-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DHdniHoP+cHij1FpaZR/WiTxBMQ5aXwL0ELyRwqOfxPEllQU5rdbX7tdQWPWgHFg Zmz91mhtBnGbzBK0U84C9Q== 0000950152-97-003203.txt : 19970428 0000950152-97-003203.hdr.sgml : 19970428 ACCESSION NUMBER: 0000950152-97-003203 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 16 FILED AS OF DATE: 19970425 EFFECTIVENESS DATE: 19970425 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: OHIO NATIONAL FUND INC CENTRAL INDEX KEY: 0000315754 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 310978635 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 002-67464 FILM NUMBER: 97587333 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-03015 FILM NUMBER: 97587334 BUSINESS ADDRESS: STREET 1: 237 WILLIAM HOWARD TAFT RD CITY: CINCINNATI STATE: OH ZIP: 45219 BUSINESS PHONE: 5138613600 MAIL ADDRESS: STREET 1: 237 WILLIAM HOWARD TAFT RD CITY: CINCINNATI STATE: OH ZIP: 45219 FORMER COMPANY: FORMER CONFORMED NAME: ON MARKET YIELD FUND INC DATE OF NAME CHANGE: 19821026 485BPOS 1 OHIO NATIONAL FUND, INC. 485BPOS 1 File No. 2-67464 File No. 811-3015 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X / Post-Effective Amendment No. 33 / X / REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X / Amendment No. 22 / X / --------------- OHIO NATIONAL FUND, INC. (Exact Name of Registrant) One Financial Way Cincinnati, Ohio 45242 (Address of Principal Executive Office) Area Code (513) 794-6316 (Registrant's Telephone Number) Ronald L. Benedict, Secretary Ohio National Fund, Inc. One Financial Way Cincinnati, Ohio 45242 (Name and Address of Agent for Service) Notice to: W. Randolph Thompson, Esq. Of Counsel Jones & Blouch L.L.P. Suite 405 West 1025 Thomas Jefferson Street, N.W. Washington, D.C. 20007 --------------- Approximate Date of Proposed Public Offering: as soon after the effective date of this amendment as is practicable. Registrant has heretofore registered an indefinite amount of securities under the Securities Act of 1933 pursuant to Rule 24f-2 and on February 23, 1996 filed its Rule 24f-2 Notice for its most recent fiscal year. It is proposed that this filing will become effective (check appropriate box): immediately upon filing pursuant to paragraph (b) ___ X on May 1, 1997 pursuant to paragraph (b) ___ 60 days after filing pursuant to paragraph (a)(1) ___ on (date) pursuant to paragraph (a)(1) ___ 75 days after filing pursuant to paragraph (a)(2) ___ on (date), pursuant to paragraph (a)(3) of Rule 485. ___ If appropriate, check the following box: ___ this post-effective amendment designates a new effective date for a previously filed post-effective amendment. 2 OHIO NATIONAL FUND, INC. CROSS REFERENCE TO ITEMS REQUIRED BY RULE 404(a) N-1A Item of Part A Caption in Prospectus ------------------- --------------------- 1. Cover Page 2. Not Applicable 3. Financial Highlights 4. General Description of the Fund; Investment Objectives and Policies; Investment Restrictions 5. Management of the Fund 6. Capital Stock, Dividends, Distributions and Taxes 7. Purchase and Redemption of Shares 8. Purchase and Redemption of Shares 9. Not Applicable Caption in Statement of N-1A Item of Part B Additional Information ------------------- ---------------------- 10. Cover Page 11. Table of Contents 12. The Fund 13. Investment Objectives and Policies (Money Market Instruments); Investment Restrictions (Hedging Transactions, Covered Call Options and Secured Put Options, Risk Factors with Options, Futures Contracts, Options on Futures Contracts and Financial Indexes, Risk Factors with Futures and Options on Futures, Risk Factors with Foreign Investments); Condensed Financial Information (Portfolio Turnover) 14. Management of the Fund (Directors and Officers of the Fund) 15. Management of the Fund (Controlling Shareholders) 16. Management of the Fund (Investment Advisory and Other Services); Experts 3 Caption in Statement of N-1A Item of Part B Additional Information ------------------- ---------------------- 17. Brokerage Allocation 18. Capital Stock (in prospectus) 19. Purchase and Redemption of Shares 20. Tax Status 21. Not Applicable 22. Fund Performance 23. Financial Statements 4 PART A. INFORMATION REQUIRED IN A PROSPECTUS 5 OHIO NATIONAL FUND, INC. ONE FINANCIAL WAY CINCINNATI, OHIO 45242 TELEPHONE (513) 794-6316 MAY 1, 1997 Ohio National Fund, Inc. (the "Fund") is a series investment company which consists of 16 separate investment portfolios that seek the following investment objectives: EQUITY PORTFOLIO - long-term growth of capital by investing principally in common stocks or other equity securities. Current income is a secondary objective. MONEY MARKET PORTFOLIO- maximum current income consistent with preservation of capital and liquidity by investing in high quality money market instruments. BOND PORTFOLIO - high level of return consistent with preservation of capital by investing primarily in high quality intermediate and long-term debt securities. OMNI PORTFOLIO - high level of long-term total return consistent with preservation of capital by investing in stocks, bonds and money market instruments. INTERNATIONAL PORTFOLIO - long-term capital growth by investing primarily in common stocks of foreign companies. CAPITAL APPRECIATION PORTFOLIO - maximum capital growth by investing primarily in common stocks that are (1) considered to be undervalued or temporarily out of favor with investors, or (2) expected to increase in price over the short term. SMALL CAP PORTFOLIO - maximum capital growth by investing primarily in common stocks of small and medium size companies. GLOBAL CONTRARIAN PORTFOLIO - long-term growth of capital by investing in foreign and domestic securities believed to be undervalued or presently out of favor. AGGRESSIVE GROWTH PORTFOLIO - capital growth. CORE GROWTH PORTFOLIO - long-term capital appreciation. GROWTH & INCOME PORTFOLIO -long-term total return by investing in equity and debt securities focusing on small- and mid-cap companies that offer potential for capital appreciation, current income, or both. S&P 500 INDEX PORTFOLIO - total return that approximates that of the Standard & Poor's 500 Index ("S&P 500" (R)) by investing in common stocks and in stock index futures contracts hedged by U.S. Government obligations, investment-grade corporate bonds and cash equivalents. SOCIAL AWARENESS PORTFOLIO - long-term capital growth by investing primarily in common stocks and other equity securities of companies that, in the Adviser's opinion, conduct their business in a way that enhances society's quality of life. STRATEGIC INCOME PORTFOLIO - high current income by investing at least 40% of its assets in a core group of U.S. government and corporate fixed income securities and the remainder in other income producing securities. Continued on page 2. - -------------------------------------------------------------------------------- THIS PROSPECTUS SETS FORTH CONCISELY THE INFORMATION ABOUT THE FUND THAT A PROSPECTIVE PURCHASER OF A VARIABLE CONTRACT DESCRIBED IN THE ACCOMPANYING PROSPECTUS OUGHT TO KNOW BEFORE PURCHASING SUCH A CONTRACT. THIS PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE. ADDITIONAL INFORMATION ABOUT THE FUND HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IN A STATEMENT OF ADDITIONAL INFORMATION, DATED MAY 1, 1997, WHICH IS INCORPORATED HEREIN BY REFERENCE. THE STATEMENT OF ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST AND WITHOUT CHARGE BY WRITING OR CALLING THE FUND AT THE ADDRESS SHOWN ABOVE. INVESTMENTS IN THE MONEY MARKET PORTFOLIO ARE NEITHER INSURED NOR GUARANTEED BY THE UNITED STATES GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE MONEY MARKET PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $10 PER SHARE. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. 1 6 STELLAR PORTFOLIO - maximum total return by investing in domestic and foreign securities (equity and fixed income), real estate securities, precious metal securities and money market securities. RELATIVE VALUE PORTFOLIO - maximum total return consistent with reasonable risk by investing primarily in equity securities. The Fund's shares are not offered directly to the public but are purchased principally for the account of certain separate accounts of The Ohio National Life Insurance Company ("ONLI"), Ohio National Life Assurance Corporation ("ONLAC") and other insurers. Some variable contracts do not permit allocations to all portfolios of the Fund. The accompanying variable contract prospectus identifies the portfolios available under that contract. TABLE OF CONTENTS Page Financial Highlights ................................................... 2 General Description of the Fund ........................................ 6 Investment Objectives and Policies ..................................... 7 Investment Restrictions ................................................ 13 Management of the Fund ................................................. 18 Capital Stock .......................................................... 21 Dividends, Distributions and Taxes ..................................... 22 Purchase and Redemption of Shares ...................................... 22 Fund Performance ....................................................... 23 About the S&P 500 ...................................................... 23 FINANCIAL HIGHLIGHTS OF OHIO NATIONAL FUND, INC. FOR THE TEN YEARS ENDED DECEMBER 31, 1996 The following information has been audited by KPMG Peat Marwick LLP, independent certified public accountants, and is an integral part of the Fund's audited financial statements which appear in the Statement of Additional Information (which may be obtained by variable contract owners and prospective purchasers), incorporated by reference herein, and should be read in conjunction with those financial statements.
EQUITY PORTFOLIO - ---------------------------------------------------------------------------------------------------------------------------------- 1996 1995 1994 1993 1992 1991 1990 -------- -------- --------- --------- --------- --------- ---------- Net asset value, beginning of period $ 28.58 $ 23.20 $ 23.90 $ 21.63 $ 20.61 $ 18.02 $ 20.09 Income from investment operations: Net investment income .47 .50 .45 .41 .50 .60 .86 Net realized and unrealized gains (losses) on investments and foreign currency transactions 4.58 5.56 (.39) 2.57 1.02 2.97 (1.62) Total from investment operations 5.05 6.15 .06 2.98 1.52 3.57 (.76) Less distributions: Dividends from net investment income (.46) (.39) (.44) (.42) (.50) (.63) (.87) Distributions from realized capital gains (.87) (.38) (.32) (.29) -- (.35) (.44) Total distributions (1.33) (.77) (.76) (.71) (.50) (.98) (1.31) Net asset value, end of period $ 32.30 $ 28.58 $ 23.20 $ 23.90 $ 21.63 $ 20.61 $ 18.02 Total return(a) 18.35% 27.20% 0.25% 14.09% 7.55% 20.18% (3.85%) Ratios/supplemental data: Net Assets, end of period (000,000's omitted) $ 232.8 $ 175.7 $ 123.3 $ 109.9 $ 87.4 $ 68.2 $ 49.2 Ratio of expenses to average net assets .73% .73% .62% .63% .65% .66% .69% Ratio of net investment income to average net assets 1.60% 1.90% 1.90% 1.91% 2.44% 3.12% 4.75% Portfolio turnover rate 11% 14% 8% 18% 12% 23% 5% Average commission rate (f) .069 N/A N/A N/A N/A N/A N/A
EQUITY PORTFOLIO - ------------------------------------------------------------------------------------- 1989 1988 1987 ----------- ----------- ----------- Net asset value, beginning of period $ 17.99 $ 16.82 $ 15.94 Income from investment operations: Net investment income .71 .66 .53 Net realized and unrealized gains (losses) on investments and foreign currency transactions 3.42 1.86 1.22 Total from investment operations 4.13 2.52 1.75 Less distributions: Dividends from net investment income (.66) (.67) (.50) Distributions from realized capital gains (1.37) (.68) (.37) Total distributions (2.03) (1.35) (.87) Net asset value, end of period $ 20.09 $ 17.99 $ 16.82 Total return(a) 23.21% 15.01% 10.81% Ratios/supplemental data: Net Assets, end of period (000,000's omitted) $ 42.8 $ 33.3 $ 30.8 Ratio of expenses to average net assets 0.70% 0.71% 0.68% Ratio of net investment income to average net assets 3.55% 3.59% 2.89% Portfolio turnover rate 16% 9% 7% Average commission rate (f) N/A N/A N/A
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MONEY MARKET PORTFOLIO - ----------------------------------------------------------------------------------------------------------------------- 1996 1995 1994 1993 1992 1991 1990 -------- -------- ------- -------- ------- ------- --------- Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 Income from investment operations: Net investment income .50 .54 .39 .27 .31 (.54) .76 Net realized and unrealized gains (losses) on investments and foreign currency transactions -- -- -- -- -- -- -- Total from investment operations .50 .54 .39 .27 .31 .54 .76 Less distributions: Dividends from net investment income (.50) (.54) (.39) (.27) (.31) (.54) (.76) Distributions from realized capital gains -- -- -- -- -- Total distributions (.50) (.54) (.39) (.27) (.31) (.54) (.76) Net asset value, end of period $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 Total return(a) 5.17% 5.62% 4.00% 2.71% 3.12% 5.39% 7.60% Ratios/supplemental data: Net Assets, end of period (000,000's omitted) $ 25.5 $ 15.7 $ 13.1 $ 19.1 $ 20.6 $ 24.2 $ 26.1 Ratio of expenses to average net assets(c) .44% .44% .39% .53% 0.66% 0.67% 0.68% Ratio of net investment income to average net assets(c) 4.98% 5.39% 3.69% 2.71% 3.16% 5.41% 7.57%
MONEY MARKET PORTFOLIO - ----------------------------------------------------------------------------- 1989 1988 1987 ---------- ---------- ---------- Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00 Income from investment operations: Net investment income .86 .69 .61 Net realized and unrealized gains (losses) on investments and foreign currency transactions -- -- -- Total from investment operations .86 .69 .61 Less distributions: Dividends from net investment income (.86) (.69) (.61) Distributions from realized capital gains -- -- Total distributions (.86) (.69) (.61) Net asset value, end of period $ 10.00 $ 10.00 $ 10.00 Total return(a) 8.56% 6.89% 6.10% Ratios/supplemental data: Net Assets, end of period (000,000's omitted) $ 23.6 $ 22.8 $ 21.1 Ratio of expenses to average net assets(c) 0.70% 0.71% 0.76% Ratio of net investment income to average net assets(c) 8.51% 6.87% 6.06%
BOND PORTFOLIO - ----------------------------------------------------------------------------------------------------------------------- 1996 1995 1994 1993 1992 1991 1990 -------- --------- --------- -------- -------- -------- ------ Net asset value, beginning of period $ 10.93 $ 9.70 $ 10.87 $ 10.45 $ 10.37 $ 9.89 $ 9.93 Income from investment operations: Net investment income .69 .70 .67 .69 .67 .74 .79 Net realized and unrealized gains (losses) on investments and foreign currency transactions (.32) 1.08 (1.07) .41 .10 .49 (.05) Total from investment operations .37 1.78 (.40) 1.10 .77 1.23 .74 Less distributions: Dividends from net investment income (.68) (.55) (.69) (.68) (.69) (.75) (.78) Distributions from realized capital gains -- -- (.08) -- -- -- -- Total distributions (.68) (.55) (.77) (.68) (.69) (.75) (.78) Net asset value, end of period $ 10.62 $ 10.93 $ 9.70 $ 10.87 $ 10.45 $ 10.37 $ 9.89 Total return(a) 3.71% 18.90% (3.84%) 10.69% 7.55% 12.96% 7.82% Ratios/supplemental data: Net Assets, end of period (000,000's omitted) $ 20.8 $ 18.1 $ 13.1 $ 12.0 $ 8.9 $ 5.9 $ 4.7 Ratio of expenses to average net assets .79% .75% .63% .62% 0.65% 0.65% 0.70% Ratio of net investment income to average net assets 6.54% 6.76% 6.71% 6.33% 6.73% 7.42% 8.02% Portfolio turnover rate 3% 4% 5% 13% 20% 18% 4%
BOND PORTFOLIO - ------------------------------------------------------------------------------ 1989 1988 1987 ---------- ---------- ----------- Net asset value, beginning of period $ 9.72 $ 9.84 $ 10.71 Income from investment operations: Net investment income .81 .77 .83 Net realized and unrealized gains (losses) on investments and foreign currency transactions .20 (.13) (.76) Total from investment operations 1.01 .64 .07 Less distributions: Dividends from net investment income (.80) (.76) (.83) Distributions from realized capital gains -- -- (.11) Total distributions (.80) (.76) (.94) Net asset value, end of period $ 9.93 $ 9.72 $ 9.84 Total return(a) 10.71% 6.74% 0.74% Ratios/supplemental data: Net Assets, end of period (000,000's omitted) $ 4.0 $ 3.7 $ 3.8 Ratio of expenses to average net assets 0.70% 0.79% 1.09% Ratio of net investment income to average net assets 8.21% 7.50% 7.78% Portfolio turnover rate -- 27% 13%
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OMNI PORTFOLIO - -------------------------------------------------------------------------------------------------------------------------------- 1996 1995 1994 1993 1992 1991 1990 -------- --------- -------- --------- --------- --------- --------- Net asset value, beginning of period $ 17.60 $ 14.76 $ 15.38 $ 14.14 $ 13.63 $ 12.16 $ 12.76 Income from investment operations: Net investment income .53 .58 .55 .58 .63 .65 .78 Net realized and unrealized gains (losses) on investments and foreign currency transactions 2.10 2.72 (.63) 1.21 .51 1.49 (.54) Total from investment operations 2.63 3.30 (.08) 1.79 1.14 2.14 .24 Less distributions: Dividends from net investment income (.52) (.46) (.54) (.54) (.63) (.67) (.78) Distributions from realized capital gains (.31) -- -- -- -- -- (06) Total distributions (.83) (.46) (.54) (.55) (.63) (.67) (.84) Net asset value, end of period $ 19.40 $ 17.60 $ 14.76 $ 15.38 $ 14.14 $ 13.63 $ 12.16 Total return(a) 15.54% 22.75% (0.53%) 12.85% 8.61% 18.14% 1.92% Ratios/supplemental data: Net Assets, end of period (000,000's omitted) $ 145.5 $ 109.6 $ 85.0 $ 74.2 $ 46.4 $ 36.5 $ 35.4 Ratio of expenses to average net assets .76% .75% .62% .62% 0.65% 0.67% 0.69% Ratio of net investment income to average net assets 2.89% 3.56% 3.67% 3.74% 4.66% 5.04% 6.32% Portfolio turnover rate 12% 10% 7% 17% 16% 15% 7% Average commission rate (f) .072 N/A N/A N/A N/A N/A N/A
OMNI PORTFOLIO - ---------------------------------------------------------------------------------- 1989 1988 1987 ----------- ----------- ----------- Net asset value, beginning of period $ 11.89 $ 11.23 $ 12.18 Income from investment operations: Net investment income .75 .67 .59 Net realized and unrealized gains (losses) on investments and foreign currency transactions 1.07 .99 (.76) Total from investment operations 1.82 1.66 (.17) Less distributions: Dividends from net investment income (.73) (.66) (.58) Distributions from realized capital gains (.22) (.34) (.20) Total distributions (.95) (1.00) (.78) Net asset value, end of period $ 12.76 $ 11.89 $ 11.23 Total return(a) 15.45% 15.05% (1.70%) Ratios/supplemental data: Net Assets, end of period (000,000's omitted) $ 31.8 $ 26.1 $ 28.0 Ratio of expenses to average net assets 0.70% 0.71% 0.69% Ratio of net investment income to average net assets 5.99% 5.40% 4.88% Portfolio turnover rate 24% 14% 12% Average commission rate (f) N/A N/A N/A
INTERNATIONAL CAPITAL APPRECIATION PORTFOLIO PORTFOLIO ---------------------------------------------- ------------------------------------- 1996 1995 1994 1993(e) 1996 1995 1994(e) -------- -------- ------- -------- -------- ---------- --------- Net asset value, beginning of period $ 14.38 $ 13.30 $ 12.48 $ 10.00 $ 11.99 $ 10.25 $ 10.00 Income from investment operations: Net investment income (loss) .25 .31 .16 .02 .48 .39 .22 Net realized and unrealized gains (losses) on investments and foreign currency transactions 1.76 1.28 .84 2.47 1.31 1.85 .23 Total from investment operations 2.01 1.59 1.00 2.49 1.79 2.24 .45 Less distributions: Dividends from net investment income (.63) (.28) (.12) (.01) (.44) (.29) (.20) Distributions from realized capital gains (.27) (.23) (.06) -- (.41) (.21) -- Total distributions (.90) (.51) (.18) (.01) (.85) (.50) (.20) Net asset value, end of period $ 15.49 $ 14.38 $ 13.30 $ 12.48 $ 12.93 $ 11.99 $ 10.25 Total return(a) 14.48% 12.10% 8.07% 24.96% 15.75% 22.62% 4.53% Ratios/supplemental data: Net Assets, end of period (000,000's omitted) $ 137.3 $ 90.6 $ 62.9 $ 17.5 $ 38.3 $ 19.3 $ 6.8 Ratio of expenses to average net assets(d) 1.15% 1.12% 1.05% 1.13%(b) .97% .96% .98% Ratio of net investment income to average net assets(d) 1.64% 2.29% 1.23% .41%(b) 3.90% 3.47% 3.24% Portfolio turnover rate 14% 7% 16% 8% 37% 32% 20% Average commission rate (f) .031 N/A N/A N/A .053 N/A N/A
SMALL CAP PORTFOLIO ---------------------------------------------- 1996 1995 1994(e) ------- ---------- ---------- Net asset value, beginning of period $ 15.85 $ 11.99 $ 10.00 Income from investment operations: Net investment income (loss) (.08) (.02) .18 Net realized and unrealized gains (losses) on investments and foreign currency transactions 2.80 3.95 1.94 Total from investment operations 2.72 3.93 2.12 Less distributions: Dividends from net investment income -- (.07) (.13) Distributions from realized capital gains (.54) -- -- Total distributions (.54) (.07) (1.31) Net asset value, end of period $ 18.03 $ 15.85 $ 11.99 Total return(a) 17.71% 33.01% 21.26% Ratios/supplemental data: Net Assets, end of period (000,000's omitted) $ 38.5 $ 16.0 $ 3.3 Ratio of expenses to average net assets(d) .96% .96% .91%(b) Ratio of net investment income to average net assets(d) (.48%) (.11%) 3.27% Portfolio turnover rate 70% 75% 222% Average commission rate (f) .060 N/A N/A
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GLOBAL AGGRESSIVE CONTRARIAN GROWTH -------------------------- -------------------------- 1996 1995(e) 1996 1995(e) ------- -------- -------- --------- Net asset value, beginning of period $ 10.80 $ 10.00 $ 11.84 $ 10.00 Income from investment operations: Net investment income (loss) .28 .13 1.64 1.56 Net realized and unrealized gains (losses) on investments and foreign currency transactions 1.00 .75 (1.59) 1.08. Total from investment operations 1.28 .88 .05 2.64 Less distributions: Dividends from net investment income (.33) (.08) (1.86) (.80) Distributions from realized capital gains (.09) -- -- -- Total distributions (.42) (.08) (1.86) (.80) Net asset value, end of period $ 11.66 $ 10.80 $ 10.03 $ 11.84 Total return(a) 12.09% 8.89% .76% 26.95% Ratios/supplemental data: Net Assets, end of period (000,000's omitted) $ 11.3 $ 4.4 $ 12.0 $ 4.0 Ratio of expenses to average net assets(d) 1.29% 1.58%(b) 1.01% 1.02%(b) Ratio of net investment income to average net assets(d) 2.44% 1.64%(b) 15.81% 18.18%(b) Portfolio turnover rate 18% 6%(b) 1,987% 1,488%(b) Average commission rate (f) .028 N/A .034 N/A
FINANCIAL HIGHLIGHTS FOOTNOTES (a) This total return information does not reflect expenses that apply to any separate account or the related variable annuity or variable life insurance contracts. Inclusion of those charges would reduce the total return figures for all periods shown. (b) Annualized. (c) On and after June 17, 1993, the investment adviser has waived part of the management fee with respect to the Money Market Portfolio, to the extent such fee exceeds an annual rate of 0.25% of the Money Market Portfolio's daily net asset value. Had the fee not been waived, the annualized ratio of net expenses to average net assets would have been 0.49%, 0,55%, 0.59% and 0.63%, and the annualized ratio of net investment income to average net assets would have been 4.93%, 5.27%, 3.51% and 2.60%, respectively, for 1996, 1995, 1994 and 1993. (d) The investment adviser reimbursed certain operating expenses of the International Portfolio in 1993, the Capital Appreciation and Small Cap Portfolios in 1994, and the Global Contrarian Portfolio in 1995. Had the investment adviser not reimbursed such expenses, the annualized ratio of expenses to average net assets would have been 1.39% and the annualized ratio of net investment income to average net assets would have been 0.15% for the International Portfolio in 1993. Had the investment adviser not reimbursed such expenses of the Capital Appreciation and Small Cap Portfolios, the annualized ratio of expenses to average net assets would have been 1.05% and 0.95%, respectively in 1994. The annualized ratio of net investment income to average net assets would have been 3.18% and 3.24%, respectively, for the Capital Appreciation and Small Cap Portfolios. Had the investment adviser not reimbursed such expenses of the Global Contrarian Portfolio, the annualized ratio of expenses to average net assets would have been 1.90% and the annualized ratio of net investment income to average net assets would have been 1.32% for the Global Contrarian Portfolio in 1995. 5 10 (e) Total return was calculated on an aggregate basis (not annualized) for the International Portfolio from the commencement of its operations on April 30, 1993, through December 31, 1993, for the Capital Appreciation and Small Cap Portfolios, from their commencement of operations, May 1, 1994, through December 31, 1994, and for the Global Contrarian and Aggressive Growth Portfolios from their commencement of operations, March 31, 1995, through December 31, 1995. (f) Represents the total amount of commissions paid on equity security transactions divided by the total number of shares purchased and sold by the respective portfolio for which commissions were charged. GENERAL DESCRIPTION OF THE FUND The Fund, incorporated under the laws of Maryland on March 6, 1980, is an open-end diversified management investment company commonly referred to as a "mutual fund." It is a "no-load" fund which sells and redeems its shares at net asset value without any sales or redemption charge. The Fund is organized as a "series" company, which means that it has several different investment portfolios. Currently there are 16 investment portfolios: the Equity Portfolio, the Money Market Portfolio, the Bond Portfolio, the Omni Portfolio, the International Portfolio, the Capital Appreciation Portfolio, the Small Cap Portfolio, the Global Contrarian Portfolio, the Aggressive Growth Portfolio, the Core Growth Portfolio, the Growth & Income Portfolio, the S&P 500 Index Portfolio, the Social Awareness Portfolio, the Strategic Income Portfolio, the Stellar Portfolio and the Relative Value Portfolio. Interests in each portfolio are represented by a separate class of common stock, par value $1. Each class represents an undivided interest in the assets of the portfolio attributable to that class. Fund shares are currently offered only to the separate accounts of ONLI (a mutual life insurance company organized under Ohio law) and ONLAC (a stock life insurer organized under Ohio law and wholly owned by ONLI), but may in the future be offered to the separate accounts of other life insurance companies (the "separate accounts"). Such separate accounts use Fund shares as the underlying investment medium to support certain benefits under variable annuity and variable life insurance contracts. As is described in the accompanying variable contract prospectus, each contract owner will select the Fund portfolio or portfolios that will support certain benefits under his or her contract. The value of such benefits will vary with the investment experience of the underlying portfolio(s) of the Fund. Consequently, each prospective contract owner should carefully review the objectives, policies and risks of each portfolio and the operation of the Fund generally as set forth in this prospectus. It is conceivable that in the future it may become disadvantageous for both variable life and variable annuity separate accounts to invest in the Fund. Although ONLI, ONLAC and the Fund do not currently foresee any such disadvantage, the Board of Directors of the Fund will monitor events in order to identify any material conflict between variable life and variable annuity contract owners and to determine what action, if any, should be taken in response thereto. Such action could include the withdrawal of a separate account from participation in the Fund. Material conflicts could result from such things as (1) changes in state insurance law; (2) changes in federal income tax law; (3) changes in the investment management of any portfolio of the Fund; or (4) differences between voting instructions given by variable life and variable annuity contract owners. The Fund may be used in the future to support benefits under other types of contracts or for other purposes. Fund shares are not now, and without a change in applicable law will never be, offered directly to the public. Consequently, the separate accounts will be the sole shareholders of the Fund. Fund shares attributable to contracts participating in such separate accounts will be voted by such separate accounts as directed by the contract owners. The investment and reinvestment of Fund assets is managed by Ohio National Investments Inc. (the "Adviser") directly or through sub-advisers. See "Management of the Fund," page 17. The investment and reinvestment of the assets of the following portfolios are managed by the firms indicated as sub-advisers:
PORTFOLIO SUB-ADVISER - --------- ----------- International and Global Contrarian Societe Generale Asset Management Corp. ("SGAM") Capital Appreciation T. Rowe Price Associates, Inc. ("TRPA") Small Cap Founders Asset Management, Inc. ("FAM ") Aggressive Growth Strong Capital Management, Inc. ("SCM") Core Growth Pilgrim Baxter & Associates, Ltd. ("PBA") Growth & Income Robertson Stephens Investment Management, L.P. ("RSIM") Strategic Income, Stellar and Relative Value Star Bank, N.A. ("Star")
6 11 INVESTMENT OBJECTIVES AND POLICIES Each portfolio has a different investment objective which it pursues through separate investment policies as described below. The differences in objectives and policies among the portfolios can be expected to affect the return of each portfolio and the degree of market and financial risk to which each portfolio is subject. Financial risk refers to the ability of an issuer of a debt security to pay principal and interest on such security, and to the earnings stability and overall financial soundness of an issuer of an equity security. Market risk refers to the volatility of the price of a security in response to changes in conditions in the securities markets in general and, particularly in the case of debt securities, changes in the overall level of interest rates. There is no assurance that the investment objective of any portfolio will be realized. The investment objectives of each portfolio discussed below and in the Statement of Additional Information may not be changed without the approval of the holders of a majority of the outstanding shares of that portfolio. The relatively high portfolio turnover rates expected for the Small Cap, Aggressive Growth, Core Growth, Growth & Income and Strategic Income Portfolios will result in correspondingly higher brokerage costs that must be borne by these portfolios. The Statement of Additional Information provides a fuller description of the types of financial instruments in which the Money Market Portfolio may invest and definitions of debt ratings of nationally recognized statistical rating organizations, and information about portfolio turnover rates for each portfolio. EQUITY PORTFOLIO The principal investment objective of the Equity Portfolio is long-term growth of capital. Current income is a secondary consideration although growth of income may accompany growth of capital. This Portfolio will seek to attain its objective of capital growth by investing primarily in common stocks or securities convertible into, or which carry the right to buy, common stocks. It may also invest to a limited degree in non-convertible preferred stocks, debt securities and readily marketable mortgage notes. When in management's opinion market or economic conditions warrant a defensive posture, the Portfolio may place any portion of its assets in investment-grade debt securities, preferred stocks, Government securities or cash. (The short-term investment position of the Portfolio at December 31, 1996 was 12.4%). The Portfolio may also maintain reasonable amounts in cash or short-term debt securities pending selection of investments in accordance with its policies. This Portfolio will invest primarily in securities listed on national securities exchanges, but from time to time it may also purchase securities traded in the over-the-counter market and foreign securities. In general, investment in shares of this Portfolio should involve greater market and financial risk than an investment in any of the Money Market, Bond, Omni or Capital Appreciation Portfolios, but less risk than investments in the International, Small Cap, Global Contrarian or Aggressive Growth Portfolios. MONEY MARKET PORTFOLIO The objective of the Money Market Portfolio is to obtain maximum current income consistent with preservation of principal and liquidity. This Portfolio seeks to achieve its objective by investing in high quality money market instruments, including: 1. obligations maturing in 13 months or less and issued or guaranteed as to principal and interest by the United States Government, or any agency or authority controlled or supervised by and acting as an instrumentality of the U.S. Government pursuant to authority granted by Congress; 2. commercial paper, certificates of deposit and bankers' acceptances that have received the highest rating by any two nationally recognized statistical rating organizations ("NRSRO's"), or the highest rating by one NRSRO if that is the only NRSRO having rated the security, or whose issuer has received such a rating or ratings with respect to a class of short-term debt obligations that is now comparable in priority and security to those to be purchased; 3. commercial paper, certificates of deposit, bankers' acceptances or other corporate obligations maturing in 13 months or less and which, although not rated by any NRSRO, the Board of Directors determines to be of a quality comparable to that of instruments receiving either of the two highest ratings, provided, that any security determined to be comparable in quality to the second highest rating shall be included in the 5% limitation under item 5; and 4. repurchase agreements with respect to any of the foregoing obligations. 7 12 5. as to no more than 5% of the Portfolio's assets, in commercial paper, certificates of deposit or bankers' acceptances receiving the second highest rating by any two NRSRO's (or by one NRSRO if (a) that is the only NRSRO having rated the security or (b) one other NRSRO has given the security its highest rating), or whose issuer has received such a rating or ratings with respect to a class of short-term debt obligations that is now comparable in priority and security to those to be purchased, provided, that no more than $1 million (or 1% of Portfolio assets, if greater) may be invested in such securities of any one issuer; This Portfolio may invest up to 50% of its assets in the securities of foreign issuers (including private issuers and foreign governments or political subdivisions, agencies or instrumentalities of foreign governments), provided they meet the above quality standards and they are denominated in U.S. dollars and held in custody in the United States. The investments of this Portfolio in such money market instruments are subject to the terms and conditions of Rule 2a-7 under the Investment Company Act of 1940, including the requirement that they be limited to those instruments which the Board of directors determines, present minimal credit risks. Generally, this Portfolio will purchase money market securities with the intention of holding them until maturity, at which time they will be redeemed. To the extent it is able to do so, the Portfolio will not realize any gain or loss on these securities. There may be times, however, when it may be necessary or appropriate to sell securities prior to maturity in order to shorten the Portfolio's average maturity, to meet redemptions, or because of a reevaluation of an issuer's credit-worthiness. Rule 2a-7 permits this Portfolio to value its assets on the basis of amortized cost as a means of maintaining the net asset value of the Money Market shares at $10 per share. Under the terms of the rule, the Portfolio may neither purchase any debt security having a remaining maturity of more than 397 days nor maintain a dollar-weighted average portfolio maturity of more than 90 days. Under the amortized cost method, all such debt securities are valued at their cost on the date of acquisition with a daily adjustment being made to accrued income to reflect amortization of premium or accretion of discount to the maturity date. If such method results in a deviation in excess of 1/2 of 1% from value based on available market quotations, the Board of Directors will promptly consider what, if any, action it should initiate. Such action may include selling portfolio instruments; withholding dividends; recapitalizing outstanding shares; requiring shareholders to contribute shares to capital or using available market quotations. An investor's rate of return will vary as short-term interest rates vary. The rate of return will also be affected by other factors such as the operating expenses of the Portfolio and the sales, if any, of portfolio securities prior to maturity. On balance, however, investment in this Portfolio should involve less market and financial risk than an investment in any other portfolio. BOND PORTFOLIO The principal investment objective of the Bond Portfolio is to obtain a high level of income and opportunity for capital appreciation consistent with preservation of capital. Investments will be made primarily in intermediate-term and long-term fixed-income securities. At least 80% of the total assets of this Portfolio (exclusive of cash and Government securities) will be invested in: 1. publicly traded, investment grade, non-convertible corporate debt securities issued by United States corporations and assigned within the four highest bond ratings by Moody's or Standard and Poor's ("S&P"); and 2. corporate debt securities used for short-term investment and limited to the top grade of these two rating services. Up to 20% of the total assets of the Portfolio may be invested in: (1) securities having high potential for capital appreciation; (2) preferred stocks, convertible securities and securities carrying warrants to purchase equity securities; and (3) debt securities issued by U.S. banks and savings and loan associations which at the date of investment have capital, surplus and undivided profits as of the date of their most recent financial statements in excess of $100,000,000. This Portfolio will not invest in common stocks directly, but it may retain for reasonable periods of time up to 10% of its total assets in common stocks acquired upon the conversion of debt securities or upon the exercise of warrants acquired with debt securities. 8 13 It is expected that this Portfolio will include debt securities with varying maturities selected from various industries, depending upon the Adviser's evaluation of current and anticipated market conditions. The market values of debt instruments will vary depending upon their respective yields; therefore, the net asset value per share of the Portfolio will change from time to time as the general level of interest rates changes. Consequently, an investment in the shares of this Portfolio involves substantial market risk, but should involve less financial risk than an investment in any of the portfolios other than the Money Market Portfolio. OMNI PORTFOLIO The principal investment objective of the Omni Portfolio is to realize a high level of long-term total rate of return consistent with prudent investment risks. Total rate of return consists of current income including dividends, interest and discount accruals and capital appreciation. This Portfolio will seek to attain its objectives by investing in any of the securities in which the Equity, Money Market and Bond Portfolios may invest. The mix of investments will be adjusted from time to time among the various market sectors (stocks, bonds and money market instruments) to capitalize on perceived variations in return potential produced by the interaction of changing market and economic conditions. The Portfolio may at times be invested in less than all three of the market sectors. No minimum portion of the Portfolio is required to be invested in any sector. The frequency of changes in investment mix depends upon market and economic conditions. The Portfolio's principal investment objective is supplemented and limited by the investment objectives, policies and restrictions established for each of the market sectors. Within the equity sector, the Portfolio will attempt to obtain long-term growth of capital while current income will be a secondary consideration. Within the bond sector, the Portfolio will attempt to obtain a high level of income and opportunity for capital appreciation consistent with preservation of capital. Within the money market sector, the Portfolio will attempt to obtain maximum current income consistent with the preservation of principal and liquidity. Investment in this Portfolio involves all of the risks associated with investing in the other portfolios. In addition, there is the risk that at any given time this Portfolio will invest too much or too little in each of the respective market sectors. INTERNATIONAL PORTFOLIO The principal investment objective of the International Portfolio is to obtain long-term capital growth by investing primarily in common stocks (and securities convertible into common stocks) of foreign companies. This Portfolio may also invest in fixed-income securities of foreign issuers. When deemed appropriate for short-term investment or for defensive purposes, it may invest in short-term debt instruments of U.S. or foreign issuers, in U.S. Government obligations, or in U.S. common stocks. This Portfolio enables variable contractowners to diversify their investment by participating in companies and economies outside the U.S. However, investing in foreign securities may involve a greater degree of risk than investing in domestic securities because of the possibilities of currency exchange rate fluctuations, currency exchange controls, less publicly available information, more volatile markets, thinner markets (less trading volume), slower settlement of trades, greater likelihood of trade failures, less securities regulation, less favorable tax provisions, lack of uniformity of accounting, auditing and financial reporting standards, war and expropriation. Foreign investments also generally involve higher brokerage commissions, higher custodian costs, and currency conversion fees. Investment in this Portfolio will generally involve a greater degree of market and financial risk than any of the portfolios except for the Global Contrarian Portfolio. CAPITAL APPRECIATION PORTFOLIO The principal investment objective of the Capital Appreciation Portfolio is to maximize capital growth through investment primarily in common stocks. This Portfolio seeks to achieve capital appreciation by investing in securities of companies that are undervalued in relation to the company's assets, earnings, market position or breakup value; are currently out of favor in the investment community; or have attractive growth potential in their business markets. Securities are also sought that have been over-discounted due to adverse operating results, deteriorating economic or industry conditions, or unfavorable publicity. 9 14 The Portfolio may also invest in fixed-income securities and money market instruments to preserve its principal value during uncertain or declining market conditions. The Portfolio's total return will consist principally of capital appreciation (or depreciation) and, to a lesser extent, current income. The Portfolio's active management may result in a higher portfolio turnover rate and correspondingly higher brokerage costs. Investment in this Portfolio will generally involve market and financial risks that are comparable to, or somewhat less than, those of the Equity Portfolio. SMALL CAP PORTFOLIO To achieve its investment objective of capital appreciation, this Portfolio invests primarily in the common stocks of small and medium sized companies. Ordinarily, these companies are not listed on a national securities exchange but will be traded over the counter. Under normal market conditions, at least 65% of this Portfolio's assets will be invested in common stocks of companies with market capitalizations of less than $1 billion. However it may also invest in larger companies if they appear to present better prospects for capital appreciation. This Portfolio may invest up to 30% of its assets in foreign securities. Small and medium sized companies selected for this Portfolio are generally those that are still in the developing stages of their life cycles and are able to achieve rapid growth in sales, earnings and share prices. Investments in such companies involve greater volatility and risk than is customarily associated with more established companies because such companies often have limited product lines, markets or financial resources, and their securities may be subject to more abrupt or erratic movements in price than securities of larger companies or the market averages. Investment in this Portfolio generally involves a higher degree of market and financial risks than those of the Equity Portfolio. GLOBAL CONTRARIAN PORTFOLIO The objective of the Global Contrarian Portfolio is to provide long-term growth of capital by investing in foreign and domestic securities that, in the judgment of the portfolio manager, are undervalued or presently out of favor with other investors but have positive prospects for eventual appreciation. While this Portfolio will primarily invest in common stocks (and securities convertible into common stocks), it may also invest in fixed income securities that appear to be undervalued or out of favor. A substantial portion (at least 25%) of this Portfolio will be invested in foreign securities, in at least three countries, under normal market conditions. To that extent, the risk factors described in the second paragraph under "International Portfolio," above, will apply. In addition, "contrarian" investing generally involves substantial risks, particularly in the short term. Companies or markets that appear to be undervalued or are out of favor with investors may remain so for an extended period of time or may never recover. Therefore, this Portfolio should be considered primarily for long-term investments. Investment in this Portfolio generally involves a high degree of market and financial risk. AGGRESSIVE GROWTH PORTFOLIO The investment objective of the Aggressive Growth Portfolio is to seek capital growth. The Portfolio invests in a diversified portfolio of securities believed to represent attractive growth opportunities. The Portfolio normally emphasizes equity securities, although it has the flexibility to invest in any type of security that is believed to have the potential for capital appreciation. The Portfolio may invest up to 100% of its assets in equity securities, including common stocks, preferred stocks, securities that are convertible into common or preferred stocks, such as convertible bonds, and warrants. The Portfolio may invest up to 100% of its assets in intermediate - to long-term corporate or U.S. government debt securities. When market conditions warrant a temporary defensive position, the Portfolio may invest without limitation in cash and short-term, fixed-income securities, including U.S. government securities, commercial paper, banker's acceptances, certificates of deposit, and time deposits. Although the debt securities in which the Portfolio invests will be primarily investment-grade debt securities, the Portfolio may invest up to 5% of its total assets in non-investment-grade debt securities. The Portfolio may invest up to 15% of its assets in foreign securities, which involve certain risks. 10 15 The Portfolio seeks to uncover emerging investment trends and attractive growth opportunities. In its search for potential investments, the Portfolio attempts to identify companies that are poised for accelerated earnings growth due to innovative products or services, new management, or favorable economic or market cycles. These companies may be small, unseasoned firms in the early stages of development, or they may be mature organizations. The Portfolio engages in substantial short-term trading, which involves significant risk and may be deemed speculative. Such trading results in a higher portfolio turnover rate and correspondingly higher brokerage costs. Investment in this Portfolio involves a high degree of market and financial risk. CORE GROWTH PORTFOLIO The objective of the Core Growth Portfolio is to provide long-term capital appreciation by investing primarily in equity securities of large, medium and small companies that PBA believes have strong earnings growth and long-term capital appreciation prospects. PBA seeks companies poised for rapid growth that have a history of above-average earnings growth, demonstrate the ability to sustain that growth, and operate in industries or markets experiencing increased demand for their products or services. In managing the Core Growth Portfolio, PBA uses both quantitative and fundamental processes focusing on quality earnings growth. PBA begins by creating a universe of rapidly growing companies having desired quality characteristics. Using proprietary software and research models that incorporate attributes of successful growth (such as positive earnings surprises, upward earnings estimate revisions, and accelerating sales and earnings growth), PBA creates a universe of growing companies. Then, using fundamental research, PBA evaluates each company's earnings quality and assesses the sustainability of the company's current growth trends. Through this highly disciplined process, PBA seeks to construct an investment portfolio having strong growth characteristics. This portfolio's investments in small and medium capitalization companies may experience greater price volatility than portfolios investing primarily in larger, more established companies. Because the universe of companies in which this portfolio invests will experience stock price volatility, it is important that investors maintain a long-term investment perspective. GROWTH & INCOME PORTFOLIO The Growth & Income Portfolio's investment objective is long-term total return. The Portfolio will pursue this objective primarily by investing in equity and debt securities, focusing on small- and mid-cap companies that offer the potential for capital appreciation, current income, or both. The Portfolio will normally invest the majority of its assets in common stocks, convertible securities, bonds, and notes. Although the Portfolio is intended to focus on companies with market capitalizations of up to $3 billion, the Portfolio will remain flexible and may invest in securities of larger companies. The Portfolio may also engage in short sales of securities expected to decline in price. Small- and mid-cap companies may present greater opportunities for investment return than do larger companies, but may also involve greater risks. They may have limited product lines, marketing or financial resources, or may depend on a limited management group. Their securities may trade less frequently and in limited volume. As a result, the prices of these securities may fluctuate more than prices of securities of larger, widely traded companies. S&P 500 INDEX PORTFOLIO The investment objective of the S&P 500 Index Portfolio is to seek total return approximating that of the S&P 500, including reinvestment of dividends, at a risk level consistent with that of the S&P 500. It will seek this objective by investing primarily in (a) common stocks and other securities that need not be included among the 500 stocks in the S&P 500, and/or (b) S&P 500 stock index futures contracts which will be hedged by investing in securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities, investment-grade corporate bonds and cash equivalents. This strategy is intended to replicate the performance of the S&P 500. However, Portfolio expenses will reduce the Portfolio's ability to exactly track the S&P 500 and there can be no assurance that the Portfolio's investments will have the desired effect. 11 16 The value of S&P 500 stock index futures contracts is tied directly to the fluctuations of the S&P 500. The Portfolio's ability to use futures contracts as a substitute for maintaining a fully-invested market position in the 500 stocks comprising the S&P 500 obligates the Portfolio to hedge its position by delivering a specific dollar amount equal to the difference between the value of the S&P 500 at the time the contract was made and the closing of the contract. The futures contracts can result in a high degree of leverage so that, were the Portfolio's position in the contracts not to be hedged by its position in U.S. Government obligations, investment-grade corporate bonds and cash equivalents, a relatively small decline in the S&P 500 could result in a substantial loss to the Portfolio, including part or all of the margin deposits required on the contracts. See "About the S&P 500" on page 23. SOCIAL AWARENESS PORTFOLIO The objective of the Social Awareness Portfolio is to provide long-term growth of capital by investing primarily in the common stocks and other equity securities of companies that, in the Adviser's opinion, conduct their business in a way that enhances society's quality of life. The Portfolio's social concern criteria will necessarily limit the universe of securities that may be selected for this Portfolio. However, the Adviser believes the Portfolio's objective of long-term capital growth can be achieved despite this limitation. In choosing investments, the Adviser will consider a company's record in (a) quality and safety of its products and services, (b) environmental protection and enhancement, (c) employee relations, opportunities and safety, (d) consumer relations and protection, (e) community involvement, and (f) expectations for the creation of new jobs and economic development due to anticipated company growth. In addition, each potential investment will be subject to the Adviser's standards of investment analysis. As a matter of operating policy that may be modified by the Board of Directors, the Portfolio will not invest in any company substantially engaged in the manufacture of or distribution of tobacco products, alcoholic beverages or weapons, or the operation of gambling casinos, or the support of repressive regimes. The Adviser will attempt to monitor and respond to changes in business practices of the companies selected for investment and, in case of any adverse development, will consider whether or not the Portfolio's policies would require it to sell its position in that company. Any sale under those circumstances would, however, be subject to prudent market considerations. STRATEGIC INCOME PORTFOLIO The investment objective of the Strategic Income Portfolio is to generate high current income by investing at least 80% of its assets in income producing securities, including at least 40% of its assets in a core asset group of U.S. government and corporate fixed income securities, and 5% to 20% of its assets in each of the following satellite categories: (a) foreign bonds, (b) real estate investment trusts, (c) domestic equity securities, (d) money market securities and (e) the following structured fixed income securities: mortgage backed securities, collateralized mortgage obligations ("CMOs"), adjustable rate mortgage securities ("ARMS") and asset-backed securities. The core assets are selected based on the outlook for interest rates and their yield in relation to other fixed income securities of similar quality and maturity and only include investment grade bonds (i.e., those rated Baa or higher by Moody's, or BBB or higher by S&P or Fitch or which, if unrated, are deemed by Star to be of comparable quality). The foreign bonds are of non-U.S. companies and governments. They are investment grade, are denominated in currencies other than U.S. dollars and may include American Depositary Receipts and International Depositary Receipts. The Portfolio may also invest in shares of investment companies that invest primarily in foreign bonds. Real estate investment trusts include equity or mortgage real estate trusts integrated to capture income diversified by sector (e.g., shopping malls, apartment buildings and health care facilities) and by geographic location. The domestic equity category consists of high-dividend common and preferred stocks of U.S. companies with a history of stable earnings and/or growing dividends. The domestic equity category may also include warrants and securities convertible into the common stocks of these U.S. companies. The money market category includes (a) commercial paper and Europaper (dollar-denominated commercial paper issued outside the U.S.) having at least one rating in one of the two highest categories of any NRSRO; (b) instruments of domestic and foreign banks and savings and loans (such as certificates of 12 17 deposit, demand and time deposits, savings shares and bankers acceptances) if they have capital, surplus and individual profits of over $100,000,000, or if the principal amount of the instrument is insured by a fund administered by the Federal Deposit Insurance Corporation ("FDIC insured"), including Eurodollar Certificates of Deposit ("ECDs"), Yankee Certificates of Deposit ("Yankee CDs") and Eurodollar Time Deposits ("ETDs"); (c) obligations of the U.S. government or its agencies or instrumentalities; (d) repurchase agreements, and (e) other unrated short-term instruments deemed by Star to be of comparable quality to the other obligations in which the Portfolio may invest. This Portfolio may also engage in short sales from time to time. See "Risks Related to Short Sales" on page 17. STELLAR PORTFOLIO The investment objective of the Stellar Portfolio is to maximize total return by investing approximately 15% to 25% of its assets in each of the following categories: (a) domestic equity securities which Star deems to be undervalued relative to stocks contained in the S&P 500 Composite Stock Index; (b) domestic fixed income securities including investment grade corporate debt obligations and obligations of the U.S. government and its agencies and instrumentalities; (c) foreign securities including securities of non-U.S. companies, investment grade corporate and government fixed income securities denominated in currencies other than U.S. dollars, and investment companies that invest primarily in foreign securities; (d) real estate securities including publicly traded equity and convertible debt securities of real estate related companies and real estate investment trusts, and (e) precious metal securities and/or money market securities. Precious metal securities include equity securities of domestic and foreign companies that explore for, extract, process, or deal in precious metals such as gold, silver, palladium and platinum. Up to 5% of the Portfolio may be invested in domestic and foreign asset-based securities for which the principal amount, redemption terms or conversion terms are related to the market price of some precious metals. Money market securities in which the Portfolio may invest are U.S. and foreign short-term money market instruments including commercial paper and Europaper (dollar-denominated commercial paper issued outside the U.S.) having at least one rating in one of the two highest categories of any NRSRO; instruments of domestic and foreign banks and savings and loans (such as certificates of deposit, demand and time deposits, savings shares and bankers' acceptances) if they have capital, surplus and undivided profits of over $100,000,000, or if the principal amount of the instrument is FDIC insured (these may include ECDs, Yankee CDs and ETDs); obligations of the U.S. government or its agencies or instrumentalities; repurchase agreements, or other short-term instruments deemed by Star to be of comparable quality to the other foregoing money market securities. RELATIVE VALUE PORTFOLIO The investment objective of the Relative Value Portfolio is to obtain the highest total return as is consistent with reasonable risk by investing primarily in stocks which Star deems to represent characteristics with low volatility, above-average yields, and are undervalued relative to the stocks comprising the S&P Composite Stock Index. Unless it is in a defensive position, at least 70% of the Portfolio's assets will be invested in common stocks of companies in the top 25% of their industries with regard to revenues. However, other factors, such as product position or market share, will also be considered and may outweigh revenues. The Portfolio will also invest in fixed income securities, including convertible securities; domestic corporate debt obligations (rated or A or higher by Moody's or S&P or Fitch); and obligations of the U.S. government or its agencies or instrumentalities. INVESTMENT RESTRICTIONS The Fund is subject to a number of restrictions in implementing its investment policies. The following is a list of certain significant restrictions for all portfolios other than the Capital Appreciation and Aggressive Growth Portfolios, the restrictions for which are listed separately. The Statement of Additional Information provides a complete list of all investment restrictions applicable to the Fund. Restrictions number 4, 7 and 8 are nonfundamental policies of the Small Cap, Core Growth, Growth & Income, S&P 500 Index, Social Awareness, Strategic Income, Stellar and Relative Value Portfolios, and restrictions number 4 and 7 are nonfundamental policies of the Global Contrarian Portfolio, and as such may be changed by the Board of Directors. Otherwise, none of the following restrictions may be changed without the affirmative vote of a majority of the outstanding voting securities of the Fund or of a particular portfolio, as appropriate. 13 18 Each portfolio of the Fund (other than the Capital Appreciation and Aggressive Growth Portfolios) will not: 1. invest more than 5% of the value of the total assets of such portfolio in the securities of any one insurer (except U.S. Government securities); 2. purchase more than 10% of the outstanding voting securities of any one issuer, and the Money Market Portfolio will not acquire the voting securities of any issuer except in connection with a merger, consolidation or other reorganization; 3. invest more than 25% of the value of its total assets in any one industry, except that each portfolio may invest more than 25% of the value of its total assets in obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities or in certificates of deposit, bankers' acceptances, bank time deposits or other obligations of banks or financial institutions. However, it is the intention of management not to invest in time deposits which involve any penalty or other restriction on withdrawal; 4. invest more than 10% of the value of its assets (15% in the case of the Small Cap, Core Growth and Growth & Income Portfolios) in securities or other investments, including repurchase agreements maturing in more than seven days, that are subject to legal or contractual restrictions upon resale or are otherwise not readily marketable; 5. other than the Growth & Income and Strategic Income Portfolios, borrow money, except for temporary or emergency purposes from banks, in which event the aggregate amount borrowed shall not exceed 5% of the value of the assets of the portfolio. In the case of such borrowing, each portfolio may pledge, mortgage or hypothecate up to 5% of its assets. Reverse repurchase agreements are not considered to be borrowing money for purposes of this restriction. The Growth & Income and Strategic Income Portfolios may borrow money directly or through reverse repurchase agreements in amounts up to one-third of the value of each of their total net assets, other than the amount borrowed; 6. purchase or sell commodities or commodity contracts except that (a) each portfolio other than the Money Market Portfolio may, for hedging purposes, purchase and sell financial futures contracts and options thereon within the limits of investment restriction 7 below, (b) notwithstanding restriction 7 below, the S&P 500 Index Portfolio may purchase and sell stock index futures contracts in accordance with its stated investment objectives, and (c) the Stellar Portfolio may purchase or sell precious metal securities; 7. other than the S&P 500 Index Portfolio, purchase or sell put or call options, except that each portfolio other than the Money Market Portfolio may, for hedging purposes, (a) write call options traded on a registered national securities exchange if such portfolio owns the underlying securities subject to such options, and purchase call options for the purpose of closing out positions in options it has written, (b) purchase put options on securities owned, and sell such options in order to close its positions in put options, (c) purchase and sell financial futures contracts and options thereon, and (d) purchase and sell financial index options; provided, however, that no option or futures contract shall be purchased or sold if, as a result, more than one-third of the total assets of the portfolio would be hedged by options or futures contracts, and no more than 5% of any portfolio's total assets, at market value, may be used for premiums on open options and initial margin deposits on futures contracts; 8. other than the International and Global Contrarian Portfolios, invest in securities of foreign issuers except that (a) each of the Equity, Bond, Omni, Core Growth, Growth & Income, S&P 500 Index, Social Awareness and Relative Value Portfolios may (i) invest up to 15% of their respective assets in securities of foreign issuers (including private issuers and foreign governments or political subdivisions, agencies or instrumentalities of foreign governments), American Depository Receipts, and securities of United States domestic issuers denominated in foreign currency, and (ii) invest up to an additional 10% of the assets of the portfolio in securities issued by foreign governments or political subdivisions, agencies or instrumentalities thereof, (b) the Small Cap Portfolio may invest up to 30% of its assets in the securities of foreign issuers, (c) the Money Market Portfolio may invest up to 50% of its assets in the securities of foreign issuers, provided the securities are denominated in U.S. dollars and held in custody in the United States, (d) the Strategic Income Portfolio may invest up to 20% of its assets in foreign bonds and (e) the Stellar Portfolio may invest up to 25% of its assets in the securities of foreign issuers. For purposes of this restriction number 8, U.S. dollar denominated depository receipts traded in domestic markets do not constitute foreign securities; 14 19 As nonfundamental policies of each portfolio other than the Capital Appreciation and Aggressive Growth Portfolios, which policies may be changed at any time by the vote of a majority of the Board of Directors, (a) no portfolio will invest more than 20% of its assets in securities of issuers located in any one foreign country, except that up to an additional 5% of its assets may be invested in securities of issuers located in each of any three of Australia, Canada, France, Germany, Japan or the United Kingdom; and (b) each portfolio other than the Money Market Portfolio, in order to hedge against changes in the exchange rates of foreign currencies in relation to the U.S. dollar, may engage in forward foreign currency contracts, foreign currency options and foreign currency futures contracts in connection with the purchase, sale or ownership of specific securities (but, not more than 5% of a portfolio's assets may be invested in such currency hedging contracts). If a percentage restriction is adhered to at the time of an investment, a later increase or decrease in the investment's percentage of the value of a portfolio's total assets resulting from a change in such values or assets will not constitute a violation of the percentage restriction. CAPITAL APPRECIATION PORTFOLIO FUNDAMENTAL POLICIES As a matter of fundamental policy, the Portfolio may not: C.A.1. Borrow money except that the Portfolio may (i) borrow for non-leveraging, temporary or emergency purposes and (ii) engage in reverse repurchase agreements and make other investments or engage in other transactions, which may involve a borrowing, in a manner consistent with the Portfolio's investment objective and program, provided that the combination of (i) and (ii) shall not exceed 33 1/3% of the value of the Portfolio's total assets (including the amount borrowed) less liabilities (other than borrowings) or such other percentage permitted by law. Any borrowings which come to exceed this amount will be reduced in accordance with applicable law. The Portfolio may borrow from banks, other portfolios managed by TRPA or other persons to the extent permitted by applicable law; C.A.2. Purchase or sell physical commodities; except that it may enter into futures contracts and options thereon; C.A.3. Purchase the securities of any issuer if, as a result, more than 25% of the value of the Portfolio's total assets would be invested in the securities of issuers having their principal business activities in the same industry; C.A.4. Make loans, although the Portfolio may (i) lend portfolio securities and participate in an interfund lending program with other portfolios managed by TRPA provided that no such loan may be made if, as a result, the aggregate of such loans would exceed 33 1/3% of the value of the Portfolio's total assets; (ii) purchase money market securities and enter into repurchase agreements; and (iii) acquire publicly-distributed or privately-placed debt securities and purchase debt; C.A.5. Purchase a security if, as a result, with respect to 75% of the value of its total assets, more than 5% of the value of the Portfolio's total assets would be invested in the securities of a single issuer, except securities issued or guaranteed by the U.S. Government or any of its agencies or instrumentalities; C.A.6. Purchase a security if, as a result, with respect to 75% of the value of the Portfolio's total assets, more than 10% of the outstanding voting securities of any issuer would be held by the Fund (other than obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities); C.A.7. Purchase or sell real estate unless acquired as a result of ownership of securities or other instruments (but this shall not prevent the Portfolio from investing in securities or other instruments backed by real estate or in securities of companies engaged in the real estate business); C.A.8. Issue senior securities except in compliance with the Investment Company Act of 1940; or C.A.9. Underwrite securities issued by other persons, except to the extent that the Portfolio may be deemed to be an underwriter within the meaning of the Securities Act of 1933 in connection with the purchase and sale of its portfolio securities in the ordinary course of pursuing its investment program. 15 20 With respect to investment restrictions C.A.1. and C.A.4., the Portfolio will not borrow from or lend to any other portfolios managed by TRPA unless they apply for and receive an exemptive order from the SEC or the SEC issues rules permitting such transactions. The Portfolio has no current intention of engaging in any such activity and there is no assurance the SEC would grant any order requested by the Portfolio or promulgate any rules allowing the transactions. With respect to investment restriction C.A.2., the Portfolio does not consider currency contracts or hybrid investments to be commodities. For purposes of investment restriction C.A.3., U.S., state or local governments, or related agencies or instrumentalities, are not considered an industry. For purposes of investment restriction C.A.4., the Portfolio will consider the acquisition of a debt security to include the execution of a note or other evidence of an extension of credit with a term of more than nine months. AGGRESSIVE GROWTH PORTFOLIO FUNDAMENTAL POLICIES As a matter of fundamental policy, the Portfolio: A.G.1. May not with respect to 75% of its total assets, purchase the securities of any issuer (except securities issued or guaranteed by the U.S. government or its agencies or instrumentalities) if, as a result, (i) more than 5% of the Portfolio's total assets would be invested in the securities of that issuer, or (ii) the Portfolio would hold more than 10% of the outstanding voting securities of that issuer. A.G.2. May (i) borrow money from banks and (ii) make other investments or engage in other transactions permissible under the Investment Company Act of 1940 which may involve a borrowing, provided that the combination of (i) and (ii) shall not exceed 33 1/3% of the value of the Portfolio's total assets (including the amount borrowed), less the Portfolio's liabilities (other than borrowings), except that the Portfolio may borrow up to an additional 5% of its total assets (not including the amount borrowed) from a bank for temporary or emergency purposes (but not for leverage or the purchase of investments). The Portfolio may also borrow money from the other mutual funds managed by SCM or other persons to the extent permitted by applicable law. A.G.3. May not issue senior securities, except as permitted under the Investment Company Act of 1940. A.G.4. May not act as an underwriter or another issuer's securities, except to the extent that the Portfolio may be deemed to be an underwriter within the meaning of the Securities Act of 1933 in connection with the purchase and sale of portfolio securities. A.G.5. May not purchase or sell physical commodities unless acquired as a result of ownership of securities or other instruments (but this shall not prevent the Portfolio from purchasing or selling options, futures contracts, or other derivative instruments, or from investing in securities or other instruments backed by physical commodities). A.G.6. May not make loans if, as a result, more than 33 1/3% of the Portfolio's total assets would be lent to other persons, except through (i) purchases of debt securities or other debt instruments, or (ii) engaging in repurchase agreements. A.G.7. May not purchase the securities of any issuer if, as a result, more than 25% of the Portfolio's total assets would be invested in the securities of issuers, the principal business activities of which are in the same industry. A.G.8. May not purchase or sell real estate unless acquired as a result of ownership of securities or other instruments (but this shall not prohibit the Portfolio from purchasing or selling securities or other instruments backed by real estate or of issuers engaged in real estate activities. FOREIGN INVESTMENTS. Investments in foreign securities involve considerations not normally associated with investing in domestic issuers. For a summary of such considerations, see the second paragraph under "International Portfolio" on page 9. 16 21 RISKS RELATED TO HEDGING TECHNIQUES. The use for hedging purposes of options and futures contracts on securities and foreign currencies involves certain risks, including whether the Adviser or a sub-adviser will be able to predict correctly the direction of movement of stock prices, interest rates, currency prices and other economic factors, whether sufficient market liquidity will exist to permit a portfolio to close out positions taken, and whether price movements of portfolio securities subject to a hedge follow price movements of securities or currencies underlying options and futures contracts, none of which can be assured. A discussion of the risks involved in the use of such hedging techniques is contained in the Statement of Additional Information. RISKS RELATED TO LEVERAGING. The Growth & Income and Strategic Income Portfolios may borrow for investment purposes pursuant to a fundamental policy. This borrowing, which is known as leveraging, generally will be unsecured, except to the extent the Portfolios enter into the reverse repurchase agreements described below. The Investment Company Act of 1940 requires these Portfolios to maintain continuous asset coverage (that is, total assets including borrowings, less liabilities exclusive of borrowings) of 300% of the amount borrowed. If the 300% asset coverage should decline as a result of market fluctuations or other reasons, a Portfolio may be required to sell some of its portfolio holdings within three days to reduce the debt and restore the 300% asset coverage, even though it may be disadvantageous from an investment standpoint to sell securities at that time. Borrowing creates an opportunity for increased net income to the Portfolios but, at the same time, creates special risk considerations. For example, leveraging may exaggerate the effect on net asset value of any increase or decrease in the market value of a Portfolio's securities. To the extent the income derived from securities purchased with borrowed funds exceeds the interest a Portfolio will have to pay, that Portfolio's net income will be greater than if borrowing were not used. Conversely, if the income from the assets retained with borrowed funds is not sufficient to cover the cost of borrowing, the net income of that Portfolio will be less than if borrowing were not used and , therefore, the amount available for distribution to shareholders as dividends will be reduced. The Portfolios also may be required to maintain minimum average balances in connection with borrowing or to pay a commitment or other fee to maintain a line of credit; either of these requirements would increase the cost of borrowing over the stated interest rate. Among the forms of borrowing in which the Growth & Income and Strategic Income Portfolios may engage is the entry into reverse repurchase agreements with banks, brokers or dealers. These transactions involve the transfer by a Portfolio of an underlying debt instrument in return for cash proceeds based on a percentage of the value of the security. The Portfolio retains the right to receive interest and principal payments on the security. At an agreed upon future date, the Portfolio repurchases the security at an agreed-upon price. In certain types of agreements, there is no agreed upon repurchase date, and interest payments are calculated daily, often based on the prevailing U.S. government securities or other high-quality liquid debt securities at least equal to the aggregate amount of its reverse repurchase obligations, plus accrued interest, in certain cases, in accordance with releases promulgated by the Securities and Exchange Commission. The Commission views reverse repurchase transactions as collateralized borrowings by the Portfolio. These agreements, which are treated as if reestablished each day, can provide the Portfolios with a flexible borrowing tool. RISKS RELATED TO SHORT SALES. From time to time, the Strategic Income Portfolio may engage in short sales which are transactions in which the Portfolio sells a security it does not own in anticipation of a decline in the market value of that security. To complete such a transaction, the Portfolio must borrow the security to make delivery to the buyer. The Portfolio then is obligated to replace the security borrowed by purchasing it at the market price at the time of replacement. The price at such time may be more or less than the price at which the security was sold by the Portfolio. Until the security is replaced, the Portfolio is required to pay to the lender amounts equal to any dividends or interest which accrue during the period of the loan. To borrow the security, the Portfolio also may be required to pay a premium, which would increase the cost of the security sold. The proceeds of the short sale will be retained by the broker, to the extent necessary to meet margin requirements, until the short position is closed out. 17 22 It is anticipated that the frequency of short sales will vary substantially under different market conditions. As an operating policy of the Strategic Income Portfolio which may be changed without shareholder approval, no securities will be sold short if, after effect is given to that short sale, the total market value of all securities sold short would exceed 25% of the value of the Portfolio's net assets. The Portfolio may not sell short the securities of any single issuer listed on a national securities exchange to the extent of more than 2% of the value of the Portfolio's net assets. The Portfolio may not sell short the securities of any class of an issuer to the extent, at the time of the transaction, of more than 2% of the outstanding securities of that class. The Portfolio will incur a loss as a result of a short sale if the price of the security increases between the date of the short sale and the date on which the Portfolio replaces the borrowed security; conversely, the Portfolio will realize a gain if the security declines in price between those dates. This result is the opposite of what one would expect from a cash purchase of a long position in a security. The amount of any gain will be decreased, and the amount of any loss increased, by the amount of any premium or amounts in lieu of interest the Portfolio may be required to pay in connection with a short sale. RISKS RELATED TO REAL ESTATE SECURITIES. Although the Fund's real estate investments will be limited to publicly traded securities secured by real estate or interests therein or issued by companies that invest in real estate or interests therein, these investments may be subject to risks associated with direct ownership of real estate. These include declines in the value of real estate, risks related to general and local economic conditions and increases in interest rates. Real estate investment trusts are often not diversified and are, therefore, subject to the risk of financing projects. They may also be subject to heavy cash flow dependency, defaults by borrowers and self-liquidation. Those real estate investment trusts that hold equity positions in real estate may be affected by any changes in the value of the underlying property. Those real estate investment trusts that lend money to property developers may be affected by the quality of any credit extended. RISKS RELATED TO PRECIOUS METALS. The prices of precious metals and precious metal securities have historically been subject to high volatility. The earnings and financial condition of precious metal companies may be adversely affected by volatile precious metal prices. MANAGEMENT OF THE FUND The Fund's Board of Directors is responsible for directing the management of the business and affairs of the Fund. The Board of Directors has the power to amend the Fund's By-laws, to elect its officers, to declare and pay dividends, and to exercise all the powers of the Fund except those reserved to the shareholders. The Adviser is a wholly-owned subsidiary of ONLI and is located at One Financial Way, Cincinnati, Ohio 45242. It has served as the Fund's investment adviser since May 1, 1996. Prior to that date, the Fund's investment adviser was O.N. Investment Management Company, an indirect wholly-owned subsidiary of ONLI which, like the Adviser, made use of ONLI's investment personnel and administrative systems. The Adviser engages sub-advisers to direct the investments and reinvestments of certain portfolios. SGAM, located at 1221 Avenue of the Americas, New York, NY 10020, is owned by Societe Generale, one of the largest banks in Europe. SGAM and its predecessors have been investment advisers to international mutual funds since 1970. It has managed the assets of the International Portfolio since 1993, and the Global Contrarian Portfolio since 1995. TRPA, located at 100 East Pratt Street, Baltimore, Maryland 21202, manages assets for various individual and institutional investors, particularly the T. Rowe Price group of mutual funds. It is the successor to an investment firm founded in 1937. It has managed the assets of the Capital Appreciation Portfolio since 1994. FAM, located at 2930 East Third Avenue, Denver, Colorado 80206, manages the assets of the Founders group of mutual funds as well as private accounts. It was established in 1938. It has managed the assets of the Small Cap Portfolio since 1994. 18 23 SCM, located at 100 Heritage Reserve, Milwaukee, Wisconsin 53051, manages the assets of the Strong group of mutual funds as well as pension funds and private accounts. It was established in 1974. It has managed the assets of the Aggressive Growth Portfolio since 1995. PBA, located at 1255 Drummer's Lane, Wayne, Pennsylvania 19087, is controlled by United Asset Management Corp. located in Boston, Massachusetts. With its predecessors, PBA has been an investment adviser since 1982 and it manages the PBHG mutual funds. It has managed the assets of the Core Growth Portfolio since 1997. RSIM, located at 555 California Street, San Francisco, California 94104, has been an investment adviser since 1978. It specializes in growth companies and manages the Robertson Stephens mutual funds as well as private and institutional asset pools. It has managed the assets of the Growth & Income Portfolio since 1997. Star, located at 425 Walnut Street, Cincinnati, Ohio 45202, is a national bank founded in 1863. It is the largest bank and trust organization of StarBanc Corporation. It has managed commingled funds since 1957. It has managed the assets of the Strategic Income, Stellar and Relative Value Portfolios since 1997. The individuals primarily responsible for the day-to-day management of the Fund's portfolios are Joseph Brom, Michael Boedeker, Stephen Williams, Douglas Hundley, Keith Hanson, Jean-Marie Eveillard, Richard Howard, Michael Haines, Richard Strong, James McCall, John Wallace, Randolph Bateman, Joseph Belew, Fred Brink, Kirk Mentzer and Peter Sorrentino. Joseph Brom is president of the Adviser and senior vice president and chief investment officer of ONLI. He oversees the management of the Equity, Money Market, Bond, Omni, S&P 500 Index and Social Awareness Portfolios. He is a chartered financial analyst with a bachelor's degree in economics and finance and a law degree from the University of Wisconsin. He has been an investment officer of ONLI since 1975 and previously had 15 years of experience in securities management. Michael Boedeker, a vice president of the Adviser, has managed the Bond Portfolio since 1989. He is a chartered financial analyst with a bachelor's degree in business and a master of business administration degree in finance from Indiana University. He has been vice president of fixed income securities for ONLI since 1989 and previously had over 20 years of experience in fixed income securities and mutual fund management, most recently as senior vice president and chief investment officer of Mutual Security Life Insurance Co. for more than 5 years. Stephen Williams, a vice president of the Adviser, has managed the Equity and Omni Portfolios since 1987. He has a bachelor's degree in finance from the University of Cincinnati. He has been an investment analyst and director of securities for ONLI since 1977. Douglas Hundley, a vice president of the Adviser, is the portfolio manager of the S&P 500 Index Portfolio and he has managed the Money Market Portfolio since 1996. He has a bachelor's degree in accounting and economics from Northern Kentucky University, a master of business administration degree in finance from the University of Texas, and is a certified public accountant in Ohio. He has been an investment officer of ONLI since 1995. For more than seven years prior to that he was an assistant portfolio manager for the Metropolitan Life Insurance Co. and was a financial analyst for Star for a year. Keith Hanson, a vice president of the Adviser, is the portfolio manager of the Social Awareness Portfolio. He is a chartered financial analyst with a bachelor's degree in business administration from Marquette University. He has been an investment officer of ONLI since 1994. For a year prior to that he was a research analyst in the valuation of small businesses for Blum & Colombe, SC, and for seven years before that he was a securities analyst for Johnson Asset Management. Jean-Marie Eveillard, president of SGAM, has managed the International Portfolio since its inception in 1993 and the Global Contrarian Portfolio since its inception in 1995. He is a graduate of the Ecole des Hautes Etudes Commerciales in Paris. He has been president of SoGen International Fund since 1984 and for 21 years prior to that had been a securities analyst and mutual fund manager of Societe Generale and SoGen International Fund. Richard Howard, president of the T. Rowe Price Capital Appreciation Fund and a vice president of TRPA, is the portfolio manager of the Capital Appreciation Portfolio. He is a chartered financial analyst with a bachelor's degree in engineering from Millikin University and a master of business administration degree from Harvard. He joined TRPA in 1982 and previously worked as an industry specialist for Fidelity Management and Research and for CG Investment Management Company. Michael Haines, senior vice president of investment of FAM, is the portfolio manager of the Small Cap Portfolio. He has a bachelor's degree from the Colorado College and a master of business administration from the University of Denver. He has been a portfolio manager for FAM since 1990 and for 5 years prior to that was a financial analyst for FAM. 19 24 Richard Strong, chairman of the board of SCM, is the portfolio manager of the Aggressive Growth Portfolio. He has a bachelor's degree from Baldwin Wallace College and a master's degree in finance from the University of Wisconsin. He founded SCM in 1974 after 8 years of investment experience with several other firms. James McCall, a portfolio manager with PBA since 1994, manages the Core Growth Portfolio. He has a bachelor's degree from the Philadelphia College of Pharmacy and Science and masters degrees in pharmacy and business administration from the University of Utah. Prior to joining PBA, he spent nine years as a vice president and portfolio manager with First National Bank of Maryland and as mutual fund portfolio manager for Provident Mutual Management Co. He spent ten years as a pharmacist before entering the investment field. John Wallace, a managing director of RSIM, is the portfolio manager of the Growth & Income Portfolio. He has a bachelor's degree in Spanish and Anthropology from the University of Idaho and a master of business administration degree from Pace University. He joined RSIM in 1995. For nine years prior to that he was a mutual fund portfolio manager for Oppenheimer Management Corp. Prior to that, he had been the co-founder, owner and operator of an Ecuadorian export firm. Randolph Bateman, senior vice president and chief investment officer of Star's trust financial services group, manages the foreign bonds component of the Strategic Income Portfolio and the foreign securities component of the Stellar Portfolio. He oversees investment policy and research for the Star trust group's capital management division. He is a chartered financial analyst with a bachelor's degree in economics from North Carolina State University. He has been an investment officer of Star since 1988. Prior to that, he had 17 years of investment experience including serving as president of MPACT Securities. Joseph Belew, vice president and trust officer of Star, manages the Relative Value Portfolio. He has a bachelor's degree in business management from Belmont College. He has been a trust officer and investment manager of Star since 1979. Fred Brink, a trust investment officer and fund manager for the capital management division of Star, manages the real estate securities component of the Strategic Income and Stellar Portfolios. He manages real estate investment trusts and mutual funds for Star. He has a bachelor's degree in finance from the University of Cincinnati. He has been a trust investment officer for Star since 1991. Kirk Mentzer, senior trust officer and director of fixed income research for the capital management division of Star, manages the domestic and structured fixed income components of the Strategic Income Portfolio and the domestic fixed income component of the Stellar Portfolio. He also manages the money market components of the Strategic Income, Stellar and Relative Value Portfolios. He is responsible for fixed income investment policy and strategy for Star's capital management division. He has a bachelor's degree in finance and insurance from the University of Cincinnati and a master's degree in finance from Xavier University. He has been a trust officer for Star since 1989 . Peter Sorrentino, vice president and director of portfolio management and research for the capital management division of Star, manages the domestic equity components of the Strategic Income and Stellar Portfolios. He is a chartered financial analyst and has bachelor's degrees in both finance and accounting from the University of Cincinnati. He has been an investment officer of Star since 1996 and for 9 years prior to that was a vice president and regional director of portfolio management for Bank One Investment Advisers. Under the Investment Advisory Agreement dated May 1, 1996, and supplemented January 2, 1997, the Adviser provides portfolio management and investment advice to the Fund and administers its other affairs, subject to the supervision of the Fund's Board of Directors. As compensation for its services to the Equity, Bond, Omni and Social Awareness Portfolios, the Adviser is paid fees at an annual rate of 0.60% of the first $100 million of each Portfolio's net assets, 0.50% of the next $150 million, 0.45% of the next $250 million, 0.40% of the next $500 million, 0.30% of the next $1 billion and 0.25% of net assets over $2 billion. For the Money Market Portfolio, the Adviser is paid a fee at an annual rate of 0.30% of the first $100 million, 0.25% of the next $150 million, 0.23% of the next $250 million, 0.20% of the next $500 million and 0.15% of net assets over $1 billion. However, as to the Money Market Portfolio, the Adviser is presently waiving any of its fee in excess of 0.25%. For the International, Global Contrarian and Relative Value Portfolios, the Adviser is paid fees at an annual rate of 0.90% of each Portfolio's average daily net asset value. 20 25 The Adviser is paid fees at an annual rate of 0.80% of the average daily net asset value of each of the Capital Appreciation, Small Cap, Aggressive Growth and Strategic Income Portfolios. The Adviser is paid fees at an annual rate of 0.95% of the first $150 million of the average daily net asset value of the Core Growth Portfolio and 0.80% of net assets over $150 million. The Adviser is paid fees at an annual rate of 0.85% of the first $200 million of the average daily net asset value of the Growth & Income Portfolio and 0.80% of net assets over $200 million. The Adviser is paid fees at an annual rate of 0.40% of the first $100 million of the average daily net asset value of the S&P 500 Index Portfolio, 0.35% of the next $150 million and 0.33% of net assets over $250 million. The Adviser is paid fees at an annual rate of 1.00% of the average daily net asset value of the Stellar Portfolio. Pursuant to Sub-Advisory Agreements dated May 1, 1996, the Adviser (1) pays SGAM fees at an annual rate of 0.75% of the International and Global Contrarian Portfolios' average daily net asset value for directing the investment and reinvestment of those Portfolios' assets, (2) pays TRPA a fee at an annual rate of 0.70% of the first $5 million, and 0.50% of average daily net asset value in excess of $5 million for directing the investment and reinvestment of the Capital Appreciation Portfolio's assets, (3) pays FAM a fee at an annual rate of 0.65% of the first $75 million, 0.60% of the next $75 million, and 0.55% of average daily net asset value in excess of $150 million for directing the investment and reinvestment of the Small Cap Portfolio's assets and (4) pays SCM a fee at an annual rate of 0.70% of the first $50 million and 0.50% of average daily net asset value in excess of $50 million for directing the investment and reinvestment of the Aggressive Growth Portfolio's assets. Pursuant to Sub-Advisory Agreements dated January 2, 1997, the Adviser (1) pays PBA fees at an annual rate of 0.75% of the first $50 million, 0.70% of the next $100 million, and 0.50% of average daily net asset value in excess of $150 million for directing the investment and reinvestment of the Core Growth Portfolio's assets, (2) pays RSIM 0.60% of the first $100 million, 0.55% of the next $100 million, and 0.50% of average daily net asset value in excess of $200 million for directing the investment and reinvestment of the Growth & Income Portfolio's assets, (3) pays Star fees at an annual rate of 0.55 % of the first $50 million and 0.50% of average daily net asset value in excess of $50 million for directing the investment and reinvestment of Strategic Income Portfolio assets, (4) pays Star fees at an annual rate of 0.75% of the first $50 million and 0.70% of average daily net asset value in excess of $50 million for directing the investment and reinvestment of Stellar Portfolio assets and (5) pays Star fees at an annual rate of 0.65% of the first $50 million and 0.60% of average daily net asset value in excess of $50 million for directing the investment and reinvestment of Relative Value Portfolio assets. Under a service agreement among the Fund, the Adviser and ONLI, the latter has agreed to furnish the Adviser, at cost, such research facilities, services and personnel as may be needed by the Adviser in connection with its performance under the Investment Advisory Agreement. The Adviser reimburses ONLI for its expenses in this regard. The Fund also incurs other miscellaneous expenses for legal and accounting services, registration and filing fees, custodial services and shareholder services. The Fund's transfer agent and Fund accounting agent is American Data Services, Inc., 24 West Carver Street, Huntington, New York 11743. The custodian for those portfolios other than the International and Global Contrarian Portfolios is Star, which is located at 425 Walnut Street, Cincinnati, Ohio 45202. The custodian for the International and Global Contrarian Portfolios is Investors Fiduciary Trust Company, 127 West Tenth Street, Kansas City, Missouri. For assets held outside the United States, the custodians enter into subcustodial agreements, subject to approval by the Board of Directors. CAPITAL STOCK The Fund's authorized capital consists of 250 million shares of capital stock with a par value of $1 per share; 20 million of such shares are allocated to each of the Equity, Omni and International Portfolios, and 10 million of such shares are allocated to each of the other portfolios. These shares may be reallocated by the Board of Directors to another of the existing portfolios or to any new portfolio. All shares of all portfolios have equal voting rights, except that only shares of a particular portfolio are entitled to vote on matters pertaining only to that portfolio. Pursuant to the Investment Company Act of 1940 and the rules and regulations thereunder, certain matters approved by a vote of all Fund shareholders may not be binding on a portfolio whose shareholders have not approved such matter. 21 26 Each issued and outstanding share is entitled to one vote and to participate equally in dividends and distributions declared by the respective portfolio and in net assets of such portfolio remaining upon liquidation or dissolution after satisfaction of outstanding liabilities. The shares of each portfolio, when issued, will be fully paid and non-assessable, have no preemptive, conversion, cumulative dividend or similar rights, and are freely transferable. Fund shares do not have cumulative voting rights, which means that the holders of more than half of the Fund shares voting for election of directors can elect all of the directors if they so choose. In such event, the holders of the remaining shares would not be able to elect any directors. All of the outstanding Fund shares are owned of record by ONLI and ONLAC and are held in their various separate accounts. The shares held in connection with those separate accounts are voted by ONLI or ONLAC in accordance with instructions received from the owners of variable contracts issued in connection with such separate accounts and persons receiving payments under the variable contracts. Fund shares attributable to contracts owned by ONLI and ONLAC, and Fund shares not attributable to variable contracts, will be voted in proportion to instructions received from all variable contract owners. DIVIDENDS, DISTRIBUTIONS AND TAXES Each portfolio seeks to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code. It is the Fund's policy to comply with the provisions of the Code regarding distribution of investment income and net realized capital gains so that the Fund will not be subject to federal income tax on amounts distributed. Consequently, the Fund distributes to its shareholders each year substantially all of its net investment income and net realized capital gains (if any). For the Money Market Portfolio, all of the undistributed net investment income is determined and paid as a dividend to shareholders of record immediately before each computation of the net asset value of Money Market shares. For the other portfolios, dividends representing net investment income will normally be distributed quarterly and any net realized capital gains will be distributed annually. However, the Fund's Board of Directors may declare such dividends at more frequent intervals. Dividends and distributions are automatically reinvested in additional shares of their respective portfolios at net asset value without a sales charge unless a shareholder requests that they be paid in cash. PURCHASE AND REDEMPTION OF SHARES Fund shares are sold without a sales charge and may be redeemed at their net asset value next computed after a purchase or redemption order is received by the Fund. (The net asset value of the Money Market Portfolio is normally $10 per share.) Depending upon the net asset values at that time, the amount paid upon redemption may be more or less than the cost of the shares redeemed. Payment for shares redeemed will be made as soon as possible, but in any event within seven days after evidence of ownership of the shares is tendered to the Fund except in extraordinary circumstances as described in the Statement of Additional Information. The net asset value of the Fund's shares is determined on each day on which an order for purchase or redemption of the Fund's shares is received and there is a sufficient degree of trading in portfolio securities that the current net asset value of its shares might be materially affected. Such determination is made as of 4:00 p.m. Eastern time on each business day. The net asset value of each portfolio is computed by dividing the value of the securities in that portfolio plus any cash or other assets less all liabilities of the portfolio, by the number of shares outstanding for that portfolio. Shares of one portfolio may be exchanged for shares of another portfolio of the Fund on the basis of the relative net asset values next computed after an exchange order is received by the Fund. 22 27 FUND PERFORMANCE From time to time, the current yield, average annual total return and cumulative total returns for the portfolios will be advertised. The results might be compared to other similar mutual funds or unmanaged indices. Management's discussion and analysis of the Fund's performance is included in the Fund's most-recent annual report and is available free upon request. Total return for a portfolio reflects the sum of all of its earnings plus any changes in the value of its assets, reduced by all expenses accrued during a measurement period. For this purpose, it is assumed that all dividends and capital gains distributions are reinvested. The average annual total return is expressed as a percentage of an amount invested for a one-year period. Each portfolio's average return is computed by a formula in which a hypothetical initial investment of $1,000 is equated to an ending redeemable value from the inception of the portfolio for one-, five- and ten-year periods. Cumulative total return reflects a portfolio's aggregate performance, expressed as a dollar amount change, from the beginning to the end of the period. Percentage changes in net asset value per share and total returns quoted for a portfolio include the effect of deducting that portfolio's expenses, but do not include charges and expenses attributable to any particular insurance product. The amount by which variable annuity separate account charges and expenses would reduce Fund's total return may be demonstrated by comparing the Fund's total return to that of the variable annuity separate account for the same period. Variable life insurance separate account charges vary significantly, depending upon a variety of demographic factors (such as age, sex and health status) and several contract-specific factors (such as stated amount of death benefit), but in all cases would have the result of lowering the total return of the Fund. From time to time the annualized yield and "effective" yield will be quoted for the Money Market Portfolio. The Money Market Portfolio's yield refers to the income generated by an investment in the Portfolio over the seven-day period indicated. This income is then "annualized" by assuming that the same amount of income generated by the Portfolio that week is generated over a 52-week period and is shown as a percentage of the investment. "Effective" yield is calculated similarly but, when annualized, the income earned by an investment in the Portfolio is assumed to be reinvested. The effective yield will be slightly higher than the yield because of the compounding effect of this assumed reinvestment. All performance quotations are based on historical investment performance and are not intended to indicate future performance ABOUT THE S&P 500 The S&P 500 is a widely publicized index that tracks 500 companies traded on the New York and American Stock Exchanges and in the over-the-counter market. It is weighted by market value so that each company's stock influences the S&P 500 in proportions to its relative market capitalization. Most of the stocks in the S&P 500 are issued by companies that are among the 500 largest in the United States in terms of aggregate market value. However, for diversification purposes, some stocks of smaller companies are included in the S&P 500. "Standard & Poor's (R)," "S&P (R)," "S&P 500 (R)" and "Standard & Poor's 500" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by the Adviser. The S&P 500 Index Portfolio is not sponsored, endorsed, sold or promoted by Standard & Poor's ("S&P") and S&P makes no representation regarding the advisability of investing in the S&P 500 Index Portfolio. S&P makes no representation or warranty, express or implied, to the owners of the Portfolio or any member of the public regarding the advisability of investing in securities generally or in the Portfolio particularly or the ability of the S&P 500 Index to track general stock market performance. S&P's only relationship to the Adviser is the licensing of certain trademarks and trade names of S&P and of the S&P 500 Index which is determined, composed and calculated by S&P without regard to the Adviser or the Portfolio. S&P has no obligation to take the needs of the Adviser or the owners of the Portfolio into consideration in determining, composing 23 28 or calculating the S&P 500 Index. S&P is not responsible for and has not participated in the determination of the prices and amount of the Portfolio or the timing of the issuance or sale of the Portfolio or in the determination or calculation of the equation by which the Portfolio is to be converted into cash. S&P has no obligation or liability in connection with the administration, marketing or trading of the Portfolio. S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE ADVISER, OWNERS OF THE PORTFOLIO, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OR MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES. 24 29 PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION 30 OHIO NATIONAL FUND, INC. One Financial Way Cincinnati, Ohio 45242 Telephone (5l3) 794-6316 STATEMENT OF ADDITIONAL INFORMATION MAY 1, 1997 This Statement of Additional Information is not a prospectus. It should be read in conjunction with the prospectus of Ohio National Fund, Inc. (the "Fund") dated May 1, 1997. To obtain a free copy of the Fund's prospectus, write or call the Fund at the above address. Table of Contents -----------------
Page ---- The Fund ................................................................. 3 Fund Performance ......................................................... 3 Current Yield of Money Market Portfolio Total Return Portfolio Turnover Investment Objectives and Policies ....................................... 7 Money Market Instruments Investment Restrictions .................................................. 9 Hedging Transactions Covered Call Options and Put Options Risk Factors with Options Futures Contracts Options on Futures Contracts and Financial Indexes Risk Factors with Futures, Options on Futures and Options on Indexes Risk Factors with Foreign Investments Foreign Currency Hedging Transactions Short Sales Management of the Fund ................................................... 20 Directors and Officers Compensation of Directors Shareholders' Meetings Investment Advisory and Other Services Brokerage Allocation ..................................................... 24 Purchase and Redemption of Shares ........................................ 25 Tax Status ............................................................... 27 Experts .................................................................. 27 Legal Counsel ............................................................ 27 The S&P 500 .............................................................. 27 Financial Statements ..................................................... 29
31 Appendix ................................................................. 63 Debt Security Ratings
32 THE FUND The Fund is an open-end diversified management investment company which currently consists of 16 separate portfolios - the Equity Portfolio, the Money Market Portfolio, the Bond Portfolio, the Omni Portfolio, the International Portfolio, the Capital Appreciation Portfolio, the Small Cap Portfolio, the Global Contrarian Portfolio, the Aggressive Growth Portfolio, the Core Growth Portfolio, the Growth & Income Portfolio, the S&P 500 Index Portfolio, the Social Awareness Portfolio, the Strategic Income Portfolio, the Stellar Portfolio and the Relative Value Portfolio. At present, the Fund sells its shares only to separate accounts of The Ohio National Life Insurance Company ("ONLI") and Ohio National Life Assurance Corporation ("ONLAC") to support certain benefits under variable contracts issued by ONLI and ONLAC. In the future, Fund shares may be used for other purposes, but absent a change in applicable law, will not be sold directly to the public. The Fund was created on November 2, 1982 as the result of a plan of reorganization and an agreement of merger entered into by O.N. Fund, Inc. and O.N. Market Yield Fund, Inc., both of which were Maryland corporations. O.N. Fund, Inc. was merged into O.N. Market Yield Fund, Inc., which acquired all of O.N. Fund's assets and assumed all of O.N. Fund's liabilities. The shares of O.N. Fund were converted to an equal number of shares of the Equity Portfolio of O.N. Market Yield Fund and all shares of O.N. Market Yield Fund were converted into an equal number of shares of the Money Market Portfolio. The name of O.N. Market Yield Fund was changed to the Fund's current name, Ohio National Fund, Inc., and a Bond Portfolio was created. The Omni Portfolio was added in 1984, the International Portfolio in 1993, and the Capital Appreciation and Small Cap Portfolios in 1994, the Global Contrarian and Aggressive Growth Portfolios in 1995, and the Core Growth, Growth & Income, S&P 500 Index, Social Awareness, Strategic Income, Stellar and Relative Value Portfolios in 1997. The investments held by each portfolio are maintained separately from those held by the other portfolios. The investment and reinvestment of the assets of the Equity, Money Market, Bond, Omni, S&P 500 Index and Social Awareness Portfolios is directed by the Fund's investment adviser, Ohio National Investments, Inc. (the "Adviser"), a wholly-owned subsidiary of ONLI. The principal business address of ONLI, ONLAC and the Adviser is One Financial Way, Cincinnati, Ohio 45242. The investment and reinvestment of International and Global Contrarian Portfolio assets is managed by Societe Generale Asset Management Corp. ("SGAM") as sub-adviser. The principal business address of SGAM is 1221 Avenue of the Americas, New York, New York 10020. The investment and reinvestment of Capital Appreciation Portfolio assets is managed by T. Rowe Price Associates, Inc. ("TRPA") as sub-adviser. The principal business address of TRPA is 100 East Pratt Street, Baltimore, Maryland 21202. The investment and reinvestment of Small Cap Portfolio assets is managed by Founders Asset Management, Inc. ("FAM") as sub-adviser. The principal business address of FAM is 2930 East Third Avenue, Denver, Colorado 80206. The investment and reinvestment of Aggressive Growth Portfolio assets is managed by Strong Capital Management, Inc. ("SCM") as sub-adviser. The principal business address of SCM is 100 Heritage Reserve, Milwaukee, Wisconsin 53051. The investment and reinvestment of Core Growth Portfolio assets is managed by Pilgrim Baxter & Associates, Ltd. ("PBA") as sub-adviser. The principal business address of PBA is 1255 Drummers Lane, Wayne, Pennsylvania 19087. The investment and reinvestment of Growth & Income Portfolio assets is managed by Robertson Stephens Investment Management, L.P. ("RSIM") as sub-adviser. The principal business address of RSIM is 555 California Street, San Francisco, California 94104. The investment and reinvestment of Strategic Income, Stellar and Relative Value Portfolio assets is managed by Star Bank, N.A. ("Star") as subadviser. The principal business address of Star is 425 Walnut Street, Cincinnati, Ohio 45202. FUND PERFORMANCE The Fund may distribute sales literature comparing the percentage change in net asset value per share for any of its portfolios against the Consumer Price Index or such established market indices as the Dow Jones Industrial Average, the Standard & Poor's 500 Stock Index, one or more of Lehman Brothers Bond Indices, the Morgan Stanley Europe, Australia and Far East Index, the Morgan Stanley World Index, the Russell 2000 Index, the New York Stock Exchange Composite Index, the American Stock Exchange Index, the National Association of 3 33 Securities Dealers Automated Quotations Composite Index, the Value Line Composite Index, the Investors Business Daily 6000 Index, IBC's Money Fund Reports, or other management investment companies having investment objectives similar to the portfolio being compared. These comparisons may include graphs, charts, tables or examples. The average annual total return and cumulative total returns for each portfolio may also be advertised. The Fund may also advertise the performance rankings assigned to certain portfolios or their subadvisers by various statistical services, including Morningstar, Inc. and Lipper Analytical Services, Inc., or as they appear in various publications including The Wall Street Journal, Investors Business Daily, The New York Times, Barron's, Forbes, Fortune, Business Week, Financial Services Week, Financial World, Kiplinger's Personal Finance and Money Magazine. The prospectus sets forth in tabular form, under the caption "Financial Highlights," certain information concerning the Fund and its individual portfolios. The following discussion describes the methods of calculating the current yield of the Money Market Portfolio and the total return of all portfolios, and states the Fund's policy with respect to each portfolio's turnover rate. CURRENT YIELD OF MONEY MARKET PORTFOLIO Current annualized yield quotations for the Money Market Portfolio are based on the portfolio's net investment income for a seven-day period and exclude any realized or unrealized gains or losses on portfolio securities. Current annualized yield is computed by determining the net change (exclusive of realized gains and losses from the sale of securities and unrealized appreciation and depreciation) in the value of a hypothetical account having a balance of one share at the beginning of such seven-day period, dividing such net change in account value by the value of the account at the beginning of the period, and annualizing this quotient on a 365-day basis. The net change in account value reflects the value of any additional shares purchased with dividends from the original share in the account during the seven-day period, any dividends declared on such original share and any such additional shares during the period, and expenses accrued during the period. The Fund may also disclose the effective yield of the Money Market Portfolio for a seven-day period for which the current annualized yield is computed by expressing the unannualized return on a compounded, annualized basis. TOTAL RETURN Total returns quoted in advertising reflect all aspects of a portfolio's investment return, including the effects of reinvesting dividends and capital gain distributions as well as changes in the portfolio's net asset value per share over the period shown. Average annual returns are calculated by determining the growth or decline in value of a hypothetical historical investment in a portfolio over a stated period, and then calculating the annually compounded percentage rate that would have produced the same result had the rate of growth or decline been constant over that period. While average annual returns are a convenient means of comparing investment alternatives, no portfolio will experience a constant rate of growth or decline over time. The average annual compounded rate of return for a portfolio over a given period is found by equating the initial amount invested to the ending redeemable value using the following formula: P(1 + T)n = ERV where: P = a hypothetical initial payment of $1,000, T = the average annual total return, n = the number of years, and ERV = the ending redeemable value of a hypothetical $1,000 beginning-of-period payment at the end of the period (or fractional portion thereof). 4 34 The average annual total returns for each of the portfolios from the inception of the portfolio and for the one-, five- and ten-year periods ending on December 31, 1996, are as stated below:
One Five Ten From Inception Year Years Years Inception Date ---- ----- ----- --------- ---- Equity 18.35% 13.11% 12.89% 10.45% 10-06-69 Money Market 5.17% 4.13% 5.62% 7.42% 03-20-80 Bond 3.71% 7.14% 7.43% 8.66% 11-02-82 Omni 15.54% 11.57% 10.52% 11.57% 09-10-84 International 14.48% N/A N/A 16.21% 04-30-93 Capital Appreciation 15.75% N/A N/A 15.93% 05-01-94 Small Cap 17.71% N/A N/A 27.16% 05-01-94 Global Contrarian 12.09% N/A N/A 12.07% 03-31-95 Aggressive Growth 0.76% N/A N/A 15.12% 03-31-95 Core Growth N/A N/A N/A N/A 01-03-97 Growth & Income N/A N/A N/A N/A 01-03-97 S&P 500 Index N/A N/A N/A N/A 01-03-97 Social Awareness N/A N/A N/A N/A 01-03-97 Strategic Income N/A N/A N/A N/A 01-03-97 Stellar N/A N/A N/A N/A 01-03-97 Relative Value N/A N/A N/A N/A 01-03-97
In addition to average annual total returns, advertising may reflect cumulative total returns that simply reflect the change in value of an investment in a portfolio over a period. This may be expressed as either a percentage change, from the beginning to the end of the period, or the end-of-period dollar value of an initial hypothetical investment. The cumulative total returns for each of the portfolios from the inception of the portfolio and for the five- and ten-year periods ending on December 31, 1996 (assuming a hypothetical initial investment of $1,000) were as follows:
Five Years Ten Years From Inception ---------- --------- -------------- Equity $1,852 $3,360 $16,186 Money Market $1,225 $1,729 $ 3,240 Bond $1,411 $2,048 $ 3,242 Omni $1,729 $2,718 $ 3,846 International N/A N/A $ 1,733 Capital Appreciation N/A N/A $ 1,429 Small Cap N/A N/A $ 1,828 Global Contrarian N/A N/A $ 1,191 Aggressive Growth N/A N/A $ 1,245 Core Growth N/A N/A N/A Growth & Income N/A N/A N/A S&P 500 Index N/A N/A N/A Social Awareness N/A N/A N/A Strategic Income N/A N/A N/A Stellar N/A N/A N/A Relative Value N/A N/A N/A
5 35 PORTFOLIO TURNOVER Each portfolio has a different expected rate of portfolio turnover. However, the rate of portfolio turnover will not be a limiting factor when the management of the Fund deems it appropriate to purchase or sell securities for a portfolio, except in the following circumstances. The Fund intends to comply with the various requirements of the Internal Revenue Code so as to qualify as a "regulated investment company" thereunder. Among such requirements is a limitation of less than 30% of the amount of gross income which each portfolio may derive from gains on the sale or other disposition of securities held for less than three months. Accordingly, the ability of any portfolio to effect certain portfolio transactions at a given time may be limited. The Small Cap, Aggressive Growth and Strategic Income Portfolios may engage in the purchase and sale of securities close to the ex-dividend date in order to receive the anticipated dividend and then sell the securities after the ex-dividend date. This practice could substantially increase the Portfolio's turnover rate. The Fund's policy with respect to each portfolio is as follows: Equity Portfolio - Although this Portfolio will not normally purchase securities with the intention of obtaining short-term capital appreciation, purchases and sales will be made whenever deemed prudent and consistent with the investment objectives of the Portfolio. During periods of relatively stable market and economic conditions, it is anticipated that the annual portfolio turnover rate of the Portfolio will be moderate. During periods when changing market or economic conditions are foreseen, shifts in portfolio emphasis may cause the rate of portfolio turnover to increase. During 1996 the turnover rate for this portfolio was 11%. Money Market Portfolio - Since the assets of this Portfolio consist of short-term instruments, replacement of portfolio securities will occur frequently. However, since purchases are generally effected with dealers or issuers on a net basis, it is not expected that the Portfolio will incur significant brokerage commissions. Bond Portfolio - This Portfolio will engage in transactions when the Adviser believes that they will help to achieve the overall objectives of the Portfolio. Portfolio securities may or may not be held to maturity. The rate of portfolio turnover will vary from time to time but is not expected to exceed 50% annually. The turnover rate for this portfolio was 3% in 1996. Omni Portfolio - The rate of portfolio turnover will vary from time to time but is not expected to exceed 50% annually. The turnover rate for this portfolio was 12% in 1996. International Portfolio - Although this Portfolio will not normally engage in short-term trading, purchases and sales of securities will be made whenever deemed appropriate to achieve the Portfolio's objective of long-term capital growth. The rate of portfolio turnover will not be a limiting factor when portfolio changes are deemed appropriate to achieve this Portfolio's stated objective. Under normal circumstances, the portfolio turnover rate for this portfolio is not expected to exceed 75% annually. The turnover rate for this portfolio was 14% in 1996. Capital Appreciation Portfolio - Although TRPA generally seeks less volatile securities for this Portfolio, the Portfolio may be traded fairly aggressively. Its portfolio turnover rate is normally expected to be 50% to 150% annually. The turnover rate for this portfolio was 37% in 1996. Small Cap Portfolio - While this Portfolio purchases and holds securities with the goal of meeting its investment objectives, portfolio changes are made whenever FAM believes they are advisable, usually without reference to the length of time a security has been held. The engagement in a substantial number of short-term transactions is expected to result in annual portfolio turnover rates of 100% to 300%. The turnover rate for this portfolio was 70% in 1996. Global Contrarian Portfolio - Because of the long-term growth objective and the purchase of under-valued and out-of-favor securities, this Portfolio will generally tend to hold securities for a relatively longer time 6 36 with the expectation of eventual price appreciation. As a result, the portfolio turnover rate is not expected to exceed 50% annually, However, it could be substantially higher at times due to repositioning of the portfolio. The turnover rate for this portfolio was 18% in 1996. Aggressive Growth Portfolio - The securities of this Portfolio are generally expected to be traded more aggressively than those of the other portfolios. Its portfolio turnover rate can normally be expected to be in the range of 100% to 300% annually. The turnover rate for this portfolio was 1,987% in 1996. Core Growth Portfolio - Although the securities held in this Portfolio are generally held for appreciation, PBA's disciplined response to its analytic process will occasionally result in sales without regard to the length of time a security has been held. The annual turnover rate is normally expected to be in the range of 50% to 250%. Growth & Income Portfolio - RSIM exercises "sell" disciplines. A stock held in this Portfolio is likely to be sold if it declines substantially in price (at least 15%), if it reaches its upside target price, if the company's business fundamentals turn negative, or if a more attractive opportunity appears. The prices of small- and mid-cap company securities in which this Portfolio invests may be more volatile than those of larger companies. As a result, the Portfolio's annual turnover rate is normally expected to be in the 100% to 200% range. S&P 500 Index Portfolio - Securities held in this Portfolio generally will not be actively traded. Although it will often purchase fixed-income securities with relatively short maturities, those transactions are not expected to generate substantial brokerage commissions. The annual turnover rate is not expected to exceed 100%. Social Awareness Portfolio - This Portfolio will not normally purchase securities with the intention of obtaining short-term returns. Under normal market conditions, the annual turnover rate is not expected to exceed 50%. Strategic Income Portfolio - The securities of this Portfolio will generally be traded more frequently than those of the other income oriented portfolios. Its portfolio turnover rate can normally be expected to be in the range of 50% to 250% annually. Stellar Portfolio - Although this Portfolio does not seek short-term profits, its securities will be sold whenever Star believes it is appropriate to do so in light of the Portfolio's investment objective without regard to the length of time a particular security may have been held. Its portfolio turnover rate is normally expected to be 50% to 150%. Relative Value Portfolio - Although this Portfolio does not seek short-term profits, its securities will be sold whenever Star believes it is appropriate to do so in light of the Portfolio's investment objective without regard to the length of time a particular security may have been held. Its portfolio turnover rate is not expected to exceed 75% during normal economic and market conditions. INVESTMENT OBJECTIVES AND POLICIES The following descriptions of money market instruments supplement the Fund's "Investment Objectives and Policies" set forth in the prospectus. The Money Market Portfolio and the Omni, Strategic Income and Stellar Portfolios, to the extent they invest in the money market sector, will invest extensively in these instruments. The other Portfolios may invest in such instruments to a limited extent (to invest otherwise idle cash) or on a temporary basis for defensive purposes. The debt security ratings referred to in the prospectus in connection with the investment policies of the portfolios are defined in the Appendix to this Statement of Additional Information. 7 37 MONEY MARKET INSTRUMENTS U.S. Government Obligations - Bills, notes, bonds and other debt securities issued or guaranteed as to principal or interest by the United States or by agencies or authorities controlled or supervised by and acting as instrumentalities of the U.S. Government established under authority granted by Congress, including, but not limited to, the Government National Mortgage Association, the Tennessee Valley Authority, the Bank for Cooperatives, the Farmers Home Administration, and Federal Home Loan Banks. Some obligations of U.S. Government agencies, authorities and other instrumentalities are supported by the full faith and credit of the U.S. Treasury; others by the right of the issuer to borrow from the Treasury; and others only by the credit of the issuer. Certain of the foregoing may be purchased on a "when issued" basis at which time the rate of return will not have been set. Certificates of Deposit - Certificates issued against funds deposited in a bank for a definite period of time, at a specified rate of return. Normally they are negotiable. Bankers' Acceptances - Short-term credit instruments issued by corporations to finance the import, export, transfer or storage of goods. They are termed "accepted" when a bank guarantees their payment at maturity and reflect the obligation of both the bank and drawer to pay the face amount of the instrument at maturity. Commercial Paper - Promissory notes issued by corporations to finance their short-term credit needs. Commercial paper obligations may include variable amount master demand notes. Variable amount master demand notes are obligations that permit the investment of fluctuating amounts by the Portfolio at varying rates of interest pursuant to direct arrangements between the Portfolio, as lender, and the borrower. These notes permit daily changes in the amounts borrowed. The Portfolio has the right to increase the amount under the note at any time up to the full amount provided by the note agreement, or to decrease the amount, and the borrower may prepay up to the full amount of the note without penalty. Because variable amount master demand notes are direct lending arrangements between the lender and the borrower, it is not generally contemplated that such instruments will be traded, and there is no secondary market for these notes, although they are redeemable (and thus immediately repayable by the borrower) at face value, plus accrued interest, at any time. In connection with a master demand note arrangement, the Adviser will monitor, on an ongoing basis, the earning power, cash flow, and other liquidity ratios of the issuer, and the borrower's ability to pay principal and interest on demand. While master demand notes, as such, are not typically rated by credit rating agencies, if not so rated the Portfolio may invest in them only if at the time of an investment the issuer meets the criteria set forth above for all other commercial paper issuers. Such notes will be considered to have a maturity of the longer of the demand period or the period of the interest guarantee. Corporate Obligations - Bonds and notes issued by corporations in order to finance longer-term credit needs. Repurchase Agreements - Agreements by which the Portfolio purchases a security and obtains a simultaneous commitment from the seller (a member bank of the Federal Reserve System or a government securities dealer recognized by the Federal Reserve Board) to repurchase the security at a mutually agreed upon price and date. It may also be viewed as a loan of money by the Portfolio to the seller. The resale price is normally in excess of the purchase price and reflects an agreed upon market rate. The rate is effective for the period of time the Portfolio is invested in the agreement and unrelated to the coupon rate on the purchased security. The period of these repurchase agreements will usually be short, from overnight to one week, and at no time will the Portfolio invest in repurchase agreements for more than one year. These transactions afford an opportunity for the Portfolio to earn a return on temporarily available cash. Although repurchase agreements carry certain risks not associated with direct investments in securities, the Fund intends to enter into repurchase agreements only with financial institutions believed by the Adviser to present minimal credit risks in accordance with criteria established by the Fund's Board of Directors. The Adviser will review and monitor the creditworthiness of such institutions under the Board's general supervision. The Fund will only enter into repurchase agreements pursuant to a master repurchase agreement that provides that all transactions be fully collateralized and that the collateral be in the actual or constructive possession of the Fund. The agreement must also provide that the Fund will always receive 8 38 as collateral securities whose market value, including accrued interest, will be at least equal to 100% of the dollar amount invested by the Portfolio in each agreement, and the Portfolio will make payment for such securities only upon physical delivery or evidence of book entry transfer to the account of the Custodian. If the seller were to default, the Portfolio might incur a loss if the value of the collateral securing the repurchase agreement declines and may incur disposition costs in connection with liquidating the collateral. In addition, if bankruptcy proceedings are commenced with respect to the seller of the security, realization upon the collateral by the Portfolio may be delayed or limited and a loss may be incurred if the collateral securing the repurchase agreement declines in value during the bankruptcy proceedings. Investments in repurchase agreements will be limited to transactions with financial institutions believed by the Adviser to present minimal credit risks. The Portfolio will not enter into repurchase agreements with securities dealers unless it has obtained an exemptive order from the Commission or an opinion of counsel that such transactions will not violate a legal prohibition which in some circumstances bars an investment company from purchasing any securities issued by a securities dealer. INVESTMENT RESTRICTIONS The prospectus lists the most significant investment restrictions to which the Fund is subject. The following is a complete list of the Fund's investment restrictions. Except as otherwise specified, all of the investment restrictions stated in the prospectus and this Statement of Additional Information are fundamental policies. Restrictions number 4, 7, 8, 12, 13 and 14 are nonfundamental policies of the Small Cap, Core Growth, Growth & Income, S&P 500 Index, Social Awareness, Strategic Income, Stellar and Relative Value Portfolios, and restrictions number 4, 7, 12, 13 and 14 are nonfundamental policies of the Global Contrarian Portfolio. The fundamental policies and nonfundamental operating policies of the Capital Appreciation and Aggressive Growth Portfolios are shown separately below. Fundamental policies may not be changed without the affirmative vote of the majority of the outstanding voting securities of the Fund or a particular portfolio, as appropriate. The Investment Company Act of l940 defines a majority vote as the vote of the lesser of (i) 67% of the shares represented at a meeting at which more than 50% of the outstanding shares are represented or (ii) more than 50% of the outstanding voting securities. With respect to the submission of a change in an investment policy to the holders of outstanding voting securities of a particular portfolio, such matter shall be deemed to have been effectively acted upon with respect to such portfolio if a majority of the outstanding voting securities of such portfolio vote for the approval of such matter, notwithstanding (1) that such matter has not been approved by the holders of a majority of the outstanding voting securities of any other portfolio affected by such matter, and (2) that such matter has not been approved by the vote of a majority of the outstanding voting securities of the Fund. The Fund may not issue senior securities and each portfolio of the Fund (other than the Capital Appreciation and Aggressive Growth Portfolios) will not: l. invest more than 5% of the value of the total assets of such portfolio in the securities of any one issuer (except U.S. Government securities); 2. purchase more than l0% of the outstanding voting securities of any one issuer, and the Money Market Portfolio will not acquire the voting securities of any issuer except in connection with a merger, consolidation or other reorganization; 3. invest more than 25% of the value of its total assets in any one industry, except that each portfolio may invest more than 25% of the value of its total assets in obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities or in certificates of deposit, bankers' acceptances, bank time deposits or other obligations of banks or financial institutions. However, it is the intention of management not to invest in time deposits which involve any penalty or other restriction on withdrawal; 4. invest more than 10% of the value of its assets (15% in the case of the Small Cap, Core Growth and Growth & Income Portfolios) in securities or other investments, including repurchase agreements maturing in more than seven days, that are subject to legal or contractual restrictions upon resale or are otherwise not readily marketable; 9 39 5. other than the Growth & Income and Strategic Income Portfolios, borrow money, except for temporary or emergency purposes from banks, in which event the aggregate amount borrowed shall not exceed 5% of the value of the assets of the portfolio; in the case of such borrowing, each portfolio may pledge, mortgage or hypothecate up to 5% of its assets. Reverse repurchase agreements are not considered to be borrowed money for purposes of this restriction. The Growth & Income and Strategic Income Portfolios may borrow money directly or through reverse repurchase agreements in amounts up to one-third of the value of each of their total net assets, other than the amount borrowed; 6. purchase or sell commodities or commodity contracts except that (a) each portfolio other than the Money Market Portfolio may, for hedging purposes, purchase and sell financial futures contracts and options thereon within the limits of investment restriction 7 below, (b) the S&P 500 Index Portfolio may purchase or sell stock index futures contracts in accordance with its stated investment objectives, and (c) the Stellar Portfolio may purchase or sell precious metal securities; 7. other than the S&P 500 Index Portfolio, purchase or sell put or call options, except that each portfolio other than the Money Market Portfolio may, for hedging purposes, (a) write call options traded on a registered national securities exchange if such portfolio owns the underlying securities subject to such options, and purchase call options for the purpose of closing out positions in options it has written, (b) purchase put options on securities owned, and sell such options in order to close its positions in put options, (c) purchase and sell financial futures contracts and options thereon, and (d) purchase and sell financial index options; provided, however, that no option or futures contract shall be purchased or sold if, as a result, more than one-third of the total assets of the portfolio would be hedged by options or futures contracts, and no more than 5% of any portfolio's total assets, at market value, may be used for premiums on open options and initial margin deposits on futures contracts; 8. other than the International and Global Contrarian Portfolios, invest in securities of foreign issuers except that (a) each of the Equity, Bond, Omni, Core Growth, Growth & Income, S&P 500 Index, Social Awareness and Relative Value Portfolios may (i) invest up to l5% of their respective assets in securities of foreign issuers (including foreign governments or political subdivisions, agencies or instrumentalities of foreign governments) American Depository Receipts, and securities of United States domestic issuers denominated in foreign currency, and (ii) invest up to an additional l0% of the assets of the portfolio in securities issued by foreign governments or political subdivisions, agencies or instrumentalities thereof, (b) the Small Cap Portfolio may invest up to 30% of its assets in the securities of foreign issuers, (c) the Money Market Portfolio may invest up to 50% of its assets in the securities of foreign issuers, provided the securities are denominated in U.S. dollars and held in custody in the United States, (d) the Strategic Income Portfolio may invest up to 20% of its assets in foreign bonds and (e) the Stellar Portfolio may invest up to 25% of its assets in the securities of foreign issuers. For purposes of this restriction number 8, U.S. dollar denominated depository receipts traded in domestic markets do not constitute foreign securities; 9. underwrite securities of other issuers except insofar as the Fund may be considered an underwriter under the Securities Act of l933 in selling portfolio securities; 10. purchase or sell real estate, except that each portfolio may invest in securities secured by real estate or interests therein or securities issued by companies which invest in real estate or interests therein. For purposes of this restriction, "real estate" does not include investments in readily marketable notes or other evidence of indebtedness secured by mortgages or deeds of trust relating to real property; 11. lend money to other persons except by the purchase of obligations in which the portfolio is authorized to invest and by entering into repurchase agreements. Other than the Strategic Income Portfolio, no more than 10% of a portfolio's total assets will be invested in repurchase agreements maturing in more than seven days; 10 40 12. sell securities short or purchase securities on margin except such short-term credits as are required to clear transactions, except that the Growth & Income Portfolio may sell securities short and the Strategic Income Portfolio may sell securities short if (i) it owns, or has a right to acquire, an equal amount of those securities or (ii) if it does not own the securities, it has segregated an amount of its other assets equal to the lesser of the market value of the securities sold short or the amount required to acquire those securities (while in a short position, the Portfolio will retain the securities, rights or segregated assets); 13. participate on a joint or joint and several basis in any trading account in securities; 14. purchase securities for the purpose of exercising control or management; 15. purchase securities of other investment companies, except in connection with a merger, consolidation or reorganization, or except the purchase by any portfolio other than the Money Market or Bond Portfolios of the securities of closed-end investment companies if after the purchase: (i) a portfolio does not own more than 3% of the total outstanding voting stock of the other investment company or (ii) the value of the securities of all investment companies held by such portfolio does not exceed 10% of the value of the total assets of that portfolio. Purchases of investment company securities will be made (a) only on the open market or through dealers or underwriters receiving the customary sales loads, or (b) as part of a merger, consolidation or plan of reorganization. As nonfundamental policies of each portfolio other than the Capital Appreciation and Aggressive Growth Portfolios, which policies may be changed at any time by the vote of a majority of the Board of Directors, (a) no portfolio will invest more than 20% of its assets in securities of issuers located in any one foreign country, except that up to an additional 5% of its assets may be invested in securities of issuers located in each of any three of Australia, Canada, France, Germany, Japan or the United Kingdom; and (b) each portfolio other than the Money Market Portfolio, in order to hedge against changes in the exchange rates of foreign currencies in relation to the U.S. dollar, may engage in forward foreign currency contracts, foreign currency options and foreign currency futures contracts in connection with the purchase, sale or ownership of specific securities (but, not more than 5% of a portfolio's assets may be invested in such currency hedging contracts). In addition to the above restrictions, in order to comply with Rule 2a-7 under the Investment Company Act of 1940, no more than 5% of the assets of the Money Market Portfolio will be invested in "second-tier" short-term debt instruments, that is those receiving the second highest rating by any two nationally recognized statistical rating organizations ("NRSRO's") and not receiving the highest rating from more than one NRSRO (or receiving the second highest rating from one NRSRO if (a) that is the only NRSRO having rated the security or (b) one other NRSRO has given the security its highest rating), or whose issuer has received such a rating or ratings with respect to a class of short-term debt obligations that is now comparable in priority and security to those to be purchased. In addition, not more than $1 million (or 1% of this portfolio's assets, if greater) may be invested in the second-tier instruments of any one issuer. Under normal market conditions, at least 65% of the assets of the International Portfolio and at least 25% of the assets of the Global Contrarian Portfolio will be invested in foreign securities, including securities of issuers in at least three different foreign countries. As of the date of this Statement of Additional Information, the Board of Directors has approved investment by those portfolios other than the Money Market Portfolio in 50 countries with developed securities markets, including the following countries with developed economies: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Israel, Italy, Japan, Luxembourg, Netherlands, New Zealand, Norway, Spain, Sweden, Switzerland and the United Kingdom; and the following countries with developing economies: Argentina, Bangla Desh, Brazil, Chile, China (Shanghai and Shenzhen Exchanges), Czech Republic, Egypt, Greece, Hong Kong, Hungary, Indonesia, Jordan, Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland, Portugal, Singapore, South Africa, South Korea, Sri Lanka, Taiwan, Thailand, Turkey, Uruguay, Venezuela and Zimbabwe. CAPITAL APPRECIATION PORTFOLIO FUNDAMENTAL POLICIES As a matter of fundamental policy, the Portfolio may not: 11 41 C.A.1. Borrow money except that the Portfolio may (i) borrow for non-leveraging, temporary or emergency purposes and (ii) engage in reverse repurchase agreements and make other investments or engage in other transactions, which may involve a borrowing, in a manner consistent with the Portfolio's investment objective and program, provided that the combination of (i) and (ii) shall not exceed 33 1/3% of the value of the Portfolio's total assets (including the amount borrowed) less liabilities (other than borrowings) or such other percentage permitted by law. Any borrowings which come to exceed this amount will be reduced in accordance with applicable law. The Portfolio may borrow from banks, other portfolios managed by TRPA or other persons to the extent permitted by applicable law; C.A.2. Purchase or sell physical commodities; except that it may enter into futures contracts and options thereon; C.A.3. Purchase the securities of any issuer if, as a result, more than 25% of the value of the Portfolio's total assets would be invested in the securities of issuers having their principal business activities in the same industry; C.A.4. Make loans, although the Portfolio may (i) lend portfolio securities and participate in an interfund lending program with other portfolios managed by TRPA provided that no such loan may be made if, as a result, the aggregate of such loans would exceed 33 1/3% of the value of the Portfolio's total assets; (ii) purchase money market securities and enter into repurchase agreements; and (iii) acquire publicly-distributed or privately-placed debt securities and purchase debt; C.A.5. Purchase a security if, as a result, with respect to 75% of the value of its total assets, more than 5% of the value of the Portfolio's total assets would be invested in the securities of a single issuer, except securities issued or guaranteed by the U.S. Government or any of its agencies or instrumentalities; C.A.6. Purchase a security if, as a result, with respect to 75% of the value of the Portfolio's total assets, more than 10% of the outstanding voting securities of any issuer would be held by the Fund (other than obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities); C.A.7. Purchase or sell real estate unless acquired as a result of ownership of securities or other instruments (but this shall not prevent the Portfolio from investing in securities or other instruments backed by real estate or in securities of companies engaged in the real estate business); C.A.8. Issue senior securities except in compliance with the Investment Company Act of 1940; or C.A.9. Underwrite securities issued by other persons, except to the extent that the Portfolio may be deemed to be an underwriter within the meaning of the Securities Act of 1933 in connection with the purchase and sale of its portfolio securities in the ordinary course of pursuing its investment program. With respect to investment restrictions C.A.1. and C.A.4,, the Portfolio will not borrow from or lend to any other portfolios managed by TRPA unless they apply for and receive an exemptive order from the SEC or the SEC issues rules permitting such transactions. The Portfolio has no current intention of engaging in any such activity and there is no assurance the SEC would grant any order requested by the Portfolio or promulgate any rules allowing the transactions. With respect to investment restriction C.A.2., the Portfolio does not consider currency contracts or hybrid investments to be commodities. For purposes of investment restriction C.A.3., U.S., state or local governments, or related agencies or instrumentalities, are not considered an industry. 12 42 For purposes of investment restriction C.A.4., the Portfolio will consider the acquisition of a debt security to include the execution of a note or other evidence of an extension of credit with a term of more than nine months. CAPITAL APPRECIATION PORTFOLIO NONFUNDAMENTAL OPERATING POLICIES As a matter of nonfundamental operating policy, the Portfolio may not: C.A.10. Purchase additional securities when money borrowed exceeds 5% of its total assets; C.A.11. Invest in companies for the purpose of exercising management or control; C.A.12. Purchase a futures contract or an option thereon if, with respect to positions in futures or options on futures which do not represent bona fide hedging, the aggregate initial margin and premiums on such options would exceed 5% of the Portfolio's net asset value; C.A.13. Purchase illiquid securities and securities of unseasoned issuers if, as a result, more than 15% of its net assets would be invested in such securities, provided that the Portfolio will not invest more than 5% of its total assets in restricted securities and not more than 5% in securities of unseasoned issuers. Securities eligible for resale under Rule 144A of the Securities Act of 1933 are not included in the 5% limitation but are subject to the 15% limitation; C.A.14. Purchase securities of open-end or closed-end investment companies except in compliance with the Investment Company Act of 1940 and applicable state law; C.A.15. Purchase securities on margin, except (i) for use of short-term credit necessary for clearance of purchases of portfolio securities and (ii) to make margin deposits in connection with futures contracts or other permissible investments; C.A.16. Mortgage, pledge, hypothecate or, in any manner, transfer any security owned by the Portfolio as security for indebtedness except as may be necessary in connection with permissible borrowings or investments and then such mortgaging, pledging or hypothecating may not exceed 33 1/3% of the Portfolio's total assets at the time of borrowing or investment; C.A.17. Purchase participations or other direct interests in or enter into leases with respect to, oil, gas, or other mineral exploration or development programs; C.A.18. Invest in puts, calls, straddles, spreads, or any combination thereof, except to the extent permitted by the prospectus and Statement of Additional Information; C.A.19. Purchase or retain the securities of any issuer if, to the knowledge of the Fund's management, those officers and directors of the Fund, and of the Portfolio's investment manager, who each owns beneficially more than 0.5% of the outstanding securities of such issuer, together own beneficially more than 5% of such securities; C.A.20. Effect short sales of securities; C.A.21. Purchase a security (other than obligations issued or guaranteed by the U.S., any foreign, state of local government, their agencies or instrumentalities) if, as a result, more than 5% of the value of the Portfolio's total assets would be invested in the securities of issuers which at the time of purchase had been in operation for less than three years (for this purpose, the period of operation of any issuer shall include the period of operation of any predecessor or unconditional guarantor of such issuer). This restriction does not apply to securities of pooled investment vehicles or mortgage or asset-backed securities; or 13 43 C.A.22. Invest in warrants if, as a result thereof, more than 2% of the value of the total assets of the Portfolio would be invested in warrants which are not listed on the New York Stock Exchange, the American Stock Exchange, or a recognized foreign exchange, or more than 5% of the value of the total assets of the Portfolio would be invested in warrants whether or not so listed. For purposes of these percentage limitations, the warrants will be valued at the lower of cost or market and warrants acquired by the Portfolio in units or attached to securities may be deemed to be without value. AGGRESSIVE GROWTH PORTFOLIO FUNDAMENTAL POLICIES As a matter of fundamental policy, the Portfolio: A.G.1. May not with respect to 75% of its total assets, purchase the securities of any issuer (except securities issued or guaranteed by the U.S. government or its agencies or instrumentalities) if, as a result, (i) more than 5% of the Portfolio's total assets would be invested in the securities of that issuer, or (ii) the Portfolio would hold more than 10% of the outstanding voting securities of that issuer. A.G.2. May (i) borrow money from banks and (ii) make other investments or engage in other transactions permissible under the Investment Company Act of 1940 which may involve a borrowing, provided that the combination of (i) and (ii) shall not exceed 33 1/3% of the value of the Portfolio's total assets (including the amount borrowed), less the Portfolio's liabilities (other than borrowings), except that the Portfolio may borrow up to an additional 5% of its total assets (not including the amount borrowed) from a bank for temporary or emergency purposes (but not for leverage or the purchase of investments). The Portfolio may also borrow money from the other mutual funds managed by SCM or other persons to the extent permitted by applicable law. A.G.3. May not issue senior securities, except as permitted under the Investment Company Act of 1940. A.G.4. May not act as an underwriter of another issuer's securities, except to the extent that the Portfolio may be deemed to be an underwriter within the meaning of the Securities Act of 1933 in connection with the purchase and sale of portfolio securities. A.G.5. May not purchase or sell physical commodities unless acquired as a result of ownership of securities or other instruments (but this shall not prevent the Portfolio from purchasing or selling options, futures contracts, or other derivative instruments, or from investing in securities or other instruments backed by physical commodities). A.G.6. May not make loans if, as a result, more than 33 1/3% of the Portfolio's total assets would be lent to other persons, except through (i) purchases of debt securities or other debt instruments, or (ii) engaging in repurchase agreements. A.G.7. May not purchase the securities of any issuer if, as a result, more that 25% of the Portfolio's total assets would be invested in the securities of issuers, the principal business activities of which are in the same industry. A.G.8. May not purchase or sell real estate unless acquired as a result of ownership of securities or other instruments (but this shall not prohibit the Portfolio from purchasing or selling securities or other instruments backed by real estate or of issuers engaged in real estate activities). 14 44 AGGRESSIVE GROWTH PORTFOLIO NONFUNDAMENTAL OPERATING POLICIES As a matter of nonfundamental operating policy, the Portfolio may not: A.G.9. Sell securities short, unless the Portfolio owns or has the right to obtain securities equivalent in kind and amount to the securities sold short, or unless it covers such short sale as required by the current rules and positions of the SEC or its staff, and provided that transactions in options, futures contracts, options on futures contracts, or other derivative instruments are not deemed to constitute selling securities short. A.G.10. Purchase securities on margin, except that the Portfolio may obtain such short-term credits as are necessary for the clearance of transactions; and provided that margin deposits in connection with futures contacts, options on futures contracts, or other derivative instruments shall not constitute purchasing securities on margin. A.G.11. Invest in illiquid securities if, as a result of such investment, more than 15% of its net assets would be invested in illiquid securities, or such other amounts as may be permitted under the Investment Company Act of 1940. A.G.12. Purchase securities of other investment companies except in compliance with the Investment Company Act of 1940 and applicable state law. A.G.13. Purchase the securities of any issuer (other than securities issued or guaranteed by domestic or foreign governments or political subdivisions thereof) if, as a result, more than 5% of its total assets would be invested in the securities of issuers that, including predecessor or unconditional guarantors, have a record of less than three years of continuous operation. This policy does not apply to securities of pooled investment vehicles or mortgage or asset-backed securities. A.G.14. Invest in direct interests in oil, gas, or other mineral exploration programs or leases; however, the Portfolio may invest in the securities of issuers that engage in these activities. A.G.15. Engage in futures or options on futures transactions which are impermissible pursuant to Rule 4.5 under the Commodity Exchange Act and, in accordance with Rule 4.5, will use futures or options on futures transactions solely for bona fide hedging transactions (within the meaning of the Commodity Exchange Act), provided, however, that the Portfolio may, in addition to bona fide hedging transactions, use futures and options on futures transactions if the aggregate initial margin and premiums required to establish such positions, less the amount by which any such options positions are in the money (within the meaning of the Commodity Exchange Act), do not exceed 5% of the Portfolio's net assets. In addition, (i) the aggregate value of securities underlying call options on securities written by the Portfolio or obligations underlying put options on securities written by the Portfolio determined as of the date the options are written will not exceed 50% of the Portfolio's net assets; (ii) the aggregate premiums paid on all options purchased by the Portfolio and which are being held will not exceed 20% of the Portfolio's net assets; (iii) the Portfolio will not purchase put or call options, other than hedging positions, if, as a result thereof, more than 5% of its total assets would be so invested; and (iv) the aggregate margin deposits required on all futures and options on futures transactions being held will not exceed 5% of the Portfolio's total assets. A.G.16. Pledge, mortgage or hypothecate any assets owned by the Portfolio except as may be necessary in connection with permissible borrowings or investments and then such pledging, mortgaging, or hypothecating may not exceed 33 1/3% of the Portfolio's total assets at the time of the borrowing or investment. 15 45 A.G.17. Purchase warrants, valued at the lower of cost or market value, in excess of 5% of the Portfolio's net assets. Included in that amount, but not to exceed 2% of the Portfolio's net assets, may be warrants that are not listed on the New York Stock Exchange or the American Stock Exchange. Warrants acquired by the Portfolio in units or attached to securities are not subject to these restrictions. A.G.18. Borrow money except (i) from banks or (ii) through reverse repurchase agreements or mortgage dollar rolls, and will not purchase securities when bank borrowings exceed 5% of its total assets. A.G.19. Make any loans other than loans of portfolio securities, except through (i) purchases of debt securities or other debt instruments, or (ii) engaging in repurchase agreements. HEDGING TRANSACTIONS The purpose of hedging transactions using put and call options on individual securities, financial futures contracts, and options on such contracts and on financial indexes, all to the extent provided in investment restriction 7, is to reduce the risk of fluctuation of portfolio securities values or to take advantage of expected market fluctuations. However, while such transactions are defensive in nature and are not speculative, some risks remain. The use of options and futures contracts may help the Fund to gain exposure or to protect itself from changes in market values. For example, the Fund may have a substantial amount of cash at the beginning of a market rally. Conventional procedures of purchasing a number of individual issues requires time and may result in missing a significant market movement. By using futures contracts, the Fund can obtain immediate exposure to the market. The buying program will then proceed and, once it is completed (or as it proceeds), the futures contracts will be closed. Conversely, in the early stages of a market decline, market exposure can be promptly offset by selling futures contracts, and individual securities can be sold over a longer period under cover of the resulting short contract position. COVERED CALL OPTIONS AND PUT OPTIONS In writing (i.e., selling) "covered" call options on securities owned by a portfolio, the portfolio gives the purchaser of the call option the right to purchase the underlying securities owned by the portfolio at a specified "exercise" price at any time prior to the expiration of the option, normally within nine months. In purchasing put options on securities owned by a portfolio, the portfolio pays the seller of the put option a premium for the right of the portfolio to sell the underlying securities owned by the portfolio at a specified exercise price prior to the expiration of the option. Whenever a portfolio has a covered call option outstanding, the underlying securities will be segregated by the Custodian and held in an escrow account to assure that such securities will be delivered to the option holder if the option is exercised. While the underlying securities are subject to the option, the portfolio remains the record owner of the securities, entitling it to receive dividends and to exercise any voting rights. In order to terminate its position as the writer of a call option or the purchaser of a put option, the portfolio may enter into a "closing" transaction, which is the purchase of a call option or sale of a put option on the same underlying securities and having the same exercise price and expiration date as the option previously sold or purchased by the portfolio. 16 46 RISK FACTORS WITH OPTIONS The purchaser of an option pays the option writer a "premium" for the option. In the case of a covered call option written by a portfolio, if the purchaser does not exercise the call option, the premium will generate additional capital gain to the portfolio. If the market price of the underlying security declines, the premium received for the call option will reduce the amount of the loss the portfolio would otherwise incur. However, if the market price of the underlying security rises above the exercise price and the call option is exercised, the portfolio will lose its opportunity to profit from that portion of the rise which is in excess of the exercise price plus the option premium. Therefore, the Fund will write call options only when the Adviser believes that the option premium will yield a greater return to the portfolio than any capital appreciation that might occur on the underlying security during the life of the option. In the case of a put option purchased by a portfolio, if the market price of the underlying security remains or rises above the exercise price of the option, the portfolio will not exercise the option and the premium paid for such option will reduce the gain the portfolio would otherwise have earned. Conversely, if the market price of the underlying security falls below the exercise price less the premium paid for the option, the portfolio will exercise the option, thereby reducing the loss the portfolio would have otherwise suffered. Accordingly, a portfolio will purchase put options only when the Adviser believes that the market price of the underlying security is more likely to decrease than increase. Whenever a portfolio enters into a closing transaction, the portfolio will realize a gain (or loss) if the premium plus commission it pays for a closing call option is less (or greater) than the premium it received on the sale of the original call option. Conversely, the portfolio will realize a gain (or loss) if the premium it receives, less commission, for a closing put option is greater (or less) than the premium it paid for the original put option. The portfolio will realize a gain if a call option it has written lapses unexercised, and a loss if a put option it has purchased lapses unexercised. FUTURES CONTRACTS The Fund may invest in two kinds of financial futures contracts: stock index futures contracts and interest rate futures contracts. Stock index futures contracts are contracts developed by and traded on national commodity exchanges whereby the buyer will, on a specified future date, pay or receive a final cash payment equal to the difference between the actual value of the stock index on the last day of the contract and the value of the stock index established by the contract multiplied by the specific dollar amount set by the exchange. Futures contracts may be based on broad-based stock indexes such as the S&P 500 or on narrow-based stock indexes. A particular index will be selected according to the Adviser's investment strategy for the particular portfolio. An interest rate futures contract is an agreement whereby one party agrees to sell and another party agrees to purchase a specified amount of a specified financial instrument (debt security) at a specified price at a specified date, time and place. Although interest rate futures contracts typically require actual future delivery of and payment for financial instruments, the contracts are usually closed out before the delivery date. A public market exists in interest rate futures contracts covering primarily the following financial instruments: U.S. Treasury bonds; U.S. Treasury notes; Government National Mortgage Association (GNMA) modified pass-through mortgage-backed securities; three-month U.S. Treasury bills; 90-day commercial paper; bank certificates of deposit; and Eurodollar certificates of deposit. It is expected that futures contracts trading in additional financial instruments will be authorized. At the time the Fund enters into a contract, it sets aside a small portion of the contract value in an account with the Fund's custodian as a good faith deposit (initial margin) and each day during the contract period requests and receives or pays cash equal to the daily change in the contract value (variable margin). The Fund, its futures commission merchant and the Fund's custodian retain control of the initial margin until the contract is liquidated. 17 47 OPTIONS ON FUTURES CONTRACTS AND FINANCIAL INDEXES Instead of entering into a financial futures contract, the Fund may buy an option giving it the right to enter into such a contract at a future date. The price paid for such an option is called a premium. The Fund also may buy options on financial indexes that are traded on securities exchanges. Options on financial indexes react to changes in the value of the underlying index in the same way that options on financial futures contracts do. All settlements for options on financial indexes also are for cash. Financial futures contracts, options on such contracts and options on financial indexes will only be used for hedging purposes and will, therefore, be incidental to the Fund's activities in the securities market. Accordingly, portfolio securities subject to options, or money market instruments having the market value of any futures contracts, generally will be set aside to collateralize the options or futures contracts. RISK FACTORS WITH FUTURES, OPTIONS ON FUTURES AND OPTIONS ON INDEXES One risk of entering into financial futures contracts, buying options on such contracts and buying options on financial indexes is that there may not be enough buyers and sellers in the market to permit the Fund to close a position when it wants to do so. In such event, besides continuing to be subject to the margin requirements, the Fund would experience a gain or loss to the extent that the price movement of the securities subject to the hedge differed from the position. To limit the risk, the Fund will invest only where there is an established secondary market. A risk applicable to both futures contracts and related options is that changes in the value of the contracts or option may not correlate with changes in the underlying financial index or with changes in the value of the securities subject to hedge or both. This failure may be due, in part, to temporary activity of speculators in the futures markets. To the extent there is not a perfect correlation, changes in the value of the Fund's assets would not be offset by change in the value of the contracts and options it had bought. When the Fund buys an option on a futures contract or an option on a financial index, its risk of loss is limited to the amount of the premium paid. When the Fund enters into a futures contract, there is no such limit. However, the loss on an options contract would exceed that of a futures contract if the change in the value of the index does not exceed the premium paid for the option. The success of a hedge depends upon the Adviser's ability to predict increases or decreases in the relevant financial index. If this expectation proves incorrect, the Fund could suffer a loss, and would be better off if those futures contracts or options had not been purchased. The skills involved in determining whether to enter into a futures contract or purchase or sell an option are different from those involved in determining whether to buy or sell a security. The Adviser has had only limited experience using financial futures contracts, options on financial futures and options on financial indexes. Because of the low margin deposits required, futures trading involves a high degree of leverage. As a result, a relatively small price movement in a futures contract may result in immediate and substantial gain or loss. A purchase or sale of a futures contract may result in losses in excess of the amount invested in the futures contract. However, the Fund would presumably have sustained comparable losses if, instead of the futures contract, it had invested in the underlying financial instrument. Most futures exchanges limit the amount of fluctuation permitted in futures contract prices during a single trading day. The daily limit establishes the maximum amount that the price of a futures contract may vary either up or down from the previous day's settlement price at the end of a trading session. Once the daily limit has been reached in a particular type of contract, no more trades may be made on that day at a price beyond that limit. The daily limit governs only price movements during a particular trading day and therefore does not limit potential losses because the limit may prevent the liquidation of unfavorable positions. Futures contract prices have occasionally moved to the daily limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of futures and subjecting some futures traders to substantial losses. 18 48 RISK FACTORS WITH FOREIGN INVESTMENTS Investments in foreign securities involve considerations not normally associated with investing in domestic issuers. Such factors include changes in currency exchange rates, currency exchange control regulations, the possibility of seizure or nationalization of companies, political or economic instability, imposition of unforeseen taxes, the possibility of financial information being difficult to obtain or difficult to interpret under foreign accounting standards, the necessity of trading in markets that in relation to U.S. markets may be less efficient and have available less information concerning issuers, or the imposition of other restraints that might adversely affect investments. In selecting foreign investments, the Fund seeks to minimize these factors. It seeks to invest in securities having investment characteristics and qualities comparable to the kinds of domestic securities in which it invests. The Fund seeks to avoid investments in countries with volatile or unstable political or economic conditions. The Fund may invest in securities of foreign issuers either directly or in the form of American Depository Receipts (ADRs). ADRs are securities typically issued by an American bank or trust company which evidence ownership of underlying securities issued by a foreign corporation. ADRs enable foreign stocks to be traded and cleared on United States markets. They bear the same investment risks as the underlying foreign stocks. Since investments in foreign securities, other than U.S. dollar denominated securities, involve currencies of foreign countries, the value of a portfolio's assets, as measured in U.S. dollars may be affected favorably or unfavorably by changes in currency exchange rates and in currency exchange control regulations. FOREIGN CURRENCY HEDGING TRANSACTIONS In order to hedge against changes in the exchange rates of foreign currencies in relation to the U.S. dollar, each portfolio, other than the Money Market Portfolio, may engage in forward foreign currency contracts, foreign currency options and foreign currency futures contracts in connection with the purchase, sale or ownership of a specific security. The portfolios generally conduct their foreign currency exchange transactions on a spot (i.e., cash) basis at the spot rate prevailing in the foreign exchange currency market. When a portfolio purchases or sells a security denominated in a foreign currency, it may enter into a forward foreign currency contract ("forward contract") for the purchase or sale, for a fixed amount of dollars, of the amount of currency involved in the underlying security transaction. A forward contract involves an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. In this manner, a portfolio may obtain protection against a possible loss resulting from an adverse change in the relationship between the U.S. dollar and the foreign currency during the period between the date the security is purchased or sold and the date upon which payment is made or received. Although such contracts tend to minimize the risk of loss due to the decline in the value of the hedged currency, at the same time they tend to limit any potential gain which might result should the value of such currency increase. Forward contracts are traded in the interbank market conducted directly between currency traders (usually large commercial banks) and their customers. Generally a forward contract has no deposit requirement, and no commissions are charged. Although foreign exchange dealers do not charge a fee for conversion, they do realize a profit based on the difference between the prices at which they buy and sell various currencies. When the portfolio manager believes that the currency of a particular foreign country may suffer a substantial decline against the U.S. dollar, a portfolio may enter into a forward contract to sell, for a fixed amount of dollars, the amount of foreign currency approximating the value of some or all of that portfolio's securities denominated in such foreign currency. No portfolio will enter into such forward contracts or maintain a net exposure to such contracts where the consummation of the contracts would obligate the portfolio to deliver an amount of foreign currency in excess of the value of its assets denominated in that currency. At the consummation of a forward contract for delivery by a portfolio of a foreign currency, the portfolio may either make delivery of the foreign currency or terminate its contractual obligation to deliver the foreign 19 49 currency by purchasing an offsetting contract obligating it to purchase, at the same maturity date, the same amount of the foreign currency. If the portfolio chooses to make delivery of the foreign currency, it may be required to obtain such currency through the sale of its securities denominated in such currency or through conversion of other portfolio assets into such currency. It is impossible to forecast the market value of portfolio securities at the expiration of the forward contract. Accordingly, it may be necessary for the portfolio to purchase additional foreign currency on the spot market (and bear the expense of such purchase) if the market value of the security is less than the amount of foreign currency the portfolio is obligated to deliver, and if a decision is made to sell the security and make delivery of the foreign currency. Conversely, it may be necessary for the portfolio to sell on the spot market some of the foreign currency received on the sale of its hedged security if the security's market value exceeds the amount of foreign currency the portfolio is obligated to deliver. If the portfolio retains the hedged security and engages in an offsetting transaction, it will incur a gain or loss to the extent that there has been movement in spot or forward contract prices. If a portfolio engages in an offsetting transaction, it may subsequently enter into a new forward contract to sell the foreign currency. Should forward prices decline during the period between the portfolio's entering into a forward contract for the sale of a foreign currency and the date it enters into an offsetting contract for the purchase of the foreign currency, the portfolio will realize a gain to the extent the price of the currency it has agreed to sell exceeds the price of the currency it has agreed to purchase. Should forward prices increase, the portfolio will suffer a loss to the extent the price of the currency it has agreed to purchase exceeds the price of the currency it has agreed to sell. Buyers and sellers of foreign currency options and futures contracts are subject to the same risks previously described with respect to options and futures generally (see "Risk Factors with Options" and "Risk Factors with Futures, Options on Futures and Options on Indexes," above). In addition, settlement of currency options and futures contracts with respect to most currencies must occur at a bank located in the issuing nation. The ability to establish and close out positions on such options is subject to the maintenance of a liquid market that may not always be available. Currency rates may fluctuate based on political considerations and governmental actions as opposed to purely economic factors. Predicting the movements of foreign currency in relation to the U.S. dollar is difficult and requires different skills than those necessary to predict movements in the securities market. There is no assurance that the use of foreign currency hedging transactions can successfully protect a portfolio against loss resulting from the movements of foreign currency in relation to the U.S. dollar. In addition, it must be remembered that these methods of protecting the value of a portfolio's securities against a decline in the value of a currency does not eliminate fluctuations in the underlying prices of the securities. It simply establishes a rate of exchange which can be achieved at some future point in time. Additionally, although such contracts tend to minimize the risk of loss due to the decline in the value of the hedged currency, at the same time they tend to limit any potential gain which might result should the value of such currency increase. SHORT SALES Until a borrowed security borrowed in connection with a short sale (as described in the prospectus is replaced), the Portfolio will be required to maintain daily a segregated account, containing cash or U.S. government securities, at such a level that (i) the amount deposited in the account plus the amount deposited with the broker as collateral will at all times be equal to at least 100% of the current value of the security sold short and (ii) the amount deposited in the segregated account plus the amount deposited with the broker as collateral will not be less than the market value of the security at the time it was sold short. The Strategic Income Portfolio may purchase call options to provide a hedge against an increase in the price of a security sold short. When the Portfolio purchases a call option, it has to pay a premium to the person writing the option and a commission to the broker selling the option. If the option is exercised by the Portfolio, the premium and the commission paid may be more than the amount of the brokerage commission charged if the security were to be purchased directly. See "Hedging Transactions" and "Covered Call Options and Put Options." In addition to the short sales discussed above, the Portfolio also may make short sales "against the box," a transaction in which the Portfolio enters into a short sale of a security which the Portfolio owns. The proceeds of the short sale are held by a broker until the settlement date, at which time the Portfolio delivers the security to close the short position. The Portfolio receives the net proceeds from the short sale. The Portfolio at no time will have more than 5% of the value of its net assets in deposits on short sales against the box. 20 50 MANAGEMENT OF THE FUND DIRECTORS AND OFFICERS OF THE FUND The directors and officers of the Fund, together with information as to their principal occupations during the past five years are listed below:
Position with Principal Occupation Name and address the Fund during past five years - ---------------- -------- ---------------------- Ronald L. Benedict* Secretary and Second Vice President and Counsel and One Financial Way Director Assistant Secretary, ONLI; Secretary of Cincinnati, Ohio the Adviser George E. Castrucci Director Retired; formerly President and 8355 Old Stable Rd. Chief Operating Officer of Great Cincinnati, Ohio American Communications Co and Chairman and Chief Executive Officer of Great American Broadcasting Co.; Director of Benchmark Savings Bank; Director of Baldwin Piano & Organ Co. Ross Love Director President & CEO, Blue Chip Broadcasting 615 Windings Way Ltd.; Trustee, Health Alliance of Greater Cincinnati, Ohio Cincinnati; Director, Partnership for a Drug Free America (Chairman of African- American Task Force); Advisory Board, Syracuse University School of Management; Director, Association of National Advertisers; Until 1996 was Vice President of Advertising, Procter & Gamble Co. George M. Vredeveld Director Professor of Economics, University of University of Cincinnati of Cincinnati; Director of Center for P.O. Box 210223 Economic Education; Private Consultant; Cincinnati, Ohio Director of Benchmark Savings Bank Donald J. Zimmerman* President and Director and Senior Vice President, One Financial Way Director Insurance Operations and Cincinnati, Ohio Secretary, ONLI Michael A. Boedeker Vice President Vice President, Fixed Income One Financial Way Securities, ONLI; Vice President Cincinnati, Ohio and Director of Adviser Joseph P. Brom Vice President Vice President, Investments, One Financial Way ONLI; President and Director Cincinnati, Ohio of the Adviser Stephen T. Williams Vice President Director of Securities, ONLI; One Financial Way Vice President and Director of Cincinnati, Ohio the Adviser Dennis R. Taney Treasurer Mutual Funds Financial Operations, One Financial Way ONLI; Treasurer of the Adviser Cincinnati, Ohio
*Indicates Directors who are "Interested Persons" as defined by the Investment Company Act of 1940, as amended. 21 51 All directors and officers of the Fund hold similar positions with ONE Fund, Inc. ("ONE Fund"), another mutual fund sponsored by ONLI and managed by the Adviser. COMPENSATION OF DIRECTORS Directors who are not affiliated with the Adviser, ONLI, ONLAC or a sub-adviser were compensated as follows in 1996:
Aggregate Compensation Total Compensation Director From the Fund From Fund Complex* - -------- ------------- ------------------ James E. Baker $ 2,000 $ 2,850 George E. Castrucci 10,400 15,000 Maurice H. Kirby, Jr 10,400 15,000 George M. Vredeveld 8,400 12,150
* The "Fund Complex" consists of the Fund and ONE Fund, Inc. Directors and officers of the Fund who are affiliated with the Adviser, ONLI or ONLAC receive no compensation from the Fund Complex. The Fund has no pension, retirement or deferred compensation plan for its directors or officers. SHAREHOLDERS' MEETINGS The Fund's by-laws provide that shareholders meetings need only be held every three years unless matters requiring shareholder approval should occur more frequently. It is anticipated that shareholder meetings will generally occur every three years. INVESTMENT ADVISORY AND OTHER SERVICES The Adviser is an Ohio corporation organized on January 17, 1996 to provide investment advice and management services to funds affiliated with ONLI. The Adviser is a wholly-owned subsidiary of ONLI. The Adviser succeeded O.N. Investment Management Company ("ONIMCO") as the Fund's investment adviser on May 1, 1996. Prior to that date, ONIMCO had been the investment adviser from the Fund's inception. The Adviser, like ONIMCO before it, uses ONLI's investment personnel and administrative systems. The Adviser regularly furnishes to the Fund's Board of Directors recommendations with respect to an investment program consistent with the investment policies of each portfolio. Upon approval of an investment program by the Fund's Board of Directors, the Adviser implements the program by placing the orders for the purchase and sale of securities or, in the case of the International, Capital Appreciation, Small Cap, Global Contrarian, Aggressive Growth, Core Growth, Growth & Income, Strategic Income, Stellar and Relative Value Portfolios, by delegating that implementation to SGAM, TRPA, FAM, SCM, PBA, RSIM or Star, as the case may be. The Adviser's services are provided under an Investment Advisory Agreement with the Fund. Under the Investment Advisory Agreement, the Adviser provides personnel, including executive officers for the Fund. The Adviser also furnishes at its own expense or pays the expenses of the Fund for clerical and related administrative services (other than those provided by the custodian agreements with Star and Investors Fiduciary Trust Company and an agency agreement with American Data Services, Inc.), office space, and other facilities. The Fund pays corporate expenses incurred in its operations, including, among others, local income, franchise, issuance or other taxes; certain printing costs; brokerage commissions on portfolio transactions; custodial and transfer agent fees; auditing and legal expenses; and expenses relating to registration of its shares for sale and shareholders' meetings. As compensation for its services, the Adviser receives from the Fund annual fees on the basis of each portfolio's average daily net assets during the quarterly period for which the fees are paid based on the following schedule: (a) for each of the Equity, Bond, Omni and Social Awareness Portfolios, 0.60% of the first $100 million of each Portfolio's net assets, 0.50% of the next $150 million of net assets, 0.45% of the next $250 million of net assets, 22 52 0.40% of the next $500 million of net assets, 0.30% of the next $1 billion of net assets, and 0.25% of net assets over $2 billion; (b) for the Money Market Portfolio, 0.30% of the first $100 million of net assets, 0.25% of the next $150 million of net assets, 0.23% of the next $250 million of net assets, 0.20% of the next $500 million of net assets, and 0.15% of net assets over $1 billion; (c) for the International, Global Contrarian and Relative Value Portfolios, 0.90% of each Portfolio's net assets; (d) for the Capital Appreciation, Small Cap, Aggressive Growth and Strategic Income Portfolios, 0.80% of each Portfolio's net assets, (e) for the Core Growth Portfolio, 0.95% of the first $150 million of net assets, and 0.80% of net assets over $150 million; (f) for the Growth & Income Portfolio, 0.85% of the first $200 million of net assets, and 0.80% of net assets over $200 million, (g) for the S&P 500 Index Portfolio, 0.40% of the first $100 million of net assets, 0.35% of the next $150 million of net assets, and 0.33% of net assets over $250 million; and (h) for the Stellar Portfolio, 1.00% of that Portfolio's net assets. However, as to the Money Market Portfolio, the Adviser is presently waiving any of its fee in excess of 0.25%. Under the Investment Advisory Agreement, the Fund authorizes the Adviser to retain sub-advisers for the International, Capital Appreciation, Small Cap, Global Contrarian, Aggressive Growth, Core Growth, Growth & Income, Strategic Income, Stellar and Relative Value Portfolios, subject to the approval of the Fund's Board of Directors. The Adviser has entered into Sub-Advisory Agreements with SGAM, TRPA, FAM, SCM, PBA, RSIM and Star, respectively, to manage the investment and reinvestment of those Portfolios' assets, subject to the supervision of the Adviser. As compensation for their services, (a) SGAM receives from the Adviser fees at the annual rate of 0.75% of the International and Global Contrarian Portfolios' average daily net assets during the quarter for which the fee is paid; (b) TRPA receives from the Adviser a fee at an annual rate of 0.70% of the first $5 million, and 0.50% of average daily net asset value in excess of $5 million, of the Capital Appreciation Portfolio; (c) FAM receives from the Adviser a fee at an annual rate of 0.65% of the first $75 million, 0.60% of the next $75 million, and 0.55% of the average daily net asset value in excess of $150 million of the Small Cap Portfolio; (d) SCM receives from the Adviser a fee at an annual rate of 0.70% of the first $50 million, and 0.50% of average daily net asset value in excess of $50 million of the Aggressive Growth Portfolio; (e) PBA receives from the Adviser a fee at an annual rate of 0.75% of the first $50 million, 0.70% of the next $100 million, and 0.50% of average daily net assets in excess of $150 million of the Core Growth Portfolio; (f) RSIM receives from the Adviser a fee at an annual rate of 0.60% of the first $100 million, 0.55% of the next $100 million, and 0.50% of average daily net assets in excess of $200 million of the Growth & Income Portfolio; and (g) Star receives from the Adviser fees at an annual rate of (i) 0.55% of the first $50 million and 0.50% of average daily net assets in excess of $50 million of the Strategic Income Portfolio, (ii) 0.75% of the first $50 million and 0.70% of average daily net assets in excess of $50 million of the Stellar Portfolio and (iii) 0.65% of the first $50 million and 0.60% of average daily net assets in excess of $50 million of the Relative Value Portfolio. For each of the indicated years, ending December 31*, the following investment advisory fees from each of the Fund's portfolios were paid to ONIMCO and the Adviser as follows:
1996 1995 1994 ---- ---- ---- Equity $1,124,431 $ 812,156 $ 522,678 Money Market** 48,721 31,228 33,012 Bond 117,359 87,798 55,332 Omni 735,210 542,756 367,235 International 1,045,160 678,133 380,483 Capital Appreciation 229,794 96,082 30,172 Small Cap 212,875 69,124 9,398 Global Contrarian 70,122 21,955 N/A Aggressive Growth 63,707 11,898 N/A Core Growth N/A N/A N/A Growth & Income N/A N/A N/A S&P 500 Index N/A N/A N/A Social Awareness N/A N/A N/A Strategic Income N/A N/A N/A Stellar N/A N/A N/A Relative Value N/A N/A N/A ---------- ---------- -------- $3,647,379 $2,351,130 $1,398,310
23 53 * The International Portfolio commenced operations on April 30, 1993. The Capital Appreciation and Small Cap Portfolios commenced operations on May 1, 1994. The Global Contrarian and Aggressive Growth Portfolios commenced operations on March 31, 1995. The Core Growth, Growth & Income, S&P 500 Index, Social Awareness, Strategic Income, Stellar and Relative Value Portfolios commenced operations on January 3, 1997. ** An additional $9,697, $14,932, and $25,824 was earned but waived in 1996, 1995 and 1994, respectively, as described above. The Investment Advisory Agreement also provides that if the total expenses applicable to any portfolio during any calendar quarter (excluding taxes, brokerage commissions, interest and the investment advisory fee) exceed l%, on an annualized basis, of such portfolio's average daily net asset value, the Adviser will pay such expenses. Under the same terms, ONIMCO paid the Global Contrarian Portfolio $8,127 in 1995, ONIMCO paid the Capital Appreciation and Small Cap Portfolios $2,669 and $458, respectively, during 1994, and ONIMCO paid the International Portfolio $11,917 in 1993. No other such amounts were paid to any portfolio during the three years ended December 31, 1996. Under a Service Agreement among the Fund, the Adviser and ONLI, the latter has agreed to furnish the Adviser, at cost, such research facilities, services and personnel as may be needed by the Adviser in connection with its performance under the Investment Advisory Agreement. The Adviser reimburses ONLI for its expenses in this regard. The Investment Advisory Agreement and the Service Agreement were approved as to all then-existing portfolios, and the Sub-Advisory Agreements were approved for the International, Global Contrarian, Capital Appreciation, Small Cap and Aggressive Growth Portfolios, by the votes of the Board of Directors on January 24, 1996, and the shareholders on March 28, 1996. The foregoing agreements were approved by the Board of Directors for continuance on August 22, 1996. The Board of Directors approved the extension of the Investment Advisory Agreement (including the fees applicable to each portfolio) and the Service Agreement and, as applicable, the Sub-Advisory Agreements, for the Core Growth, Growth & Income, S&P 500 Index, Social Awareness, Strategic Income, Stellar and Relative Value Portfolios on August 22, 1996. The shareholders of these portfolios approved the agreements on January 2, 1997. These agreements will continue in force from year to year hereafter, if such continuance is specifically approved at least annually by a majority of the Fund's directors who are not parties to such agreements or interested persons of any such party, with votes to be cast in person at a meeting called for the purpose of voting on such continuance, and also by a majority of the Board of Directors or by a majority of the outstanding voting securities of each portfolio voting separately. The Investment Advisory, Service, and Sub-Advisory Agreements may be terminated at any time, without the payment of any penalty, on 60 days' written notice to the Adviser by the Fund's Board of Directors or, as to any portfolio, by a vote of the majority of the portfolio's outstanding voting securities. The Investment Advisory Agreement may be terminated by the Adviser on 90 days' written notice to the Fund. The Service Agreement may be terminated, without penalty, by the Adviser or ONLI on 90 days' written notice to the Fund and the other party. The Sub-Advisory Agreements may be terminated, without penalty, by the Adviser or the sub-adviser on 90 days' written notice to the Fund and the other party. The Agreements will automatically terminate in the event of their assignment. BROKERAGE ALLOCATION The Adviser buys and sells the portfolio securities for the Equity, Money Market, Bond, Omni, S&P 500 Index and Social Awareness Portfolios and selects the brokers and dealers to handle such transactions. Each of the sub-advisers selects the brokers and dealers that execute the transactions for the portfolios managed by the respective sub-adviser. It is the intention of the Adviser and of each sub-adviser to place orders for the purchase and sale of securities with the objective of obtaining the most favorable price consistent with good brokerage service. The cost of securities transactions for each portfolio will consist primarily of brokerage commissions or dealer or underwriter spreads. Bonds and money market securities are generally traded on a net basis and do not normally involve either brokerage commissions or transfer taxes. 24 54 Occasionally, securities may be purchased directly from the issuer. For securities traded primarily in the over-the-counter market, the Adviser and sub-advisers will, where possible, deal directly with dealers who make a market in the securities unless better prices and execution are available elsewhere. Such dealers usually act as principals for their own account. In selecting brokers or dealers through whom to effect transactions, the Adviser and sub-advisers consider a number of factors including the quality, difficulty and efficiency of execution, and value of research, statistical, quotation and valuation services provided. Research services by brokers include advice, either directly or through publications or writings, as to the value of securities, the advisability of purchasing or selling securities, the availability of securities or purchasers or sellers of securities, and analyses and reports concerning issuers, industries, securities, economic factors and trends, and portfolio strategy. In making such determination, the Adviser or sub-adviser may use a broker whose commission in effecting a securities transaction is in excess of that of some other broker if the Adviser or sub-adviser determines in good faith that the amount of such commission is reasonable in relation to the value of the research and related services provided by such broker. In effecting a transaction for one portfolio, a broker may also offer services of benefit to other portfolios managed by the Adviser or sub-adviser, or of benefit to its affiliates. Generally, it is not possible to place a dollar value on research and related services provided by brokers to the Adviser or a sub-adviser. However, receipt of such services may tend to reduce the expenses of the Adviser or the sub-advisers. Research, statistical and similar information furnished by brokers may be of incidental assistance to other clients of the Adviser or the sub-advisers and conversely, transaction costs paid by other clients of the Adviser or the sub-advisers may generate information which is beneficial to the Fund. Consistent with these policies, the sub-advisers may, with the Board of Directors' approval and subject to its review, direct portfolio transactions to be executed by a broker affiliated with the sub-adviser so long as the commission paid to the affiliated broker is reasonable and fair compared to the commission that would be charged by an unaffiliated broker in a comparable transaction. For each of the indicated years, ending on December 3l, the following brokerage commission amounts were paid by each portfolio:
1996 1995 1994 ---- ---- ---- Equity $ 76,647 $ 81,091 $ 52,713 Money Market None None None Bond None 630 None Omni 41,879 39,073 25,413 International 187,147 153,524 131,000 Capital Appreciation 33,327 16,786 10,219 Small Cap 48,973 16,688 8,265 Global Contrarian 17,514 12,257 N/A Aggressive Growth 173,952 42,839 N/A Core Growth N/A N/A N/A Growth & Income N/A N/A N/A S&P 500 Index N/A N/A N/A Social Awareness N/A N/A N/A Strategic Income N/A N/A N/A Stellar N/A N/A N/A Relative Value N/A N/A N/A -------- -------- -------- $579,439 $362,888 $227,610
In l996, substantially all of such commissions were paid to brokers who furnished statistical data and research information to ONIMCO, the Adviser, SGAM, TRPA, FAM, or SCM. 25 55 PURCHASE AND REDEMPTION OF SHARES Fund shares are sold without a sales charge and may be redeemed at their net asset value next computed after a purchase or redemption order is received by the Fund. (The net asset value for the Money Market Portfolio is normally $l0 per share.) Depending upon the net asset values at that time, the amount paid upon redemption may be more or less than the cost of the shares redeemed. Payment for shares redeemed will be made as soon as possible, but in any event within seven days after evidence of ownership of the shares is tendered to the Fund. However, the Fund may suspend the right of redemption or postpone the date of payment beyond seven days during any period when (a) trading on the New York Stock Exchange is restricted, as determined by the Securities and Exchange Commission, or such Exchange is closed for other than weekends and holidays; (b) an emergency exists, as determined by the Commission, as a result of which disposal by the Fund of securities owned by it is not reasonably practicable, or it is not reasonably practicable for the Fund fairly to determine the value of its net assets; or (c) the Commission by order so permits for the protection of security holders of the Fund. Shares of one portfolio may be exchanged for shares of another portfolio of the Fund on the basis of the relative net assets value next computed after an exchange order is received by the Fund. The net asset value of the Fund's shares is determined on each day on which an order for purchase or redemption of the Fund's shares is received and there is a sufficient degree of trading in portfolio securities that the current net asset value of its shares might be materially affected. Such determination is made as of 4:00 p.m. Eastern time on each business day. "Business day" means each weekday (Monday through Friday) except for the following holidays: New Years Day, Presidents Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas. The net asset value of each portfolio is computed by dividing the value of the securities in that portfolio plus any cash or other assets less all liabilities of the portfolio, by the number of shares outstanding for that portfolio. Securities which are held in a portfolio and listed on a securities exchange are valued at the last sale price or, if there has been no sale that day, at the last bid price reported as of 4 p.m. Eastern time. Over-the-counter securities are valued at the last bid price as of 4 p.m. Eastern time. Short-term debt securities in all portfolios other than the Money Market and Omni Portfolios, with remaining maturities of 60 days or less, are valued at amortized cost. The Fund has obtained an exemptive order from the Commission permitting it to value all short-term debt securities in the Omni Portfolio at amortized cost. The Fund relies on Rule 2a-7 under the Investment Company Act of 1940 to value the assets of the Money Market Portfolio on the basis of amortized cost with a view toward stabilizing the net asset value at $l0 per share and allowing dividend payments to reflect net interest income as earned. Accordingly, the short-term debt assets of the Omni and Money Market Portfolios are valued at their cost on the date of acquisition with a daily adjustment being made to accrued income to reflect amortization of premium or accretion of discount to the maturity date. All other assets of the Omni Portfolio and of those portfolios other than the Money Market Portfolio, including restricted debt securities and other investments for which market quotations are not readily available, are valued at their fair value as determined in good faith by the Board of Directors. As a condition of the exemptive order, the Fund has agreed, with respect to short-term debt securities in its Omni Portfolio, to maintain a dollar-weighted average maturity of not more than l20 days and to not purchase any such debt security having a maturity of more than one year. In relying on Rule 2a-7 with respect to short-term debt securities in its Money Market Portfolio, the Fund has agreed to maintain a dollar-weighted average portfolio maturity of not more than 90 days and to not purchase any such debt security having a maturity of more than 397 days. The dollar-weighted average maturity of short-term debt securities is determined by dividing the sum of the dollar value of each such security times the remaining days to maturity of such security by the sum of the dollar value of all short-term debt securities. Should the disposition of a short-term debt security result in a dollar-weighted average maturity of more than the number of days allowed under the exemptive order or Rule 2a-7, as the case may be, the Portfolio will invest its available cash so as to reduce such average maturity to the required number of days or less as soon as reasonably practicable. The Fund normally holds short-term debt 26 56 securities to maturity and realizes par therefor unless an earlier sale is required to meet redemption requirements. In addition, the Omni and Money Market Portfolios are required to limit their short-term debt investments, including repurchase agreements, to those United States dollar denominated instruments which the Board of Directors determines present minimal credit risks and which are in the top two rating categories of any nationally recognized statistical rating organizations or, in the case of any instrument that is not rated, of comparable quality as determined by the Board of Directors. Although the use of amortized cost provides certainty in valuation, it may result in periods during which value so determined is higher or lower than the price the Fund would receive if it liquidated its securities. The Fund's Board of Directors is obligated, as a particular responsibility within the overall duty of care owed to Money Market Portfolio shareholders, to establish procedures reasonably designed, taking into account current market conditions and the investment objective of such Portfolio, to stabilize the Portfolio's net asset value per share as computed for the purpose of distribution, redemption and repurchase, at $l0 per share. The procedures adopted by the Board of Directors include periodically reviewing, as it deems appropriate and at such intervals as are reasonable in light of current market conditions, the extent of deviation, if any, between the net asset value per share based on available market quotations and such value based on the Portfolio's $l0 amortized cost price. If such deviation exceeds 1/2 of 1 percent, or if there is any other deviation which the Board of Directors believes would result in a material dilution to shareholders or purchasers, the Board of Directors will promptly consider what action, if any, it should initiate. Such action may include redemption in kind; selling portfolio instruments prior to maturity to realize capital gains or losses, or to shorten the average portfolio maturity; withholding dividends; splitting, combining or otherwise recapitalizing outstanding shares; or using available market quotations to determine net asset value per share. The Portfolio may reduce the number of its outstanding shares by requiring shareholders to contribute to capital proportionately the number of full and fractional shares as is necessary to maintain the net asset value per share of $l0. ONLI and ONLAC, the sole shareholders of the Money Market Portfolio, have agreed to this procedure and contract owners who allocate purchase payments to the Money Market Portfolio will be bound by such agreement. TAX STATUS At December 3l, 1995 the Fund qualified as a regulated investment company under Subchapter M of the Internal Revenue Code (the "Code"). Under such provisions, the Fund is not subject to federal income tax on such part of its net ordinary income and net realized capital gains which it distributes to shareholders. Each portfolio is treated as a separate entity for federal income tax purposes, including determining whether it qualifies as a regulated investment company and determining its net ordinary income (or loss) and net realized capital gains (or losses). To qualify for treatment as a regulated investment company, each portfolio must, among other things, derive in each taxable year at least 90% of its gross income from dividends, interest and gains from the sale or other disposition of securities and derive less than 30% of its gross income in each taxable year from the gains (without deduction for losses) from the sale or other disposition of securities held for less than three months. Each portfolio also intends to comply with the diversification requirements or regulations under Section 817(h) of the Code. The foregoing is a general and abbreviated summary of the applicable provisions of the Code and Treasury Regulations currently in effect. For the complete provisions, reference should be made to the pertinent Code sections and the Treasury Regulations promulgated thereunder. Since the only eligible shareholders of the Fund are separate accounts of ONLI, ONLAC and other insurance companies, no discussion is stated herein as to the federal income tax consequences at the shareholder level. EXPERTS The financial statements of Ohio National Fund, Inc. as of December 3l, l996 and for the periods indicated herein included in this Statement of Additional Information and the Financial Highlights included in the prospectus have been included herein and in the prospectus in reliance upon the report of KPMG Peat Marwick LLP, 27 57 independent certified public accountants, appearing in this Statement of Additional Information, and upon the authority of said firm as experts in accounting and auditing. KPMG Peat Marwick LLP's business address is 201 East Fifth Street, Cincinnati, Ohio 45202. LEGAL COUNSEL Messrs. Jones & Blouch L.L.P., Washington, D.C., have passed on matters pertaining to the federal securities laws and Ronald L. Benedict, Esq., Secretary of the Fund and Second Vice President and Counsel of ONLI, has passed on all other legal matters relating to the legality of the shares described in the prospectus and this Statement of Additional Information. THE S&P 500 "Standard & Poor's (R)," "S&P (R)," "S&P 500 (R)" and "Standard & Poor's 500" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by the Adviser. The S&P 500 Index Portfolio is not sponsored, endorsed, sold or promoted by Standard & Poor's ("S&P") and S&P makes no representation regarding the advisability of investing in the S&P 500 Index Portfolio. S&P makes no representation or warranty, express or implied, to the owners of the Portfolio or any member of the public regarding the advisability of investing in securities generally or in the Portfolio particularly or the ability of the S&P 500 Index to track general stock market performance. S&P's only relationship to the Adviser is the licensing of certain trademarks and trade names of S&P and of the S&P 500 Index which is determined, composed and calculated by S&P without regard to the Adviser or the Portfolio. S&P has no obligation to take the needs of the Adviser or the owners of the Portfolio into consideration in determining, composing or calculating the S&P 500 Index. S&P is not responsible for and has not participated in the determination of the prices and amount of the Portfolio or the timing of the issuance or sale of the Portfolio or in the determination or calculation of the equation by which the Portfolio is to be converted into cash. S&P has no obligation or liability in connection with the administration, marketing or trading of the Portfolio. S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE ADVISER, OWNERS OF THE PORTFOLIO, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OR MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES. 28 58 OHIO NATIONAL FUND, INC. December 31, 1996 STATEMENTS OF ASSETS AND LIABILITIES
PORTFOLIO ------------------------------------------------------------------------------------- MONEY CAPITAL EQUITY MARKET BOND OMNI INTERNATIONAL APPRECIATION ------------ ----------- ------------- ------------ ------------- ------------ Assets: Investments in securities at market value (note 1) ...................... $232,147,553 $23,952,935 $ 20,312,667 $145,384,948 $ 134,384,201 $38,051,933 Cash in bank .......................... 91,899 33,904 21,751 20,205 69,939 1,898 Unrealized gain on foreign currency exchange contracts (note 6) ......... 0 0 0 0 1,686,502 0 Receivable for securities sold ........ 0 0 0 0 169,255 0 Receivable for shares sold ............ 568,786 1,594,884 60,249 212,996 971,753 271,526 Dividends and interest receivable ..... 336,613 0 429,429 539,273 366,362 155,957 Other ................................. 3,500 246 333 2,283 35,491 289 ------------ ----------- ------------- ------------ ------------- ----------- Total assets ........................ 233,148,351 25,581,969 20,824,429 146,159,705 137,683,503 38,481,603 ------------ ----------- ------------- ------------ ------------- ----------- Liabilities: Unrealized loss on foreign currency exchange contracts (note 6) ......... 0 0 0 0 47,691 0 Payable for securities purchased ...... 0 0 0 0 37,373 118,925 Dividends payable ..................... 0 3,342 0 0 0 0 Payable for shares redeemed ........... 0 47,347 8,228 449,210 0 196 Payable for investment management services (note 3) ................... 308,692 13,019 31,160 202,348 297,964 71,971 Accrued expenses ...................... 63,305 6,931 6,154 40,457 11,276 9,268 ------------ ----------- ------------- ------------ ------------- ----------- Total liabilities ................... 371,997 70,639 45,542 692,015 394,304 200,360 ------------ ----------- ------------- ------------ ------------- ----------- NET ASSETS AT MARKET VALUE ............... $232,776,354 $25,511,330 $ 20,778,887 $145,467,690 $ 137,289,199 $38,281,243 ============ =========== ============= ============ ============= =========== Net assets consist of: Par value, $1 per share ............... $ 7,206,842 $ 2,551,133 $ 1,955,819 $ 7,499,253 $ 8,861,590 $ 2,960,845 Paid-in capital in excess of par value ........................ 142,968,012 22,960,197 18,228,687 101,513,673 111,037,006 30,684,042 Accumulated undistributed net realized gain (loss) on investments ... 2,116,393 0 (82,701) 1,460,737 4,130,538 861,202 Net unrealized appreciation (depreciation) on: Investments (note 1) ................ 79,493,857 0 338,709 33,979,603 10,740,304 3,479,545 Forward currency contracts (note 6) . 0 0 0 0 1,638,811 0 Foreign currency related transactions 0 0 0 0 (1,697) 0 Undistributed net investment income (loss) ....................... 991,250 0 338,373 1,014,424 882,647 295,609 ------------ ----------- ------------- ------------ ------------- ----------- NET ASSETS AT MARKET VALUE ............... $232,776,354 $25,511,330 $ 20,778,887 $145,467,690 $ 137,289,199 $38,281,243 ============ =========== ============= ============ ============= =========== SHARES OUTSTANDING (note 5) .............. 7,206,842 2,551,133 1,955,819 7,499,253 8,861,590 2,960,845 ------------ ----------- ------------- ------------ ------------- ----------- NET ASSET VALUE PER SHARE ................ $ 32.30 $ 10.00 $ 10.62 $ 19.40 $ 15.49 $ 12.93 ============ =========== ============= ============ ============= =========== PORTFOLIO ------------------------------------------ SMALL GLOBAL AGGRESSIVE CAP CONTRARIAN GROWTH ------------ ------------ ------------ Assets: Investments in securities at market value (note 1) ...................... $ 38,416,267 $ 11,049,517 $ 12,008,171 Cash in bank .......................... 8 54,173 865 Unrealized gain on foreign currency exchange contracts (note 6) ......... 0 45,794 0 Receivable for securities sold ........ 91,941 52,969 64,224 Receivable for shares sold ............ 348,880 85,806 89,015 Dividends and interest receivable ..... 13,378 32,013 22,421 Other ................................. 154 147 164 ------------ ------------ ------------ Total assets ........................ 38,870,628 11,320,419 12,184,860 ------------ ------------ ------------ Liabilities: Unrealized loss on foreign currency exchange contracts (note 6) ......... 0 685 0 Payable for securities purchased ...... 330,137 0 150,970 Dividends payable ..................... 0 0 0 Payable for shares redeemed ........... 0 0 0 Payable for investment management services (note 3) ................... 70,147 23,737 21,947 Accrued expenses ...................... 6,635 6,244 2,364 ------------ ------------ ------------ Total liabilities ................... 406,919 30,666 175,281 ------------ ------------ ------------ NET ASSETS AT MARKET VALUE ............... $ 38,463,709 $ 11,289,753 $ 12,009,579 ============ ============ ============ Net assets consist of: Par value, $1 per share ............... $ 2,133,686 $ 968,333 $ 1,197,097 Paid-in capital in excess of par value ........................ 29,999,731 9,536,715 11,518,162 Accumulated undistributed net realized gain (loss) on investments ... (233,108) 203,560 (1,424,222) Net unrealized appreciation (depreciation) on: Investments (note 1) ................ 6,714,739 444,102 546,019 Forward currency contracts (note 6) . 0 45,109 0 Foreign currency related transactions 89 (138) 0 Undistributed net investment income (loss) ....................... (151,428) 92,072 172,523 ------------ ------------ ------------ NET ASSETS AT MARKET VALUE ............... $ 38,463,709 $ 11,289,753 $ 12,009,579 ============ ============ ============ SHARES OUTSTANDING (note 5) .............. 2,133,686 968,333 1,197,097 ------------ ------------ ------------ NET ASSET VALUE PER SHARE ................ $ 18.03 $ 11.66 $ 10.03 ============ ============ ============
The accompanying notes are an integral part of these financial statements. 59 OHIO NATIONAL FUND, INC. Year Ended December 31, 1996 STATEMENTS OF OPERATIONS
PORTFOLIO ---------------------------------------------------------------------------------- MONEY CAPITAL EQUITY MARKET BOND OMNI INTERNATIONAL APPRECIATION ----------- ----------- ----------- ----------- ------------- ------------ Investment income: Interest ................................ $ 1,686,797 $ 1,065,875 $ 1,391,482 $ 2,794,396 $ 698,700 $ 798,422 Dividends ............................... 3,086,469 0 41,395 1,868,511 2,534,092(a) 601,844 ----------- ----------- ----------- ----------- ----------- ---------- Total investment income ............... 4,773,266 1,065,875 1,432,877 4,662,907 3,232,792 1,400,266 ----------- ----------- ----------- ----------- ----------- ---------- Expenses: Management fees (note 3) ................ 1,124,431 58,418 117,360 735,210 1,045,159 229,794 Custodian fees (note 3) ................. 276,590 26,288 26,406 172,176 240,001 38,803 Directors' fees (note 3) ................ 12,972 1,332 1,334 8,153 6,640 1,123 Professional fees ....................... 34,582 3,242 3,391 21,829 13,900 3,173 Other ................................... 55,478 6,450 5,985 37,364 25,914 5,885 ----------- ----------- ----------- ----------- ----------- ---------- Total expenses ........................ 1,504,053 95,730 154,476 974,732 1,331,614 278,778 Less fees waived (note 3) ............. 0 (9,697) 0 0 0 0 ----------- ----------- ----------- ----------- ----------- ---------- Net expenses .......................... 1,504,053 86,033 154,476 974,732 1,331,614 278,778 ----------- ----------- ----------- ----------- ----------- ---------- Net investment income (loss) ........ 3,269,213 979,842 1,278,401 3,688,175 1,901,178 1,121,488 ----------- ----------- ----------- ----------- ----------- ---------- Realized and unrealized gain (loss) on investments and foreign currency Net realized gain (loss) from: Investments ........................... 2,116,393 0 2,392 1,460,737 4,130,538 1,168,575 Foreign currency related transactions . 0 0 0 0 2,879,840 0 Net increase (decrease) in unrealized appreciation (depreciation) on: Investments ......................... 29,110,600 0 (518,569) 13,387,967 4,882,238 2,026,474 Foreign currency related transactions 0 0 0 0 1,097,455 0 ----------- ----------- ----------- ----------- ----------- ---------- Net gain (loss) on investments ...... 31,226,993 0 (516,177) 14,848,704 12,990,071 3,195,049 ----------- ----------- ----------- ----------- ----------- ---------- Net increase in net assets from operations ........... $34,496,206 $ 979,842 $ 762,224 $18,536,879 $14,891,249 $4,316,537 =========== =========== =========== =========== =========== ========== PORTFOLIO --------------------------------------- SMALL GLOBAL AGGRESSIVE CAP CONTRARIAN GROWTH ----------- ---------- ----------- Investment income: Interest ................................ $ 103,106 $128,285 $ 46,927 Dividends ............................... 25,786 161,763(b) 1,292,966 ----------- -------- ----------- Total investment income ............... 128,892 290,048 1,339,893 ----------- -------- ----------- Expenses: Management fees (note 3) ................ 212,875 70,122 63,707 Custodian fees (note 3) ................. 35,915 27,703 10,750 Directors' fees (note 3) ................ 997 345 346 Professional fees ....................... 2,356 810 822 Other ................................... 4,125 1,407 4,983 ----------- -------- ----------- Total expenses ........................ 256,268 100,387 80,608 Less fees waived (note 3) ............. 0 0 0 ----------- -------- ----------- Net expenses .......................... 256,268 100,387 80,608 ----------- -------- ----------- Net investment income (loss) ........ (127,376) 189,661 1,259,285 ----------- -------- ----------- Realized and unrealized gain (loss) on investments and foreign currency Net realized gain (loss) from: Investments ........................... (233,108) 203,560 (1,376,916) Foreign currency related transactions . (941) 71,821 18,597 Net increase (decrease) in unrealized appreciation (depreciation) on: Investments ......................... 4,808,600 285,658 389,786 Foreign currency related transactions 122 42,331 (11,874) ----------- -------- ----------- Net gain (loss) on investments ...... 4,574,673 603,370 (980,407) ----------- -------- ----------- Net increase in net assets from operations ........... $ 4,447,297 $793,031 $ 278,878 =========== ======== ===========
(a) Net of $223,281 foreign taxes withheld. (b) Net of $10,035 foreign taxes withheld. The accompanying notes are an integral part of these financial statements. 60 OHIO NATIONAL FUND, INC. Years Ended December 31 1996 and 1995 STATEMENTS OF CHANGES IN NET ASSETS
PORTFOLIO -------------------------------------------------------------------------- EQUITY MONEY MARKET BOND YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 12-31-96 12-31-95 12-31-96 12-31-95 12-31-96 ----------------------------- --------------------------- ------------ From operations: Net investment income ................... $ 3,269,213 $ 2,852,911 $ 979,842 $ 683,716 $ 1,278,401 Realized gain (loss) on investments and foreign currency related transactions .. 2,116,393 5,341,756 0 0 2,392 Unrealized gain (loss) on investments and foreign currency related transactions .. 29,110,600 26,897,831 0 0 (518,569) ------------- ------------- ------------ ------------ ------------ Net increase in assets from operations ................... 34,496,206 35,092,498 979,842 683,716 762,224 ------------- ------------- ------------ ------------ ------------ Dividends and distributions to shareholders: Dividends declared .................... (3,065,136) (2,203,910) (979,842) (683,716) (1,230,887) Capital gains distribution ............ (5,341,756) (2,034,408) 0 0 0 ------------- ------------- ------------ ------------ ------------ Total dividends and distributions ... (8,406,892) (4,238,318) (979,842) (683,716) (1,230,887) ------------- ------------- ------------ ------------ ------------ From Capital Share Transactions (note 5): Received from shares sold ............... 37,139,279 27,001,671 28,544,523 14,165,258 6,923,633 Received from dividends reinvested ...... 8,406,892 4,238,318 979,842 683,716 1,230,887 Paid for shares redeemed ................ (14,554,329) (9,726,105) (19,728,821) (12,191,289) (4,971,363) ------------- ------------- ------------ ------------ ------------ Increase in net assets derived from capital share transactions ..... 30,991,842 21,513,884 9,795,544 2,657,685 3,183,157 ------------- ------------- ------------ ------------ ------------ Increase in assets ................ 57,081,156 52,368,064 9,795,544 2,657,685 2,714,494 ------------- ------------- ------------ ------------ ------------ Net Assets: Beginning of period ..................... 175,695,198 123,327,134 15,715,786 13,058,101 18,064,393 ------------- ------------- ------------ ------------ ------------ End of period(a)......................... $ 232,776,354 $ 175,695,198 $ 25,511,330 $ 15,715,786 $ 20,778,887 ============= ============= ============ ============ ============ Includes undistributed net (a) investment income of .................. $ 991,250 $ 787,173 $ 0 $ 0 $ 338,373 ============= ============= ============ ============ ============ PORTFOLIO ------------------------------------------------------------------------- BOND OMNI INTERNATIONAL YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 12-31-95 12-31-96 12-31-95 12-31-96 12-31-95 ------------ ---------------------------- --------------------------- From operations: Net investment income ................... $ 1,047,685 $ 3,688,175 $ 3,415,111 $ 1,901,178 $ 1,727,831 Realized gain (loss) on investments and foreign currency related transactions .. (85,093) 1,460,737 1,972,001 7,010,378 2,149,202 Unrealized gain (loss) on investments and foreign currency related transactions .. 1,682,695 13,387,967 13,934,522 5,979,693 4,907,572 ------------ ------------- ------------ ------------ ------------ Net increase in assets from operations ................... 2,645,287 18,536,879 19,321,634 14,891,249 8,784,605 ------------ ------------- ------------ ------------ ------------ Dividends and distributions to shareholders: Dividends declared .................... (802,639) (3,564,088) (2,700,506) (4,697,527) (1,426,199) Capital gains distribution ............ (1,741) (1,956,755) 0 (1,691,528) (1,090,908) ------------ ------------- ------------ ------------ ------------ Total dividends and distributions ... (804,380) (5,520,843) (2,700,506) (6,389,055) (2,517,107) ------------ ------------- ------------ ------------ ------------ From Capital Share Transactions (note 5): Received from shares sold ............... 4,015,347 25,730,422 15,409,257 37,362,568 26,592,168 Received from dividends reinvested ...... 804,380 5,520,843 2,700,506 6,389,055 2,517,107 Paid for shares redeemed ................ (1,744,440) (8,376,827) (10,120,050) (5,558,345) (7,658,197) ------------ ------------- ------------ ------------ ------------ Increase in net assets derived from capital share transactions ..... 3,075,287 22,874,438 7,989,713 38,193,278 21,451,078 ------------ ------------- ------------ ------------ ------------ Increase in assets ................ 4,916,194 35,890,474 24,610,841 46,695,472 27,718,576 ------------ ------------- ------------ ------------ ------------ Net Assets: Beginning of period ..................... 13,148,199 109,577,216 84,966,375 90,593,727 62,875,151 ------------ ------------- ------------ ------------ ------------ End of period(a)......................... $ 18,064,393 $ 145,467,690 $109,577,216 $137,289,199 $ 90,593,727 ============ ============= ============ ============ ============ Includes undistributed net (a) investment income of .................. $ 290,858 $ 1,014,424 $ 890,337 $ 882,647 $ 799,333 ============ ============= ============ ============ ============
The accompanying notes are an integral part of these financial statements. 61 OHIO NATIONAL FUND, INC. Years Ended December 31, 1996 and 1995 STATEMENTS OF CHANGES IN NET ASSETS
PORTFOLIO -------------------------------------------------------------------------------------- CAPITAL APPRECIATION SMALL CAP GLOBAL CONTRARIAN (b) YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 12-31-96 12-31-95 12-31-96 12-31-95 12-31-96 12-31-95 --------------------------- --------------------------- -------------------------- From operations: Net investment income (loss) ............ $ 1,121,488 $ 418,358 ($ 127,376) ($ 9,784) $ 189,661 $ 41,517 Realized gain (loss) on investments and foreign currency related transactions . 1,168,575 347,729 (234,049) 564,882 275,381 63,612 Unrealized gain (loss) on investments and foreign currency related transactions .. 2,026,474 1,486,874 4,808,722 1,631,811 327,989 161,084 ------------ ------------ ------------ ------------ ------------ ----------- Net increase in assets from operations ................... 4,316,537 2,252,961 4,447,297 2,186,909 793,031 266,213 ------------ ------------ ------------ ------------ ------------ ----------- Dividends and distributions to shareholders: Dividends declared .................... (969,506) (284,670) 0 (28,120) (213,826) (23,897) Capital gains distribution ............ (655,102) (139,011) (542,566) 0 (36,817) 0 ------------ ------------ ------------ ------------ ------------ ----------- Total dividends and distributions ... (1,624,608) (423,681) (542,566) (28,120) (250,643) (23,897) ------------ ------------ ------------ ------------ ------------ ----------- From Capital Share Transactions (note 5): Received from shares sold ............... 16,614,123 10,945,010 19,468,827 11,178,786 7,880,959 4,311,648 Received from dividends reinvested ...... 1,624,608 423,681 542,566 28,120 250,643 23,897 Paid for shares redeemed ................ (1,969,700) (632,303) (1,490,446) (584,139) (1,804,832) (157,266) ------------ ------------ ------------ ------------ ------------ ----------- Increase in net assets derived from capital share transactions ..... 16,269,031 10,736,388 18,520,947 10,622,767 6,326,770 4,178,279 ------------ ------------ ------------ ------------ ------------ ----------- Increase in assets ................ 18,960,960 12,565,668 22,425,678 12,781,556 6,869,158 4,420,595 ------------ ------------ ------------ ------------ ------------ ----------- Net Assets: Beginning of period ..................... 19,320,283 6,754,615 16,038,031 3,256,475 4,420,595 0 ------------ ------------ ------------ ------------ ------------ ----------- End of period (a) ....................... $ 38,281,243 $ 19,320,283 $ 38,463,709 $ 16,038,031 $ 11,289,753 $ 4,420,595 ============ ============ ============ ============ ============ =========== Includes undistributed net (a) investment income (loss) of ........... $ 295,609 $ 143,627 ($ 151,428) ($ 23,110) $ 92,072 $ 44,416 ============ ============ ============ ============ ============ =========== (b) Commenced operations March 31, 1995. PORTFOLIO -------------------------- AGGRESSIVE GROWTH (b) YEAR ENDED YEAR ENDED 12-31-96 12-31-95 -------------------------- From operations: Net investment income (loss) ............ $ 1,259,285 $ 295,848 Realized gain (loss) on investments and foreign currency related transactions . (1,358,319) (39,900) Unrealized gain (loss) on investments and foreign currency related transactions .. 377,912 168,107 ------------ ----------- Net increase in assets from operations ................... 278,878 424,055 ------------ ----------- Dividends and distributions to shareholders: Dividends declared .................... (1,271,325) (137,288) Capital gains distribution ............ 0 0 ------------ ----------- Total dividends and distributions ... (1,271,325) (137,288) ------------ ----------- From Capital Share Transactions (note 5): Received from shares sold ............... 8,883,382 3,709,801 Received from dividends reinvested ...... 1,271,325 137,288 Paid for shares redeemed ................ (1,158,142) (128,395) ------------ ----------- Increase in net assets derived from capital share transactions ..... 8,996,565 3,718,694 ------------ ----------- Increase in assets ................ 8,004,118 4,005,461 ------------ ----------- Net Assets: Beginning of period ..................... 4,005,461 0 ------------ ----------- End of period (a) ....................... $ 12,009,579 $ 4,005,461 ============ =========== Includes undistributed net (a) investment income (loss) of ........... $ 172,523 $ 165,966 ============ =========== (b) Commenced operations March 31, 1995.
The accompanying notes are an integral part of these financial statements. 62 OHIO NATIONAL FUND, INC. December 31, 1996 SCHEDULE OF INVESTMENTS EQUITY PORTFOLIO
MARKET SHARES COMMON STOCK VALUE - ----------------------------------------------------------------- AEROSPACE (3.5%) 44,500 Allied Signal, Inc. $ 2,981,500 64,000 Raytheon Co. 3,080,000 31,350 Rockwell International Corp. 1,908,431 1,316 Boeing Co. 139,990 --------------- 8,109,921 --------------- AUTOMOTIVE AND RELATED (3.0%) 22,500 Arvin Industries, Inc. 556,875 31,000 Chrysler Corp. 1,023,000 47,000 * Custom Chrome, Inc. 945,875 39,184 Ford Motor Co. 1,248,990 20,000 Magna International, Inc. 1,115,000 43,000 Modine Manufacturing Co. 1,150,250 47,000 Walbro Corp. 857,750 --------------- 6,897,740 --------------- BANKING (3.9%) 15,000 Boatmen's Bancshares, Inc. 967,500 25,200 Charter One Financial Inc. 1,058,400 21,000 First Union Corp. 1,554,000 70,000 Hanson Trust, PLC 472,500 35,000 Long Island Bancorp, Inc. 1,225,000 22,500 Mellon Bank Corp. 1,597,500 37,000 * Olympic Financial Ltd 531,875 40,000 SEI Corp. 890,000 20,500 Susquehanna Bancshares Inc. 709,813 --------------- 9,006,588 --------------- BUSINESS SERVICES (9.0%) 64,000 * Alternative Resources Inc. 1,112,000 34,500 * Banctec, Inc. 711,563 70,000 BMC Industries Inc. - Minn. 2,205,000 30,000 * Computer Sciences Corp. 2,463,750 89,000 First Data Corp. 3,248,500 12,500 Fisher Scientific International 589,063 33,000 * ITT Corp. 1,431,375 50,000 Manpower Inc. 1,625,000 76,000 Reynolds & Reynolds CL A 1,976,000 35,000 Standard Register Co. 1,137,500 30,000 * Symbol Technologies, Inc. 1,327,500 50,000 * Verifone, Inc. 1,475,000 23,000 Wackenhut Corp. Class B 350,750 45,000 * Zebra Technology Corp. 1,051,875 --------------- 20,704,875 --------------- CHEMICALS (4.0%) 17,500 E I DuPont De Nemours & Co. 1,651,563 96,000 Engelhard Corp. 1,836,000 28,000 Lubrizol Corp. 868,000 5,000 * Millenium Chemicals 88,750 85,000 Monsanto Co. 3,304,375 60,000 OM Group, Inc. 1,620,000 --------------- 9,368,688 --------------- COMMUNICATIONS (3.5%) 49,000 * Atlantic Tele-Network Inc. 747,250 82,500 * Andrew Corp. 4,377,656 12,500 * Granite Broadcasting, Corp. 132,813 27,500 * Mastec Inc. 1,457,500 15,000 * U.S. Robotics 1,080,000 --------------- 7,795,219 --------------- COMPUTER AND RELATED (10.8%) 60,000 * Cisco Systems, Inc. $ 3,817,500 65,000 * Continental Circuits Corp. 698,750 58,000 Hewlett-Packard Co. 2,914,500 50,000 * Informix Corp. 1,018,750 32,000 Intel Corp. 4,190,000 90,000 MacNeal-Schwendler Corp. 708,750 20,000 * Microsoft Corp. 1,652,500 40,000 Motorola, Inc. 2,455,000 47,058 * Seagate Technology 1,858,791 22,871 * Solectron Corp. 1,220,740 80,000 * Sun Microsystems, Inc. 2,055,000 40,000 Texas Instruments, Inc. 2,550,000 --------------- 25,140,281 --------------- CONTAINERS (0.9%) 90,000 * Owens-Illinois, Inc. 2,047,500 --------------- ELECTRICAL EQUIPMENT (5.6%) 45,000 * Analog Devices, Inc. 1,524,375 60,000 * Anixter Intl. Inc. 967,500 29,400 Eaton Corp. 2,050,650 40,000 General Electric Co. 3,955,000 40,000 Varian Associates, Inc. 2,035,000 55,000 Westinghouse Electric 1,093,125 25,000 Xerox Corp. 1,315,625 --------------- 12,941,275 --------------- ENTERTAINMENT AND LEISURE (0.6%) 37,500 Cedar Fair 1,387,500 --------------- FOOD AND RELATED (1.4%) 84,000 * Buffets, Inc. 766,500 25,500 H.J. Heinz Co. 911,625 22,500 Panamerican Beverages, Inc. 1,054,688 33,000 Smart & Final, Inc. 713,625 --------------- 3,446,438 --------------- FORESTRY AND PAPER PRODUCTS (0.7%) 68,000 Sonoco Products 1,759,500 --------------- HOUSEHOLD PRODUCTS (0.3%) 38,000 * Guest Supply Inc. 669,750 --------------- HOUSING, FURNITURE & RELATED (1.9%) 136,000 Clayton Homes, Inc. 1,836,000 64,000 Newell Co. 2,016,000 50,000 Shaw Industries, Inc. 587,500 --------------- 4,439,500 --------------- INDUSTRIAL SERVICES (4.2%) 38,000 * Canisco Resources Inc. 152,000 31,500 Federal Signal Corp. 815,063 22,500 Fluor Corp. 1,411,875 40,000 Kysor Industrial Corp. 1,305,000 20,500 * Medar Inc. 115,313 35,300 Minerals Technologies, Inc. 1,447,300 50,000 Regal Beloit 981,250 32,000 Stewart & Stevenson Services 932,000 50,000 WMX Technologies, Inc. 1,631,250 20,000 York International, Corp. 1,117,500 --------------- 9,908,550 --------------- (continued)
63 OHIO NATIONAL FUND, INC. December 31, 1996 SCHEDULE OF INVESTMENTS EQUITY PORTFOLIO (CONTINUED)
MARKET SHARES COMMON STOCK VALUE - ----------------------------------------------------------------- INSURANCE SERVICES (6.0%) 28,125 American International Group $ 3,044,531 36,000 Chubb Corp. 1,935,000 35,831 Cincinnati Financial Corp. 2,324,536 40,000 Equitable Cos., Inc. 985,000 34,500 Providian Corp. 1,772,438 26,500 St. Paul Cos. 1,553,563 -------------- 11,615,067 -------------- MACHINERY (1.9%) 4,400 * Bridgeport Machines Inc. 49,500 24,000 Caterpillar, Inc. 1,806,000 30,000 Deere & Company 1,218,750 53,500 Hardinge Inc. 1,424,438 -------------- 4,498,688 -------------- MEDICAL AND RELATED (5.7%) 32,000 Abbott Laboratories 1,624,000 36,000 Allergan, Inc. 1,282,500 7,500 Allegiance Corp. 207,188 37,500 Baxter International 1,537,500 41,500 * Cephalon Inc. 850,750 66,000 Columbia HCA Healthcare Corp. 2,689,500 39,000 * Foundation Health Corp. 1,238,250 27,000 Guidant Corp. 1,539,000 30,000 * Humana Inc. 573,750 13,500 National Healthcare-LP 588,938 40,875 * Quorum Health Group Inc. 1,216,031 -------------- 13,347,406 -------------- METALS AND MINING (1.1%) 16,000 Phelps Dodge Corp. 1,080,000 43,800 * Wolverine Tube, Inc. 1,543,950 -------------- 2,623,950 -------------- METAL FABRICATING (0%) 7,000 Amcast Industrial Corp. 173,250 -------------- OIL, ENERGY AND NATURAL GAS (8.0%) 40,000 Ashland, Inc. 1,755,000 29,000 * Belco Oil & Gas 793,875 65,500 Camco International, Inc. 3,021,188 27,000 Chevron Corp. 1,755,000 13,000 Coastal Corp. 635,375 57,500 * Enserch Exploration Inc. 675,625 75,000 * Louis Dreyfus Natural Gas 1,284,375 38,000 National Propane Partners 745,750 35,000 * Offshore Logistics Inc. 678,125 20,000 Schlumberger, Ltd. 1,997,500 17,850 * Ultramar Diamond Shamrock 564,506 45,000 Union Texas Petroleum 1,006,875 90,000 Westcoast Energy, Inc. 1,507,500 51,000 Williams Cos. Inc. 1,912,500 15,200 Wiser Oil 300,200 -------------- 18,633,394 -------------- RETAIL (1.2%) 35,000 Family Dollar Stores $ 713,125 50,000 * Globe Business Resources 512,500 35,000 * Ridgeview Inc. 258,125 23,000 Stanhome, Inc. 609,500 25,000 Warnaco Group 740,625 ---------------- 2,833,875 ---------------- REAL ESTATE AND LEASING (2.2%) 62,000 Commercial Net Lease Realty $ 984,250 37,500 First Industrial Reality Trust 1,139,063 46,000 Healthcare Realty Trust 1,219,000 25,000 Liberty Property Trust 643,750 29,500 National Health Investors, Inc. 1,117,313 ---------------- 5,103,375 ---------------- TEXTILES AND RELATED (0.5%) 25,000 Oxford Industries, Inc. 600,000 25,000 Singer Co. NV 559,375 ---------------- 1,159,375 ---------------- TRANSPORTATION AND EQUIPMENT (4.3%) 41,382 Burlington Northern, Inc. 3,574,370 15,000 * Consolidated Freightways Corp 133,125 30,000 Consolidated Freightways Inc. 667,500 40,000 Greenbrier Companies, Inc. 415,000 33,750 Illinois Central Corp. 1,080,000 25,000 Norfolk Southern Corp. 2,187,500 56,800 Trinity Industries 2,130,000 ---------------- 10,187,495 ---------------- UTILITIES (1.0%) 21,500 Entergy Corp. 596,625 27,500 FPL Group, Inc. 1,265,000 20,500 Montana Power Co. 438,188 ---------------- 2,299,813 ---------------- TOTAL COMMON STOCKS (84.2%) (COST $116,609,563) $196,099,010 ----------------
MARKET SHARES PREFERRED STOCK VALUE - ----------------------------------------------------------------- BANKING (0.1%) 11,000 Money Store 6.5% $ 301,125 ---------------- COMPUTER & RELATED (0.3%) 24,000 General Datacommunications 603,000 ---------------- OIL AND GAS (0.7%) 13,000 Ashland Oil, cum., conv. 892,125 15,000 Howell Corp., $3.50 Series A 765,000 ---------------- 1,657,125 ---------------- METALS AND MINING (0.7%) 50,000 Freeport McMoRan Copper & Gold, Series B 1,600,000 ---------------- REAL ESTATE (0.2%) 20,000 Oasis Residential Inc. Series A cum., conv. 517,500 ---------------- TOTAL PREFERRED STOCK (2.0%) (COST $4,733,590) $ 4,678,750 ---------------- (continued)
64 OHIO NATIONAL FUND, INC. December 31, 1996 SCHEDULE OF INVESTMENTS EQUITY PORTFOLIO (CONTINUED)
FACE MARKET AMOUNT CONVERTIBLE DEBENTURES VALUE - ----------------------------------------------------------------- ELECTRICAL EQUIPMENT (0.3%) $700,000 Richey Electric, 7.000% conv. debentures, due 03-01-06 $ 699,125 -------------- METAL FABRICATING (0.4%) 900,000 INCO, Ltd., 7.750% conv. subordinated debentures, due 03-15-16 947,250 -------------- OIL, ENERGY AND NATURAL GAS (0.3%) 800,000 Offshore Log, 6.000% debentures due 12-15-06 831,000 -------------- TOTAL CONVERTIBLE (1.0%) $2,477,375 (COST $2,418,125) --------------
FACE MARKET AMOUNT SHORT-TERM NOTES VALUE - ----------------------------------------------------------------- FINANCE (10.7%) $3,600,000 American Express Credit Corp. 5.350% 01-03-97 $ 3,598,930 2,625,000 Associates Corp. of America 5.700% 01-10-97 2,621,259 3,064,000 General Motors Accept. Corp. 5.340% 01-06-97 3,061,621 5,340,000 Household Finance 5.600% 01-07-97 5,335,016 3,845,000 Heller Financial Inc. 5.450% 01-02-97 3,844,413 6,565,000 Prudential Funding Corp. 5.800% 01-09-97 6,556,538 ---------------- 25,017,778 ---------------- RETAIL (1.7%) 3,879,000 Sears, Roebuck Acceptance Corp. 5.780% 01-08-97 3,874,640 ---------------- TOTAL SHORT-TERM NOTES (12.4%) (COST $28,892,418) $ 28,892,418 ---------------- TOTAL HOLDINGS (COST $152,653,696)(a) $232,147,553 ================
*Non-income producing securities. (a) Also represents cost for Federal income tax purposes. The accompanying notes are an integral part of these financial statements. 65 OHIO NATIONAL FUND, INC. December 31, 1996 SCHEDULE OF INVESTMENTS MONEY MARKET PORTFOLIO
FACE MARKET AMOUNT SHORT-TERM NOTES VALUE - ----------------------------------------------------------------- AUTOMOTIVE AND RELATED (11.1%) $1,000,000 Budget Funding Corp. 5.320% 01-10-97 $ 998,670 200,000 Ford Motor Credit Corp. 5.400% 01-02-97 199,970 595,000 Ford Motor Credit Corp. 5.600% 01-02-97 594,907 675,000 General Motors Acceptance Corp. 5.420% 01-28-97 672,256 382,000 General Motors Acceptance Corp. 5.390% 01-27-97 380,512 -------------- 2,846,316 -------------- BANKING (4.1%) 360,000 Merrill Lynch 5.430% 01-13-97 359,348 689,000 Merrill Lynch 5.350% 02-19-97 683,983 -------------- 1,043,331 -------------- COMPUTER AND RELATED (3.3%) 325,000 IBM Credit Corp. 5.320% 01-09-97 324,616 521,000 IBM CREDIT CORP. 5.380% 01-23-97 519,287 -------------- 843,903 -------------- CONSUMER DURABLES (2.4%) 622,000 Harley-Davidson 5.400% 01-31-97 619,201 -------------- ELECTRICAL EQUIPMENT (2.9%) 740,000 G.E. Capital Corp. 5.320% 01-22-97 737,704 -------------- FINANCE (17.1%) 406,000 American Express Credit 5.330% 01-14-97 405,219 284,000 American Express Credit 5.325% 01-09-97 283,664 491,000 American General Finance 5.530% 01-08-97 490,472 145,000 American General Finance 5.400% 01-08-97 144,848 891,000 Associates Corp. 5.450% 02-10-97 885,605 664,000 Beneficial Corp. 5.500% 01-21-97 661,971 1,000,000 Heller Financial Inc. 5.480% 02-12-97 993,607 511,000 Household Finance Corp. 5.310% 01-13-97 510,096 -------------- 4,375,480 -------------- INDUSTRIAL (12.8%) $1,000,000 Fluor Corp. 5.580% 01-29-97 $ 995,660 262,000 John Deere Capital Corp. 5.480% 01-17-97 261,362 1,030,000 Duponte Nemours 5.280% 01-07-97 1,029,094 985,000 NEC Industries 5.510% 01-06-97 984,246 -------------- 3,270,362 -------------- INSURANCE (14.1%) 962,000 Aetna Services 5.570% 01-15-97 959,916 1,000,000 Jefferson-Pilot 5.450% 01-07-97 999,092 530,000 Prudential Funding Inc. 5.380% 01-10-97 529,287 530,000 Prudential Funding Inc. 5.420% 01-29-97 527,766 587,000 Reliastar 5.420% 01-21-97 585,232 -------------- 3,601,293 -------------- MACHINERY (3.9%) 1,000,000 Echlin 5.370% 01-16-97 997,763 -------------- RECEIVABLES (11.7%) 1,000,000 Alamo Funding 5.420% 01-24-97 996,537 1,000,000 Dynamic Funding 5.500% 01-17-97 997,556 1,000,000 Madison Funding Corp. 5.450% 01-14-97 998,032 -------------- 2,992,125 -------------- RETAIL (6.0%) 478,000 Sears Roebuck Acceptance Corp. 5.350% 01-23-97 476,437 727,000 Southland 5.320% 01-15-97 725,496 340,000 Southland 5.380% 01-23-97 338,882 -------------- 1,540,815 -------------- UTILITIES (4.2%) 1,089,000 Madison Gas 5.540% 01-27-97 1,084,643 -------------- TOTAL HOLDINGS (COST $23,952,935)(a) $23,952,935 ==============
(a) Also represents cost for Federal income tax purposes. The accompanying notes are an integral part of these financial statements. 66 OHIO NATIONAL FUND, INC. December 31, 1996 SCHEDULE OF INVESTMENTS BOND PORTFOLIO
FACE MARKET AMOUNT LONG-TERM BONDS & NOTES VALUE - ------------------------------------------------------------------ GOVERNMENT (12.2%) $250,000 U.S. Treasury Note 6.375% 08-15-02 $ 251,748 500,000 U.S. Treasury Note 7.375% 11-15-97 507,295 500,000 U.S. Treasury Note 5.625% 02-15-06 472,855 500,000 U.S. Treasury Note 7.875% 11-15-99 523,915 745,000 U.S. Treasury Note 7.750% 02-15-01 787,242 -------------- 2,543,054 -------------- AUTOMOTIVE AND RELATED (3.0%) 100,000 Arvin Industries 10.000% 08-01-00 107,500 500,000 GMAC 8.400% 10-15-99 525,625 -------------- 633,125 -------------- COMMUNICATIONS (1.2%) 250,000 Tele-communications, Inc. 8.250% 01-15-03 252,813 -------------- COMPUTER AND RELATED (2.3%) 300,000 Apple Computer Inc. 6.500% 02-15-04 263,250 200,000 Comdisco, Inc. 7.750% 09-01-99 206,000 -------------- 469,250 -------------- CONSUMER GOODS (2.5%) 200,000 RJR Nabisco Inc. 8.750% 04-15-04 201,250 300,000 RJR Nabisco Inc. 8.625% 12-01-02 308,625 -------------- 509,875 -------------- ELECTRICAL EQUIPMENT (9.3%) 1,000,000 Anixter Intl 8.000% 09-15-03 1,018,750 500,000 Pioneer 8.500% 08-01-06 508,750 400,000 Tektronix Inc. 7.500% 08-01-03 405,500 -------------- 1,933,000 -------------- FINANCE (1.2%) 250,000 Aristar Inc. 5.750% 07-15-98 248,750 -------------- FOOD AND RELATED (2.3%) 500,000 Wendy's Inc. 6.350% 12-15-05 478,750 -------------- FORESTRY AND PAPER PRODUCTS (4.1%) 300,000 Boise Cascade Co. 9.850% 06-15-02 337,875 250,000 Champion International 7.700% 12-15-99 258,438 250,000 ITT Rayonier Inc. 7.500% 10-15-02 257,813 -------------- 854,125 -------------- HOTEL/LODGING (1.5%) $300,000 Marriott International 7.780% 04-15-05 $ 311,250 -------------- GOVERNMENT (FOREIGN) (2.3%) 200,000 British Columbia 7.000% 01-15-03 204,250 250,000 Province of Quebec 8.625% 01-19-05 274,688 -------------- 478,938 -------------- HOUSING, FURNITURE AND RELATED (0.8%) 140,000 Armstrong World 9.750% 04-15-08 166,425 -------------- INSURANCE (3.2%) 250,000 Continental Corp. 7.250% 03-01-03 254,375 400,000 Transamerica Finance Corp. 7.500% 03-15-04 412,000 -------------- 666,375 -------------- MEDICAL AND RELATED (2.6%) 250,000 Bergen Brunswig 7.375% 01-15-03 256,875 300,000 Cardinal Health Inc. 6.500% 02-15-04 293,250 -------------- 550,125 -------------- METALS AND MINING (2.3%) 500,000 Cyprus Minerals 6.625% 10-15-05 480,000 -------------- OIL, ENERGY AND NATURAL GAS (11.5%) 200,000 Atlantic Richfield 8.550% 03-01-12 224,500 100,000 DeKalb Energy 9.875% 07-15-00 101,000 400,000 Dresser Industries, Inc. 6.250% 06-01-00 397,500 125,000 Marathon Oil 7.000% 06-01-02 125,313 488,450 Mobile Energy Services Co. 8.665% 01-01-17 498,490 400,000 PDV America, Inc. 7.875% 08-01-03 391,000 140,000 Shell Oil Co. 6.950% 12-15-98 142,450 500,000 System Energy 7.800% 08-01-00 505,000 -------------- 2,385,252 -------------- REAL ESTATE (7.1%) 300,000 Avalon Properties Inc. 7.375% 09-15-02 300,375 900,000 Colonial Realty 8.050% 07-15-06 921,375 250,000 Sun Communities 7.625% 05-01-03 253,750 -------------- 1,475,500 --------------
(continued) 67 OHIO NATIONAL FUND, INC. December 31, 1996 SCHEDULE OF INVESTMENTS BOND PORTFOLIO (CONTINUED)
FACE MARKET AMOUNT LONG-TERM BONDS & NOTES VALUE - ------------------------------------------------------------------ TRANSPORTATION (5.4%) $250,000 American President Cos., Ltd. 7.125% 11-15-03 $ 247,500 350,000 Illinois Central Gulf Railroad 6.750% 05-15-03 346,938 500,000 Northwest Airlines 8.070% 01-02-15 521,328 -------------- 1,115,766 -------------- UTILITIES (15.6%) 200,000 Cleveland Electric Illum. 7.625% 08-01-02 195,000 500,000 Great Lakes Power Inc. 8.900% 12-01-99 529,375 250,000 Kansas Gas & Electric 8.290% 03-29-16 258,750 550,000 Mississippi Power & Light 8.800% 04-01-05 561,688 200,000 Old Dominion Electric Co-op 8.760% 12-01-22 221,250 200,000 Sprint Corp. 8.125% 07-15-02 213,000 700,000 Texas Utilities Electric Co. 7.480% 01-01-17 683,375 200,000 Toledo Edison Co. 7.875% 08-01-04 197,750 375,000 New Orleans Public Service Co. 8.670% 04-01-05 382,031 -------------- 3,242,219 -------------- MISCELLANEOUS (3.3%) 700,000 ITT Destinations Inc. 6.750% 11-15-05 680,750 -------------- TOTAL LONG-TERM BONDS & NOTES (93.7%) (COST $19,161,756) $ 19,475,341 --------------
MARKET SHARES PREFERRED STOCK VALUE - ------------------------------------------------------------------ UTILITIES (2.3%) 12,000 GTE Delaware, 8.750%, Series B $316,500 6,500 Phillips Gas Co., 9.320% Series A 170,625 -------------- 487,125 -------------- TOTAL PREFERRED STOCKS (2.3%) (COST $462,500) $487,125 --------------
MARKET SHARES WARRANTS VALUE - ----------------------------------------------------------------- DIVERSIFIED 500 * Plastic Specialties & Tech Inc. $500 -------------- TOTAL WARRANTS (0.0%) $500 (COST $0) --------------
FACE MARKET AMOUNT SHORT-TERM NOTES VALUE - ----------------------------------------------------------------- FINANCE (1.7%) $350,000 Household 6.150% 01-06-97 $ 349,701 -------------- TOTAL SHORT-TERM NOTES (1.7%) (COST $349,702) $ 349,701 -------------- TOTAL HOLDINGS (COST $19,973,958)(a) $20,312,667 ==============
*Non-income producing securities. (a) Also represents cost for Federal income tax purposes. The accompanying notes are an integral part of these financial statements. 68 OHIO NATIONAL FUND, INC. December 31, 1996 SCHEDULE OF INVESTMENTS OMNI PORTFOLIO
FACE MARKET AMOUNT LONG-TERM BONDS & NOTES VALUE - -------------------------------------------------------------------- GOVERNMENT (2.4%) $ 775,000 U.S. Treasury Note 6.375% 07-15-99 $ 782,432 500,000 U.S. Treasury Note 7.875% 11-15-99 523,915 2,005,000 U.S. Treasury Note 7.750% 02-15-01 2,118,684 ---------------- 3,425,031 ---------------- AVIATION (0.3%) 500,000 AAR Corp. 7.250% 10-15-03 478,125 ---------------- COMPUTERS AND RELATED (0.4%) 700,000 Apple Computer, Inc. 6.500% 02-15-04 614,250 ---------------- CONSUMER GOODS (0.8%) 700,000 Kroger Co. 9.750% 02-15-04 740,250 400,000 RJR Nabisco, Inc. 8.750% 04-15-04 402,500 ---------------- 1,142,750 ---------------- FINANCE (1.0%) 1,000,000 Green Tree Financial Corp. 8.700% 06-15-25 1,000,000 400,000 Citfed Bankcorp Inc. 8.250% 09-01-03 388,500 ---------------- 1,388,500 ---------------- FORESTRY AND PAPER PRODUCTS (1.1%) 700,000 Boise Cascade Co. 9.850% 06-15-02 788,375 500,000 Champion International 9.875% 06-01-00 549,375 250,000 ITT Rayonier, Inc. 7.500% 10-15-02 257,813 ---------------- 1,595,563 ---------------- HOUSING, FURNITURE AND RELATED (0.2%) 250,000 Armstrong World 9.750% 04-15-08 297,188 ---------------- INDUSTRIAL SERVICES (0.3%) 350,000 Robins & Myers 6.500% 09/01/03 395,938 ---------------- INSURANCE (0.8%) 500,000 Continental Corp. 7.250% 03-01-03 508,750 600,000 Transamerica Finance Corp. 7.500% 03-15-04 618,000 ---------------- 1,126,750 ---------------- MEDICAL AND RELATED (0.4%) 500,000 Bergen Brunswig 7.375% 01-15-03 513,750 ---------------- METALS AND MINING (0.3%) $500,000 Cyprus Minerals 6.625% 10-15-05 $ 480,000 ---------------- OIL, ENERGY AND NATURAL GAS (1.5%) 400,000 Dekalb Energy 9.875% 07-15-00 404,000 350,000 Dresser Industries, Inc. 6.250% 06-01-00 347,813 375,000 Marathon Oil 7.00% 06-01-02 375,938 600,000 PDV America, Inc. 7.875% 08-01-03 586,500 500,000 Union Texas Petroleum 8.250% 11-15-99 516,250 ---------------- 2,230,500 ---------------- TRANSPORTATION (0.6%) 500,000 American President Cos., Ltd. 7.125% 11-15-03 495,000 400,000 Illinois Central Gulf Railroad 6.750% 05-15-03 396,500 ---------------- 891,500 ---------------- UTILITIES (2.2%) 400,000 Cleveland Electric Illum. 7.625% 08-01-02 390,000 1,000,000 Great Lakes Power 9.000% 08-01-04 1,076,250 500,000 Mississippi Power & Light 8.800% 04-01-05 510,625 400,000 Old Dominion Elec. Co. 8.760% 12-01-22 442,500 300,000 Sprint Corp. 8.125% 07-15-02 319,500 500,000 Texas New Mexico Power Co. 9.250% 09-15-00 531,875 ---------------- 3,270,750 ---------------- TOTAL LONG-TERM BONDS & NOTES (12.3%) (COST $17,440,483) $17,850,593 ----------------
FACE MARKET AMOUNT SHORT-TERM NOTES VALUE - ------------------------------------------------------------------- AUTOMOTIVE AND RELATED (3.1%) $2,070,000 General Motors Acceptance Corp. 5.340% 01-06-97 $ 2,068,393 2,410,000 Ford Motor 5.600% 01-02-97 2,409,617 ---------------- 4,478,010 ---------------- RETAIL (1.0%) 1,395,000 Sears Roebuck Acceptance Corp. 5.780% 01-08-97 1,393,432 ----------------
(continued) 69 OHIO NATIONAL FUND, INC. December 31, 1996 SCHEDULE OF INVESTMENTS OMNI PORTFOLIO (CONTINUED)
FACE MARKET AMOUNT SHORT-TERM NOTES VALUE - -------------------------------------------------------------------- FINANCE (15.2%) $5,310,000 American Express Credit Corp. 5.350% 01-03-97 $ 5,308,422 5,320,000 Associates Corp. 5.700% 01-10-97 5,312,419 5,485,000 Household Finance 5.600% 01-07-97 5,479,881 2,965,000 Heller Finance 5.450% 01-02-97 2,964,547 3,100,000 Prudential Funding Corp. 5.800% 01-09-97 3,096,004 ---------------- 22,161,273 ---------------- TOTAL SHORT-TERM NOTES (19.3%) (COST $28,032,715) $ 28,032,715 ----------------
MARKET SHARES COMMON STOCK VALUE - -------------------------------------------------------------------- AEROSPACE (2.5%) 22,000 Allied Signal, Inc. $ 1,474,000 728 Boeing Co. 77,441 21,600 Raytheon Co. 1,039,500 17,350 Rockwell International Corp. 1,056,181 ---------------- 3,647,122 ---------------- AUTOMOTIVE AND RELATED (3.2%) 7,500 Arvin Industries, Inc. 185,625 11,700 Chrysler Corp. 386,100 25,500 * Custom Chrome, Inc. 513,188 8,000 Eaton Corp. 558,000 58,777 Ford Motor Co. 1,873,517 10,000 Magna International, Inc. 557,500 34,000 Walbro Corp. 620,500 ---------------- 4,694,429 ---------------- BANKING (3.5%) 10,000 Boatmen's Bancshares, Inc. 645,000 13,650 Charter One Financial, Inc. 573,300 35,000 First Colorado Bancorp 595,000 10,000 First Union Corp. 740,000 14,332 Franklin National Bank 168,401 45,000 Hanson Trust, Plc 303,750 17,500 Long Island Bancorp, Inc. 612,500 11,250 Mellon Bank Corp. 798,750 16,000 * Olympic Financial Ltd. 230,000 12,500 Susquehanna Bancshares, Inc. 432,813 ---------------- 5,099,514 ---------------- BUSINESS SERVICES (4.5%) 37,000 * Alternative Resources Co. 642,875 30,000 BMC Industries, Inc.-Minn. 945,000 6,600 * Computer Sciences Corp. 542,025 40,000 First Data Corp. 1,460,000 16,000 * ITT Corp. 694,000 30,000 Manpower, Inc. 975,000 5,000 Standard Register Co. 162,500 22,000 * Verifone, Inc. 649,000 22,000 * Zebra Technology Corp. 514,250 ---------------- 6,584,650 ---------------- CHEMICALS (1.9%) 2,500 E I DuPont DeNemours & Co. $ 235,938 30,000 Learonal Inc. 690,000 12,000 Lubrizol Corp. 372,000 3,214 * Millenium Chemicals 57,049 15,000 Monsanto Co. 583,125 33,000 OM Group, Inc. 891,000 --------------- 2,829,111 --------------- COMPUTER AND RELATED (7.5%) 30,000 * Cisco Systems, Inc. 1,908,750 22,000 * Informix Corp. 448,250 30,000 Hewlett-Packard Co. 1,507,500 14,000 Intel Corp. 1,833,125 55,000 MacNeal-Schwendler Corp. 433,125 10,000 * Microsoft Corp. 826,250 47,058 * Seagate Technology, Inc. 1,858,791 40,000 * Sun Microsystems, Inc. 1,027,500 18,000 Texas Instruments, Inc. 1,147,500 --------------- 10,990,791 --------------- COMMUNICATIONS (2.6%) 31,000 * Atlantic Tele-Network Inc. 472,750 36,000 * Andrew Corp. 1,910,250 7,500 * Granite Broadcasting Corp. 79,688 15,000 * Mastec, Inc. 795,000 8,000 * U.S. Robotics Corp. 576,000 --------------- 3,833,688 --------------- CONTAINERS (1.1%) 70,000 Owens-Illinois, Inc. 1,592,500 --------------- ELECTRICAL EQUIPMENT (4.3%) 25,000 * Analog Devices, Inc. 846,875 30,000 * Anixter International, Inc. 483,750 26,116 Federal Signal Corp. 675,752 14,000 General Electric Co. 1,384,250 13,500 Robbins & Myers 337,500 40,000 Westinghouse Electric 795,000 18,000 Varian Associates, Inc. 915,750 15,000 Xerox Corp. 789,375 --------------- 6,228,252 --------------- ENTERTAINMENT AND LEISURE (0.8%) 33,000 Cedar Fair 1,221,000 --------------- FOOD AND RELATED (1.3%) 50,000 * Buffets, Inc. 456,250 16,500 H.J. Heinz Co. 589,875 11,500 PanAmerican Beverages, Inc. 539,063 15,000 Smart & Final, Inc. 324,375 --------------- 1,909,563 --------------- FORESTRY AND PAPER PRODUCTS (0.7%) 38,000 Sonoco Products Inc. 983,250 --------------- HOUSING, FURNITURE & RELATED (1.2%) 37,024 Clayton Homes 499,837 30,000 Haverty Furniture Co. 341,250 24,000 Newell Co. 756,000 11,200 Shaw Industries, Inc. 131,600 --------------- 1,728,687 ---------------
70 OHIO NATIONAL FUND, INC. December 31, 1996 SCHEDULE OF INVESTMENTS OMNI PORTFOLIO (CONTINUED)
MARKET SHARES COMMON STOCK VALUE - -------------------------------------------------------------------- INDUSTRIAL SERVICES (1.5%) 20,000 * Canisco Resources Inc. $ 80,000 30,000 Clarcor 663,750 2,000 * Plastic Specialties & TC 2,000 1,600 Regal Beloit 31,400 28,000 Stewart & Stevenson Services 815,500 42,500 Versa Technologies 552,500 ---------------- 2,145,150 ---------------- INSURANCE (5.0%) 16,125 American International Group 1,745,531 30,000 Chubb Corp. 1,612,500 24,806 Cincinnati Financial Corp. 1,609,289 20,000 Equitable Cos., Inc. 492,500 20,500 Providian Corporation 1,053,188 12,500 St. Paul Cos. 732,813 ---------------- 7,245,821 ---------------- MACHINERY (0.9%) 6,000 Caterpillar, Inc. 451,500 33,000 Hardinge Inc. 878,625 ---------------- 1,330,125 ---------------- METAL FABRICATING (0.9%) 27,000 Amcast Industrial Corp. 668,250 18,000 Engelhard Corp. 344,250 4,000 Phelps Dodge Corp. 270,000 ---------------- 1,282,500 ---------------- METALS AND MINING (0.7%) 20,000 Minerals Technologies, Inc. $ 820,000 6,200 * Wolverine Tube, Inc. 218,550 ---------------- 1,038,550 ---------------- MEDICAL AND RELATED (4.3%) 28,000 Abbott Laboratories 1,421,000 14,000 Allergan, Inc. 498,750 5,300 Allegiance Corp. 146,413 26,500 Baxter International 1,086,500 20,000 * Cephalon 410,000 25,000 * Foundation Health Corp. 793,750 19,000 Guidant Corp. 1,083,000 18,000 * Humana, Inc. 344,250 16,000 * Quorum Health Group Inc. 476,000 ---------------- 6,259,663 ---------------- OIL, ENERGY AND NATURAL GAS (7.9%) 15,000 Ashland, Inc. 658,125 15,000 * Belco Oil & Gas 410,625 45,500 Camco International, Inc. 2,098,688 23,000 Chevron Corp. 1,495,000 7,000 Coastal Corp. 342,125 7,650 * Diamond Shamrock, Inc. 241,931 27,000 * Enserch Exploration, Inc. 317,250 40,000 * Louis Dreyfus Natural Gas 685,000 32,200 National Propane Partners 631,925 17,500 * Offshore Logistics Inc. 339,063 10,000 Schlumberger, Ltd. 998,750 35,000 Union Texas Petroleum Holdings, Inc. 783,125 11,600 WD-40 Co. 591,781 45,000 Westcoast Energy, Inc. 753,750 28,500 Williams Cos. Inc. 1,068,750 7,600 Wiser Oil 150,100 ---------------- 11,565,988 ---------------- REAL ESTATE (3.2%) 70,300 Commercial Net Lease Realty $ 1,116,013 30,500 First Industrial Realty Trust 926,438 45,000 Healthcare Realty Trust 1,192,500 17,000 Liberty Property Trust 437,750 24,000 National Health Investors, Inc. 909,000 --------------- 4,581,700 --------------- RETAIL (0.5%) 12,000 Stanhome, Inc. 318,000 13,000 Warnaco Group Class A 385,125 --------------- 703,125 --------------- TRANSPORTATION AND EQUIPMENT (3.3%) 24,255 Burlington Northern Santa Fe 2,095,026 15,000 Consolidated Freightways, Inc. 333,750 7,500 * Consolidated Freightways Corp. 66,563 24,000 Greenbrier Companies, Inc. 249,000 11,250 Illinois Central Corp. 360,000 10,000 Norfolk Southern Corp. 875,000 21,000 Trinity Industries 787,500 --------------- 4,766,838 --------------- UTILITIES (0.7%) 6,000 Entergy Corp. 166,500 15,000 FPL Group, Inc. 690,000 7,000 Montana Power Co. 149,625 --------------- 1,006,125 --------------- TOTAL COMMON STOCKS (64.0%) (COST $59,810,887) $93,268,140 ---------------
MARKET SHARES PREFERRED STOCK VALUE - ------------------------------------------------------------------ BANKING (0.2%) 11,000 Money Store, 6.5% $301,125 --------------- COMPUTERS AND RELATED (0.3%) 16,000 General Datacommunications, 9.000% cum., conv. 402,000 --------------- FOOD & RELATED (0.4%) 20,000 Conagra Capital LC, 9.350% cum., conv. Series C 532,500 --------------- METALS AND MINING (0.6%) 30,000 Freeport McMoRan Copper & Gold cum., conv. 960,000 --------------- OIL, ENERGY AND NATURAL GAS (0.7%) 7,000 Ashland, Inc., cum., conv. 480,375 10,000 Howell Corp., $3.50 Series A 510,000 --------------- 990,375 --------------- REAL ESTATE (0.3%) 15,000 Oasis Residential , Inc., 9.000% cum., conv. Series A 388,125 ---------------
71 OHIO NATIONAL FUND, INC. December 31, 1996 SCHEDULE OF INVESTMENTS OMNI PORTFOLIO (CONTINUED)
MARKET SHARES PREFERRED STOCK VALUE - -------------------------------------------------------------------- UTILITIES (0.7%) 20,000 GTE Delaware 8.750%, Series B $ 527,500 22,000 Phillips Gas Co. 9.320% Series A 577,500 ---------------- 1,105,000 ---------------- TOTAL PREFERRED STOCKS (3.2%) (COST $4,603,135) $4,679,125 ----------------
FACE MARKET AMOUNT CONVERTIBLE DEBENTURES VALUE - -------------------------------------------------------------------- ELECTRICAL EQUIPMENT (0.2%) $300,000 Richey Electric, 7.000% conv. debentures, due 03-01-06 $ 299,625 ---------------- METAL FABRICATING (0.4%) 600,000 INCO, Ltd., 7.750% conv. subordinated debentures, due 03-15-16 631,500 ---------------- OIL, ENERGY AND NATURAL GAS (0.5%) 600,000 Offshore Logistics, Inc., 6.000% conv. debentures, due 12-15-06 623,250 ---------------- TOTAL CONVERTIBLE DEBENTURES (1.1%) (COST $1,518,125) $ 1,554,375 ---------------- TOTAL HOLDINGS (COST $111,405,345)(a) $145,384,948 ================
* Non-income producing securities. (a) Also represents cost for Federal income tax purposes. The accompanying notes are an integral part of these financial statements. 72 OHIO NATIONAL FUND, INC. December 31, 1996 SCHEDULE OF INVESTMENTS INTERNATIONAL PORTFOLIO
MARKET SHARES COMMON STOCK VALUE - ---------------------------------------------------------------------------- JAPAN (13.2%) 125,000 Aida Engineering Limited (19) $ 789,326 35,750 Chofu Seisakusho (9) 671,390 235,000 Dai-Tokyo Fire Marine Ins. Co. Ltd.(18) 1,245,047 150,000 Dowa Fire & Marine Ins. Co. Ltd.(18) 576,327 75,000 Fuji Photo Film Co., Ltd. (9) 2,468,125 12,000 Hitachi Ltd. ADR (11) 1,110,000 150,000 * Iino Kaiun Kaisha (5) 529,807 35,000 Ito-Yokado Co. Ltd. (28) 1,519,642 100,000 Koa Fire & Marine Ins. Co., Ltd.(18) 484,149 165,000 Nichido Fire & Marine Ins. Co., Ltd.(18) 938,146 135,000 Nisshinbo Industries Inc. (8) 1,049,018 100,000 Nittetsu Mining Co., Ltd. (22) 757,236 75,000 Shimano Inc. (9) 1,272,829 30,000 Sotoh Co. (31) 286,871 149,000 Shoei Co. (27) 1,270,762 10,000 Toho Co. (20) 1,447,278 135,000 Tokyo Marine & Fire Ins. Co. Ltd.(18) 1,267,660 15,000 Tsutsumi Jewelry Co. (9) 370,865 ---------- 18,054,478 ---------- FRANCE (12.3%) 2,500 C.E.E. (Continentale d'Equipments Electriques) (10) 89,114 18,000 Compagnie Generale des Eaux (33) 2,230,058 6,575 Crometal (5) 418,064 20,000 Elf Aquitaine (12) 1,820,039 15,000 Emin Leydier (24) 1,043,353 25,000 Eramet (22) 1,310,212 4,300 Eurafrance (34) 1,857,534 10,000 Gaumont SA (20) 828,516 6,396 Groupe NSC (19) 680,268 3,500 La Brosse et DuPont (9) 269,750 18,500 Legrand ADP (10) 2,046,050 15,000 Marine Wendel (34) 1,375,723 19,999 Michelin 'B' (5) 1,079,329 2,500 Promodes C.I. (28) 452,794 1,000 Promodes (28) 282,274 2,500 SAGA (Societe Anontme de Gerance et d'Armement) (32) 43,353 1,000 Sucriere de Pithiviers-le-Vieil (1) 618,497 2,500 Taittinger (13) 487,476 ---------- 16,932,402 ---------- GERMANY (7.5%) 50,000 Bayer AG (7) 2,027,597 10,000 Bertelsmann AG D.R.C. (25) 1,291,558 5,650 Buderus AG (5) 2,825,000 3,500 Degussa AG (28) 1,590,909 25,000 IVG Holding AG (27) 857,955 5,765 IVG Holding AG 'new' (27) 192,042 35,000 SKW Trostberg AG (4) 950,455 1,000 Axel Springer Verlag AG (20) 594,156 ---------- 10,329,672 ---------- NEW ZEALAND (4.5%) 825,549 Carter Holt Harvey Limited (14) 1,871,704 23,500 Colonial Motor Co. Ltd. (2) 59,089 650,000 * Evergreen Forests Ltd. (14) 270,866 278,500 Independent Press Comm. (20) 1,553,966 1,601,500 Shortland Properties, Ltd. (27) 1,108,517 1,234,030 Tasman Agriculture Limited (1) 976,187 450,000 Wrightson Ltd. (1) 390,937 ---------- 6,231,265 ---------- SWITZERLAND (7.0%) 335 Bank of Intl. Settlements (3) 2,497,205 5,500 Edipresse SA Bearer (20) 1,074,171 2,500 Kuehne & Nagel Intl. AG (32) 1,323,146 400 Lindt & Sprungli AG PC (9) 658,964 850 Schindler Holding AG PC (5) 921,916 6,500 Sika Finanz AG Bearer (7) 1,550,503 3,250 Societe Generale d'Affichage (20) 1,388,185 1 Vetropack Holding AG Bearer (23) 2,385 650 Vetropack Holding AG PC (23) 136,154 ---------- 9,552,628 ---------- CANADA (4.2%) 65,000 Canadian Pacific Ltd. (34) 1,722,500 50,000 Dofasco, Inc. (30) 944,738 20,000 Franco-Nevada Mining Corp. (21) 915,557 100,000 Noranda, Inc. (21) 2,228,707 ---------- 5,811,502 ---------- SWEDEN (4.0%) 70,000 AssiDoman AB (14) 1,943,606 45,000 Bylock & Nordsjofrakt AB 'B' (32) 473,480 50,000 Investor AB Class B (34) 2,202,997 75,000 IRO AB (31) 909,695 ---------- 5,529,779 ---------- LATIN AMERICA (3.8%) 185,000 Antofagasta Holdings plc (21) 1,077,163 30,000 Banco Latinoamericano 'Bladex' (3) 1,522,500 675,000 Ledesma SA (1) 843,906 1,000,000 Siderca S.A.I.C. (12) 1,825,338 --------- 5,268,906 --------- HONG KONG (3.7%) 3,887,528 CDL Hotels Intl. Ltd. (16) 2,224,101 1,650,000 Shaw Brothers (Hong Kong) Ltd.(20) 1,962,635 1,000,000 South China Morning Post Holdings Corp. (25) 827,461 --------- 5,014,198 --------- NETHERLANDS (3.4%) 25,000 Apothekers Cooperatie OPG (17) 718,915 33,450 German City Estates NV (27) 516,759 50,000 Philips Electronics NV ADR (11) 2,000,000 20,000 Randstad Holdings NV (29) 1,444,194 --------- 4,679,868 --------- UNITED KINGDOM (3.1%) 50,000 BAA plc (32) 416,566 300,000 Berisford plc (34) 737,231 125,000 Blenheim Group plc (20) 1,073,523 75,000 ED & F Man Group plc (34) 222,839 425,000 * McBride plc (10) 989,825 185,000 Royal Doulton plc (9) 856,978 --------- 4,296,962 --------- SINGAPORE (2.8%) 375,000 Clipsal Industries Ltd. (10) 1,365,000 649,000 Intraco Ltd. (34) 969,210 150,000 Singapore Bus Service Ltd. (32) 777,063 350,000 Times Publishing Ltd. (25) 790,282 --------- 3,901,556 --------- ITALY (2.3%) 165,000 Arnoldo Mondadori Editore SpA (25) 1,342,391 2,750,000 * Montedison non-conv. Savings SpA(34) 1,750,000 --------- 3,092,391 ---------
(continued) 73 OHIO NATIONAL FUND, INC. December 31, 1996 SCHEDULE OF INVESTMENTS INTERNATIONAL PORTFOLIO (CONTINUED)
MARKET SHARES COMMON STOCK VALUE - ----------------------------------------------------------------------------------- NORWAY (1.7%) 125,000 Schibsted AS (25) $2,305,079 ---------- DENMARK (1.6%) 27,500 Carlsberg International A/S Class'B'(9) 1,856,737 3,500 Kobenhavns Lufthavne (32) 356,249 ---------- 2,212,986 ---------- SPAIN (1.4%) 225,000 Energia e Ind. Aragonesas SA (33) 1,247,209 6,500 Corporation Financiera Alba SA (34) 656,556 ---------- 1,903,765 ---------- AUSTRIA (1.4%) 16,500 VAE AG (26) 1,873,216 ---------- BELGIUM (0.8%) 5,730 Deceuninck Plastics Ind. SA (4) 989,254 200 Societe Belge de Betons, SA (34) 93,883 ---------- 1,083,137 ---------- MEXICO (0.6%) 750,000 * Grupo Fernandez Editores SA de CV(25) 183,576 175,000 Industrias Penoles SA de CV (21) 619,214 1,921,000 United Mexican States Oil Recovery (12) 0 ------------ 802,790 ------------ FINLAND (0.5%) 10,000 Vaisala Oy A (5) 652,486 ------------ SOUTH AFRICA (0.4%) 10,825 Anglo American Platinum Corp.ADR(22) 64,207 35,000 Anglo American Platinum Corp.(22) 207,599 10,192 JCI Ltd. ADR (22) 100,210 25,000 JCI Ltd. (22) 245,805 ------------ 617,821 ------------ ISRAEL (0.4%) 150,000 Israel Land Development Co. Ltd. (34) 549,937 ------------ AUSTRALIA (0.4%) 185,000 Eltin Ltd. (22) 424,913 100,000 Motors Holdings Ltd. (2) 69,938 ------------ 494,851 ------------ GREECE (0.1%) 48,200 H. Benrubi & Fils SA (9) 155,465 ------------ PORTUGAL (0.1%) 10,000 Companhia de Celulose do Cairna (1) 171,447 ------------ SOUTH KOREA (0.1%) 35,000 L.G. Electronics GDR (11) 118,125 ------------ MISCELLANEOUS (2.3%) 55,000 North European Oil Royalty Tr. (12) 721,875 50,000 Minorco ADR (34) 1,040,625 675,000 Lonrho plc (34) 1,439,142 ------------ 3,201,642 ------------ TOTAL COMMON STOCK (83.6%) (COST $104,873,312) $114,838,353 ------------ GERMANY (0.9%) 15,000 Hornbach Holdings AG Pfd. (28) $ 1,071,429 1,000 SAP AG Pfd. (8) 137,532 ------------ 1,208,961 ------------ INDONESIA (1.1%) 10,000 Freeport McMoRan Pfd. 'B' (22) 320,000 21,500 Freeport McMoRan Pfd. 'C' (22) 663,812 30,000 Freeport McMoRan Pfd. 'D' (22) 510,000 ------------ 1,493,812 ------------ TOTAL PREFERRED STOCK (2.0%) (COST $3,054,324) $ 2,702,773 ------------
MARKET AMOUNT CONVERTIBLE DEBENTURES VALUE - -------------------------------------------------------------------- U.S. DOLLAR (2.6%) $ 100,000 Acer Inc. 4.000% due 06-10-01 (8) $ 329,500 350,000 PT Inti Indorayon Utama 7.000% due 05-02-06 (24) 264,688 950,000 Cheil Foods & Chemicals Co 3.000% due 12-31-06 (9) 1,163,750 250,000 Sincere Navigation 3.750% due 05-26-03 (32) 280,000 250,000 Medya International Ltd. 10.000% due 06-28-01 (20) 210,000 250,000 PT Pabrik Kertas Tjiwi Kimia 7.250% due 04-21-01 (24) 251,875 750,000 Scandinavian Broadcasting 7.250% due 08-01-05 (20) 701,250 250,000 Tubos de Acero de Mexico SA 7.500% due 06-12-97 (12) 335,875 ---------------- TOTAL U.S. DOLLAR (2.6%) $3,536,938 ---------------- NON U.S. DOLLAR (3.0%) $ 3,600,000 FF Alcatel Alstholm 2.500% due 01-01-04 (11) $ 855,491 687,150 FF Gaumont SA 3.750% due 01-01-03 (20) 178,003 1,300,000 FF Immobiliere Hoteliere due 01-01-01 (33) 761,079 1,211,250 FF Compagnie Generale des Eaux 6.000% due 01-01-98 (33) 280,303 450,000 GBP Berisford plc 5.000% (9) 520,172 500,000 GBP BAA plc 5.750% due 03-29-06 (32) 848,758 55,000,000 JPY Nippon Yusen 2.000% due 09-29-00 (32) 515,980 320,000 NZ Shortland Properties Inc. 7.500% due 12-31-98 (27) 216,975 ---------------- TOTAL NON-U.S. DOLLAR (3.0%) $4,176,762 TOTAL CONVERTIBLE SUBORDINATED ---------------- DEBENTURES (5.6%) (COST $6,897,865) $7,713,700 ----------------
(continued) 74 OHIO NATIONAL FUND, INC. December 31, 1996 SCHEDULE OF INVESTMENTS INTERNATIONAL PORTFOLIO (CONTINUED)
FACE MARKET AMOUNT NON-CONVERTIBLE BONDS VALUE - -------------------------------------------------------------------- U.S. DOLLAR (1.6%) $1,250,000 Federal Republic Of Brazil 6.500% due 04-15-24 (15) $ 964,844 220,500 Republic of Argentina 6.625% due 03-31-05 (15) 192,111 500,000 United Mexican States 'A' 6.453% due 12-31-19 (15) 430,625 500,000 United Mexican States 'B' 6.375% 12-31-19 (15) 430,625 250,000 United Mexican States 'C' 6.375% 12-31-19 (15) 215,313 -------------- 2,233,517 -------------- NON-U.S. DOLLAR (0.6%) 1,000,000 NZ Republic of New Zealand 10.000% due 03-15-02 (15) 793,421 -------------- TOTAL NON-CONVERTIBLE BONDS (2.2%) (COST $2,715,959) $3,026,938 --------------
FACE MARKET AMOUNT SHORT-TERM NOTES VALUE - -------------------------------------------------------------------- CONSUMER GOODS (2.2%) $2,998,000 AT&T Capital Corp. 6.800% 01-06-97 (11) $ 2,995,169 ---------------- OIL AND ENERGY (1.6%) 1,100,000 Exxon Imperial U.S. 6.000% 01-02-97 (12) 1,099,817 1,200,000 Exxon Imperial U.S. 6.000% 01-03-97 (12) 1,199,600 ---------------- 2,299,417 FINANCE (0.6%) 808,000 Merrill Lynch 6.600% 01-02-97 (3) 807,852 ---------------- TOTAL SHORT-TERM NOTES (4.4%) (COST $6,102,437) $ 6,102,437 ---------------- TOTAL HOLDINGS (COST $123,643,897) (a) $134,384,201 ================
(a) Also represents cost for Federal income tax purposes. * Non-income producing securities. FOREIGN CURRENCIES NZ - New Zealand Dollar FF - French Franc GBP - British Pound JPY - Japanese Yen Industry Classifications (1) Agriculture (18) Insurance (2) Automotive (19) Machinery (3) Banking (20) Media (4) Building Products (21) Metal (non-ferrous) (5) Capital Goods (22) Mining (6) Cement (23) Packaging (7) Chemicals (24) Paper (8) Computer Products (25) Publishing (9) Consumer Products (26) Rail Equipment (10) Electrical Products (27) Real Estate (11) Electronics (28) Retailing (12) Energy and Oil (29) Services (13) Food & Beverage (30) Steel (14) Forest Products (31) Textile (15) Governmental (32) Transportation (16) Hotels (33) Utilities (17) Health Care (34) Miscellaneous The accompanying notes are an integral part of these financial statements. 75 OHIO NATIONAL FUND, INC. December 31, 1996 SCHEDULE OF INVESTMENTS CAPITAL APPRECIATION PORTFOLIO
FACE MARKET AMOUNT LONG-TERM BONDS & NOTES VALUE - ------------------------------------------------------------------ GOVERNMENT (4.7%) $100,000 U.S. Treasury Note 5.750% 10-31-97 $100,158 100,000 U.S. Treasury Note 7.375% 11-15-97 101,459 250,000 U.S. Treasury Note 6.125% 07-31-00 250,023 1,000,000 U.S. Treasury Note 5.500% 02-28-99 991,520 250,000 U. S. Treasury Note 6.750% 05-31-99 254,305 100,000 FNMA 5.370% 02-07-01 96,519 -------------- 1,793,984 -------------- BUSINESS SERVICES (0.6%) 450,000 Silicon Graphics, zero coupon contracts due 11-02-13 234,563 -------------- COMMUNICATIONS (2.5%) 550,000 Cellular Communications, zero coupon contracts due 07-27-99 480,563 500,000 Comcast Cable 3.375% 09-09-05 460,000 -------------- 940,563 -------------- DRUGS (0.6%) 500,000 Alza Corp., zero coupon contracts due 07-14-14 209,375 -------------- FINANCE (1.9%) 650,000 Tennessee Valley Authority 5.980% 04-01-36 658,938 50,000 UBS Finance 2.000% 12-15-00 46,500 -------------- 705,438 -------------- FOREIGN (3.6%) 450,000 Homestake Mining 5.500% 06-23-00 435,375 100,000 Peninsula & Oriental 7.250% 05-19-03 176,234 700,000 Sandoz Cap. 2.000% 10-06-02 752,500 -------------- 1,364,109 -------------- HOUSING AND RELATED (0.4%) 150,000 Home Depot 3.250% 10-01-01 147,000 -------------- INSURANCE (1.5%) 150,000 Chubb Capital Corp. 6.000% 05-15-98 182,625 250,000 Grand Metropolitan 6.500% 01-31-00 290,000 100,000 Grand Metropolitan -144A 6.500% 01-31-00 118,000 -------------- 590,625 -------------- INDUSTRIAL SERVICES (1.0%) $430,000 WMX Technologies 2.000% 01-24-05 $401,513 -------------- MEDIA AND PUBLISHING (1.4%) 1,400,000 Time Warner, zero coupon contracts due 12-17-12 525,000 -------------- OIL, ENERGY AND NATURAL GAS (1.4%) 425,000 Enserch Corp. 6.375% 04-01-02 435,625 100,000 Price Co. 5.500% 02-28-12 103,000 -------------- 538,625 -------------- TOTAL LONG-TERM BONDS & NOTES (19.6%)(COST $7,346,431) $7,450,793 --------------
FACE MARKET AMOUNT SHORT-TERM NOTES VALUE - ----------------------------------------------------------------- GOVERNMENT (1.7%) $648,000 US Treasury Bill 4.815% 03-06-97 $642,181 -------------- FINANCE (4.2%) 1,000,000 Corporate Asset Funding 5.380% 01-17-97 997,609 597,000 Island Finance Puerto Rico 5.500% 01-09-97 596,270 -------------- 1,593,879 -------------- FOOD AND RELATED (2.3%) 884,000 Sysco Corp. 5.800% 01-14-97 882,149 -------------- PUBLISHING (2.6%) 1,000,000 Dow Jones 5.350% 02-05-97 994,799 -------------- UTILITIES (2.2%) 833,000 Northern States Power 6.000% 01-07-97 832,167 -------------- MISCELLANEOUS (2.5%) 940,000 Mobil Australia Finance 5.400% 01-02-97 939,859 -------------- TOTAL SHORT TERM NOTES (15.5%) (COST $5,885,305) $5,885,033 --------------
76 OHIO NATIONAL FUND, INC. December 31, 1996 SCHEDULE OF INVESTMENTS CAPITAL APPRECIATION PORTFOLIO (CONTINUED)
FACE MARKET AMOUNT CONVERTIBLE DEBENTURES VALUE - ------------------------------------------------------------------ COMPUTER AND RELATED (4.1%) $2,750,000 Automatic Data Process, zero coupon contracts due 02-20-12 $1,570,938 -------------- DRUGS (0.4%) 200,000 Mckesson Co., 4.500% conv. subordinated debentures, due 03-01-04 176,250 -------------- DURABLE GOODS (0.6%) 100,000 Outboard Marine, 7.000% conv. subordinated debentures, due 07-01-02 97,500 -------------- INSURANCE (1.2%) 775,000 USF&G, zero coupon contracts due 03-03-09 489,219 -------------- ELECTRICAL EQUIPMENT (0.2%) 95,000 Cooper Industries Inc., conv. 7.050% 01-01-15 101,413 -------------- MEDIA (2.5%) 850,000 TBS, zero coupon contracts due 02-13-07 413,313 1,500,000 US West, zero coupon contracts due 06-25-11 536,250 -------------- 949,563 -------------- REAL ESTATE (1.8%) 650,000 Rouse Co., 5.750% conv. subordinated debentures, due 07-23-02 708,500 -------------- RETAIL (0.6%) 400,000 Office Depot zero coupon contracts due 11-01-08 235,500 -------------- UTILITIES (0.5%) 200,000 Potomac Electricity & Power Co., 5.000% conv. subordinated debentures, due 09-01-02 185,000 -------------- MISCELLANEOUS (0.5%) 125,000 Lonrho 6.000% conv. subordinated debenture, due 02-27-04 192,991 -------------- TOTAL CONVERTIBLE DEBENTURES (12.4%) (COST $4,452,927) $4,706,873 --------------
MARKET SHARES COMMON STOCK VALUE - ------------------------------------------------------------------ COMPUTER AND RELATED (0.8%) 2,000 IBM Corp. $302,000 -------------- BUILDING MATERIALS (3.7%) 12,000 Lowes Corp. 1,131,000 25,000 Schuller Corp. 265,625 -------------- 1,396,625 -------------- CHEMICALS (4.5%) 24,000 * Genetech Inc. $1,287,000 9,000 Great Lakes Chemical Corp. 420,750 1,000 * Millenium Chemicals 17,750 -------------- 1,725,500 -------------- BUSINESS SERVICES (0.7%) 6,000 PHH Corp. 258,000 -------------- CONSUMER PRODUCTS (3.2%) 7,000 Corning, Inc. 323,750 90,000 * Petrie Stores 247,500 2,600 Phillip Morris Cos., Inc. 292,825 6,000 Polaroid Corp. 261,000 3,000 * Toys R Us 90,000 -------------- 1,215,075 -------------- DRUGS (0.6%) 2,000 Schering - Plough Corp. 129,500 85 * Novartis AG-Bearer 96,880 -------------- 226,380 -------------- DURABLE GOODS (0.1%) 3,000 A T Cross Co. 34,875 2,000 * English China Clays 6,630 -------------- 41,505 -------------- FINANCE (3.1%) 5,000 American Express 282,500 3,200 Federal Nat'l Mortgage Assn. 119,200 4,200 Fund American Enterprise 402,150 4,200 Student Loan Marketing 391,125 -------------- 1,194,975 -------------- FOOD AND RELATED (0.1%) 2,500 McCormick & Company, Inc. 58,906 -------------- Forestry and Paper Products (1.2%) 1,500 International Paper Co. 60,563 8,000 Weyerhaeuser Co. 379,000 -------------- 439,563 -------------- INDUSTRIAL SERVICES (0.4%) 25,000 Hanson Trust 168,750 -------------- INSURANCE (1.8%) 4,000 Alexander & Alexander 69,500 4,500 Harleysville Group Inc. 137,250 4,500 Unitrin, Inc. 250,875 10,000 Willis Corroon Group plc 115,000 3,700 Zurich Reinsurance 115,625 -------------- 688,250 -------------- MEDIA AND PUBLISHING (6.4%) 12,000 * Chris-Craft Ind., Inc. 500,050 2,500 Meredith Corp. 131,875 23,000 New York Times Co. Class A 874,000 8,000 Readers Digest 290,000 1,200 Times Mirror Co. Class A 59,700 2,000 Washington Post Class B 670,250 -------------- 2,525,875 --------------
77 OHIO NATIONAL FUND, INC. December 31, 1996 SCHEDULE OF INVESTMENTS CAPITAL APPRECIATION PORTFOLIO (CONTINUED)
MARKET SHARES COMMON STOCK VALUE - ------------------------------------------------------------------ METALS AND MINING (3.3%) 10,000 Allegheny Teledyne, Inc. $230,000 3,000 * Helcla Mining Co. 16,875 17,000 Homestake Mining Co. 242,250 11,100 Newmont Mining Corp. 496,725 1,500 Prime Resources Group 10,617 18,500 Santa Fe Pacific Gold 284,438 -------------- 1,280,905 -------------- OIL, ENERGY AND NATURAL GAS (10.0%) 16,000 Amerada Hess Corp. 926,000 3,000 Atlantic Richfield Co. 397,500 1,500 Kerr McGee 108,000 17,500 Mitchell Energy & Development 387,188 12,000 Murphy Oil Corp. 667,500 6,000 * Oryx Energy Co. 148,500 3,000 Petro-Canada Inc. 42,357 9,000 Sun Company, Inc. 219,375 5,000 Texaco, Inc. 490,625 15,000 Union Texas Petroleum 335,625 -------------- 3,722,670 -------------- RETAIL (0.3%) 6,000 * Hill Stores Co. 36,000 4,000 Wal-Mart Stores, Inc. 91,500 -------------- 127,500 -------------- TRANSPORTATION (0.9%) 12,000 Overseas Shipholding Inc. 204,000 4,000 Ryder System, Inc. 112,500 -------------- 316,500 -------------- UTILITIES (6.4%) 145,000 Centerior Energy Corp. 1,558,750 8,000 Entergy Corp. 222,000 5,000 Ohio Edison Co. 113,750 3,000 Public Service Co. New Mexico 58,875 18,000 Unicom Corp. 488,250 -------------- 2,441,625 -------------- MISCELLANEOUS (0.1%) 1,250 * Imperial Tobacco Group 16,125 22,000 * Lonrho Plc 47,300 -------------- 63,425 -------------- TOTAL COMMON STOCK (47.6%) (COST $15,187,266) $18,194,028 --------------
MARKET SHARES PREFERRED STOCK VALUE - ----------------------------------------------------------------- COMPUTER AND RELATED (0.4%) 2,000 Microsoft Covt. Preferred A $160,250 -------------- FINANCE (1.0%) 7,000 Kemper Co., 5.750% Series E 364,000 -------------- FORESTRY AND PAPER PRODUCTS (0.1%) 1,000 International Paper 46,239 -------------- UTILITIES (2.8%) 265 Cleveland Electric 9.000% 266,823 150 Cleveland Electric 8.800% 149,532 4,940 Cleveland Electric 400,140 2,894 Entergy Gulf Series B 140,359 1,000 Niagara Mohawk Power Series A 17,750 1,000 Niagara Mohawk Power Series B 19,625 3,700 Niagara Mohawk Power Series C 70,300 -------------- 1,064,529 -------------- TOTAL PREFERRED STOCK (4.3%) (COST $1,518,528) $1,635,018 --------------
PUT OPTION PURCHASES MARKET SHARES STOCK/EXPIRATION/EXERCISE PRICE VALUE - ----------------------------------------------------------------- 5 AlleghenyTeledyne January'97'/$20 $32 5 Allegheny Teledyne February'97'/$22.50 188 5 Allegheny Teledyne April'97'/$25 1,282 10 Amerada Hess/May'97'/$60 3,875 4 AUD'B'/February'97'/$50 2,750 20 AUD'B'/February'97'/$45 5,000 11 AUD'B'/February'97'/$40 482 20 HFS/July'97'/$60 17,250 10 HFS/April'97'/$60 6,375 10 HFS/April'97'/$85 25,125 10 Home Depot/May'97'/$60 9,750 5 IBM/July'97'/$170 11,188 5 IBM/July'97'/$160 7,875 5 IBM/July'97'/$155 6,563 5 IBM VF/April'97'/$140 2,500 10 Microsoft/July'97'/$85 8,125 2 Phillip Morris/March'97'/$105 425 5 Phillip Morris/March'97'/$115 3,000 10 Schering-Plough/May'97'/$75 10,375 10 Schering-Plough/May'97'/$70 6,250 10 Silicon Graphics/Feb.'97'/$30 4,500 5 Texaco/April'97'/$95 1,438 5 Times Mirror/March'97'/$50 594 4 Toys R Us/March'97'/$35 2,000 5 Toys R Us/January'97'/$35 2,438 20 Toys R Us/June'97'/$40 19,750 15 Walmart/March'97'/$30 10,125 25 Walmart/March'97'/$27.50 10,938 -------------- TOTAL PUT OPTION PURCHASE (0.5%) (COST $181,931) $180,189 -------------- TOTAL HOLDINGS (COST $34,572,388) (a) $38,051,933 ==============
*Non-income producing securities. (a) Also represents cost for Federal income tax purposes. The accompanying notes are an integral part of these financial statements. 78 OHIO NATIONAL FUND, INC. December 31, 1996 SCHEDULE OF INVESTMENTS SMALL CAP PORTFOLIO
MARKET SHARES U.S. COMMON STOCK VALUE ------------------------------------------------------------------- AEROSPACE (2.0%) 19,000 * Tracor Inc. $ 403,750 18,700 * Remec Inc. 366,988 ---------- 770,738 ---------- BANKS (0.3%) 2,500 Banco Latinoamericano De Export 126,875 ---------- BUSINESS SERVICES (5.5%) 21,775 American Pad and Paper Co. 492,659 3,850 * Caribiner International Inc. 193,463 10,000 Concord EFS, Inc. 282,500 20,400 * Protection One Inc. 201,450 6,800 Rental Service Corp. 187,000 3,050 * Rural/Metro Corp. 109,800 7,000 * Sylvan Learning Systems Inc. 199,500 22,775 * World Color Press, Inc. 438,419 ---------- 2,104,791 ---------- CHEMICALS (1.7%) 18,400 Crompton & Knowles Corp. 354,200 12,025 Teletech Holding Inc. 312,650 ---------- 666,850 ---------- COMMUNICATIONS (0.2%) 2,325 SFX Broadcasting, Inc. 69,169 ---------- COMMERCIAL SERVICES (2.1%) 6,000 Harsco Corp. 411,000 14,075 JP Foodservice 392,340 ---------- 803,340 ---------- COMPUTER AND RELATED (18.0%) 33,975 * Avant! Corp. 1,078,702 10,800 BA Merchant Services, Inc. 193,050 9,000 CDW Computer Centers, Inc. 533,813 5,700 * CSG Systems Intl. Inc. 87,638 6,275 * Cybercash Inc. 144,325 12,250 * Dendrite International 101,063 4,975 Farallon Communications 31,591 4,000 * Fore Systems Inc. 131,500 37,450 * Geoworks 917,524 7,400 * Insight Enterprises Inc. 207,200 21,000 * Network General Corp. 635,250 2,000 * Parametric Technology Corp. 102,750 9,750 Premenos Technology Corp. 84,094 53,400 * Ross Systems Inc. 513,975 15,350 * Scopus Technology Inc. 713,775 12,025 * Sterling Commerce Inc. 423,881 25,400 Sync Research Inc. 349,326 8,000 * Synopsys Inc. 370,000 11,975 Vanstar Corp. 293,388 ---------- 6,912,843 ---------- DRUGS (5.2%) 48,400 * Genelabs Technologies 296,450 1,850 Medicis Pharmaceutical A 81,400 4,625 * Nexstar Pharmaceuticals 69,375 8,625 * Parexel International Corp. 445,266 18,250 * SEQUUS Pharmaceuticals 292,000 18,250 * Watson Pharmaceuticals Inc. 820,109 ---------- 2,004,600 ---------- ELECTRONICS (8.5%) 3,875 * Asyst Technologies Inc. $ 66,359 9,250 * Berg Electronics Corp. 271,719 12,075 Cypress Semiconductor 170,559 11,975 International Rectifier Corp. 182,619 8,148 * PRI Automation Inc. 370,734 10,450 * Sanmina Corp. 590,425 15,050 * Sawtek Inc. 596,356 9,250 * Speedfam International Inc. 263,625 23,500 Summit Design, Inc. 240,875 7,125 * Vitesse Semiconductor Corp. 324,188 6,425 Ultrak Inc. 195,963 ---------- 3,273,422 ---------- ENTERTAINMENT AND LEISURE (1.3%) 9,300 Midway Games 188,325 8,450 * Signature Resorts, Inc. 297,863 ---------- 486,188 ---------- ENVIRONMENTAL CONTROL (2.0%) 22,000 * United Waste Systems Inc. 756,250 ---------- FINANCE (1.1%) 3,550 * Credit Acceptance Corp. 83,425 10,100 * First USA Paymentech Inc. 342,138 ---------- 425,563 ---------- HOTEL AND MOTEL (2.2%) 18,775 * Doubletree Corp. 844,875 ---------- INSURANCE (1.0%) 4,075 Executive Risk Inc. 150,775 4,000 Reliastar Financial Corp. 231,000 ---------- 381,775 ---------- MEDICAL AND RELATED (10.9%) 9,300 Advance Paradigm 192,975 4,375 * Express Scripts Inc. 156,953 7,000 * Gulf South Medical Supply 179,375 6,000 * HCIA Inc. 207,000 12,150 * Heartport Inc. 277,931 14,775 * HPR Inc. 203,156 13,000 * Multicare Companies Inc. 263,250 5,125 NCS Healthcare Inc. 149,266 16,800 Omnicare Inc. 539,700 24,050 * Orthodontic Centers of America 384,800 7,000 Pediatrix Medical Group 258,125 9,000 * Pharmaceutical Product Development 227,250 15,250 Physio-Control Intl. Corp. 343,125 12,300 Rexall Sundown Inc. 334,406 6,000 * Sola International Inc. 228,000 7,100 * Sunrise Assisted Living Inc. 197,913 4,750 * Visible Genetics Inc. 41,563 ---------- 4,184,788 ---------- OIL, ENERGY AND NATURAL GAS (0.9%) 9,000 * Falcon Drilling Co. Inc. 353,250 ----------
79 OHIO NATIONAL FUND, INC. December 31, 1996 SCHEDULE OF INVESTMENTS SMALL CAP PORTFOLIO (CONTINUED)
MARKET SHARES U.S. COMMON STOCK VALUE --------------------------------------------------------------------- REAL ESTATE (0.5%) 7,175 Fairfield Communities Inc. $ 177,581 ----------- RETAIL (5.6%) 8,156 * Consolidated Stores Corp. 262,012 8,000 * Corporate Express, Inc. 235,500 9,025 Men's Wearhouse, Inc. 221,113 11,350 * Proffitt's Inc. 418,531 7,075 * Henry Shein Inc. 243,203 18,725 * The Sports Authority Inc. 407,269 9,250 United Natural Foods 157,250 6,300 * Williams-Sonoma, Inc. 229,163 ----------- 2,174,040 ----------- TELECOMMUNICATIONS (10.5%) 6,625 * Cellular Communications Intl. Inc. 192,125 22,475 * Digital Microwave Corp. 626,491 9,000 * Intermedia Comm. of Florida 231,750 3,575 * LCI International Inc. 76,863 6,750 McLeod Inc. 172,125 2,625 * Omnipoint Corp. 50,531 30,275 * P-COM International 897,927 8,175 Pacific Gateway Exchange Inc. 298,388 19,750 * Periphonics Corp. 577,688 9,175 Picturetel Corp. 238,550 4,950 Telco Communications 86,625 9,400 Tel-Save Holdings, Inc. 272,600 4,300 Teltrend, Inc. 119,325 9,100 * Winstar Communications Intl. 191,100 ----------- 4,032,086 ----------- TEXTILES (5.4%) 11,525 * Kenneth Cole Products 178,638 12,000 * Nautica Enterprises Inc. 303,000 12,550 * Quicksilver Inc. 268,256 18,000 Warnaco Group 533,250 27,050 Wolverine World Wide 784,450 ----------- 2,067,594 ----------- TRANSPORTATION (1.9%) 100,075 * Atlas Air, Inc. 481,081 9,000 Mark VII Inc. 249,188 ----------- 730,269 ----------- TOTAL U.S. COMMON STOCK (86.8%) (COST $27,331,224) $33,346,884 -----------
MARKET SHARES FOREIGN COMMON STOCK VALUE --------------------------------------------------------------------- BRITISH STERLING POUND: MEDIA 40,000 * Flextech Plc $ 463,762 RETAIL 36,500 * Next Plc 354,474 MISCELLANEOUS 16,754 Wetherspoon (J.D.) 335,452 ----------- TOTAL BRITISH STERLING POUND (3.0%) 1,153,689 ----------- JAPANESE YEN: MISCELLANEOUS 8,000 Hoya Corp. 313,604 ----------- TOTAL JAPANESE YEN (0.8%) 313,604 ----------- NETHERLANDS GUILDER: MISCELLANEOUS 4,530 * Hunter Douglas NV 305,101 TRANSPORTATION 7,100 * IHC Caland 405,131 ----------- TOTAL NETHERLANDS GUILDER (1.9%) 710,232 ----------- TOTAL FOREIGN COMMON STOCK (5.7%) (COST $1,478,446) $ 2,177,525 -----------
FACE MARKET AMOUNT MASTER NOTES VALUE - ----------------------------------------------------------------------- $2,891,858 Provident Insured Money Account $ 2,891,858 ----------- TOTAL MASTER NOTES (7.6%) (COST $2,891,858) $ 2,891,858 ----------- TOTAL HOLDINGS (COST $31,701,528) (a) $38,416,267 ===========
* Non-income producing securities. (a) Also represents cost for Federal income tax purposes. 80 OHIO NATIONAL FUND, INC. December 31, 1996 SCHEDULE OF INVESTMENTS GLOBAL CONTRARIAN PORTFOLIO
MARKET SHARES U.S. COMMON STOCK VALUE - --------------------------------------------------------------------- CHEMICALS (0.6%) 5,000 Lawter International Inc. $ 63,125 ---------- CAPITAL GOODS (4.1%) 1,000 Bandag Inc. Class 'A' 45,750 4,000 Blount International Inc. Cl 'A' 153,500 5,000 Keystone International Inc. 100,625 12,000 Woodhead Industries, Inc. 165,000 ---------- 464,875 ---------- CONSUMER PRODUCTS (2.2%) 1,000 Allen Organ Co. Class 'B' 38,500 1,000 Dole Foods Company, Inc. 33,875 5,000 Furniture Brands International Inc. 70,000 10,000 Hancock Fabrics 103,750 ---------- 246,125 ---------- ENERGY AND OIL (3.7%) 2,535 * Enterra Corp. 76,050 4,000 North European Oil Royalty Trust 52,500 1,700 Rochester & Pittsburgh Coal Co. 44,625 30,000 San Juan Basin Royalty Trust 247,500 ---------- 420,675 ---------- FINANCE (3.7%) 8,000 * Classic Bankshares Inc. 92,000 5,000 * East Texas Financial Services 82,500 8,000 * First Federal Financial Services 95,000 8,500 Redwood Financial Inc. 85,531 5,000 Southern Banc Co., Inc. 65,000 ---------- 420,031 ---------- FORESTRY PRODUCTS (2.0%) 1,000 Georgia Pacific Corp. 72,000 3,400 Greif Brothers Corp. Class 'A' 96,900 1,500 Rayonier Inc. 57,563 ---------- 226,463 ---------- MEDIA (0.1%) 5,000 * Integrity Music, Inc. Class 'A' 8,125 ---------- METALS AND MINING (1.2%) 3,000 Asarco Inc. 74,625 1,000 Reynolds Metals Co. 56,375 ---------- 131,000 ---------- REAL ESTATE (0.9%) 2,000 Alico, Inc. 37,500 1,000 Forest City Enterprises Inc. 'A' 60,500 ---------- 98,000 ---------- TRANSPORTATION (0.6%) 3,500 Kenan Transport Company 66,500 ---------- UTILITIES (0.4%) 2,000 Montana Power Co. 42,750 ---------- MISCELLANEOUS (2.8%) 15,000 * Kaiser Ventures Inc. 135,000 1,500 Pioneer Group, Inc. 35,625 4,000 UniFirst Corp. 85,000 3,000 Zero Corporation 60,000 ---------- 315,625 ---------- TOTAL U.S. COMMON STOCK $2,503,294 (22.3%) (COST $2,307,523) ----------
MARKET SHARES FOREIGN COMMON STOCK VALUE - -------------------------------------------------------------------- FRANCE (5.6%) 2,150 Emin-Leydier (14) $149,547 2,000 Eramet (14) 104,817 200 Eurafrance (34) 86,397 250 FIMALAC SA (34) 23,218 1,000 Legrand ADP (10) 110,597 750 Marine Wendel (34) 68,786 300 Groupe NSC (19) 31,908 900 Rougier SA (14) 52,890 -------- 628,160 -------- JAPAN (5.4%) 10,000 Airport Facilities Co., Ltd. (32) 77,533 7,000 Dai Tokyo Fire & Marine Ins. Co. (18) 37,086 12,000 Dowa Fire & Marine Ins. Co. (18) 46,106 2,500 Fuji Photo Film Co. Ltd. (9) 82,271 2,500 Fuji Photo Film Co. Ltd. ADR (9) 82,500 2,000 Koekisha Co. Ltd. (29) 68,918 7,000 Nittetsu Mining Co., Ltd. (22) 53,007 5,000 Tokio Marine & Fire Ins. Co. Ltd. (18) 46,950 400 Toho Co. (20) 57,891 5,000 Yoshimoto Kogyo Co. (20) 59,442 -------- 611,704 -------- GERMANY (2.9%) 100 Axel Springer Verlag AG (20) 59,416 2,500 Bayer AG (7) 101,380 325 Buderus AG (5) 162,500 -------- 323,296 -------- SINGAPORE (3.7%) 35,000 Cilpsal Industries Ltd. (10) 127,400 85,000 Intraco Ltd. (34) 126,938 6,500 Singapore Bus Service Ltd. (32) 33,673 143,000 * Thakral Corporation (10) 127,985 -------- 415,996 -------- SWITZERLAND (3.0%) 7 Bank of Intl. Settlements (3) 52,180 2 Bank of Intl. Settlements (3) 14,644 300 Kuehne & Nagel Intl. AG (32) 158,777 65 Schindler Holding AG PC (5) 70,499 175 Sika Finanz AG Bearer (7) 41,744 -------- 337,844 -------- LATIN AMERICA (3.0%) 10,000 Antofagasta Holdings plc (21) 58,225 50,000 Cresud SA (1) 88,516 25,000 IRSA Inversiones y Rep. SA (34) 80,265 35,000 Ledesma SA (1) 43,758 265,000 Grupo Fernandez Editors (25) 64,864 -------- 335,628 -------- UNITED KINGDOM (1.8%) 70,000 ED & F Man (34) 207,983 -------- HONG KONG (1.6%) 101,000 CDL Hotels Intl. Ltd. (16) 57,783 300,000 China-Hong Kong Photo Products (9) 100,847 16,000 Shaw Brothers (Hong Kong) Ltd.(20) 19,032 -------- 177,662 --------
81 OHIO NATIONAL FUND, INC. December 31, 1996 SCHEDULE OF INVESTMENTS GLOBAL CONTRARIAN PORTFOLIO (CONTINUED)
MARKET SHARES FOREIGN COMMON STOCK VALUE - --------------------------------------------------------------------- NEW ZEALAND (1.5%) 60,000 Carter Holt Harvey Limited (14) $ 136,033 5,500 Shortland Properties, Ltd. (27) 3,807 30,000 Wrightson Ltd. (1) 26,062 ---------- 165,902 ---------- BELGIUM (1.1%) 700 Engrais Rosier SA (34) 123,498 ---------- PORTUGAL (0.9%) 8,000 Espirito Santo Financial Holdings (3) 106,000 ---------- SOUTH AFRICA (0.9%) 10,000 Vaal Reefs Exploration Ltd. (21) 61,875 2,500 Western Areas Gold Mining Ltd. (21) 34,466 ---------- 96,341 ---------- THAILAND (0.8%) 20,000 Oriental Hotel (16) 93,553 ---------- NETHERLANDS (0.7%) 1,300 Bosch & Keuning NV (20) 44,379 2,000 German City Estates NV (27) 30,897 ---------- 75,276 ---------- SPAIN (0.6%) 12,000 Energia e Industrias Aragonesas (7) 66,518 ---------- PHILIPPINES (0.6%) 70,000,000 Manila Mining Corp. 'B' (22) 63,878 ---------- SWEDEN (0.5%) 5,000 Bylock & Nordsjofrakt AB 'B'(32) 52,609 ---------- CANADA (0.4%) 2,000 Noranda, Inc. (21) 44,574 ---------- AUSTRALIA (0.4%) 171,425 Medical Corporation Australasia (34) 45,300 ---------- MISCELLANEOUS (1.8%) 100,000 Lonrho plc (34) 213,206 ---------- TOTAL FOREIGN COMMON STOCK $4,184,928 (37.2%) (COST $4,140,101) ---------- TOTAL COMMON STOCKS (59.5%) (COST $6,447,624) $6,688,222 ----------
MARKET SHARES U.S. PREFERRED STOCK VALUE - ---------------------------------------------------------------------- MEDIA (0.4%) 2,000 Cowles Media Co. Pfd. 52,000 --------- REAL ESTATE (0.7%) 1,500 Catellus Development Pfd. 'B' 88,688 --------- TOTAL U.S. PREFERRED STOCK $ 140,688 (1.1%) (COST $104,375) ---------
MARKET SHARES FOREIGN PREFERRED STOCK VALUE ------------------------------------------------------------------- GERMANY (0.9%) 1,500 Hornbach Holdings AG (28) $ 107,143 --------- INDONESIA (1.8%) 4,000 Freeport McMoRan Pfd. 'C' (22) 123,500 5,000 Freeport McMoRan Pfd. 'D' (22) 85,000 --------- 208,500 --------- ITALY (0.9%) 9,000 Istituto Finanziario Industriale (34) 100,494 --------- TOTAL FOREIGN PREFERRED STOCK (3.6%) (COST $384,950) $ 416,137 --------- TOTAL PREFERRED STOCK (4.7%) (COST $489,325) $ 556,825 ---------
FACE MARKET AMOUNT CONVERTIBLE DEBENTURES VALUE ------------------------------------------------------------------- U.S. DOLLAR (0.5%) $50,000 Cheil Jedang 3.000% due 12-31-06 (9) $ 61,250 --------- NON-U.S. DOLLAR (0.7%) 520,000 FF Immobiliere Hoteliere 5.000% due 01-01-01 (16) 76,108 11,000 NZ Shortland Properties Inc. 7.500% due 12-31-98 (27) 7,459 ---------- 83,567 ---------- TOTAL CONVERTIBLE DEBENTURES (1.2%) (COST $128,642) $ 144,817 ----------
FACE MARKET AMOUNT NON-CONVERTIBLE BONDS VALUE ------------------------------------------------------------------- U.S. DOLLAR (6.6%) $50,000 Cemex SA 9.500% due 09-20-01 (6) $ 51,188 150,000 Federal Republic Of Brazil 6.500% due 04-15-06 (15) 130,875 343,000 Republic of Argentina FRB 6.625% due 03-31-05 (15) 298,839 250,000 Republic of Venezuela 6.500% due 12-18-07 (15) 212,500 50,000 PT Pabrik Kertas Tjiwi Kimia 13.250% due 08-01-01 (14) 56,875 --------- TOTAL NON-CONVERTIBLE BONDS (6.6%) (COST $630,447) $ 750,277 ---------
82 OHIO NATIONAL FUND, INC. December 31, 1996 SCHEDULE OF INVESTMENTS GLOBAL CONTRARIAN PORTFOLIO (CONTINUED)
FACE MARKET AMOUNT SHORT-TERM NOTES VALUE - -------------------------------------------------------------------- FINANCE (9.4%) $500,000 American Express 5.500% due 01-02-97 $ 499,924 558,000 Merril Lynch 6.600% due 01-02-97 557,898 ------------ 1,057,822 ------------ CONSUMER GOODS (11.7%) 540,000 AT&T Corp. 5.560% due 01-02-97 539,917 540,000 General Electric Cap. Corp. 5.550% due 01-03-97 539,834 243,000 General Electric Cap. Corp. 5.630% due 01-21-97 242,240 ------------ 1,321,991 ------------ OIL (4.7%) 530,000 Exxon Imperial U.S. 5.900% due 01-06-97 529,563 ------------ TOTAL SHORT-TERM NOTES (25.8%) (COST $2,909,377) $ 2,909,376 ------------ TOTAL HOLDINGS (COST $10,605,415)(a) $ 11,049,517 ============
(a) Also represents cost for Federal Income tax purposes. FOREIGN CURRENCIES * Non-income producing securities. NZ - New Zealand Dollar FF - French Franc Industry Classifications (1) Agriculture (12) Energy and Oil (23) Packaging (2) Automotive (13) Food & Beverage (24) Paper (3) Banking (14) Forest Products (25) Publishing (4) Building Products (15) Governmental (26) Rail Equipment (5) Capital Goods (16) Hotels (27) Real Estate (6) Cement (17) Health Care (28) Retailing (7) Chemicals (18) Insurance (29) Services (8) Computer Products (19) Machinery (30) Steel (9) Consumer Products (20) Media (31) Textile (10) Electrical Products (21) Metal (non-ferrous) (32) Transportation (11) Electronics (22) Mining (33) Utilities (34) Miscellaneous The accompanying notes are an integral part of these financial statements. 83 OHIO NATIONAL FUND, INC. DECEMBER 31, 1996 SCHEDULE OF INVESTMENTS AGGRESSIVE GROWTH PORTFOLIO
MARKET SHARES COMMON STOCK VALUE - ---------------------------------------------------------------- U.S. COMMON STOCKS: AEROSPACE (0.2%) 275 Boeing Co. $29,253 ------------- AUTOMOTIVE AND RELATED (1.2%) 3,425 * Custom Chrome, Inc. 68,928 700 General Motors Corp. 39,025 750 Harley-Davidson, Inc. 35,250 ------------- 143,203 ------------- BANKING (3.7%) 675 BankAmerica Corp. 67,331 1,254 Chase Manhattan Corp. 111,920 425 First Bank System, Inc. 29,006 1,200 Household International, Inc. 110,700 2,850 TCF Financial Corp. 124,042 ------------- 442,999 ------------- BUSINESS SERVICES (5.2%) 600 * Checkfree Corporation 10,275 13,575 Danka Business Systems PLC ADR 480,246 2,050 Interim Services, Inc. 72,775 700 Manpower, Inc. 22,750 1,150 MoneyGram Payment Systems, Inc. 15,238 1,250 Universal Outdoor Holdings, Inc. 29,375 ------------- 630,659 ------------- COMMERCIAL SERVICES (10.1%) 13,398 * Accustaff, Inc. 283,033 4,150 * Consolidated Graphics, Inc. 232,400 13,400 CUC International, Inc. 318,250 3,000 Getty Communications PLC ADR 45,000 5,650 * Greenwich Air Services, Inc. 125,713 3,300 Hexcel Corp. 53,625 6,800 * PIA Merchandising Services, Inc. 71,320 1,100 Pittston Company Brinks Group 29,700 850 * Vallen Corp. 14,131 1,500 Wilmar Industries, Inc. 41,625 ------------- 1,214,797 ------------- COMPUTER AND RELATED (7.9%) 150 America Online, Inc. 4,988 1,600 BroadVision, Inc. 12,600 750 Cisco Systems, Inc. 47,719 1,200 Computer Associates Intl. Inc. 59,700 5,000 Creative Technology, Ltd. 58,750 2,000 IA Corporation 11,750 1,675 Intel Corp. 219,320 1,400 International Business Machines Corp. 211,400 1,810 * McAfee Associates, Inc. 79,640 200 * Micro Systems, Inc. 6,150 2,260 National Techteam, Inc. 45,200 1,400 OneWave, Inc. 10,938 550 Phoenix International, Inc. 9,488 600 Select Software Tools, Ltd. ADR 10,950 900 Sterling Commerce, Inc. 31,725 2,837 * Sykes Enterprises, Inc. 106,388 750 TriTeal Corp. 15,938 ------------- 942,642 -------------
MARKET SHARES COMMON STOCK VALUE - ---------------------------------------------------------------- COMMUNICATIONS (1.7%) 700 American Radio Systems Corp., Cl. A $19,075 75 Ascend Communications, Inc. 4,659 600 Cascade Communications Corp. 33,075 700 Clear Channel Communications, Inc. 25,288 600 Comcast Corp. Class A 10,688 550 Harmonic Lightwaves, Inc. 8,456 1,400 TeleCommunications, Inc. Cl. A 18,288 1,200 U. S. West Inc. Media Group 22,200 1,950 Young Broadcasting, Inc. Cl. A 57,038 ------------- 198,766 ------------- CONSUMER PRODUCTS (4.2%) 7,775 McKesson Corp. 435,400 350 Newell Companies, Inc. 11,025 600 Philip Morris Companies, Inc. 67,716 ------------- 514,141 ------------- DRUGS (3.8%) 1,900 Bergen Brunswig Corp. Cl. A 54,150 350 Eli Lilly & Company 25,550 31,600 Foxmeyer Health Corp. 51,350 20,400 Halsey Drug Co., Inc. 124,950 5,095 Pharmacia & Upjohn, Inc. 201,978 ------------- 457,978 ------------- ELECTRICAL EQUIPMENT (0.5%) 10,150 Fedders Corp. Class A 50,750 400 Scientific-Atlanta, Inc. 6,000 ------------- 56,750 ------------- ELECTRONICS (2.1%) 400 Cypress Semiconductor, Inc. 5,650 1,475 Harman International Industries, Inc. 82,046 625 Motorola, Inc. 38,359 200 SDL, Inc. 5,250 475 Sensormatic Electronics Corp. 7,956 500 Texas Instruments, Inc. 31,875 650 Uniphase Corp. 34,125 2,500 * Universal Electronics Inc. 13,750 375 U.S. Robotics, Inc. 27,000 225 Xerox Corp. 11,856 ------------- 257,868 ------------- ENTERTAINMENT AND LEISURE (2.0%) 4,425 Circus Circus Enterprises, Inc. 152,109 825 Mattel, Inc. 22,894 1,425 SCP Pool Corp. 29,569 550 The Walt Disney Co. 38,294 ------------- 242,866 ------------- FINANCE (3.4%) 1,600 American Express Co. 90,400 2,750 * Associates First Capital Corp. 121,317 1,025 Citicorp 105,575 2,350 Mercury Finance Co. 28,788 700 MGIC Investment Corp. 53,200 500 The Quick and Reilly Group, Inc. 14,938 ------------- 414,217 -------------
(continued) 84 OHIO NATIONAL FUND, INC. DECEMBER 31, 1996 SCHEDULE OF INVESTMENTS AGGRESSIVE GROWTH PORTFOLIO (CONTINUED)
MARKET SHARES COMMON STOCK VALUE - ----------------------------------------------------------------- FOOD AND RELATED (4.3%) 2,400 * Casa Ole' Restaurants, Inc. $22,200 3,325 * Longhorn Steaks, Inc. 62,746 2,000 McDonald's Corp. 90,500 12,225 * Quality Dining, Inc. 218,522 5,200 * Rainforest Cafe, Inc. 122,260 -------------- 516,228 -------------- FORESTRY AND PAPER PRODUCTS (0%) 200 Buckeye Cellulose Corp. 5,325 -------------- HOTEL/LODGING (1.8%) 3,400 Candlewood Hotel Co. Inc. 32,725 600 Hilton Hotels Corp. 15,675 2,350 LaQuinta Inns, Inc. 44,944 6,200 Red Roof Inns, Inc. 96,159 250 Signature Resorts, Inc. 8,813 1,400 Sholodge Inc. 18,900 -------------- 217,216 -------------- HOUSING AND RELATED (0.8%) 3,450 Diamond Home Services, Inc. 94,875 -------------- INSURANCE (2.7%) 350 Conesco, Inc. 22,313 9,825 * United Dental Care, Inc. 298,121 -------------- 320,434 -------------- MANUFACTURING (0.6%) 1,500 Applied Power, Inc. 59,438 150 Minnesota Mining & Manufacturing Co. 12,431 -------------- 71,869 -------------- MEDICAL AND RELATED (6.1%) 100 American Healthcorp, Inc. 1,163 2,600 * Cohr, Inc. 70,200 2,250 Dentsply International, Inc. 106,875 5,650 * FemRx, Inc. 25,425 2,125 Humana, Inc. 40,641 2,300 NCS Healthcare, Inc. Cl. A 66,988 950 Omnicare, Inc. 30,519 700 Renal Treatment Centers, Inc. 17,850 2,150 Sabratek Corp. 34,131 450 * Steris Corp. 19,575 10,000 Suburban Ostomy Supply Co., Inc. 137,500 5,175 * Sybron International Corp. 170,775 -------------- 721,641 -------------- RETAIL (11.1%) 3,950 Bacou USA, Inc. 65,669 8,250 Central Garden and Pet Co. 173,809 3,718 * Consolidated Stores Corp. 119,457 4,250 * Corporate Express, Inc. 125,109 2,850 * Federated Department Stores, Inc. 97,256 200 Goodys Family Clothing, Inc. 3,575 2,050 The Home Depot, Inc. 102,756 16,850 * Movie Gallery, Inc. 219,062 1,250 * MSC Industrial Direct Co., Inc. Cl. A 46,250 9,375 OfficeMax, Inc. 99,609 2,150 Revco D.S., Inc. 79,550 2,250 Rite Aid Corp. 89,438 3,000 Stein Mart, Inc. 60,750 2,650 Zale Corp. 50,703 -------------- 1,332,993 --------------
MARKET SHARES COMMON STOCK VALUE ----------------------------------------------------------------- OIL, ENERGY AND NATURAL GAS (15.9%) 350 Barrett Resources Corp. $14,919 1,350 Chesapeake Energy Corp. 75,094 1,600 Cooper Cameron Corp. 122,686 250 Enron Corp. 10,781 11,675 * Flores & Rucks, Inc. 621,694 2,100 * Global Marine, Inc. 43,313 500 Marine Drilling Co., Inc. 9,844 4,350 Nabors Industries, Inc. 83,738 600 National Oilwell, Inc. 18,450 8,250 Noble Drilling Corp. 163,969 475 * Nuevo Energy Co. 24,700 2,800 Oceaneering International, Inc. 44,237 1,300 Rowan Companies, Inc. 29,413 350 Schlumberger, Ltd. 34,956 1,900 3DX Technologies, Inc. 20,900 1,825 * Triton Energy, Ltd. 88,513 17,200 Union Pacific Resources Group, Inc. 503,132 -------------- 1,910,336 -------------- TELECOMMUNICATIONS (1.5%) 850 Aware Inc. 8,606 1,825 Belden, Inc. 67,525 925 Cincinnati Bell, Inc. 57,004 2,600 * Loral Space & Communications Ltd. 47,775 -------------- 180,910 -------------- TRANSPORTATION (2.2%) 500 Atlas Air, Inc. 23,875 1,150 Burlington Northern Santa Fe Corp. 99,331 2,725 * Coach USA, Inc. 79,025 2,275 * Hub Group, Inc. Cl. A 60,856 -------------- 263,088 -------------- UTILITIES (0.2%) 700 WICOR, Inc. 25,113 -------------- TOTAL U.S. (93.2%) (COST $10,659,963) $11,206,163 --------------
FACE MARKET AMOUNT REPURCHASE AGREEMENTS VALUE ----------------------------------------------------------------- $802,000 Provident Bank 6.000% due 01-02-97 repurchase price $802,267 $802,000 collateralized by U.S. Treasury -------------- Notes, due 08-31-98 (cost $804,000) TOTAL REPURCHASE AGREEMENTS (6.7%) (COST $802,000) $802,000 --------------
MARKET SHARES WARRANTS VALUE ----------------------------------------------------------------- 81 Laboratory Corp. of America $8 -------------- TOTAL WARRANTS (0.0%) (COST $189) $8 -------------- TOTAL HOLDINGS (COST $11,462,152) (A) $12,008,171 ==============
*Non-income producing securities. (a) Also represents cost for Federal income tax purposes. The accompanying notes are an integral part of these financial statements. 85 OHIO NATIONAL FUND, INC. DECEMBER 31, 1996 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 nine separate investment portfolios that seek the following investment objectives: EQUITY PORTFOLIO--long-term growth of capital by investing principally in common stocks or other equity securities. Current income is a secondary objective. MONEY MARKET PORTFOLIO--maximum current income consistent with preservation of capital and liquidity by investing in high quality money market instruments. BOND PORTFOLIO--high level of return consistent with preservation of capital by investing primarily in high quality intermediate and long-term debt securities. OMNI PORTFOLIO--high level of long-term total return consistent with preservation of capital by investing in stocks, bonds and money market instruments. INTERNATIONAL PORTFOLIO--long-term capital growth by investing primarily in common stocks of foreign companies. CAPITAL APPRECIATION PORTFOLIO--maximum capital growth by investing primarily in common stocks that are (1) considered to be undervalued or temporarily out of favor with investors, or (2) expected to increase in price over the short term. SMALL CAP PORTFOLIO-maximum capital growth by investing primarily in common stocks of small and medium size companies. GLOBAL CONTRARIAN PORTFOLIO--long-term growth of capital by investing in foreign and domestic securities believed to be undervalued or presently out of favor. AGGRESSIVE GROWTH PORTFOLIO--capital growth. The following is a summary of significant accounting policies: Investments in the Money Market Portfolio are valued at amortized cost in accordance with Rule 2a-7 which approximates market value. All net investment income of the Money Market Portfolio is declared and paid daily as a dividend to shareholders immediately before the computation of the net asset value of Money Market Portfolio shares. Dividends are automatically reinvested in additional Money Market Portfolio shares at the net asset value immediately following such computation. Distributions arising from net investment income from the remaining portfolios are declared and paid to shareholders quarterly and are recorded on the ex-dividend date. Distributions arising from accumulated net realized capital gains are recorded on the ex-dividend date and are distributed to shareholders at least once a year. For all other portfolios, securities which are traded on U.S. and foreign stock exchanges or in the over-the-counter markets are valued at the last sale price or, if there has been no sale that day, at the last bid price 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 values 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 and Aggressive 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 contract). 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. (continued) 86 OHIO NATIONAL FUND, INC. DECEMBER 31, 1996 NOTES TO FINANCIAL STATEMENTS (Continued) 87 OHIO NATIONAL FUND, INC. DECEMBER 31, 1996 NOTES TO FINANCIAL STATEMENTS Each portfolio other than the Money Market Portfolio, may (a) write call options traded on a registered national securities exchange if such portfolio owns the underlying securities subject to such options, and purchase call options for the purpose of closing out positions it has written, (b) purchase put options on securities owned, and sell such options in order to close its positions in put options, (c) purchase and sell financial futures and options thereon, and (d) purchase and sell financial index options; provided, however, that no option or futures contract shall be purchased or sold if, as a result, more than one-third of the total assets of the portfolio would be hedged by options or futures contracts, and no more than 5% of any portfolio's total assets, at market value, may be used for premiums on open options and initial margin deposits on futures contracts. Options are recorded at market value, and the related realized and unrealized gains and losses are included in the statement of operations. The portfolios making use of options bear the market risk of an unfavorable change in the price of any security underlying the options. The Fund may invest in two kinds of financial futures contracts: stock index futures contracts and interest rate futures contracts. Stock index futures contracts are contracts developed by and traded on national commodity exchanges whereby the buyer will, on a specified future date, pay or receive a final cash payment equal to the difference between the actual value of the stock index on the last day of the contract and the value of the stock index established by the contract multiplied by the specific dollar amount set by the exchange. Future 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. ("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. 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 and Aggressive 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 the first in first out basis except in the case of the Aggresive Growth Portfolio 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 and Aggressive 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 transactions. 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, 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. 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. 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. (continued) 88 OHIO NATIONAL FUND, INC. DECEMBER 31, 1996 NOTES TO FINANCIAL STATEMENTS The gross unrealized appreciation and depreciation on investments in each portfolio as of December 31, 1996 were as follows:
PORTFOLIO ---------------------------------------------------------------------------------------------------------- INTER- CAPITAL SMALL GLOBAL AGGRESS. EQUITY BOND OMNI NATIONAL APPREC. CAP CONTR. GROWTH ------------ --------- ------------ ------------ ----------- ----------- ---------- ------------ Gross unrealized: Appreciation.. $ 84,862,855 $ 504,399 $ 36,938,067 $ 18,395,098 $ 4,059,993 $ 7,812,800 $ 926,937 $ 1,137,106 Depreciation.. (5,368,998) (165,690) (2,958,464) (7,654,794) (580,448) (1,098,061) (482,835) (591,087) Net unrealized Appreciation.. $ 79,493,857 $ 338,709 $ 33,979,603 $ 10,740,304 $ 3,479,545 $ 6,714,739 $ 444,102 $ 546,019
(2) INVESTMENT TRANSACTIONS Purchases and sales of investment securities (excluding short-term securities) for the year ended December 31,1996 were as follows:
PORTFOLIO ---------------------------------------------------------------------------------------------------------- INTER- CAPITAL SMALL GLOBAL AGGRESS. EQUITY BOND OMNI NATIONAL APPREC. CAP CONTR. GROWTH ------------ --------- ------------ ------------ ----------- ----------- ---------- ------------ Stocks & Bonds: Purchases ... $40,170,942 $2,744,925 $24,425,154 $48,479,648 $39,244,357 $46,994,970 $4,970,439 $142,060,566 Sales ....... $18,647,850 $ 261,349 $11,310,895 $14,608,686 $ 8,449,211 $15,407,487 $1,089,054 $146,254,401 U.S. Government Obligations: Purchases ... -- $ 474,406 -- -- $ 1,501,016 -- -- $ 5,432,026 Sales ....... -- $ 300,000 $ 1,500,000 -- -- -- -- $ 5,794,225
(3) INVESTMENT ADVISORY AGREEMENT, SUB-ADVISORY AGREEMENTS AND TRANSACTIONS WITH AFFILIATED PERSONS The Fund has an investment advisory agreement with ONI, a wholly owned subsidiary of Ohio National Life Insurance Company (ONLIC), under the terms of which ONI provides porfolio management and investment advice to the Fund and administers its other affairs, subject to the supervision of the Fund's Board of Directors. Prior to May 1, 1996 O.N. Investment Management Company served as the Fund's investment advisor. As compensation for its services to the Equity, Bond and Omni Portfolios, ONI is paid fees at an annual rate of 0.60% of the first $100 million of each of those Portfolios' net assets, 0.50% of the next $150 million, 0.45% of the next $250 million, 0.40% of the next $500 million, 0.30% of the next $1 billion and 0.25% of net assets over $2 billion. For the Money Market Portfolio, ONI is paid a fee at an annual rate of 0.30% of the first $100 million, 0.25% of the next $150 million, 0.23% of the next $250 million, 0.20% of the next $500 million and 0.15% of the net assets over $1 billion. However, as to the Money Market Portfolio, ONI is presently waiving any of its fees in excess of 0.25%. The amount waived in 1996 was $9,697. For the International and Global Contrarian Portfolios, ONI is paid fees at an annual rate of 0.90% of each of those Portfolio's average daily net asset value. ONI is paid fees at an annual rate of 0.80% of the average daily net assets value of each of the Capital Appreciation, Small Cap and Aggressive Growth Portfolios. ONI pays Societe Generale Asset Management Corporation (SGAM) fees at an annual rate of 0.75% of the International and Global Contrarian Portfolios' average daily net asset value for directing the investment and reinvestment of those Portfolios' assets pursuant to sub-advisory agreements between ONI and SGAM dated May 1, 1996. Under sub-advisory agreements dated May 1, 1996: (1) ONI pays T. Rowe Price Associates, Inc. (TRPA) a fee at an annual rate of 0.70% of the first $5 million, and 0.50% of average daily net asset value in excess of $5 million for directing the investment and reinvestment of the Capital Appreciation Portfolio's assets, and (2) ONI pays Founders Asset Management, Inc. (FAM) a fee at an annual rate of 0.65% of the first $75 million, 0.60% of the next $75 million, and 0.55% of average daily net asset value in excess of $150 million for directing the investment and reinvestment of the Small Cap Portfolio's assets, and (3) ONI pays Strong Capital Management, Inc. (SCM) a fee at an annual rate of 0.70% of the first $50 million and 0.50% of average daily net asset value in excess of $50 million for directing the investment and reinvestment of the Aggressive Growth Portfolio's assets. 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. (continued) 89 OHIO NATIONAL FUND, INC. December 31, 1996 Notes to Financial Statements (Continued) The Fund's custodian, transfer agent and dividend paying agent was The Provident Bank, One East Fourth Street, Cincinnati, Ohio. The Provident Bank was also the custodian for those portfolios other than the International and Global Contrarian Portfolios. Effective January 1, 1997 American Data Services, Inc., 24 West Carver Street, Huntington, New York became the new transfer agent and dividend paying agent for the Fund. Also effective January 1, 1997 Star Bank, 425 Walnut Street, Cincinnati, Ohio, became the new custodian for those portfolios other than the International and Global Contrarian Portfolios. The custodian for the International and Global Contrarian Portfolios is Investors Fiduciary Trust Company, 127 West Tenth Street, Kansas City, Missouri. For International and Global Contrarian Portfolio assets held outside the United States, Star Bank and Investors Fiduciary Trust Company enters into subcustodial agreements, subject to approval by the Board of Directors. (4) DISTRIBUTIONS TO SHAREHOLDERS On January 2, 1997, the following dividends were paid from net investment income and net realized gains on investments to shareholders of record on December 31, 1996: NET INVESTMENT INCOME
CAPITAL GLOBAL AGGRESS. EQUITY BOND OMNI APPRECIATION INTERNATIONAL CONTRARIAN GROWTH - ---------------- ---------------- ------------------ ---------------- ---------------- ---------------- ---------------- PER PER PER PER PER PER PER SHARE AGGREGATE SHARE AGGREGATE SHARE AGGREGATE SHARE AGGREGATE SHARE AGGREGATE SHARE AGGREGATE SHARE AGGREGATE - ---------------- ---------------- ------------------ ---------------- ---------------- ---------------- ---------------- .13 $903,508 .17 $338,373 .14 $1,014,424 .10 $295,609 .10 $882,310 .10 $92,076 .14 $172,523
NET REALIZED GAINS ON INVESTMENTS
CAPITAL GLOBAL EQUITY OMNI APPRECIATION INTERNATIONAL CONTRARIAN ----------------- ------------------ ----------------- ----------------- ---------------- PER PER PER PER PER SHARE AGGREGATE SHARE AGGREGATE SHARE AGGREGATE SHARE AGGREGATE SHARE AGGREGATE ----------------- ------------------ ----------------- ----------------- ---------------- .29 $2,116,393 .19 $1,460,737 .19 $553,830 .47 $4,130,538 .21 $203,560
On January 30, 1997 an additional net realized gain on investments of $307,373 (.09 per share) was paid to the shareholders of record on January 29, 1997 in the Capital Appreciation Portfolio. For Federal income tax purposes, the Bond, Small Cap and Aggressive Growth Portfolios had capital loss carryovers of $82,701, $229,009 and $1,425,782 respectively, at December 31, 1996. If not offset by capital gains, $82,701 and $47,306 will expire in 2003 in the Bond and Aggressive Growth Portfolios respectively and $229,009 and $1,378,476 will expire in 2004 in the Small Cap and Aggressive Growth Portfolio 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. (5) CAPITAL SHARES TRANSACTIONS Capital share transactions for the years ended December 31, 1996 and 1995 were as follows:
Equity Money Market Bond Omni ---------------------- ---------------------- -------------------- ---------------------- 1996 1995 1996 1995 1996 1995 1996 1995 --------- --------- --------- --------- ------- ------- --------- ------- Capital shares issued on sales .......... 1,251,722 1,027,904 2,854,453 1,416,527 654,067 386,744 1,421,502 934,361 Capital shares issued on reinvested dividends .. 296,586 175,132 97,983 68,371 118,018 78,755 312,746 167,487 Capital shares redeemed ...... 488,195 371,799 1,972,882 1,219,129 469,144 168,371 461,070 631,665
(continued) 90 OHIO NATIONAL FUND, INC. DECEMBER 31,1996 NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Global International Capital Appreciation Small Cap Contrarian(a) ---------------------- --------------------- ---------------------- ------------------- 1996 1995 1996 1995 1996 1995 1996 1995 ---- ---- ---- ---- ---- ---- ---- ---- Capital shares issued on sales .......... 2,498,593 1,949,778 1,370,341 969,718 1,175,931 778,636 694,759 421,953 Capital shares issued on reinvested dividends .. 437,139 186,973 137,455 39,565 35,538 2,166 22,442 2,275 Capital shares redeemed ...... 372,436 564,813 158,593 56,759 89,525 40,666 158,086 15,010
Aggressive Growth(a) 1996 1995 ---- ---- -------------------- Capital shares issued on sales .......... 849,211 337,342 Capital shares issued on reinvested dividends .. 124,213 12,046 Capital shares redeemed ...... 114,532 11,183
(a)Commenced operations March 31, 1995 The Fund is authorized to issue 250,000,000 of its capital shares. 20,000,000 shares have been allocated to the Equity, Omni and International Portfolios, and 10,000,000 shares are allocated to each of the other portfolios. The remaining 60,000,000 shares are unallocated at this time. (6) COMMITMENTS As of December 31, 1996 the International and Global Contrarian Portfolios had entered into forward currency contracts, as set forth below summarized by currency:
INTERNATIONAL PORTFOLIO SETTLEMENT CURRENCY TO BE U.S. $ VALUE CURRENCY TO BE U.S. $ VALUE UNREALIZED DATES THROUGH DELIVERED AT 12/31/96 RECEIVED AT 12/31/96 GAIN (LOSS) - ------------- -------------------------------- ------------- ------------------------------ ------------ ---------- --------- 05/07/97 6,798,000 Swiss Franc 5,130,565 5,261,954 U.S. Dollar 5,261,954 $ 131,389 -- 05/07/97 159,885 U.S. Dollar 159,885 211,000 Swiss Franc 159,245 -- $ (640) 01/03/97 9,312,000 Deutsche Mark 6,046,753 6,268,411 U.S. Dollar 6,268,411 221,658 -- 01/03/97 5,979,811 U.S. Dollar 5,979,811 9,312,000 Deutsche Mark 6,046,753 66,942 -- 05/14/97 13,711,000 Deutsche Mark 8,979,044 8,945,073 U.S. Dollar 8,945,073 -- (33,971) 01/10/97 54,098,000 French Franc 10,427,927 10,655,604 U.S. Dollar 10,655,604 227,677 -- 05/21/97 30,244,000 French Franc 5,873,759 5,872,931 U.S. Dollar 5,872,931 -- (828) 01/17/97 1,125,000,000 Japanese Yen 9,704,969 10,579,224 U.S. Dollar 10,579,224 874,255 -- 01/17/97 267,189 U.S. Dollar 267,189 30,100,000 Japanese Yen 259,662 -- ( 7,527) 05/28/97 461,050,000 Japanese Yen 4,051,050 4,215,631 U.S. Dollar 4,215,631 164,581 -- 03/17/97 350,000 New Zealand$ 248,220 243,495 U.S. Dollar 243,495 -- (4,725) ------------ ---------- ---------- -------- 56,869,172 58,507,983 $1,686,502 $(47,691) ============ ========== ========== ========
(continued) 91 OHIO NATIONAL FUND, INC. DECEMBER 31,1996 NOTES TO FINANCIAL STATEMENTS (CONTINUED)
GLOBAL CONTRARIAN PORTFOLIO SETTLEMENT CURRENCY TO BE U.S. $ VALUE CURRENCY TO BE U.S. $ VALUE UNREALIZED DATES THROUGH DELIVERED AT 12/31/96 RECEIVED AT 12/31/96 GAIN (LOSS) - ------------- ------------------------- ------------ ------------------------ ----------- ------- ------ 05/07/97 34,000 Swiss Franc 25,660 25,814 U.S. Dollar 25,814 $ 154 -- 01/03/97 183,000 Deutsche Mark 118,831 121,624 U.S. Dollar 121,624 2,793 -- 01/03/97 117,511 U.S. Dollar 117,511 183,000 Deutsche Mark 118,831 1,320 -- 05/14/97 396,000 Deutsche Mark 259,332 259,827 U.S. Dollar 259,827 495 -- 01/10/97 2,112,000 French Franc 409,037 414,863 U.S. Dollar 414,863 5,826 -- 01/10/97 43,830 U.S. Dollar 43,830 226,000 French Franc 43,564 -- $(266) 01/17/97 34,400,000 Japanese Yen 296,756 323,506 U.S. Dollar 323,506 26,750 -- 05/28/97 23,600,000 Japanese Yen 207,363 215,819 U.S. Dollar 215,819 8,456 -- 05/07/97 125,000 Dutch Guilder 72,925 72,506 U.S. Dollar 72,506 (419) --------- --------- ------- ----- 1,551,245 1,596,354 $45,794 $(685) ========= ========= ======= =====
(7) Financial Highlights The Financial Highlights on pages 2 to 5 of the prospectus are a part of these Financial Statements. 92 OHIO NATIONAL FUND, INC. INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholders Ohio National Fund, Inc.: We have audited the accompanying statements of assets and liabilities and the schedules of investments of Ohio National Fund, Inc. (comprising, respectively, the Equity, Money Market, Bond, Omni, International, Capital Appreciation, Small Cap, Global Contrarian and Aggressive Growth Portfolios) as of December 31, 1996, and the related statements of operations, statements of changes in net assets and the financial highlights for each of the periods indicated herein. These financial statements and financial highlights are the responsibility of the fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1996, by correspondence with the custodian and brokers, and where replies are not received, we carried out other appropriate auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the portfolios comprising Ohio National Fund, Inc. as of December 31, 1996, and the results of their operations, the changes in their net assets and their financial highlights for each of the periods indicated herein, in conformity with generally accepted accounting principles. KPMG PEAT MARWICK LLP Cincinnati, Ohio January 28, 1997 93 APPENDIX DEBT SECURITY RATINGS The Commission has designated six nationally recognized statistical rating organizations: Duff and Phelps, Inc. ("D & P"), Fitch Investors Service, Inc. ("Fitch"), Moody's Investors Service, Inc. (Moody's"), Standard & Poor's Corp. ("S & P"), and, with respect to bank-supported debt and debt issued by banks, broker-dealers and their affiliates, IBCA Inc. and its British affiliate, IBCA Limited ("IBCA") and Thompson Bankwatch, Inc. ("TBW"). ONIMCO may use the ratings of all six such rating organizations as factors to consider in determining the quality of debt securities, although it will generally only follow D&P, Fitch, Moody's and S&P. IBCA and TBW will only be consulted if fewer than two of the other four rating organizations have given their top rating to a security. Only the ratings of Moody's and S & P will be considered in determining the eligibility of bonds for acquisition by the Fund. MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") Commercial Paper: Moody's short-term debt ratings are opinions of the ability of issuers to punctually repay senior debt obligations having an original maturity not exceeding one year. P-1 The Prime-1 (P-1) rating is the highest commercial paper rating assigned by Moody's. Issuers (or supporting institutions) rated P-1 have a superior ability for repayment of senior short-term debt obligations. P-1 repayment ability will often be evidenced by many of the following characteristics: leading market positions in well-established industries, high rates of return on funds employed, conservative capitalization structure with moderate reliance on debt and ample asset protection, broad margins in earnings coverage of fixed financial charges and high internal cash generation, and well-established access to a range of financial markets and assured sources of alternate liquidity. P-2 Issuers (or supporting institutions) rated Prime-2 (P-2) have a strong ability for repayment of senior short-term obligations. This will normally be evidenced by many of the characteristics cited above for P-1, but to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained. Bonds: Aaa Bonds which are rated Aaa by Moody's are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa Bonds which are rated as Aa by Moody's are judged to be of high quality by all standards. Together with the Aaa group, they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in Aaa securities. A Bonds which are rated A by Moody's possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment sometime in the future. 63 94 Baa Bonds which are rated Baa by Moody's are considered as medium grade obligations, that is, they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. STANDARD & POOR'S CORP. ("S & P") Commercial Paper: An S & P commercial paper rating is a current assessment of the likelihood of timely payment of debt having an original maturity of no more than one year. A-1 This is S & P's highest category and it indicates that the degree of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are designated A-1+. A-2 Capacity for timely payment on issues with this designation is satisfactory. However, the relative degree of safety is not as high as for issues designated as A-1. Bonds: AAA Bonds rated AAA by S&P are the highest grade obligations. They possess the ultimate degree of protection as to principal and interest. Market prices move with interest rates, and hence provide maximum safety on all counts. AA Bonds rated AA by S&P also qualify as high grade obligations, and in the majority of instances differ from AAA issues only in small degree. Here, too, prices move with the long-term money market. A Bonds rated A by S&P are regarded as upper medium grade. They have considerable investment strength but are not entirely free from the adverse effects of changes in economic and trade conditions. Interest and principal are regarded as safe. They predominantly reflect money rates in their market behavior, but to some extent, also economic conditions. BBB The BBB or medium grade category is the borderline between definitely sound obligations and those where the speculative element begins to predominate. These bonds have adequate asset coverage and normally are protected by satisfactory earnings. Their susceptibility to changing conditions, particularly to depressions, necessitates constant watching. Marketwise, the bonds are more responsive to business and trade conditions than to interest rates. This is the lowest group which qualifies for commercial bank investments. DUFF & PHELPS, INC. ("D & P") Commercial Paper: D & P's short-term ratings have incorporated gradations of "1+" and "1-" in recognition of quality differences within the first tier. D-1+ Highest certainty of timely payment. Short-term liquidity, including internal operating factors and/or access to alternative sources of funds, is outstanding, and safety is just below risk-free U.S. Treasury short-term obligations. D-1 Very high certainty of timely payment. Liquidity factors are excellent and supported by good fundamental protection factors. Risk factors are minor. D-1- High certainty of timely payment. Liquidity factors are strong and supported by good fundamental protection. 64 95 D-2 Good certainty of timely payment. Liquidity factors and company fundamentals are sound. Although ongoing funding needs may enlarge total financing requirements, access to capital markets is good. Risk factors are small. FITCH INVESTORS SERVICE, INC. ("FITCH") Commercial Paper Fitch's short-term ratings apply to debt obligations that are payable on demand or have original maturities of up to three years, including commercial paper, certificates of deposit, medium-term notes, and municipal and investment notes. Fitch's short-term ratings emphasize the existence of liquidity necessary to meet the issuer's obligations in a timely manner. F-1+ Exceptionally strong credit quality. Issues assigned this rating are regarded as having the strongest degree of assurance for timely payment. F-1 Very strong credit quality. Issues assigned this rating reflect an assurance of timely payment only slightly less in degree than issues rated F-1+. F-2 Good credit quality. Issues carrying this rating have a satisfactory degree of assurance for timely payment, but the margin of safety is not as great as the F-1+ and F-1 categories. 65 96 OHIO NATIONAL FUND, INC. Form N-1A PART C. OTHER INFORMATION 97 FINANCIAL STATEMENTS AND EXHIBITS The following audited financial statements are included in Part B of this registration statement: Statements of Assets and Liabilities as of December 31, 1996 Statements of Operations for the Year Ended December 31, 1996 Statements of Changes in Net Assets for the Years Ended December 31, 1996 and 1995 Schedule of Investments at December 31, 1996 --Equity Portfolio Schedule of Investments at December 31, 1996 -- Money Market Portfolio Schedule of Investments at December 31, 1996 -- Bond Portfolio Schedule of Investments at December 31, 1996 -- Omni Portfolio Schedule of Investments at December 31, 1996 -- International Portfolio Schedule of Investments at December 31, 1996 -- Capital Appreciation Portfolio Schedule of Investments at December 31, 1996 -- Small Cap Portfolio Schedule of Investments at December 31, 1996 -- Global Contrarian Portfolio Schedule of Investments at December 31, 1996 -- Aggressive Growth Portfolio Notes to Financial Statements for December 31, 1996 Independent Auditors' Report of KPMG Peat Marwick LLP dated January 28, 1997 The following audited financial information is included in Part A of this registration statement: Financial Highlights (Ten years ended December 31, 1995) Written Consents of the Following Persons: Ronald L. Benedict, Esq. as Legal Counsel to the Registrant Jones & Blouch L.L.P. as Legal Counsel to the Registrant KPMG Peat Marwick LLP as Independent Certified Public Accountants for the Registrant Exhibits: (8) Custody Agreement between the Registrant and Star Bank, N.A. (9) Fund Accounting Services Agreement between the Registrant and American Data Services, Inc. (9) (a) Transfer Agency and Service Agreement between the Registrant and American Data Services, Inc. (9) (c) Master Repurchase Agreement between the Registrant and Star Bank, N.A. (13)(b) Investment letter for the initial subscription of stock of the Registrant's Core Growth, Growth & Income, S&P 500 Index, Social Awareness, Strategic Income, Stellar and Relative Value Portfolios. (16) Computation of Performance Data. -1- 98 All other relevant exhibits, which have previously been filed with the Commission and are incorporated herein by reference, are as follows: (1) Articles of Incorporation of the Registrant (amended as of November 2, 1982) were filed as Exhibit (1) of the Registrant's Form N-1, Post-effective Amendment No. 6, on August 3, 1982. (1)(a) Articles Supplementary of the Registrant, effective December 30, 1992, were filed as Exhibit (1)(a) of the Registrant's Form N-1A, Post-effective amendment No. 21, on February 26, 1993. (1)(b) Articles Supplementary of the Registrant, effective March 1, 1994, were filed as Exhibit (1)(b) of the Registrant's Form N-1A, Post-effective Amendment No. 24, on March 2, 1994. (1)(c) Articles Supplementary of the Registrant, effective December 15, 1994 were filed as Exhibit (1)(c) of the Registrant's Form N-1A, Post-effective Amendment No. 27, on December 30, 1994. (1)(d) Articles Supplementary of the Registrant, effective September 16, 1996 were filed as Exhibit no. (1)(d) of the Registrant's Form N-1A, Post-effective Amendment no. 32, on October 21, 1996. (2) By-laws of the Registrant (as amended March 16, 1989) were filed as Exhibit (2) of the Registrant's Form N-1A, Post-effective Amendment No. 17, on March 27, 1989. (4) Specimen of certificated securities of the Registrant's International Portfolio was filed as Exhibit (4) of the Registrant's Form N-1A, Post-effective Amendment No. 21, on February 26, 1993. (4)(a) Specimen of certificated securities of the Registrant's Capital Appreciation Portfolio was filed as Exhibit (4)(a) of the Registrant's Form N-1A, Post-effective Amendment No. 25, on March 25, 1994. (4)(b) Specimen of certificated securities of the Registrant's Small Cap Portfolio was filed as Exhibit (4)(b) of the Registrant's Form N-1A, Post-effective Amendment No. 25, on March 25, 1994. (4)(c) Specimens of certificated securities of the Registrant's Global Contrarian and Aggressive Growth Portfolios were filed as Exhibit (4)(c) of the Registrant's Form N-1A, Post-effective Amendment No. 27, on December 30, 1994. (4)(d) Specimens of certificated securities of the Registrant's Core Growth, Growth & Income, S&P 500 Index, Social Awareness, Strategic Income, Stellar and Relative Value Portfolios were filed as Exhibit no. (4)(d) of the Registrant's Form N-1A, Post-effective Amendment no. 32, on October 21, 1996. (5)(a) Investment Advisory Agreement between the Registrant and Ohio National Investments, Inc., dated May 1, 1996, was filed as Exhibit (5)(a) of the Registrant's Form N-1A, Post-effective Amendment No. 31, on March 1, 1996. (5)(a)(1) Schedule A, amended effective January 3, 1997, to the Investment Advisory Agreement between the Registrant and Ohio National Investments, Inc., dated May 1, 1996 was filed as Exhibit no. (5)(a)(1) of the Registrant's Form N-1A, Post-effective Amendment no. 32, on October 21, 1996. -2- 99 (5)(b) Sub-Advisory Agreement (for the International and Global Contraian Portfolios) between Ohio National Investments, Inc. and Societe Generale Asset Management Corp., dated May 1, 1996, was filed as Exhibit (5)(b) of the Registrant's Form N-1A, Post-effective Amendment No. 31, on March 1, 1996. (5)(c) Sub-Advisory Agreement (for the Capital Appreciation Portfolio) between Ohio National Investments, Inc. and T. Rowe Price Associates, Inc. dated May 1, 1996, was filed as Exhibit 5(c) of the Registrant's Form N-1A, Post-effective Amendment No. 31, on March 1, 1996. (5)(d) Sub-Advisory Agreement (for the Small Cap Portfolio) between Ohio National Investments, Inc. and Founders Asset Management, Inc., dated May 1, 1996, was filed as Exhibit (5)(d) of the Registrant's Form N-1A, Post-effective Amendment No. 31, on March 1, 1996. (5)(e) Sub-Advisory Agreement (for the Aggressive Growth Portfolio) between Ohio National Investments, Inc. and Strong Capital Management, Inc., dated May 1, 1996, was filed as Exhibit (5)(e) of the Registrant's Form N-1A, Post-effective Amendment No. 31, on March 1, 1996. (5)(f) Sub-Advisory Agreement (for the Core Growth Portfolio) between Ohio National Investments, Inc. and Pilgrim Baxter & Associates, Ltd., dated January 3, 1997 was filed as Exhibit no. (5)(f) of the Registrant's Form N-1A, Post-effective Amendment no. 32, on October 21, 1996. (5)(g) Sub-Advisory Agreement (for the Growth & Income Portfolio) between Ohio National Investments, Inc. and Robertson Stephens Investment Management, L.P., dated January 3, 1997 was filed as Exhibit no. (5)(g) of the Registrant's Form N-1A, Post-effective Amendment no. 32, on October 21, 1996. (5)(h) Sub-Advisory Agreement (for the Strategic Income, Stellar and Relative Value Portfolios) between Ohio National Investments, Inc. and Star Bank, N.A., dated January 3, 1997 was filed as Exhibit no. (5)(h) of the Registrant's Form N-1A, Post-effective Amendment no. 32, on October 21, 1996. (8)(a) Custody Agreement (for the International Portfolio) between the Registrant and Investors Fiduciary Trust Company was filed as Exhibit (8)(a) of the Registrant's Form N-1A, Post-effective Amendment No. 22, on April 22, 1993. (8)(a)(i) First Amendment of Custody Agreement (adding the Global Contrarian Portfolio) between the Registrant and Investors Fiduciary Trust Company was filed as Exhibit (8)(a)(i) of the Registrant's Form N-1A, Post-effective Amendment No. 27, on December 30, 1994. (9)(b) Service Agreement among the Registrant, Ohio National Investments, Inc. and The Ohio National Life Insurance Company, dated May 1, 1996, was filed as Exhibit (9)(b) of the Registrant's Form N-1A, Post-effective Amendment No. 31, on March 31, 1996. (9)(d) Joint Insured Agreement among the Registrant, ONE Fund, Inc. and Ohio National Investments, Inc., dated May 1, 1996, was filed as Exhibit (9)(d) of the Registrant's Form N-1A, Post-effective Amendment No. 31, on March 1, 1996. (9)(e) Services Agreement (for the International Portfolio) between the Registrant and Interactive Data Corporation was filed as Exhibit (9)(e) of the Registrant's Form N-1A, Post-effective Amendment No. 23, on October 29, 1993. -3- 100 (10) Opinion and consent of Ronald L. Benedict, Esq., as to the shares of the Registrant's International Portfolio was filed as Exhibit (10) of the Registrant's Form N-1A, Post-effective Amendment No. 21, on February 26, 1993. (10)(a) Opinion and consent of Ronald L. Benedict, Esq., as to the shares of the Registrant's Capital Appreciation, Small Cap, Global Contrarian and Aggressive Growth Portfolios was filed as Exhibit (10)(a) of the Registrant's Form N-1A, Post-effective Amendment No. 27, on December 30, 1994. (10)(b) Opinion and consent of Ronald L. Benedict, Esq., as to the shares of the Registrant's Core Growth, Growth & Income, S&P 500 Index, Social Awareness, Strategic Income, Stellar and Relative Value Portfolios was filed as Exhibit no. (10)(b) of the Registrant's Form N-1A, Post-effective Amendment no. 32, on October 21, 1996. (13) Investment letter for the initial subscription of capital stock of the Registrant's International Portfolio was filed as Exhibit (13) of the Registrant's Form N-1A, Post-effective Amendment No. 22, on April 22, 1993. (13)(a) Investment letters for the initial subscriptions of capital stock of the Registrant's Capital Appreciation, Small Cap, Global Contrarian and Aggressive Growth Portfolios were filed as Exhibit (13)(a) of the Registrant's Form N-1A, Post-effective Amendment No. 27, on December 30, 1994. (16) Computation of Performance Data was filed as exhibits (16) of the Registrant's Form N-1A, Post-effective Amendments No. 18 on March 2, 1990, No. 19 on April 18, 1991, No. 20 on April 29, 1992, No. 21 on February 26, 1993, No. 24 on March 2, 1994, No. 28 on February 17, 1995, and No. 31 on March 1, 1996. PERSONS UNDER COMMON CONTROL WITH REGISTRANT The Registrant is an affiliate of The Ohio National Life Insurance Company ("ONLI"). The diagram on page 4A shows all persons under common control with the Registrant. ONLI is a mutual life insurer and it owns 100% of the voting securities of each of its subsidiaries. As of April 1, 1997, it also owned 92.2% of the voting securities of the Registrant, which are held of record in the separate accounts of ONLI. The remaining 7.8% of the Registrant's voting securities were owned by Ohio National Life Assurance Corporation ("ONLAC") and held of record in ONLAC's separate account. ONLI owns 100% of the voting securities of Ohio National Investments, Inc. (the "Adviser"). ONLI also owned 52.9% of the voting shares of ONE Fund, Inc. ("ONE Fund") as of that date. NUMBER OF HOLDERS OF SECURITIES As of April 1, 1997, the securities of the Registrant were held as follows:
Title of Class Number of Record Holders -------------- ------------------------ Equity 5 Money Market 5 Bond 5 Omni 5 International 5 Capital Appreciation 5 Small Cap 5 Global Contrarian 5 Aggressive Growth 5 Core Growth 5 Growth & Income 5 S&P 500 Index 5 Social Awareness 5 Strategic Income 1 Stellar 1 Relative Value 1
-4- 101 INDEMNIFICATION Under Section 2-418 of the Maryland General Corporation Law, with respect to any proceedings against a present or former director, officer, agent or employee (a "corporate representative") of the Registrant (a Maryland corporation), except a proceeding brought by or on behalf of the Registrant, the Registrant may indemnify the corporate representative against expenses, including attorneys' fees, and judgments, fines, penalties, and amounts paid in settlement, if such expenses were actually and reasonably incurred by the corporate representative in connection with the proceeding, if: (i) he or she acted in good faith; (ii) in the case of conduct in his or her official capacity he or she reasonably believed that his or her conduct was in the best interests of the Registrant, and in all other cases he or she reasonably believed that his or her conduct was not opposed to the best interests of the Registrant; and (iii) with respect to any criminal proceeding, he or she had no reasonable cause to believe his or her conduct was unlawful. The Registrant is also authorized under Section 2-418 of the Maryland General Corporation Law to indemnify a corporate representative under certain circumstances against reasonable expenses incurred in connection with the defense of a suit or action by or in the right of the Registrant except where the corporate representative has been adjudged liable to the Registrant. Under Article 11 of the Registrant's By-laws, directors and officers of Registrant are entitled to indemnification by the Registrant to the fullest extent permitted under Maryland law and the Investment Company Act of 1940. Reference is made to Article 11 of Registrant's By-laws and Section 2-418 of the Maryland General Corporation Law. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER Ohio National Investments, Inc. (the "Adviser") is engaged in providing investment management services to the Registrant and to ONE Fund. The Adviser is also authorized to provide such services to others. The Adviser has not engaged in any other business of a substantial nature during the past two fiscal years. The names of each director and officer of the Adviser and the business of a substantial nature of each during the past two fiscal years are as follows:
Position with Business of a Substantial Name the Adviser Nature During Past Two Years - ---- ----------- ---------------------------- Joseph P. Brom Director and Senior Vice President and Chief President Investment Officer of ONLI; Vice President of Registrant; Senior Vice President of ONLAC; Vice President of ONE Fund; Until 1997 was Director and President of ONIMCO Michael A. Boedeker Director and Vice President, Fixed Income Securities Vice President of ONLI; Vice President of ONLAC; Vice President of Registrant; Vice President of ONE Fund; Until 1997 was Director and Vice President of ONIMCO Stephen T. Williams Director and Director of Securities of ONLI; Vice Vice President President of Registrant; Vice President of ONE Fund; Until 1997 was Director and Vice President of ONIMCO Michael D. Stohler Director and Vice President, Mortgages & Real Estate ONLI; Vice President Director and President Enterprise Park, Inc. Keith O. Hanson Vice President Senior Investment Analyst of ONLI. R. Douglas Hundley Vice President Investment Officer of ONLI. Jed R. Martin Vice President Investment Officer of ONLI.
-5- 102
Position with Business of a Substantial Name the Adviser Nature During Past Two Years - ---- ----------- ---------------------------- Ronald L. Benedict Secretary Second Vice President and Counsel of ONLI; Director and Secretary of Registrant; Director and Secretary of ONE Fund; Director and Secretary of ONESCO; Assistant Secretary of ONLAC; Secretary of ONE, Inc.; Until 1997 was Secretary of ONIMCO Dennis R. Taney Treasurer Mutual Fund Financial Operations Director of ONLI; Treasurer of Registrant; Treasurer of ONE Fund; Until 1997 was Treasurer of ONIMCO
BUSINESS AND OTHER CONNECTIONS OF SGAM Societe Generale Asset Management Corp. ("SGAM") provides investment management services to the International and Global Contrarian Portfolios of the Registrant and of ONE Fund. SGAM's primary business is managing SoGen International Fund, Inc. and SoGen Funds, Inc. ("SoGen"), diversified investment companies of the management type registered under the 1940 Act. The officers and directors of SGAM and their business of a substantial nature during the past two fiscal years are as follows:
Position Business of a Substantial Name with SGAM Nature During Past Two Years - ---- --------- ---------------------------- Philip J. Bafundo Secretary and VicePresident, Secretary and Treasurer Treasurer of SoGen; Certified Public Accountant (New York) Frances G. Bijon Director International Director of Societe Generale Asset Management S.A. Jean-Marie Eveillard President and President and Director of Director SoGen Jean-Pierre Gentil Chairman of the Chairman of the Board and Board and Director Director of SoGen; Manager of the Investment and Custody Department of Societe Generale Jean-Roger Huet Director President of New York Branch of Societe Generale. Jean-Marie Stein Director Director of French Funds of Societe Generale
BUSINESS AND OTHER CONNECTIONS OF TRPA T. Rowe Price Associates, Inc. ("TRPA") provides investment management services to the Capital Appreciation Portfolio of the Registrant. TRPA's primary business is the management of assets for individual and institutional investors, particularly the T. Rowe Price group of mutual funds. The officers and directors of TRPA and their business of a substantial nature during the past two fiscal years are as follows: -6- 103
Position Business of a Substantial Name with TRPA Nature during Past Two Years - ---- --------- ---------------------------- George J. Collins President, Chief Director of Rowe Price- Executive Officer Fleming International, Inc. and Managing Director ("Price-Fleming"); Director of T. Rowe Price Retirement Plan Services, Inc. ("RPS"); Director of T. Rowe Price Trust Company ("Trust Co."); Chairman of the Board of T. Rowe Price mutual funds ("Price Funds") James S. Riepe Managing Director Chairman of the Board of T. Rowe Price Services, Inc. ("Price Services"); Chairman of the Board of RPS; Chairman of the Board of Trust Co.; President and Director of T. Rowe Price Investment Services, Inc. ("Investment Services"); Vice President and Trustee of Price Funds Henry H. Hopkins Managing Director Vice President and Director of Investment Services; Vice President and Director of Price Services; Vice President and Director of Trust Co.; Vice President of Price- Fleming; Vice President of RPS; Director of ICI Mutual Insurance Company; Vice President of Price Funds James W. Halbkat, Jr. Director President of U.S. Monitor Corp. John W. Rosenblum Director Taylor Murphy Professor of Darden Graduate School of Business Administration, University of Virginia; Director of Chesapeake Corporation; Director of Cadmus Communications Corp.; Director of Comdial Corp.; Director of Cone Mills Corp. Robert L. Strickland Director Chairman of Lowe's Companies, Inc. Philip C. Walsh Director Consultant to and Director of Cyprus Minerals Corp.; Director of Piedmont Mining Co., Inc. George A. Roche Chief Financial Vice President and Director of Price-Fleming Officer and Managing Director
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Position Business of a Substantial Name with TRPA Nature during Past Two Years - ---- --------- ---------------------------- M. David Testa Managing Director Chairman of the Board of Price-Fleming Charles P. Smith Managing Director Vice President of Price-Fleming Peter Van Dyke Managing Director Vice President of Price-Fleming Robert P. Campbell Vice President Vice President of Price-Fleming Robert C. Howe Vice President Vice President of Price-Fleming Veena A. Kutler Vice President Vice President of Price-Fleming George A. Murnaghan Vice President Vice President of Price-Fleming; Assistant Vice President of Investment Services William F. Wendler, II Vice President Vice President of Price-Fleming; Assistant Vice President of Investment Services Edward A. Wiese Vice President Vice President of Price-Fleming Price-Fleming Alvin M. Younger, Jr. Managing Director, Secretary and Treasurer of Secretary and Price-Fleming Treasurer Joseph P. Croteau Vice President Controller of Price-Fleming Nolan L. North Vice President and Assistant Treasurer of Price-Fleming Assistant Treasurer Arthur B. Cecil Vice President Vice President of Price Funds Charles A. Morris Vice President Vice President of Price Funds David A. Rea Vice President Vice President of Price Funds Alan R. Stuart Vice President Vice President of Price Funds Lenora V. Hornung Vice President Secretary of Price Funds Carmen F. Deyesu Vice President Vice President of Price Services; Vice President of Trust Co.; Treasurer of Price Funds David S. Middleton Vice President Vice President of Price Services; Vice President of Trust Co.; Controller of Price Funds Richard P. Howard Vice President President and portfolio manager of T. Rowe Price Capital Appreciation Fund
-8- 105 Wholly-owned subsidiaries of TRPA include the following: Investment Services, a Maryland corporation, is the principal underwriter and distributor of the Price Funds; Price Services, a Maryland corporation, provides transfer agent, dividend disbursing and shareholder services to the Price Funds; RPS, a Maryland corporation, provides administrative, recordkeeping and subaccounting services to administrators of employee benefit plans; Trust Co., a Maryland limited purpose trust company, provides fiduciary and custodial services to employee benefit plans and common trust funds; T. Rowe Price Real Estate Group, Inc., a Maryland corporation, provides real estate services and is the investment manager of several real estate investment trusts, funds and limited partnerships; T. Rowe Price Stable Asset Management, Inc., a Maryland corporation, is an investment adviser specializing in management of portfolios seeking stable and consistent returns; T. Rowe Price Recovery Fund Associates, Inc., a Maryland corporation, is the general partner of T. Rowe Price Recovery Fund, LP, a Delaware limited partnership that invests in financially distressed companies; T. Rowe Price (Canada), Inc., a Maryland corporation, is an investment adviser which may register as such under the Securities Act of Ontario. Tower Venture, Inc., a Maryland corporation, serves as a general partner of 100 East Pratt Street, LP, a Maryland limited partnership (whose limited partners include TRPA) formed to improve TRPA's headquarters property; TRP Suburban, Inc., a Maryland corporation, is involved in the construction of an office building to house certain administrative functions of TRPA in Owings Mills, MD; TRP Finance, Inc. and TRP Finance MRT, Inc., are Delaware corporations managing passive corporate investments and other intangible assets. TRP Distribution, Inc., a Maryland corporation, is a wholly-owned subsidiary of Investment Services and engages in the sale of investment products prepared by Investment Services. Price-Fleming, a Maryland corporation, is a joint venture 50% owned by TRP Finance, Inc., and provides investment counsel service with respect to foreign securities for U.S. institutional investors. BUSINESS AND OTHER CONNECTIONS OF FAM Founders Asset Management, Inc. ("FAM") provides investment management services to the Small Cap Portfolio of the Registrant. FAM's primary business is the management of the Founders group of mutual funds. It also serves as investment adviser to private accounts. The officers and directors of FAM and their business of a substantial nature during the past two fiscal years are as follows:
Position Business of a Substantial Name with FAM Nature During Past Two Years - ---- -------- ---------------------------- Bjorn K. Borgen President, Secretary, President, Executive Committee sole Director and member and Director of owner Founders Funds, Inc.
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Position Business of a Substantial Name with FAM Nature During Past Two Years - ---- -------- ---------------------------- Michael K. Haines SeniorVice President Portfolio manager for of Investments Founders Discovery Fund and Founders Frontier Fund David L. Ray Vice President, Vice President, Secretary and Assistant Secretary Treasurer of Founders Funds, and Treasurer Inc. Michael W. Gerding Vice President of Portfolio manager for Investments Founders Worldwide Growth Fund and Founders Passport Fund Charles W. Hooper Vice President of Portfolio manager for Investments Founders Special Fund Gregory P. Contillo Vice President of N/A Institutional Marketing James P. Rankin Vice President of N/A Shareholder Services Lois F. Wong Vice President of N/A Advertising
BUSINESS AND OTHER CONNECTIONS OF SCM Strong Capital Management, Inc. ("SCM") provides investment management services to the Aggressive Growth Portfolio of the Registrant. SCM's primary business is the management of the Strong group of mutual funds ("Strong Funds"). It also serves as investment adviser to individual and institutional accounts. The officers and directors of SCM and their business of a substantial nature during the past two fiscal years are as follows:
Position Business of a Substantial Name with SCM Nature During Past Two Years - ---- -------- ---------------------------- Richard S. Strong Chairman and Director Chairman and Director of the Strong Funds; Chairman and Director of Strong Holdings, Inc.; Chairman and Director of Strong Funds Distributors, Inc.; Chairman and Director of Heritage Reserve Development Corp.; Managing board member of Fussville Real Estate Holdings LLC and Fussville Development LLC. John Dragisic Vice Chairman and Director Vice Chairman and Director of the Strong Funds; Director of Strong Holdings, Inc.; Director of Strong Funds Distributors, Inc.; Until July 1994 was President and Chief Executive Officer of Grunau Company, Inc. Richard T. Weiss Director N/A Rochelle Lamm Wallach President and Director of Until November, 1994, was President and Strong Advisory Services, Director of AAL Capital Management a division of SCM Corporation and the AAL Mutual Funds.
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Position Business of a Substantial Name with SCM Nature During Past Two Years - ---- -------- ---------------------------- Thomas P. Lemke Senior Vice President, Senior Vice President of the Strong Funds; Secretary and General Until September 1994 was Resident Counsel Counsel for Funds Management at J.P. Morgan & Co. Ronald A. Neville Senior Vice President Until January, 1995, was Treasurer and Chief and Chief Financial Officer Financial Officer of Twentieth Century Securities. Bruce Behling Senior Vice President N/A Lloyd Cole Senior Vice President N/A Lawrence A. Totsky Senior Vice President Senior Vice President of the Strong Funds Thomas M. Zoeller Treasurer Treasurer of the Strong Funds; Treasurer of Strong Holdings, Inc.; Treasurer and Secretary of Strong Funds Distributors, Inc.; Treasurer of Heritage Reserve Development Corp.; Treasurer of Fussville Real Estate Holdings LLC and Fussville Development LLC.
Strong Holdings, Inc., a Wisconsin corporation, is a subsidiary of SCM. Strong Funds Distributors, Inc., a Wisconsin corporation, is a subsidiary of Strong Holdings, Inc. Heritage Reserve Development Corp., a Wisconsin corporation, is a subsidiary of Strong Holdings, Inc. Fussville Real Estate Holdings LLC and Fussville Development LLC, Wisconsin limited liability companies, are subsidiaries of SCM. BUSINESS AND OTHER CONNECTIONS OF PBA Pilgrim Baxter & Associates, Ltd. ("PBA") provides investment management services to the Core Growth Portfolios of the Registrant and of ONE Fund. PBA also serves as investment adviser to the PBHG Funds, Inc., diversified investment companies of the management type registered under the 1940 Act. PBA also provides investment advisory services to pension and profit-sharing plans, charitable institutions, corporations, individual investors, trusts, estates and other investment companies. The officers and directors of PBA and their business of a substantial nature during the past two fiscal years are as follows:
Position Business of a Substantial Name with PBA Nature During Past Two Years - ---- -------- ---------------------------- Harold J. Baxter Director, Chairman Director of United Asset and Chief Executive Management, Corp.; Director, Officer Chairman & Chief Executive Officer of PBHG Funds, Inc. Gary L. Pilgrim Director, President, President of PBHG Funds, Inc. Secretary, Treasurer and Chief Investment Officer Brian F. Bereznak Director and Chief Vice President and Assistant Operating Officer Secretary of PBHG Funds, Inc. Eric C. Schneider Chief Financial Officer N/A
-11- 108 BUSINESS AND OTHER CONNECTIONS OF RSIM Robertson Stephens Investment Management, L.P. ("RSIM") provides investment management services to the Growth & Income Portfolio of the Registrant. RSIM, a California limited partnership, also serves as investment adviser to the Robertson Stephens group of mutual funds as well as private and institutional asset pools. The principal officers of RSIM and their business of a substantial nature during the past two fiscal years are as follows:
Position Business of a Substantial Name with RSIM Nature During Past Two Years - ---- --------- ---------------------------- Sanford R. Robertson Chairman Managing Director and Member of Robertson, Stephens & Co., LLC ("RS & Co.") Paul H. Stephens Chief Investment Managing Director and Member of Officer RS & Co. G. Randy Hecht Chief Operating Managing Director and Member of RS & Co.; Officer and Executive President, Chief Executive Officer Vice President and Trustee of Robertson Stephens Funds Michael G. McCaffery President and Chief Managing Director and Member of Executive Officer RS & Co. John L. Wallace Portfolio Manager Managing Director and Member of RS & Co.; formerly Vice President and Portfolio Manager of Oppenheimer Main Street Income & Growth Fund and Oppenheimer Total Return Fund
BUSINESS AND OTHER CONNECTIONS OF STAR Star Bank, N.A. ("Star") provides investment management services to the Strategic Income, Stellar and Relative Value Portfolios of the Registrant. Star is a national bank and trust organization which has a substantial business in managing commingled funds including registered investment companies. Star also serves as the custodian of the Registrant's assets other than those in the Registrant's International and Global Contrarian Portfolios. The directors and principal officers of Star and their business of a substantial nature during the last two fiscal years are as follows:
Position Business of a Substantial Name with Star Nature During Past Two Years - ---- --------- ---------------------------- Jerry A. Grundhofer Chairman, President, Chairman, President, Chief Chief Executive Officer Executive Officer and Director of and Director Star Banc Corp. James R. Bridgeland, Jr. Director Partner of Taft, Stettinius & Hollister Laurance L. Browning, Jr. Director Formerly Vice Chairman, Emerson Electric Co. Victoria B. Buyniski Director President & Chief Executive Officer, United Medical Resouces, Inc.
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Position Business of a Substantial Name with Star Nature During Past Two Years - ---- --------- ---------------------------- Samuel M. Cassidy Director Formerly President & Chief Executive Office of Star Raymond R. Clark Director Formerly President & Chief Executive Officer of Cincinnati Bell Telephone Co. V. Anderson Coombe Director Chairman of Wm. Powell Co. John C. Dannemiller Director Chairman & Chief Executive Officer of Bearings, Inc. J.P. Hayden, Jr. Director Chairman & Chief Executive Officer of The Midland Co. Roger L. Howe Director Chairman of U.S. Precision Lens, Inc. Thomas J. Klinedinst, Jr. Director Chairman, President, Chief Executive Officer & Chief Operating Officer of Thomas E. Wood, Inc. Charles S. Mechem, Jr. Director Commissioner Emeritus of Ladies Professional Golf Assoc.; formerly Chairman of U.S. Shoe Corp. Daniel J. Meyer Director Chairman & Chief Executive Officer of Cincinnati Milacron, Inc. David B. O'Maley Director Chairman, President & Chief Executive Officer of ONLI O'dell M. Owens Director Director of Reproductive Endocrinology and Infertility of Christ Hospital Thomas E. Petry Director Chairman & Chief Executive Officer of Eagle-Picher Industries, Inc. William C. Portman Director Chairman of Portman Equipment Co. Oliver W. Waddell Director Formerly Chairman of Star Banc Corp. and Vice Chairman of Star Daniel B. Benhase Executive Vice President N/A Joseph A. Campanella Executive Vice President N/A Richard K. Davis Executive Vice President N/A S. Kay Geiger Executive Vice President N/A Timothy J. Fogarty Executive Vice President N/A Jerome C. Kohlhepp Executive Vice President N/A Thomas J. Lakin Executive Vice President, N/A General Counsel and Secretary
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Position Business of a Substantial Name with Star Nature During Past Two Years - ---- --------- ---------------------------- David M. Moffett Executive Vice President N/A & Chief Financial Officer David R. Noe Executive Vice President N/A Andrew E. Randall Executive Vice President N/A Wayne J. Shircliff Executive Vice President N/A Stephen E. Smith Executive Vice President N/A
PRINCIPAL UNDERWRITERS Not Applicable LOCATION OF ACCOUNTS AND RECORDS The books and records required under Section 31(a) and Rules thereunder are maintained and in the possession of the following persons: (a) Journals and other records of original entry: For those portfolios other than the International and Global Contrarian Portfolio: Star 425 Walnut Street Cincinnati, Ohio 45202 and American Data Services, Inc. ("ADS") 24 West Carver Street Huntington, NY 11743 For the International and Global Contrarian Portfolios: Investors Fiduciary Trust Co. ("IFTC") 127 West Tenth Street Kansas City, Missouri 64105 (b) General and auxiliary ledgers: ADS and IFTC (c) Securities records for portfolio securities: ADS and IFTC (d) Corporate charter (Articles of Incorporation), By-Laws and Minute Books: Ronald L. Benedict, Secretary Ohio National Fund, Inc. One Financial Way Cincinnati, Ohio 45242 -14- 111 (e) Records of brokerage orders: The Adviser (f) Records of other portfolio transactions: The Adviser (g) Records of options: The Adviser (h) Records of trial balances: ADS and The Adviser (i) Quarterly records of allocation of brokerage orders and commissions: The Adviser (j) Records identifying persons or group authorizing portfolio transactions: The Adviser (k) Files of advisory materials The Adviser MANAGEMENT SERVICES Not Applicable UNDERTAKINGS Not Applicable -15- 112 SIGNATURES Pursuant to the requirements of the Securities Act of l933 and the Investment Company Act of l940, Ohio National Fund, Inc. certifies that it meets the requirements of Securities Act Rule 485(b) for effectiveness of this registration statement and has duly caused this post-effective amendment to the registration statement to be signed on its behalf by the undersigned thereunto duly authorized in the City of Cincinnati and the State of Ohio on the 25th day of April, 1997. OHIO NATIONAL FUND, INC. By /s/Donald J. Zimmerman ------------------------------ Donald J. Zimmerman, President Attest /s/Ronald L. Benedict -------------------------------- Ronald L. Benedict, Secretary Pursuant to the requirements of the Securities Act of l933, this post-effective amendment to the registration statement has been signed below by the following persons in the capacities and on the dates indicated.
Signature Title Date - --------- ----- ---- /s/Donald J. Zimmerman - ------------------------- President and Director April 25, 1997 Donald J. Zimmerman (Principal Executive Officer) /s/Dennis R. Taney - ------------------------- Treasurer (Principal Financial April 25, 1997 Dennis R. Taney and Accounting Officer) /s/Ronald L. Benedict - ------------------------- Director April 25, 1997 Ronald L. Benedict /s/George E. Castrucci - ------------------------- Director April 25, 1997 George E. Castrucci /s/Ross Love - ------------------------- Director April 25, 1997 Ross Love /s/George M. Vredeveld - ------------------------- Director April 25, 1997 George M. Vredeveld
113 INDEX OF CONSENTS AND EXHIBITS
Page Number in Exhibit Sequential Numbering Number Description System Where Located - ------ ----------- -------------------- Consent of Ronald L. Benedict, Esq. Consent of Jones & Blouch L.L.P. Consent of KPMG Peat Marwick LLP (8) Custody Agreement between the Registrant and Star Bank, N.A. (9) Fund Accounting Services Agreement between the Registrant and American Data Services, Inc. (9)(a) Transfer Agency and Service Agreement between the Registrant and American Data Services, Inc. (9)(c) Master Repurchase Agreement between the Registrant and Star Bank, N.A. (13)(b) Investment letter for the initial subscription of stock of the Registrant's Core Growth, Growth & Income, S&P 500 Index, Social Awareness, Strategic Income, Stellar and Relative Value Portfolios. (16) Computation of Performance Data.
114 CONSENTS 115 [Letterhead] April 25, 1997 The Board of Directors Ohio National Fund, Inc. 237 William Howard Taft Road Cincinnati, Ohio 452l9 Re: Ohio National Fund, Inc. Registration Statement File Nos. 2-67464 and 811-3015 Gentlemen: The undersigned hereby consents to the use of my name under the caption of "Legal Counsel" in the registration statement on Form N-lA of the above captioned registrant. Sincerely, /s/ Ronald L. Benedict ---------------------- Ronald L. Benedict Secretary and Legal Counsel RLB/nh 116 Jones & Blouch L.L.P. Suite 405-West 1025 Thomas Jefferson St., N.W. Washington, DC 20007 (202) 223-3500 April 25, 1997 Board of Directors Ohio National Fund, Inc. One Financial Way Cincinnati, OH 45242 Re: Ohio National Fund, Inc. Registration Statement on Form N-1A File No. 2-67464 ----------------------------------- Dear Sirs: We hereby consent to the reference to this firm under the caption "Legal Counsel" in the Statement of Additional Information included in Post-Effective Amendment No. 33 under the Securities Act of 1933 to the Registration Statement for Ohio National Fund, Inc. (File No. 2-67464). Very truly yours, /s/ JONES & BLOUCH L.L.P. -------------------- Jones & Blouch L.L.P. 117 Independent Certified Public Accountant's Consent The Board of Directors Ohio National Fund, Inc.: We consent to the inclusion of our report included herein and to the reference to our firm under the headings "Financial Highlights" in the prospectus and "Experts" in the Statement of Additional Information. KPMG Peat Marwick LLP Cincinnati, Ohio April 25, 1997 118 EXHIBITS EX-8 2 EXHIBIT 8 1 CUSTODY AGREEMENT This agreement (the "Agreement") is entered into as of the 2nd day of January, 1997, by and between Ohio National Fund, Inc. (the "Corporation"), an open-end management investment company organized under the laws of the State of Maryland and having its office at One Financial Way, Cincinnati, Ohio 45242 acting for and on behalf of its Equity Portfolio, Money Market Portfolio, Bond Portfolio, Omni Portfolio, Capital Appreciation Portfolio, Small Cap Portfolio, Aggressive Growth Portfolio, Core Growth Portfolio, Growth & Income Portfolio, S&P 500 Index Portfolio, Social Awareness Portfolio, Strategic Income Portfolio, Stellar Portfolio, and Relative Value Portfolio (the "Funds"), which are operated and maintained by the Corporation for the benefit of the holders of shares of each Fund, and Star Bank, N.A. (the "Custodian"), a national banking association having its principal office and place of business at Star Bank Center, 425 Walnut Street, Cincinnati, Ohio 45202. WHEREAS, the Corporation and the Custodian desire to enter into this Agreement to provide for the custody and safekeeping of the assets of the Funds as required by the Investment Company Act of 1940, as amended (the "Act"). WHEREAS, the Corporation hereby appoints the Custodian as custodian of all the Funds' securities and moneys at any time owned by the Funds during the term of this Agreement (the "Fund Assets"). WHEREAS, the Custodian hereby accepts such appointment as Custodian and agrees to perform the duties thereof as hereinafter set forth. THEREFORE, in consideration of the mutual promises hereinafter set forth, the Corporation and the Custodian agree as follows: ARTICLE I Definitions The following words and phrases, when used in this Agreement, unless the context otherwise requires, shall have the following meanings: Authorized Person - the President, Secretary, Treasurer, or Vice President of the Corporation, or any other person, whether or not any such person is an officer or employee 1 2 of the Corporation, duly authorized by the Board of Directors of the Corporation to give Oral Instructions and Written Instructions on behalf of the Funds, and listed in the Certificate annexed hereto as Appendix A, or such other Certificate as may be received by the Custodian from time to time. Book-Entry System - the Federal Reserve Bank book-entry system for United States Treasury securities and federal agency securities. Depository - The Depository Trust Company ("DTC"), a limited purpose trust company, its successor(s) and its nominee(s), or any other person or clearing agent. Dividend and Transfer Agent - the dividend and transfer agent appointed, from time to time, pursuant to a written agreement between the dividend and transfer agent and the Corporation. Foreign Securities - a) securities issued and sold primarily outside of the United States by a foreign government, a national of any foreign country, or a trust or other organization incorporated or organized under the laws of any foreign country or; b) securities issued or guaranteed by the government of the United States, by any state, by any political subdivision or agency thereof, or by any entity organized under the laws of the United States or of any state thereof, which have been issued and sold primarily outside of the United States. Money Market Security - debt obligations issued or guaranteed as to principal and/or interest by the government of the United States or agencies or instrumentalities thereof, commercial paper, obligations (including certificates of deposit, bankers' acceptances, repurchase agreements and reverse repurchase agreements with respect to the same), and time deposits of domestic banks and thrift institutions whose deposits are insured by the Federal Deposit Insurance Corporation, and short-term corporate obligations where the purchase and sale of such securities normally require settlement in federal funds or their equivalent on the same day as such purchase and sale, all of which mature in not more than thirteen (13) months. Officers - the President, Secretary, Treasurer and Vice Presidents of the Corporation listed in the Certificate annexed hereto as Appendix A, or such other Certificate as may be received by the Custodian from time to time. Oral Instructions - verbal instructions received by the Custodian from an Authorized Person (or from a person that the Custodian reasonably believes in good faith 2 3 to be an Authorized Person) and confirmed by Written Instructions in such a manner that such Written Instructions are received by the Custodian on the business day immediately following receipt of such Oral Instructions. Prospectus - the Corporation's then currently effective prospectus and Statement of Additional Information, as filed with the Securities and Exchange Commission and effective from time to time. Security or Securities - Money Market Securities, common stock, preferred stock, options, financial futures, bonds, notes, debentures, corporate debt securities, mortgages, and any certificates, receipts, warrants, or other instruments representing rights to receive, purchase, or subscribe for the same or evidencing or representing any other rights or interest therein, or any property or assets. Written Instructions - communication received in writing by the Custodian from an Authorized Person. ARTICLE II DOCUMENTS AND NOTICES TO BE FURNISHED BY THE CORPORATION A. The following documents, including any amendments thereto, will be provided contemporaneously with the execution of the Agreement, to the Custodian by the Corporation: 1. A copy of the Articles of Incorporation of the Corporation, as amended and supplemented, certified by the Secretary. 2. A copy of the By-Laws of the Corporation, as amended, certified by the Secretary. 3. A copy of the resolution of the Board of Directors of the Corporation appointing the Custodian, certified by the Secretary. 4. A copy of the then current Prospectus. 5. A Certificate of the President and Secretary of the Corporation setting forth the names and signatures of the Officers. B. The Corporation agrees to notify the Custodian in writing of the appointment of any Dividend and Transfer Agent. 3 4 ARTICLE III RECEIPT OF FUND ASSETS A. During the term of this Agreement, the Corporation will deliver or cause to be delivered to the Custodian all moneys constituting Fund Assets. The Custodian shall be entitled to reverse any deposits made on a Fund's behalf where such deposits have been entered and money are not finally collected within 30 days of the making of such entry. B. During the term of this Agreement, the Corporation will deliver or cause to be delivered to the Custodian all Securities constituting Fund Assets. The Custodian will not have any duties or responsibilities with respect to such Securities until actually received by the Custodian. C. As and when received, the Custodian shall deposit to the respective accounts of each of the Funds any and all payments for shares of each Fund issued or sold from time to time as they are received from the Fund's distributor or Dividend and Transfer Agency or from a Fund itself. ARTICLE IV DISBURSEMENT OF FUND ASSETS A. The Corporation shall furnish to the Custodian a copy of the resolution of the Board of Directors of the Corporation, certified by the Corporation's Secretary, either (i) setting forth the date of the declaration of any dividend or distribution in respect of shares of each Fund, the date of payment thereof, the record date as of which Fund shareholders entitled to payment shall be determined, the amount payable per share to Fund shareholders of records as of that date, and the total amount to be paid by the Dividend and Transfer Agent on the payment date, or (ii) authorizing the declaration of dividends and distributions in respect of shares of the Fund on a daily or other periodic basis and authorizing the Custodian to rely on a Certificate setting forth the date of the declaration of any such dividend or distribution, the date of payment thereof, the record date as of which Fund shareholders entitled to payment shall be determined, the amount payable per 4 5 share to Fund shareholders of record as of that date, and the total amount to be paid by the Dividend and Transfer Agent on the payment date. On the payment date specified in such resolution or Certificate described above, the Custodian shall segregate such amounts from moneys held for the account of the Fund so that they are available for such payment. B. Upon receipt of Written Instructions so directing it, the Custodian shall segregate amounts necessary for the payment of redemption proceeds to be made by the Dividend and Transfer Agent from moneys held for the accounts of the Funds so that they are available for such payment. C. Upon receipt of a Certificate directing payment and setting form the name and address of the person to whom such payment is to be made, the amount of such payment, and the purpose for which payment is to be made, the Custodian shall disburse amounts as and when directed from the Fund Assets. The Custodian is authorized to rely on such directions and shall be under no obligation to inquire as to the propriety of such directions. D. Upon receipt of a Certificate directing payment, the Custodian shall disburse moneys from the Fund Assets in payment of the Custodian's fees and expenses as provided in Article VIII hereof. ARTICLE V Custody of Fund Assets A. The Custodian shall open and maintain a separate bank account or accounts in the United States in the name of each Fund, subject only to draft or order by the Custodian acting pursuant to the terms of this Agreement, and shall hold all cash received by it from or for the account of each Fund, other than cash maintained by that Fund in a bank account established and used by the Fund in accordance with Rule 17f-3 under the Act. Moneys held by the Custodian on behalf of a Fund may be deposited by the Custodian to its credit as Custodian in the banking department of the Custodian. Such moneys shall be deposited by the Custodian in its capacity as such, and shall be withdrawable by the Custodian only in such capacity. 5 6 B. The Custodian shall hold all Securities delivered to it in safekeeping in a separate account or accounts maintained at Star Bank, N.A. for the benefit of each respective Fund. C. All Securities held which are issued or issuable only in bearer form, shall be held by the Custodian in that form; all other Securities held for a Fund shall be registered in the name of the Custodian or its nominee. The Corporation agrees to furnish to the Custodian appropriate instruments to enable the Custodian to hold, or deliver in proper form for transfer, any Securities that it may hold for the accounts of the Funds and which may, from time to time, be registered in the name of each Fund. D. With respect to all Securities held for the Funds, the Custodian shall on a timely basis (concerning items 1 and 2 below, as defined in the Custodian's Standard of Service Guide, as amended from time to time, annexed hereto as Appendix C): 1.) Collect all income due and payable with respect to such Securities; 2.) Present for payment and collect amounts payable upon all Securities which may mature or be called, redeemed, or retired, or otherwise become payable; 3.) Surrender Securities in temporary form for definitive Securities; and 4.) Execute, as agent, any necessary declarations or certificates of ownership under the Federal income tax laws or the laws or regulations of any other taxing authority, including any foreign taxing authority, now or hereafter in effect. E. Upon receipt of a Certification and not otherwise, the Custodian shall: 1.) Execute and deliver to such persons as may be designated in such Certificate proxies, consents, authorizations, and any other instruments whereby the authority of the Funds as beneficial owners of any Securities may be exercised; 2.) Deliver any Securities in exchange for other Securities or cash issued or paid in connection with the liquidation, reorganization, refinancing, merger, consolidation, or recapitalization or any trust, or the exercise 6 7 of any conversion privilege; 3.) Deliver any Securities to any protective committee, reorganization committee, or other person in connection with the reorganization, refinancing, merger, consolidation, recapitalization, or sale of assets of any trust, and receive and hold under the terms of this Agreement such certificates of deposit, interim receipts or other instruments or documents as may be issued to it to evidence such delivery; 4.) Make such transfers or exchanges of Fund Assets and take such other steps as shall be stated in said Certificate to be for the purpose of effectuating any duly authorized plan of liquidation, reorganization, merger, consolidation or recapitalization of the Corporation or one or more Funds; and 5.) Deliver any Securities held for a Fund to the depository agent for tender or other similar offers. F. The Custodian shall promptly deliver to the Corporation all notices, proxy material and executed but unvoted proxies pertaining to shareholder meetings of Securities held by the Funds. The Custodian shall not vote or authorize the voting of any Securities or give any consent, waiver or approval with respect thereto unless so directed by a Certificate or Written Instruction. G. The Custodian shall promptly deliver to the Corruption all information received by the Custodian and pertaining to Securities held by the Funds with respect to tender or exchange offers, calls for redemption or purchase, or expiration of rights. ARTICLE VI PURCHASE AND SALE OF SECURITIES A. Promptly after each purchase of Securities by a Fund, the Corporation shall deliver to the Custodian (i) with respect to each purchase of Securities which are not Money Market Securities, Written Instructions, and (ii) with respect to each purchase of Money Market Securities, Written Instructions or Oral Instructions, specifying with respect to each such purchase the: 7 8 1.) name of the issuer and the title of the Securities, 2.) principal amount purchased and accrued interest, if any, 3.) date of purchase and settlement, 4.) purchase price per unit, 5.) total amount payable, and 6.) name of the person from whom, or the broker through which, the purchase was made. The Custodian shall, against receipt of Securities purchased by or for a Fund, pay out of the Fund Assets the total amount payable to the person from whom or the broker through which the purchase was made, provided that the same conforms to the total amount payable as set forth in such Written Instructions or Oral Instructions, as the case may be. B. Promptly after each sale of Securities by a Fund, the Corporation shall deliver to the Custodian (i) with respect to each sale of Securities which are not Money Market Securities, Written Instructions, and (ii) with respect to each sale of Money Market Securities, Written Instructions or Oral Instructions, specifying with respect to each such sale the: 1.) name of the issuer and the title of the Securities, 2.) principal amount sold and accrued interest, if any, 3.) date of sale and settlement, 4.) sale price per unit, 5.) total amount receivable, and 6.) name of the person to whom, or the broker through which, the sale was made. The Custodian shall deliver the Securities against receipt of the total amount receivable, provided that the same conforms to the total amount receivable as set forth in such Written Instructions or Oral Instructions, as the case may be. C. On contractual settlement date, the account of each fund will be charged for all purchased Securities settling on that day, regardless of whether or not delivery is made. Likewise, on contractual settlement date, proceeds from the sale of Securities settling that day will be credited to the account of each Fund, irrespective of delivery. 8 9 D. Purchases and sales of Securities effected by the Custodian will be made on a delivery versus payment basis. The Custodian may, in its sole discretion, upon receipt of a Certificate, elect to settle a purchase or sale transaction in some other manner, but only upon receipt of acceptable indemnification from the Corporation. E. The Custodian shall, upon receipt of Written Instructions so directing it, establish and maintain a segregated account or accounts for and on behalf of each Fund. Cash and/or Securities may be transferred into such account or accounts for specific purposes, to-wit: 1.) in accordance with the provision of any agreement among the Corporation, the Custodian, and a broker-dealer registered under the Securities and Exchange Act of 1934, as amended, and also a member of the National Association of Securities Dealers (NASD) (or any futures commission merchant registered under the Commodity Exchange Act), relating to compliance with the rules of the Options Clearing Corporation and of any registered national securities exchange, the Commodity Futures Trading Commission, any registered contract market, or any similar organization or organizations requiring escrow or other similar arrangements in connection with transactions by the Fund; 2.) for purposes of segregating cash or government securities in connection with options purchased, sold or written by the Fund or commodity futures contracts or options thereon purchased or sold by the Fund; 3.) for the purpose of compliance by the Fund with the procedures required for reverse repurchase agreements, firm commitment agreements, standby commitment agreements, and short sales by Act Release No. 10666, or any subsequent release or releases or rule of the Securities and Exchange Commission relating to the maintenance of segregated accounts by registered investment companies; and 4.) for other corporate purposes, only in the case of this clause 4 upon receipt of a copy of resolution of the Board of Directors of the Corporation, certified by its Secretary, setting forth the purposes of such segregated account. 9 10 F. Except as otherwise may be agreed upon by the parties hereto, the Custodian shall not be required to comply with any Written Instructions to settle the purchase of any Securities on behalf of a Fund unless there is sufficient cash in that Fund's account at the time or to settle the sale of any Securities from the account unless such Securities are in deliverable form. Notwithstanding the foregoing, if the purchase price of such Securities exceeds the amount of cash in the account at the time of such purchase, the Custodian may, in its sole discretion, advance the amount of the difference in order to settle the purchase of such Securities. The amount of any such advance shall be deemed a loan from the Custodian to the Fund payable on demand and bearing interest accruing from the date such loan is made up to but not including the date such loan is repaid at a rate per annum customarily charged by the Custodian on similar loans. ARTICLE VII FUND INDEBTEDNESS In connection with any borrowings by a Fund, the Fund will cause to be delivered to the Custodian by a bank or broker requiring Securities as collateral for such borrowings (including the Custodian if the borrowing is from the Custodian), a notice or undertaking in the form currently employed by such bank or broker setting forth the amount of collateral. The Fund shall promptly deliver to the Custodian a Certificate specifying with respect to each such borrowing: (a) the name of the bank or broker, (b) the amount and terms of the borrowing, which may be set forth by incorporating by reference an attached promissory note duly endorsed by the Corporation on behalf of the Fund, or a loan agreement, (c) the date, and time if known, or which the loan is to be entered into, (d) the date on which the loan becomes due and payable, (e) the total amount payable to the Fund on the borrowing date, and (f) the description of the Securities securing the loan, including the name of the issuer, the title and the number of shares or the principal amount. The Custodian shall deliver on the borrowing date specified in the Certificate and required collateral against the lender's delivery of the total loan amount then payable, provided that the same conforms to that which is described in the Certificate. The Custodian shall deliver, in the manner directed by the Corporation, such Securities as additional collateral, as may be specified in a Certificate, to secure further any transaction described in this 10 11 Article VII. The Corporation shall cause all Securities released from collateral status to be returned directly to the Custodian and the Custodian shall receive from time to time such return of collateral as may be tendered to it. The Custodian may, at the option of the lender, keep such collateral in its possession, subject to all rights therein given to the lender because of the loan. The Custodian may require such reasonable conditions regarding such collateral and its dealings with third-party lenders as it may deem appropriate. ARTICLE VIII CONCERNING THE CUSTODIAN A. Except as otherwise provided herein, the Custodian shall not be liable for any loss or damage resulting from its action or omission to act or otherwise, except for any such loss or damage arising out of its own negligence or willful misconduct. The Corporation shall defend, indemnify and hold harmless the Custodian and its directors, officers, employees and agents with respect to any loss, claim, liability or cost (including reasonable attorneys' fees) arising or alleged to arise from or relating to the Corporation's duties hereunder or any other action or inaction of the Corporation or its Directors, officers, employees or agents, except such as may arise from the negligent action, omission, willful misconduct or breach of this Agreement by the Custodian. The provisions under this paragraph shall survive the termination of this Agreement. B. Without limiting the generality of the foregoing, the Custodian, acting in the capacity of Custodian hereunder, shall be under no obligation to inquire into, and shall not be liable for: 1.) The validity of the issue of any Securities purchased by or for the account of a Fund, the legality of the purchase thereof, or the propriety of the amount paid therefor; 2.) The legality of the sale of any Securities by or for the account of a Fund, or the propriety of the amount for which the same are sold; 3.) The legality of the issue or sale of any shares of a Fund, or the 11 12 sufficiency of the amount to be received therefor; 4.) The legality of the redemption of any shares of a Fund, or the propriety of the amount to be paid therefor; 5.) The legality of the declaration or payment of any dividend by a Fund in respect of shares of the Fund; 6.) The legality of any borrowing by a Fund on behalf of a Fund, using Securities as collateral. C. The Custodian shall not be under any duty or obligation to take action to effect collection of any amount due to a Fund from any Dividend and Transfer Agent of the Fund nor to take any action to effect payment or distribution by any Dividend and Transfer Agent of the Fund of any amount paid by the Custodian to any Dividend and Transfer Agent of the Fund in accordance with this Agreement. D. Notwithstanding Section D of Article V, the Custodian shall not be under any duty or obligation to take action to effect collection of any amount, if the Securities upon which such amount is payable are in default, or if payment is refused after due demand or presentation, unless and until (i) it shall be directed to take such action by a Certificate and (ii) it shall be assured to its satisfaction (including prepayment thereof) of reimbursement of its costs and expenses in connection with any such action. E. The Corporation acknowledges and hereby authorizes the Custodian to hold Securities through its various agents described in Appendix B annexed hereto. The Corporation hereby represents that such authorization has been duly approved by the Board of Directors of the Corporation as required by the Act. The Custodian acknowledges that although certain Fund Assets are held by its agents, the Custodian remains primarily liable for the safekeeping of the Fund Assets. In addition, the Corporation acknowledges that the Custodian may appoint one or more financial institutions, as agent or agents or as sub-custodian or sub-custodians, including, but not limited to, banking institutions located in foreign countries, for the purpose of holding Securities and moneys at any time owned by the Funds. The Custodian shall not be relieved of any obligation or liability under this Agreement in connection with the appointment or activities of such agents or sub-custodians. Any such agent or sub-custodian shall be qualified to serve as such for assets of investment companies registered under the Act. Upon request, the Custodian shall promptly forward 12 13 to the Corporation any documents it receives from any agent or sub-custodian appointed hereunder which may assist trustees of registered investment companies to fulfill their responsibilities under Rule 17f-5 of the Act. F. The Custodian shall not be under any duty or obligation to ascertain whether any Securities at any time delivered to or held by it for the account of a Fund are such as properly may be held by that Fund under the provisions of the Articles of Incorporation and the Corporation's By-Laws. G. The Custodian shall treat all records and other information relating to the Funds and Fund Assets as confidential and shall not disclose any such records or information to any other person unless (i) the Corporation shall have consented thereto in writing or (ii) such disclosure is required by law. H. The Custodian shall be entitled to receive and the Corporation agrees to pay to the Custodian such compensation as shall be determined pursuant to Appendix D attached hereto, or as shall be determined pursuant to amendments to such Appendix D. The Custodian shall be entitled to charge against any money held by it for the account of each Fund, the amount of any of its fees, any loss, damage, liability or expense, including counsel fees related to that Fund. The expenses which the Custodian may charge against the account of a Fund include, but are not limited to, the expenses of agents or sub-custodians incurred in settling transactions involving the purchase and sale of Securities of that Fund. I. The Custodian shall be entitled to rely upon any Oral Instructions and any Written Instructions. The Corporation agrees to forward to the Custodian Written Instructions confirming Oral Instructions in such a manner so that such Written Instructions are received by the Custodian, whether by hand delivery, facsimile or otherwise, on the same business day on which such Oral Instructions were given. The Corporation agrees that the failure of the Custodian to receive such confirming instructions shall in no way affect the validity of the transactions or enforceability of the transactions hereby authorized by the Corporation. The Corporation agrees that the Custodian shall incur no liability to the Corporation for acting upon Oral Instructions given to the Custodian hereunder concerning such transactions. J. The Custodian will (i) set up and maintain proper books of account and complete records of all transactions in the accounts maintained by the Custodian 13 14 hereunder in such manner as will meet the obligations of the Corporation under the Act, with particular attention to Section 31 thereof and Rules 31a-1 and 31a.-2 thereunder and those records are the property of the Corporation, and (ii) preserve for the periods prescribed by applicable Federal statute or regulation all records required to be so preserved. All such books and records shall be the property of the Corporation, and shall be open to inspection and audit at reasonable times and with prior notice by Officers and auditors employed by the Corporation. K. The Custodian shall send to the Corporation any report received on the systems of internal accounting control of the Custodian, or its agents or sub-custodians, as the Corporation may reasonably request from time to time. L. The Custodian performs only the services of a custodian and shall have no responsibility for the management, investment or reinvestment of the Securities from time to time owned by the Funds. The Custodian is not a selling agent for shares of the Funds and performance of its duties as custodian shall not be deemed to be a recommendation to the Corporation's shareholders or others of shares of the Funds as an investment. M. The Custodian shall take all reasonable action, that the Corporation may from time to time request, to assist the Corporation in obtaining favorable opinions from the Corporation's independent accountants, with respect to the Custodian's activities hereunder, in connection with the preparation of the Corporation's Form N-1A, Form N-SAR, or other reports to the Securities and Exchange Commission. N. The Corporation hereby pledges to and grants the Custodian a security interest in any Fund Assets to secure the payment of any liabilities of the Corporation to the Custodian, whether acting in its capacity as Custodian or otherwise, or on account of money borrowed from the Custodian. This pledge is in addition to any other pledge of collateral by the Corporation to the Custodian. ARTICLE X TERMINATION A. Either of the parties hereto may terminate this Agreement for any reason by giving to the other party a notice in writing specifying the date of such termination, which shall be not less than ninety (90) days after the date of giving of such notice. If such notice 14 15 is given by the Corporation, it shall be accompanied by a copy of a resolution of the Board of Directors of the Corporation, certified by the Secretary of the Corporation, electing to terminate this Agreement and designing a successor custodian or custodians. In the event such notice is given by the Custodian, the Corporation shall, on or before the termination date, deliver to the Custodian a copy of a resolution of the Board of Directors of the Corporation, certified by the Secretary, designating a successor custodian or custodians to act on behalf of the Corporation. In the absence of such designation by the Corporation, the Custodian may designate a successor custodian which shall be a bank or trust company having not less than $100,000,000 aggregate capital, surplus, and undivided profits. Upon the date set forth in such notice this Agreement shall terminate, and the Custodian, provided that it has received a notice of acceptance by the successor custodian, shall deliver on that date, directly to the successor custodian all Securities and moneys then owned by the Corporation and held by it as Custodian. Upon termination of this Agreement, the Corporation shall pay to the Custodian on behalf of the Funds such compensation as may be due as of the date of such termination. The Corporation agrees on behalf of the Funds that the Custodian shall be reimbursed for its reasonable costs in connection with the termination of this Agreement. B. If a successor custodian is not designated by the Corporation, or by the Custodian in accordance with the preceding paragraph, or the designated successor cannot or will not serve, the Corporation shall, upon the delivery by the Custodian to the Funds of all Securities (other than Securities held in the Book-Entry System which cannot be delivered to the Funds) and moneys then owned by the Funds, be deemed to be the custodian for the Funds, and the Custodian shall thereby be relieved of all duties and responsibilities pursuant to this Agreement, other than the duty with respect to Securities held in the Book-Entry System, which cannot be delivered to the Funds, which shall be held by the Custodian in accordance with this Agreement. ARTICLE XI MISCELLANEOUS A. Appendix A sets forth the names and the signatures of all Authorized Persons, as certified by the Secretary of the Corporation. The Corporation agrees to 15 16 furnish to the Custodian a new Appendix A in form similar to the attached Appendix A, if any present Authorized Person ceases to be an Authorized Person or if any other or additional Authorized Persons are elected or appointed. Until such new Appendix A shall be received, the Custodian shall be fully protected in acting under the provisions of this Agreement upon Oral Instructions or signatures of the then current Authorized Persons as set forth in the last delivered Appendix A. B. No recourse under any obligation of this Agreement or for any claim based thereon shall be had against any organizer, shareholder, Officer, Director, past, present or future as such, of the Corporation or of any predecessor or successor, either directly or through the Fund or any such predecessor or successor, whether by virtue of any constitution, statute or rule of law or equity, or be the enforcement of any assessment or penalty or otherwise; it being expressly agreed and understood that this Agreement and the obligations thereunder are enforceable solely against the Corporation, and that no such personal liability whatever shall attach to, or is or shall be incurred by, the organizers, shareholders, Officers, Directors of the Corporation or of any predecessor or successor, or any of them as such. To the extent that any such liability exists, it is hereby expressly waived and released by the Custodian as a condition of, and as a consideration for, the execution of this Agreement. C. The obligations set forth in this Agreement as having been made by the Corporation have been made by the Board of Directors, acting as such Directors for an on behalf of the Funds, pursuant to the authority vested in them under the laws of the State of Maryland, the Articles of Incorporation and the By-Laws of the Corporation. This Agreement has been executed by Officers of the Corporation as officers, and not individually, and the obligations contained herein are not binding upon any of the Directors, Officers, agents or holders of shares, personally, but bind only the Corporation. D. Provisions of the Prospectus and any other documents (including advertising material) specifically mentioning the Custodian (other than merely by name and address) shall be reviewed with the Custodian by the Corporation prior to publication and/or dissemination or distribution, and shall be subject to the consent of the Custodian. E. Any notice or other instrument in writing, authorized or required by this Agreement to be given to the Custodian, shall be sufficiently given if addressed to the Custodian and mailed or delivered to it at its offices at Star Bank Center, 425 Walnut 16 17 Street, M.L. 6118, Cincinnati, Ohio 45202, attention Mutual Fund Custody Department, or at such other place as the Custodian may from time to time designate in writing. F. Any notice or other instrument in writing, authorized or required by this Agreement to be given to the Corporation shall be sufficiently given when delivered to the Fund or on the second business day following the time such notice is deposited in the U.S. mail postage prepaid and addressed to the Corporation at its office at One Financial Way, Cincinnati, Ohio 45242 or at such other place as the Corporation may from time to time designate in writing. G. This Agreement, with the exception of the Appendices, may not be amended or modified in any manner except by a written agreement executed by both parties with the same formality as this Agreement, and authorized and approved by a resolution of the Board of Directors of the Corporation. H. This Agreement shall extend to and shall be binding upon the parties hereto, and their respective successors and assigns; provided, however, that this Agreement shall not be assignable by the Corporation or by the Custodian, and no attempted assignment by the Corporation or the Custodian shall be effective without the written consent of the other party hereto. I. This Agreement shall be construed in accordance with the laws of the State of Ohio. J. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but such counterparts shall, together, constitute only one instrument. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective Officers, thereunto duly authorized as of the day and year first above written. ATTEST: Ohio National Fund, Inc. /s/ Ronald L. Benedict By: /s/Donald J. Zimmerman - ---------------------- -------------------------- Title: President 17 18 ATTEST: Star Bank, N.A. /s/ Lynnette Gibson By: /s/ Marsha A. Croxten - ------------------- ------------------------- Title: Vice President 18 19 APPENDIX A
Authorized Persons Specimen Signatures ------------------ ------------------- President: Donald J. Zimmerman ___________________ Secretary: Ronald L. Benedict ___________________ Treasurer: Dennis R. Taney ___________________ Vice President: Joseph P. Brom ___________________ Vice President: Michael A. Boedeker ___________________ Vice President: Stephen T. Williams ___________________ Adviser Employees: B. Douglas Hundley ___________________ Jed R. Martin ___________________ Keith Hanson ___________________ Annette Brown ___________________ Tanya Denton ___________________ Emily Donham ___________________ Transfer Agent/Fund Accountant Employees: -------------------- ------------------- -------------------- ------------------- -------------------- -------------------
19 20 APPENDIX B The following agents are employed currently by Star Bank, N.A. for securities processing and control . . . The Depository Trust Company (New York) 7 Hanover Square New York, NY 10004 The Federal Reserve Bank Cincinnati and Cleveland Branches Bankers Trust Company 16 Wall Street New York, NY 10005 (For Foreign Securities and certain non-DTC eligible Securities) 20 21 APPENDIX C Star Bank, N.A. STANDARDS OF SERVICE GUIDE Star Bank, N.A. is committed to providing superior quality service to all customers and their agents at all times. We have compiled this guide as a tool for our clients to determine our standards for the processing of security settlements, payment collection, and capital change transactions. Deadlines recited in this guide represent the times required for Star Bank to guarantee processing. Failure to meet these deadlines will result in settlement at our client's risk. In all cases, Star Bank will make every effort to complete all processing on a timely basis. Star Bank is a direct participant of the Depository Trust Company, a direct member of the Federal Reserve Bank of Cleveland, and utilizes the Bankers Trust Company as its agent for ineligible and foreign securities. For corporation reorganizations, Star Bank utilizes SEI's Reorg Source, Financial Information, Inc., XCITEK, DTC Important Notices, and the Wall Street Journal. For bond calls and mandatory puts, Star Bank utilizes SEI's Bond Source, Kenny Information Systems, Standard & Poor's Corporation, and DTC Important Notices. Star Bank will not notify clients of optional put opportunities. Any securities delivered free to Star Bank or its agents must be received three (3) business days prior to any payment or settlement in order for the Star Bank standards of service to apply. Should you have any questions regarding the information contained in this guide, please feel free to contact your account representative. The information contained in this Standards of Service Guide is subject to change. Should any changes be made Star Bank will provide you with an updated copy of this Standards of Service Guide. 21 22 STAR BANK SECURITY SETTLEMENT STANDARDS
TRANSACTION TYPE INSTRUCTIONS DEADLINES * DELIVERY INSTRUCTIONS DTC 1:30 P.M. on Settlement Date DTC Participant #2219 Agent Bank ID #27895 Institutional #______________ For Account #_______________ Federal Reserve Book Entry 12:30 P.M. on Settlement Date Federal Reserve Bank of Cinti/Trust for Star Bank, N.A. ABA #042000013 For Account # _______________ Federal Reserve Book Entry (Repurchase 1:00 P.M. on Settlement Date Federal Reserve Bank of Cinti/Spec Agreement Collateral Only) for Star Bank, N.A. ABA #042000013 For Account # _______________ PTC Securities 12:00 P.M. on Settlement Date PTC for Account BTRST/CIST (GNMA Book Entry) Sub Account: Star Bank, N.A. #090334 Physical Securities 9:30 A.M. EST on Settlement Date Bankers Trust Company (for Deliveries, by 4:00 P.M. on Settlement 16 Wall Street, 4th Floor, Window 43 Date minus 1) for Star Bank Account #090334 CEDEL/EURO-CLEAR 11:00 A.M. on Settlement Date minus 2 Euroclear Via Cedal Bridge In favor of Bankers Trust Comp Cedel 53355 For Star Bank Account #501526354 Cash Wire Transfer 3:00 P.M. Star Bank, N.A. Cinti/Trust ABA #042000013 Credit Account #9901877 Further Credit to _______________ Account # ______________________
* All times listed are Cincinnati time. 22 23 STAR BANK PAYMENT STANDARDS
SECURITY TYPE INCOME PRINCIPAL Equities Payable Date Municipal Bonds* Payable Date Payable Date Corporate Bonds * Payable Date Payable Date Federal Reserve Bank Book Entry* Payable Date Payable Date PTC GNMA's (P&I) Payable Date + 1 Payable Date + 1 CMOs * DTC Payable Date + 1 Payable Date + 1 Bankers Trust Payable Date + 1 Payable Date + 1 SBA Loan Certificates When Received When Received Unit Investment Trust Certificates* Payable Date Payable Date Certificates of Deposit * Payable Date Payable Date Limited Partnerships When Received When Received Foreign Securities When Received When Received *Variable Rate Securities Federal Reserve Bank Book Entry Payable Date Payable Date DTC Payable Date + 1 Payable Date + 1 Bankers Trust Payable Date + 1 Payable Date + 1
NOTE: If a payable date falls on a weekend or bank holiday, payment will be made on the immediately following business day. 23 24 STAR BANK CORPORATE REORGANIZATION STANDARDS
TYPE OF ACTION NOTIFICATION TO CLIENT DEADLINE FOR CLIENT INSTRUCTIONS TRANSACTION TO STAR BANK POSTING Rights, Warrants, Letter of 10 business days prior to 5 business days prior to expiration Upon receipt and Optional Mergers expiration or receipt of notice Mandatory Puts with Later of 10 business days prior to 5 business days prior to expiration Upon receipt Option to Retain expiration on receipt of notice Class Actions 10 business days prior to expiration date 5 business days prior to expiration Upon receipt Voluntary Tenders, Later of 10 business days prior to 5 business days prior to expiration Upon receipt Exchanges, expiration of receipt of notice and Conversions Mandatory Puts, Defaults, At posting of funds or securities received None Upon receipt Liquidations, Bankruptcies, Stock Splits, Mandatory Exchanges Full and Partial Calls Later of 10 business days prior to None Upon receipt expiration or receipt of notice
NOTE: Fractional shares/par amounts resulting from any of the above will be sold. 24 25 APPENDIX D SCHEDULE OF COMPENSATION Star Bank, N.A., as Custodian, will receive monthly compensation for services according to the terms of the following Schedule: I. MARKET VALUE FEE Based upon an annual rate of: Million .0004 (4 Basis Points) on First $100 .0003 (3 Basis Points) on First $ 50 .0002 (2 Basis Points) on Next 50 .00015 (1.5 Basis Points) on Balance II. MONTHLY MINIMUM FEE-PER FUND $400.00 III. OUT-OF-POCKET EXPENSES The only out-of-pocket expenses charged to your account will be shipping fees or transfer fees. IV. IRA DOCUMENTS Per Shareholder/year to hold each IRA Document $8.00 V. EARNINGS CREDITS On a monthly basis any earnings credits generated from uninvested custody balances will be applied against any cash management service fees generated. Earnings credits are based on the average yield on the 91 day U.S. Treasury Bill for the preceding thirteen weeks less the 10% reserve. 25 26 STAR BANK, N.A. THIRD PARTY ACCESS COMPENSATION SCHEDULE OHIO NATIONAL FUND, INC. Third Party access is available within two (2) weeks and requires dial-up software which will allow your organization to access their Star Bank accounts from any location. Requirements and Expenses: Cost - -------------------------- ---- One time client expense for software $250.00 (waived) purchased from SEI which includes internal password control and ability to dial a local IBM Information Systems number (Generally anywhere in the continental U.S.A.) Ongoing Expenses: - ----------------- Telephone Connect Time (local Access Only) $ .37/minute *Long distance rates (if applicable) will be determined pursuant to the rates charged by client's long distance carrier. 26 27 APPENDIX D SCHEDULE OF COMPENSATION CONTINUED
Services Unit Cost ($) Monthly Cost ($) - -------- ------------ --------------- D.D.A. Account Maintenance 14.00 Deposits .399 Deposited Items .109 Checks Paid .159 Balance Reporting - P.C. Access 50.00 ACH Transaction .095 ACH Monthly Maintenance 40.00 Controlled Disbursement (1st account) 110.00 Each additional account 25.00 Deposited Items Returned 6.00 International Items Returned 10.00 NSF Returned Checks 25.00 Stop Payments 22.00 Data Transmission per account 110.00 Data Capture* .10 Drafts Cleared .179 Lockbox Maintenance** 55.00 Lockbox items Processed - with copy of check .32 - without copy of check .26 Checks Printed .20 Positive Pay .06 Issued Items .015 Wire Incoming - Domestic 10.00 - International 10.00 Wire Outgoing - Domestic - Repetitive 12.00 - Non-Repetitive 13.00 - International - Repetitive 35.00 - Non-Repetitive 40.00 PC - Initiated Wires: - Domestic - Repetitive 9.00 - Non-Repetitive 9.00 - International - Repetitive 25.00 - Non-Repetitive 25.00 - ---------------------------
*** Uncollected Charge Star Bank Prime Rate as of first of month plus 4% * Price can vary depending upon what information needs to be captured ** With the use of lockbox, the collected balance in the demand deposit account will be significantly increased and therefore earnings to offset cash management service fees will be maximized. *** Fees for uncollected balances are figures on the monthly average of all combined accounts. **** Other available cash management services are priced separately. Revised 10/31/95 27 EX-9 3 EXHIBIT 9 1 FUND ACCOUNTING SERVICE AGREEMENT BETWEEN OHIO NATIONAL FUND, INC. AND AMERICAN DATA SERVICES, INC. 2
INDEX 1. DUTIES OF ADS......................................................3 2. COMPENSATION OF ADS................................................4 3. LIMITATIONS OF LIABILITY OF ADS....................................4 4. REPORTS............................................................5 5. ACTIVITIES OF ADS..................................................5 6. ACCOUNTS AND RECORDS...............................................5 7. CONFIDENTIALITY....................................................5 8. DURATION AND TERMINATION OF THIS AGREEMENT.........................5 9. ASSIGNMENT.........................................................6 10. NEW YORK LAWS APPLY................................................6 11. AMENDMENTS TO THIS AGREEMENT.......................................6 12. MERGER OF AGREEMENT................................................6 13. NOTICES............................................................6 SCHEDULE A..................................................................7 (A) FUND ACCOUNTING SERVICE FEE............................................7 FEE INCREASES.......................................................7 (B) EXPENSES...............................................................7 (C) SPECIAL REPORTS........................................................7 (D) SERVICE DEPOSIT........................................................8 (E) CONVERSION CHARGE......................................................8 SCHEDULE B:.................................................................9
2 3 FUND ACCOUNTING SERVICE AGREEMENT AGREEMENT made the 1st day of January, 1997, by and between Ohio National Fund, Inc.; a Maryland corporation having its principal office and place of business at One Financial Way, Cincinnati, Ohio 45242 (the "Fund"), and American Data Services, Inc., a New York corporation having its principal office and place of business at 24 West Carver Street, Huntington, New York 11743 ("ADS"). BACKGROUND WHEREAS, the Fund is a diversified, open-end management investment company registered with the United States Securities and Exchange Commission under the Investment Company Act of 1940, as amended (the "1940 Act"); and WHEREAS, ADS is a corporation experienced in providing accounting services to mutual funds and possesses facilities sufficient to provide such services; and WHEREAS, the Fund desires to avail itself of the experience, assistance and facilities of ADS and to have ADS perform for the Fund certain services appropriate to the operations of the Fund, and ADS is willing to furnish such services in accordance with the terms hereinafter set forth. TERMS NOW, THEREFORE, in consideration of the promises and mutual covenants hereinafter contained, the Fund and ADS hereby agree as follows: 1. DUTIES OF ADS. ADS will provide the Fund with the necessary office space, communication facilities and personnel to perform the following services for the Fund: (a) Timely calculate and transmit to NASDAQ the Fund's daily net asset value and communicate such value to the Fund and its transfer agent; (b) Maintain and keep current all books and records of the Fund as required by Rule 31a-1 under the 1940 Act, as such rule or any successor rule may be amended from time to time ("Rule 31a-1"), that are applicable to the fulfillment of ADS's duties hereunder, as well as any other documents necessary or advisable for compliance with applicable regulations as may be mutually agreed to between the Fund and ADS, Without limiting the generality of the foregoing, ADS will prepare and maintain the following records upon receipt of information in proper form from the Fund or its authorized agents: 3 4 Cash receipts journal Cash disbursements journal Dividend record Purchase and sales - portfolio securities journal Subscription and redemption journals Security ledgers Broker ledger General ledger Daily expense accruals Daily income accruals Securities and monies borrowed or loaned and collateral therefore Foreign currency journals Trial balances (c) Provide the Fund and its investment adviser with daily portfolio valuation, net asset value calculation and other standard operational reports as requested from time to time. (d) Provide all raw data available from our fund accounting system (PAIRS) for management's or the administrators preparation of the following: 1. Semi-annual financial statements; 2. Semi-annual form N-SAR; 3. Annual tax returns; 4. Financial data necessary to update form N-1A; 5. Proxy statement. (e) Provide facilities to accommodate annual audit and any audits or examinations conducted by the Securities and Exchange Commission or any other governmental or quasi-governmental entities with jurisdiction. ADS shall for all purposes herein be deemed to be an independent contractor and shall, unless otherwise expressly provided or authorized, have no authority to act for or represent the Fund in any way or otherwise be deemed an agent of the Fund. 2. COMPENSATION OF ADS. In consideration of the services to be performed by ADS as set forth herein for each portfolio listed in Schedule B, ADS shall be entitled to receive compensation and reimbursement for all reasonable out-of-pocket expenses. The Fund agrees to pay ADS the fees and reimbursement of out-of-pocket expenses as set forth in the fee schedule attached hereto as Schedule A. 3. LIMITATION OF LIABILITY OF ADS. (a) ADS shall be held to the exercise of reasonable care in carrying out the provisions of the Agreement, but shall be liable to the Fund for any action taken 4 5 or omitted by it with negligence, bad faith, willful misconduct or reckless disregard of its duties hereunder. It shall be entitled to rely upon any may act upon the accounting records and reports generated by the Fund, advice of the Fund, or of counsel for the Fund and upon statements of the Fund's independent accountants, and shall be without liability for any action reasonably taken or omitted pursuant to such records and reports or advice, provided that such action is not, to the knowledge of ADS, in violation of applicable federal or state laws or regulations, and provided further that such action is taken without negligence, bad faith, willful misconduct or reckless disregard of its duties. (b) Nothing herein contained shall be construed to protect ADS against any liability to the Fund or its security holders to which ADS shall otherwise be subject by reason of willful misfeasance, bad faith, gross negligence in the performance of its duties on behalf of the Fund, reckless disregard of ADS' obligations and duties under this Agreement or the willful violation of any applicable law. (c) Except as may otherwise be provided by applicable law, neither ADS nor its stockholders, officers, directors, employees or agents shall be subject to, and the Fund shall indemnify and hold such persons harmless from and against, any liability for and any damages, expenses or losses incurred by reason of the inaccuracy of information furnished to ADS by the Fund or its authorized agents. 4. REPORTS. (a) ADS shall not be responsible for the accuracy of any information furnished to it by the Fund or its authorized agents, and the Fund shall hold ADS harmless in regard to any liability incurred by reason of the inaccuracy of such information. (b) Whenever, in the course of performing its duties under this Agreement, ADS determines, on the basis of information supplied to ADS by the Fund or its authorized agents, that a violation of applicable law has occurred or that, to its knowledge, a possible violation of applicable law may be occurred or, with the passage of time, would occur, ADS shall promptly notify the Fund and its counsel of such violation. 5. ACTIVITIES OF ADS. The services of ADS under this Agreement are not to be deemed exclusive, and ADS shall be free to render similar services to others so long as its services hereunder are not impaired thereby and the Fund's interests are not impaired, diminished, compromised or conflicted with thereby. 6. ACCOUNTS AND RECORDS. The accounts and records maintained by ADS shall be the property of the Fund, and shall be surrendered to the Fund promptly upon request by the Fund in 5 6 the form in which such accounts and records have been maintained or preserved. ADS agrees to maintain a back-up set of accounts and records of the Fund (which back-up set shall be updated on at least a weekly basis) at a location other than that where the original accounts and records are stored. ADS shall assist the Fund's independent auditors, or, upon approval of the Fund, any regulatory body, in any requested review of the Fund's accounts and records. ADS shall preserve the accounts and records as they are required to be maintained and preserved by Rule 31a-1. 7. CONFIDENTIALITY. ADS agrees that it will, on behalf of itself and its officers and employees, treat all transactions contemplated by this Agreement, and all other information germane thereto, as confidential and not to be disclosed to any person except as may be authorized by the Fund. 8. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement shall become effective as of January 1, 1997 and the fees hereunder are guaranteed until December 31, 1999, provided however, that both parties to this Agreement have the option to terminate the Agreement, without penalty, upon ninety (90) days prior written notice or as otherwise required by applicable law. Should the Fund exercise its right to terminate, all out-of-pocket expenses associated with the movement of records and material will be borne by the Fund. Additionally, ADS reserves the right to charge for any other reasonable expenses associated with such termination. 9. ASSIGNMENT. This Agreement shall extend to and shall be binding upon the parties hereto and their respective successors and assigns; provided, however, that this Agreement shall not be assignable by the Fund without the prior written consent of ADS, or by ADS without the prior written consent of the Fund. 10. NEW YORK LAWS TO APPLY. The provisions of this Agreement shall be construed and interpreted in accordance with the laws of the State of New York as at the time in effect and the applicable provisions of the 1940 Act. To the extent that the applicable law of the State of New York, or any of the provisions herein, conflict with the applicable provisions of the 1940 Act, the latter shall control. 11. AMENDMENTS TO THIS AGREEMENT. This Agreement may be amended by the parties hereto only if such amendment is in writing and signed by both parties. 6 7 12. MERGER OF AGREEMENT This Agreement constitutes the entire agreement between the parties hereto and supersedes any prior agreement with respect to the subject matter hereof whether oral or written. 13. NOTICES. All notices and other communications hereunder shall be in writing, shall be deemed to have been given when received or when sent by telex or facsimile, and shall be given to the following addresses (or such other addresses as to which notice is given): To the Fund: To ADS: Dennis R. Taney Michael Miola Treasurer President Ohio National Fund, Inc. American Data Services, Inc. One Financial Way 24 West Carver Street Cincinnati, Ohio 45242 Huntington, New York 11743 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. OHIO NATIONAL FUND, INC. AMERICAN DATA SERVICES, INC. By: /s/ DONALD J. ZIMMERMAN By: /s/ MICHAEL MIOLA -------------------------- ------------------------ Donald J. Zimmerman, Michael Miola, President President 7 8 SCHEDULE A (a) FUND ACCOUNTING SERVICE FEE: For the services rendered by ADS in its capacity as fund accounting agent, as specified in Paragraph 1. DUTIES OF ADS, the Fund shall pay ADS, within ten (10) days after receipt of an invoice from ADS at the beginning of each month, a fee calculated as follows: Monthly fund accounting service fees will be based upon the prior month combined average net assets of the portfolios to be processed for both the Ohio National Fund, Inc. and the ONE Fund, Inc. ("Combined Average Net Assets") with no prorating for partial months. MONTHLY SERVICE FEE: o 1/12th of 7.50 basis points on the first $400 million of the Combined Average Net Assets, plus; o 1/12th of 4.00 basis points on the next $200 million of the Combined Average Net Assets, plus; o 1/12th of 2.00 basis points on all Combined Average Net Assets in excess of $600 million. MULTI-CLASS PROCESSING CHARGE $300 per month will be charged for each additional class of stock per portfolio. FEE INCREASES The fees enumerated above will be guaranteed for a period of three years. (b) EXPENSES. The Fund shall reimburse ADS for any out-of-pocket expenses, exclusive of salaries, advanced by ADS in connection with but not limited to the printing or filing of documents for the Fund, travel requested by the Fund, telephone, quotation services, facsimile transmissions, stationery and supplies, record storage, postage, and courier charges, incurred in connection with the performance of its duties hereunder. ADS shall provide the Fund with a monthly invoice of such expenses and the Fund shall reimburse ADS within fifteen (15) days after receipt thereof. (c) SPECIAL REPORTS. All reports and/or analyses requested by the Fund, its auditors, legal counsel, portfolio manager, or any regulatory agency having jurisdiction over the Fund, that are not in the normal course of fund accounting activities as specified in Section 1 of this Agreement shall be subject to an additional charge, agreed upon in advance, based upon the following rates: 8 9 Labor: Senior staff - $150.00/hr. Junior staff - $75.00/hr. Computer time - $45.00/hr. (d) SERVICE DEPOSIT. The Fund will remit to ADS upon execution of this Agreement a service deposit equal to one (1) month's fee under this Agreement, computed in accordance with fee structure enumerated in (a) above based upon the assets of the portfolios listed in Schedule B of this Agreement as of the execution date of this agreement. The Fund will have the option to have the security deposit applied to the last month's service fee, or applied to any new contract between the Fund and ADS. (e) CONVERSION CHARGE. With the exception of out-of-pocket expenses incurred to obtain the records to be converted (i.e. courier charges, telephone toll charges and required travel to previous service agent to review records and schedule transfer), there will be no charge to convert the records to be converted, there will be no charge to convert the records on to our system. 9 10 SCHEDULE B: PORTFOLIOS TO BE SERVICED UNDER THIS AGREEMENT: Equity Portfolio Money Market Portfolio Bond Portfolio Omni Portfolio Capital Appreciation Portfolio Small Cap Portfolio Aggressive Growth Portfolio Core Growth Portfolio Growth & Income Portfolio S&P 500 Index Portfolio Social Awareness Portfolio Strategic Income Portfolio Stellar Portfolio Relative Value Portfolio 10 EX-9.A 4 EXHIBIT 9(A) 1 TRANSFER AGENCY AND SERVICE AGREEMENT between OHIO NATIONAL FUND, INC. and AMERICAN DATA SERVICES, INC. 2 INDEX 1. TERMS OF APPOINTMENT; DUTIES OF ADS...................................3 2. FEES AND EXPENSES.....................................................4 3. REPRESENTATIONS AND WARRANTIES OF ADS.................................4 4. REPRESENTATIONS AND WARRANTIES OF THE FUND............................5 5. INDEMNIFICATION.......................................................5 6. COVENANTS OF THE FUND AND ADS.........................................6 7. TERMINATION OF AGREEMENT..............................................7 8. ASSIGNMENT............................................................7 9. AMENDMENT.............................................................7 10. NEW YORK LAWS TO APPLY................................................8 11. MERGER OF AGREEMENT...................................................8 12. NOTICES...............................................................8 FEE SCHEDULE...............................................................9 (A) ACCOUNT MAINTENANCE CHARGE:...........................................9 FEE INCREASES.........................................................9 (B) EXPENSES:.............................................................9 (C) SPECIAL REPORTS:......................................................9 (D) CONVERSION CHARGE:....................................................9 (E) SERVICE DEPOSIT:.....................................................10 SCHEDULE A................................................................11 2 3 TRANSFER AGENCY AND SERVICE AGREEMENT AGREEMENT made the 1st day of January, 1997, by and between Ohio National Fund, Inc.; a Maryland corporation having its principal office and place of business at One Financial Way, Cincinnati, Ohio 45242 (the "Fund"), and American Data Services, Inc., a New York corporation having its principal office and place of business at 24 West Carver Street, Huntington, New York 11743 ("ADS"). WHEREAS, the Fund desires to appoint ADS as its transfer agent, dividend disbursing agent and agent in connection with certain other activities, and ADS desires to accept such appointment; NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties agree as follows: 1. TERMS OF APPOINTMENT; DUTIES OF ADS 1.01 Subject to the terms and conditions set forth in this agreement, the Fund hereby employs and appoints ADS to act, and ADS agrees to act, as its transfer agent for the Fund's authorized and issued shares of its common stock, $1.00 par value, ("Shares"), dividend disbursing agent and agent in connection with any accumulation, open-account or similar plans provided to the shareholders of the fund ("Shareholders") set out in the currently effective prospectus and statement of additional information ("prospectus") of the Fund. 1.02 ADS agrees that it will perform the following services: (a) In accordance with procedures established from time to time by agreement between the Fund and ADS, ADS shall: I. Receive for acceptance, orders for the purchase of Shares, and promptly deliver payment and appropriate documentation therefore to the Custodian of the Fund authorized by the Board of Directors of the Fund (the "Custodian"); II. Pursuant to purchase orders, issue the appropriate number of Shares and hold such Shares in the appropriate Shareholder account; III. Receive for acceptance redemption requests and redemption directions and deliver the appropriate documentation therefore to the Custodian; IV. At the appropriate time as and when it receives monies paid to it by the Custodian with respect to any redemption, pay over or cause to be paid over in the appropriate manner such monies as instructed by the redeeming Shareholders; 3 4 V. Effect transfers of Shares by the registered owners thereof upon receipt of appropriate instructions; VI. Prepare and transmit payments for dividends and distributions declared by the Fund; VII. Maintain records of account for and advise the Fund and its Shareholders as to the foregoing; and VIII. Record the issuance of shares of the Fund and maintain pursuant to SEC Rule 17Ad-10(e) a record of the total number of shares of the Fund which are authorized, based upon data provided to it by the Fund, and issued and outstanding. ADS shall also provide the Fund on a regular basis with the total number of shares which are authorized and issued and outstanding and shall have no obligation, when recording the issuance of shares, to monitor the issuance of such shares or to take cognizance of any laws relating to the issue or sale of such shares, which functions shall be the sole responsibility of the Fund. (b) In addition to and not in lieu of the services set forth in the above paragraph (a), ADS shall: i) Perform all of the customary services of a transfer agent, dividend disbursing agent, including but not limited to: maintaining all Shareholder accounts, preparing Shareholder meeting lists, mailing proxies, receiving and tabulating proxies, mailing Shareholder reports and prospectuses to current Shareholders, withholding taxes on U.S. resident and non-resident alien accounts, preparing and filing U.S. Treasury Department Forms 1099 and other appropriate forms required with respect to dividends and distributions by federal authorities for all Shareholders, preparing and mailing confirmation forms and statements of account to Shareholders for all purchases and redemptions of Shares and other confirmable transactions in Shareholder accounts, preparing and mailing activity statements for Shareholders, and providing Shareholder services including but not limited to telephonic transactions, written transactions and information related to shareholder accounts; and (ii) provide a system and reports which will enable the Fund to monitor the total number of Shares sold in each State. Procedures applicable to certain of these services may be established from time to time by agreement between the Fund and ADS. 2. FEES AND EXPENSES 2.01 For performance by ADS pursuant to this Agreement, the Fund agrees to pay ADS an annual maintenance fee for each Shareholder account and transaction fees for each portfolio or class of shares serviced under this Agreement (See Schedule A) as set out in the fee schedule attached hereto. Such fees and out-of-pocket expenses and advances identified under Section 2.02 below may be 4 5 changed from time to time subject to mutual written agreement between the Fund and ADS. 2.02 In addition to the fee paid under Section 2.01 above, the Fund agrees to reimburse ADS for out-of-pocket expenses or advances incurred by ADS for the items set out in the fee schedule attached hereto. In addition, any other expenses incurred by ADS at the request or with the consent of the Fund, will be reimbursed by the Fund. 2.03 The fund agrees to pay all fees and reimbursable expenses, including postage for mailing of dividends, proxies, Fund reports and other mailings to all shareholder accounts. 3. REPRESENTATIONS AND WARRANTIES OF ADS ADS represents and warrants to the Fund that: 3.01 It is a corporation duly organized and existing and in good standing under the laws of the State of New York. 3.02 It is duly qualified to carry on its business in the State of New York. 3.03 It is empowered under applicable laws and by its charter and by-laws to enter into and perform this Agreement. 3.04 All requisite corporate proceedings have been taken to authorize it to enter into and perform this Agreement. 3.05 It has and will continue to have access to the necessary facilities, equipment and personnel to perform its duties and obligations under this Agreement. 3.06 ADS is duly registered as a transfer agent under the Securities Act of 1934 and shall continue to be registered throughout the remainder of this Agreement. 4. REPRESENTATIONS AND WARRANTIES OF THE FUND The Fund represents and warrants to ADS that; 4.01 It is a corporation duly organized and existing and in good standing under the laws of the State of Maryland. 4.02 It is empowered under applicable laws and by its Articles of Incorporation and By-Laws to enter into and perform this Agreement. 4.03 All corporate proceedings required by said Articles of Incorporation and By-Laws have been taken to authorize it to enter into and perform this Agreement. 5 6 4.04 It is an open-end and diversified management investment company registered under the Investment Company Act of 1940. 4.05 A registration statement under the Securities Act of 1933 is currently effective and will remain effective, and appropriate state securities law filings as required, have been or will be made and will continue to be made, with respect to all Shares of the Fund being offered for sale. 5. INDEMNIFICATION 5.01 ADS shall not be responsible for, and the Fund shall indemnify and hold ADS harmless from and against, any and all losses, damages, costs, charges, counsel fees, payments, expenses and liability arising out of or attributable to: (a) All actions of ADS or its agents or subcontractors required to be taken pursuant to this Agreement, provided that such actions are taken in good faith and without negligence or willful misconduct. (b) The Fund's refusal or failure to comply with the terms of this Agreement, or which arise out of the Fund's lack good faith, negligence or willful misconduct or which arise out of the breach of any representation or warranty of the Fund hereunder. (c) The reliance on or use by ADS or its agents or subcontractors of information, records and documents which (i) are received by ADS or its agents or subcontractors and furnished to it by or on behalf of the Fund, and (ii) have been prepared and/or maintained by the Fund or any other person or firm on behalf of the Fund. (d) The reliance on, or the carrying out by ADS or its agents or subcontractors of any instructions or requests of the Fund. (e) The offer or sale of Shares in violation of any requirement under the federal securities laws or regulations or the securities laws or regulations of any state that such Shares be registered in such state or in violation of any stop order or other determination or ruling by any federal agency or any state with respect to the offer or sale of such Shares in such state. 5.02 ADS shall indemnify and hold the Fund harmless from and against any and all losses, damages, costs, charges, counsel fees, payments, expenses and liability arising out of or attributable to any action or failure or omission to act by ADS as a result of ADS's lack of good faith, negligence or willful misconduct. 5.03 At any time ADS may apply to any officer of the Fund for instructions, and may consult with legal counsel with respect to any matter arising in connection with the services to be performed by ADS under this Agreement, and ADS and its agents or subcontractors shall not be liable and shall be indemnified by the Fund for 6 7 any action taken or omitted by it in reliance upon such instructions or upon the opinion of such counsel. ADS, its agents and subcontractors shall be protected and indemnified in acting upon any paper or document furnished by or on behalf of the Fund, reasonably believed to be genuine and to have been signed by the proper person or persons, or upon any instruction, information, data, records or documents provided ADS or its agents or subcontractors by machine readable input, telex, CRT data entry or other similar means authorized by the Fund, and shall not be held to have notice of any change of authority of any person, until receipt of written notice thereof from the Fund. ADS, its agents and subcontractors shall also be protected and indemnified in recognizing stock certificates which are reasonably believed to bear the proper manual or facsimile signatures of the officers of the Fund, and the proper countersignature of any former transfer gent or registrar, or of a co-transfer agent or co-register. 5.04 In the event either party is unable to perform its obligations under the terms of this Agreement because of acts of God or strikes reasonably beyond its control, or other causes reasonably beyond its control, such party shall not be liable for damages to the other for any damages resulting from such failure to perform or otherwise from such causes. 5.05 Neither party to this Agreement shall be liable to the other party for consequential damages under any provision of this Agreement or for any act or failure to act hereunder. 5.06 In order that the indemnification provisions contained in this Article 5 shall apply, upon the assertion of a claim for which either party may be required to indemnify the other, the party seeking indemnification shall promptly notify the other party of such assertion, and shall keep the other party advised with respect to all developments concerning such claim. The party who may be required to indemnify shall have the option to participate with the party seeking indemnification in the defense of such claim. The party seeking indemnification shall in no case confess any claim or make any compromise in any case in which the other party may be required to indemnify it except with the other party's prior written consent. 6. COVENANTS OF THE FUND AND ADS 6.01 The Fund shall promptly furnish to ADS a certified copy of the resolution of the Board of Directors of the Fund authorizing the appointment of ADS and the execution and delivery of this Agreement. 6.02 ADS hereby agrees to establish and maintain facilities and procedures reasonably acceptable to the Fund for safekeeping of stock certificates, check forms and facsimile signatures imprinting devices, if any; and for the preparation or use, and for keeping account of, such certificates, forms and devices. 6.03 ADS shall keep records relating to the services to be performed hereunder, in the form and manner as it may deem advisable. To the extent 7 8 required by Section 31 of the Investment Company Act of 1940, as amended, and the Rules thereunder, ADS agrees that all such records prepared or maintained by ADS relating to the services to be performed by ADS hereunder are the property of the Fund and will be preserved, maintained and made available in accordance with such Section and Rules, and will be surrendered promptly to the Fund on and in accordance with its request. 6.04 ADS and the Fund agree that all books, records, information and data pertaining to the business of the other party which are exchanged or received pursuant to the negotiation or the carrying out of this Agreement shall remain confidential, and shall not be voluntarily disclosed to any other person, except as may be required by law. 6.05 In case of any requests or demands for the inspection of the Shareholder records of the Fund, ADS will endeavor to notify the Fund and to secure instructions from an authorized officer of the Fund as to such inspection. ADS reserves the right, however, to exhibit the Shareholder records to any person whenever it is advised by its counsel that it may be held liable for the failure to exhibit the Shareholder records to such person, and shall promptly notify the Fund of any unusual requests to inspect or copy the shareholder records of the Fund or the receipt of any other unusual request to inspect, copy or produce the records of the Fund. 7. TERMINATION OF AGREEMENT 7.01 This Agreement shall become effective as of January 1, 1997 and the fees hereunder are guaranteed until December 31, 1999, provided however, that both parties to this Agreement have the option to terminate the Agreement, without penalty, upon ninety (90) days prior written notice or as otherwise required by applicable law. 7.02 Should the Fund exercise its right to terminate, all out-of-pocket expenses associated with the movement of records and material will be borne by the Fund. Additionally, ADS reserves the right to charge for any other reasonable expenses associated with such termination. 8. ASSIGNMENT 8.01 Neither this Agreement nor any rights or obligations hereunder may be assigned by either party without the written consent of the other party. 8.02 This Agreement shall inure to the benefit of and be binding upon the parties and their respective permitted successors and assigns. 9. AMENDMENT 8 9 9.01 This Agreement may be amended or modified by a written agreement executed by both parties and authorized or approved by a resolution of the Board of Directors of the Fund. 10. NEW YORK LAWS TO APPLY 10.01 The provisions of this Agreement shall be construed and interpreted in accordance with the laws of the State of New York as at the time in effect and the applicable provisions of the 1940 Act. To the extent that the applicable law of the State of New York, or any of the provisions herein, conflict with the applicable provisions of the 1940 Act, the latter shall control. 11. MERGER OF AGREEMENT 11.01 This Agreement constitutes the entire agreement between the parties hereto and supersedes any prior agreement with respect to the subject matter hereof whether oral or written. 12. NOTICES All notices and other communications hereunder shall be in writing, shall be deemed to have been given when received or when sent by telex or facsimile, and shall be given to the following addresses (or such other addresses as to which notice is given): To the Fund: To ADS: Dennis R. Taney Michael Miola Treasurer President Ohio National Fund, Inc. American Data Services, Inc. One Financial Way 24 West Carver Street Cincinnati, OH 45242 Huntington, New York 11743 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. OHIO NATIONAL FUND, INC. AMERICAN DATA SERVICES, INC. By: /s/ DONALD J. ZIMMERMAN By: /s/ MICHAEL MIOLA ------------------------------- ---------------------------- Donald J. Zimmerman, President Michael Miola, President 9 10 FEE SCHEDULE For the services rendered by ADS in its capacity as transfer agent, the Fund shall pay ADS, within ten (10) days after receipt of an invoice from ADS for its services rendered, a fee, calculated as follows: (a) ACCOUNT MAINTENANCE CHARGE: The annual account maintenance charge for all of the portfolios serviced by ADS for the Fund will be $56,700.00. This amount will be prorated on a monthly basis to each portfolio serviced. FEE INCREASES The fees enumerated above will be guaranteed for a period of three years from the date of this Agreement. (b) EXPENSES: The Fund shall reimburse ADS for any out-of-pocket expenses, exclusive of salaries, advanced by ADS in connection with but not limited to the costs for printing fund documents, (i.e. printing of confirmation forms, shareholder statements, redemption/dividend checks, envelopes, financial statements, proxy statement, fund prospectus, etc.) proxy solicitation and mailing expenses, travel requested by the Fund, 800-line costs and fees, stationery and supplies (related to Fund records), record storage, postage (plus a $0.07 service charge for all mailings), pro-rata portion of annual SAS-70 audit letter, telex and courier charges incurred in connection with the performance of its duties hereunder. ADS shall provide the Fund with a monthly invoice of such expenses and the Fund shall reimburse ADS within fifteen (15) days after receipt thereof. (c) SPECIAL REPORTS: All reports and/or analyses requested by the Fund that are not included in the fee schedule, shall be subject to an additional charge, agreed upon in advance, based upon the following rates: Labor: Senior staff - $150.000/hr. Junior staff - $ 75.00/hr. Computer rime - $ 45.00/hr. (d) CONVERSION CHARGE: 10 11 There will be a charge (not to exceed $7,000) to convert the Fund's shareholder accounting records on to the ADS stock transfer system. In addition, ADS will be reimbursed for all out-of-pocket expenses, enumerated in paragraph (b) above and data media conversion costs, incurred during the conversion process. The conversion charge will be estimated and agreed upon in advance by the Fund and ADS. The charge will be based upon the quantity of records to be converted and the condition of the previous service agents records. (e) SERVICE DEPOSIT: The Fund will remit to ADS upon execution of This Agreement a service deposit of equal to one (1) month's shareholder service fee. The service deposit computation will be based either on the total number of shareholder accounts (open and closed) of each portfolio to be serviced or the minimum fee, whichever is greater, as of the execution date of this Agreement. The Fund will have the option to have the service deposit applied to the last month's service fee, or applied to any new contract between the Fund and ADS. 11 12 SCHEDULE A PORTFOLIOS TO BE SERVICED UNDER THIS AGREEMENT Equity Portfolio Money Market Portfolio Bond Portfolio Omni Portfolio International Portfolio Capital Appreciation Portfolio Small Cap Portfolio Global Contrarian Portfolio Aggressive Growth Portfolio Core Growth Portfolio Growth & Income Portfolio S&P 500 Index Portfolio Social Awareness Portfolio Strategic Income Portfolio Stellar Portfolio Relative Value Portfolio 12 EX-9.C 5 EXHIBIT 9(C) 1 STAR BANK, N.A. MASTER REPURCHASE AGREEMENT 1. APPLICABILITY. From time to time the parties hereto may enter into transactions in which Star Bank, N.A., ("Seller") agrees to transfer to the other party to this Agreement ("Buyer") securities or financial instruments ("Securities") against the transfer of funds by Buyer, with a simultaneous agreement by Buyer to transfer to Seller such Securities at a date certain or on demand, against the transfer of funds by Seller. Each such transaction shall be referred to herein as a "Transaction" and shall be governed by this Agreement unless otherwise agreed in writing. FUNDS HELD PURSUANT TO A TRANSACTION ARE NOT A DEPOSIT AND THEREFORE ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION. 2. DEFINITIONS. (a) "Act of Insolvency", with respect to any person, (i) the commencement by such person as debtor of any case or proceeding under any bankruptcy, insolvency, reorganization, liquidation, dissolution or similar law, or such person seeking the appointment of a receiver, trustee, custodian or similar official for such person or any substantial part of its property, or (ii) the commencement of any such case or proceeding against such person, or another seeking such an appointment, which (A) is consented to or not timely contested by such person, (B) results in the entry of an order for relief, such an appointment or the entry of an order having a similar effect, or (C) is not dismissed within 30 days; (b) "Additional Purchased Securities", securities provided by Seller to Buyer pursuant to Paragraph 4 hereof; (c) "Buyer's Margin Amount", with respect to any Transaction as of any date, the amount obtained by application of a percentage (which may be equal to the percentage agreed to pursuant to subparagraph (p) of this paragraph), agreed to by Buyer and Seller prior to entering into the Transaction, to the Repurchase Price for such Transaction as of such date; (d) "Confirmation", the meaning specified in Paragraph 3(b) hereof; (e) "Income", with respect to any Security at any time, any principal thereof then payable and all interests. (f) "Margin Deficit", the meaning specified in Paragraph 4(a) hereof; (g) "Margin Excess", the meaning specified in Paragraph 4(b) hereof; (h) "Market Value", with respect to any Securities as of any date, the price for such Securities on such date obtained from a generally recognized source or the most recent closing bid quotation from such a source, plus accrued Income to the extent not included therein (other than any Income credited or paid to, or applied to the obligations of, Seller pursuant to Paragraph 5 hereof) as of such date; (i) "Price Differential", with respect to any Transaction hereunder as of any date, the aggregate amount obtained by daily application of the Pricing Rate for such Transaction to the Purchase Price for such Transaction on a 360 day per year basis for the actual number of days during the period commencing on (and including) the Purchase Date for such Transaction and ending on (but excluding) the date of determination (reduced by any amount of such Price Differential previously paid by Seller to Buyer with respect to such Transaction); 2 (j) "Pricing Rate", the per annum percentage rate for determination for the Price Differential; (k) "Purchase Date", the date on which Securities are transferred by Seller to Buyer; (l) "Purchase Price", (i) on the Purchase Date, the price at which Purchased Securities are transferred by Seller to Buyer, and (ii) thereafter, such price increased by the amount of any cash paid by Buyer to Seller pursuant to Paragraph 4(b) hereof and decreased by the amount of any cash paid by Seller to Buyer pursuant to Paragraph 4(a) hereof or applied to reduce Seller's obligations under clause (ii) of Paragraph 5 hereof; (m) "Purchased Securities", the Securities transferred by Seller to Buyer in a Transaction hereunder, and any Securities substituted therefor in accordance with Paragraph 9 hereof. The term "Purchased Securities" with respect to any Transaction at any time also shall include Additional Purchased Securities pursuant to Paragraph 4 and shall exclude Securities returned pursuant to Paragraph 4; (n) "Repurchase Date", the date on which Seller is to repurchase the Purchased Securities from Buyer, including any date determined by application of the provisions of Paragraphs 3 (c) or 11 hereof; (o) "Repurchase Price", the price at which Purchased Securities are to be transferred from Buyer to Seller upon termination of a Transaction, which will be determined in each case (including transactions terminable upon demand) as the sum of the Purchase Price and the Price Differential as of the date of such determination, increased by any amount determined by the application of the provisions of Paragraph 11 hereof; (p) "Seller's Margin Amount", with respect to any Transaction as of any date, the amount obtained by application of a percentage (which may be equal to the percentage agreed to purchase to subparagraph (c) of this Paragraph), agreed to by Buyer and Seller prior to entering into the Transaction, to the Repurchase Price for such Transaction as of such date. 3. INITIATION; CONFIRMATION; TERMINATION. (a) An agreement to enter into a Transaction may be made orally or in writing at the initiation of either Buyer or Seller, or automatically pursuant to the terms of any one or more of Buyer's deposit accounts with seller. On the Purchase Date for the Transaction, the Purchased Securities shall be held by Seller or its agent in the manner prescribed in Part 450.4 of the Title 17 of the Code of Federal Regulations, against the crediting of the Purchase Price to an account of the Seller in immediately available funds. (b) At the end of the day of initiation of any Transaction herein, or at the end of any other day during which other securities are substituted for Purchased Securities pursuant to Paragraph 9 hereof, Seller shall promptly deliver to Buyer a written confirmation of each Transaction (a "Confirmation"); provided, however, that Seller need not send a Confirmation at the end of any day during which other securities are substituted for Purchased Securities pursuant to Paragraph 9 hereof unless the substitution results in a change to issuer, maturity date, par amount or coupon rate specified in the previous Confirmation, and provided further that Seller need not send a Confirmation with respect to Transactions or substitutions that occur before January 31, 1988. The Confirmation shall identify the Buyer and the Seller and shall specify (i) the Purchase Date, (ii) the Purchase Price, (iii) the Repurchase Date, unless the Transaction is to be terminable on demand, (iv) the Pricing Rate or Repurchase Price applicable to the Transaction, (v) the Issuer, maturity date, coupon rate, par amount and market value of the Purchased Securities, (vi) the CUSIP or mortgage-backed security pool number, as appropriate, of the Purchased Securities, and (vii) any additional terms or conditions of the Transaction not inconsistent with this Agreement. The Confirmation, together with this Agreement, shall constitute conclusive evidence of the terms agreed between Buyer and Seller 3 with respect to the Transaction to which the Confirmation relates, unless with respect to the Confirmation specific objection is made promptly after receipt thereof. In the event of any conflict between the terms of such Confirmation and this Agreement, this Agreement shall prevail. (c) In the case of Transactions terminable upon demand, such demand shall be made by the Buyer or Seller, no later than such time as is customary in accordance with market practice, by telephone or otherwise on or prior to the banking day on which such termination will be effective. On the date of such demand, or on the date fixed for termination in the case of Transactions having a fixed term, termination of the Transaction will be effected by transfer to Seller or its agent of the Purchased Securities and any income in respect thereof collected by the Buyer (and not previously credited or paid to, or applied to the obligations of, Seller pursuant to Paragraph 5 hereof) against the crediting of the Repurchase Price to an account of the Buyer in immediately available funds. 4. MARGIN MAINTENANCE. (a) If at any time the aggregate Market Value of all Purchased Securities subject to all Transactions is less than the aggregate Buyer's Margin Amount for all such Transactions (a "Margin Deficit"), then Buyer may require Seller, at Seller's option, to make a cash payment to Buyer or to transfer to Buyer additional Securities reasonably acceptable to Buyer ("Additional Purchased Securities"), so that the cash and aggregate Market Value of the Purchased Securities, including any such Additional Purchased Securities, will thereupon equal or exceed such aggregate Buyer's Margin Amount. (b) If at any time the aggregate Market Value of all Purchased Securities subject to all Transactions exceeds the aggregate Seller's Margin Amount for all such Transactions at such time (a "Margin Excess"), then Seller may be notice to Buyer require Buyer, at Buyer's option, to make a cash payment to Seller or to transfer Purchased Securities to Seller, so that the aggregate Market Value of the Purchased Securities, after deduction of any such cash or any Purchased Securities so transferred, will thereupon not exceed such aggregate Seller's Margin Amount. (c) Any cash paid or repaid pursuant to this Paragraph shall be attributed to such Transactions as shall be agreed upon by Buyer and Seller. (d) Seller and Buyer may agree, with respect to any or all Transactions hereunder, that the rights of Buyer or Seller (or both) under subparagraphs (a) and (b) of this Paragraph may be exercised only where a Margin Deficit or Margin Excess exceeds a specified dollar amount or a specified percentage of the Repurchase Price for such Transactions (which amount or percentage shall be agreed to by Buyer and Seller prior to entering into any such Transactions). (e) Seller and Buyer may agree, with respect to any or all Transactions hereunder, that the respective rights of Buyer and Seller under subparagraphs (a) and (b) of this Paragraph to require the elimination of a Margin Deficit or a Margin Excess, as the case may be, can be exercised whenever such a Margin Deficit or Margin Excess exists with respect to any single Transaction hereunder (calculated without regard to any other Transaction outstanding under this agreement). 5. INCOME PAYMENTS. Where a particular Transaction's term extends over an Income payment date on the Securities subject to the Transaction, an amount equal to such Income payment or payments with respect to any Purchased Securities subject to such Transaction shall, on the date such Income is payable, be paid or credited to the account of Seller. 4 6. SECURITY INTEREST. Although the parties intend that all Transactions hereunder be sales and purchases and not loans, in the event any such Transactions are deemed to be loans, Seller shall be deemed to have pledged to Buyer as security for the performance by Seller of its obligations under each such Transaction, and shall be deemed to have granted to Buyer a security interest in, all of the Purchased Securities with respect to all Transactions hereunder and all proceeds thereof. 7. PAYMENT AND TRANSFER. Unless otherwise mutually agreed, all payments hereunder shall be in immediately available funds. All transfers of securities by one party hereto to the other party shall be made by Seller or its agent in the manner prescribed in Part 450 of Title 17 of the Code of Federal Regulations. 8. SEGREGATION OF PURCHASED SECURITIES. All Purchased Securities in the possession of the Seller shall be segregated from Seller's securities and shall be identified as subject to this Agreement. Segregation shall be accomplished as prescribed in Part 450 of Title 17 of the Code of Federal Regulations. 9. SUBSTITUTION. (DELETED) 10. REPRESENTATIONS. Each of the Buyer and Seller represents and warrants to the other that (i) it is duly authorized to execute and deliver this Agreement, to enter into the Transactions contemplated hereunder and to perform its obligations hereunder and has taken all necessary action to authorize such execution, delivery and performance, (ii) it will engage in such Transactions as principal (or, if agreed in writing in advance of any Transaction by the other party hereto, as agent for a disclosed principal), (iii) the person signing this Agreement on its behalf is duly authorized to do so on its behalf, (iv) it has obtained all authorizations of any governmental body required in connection with this Agreement and the Transactions hereunder and such authorizations are in full force and effect and (v) the execution, delivery and performance of this Agreement and the Transactions hereunder will not violate any law, ordinance, charter, by-law or rule applicable to it or any agreement by which it is bound or by which any of its assets are affected. On the Purchase Date for any Transaction Buyer and Seller shall each be deemed to repeat all the foregoing representations made by it. 11. EVENTS OF DEFAULT. In the event that (i) Seller fails to repurchase or Buyer fails to deliver Purchased Securities upon the applicable Repurchase Date, (ii) Seller or Buyer fails, after one business day's notice, to comply with Paragraph 4 hereof, (iii) Buyer fails to comply the Paragraph 5 hereof, (iv) an Act of Insolvency occurs with respect to Seller or Buyer, (v) any representation made by Seller or Buyer shall prove to have been incorrect or untrue in any material respect when made or repeated or deemed to have been made or repeated, or (vi) Seller or Buyer shall admit to the other its inability to, or its intention not to, perform any of its obligations hereunder (each an "Event of Default"); 5 (a) At the option of the nondefaulting party, exercised by written notice to the defaulting party (which option shall be deemed to have been exercised, even if no notice is given, immediately upon the occurrence of an Act of Insolvency), the Repurchase Date for each Transaction hereunder shall be deemed immediately to occur. (b) In all Transactions in which the defaulting party is Seller, if Buyer exercises or is deemed to have exercised the option referred to in subparagraph (a) of this paragraph, (i) Seller's obligations hereunder to repurchase all Purchased Securities in such Transactions shall thereupon become immediately due and payable, (ii) to the extent permitted by applicable law, the Repurchase Price with respect to each such Transaction shall be increased by the aggregate amount obtained by daily application of the Pricing Rate for such Transaction to the Repurchase Price for such Transaction as of the Repurchase Date as determined pursuant to subparagraph (a) of this Paragraph (decreased as of any day by (A) any amounts retained by Buyer with respect to such Repurchase Price pursuant to clause (iii) of this subparagraph, (B) any proceeds from the sale of Purchased Securities pursuant to subparagraph (d)(i) of this paragraph, and (C) any amounts credited to the account of Seller pursuant to subparagraph (e) of this paragraph) on a 360 day per year basis for the actual number of days during the period from the date of the Event of Default giving rise to such option to the date of payment of the Repurchase Price as so increased, (iii) all Income paid after such exercise or deemed exercise shall be paid to Buyer and applied to the aggregate unpaid Repurchase Prices owed by Seller, and (iv) Seller shall immediately deliver to Buyer any Purchased Securities subject to such Transactions then in Seller's possession. (c) In all Transactions in which the defaulting party is Buyer, upon tender by Seller of payment of the aggregate Repurchase Prices for all such Transactions, Buyer's right, title and interest in all Purchased Securities subject to such Transaction shall be deemed transferred to Seller, and Buyer shall deliver all such Purchased Securities to Seller. (d) After one business day's notice to the defaulting party (which notice need not be given if an Act of Insolvency shall have occurred, and which may be the notice given under subparagraph (a) of this paragraph or the notice given under clause (ii) of the first sentence of this Paragraph), the nondefaulting party may: (i) as to Transactions in which the defaulting party is Seller, (A) immediately sell, in a recognized market at such price or prices as Buyer may reasonably deem satisfactory, any or all Purchased Securities subject to such Transactions and apply the proceeds thereof to the aggregate unpaid repurchase Prices owing by Seller or (B) in its sole discretion elect, in lieu of selling all or a portion of such Purchased Securities, to give Seller credit for such Purchased Securities in an amount equal to the price therefor on such date, obtained from a generally recognized source or the most recent closing bid quotation from such a source, against the aggregate unpaid Repurchase Price; and (ii) as to Transactions in which the defaulting party is Buyer, (A) purchase securities ("Replacement Securities") of the same class and amount as any Purchased Securities that are not delivered by Buyer to Seller as required hereunder or (B) in its sole discretion elect, in lieu of purchasing Replacement Securities, to be deemed to have purchased Replacement Securities at the price therefor on such date, obtained from a generally recognized source or the most recent closing bid quotation from such a source. (e) As to Transactions in which the defaulting party is Buyer, Buyer shall remain liable to Seller (i) with respect to Purchased Securities, for any excess of the price paid (or deemed paid) by Seller for Replacement Securities therefor over the Repurchase Price for such Purchased Securities and (ii) with respect to Additional Purchased Securities, for the price paid (or deemed paid) by Seller for the Replacement Securities therefor. In addition, Buyer shall be liable to Seller for interest on such remaining liability with respect to each such purchase (or 6 deemed purchase) until paid in full by Buyer. Such interest shall be at a rate equal to the Pricing Rate. (f) For purposes of this Paragraph 11, the Repurchase Price for each Transaction hereunder in respect of which the defaulting party is Buyer shall not increase above the amount of such Repurchase Price for such Transaction shall be determined as of the date of the exercise or deemed exercise by Seller of its option under subparagraph (a) of this paragraph. (g) The defaulting party shall be liable to the nondefaulting party for the amount of all reasonable legal or other expenses incurred by the nondefaulting party in connection with or as a consequence of an Event of Default, together with interest thereon at a rate equal to the Pricing Rate. 12. SINGLE AGREEMENT. Buyer and Seller acknowledge that, and have entered hereinto and will enter into each Transaction hereunder in consideration of and in reliance upon the fact that, all Transactions hereunder constitute a single business and contractual relationship and have been made in consideration of each other. Accordingly, each of Buyer and Seller agrees (i) to perform all of its obligations in respect of each Transaction hereunder, and that a default in the performance of any such obligations shall constitute a default by it in respect of all Transactions hereunder, (ii) that each o them shall be entitled to set off claims and apply property held by them in respect of any Transaction against obligations owing to them in respect of any other Transactions hereunder and (iii) that payments, deliveries and other transfers made by either of them in respect to any Transaction shall be deemed to have been made in consideration of payments, deliveries and other Transactions hereunder, and the obligations to make any such payments, deliveries and other transfers may be applied against each other and netted. 13. NOTICES AND OTHER COMMUNICATIONS. Unless another address is specified in writing by the respective party to whom any notice or other communication is to be given hereunder, all such notices or communications shall be in writing or confirmed in writing and delivered at the respective addresses set forth in Annex I attached hereto. 14. ENTIRE AGREEMENT: SEVERABILITY. This Agreement shall supersede any existing agreements between the parties containing general terms and conditions for repurchase transactions. Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement. 15. NON-ASSIGNABILITY; TERMINATION. The rights and obligations of the parties under this Agreement and under any Transaction shall not be assigned by either party without the prior written consent of the other party. Subject to the foregoing, this Agreement and any Transactions shall be binding upon and shall inure to the benefit of the parties and their respective successors and assigns. This Agreement may be canceled by either party upon giving written notice to the other, except that this Agreement shall, notwithstanding such notice, remain applicable to any Transactions then outstanding. 7 16. GOVERNING LAW. This Agreement shall be governed by the laws of the State of Ohio without giving effect to the conflict of law principles thereof. 17. NO WAIVERS, ETC. No express or implied waiver of any Event of Default by either party shall constitute a waiver of any other Event of Default and no exercise of any remedy hereunder by any party shall constitute a wavier of its right to exercise any other remedy hereunder. No modification or waiver of any provision of this Agreement and no consent by any party to a departure herefrom shall be effective unless and until such shall be in writing and duly executed by both of the parties hereto. Without limitation on any of the foregoing, the failure to give a notice pursuant to subparagraph 4(a) and 4(b) hereof will not constitute a wavier of any right to do so at a later date. 18. USE OF EMPLOYEE PLAN ASSETS. If assets of an employee benefit plan subject to any provision of the Employee Retirement Income Security Act of 1974 ("ERISA") are intended to be used by either party hereto (the "Plan Party") in a Transaction, the Plan Party shall so notify the other party prior to the Transaction. The Plan Party shall represent in writing to the other party that the Transaction does not constitute a prohibited transaction under ERISA or is otherwise exempt therefrom, and the other party may proceed in reliance thereon but shall not be required so to proceed. STAR BANK, N.A. OTHER PARTY TO AGREEMENT ("SELLER) ("BUYER") OHIO NATIONAL FUND, INC. BY: /s/ DARYL N. BIBLE BY: /s/ DONALD J. ZIMMERMAN ----------------------- -------------------------------- PRINT NAME: Daryl N. Bible PRINT NAME: Donald J. Zimmerman TITLE: Vice President TITLE: President DATE: 1-9-97 DATE: 1-3-97 ANNEX I (Names and Addresses for Communications Between Parties) 8 ADDENDUM TO MASTER REPURCHASE AGREEMENT This Addendum is to the Master Repurchase Agreement of even date herewith (together with any other Addenda or Schedule thereto, the "Agreement") by and between Ohio National Fund, Inc. (the "Buyer") and Star Bank, National Association (the "Seller"). Capitalized terms used herein shall have the same meaning as originally set forth in the Agreement unless otherwise indicated herein. 1. Substitution. Notwithstanding anything to the contrary set forth in the Agreement, Buyer and Seller agree that all Purchased Securities shall be held by the Trust Department (the "Department") of Seller as custodian, that Seller shall not be permitted to substitute any other Securities for any Purchased Securities without the prior consent of the Trust Department or the Buyer, and that at no time will the Buyer's securities be commingled with the Seller's own securities. 2. Unless otherwise agreed by the parties and set forth on a confirmation or other writing, the percentage applied to obtain the Buyer's Margin Amount (as defined in Section 2(C) of the Agreement) with respect to any transaction hereunder shall be 100% for U.S. Government and Agency Securities. Except as specifically modified by this Addendum, the Agreement shall continue in full force and effect as originally stated therein. Ohio National Fund, Inc. BY: /s/ DONALD J. ZIMMERMAN ------------------------- TITLE: President DATE: 1-3-1997 STAR BANK, NATIONAL ASSOCIATION BY: /s/ DARYL N. BIBLE ------------------------- TITLE: Vice President DATE: 1-9-97 9
ACCOUNT NAME ACCOUNT NUMBER - ------------ -------------- OHIO NATIONAL FUND, INC. EQUITY PORTFOLIO 19-6553 OHIO NATIONAL FUND, INC. MONEY MARKET PORTFOLIO 19-6554 OHIO NATIONAL FUND, INC. BOND PORTFOLIO 19-6555 OHIO NATIONAL FUND, INC. OMNI PORTFOLIO 19-6556 OHIO NATIONAL FUND, INC. CAPITAL APPRECIATION PORTFOLIO 19-6557 OHIO NATIONAL FUND, INC. SMALL CAP PORTFOLIO 19-6558 OHIO NATIONAL FUND, INC. AGGRESSIVE GROWTH PORTFOLIO 19-6559 OHIO NATIONAL FUND, INC. CORE GROWTH PORTFOLIO 19-6560 OHIO NATIONAL FUND, INC. GROWTH & INCOME PORTFOLIO 19-6561 OHIO NATIONAL FUND, INC. S&P 500 INDEX PORTFOLIO 19-6562 OHIO NATIONAL FUND, INC. SOCIAL AWARENESS PORTFOLIO 19-6563 OHIO NATIONAL FUND, INC. STRATEGIC INCOME PORTFOLIO 19-6564 OHIO NATIONAL FUND, INC. STELLAR PORTFOLIO 19-6565 OHIO NATIONAL FUND, INC. RELATIVE VALUE PORTFOLIO 19-6566
EX-13.B 6 EXHIBIT 13(B) 1 One Financial Way Cincinnati, Ohio 45242 [LOGO] Post Office Box 237 Ohio National Cincinnati, Ohio 45201-0237 Financial Services Telephone: 513.794.6100 January 2, 1997 Donald J. Zimmerman, President Ohio National Fund, Inc. 237 William Howard Taft Road Cincinnati, Ohio 45219 Re: Subscription of Capital Stock of Ohio National Fund, Inc. Portfolios Dear Don: The Ohio National Life Insurance Company, an Ohio domiciled mutual life insurer, hereby subscribes to (i) 100 shares of the Core Growth Portfolio of Ohio National Fund, Inc. (the "Fund") for a consideration of $1,000, and (ii) 100 shares of the Growth & Income Portfolio of the Fund for a consideration of $1,000, and (iii) 100 shares of the S&P 500 Index Portfolio of the Fund for a consideration of $1,000, and (iv) 100 shares of the Social Awareness Portfolio of the Fund for a consideration of $1,000, and (v) 100 shares of the Strategic Income Portfolio for a consideration of $1,000, and (vi) 100 shares of the Stellar Portfolio for a consideration of $1,000, and (vii) 100 shares of the Relative Value Portfolio for a consideration of $1,000. The consideration for such shares is hereby tendered. The undersigned subscriber declares its intentions to purchase the said shares of the Fund for investment purposes only, with no present intention to resell, redistribute or redeem such securities, subject however, to any requirements of applicable law that the disposition of the undersigned's properly shall be and remain in its control at all times. THE OHIO NATIONAL LIFE INSURANCE COMPANY By: /s/ JOSEPH P.BROM ------------------------------------------ Joseph P. Brom, Senior Vice President and Chief Investment Officer JPB/nh EX-16 7 EXHIBIT 16 1 Annual Report Calculations Equity
Fund Top Top Top Retirement Fund Fund Year ROR Value Combined Top Plus Explorer Spectrum Advantage Cumulative Annualized ---- --- ----- -------- -------- -------- -------- --------- ---------- ---------- 12/31/68 10.000000 9.12% 9.46% 8.90% 8.80% 8.98% 1518.60% 10.45% 12/31/69 1.0090 10.090000 12/31/70 1.0763 10.859867 12/31/71 1.0766 11.691733 12/31/72 1.1340 13.258425 12/31/73 0.8989 11.917998 12/31/74 0.8047 9.590413 12/31/75 1.1985 11.494110 12/31/76 1.1680 13.425121 12/31/77 0.9116 12.238340 12/31/78 1.0726 13.126844 12/31/79 1.1587 15.210074 12/31/80 1.4147 21.517691 12/31/81 0.9707 20.887223 12/31/82 1.2874 26.890211 12/31/83 1.1849 31.862211 12/31/84 0.9912 31.581823 12/31/85 1.2369 39.063557 12/31/86 1.2331 48.169272 11.51% 11.87% 11.30% 11.19% 11.37% 236.02% 12.89% 12/31/87 1.1082 53.381187 12/31/88 1.1503 61.404380 12/31/89 1.2321 75.656336 12/31/90 0.9614 72.736002 12/31/91 1.2018 87.414127 11.74% 12.09% 11.52% 11.41% 11.59% 85.16% 13.11% 12/31/92 1.0754 94.005152 12/31/93 1.1409 107.250478 12/31/94 1.0025 107.518604 12/31/95 1.2720 136.763665 16.92% 17.29% 16.69% 16.58% 16.77% 18.35% 18.35% 12/31/96 1.1835 161.859797
2 Money Market
Fund Top Top Top Retirement Fund Fund Year ROR Value Combined Top Plus Explorer Spectrum Advantage Cumulative Annualized ---- --- ----- -------- -------- -------- -------- --------- ---------- ---------- 7/31/80 10.000000 6.12% 6.46% 5.91% 5.81% 5.98% 223.97% 7.42% 12/31/80 1.0483 10.483000 12/31/81 1.1625 12.186488 12/31/82 1.1227 13.681770 12/31/83 1.0861 14.859770 12/31/84 1.1011 16.362093 12/31/85 1.0775 17.630155 12/31/86 1.0630 18.740855 4.35% 4.68% 4.14% 4.04% 4.21% 72.87% 5.62% 12/31/87 1.0628 19.917780 12/31/88 1.0713 21.337918 12/31/89 1.0889 23.234859 12/31/90 1.0789 25.068089 12/31/91 1.0554 26.456861 2.87% 3.20% 2.68% 2.57% 2.75% 22.45% 4.13% 12/31/92 1.0317 27.295544 12/31/93 1.0274 28.043442 12/31/94 1.0400 29.165179 12/31/95 1.0562 30.804262 3.90% 4.23% 3.70% 3.59% 3.77% 5.17% 5.17% 12/31/96 1.0517 32.396843
Bond
Fund Top Top Top Retirement Fund Fund Year ROR Value Combined Top Plus Explorer Spectrum Advantage Cumulative Annualized ---- --- ----- -------- -------- -------- -------- --------- ---------- ---------- 11/02/82 10.000000 7.34% 7.68% 7.13% 7.03% 7.21% 224.19% 8.66% 12/31/82 1.0060 10.060000 12/31/83 1.0263 10.324578 12/31/84 1.1215 11.579014 12/31/85 1.2153 14.071976 12/31/86 1.1249 15.829566 6.13% 6.47% 5.92% 5.82% 5.99% 104.79% 7.43% 12/31/87 1.0081 15.957785 12/31/88 1.0674 17.033340 12/31/89 1.1071 18.857611 12/31/90 1.0782 20.332276 12/31/91 1.1296 22.967339 5.83% 6.17% 5.63% 5.52% 5.70% 41.15% 7.14% 12/31/92 1.0754 24.699076 12/31/93 1.1069 27.339407 12/31/94 0.9616 26.289574 12/31/95 1.1890 31.258304 2.45% 2.78% 2.25% 2.15% 2.32% 3.71% 3.71% 12/31/96 1.0371 32.417987
3 Omni
- ------------------------------------------------------------------------------------------------------------------------------- Fund Top Top Top Year ROR Value Combined Top Plus Explorer Spectrum ================ ================ ================ ============= ============= ============== =============== 9/10/84 10.000000 10.21% 10.56% 9.99% 9.89% 12/31/84 1.0374 10.374000 12/31/85 1.1559 11.991307 12/31/86 1.1794 14.142547 9.18% 9.52% 8.96% 8.85% 12/31/87 0.9832 13.904952 12/31/88 1.1503 15.994867 12/31/89 1.1546 18.467673 12/31/90 1.0191 18.820405 12/31/91 1.1815 22.236309 10.71% 11.07% 10.50% 10.39% 12/31/92 1.0860 24.148632 12/31/93 1.1285 27.251731 12/31/94 0.9947 27.107297 12/31/95 1.2275 33.274207 14.15% 14.51% 13.92% 13.81% 12/31/96 1.1554 38.445018 - -------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------- Retirement Fund Fund Advantage Cumulative Annualized =============== ============ ============= 10.07% 284.47% 11.57% 9.04% 171.84% 10.52% 10.58% 72.89% 11.57% 14.00% 15.54% 15.54% - ----------------------------------------------------
International
- ------------------------------------------------------------------------------------------------------------------------------- Fund Top Top Top Year ROR Value Combined Top Plus Explorer Spectrum ================ ================ ================ ============= ============= ============== =============== 5/03/93 10.000000 14.78% 15.15% 14.56% 14.64% 12/31/93 1.2496 12.496000 12/31/94 1.0807 13.504427 12/31/95 1.1210 15.138463 13.10% 13.46% 12.88% 12.77% 12/31/96 1.1448 17.330512 - -------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------- Retirement Fund Fund Advantage Cumulative Annualized =============== ============ ============= 14.64% 73.31% 16.21% 12.96% 14.48% 14.48% - ----------------------------------------------------
Small Cap
- ------------------------------------------------------------------------------------------------------------------------------- Fund Top Top Top Year ROR Value Combined Top Plus Explorer Spectrum ================ ================ ================ ============= ============= ============== =============== 4/30/94 10.000000 25.55% 25.96% 25.32% 25.19% 12/31/94 1.2012 12.012000 12/31/95 1.3115 15.753738 16.28% 16.66% 16.06% 15.94% 12/31/96 1.1606 18.283788 - -------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------- Retirement Fund Fund Advantage Cumulative Annualized =============== ============ ============= 25.40% 89.85% 27.16% 16.14% 17.71% 17.71% - ----------------------------------------------------
4 Capital Appreciation
- ------------------------------------------------------------------------------------------------------------------------------------ Fund Top Top Year ROR Value Combined Top Plus Explorer ================= ================ ================ ================ ================ =============== 4/30/94 10.000000 14.50% 14.86% 14.27% 12/31/94 1.0354 10.354000 12/31/95 1.2090 12.517986 14.35% 14.72% 14.13% 12/31/96 1.1413 14.286777 - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------- Top Retirement Fund Fund Spectrum Advantage Cumulative Annualized ================ ================ ================ ================ 14.16% 14.35% 48.36% 15.93% 14.02% 14.21% 15.75% 15.75% - -------------------------------------------------------------------------------------------
Aggressive Growth
- ----------------------------------------------------------------------------------------------------------------------------------- Fund Top Top Year ROR Value Combined Top Plus Explorer ================= ================ ================ ================ ================ =============== 3/31/95 10.000000 13.66% 14.03% 13.44% 12/31/95 1.2561 12.561000 -0.46% -0.14% -0.65% 12/31/96 0.9935 12.479354 - -----------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------- Top Retirement Fund Fund Spectrum Advantage Cumulative Annualized ================ ================ ================ ================ 13.33% 13.52% 27.92% 15.12% -0.75% -0.58% 0.76% 0.76% - --------------------------------------------------------------------------------------------
Global Contrarian
- ----------------------------------------------------------------------------------------------------------------------------------- Fund Top Top Year ROR Value Combined Top Plus Explorer ================= ================ ================ ================ ================ =============== 3/31/95 10.000000 10.67% 11.02% 10.45% 12/31/95 1.0774 10.774000 10.74% 11.09% 10.52% 12/31/96 1.1052 11.907425 - -----------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------- Top Retirement Fund Fund Spectrum Advantage Cumulative Annualized ================ ================ ================ ================ 10.34% 10.53% 22.06% 12.07% 10.41% 10.60% 12.09% 12.09% - --------------------------------------------------------------------------------------------
EX-27.1 8 EXHIBIT 27.1
6 0000315754 OHIO NATIONAL FUND, INC. 01 EQUITY YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 28.58 .47 4.58 (.46) (.87) 0 32.30 .73 0 0
EX-27.2 9 EXHIBIT 27.2
6 0000315754 OHIO NATIONAL FUND, INC. 02 MONEY MARKET 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 10.00 .50 0 (.50) 0 0 10.00 0.44 0 0
EX-27.3 10 EXHIBIT 27.3
6 0000315754 OHIO NATIONAL FUND, INC. 03 BOND 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 10.93 .69 (.32) (.68) 0 0 10.62 0.79 0 0
EX-27.4 11 EXHIBIT 27.4
6 0000315754 OHIO NATIONAL FUND, INC. 04 OMNI 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 17.60 .53 2.10 (.52) (.31) 0 19.40 .76 0 0
EX-27.5 12 EXHIBIT 27.5
6 0000315754 OHIO NATIONAL FUND, INC. 05 INTERNATIONAL 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 14.38 .25 1.76 (.63) (.27) 0 15.49 1.15 0 0
EX-27.6 13 EXHIBIT 27.6
6 0000315754 OHIO NATIONAL FUND, INC. 06 CAPITAL APPRECIATION 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 11.99 .48 1.31 (.44) (.41) 0 12.93 .97 0 0
EX-27.7 14 EXHIBIT 27.7
6 0000315754 OHIO NATIONAL FUND, INC. 07 SMALL CAP 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 15.85 (.08) 2.80 0 (.54) 0 18.03 .96 0 0
EX-27.8 15 EXHIBIT 27.8
6 0000315754 OHIO NATIONAL FUND, INC. 08 GLOBAL CONTRARIAN 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 10.80 .28 1.00 (.33) (.09) 0 11.66 1.29 0 0
EX-27.9 16 EXHIBIT 27.9
6 0000315754 OHIO NATIONAL FUND, INC. 09 AGGRESSIVE GROWTH 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 11.84 1.64 (1.59) (1.86) 0 0 10.03 1.01 0 0
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