (COST $986,422)............ $ 693,400
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKE
SHARES U.S. PREFERRED STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
CONTAINERS (1.0%)
4,000 Sealed Air Corp. Conv. ............ $ 207,500
-----------
REAL ESTATE (0.5%)
7,000 Price Enterprises Inc. ............ $ 96,688
-----------
TOTAL US PREFERRED STOCK (1.5%)
(COST $231,527)................... $ 304,188
-----------
TOTAL PREFERRED STOCK (5.0%) (COST
$1,217,949)....................... $ 997,588
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT NON-CONVERTIBLE BONDS VALUE
- -------------------------------------------------------------
<C> <S> <C>
U.S. DOLLAR (2.1%)
$ 300,000 *Bangkok Public Co. 8.375% due
01/15/27.......................... $ 183,000
50,000 Cemex SA 9.500% due 09/20/01 (6)... 50,250
200,000 *Grupo Televisa 13.250% due
05/15/08 (20)..................... 149,500
50,000 PT Pabrik Kertas Tjiwi Kimia
13.250% due 08/01/01 (14)......... 33,250
-----------
416,000
-----------
TOTAL NON-CONVERTIBLE BONDS (2.1%)
(COST $339,584)................... $ 416,000
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT CONVERTIBLE DEBENTURES VALUE
- -------------------------------------------------------------
<C> <S> <C>
U.S. DOLLAR (4.1%)
$ 124,000 Air & Water Technology Corp. 8.000%
due 05/15/15 (29)................. $ 81,840
200,000 Lukinter Finance 1.000% due
11/03/03 (12)..................... 56,000
155,000 IRSA 4.500% due 08/02/03 (4)....... 157,713
250,000 Tipco Asphalt Co. 2.750% due
09/19/06 (6)...................... 201,250
100,000 Samsung Electronics Co. Ltd due
12/31/07 (11)..................... 90,000
300,000 ICTSI 1.750% due 03/13/04 (6)...... 229,500
-----------
816,303
-----------
NON U.S. DOLLAR (0.3%)
2,000 FF Immobilier Hotelier 5.000%
01/01/01 (25)..................... 66,175
-----------
TOTAL CONVERTIBLE DEBENTURES (4.4%)
(COST $1,036,413)................. $ 882,478
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT SHORT-TERM NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
AUTOMOTIVE & RELATED (4.3%)
$ 849,000 Ford Motor Credit Co. 5.970%
01/06/99.......................... $ 848,296
-----------
</TABLE>
(continued)
49
<PAGE> 50
OHIO NATIONAL FUND, INC.
GLOBAL CONTRARIAN PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT SHORT-TERM NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
ELECTRICAL EQUIPMENT (9.6%)
970,000 Emerson Electric Inc. 5.320%
01/13/99.......................... $ 968,280
937,000 Hitachi America Ltd 4.850%
01/19/99.......................... 934,728
-----------
1,903,008
-----------
FINANCIAL (4.9%)
975,000 American Express 5.250% 01/08/99... 974,004
-----------
INSURANCE SERVICES (4.8%)
960,000 Prudential Funding Corp. 5.950
01/07/99.......................... 959,048
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT SHORT-TERM NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
RESTAURANTS (4.2%)
825,000 McDonalds Corp. 5.880% 01/04/99.... $ 824,596
-----------
TOTAL SHORT-TERM NOTES (27.8%)
(COST $5,508,952)................. $ 5,508,952
-----------
TOTAL HOLDINGS (97.7%)
(COST $20,763,041) (a)............ $19,772,243
-----------
CASH & RECEIVABLES, NET OF
LIABILITIES (0.3%)................ 45,971
-----------
TOTAL NET ASSETS (100.0%).......... $19,818,214
===========
</TABLE>
- ---------------
* Non-income producing securities.
(a) Also represents cost for Federal Income tax purposes.
FOREIGN CURRENCIES
FF -- French Franc
Industry Classifications
<TABLE>
<C> <S>
(1) Agriculture
(2) Automotive
(3) Banking
(4) Building Products
(5) Capital Goods
(6) Cement
(7) Chemicals
(8) Computer Products
(9) Consumer Products
(10) Electrical Products
(11) Electronics
(12) Energy and Oil
(13) Food & Beverage
(14) Forest Products
(15) Governmental
(16) Hotels
(17) Health Care
(18) Insurance
(19) Machinery
(20) Media
(21) Metal (non-ferrous)
(22) Mining
(23) Packaging
(24) Paper
(25) Publishing
(26) Rail Equipment
(27) Real Estate
(28) Retailing
(29) Services
(30) Steel
(31) Textile
(32) Transportation
(33) Utilities
(34) Miscellaneous
(35) Holding Companies
</TABLE>
The accompanying notes are an integral part of these financial statements.
50
<PAGE> 51
OHIO NATIONAL FUND, INC.
GLOBAL CONTRARIAN PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<S> <C>
Assets:
Investments in securities at market value
(note 1) (cost $20,763,041)............. $19,772,243
Cash in bank.............................. 49,433
Unrealized gain on forward currency
contracts (note 5)...................... 556
Receivable for fund shares sold........... 2,269
Dividends and accrued interest
receivable.............................. 56,441
Other..................................... 81
-----------
Total assets............................ 19,881,023
-----------
Liabilities:
Unrealized loss on forward currency
contracts (note 5)...................... 20,532
Payable for shares redeemed............... 7,737
Payable for investment management services
(note 3)................................ 15,122
Other accrued expenses.................... 19,418
-----------
Total liabilities....................... 62,809
-----------
Net assets at market value.................. $19,818,214
===========
Net assets consist of:
Par value, $1 per share................... $ 1,842,278
Paid-in capital in excess of par value.... 19,017,026
Accumulated net realized gain on
investments and foreign currency
transactions (note 1)................... (31,657)
Net unrealized appreciation (depreciation)
on:
Investments (note 1).................... (990,798)
Foreign currency related transactions... 1,341
Forward currency contracts (note 5)..... (19,976)
-----------
Net assets at market value.................. $19,818,214
===========
Shares outstanding (note 4)................. 1,842,278
Net asset value per share................... $ 10.76
===========
</TABLE>
STATEMENT OF OPERATIONS
Year ended December 31, 1998
<TABLE>
<S> <C>
Investment income:
Interest................................... $ 340,309
Dividends (net of $22,495 foreign taxes
withheld)................................ 390,389
----------
Total investment income.................. 730,698
----------
Expenses:
Management fees (note 3)................... 175,546
Accounting, custody, and transfer agent
fees (note 3)............................ 66,350
Directors' fees (note 3)................... 766
Professional fees.......................... 3,320
Printing, postage, and proxy fees.......... 3,686
Other...................................... 1,377
----------
Total expenses........................... 251,045
----------
Net investment income.................... $ 479,653
----------
Realized and unrealized gain (loss) on
investments and foreign currency:
Net realized gain from:
Investments.............................. $1,750,418
Forward currency related transactions.... 49,555
Net increase in unrealized depreciation on:
Investments............................ (1,627,039)
Foreign currency related
transactions........................ (84,425)
----------
Net gain on investments................ 88,509
----------
Net increase in net assets from
operations.......................... $ 568,162
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
51
<PAGE> 52
OHIO NATIONAL FUND, INC.
GLOBAL CONTRARIAN PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
From operations:
Net investment income..................................... $ 479,653 $ 338,300
Realized gain on investments and foreign currency
transactions............................................ 1,799,973 923,298
Unrealized gain (loss) on investments and foreign currency
transactions............................................ (1,711,464) 212,957
----------- -----------
Net increase in net assets from operations............ 568,162 1,474,555
----------- -----------
Dividends and distributions to shareholders:
Dividends paid from net investment income................. (479,631) (430,394)
Capital gains and foreign currency related transaction
distributions........................................... (1,831,630) (1,126,860)
----------- -----------
Total dividends and distributions..................... (2,311,261) (1,557,254)
----------- -----------
From capital share transactions (note 4):
Received from shares sold................................. 4,215,794 7,002,064
Received from dividends reinvested........................ 2,311,261 1,557,254
Paid for shares redeemed.................................. (2,989,242) (1,742,872)
----------- -----------
Increase in net assets derived from capital share
transactions......................................... 3,537,813 6,816,446
----------- -----------
Increase in net assets............................. 1,794,714 6,733,747
Net Assets:
Beginning of period....................................... 18,023,500 11,289,753
----------- -----------
End of period (a)......................................... $19,818,214 $18,023,500
=========== ===========
(a) Includes overdistributed net investment income of....... $ 0 $ (22)
=========== ===========
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, APRIL 1,
---------------------------------------------- 1995 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Per share data:
Net asset value, beginning of period................... $11.73 $11.66 $10.80 $10.00
Income from investment operations:
Net investment income................................ 0.29 0.29 0.28 0.13
Net realized and unrealized gain on investments and
foreign currency transactions...................... 0.12 1.03 1.00 0.75
------ ------ ------ ------
Total income from investment operations.......... 0.42 1.32 1.28 0.88
------ ------ ------ ------
Less distributions:
Dividends from net investment income................. (0.29) (0.38) (0.24) (0.08)
Distributions from net realized capital gains and
foreign currency related transactions.............. (1.10) (0.87) (0.18) 0.00
------ ------ ------ ------
Total distributions.............................. (1.39) (1.25) (0.42) (0.08)
------ ------ ------ ------
Net asset value, end of period......................... $10.76 $11.73 $11.66 $10.80
====== ====== ====== ======
Total return........................................... 3.53% 11.67% 12.09% 8.89%(b)
Ratios and supplemental data:
Ratio of expenses to average net assets.............. 1.30% 1.32% 1.29% 1.58%(a,c)
Ratio of net investment income to average net
assets............................................. 2.48% 2.33% 2.44% 1.64%(a)
Portfolio turnover rate................................ 55% 29% 18% 6%
Net assets at end of period (millions)................. $ 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 Global
Contrarian Portfolio for the period ended December 31, 1995. Had the advisor
not reimbursed such expenses, the annualized ratio of expenses to average
net assets would have been 1.90% and the annualized ratio of net investment
income to average net assets would have been 1.32%.
The accompanying notes are an integral part of these financial statements.
52
<PAGE> 53
AGGRESSIVE GROWTH PORTFOLIO
OHIO NATIONAL FUND, INC.
OBJECTIVE
The principal investment objective of the Aggressive Growth Portfolio is to seek
capital growth. The portfolio invests in a diversified collection of securities
believed to represent attractive growth opportunities.
PERFORMANCE AS OF DECEMBER 31, 1998
<TABLE>
<S> <C>
TOTAL RETURNS:
One-year 7.84%
Three-year 6.93%
Since inception (3/31/95) 12.47%
</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 portfolio has outperformed the small-cap Russell 2000 for the year, but
lagged the Russell Mid-Cap Growth and S&P 500 Indexes in spite of appropriate
strategic moves. Performance was especially hurt by our heavy positions in
small-cap stocks, which were devastated by the flight to quality, even though
the majority of our investments have hit their profit targets. Stock selection
emphasized dependable growth companies, whose profits should hold up even in the
face of an economic downturn.
We began positioning the portfolio's investments for a deteriorating economic
climate and difficult stock market during the third quarter. We decreased
exposure to cyclicals and retail stocks, and increased cash to reinforce the
portfolio's defensive posture. Heavy cash positions hurt relative performance
after the market began to rebound in October. Financial Stocks were also trimmed
due to their lower earnings trend.
Most macroeconomic indicators point to a decline in U.S. economic activity and
corporate profits in the next few quarters. The Fed appears willing to counter
the slowdown with the use of monetary stimulus. Although we remain cautious,
valuations for all but the few largest stocks have become extremely attractive.
We will continue to exploit the best growth opportunities in companies with
capable management and dependable earnings.
CHANGE IN VALUE OF $10,000 INVESTMENT
[GRAPH]
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, 1998
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Central Garden and Pet 4.8
2. Sybron International Corp-Wis 2.7
3. Equity Corporation
International 2.3
4. Corrections Corp of America 2.1
5. Coinmatch Laundry Corp 2.0
6. Henry Schein Inc 2.0
7. Chancellor Media Corp Class A 2.0
8. United Stationers Inc 1.9
9. Household International Inc 1.9
10. Rayovac Corporation 1.7
</TABLE>
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
Retail 11.5
Business Services 8.9
Medical and Related 8.7
Computer and Related 7.0
Industrial Services 6.1
</TABLE>
The prices of small company stocks are generally more volatile than the prices
of large company stocks.
53
<PAGE> 54
OHIO NATIONAL FUND, INC.
AGGRESSIVE GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
ADVERTISING (1.7%)
2,375 *Lamar Advertising Co. CL A......... $ 88,469
12,253 *Outdoor Systems Inc. .............. 367,590
-----------
456,059
-----------
AUTOMOTIVE & RELATED (0.5%)
3,050 Harley-Davidson Inc. .............. 144,494
-----------
BANKING (2.7%)
12,660 Household Intl. Inc. .............. 501,653
8,925 TCF Financial Corp. ............... 215,873
-----------
717,526
-----------
BROADCAST RADIO & TV (0.5%)
4,500 *Infinity Broadcasting Corp. ....... 123,188
-----------
BUSINESS SERVICES (8.9%)
5,525 *Consolidated Graphics Inc. ........ 373,283
24,873 *Modis Professional Services........ 360,659
15,125 *Pierce Leahy Corp. ................ 385,687
6,400 Pittston Brink's Group............. 204,000
8,625 Service Master Corp. .............. 190,289
19,800 *United Stationers Inc. ............ 514,800
2,675 Xerox Corp. ....................... 315,650
-----------
2,344,368
-----------
COMPUTER & RELATED (7.0%)
7,625 *Black Box Corp. ................... 288,797
13,775 *Global Imaging Systems Inc. ....... 334,044
5,200 HBO & Co. ......................... 149,175
2,100 IBM................................ 387,975
3,625 *Lexmark Intl. Group CL A........... 364,312
3,100 *Security Dynamics Tech Inc. ....... 71,300
4,400 *Storage Technology Corp. .......... 156,475
3,200 *Sykes Enterprises.................. 97,600
-----------
1,849,678
-----------
COMMUNICATIONS (4.4%)
7,800 *American Tower Corp. CL A.......... 230,587
2,400 *Aware Inc. ........................ 65,250
20,054 *Davel Communications Group
Inc. ............................. 365,986
2,700 *MCI Worldcom Inc. ................. 193,725
5,500 *Tele-Communications TCI Group...... 304,219
-----------
1,159,767
-----------
CONSUMER PRODUCTS & SERVICES (5.4%)
8,550 *Action Performance Co. ............ 302,456
22,550 *Equity Corporation
International..................... 598,984
5,400 Newell Co. ........................ 222,750
5,500 Philip Morris Cos. Inc. ........... 294,250
-----------
1,418,440
-----------
DRUGS (0.7%)
26,900 *Halsey Drug Co. Inc. .............. 36,987
4,200 Jones Pharma Inc. ................. 153,300
-----------
190,287
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
DURABLE GOODS (1.1%)
7,675 Applied Power Inc. CL. A........... $ 289,731
-----------
EDUCATIONAL PRODUCTS & SERVICES (1.5%)
11,575 *ITT Educational Services Inc. ..... 393,550
-----------
ELECTRICAL EQUIPMENT (2.7%)
5,000 *Micron Technology Inc. ............ 252,813
17,550 Rayovac Corp. ..................... 468,366
-----------
721,179
-----------
ENTERTAINMENT & LEISURE (4.5%)
11,975 *Bally Total Fitness Holding
Corp. ............................ 297,878
9,500 International Game Technology...... 230,969
17,593 *SCP Pool Corp. .................... 266,094
5,425 *Viacom Inc. CL B................... 401,450
-----------
1,196,391
-----------
FINANCE (3.8%)
6,050 Associates First Capital Corp. .... 256,369
3,275 Block, H&R Inc. ................... 147,375
6,450 Citigroup.......................... 319,275
2,400 Dime Bancorp Inc. ................. 63,450
9,200 Waddell & Reed Financial........... 217,925
-----------
1,004,394
-----------
FOOD & RELATED (1.1%)
2,600 Lancaster Colony Corp. ............ 83,525
8,100 *Merkert American Corp. ............ 122,513
1,900 *US Foodservice..................... 93,100
-----------
299,138
-----------
INDUSTRIAL SERVICES (6.1%)
41,425 *Coinmatch Laundry Corp. .......... 538,525
8,950 *Republic Services Inc. CL A........ 165,016
20,950 *Superior Services Inc. ............ 420,309
1,500 *Valassis Communications Inc. ...... 77,438
8,801 Waste Management Inc. ............. 410,323
-----------
1,611,611
-----------
INSURANCE (2.8%)
9,500 American Bankers Ins. Group........ 459,563
15,950 *Compdent Corp. .................... 165,481
2,000 *Mony Group Inc. .................. 62,625
1,345 Protective Life.................... 53,556
-----------
741,225
-----------
MEDIA & PUBLISHING (3.3%)
11,075 *Chancellor Media Corp. CL A........ 530,216
6,200 *Clear Channel Communications....... 337,900
-----------
868,116
-----------
</TABLE>
(continued)
54
<PAGE> 55
OHIO NATIONAL FUND, INC.
AGGRESSIVE GROWTH PORTFOLIO(CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
MEDICAL & RELATED (8.7%)
7,350 *Cytyc Corp. ....................... $ 189,263
4,200 *Datascope.......................... 96,600
3,150 McKesson Corp. .................... 249,047
11,833 *Henry Schein Inc. ................. 529,527
2,200 *Medtronic Inc. .................... 163,350
6,650 *PSS World Medical Inc. ............ 152,950
5,850 *Steris Corp. ...................... 166,359
23,800 *Sybron Intl. Corp.-Wis. ........... 647,063
1,250 Warner-Lambert Co. ................ 93,984
-----------
2,288,143
-----------
OIL, ENERGY & NATURAL GAS (0.5%)
9,225 *Noble Drilling Corp. .............. 119,348
-----------
PRIVATE CORRECTIONS (2.1%)
32,250 *Corrections Corp. of America....... 568,406
-----------
REAL ESTATE INVESTMENT TRUSTS (1.6%)
4,250 CCA Prison Realty Trust............ 87,125
34,800 Sunstone Hotel Inves tors Inc. .... 328,425
-----------
415,550
-----------
RESTAURANTS (2.2%)
8,900 *PJ America Inc. ................... 161,312
5,300 *Papa Johns Intl. Inc. ............. 233,863
30,300 *Rainforest Cafe Inc. .............. 183,694
-----------
578,869
-----------
RETAIL (11.5%)
89,000 *Central Garden and Pet Co. ........ 1,279,375
2,150 Loews Companies Inc. .............. 110,053
9,575 *MSC Industrial Direct Co. CL A..... 216,634
37,500 *Movie Gallery Inc. ................ 267,188
11,600 *Office Depot Inc. ................. 428,475
11,925 Pier 1 Imports Inc. ............... 115,523
5,400 Regis Corp. Minn RJQ............... 216,000
1,400 Rite Aid Corp. .................... 69,388
7,200 *School Specialty Inc. ............. 153,900
9,425 *Wilmar Industries Inc. ............ 191,445
-----------
3,047,981
-----------
RENTAL AUTO/EQUIPMENT (1.3%)
11,100 *Renters Choice Inc. ............... 352,425
-----------
TRANSPORTATION & EQUIPMENT (2.9%)
8,450 Burlington Northern Sante Fe....... 285,188
8,250 *Hub Group Inc. CL A................ 159,844
6,275 Kansas City Southern Ind. Inc. .... 308,651
-----------
753,683
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
UTILITIES (0.2%)
1,000 Montana Power Co. ................. $ 56,560
-----------
TOTAL COMMON STOCKS (89.7%)
(COST $22,504,624)................ 23,710,107
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES PREFERRED STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
MEDIA & PUBLISHING (0.6%)
6,600 News Corp. Ltd..................... $ 162,938
-----------
TOTAL PREFERRED STOCK (0.6%)
(COST $162,199)................... $ 162,938
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT SHORT-TERM OBLIGATIONS VALUE
- -------------------------------------------------------------
<C> <S> <C>
GOVERNMENT (0.4%)
$ 75,000 US Treasury Bills 4.370%
04/01/99.......................... $ 74,217
25,000 US Treasury Bills 4.450%
03/25/99.......................... 24,761
-----------
TOTAL SHORT-TERM OBLIGATIONS (0.4%)
(COST $98,924).................... $ 98,978
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS VALUE
- -------------------------------------------------------------
<C> <S> <C>
FINANCIAL (2.7%)
$ 707,000 Star Bank 3.50% due 01/04/99
repurchase price $707,275
collateralized by GNMA
certificates pool# 8375 due
02/20/24 (Cost $707,000).......... $ 707,000
-----------
TOTAL REPURCHASE AGREEMENTS (2.7%)
(COST $707,000)................... $ 707,000
-----------
TOTAL HOLDINGS (93.4%)
(COST $23,472,747) (a)............ $24,679,023
-----------
CASH & RECEIVABLES, NET OF
LIABILITIES (6.6%)................ 1,768,126
-----------
TOTAL NET ASSETS (100.0%).......... $26,447,149
===========
</TABLE>
- ---------------
* Non-income producing securities.
(a) Also represents cost for Federal income tax purposes.
The accompanying notes are an integral part of these financial statements.
55
<PAGE> 56
OHIO NATIONAL FUND, INC.
AGGRESSIVE GROWTH PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<S> <C>
Assets:
Investments in securities at market value
(note 1) (cost $23,472,747)............ $ 24,679,023
Cash in bank............................. 993
Receivable for securities sold........... 1,888,483
Receivable for fund shares sold.......... 22,575
Dividends and accrued interest
receivable............................. 8,282
Other.................................... 12,150
------------
Total assets........................... 26,611,506
------------
Liabilities:
Payable for securities purchased......... 137,120
Payable for securities redeemed.......... 1,707
Payable for investment management
services (note 3)...................... 16,811
Other accrued expenses................... 8,719
------------
Total liabilities...................... 164,357
------------
Net assets at market value................. $ 26,447,149
============
Net assets consist of:
Par value, $1 per share.................. $ 2,372,412
Paid-in capital in excess of par value... 23,142,547
Accumulated net realized gain on
investments (note 1)................... (307,236)
Net unrealized appreciation on:
Investments (note 1)................... 1,206,276
Futures contracts (note 1)............. 33,150
------------
Net assets at market value................. $ 26,447,149
============
Shares outstanding (note 4)................ 2,372,412
Net asset value per share.................. $ 11.15
============
</TABLE>
STATEMENT OF OPERATIONS
Year ended December 31, 1998
<TABLE>
<S> <C>
Investment income:
Interest................................... $ 91,865
Dividends.................................. 101,471
----------
Total investment income.................. 193,336
----------
Expenses:
Management fees (note 3)................... 182,408
Custodian fees (note 3).................... 4,850
Directors' fees (note 3)................... 851
Professional fees.......................... 3,770
Accounting and transfer agent fees......... 17,760
Other...................................... 5,337
----------
Total expenses........................... 214,976
----------
Net investment loss...................... $ (21,640)
----------
Realized and unrealized gain (loss) on
investments:
Net realized gain (loss) from:
Investments.............................. $1,799,308
Futures contracts........................ (357,846)
Net increase in unrealized appreciation on:
Investments.............................. 341,658
Futures contracts........................ 33,150
----------
Net gain on investments................ 1,816,270
----------
Net increase in net assets from
operations.......................... $1,794,630
==========
</TABLE>
56
<PAGE> 57
OHIO NATIONAL FUND, INC.
AGGRESSIVE GROWTH PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER DECEMBER
31, 31,
1998 1997
------------ ------------
<S> <C> <C>
From operations:
Net investment (loss)..................................... $ (21,640) $ (61,720)
Realized gain on investments and futures contracts........ 1,441,462 1,523,817
Unrealized gain on investments and futures contracts...... 374,808 318,599
------------ ------------
Net increase in net assets from operations............ 1,794,630 1,780,696
------------ ------------
Dividends and distributions to shareholders:
Dividends paid from net investment income................. 0 (172,523)
Capital gains distributions............................... (1,782,997) (65,296)
------------ ------------
Total dividends and distributions..................... (1,782,997) (237,819)
------------ ------------
From capital share transactions (note 4):
Received from shares sold................................. 7,546,285 8,136,995
Received from dividends reinvested........................ 1,782,997 237,819
Paid for shares redeemed.................................. (2,786,473) (2,034,563)
------------ ------------
Increase in net assets derived from capital share
transactions......................................... 6,542,809 6,340,251
------------ ------------
Increase in net assets............................. 6,554,442 7,883,128
Net Assets:
Beginning of period....................................... 19,892,707 12,009,579
------------ ------------
End of period............................................. $ 26,447,149 $ 19,892,707
============ ============
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
APRIL 1,
YEARS ENDED DECEMBER 31, 1995 TO
------------------------------ DECEMBER 31,
1998 1997 1996 1995
------ ------ ------ ------------
<S> <C> <C> <C> <C>
Per share data:
Net asset value, beginning of period........................ $11.09 $10.03 $11.84 $10.00
Income from investment operations:
Net investment income (loss).............................. (0.01) (0.05) 1.64 1.56
Net realized and unrealized gain (loss) on investments.... 0.88 1.29 (1.59) 1.08
------ ------ ------ ------
Total income from investment operations................. 0.87 1.24 0.05 2.64
------ ------ ------ ------
Less distributions:
Dividends from net investment income (loss)............... 0.00 (0.14) (1.86) (0.80)
Distributions from net realized capital gains............. (0.81) (0.04) 0.00 0.00
------ ------ ------ ------
Total distributions..................................... (0.81) (0.18) (1.86) (0.80)
------ ------ ------ ------
Net asset value, end of period.............................. $11.15 $11.09 $10.03 $11.84
====== ====== ====== ======
Total return................................................ 7.84% 12.53% 0.76% 26.95%(b)
Ratios and supplemental data:
Ratio of expenses to average net assets................... 0.94% 0.97% 1.01% 1.02%(a)
Ratio of net investment income to average net assets...... (0.09%) (0.40%) 15.81% 18.18%(a)
Portfolio turnover rate..................................... 203% 193% 1987% 1488%
Net assets at end of period (millions)...................... $ 26.4 $ 19.9 $ 12.0 $ 4.0
</TABLE>
- ---------------
(a) Annualized
(b) Calculated on an aggregate basis (not annualized)
57
<PAGE> 58
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58
<PAGE> 59
CORE GROWTH PORTFOLIO
OHIO NATIONAL FUND, INC.
OBJECTIVE
The objective of the Core Growth Portfolio is to provide long-term capital
appreciation.
PERFORMANCE AS OF DECEMBER 31, 1998
TOTAL RETURN:
<TABLE>
<S> <C>
One-year 8.82%
Since inception (1/3/97) 2.74%
</TABLE>
Returns represent past performance, which is no guarantee of future results.
Investment return and principal value will vary so that shares, when redeemed,
may be worth more or less than their original cost. Actual results for variable
annuity and variable universal life contracts will be lower due to contract
charges. Consult your contract for applicable charges for mortality and
expenses.
COMMENTS
We can sum up the second half of 1998 in one word -- volatile. The large-cap
indexes hit their summer peak in mid-July, then lost ground through the rest of
July and hit a low for the third quarter on the last day of August. In
September, stocks staged a healthy rebound, but did not recover to their levels
at the end of the second quarter. The market declined significantly in early
October, only to rebound even more dramatically through the end of the year.
Throughout the year, small-cap and mid-cap stocks did not participate fully when
the market was going up, but they certainly participated when the market went
down. We entered the fourth quarter with the S&P 500 Index up 6% and the Russell
2000 Index down 16% for the year -- a remarkable divergence of returns.
We think that smaller stocks will participate more fully in any market increases
this year for several reasons. Earnings growth has slowed drastically for the
larger companies that make up the S&P 500 Index. At the same time earnings
growth in the small and mid-cap universe remains strong and valuations are at or
near all time lows. Finally, while emerging market economies continue to be a
concern, we believe any improvement in these countries should make investors
more willing to hold less liquid stocks.
CHANGE IN VALUE OF $10,000 INVESTMENT
[GRAPH]
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, 1998
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Citrix Systems Inc. 3.0
2. Guidant Corp. 2.5
3. EMC Corp. 2.4
4. Cisco Systems 2.2
5. Premier Parks 2.1
6. MCI Worldcom 2.1
7. Macromedia 1.8
8. Compuware Corp. 1.8
9. United Rentals Inc. 1.8
10. Carnival Corp. 1.7
</TABLE>
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
Computer and Related 13.9
Medical & Related 12.7
Electrical Equipment 10.0
Communications 8.5
Network Products & Services 7.9
</TABLE>
59
<PAGE> 60
OHIO NATIONAL FUND, INC.
CORE GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- ------------------------------------------------------------
<C> <S> <C>
ADVERTISING (1.7%)
800... *Getty Images Inc. ................... $ 13,750
6,200.. *Outdoor Systems Inc. ................ 186,000
-----------
199,750
-----------
AEROSPACE (0.6%)
2,300.. *Kellstrom Industries................. 66,125
-----------
AUTOMOTIVE & RELATED (1.6%)
4,000.. *Harley Davidson, Inc. ............... 189,500
-----------
BROADCAST RADIO & TV (3.5%)
1,800.. *Citadel Communications............... 46,575
6,700.. *Fox Entertainment Group.............. 168,756
3,100.. *Jacor Communications................. 199,563
-----------
414,894
-----------
BUSINESS SERVICES (3.9%)
2,800.. *Abacus Direct Corp. ................. 127,400
2,900.. *Acxiom Corp. ........................ 89,900
2,600.. *Documentum Inc. ..................... 138,938
4,700.. *RWD Technologies, Inc. .............. 101,637
-----------
457,875
-----------
COMMUNICATIONS (8.5%)
10,600.. *Amdocs Ltd. ......................... 181,525
3,800.. *American Tower Corp. ................ 112,338
2,200.. *Aware Inc. .......................... 59,813
1,700.. *DSET Corp. .......................... 17,637
4,000.. *Geotel Communication Corp. .......... 149,000
2,500.. *Global Crossing...................... 112,812
3,400.. *MCI Worldcom Inc. ................... 243,950
3,600.. *Univision Communications............. 130,275
-----------
1,007,350
-----------
COMPUTER & RELATED (13.9%)
3,700.. *BMC Software Inc. ................... 164,881
3,600.. *Citrix Systems....................... 349,425
2,700.. *Compuware Corp. ..................... 210,938
2,800.. *Dell Computer Corp. ................. 204,925
3,300.. *EMC Corp. ........................... 280,500
6,400.. *Macromedia Inc. ..................... 215,600
1,900.. *Mercury Interactive Corp. ........... 120,175
700... *Microsoft Corp. ..................... 97,081
-----------
1,643,525
-----------
DRUGS (1.9%)
600... *Medimmune Inc. ...................... 59,662
2,600.. *Watson Pharmaceuticals............... 163,475
-----------
223,137
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- ------------------------------------------------------------
<C> <S> <C>
ELECTRICAL EQUIPMENT (10.0%)
5,000.. *Advanced Micro Devices Inc. ......... $ 144,688
2,300.. *Altera Corp. ........................ 140,012
4,400.. *Applied Micro Circuits Corp. ........ 149,463
6,400.. *Celestica Inc. ...................... 158,000
1,800.. Linear Technology..................... 161,213
2,200.. *Transwitch Corp. .................... 85,662
2,900.. *Uniphase Corp. ...................... 201,187
3,000.. *Vitesse Semiconductor Corp. ......... 136,875
-----------
1,177,100
-----------
ENTERTAINMENT & LEISURE (4.8%)
2,400 *Cinar Films Inc...................... 60,900
4,300 Carnival Corp......................... 206,400
8,200.. *Premier Parks........................ 248,050
3,600 *Sunterra Corp........................ 54,000
-----------
569,350
-----------
FINANCIAL SERVICES (1.1%)
3,600 Newcourt Credit Group Inc............. 125,775
-----------
FOOD & RELATED (1.9%)
3,500 *Suiza Foods Corp..................... 178,281
1,000 *Whole Food Market Inc................ 48,375
-----------
226,656
-----------
HOUSING, FURNITURE & RELATED (1.2%)
5,100.. *Restoration Hardware 137,063
-----------
INDUSTRIAL SERVICES (1.2%)
3,000 Waste Management Inc.................. 139,875
-----------
INTERNET SERVICE PROVIDER (3.9%)
2,300 America On Line Inc................... 332,925
400... *Mindspring Enterprises 24,425
4,700 *PSINet Inc........................... 98,113
-----------
455,463
-----------
MACHINERY (2.3%)
1,200 Danaher Corp.......................... 65,175
6,300 *United Rentals Inc................... 208,687
-----------
273,862
-----------
MEDICAL & RELATED (12.7%)
2,400 Cardinal Health Inc................... 182,100
2,700 Guidant Corp.......................... 297,675
7,950 *Health Management Assoc. Inc......... 171,919
3,400.. *Healthcare Financial Partners........ 135,575
1,200 *Immunex Corp......................... 150,975
3,000 *Medical Manager Corp................. 94,125
4,900 *Medquist Inc......................... 193,550
1,200 Pfizer Inc............................ 150,525
1,400 *Province Healthcare Co............... 50,225
4,400 *Theragenics Corp..................... 73,975
-----------
1,500,644
-----------
</TABLE>
(continued)
60
<PAGE> 61
OHIO NATIONAL FUND, INC.
CORE GROWTH PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- ------------------------------------------------------------
<C> <S> <C>
NETWORK PRODUCTS & SERVICES (7.9%)
3,100 *Ascend Communications Inc............. $ 203,825
900 *Axent Technologies Inc................ 27,506
1,900 *Check Point Software.................. 87,044
2,750 *Cisco Systems......................... 255,234
2,250 *Network Assoc. Inc.................... 149,063
4,600 *New Era of Networks Inc............... 202,400
-----------
925,072
-----------
TRANSPORTATION (1.3%)
4,700 *Motivepower Industries Inc............ 151,281
-----------
OIL, ENERGY & NATURAL GAS (1.7%)
5,900 *BJ Services Co. ...................... 92,188
1,700 *Friede Goldman Intl. Inc. ............ 19,338
1,300 *Hanover Compress...................... 33,394
2,300 *Tuboscope Inc. ....................... 18,687
5,200 *Varco International Inc. ............. 40,300
-----------
203,907
-----------
RETAIL (6.0%)
600 *CDW Computer Centers Inc.............. 57,562
3,000 *Duane Reade Inc....................... 115,500
3,200 Home Depot Inc........................ 195,800
3,900 *Linens N Things Inc................... 154,537
4,100 *Staples Inc........................... 179,119
-----------
702,518
-----------
TOTAL COMMON STOCK
(91.6%) (COST $8,162,680)............ $10,790,722
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS VALUE
- -------------------------------------------------------------
<C> <S> <C>
FINANCIAL (7.3%)
$865,000 Star Bank 3.5% due 01/04/99
repurchase price $865,336
collateralized by GNMA certificates
pool # 837 due 02-20-24
(cost $865,000)..................... $ 865,000
-----------
TOTAL REPURCHASE AGREEMENTS (7.3%)
(COST $865,000)..................... $ 865,000
-----------
TOTAL HOLDINGS (98.9%)
(COST $9,017,680) (a)............... $11,655,722
-----------
CASH & RECEIVABLES,
NET OF LIABILITIES (1.1%)........... 125,865
-----------
TOTAL NET ASSETS (100.0%)............ $11,781,587
===========
</TABLE>
- ---------------
* Non income producing security.
(a) Also represents cost for Federal income tax purposes.
The accompanying notes are an integral part of these financial statements.
61
<PAGE> 62
OHIO NATIONAL FUND, INC.
CORE GROWTH PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<S> <C>
Assets:
Investments in securities at market value
(note 1) (cost $9,017,680).............. $11,655,722
Cash in bank.............................. 441
Receivable for securities sold............ 264,936
Receivable for fund shares sold........... 2,554
Dividends and accrued interest
receivable.............................. 192
Other..................................... 43
-----------
Total assets............................ 11,923,888
-----------
Liabilities:
Payable for securities purchased.......... 51,006
Payable for shares redeemed............... 77,477
Payable for investment management services
(note 3)................................ 8,569
Other accrued expenses.................... 5,249
-----------
Total liabilities....................... 142,301
-----------
Net assets at market value.................. $11,781,587
===========
Net assets consist of:
Par value, $1 per share................... $ 1,118,017
Paid-in capital in excess of par value.... 9,658,337
Accumulated net realized loss on
investments (note 1).................... (1,632,809)
Net unrealized appreciation on investments
(note 1)................................ 2,638,042
-----------
Net assets at market value.................. $11,781,587
===========
Shares outstanding (note 4)................. 1,118,017
Net asset value per share................... $ 10.54
===========
</TABLE>
STATEMENT OF OPERATIONS
Year ended December 31, 1998
<TABLE>
<S> <C>
Investment income:
Interest.................................. $ 47,437
Dividends................................. 4,679
-----------
Total investment income................. 52,116
-----------
Expenses:
Management fees (note 3).................. 96,330
Custodian fees (note 3)................... 4,825
Directors' fees (note 3).................. 432
Professional fees......................... 1,844
Accounting and transfer agent fees........ 8,440
Other..................................... 2,883
-----------
Total expenses.......................... 114,754
-----------
Net investment loss..................... $ (62,638)
-----------
Realized and unrealized gain (loss) on
investments:
Net realized loss from investments........ $(1,185,242)
Net increase in unrealized appreciation on
investments............................. 2,239,047
-----------
Net gain on investments............... 1,053,805
-----------
Net increase in net assets from
operations......................... $ 991,167
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
62
<PAGE> 63
OHIO NATIONAL FUND, INC.
CORE GROWTH PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
From operations:
Net investment loss....................................... $ (62,638) $ (11,892)
Realized loss on investments.............................. (1,185,242) (447,567)
Unrealized gain on investments............................ 2,239,047 398,995
----------- ----------
Net increase (decrease) in net assets from
operations.......................................... 991,167 (60,464)
----------- ----------
Dividends and distributions to shareholders:
Dividends paid from net investment income................. 0 (3,539)
----------- ----------
From capital share transactions (note 4):
Received from shares sold................................. 4,380,111 12,368,097
Received from dividends reinvested........................ 0 3,539
Paid for shares redeemed.................................. (3,133,724) (2,763,600)
----------- ----------
Increase in net assets derived from capital share
transactions........................................ 1,246,387 9,608,036
----------- ----------
Increase in net assets............................ 2,237,554 9,544,033
Net Assets:
Beginning of period....................................... 9,544,033 0
----------- ----------
End of period............................................. $11,781,587 $9,544,033
=========== ==========
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------
1998 1997
-------- ------
<S> <C> <C>
Per share data:
Net asset value, beginning of period........................ $ 9.68 $10.00
Loss from investment operations:
Net investment loss....................................... (0.06) (0.02)
Net realized and unrealized gain (loss) on investments.... 0.92 (0.30)
Total income (loss) from investment operations......... 0.86 (0.32)
-------- ------
Net asset value, end of period.............................. $ 10.54 $ 9.68
======== ======
Total return................................................ 8.82% (3.08%)
Ratios and supplemental data:
Ratio of expenses to average net assets..................... 1.13% 1.11%
Ratio of net investment loss to average net assets........ (0.62)% (0.18)%
Portfolio turnover rate..................................... 134% 65%
Net assets at end of period (millions)...................... $ 11.8 $ 9.5
</TABLE>
The accompanying notes are an integral part of these financial statements.
63
<PAGE> 64
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64
<PAGE> 65
GROWTH & INCOME PORTFOLIO
OHIO NATIONAL FUND, INC.
OBJECTIVE
The Growth & Income Portfolio's investment objective is long-term total return.
PERFORMANCE AS OF DECEMBER 31, 1998
TOTAL RETURN:
<TABLE>
<S> <C>
One-year 7.09%
Since inception (1/3/97) 21.05%
</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
Fueled by a strong, snap back rally in the market, the Ohio National Growth &
Income Portfolio rose 16.5% in the fourth quarter. The strong rebound helped to
mitigate the severe underperformance investors in small and mid-cap stocks
endured throughout most of the second and third quarter in 1998.
Having endured a strong market decline in the spring and summer, we positioned
the portfolio in a defensive posture entering the fourth quarter. We expanded
our weighting to convertible, preferred, and utility shares. That conservative
strategy hindered our fourth quarter results, as many stocks rallied strongly
from their summer lows.
Looking forward, we maintain some optimism that the small and mid-cap stocks may
catch up to the large cap stocks in 1999 after four years of general
underperformance. The deflationary forces of excess global capacity coupled with
slowing demand from most energy markets have already had a negative effect on
the profits of some large-cap multinational companies.
CHANGE IN VALUE OF $10,000 INVESTMENT
LOGO
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, 1998
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. American Bank Note Holographics
Inc 2.5
2. Mediaone Group Inc 2.1
3. Bergen Brunswig Corp 1.8
4. Novell Inc 1.8
5. Millennium Pharmaceuticals 1.7
6. System Software Assoc CV 1.7
7. Discreet Logic Inc 1.7
8. Fore Systems Inc 1.6
9. Adelphia Communications-CL A 1.6
10. Dset Corp 1.6
</TABLE>
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
Communications 15.1
Computer and Related 11.4
Medical and Related 8.7
Networking Products 8.2
Cable TV 7.9
</TABLE>
65
<PAGE> 66
OHIO NATIONAL FUND, INC.
GROWTH AND INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
AEROSPACE (1.1%)
6,500 *Alliant Techsystems Inc........... $ 535,844
-----------
BANKING (0.9%)
15,000 Keycorp............................ 480,000
-----------
BUSINESS SERVICES (5.5%)
15,500 *Acnielsen Corp.................... 437,875
5,000 *CSG Systems Intl. Inc............. 395,000
50,000 *Condor Technology Solutions....... 500,000
15,000 National Data Corp................. 730,313
10,000 *Tele-Comm Liberty Media GR-A...... 440,133
12,500 *Usweb Corp........................ 329,688
-----------
2,833,009
-----------
CABLE TV (7.9%)
18,000 *Adelphia Communications CL A...... 823,500
25,000 *Century Communications CL A....... 792,969
12,000 Comcast Corp. Special CL A......... 704,250
22,500 *Mediaone Group Inc................ 1,057,500
12,500 Tele Communications TCI Group
Ser............................... 691,406
-----------
4,069,625
-----------
COMMUNICATIONS (12.5%)
45,500 *Caprock Communications Corp....... 304,281
16,000 Comsat Corp. Series 1.............. 576,000
40,000 *DIGI International Inc............ 445,000
79,000 *DSET Corp......................... 819,625
130,000 *Metrocall Inc..................... 568,750
9,000 *Netscape Communications Corp...... 546,750
20,500 *Pagemart Wireless Inc............. 114,031
85,000 *Paging Network Inc................ 398,438
10,500 SBC Communications Inc............. 563,062
17,500 *Skytel Communications Corp........ 387,187
6,000 Sprint Corp........................ 504,750
30,000 Sprint Corp. (PCS GRP)............. 693,750
50,000 *Startec Global Communications
Corp.............................. 481,250
-----------
6,402,874
-----------
COMPUTER & RELATED (8.3%)
45,000 *Discreet Logic Inc................ 849,375
15,000 *Electronics For Imaging........... 602,813
4,500 *EMC Corp. Mass.................... 382,500
20,000 *Hyperion Solutions Corp........... 360,000
15,000 *Imrglobal Corp.................... 441,562
20,000 *Micron Electronics Inc............ 346,250
14,000 *Seagate Technology Inc............ 423,500
40,000 *Splash Technology Hdgs. Inc....... 297,500
6,500 *Sun Microsystems Inc.............. 556,562
-----------
4,260,062
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
CONSUMER PRODUCTS (6.0%)
75,000 *American Bank Note Holographics
Inc............................... $ 1,312,500
11,500 Philip Morris Cos. Inc............. 615,250
7,000 Rite Aid Corp...................... 346,938
10,000 Sotheby's Holdings Inc............. 320,000
20,000 The Warnaco Group Inc.............. 505,000
-----------
3,099,688
-----------
DRUGS (2.5%)
15,000 *King pharmaceuticals Inc.......... 391,875
35,000 *Millennium Pharmaceuticals........ 905,625
-----------
1,297,500
-----------
ELECTRICAL EQUIPMENT (0.4%)
10,000 *Conexant Systems Inc.............. 177,914
-----------
ENTERTAINMENT & LEISURE (1.4%)
40,000 *Acclaim Entertainment Inc......... 490,000
7,500 Walt Disney Co..................... 225,000
-----------
715,000
-----------
FINANCIAL SERVICES (4.7%)
75,000 *Amresco Inc....................... 656,250
11,500 Countrywide Credit Ind. Inc........ 577,156
7,500 Fannie Mae......................... 555,000
25,000 *Golden State Bancorp.............. 114,062
22,500 *Hambrecht & Quist Group........... 510,469
-----------
2,412,937
-----------
INSURANCE SERVICES (2.1%)
12,000 Berkley (W.R.) Corp................ 408,750
50,000 *Scottish Life Holdings Ltd........ 687,500
-----------
1,096,250
-----------
MEDIA & PUBLISHING (0.6%)
20,000 *Ziff-Davis Inc.................... 316,250
-----------
MEDICAL & RELATED (7.5%)
20,000 *Alkermes Inc...................... 443,750
17,500 *Alternative Living Services....... 599,375
3,000 *Amgen Inc......................... 313,688
27,000 Bergen Brunswig Corp............... 941,625
40,000 *Brookdale Living Communities...... 780,000
40,000 *Endocardial Solutions Inc......... 400,000
7,500 *Sunrise Assisted Living Inc....... 389,062
-----------
3,867,500
-----------
NETWORKING PRODUCTS (8.2%)
13,000 *3Com Corp......................... 582,563
46,000 *Adaptec Inc....................... 807,875
12,000 *Checkpoint Software Tech.......... 549,750
45,000 *Fore Systems Inc.................. 824,062
17,500 *Newbridge Networks Corp........... 531,563
50,000 *Novell Inc........................ 906,250
-----------
4,202,063
-----------
</TABLE>
(continued)
66
<PAGE> 67
OHIO NATIONAL FUND, INC.
GROWTH AND INCOME PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
OIL, ENERGY & NATURAL GAS (2.6%)
25,000 AGL Resources Inc.................. $ 576,563
400,000 *Bonus Resource Service............ 384,000
15,750 *Southern Union Co................. 383,906
-----------
1,344,469
-----------
TRANSPORTATION (0.7%)
18,000 Knightsbridge Tanker Ltd........... 374,625
-----------
UTILITIES (1.1%)
10,000 Montana Power Co................... 565,625
RETAIL (6.3%)
12,500 *BJ's Wholesale Club Inc........... 578,906
20,000 Claires Stores Inc................. 410,000
19,000 *Creative Computers Inc............ 603,250
25,000 *Hollywood Entertainment Corp...... 681,250
8,000 *Kroger Co. Inc.................... 484,000
50,000 Pier 1 Imports Inc................. 484,375
-----------
3,241,781
-----------
TOTAL COMMON STOCK (80.4%)
(COST $34,175,108)................ $41,293,016
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES CLOSED-END INVESTMENTS VALUE
- -------------------------------------------------------------
<C> <S> <C>
FOREIGN (1.2%)
25,500 Webs-Hong Kong Index Series........ $ 239,063
35,000 Webs-Japan Index Series............ 358,750
-----------
TOTAL CLOSED-END INVESTMENTS (1.2%)
(COST $611,042)................... $ 597,813
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES REAL ESTATE INVESTMENT TRUSTS VALUE
- -------------------------------------------------------------
<C> <S> <C>
50,000 Equity One Inc..................... $ 453,125
80,000 Canadian Hotel Inc................. 409,600
-----------
TOTAL REAL ESTATE INV. TRUSTS
(1.7%)
(COST $1,160,929)................. $ 862,725
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES PREFERRED STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
COMMUNICATIONS (1.8%)
24,400 Cellnet Data Systems 7% Conv....... $ 317,200
15,000 Nextlink Communications Conv....... 592,500
-----------
909,700
-----------
ELECTRICAL EQUIPMENT (0.8%)
10,000 Pioneer Standard Electric Conv..... 425,000
-----------
HOTEL/LODGING (0.3%)
7,500..... Servico Inc. 7% Conv. (144A)....... 168,750
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES PREFERRED STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
INDUSTRIAL SERVICES (1.0%)
16,000 Cendant Corp. 7.5% Conv............ $ 534,000
-----------
METALS & MINING (0.5%)
15,000 Freeport McMoran Cooper Gold....... 223,125
-----------
TRANSPORTATION & EQUIPMENT (1.1%)
1,500 Trans World Airlines 8% Conv.
(144A)............................ 33,750
11,000 Trans World Airlines $4.625 Conv... 451,000
3,500 TWA Series A 8.000% Conv........... 78,750
-----------
563,500
-----------
TOTAL PREFERRED STOCK (5.5%)
(COST $3,380,844)................. $ 2,824,075
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT CONVERTIBLE DEBENTURE VALUE
- -------------------------------------------------------------
<C> <S> <C>
INDUSTRIAL SERVICES (0.5%)
$ 200,000 Alternative Living Services 5.250%
12/15/02.......................... $ 247,250
-----------
COMMUNICATIONS (0.8%)
400,000 Premiere Technology Inc. 5.750%
07/01/04.......................... 208,000
200,000 Tele-Communications Intl. 4.500%
02/15/06.......................... 213,000
-----------
421,000
-----------
COMPUTER & RELATED (3.1%)
250,000 Adaptec Inc. 4.750% 02/01/04....... 194,375
400,000 Hutchinson Tech 6.000% 03/15/05.... 557,000
1,200,000 System Software Associates 7.000%
09/15/02.......................... 864,000
-----------
1,615,375
-----------
MEDICAL & RELATED (1.2%)
100,000 American Retirement Corp. 5.750%
10/01/02.......................... 86,125
125,000 Assisted Living Concepts 6.000%
11/01/02.......................... 103,125
600,000 Sabratek Corp. 6.000% 04/15/05..... 405,000
-----------
594,250
-----------
OIL, ENERGY & NATURAL GAS (0.4%)
250,000 Offshore Logistics Inc. 6.000%
12/15/03.......................... 216,250
-----------
RETAIL (0.4%)
250,000 Nine West Group 5.500% 07/15/03.... 197,187
TRANSPORTATION & EQUIPMENT (0.6%)
500,000 Halter Marine Inc. 4.500%
09/15/04.......................... 282,500
TOTAL CONVERTIBLE DEBENTURES (7.0%)
(COST $3,575,658)................. $ 3,573,812
-----------
</TABLE>
(continued)
67
<PAGE> 68
OHIO NATIONAL FUND, INC.
GROWTH AND INCOME PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS VALUE
- -------------------------------------------------------------
<C> <S> <C>
FINANCIAL (7.6%)
$3,909,000 Star Bank 3.5%, Due 01/04/99
repurchase price $3,910,520
collateralized by GNMA
certificates pool # 8375 due
02/20/24 (cost $3,909,000)........ $ 3,909,000
-----------
TOTAL REPURCHASE AGREEMENTS (7.6%)
(COST $3,909,000)................. $ 3,909,000
-----------
TOTAL HOLDINGS (103.4%)
(COST $46,812,581) (a)............ $53,060,441
-----------
CASH & RECEIVABLES, NET OF
LIABILITIES (-3.4%)............... (1,686,935)
-----------
TOTAL NET ASSETS (100.0%).......... $51,373,506
===========
</TABLE>
- ---------------
* Non-income producing securities.
(a) Also represents cost for Federal income tax purposes.
(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 $202,500 or 0.4% 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.
68
<PAGE> 69
OHIO NATIONAL FUND, INC.
GROWTH & INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<S> <C>
Assets:
Investments in securities at market
value (note 1) (cost
$46,812,581)...................... $53,060,441
Cash in bank......................... 966
Receivable for securities sold....... 1,144,260
Receivable for fund shares sold...... 10,055
Dividends and accrued interest
receivable........................ 95,030
Other................................ 144
-----------
Total assets...................... 54,310,896
-----------
Liabilities:
Payable for securities purchased..... 2,170,331
Payable for shares redeemed.......... 725,090
Payable for investment management
services (note 3)................. 35,560
Other accrued expenses............... 6,409
Total liabilities................. 2,937,390
-----------
Net assets at market value............. $51,373,506
===========
Net assets consist of:
Par value, $1 per share.............. $ 3,768,803
Paid-in capital in excess of par
value............................. 44,361,937
Accumulated net realized loss on
investments (note 1).............. (3,005,094)
Net unrealized appreciation on
investments (note 1).............. 6,247,860
-----------
Net assets at market value............. $51,373,506
===========
Shares outstanding (note 4)............ 3,768,803
Net asset value per share.............. $ 13.63
===========
</TABLE>
STATEMENT OF OPERATIONS
Year ended December 31, 1998
<TABLE>
<S> <C>
Investment income:
Interest........................... $ 308,157
Dividends.......................... 468,381
------------
Total investment income......... 776,538
------------
Expenses:
Management fees (note 3)........... 323,909
Custodian fees (note 3)............ 7,550
Directors' fees (note 3)........... 1,059
Professional fees.................. 4,005
Accounting and transfer agent
fees............................ 23,604
Other.............................. 5,758
------------
Total expenses.................. 365,885
------------
Net investment income........... $ 410,653
Realized and unrealized gain on
investments:
Net realized loss from
investments..................... ($ 3,005,094)
Net increase in unrealized
appreciation on investments..... 5,132,366
------------
Net gain on investments......... 2,127,272
------------
Net increase in net assets from
operations.................... $ 2,537,925
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
69
<PAGE> 70
OHIO NATIONAL FUND, INC.
GROWTH & INCOME PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
From operations:
Net investment income..................................... $ 410,653 $ 83,786
Realized gain (loss) on investments....................... (3,005,094) 879,953
Unrealized gain on investments............................ 5,132,366 1,115,494
----------- -----------
Net increase in net assets from operations............ 2,537,925 2,079,233
----------- -----------
Dividends and distributions to shareholders:
Dividends paid from net investment income................. (411,458) (83,966)
Capital gains distributions............................... 0 (881,389)
----------- -----------
Total dividends and distributions..................... (411,458) (965,355)
----------- -----------
From capital share transactions (note 4):
Received from shares sold................................. 35,505,173 17,263,935
Received from dividends reinvested........................ 411,458 965,355
Paid for shares redeemed.................................. (5,375,872) (636,888)
----------- -----------
Increase in net assets derived from capital share
transactions......................................... 30,540,759 17,592,402
----------- -----------
Increase in net assets............................. 32,667,226 18,706,280
----------- -----------
Net Assets:
Beginning of period....................................... 18,706,280 0
----------- -----------
End of period............................................. $51,373,506 $18,706,280
=========== ===========
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1998 1997
------------ ------------
<S> <C> <C>
Per share data:
Net asset value, beginning of period........................ $ 12.85 $ 10.00
Income from investment operations:
Net investment income..................................... 0.14 0.11
Net realized and unrealized gain on investments........... 0.77 3.52
----------- -----------
Total income from investment operations................. 0.91 3.63
----------- -----------
Less distributions:
Dividends from net investment income...................... (0.13) (0.11)
Distributions from net realized capital gains............. 0.00 (0.67)
----------- -----------
Total distributions..................................... (0.13) (0.78)
----------- -----------
Net asset value, end of period.............................. $ 13.63 $ 12.85
=========== ===========
Total return................................................ 7.09% 36.58%
Ratios and supplemental data:
Ratio of expenses to average net assets................... 0.97% 0.95%
Ratio of net investment income to average net assets...... 1.09% 1.04%
Portfolio turnover rate..................................... 286% 185%
Net assets at end of period (millions)...................... $ 51.4 $ 18.7
</TABLE>
The accompanying notes are an integral part of these financial statements.
70
<PAGE> 71
S&P 500 INDEX PORTFOLIO
OHIO NATIONAL FUND, INC.
OBJECTIVE
The S&P 500 Index Portfolio seeks total return approximating that of the S&P 500
Index, including reinvestment of dividends, at a risk level consistent with that
of the S&P 500 Index.
PERFORMANCE AS OF DECEMBER 31, 1998
<TABLE>
<S> <C>
TOTAL RETURN:
One-year 30.00%
Since inception (1/3/97) 31.03%
</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
1998 turned out to be a very volatile, but yet another good year for the S&P 500
Index and for your S&P 500 Index Fund. After the 1st seven months of 1998, we
had seen two months of negative returns, but good overall gains of nearly 16.50%
for the S&P Index. In August, however, with negative sentiment leading the way,
the market dropped 14.6%, wiping out most of the gains for the year. Next we had
strong months in September through December, bringing the index all the way back
for a total return of 28.58% for all of 1998, including dividends reinvested
back into the index.
Your Ohio National Index Fund mirrored these volatile ups and downs, leading all
index funds in return most of the year. It finished the year as the number one
index fund in the country, with a total return after expenses of 30.00%, or
1.42% higher than the actual index. The next highest return for "Insurance
Products Underlying Funds -- S&P 500 Index Funds," was 28.72% for the year. The
highest return for S&P 500 Index Funds -- non-insurance product related -- was
29.34% for the year. Returns are reported by Lipper's analytical review
services, ranking over 130 S&P 500 index funds.
1999 is a promising year. Economic growth fundamentals are good, with wage
inflation pressures lessening, low interest rates and forecast low inflation. We
expect GDP growth to remain strong, though lower than the 3.9% rate for 1998.
Year 2000 hiccups will probably occur during 1999, plus some damage from weak
Asian and South American economies. As the economy slows from its 3.9% growth
rate, expect questions of stock market overvaluation to recur. Ultimately, it
will be another volatile year in the stock market, but we expect to be
discussing stock market gains with you 12 months from now.
CHANGE IN VALUE OF $10,000 INVESTMENT
[GRAPH]
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, 1998
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. S&P 500 Depository Shares 3.3
2. Johnson & Johnson 2.5
3. Cisco Systems Inc 2.2
4. Merck & Co Inc 2.1
5. Microsoft Corp 1.8
6. AT&T Corp 1.7
7. Chase Manhattan Corp 1.6
8. SBC Communications 1.5
9. Oracle Corp 1.4
10. Exxon Corp 1.4
</TABLE>
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
Computer & Related 9.6
Communications 5.8
Banking 4.4
Consumer Products 3.9
Drugs 3.5
</TABLE>
71
<PAGE> 72
OHIO NATIONAL FUND, INC.
S&P 500 INDEX PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
AEROSPACE (1.0%)
8,700 Allied Signal Inc. ................ $ 385,519
18,000 Boeing Co. ........................ 587,250
-----------
972,769
-----------
AUTOMOTIVE & RELATED (0.4%)
6,200 Ford Motor Co. .................... 363,863
-----------
BANKING (3.9%)
12,900 Bank One Corp. .................... 658,706
15,900 BankBoston Corp. .................. 619,106
22,800 Chase Manhattan.................... 1,551,825
12,100 Fifth Third Bancorp................ 862,881
-----------
3,692,518
-----------
CABLE TV (0.7%)
13,400 MediaOne Group Inc. ............... 629,800
-----------
CHEMICALS (1.0%)
20,000 Monsanto Corp. .................... 950,000
-----------
COMMUNICATIONS (5.8%)
21,500 AT&T Corp. ........................ 1,617,875
11,500 *Airtouch Communications........... 829,438
19,200 Ameritech Corp. ................... 1,216,800
6,900 Motorola Corp. .................... 421,331
25,600 SBC Communications Inc. ........... 1,372,800
-----------
5,458,244
-----------
COMPUTER & RELATED (9.6%)
22,300 *Cisco Systems..................... 2,069,719
18,000 Compaq Computer Corp. ............. 754,875
13,500 Hewlett-Packared Co. .............. 922,219
10,400 Intel Corp. ....................... 1,233,050
6,000 Intl. Business Machines............ 1,108,500
12,000 *Microsoft Corp. .................. 1,664,250
31,000 *Oracle Corp. ..................... 1,336,875
-----------
9,089,488
-----------
CONSUMER PRODUCTS (4.4%)
28,000 Johnson & Johnson.................. 2,348,500
14,600 Philip Morris Co. Inc. ............ 781,100
11,000 Procter & Gamble Co. .............. 1,004,438
-----------
4,134,038
-----------
DRUGS (3.5%)
4,000 *Amgen Inc. ....................... 418,250
13,300 Merck & Co. Inc. .................. 1,964,244
16,600 Schering-Plough.................... 917,150
-----------
3,299,644
-----------
DURABLE GOODS (0.2%)
4,600 Gillette Co. ...................... 222,237
-----------
ELECTRICAL EQUIPMENT (2.9%)
22,000 Edison International............... 613,250
11,500 General Electric Co. .............. 1,173,719
11,900 Honeywell Inc. .................... 896,219
-----------
2,683,188
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
ENTERTAINMENT & LEISURE (0.9%)
28,000 Disney Walt Co. ................... $ 840,000
-----------
FINANCIAL SERVICES (2.8%)
11,000 American Express Co. .............. 1,124,750
29,000 Associates First Capital Corp. CL
A................................. 1,228,875
7,000 Lehman Brothers Hldg. Inc. ........ 308,437
-----------
2,662,062
-----------
FOOD & RELATED (2.5%)
9,300 Campbell Soup Co. ................. 511,500
18,500 Coca-Cola Co. ..................... 1,237,188
22,000 Sara Lee Corp. .................... 620,125
-----------
2,368,813
-----------
FORESTRY & PAPER PRODUCTS (0.3%)
4,800 Weyerhaeuser Co. .................. 243,900
-----------
INSURANCE SERVICES (0.9%)
9,000 American Intl. Group Inc. ......... 869,625
-----------
MACHINERY (0.6%)
5,400 Caterpillar Inc. .................. 248,400
3,800 Tyco International Ltd. ........... 286,662
-----------
535,062
-----------
MEDICAL & RELATED (0.6%)
22,000 *Boston Scientific Corp. .......... 589,875
-----------
OIL, ENERGY & NATURAL GAS (3.4%)
17,700 Exxon Corp. ....................... 1,294,313
26,800 Royal Dutch Petroleum Co. ......... 1,283,050
5,200 Schlumberger Ltd. ................. 239,850
13,000 USX-Marathon Group................. 391,625
-----------
3,208,838
-----------
RESTAURANTS (0.4%)
4,500 McDonald's Corp. .................. 344,812
-----------
RETAIL (2.4%)
11,500 Dayton Hudson Corp. ............... 623,875
17,000 Home Depot Inc. ................... 1,040,188
7,500 Wal-Mart Stores Inc. .............. 610,781
-----------
2,274,844
-----------
SERVICES (0.8%)
7,900 *Kroger Co. ....................... 477,950
2,500 Xerox Corp. ....................... 295,000
-----------
772,950
-----------
TRANSPORTATION & EQUIPMENT (0.3%)
7,000 Norfolk Southern Corp. ............ 221,812
-----------
UTILITIES (0.6%)
8,500 Duke Energy Corp. ................. 544,531
-----------
TOTAL COMMON STOCKS (49.9%) (COST
$39,221,561)...................... $46,972,913
-----------
</TABLE>
(continued)
72
<PAGE> 73
OHIO NATIONAL FUND, INC.
S&P 500 INDEX PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES DEPOSITORY SHARES VALUE
- -------------------------------------------------------------
<C> <S> <C>
FINANCIAL (3.3%)
25,400 S&P 500 Depository Shares.......... $ 3,124,200
-----------
TOTAL DEPOSITORY SHARES (3.3%)
(COST $3,057,904)................. $ 3,124,200
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT SHORT-TERM NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
AEROSPACE (2.7%)
$2,514,000 Allied Signal 5.750% 01/06/99...... $ 2,511,992
-----------
AUTOMOTIVE & RELATED (5.8%)
1,954,000 Ford Motor 5.280% 01/14/99......... 1,950,274
1,330,000 GM Acceptance Corp. 5.390%
01/08/99.......................... 1,328,606
2,217,000 Hertz Corp. 5.400% 01/11/99........ 2,213,675
-----------
5,492,555
-----------
COMMUNICATIONS (0.8%)
781,000 Cincinnati Bell 5.200% 01/04/99.... 780,662
-----------
FINANCIAL SERVICES (21.7%)
908,000 American Express Credit Corp.
5.180% 01/20/99................... 905,518
1,900,000 American Express Credit Corp.
5.250% 01/06/99................... 1,898,615
2,131,000 American General Financial Corp.
5.410% 01/25/99................... 2,123,314
1,490,000 Associates Corp. of N. America
5.020% 01/04/99................... 1,489,377
2,477,000 BAT Capital Corp. 5.600%
01/22/99.......................... 2,468,908
740,000 BAT Capital Corp. 5.700%
01/05/99.......................... 739,531
1,833,000 CIT Group Holding 5.330%
01/27/99.......................... 1,825,944
2,066,000 Deere & Co. 6.000% 01/04/99........ 2,064,967
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT SHORT-TERM NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
FINANCIAL SERVICES, CONTINUED
$3,162,000 Heller Financial 5.500% 01/19/99... $ 3,153,304
2,038,000 Household Finance Corp. 5.330%
01/13/99.......................... 2,034,379
1,723,000 IBM Credit 5.320% 01/08/99......... 1,721,218
-----------
20,425,075
-----------
INSURANCE (8.4%)
2,757,000 AETNA Services 5.550% 01/07/99..... 2,754,450
1,558,000 Cigna Corp. 5.020% 01/05/99........ 1,557,131
1,700,000 Cigna Corp. 5.250% 01/28/99........ 1,693,306
1,926,000 Prudential Funding 5.330%
01/21/99.......................... 1,920,297
-----------
7,925,184
-----------
INDUSTRIAL SERVICES (1.6%)
1,459,000 Fluor Corp. 5.330% 01/12/99........ 1,456,624
-----------
RETAIL (2.1%)
535,000 Sears Roebuck 5.380% 01/20/99...... 533,480
1,460,000 Sears Roebuck 5.400% 01/21/99...... 1,455,620
-----------
1,989,100
-----------
UTILITIES (1.6%)
1,542,000 Dixie Pipeline 5.320% 01/15/99..... 1,538,810
-----------
TOTAL SHORT-TERM NOTES (44.7%)
(COST $42,120,002)................ $42,120,002
-----------
TOTAL HOLDINGS (97.9%)
(COST $84,399,467) (a)............ $92,217,115
-----------
CASH & RECEIVABLES, NET OF
LIABILITIES (2.1%)................ 1,940,296
-----------
TOTAL NET ASSETS (100.0%).......... $94,157,411
-----------
</TABLE>
- ---------------
* Non-income producing securities.
(a) Also represents cost for Federal income tax purposes.
The accompanying notes are an integral part of these financial statements.
73
<PAGE> 74
OHIO NATIONAL FUND, INC.
S&P 500 PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<S> <C>
Assets:
Investments in securities at market value
(note 1) (cost $84,399,467)............. $92,217,115
Cash in bank.............................. 960
Receivable for fund shares sold........... 1,155,976
Receivable for securities sold............ 972,913
Receivable from brokers (note 1).......... 1,989,869
Dividends and accrued interest
receivable.............................. 56,048
Other..................................... 662
-----------
Total assets............................ 96,393,543
-----------
Liabilities:
Payable for securities purchased.......... 2,199,061
Payable for investment management services
(note 3)................................ 29,274
Other accrued expenses.................... 7,797
-----------
Total liabilities....................... 2,236,132
-----------
Net assets at market value.................. $94,157,411
===========
Net assets consist of:
Par value, $1 per share................... $ 6,615,166
Paid-in capital in excess of par value.... 77,660,427
Accumulated net realized loss on
investments (note 1).................... (47,118)
Net unrealized appreciation on:
Investments (note 1).................... 7,817,648
Futures contracts (note 1).............. 2,090,500
Undistributed net investment income....... 20,788
-----------
Net assets at market value.................. $94,157,411
===========
Shares outstanding (note 4)................. 6,615,166
Net asset value per share................... $ 14.23
===========
</TABLE>
STATEMENT OF OPERATIONS
Year ended December 31, 1998
<TABLE>
<S> <C>
Investment income:
Interest.................................. $ 1,411,926
Dividends................................. 383,336
-----------
Total investment income................. 1,795,262
-----------
Expenses:
Management fees (note 3).................. 212,478
Custodian fees (note 3)................... 9,550
Directors' fees (note 3).................. 936
Professional fees......................... 4,058
Accounting and transfer agent fees........ 26,500
Other..................................... 6,401
-----------
Total expenses.......................... 259,923
-----------
Net investment income................... $ 1,535,339
-----------
Realized and unrealized gain on investments
and futures contracts:
Net realized gain from:
Investments............................. $ 292,938
Futures contracts....................... 3,661,222
Net increase in unrealized appreciation
on:
Investments............................. 7,587,930
Futures contracts....................... 1,981,175
-----------
Net gain on investments............... 13,523,265
-----------
Net increase in net assets from
operations......................... $15,058,604
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
74
<PAGE> 75
OHIO NATIONAL FUND, INC.
S&P 500 PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
From operations:
Net investment income..................................... $ 1,535,339 $ 617,994
Realized gain on investments and futures contracts........ 3,954,160 1,486,912
Unrealized gain on investments and futures contracts...... 9,569,105 339,043
------------ ------------
Net increase in net assets from operations............ 15,058,604 2,443,949
------------ ------------
Dividends and distributions to shareholders:
Dividends paid from net investment income................. (1,519,364) (613,181)
Capital gains distributions............................... (4,001,278) (1,486,912)
Capital gains distributions in excess of realized gains... 0 (108,075)
------------ ------------
Total dividends and distributions..................... (5,520,642) (2,208,168)
------------ ------------
From capital share transactions (note 4):
Received from shares sold................................. 61,751,546 20,644,767
Received from dividends reinvested........................ 5,520,642 2,208,168
Paid for shares redeemed.................................. (4,725,079) (1,016,376)
------------ ------------
Increase in net assets derived from capital share
transactions......................................... 62,547,109 21,836,559
------------ ------------
Increase in net assets............................. 72,085,071 22,072,340
------------ ------------
Net Assets:
Beginning of period....................................... 22,072,340 0
------------ ------------
End of period (a)......................................... $94,157,411 $ 22,072,340
============ ============
(a) Includes undistributed net investment income of......... $ 20,788 $ 4,813
============ ============
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
---------------
1998 1997
------ ------
<S> <C> <C>
Per share data:
Net asset value, beginning of period........................ $11.73 $10.00
Income from investment operations:
Net investment income (loss).............................. 0.38 (0.45)
Net realized and unrealized gain (loss) on investments.... 3.09 (2.70)
------ ------
Total income (loss) from investment operations.......... 3.47 (3.15)
------ ------
Less distributions:
Dividends from net investment income...................... (0.33) (0.45)
Distributions from net realized capital gains............. (0.64) (0.91)
Distributions in excess realized capital gains............ 0.00 (0.06)
------ ------
Total distributions..................................... (0.97) (1.42)
------ ------
Net asset value, end of period.............................. $14.23 $11.73
====== ======
Total return................................................ 30.00% 31.75%
Ratios and supplemental data:
Ratio of expenses to average net assets................... 0.49% 0.52%
Ratio of net investment income to average net assets...... 2.89% 5.29%
Portfolio turnover rate..................................... 115% 445%
Net assets at end of period (millions)...................... $ 94.2 $ 22.1
</TABLE>
The accompanying notes are an integral part of these financial statements.
75
<PAGE> 76
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76
<PAGE> 77
SOCIAL AWARENESS PORTFOLIO
OHIO NATIONAL FUND, INC.
OBJECTIVE
The objective of the Social Awareness Portfolio is to provide long-term growth
of capital by investing primarily in the common stocks and other equity
securities of companies that, in the Adviser's opinion, conduct their business
in a way that enhances society's quality of life. The portfolio's social concern
criteria will necessarily limit the universe of securities that may be selected
for this portfolio. However, the Adviser believes the portfolio's objective of
long-term capital growth can be achieved despite this limitation.
PERFORMANCE AS OF DECEMBER 31, 1998
TOTAL RETURN:
<TABLE>
<S> <C>
One-year (22.41%)
Since inception (1/3/97) (1.24%)
</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
As expected, 1998 has turned out to be a volatile period for equity markets. The
magnitude of the swings, however, has been surprising. The general market peaked
in late April. In response to economic turmoil worldwide, investors sought out
highly liquid, blue chip issues and Treasury securities in a flight to quality.
As a result, small capitalization issues suffered the eighth 30%+ decline over
the past 72 years. Although markets have rebounded since early October, many
securities have yet to fully recover. As of year end, the average NASDAQ issue
remains 38% off its 52 week high and the average S&P 500 issue remains 19% off
its 52 week high.
The Social Awareness Portfolio has been hurt by the market turmoil. The fund
normally invests in a range of large, medium and small capitalization issues.
Cash positions were slightly over 10% at the end of April. The cash was invested
gradually over the next several months, only to feel the brunt of the selloff in
August and early October. Issues that normally sell between 15 to 17 times
earnings, or in line with estimated future growth rates, sold for 10 times
earnings at the end of the third quarter. For the year, positive results from
technology and transportation issues were offset by weakness in other areas,
most notably capital goods and energy holdings.
In conclusion, markets in 1999 will still experience volatility. Economic
conditions world wide are uncertain, but look to be mending. Expectations for
corporate profitability could also be too high. We are hopeful smaller and
medium capitalization issues will recover to reasonable valuation levels.
Clearly, short term results for the Social Awareness Portfolio have been
unacceptable. However, prospects remain solid and we are taking some measures
which would mitigate some of the fluctuations experienced during the past year.
CHANGE IN VALUE OF $10,000 INVESTMENT
[GRAPH]
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, 1998
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. LoJack Corp 5.2
2. Boise Cascade 4.8
3. Louis Dreyfus Natural Gas 4.4
4. Weyerhaeuser 3.7
5. Reynolds & Reynolds 3.5
6. Alternative Resource 3.4
7. Foundation Health 3.0
8. Source Information Mgmt. Co 2.9
9. Manpower 2.7
10. Recycling Industries Inc 2.7
</TABLE>
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
Oil, Energy, and Natural Gas 17.9
Business Services 17.7
Forestry and Paper Products 8.2
Medical & Related 6.9
Industrial Services 6.6
</TABLE>
77
<PAGE> 78
OHIO NATIONAL FUND, INC.
SOCIAL AWARENESS PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
BANKING (1.6%)
12,000 Investors Bancorp..................... $ 106,500
----------
BUSINESS SERVICES (17.7%)
21,000 *Alternative Resource................. 223,125
29,000 *LoJack Corp.......................... 344,375
7,000 Manpower.............................. 176,312
16,500 *Source Information Mgmt. Co.......... 191,813
10,000 Reynolds & Reynolds................... 229,375
----------
1,165,000
----------
CHEMICALS (2.3%)
5,600 Hercules Inc.......................... 153,300
----------
COMPUTER & RELATED (5.9%)
12,300 *Electronic Processing Inc............ 123,000
9,400 *Mapinfo.............................. 145,700
9,500 *Rand A Tech. Canada Mutual Fund...... 120,694
----------
389,394
----------
CONSUMER PRODUCTS (5.5%)
6,900 Polaroid.............................. 128,944
6,800 *Sola International................... 117,300
7,100 Tupperware............................ 116,706
----------
362,950
----------
ELECTRICAL EQUIPMENT (4.8%)
7,400 *Anixter International................ 150,313
3,800 CTS Corporation....................... 165,300
----------
315,613
----------
FINANCIAL SERVICES (2.3%)
20,000 Thronburg Mortgage Asset.............. 152,500
----------
FOOD & RELATED (1.8%)
4,300 *Specialty Equipment.................. 116,369
----------
FORESTRY & PAPER PRODUCTS (8.2%)
9,500 Boise Cascade......................... 294,500
4,800 Weyerhaeuser Co....................... 243,900
----------
538,400
----------
HOTEL/LODGING (1.6%)
8,700 *Guest Supply......................... 103,856
----------
HOUSING, FURNITURE & RELATED (2.6%)
12,500 Clayton Homes Inc..................... 172,656
----------
INDUSTRIAL SERVICES (6.6%)
6,300 IMCO Recycling........................ 97,256
34,700 *Medar Inc............................ 39,038
4,400 Millipore Corp........................ 125,125
175,000 *Recycling Industries Inc............. 175,000
----------
436,419
----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
METALS & MINING (4.1%)
5,600 *Wolverine Tube Inc................... $ 117,600
12,400 Worthington Industries................ 155,000
----------
272,600
----------
MEDICAL & RELATED (6.9%)
10,000 *Capital Senior Living Corp. ......... 139,375
16,710 *Foundation Health.................... 199,476
5,000 *Quorum Health........................ 64,687
3,000 *Stericycle Inc....................... 48,375
----------
451,913
----------
OIL, ENERGY & NATURAL GAS (17.9%)
4,000 Kerr Mc Gee........................... 153,000
20,500 *Louis Dreyfus Natural Gas............ 292,125
18,500 *Matrix Service Co.................... 87,875
25,000 *Meridian Resource Corp............... 79,688
225,000 *Newstar Resources.................... 77,344
7,000 *Offshore Logistics................... 83,125
21,900 *Santa Fe Energy Resources............ 161,512
13,500 *Seim Industries Inc. (Norex)......... 106,669
5,100 Transocean Offshore................... 136,743
----------
1,178,081
----------
REAL ESTATE & LEASING (2.0%)
14,000 Bando McGlocklin Capital Corp......... 134,750
----------
RESTAURANTS (2.1%)
11,700 *Buffets.............................. 139,669
----------
TRANSPORTATION & EQUIPMENT (2.2%)
3,000 *Atlas Air Inc........................ 146,812
----------
TOTAL COMMON STOCK (96.1%) (COST
$7,633,764).......................... $6,336,782
----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES PREFERRED STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
METALS & MINING (2.2%)
9,800 Freeport McMoran Copper & Gold........ $ 145,775
----------
TOTAL PREFERRED STOCK (2.2%) (COST
$243,389)............................ $ 145,775
----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT LONG-TERM BONDS & NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
INDUSTRIAL SERVICES (0.4%)
$ 25,000 Medar Inc. Sr. Sub. Notes 12.950%
06/30/05............................. $ 25,000
----------
TOTAL LONG-TERM BONDS & NOTES (0.4%)
(COST $22,850)....................... $ 25,000
----------
</TABLE>
(continued)
78
<PAGE> 79
OHIO NATIONAL FUND, INC.
SOCIAL AWARENESS PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT SHORT-TERM NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
FINANCIAL SERVICES (1.6%)
$107,000 GE Capital 4.700% 01/04/99............ $ 106,958
----------
TOTAL SHORT-TERM NOTES (1.6%) (COST
$106,958)............................ $ 106,958
----------
TOTAL HOLDINGS (100.3%) (COST
$8,006,961) (A)...................... $6,614,515
----------
CASH & RECEIVABLES, NET OF LIABILITIES
(-0.3%).............................. (23,248)
----------
TOTAL NET ASSETS (100.0%)............. $6,591,267
----------
</TABLE>
- ---------------
* Non-income producing securities.
(a) Also represents cost for Federal income tax purposes.
The accompanying notes are an integral part of these financial statements.
79
<PAGE> 80
OHIO NATIONAL FUND, INC.
SOCIAL AWARENESS PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31,1998
<TABLE>
<S> <C>
Assets:
Investments in securities at market value
(note 1) (cost $8,006,961)............... $ 6,614,515
Cash in bank............................... 348
Receivable for securities sold............. 23,749
Receivable for fund shares sold............ 681
Dividends and accrued interest
receivable............................... 7,530
-----------
Total assets............................. 6,646,823
-----------
Liabilities:
Payable for shares purchased............... 10,672
Payable for shares redeemed................ 37,049
Payable for investment management services
(note 3)................................. 3,234
Other accrued expenses..................... 4,601
-----------
Total liabilities........................ 55,556
-----------
Net assets at market value................... $ 6,591,267
===========
Net assets consist of:
Par value, $1 per share.................... $ 749,078
Paid-in capital in excess of par value..... 7,856,655
Accumulated net realized loss on
investments (note 1)..................... (622,020)
Net unrealized depreciation on investments
(note 1)................................. (1,392,446)
-----------
Net assets at market value................... $ 6,591,267
===========
Shares outstanding (note 4).................. 749,078
Net asset value per share.................... $ 8.80
===========
</TABLE>
STATEMENT OF OPERATIONS
Year ended December 31, 1998
<TABLE>
<S> <C>
Investment income:
Interest.................................. $ 20,757
Dividends................................. 69,258
-----------
Total investment income................. 90,015
-----------
Expenses:
Management fees (note 3).................. 40,259
Custodian fees (note 3)................... 5,065
Directors' fees (note 3).................. 199
Professional fees......................... 861
Accounting and transfer agent fees........ 5,622
Other..................................... 1,371
-----------
Total expenses.......................... 53,377
-----------
Net investment income................... $ 36,638
-----------
Realized and unrealized gain on investments:
Net realized loss from investments........ $ (622,020)
Net increase in unrealized depreciation on
investments............................. (1,498,903)
-----------
Net loss on investments................. (2,120,923)
-----------
Net decrease in net assets from
operations............................ $(2,084,285)
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
80
<PAGE> 81
OHIO NATIONAL FUND, INC.
SOCIAL AWARENESS PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
From operations:
Net investment income..................................... $ 36,638 $ 21,619
Realized gain (loss) on investments....................... (622,020) 406,600
Unrealized gain (loss) on investments..................... (1,498,903) 106,457
----------- ----------
Net increase (decrease) in net assets from
operations........................................... (2,084,285) 534,676
----------- ----------
Dividends and distributions to shareholders:
Dividends paid from net investment income................. (36,718) (21,672)
Capital gains distributions............................... 0 (406,600)
----------- ----------
Total dividends and distributions..................... (36,718) (428,272)
----------- ----------
From capital share transactions (note 4):
Received from shares sold................................. 5,521,237 4,461,187
Received from dividends reinvested........................ 36,718 428,272
Paid for shares redeemed.................................. (1,687,515) (154,033)
----------- ----------
Increase in net assets derived from capital share
transactions......................................... 3,870,440 4,735,426
----------- ----------
Increase in net assets............................. 1,749,437 4,841,830
Net Assets:
Beginning of period....................................... 4,841,830 0
----------- ----------
End of period............................................. $ 6,591,267 $4,841,830
=========== ==========
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------
1998 1997
------- ------
<S> <C> <C>
Per share data:
Net asset value, beginning of period........................ $ 11.40 $10.00
Income from investment operations:
Net investment income..................................... 0.05 0.09
Net realized and unrealized gain (loss) on investments.... (2.60) 2.47
------- ------
Total income (loss) from investment operations.......... (2.55) 2.56
------- ------
Less distributions:
Dividends from net investment income...................... (0.05) (0.07)
Distributions from net realized capital gains............. 0.00 (1.09)
------- ------
Total distributions..................................... (0.05) (1.16)
------- ------
Net asset value, end of period.............................. $ 8.80 $11.40
======= ======
Total return................................................ (22.41)% 25.63%
Ratios and supplemental data:
Ratio of expenses to average net assets................... 0.81% 0.95%
Ratio of net investment income to average net assets...... 0.55% 0.75%
Portfolio turnover rate..................................... 71% 40%
Net assets at end of period (millions)...................... $ 6.6 $ 4.8
</TABLE>
The accompanying notes are an integral part of these financial statements.
81
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82
<PAGE> 83
STRATEGIC INCOME PORTFOLIO
OHIO NATIONAL FUND, INC.
OBJECTIVE
The Strategic Income Portfolio seeks to generate high current income by
investing at least 80% of its assets in income-producing securities, including
at least 40% of assets in a core group of U.S. government and corporate
fixed-income securities, and the remainder in other income-producing securities.
PERFORMANCE AS OF DECEMBER 31, 1998
TOTAL RETURN:
<TABLE>
<S> <C>
One-year (1.42%)
Since inception (1/3/97) 3.55%
</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 Strategic Income Fund has always been an interesting product. Its concept is
unique and our approach conservative in pursuing a high level of income. Last
year was successful in terms of maintaining a high-income stream and low NAV
volatility. Unfortunately, market dislocations resulted in a negative total
return in a calendar year. What happened and how are we reacting? Simply stated,
international turmoil resulted in a "crisis of confidence" that drove investors
away from risky assets into the safety of U.S. Treasury securities. Yields
declined dramatically for Treasury notes, but only slightly for corporates and
mbs's. At the peak of despair, corporate bond valuations were priced as if a
recession was raging and defaults imminent.
Our fixed income outlook for 1999 includes the following key points: Positive
economic growth (2% to 3% for the year) and mild inflation pressures (2%); Bond
yields remaining within a 4.5% to 5.5% range; Federal Reserve to lower key
short-term rates 25-75 basis points; and improving market liquidity. We also
believe REIT's offer tremendous value as evidenced by P/E's close to 10X and
revenue growth for most operations are expected to top 8% in 1999.
CHANGE IN VALUE OF $10,000 INVESTMENT
[STRATEGIC INCOME PORTFOLIO CHART]
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, 1998
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. GNMA 7.00% 02/15/28 4.5
2. Occidental Petroleum 10.125%
09/15/09 3.1
3. NB Cap Trust 8.25% 04/15/27 2.8
4. Norfolk Southern Corp 7.70%
05/15/17 2.8
5. Zurich Cap Trust 8.376% 06/01/37 2.8
6. ABM-AMRO Bank N.V. 7.75%
05/15/23 2.7
7. Lockheed Corp 7.875% 03/15/23 2.7
8. Sears Roebuck Accep. Global
7.00% 06/15/07 2.7
9. Noble Affiliates 8.00% 04/01/27 2.6
10. Phillip Morris 7.125% 08/15/02 2.6
</TABLE>
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
US Government 19.6
Financial Services 14.0
REIT's 13.2
Oil, Energy, and Natural Gas 10.5
Banking 7.8
</TABLE>
83
<PAGE> 84
OHIO NATIONAL FUND, INC.
STRATEGIC INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT LONG-TERM BONDS & NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
GOVERNMENT (19.6%)
$ 89,864 FNMA 7.500% 09/01/28.................. $ 92,364
100,000 FNMA 6.500% 04/18/25.................. 101,515
88,887 FNMA 9.000% 04/01/16.................. 94,053
79,100 FNMA 7.000% 09/01/27.................. 80,732
55,066 FNMA 7.500% 07/15/21.................. 55,744
101,447 FNMA 7.500% 10/01/24.................. 104,268
75,052 GNMA 7.500% 06/15/27.................. 77,468
175,955 GNMA 7.000% 02/15/28.................. 180,189
----------
786,333
----------
BANKING (7.8%)
100,000 ABM-AMRO Bank N.V. 7.750% 05/15/23.... 110,544
75,000 Banc One Corp. 8.000% 04/29/27........ 90,067
100,000 Nations Bank Capital Trust 8.250%
04/15/27............................. 113,927
----------
314,538
----------
COMPUTER & RELATED (2.1%)
80,000 IBM Corp. 6.500% 01/15/28............. 84,694
----------
CONSUMER PRODUCTS (2.6%)
100,000 Phillip Morris Co. 7.125% 08/15/02.... 104,932
----------
FINANCIAL SERVICES (8.0%)
100,000 Lehman Brothers Holdings 7.125%
09/15/03............................. 102,611
100,000 Merrill Lynch & Co. NT 7.000%
04/27/08............................. 106,744
100,000 Zurich Capital Trust (144A) 8.376%
06/01/37............................. 111,391
----------
320,746
----------
FORESTRY & PAPER PRODUCTS (0.8%)
30,000 International Paper Co. 7.625%
01/15/07............................. 32,657
----------
INDUSTRIAL SERVICES (3.3%)
25,000 Fort James Corp. NT 6.625% 09/15/04... 25,673
100,000 Lockheed Corp. NT 7.875% 03/15/23..... 107,256
----------
132,929
----------
OIL, ENERGY & NATURAL GAS (8.1%)
100,000 Noble Affiliates, Inc. 8.000%
04/01/27............................. 105,723
100,000 Occidental Petroleum 10.125%
09/15/09............................. 125,103
75,000 Transcanada Pipeline 9.875%
01/01/21............................. 96,193
----------
327,019
----------
REAL ESTATE & LEASING (4.8%)
95,000 Meditrust NT 7.600% 07/15/01.......... 91,130
100,000 Spieker Properties Inc. 7.125
12/01/06............................. 100,622
----------
191,752
----------
RETAIL (4.6%)
75,000 JC Penney Inc. 9.450% 07/15/02........ 78,748
100,000 Sears Roebuck Acceptance Global 7.000%
06/15/07............................. 107,143
----------
185,891
----------
TRANSPORTATION & EQUIPMENT (2.8%)
100,000 Norfolk Southern Corp. 7.700%
05/15/17............................. 113,825
----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT LONG-TERM BONDS & NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
UTILITIES (4.0%)
$100,000 Duke Power Co. 7.875% 05/01/24........ $ 104,276
50,000 GTE Corp. 7.830% 05/01/23............. 54,732
----------
159,008
----------
TOTAL LONG-TERM BONDS & NOTES (68.5%)
(COST $2,709,523).................... $2,754,324
----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES REAL ESTATE INVESTMENT TRUSTS VALUE
- -------------------------------------------------------------
<C> <S> <C>
1,000 American Health Properties Inc........ $ 20,625
1,375 Glimcher Realty Trust SBI............. 21,570
603 Healthcare Realty Trust Inc........... 13,454
1,000 Highwoods Properties Inc.............. 25,750
190 Hospitality Properties Trust.......... 4,584
2,700 IMPAC Mortgage Holdings............... 12,319
358 LTC Healthcare Inc.................... 940
3,581 LTC Properties Inc.................... 59,534
1,750 Meditrust............................. 26,469
2,500 National Health Investors Inc......... 61,719
3,300 Omega Healthcare Investments Inc...... 99,619
644 Pennsylvania Real Estate Invs......... 12,518
3,400 Summit Properties Inc................. 58,650
4,994 Thornburg Mtg. Asset Corp............. 38,079
3,000 Town & Country Trust.................. 48,187
6,600 Winston Hotels Inc.................... 54,037
----------
558,054
----------
TOTAL REAL ESTATE INVEST. TRUSTS
(13.9%) (COST $763,852).............. $ 558,054
----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES CLOSED-END INVESTMENT COMPANIES VALUE
- -------------------------------------------------------------
<C> <S> <C>
6,900 First Commonwealth Fund Inc........... $ 73,744
11,000 Kleinworth Benson Australian Fund..... 72,187
----------
145,931
----------
TOTAL INVESTMENT COMPANIES (3.6%)
(COST $184,077)...................... $ 145,931
----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
HOTEL/LODGING (1.2%)
4,000 RFS Hotels Invs. Inc.................. $ 49,000
----------
OIL, ENERGY & NATURAL GAS (0.4%)
1,000 Occidental Pete. Corp................. 16,876
----------
TOTAL COMMON STOCK (1.6%) (COST
$66,997)............................. $ 65,876
----------
</TABLE>
(continued)
84
<PAGE> 85
OHIO NATIONAL FUND, INC.
STRATEGIC INCOME PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES PREFERRED STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
FINANCIAL SERVICES (3.6%)
2,500 Citigroup Cap I...................... $ 64,219
3,000 PLC Capital Trust I 8.25%............ 78,562
-----------
142,781
-----------
OIL, ENERGY & NATURAL GAS (1.9%)
3,000 Enron Capital Trust I 8.3%........... 76,688
-----------
REAL ESTATE & LEASING (1.6%)
2,500 Kimco Realty Corp. 8.5%.............. 63,437
-----------
UTILITIES (1.6%)
2,500 Detroit Edison Co. 7.375%............ 62,656
-----------
TOTAL PREFERRED STOCK (8.6%)
(COST $343,149)..................... $ 345,562
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS VALUE
- -------------------------------------------------------------
<C> <S> <C>
FINANCIAL (2.7%)
$107,000 Star Bank 3.50% due 01/04/99
repurchase price 107,042
collateralized by GNMA certificates
pool #8375 due 02/20/24 (Cost
$107,000)........................... $ 107,000
-----------
TOTAL REPURCHASE AGREEMENTS (2.7%)
(COST $107,000)..................... $ 107,000
-----------
TOTAL HOLDINGS (98.9%)
(COST $4,174,598) (a)............... $ 3,976,747
-----------
CASH & RECEIVABLES, NET OF
LIABILITIES (1.1%).................. 42,766
-----------
TOTAL NET ASSETS (100.0%)............ $ 4,019,513
===========
</TABLE>
- ---------------
(a) Also represents cost for Federal income tax purposes.
(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 $111,391 or 2.8% 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.
85
<PAGE> 86
OHIO NATIONAL FUND, INC.
STRATEGIC INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<S> <C>
Assets:
Investments in securities at market value
(note 1) (cost $4,174,598)............... $ 3,976,747
Cash in bank............................... 303
Dividends and accrued interest
receivable............................... 52,700
-----------
Total assets............................. 4,029,750
-----------
Liabilities:
Payable for shares redeemed................ 75
Payable for investment management services
(note 3)................................. 2,736
Other accrued expenses..................... 7,426
-----------
Total liabilities........................ 10,237
-----------
Net assets at market value................... $ 4,019,513
===========
Net assets consist of:
Par value, $1 per share.................... $ 430,177
Paid-in capital in excess of par value..... 3,884,217
Accumulated net realized loss on
investments (note 1)..................... (97,030)
Net unrealized depreciation on investments
(note 1)................................. (197,851)
-----------
Net assets at market value................... $ 4,019,513
===========
Shares outstanding (note 4).................. 430,177
Net asset value per share.................... $ 9.34
===========
</TABLE>
STATEMENT OF OPERATIONS
Year ended December 31, 1998
<TABLE>
<S> <C>
Investment income:
Interest.................................... $ 179,398
Dividends................................... 134,171
---------
Total investment income................... 313,569
---------
Expenses:
Management fees (note 3).................... 30,384
Custodian fees (note 3)..................... 4,825
Directors' fees (note 3).................... 269
Professional fees........................... 737
Accounting and transfer agent fees.......... 7,256
Other....................................... 1,231
---------
Total expenses............................ 44,702
---------
Net investment income..................... $ 268,867
---------
Realized and unrealized loss on investments:
Net realized loss from investments.......... $ (97,030)
Net increase in unrealized depreciation on
investments............................... (230,070)
---------
Net loss on investments................... (327,100)
---------
Net decrease in net assets from
operations.............................. $ (58,233)
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
86
<PAGE> 87
OHIO NATIONAL FUND, INC.
STRATEGIC INCOME PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
From operations:
Net investment income..................................... $ 268,867 $ 166,446
Realized gain (loss) on investments....................... (97,030) 3,690
Unrealized gain (loss) on investments..................... (230,070) 32,219
----------- ----------
Net increase in net assets from operations............ (58,233) 202,355
----------- ----------
Dividends and distributions to shareholders:
Dividends paid from net investment income................. (269,685) (165,770)
Capital gains distributions............................... (1,157) (2,533)
----------- ----------
Total dividends and distributions..................... (270,842) (168,303)
----------- ----------
From capital share transactions (note 4):
Received from shares sold................................. 1,160,301 3,110,382
Received from dividends reinvested........................ 270,842 168,303
Paid for shares redeemed.................................. (333,046) (62,246)
----------- ----------
Increase in net assets derived from capital share
transactions......................................... 1,098,097 3,216,439
----------- ----------
Increase in net assets............................. 769,022 3,205,491
Net Assets:
Beginning of period....................................... 3,250,491 0
----------- ----------
End of period (a)......................................... $ 4,019,513 $3,205,491
=========== ==========
(a) Includes undistributed net investment income of......... $ 0 $ 676
=========== ==========
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------
1998 1997
------ ------
<S> <C> <C>
Per share data:
Net asset value, beginning of period........................ $10.16 $10.00
Income from investment operations:
Net investment income..................................... 0.68 0.71
Net realized and unrealized gain (loss) on investments.... (0.82) 0.13
------ ------
Total income (loss) from investment operations.......... (0.14) 0.84
------ ------
Less distributions:
Dividends from net investment income...................... (0.68) (0.67)
Distributions from net realized capital gains............. 0.00 (0.01)
------ ------
Total distributions..................................... (0.68) (0.68)
------ ------
Net asset value, end of period.............................. $ 9.34 $10.16
====== ======
Total return................................................ (1.42)% 8.74%
Ratios and supplemental data:
Ratio of expenses to average net assets................... 1.18% 1.30%
Ratio of net investment income to average net assets...... 7.12% 7.04%
Portfolio turnover rate..................................... 104% 102%
Net assets at end of period (millions)...................... $ 4.0 $ 3.2
</TABLE>
The accompanying notes are an integral part of these financial statements.
87
<PAGE> 88
THIS PAGE INTENTIONALLY LEFT BLANK
88
<PAGE> 89
STELLAR PORTFOLIO
OHIO NATIONAL FUND, INC.
OBJECTIVE
The Stellar Portfolio seeks to maximize total return by investing approximately
15% to 25% of its assets in each of the following categories: domestic equities,
domestic bonds, foreign securities, real estate securities, and precious metal
and/or money market securities.
PERFORMANCE AS OF DECEMBER 31, 1998
TOTAL RETURN:
<TABLE>
<S> <C>
One-year 2.92%
Since inception (1/3/97) 6.28%
</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 prevailing market conditions were ideal for investors in the Stellar
portfolio. The Fund insulated shareholders from much of the volatility in equity
prices, while benefiting in performance terms from the rally in bond prices. The
REIT portfolio suffered the most severe damage during the second and third
quarters, due principally to a change in the tax code and slowing growth for the
group. The domestic equity portfolio was the most volatile and rewarding. The
key to success in the U.S. was the decision to focus on large capitalization
growth companies. This subset of the market moved to higher valuation levels
throughout the year, as investors became more and more concerned about a decline
in revenue growth.
Investor expectations for 1999 are still out of line with reality. As we have
seen thus far in 1998, the market reacts violently to disappointments and tends
to overreact in both the positive and negative. We believe that the market must
adjust expectations for earnings growth in 1999 to reflect the slowing
manufacturing activity and the rising costs in the services sector, but still
positive year over year growth.
CHANGE IN VALUE OF $10,000 INVESTMENT
[GRAPH]
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, 1998
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. FNMA Med Term NT 6.03% 05/07/01 4.7
2. Mack Cali Realty Corp 3.8
3. Kimco Realty Corp 3.7
4. FJLMC 7.92% 06/29/11 3.7
5. FNMA 6.21% 11/07/07 3.0
6. Catellus Development 2.2
7. GNMA Pool 447728 7.50% 06/15/27 2.1
8. BRE Properties CL A 2.1
9. Vornado Realty Trust 2.1
10. New Plan Excel Realty Trust 2.0
</TABLE>
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
REIT's 20.9
CMO's 13.5
Closed-End Investment Companies 9.3
Computer and Related 3.5
Oil, Energy, and Natural Gas 3.5
</TABLE>
89
<PAGE> 90
OHIO NATIONAL FUND, INC.
STELLAR PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
AEROSPACE (0.3%)
200 Comair Holdings Inc. .............. $ 6,750
100 *Continental Airlines CL B......... 3,350
-----------
10,100
-----------
AUTOMOTIVE & RELATED (0.2%)
200 Paccar Inc. ....................... 8,225
-----------
BANKING (1.1%)
127 Bank One Corp. .................... 6,485
200 Bankboston Corp. .................. 7,787
220 Charter One Financial Inc. ........ 6,105
200 Fleet Financial.................... 8,938
80 Texas Regl Bancshare Inc. CL A..... 2,005
200 Wells Fargo Co. ................... 7,987
-----------
39,307
-----------
BUSINESS SERVICES (0.6%)
200 *American Mgmt. Systems Inc. ...... 8,000
150 Deluxe Corp. ...................... 5,484
200 *Fiserv Inc. ...................... 10,288
-----------
23,772
-----------
CHEMICALS (0.1%)
125 Lyondell Petro Chemical Co. ....... 2,250
-----------
COMMUNICATIONS (0.4%)
187 *MCI Worldcom Inc. ................ 13,387
-----------
COMPUTER & RELATED (3.5%)
200 *Cisco Systems Inc. ............... 18,563
200 Computer Sciences Corp. ........... 12,887
200 *EMC Corp. ........................ 17,000
100 Honeywell Inc. .................... 7,531
150 Intel Corp. ....................... 17,784
100 *Lexmark Intl. Group Inc. CL A..... 10,050
100 *Microsoft Corp. .................. 13,869
200 *Network Associates Inc. .......... 13,250
200 *Sun Microsystems Inc. ............ 17,125
-----------
128,059
-----------
CONSUMER PRODUCTS (0.1%)
100 Gillette Co. ...................... 4,831
-----------
DRUGS (0.8%)
125 Warner Lambert Co. ................ 9,398
300 *Waston Pharmaceuticals Inc........ 18,863
-----------
28,261
-----------
ELECTRICAL EQUIPMENT (0.4%)
225 *Benchmark Electronics Inc......... 8,241
100 Johnson Controls Inc. ............. 5,900
-----------
14,141
-----------
ENTERTAINMENT & LEISURE (0.2%)
200 The Walt Disney Co. ............... 6,000
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- ---------------------------------------------------------------
<C> <S> <C>
FINANCIAL SERVICES (1.2 %)
100 American Express Co. ................ $ 10,225
200 Associates First Capital CL A........ 8,475
200 Fannie Mae-Federal National Mgmt. ... 14,800
150 Morgan Stanley Dean Witter & Co. .... 10,650
-----------
44,150
-----------
FOOD & RELATED (0.4%)
300 Flemming Cos......................... 3,112
150 Pepsico Inc. ........................ 6,141
200 Sara Lee Corp. ...................... 5,638
-----------
14,891
-----------
HOUSING, FURNITURE & RELATED (0.7%)
275 *American Homestar Corp. ............ 4,125
650 *International Comfort Products...... 5,200
300 Parker Hannifin Corp. ............... 9,825
219 *Palm HBR Homes Inc.................. 5,516
-----------
24,666
-----------
INDUSTRIAL SERVICES (0.3%)
260 Ecolab Inc........................... 9,409
-----------
INSURANCE SERVICES (0.8%)
100 Allmerica Financial Corp. ........... 5,788
100 American Intl. Group................. 9,663
112 AON Corp. ........................... 6,202
150 ITT Hartford......................... 8,231
-----------
29,884
-----------
MEDICAL & RELATED (1.0%)
200 Allegiance Corp. .................... 9,325
150 Guidant Corp. ....................... 16,538
300 *Quorum Health Group................. 3,881
225 *Tenet Healthcare Corp. ............. 5,906
-----------
35,650
-----------
METAL & MINING (0.2%)
100 Aluminum Co. America................. 7,456
-----------
OIL, ENERGY & NATURAL GAS (1.6%)
500 *BJ Services Co. .................... 7,813
200 Coastal Corp. ....................... 6,988
100 Diamond Offshore Drilling............ 2,369
200 Ensco International Inc. ............ 2,137
300 *Global Marine Inc. ................. 2,756
100 Mobil Corp. ......................... 8,712
200 Schlumberger Ltd..................... 9,225
250 Tosco Corp. ......................... 6,469
200 Texaco Inc. ......................... 10,575
-----------
57,044
-----------
REAL ESTATE & LEASING (2.4%)
5,500 *Catellus Development Corp. ......... 78,719
275 D R Horton Inc. ..................... 6,325
110 *Vornado Operating Inc. ............. 887
-----------
85,931
-----------
</TABLE>
(continued)
90
<PAGE> 91
OHIO NATIONAL FUND, INC.
STELLAR PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- ---------------------------------------------------------------
<C> <S> <C>
RETAIL (1.5%)
200 American Stores Co. ................. $ 7,388
250 Dayton Hudson Corp. ................. 13,563
150 Gap Inc.............................. 8,437
200 *Kohls Corp. ........................ 12,287
250 Lowe's Cos........................... 12,797
-----------
54,472
-----------
UTILITIES (0.2%)
75 General Electric Co. ................ 7,653
-----------
TOTAL COMMON STOCK (18.0%)
(COST $521,946)..................... $ 649,539
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES REAL ESTATE INVESTMENT TRUSTS VALUE
- -------------------------------------------------------------
<C> <S> <C>
1,800 Apartment Inv.. & Mgmt. Co. CL
A................................ $ 66,938
3,000 BRE Properties CL A............... 74,250
3,250 Brandywine Realty Trust........... 58,094
2,500 Glenborough Realty Trust Inc...... 50,937
3,400 Kimco Realty Corp. ............... 134,938
3,400 Kroger Equity Inc. ............... 58,437
4,425 Mack Cali Realty Corp. ........... 136,622
400 Manufactured Home Communities..... 10,025
3,200 New Plan Excel Realty Trust....... 71,000
800 Reckson Assoc. Realty Corp. ...... 17,750
2,400 US Restaurants Properties......... 58,350
2,200 Vornado Realty Trust.............. 74,250
------------
TOTAL REAL ESTATE INVESTMENT
TRUSTS (22.4%) (COST $878,705)... $ 811,591
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES CLOSED-END INVESTMENT COMPANIES VALUE
- -------------------------------------------------------------
<C> <S> <C>
500 Argentina Fund Inc................ $ 4,500
300 Brazil Fund Inc................... 3,262
3,000 Central European Value Fund....... 31,125
800 Chile Fund Inc.................... 7,250
875 First Commonwealth Fund Inc....... 9,352
2,200 France Growth Fund................ 29,975
5,000 Hancock Patriot Prem. Div. Fund
II............................... 59,688
1,500 Irish Investment Fund Inc......... 30,563
2,200 *Japan Webs Index Series.......... 22,550
5,000 Kleinworth Benson Austral. Inc.
Fund............................. 32,812
650 Mexico Fund Inc................... 7,272
2,000 Swiss Helvetia Fund............... 32,000
300 Templeton Emerging Mkts. Fund..... 2,887
5,000 Templeton Global Govt. Fund....... 33,125
2,000 United Kingdom Fund............... 28,875
------------
TOTAL CLOSED END INVESTMENT CO.
(9.3%) (COST $391,526)........... $ 335,236
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES DEPOSITORY SHARES VALUE
- -------------------------------------------------------------
<C> <S> <C>
FINANCIAL (1.9%)
550 S&P 500 Depository Shares......... $ 67,650
------------
TOTAL DEPOSITORY SHARES (1.9%)
(COST $61,326)................... $ 67,650
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES FOREIGN COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
ARGENTINA (0.2%)
OIL, ENERGY & NATURAL GAS
200 YPF Sociedad Anonima Spon ADR..... $ 5,588
------------
AUSTRALIA (0.7%)
BANKING
350 Nat'l. Australia Bank LTD ADR..... 26,053
------------
CANADA (0.8%)
METALS & MINING
500 Alcan Aluminum Ltd................ 13,531
TRANSPORTATION
775 Canadian Pacific Ltd.............. 14,628
------------
TOTAL CANADA...................... 28,159
------------
DENMARK (0.9%)
CHEMICALS
500 Novo-Nordisk AS ADR............... 33,250
------------
FINLAND (0.7%)
COMMUNICATIONS
200 *Nokia Corp. Sponsored ADR........ 24,088
------------
GERMANY (0.7%)
AUTOMOTIVE & RELATED
251 *DaimlerChrysler AG Spon ADR...... 24,112
------------
ITALY (0.3%)
CONSUMER PRODUCTS
875 Luxottica Group ADR............... 10,500
------------
JAPAN (0.4%)
ELECTRICAL EQUIPMENT
100 Hitachi Ltd. ADR.................. 6,044
125 Sony Corp. ....................... 8,969
------------
15,013
------------
NETHERLANDS (1.1%)
ELECTRICAL EQUIPMENT
350 Phillips NV....................... 23,691
------------
OIL, ENERGY & NATURAL GAS
350 Royal Dutch Petroleum Co. ........ 16,756
------------
TOTAL NETHERLANDS................. 40,447
------------
NORWAY (0.3%)
CHEMICALS
350 Norsk Hydro AS Spon ADR........... 11,966
------------
SWEDEN (0.5%)
AUTOMOTIVE & RELATED
737 Volvo Aktiebolaget Ser B ADR...... 17,181
------------
</TABLE>
(continued)
91
<PAGE> 92
OHIO NATIONAL FUND, INC.
STELLAR PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES FOREIGN COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
SPAIN (1.6%)
BANKING
510 Banco de Santander ADR............ $ 10,073
OIL, ENERGY & NATURAL GAS
850 Repsol SA Spon. ADR............... 46,431
------------
TOTAL SPAIN....................... 56,504
------------
UNITED KINGDOM (1.6%)
COMMUNICATIONS
850 Cable & Wireless Pub. Ltd......... 31,236
175 Vodafone Group Spon. ADR.......... 28,197
------------
59,433
------------
TOTAL FOREIGN COMMON STOCK (9.8%)
(COST $275,585).................. $ 352,294
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES PREFERRED STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
BANKING (1.4%)
1,000 Banco Bilbao Vizcaya (Spain) 8%... $ 26,375
1,000 BankUnited Cap II 9.6%............ 25,250
------------
51,625
------------
FINANCIAL SERVICES (1.0%)
1,500 MSDW Capital Trust I 7.1%......... 37,969
------------
REAL ESTATE & LEASING (0.4%)
540 Kimco Realty Corp. CL D Conv...... 13,972
------------
UTILITIES (0.9%)
1,200 HL&P Cap Trust I 8.125%........... 31,275
------------
TOTAL PREFERRED STOCK (3.7%)
(COST $130,927).................. $ 134,841
------------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT LONG-TERM BONDS & NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
GOVERNMENT (15.1%)
$ 100,000 FNMA 6.210% 11/07/07.............. $ 106,568
125,000 Federal Home Loan Mortgage 7.920%
06/29/11......................... 132,316
170,000 FNMA 6.030% 05/07/01.............. 170,626
75,052 GNMA 7.500% 06/15/27.............. 77,468
50,000 US Treasury Note 7.250%
05/15/04......................... 56,047
------------
TOTAL LONG-TERM BONDS & NOTES
(15.1%) (COST $530,436).......... $ 543,025
------------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS VALUE
- -------------------------------------------------------------
<C> <S> <C>
FINANCIAL (19.3%)
$ 696,000 Star Bank 3.5% 01/04/99 repurchase
price $696,271 collateralized by
GNMA certificates pool #8375 due
02/20/24 (Cost $696,000)......... $ 696,000
------------
TOTAL REPURCHASE AGREEMENTS
(19.3%) (COST $696,000).......... $ 696,000
------------
TOTAL HOLDINGS (99.5%)
(COST $3,486,451)................ $ 3,590,176
------------
CASH & RECEIVABLES,
NET OF LIABILITIES (0.5%)........ 14,800
------------
TOTAL NET ASSETS (100.0%)......... $ 3,604,976
============
</TABLE>
- ---------------
* Non-income producing securities.
(a) Also represents cost for Federal income tax purposes.
The accompanying notes are an integral part of these financial statements.
92
<PAGE> 93
OHIO NATIONAL FUND, INC.
STELLAR PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<S> <C>
Assets:
Investments in securities at market value
(note 1) (cost $2,790,451)............... $2,894,176
Repurchase agreements (note 1) (cost
$696,000)................................ 696,000
Cash in bank............................... 275
Dividends and accrued interest
receivable............................... 23,010
----------
Total assets............................. 3,613,461
----------
Liabilities:
Payable for shares redeemed................ 51
Payable for investment management services
(note 3)................................. 3,027
Other accrued expenses..................... 5,407
----------
Total liabilities........................ 8,485
----------
Net assets at market value................... $3,604,976
==========
Net assets consist of:
Par value, $1 per share.................... $ 341,443
Paid-in capital in excess of par value..... 3,164,357
Accumulated net realized gain on
investments (note 1)..................... (6,321)
Net unrealized appreciation on investments
(note 1)................................. 103,725
Undistributed net investment income........ 1,772
----------
Net assets at market value................... $3,604,976
==========
Shares outstanding (note 4).................. 341,443
Net asset value per share.................... $ 10.56
==========
</TABLE>
STATEMENT OF OPERATIONS
Year ended December 31, 1998
<TABLE>
<S> <C>
Investment income:
Interest................................... $ 64,711
Dividends.................................. 98,004
----------
Total investment income.................. 162,715
----------
Expenses:
Management fees (note 3)................... 32,977
Custodian fees (note 3).................... 4,825
Directors' fees (note 3)................... 269
Professional fees.......................... 737
Accounting and transfer agent fees......... 6,982
Other...................................... 1,244
----------
Total expenses........................... 47,034
----------
Net investment income.................... $ 115,681
Realized and unrealized gain (loss) on
investments:
Net realized gain from investments......... $ 20,231
Net decrease in unrealized appreciation on
investments.............................. (54,343)
----------
Net loss on investments................ (34,112)
----------
Net increase in net assets from
operations.......................... $ 81,569
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
93
<PAGE> 94
OHIO NATIONAL FUND, INC.
STELLAR PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
From operations:
Net investment income..................................... $ 115,681 $ 73,156
Realized gain (loss) on investments....................... 20,231 (11,917)
Unrealized gain (loss) on investments..................... (54,343) 158,068
---------- ----------
Net increase in net assets from operations............ 81,569 219,307
---------- ----------
Dividends and distributions to shareholders:
Dividends paid from net investment income................. (114,147) (72,918)
Capital gains distributions............................... (14,635) 0
---------- ----------
Total Distributions................................... (128,782) (72,918)
---------- ----------
From capital share transactions (note 4):
Received from shares sold................................. 1,063,702 2,644,507
Received from dividends reinvested........................ 128,782 72,918
Paid for shares redeemed.................................. (346,843) (57,267)
---------- ----------
Increase in net assets derived from capital share
transactions......................................... 845,641 2,660,158
---------- ----------
Increase in net assets............................. 798,428 2,806,548
Net Assets:
Beginning of period....................................... 2,806,548 0
---------- ----------
End of period (a)......................................... $3,604,976 $2,806,548
========== ==========
(a) Includes undistributed net investment income of......... $ 1,772 $ 238
========== ==========
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1998 1997
------ ------
<S> <C> <C>
Per share data:
Net asset value, beginning of period........................ $10.65 $10.00
Income from investment operations:
Net investment income..................................... 0.37 0.32
Net realized and unrealized gain (loss) on investments.... (0.07) 0.64
Total income from investment operations................. 0.30 0.96
------ ------
Less distributions:
Dividends declared........................................ (0.35) (0.31)
Distributions from net realized capital gains............. (0.04) 0.00
Total distributions..................................... (0.39) (0.31)
------ ------
Net asset value, end of period.............................. $10.56 $10.65
====== ======
Total return................................................ 2.92% 9.70%
Ratios and supplemental data:
Ratio of expenses to average net assets................... 1.43% 1.54%
Ratio of net investment income to average net assets...... 3.53% 3.07%
Portfolio turnover rate..................................... 81% 17%
Net assets at end of period (millions)...................... $ 3.6 $ 2.8
</TABLE>
The accompanying notes are an integral part of these financial statements.
94
<PAGE> 95
RELATIVE VALUE PORTFOLIO
OHIO NATIONAL FUND, INC.
OBJECTIVE
The Relative Value Portfolio seeks the highest total return as is consistent
with reasonable risk by investing in stocks deemed to represent characteristics
with low volatility, above-average yields and are undervalued relative to the
stocks comprising the S&P Composite Stock Index.
PERFORMANCE AS OF DECEMBER 31, 1998
<TABLE>
<S> <C>
TOTAL RETURN:
One-year 20.72%
Since inception (1/3/97) 24.53%
</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
During the past twelve months, the equity market saw significant volatility due
to concerns over Asia, corporate earnings, and the turmoil in the White House.
How did the portfolio perform versus the average growth and income fund? By
adhering to the tenets of the valuation process employed by the fund, the
securities selected are typically those which exhibit a higher degree of
operating and financial stability. During volatile periods in the market, stocks
possessing these attributes command a premium in valuation as a "flight to
quality" intensifies demand for these stocks. For the twelve months ending
November 30, 1998 the Relative Value Fund generated a total rate in excess of
16% on a net asset value basis. This compares to an 11.61% return for the
average growth and income fund as reported by Lipper Analytical Services, Inc.
As we look to 1999, we forecast a slow growth economic environment where
inflation continues to remain benign and corporate earnings growth slows to
single digit increases. Technology and healthcare will continue to provide
market leadership in the fund and we will continue to pursue opportunities in
the consumer cyclicals, communication, financial services, and energy companies.
CHANGE IN VALUE OF $10,000 INVESTMENT
[GRAPH]
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, 1998
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Cincinnati Bell Inc 6.4
2. IBM Corp 5.9
3. Intel Corp 5.3
4. Proctor & Gamble Co 5.0
5. Lucent Technologies 3.8
6. Smithkline Beecham 3.5
7. General Electric 3.4
8. Bristol Myers Squibb 3.4
9. Texaco Inc 3.2
10. Merck & Co. Inc 2.9
</TABLE>
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
Communications 13.3
Computer and Related 12.4
Drugs 12.0
Consumer Products 11.0
Banking 10.4
</TABLE>
95
<PAGE> 96
OHIO NATIONAL FUND, INC.
RELATIVE VALUE PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
AEROSPACE (3.2%)
2,000 Allied Signal Inc................. $ 88,625
2,000 Lockheed Martin Corp.............. 169,500
1,100 Raytheon Co. Class B.............. 58,575
------------
316,700
------------
AUTOMOTIVE & RELATED (3.5%)
2,500 Ford Motor Co..................... 146,719
1,500 General Motors Corp............... 107,344
1,900 Goodyear Tire & Rubber Co......... 95,83
------------
349,894
------------
BANKING (10.4%)
2,000 Bank America Corp................. 120,250
6,000 Bank New York Inc................. 241,500
5,000 Bank One Corp..................... 255,313
4,400 First Financial Bancorp........... 127,325
2,000 Mellon Bank Corp.................. 137,500
2,000 PNC Bank Corp..................... 108,250
2,000 TCF Financial Corp................ 48,375
------------
1,038,513
------------
COMMUNICATIONS (11.8%)
2,000 AT&T Corp......................... 150,500
17,000 Cincinnati Bell Inc............... 642,813
3,500 Lucent Technologies Inc........... 385,000
------------
1,178,313
------------
COMPUTER & RELATED (12.4%)
1,500 Honeywell Inc..................... 112,969
4,500 Intel Corp........................ 533,531
3,200 IBM Corp.......................... 591,200
------------
1,237,700
------------
CONSUMER PRODUCTS (11.0%)
4,000 Gillette Co....................... 193,250
5,500 Philip Morris Cos. Inc............ 294,250
5,500 Procter & Gamble Co............... 502,219
2,000 Whirlpool Corp.................... 110,750
------------
1,100,469
------------
DRUGS (8.5%)
4,000 American Home Products Corp....... 225,250
2,500 Bristol Myers Squibb Co........... 334,531
2,000 Merck & Co. Inc................... 295,375
------------
855,156
------------
ELECTRICAL EQUIPMENT (3.9%)
3,300 General Electric Co............... 336,806
1,000 Johnson Controls Inc.............. 59,000
------------
395,806
------------
FINANCIAL SERVICES (4.1%)
1,500 American Express Co............... 153,375
5,250 Citigroup Inc..................... 259,875
------------
413,250
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
INSURANCE SERVICES (4.5%)
5,000 Cincinnati Financial Corp......... $ 183,125
6,500 Ohio Casualty Corp................ 267,312
------------
450,437
------------
OIL, ENERGY & NATURAL GAS (5.8%)
3,000 Mobil Corp........................ 261,375
6,000 Texaco Inc........................ 317,250
------------
578,625
------------
RETAIL (4.1%)
4,000 Federated Department Stores....... 174,250
5,500 Sears Roebuck & Co. .............. 233,750
------------
408,000
------------
UTILITIES (3.3%)
3,000 GPU Inc........................... 132,562
3,000 GTE Corp. ........................ 202,312
------------
334,874
------------
TOTAL U.S. COMMON STOCK (86.5%)
(COST $7,071,037)................ $ 8,657,737
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES FOREIGN COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
UNITED KINGDOM (5.0%)
COMMUNICATIONS (1.5%)
1,000 Cable & Wireless Pub Co. Ltd
ADR.............................. $ 36,750
700 Vodafone Group PLC ADR............ 112,788
------------
149,538
------------
DRUGS (3.5%)
5,000 Smithkline Beecham PLC ADR CL A... 347,500
------------
TOTAL UNITED KINGDOM.............. 497,038
------------
NETHERLANDS (1.4%)
OIL, ENERGY AND NATURAL GAS
3,000 Royal Dutch Pete Co NY Reg 1.25... 143,625
------------
TOTAL FOREIGN COMMON STOCK (6.4%)
(COST $483,594).................. $ 640,663
------------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS VALUE
- -------------------------------------------------------------
<C> <S> <C>
FINANCIAL (7.1%)
$709,000 Star Bank 3.50% due 01/04/99
repurchase price $709,276
collateralized by GNMA certificates
pool # 8375 due 02/20/24 (cost
$709,000)........................... $ 709,000
-----------
TOTAL REPURCHASE AGREEMENTS (7.1%)
(COST $709,000)..................... $ 709,000
-----------
TOTAL HOLDINGS (100.%)
(COST $8,263,631)(a)................ $10,007,400
-----------
CASH & RECEIVABLES, NET OF
LIABILITIES (0.0%).................. 1,573
-----------
TOTAL NET ASSETS (100.0%)............ $10,008,973
===========
</TABLE>
- ---------------
(a) Also represents cost for Federal income tax purposes.
The accompanying notes are an integral part of these financial statements.
96
<PAGE> 97
OHIO NATIONAL FUND, INC.
RELATIVE VALUE PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<S> <C>
Assets:
Investments in securities at market value
(note 1) (cost $8,263,631)............. $ 10,007,400
Cash in bank............................. 639
Dividends and accrued interest
receivable............................. 13,385
------------
Total assets........................... 10,021,424
============
Liabilities:
Payable for shares redeemed.............. 399
Payable for investment management
services (note 3)...................... 7,388
Other accrued expenses................... 4,664
------------
Total liabilities...................... 12,451
------------
Net assets at market value................. $ 10,008,973
============
Net assets consist of:
Par value, $1 per share.................. $ 666,479
Paid-in capital in excess of par value... 7,609,086
Accumulated net realized gain on
investments (note 1)................... (10,361)
Net unrealized appreciation on
investments (note 1)................... 1,743,769
------------
Net assets at market value................. $ 10,008,973
============
Shares outstanding (note 4)................ 666,479
Net asset value per share.................. $ 15.02
============
</TABLE>
STATEMENT OF OPERATIONS
Year ended December 31, 1998
<TABLE>
<S> <C>
Investment income:
Interest.................................. $ 52,822
Dividends................................. 147,746
-----------
Total investment income................. 200,568
-----------
Expenses:
Management fees (note 3).................. 80,506
Custodian fees (note 3)................... 4,968
Directors' fees (note 3).................. 255
Professional fees......................... 1,107
Accounting and transfer agent fees........ 6,572
Other..................................... 1,772
-----------
Total expenses.......................... 95,180
-----------
Net investment income................... $ 105,388
Realized and unrealized gain on investments:
Net realized gain from investments........ $ 83,624
Net increase in unrealized appreciation on
investments............................. 979,715
-----------
Net gain on investments................. 1,063,339
-----------
Net increase in net assets from
operations............................ $ 1,168,727
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
97
<PAGE> 98
OHIO NATIONAL FUND, INC.
RELATIVE VALUE PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
From operations:
Net investment income..................................... $ 105,388 $ 47,841
Realized gain (loss) on investments....................... 83,624 (2,446)
Unrealized gain on investments............................ 979,715 764,054
------------ ------------
Net increase in assets from operations................ 1,168,727 809,449
------------ ------------
Dividends and distributions to shareholders:
Dividends declared from net investment income............. (105,730) (47,665)
Capital gains distributions............................... (91,539) 0
------------ ------------
Total dividends and distributions..................... (197,269) (47,665)
------------ ------------
From capital share transactions (note 4):
Received from shares sold................................. 6,696,273 5,066,632
Received from dividends reinvested........................ 197,269 47,665
Paid for shares redeemed.................................. (3,589,324) (142,784)
------------ ------------
Increase in net assets derived from capital share
transactions......................................... 3,304,218 4,971,513
------------ ------------
Increase in net assets............................. 4,275,676 5,733,297
------------ ------------
Net Assets:
Beginning of period....................................... 5,733,297 0
------------ ------------
End of period (a)......................................... $10,008,973 $ 5,733,297
============ ============
(a) Includes undistributed net investment income of......... $ (166) $ 0
============ ============
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1998 1997
------------ ------------
<S> <C> <C>
Per share data:
Net asset value, beginning of period........................ $ 12.68 $ 10.00
Income from investment operations:
Net investment income..................................... 0.15 0.16
Net realized and unrealized gain on investments........... 2.48 2.66
------------ ------------
Total income from investment operations................. 2.63 2.82
------------ ------------
Less distributions:
Dividends declared........................................ (0.15) (0.14)
Distributions from net realized capital gains............. (0.14) 0.00
------------ ------------
Total distributions..................................... (0.29) (0.14)
------------ ------------
Net asset value, end of period.............................. $ 15.02 $ 12.68
============ ============
Total return................................................ 20.72% 28.28%
Ratios and supplemental data:
Ratio of expenses to average net assets................... 1.08% 1.18%
Ratio of net investment income to average net assets...... 1.19% 1.35%
Portfolio turnover rate..................................... 54% 7%
Net assets at end of period (millions)...................... $ 10.0 $ 5.7
</TABLE>
The accompanying notes are an integral part of these financial statements.
98
<PAGE> 99
BLUE CHIP PORTFOLIO
OHIO NATIONAL FUND, INC.
OBJECTIVE
The Blue Chip Portfolio seeks growth of capital and income by investing in
securities of high quality companies.
PERFORMANCE AS OF DECEMBER 31, 1998
<TABLE>
<S> <C>
TOTAL RETURN:
Since inception (5/1/98) 2.34%
</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
1998 was an extremely difficult year for active value managers. The S&P 500's
28.7% return was dominated by a handful of ultra-large growth oriented
Technology, Pharmaceutical, and Telephone companies. The return for the average
stock in the S&P 500, as measured by the equal-weighted S&P 500, was only 12.8%.
This nearly 16% disparity between the average stock and the market itself is
something the market has not experienced in the last 25 years. In this difficult
environment the portfolio, from its inception on May 1, 1998, returned 2.34%.
This return was in line with our value oriented benchmarks: The average Lipper
Growth & Income fund returned 2.59% and the S&P Value Index returned 1.41%. We
are obviously not pleased with our relative performance versus the S&P 500, but
given our investment style and market conditions, the returns are not
unreasonable. It is worth noting that historically, after periods of extremely
narrow market leadership dominated by a handful of growth stocks, active value
management can provide superior returns.
As we enter 1999, the markets are faced with numerous challenges. At a P/E ratio
nearing 30 times, and price-to-book ration north of 8 times and a dividend yield
of 1.3%, the S&P 500 is in uncharted valuation territory for this point in any
business cycle. In this type of environment, we believe that our value
disciplines -- 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 -- will provide a more reasonable ride as
rationality works its way back into the market.
CHANGE IN VALUE OF $10,000 INVESTMENT
[GRAPH]
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, 1998
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Kimberly-Clark Corp 2.8
2. UST Inc 2.1
3. GTE Corp 2.1
4. Corn Products International 2.0
5. Conseco Inc 1.9
6. Electronic Data Systems Corp 1.9
7. Philip Morris Cos Inc 1.9
8. Ashland Inc 1.8
9. Sun Microsystems 1.8
10. Pharmacia & Upjohn Inc 1.8
</TABLE>
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
Consumer Products 10.2
Oil, Energy, and Natural Gas 9.1
Utilities 8.8
Computer & Related 7.5
Retail 6.8
</TABLE>
99
<PAGE> 100
OHIO NATIONAL FUND, INC.
BLUE CHIP PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
AEROSPACE (1.7%)
1,500 Boeing Company.................... $ 48,938
------------
AUTOMOTIVE & RELATED (3.9%)
500 General Motors Corp. ............. 35,781
800 Cooper Tire & Rubber.............. 16,350
400 Johnson Controls Inc. ............ 23,600
1,100 Tenneco Inc. ..................... 37,469
------------
113,200
------------
BANKING (1.6%)
400 Republic New York Corp. .......... 18,225
700 Washington Mutual Inc. ........... 26,731
------------
44,956
------------
BUSINESS SERVICES (2.7%)
1,500 First Data Corp. ................. 47,531
1,000 King World Prod Inc. ............. 29,438
------------
76,969
------------
CHEMICALS (0.6%)
200 Dow Chemical Co. ................. 18,188
------------
COMMUNICATIONS (3.0%)
400 AT & T Corp. ..................... 30,100
500 Motorola Inc. .................... 30,531
500 SBC Communications Inc. .......... 26,813
------------
87,444
------------
COMPUTER & RELATED (7.5%)
1,100 Electronic Data Systems Corp. .... 55,275
200 IBM CO............................ 36,950
1,000 *Seagate Technology Inc. .......... 30,250
1,200 *Storage Technology Corp. ......... 42,675
600 *Sun Microsystems Inc. ............ 51,375
------------
216,525
------------
CONSUMER PRODUCTS (10.2%)
400 Eastman Kodak Co. ................ 28,800
1,200 Kimberly-Clark Corp. ............. 65,400
1,100 Liz Claiborne Inc. ............... 34,719
1,000 Phillip Morris Co. Inc. .......... 53,500
1,600 RJR Nabisco Corp. ................ 47,500
1,800 UST Inc. ......................... 62,775
------------
292,694
------------
CONTAINERS (1.1%)
1,000 Crown Cork & Seal Co. Inc. ....... 30,813
------------
DRUGS (3.8%)
600 Abbott Laboratories............... 29,400
200 Merck & Co. Inc. ................. 29,537
900 Pharmacia & Upjohn Inc. .......... 50,963
------------
109,900
------------
ENTERTAINMENT & LEISURE (2.7%)
800 Brunswick Corp. .................. 19,800
500 *Viacom Inc. CL A.................. 36,781
300 *Viacom Inc. CL B.................. 22,200
------------
78,781
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
ELECTRICAL EQUIPMENT (2.2%)
711 AMP Inc. ......................... $ 37,016
800 Houston Industries Inc. .......... 25,700
------------
62,716
------------
FINANCIAL SERVICES (3.0%)
700 Bear Stearns Co. Inc. ............ 26,163
1,300 CIT Group Inc. CL A............... 41,356
300 MBIA Inc. ........................ 19,669
------------
87,188
------------
FOOD & RELATED (5.3%)
700 Anheuser Busch Co. Inc. .......... 45,937
2,810 Archer-Daniels Midland Co. ....... 48,297
1,900 Corn Products Intl. Inc. ......... 57,713
------------
151,947
------------
INDUSTRIAL SERVICES (2.9%)
700 Browning-Ferris Ind. Inc. ........ 19,906
900 Nucor Corp. ...................... 38,925
552 Waste Management Inc. ............ 25,737
------------
84,568
------------
INSURANCE SERVICES (6.3%)
500 Allstate Corp. ................... 19,312
600 CIGNA Corp. ...................... 46,387
1,824 Conseco Inc. ..................... 55,746
300 Lincoln National Corp. ........... 24,544
600 Marsh & McLennan Co. Inc. ........ 35,063
------------
181,052
------------
MACHINERY (1.7%)
800 Deere & Co. ...................... 26,500
500 Ingersoll-Rand Co. ............... 23,469
------------
49,969
------------
MEDICAL & RELATED (3.0%)
200 Bristol-Myers Squibb Co. ......... 26,763
2,000 Oxford Health Plans Inc. ......... 29,750
700 United Healthcare Corp. .......... 30,143
------------
86,656
------------
METALS & MINING (0.8%)
1,200 Barrick Gold Corp. ............... 23,400
------------
OIL, ENERGY & NATURAL GAS (8.6%)
1,100 Ashland Inc. ..................... 53,212
1,000 Diamond Offshore Drilling......... 23,688
300 Exxon Corp. ...................... 21,937
300 Mobil Corp. ...................... 26,137
1,000 Occidental Petroleum Corp. ....... 16,875
900 Schlumberger Ltd. ................ 41,513
700 Sunoco Inc. ...................... 25,244
300 Texaco Inc. ...................... 15,863
800 USX-Marathon Group................ 24,100
------------
248,569
------------
REAL ESTATE & LEASING (0.6%)
600 Boston Properties Inc. ........... 18,300
------------
</TABLE>
(continued)
100
<PAGE> 101
OHIO NATIONAL FUND, INC.
BLUE CHIP PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
RESTAURANTS (1.1%)
600 *Tricon Global Restaurants
Inc. ............................ $ 30,075
RETAIL (6.8%)
900 American Stores Co. .............. 33,244
900 Dillards Inc. CL A................ 25,537
1,800 *K Mart Corp. ..................... 27,562
1,100 Sherwin-Williams Co. ............. 32,313
2,600 *Toys "R" Us Inc. ................. 43,875
400 Wal-Mart Stores Inc. ............. 32,575
------------
195,106
------------
TRANSPORTATION & EQUIPMENT (1.8%)
700 CNF Transportation Inc............ 26,294
1,000 Ryder Systems Inc. ............... 26,000
------------
52,294
------------
UTILITIES (8.8%)
600 Coastal Corp. .................... 20,962
600 Consolidated Natural Gas Co. ..... 32,400
1,200 Entergy Corp. .................... 37,350
900 GTE Corp. ........................ 60,694
1,000 PG&E Corp. ....................... 31,500
1,000 Peco Energy Co. .................. 41,623
700 Public Service Enterprises
Group............................ 28,000
------------
252,529
------------
TOTAL U.S. COMMON STOCK (91.7%)
(COST $2,519,373)............... $ 2,642,777
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES FOREIGN COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
CANADA (0.7%)
TRANSPORTATION & EQUIPMENT
400 Canadian National Railway......... $ 20,750
------------
NETHERLANDS (1.5%)
ELECTRICAL EQUIPMENT (1.0%)
400 Philips Electronics............... 27,075
------------
OIL, ENERGY & NATURAL GAS (0.5%)
300 Royal Dutch Petroleum Co. ADR..... 14,363
------------
TOTAL NETHERLANDS................. 41,438
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES FOREIGN COMMON STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
SWEDEN (1.1%)
ELECTRICAL EQUIPMENT
3,000 ABB AB Sponsored ADR.............. $ 33,000
------------
TOTAL FOREIGN COMMON STOCK (3.3%)
(COST $109,634).................. $ 95,188
------------
TOTAL COMMON STOCK (95.0%)
(COST $2,629,007)................ $ 2,737,965
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES FOREIGN PREFERRED STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
AUSTRALIA (1.4%)
MEDIA & PUBLISHING
1,600 News Corp. Ltd. ADR............... $ 39,500
------------
TOTAL FOREIGN PREFERRED STOCK
(1.4%) (COST $38,357)............ $ 39,500
------------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS VALUE
- -------------------------------------------------------------
<C> <S> <C>
FINANCIAL (5.2%)
$ 149,000 Star Bank 3.50% due 01/04/99
repurchase price $149,058
collateralized by GNMA
certificates pool # 8375 due
02/20/24 (cost $149,000).......... $ 149,000
------------
TOTAL REPURCHASE AGREEMENTS (5.2%)
(COST $149,000)................... $ 149,000
------------
TOTAL HOLDINGS (101.6%)
(COST $2,816,364) (a)............. $ 2,926,465
------------
CASH & RECEIVABLES,
NET OF LIABILITIES (-1.6%)........ (47,352)
------------
TOTAL NET ASSETS (100.0%)......... $ 2,879,113
============
</TABLE>
- ---------------
* Non-income producing
(a) Also represents cost for Federal income tax purposes.
The accompanying notes are an integral part of these financial statements.
101
<PAGE> 102
OHIO NATIONAL FUND, INC.
BLUE CHIP PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<S> <C>
Assets:
Investments in securities at market value
(note 1) (cost $2,816,364)............... $2,926,465
Cash in bank............................... 397
Receivable for fund shares sold............ 3,128
Dividends and accrued interest
receivable............................... 4,895
Other...................................... 7,279
----------
Total assets............................. 2,942,164
----------
Liabilities:
Payable for securities purchased........... 56,023
Payable for investment management services
(note 3)................................. 4,031
Other accrued expenses..................... 2,997
----------
Total liabilities........................ 63,051
----------
Net assets at market value................... $2,879,113
==========
Net assets consist of:
Par value, $1 per share.................... $ 281,663
Paid-in capital in excess of par value..... 2,505,620
Accumulated net realized loss on
investments (note 1)..................... (18,271)
Net unrealized appreciation on investments
(note 1)................................. 110,101
----------
Net assets at market value................... $2,879,113
==========
Shares outstanding (note 4).................. 281,663
Net asset value per share.................... $ 10.22
==========
</TABLE>
STATEMENT OF OPERATIONS
May 1, 1998 to December 31, 1998
<TABLE>
<S> <C>
Investment income:
Interest..................................... $ 2,940
Dividends.................................... 29,240
--------
Total investment income.................... 32,180
--------
Expenses:
Management fees (note 3)..................... 13,619
Custodian fees (note 3)...................... 3,210
Directors' fees (note 3)..................... 132
Professional fees............................ 420
Accounting and transfer agent fees........... 16,754
Other........................................ 702
--------
Total expenses............................. 34,837
--------
Less expenses voluntarily reduced or
reimbursed (note 3)...................... (6,571)
--------
Net expenses............................. 28,266
--------
Net investment income........................ $ 3,914
--------
Realized and unrealized gain (loss) on
investments:
Net realized loss from investments........... $(18,271)
Net increase in unrealized appreciation on
investments................................ 110,101
--------
Net gain on investments.................... 91,830
--------
Net increase in net assets from
operations............................... $ 95,744
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
102
<PAGE> 103
OHIO NATIONAL FUND, INC.
BLUE CHIP PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM MAY 1, 1998
TO DECEMBER 31, 1998
--------------------
<S> <C>
From operations:
Net investment income..................................... $ 3,914
Realized loss on investments.............................. (18,271)
Unrealized gain on investments............................ 110,101
----------
Net increase in net assets from operations............ 95,744
----------
Dividends and distributions to shareholders:
Dividends paid from net investment income................. (4,115)
----------
From capital share transactions (note 4):
Received from shares sold................................. 2,842,759
Received from dividends reinvested........................ 4,115
Paid for shares redeemed.................................. (59,390)
----------
Increase in net assets derived from capital share
transactions......................................... 2,787,484
----------
Increase in net assets............................. 2,879,113
----------
Net Assets:
Beginning of period....................................... 0
----------
End of period............................................. $2,879,113
==========
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM MAY 1, 1998
TO DECEMBER 31, 1998
--------------------
<S> <C>
Per share data:
Net asset value, beginning of period........................ $10.00
Income from investment operations:
Net realized and unrealized gain on investments........... 0.23
Total income from investment operations................. 0.23
------
Less distributions:
Dividends declared........................................ (0.01)
------
Net asset value, end of period.............................. $10.22
======
Total return (b)............................................ 2.34%
Ratios and supplemental data (a & c):
Ratios net of fees reimbursed by advisor:
Expenses................................................ 1.84%
Net investment income................................... 0.25%
Ratios assuming no fees reimbursed by advisor:
Expenses................................................ 2.26%
Net investment income................................... 0.17%
Portfolio turnover rate..................................... 32%
Net assets at end of period (millions)...................... $ 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.
103
<PAGE> 104
THIS PAGE INTENTIONALLY LEFT BLANK
104
<PAGE> 105
EQUITY INCOME PORTFOLIO
OHIO NATIONAL FUND, INC.
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, 1998
<TABLE>
<S> <C>
TOTAL RETURN:
Since inception (5/1/98) 5.92%
</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 S&P 500 has just completed its fourth consecutive year of 20%+ gains. After
falling nearly 20% from its July 17 market peak, the S&P began a dramatic
recovery in early October, to finish the year with a total return of 28.58%.
While this is an extremely impressive showing, it was accompanied by volatility
which had been absent for a number of years. Additionally, the advance was
concentrated in a handful of companies. Specifically, 20 stocks accounted for
59% of the market's rise, while 100 stocks accounted for 85% of its gain.
Unfortunately, the median gain for a stock in the S&P 500 was only 2% with over
70% of the stocks lagging the index return. Since inception on May 1, 1998
through December 31, 1998, the Blue Chip portfolio's total return of 5.92% was
ahead of the 2.00% return of the average equity income fund.
The economic outlook for 1999 appears weak, particularly on a global basis. Only
limited signs point to a bottoming of Asians economies, while Latin American
economies continue to decelerate. The U.S. economic picture is mixed. Industrial
production is weakening even as consumer spending and confidence remains strong,
aided by declines in energy prices and interest rates. In fact, inflation is
close to zero and deflation has become a real fear.
CHANGE IN VALUE OF $10,000 INVESTMENT
[GRAPH]
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, 1998
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Bristol-Myers Squibb Co 2.4
2. General Mills Inc 2.1
3. Electronic Data Systems 2.0
4. Baxter International Inc 2.0
5. American Home Products Corp 2.0
6. Merck & Co Inc 2.0
7. GTE Corp 1.8
8. Home Depot Inc Sub Notes 3.25%
10/01/01 1.8
9. Texas Utilities Co PRIDES
$4.625 1.8
10. Abbot Laboratories 1.8
</TABLE>
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
Computer & Related 13.8
Utilities 9.6
Banking 6.8
Drugs 6.7
Medical & Related 5.9
</TABLE>
105
<PAGE> 106
OHIO NATIONAL FUND, INC.
EQUITY INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- ------------------------------------------------------------
<C> <S> <C>
AEROSPACE (1.8%)
400 General Dynamics Corp. ............... $ 23,450
200 Lockheed Martin Corp. ................ 16,950
----------
40,400
----------
AUTOMOTIVE & RELATED (2.1%)
800 Cooper Tire and Rubber Co............. 16,350
400 Ford Motor Co......................... 23,475
100 Magna International Inc............... 6,200
----------
46,025
----------
BANKING (6.8%)
700 Bank One Corp......................... 35,744
400 Bankamerica Corp...................... 24,050
400 Chase Manhattan Corp.................. 27,225
600 First Union Corp...................... 36,487
400 Mellon Bank Corp...................... 27,500
----------
151,006
----------
BUSINESS SERVICES (0.5%)
100 Xerox Corp............................ 11,800
----------
CHEMICALS (0.7%)
300 Duponte (EI) De Nemours & Co. ........ 15,919
----------
COMMUNICATIONS (7.0%)
400 Ameritech Corp........................ 25,350
600 GTE Corp.............................. 40,463
497 MCI Worldcomm Inc..................... 35,660
400 Motorola Inc.......................... 24,425
300 Sprint Corp........................... 25,237
150 Sprint Corp. (PCS Group).............. 3,469
----------
154,604
----------
COMPUTER & RELATED (7.8%)
100 Cisco Systems Inc..................... 9,281
900 Electronic Data Systems............... 45,225
300 Hewlett Packard Co.................... 20,494
200 IBM CO................................ 36,950
700 Storage Technology.................... 24,894
200 Sun Microsystems Inc.................. 17,125
1,300 Western Digital Corp.................. 19,581
----------
173,550
----------
CONSUMER PRODUCTS (5.5%)
300 Johnson & Johnson..................... 25,163
400 Kimberly Clark Corp................... 21,800
600 Phillip Morris Co. Inc................ 32,100
600 Pepsico Inc........................... 24,563
400 RJR Nabisco........................... 11,875
200 UST Inc............................... 6,975
----------
122,476
----------
DRUGS (6.7%)
800 Abbott Laboratories................... 39,200
800 American Home Products Corp. ......... 45,050
300 Merck & Co. Inc....................... 44,306
300 Tellabs Inc........................... 20,569
----------
149,125
----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- ------------------------------------------------------------
<C> <S> <C>
CONTAINERS (1.4%)
1,000 Crown Cork & Seal..................... $ 30,812
----------
ELECTRICAL EQUIPMENT (0.5%)
100 Intel Corp............................ 11,856
----------
FINANCIAL SERVICES (3.3%)
200 Associated First Capital Corp. CL A... 8,475
500 Citigroup Inc. ....................... 24,750
400 H&R Block Inc. ....................... 18,000
300 Morgan Stanley, Dean Witter........... 21,300
----------
72,525
----------
FOOD & RELATED (3.4%)
600 General Mills Inc. ................... 46,650
500 HJ Heinz Co. ......................... 28,313
----------
74,963
----------
FOREIGN (1.2%)
300 British Petro ADR..................... 26,888
----------
INDUSTRIAL SERVICES (3.9%)
600 Browning Ferris Ind. ................. 17,062
700 Halliburton Co. ...................... 20,738
300 Textron Inc. ......................... 22,781
1,900 Usec Inc. ............................ 26,363
----------
86,944
----------
INSURANCE SERVICES (1.7%)
200 Chubb Corp. .......................... 12,975
100 Lincoln National...................... 8,181
300 Marsh & McLennan Co. Inc. ............ 17,531
----------
38,687
----------
MEDIA & PUBLISHING (1.1%)
1,680 Hollinger Intl. Publishing Inc. ...... 23,415
----------
MEDICAL & RELATED (4.4%)
700 Baxter International Inc. ............ 45,019
400 Bristol-Myers Squibb.................. 53,525
----------
98,544
----------
METALS & MINING (0.9%)
1,000 Barrick Gold Corp. ................... 19,500
----------
OIL, ENERGY & NATURAL GAS (4.3%)
400 Burlington Resources Inc. ............ 14,325
400 Exxon Corp. .......................... 29,250
400 Mobil Corp. .......................... 34,850
700 Ultramar Diamond Shamrock............. 16,975
----------
95,400
----------
RETAIL (2.3%)
1,300 Food Lion Inc. CL A................... 13,813
900 Food Lion Inc. CL B................... 9,056
300 Intimate Brands Inc. ................. 8,962
400 JC Penney Inc. ....................... 18,750
----------
50,581
----------
RESTAURANTS (0.2%)
200 Wendy's Intl. Inc. ................... 4,362
----------
</TABLE>
(continued)
106
<PAGE> 107
OHIO NATIONAL FUND, INC.
EQUITY INCOME PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE
- ------------------------------------------------------------
<C> <S> <C>
TRANSPORTATION & EQUIPMENT (1.2%)
700 CNF Transportation Inc. .............. $ 26,294
----------
UTILITIES (7.2%)
400 CMS Energy Corp....................... 19,375
300 Elpaso Natural Gas.................... 10,444
600 Enron Corp............................ 34,238
300 General Electric Co................... 30,619
1,000 Pacificorp............................ 21,062
600 Sonat Inc............................. 16,237
400 Teco Energy Inc....................... 11,275
500 Williams Co. Inc...................... 15,593
----------
158,843
----------
TOTAL COMMON STOCK (75.9%)
(COST $1,588,682).................... $1,684,519
----------
</TABLE>
<TABLE>
<CAPTION>
REAL ESTATE MARKET
SHARES INVESTMENT TRUSTS VALUE
- ------------------------------------------------------------
<C> <S> <C>
300 Colonial Properties Trust............. $ 7,988
300 Duke Realty Investments Inc. ......... 6,975
300 Equity Residential Properties Trust... 12,131
300 Liberty Property Trust................ 7,387
300 New Plan Excel Realty Trust........... 6,656
300 Post Properties Inc. ................. 11,531
----------
TOTAL REAL ESTATE INVESTMENT TRUSTS
(2.4%) (COST $57,707)................ $ 52,668
----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES PREFERRED STOCKS VALUE
- ------------------------------------------------------------
<C> <S> <C>
COMPUTER & RELATED (1.8%)
400 Microsoft Corp. $2.196 Conv. ......... $ 39,100
----------
CONSUMER PRODUCTS (1.2%)
500 Ralston Purina Co. 7% Conv............ 26,125
----------
FINANCIAL SERVICES (2.9%)
900 Conseco Inc. 7% Series F Co. ......... 34,706
200 Jefferson Pilot 7.25% Conv............ 20,900
400 Merril Lynch & Co. 6.25% Co. ......... 9,500
----------
65,106
----------
FOOD & RELATED (0.8%)
400 Suiza Foods Corp. 5.5% Conv. ......... 17,350
----------
INSURANCE SERVICES (0.6%)
600 Lincoln Natl. Corp. $1.938 Conv. ..... 14,138
----------
MACHINERY (1.2%)
1,100 Ingersoll Rand Co. 6.75% Co. ......... 26,125
----------
MEDICAL & RELATED (1.5%)
300 McKesson Corp. 5% Conv. .............. 32,137
----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES PREFERRED STOCKS VALUE
- ------------------------------------------------------------
<C> <S> <C>
RESTAURANTS (0.7%)
300 Wendys Intl. Ser A $2.50 Conv. ....... $ 15,600
----------
UTILITIES (2.4%)
700 Texas Utilities $4.625 Conv. ......... 39,463
100 Williams Co. $3.50 Conv. ............. 14,475
----------
53,938
----------
TOTAL PREFERRED STOCKS (13.1%)
(COST $310,344)...................... $ 289,619
----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT CONVERTIBLE DEBENTURES VALUE
- ------------------------------------------------------------
<C> <S> <C>
AUTOMOTIVE & RELATED (0.8%)
$15,000 Magna Intl. Inc. 5.000%
due 10/15/02......................... $ 17,306
----------
COMPUTER & RELATED (4.2%)
5,000 America Online 4.000%
due 11/15/02......................... 28,013
20,000 Apple Computer Inc. 6.000%
due 06/01/01......................... 28,825
10,000 EMC Corp. 3.250%
due 03/15/02......................... 37,425
----------
94,263
----------
RETAIL (1.8%)
15,000 Home Depot Inc. 3.250%
due 10/01/01......................... 39,600
----------
TOTAL CONVERTIBLE DEBENTURES (6.8%)
(COST $103,221)...................... $ 151,169
----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS VALUE
- ------------------------------------------------------------
<C> <S> <C>
FINANCIAL (1.4%)
$31,000 Star Bank 3.50% due 01/04/99
repurchase price $31,012
collateralized by GNMA certificates
pool #8375 due 02/20/24 (cost
$31,000)............................. $ 31,000
----------
TOTAL REPURCHASE AGREEMENTS (1.4%)
(COST $31,000)....................... $ 31,000
----------
TOTAL HOLDINGS (99.6%)
(COST $2,090,954) (a)................ $2,208,975
----------
CASH & RECEIVABLES,
NET OF LIABILITIES (0.4%)............ 10,839
----------
TOTAL NET ASSETS (100.0%)............. $2,219,814
==========
</TABLE>
- ---------------
(a) Also represents cost for Federal income tax purposes.
The accompanying notes are an integral part of these financial statements.
107
<PAGE> 108
OHIO NATIONAL FUND, INC.
EQUITY INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<S> <C>
Assets:
Investments in securities at market value
(note 1) (cost $2,090,954)............... $2,208,975
Cash in bank............................... 176
Receivable for securities sold............. 6,476
Receivable for fund shares sold............ 864
Dividends and accrued interest
receivable............................... 4,016
Other...................................... 8,405
----------
Total assets............................. 2,228,912
----------
Liabilities:
Payable for securities purchased........... 3,886
Payable for investment management services
(note 3)................................. 2,654
Other accrued expenses..................... 2,558
----------
Total liabilities........................ 9,098
----------
Net assets at market value................... $2,219,814
==========
Net assets consist of:
Par value, $1 per share.................... $ 210,819
Paid-in capital in excess of par value..... 1,896,688
Accumulated net realized loss on
investments (note 1)..................... (5,714)
Net unrealized appreciation on investments
(note 1)................................. 118,021
----------
Net assets at market value................... $2,219,814
==========
Shares outstanding (note 4).................. 210,819
Net asset value per share.................... $ 10.53
==========
</TABLE>
STATEMENT OF OPERATIONS
May 1, 1998 to December 31, 1998
<TABLE>
<S> <C>
Investment income:
Interest.................................... $ 3,686
Dividends................................... 33,414
--------
Total investment income................... 37,100
--------
Expenses:
Management fees (note 3).................... 9,909
Custodian fees (note 3)..................... 3,210
Directors' fees (note 3).................... 132
Professional fees........................... 420
Accounting and transfer agent fees.......... 17,453
Other....................................... 703
--------
Total expenses............................ 31,827
--------
Less expenses voluntarily reduced or
reimbursed (note 3)..................... (8,405)
--------
Net expenses............................ 23,422
--------
Net investment income..................... $ 13,678
--------
Realized and unrealized gain (loss) on
investments:
Net realized loss from investments.......... $ (5,714)
Net increase in unrealized appreciation on
investments............................... 118,021
--------
Net gain on investments................. 112,307
--------
Net increase in net assets from
operations........................... $125,985
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
108
<PAGE> 109
OHIO NATIONAL FUND, INC.
EQUITY INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM MAY 1, 1998
TO DECEMBER 31, 1998
--------------------
<S> <C>
From operations:
Net investment income..................................... $ 13,678
Realized loss on investments.............................. (5,714)
Unrealized gain on investments............................ 118,021
----------
Net increase in net assets from operations............ 125,985
----------
Dividends and distributions to shareholders:
Dividends paid from net investment income................. (13,781)
----------
From capital share transactions (note 4):
Received from shares sold................................. 2,160,574
Received from dividends reinvested........................ 13,781
Paid for shares redeemed.................................. (66,745)
Increase in net assets derived from capital share
transactions......................................... 2,107,610
----------
Increase in net assets............................. 2,219,814
----------
Net Assets:
Beginning of period....................................... 0
----------
End of period............................................. $2,219,814
==========
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM MAY 1, 1998
TO DECEMBER 31, 1998
--------------------
<S> <C>
Per share data:
Net asset value, beginning of period........................ $10.00
Income from investment operations:
Net investment income..................................... 0.07
Net realized and unrealized gain on investments........... 0.53
------
Total income from investment operations................. 0.60
------
Less distributions:
Dividends declared........................................ (0.07)
------
Net asset value, end of period.............................. $10.53
======
Total return (b)............................................ 5.92%
Ratios and supplemental data (a)(c):
Ratios net of fees reimbursed by advisor:
Expenses................................................ 1.77%
Net investment income................................... 1.04%
Ratios assuming no fees reimbursed by advisor:
Expenses................................................ 2.41%
Net investment income................................... 0.40%
Portfolio turnover rate..................................... 38%
Net assets at end of period (millions)...................... $ 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.
109
<PAGE> 110
THIS PAGE INTENTIONALLY LEFT BLANK
110
<PAGE> 111
HIGH INCOME PORTFOLIO
OHIO NATIONAL FUND, INC.
OBJECTIVE
The High Income Bond Portfolio seeks high current income by investing primarily
in lower rated corporate debt obligations.
PERFORMANCE AS OF DECEMBER 31, 1998
TOTAL RETURNS:
<TABLE>
<S> <C>
Since inception (5/1/98) (0.20%)
</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 12 months ending December 31, 1998 was marked by volatility and generally
disappointing returns from a high yield bond perspective. There were several
reasons for the volatility and disappointing returns including problems in the
international arena, a mid summer stock market swoon, hedge fund problems,
falling commodity prices, and a growing consensus in the latter part of 1998
pointing to a slowing of the domestic economy in 1999. These factors caused high
yield bonds to underperform high quality bonds. For example, the Lehman Brothers
High Yield Bond Index returned 1.87% substantially underperforming the Lehman
Brothers Aggregate Bond Index, a measure of high quality bond performance, which
returned 8.70%
As we look out into 1999, many contradicting factors are present. On the
negative side, concerns continue regarding our international trading partners
such as Japan and Latin America on the domestic economy, falling commodity
prices, and the uncertainty of Y2K and the volatility of the stock market. On
the plus side, the consensus economic forecast sees the domestic economy
continuing its remarkable growth for another year although at a slower pace,
inflation is almost non-existent, and most importantly, the yield spread between
high yield bonds and Treasury securities remains very wide especially in light
of the amazing resilience of the domestic economy. Overall, wide spreads and
positive economic growth should make 1999 a good year for high yield securities
CHANGE IN VALUE OF $10,000 INVESTMENT
[GRAPH]
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, 1998
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Tenet Health Corp Sr Sub Ser
144A 8.125% 12/01/08 2.5
2. Premier Parks Inc Cpn 0% till
04/01/03 then 10% 04/01/08 2.1
3. Allied Waste N.A., Inc. Sr.
Note 7.625% 01/01/06 1.9
4. Sonclair Broadcast Group 8.75%
12/15/07 1.9
5. NTL, Inc Sr Defd 0% til
04/01/03 then 9.75% 04/1/08 1.9
6. Chancellor Media Corp 8.125%
12/15/07 1.9
7. Level 3 Communication, Inc Sr.
Note 9.175% 05/01/08 1.9
8. Polymer Group Inc Ser 144A
8.75% 03/01/08 1.9
9. Intermedia Communication, Sr
Note 8.60% 06/01/08 1.8
10. CSC Holdings, Inc. Sr. Sub
9.25% 11/01/05 1.8
</TABLE>
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
Telecommunications & Cellular 18.2
Cable Television 11.0
Broadcast Radio & TV 9.1
Consumer Products 7.1
Food & Related 6.8
</TABLE>
111
<PAGE> 112
OHIO NATIONAL FUND, INC.
HIGH INCOME BOND PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT LONG-TERM BONDS & NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
ADVERTISING (1.8%)
$ 50,000 Lamar Advertising Co.
8.625% 09/15/07..................... $ 52,750
125,000 Outdoor Systems Inc.
8.875% 06/15/07..................... 134,375
-----------
187,125
-----------
AUTOMOTIVE & RELATED (1.0%)
100,000 Collins & Aikman Products
11.500% 04/15/06 (144A)............. 104,000
-----------
BANKING (0.5%)
50,000 GS Escrow Corp.
7.125% 08/01/05..................... 49,566
-----------
BROADCAST RADIO/TV (7.3%)
100,000 ACME Television
10.875% 09/30/04.................... 80,250
100,000 Big City Radio Inc.
due 03/15/05 0% till 3/15/01 then
11.250% (144A)...................... 66,500
200,000 Chancellor Media Corp.
8.125% 12/15/07..................... 199,500
50,000 Chancellor Media Corp.
9.000% 10/01/08 (144A).............. 52,750
50,000 Cummulus Media Inc.
10.375% 07/01/08.................... 53,250
150,000 Fox/Liberty Networks LLC
due 08/15/07 0% till 08/01/02 then
9.750%.............................. 104,250
200,000 Sinclair Broadcast Group
8.750% 12/15/07..................... 203,500
-----------
760,000
-----------
BUSINESS SERVICES (4.1%)
75,000 Dialog Corp. PLC 11.000% 11/15/07.... 75,000
100,000 Fisher Scientific Intl
9.000% 02/01/08..................... 100,000
100,000 Sitel Corp. NT
9.250% 03/15/06 (144A).............. 90,500
100,000 United Stationers Supplies
8.375% 04/15/08..................... 100,250
100,000 US Office Products Co.
9.750% 06/15/08 (144A).............. 65,500
-----------
431,250
-----------
CABLE TV (9.2%)
125,000 Diamond Cable Comm. PLC
due 02/15/07 0% till 02/15/02 then
10.750%............................. 90,625
100,000 Echostar Satellite Broadcasting Corp.
due 03/15/04 0% till 03/15/00 then
13.125%............................. 100,250
100,000 Lenfest Communication
8.375% 11/01/05..................... 108,750
325,000 NTL Inc. due 04/01/08
0% till 04/01/03 then 9.750%
(144A).............................. 201,906
100,000 Pegasus Communications Ser.
B 9.625% 10/15/05................... 100,500
125,000 Rogers Cablesystems Ltd.
10.000% 03-15-05.................... 140,625
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT LONG-TERM BONDS & NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
CABLE TV, CONTINUED
$175,000 Telewest Communications PLC
due 10/01/07 0% till 10-01-00 then
11.000%............................. $ 147,000
125,000 United Intl. Holdings Series B
due 02/15/08 0% till 02/15/03 then
10.750%............................. 68,125
-----------
957,781
-----------
CHEMICALS (3.4%)
150,000 ISP Holdings Inc.
9.000% 10/15/03..................... 159,375
200,000 Polymer Group Inc.
8.750% 03/01/08..................... 197,500
-----------
356,875
-----------
COMMUNICATIONS (20.1%)
50,000 American Cellular Corp.
10.500% 05/15/08 (144A)............. 49,750
50,000 Arch Communications Group
12.750% 07/01/07.................... 50,250
150,000 Call-Net Enterprises Inc.
due 08/15/07 0% till 8/15/02 then
9.270%.............................. 96,750
50,000 Centennial Cellular Corp.
10.750% 12/15/08.................... 50,500
50,000 Hermes Europe Railtel B.V.
11.50% 08/15/07..................... 53,250
50,000 Hermes Europe Railtel B.V.
10.375% 01/15/09.................... 51,000
150,000 ICG Services Inc.
due 05/01/08 0% till 05/03/03 then
9.875%.............................. 77,884
200,000 Intermedia Communications
8.600% 06/01/08..................... 191,000
100,000 IXC Communications Inc.
9.000% 04/15/08..................... 100,625
200,000 Level 3 Communication Inc.
9.125% 05/01/08..................... 199,500
225,000 Mcleod USA Inc.
due 03/01/07 0% till 03/01/02 then
10.500%............................. 171,000
200,000 Metronet Communications
due 06/15/08 0% till 06/15/03 then
9.950%.............................. 123,500
300,000 Nextel Communications
due 02/15/08 0% till 02/15/03 then
9.950% (144A)....................... 181,500
150,000 Nextlink Communications
due 04/15/08 0% 04/15/03 then
9.450%.............................. 87,000
100,000 Paging Network 10.125%
08/01/07............................ 98,000
100,000 Psinet Inc.
10.000% 02/15/05 (144A)............. 99,500
175,000 Qwest Communications Intl
due 10/15/07 0% 10/15/02 then
9.470%.............................. 137,375
100,000 Telecomm Techniques
9.750% 05/15/08 (144A).............. 97,500
150,000 Telesystem Intl. Wireless Ser. B
due 06/30/07 0% till 06/30/02 then
13.250%............................. 64,500
</TABLE>
(continued)
112
<PAGE> 113
OHIO NATIONAL FUND, INC.
HIGH INCOME BOND PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT LONG-TERM BONDS & NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
COMMUNICATIONS, CONTINUED
$ 75,000 Teligent Inc.
11.500% 12/01/07.................... $ 69,375
100,000 Triton Pcs. Inc.
due 05/01/08 0% till 05/01/03 then
11.000% (144A)...................... 47,250
-----------
2,097,009
-----------
CONSUMER PRODUCTS (7.1%)
75,000 Albecca Inc.
10.750% 08/15/08 (144A)............. 75,563
100,000 Amscan Holdings Inc.
9.875% 12/15/07..................... 93,750
100,000 Chattem Inc. Series B
8.875% 04/01/08..................... 103,000
100,000 NBTY Inc.
8.625% 09/15/07..................... 98,000
100,000 Playtex Family Products Corp.
9.000% 12/15/03..................... 105,000
200,000 Revlon Consumer Products Corp.
8.625% 02/01/08 (144A).............. 185,000
125,000 Sealy Mattress Co. Series B
due 12/05/07 0% till 12/15/02 then
10.875%............................. 75,625
-----------
735,938
-----------
CONTAINERS (2.0%)
100,000 Ball Corp.
8.250% 08/01/08 (144A).............. 105,125
100,000 Tenki-Plex Inc.
9.250% 03/01/08 (144A).............. 105,000
-----------
210,125
-----------
ENTERTAINMENT & LEISURE (6.0%)
100,000 Amf Bowling WW Inc.
due 03/15/06 0% till 03/15/01 then
12.250%............................. 57,750
175,000 CSC Holdings Inc.
9.250% 11/01/05..................... 187,250
50,000 Loews Cineplex Entertainment
8.875% 08/01/08 (144A).............. 51,875
325,000 Premeir Parks Inc.
due 04/01/08 0% till 04/01/03 then
10.000%............................. 221,813
100,000 Regal Cinemas Inc.
9.500% 06/01/08 (144A).............. 103,500
-----------
622,188
-----------
FOOD & RELATED (6.8%)
50,000 Agrilink Foods Inc.
11.875% 11/01/08.................... 51,000
150,000 Ameriserve Food Distribution Inc.
10.125% 07/15/07.................... 131,250
100,000 Aurora Foods Inc.
9.875% 02/15/07..................... 109,500
75,000 Digiorgio Corp. Series B
10.000% 06/15/07.................... 70,125
50,000 Dominos Inc.
10.375% 01/15/09.................... 50,000
100,000 Eagle Family Foods
8.750% 01/15/08..................... 94,750
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT LONG-TERM BONDS & NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
FOOD & RELATED, CONTINUED
$100,000 International Home Foods
10.375% 11/01/06.................... $ 108,750
100,000 Stater Brothers Holdings
9.000% 07/01/04 (144A).............. 98,000
-----------
713,375
-----------
HOTEL/LODGING (1.2%)
125,000 HMH Properties Inc. Series B
.875% 08/01/08...................... 121,875
-----------
INDUSTRIAL SERVICES (6.5%)
200,000 Allied Waste N.A
7.625% 01/01/06..................... 203,000
100,000 Amphenol Corp.
9.875% 05/15/07..................... 104,000
75,000 Grove Worldwide LLC
9.250% 05/01/08..................... 68,625
50,000 Huntsman Corp.
9.500% 07/01/07..................... 50,000
100,000 ISG Resources Inc.
10.000% 04/15/08.................... 99,500
50,000 Metromedia Fiber Network
10.000% 11/15/08.................... 51,625
100,000 Wesco Distributions Inc.
9.125% 06/01/08..................... 100,500
-----------
677,250
-----------
MACHINERY (1.2%)
75,000 National Equipment Services
10.000% 11/30/04.................... 74,625
50,000 Untied Rentals Inc.
9.250% 01/15/09..................... 49,955
-----------
124,580
-----------
MEDIA & PUBLISHING (1.9%)
100,000 Hollinger Intl. Publishing
9.250% 02/01/06..................... 105,500
100,000 Ziff Davis Inc.
8.500% 05/01/08..................... 97,000
-----------
202,500
-----------
MEDICAL & RELATED (4.2%)
100,000 Conmed Corp.
9.000% 03/15/08..................... 100,750
100,000 Hudson Respiratory Care Inc.
9.125% 04/15/08 (144A).............. 81,500
250,000 Tenet Health Corp.
8.125% 12/01/08 (144A).............. 259,375
-----------
441,625
-----------
METAL & MINING (0.7%)
75,000 AEI Resources Inc.
11.500% 12/15/06.................... 74,625
-----------
OIL, ENERGY & NATURAL GAS (5.0%)
100,000 Chiles Offshore LLC
10.000% 05/01/08 (144A)............. 80,500
100,000 Dailey International
9.500% 02/15/08 (144A).............. 47,000
</TABLE>
(continued)
113
<PAGE> 114
OHIO NATIONAL FUND, INC.
HIGH INCOME BOND PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT LONG-TERM BONDS & NOTES VALUE
- -------------------------------------------------------------
<C> <S> <C>
OIL, ENERGY & NATURAL GAS, CONTINUED
$200,000 KCS Energy
8.875% 01/15/08..................... $ 115,000
100,000 Nuevo Energy Co.
8.875% 06/01/08..................... 97,500
100,000 Pride Petroleum Services
9.375% 05/01/07..................... 93,500
150,000 Universal Compression Inc.
due 02/15/08 0% till 02/15/03 then
9.875%.............................. 86,250
-----------
519,750
-----------
TEXTILES & RELATED (1.7%)
75,000 Glenoit Corp.
11.000% 04/15/07.................... 70,125
100,000 Pillowtex Corp.
10.000% 11/15/06.................... 107,500
-----------
177,625
-----------
TRANSPORTATION & EQUIPMENT (1.1%)
125,000 Stena Line AB
10.625% 06/01/08.................... 113,125
-----------
UTILITIES (0.4%)
50,000 Niagara Mohawk Power
due 07/01/10 0% till 07/01/03 then
8.500%.............................. 38,882
-----------
TOTAL LONG-TERM BONDS & NOTES (93.2%)
(COST $10,130,010).................. $ 9,717,069
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES PREFERRED STOCK VALUE
- -------------------------------------------------------------
<C> <S> <C>
COMMUNICATIONS (0.5%)
50 Benedek Communications
11.500% 05/18/08 (144A)............. $ 50,250
-----------
MEDIA & PUBLISHING (1.2%)
1,300 Primedia Inc. Series H
8.625% 04/01/10..................... 125,450
-----------
TOTAL PREFERRED STOCKS (1.7%)
(COST $179,025)..................... $ 175,700
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS VALUE
- -------------------------------------------------------------
<C> <S> <C>
FINANCIAL (4.2%)
$443,000 Star Bank 3.50%
due 01/04/99 repurchase price
$443,170 collateralized by GNMA
certificates, pool #8375 due
02/20/24 (cost $443,000)............ $ 443,000
-----------
TOTAL REPURCHASE AGREEMENTS (4.2%)
(COST $443,000)..................... $ 443,000
-----------
TOTAL HOLDINGS (99.1%) (COST
$10,752,035)(A)..................... $10,335,769
-----------
CASH & RECEIVABLES, NET OF
LIABILITIES (0.9%).................. 94,978
-----------
TOTAL NET ASSETS (100.0%)............ $10,430,747
===========
</TABLE>
- ---------------
(a) Also represents cost for Federal Income tax purposes.
(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 $2,299,344 or 22.1% 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.
114
<PAGE> 115
OHIO NATIONAL FUND, INC.
HIGH INCOME BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<S> <C>
Assets:
Investments in securities at market value
(note 1) (cost $10,752,035)............. $10,335,769
Cash in bank.............................. 712
Receivable for fund shares sold........... 196
Dividends and accrued interest............ 154,699
Other..................................... 79
-----------
Total assets............................ 10,491,455
-----------
Liabilities:
Payable for securities purchased.......... 50,000
Payable for investment management services
(note 3)................................ 6,607
Other accrued expenses.................... 4,101
-----------
Total liabilities....................... 60,708
-----------
Net assets at market value.................. $10,430,747
===========
Net assets consist of:
Par value, $1 per share................... $ 1,088,236
Paid-in capital in excess of par value.... 9,758,777
Net unrealized depreciation on investments
(note 1)................................ (416,266)
-----------
Net assets at market value.................. $10,430,747
===========
Shares outstanding (note 4)................. 1,088,236
Net asset value per share................... $ 9.59
===========
</TABLE>
STATEMENT OF OPERATIONS
May 1, 1998 to December 31, 1998
<TABLE>
<S> <C>
Investment income:
Interest................................... $ 458,677
Dividends.................................. 6,913
----------
Total investment income.................. 465,590
----------
Expenses:
Management fees (note 3)................... 50,117
Custodian fees (note 3).................... 3,210
Directors' fees (note 3)................... 227
Professional fees.......................... 984
Accounting and transfer agent fees......... 23,981
Other...................................... 1,422
----------
Total expenses........................... 79,941
----------
Net investment income.................... $ 385,649
Realized and unrealized gain (loss) on
investments:
Net realized gain from investments......... $ 18,061
Net increase in unrealized depreciation on
investments.............................. (416,266)
----------
Net loss on investments................ (398,205)
----------
Net decrease in net assets from
operations.......................... $ (12,556)
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
115
<PAGE> 116
OHIO NATIONAL FUND, INC.
HIGH INCOME BOND PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM MAY 1, 1998
TO DECEMBER 31, 1998
--------------------
<S> <C>
From operations:
Net investment income..................................... $ 385,649
Realized gain on investments.............................. 18,061
Unrealized loss on investments............................ (416,266)
-----------
Net decrease in net assets from operations............ (12,556)
-----------
Dividends and distributions to shareholders:
Dividends paid from net investment income................. (386,035)
Capital gains distributions............................... (18,061)
-----------
Total dividends and distributions..................... (404,096)
-----------
From capital share transactions (note 4):
Received from shares sold................................. 10,451,643
Received from dividends reinvested........................ 404,096
Paid for shares redeemed.................................. (8,340)
-----------
Increase in net assets derived from capital share
transactions......................................... 10,847,399
-----------
Increase in net assets............................. 10,430,747
Net Assets:
Beginning of period....................................... 0
-----------
End of period............................................. $10,430,747
===========
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM MAY 1, 1998
TO DECEMBER 31, 1998
--------------------
<S> <C>
Per share data:
Net asset value, beginning of period........................ $10.00
Loss from investment operations:
Net investment income..................................... 0.38
Net realized and unrealized loss on investments........... (0.40)
Total loss from investment operations................... (0.02)
------
Less distributions:
Dividends declared........................................ (0.37)
Distributions from net realized capital gains............. (0.02)
Total distributions..................................... (0.39)
------
Net asset value, end of period.............................. $ 9.59
Total return (b)............................................ (0.20%)
Ratios and supplemental data:
Ratio of expenses to average net assets................... 1.20%
Ratio of net investment income to average net assets...... 5.79%
Portfolio turnover rate..................................... 11%
Net assets at end of period (millions)...................... $ 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.
116
<PAGE> 117
SMALL CAP GROWTH PORTFOLIO
OHIO NATIONAL FUND, INC.
OBJECTIVE
The Small Cap Growth Portfolio seeks capital appreciation by investing primarily
in common stocks of emerging growth companies.
PERFORMANCE AS OF DECEMBER 31, 1998
<TABLE>
<S> <C>
TOTAL RETURN:
Since inception (5/1/98) 4.62%
</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 small-cap sector was volatile, depressing, inspiring, and when all was done,
reasonably flat in performance for the year. Fortunately, we managed to provide
significantly better returns.
The portfolio rose 36.33% in the fourth quarter 1998. This compares to the
benchmark Russell 2000 Growth that rallied up 23.64% in the fourth quarter to
close the year with a modest 1.23% return. On the strength of a strong fourth
quarter, we produced a since inception return of 4.62% versus a decline of
10.07% in the benchmark Russell 2000 Growth.
The small-cap market provided investors a great challenge last year. Our
diligent research effort paid off significantly, enabling us to understand,
analyze, and finally purchase a broad number of truly exciting emerging growth
companies and navigate the volatility that characterized the year. We go into
1999 cautiously optimistic about the small-cap investment environment.
CHANGE IN VALUE OF $10,000 INVESTMENT
[GRAPH]
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, 1998
<TABLE>
<CAPTION>
% of Net Assets
<C> <S> <C>
1. Lamar Advertising Co 3.3
2. TSI International Software Ltd 3.2
3. Gemstar Intl Group LTD 3.0
4. Network Solutions 2.9
5. Ecsoft Group PLC 2.3
6. American Eagle Outfitters Inc 2.0
7. Xoom.com Inc 2.0
8. Beyond.com Corp 1.9
9. Knight/Trimark Group Inc-A 1.8
10. Macromedia Inc 1.8
</TABLE>
TOP 5 INDUSTRIES AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
Computer & Related 17.0
Financial Services 7.6
Retail 7.0
Electrical Equipment 6.2
Communications 5.7
</TABLE>
117
<PAGE> 118
OHIO NATIONAL FUND, INC.
SMALL CAP GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- ------------------------------------------------------------
<C> <S> <C>
ADVERTISING (5.7%)
400 *Doulbeclick Inc...................... $ 18,225
2,000 *Lamar Advertising Co................. 74,500
900 *TMP Worldwide Inc.................... 37,800
----------
130,525
----------
BROADCAST RADIO & TV (3.8%)
200 *CD Radio Inc......................... 6,850
400 *Emmis Broadcasting Corp. CL A........ 17,350
1,000 *Infinity Broadcasting Corp. A........ 27,375
300 *Jacor Communications Inc. CL A....... 19,312
400 *Univision Communications Inc......... 14,475
----------
85,362
----------
BUSINESS SERVICES (3.8%)
500 *Compass Int. Services Corp........... 5,312
1,600 *DM Management Co..................... 30,400
200 *International Telecom Data........... 2,950
200 *Professional Detailing............... 5,650
600 *Ritchie Bros. Auctionees Inc......... 16,162
800 *Steiner Leisure Ltd.................. 25,600
----------
86,074
COMMUNICATIONS (5.9%)
2,300 *Allegiance Telecom Inc............... 27,888
1,100 *Com Twenty-One Inc................... 23,100
500 *DSET Corp............................ 5,187
700 *Echostar Communication A............. 33,862
2,900 *Electric Lightwave Inc. CL A......... 23,744
900 *ICG Communications Inc............... 19,350
----------
133,131
----------
COMPUTER SERVICES (7.1%)
500 *Brightstar Inform. Tech. Group
Inc.................................. 3,937
600 *Cognizant Tech Solution Corp......... 18,225
600 *Mastech Corp......................... 17,175
1,200 *SPR Inc.............................. 20,700
500 *Verisign Inc......................... 29,563
1,500 *TSI Intl. Software Corp.............. 71,813
----------
161,413
----------
COMPUTER SOFTWARE (7.6%)
500 *Electronic Processing Inc............ 5,000
200 *Keane Inc............................ 7,987
200 *IMR Global Corp...................... 5,887
700 *Inso Corp............................ 17,500
1,200 *Macromedia Inc....................... 40,425
800 *Mapics Inc........................... 13,200
600 *New Era of Networks Inc.............. 26,400
1,900 *Pervasive Software Inc............... 36,575
133 Timberline Software Corp.............. 1,829
400 *Wind River Systems................... 18,800
----------
173,603
----------
CONSUMER PRODUCTS (1.0%)
100 *American Bank Note Holograph......... 1,750
600 *Tropical Sportswear Intl............. 21,525
----------
23,275
----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- ------------------------------------------------------------
<C> <S> <C>
DRUGS (0.9%)
800 *Geltex Pharmaceuticals Inc........... $ 18,100
100 *King Pharmaceuticals Inc............. 2,612
----------
20,712
----------
EDUCATION/SCHOOLS (2.0%)
200 *Bright Horizons Family Solutions..... 5,400
1,000 *Education Management Corp............ 23,625
500 *ITT Educational Services Inc......... 17,000
----------
46,025
----------
ELECTRICAL EQUIPMENT (6.2%)
400 *Applied Micro Circuits............... 13,588
1,200 *Artisan Components Inc............... 6,375
100 *Carrier Access Corp.................. 3,444
700 *E-Tek Dynamics Inc................... 18,725
300 *Jabil Circuit Inc.................... 22,387
400 *RF Micro Devices Inc................. 18,550
300 *Sanmina Corp......................... 18,750
1,000 *Transwitch Corp...................... 38,938
----------
140,757
----------
INSURANCE SERVICES (2.0%)
1,400 *Xoom.com Inc......................... 46,200
----------
FINANCIAL SERVICES (7.6%)
1,100 *Ameritrade Holding Corp. CL A........ 34,650
700 Arm Financial Group Inc. CL A......... 15,531
1,100 *Financial Federal Corp............... 27,225
1,700 *Knight/Trimark Group................. 40,694
700 *NCO Group Inc........................ 31,500
100 *Telebanc Financial Corp.............. 3,400
800 Waddell & Reed........................ 18,950
----------
171,950
----------
HOUSING, FURNITURE & RELATED (2.2%)
600 *Knoll Inc............................ 17,775
1,200 *Select Comfort Corp.................. 31,725
----------
49,500
----------
HOTEL/LODGING (1.7%)
1,000 Four Seasons Hotels Inc............... 29,250
500 Intrawest Resorts..................... 8,438
----------
37,688
----------
HUMAN SERVICES (2.2%)
600 *Data Processing Resources Corp....... 17,550
900 *Labor Ready Inc...................... 17,719
200 *On Assignment Inc.................... 6,900
400 *Vincam Group Inc..................... 7,025
----------
49,194
----------
INTERNET SOFTWARE & SERVICES (10.2%)
1,300 *24/7 Media Inc....................... 36,400
900 *Abovenet Communications.............. 18,900
300 *CMG Information Services Inc......... 31,950
300 *Earthlink Network Inc................ 17,100
600 *Lycos Inc............................ 33,338
100 *Mindspring Enterprises Inc........... 6,106
</TABLE>
(continued)
118
<PAGE> 119
OHIO NATIONAL FUND, INC.
SMALL CAP GROWTH PORTFOLIO (CONTINUED)
SCHEDULE OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- ------------------------------------------------------------
<C> <S> <C>
INTERNET SOFTWARE & SERVICES, CONTINUED
500 *Network Solutions..................... $ 65,438
1,100 *Psinet Inc............................ 22,962
----------
232,194
----------
INDUSTRIAL SERVICES (0.8%)
100 *Rental Service Corp................... 1,569
700 *U.S. Liquids Inc...................... 15,750
----------
17,319
----------
MEDIA & PUBLISHING (3.9%)
500 *Macrovision Corp...................... 21,125
1,200 *Gemstar Intl. Group Ltd............... 68,700
----------
89,825
----------
MEDICAL & RELATED (4.3%)
800 *Cytyc Corp............................ 20,600
600 *Incyte Pharmaceuticals................ 22,425
1,100 *Ocular Sciences Inc................... 29,425
300 *Province Healthcare Co................ 10,763
700 *Sabratek Corp......................... 11,463
100 *Xomed Surgical Products Inc........... 3,200
----------
97,876
----------
NETWORK PRODUCTS (5.1%)
400 *Concur Technologies Inc............... 12,200
700 *Concord Communications................ 39,725
200 *International Network Services........ 13,300
500 *ISS Group Inc......................... 27,500
600 *Visual Networks Inc................... 22,500
----------
115,225
----------
PRINTING & PUBLISHING (0.6%)
200 *Consolidation Graphics Inc............ 13,513
----------
REAL ESTATE AND LEASING (0.5%)
600 *CB Richard Ellis Services............. 10,875
----------
RESTAURANTS (0.1%)
100 *P.J. America Inc...................... 1,812
----------
RETAIL (7.0%)
500 *Abercrombie & Fitch Co. CL A.......... 35,375
700 *American Eagle Outfitters Inc......... 46,638
2,100 *Beyond.Com Corp....................... 43,575
1,100 *Comp USA Inc.......................... 14,369
500 *Onsale Inc............................ 20,031
----------
159,988
----------
TRAVEL SERVICES (0.5%)
400 *Global Vacation Group Inc............. 3,450
500 *Resortquest International............. 7,312
----------
10,762
----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES U.S. COMMON STOCK VALUE
- ------------------------------------------------------------
<C> <S> <C>
TRANSPORTATION (0.8%)
600 Skywest Inc........................... $ 19,613
----------
VITAMINS/NUTRITION PRODUCTS (0.5%)
100 *Twinlab Corp.......................... 1,312
1,000 *Usana Inc............................. 10,125
----------
11,437
----------
TOTAL U.S. COMMON STOCK
(94.0%) (COST $1,585,404)............ $2,135,848
----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES FOREIGN COMMON STOCK VALUE
- ------------------------------------------------------------
<C> <S> <C>
UNITED KINGDOM (2.6%)
COMPUTER SERVICES (2.3%)
1,500 *Ecsoft Group PLC...................... $ 52,875
----------
HUMAN SERVICES (0.3%)
300 Select Appointments Hldg PLC ADR...... 6,450
----------
TOTAL UNITED KINGDOM.................. 59,325
----------
TOTAL FOREIGN COMMON STOCK
(2.6%) (COST $53,142)................ $ 59,325
----------
TOTAL COMMON STOCK
(96.7%) (COST $1,638,546)............ $2,195,173
----------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS VALUE
- ------------------------------------------------------------
<C> <S> <C>
FINANCIAL (3.2%)
$74,000 Star Bank 3.50% due 01/04/99
repurchase price $74,029
collateralized by GNMA certificate
pool #8375 due 02/20/24 (cost
$74,000)............................. $ 74,000
----------
TOTAL REPURCHASE AGREEMENTS
(3.2%) (COST $74,000)................ $ 74,000
----------
TOTAL HOLDINGS (99.9%)
(COST $1,712,546) (a)................ $2,269,173
----------
CASH & RECEIVABLES, NET OF
LIABILITIES (0.1%)................... 1,900
----------
TOTAL NET ASSETS (100.0%)............. $2,271,073
==========
</TABLE>
- ---------------
* Non-income producing securities
(a) Also represents cost for Federal Income tax purposes.
The accompanying notes are an integral part of these financial statements.
119
<PAGE> 120
OHIO NATIONAL FUND, INC.
SMALL CAP GROWTH PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<S> <C>
Assets:
Investments in securities at market value
(note 1) (cost $1,712,546).............. $ 2,269,173
Cash in bank.............................. 725
Dividends and accrued interest
receivable.............................. 55
Other..................................... 9,583
-----------
Total assets............................ 2,279,536
-----------
Liabilities:
Payable for securities purchased.......... 2,625
Payable for investment management services
(note 3)................................ 2,836
Other accrued expenses.................... 3,002
-----------
Total liabilities....................... 8,463
-----------
Net assets at market value.................. $ 2,271,073
===========
Net assets consist of:
Par value, $1 per share................... $ 217,009
Paid-in capital in excess of par value.... 1,912,360
Accumulated net realized loss on
investments (note 1).................... (414,923)
Net unrealized appreciation on investments
(note 1)................................ 556,627
-----------
Net assets at market value.................. $ 2,271,073
===========
Shares outstanding (note 4)................. 217,009
Net asset value per share................... $ 10.47
===========
</TABLE>
STATEMENT OF OPERATIONS
May 1, 1998 to December 31, 1998
<TABLE>
<S> <C>
Investment income:
Interest................................... $ 5,361
Dividends.................................. 534
----------
Total investment income.................. 5,895
----------
Expenses:
Management fees (note 3)................... 10,726
Custodian fees (note 3).................... 3,210
Directors' fees (note 3)................... 132
Professional fees.......................... 420
Accounting and transfer agent fees......... 17,454
Other...................................... 702
----------
Total expenses........................... 32,644
Less expenses voluntarily reduced or
reimbursed (note 3).................... (9,157)
----------
Net expenses............................. 23,487
----------
Net investment loss...................... $ (17,592)
----------
Realized and unrealized gain (loss) on
investments:
Net realized loss from investments......... $ (414,923)
Net increase in unrealized appreciation on
on investments........................... 556,627
----------
Net gain on investments................ 141,704
----------
Net increase in net assets from
operations.......................... $ 124,112
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
120
<PAGE> 121
OHIO NATIONAL FUND, INC.
SMALL CAP GROWTH PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM MAY 1, 1998
TO DECEMBER 31,
1998
-----------------
<S> <C>
From operations:
Net investment loss....................................... $ (17,592)
Realized loss on investments.............................. (414,923)
Unrealized gain on investments............................ 556,627
----------
Net increase in net assets from operations............ 124,112
----------
From capital share transactions (note 4):
Received from shares sold................................. 2,148,414
Paid for shares redeemed.................................. (1,453)
----------
Increase in net assets derived from capital share
transactions......................................... 2,146,961
----------
Increase in net assets............................. 2,271,073
----------
Net Assets:
Beginning of period....................................... 0
----------
End of period............................................. $2,271,073
==========
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM MAY 1, 1998
TO DECEMBER 31,
1998
-----------------
<S> <C>
Per share data:
Net asset value, beginning of period........................ $10.00
Income from investment operations:
Net investment loss....................................... (0.09)
Net realized and unrealized gain on investments........... 0.56
------
Total income from investment operations................. 0.47
------
Net asset value, end of period.............................. $10.47
======
Total return (b)............................................ 4.62%
Ratios and supplemental data (a)(c):
Ratios net of fees reimbursed by advisor:
Expenses................................................ 1.96%
Net investment income................................... (1.47)%
Ratios assuming no fees reimbursed by advisor:
Expenses................................................ 2.72%
Net investment income................................... (2.23)%
Portfolio turnover rate..................................... 121%
Net assets at end of period (millions)...................... $ 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 Small
Cap Growth portfolio.
The accompanying notes are an integral part of these financial statements.
121
<PAGE> 122
OHIO NATIONAL FUND, INC. December 31, 1998
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:
o Equity Portfolio -- long-term growth of capital by investing principally
in common stocks or other equity securities. Current income is a secondary
objective.
o Money Market Portfolio -- maximum current income consistent with
preservation of capital and liquidity by investing in high quality money
market instruments.
o Bond Portfolio -- high level of return consistent with preservation of
capital by investing primarily in high quality intermediate and long-term
debt securities.
o Omni Portfolio -- high level of long-term total return consistent with
preservation of capital by investing in stocks, bonds, and money market
instruments.
o International Portfolio -- long-term capital growth by investing primarily
in common stocks of foreign companies.
o 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.
o Small Cap Portfolio -- maximum capital growth by investing primarily in
common stocks of small- and medium-sized companies.
o Global Contrarian Portfolio -- long-term growth of capital by investing in
foreign and domestic securities believed to be undervalued or presently
out of favor.
o Aggressive Growth Portfolio -- capital growth.
o Core Growth Portfolio -- long-term capital appreciation.
o 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.
o 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.
o 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.
o 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.
o Stellar Portfolio -- maximum total return by investing in domestic and
foreign securities (equity and fixed income), real estate, precious metal
securities, and money market securities.
o Relative Value Portfolio -- maximum total return consistent with
reasonable risk by investing primarily in equity securities.
The following portfolios commenced operations on May 1, 1998:
o Blue Chip Portfolio -- growth of capital and income by concentrating
investment decisions in securities of high quality companies.
o 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.
122
<PAGE> 123
OHIO NATIONAL FUND, INC. December 31, 1998
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
o 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.
o Small Cap 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. All
investments and cash quoted in foreign currencies are valued daily in U.S.
dollars on the basis of the foreign currency exchange rates prevailing at
the time of such valuation.
Foreign currency exchange rates are generally determined prior to 4:00 p.m.
Eastern time. Occasionally, events affecting the value of foreign
investments and such exchange rates occur between the time at which they are
determined and the time of valuation, which in the case of the
International, Small Cap, Global Contrarian, Aggressive Growth, Stellar,
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 may (a) write call
options traded on a registered national securities exchange if such
portfolio owns the underlying securities subject to such options, and
purchase call options for the purpose of closing out positions it has
written, (b) purchase put options on securities owned, and sell such options
in order to close its positions in put options, (c) purchase and sell
financial futures and options thereon, and (d) purchase and sell financial
index options; provided, however, that no option or futures contract shall
be purchased or sold if, as a result, more than one-third of the total
assets of the portfolio would be hedged by options or futures contracts, and
no more than 5% of any portfolio's total assets, at market value, may be
used for premiums on open options and initial margin deposits on futures
contracts. Options are recorded at market value, and the related realized
and unrealized gains and losses are included in the statement of operations.
The portfolios making use of options bear the market risk of an unfavorable
change in the price of any security underlying the options.
The Fund may invest in two kinds of financial futures contracts: stock index
futures contracts and interest rate futures contracts. Stock index futures
contracts are contracts developed by and traded on national commodity
exchanges whereby the buyer will, on a specified future date, pay or receive
a final cash payment equal to the difference between the actual value
123
<PAGE> 124
OHIO NATIONAL FUND, INC. December 31, 1998
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 Russell 2000 Index Futures Contracts
and S&P 500 Index Future Contracts. The futures contracts in the S&P 500
Index Portfolio and the Aggressive Growth Portfolio at December 31, 1998 are
as follows:
<TABLE>
<CAPTION>
EXPIRATION UNDERLYING FACE UNREALIZED CASH DEPOSITED
PORTFOLIO PURCHASED DATE AMOUNT AT VALUE GAIN AS MARGIN REQUIREMENT
--------- --------- ---------- --------------- ----------- ---------------------
<S> <C> <C> <C> <C> <C>
S&P 500 138 S&P 500 Index Contracts March '99 $ 41,071,750 $ 2,090,500 $ 1,863,000
Aggressive Growth 3 Russell 2000 Index Contracts March '99 621,700 15,800 27,200
Aggressive Growth 6 S&P 500 Index Contracts March '99 1,851,275 16,975 80,800
</TABLE>
Securities transactions are recorded on a trade date basis. Dividend income
is recognized on the ex-dividend date (except in the case of foreign
securities in the International, Small Cap, Global Contrarian, Aggressive
Growth, Stellar, 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, Global Contrarian,
Aggressive Growth, Stellar, 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.
Foreign investment and currency transactions may involve certain
considerations and risks not typically associated with investing in U.S.
companies and the U.S. Government. These risks, including re-evaluation of
currency and future adverse political and economic developments, could cause
investments and their markets to be less liquid and prices more volatile than
those of comparable U.S. companies and the U.S. Government.
Each portfolio may acquire repurchase agreements from member banks of the
Federal Reserve System which ONI deems creditworthy under guidelines approved
by the Board of Directors, subject to the seller's agreement to repurchase
such securities at a mutually agreed upon date and price. The repurchase
price generally equals the price paid by the portfolio plus interest
negotiated on the basis of current short-term rates, which may be more or
less than the rate on the underlying portfolio securities. The seller, under
a repurchase agreement, is required to maintain as collateral for the
repurchase transaction securities in which the portfolio has a perfected
security interest with a value not less than 100% of the repurchase price
(including accrued interest). Securities subject to repurchase agreements are
held by the Fund's custodian or another qualified custodian or in the Federal
Reserve/Treasury book-entry system. Repurchase agreements are considered to
be loans by the portfolio under the 1940 Act.
124
<PAGE> 125
OHIO NATIONAL FUND, INC. December 31, 1998
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily due to wash sales and net
operating losses. The character of distributions made during the period from
net investment income or net realized gains, if any, may differ from their
ultimate characterization for federal income tax purposes. On the statement
of assets and liabilities, as a result of permanent book-to-tax differences,
the following reclassifications were made in the Small Cap, Aggressive
Growth, Core Growth and Small Cap Growth Portfolios: accumulated net
investment loss has been decreased by $187,071, $21,640, $62,638 and $17,952,
respectively, resulting in a reclassification adjustment to decrease Paid-in
capital in excess of par value by $187,071, $21,640, $62,638 and $17,952
respectively. This reclassification has no effect on net assets or net asset
value per share.
For Federal income tax purposes, the Bond, Omni, Small Cap, Core Growth,
Growth and Income, Social Awareness, Strategic Income, Blue Chip, Equity
Income and Small Cap Growth Portfolios had capital loss carryovers of
$274,501, $681,856, $4,198,422, $1,632,809, $3,005,094, $622,020, $97,030,
$18,271, $5,714 and $414,923 respectively, at December 31, 1998. If not
offset by capital gains, $41,235 will expire in 2003 in the Bond Portfolio,
$2,893 and $447,567 will expire in 2005 in the Bond and Core Growth
Portfolios, respectively and $230,373, $681,856, $4,198,422, $1,185,242,
$3,005,094, $622,022, $97,030, $18,271, $5,714 and $414,923 will expire in
2006 in the Bond, Omni, Small Cap, Core Growth, Growth and Income, Social
Awareness, Strategic Income, Blue Chip, Equity Income and Small Cap Growth
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.
The gross unrealized appreciation and depreciation on investments in each
portfolio as of December 31, 1998 were as follows:
<TABLE>
<CAPTION>
CAPITAL
EQUITY BOND OMNI INTERNATIONAL APPRECIATION
------------ ----------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Gross unrealized:
Appreciation............................ $127,628,808 $ 1,004,138 $ 63,012,142 $ 16,944,183 $ 6,887,251
Depreciation............................ (14,989,841) (390,280) (10,021,510) (25,740,274) (3,778,113)
Net unrealized:
Appreciation (Depreciation)............. 112,638,967 613,858 52,990,632 (8,796,091) 3,109,138
</TABLE>
<TABLE>
<CAPTION>
SMALL GLOBAL AGGRESSIVE CORE GROWTH &
CAP CONTRARIAN GROWTH GROWTH INCOME
------------ ----------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Gross unrealized:
Appreciation............................ $ 21,939,495 $ 1,274,336 $ 2,940,298 $ 2,824,800 $ 9,485,474
Depreciation............................ (1,809,202) (2,265,134) (1,700,872) (186,758) (3,237,614)
Net unrealized:
Appreciation............................ 20,130,293 (990,798) 1,239,426 2,638,042 6,247,860
</TABLE>
125
<PAGE> 126
OHIO NATIONAL FUND, INC. December 31, 1998
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
SOCIAL STRATEGIC RELATIVE
S&P 500 AWARENESS INCOME STELLAR VALUE
------------ ----------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Gross unrealized:
Appreciation............................ $ 8,688,208 $ 476,450 $ 63,288 $ 296,100 $ 1,872,191
Depreciation............................ (870,560) (1,868,896) (261,139) (192,375) (128,422)
Net unrealized:
Appreciation (Depreciation)............. 7,817,648 (1,392,446) (197,851) 103,725 1,743,769
</TABLE>
<TABLE>
<CAPTION>
EQUITY HIGH INCOME SMALL CAP
BLUE CHIP INCOME BOND GROWTH
------------ ----------- ------------ -------------
<S> <C> <C> <C> <C>
Gross unrealized:
Appreciation............................ $ 289,890 $ 246,997 $ 135,268 $ 632,194
Depreciation............................ (179,789) (128,976) (551,534) (75,567)
Net unrealized:
Appreciation (Depreciation)............. 110,101 118,021 (416,266) 556,627
</TABLE>
(2) INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term
securities) for the year ended December 31, 1998 were as follows:
<TABLE>
<CAPTION>
CAPITAL
EQUITY BOND OMNI INTERNATIONAL APPRECIATION
------------ ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Stocks & Bonds:
Purchases............................... $ 68,906,018 $ 11,874,909 $ 53,692,318 $ 29,867,283 $ 39,591,352
Sales................................... 68,240,377 2,777,343 32,345,296 27,036,107 26,909,965
U.S. Government Obligations:
Purchases............................... -- -- -- -- 1,822,469
Sales................................... -- -- -- -- 125,000
</TABLE>
<TABLE>
<CAPTION>
SMALL GLOBAL AGGRESSIVE CORE GROWTH &
CAP CONTRARIAN GROWTH GROWTH INCOME
------------ ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Stocks & Bonds:
Purchases............................... $ 71,027,299 $ 10,541,770 $ 46,159,901 $ 13,551,395 $ 131,057,532
Sales................................... 54,940,257 8,513,040 42,007,664 12,345,416 99,509,813
U.S. Government Obligations:
Purchases............................... -- -- 222,284 -- --
Sales................................... -- -- 285,000 -- --
</TABLE>
<TABLE>
<CAPTION>
SOCIAL STRATEGIC RELATIVE
S&P 500 AWARENESS INCOME STELLAR VALUE
------------ ----------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Stocks & Bonds:
Purchases............................... $ 63,131,513 $ 8,635,349 $ 4,542,831 $ 2,245,625 $ 7,029,754
Sales................................... 31,602,547 4,471,383 3,378,459 1,770,962 4,220,889
U.S. Government Obligations:
Purchases............................... -- -- 485,788 518,326 --
Sales................................... -- -- 376,351 309,376 --
</TABLE>
126
<PAGE> 127
OHIO NATIONAL FUND, INC. December 31, 1998
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
HIGH INCOME EQUITY SMALL CAP
BLUE CHIP BOND INCOME GROWTH
------------ ----------- ------------ -------------
<S> <C> <C> <C> <C>
Stocks & Bonds:
Purchases............................... $ 3,409,614 $ 2,776,741 $ 11,285,174 $ 4,075,959
Sales................................... 723,978 731,928 1,016,067 2,022,491
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 Equity, Bond, Omni and Social Awareness
Portfolios, 0.60% of the first $100 million of each Portfolio's net assets,
0.50% of the next $150 million of net assets, 0.45% of the next $250 million
of net assets, 0.40% of the next $500 million of net assets, 0.30% of the
next $1 billion of net assets, and 0.25% of net assets over $2 billion; (b)
for the Money Market Portfolio, 0.30% of the first $100 million of net
assets, 0.25% of the next $150 million of net assets, 0.23% of the net $250
million of net assets, 0.20% of the next $500 million of net assets, and
0.15% of net assets over $1 billion; (c) for the International, Global
Contrarian, Relative Value, Small Cap Growth, and Blue Chip Portfolios,
0.90% of each Portfolio's net assets; (d) for the Capital Appreciation,
Small Cap, Aggressive Growth and Strategic Income Portfolios, 0.80% of each
Portfolio's net assets, (e) for the Core Growth Portfolio, 0.95% of the
first $150 million of net assets, and 0.80% of net assets over $150 million;
(f) for the Growth & Income Portfolio, 0.85% of the first $200 million of
net assets and 0.80% of net assets over $200 million, (g) for the S&P 500
Index Portfolio, 0.40% of the first $100 million of net assets, 0.35% of the
next $150 million of net assets, and 0.33% of net assets over $250 million;
(h) for the Stellar Portfolio, 1.00% of that Portfolio's net assets; and (I)
for the High Income Bond and Equity Income, 0.75% of each Portfolio's net
assets. However, as to the Money Market Portfolio, the Advisor is presently
waiving any of its fee in excess of 0.25%. 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, Global
Contrarian, Aggressive Growth, Core Growth, Growth & Income, Small Cap
Growth, Strategic Income, Stellar, Relative Value, High Income Bond, Equity
Income, and Blue Chip Portfolios, subject to the approval of the Fund's
Board of Directors. ONI has entered into Sub-Advisory Agreements with
Societe Generale Asset Management Corp. ("SGAM"), T. Rowe Price Associates,
Inc. ("TRPA"), Founders Asset Management, Inc. ("FAM"), Strong Capital
Management, Inc. ("SCM"), Pilgrim Baxter & Associates, Ltd. ("PBA"),
Robertson Stephens Investment Management, L.P. ("RSIM"), Star Bank, N.A.
("Star"), and Federated Investment Counseling ("FIC") respectively, to
manage the investment and reinvestment of those Portfolios' assets, subject
to the supervision of ONI. As compensation for their services, (a) SGAM
receives from ONI fees at the annual rate of 0.65% of the International and
Global Contrarian Portfolios' average daily net assets during the quarter
for which the fee is paid, (b) TRPA receives from ONI a fee at an annual
rate of 0.50% of average daily net assets of the Capital Appreciation
Portfolio, (c) 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; (d) 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;
(e) 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: (f) 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; (g) Star receives from ONI fees at an annual rate of (i)
0.55% of the first $50 million and 0.50% of average daily net assets in
excess of $50 million of the Strategic Income Portfolio, (ii) 0.75% of the
$50 million and 0.70% of average daily net assets in excess of $50 million
of the Stellar Portfolio and (iii) 0.65% of the first $50 million and 0.60%
of average daily net assets in excess of $50 million of the Relative Value
Portfolio; and (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 127
<PAGE> 128
OHIO NATIONAL FUND, INC. December 31, 1998
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
net assets in excess of $100 million of each of the Equity Income and Blue
Chip Portfolios and (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.
Effective January 1, 1999 FIC replaced SGAM as the sub-advisor for the
International and Global Contrarian Portfolios. As compensation for their
services FIC will receive from ONI fees at an annual rate of (i) 0.40% of the
first $200 million and 0.35% of average net assets in excess of $200 million
of the International Portfolio and (ii) 0.75% of the first $100 million and
0.65% of the average daily net assets in excess of $100 million of the Global
Contrarian Portfolio.
Each director who is not an officer of the Fund or an employee of ONI or its
corporate affiliates is paid a quarterly retainer fee of $2,000 plus $400 for
each meeting attended.
The Fund's transfer agent and dividend paying agent is American Data
Services, Inc., The Hauppauge Corporate Center, 150 Motor Parkway, Suite 109,
Hauppauge, New York. The Fund's custodian for those portfolios other than the
International and Global Contrarian Portfolios is Star Bank, N.A., 425 Walnut
Street, Cincinnati, Ohio. The custodian for the International and Global
Contrarian Portfolios is Investors Fiduciary Trust Company, 801 Pennsylvania,
Kansas City, Missouri. For assets held outside the United States, Star Bank
and Investors Fiduciary Trust Company enter into subcustodial agreements,
subject to approval by the Board of Directors.
(4) CAPITAL SHARE
Transactions Capital share transactions for the years ended December 31, 1998
and 1997 were as follows:
<TABLE>
<CAPTION>
EQUITY MONEY MARKET BOND
---------------------- ---------------------- ----------------------
1998 1997 1998 1997 1998 1997
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Capital shares issued on sales............ 675,941 1,099,809 6,102,024 4,006,494 986,062 644,662
Capital shares issued on reinvested
dividends............................... 254,451 574,786 164,506 124,176 150,778 161,245
Capital shares redeemed................... 883,690 752,158 4,740,526 3,767,642 486,752 723,200
</TABLE>
<TABLE>
<CAPTION>
OMNI INTERNATIONAL CAPITAL APPRECIATION
---------------------- ---------------------- ----------------------
1998 1997 1998 1997 1998 1997
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Capital shares issued on sales............ 1,413,338 1,691,998 848,791 2,422,039 1,366,055 1,350,471
Capital shares issued on reinvested
dividends............................... 264,859 715,507 855,911 1,742,189 580,235 359,011
Capital shares redeemed................... 872,309 709,824 2,444,300 1,377,360 443,155 249,388
</TABLE>
<TABLE>
<CAPTION>
SMALL CAP GLOBAL CONTRARIAN AGGRESSIVE GROWTH
---------------------- ---------------------- ----------------------
1998 1997 1998 1997 1998 1997
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Capital shares issued on sales............ 918,465 1,170,240 346,731 579,754 667,591 767,314
Capital shares issued on reinvested
dividends............................... 47 131,550 211,017 132,202 159,625 23,559
Capital shares redeemed................... 381,989 320,642 252,173 143,586 249,214 193,560
</TABLE>
<TABLE>
<CAPTION>
CORE GROWTH GROWTH & INCOME S&P 500
---------------------- ---------------------- ----------------------
1998 1997 1998 1997 1998 1997
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Capital shares issued on sales............ 447,717 1,272,254 2,697,893 1,436,044 4,704,361 1,782,577
Capital shares issued on reinvested
dividends............................... 0 419 31,748 75,471 394,979 187,990
Capital shares redeemed................... 315,206 287,167 416,202 56,151 366,640 88,101
</TABLE>
128
<PAGE> 129
OHIO NATIONAL FUND, INC. December 31, 1998
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
SOCIAL AWARENESS STRATEGIC INCOME STELLAR
---------------------- ---------------------- ----------------------
1998 1997 1998 1997 1998 1997
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Capital shares issued on sales............ 491,246 399,740 116,213 309,296 98,689 262,250
Capital shares issued on reinvested
dividends............................... 3,763 37,565 27,950 16,810 12,199 6,971
Capital shares redeemed................... 170,620 12,616 33,901 6,191 32,973 5,693
</TABLE>
<TABLE>
<CAPTION>
EQUITY HIGH
RELATIVE VALUE BLUE CHIP INCOME INCOME S. CAP G.
---------------------- --------- --------- --------- ---------
1998 1997 1998 1998 1998 1998
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Capital shares issued on sales............ 486,057 460,646 287,536 216,229 1,046,722 217,195
Capital shares issued on reinvested
dividends............................... 13,803 3,973 403 1,309 42,369 0
Capital shares redeemed................... 285,649 12.351 6,276 6,719 855 186
</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, 1998, the International and Global Contrarian 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 12/31/98 AMOUNT TYPE AT 12/31/98 GAIN LOSS
------ ------------- ----------------- ----------- ---------- -------------- ----------- -------- ------------
<C> <C> <S> <C> <C> <C> <C> <C> <C>
07/15/99 4,422,000 Australian Dollar 2,699,631 2,769,587 U.S. Dollar 2,769,587 $ 69,956 --
04/07/99 7,031,000 Swiss Franc 5,164,157 5,099,760 U.S. Dollar 5,099,760 -- $ (64,397)
04/14/99 11,825,000 Deutsche Mark 7,138,761 7,092,714 U.S. Dollar 7,092,714 -- (46,047)
11/14/99 885,445 U.S. Dollar 885,445 1,472,000 Deutsche Mark 888,647 3,202 --
07/08/99 804,000 Deutsche Mark 486,727 490,274 U.S. Dollar 490,274 3,547 --
04/21/99 3,019,000 French Franc 543,059 551,265 U.S. Dollar 551,265 8,206 --
04/21/99 276,742 U.S. Dollar 276,742 1,529,000 French Franc 275,037 -- (1,705)
07/01/99 28,932,000 French Franc 5,215,087 5,243,204 U.S. Dollar 5,243,204 28,117 --
05/05/99 332,000 British Pound 552,066 560,748 U.S. Dollar 560,748 8,682 --
05/05/99 253,198 U.S. Dollar 254,197 151,000 British Pound 251,090 -- (3,107)
04/28/99 1,044,480,000 Japanese Yen 9,342,815 8,248,491 U.S. Dollar 8,248,491 -- (1,094,324)
07/29/99 1,215,749,000 Japanese Yen 11,002,751 10,702,016 U.S. Dollar 10,702,016 -- (300,735)
05/14/99 5,361,000 New Zld Dollar 2,819,350 2,750,537 U.S. Dollar 2,750,537 -- (68,813)
05/15/99 12,871 U.S. Dollar 12,872 24,000 New Zld Dollar 12,622 -- (250)
10/05/01 3,650,000 New Zld Dollar 1,958,225 1,750,175 U.S. Dollar 1,750,175 -- (208,050)
---------- ---------- -------- ------------
48,351,885 46,686,167 $121,710 $ (1,787,428)
========== ========== ======== ============
</TABLE>
GLOBAL CONTRARIAN PORTFOLIO
<TABLE>
<CAPTION>
CURRENCY TO BE DELIVERED CURRENCY TO BE RECEIVED UNREALIZED
SETTLE --------------------------------- U.S. $ VAL. --------------------------- U.S. $ VAL. -----------------------
DATES AMOUNT TYPE AT 12/31/98 AMOUNT TYPE AT 12/31/98 GAIN LOSS
------ ------------- ----------------- ----------- ---------- -------------- ----------- -------- ------------
<C> <C> <S> <C> <C> <C> <C> <C> <C>
04/28/99 39,902,000 Japanese Yen 356,921 344,714 U.S. Dollar 344,714 -- $ (12,207)
07/29/99 11,356,000 Japanese Yen 102,774 99,965 U.S. Dollar 99,965 -- (2,809)
11/13/00 18,480,000 Japanese Yen 176,715 173,147 U.S. Dollar 173,147 -- (3,568)
04/07/99 125,000 Dutch Guilder 66,816 64,868 U.S. Dollar 64,868 -- (1,948)
04/07/99 66,260 U.S. Dollar 66,260 64,868 Dutch Guilder 66,816 $ 556 --
---------- ---------- -------- ------------
769,486 749,510 $ 556 $ (20,532)
========== ========== ======== ============
</TABLE>
129
<PAGE> 130
OHIO NATIONAL FUND, INC. December 31, 1998
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(6) SPECIAL MEETING OF SHAREHOLDERS (UNAUDITED)
There was a special meeting of the shareholders of the Small Cap portfolio
on February 17, 1998. The Small Cap portfolio shareholders approved a new
Sub-Advisory Agreement between Founders Asset Management LLC and Ohio
National Investments, Inc. by a vote of 2,552,459 in favor, 29,932 opposed,
and 296,552 abstaining.
The accompanying notes are an integral part of these financial statements.
130
<PAGE> 131
OHIO NATIONAL VARIABLE ACCOUNT R
INDEPENDENT AUDITORS' REPORT
The Board of Directors of
The Ohio National Life Insurance Company
and Contract Owners of
Ohio National Variable Account R:
We have audited the accompanying statements of assets and contract owners'
equity of Ohio National Variable Account R (comprised of the Equity, Money
Market, Bond, Omni, International, Capital Appreciation, Small Cap, Global
Contrarian, Aggressive Growth, S&P 500 Index, Social Awareness, Core Growth,
Growth & Income and Montgomery Asset Emerging Market subaccounts) as of December
31, 1998, and the related statements of operations and changes in contract
owners' equity for each of the periods indicated herein. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1998, by correspondence with
the transfer agents of the underlying mutual funds. 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 referred to above present fairly, in
all material respects, the financial position of Ohio National Variable Account
R as of December 31, 1998, and the results of its operations and its changes in
contract owners' equity for each of the years indicated herein in conformity
with generally accepted accounting principles.
KPMG Peat Marwick LLP
KPMG LLP
Cincinnati, Ohio
February 5, 1999
131
<PAGE> 132
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OHIO NATIONAL VARIABLE ACCOUNT R December 31, 1998
STATEMENTS OF ASSETS AND CONTRACT OWNERS' EQUITY
<TABLE>
<CAPTION>
MONEY
EQUITY MARKET BOND OMNI INTERNATIONAL
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ---------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Assets -- Investments at market value (note
2).......................................... $31,166,072 $4,068,382 $1,674,308 $11,931,894 $16,865,296
=========== ========== ========== =========== ===========
Contract owners' equity
Contracts in accumulation period (note 3)... $31,166,072 $4,068,382 $1,674,308 $11,931,894 $16,865,296
=========== ========== ========== =========== ===========
<CAPTION>
CAPITAL
APPRECIATION SMALL CAP
SUBACCOUNT SUBACCOUNT
------------ -------------
<S> <C> <C>
Assets -- Investments at market value (note
2).......................................... $7,079,821 $9,250,038
========== ==========
Contract owners' equity
Contracts in accumulation period (note 3)... $7,079,821 $9,250,038
========== ==========
</TABLE>
<TABLE>
<CAPTION>
GLOBAL AGGRESSIVE CORE GROWTH & S&P 500
CONTRARIAN GROWTH GROWTH INCOME INDEX
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ---------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Assets -- Investments at market value (note
2).......................................... $ 2,044,553 $3,834,209 $1,296,450 $ 5,622,122 $ 7,713,053
=========== ========== ========== =========== ===========
Contract owners' equity
Contracts in accumulation period (note 3)... $ 2,044,553 $3,834,209 $1,296,450 $ 5,622,122 $ 7,713,053
=========== ========== ========== =========== ===========
<CAPTION>
MONTGOMERY
SOCIAL ASSET
AWARENESS EMERGING MKT.
SUBACCOUNT SUBACCOUNT
------------ -------------
<S> <C> <C>
Assets -- Investments at market value (note
2).......................................... $ 529,362 $ 230,780
========== ==========
Contract owners' equity
Contracts in accumulation period (note 3)... $ 529,362 $ 230,780
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
132
<PAGE> 133
OHIO NATIONAL VARIABLE ACCOUNT R
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
For the Three Years Ended December 31
<TABLE>
<CAPTION>
EQUITY MONEY MARKET
SUBACCOUNT SUBACCOUNT
------------------------------------------- -----------------------------------------
1998 1997 1996 1998 1997 1996
----------- ----------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment activity:
Reinvested dividends................ $ 374,943 $ 453,946 $ 278,504 $ 92,380 $ 55,657 $ 39,652
Risk & administrative expense (note
4)............................... (222,953) (190,776) (143,826) (13,276) (7,949) (7,545)
----------- ----------- ----------- ----------- ---------- ----------
Net investment activity........ 151,990 263,170 134,678 79,104 47,708 32,107
----------- ----------- ----------- ----------- ---------- ----------
Realized & Unrealized gain (loss) on
investments:
Reinvested capital gains......... 582,686 1,475,813 487,586 0 0 0
Realized gain (loss)............. 433,578 431,237 160,116 (1,729) 241 (6,138)
Unrealized gain (loss)........... 276,272 1,699,778 2,231,504 0 0 0
----------- ----------- ----------- ----------- ---------- ----------
Net gain (loss) on
investments................. 1,292,536 3,606,828 2,879,206 (1,729) 241 (6,138)
----------- ----------- ----------- ----------- ---------- ----------
Net increase in contract
owners' equity from
operations................ 1,444,526 3,869,998 3,013,884 77,375 47,949 25,969
----------- ----------- ----------- ----------- ---------- ----------
Equity transactions:
Sales:
Contract purchase payments....... 5,167,419 4,850,686 4,490,453 9,924,762 6,067,434 4,328,290
Transfers from fixed & other
subaccounts.................... 1,599,312 2,585,503 1,268,910 2,863,761 1,593,336 544,044
----------- ----------- ----------- ----------- ---------- ----------
6,766,731 7,436,189 5,759,363 12,788,523 7,660,770 4,872,334
----------- ----------- ----------- ----------- ---------- ----------
Redemptions:
Withdrawals & surrenders (note
5)............................. 975,495 930,275 328,631 48,825 8,519 5,529
Transfers to fixed & other
subaccounts.................... 2,231,174 2,061,907 1,294,677 9,721,391 7,321,910 4,313,747
Cost of insurance &
administrative fee (note 5).... 2,044,300 1,775,339 1,519,968 257,277 225,524 173,031
----------- ----------- ----------- ----------- ---------- ----------
5,250,969 4,767,521 3,143,276 10,027,493 7,555,953 4,492,307
----------- ----------- ----------- ----------- ---------- ----------
Net equity transactions........ 1,515,762 2,668,668 2,616,087 2,761,030 104,817 380,027
----------- ----------- ----------- ----------- ---------- ----------
Net change in contract
owners' equity............ 2,960,288 6,538,666 5,629,971 2,838,405 152,766 405,996
Contract owners' equity:
Beginning of period................. 28,205,784 21,667,118 16,037,147 1,229,977 1,077,211 671,215
----------- ----------- ----------- ----------- ---------- ----------
End of period....................... $31,166,072 $28,205,784 $21,667,118 $ 4,068,382 $1,229,977 $1,077,211
=========== =========== =========== =========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
133
<PAGE> 134
OHIO NATIONAL VARIABLE ACCOUNT R
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
For the Three Years Ended December 31
<TABLE>
<CAPTION>
BOND OMNI
SUBACCOUNT SUBACCOUNT
------------------------------------ ------------------------------------------
1998 1997 1996 1998 1997 1996
---------- -------- -------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment activity:
Reinvested dividends...................... $ 83,140 $ 68,280 $ 38,549 $ 301,587 $ 285,077 $ 168,919
Risk & administrative expense (note 4).... (9,252) (6,130) (4,242) (83,337) (65,184) (45,484)
---------- -------- -------- ----------- ----------- ----------
Net investment activity.............. 73,888 62,150 34,307 218,250 219,893 123,435
---------- -------- -------- ----------- ----------- ----------
Realized & Unrealized gain (loss) on
investments:
Reinvested capital gains............... 0 0 0 1,760 480,048 92,139
Realized gain (loss)................... 2,811 1,394 743 332,951 73,429 48,077
Unrealized gain (loss)................. (21,734) 4,309 (13,745) (101,784) 562,929 578,417
---------- -------- -------- ----------- ----------- ----------
Net gain (loss) on investments....... (18,923) 5,703 (13,002) 232,927 1,116,406 718,633
---------- -------- -------- ----------- ----------- ----------
Net increase in contract owners'
equity from operations.......... 54,965 67,853 21,305 451,177 1,336,299 842,068
---------- -------- -------- ----------- ----------- ----------
Equity transactions:
Sales:
Contract purchase payments............. 345,106 244,107 328,071 2,470,020 1,966,189 1,544,190
Transfers from fixed & other
subaccounts.......................... 567,357 131,403 87,756 2,614,095 907,850 583,740
---------- -------- -------- ----------- ----------- ----------
912,463 375,510 415,827 5,084,115 2,874,039 2,127,930
---------- -------- -------- ----------- ----------- ----------
Redemptions:
Withdrawals & surrenders (note 5)...... 13,218 21,828 8,438 705,842 187,562 167,671
Transfers to fixed & other
subaccounts.......................... 129,183 131,854 162,147 2,318,267 312,223 299,190
Cost of insurance & administrative fee
(note 5)............................. 100,579 70,289 62,462 802,634 648,661 501,412
---------- -------- -------- ----------- ----------- ----------
242,980 223,971 233,047 3,826,743 1,148,446 968,273
---------- -------- -------- ----------- ----------- ----------
Net equity transactions.............. 669,483 151,539 182,780 1,257,372 1,725,593 1,159,657
---------- -------- -------- ----------- ----------- ----------
Net change in contract owners'
equity.......................... 724,448 219,392 204,085 1,708,549 3,061,892 2,001,725
Contract owners' equity:
Beginning of period....................... 949,860 730,468 526,383 10,223,345 7,161,453 5,159,728
---------- -------- -------- ----------- ----------- ----------
End of period............................. $1,674,308 $949,860 $730,468 $11,931,894 $10,223,345 $7,161,453
========== ======== ======== =========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
134
<PAGE> 135
OHIO NATIONAL VARIABLE ACCOUNT R
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
For the Three Years Ended December 31
<TABLE>
<CAPTION>
INTERNATIONAL CAPITAL APPRECIATION
SUBACCOUNT SUBACCOUNT
------------------------------------------- ----------------------------------------
1998 1997 1996 1998 1997 1996
----------- ----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment activity:
Reinvested dividends................. $ 630,410 $ 983,741 $ 421,814 $ 155,395 $ 130,659 $ 64,452
Risk & administrative expense (note
4)................................ (124,053) (112,268) (78,825) (45,565) (28,303) (13,716)
----------- ----------- ----------- ---------- ---------- ----------
Net investment activity......... 506,357 871,473 342,989 109,830 102,356 50,736
----------- ----------- ----------- ---------- ---------- ----------
Realized & unrealized gain (loss) on
Investments:
Reinvested capital gains.......... 695,117 1,415,674 151,723 539,044 244,214 42,011
Realized gain (loss).............. (45,820) 186,736 23,917 33,861 34,042 19,381
Unrealized gain (loss)............ (670,437) (2,391,042) 752,956 (390,779) 129,929 172,281
----------- ----------- ----------- ---------- ---------- ----------
Net gain (loss) on
investments.................. (21,140) (788,632) 928,596 182,126 408,185 233,673
----------- ----------- ----------- ---------- ---------- ----------
Net increase in contract
owners' equity from
operations................. 485,217 82,841 1,271,585 291,956 510,541 284,409
----------- ----------- ----------- ---------- ---------- ----------
Equity transactions:
Sales:
Contract purchase payments........ 4,027,966 4,352,514 3,766,785 2,206,184 1,458,697 1,176,050
Transfers from fixed & other
subaccounts..................... 965,930 2,121,595 1,410,908 951,520 1,299,231 709,737
----------- ----------- ----------- ---------- ---------- ----------
4,993,896 6,474,109 5,177,693 3,157,704 2,757,928 1,885,787
----------- ----------- ----------- ---------- ---------- ----------
Redemptions:
Withdrawals & surrenders (note
5).............................. 618,889 469,189 160,367 170,616 54,331 55,870
Transfers to fixed & other
subaccounts..................... 2,112,568 2,136,043 622,081 518,403 775,912 301,791
Cost of insurance & administrative
fee (note 5).................... 1,348,113 1,269,503 1,009,169 548,283 377,999 244,293
----------- ----------- ----------- ---------- ---------- ----------
4,079,570 3,874,735 1,791,617 1,237,302 1,208,242 601,954
----------- ----------- ----------- ---------- ---------- ----------
Net equity transactions......... 914,326 2,599,374 3,386,076 1,920,402 1,549,686 1,283,833
----------- ----------- ----------- ---------- ---------- ----------
Net change in contract
owners' equity............. 1,399,543 2,682,215 4,657,661 2,212,358 2,060,227 1,568,242
Contract owners' equity:
Beginning of period.................. 15,465,753 12,783,538 8,125,877 4,867,483 2,807,236 1,238,994
----------- ----------- ----------- ---------- ---------- ----------
End of period........................ $16,865,296 $15,465,753 $12,783,538 $7,079,821 $4,867,463 $2,807,236
=========== =========== =========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
135
<PAGE> 136
OHIO NATIONAL VARIABLE ACCOUNT R
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
For the Three Years Ended December 31
<TABLE>
<CAPTION>
SMALL CAP GLOBAL CONTRARIAN
SUBACCOUNT SUBACCOUNT
---------------------------------------- ----------------------------------------
1998 1997 1996 1998 1997 1996
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment activity:
Reinvested dividends........ $ 0 $ 0 $ 0 $ 54,153 $ 52,943 $ 18,287
Risk & administrative
expense (note 4)......... (54,057) (38,798) (20,200) (13,819) (9,551) (5,154)
---------- ---------- ---------- ---------- ---------- ----------
Net investment
activity............ (54,057) (38,798) (20,200) 40,334 43,392 13,133
---------- ---------- ---------- ---------- ---------- ----------
Realized & unrealized gain
(loss) on Investments:
Reinvested capital
gains.................. 107 271,143 56,631 180,539 83,769 1,932
Realized gain (loss)..... 57,223 84,498 9,714 8,238 32,076 1,474
Unrealized gain (loss)... 930,451 130,287 414,502 (187,295) (35,010) 43,850
---------- ---------- ---------- ---------- ---------- ----------
Net gain (loss) on
investments......... 987,781 485,928 480,847 1,482 80,835 47,256
---------- ---------- ---------- ---------- ---------- ----------
Net increase in
contract owners'
equity from
operations........ 933,724 447,130 460,647 41,816 124,227 60,389
---------- ---------- ---------- ---------- ---------- ----------
Equity transactions:
Sales:
Contract purchase
payments............... 2,614,149 2,181,009 1,584,784 666,312 537,053 459,332
Transfers from fixed &
other subaccounts...... 1,096,254 1,438,960 1,168,570 218,614 450,868 403,280
---------- ---------- ---------- ---------- ---------- ----------
3,710,403 3,619,969 2,753,354 884,926 987,921 862,612
---------- ---------- ---------- ---------- ---------- ----------
Redemptions:
Withdrawals & surrenders
(note 5)............... 258,338 141,409 80,764 56,018 221,380 3,696
Transfers to fixed &
other subaccounts...... 795,000 1,146,251 258,675 219,547 218,387 35,452
Cost of insurance &
administrative fee
(note 5)............... 705,650 579,612 383,497 178,599 140,673 75,598
---------- ---------- ---------- ---------- ---------- ----------
1,758,988 1,867,272 722,936 454,164 580,440 114,746
---------- ---------- ---------- ---------- ---------- ----------
Net equity
transactions........ 1,951,415 1,752,697 2,030,418 430,762 407,481 747,866
---------- ---------- ---------- ---------- ---------- ----------
Net change in
contract owners'
equity............ 2,885,139 2,199,827 2,491,065 472,578 531,708 808,255
Contract owners' equity:
Beginning of period......... 6,364,899 4,165,072 1,674,007 1,571,975 1,040,267 232,012
---------- ---------- ---------- ---------- ---------- ----------
End of period............... $9,250,038 $6,364,899 $4,165,072 $2,044,553 $1,571,975 $1,040,267
========== ========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
136
<PAGE> 137
OHIO NATIONAL VARIABLE ACCOUNT R
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
For the Three Years Ended December 31
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH CORE GROWTH GROWTH & INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT
-------------------------------------- ------------------------ ------------------------
1998 1997 1996 1998 1997(a) 1998 1997(a)
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment activity:
Reinvested dividends........... $ 0 $ 24,808 $ 0 $ 0 $ 161 $ 40,476 $ 7,733
Risk & administrative expense
(note 4).................... (23,847) (16,668) (6,733) (7,627) (3,844) (27,216) (4,646)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net investment activity... (23,847) 8,140 (6,733) (7,627) (3,683) 13,260 3,087
---------- ---------- ---------- ---------- ---------- ---------- ----------
Realized & unrealized gain
(loss) on Investments:
Reinvested capital gains.... 258,472 9,068 158,688 0 0 0 90,978
Realized gain (loss)........ 22,270 (3,358) (294) 1,725 3,379 10,734 7,768
Unrealized gain (loss)...... (6,276) 231,511 (114,233) 101,913 (3,039) 252,938 94,008
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net gain (loss) on
investments............ 274,466 237,221 44,161 103,638 340 263,672 192,754
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net increase in
contract owners'
equity from
operations........... 250,619 245,361 37,428 96,011 (3,343) 276,932 195,841
---------- ---------- ---------- ---------- ---------- ---------- ----------
Equity transactions:
Sales:
Contract purchase
payments.................. 1,348,654 969,362 915,114 459,093 377,379 2,034,257 536,293
Transfers from fixed & other
subaccounts............... 423,659 544,712 640,496 378,819 631,937 2,464,502 1,270,995
---------- ---------- ---------- ---------- ---------- ---------- ----------
1,772,313 1,514,074 1,555,610 837,912 1,009,316 4,498,759 1,807,288
---------- ---------- ---------- ---------- ---------- ---------- ----------
Redemptions:
Withdrawals & surrenders
(note 5).................. 86,262 84,536 6,572 16,609 1,885 37,971 436
Transfers to fixed & other
subaccounts............... 460,387 418,423 120,708 327,440 116,828 582,153 95,943
Cost of insurance &
administrative fee
(note 5).................. 347,236 278,191 180,962 117,857 62,827 376,090 64,105
---------- ---------- ---------- ---------- ---------- ---------- ----------
893,885 781,150 308,242 461,906 181,540 996,214 160,484
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net equity transactions... 878,428 732,924 1,247,368 376,006 827,776 3,502,545 1,646,804
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net change in contract
owners' equity....... 1,129,047 978,285 1,284,796 472,017 824,433 3,779,477 1,842,645
Contract owners' equity:
Beginning of period............ 2,705,162 1,726,877 442,081 824,433 0 1,842,645 0
---------- ---------- ---------- ---------- ---------- ---------- ----------
End of period.................. $3,834,209 $2,705,162 $1,726,877 $1,296,450 $ 824,433 $5,622,122 $1,842,645
========== ========== ========== ========== ========== ========== ==========
</TABLE>
- ---------------
(a) Period from January 3, 1997, date of commencement of operations.
The accompanying notes are an integral part of these financial statements.
137
<PAGE> 138
OHIO NATIONAL VARIABLE ACCOUNT R
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
MONTGOMERY ASSET
S&P INDEX SOCIAL AWARENESS EMERGING MARKET
SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------------- --------------------- ---------------------
1998 1997(a) 1998 1997(a) 1998 1997(b)
---------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Investment activity:
Reinvested dividends............................ $ 108,830 $ 33,016 $ 2,652 $ 983 $ 438 $ 131
Risk & administrative expense (note 4).......... (26,947) (2,986) (3,609) (394) (1,165) (188)
---------- ---------- -------- -------- -------- --------
Net investment activity...................... 81,883 30,030 (957) 589 (727) (57)
---------- ---------- -------- -------- -------- --------
Realized & unrealized gain (loss) on
Investments:
Reinvested capital gains..................... 328,825 94,770 0 29,015 0 0
Realized gain (loss)......................... 20,356 5,779 (31,042) 926 (3,512) (554)
Unrealized gain (loss)....................... 619,923 (52,996) (102,278) (31,805) (58,655) (9,987)
---------- ---------- -------- -------- -------- --------
Net gain (loss) on investments............. 969,104 47,553 (133,320) (1,864) (62,167) (10,541)
---------- ---------- -------- -------- -------- --------
Net increase in contract owners' equity
from operations....................... 1,050,987 77,583 (134,277) (1,275) (62,894) (10,598)
---------- ---------- -------- -------- -------- --------
Equity transactions:
Sales:
Contract purchase payments................... 2,194,159 560,773 292,044 35,077 190,059 44,409
Transfers from fixed & other subaccounts..... 4,432,311 775,750 229,481 319,587 69,940 58,741
---------- ---------- -------- -------- -------- --------
6,626,470 1,336,523 521,525 354,664 259,999 103,150
---------- ---------- -------- -------- -------- --------
Redemptions:
Withdrawals & surrenders (note 5)............ 110,446 727 7,059 50 1,469 0
Transfers to fixed & other subaccounts....... 714,255 83,751 148,460 13,740 18,913 6,244
Cost of insurance & administrative fee
(note 5).................................... 407,189 62,142 37,586 4,380 26,219 6,032
---------- ---------- -------- -------- -------- --------
1,231,890 146,620 193,105 18,170 46,601 12,276
---------- ---------- -------- -------- -------- --------
Net equity transactions.................... 5,394,580 1,189,903 328,420 336,494 213,398 90,874
---------- ---------- -------- -------- -------- --------
Net change in contract owners' equity... 6,445,567 1,267,486 194,143 335,219 150,504 80,276
Contract owners' equity:
Beginning of period............................. 1,267,486 0 335,219 0 80,276 0
---------- ---------- -------- -------- -------- --------
End of period................................... $7,713,053 $1,267,486 $529,362 $335,219 $230,780 $ 80,276
========== ========== ======== ======== ======== ========
</TABLE>
- ---------------
(a) Period from January 3, 1997, date of commencement of operations.
(b) Period from April 1, 1997, date of commencement of operations.
The accompanying notes are an integral part of these financial statements.
138
<PAGE> 139
OHIO NATIONAL VARIABLE ACCOUNT R
NOTES TO FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Ohio National Variable Account R (the Account) is a separate account of The
Ohio National Life Assurance Corporation (ONLAC). All obligations arising
under variable life insurance contracts are general corporate obligations of
ONLAC. ONLAC is a wholly-owned subsidiary of The Ohio National Life
Insurance Company. The account has been registered as a unit investment
trust under the Investment Company Act of 1940.
Assets of the Account are invested in portfolio shares of Ohio National
Fund, Inc. and Montgomery Variable Series Funds III (collectively the
Funds). The Funds are diversified open-end management investment companies.
The Funds' investments are subject to varying degrees of market, interest
and financial risks; the issuers' abilities to meet certain obligations may
be affected by economic developments in their respective industries.
Investments are valued at the net asset value of fund shares held at
December 31, 1998. Share transactions are recorded on the trade date. Income
and capital gain distributions are recorded on the ex-dividend date. Net
realized capital gains and losses are determined on the basis of average
cost.
ONLAC performs investment advisory services on behalf of the Ohio National
Fund, Inc. in which the Account invests. For these services, the Company
receives fees from the mutual funds. These fees are paid to an affiliate of
the Company.
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 revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(2) INVESTMENTS
At December 31, 1998 the aggregate cost and number of shares of the
underlying funds owned by the respective subaccounts were:
<TABLE>
<CAPTION>
MONEY CAPITAL
EQUITY MARKET BOND OMNI INTERNATIONAL APPRECIATION SMALL CAP
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ----------- ----------- ----------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Aggregate Cost............... $23,407,094 $4,068,382 $1,680,174 $10,022,785 $18,457,611 $ 7,075,311 $7,563,705
Number of Shares............. 858,238 406,838 158,612 556,629 1,312,066 548,143 446,905
</TABLE>
<TABLE>
<CAPTION>
GLOBAL AGGRESSIVE CORE GROWTH & S&P 500 SOCIAL EMERGING
CONTRARIAN GROWTH GROWTH INCOME INDEX AWARENESS MARKET
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Aggregate Cost.................. $2,217,885 $3,707,739 $1,197,576 $5,275,176 $7,146,126 $ 663,445 $ 299,422
Number of Shares................ 190,156 343,906 123,026 412,451 541,875 60,162 35,020
</TABLE>
(3) CONTRACTS IN ACCUMULATION PERIOD
At December 31, 1998 the accumulation units and value per unit of the
respective subaccounts and products were:
<TABLE>
<CAPTION>
ACCUMULATION UNITS VALUE PER UNIT VALUE
------------------ -------------- -----------
<S> <C> <C> <C>
EQUITY SUBACCOUNT........................................... 1,017,188.7817 30.639418 $31,166,072
MONEY MARKET SUBACCOUNT..................................... 234,262.0684 17.366799 $ 4,068,382
BOND SUBACCOUNT............................................. 80,280.1813 20.855811 $ 1,674,308
OMNI SUBACCOUNT............................................. 425,296.1830 28.055492 $11,931,894
INTERNATIONAL SUBACCOUNT.................................... 957,062.8519 17.621931 $16,865,296
CAPITAL APPRECIATION SUBACCOUNT............................. 423,380.1421 16.722138 $ 7,079,821
SMALL CAP SUBACCOUNT........................................ 493,226.7115 18.754130 $ 9,250,038
GLOBAL CONTRARIAN SUBACCOUNT................................ 149,010.5935 13.720858 $ 2,044,553
AGGRESSIVE GROWTH SUBACCOUNT................................ 254,031.8088 15.093421 $ 3,834,209
CORE GROWTH SUBACCOUNT...................................... 124,780.6014 10.389835 $ 1,296,450
</TABLE>
139
<PAGE> 140
OHIO NATIONAL VARIABLE ACCOUNT R
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
ACCUMULATION UNITS VALUE PER UNIT VALUE
------------------ -------------- -----------
<S> <C> <C> <C>
GROWTH & INCOME SUBACCOUNT.................................. 390,193.2941 14.408556 $ 5,622,122
S&P 500 INDEX SUBACCOUNT.................................... 457,113.9196 16.873371 $ 7,713,053
SOCIAL AWARENESS SUBACCOUNT................................. 55,122.1801 9.603437 $ 529,362
EMERGING MARKET SUBACCOUNT.................................. 37,782.4744 6.108135 $ 230,780
</TABLE>
(4) RISK AND ADMINISTRATIVE EXPENSE
Although variable life payments differ according to the investment
performance of the Accounts, they are not affected by mortality or expense
experience because ONLAC assumes the expense risk and the mortality risk
under the contracts. ONLAC charges the Accounts' assets for assuming those
risks. Such charge will be assessed at a daily rate of 0.0020471% which
corresponds to an annual rate of .75% of the contract value.
(5) CONTRACT CHARGES
Each premium payment is subject to a premium expense charge. The premium
expense charge has two components: (a) Sales Load. Each contract is subject
to a level sales load of all premiums paid of 4%. (b) State Premium Tax.
Premium payments will be subject to the state premium tax and any other
state or local taxes that currently range from 2% to 4%.
Total premium expense charges in the Account amounted to approximately
$900,000 during 1998.
A surrender charge is assessed in connection with all complete surrenders,
all decreases in stated amount and certain partial surrenders consisting of
two components: (1) a contingent deferred sales charge, and (2) a contingent
deferred insurance underwriting charge.
The contingent deferred sales charge is a percentage of premiums paid in the
first two contract years. The contingent deferred sales charge percentages
are scaled by age at issue or increase. The contingent deferred insurance
underwriting charge varies with age at issue or increase.
A service charge is imposed on each transfer of cash values among the
subaccounts. Currently, ONLAC is not assessing this charge on the first four
transfers made in any contract year. For partial surrenders, a service fee
is charged.
ONLAC charges a monthly deduction from the contract value for the cost of
insurance, a $5.00 or $7.00 record keeping and processing charge, a risk
charge of $.01 per $1,000 of the stated amount for the risk associated with
the death benefit guarantee, and the cost of additional insurance benefits
provided by rider.
(6) FEDERAL INCOME TAXES
Operations of the Account form a part of, and are taxed with, operations of
ONLAC which is taxed as a life insurance company under the Internal Revenue
Code. Taxes are the responsibility of the contract owner upon termination or
withdrawal. No Federal income taxes are payable under the present law on
dividend income or capital gains distribution from the Fund shares held in
the Account or on capital gains realized by the Account on redemption of the
Fund shares.
140
