UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-03015
Ohio National Fund, Inc.
(Exact name of registrant as specified in charter)
One Financial Way, Cincinnati, Ohio | 45242 | |
(Address of principal executive offices) | (Zip code) |
CT Corporation 300 E. Lombard St. Suite 1400 Baltimore, MD 21202
(Name and address of agent for service)
Registrant’s telephone number, including area code: 513-794-6971
Date of fiscal year end: December 31
Date of reporting period: December 31, 2008
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports To Stockholders.
W E A L T H B U I L D I N G O P P O R T U N I T Y Ohio National Fund, Inc. Annual Report D E C E M B E R 3 1 , 2008 Ohio National Fund, Inc. |
OHIO NATIONAL FUND, INC.
TABLE OF CONTENTS
President’s Message | 1 | |
Directors and Officers of Ohio National Fund, Inc. | 2 | |
The following pages contain Management’s Discussion of Fund Performance, Portfolio Composition, and Financial Statements for each of the Fund’s Portfolios: | ||
Equity Portfolio | 3 | |
Money Market Portfolio | 10 | |
Bond Portfolio | 14 | |
Omni Portfolio | 22 | |
International Portfolio | 30 | |
Capital Appreciation Portfolio | 37 | |
Millennium Portfolio | 44 | |
International Small-Mid Company Portfolio (formerly the International Small Company Portfolio) | 50 | |
Aggressive Growth Portfolio | 56 | |
Small Cap Growth Portfolio | 62 | |
Mid Cap Opportunity Portfolio | 69 | |
S&P 500 Index Portfolio | 75 | |
Strategic Value Portfolio (formerly the Blue Chip Portfolio) | 86 | |
High Income Bond Portfolio | 93 | |
Capital Growth Portfolio | 104 | |
Nasdaq-100 Index Portfolio | 111 | |
Bristol Portfolio | 118 | |
Bryton Growth Portfolio | 124 | |
U.S. Equity Portfolio | 130 | |
Balanced Portfolio | 136 | |
Income Opportunity Portfolio | 143 | |
Target VIP Portfolio | 151 | |
Target Equity/Income Portfolio | 158 | |
Bristol Growth Portfolio | 164 | |
Notes to Financial Statements | 170 | |
Report of Independent Registered Public Accounting Firm | 191 | |
Additional Information (Unaudited) | 192 | |
Information About Directors and Officers (Unaudited) | 200 |
[THIS PAGE INTENTIONALLY LEFT BLANK]
President’s Message |
Dear Investor:
The year 2008 will be long remembered as one that most investors will prefer to forget. The first half of the year was painful for investors, with both domestic and international equity returns down 10 percent to 12 percent, and bond yields down slightly. As it turned out, that was nothing compared to the second half of the year. Domestic and international equities were down 28 percent to 33 percent, bringing the 2008 annual returns down significantly — from -37 percent to -40 percent. Unfortunately, bond returns turned negative, too, with the Merrill Lynch U. S. Corporate Master Index down 11.1 percent for the second half of the year and down 6.8 percent for all of 2008.
These negative returns for both equity and bonds meant there were very few places for investors to hide. One of the few asset classes with positive returns were Treasuries, as investors fled for the safety of U.S. government securities. The Merrill Lynch U.S. Treasury Master Index posted positive returns during 2008 of 13.98 percent as interest rates fell.
Today, one would have to question the wisdom of investing in government securities. With the very large amount of economic stimulus that most believe is necessary to revive the U.S. economy and the accompanying U.S. Treasury debt issuance that will come with it, Treasury yields must rise to attract investors. We have already seen this happen early in 2009, as the Ten-Year U.S. Treasury bond has risen 60 basis points from its low in late December. Since Treasury prices move inversely to yields, prices have declined and total return so far in 2009 is negative.
In addition, money market portfolios came under considerable pressure after the Reserve Primary Fund “broke the buck” following Lehman Brothers’ bankruptcy in September. A money market portfolio is required to maintain a stable share price (typically $1.00). Failing to maintain the price (in this case due to credit losses) is known as “breaking the buck”. The nation’s oldest money market mutual fund, the Reserve Primary Fund, had invested heavily in Lehman Brothers’ short-term debt. Once Lehman Brothers filed for bankruptcy, the Reserve Primary Fund’s share price fell to $0.97 — the first time in 14 years that a money market fund had broken the buck.
Lehman Brothers’ bankruptcy, along with the Reserve Primary Fund’s issues, heightened awareness of the credit issues in the U.S. economy and exacerbated the credit crunch, which continues to date. While there were some signs of a credit thaw in early January, banks are still unwilling to lend. Until credit is flowing freely, the U.S. economy will have a difficult time recovering.
The Ohio National Fund
The Portfolios in the Ohio National Fund tended to fare like most other actively-managed Portfolios did in 2008; returns were generally negative and many trailed their benchmarks. For some fund managers, even trailing the benchmark put them in the top half of their peer group, as many managers had a difficult time finding positive relative performance. One bright spot was the Income Opportunity Portfolio, which led its benchmark by almost 1,600 basis points. The Income Opportunity Portfolio is designed to provide investors
1
protection in a falling market. While the returns were still negative, the Portfolio performed as expected and limited the negative returns.
Finally, a few words about the Money Market Portfolio: As the credit crisis deepened in the fourth quarter, Ohio National’s investment management team positioned this Portfolio very defensively. That meant that the already limited exposure to the financial sector was even further limited, and target maturities were shortened. As a result, yields were very low. Our belief is that the time to search for yield is not in the midst of a serious recession and credit crisis.
Looking Ahead
In my last letter, the questions regarding the economic retraction of “how long, how wide and how deep” were asked. Unfortunately today there is still little clarity in our economic direction. We are now fifteen to seventeen months into a recession that has been forecast to last nineteen months. Typically at this point in the cycle, the equity markets are leading the recovery. As of mid-January, that recovery is still not evident. The questions, “how long, how wide and how deep”, remain unanswered.
Thank you for entrusting your assets to the Ohio National Fund. We look forward to continuing to serve your investment needs.
Sincerely,
John J. Palmer, FSA
President
Directors and Officers of Ohio National Fund, Inc.
John J. Palmer, President and Director
L. Ross Love, Director
James E. Bushman, Director
George M. Vredeveld, Director
John I. Von Lehman, Director
Thomas A. Barefield, Vice President
Christopher A. Carlson, Vice President
Dennis R. Taney, Chief Compliance Officer
R. Todd Brockman, Treasurer
Catherine E. Gehr, Assistant Treasurer
Kimberly A. Plante, Secretary
Katherine L. Carter, Assistant Secretary
The Statement of Additional Information of Ohio National Fund, Inc. (the “Fund”) includes additional information about the Fund Directors and is available, without charge, upon request, by calling 877-781-6392 toll-free.
A description of the policies and procedures that the Fund uses in voting proxies relating to Fund securities, as well as information regarding how the Fund voted proxies during the most recent twelve-month period ended June 30, 2008, is available without charge, upon request, by calling 877-781-6392 toll-free and on the Securities and Exchange Commission (the “Commission”) website at http://www.sec.gov.
The Fund has filed its Schedules of Investments as of March 31 and September 30 with the Commission, as required, on Form N-Q. Form N-Q is required to be filed with the Commission for the first and third quarters of each fiscal year within sixty days after the end of each period and is available on the Commission website upon acceptance of each submission.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the Fund. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus of Ohio National Fund, Inc. For a prospectus containing more complete information, including charges and expenses, please contact Ohio National Investments, Inc., One Financial Way, Cincinnati, OH 45242, telephone 513-794-6100.
2
Ohio National Fund, Inc.
Equity Portfolio
Equity Portfolio
Objective/Strategy
The Equity Portfolio seeks long-term growth of capital by investing primarily in common stocks or other equity securities.
Performance as of December 31, 2008
Average Annual Total Returns: | ||||
One year | -54.81% | |||
Five years | -11.56% | |||
Ten years | -4.21% |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price and reinvestment of dividends and capital gains. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost.
The Portfolio is not open to direct retail investment. Beneficial interest in shares is obtained solely by purchase of variable life insurance policies and variable annuity contracts. Actual performance results for variable annuity and variable universal life contracts will be lower due to contract charges. Consult your contract for applicable charges.
Comments
For the year ended December 31, 2008, the Equity Portfolio returned -54.81% versus -37.00% for the current benchmark, the S&P 500 Index.
Investors saw a historically terrible year in 2008. Exceptions were few and far between, as according to the Wall Street Journal, only one mutual fund in 1,700 ended the year above water. Asset classes around the world from Chinese equities to Spanish real estate saw sharp declines as troubles in the U.S. housing market spread, compounded by policy errors, culminating in a global recession. There was significant upheaval in the U.S. equity markets, particularly among financials, as erstwhile giants Bear Stearns and Lehman Brothers perished, government sponsored enterprises (“GSEs”) Fannie Mae and Freddie Mac were put into conservatorship by the government, and global insurance firm American International Group (“AIG”) required billions in government loans to survive. The year ended on a slight positive with a modest rebound in stock prices in late November and December amid constructive policy developments and excitement about the new presidential administration, but losses were severe for the year.
The Portfolio was not immune from the turmoil, underperforming the S&P 500 Index benchmark. Losses in the Financials sector were a primary culprit, with principal detractors for the year including Citigroup, Inc., AIG, Freddie Mac, and Merrill Lynch & Co., Inc. Each of these companies suffered multi-billion dollar write-downs from mortgage-backed securities or credit default swaps and ended up forced to accept government loans or being taken over. The global reach of utility firm The AES Corp. (“AES”) proved to be a detriment, as concern about leverage and the sharp slowdown in emerging markets took a big cut out of the company’s stock price. With turnaround stories Eastman Kodak Co. and Sears Holdings Corp. yet to deliver results, investors punished both companies harshly. On the upside, Amgen, Inc. gained nicely as sales trends for several of its drugs improved and encouraging test data was released for a potential blockbuster drug.(1)
Citigroup, Inc. was a poster child for the difficulties large banks faced during 2008, as the firm suffered asset write-downs, announced tens of thousands of layoffs, and was forced to turn to the government for a virtual guarantee of most of a $300 billion portfolio of troubled assets. Looking forward, though, management has proclaimed that the government guarantee, together with $27 billion of preferred shares, boosts Citigroup, Inc.’s capital position from strong to “extraordinarily strong,” and gives it the highest Tier 1 ratio in its peer group. CEO Vikram Pandit has continued to cut costs, improve efficiency and rationalize the business as a whole with the recent decision on the Smith Barney joint venture with Morgan Stanley and potential sale of CitiFinancial. If management is able to implement its turnaround strategy, Citigroup, Inc. could earn about $2.50 per share on a normalized basis. Odds favor long-term investors with Citigroup, Inc.’s stock trading at 2.5 times its normalized earnings power.(1)
AIG’s swoon began in February, after the company disclosed material weakness in its financial products unit. Calls to post more collateral against the credit default swaps written by that unit accelerated into the summer, prompting investors to sell the stock en masse. The crisis wave that claimed Lehman Brothers and forced Merrill Lynch to sell itself hit AIG in mid-September when credit rating agencies downgraded the firm. The downgrades accelerated AIG’s liquidity needs at a time when the financial system was under extreme stress. In a tell-tale sign of the shaky market confidence, several large banks declined to provide a loan package to AIG despite the urging of the Federal Reserve. It was clear that our investment case, based on the long-term fundamental value of AIG’s global franchise, was unlikely to have a chance to play out and we exited the position before the Federal Reserve came forward with a costly “bailout” that diluted existing shareholders by almost 80%.(1)
Freddie Mac was largely done in by policy choices that arguably provoked the subsequent acceleration of the financial crisis. On September 7, regulators put the two GSEs, Fannie Mae and Freddie Mac, into conservatorship. Given that the firms met all stated regulatory requirements, it seems that the government was acting largely on its desire to reduce systemic risk, improve mortgage affordability, and stabilize housing prices and the economy. Subsequent events suggest that this plan may not have worked out as initially believed. Further, in addition to massively diluting existing shareholders, the regulators’ actions left unanswered many key questions crucial for assessing the GSEs’ long-term risk-reward potential, prompting us to exit the Portfolio’s Freddie Mac position.(1)
Many issues stemming from the financial crisis continue to plague shares of Portfolio holding AES, as the market remains focused on AES’s balance sheet risks, as well as the impact of deteriorating economic growth worldwide. Because AES uses non-recourse project financing to fund new efforts, the company’s consolidated balance sheet significantly overstates the actual financial leverage and risk at the company. But as investors fled leverage, AES was sold off. Second, slowing economic growth is a concern as AES is heavily exposed to emerging
(continued)
3
Ohio National Fund, Inc.
Equity Portfolio (Continued)
Equity Portfolio (Continued)
markets, generating 75% of its revenues outside the U.S. Since power consumption is directly tied to Gross Domestic Product growth, any perceived or actual economic deceleration in these regions pressures AES shares. Investors now question whether AES can grow in this environment, with financing for new projects difficult to secure. We continue to monitor the impact of slower economic growth and limited financing on AES, but believe the extent of the company’s troubles has been overblown and that shares offer very attractive risk-adjusted returns from these depressed levels.(1)
Shares of Eastman Kodak Co. slid lower through the course of 2008, as the global economic turmoil caused consumers to cut back on purchases of digital cameras and printing companies to postpone capital expenditures on printing presses. As a result, Eastman Kodak Co. repeatedly revised its earnings outlook and then withdrew its guidance all together because of the deepening recession and the impact of volatile currency markets. On the positive side, Eastman Kodak Co. remains on track with its strategic initiatives, including the continued transition to digital, accelerated cost cutting, and monetizing its intellectual property portfolio. Furthermore, the headwind of high commodity prices should become a tailwind after the recent commodities sell-off. We are also encouraged by Eastman Kodak Co.’s recent efforts to put its ample cash of more than $6 per share to use with the announcement of a $1 billion share repurchase program. Having spent $220 million of the authorization so far, the company could take out approximately 40% of its shares at current prices.(1)
Amgen, Inc. was the lone major contributing stock in which the Portfolio had a substantial position. After surging in the third quarter, the biotechnology firm drifted downward in the difficult fourth quarter but still closed out 2008 with a solid gain. The third quarter rise was the result of Amgen, Inc. posting strong quarterly results exceeding consensus estimates, as stabilizing sales trends for its anemia drugs Aranesp and Epogen and positive test results for its promising osteoporosis drug Denosumab engendered confidence. Our thesis for Amgen, Inc. remains that the company’s strong, patent-protected product portfolio and shareholder-friendly management should more than offset the slowing growth of the company’s anemia franchise.(1)
While it is possible we may retest the lows of the fall, we believe investors are being afforded one of the best buying opportunities in several generations. Since we believe nearly the whole market is markedly under-priced, we have responded by broadening the Portfolio and expanding the number of stocks. High-quality names are as cheap as lower quality names in many cases, so we have moved up the quality spectrum without sacrificing expected returns.
We see several factors that suggest the market could well move higher from here, absent additional policy mistakes. First, money markets are experiencing some relief. Second, mortgage-backed security yields have fallen, and the 30-year mortgage rate is declining towards the government’s implicit target of 4.5%. Third, we expect the narrowing of credit spreads, which has been slowly developing at the short-end of the curve and in the highest quality instruments, to gradually work its way to the longer end of the curve and more long duration assets such as equities. We believe the market, and our Portfolio in particular, is about as attractively valued as we have ever seen it.
(1) | The Portfolio’s composition is subject to change. Holdings and weightings are as of December 31, 2008. |
Change in Value of $10,000 Investment
Hypothetical illustration based on past performance. Future performance will vary. The Portfolio’s returns reflect reinvested dividends. The Portfolio’s holdings may differ significantly from the securities in the index. The index is unmanaged and therefore does not reflect the cost of portfolio management and accounting.
The S&P 500 Index is a capitalization-weighted index designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The index presented herein includes the effects of reinvested dividends.
(continued)
4
Ohio National Fund, Inc.
Equity Portfolio (Continued)
Equity Portfolio (Continued)
Portfolio Composition as of December 31, 2008 (1)
% of Net Assets | |||
Common Stocks (3) | 90.4 | ||
Repurchase Agreements and Other Net Assets | 9.6 | ||
100.0 | |||
Top 10 Portfolio Holdings as of December 31, 2008 (1) (2)
% of Net Assets | |||||||
1. | UnitedHealth Group, Inc. | 6.8 | |||||
2. | The AES Corp. | 6.4 | |||||
3. | Aetna, Inc. | 6.3 | |||||
4. | eBay, Inc. | 3.8 | |||||
5. | Amazon.com, Inc. | 3.7 | |||||
6. | Time Warner, Inc. | 3.6 | |||||
7. | Amgen, Inc. | 3.5 | |||||
8. | CA, Inc. | 3.5 | |||||
9. | International Business Machines Corp. | 3.3 | |||||
10. | General Electric Co. | 3.3 |
(1) | Composition of Portfolio subject to change. | |
(2) | Short-term investments have been excluded from the list of Top 10 Portfolio holdings. | |
(3) | Sectors: |
% of Net Assets | |||
Information Technology | 27.6 | ||
Health Care | 17.6 | ||
Financials | 15.3 | ||
Consumer Discretionary | 14.2 | ||
Utilities | 6.5 | ||
Industrials | 5.0 | ||
Energy | 1.2 | ||
Materials | 1.1 | ||
Telecommunication Services | 1.0 | ||
Consumer Staples | 0.9 | ||
90.4 | |||
5
Ohio National Fund, Inc.
Equity Portfolio
Equity Portfolio
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 90.4% | Shares | Value | ||||||
CONSUMER DISCRETIONARY – 14.2% | ||||||||
Internet & Catalog Retail – 3.7% | ||||||||
Amazon.com, Inc. (a) | 134,550 | $ | 6,899,724 | |||||
Leisure Equipment & Products – 2.6% | ||||||||
Eastman Kodak Co. | 752,790 | 4,953,358 | ||||||
Media – 3.6% | ||||||||
Time Warner, Inc. | 661,800 | 6,657,708 | ||||||
Multiline Retail – 4.3% | ||||||||
J.C. Penney Co., Inc. | 141,200 | 2,781,640 | ||||||
Sears Holdings Corp. (a) | 136,500 | 5,305,755 | ||||||
8,087,395 | ||||||||
TOTAL CONSUMER DISCRETIONARY | 26,598,185 | |||||||
CONSUMER STAPLES – 0.9% | ||||||||
Beverages – 0.1% | ||||||||
PepsiCo, Inc. | 4,200 | 230,034 | ||||||
Personal Products – 0.8% | ||||||||
Avon Products, Inc. | 61,000 | 1,465,830 | ||||||
TOTAL CONSUMER STAPLES | 1,695,864 | |||||||
ENERGY – 1.2% | ||||||||
Oil, Gas & Consumable Fuels – 1.2% | ||||||||
Chesapeake Energy Corp. | 24,600 | 397,782 | ||||||
ConocoPhillips | 35,100 | 1,818,180 | ||||||
TOTAL ENERGY | 2,215,962 | |||||||
FINANCIALS – 15.3% | ||||||||
Capital Markets – 5.8% | ||||||||
The Goldman Sachs Group, Inc. | 22,500 | 1,898,775 | ||||||
Merrill Lynch & Co., Inc. | 370,900 | 4,317,276 | ||||||
State Street Corp. | 120,400 | 4,735,332 | ||||||
10,951,383 | ||||||||
Consumer Finance – 1.3% | ||||||||
American Express Co. | 55,600 | 1,031,380 | ||||||
Capital One Financial Corp. | 44,500 | 1,419,105 | ||||||
2,450,485 | ||||||||
Diversified Financial Services – 7.1% | ||||||||
Bank of America Corp. | 84,289 | 1,186,789 | ||||||
Citigroup, Inc. | 645,600 | 4,331,976 | ||||||
CME Group, Inc. | 2,100 | 437,031 | ||||||
JPMorgan Chase & Co. | 105,100 | 3,313,803 | ||||||
NYSE Euronext, Inc. | 149,600 | 4,096,048 | ||||||
13,365,647 | ||||||||
Insurance – 1.1% | ||||||||
The Allstate Corp. | 56,200 | 1,841,112 | ||||||
Prudential Financial, Inc. | 4,200 | 127,092 | ||||||
1,968,204 | ||||||||
TOTAL FINANCIALS | 28,735,719 | |||||||
HEALTH CARE – 17.6% | ||||||||
Biotechnology – 3.5% | ||||||||
Amgen, Inc. (a) | 113,800 | 6,571,950 | ||||||
Health Care Providers & Services – 13.1% | ||||||||
Aetna, Inc. | 415,100 | 11,830,350 | ||||||
UnitedHealth Group, Inc. | 481,200 | 12,799,920 | ||||||
24,630,270 | ||||||||
Pharmaceuticals – 1.0% | ||||||||
Merck & Co., Inc. | 60,100 | 1,827,040 | ||||||
TOTAL HEALTH CARE | 33,029,260 | |||||||
INDUSTRIALS – 5.0% | ||||||||
Aerospace & Defense – 0.5% | ||||||||
The Boeing Co. | 22,500 | 960,075 | ||||||
Industrial Conglomerates – 4.0% | ||||||||
3M Co. | 23,000 | 1,323,420 | ||||||
General Electric Co. | 377,000 | 6,107,400 | ||||||
7,430,820 | ||||||||
Machinery – 0.5% | ||||||||
Deere & Co. | 24,600 | 942,672 | ||||||
TOTAL INDUSTRIALS | 9,333,567 | |||||||
INFORMATION TECHNOLOGY – 27.6% | ||||||||
Communications Equipment – 3.0% | ||||||||
Cisco Systems, Inc. (a) | 339,000 | 5,525,700 | ||||||
Computers & Peripherals – 6.9% | ||||||||
EMC Corp. (a) | 114,500 | 1,198,815 | ||||||
Hewlett-Packard Co. | 156,400 | 5,675,756 | ||||||
International Business Machines Corp. | 72,900 | 6,135,264 | ||||||
13,009,835 | ||||||||
Electronic Equipment & Instruments – 0.0% | ||||||||
Agilent Technologies, Inc. (a) | 4,100 | 64,083 | ||||||
Internet Software & Services – 9.7% | ||||||||
eBay, Inc. (a) | 508,600 | 7,100,056 | ||||||
Google, Inc. Class A (a) | 16,850 | 5,183,903 | ||||||
Yahoo!, Inc. (a) | 485,900 | 5,927,980 | ||||||
18,211,939 | ||||||||
Semiconductors & Semiconductor Equipment – 2.4% | ||||||||
Texas Instruments, Inc. | 290,600 | 4,510,112 | ||||||
Software – 5.6% | ||||||||
CA, Inc. | 349,700 | 6,479,941 | ||||||
Electronic Arts, Inc. (a) | 182,400 | 2,925,696 | ||||||
Microsoft Corp. | 53,200 | 1,034,208 | ||||||
10,439,845 | ||||||||
TOTAL INFORMATION TECHNOLOGY | 51,761,514 | |||||||
MATERIALS – 1.1% | ||||||||
Metals & Mining – 1.1% | ||||||||
Nucor Corp. | 45,200 | 2,088,240 | ||||||
TOTAL MATERIALS | 2,088,240 | |||||||
TELECOMMUNICATION SERVICES – 1.0% | ||||||||
Diversified Telecommunication Services – 1.0% | ||||||||
AT&T, Inc. | 63,000 | 1,795,500 | ||||||
TOTAL TELECOMMUNICATION SERVICES | 1,795,500 | |||||||
(continued)
6
Ohio National Fund, Inc.
Equity Portfolio (Continued)
Equity Portfolio (Continued)
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 90.4% | Shares | Value | ||||||
UTILITIES – 6.5% | ||||||||
Electric Utilities – 0.1% | ||||||||
Exelon Corp. | 4,200 | $ | 233,562 | |||||
Independent Power Producers & Energy Traders – 6.4% | ||||||||
The AES Corp. (a) | 1,452,400 | 11,967,776 | ||||||
TOTAL UTILITIES | 12,201,338 | |||||||
Total Common Stocks | ||||||||
(Cost $268,793,967) | $ | 169,455,149 | ||||||
Face | Fair | |||||||
Repurchase Agreements – 7.5% | Amount | Value | ||||||
Bank of America 0.010% 01/02/2009 | $ | 14,120,954 | $ | 14,120,954 | ||||
Repurchase price $14,120,970 | ||||||||
Collateralized by: Federal Home Loan Bank | ||||||||
#3133XKEF8 5.525%, 04/09/2014 | ||||||||
Fair Value: $14,408,107 | ||||||||
Total Repurchase Agreements | ||||||||
(Cost $14,120,954) | $ | 14,120,954 | ||||||
Total Investments – 97.9% | ||||||||
(Cost $282,914,921) (b) | $ | 183,576,103 | ||||||
Other Assets in Excess of Liabilities – 2.1% | 3,934,180 | |||||||
Net Assets – 100.0% | $ | 187,510,283 | ||||||
Percentages are stated as a percent of net assets.
Footnotes:
(a) | Non-income producing security. | |
(b) | Represents cost for financial reporting purposes, which may differ from cost basis for Federal income tax purposes. See also Note 8 of the Notes to Financial Statements. |
The accompanying notes are an integral part of these financial statements.
7
Ohio National Fund, Inc.
Equity Portfolio
Equity Portfolio
Statement of Assets and Liabilities
December 31, 2008
Assets: | ||||
Investments in securities, at fair value (Cost $268,793,967) | $ | 169,455,149 | ||
Repurchase agreements | 14,120,954 | |||
Receivable for securities sold | 1,238,890 | |||
Receivable for fund shares sold | 8,037,408 | |||
Dividends and accrued interest receivable | 205,850 | |||
Prepaid expenses and other assets | 4,667 | |||
Total assets | 193,062,918 | |||
Liabilities: | ||||
Payable for securities purchased | 5,167,377 | |||
Payable for fund shares redeemed | 223,013 | |||
Payable for investment management services | 115,635 | |||
Accrued custody expense | 2,881 | |||
Accrued professional fees | 14,125 | |||
Accrued accounting fees | 13,124 | |||
Accrued printing and filing fees | 16,480 | |||
Total liabilities | 5,552,635 | |||
Net assets | $ | 187,510,283 | ||
Net assets consist of: | ||||
Par value, $1 per share | $ | 14,213,827 | ||
Paid-in capital in excess of par value | 356,830,654 | |||
Accumulated net realized loss on investments | (84,524,098 | ) | ||
Net unrealized depreciation on investments | (99,338,818 | ) | ||
Undistributed net investment income | 328,718 | |||
Net assets | $ | 187,510,283 | ||
Shares outstanding | 14,213,827 | |||
Authorized Fund shares allocated to Portfolio | 25,000,000 | |||
Net asset value per share | $ | 13.19 | ||
Statement of Operations
For the Year Ended December 31, 2008
Investment income: | ||||
Interest | $ | 187,543 | ||
Dividends | 5,601,486 | |||
Total investment income | 5,789,029 | |||
Expenses: | ||||
Management fees | 2,575,622 | |||
Custodian fees | 26,798 | |||
Directors’ fees | 26,463 | |||
Professional fees | 30,200 | |||
Accounting fees | 109,029 | |||
Printing and filing fees | 37,251 | |||
Compliance expense | 4,911 | |||
Other | 7,640 | |||
Total expenses | 2,817,914 | |||
Net investment income | 2,971,115 | |||
Realized/unrealized gain (loss) on investments: | ||||
Net realized gain (loss) on investments | (77,156,737 | ) | ||
Change in unrealized appreciation/depreciation on investments | (176,365,358 | ) | ||
Net realized/unrealized gain (loss) on investments | (253,522,095 | ) | ||
Change in net assets from operations | $ | (250,550,980 | ) | |
The accompanying notes are an integral part of these financial statements.
8
Ohio National Fund, Inc.
Equity Portfolio
Equity Portfolio
Statements of Changes in Net Assets
Years Ended December 31, | ||||||||
2008 | 2007 | |||||||
Increase (Decrease) in Net Assets: | ||||||||
Operations: | ||||||||
Net investment income | $ | 2,971,115 | $ | 263,738 | ||||
Net realized gain (loss) on investments and foreign currency related transactions | (77,156,737 | ) | 63,159,376 | |||||
Change in unrealized appreciation/depreciation on investments and foreign currency related transactions | (176,365,358 | ) | (94,208,204 | ) | ||||
Change in net assets from operations | (250,550,980 | ) | (30,785,090 | ) | ||||
Distributions to shareholders: | ||||||||
Distributions from net investment income | (2,642,397 | ) | (229,856 | ) | ||||
Capital transactions: | ||||||||
Received from shares sold | 87,902,505 | 75,705,851 | ||||||
Received from dividends reinvested | 2,642,397 | 229,856 | ||||||
Paid for shares redeemed | (154,908,853 | ) | (89,918,130 | ) | ||||
Change in net assets from capital transactions | (64,363,951 | ) | (13,982,423 | ) | ||||
Change in net assets | (317,557,328 | ) | (44,997,369 | ) | ||||
Net Assets: | ||||||||
Beginning of year | 505,067,611 | 550,064,980 | ||||||
End of year | $ | 187,510,283 | $ | 505,067,611 | ||||
Undistributed net investment income | $ | 328,718 | $ | 2,497 | ||||
Financial Highlights
Years Ended December 31, | ||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
Selected Per-Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 29.65 | $ | 31.52 | $ | 29.55 | $ | 27.85 | $ | 24.78 | ||||||||||
Operations: | ||||||||||||||||||||
Net investment income (loss) | 0.22 | 0.02 | (0.01 | ) | (0.01 | ) | 0.02 | |||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency related transactions | (16.48 | ) | (1.88 | ) | 1.98 | 1.71 | 3.06 | |||||||||||||
Total from operations | (16.26 | ) | (1.86 | ) | 1.97 | 1.70 | 3.08 | |||||||||||||
Distributions: | ||||||||||||||||||||
Distributions from net investment income | (0.20 | ) | (0.01 | ) | — | — | (0.01 | ) | ||||||||||||
Net asset value, end of year | $ | 13.19 | $ | 29.65 | $ | 31.52 | $ | 29.55 | $ | 27.85 | ||||||||||
Total return | –54.81 | % | –5.89 | % | 6.67 | % | 6.10 | % | 12.44 | % | ||||||||||
Ratios and supplemental data: | ||||||||||||||||||||
Net assets at end of year (millions) | $ | 187.5 | $ | 505.1 | $ | 550.1 | $ | 540.7 | $ | 502.1 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Expenses | 0.84 | % | 0.84 | % | 0.86 | % | 0.88 | % | 0.92 | % | ||||||||||
Net investment income (loss) | 0.89 | % | 0.05 | % | (0.04 | )% | (0.03 | )% | 0.09 | % | ||||||||||
Portfolio turnover rate | 39 | % | 23 | % | 13 | % | 20 | % | 10 | % |
The accompanying notes are an integral part of these financial statements.
9
Ohio National Fund, Inc.
Money Market Portfolio
Money Market Portfolio
Portfolio Composition as of December 31, 2008 (1)
% of Net Assets | |||
Short-Term Notes (2) | 32.9 | ||
Repurchase Agreements and Less Net Liabilities | 67.1 | ||
100.0 | |||
Top 10 Portfolio Holdings as of December 31, 2008 (1) (2)
% of Net Assets | |||||||
1. | Chevron Funding Corp. 0.150%, 01/06/2009 | 4.5 | |||||
2. | Merrill Lynch & Co., Inc. 0.100%, 01/05/2009 | 3.7 | |||||
3. | General Dynamics 0.200%, 01/05/2009 | 3.7 | |||||
4. | Toyota Motor Credit Corp. 0.190%, 01/09/2009 | 3.7 | |||||
5. | Johnson & Johnson 0.050%, 02/09/2009 | 3.7 | |||||
6. | Prudential Funding LLC 0.250%, 01/13/2009 | 3.7 | |||||
7. | HSBC Finance Corp. 0.700%, 01/12/2009 | 2.5 | |||||
8. | Metlife, Inc. 1.001%, 01/05/2009 | 2.0 | |||||
9. | American Honda Finance Corp. 1.352%, 01/26/2009 | 1.8 | |||||
10. | HSBC Finance Corp. 0.300%, 01/07/2009 | 1.2 |
(1) | Composition of Portfolio subject to change. | |
(2) | Sectors: |
% of Net Assets | |||
Financials | 19.8 | ||
Energy | 4.5 | ||
Industrials | 3.7 | ||
Health Care | 3.7 | ||
Consumer Staples | 1.2 | ||
32.9 | |||
10
Ohio National Fund, Inc.
Money Market Portfolio
Money Market Portfolio
Schedule of Investments | December 31, 2008 |
Face | Amortized | |||||||
Short-Term Notes – 32.9% | Amount | Cost | ||||||
CONSUMER STAPLES – 1.2% | ||||||||
Household Products – 1.2% | ||||||||
The Proctor & Gamble Co. 0.200%, 01/20/2009 (b) | $ | 4,900,000 | $ | 4,899,483 | ||||
TOTAL CONSUMER STAPLES | 4,899,483 | |||||||
ENERGY – 4.5% | ||||||||
Oil, Gas & Consumable Fuels – 4.5% | ||||||||
Chevron Funding Corp. 0.150%, 01/06/2009 | 18,000,000 | 17,999,625 | ||||||
TOTAL ENERGY | 17,999,625 | |||||||
FINANCIALS – 19.8% | ||||||||
Capital Markets – 3.7% | ||||||||
Merrill Lynch & Co., Inc. 0.100%, 01/05/2009 | 15,000,000 | 14,999,833 | ||||||
Consumer Finance – 6.1% | ||||||||
American Honda Finance Corp. 1.352%, 01/26/2009 | 7,345,000 | 7,338,114 | ||||||
John Deere Capital Corp. 0.200%, 01/07/2009 (b) | 2,000,000 | 1,999,933 | ||||||
Toyota Motor Credit Corp. 0.190%, 01/09/2009 | 15,000,000 | 14,999,367 | ||||||
24,337,414 | ||||||||
Diversified Financial Services – 3.8% | ||||||||
HSBC Finance Corp. 0.300%, 01/07/2009 | 5,000,000 | 4,999,750 | ||||||
0.700%, 01/12/2009 | 10,000,000 | 9,997,861 | ||||||
14,997,611 | ||||||||
Insurance – 6.2% | ||||||||
Metlife, Inc. 1.150%, 01/05/2009 (b) | 2,050,000 | 2,049,738 | ||||||
1.001%, 01/05/2009 (b) | 8,000,000 | 7,999,111 | ||||||
Prudential Funding LLC 0.250%, 01/13/2009 | 15,000,000 | 14,998,750 | ||||||
25,047,599 | ||||||||
TOTAL FINANCIALS | 79,382,457 | |||||||
HEALTH CARE – 3.7% | ||||||||
Pharmaceuticals – 3.7% | ||||||||
Johnson & Johnson 0.050%, 02/09/2009 (b) | 15,000,000 | 14,999,188 | ||||||
TOTAL HEALTH CARE | 14,999,188 | |||||||
INDUSTRIALS – 3.7% | ||||||||
Aerospace & Defense – 3.7% | ||||||||
General Dynamics 0.200%, 01/05/2009 (b) | 15,000,000 | 14,999,667 | ||||||
TOTAL INDUSTRIALS | 14,999,667 | |||||||
Total Short-Term Notes (Cost $132,280,420) | $ | 132,280,420 | ||||||
Face | Amortized | |||||||
Repurchase Agreements – 69.8% | Amount | Cost | ||||||
U.S. Bank 0.010% 01/02/2009 | $ | 281,038,000 | $ | 281,038,000 | ||||
Repurchase price $281,038,156 | ||||||||
Collateralized by: | ||||||||
Various Agency Mortgage-Backed Securities 2.395% to 5.000%, Due 09/01/2018 through 05/15/2033 Fair Value: $286,644,987 | ||||||||
Total Repurchase Agreements (Cost $281,038,000) | $ | 281,038,000 | ||||||
Total Investments – 102.7% (Cost $413,318,420) (a) | $ | 413,318,420 | ||||||
Liabilities in Excess of Other Assets – (2.7)% | (10,768,750 | ) | ||||||
Net Assets – 100.0% | $ | 402,549,670 | ||||||
Percentages are stated as a percent of net assets.
Footnotes:
(a) | Represents cost for Federal income tax and financial reporting purposes. See also Note 2 regarding the use of amortized cost for valuation of the Portfolio. | |
(b) | Security exempt from registration under Section 4 (2) of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified buyers under Rule 144A. At December 31, 2008, the value of these securities totaled $46,947,120 or 11.7% of the Portfolio’s net assets. These securities were deemed liquid pursuant to procedures approved by the Board of Directors. |
The accompanying notes are an integral part of these financial statements.
11
Ohio National Fund, Inc.
Money Market Portfolio
Money Market Portfolio
Statement of Assets and Liabilities
December 31, 2008
Assets: | ||||
Investments in securities, at amortized cost | $ | 132,280,420 | ||
Repurchase agreements | 281,038,000 | |||
Cash | 932 | |||
Due from adviser | 77,673 | |||
Receivable for fund shares sold | 1,032,460 | |||
Accrued interest receivable | 78 | |||
Prepaid expenses and other assets | 8,450 | |||
Prepaid temporary guarantee program expense | 44,140 | |||
Total assets | 414,482,153 | |||
Liabilities: | ||||
Payable for fund shares redeemed | 11,760,310 | |||
Payable for investment management services | 85,417 | |||
Accrued custody expense | 6,132 | |||
Accrued professional fees | 20,112 | |||
Accrued accounting fees | 26,299 | |||
Accrued printing and filing fees | 34,213 | |||
Total liabilities | 11,932,483 | |||
Net assets | $ | 402,549,670 | ||
Net assets consist of: | ||||
Par value, $1 per share | $ | 40,254,980 | ||
Paid-in capital in excess of par value | 362,294,690 | |||
Net assets | $ | 402,549,670 | ||
Shares outstanding | 40,254,980 | |||
Authorized Fund shares allocated to Portfolio | 50,000,000 | |||
Net asset value per share | $ | 10.00 | ||
Statement of Operations
For the Year Ended December 31, 2008
Investment income: | ||||
Interest | $ | 7,870,634 | ||
Expenses: | ||||
Management fees | 990,671 | |||
Custodian fees | 30,002 | |||
Directors’ fees | 34,778 | |||
Professional fees | 38,951 | |||
Accounting fees | 138,045 | |||
Printing and filing fees | 77,433 | |||
Compliance expense | 4,911 | |||
Temporary guarantee program expense | 44,139 | |||
Other | 693 | |||
Total expenses | 1,359,623 | |||
Less expenses voluntarily reduced or reimbursed by adviser | (127,673 | ) | ||
Net expenses | 1,231,950 | |||
Net investment income | 6,638,684 | |||
Change in net assets from operations | $ | 6,638,684 | ||
The accompanying notes are an integral part of these financial statements.
12
Ohio National Fund, Inc.
Money Market Portfolio
Money Market Portfolio
Statements of Changes in Net Assets
Years Ended December 31, | ||||||||
2008 | 2007 | |||||||
Increase (Decrease) in Net Assets: | ||||||||
Operations: | ||||||||
Net investment income | $ | 6,638,684 | $ | 14,487,500 | ||||
Distributions to shareholders: | ||||||||
Distributions from net investment income | (6,638,684 | ) | (14,487,500 | ) | ||||
Capital transactions: | ||||||||
Received from shares sold | 877,274,014 | 583,249,915 | ||||||
Received from dividends reinvested | 6,638,684 | 14,556,015 | ||||||
Paid for shares redeemed | (817,575,412 | ) | (515,971,609 | ) | ||||
Change in net assets from capital transactions | 66,337,286 | 81,834,321 | ||||||
Change in net assets | 66,337,286 | 81,834,321 | ||||||
Net Assets: | ||||||||
Beginning of year | 336,212,384 | 254,378,063 | ||||||
End of year | $ | 402,549,670 | $ | 336,212,384 | ||||
Financial Highlights
Years Ended December 31, | ||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
Selected Per-Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 10.00 | $ | 10.00 | $ | 10.00 | $ | 10.00 | $ | 10.00 | ||||||||||
Operations: | ||||||||||||||||||||
Net investment income | 0.17 | 0.48 | 0.47 | 0.27 | 0.09 | |||||||||||||||
Distributions: | ||||||||||||||||||||
Distributions from net investment income | (0.17 | ) | (0.48 | ) | (0.47 | ) | (0.27 | ) | (0.09 | ) | ||||||||||
Net asset value, end of year | $ | 10.00 | $ | 10.00 | $ | 10.00 | $ | 10.00 | $ | 10.00 | ||||||||||
Total return | 1.77 | % | 4.92 | % | 4.79 | % | 2.92 | % | 1.01 | % | ||||||||||
Ratios and supplemental data: | ||||||||||||||||||||
Net assets at end of year (millions) | $ | 402.5 | $ | 336.2 | $ | 254.4 | $ | 169.6 | $ | 141.0 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Ratios net of expenses voluntarily reduced or reimbursed by adviser: | ||||||||||||||||||||
Expenses | 0.32 | % | 0.31 | % | 0.32 | % | 0.33 | % | 0.36 | % | ||||||||||
Net investment income | 1.72 | % | 4.79 | % | 4.72 | % | 2.92 | % | 1.03 | % | ||||||||||
Ratios assuming no expenses voluntarily reduced or reimbursed by adviser: | ||||||||||||||||||||
Expenses | 0.35 | % | 0.32 | % | 0.35 | % | 0.37 | % | 0.40 | % |
The accompanying notes are an integral part of these financial statements.
13
Ohio National Fund, Inc.
Bond Portfolio
Bond Portfolio
Objective/Strategy
The Bond Portfolio seeks to obtain a high level of income and opportunity for capital appreciation consistent with the preservation of capital by investing primarily in intermediate-term and long-term fixed income securities.
Performance as of December 31, 2008
Average Annual Total Returns: | ||||
One year | -11.45% | |||
Five years | 0.40% | |||
Ten years | 3.52% |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price and reinvestment of dividends and capital gains. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost.
The Portfolio is not open to direct retail investment. Beneficial interest in shares is obtained solely by purchase of variable life insurance policies and variable annuity contracts. Actual performance results for variable annuity and variable universal life contracts will be lower due to contract charges. Consult your contract for applicable charges.
Comments
For the year ended December 31, 2008, the Bond Portfolio returned -11.45% versus -6.82% for the current benchmark, the Merrill Lynch U.S. Corporate Master Index.
The year 2008 was a very difficult year for both the credit and equity markets. What started as a problem with sub-prime mortgages and a “bubble” in U.S. housing values in 2007 ballooned into a near collapse of the world-wide financial system in 2008. Major financial institutions including The Bear Stearns Companies, Inc., Fannie Mae, Freddie Mac, American International Group (“AIG”), Lehman Brothers, Inc. and Washington Mutual, Inc. collapsed. Other major financial institutions would have likely failed were it not for intervention from the Federal Reserve and the U.S. Treasury. Leverage that had been building for several years in households, financial firms and some industrial corporations began to unwind in 2008, and the result has been a severe contraction in financial services and a recession that is worldwide in scope.
Against this backdrop, the S&P 500 Index declined 37.0% in 2008 and the return for the Merrill Lynch U.S. Corporate Master Index was a negative 6.82%. Corporate bonds had negative returns because credit spreads widened by 401 basis points during the year, which reflects a dramatic increase in risk premiums for credit. The negative impact on bond prices resulting from wider credit spreads more than offset the positive impact from a decline in U.S. Treasury yields. The yield on the 10-year U.S. Treasury bond declined 181 basis points during 2008 and finished the year at a yield of 2.21%. U.S. Treasury yields declined because of the weakening economy and a flight to safety on the part of investors.
The Portfolio’s underperformance versus the Merrill Lynch U.S. Corporate Master Index benchmark was 463 basis points. Underperformance versus the benchmark is primarily explained by a number of holdings from the financial services sector and several holdings that were the subject of leveraged buy outs (“LBOs”). The worst performing bonds included Lehman Brothers Holdings Inc., Clear Channel Communications, Inc., Washington Mutual Inc., Bank of Ireland (BOI) Capital Funding and The Rouse Co. LP. Lehman Brothers Holdings, Inc. and Washington Mutual Inc. collapsed under the weight of sub-prime mortgages. Clear Channel Communications, Inc. went through an LBO. The Bank of Ireland was pressured by falling home values in Ireland, and The Rouse Co. LP is an over-leveraged real estate investment trust (“REIT”) that owns shopping malls. Ironically, the best performing bonds also included several finance-related companies. The best performing bonds were Countrywide Financial Corp., Duke Energy Carolinas LLC, Wells Fargo & Co., Merrill Lynch & Co., Inc. and Bank of America Corp. Both Countrywide Financial Corp. (a mortgage lender) and Merrill Lynch & Co., Inc. were acquired by Bank of America Corp.; had these companies not been acquired, they, too, likely would have failed. (1)
Several industry weightings impacted performance. The Portfolio benefited from its underweighting in banks and brokers, because these sectors underperformed. The Portfolio was overweighted in REITs and finance, and these weightings negatively impacted performance. The Portfolio’s overweighting in electric utilities and cable benefited performance. (1)
The U.S. economy is currently in a severe recession, and we expect that the economy will remain in recession for much of 2009. Several factors in the current environment have the potential to prompt the economy into recovery. Credit is beginning to thaw, as credit spreads for corporate bonds have started to tighten and issuance of corporate bonds was strong in January. Energy savings will also stimulate the economy, as the price of a barrel of oil has fallen $100 from its peak to approximately $40 per barrel. Finally, a major fiscal stimulus package is being worked on in Washington that will add to government spending over the next few years. As these factors take effect, the economy will likely bottom and turn up. Because of massive deficit spending on the part of the Federal government, inflation may become a problem when the economy begins to grow. Given the current state and outlook for the economy and credit markets, the strategy of the Portfolio is to reduce exposure to the finance sector and increase the weightings in recession-resistant sectors such as consumer staples, aerospace/defense and healthcare. We will continue to underweight banks and brokers, and maintain the overweighting in electric utilities. We will also purchase higher quality assets until the economy stabilizes. Because of the potential for an increase in inflation once the economy begins to grow, the duration of the Portfolio will be maintained shorter than the benchmark duration. (1)
(1) | The Portfolio’s composition is subject to change. Holdings and weightings are as of December 31, 2008. |
(continued)
14
Ohio National Fund, Inc.
Bond Portfolio (Continued)
Bond Portfolio (Continued)
Change in Value of $10,000 Investment
Hypothetical illustration based on past performance. Future performance will vary. The Portfolio’s returns reflect reinvested dividends. The Portfolio’s holdings may differ significantly from the securities in the index. The index is unmanaged and therefore does not reflect the cost of portfolio management and accounting.
Merrill Lynch U.S. Corporate Master Index tracks the performance of all U.S. dollar-denominated, investment grade corporate public debt issued in the U.S. domestic bond market. Qualifying bonds must have at least one year remaining term to maturity, a fixed coupon schedule, and a minimum amount outstanding of $150 million.
Merrill Lynch U.S. Corporate Bond Index 1-10 Year represents $150 million issue or greater investment grade bonds maturing in 1 to 10 years.
We are now using the Merrill Lynch U.S. Corporate Master Index as the Portfolio’s primary benchmark because we believe the Portfolio’s investments more closely resemble the securities represented in that index than those in the Merrill Lynch U.S. Corporate Bond Index 1-10 year.
Top 10 Portfolio Holdings as of December 31, 2008 (1) (2)
% of Net Assets | |||||||
1. | Comcast Corp. 5.875%, 02/15/2018 | 1.5 | |||||
2. | Kimberly-Clark Corp. 6.125%, 08/01/2017 | 1.5 | |||||
3. | Kroger Co. 6.400%, 08/15/2017 | 1.4 | |||||
4. | Appalachian Power Co. 5.550%, 04/01/2011 | 1.4 | |||||
5. | Duke Energy Carolinas LLC 6.050%, 04/15/2038 | 1.4 | |||||
6. | Safeway, Inc. 6.350%, 08/15/2017 | 1.4 | |||||
7. | Kraft Foods, Inc. 6.125%, 02/01/2018 | 1.4 | |||||
8. | Virginia Electric & Power Co. 5.400%, 01/15/2016 | 1.4 | |||||
9. | Caterpillar, Inc. 5.700%, 08/15/2016 | 1.4 | |||||
10. | PNC Funding Corp. 5.250%, 11/15/2015 | 1.3 |
Portfolio Composition as of December 31, 2008 (1)
% of Net Assets | |||
Corporate Bonds (3) (4) | 102.5 | ||
Short-Term Notes Less Net Liabilities | (2.5) | ||
100.0 | |||
(1) | Composition of Portfolio subject to change. | |
(2) | Short-term investments have been excluded from the list of Top 10 Portfolio holdings. | |
(3) | Sectors: |
% of Net Assets | |||
Financials | 39.8 | ||
Utilities | 18.6 | ||
Consumer Discretionary | 10.7 | ||
Consumer Staples | 9.5 | ||
Industrials | 8.1 | ||
Energy | 6.6 | ||
Telecommunication Services | 4.3 | ||
Information Technology | 2.1 | ||
Materials | 1.5 | ||
Health Care | 1.3 | ||
102.5 | |||
(4) | Bond Credit Quality (Standard & Poor’s Ratings): |
% of Total Bonds | |||
AAA | 0.9 | ||
AA | 5.1 | ||
A | 32.4 | ||
BBB | 57.4 | ||
BB | 3.2 | ||
CCC | 1.0 | ||
100.0 | |||
15
Ohio National Fund, Inc.
Bond Portfolio
Bond Portfolio
Schedule of Investments | December 31, 2008 |
Face | Fair | |||||||
Corporate Bonds – 102.5% | Amount | Value | ||||||
CONSUMER DISCRETIONARY – 10.7% | ||||||||
Auto Components – 1.1% | ||||||||
Johnson Controls, Inc. 5.250%, 01/15/2011 | $ | 1,250,000 | $ | 1,149,212 | ||||
Hotels, Restaurants & Leisure – 0.5% | ||||||||
Wyndham Worldwide Corp. 6.000%, 12/01/2016 | 1,250,000 | 504,466 | ||||||
Household Durables – 1.2% | ||||||||
Mohawk Industries, Inc. 5.750%, 01/15/2011 | 1,000,000 | 918,144 | ||||||
Newell Rubbermaid, Inc. 6.250%, 04/15/2018 | 500,000 | 402,862 | ||||||
1,321,006 | ||||||||
Media – 6.0% | ||||||||
Clear Channel Communications, Inc. 5.750%, 01/15/2013 | 1,000,000 | 150,000 | ||||||
Comcast Corp. 5.875%, 02/15/2018 | 1,750,000 | 1,661,163 | ||||||
Cox Communications, Inc. 6.750%, 03/15/2011 | 1,000,000 | 973,903 | ||||||
Rogers Communications, Inc. 5.500%, 03/15/2014 | 1,000,000 | 923,570 | ||||||
Time Warner Cable, Inc. 5.850%, 05/01/2017 | 1,000,000 | 915,014 | ||||||
Time Warner, Inc. 6.875%, 05/01/2012 | 1,000,000 | 961,393 | ||||||
Viacom, Inc. 5.750%, 04/30/2011 | 1,000,000 | 908,662 | ||||||
6,493,705 | ||||||||
Multiline Retail – 1.0% | ||||||||
Macy’s Retail Holdings, Inc. 5.900%, 12/01/2016 | 1,750,000 | 1,063,911 | ||||||
Specialty Retail – 0.9% | ||||||||
The Home Depot, Inc. 5.250%, 12/16/2013 | 1,000,000 | 934,790 | ||||||
TOTAL CONSUMER DISCRETIONARY | 11,467,090 | |||||||
CONSUMER STAPLES – 9.5% | ||||||||
Beverages – 1.3% | ||||||||
Anheuser-Busch Cos., Inc. 5.500%, 01/15/2018 | 1,500,000 | 1,365,786 | ||||||
Food & Staples Retailing – 3.6% | ||||||||
CVS/Caremark Corp. 5.750%, 06/01/2017 | 1,000,000 | 943,002 | ||||||
Kroger Co. 6.400%, 08/15/2017 | 1,500,000 | 1,515,177 | ||||||
Safeway, Inc. 6.350%, 08/15/2017 | 1,500,000 | 1,485,463 | ||||||
3,943,642 | ||||||||
Food Products – 3.1% | ||||||||
Bunge N.A. Finance LP 5.900%, 04/01/2017 | 1,500,000 | 1,093,467 | ||||||
Kraft Foods, Inc. 6.125%, 02/01/2018 | 1,500,000 | 1,472,365 | ||||||
Tyson Foods, Inc. 7.850%, 04/01/2016 (c) | 1,000,000 | 745,000 | ||||||
3,310,832 | ||||||||
Household Products – 1.5% | ||||||||
Kimberly-Clark Corp. 6.125%, 08/01/2017 | 1,500,000 | 1,600,772 | ||||||
TOTAL CONSUMER STAPLES | 10,221,032 | |||||||
ENERGY – 6.6% | ||||||||
Energy Equipment & Services – 1.2% | ||||||||
Weatherford International Ltd. 6.000%, 03/15/2018 | 1,500,000 | 1,261,751 | ||||||
Oil, Gas & Consumable Fuels – 5.4% | ||||||||
Anadarko Petroleum Corp. 5.950%, 09/15/2016 | 1,500,000 | 1,326,933 | ||||||
Atlantic Richfield Co. 8.550%, 03/01/2012 | 200,000 | 222,585 | ||||||
Devon OEI Operating, Inc. 7.250%, 10/01/2011 | 1,000,000 | 1,027,320 | ||||||
Energy Transfer Partners LP 5.650%, 08/01/2012 | 1,000,000 | 893,481 | ||||||
Marathon Oil Corp. 6.125%, 03/15/2012 | 750,000 | 759,616 | ||||||
Valero Energy Corp. 6.875%, 04/15/2012 | 750,000 | 754,768 | ||||||
XTO Energy, Inc. 4.900%, 02/01/2014 | 1,000,000 | 902,259 | ||||||
5,886,962 | ||||||||
TOTAL ENERGY | 7,148,713 | |||||||
FINANCIALS – 39.8% | ||||||||
Capital Markets – 8.3% | ||||||||
Allied Capital Corp. 6.625%, 07/15/2011 | 1,500,000 | 1,156,789 | ||||||
Goldman Sachs Group, Inc. 6.150%, 04/01/2018 | 1,250,000 | 1,203,277 | ||||||
Invesco Ltd. 4.500%, 12/15/2009 | 1,500,000 | 1,410,541 | ||||||
Janus Capital Group, Inc. 6.700%, 06/15/2017 | 1,500,000 | 1,119,692 | ||||||
Jefferies Group, Inc. 5.875%, 06/08/2014 | 1,500,000 | 1,157,231 | ||||||
Merrill Lynch & Co, Inc. 6.500%, 07/15/2018 | 1,000,000 | 1,011,414 | ||||||
Morgan Stanley 4.750%, 04/01/2014 | 1,750,000 | 1,334,762 | ||||||
Nuveen Investments, Inc. 5.000%, 09/15/2010 | 1,000,000 | 547,500 | ||||||
8,941,206 | ||||||||
Commercial Banks – 9.1% | ||||||||
BB&T Corp. 5.200%, 12/23/2015 | 1,500,000 | 1,427,673 | ||||||
BOI Capital Funding No. 2 LP 5.571%, Perpetual (a) (d) | 1,000,000 | 220,005 |
(continued)
16
Ohio National Fund, Inc.
Bond Portfolio (Continued)
Bond Portfolio (Continued)
Schedule of Investments | December 31, 2008 |
Face | Fair | |||||||
Corporate Bonds – 102.5% | Amount | Value | ||||||
Commercial Banks (continued) | ||||||||
Comerica Bank 5.750%, 11/21/2016 | $ | 1,500,000 | $ | 1,164,097 | ||||
Deutsche Bank Capital Funding Trust VII 5.628%, Perpetual (a) (d) | 1,500,000 | 641,772 | ||||||
Fifth Third Bancorp 4.500%, 06/01/2018 | 1,750,000 | 1,299,575 | ||||||
PNC Funding Corp. 5.250%, 11/15/2015 | 1,500,000 | 1,446,738 | ||||||
SunTrust Bank 5.000%, 09/01/2015 | 1,500,000 | 1,389,450 | ||||||
Wachovia Capital Trust III 5.800%, Perpetual (d) | 1,500,000 | 885,390 | ||||||
Wells Fargo & Co. 5.625%, 12/11/2017 | 1,250,000 | 1,306,384 | ||||||
9,781,084 | ||||||||
Consumer Finance – 5.1% | ||||||||
American Express Co. 7.000%, 03/19/2018 | 1,250,000 | 1,266,058 | ||||||
American General Finance Corp. 4.875%, 05/15/2010 | 1,000,000 | 595,311 | ||||||
Capital One Bank USA NA 5.125%, 02/15/2014 | 1,000,000 | 926,212 | ||||||
Discover Financial Services 6.450%, 06/12/2017 | 1,500,000 | 1,054,068 | ||||||
HSBC Finance Corp. 6.375%, 11/27/2012 | 1,000,000 | 979,209 | ||||||
SLM Corp. 5.375%, 05/15/2014 | 1,000,000 | 675,592 | ||||||
5,496,450 | ||||||||
Diversifed Financial Services – 5.0% | ||||||||
Bank of America Corp. 5.650%, 05/01/2018 | 1,000,000 | 1,007,742 | ||||||
Capmark Financial Group, Inc. 6.300%, 05/10/2017 | 1,000,000 | 275,347 | ||||||
Citigroup, Inc. 6.125%, 05/15/2018 | 1,250,000 | 1,266,137 | ||||||
General Electric Capital Corp. 5.625%, 05/01/2018 | 1,000,000 | 1,009,061 | ||||||
ILFC E-Capital Trust I 5.900%, 12/21/2065 (a) (b) | 1,500,000 | 480,921 | ||||||
JPMorgan Chase & Co. 5.150%, 10/01/2015 | 1,500,000 | 1,418,360 | ||||||
5,457,568 | ||||||||
Insurance – 5.5% | ||||||||
Assurant, Inc. 5.625%, 02/15/2014 | 1,500,000 | 1,141,119 | ||||||
Axis Capital Holdings Ltd. 5.750%, 12/01/2014 | 1,000,000 | 661,253 | ||||||
Hartford Financial Services Group, Inc. 5.375%, 03/15/2017 | 1,500,000 | 1,094,377 | ||||||
Liberty Mutual Group, Inc. 5.750%, 03/15/2014 (a) | 1,000,000 | 647,094 | ||||||
Loews Corp. 5.250%, 03/15/2016 | 750,000 | 678,043 | ||||||
Prudential Financial, Inc. 6.100%, 06/15/2017 | 1,500,000 | 1,231,941 | ||||||
StanCorp Financial Group, Inc. 6.875%, 10/01/2012 | 500,000 | 452,653 | ||||||
5,906,480 | ||||||||
Real Estate Investment Trusts – 6.8% | ||||||||
Camden Property Trust 4.375%, 01/15/2010 | 1,000,000 | 895,934 | ||||||
Developers Diversified Realty Corp. 5.375%, 10/15/2012 | 1,250,000 | 524,582 | ||||||
Equity One, Inc. 6.250%, 01/15/2017 | 1,250,000 | 779,900 | ||||||
HCP, Inc. 4.875%, 09/15/2010 | 1,500,000 | 1,337,715 | ||||||
iStar Financial, Inc. 5.700%, 03/01/2014 | 1,000,000 | 310,257 | ||||||
Mack-Cali Realty L.P. 4.600%, 06/15/2013 | 1,000,000 | 713,975 | ||||||
Post Apartment Homes L.P. 5.125%, 10/12/2011 | 750,000 | 596,868 | ||||||
Potlatch Corp. 12.500%, 12/01/2009 (c) | 1,000,000 | 1,063,255 | ||||||
Simon Property Group L.P. 4.875%, 08/15/2010 | 1,250,000 | 1,106,294 | ||||||
7,328,780 | ||||||||
TOTAL FINANCIALS | 42,911,568 | |||||||
HEALTH CARE – 1.3% | ||||||||
Health Care Providers & Services – 1.3% | ||||||||
UnitedHealth Group, Inc. 6.000%, 02/15/2018 | 1,500,000 | 1,386,309 | ||||||
TOTAL HEALTH CARE | 1,386,309 | |||||||
INDUSTRIALS – 8.1% | ||||||||
Building Products – 0.7% | ||||||||
Owens Corning, Inc. 6.500%, 12/01/2016 | 1,000,000 | 725,228 | ||||||
Commercial Services & Supplies – 1.2% | ||||||||
Waste Management, Inc. 6.100%, 03/15/2018 | 1,500,000 | 1,299,597 | ||||||
Industrial Conglomerates – 0.9% | ||||||||
Hutchison Whampoa International (03/33) Ltd. 6.250%, 01/24/2014 (a) | 1,000,000 | 958,406 | ||||||
Machinery – 2.3% | ||||||||
Caterpillar, Inc. 5.700%, 08/15/2016 | 1,500,000 | 1,460,496 | ||||||
Timken Co. 5.750%, 02/15/2010 | 1,000,000 | 988,688 | ||||||
2,449,184 | ||||||||
(continued)
17
Ohio National Fund, Inc.
Bond Portfolio (Continued)
Bond Portfolio (Continued)
Schedule of Investments | December 31, 2008 |
Face | Fair | |||||||
Corporate Bonds – 102.5% | Amount | Value | ||||||
Road & Rail – 3.0% | ||||||||
CSX Corp. 5.600%, 05/01/2017 | $ | 1,500,000 | $ | 1,334,726 | ||||
Ryder System, Inc. 4.625%, 04/01/2010 | 1,000,000 | 958,067 | ||||||
Union Pacific Corp. 3.625%, 06/01/2010 | 1,000,000 | 991,608 | ||||||
3,284,401 | ||||||||
TOTAL INDUSTRIALS | 8,716,816 | |||||||
INFORMATION TECHNOLOGY – 2.1% | ||||||||
Computers & Peripherals – 0.9% | ||||||||
NCR Corp. 7.125%, 06/15/2009 | 1,000,000 | 1,003,041 | ||||||
IT Services – 1.2% | ||||||||
Computer Sciences Corp. 6.500%, 03/15/2018 (a) | 1,500,000 | 1,294,268 | ||||||
TOTAL INFORMATION TECHNOLOGY | 2,297,309 | |||||||
MATERIALS – 1.5% | ||||||||
Chemicals – 1.0% | ||||||||
Monsanto Co. 7.375%, 08/15/2012 | 1,000,000 | 1,113,527 | ||||||
Metals & Mining – 0.5% | ||||||||
Teck Cominco Ltd. 7.000%, 09/15/2012 | 1,000,000 | 523,239 | ||||||
TOTAL MATERIALS | 1,636,766 | |||||||
TELECOMMUNICATION SERVICES – 4.3% | ||||||||
Diversified Telecommunication Services – 2.7% | ||||||||
AT&T Corp. 7.300%, 11/15/2011 | 500,000 | 519,816 | ||||||
Embarq Corp. 6.738%, 06/01/2013 | 1,000,000 | 845,768 | ||||||
Telecom Italia Capital SA 5.250%, 10/01/2015 | 750,000 | 571,698 | ||||||
Verizon Communications, Inc. 5.350%, 02/15/2011 | 1,000,000 | 1,006,429 | ||||||
2,943,711 | ||||||||
Wireless Telecommunication Services – 1.6% | ||||||||
America Movil S.A.B. de C.V. 5.750%, 01/15/2015 | 1,000,000 | 921,300 | ||||||
New Cingular Wireless Services, Inc. 7.875%, 03/01/2011 | 750,000 | 776,814 | ||||||
1,698,114 | ||||||||
TOTAL TELECOMMUNICATION SERVICES | 4,641,825 | |||||||
UTILITIES – 18.6% | ||||||||
Electric Utilities – 13.6% | ||||||||
Appalachian Power Co. 5.550%, 04/01/2011 | 1,500,000 | 1,486,779 | ||||||
Commonwealth Edison Co. 5.950%, 08/15/2016 | 1,500,000 | 1,401,886 | ||||||
Duke Energy Carolinas LLC 6.050%, 04/15/2038 | 1,350,000 | 1,486,282 | ||||||
Entergy Mississippi, Inc. 5.920%, 02/01/2016 | 1,000,000 | 908,893 | ||||||
IPALCO Enterprises, Inc. 8.625%, 11/14/2011 | 1,000,000 | 940,000 | ||||||
Kansas City Power & Light Co. 5.850%, 06/15/2017 | 1,500,000 | 1,375,690 | ||||||
Metropolitan Edison Co. 4.875%, 04/01/2014 | 750,000 | 681,814 | ||||||
Pepco Holdings, Inc. 4.000%, 05/15/2010 | 750,000 | 721,371 | ||||||
Potomac Power Co. 6.500%, 11/15/2037 | 750,000 | 734,433 | ||||||
PSEG Power LLC 5.000%, 04/01/2014 | 750,000 | 673,688 | ||||||
Scottish Power Ltd. 4.910%, 03/15/2010 | 1,000,000 | 979,292 | ||||||
Tenaska Georgia Partners L.P. 9.500%, 02/01/2030 | 494,996 | 446,824 | ||||||
Union Electric Co. 6.400%, 06/15/2017 | 1,500,000 | 1,369,637 | ||||||
Virginia Electric & Power Co. 5.400%, 01/15/2016 | 1,500,000 | 1,472,099 | ||||||
14,678,688 | ||||||||
Gas Utilities – 2.0% | ||||||||
CenterPoint Energy Resources Corp. 5.950%, 01/15/2014 | 500,000 | 457,823 | ||||||
Southwest Gas Corp. 7.625%, 05/15/2012 | 1,000,000 | 1,002,083 | ||||||
Spectra Energy Capital LLC 5.500%, 03/01/2014 | 750,000 | 657,521 | ||||||
2,117,427 | ||||||||
Independent Power Producers & Energy Traders – 1.2% | ||||||||
Energy Future Competitive Holdings Co. 7.480%, 01/01/2017 | 619,000 | 364,377 | ||||||
TransAlta Corp. 6.750%, 07/15/2012 | 1,000,000 | 895,522 | ||||||
1,259,899 | ||||||||
Multi-Utilities – 1.8% | ||||||||
Avista Corp. 5.950%, 06/01/2018 | 1,000,000 | 953,241 | ||||||
Consumers Energy Co. 6.000%, 02/15/2014 | 1,000,000 | 998,839 | ||||||
1,952,080 | ||||||||
TOTAL UTILITIES | 20,008,094 | |||||||
Total Corporate Bonds (Cost $130,112,044) | $ | 110,435,522 | ||||||
(continued)
18
Ohio National Fund, Inc.
Bond Portfolio (Continued)
Bond Portfolio (Continued)
Schedule of Investments | December 31, 2008 |
Face | Fair | |||||||
Repurchase Agreements – 3.1% | Amount | Value | ||||||
U.S. Bank 0.010%, 01/02/2009 | $ | 3,391,000 | $ | 3,391,000 | ||||
Repurchase price $3,391,002 | ||||||||
Collateralized by: | ||||||||
Various Agency Mortgage-Backed Securities 2.395% to 5.000%, Due 09/01/2018 through 05/15/2033 Fair Value: $3,458,654 | ||||||||
Total Repurchase Agreements (Cost $3,391,000) | $ | 3,391,000 | ||||||
Total Investments – 105.6% (Cost $133,503,044) (e) | $ | 113,826,522 | ||||||
Liabilities in Excess of Other Assets – (5.6)% | (6,068,052 | ) | ||||||
Net Assets – 100.0% | $ | 107,758,470 | ||||||
Percentages are stated as a percent of net assets.
Footnotes:
(a) | Security exempt from registration under Regulation D of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified buyers. At December 31, 2008, the value of these securities totaled $4,242,466 or 3.9% of the Portfolio’s net assets. These securities were deemed liquid pursuant to procedures approved by the Board of Directors. | |
(b) | This security is a fixed-to-floating rate bond. The coupon rate is fixed at 5.900% through 12/21/2010. Thereafter, the rate is a variable rate based on the highest rate among the three month U.S. LIBOR and the 10-year and 30-year Constant Maturity Treasury rates. | |
(c) | This security is a credit sensitive bond. The coupon rate is a variable rate subject to adjustment based on changes in either Moody’s or S&P ratings. | |
(d) | Fixed-to-floating rate, callable, perpetual life trust preferred security. Interest rates stated are those in effect at December 31, 2008. | |
(e) | Represents cost for financial reporting purposes, which may differ from cost basis for Federal income tax purposes. See also Note 8 of the Notes to Financial Statements. |
The accompanying notes are an integral part of these financial statements
19
Ohio National Fund, Inc.
Bond Portfolio
Bond Portfolio
Statement of Assets and Liabilities
December 31, 2008
Assets: | ||||
Investments in securities, at fair value (Cost $130,112,044) | $ | 110,435,522 | ||
Repurchase agreements | 3,391,000 | |||
Cash | 205 | |||
Receivable for fund shares sold | 98,960 | |||
Accrued interest receivable | 1,957,559 | |||
Prepaid expenses and other assets | 268 | |||
Total assets | 115,883,514 | |||
Liabilities: | ||||
Payable for fund shares redeemed | 8,033,064 | |||
Payable for investment management services | 57,071 | |||
Accrued custody expense | 1,367 | |||
Accrued professional fees | 12,940 | |||
Accrued accounting fees | 10,144 | |||
Accrued printing and filing fees | 10,458 | |||
Total liabilities | 8,125,044 | |||
Net assets | $ | 107,758,470 | ||
Net assets consist of: | ||||
Par value, $1 per share | $ | 10,637,681 | ||
Paid-in capital in excess of par value | 118,486,870 | |||
Accumulated net realized loss on investments | (9,875,608 | ) | ||
Net unrealized depreciation on investments | (19,676,522 | ) | ||
Undistributed net investment income | 8,186,049 | |||
Net assets | $ | 107,758,470 | ||
Shares outstanding | 10,637,681 | |||
Authorized Fund shares allocated to Portfolio | 20,000,000 | |||
Net asset value per share | $ | 10.13 | ||
Statement of Operations
For the Year Ended December 31, 2008
Investment income: | ||||
Interest | $ | 9,187,630 | ||
Expenses: | ||||
Management fees | 866,108 | |||
Custodian fees | 9,356 | |||
Directors’ fees | 13,036 | |||
Professional fees | 20,726 | |||
Accounting fees | 69,431 | |||
Printing and filing fees | 20,408 | |||
Compliance expense | 4,911 | |||
Other | 269 | |||
Total expenses | 1,004,245 | |||
Net investment income | 8,183,385 | |||
Realized/unrealized gain (loss) on investments: | ||||
Net realized gain (loss) on investments | (7,121,821 | ) | ||
Change in unrealized appreciation/depreciation on investments | (18,186,256 | ) | ||
Net realized/unrealized gain (loss) on investments | (25,308,077 | ) | ||
Change in net assets from operations | $ | (17,124,692 | ) | |
The accompanying notes are an integral part of these financial statements.
20
Ohio National Fund, Inc.
Bond Portfolio
Bond Portfolio
Statements of Changes in Net Assets
Years Ended December 31, | ||||||||
2008 | 2007 | |||||||
Increase (Decrease) in Net Assets: | ||||||||
Operations: | ||||||||
Net investment income | $ | 8,183,385 | $ | 8,981,766 | ||||
Net realized gain (loss) on investments | (7,121,821 | ) | 37,249 | |||||
Change in unrealized appreciation/depreciation on investments | (18,186,256 | ) | (2,435,616 | ) | ||||
Change in net assets from operations | (17,124,692 | ) | 6,583,399 | |||||
Capital transactions: | ||||||||
Received from shares sold | 34,675,995 | 39,973,351 | ||||||
Paid for shares redeemed | (87,447,734 | ) | (40,020,045 | ) | ||||
Change in net assets from capital transactions | (52,771,739 | ) | (46,694 | ) | ||||
Change in net assets | (69,896,431 | ) | 6,536,705 | |||||
Net Assets: | ||||||||
Beginning of year | 177,654,901 | 171,118,196 | ||||||
End of year | $ | 107,758,470 | $ | 177,654,901 | ||||
Undistributed net investment income | $ | 8,186,049 | $ | 8,984,430 | ||||
Financial Highlights
Years Ended December 31, | ||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
Selected Per-Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 11.44 | $ | 11.03 | $ | 10.96 | $ | 11.33 | $ | 10.70 | ||||||||||
Operations: | ||||||||||||||||||||
Net investment income | 1.04 | 0.58 | 0.55 | (a) | 0.56 | (a) | 0.51 | |||||||||||||
Net realized and unrealized gain (loss) on investments | (2.35 | ) | (0.17 | ) | (0.06 | ) | (0.51 | ) | 0.12 | |||||||||||
Total from operations | (1.31 | ) | 0.41 | 0.49 | 0.05 | 0.63 | ||||||||||||||
Distributions: | ||||||||||||||||||||
Distributions from net investment income | — | — | (0.42 | ) | (0.42 | ) | — | |||||||||||||
Net asset value, end of year | $ | 10.13 | $ | 11.44 | $ | 11.03 | $ | 10.96 | $ | 11.33 | ||||||||||
Total return | –11.45 | % | 3.72 | % | 4.44 | % | 0.42 | % | 5.89 | % | ||||||||||
Ratios and supplemental data: | ||||||||||||||||||||
Net assets at end of year (millions) | $ | 107.8 | $ | 177.7 | $ | 171.1 | $ | 139.0 | $ | 114.4 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Expenses | 0.66 | % | 0.63 | % | 0.65 | % | 0.68 | % | 0.72 | % | ||||||||||
Net investment income | 5.35 | % | 4.99 | % | 4.99 | % | 4.97 | % | 5.22 | % | ||||||||||
Portfolio turnover rate | 15 | % | 13 | % | 25 | % | 13 | % | 19 | % |
(a) Calculated using the average daily shares method.
The accompanying notes are an integral part of these financial statements.
21
Ohio National Fund, Inc.
Omni Portfolio
Omni Portfolio
Objective/Strategy
The Omni Portfolio seeks a high level of long-term total return consistent with preservation of capital by investing in stocks, bonds, and money market instruments.
Performance as of December 31, 2008
Average Annual Total Returns: | ||||
One year | -31.46% | |||
Five years | -0.51% | |||
Ten years | -2.42% |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price and reinvestment of dividends and capital gains. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost.
The Portfolio is not open to direct retail investment. Beneficial interest in shares is obtained solely by purchase of variable life insurance policies and variable annuity contracts. Actual performance results for variable annuity and variable universal life contracts will be lower due to contract charges. Consult your contract for applicable charges.
Comments
For the year ended December 31, 2008, the Omni Portfolio returned -31.46% versus -28.83% for the current benchmark, which is composed of 70% S&P 500 Index and 30% Merrill Lynch U.S. Corporate Master Index.
The year 2008 was a very difficult year for both the equity and credit markets. What started as a problem with sub-prime mortgages and a “bubble” in U.S. housing values in 2007 ballooned into a near collapse of the world-wide financial system in 2008. Major financial institutions including The Bear Stearns Companies, Inc., Fannie Mae, Freddie Mac, American International Group (“AIG”), Lehman Brothers, Inc., Washington Mutual, Inc. and Merrill Lynch & Co. collapsed. Other major financial institutions would have likely failed were it not for intervention from the Federal Reserve and the U.S. Treasury. Leverage that had been building for several years in households, financial institutions and some industrial corporations began to unwind in 2008, and the result has been a severe contraction in financial services and a recession that is world-wide in scope. Whether stocks have completely discounted the global recession is debatable. With much uncertainty still facing the financial markets, investors must focus beyond 2009, as it will hopefully prove a year of economic transition, and move their sights to 2010 or later, as the world’s economy recovers with less debt.
The Portfolio’s 263 basis points of underperformance is the result of several factors. First, the equity component of the Portfolio underperformed the S&P 500 Index. Second, the bond component of the Portfolio underperformed the Merrill Lynch U.S. Corporate Master Index. Third, the Portfolio was underweighted in stocks during a period when stocks performed poorly. In the fourth quarter of the year, the Portfolio was overweighted in bonds, which performed much better than stocks during this time period. Lastly, the Portfolio built its cash position in the second half of the year, as both the credit and equity markets were struggling. (1)
With respect to 2008 performance for stocks in the Portfolio, an abysmal fourth quarter destroyed what had been a reasonable year-to-date period, as the overweighted position in insurance stocks resulted in underperformance for the year. The equity position of the Portfolio ended the year down 40.24%, 324 basis points worse than the S&P 500 Index. As the fourth quarter began, the equity portion of the Portfolio had avoided many of the financial disasters to date, by not owning Fannie Mae, Freddie Mac, Bear Stearns and Lehman Brothers. The life insurers that were owned looked financially sound and inexpensive on all measures. Unfortunately, their balance sheets were impacted by credit losses and potential liabilities in their guaranteed annuity businesses. (1)
All of the five largest detractors to equity performance were in the financial sector. These included AIG, The Hartford Financial Services Group, Inc., Bank of America Corp., Prudential Financial, Inc. and Lincoln National Corp. The five greatest positive contributors to equity performance included Rohm and Haas Co. and Quanta Services Inc., both benefiting from optimism that President Obama’s plans to revitalize the economy could provide a benefit to their businesses. Wells Fargo & Co. performed well because the company experienced fewer non-performing loans than other regional banks. Wal-Mart Stores, Inc. did well because of its value proposition in a weak economy, and Imclone Systems, Inc. because it was acquired by Eli Lilly. (1)
As we enter 2009, the equity component of the Portfolio is overweighted in industrials. The belief is their valuations are not reflective of their normalized earnings power, and that once investors have visibility as to the economy’s bottom, these stocks will recover strongly. Equity is also overweighted in insurers, though financial stocks are slightly underweighted in general, and banks continue to be underweighted in the Portfolio. The equity portion of the Portfolio is also underweighted in retail because consumer spending is expected to remain weak. (1)
The bond component of the Portfolio underperformed the Merrill Lynch U.S. Corporate Master Index by approximately 600 basis points, primarily due to poor performance of a number of holdings in the financial sector. The five worst detractors to performance were Lehman Brothers Holdings, Inc., Washington Mutual Inc., Nuveen Investments, Inc., Capmark Financial Group, Inc. and American General Finance Corp. The best performing securities in the bond component of the Portfolio were Countrywide Financial Corp., Duke Energy Carolinas LLC, Abbott Laboratories, Kimberly-Clark Corp. and Potomac Power Co. All but Countrywide Financial Corp. were in the recession-resistant sectors of electric utilities, pharmaceuticals and consumer staples; Countrywide Financial Corp. performed well because it was acquired by Bank of America. Several industry weightings also had an impact on the return of the bond component of the Portfolio. The overweighting in electric utilities and media, as well as the underweighting in banks and brokers, benefited performance. The overweighting in finance and real estate investment trusts (“REITS”), however, hurt performance. (1)
(continued)
22
Ohio National Fund, Inc.
Omni Portfolio (Continued)
Omni Portfolio (Continued)
The U.S. economy is currently in a severe recession, and we expect that the economy will remain in recession for much of 2009. Several factors in the current environment have the potential to prompt the economy into recovery. Credit is thawing, as the spread between London Interbank Offered Rate (“LIBOR”) and U.S. Treasuries has narrowed from a very wide level to under 100 basis points. This, in turn, allows banks to lend to one another, thus making credit more available to consumers and corporations. Energy savings are also stimulating the economy as the price of a barrel of oil has fallen $100 from its peak. Finally, we do have a major stimulus package being worked on in Washington that will add to government spending over the next few years. As these factors take effect, the economy will likely bottom and turn up. Because of massive deficit spending on the part of the Federal government, inflation may become a problem when the economy begins to grow. Given the state and outlook for the economy and capital markets, the strategy for the Portfolio is to maintain an underweighting in stocks, and an overweighting in bonds and a cash position that is larger than normal until the economy begins to stabilize. (1)
(1) | The Portfolio’s composition is subject to change. Holdings and weightings are as of December 31, 2008. |
Change in Value of $10,000 Investment
Hypothetical illustration based on past performance. Future performance will vary. The Portfolio’s returns reflect reinvested dividends. The Portfolio’s holdings may differ significantly from the securities in the index. The index is unmanaged and therefore does not reflect the cost of portfolio management and accounting.
Merrill Lynch U.S. Corporate Master Index tracks the performance of all U.S. dollar-denominated, investment grade corporate public debt issued in the U.S. domestic bond market. Qualifying bonds must have at least one year remaining term to maturity, a fixed coupon schedule, and a minimum amount outstanding of $150 million.
The S&P 500 Index is a capitalization-weighted index designed to measure performance of the broad domestic market through changes in the aggregate market value of 500 stocks representing all major industries. The index presented herein includes the effects of reinvested dividends.
Portfolio Composition as of December 31, 2008 (1)
% of Net Assets | |||
Common Stocks (3) | 55.7 | ||
Corporate Bonds (3) | 36.2 | ||
Repurchase Agreements and Other Net Assets | 8.1 | ||
100.0 | |||
Top 10 Portfolio Holdings as of December 31, 2008 (1) (2)
% of Net Assets | |||||||
1. | Exxon Mobil Corp. | 2.0 | |||||
2. | Hewlett-Packard Co. | 1.4 | |||||
3. | Cisco Systems, Inc. | 1.4 | |||||
4. | Lockheed Martin Corp. | 1.3 | |||||
5. | MetLife, Inc. | 1.3 | |||||
6. | QUALCOMM, Inc. | 1.2 | |||||
7. | Vertex Pharmaceuticals, Inc. | 1.2 | |||||
8. | Applied Materials, Inc. | 1.2 | |||||
9. | International Business Machines Corp. | 1.2 | |||||
10. | Air Products and Chemicals, Inc. | 1.2 |
(1) | Composition of Portfolio subject to change. | |
(2) | Short-term investments have been excluded from the list of Top 10 Portfolio holdings. | |
(3) | Sectors (combined): |
% of Net Assets | |||
Financials | 20.0 | ||
Information Technology | 13.1 | ||
Industrials | 11.5 | ||
Health Care | 10.8 | ||
Energy | 10.0 | ||
Consumer Staples | 8.5 | ||
Utilities | 6.5 | ||
Consumer Discretionary | 4.4 | ||
Materials | 3.8 | ||
Telecommunication Services | 3.3 | ||
91.9 | |||
23
Ohio National Fund, Inc.
Omni Portfolio
Omni Portfolio
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 55.7% | Shares | Value | ||||||
CONSUMER DISCRETIONARY – 1.1% | ||||||||
Media – 1.1% | ||||||||
The Walt Disney Co. | 16,200 | $ | 367,578 | |||||
TOTAL CONSUMER DISCRETIONARY | 367,578 | |||||||
CONSUMER STAPLES – 5.6% | ||||||||
Beverages – 2.9% | ||||||||
Molson Coors Brewing Co. Class B | 7,300 | 357,116 | ||||||
PepsiCo, Inc. | 6,100 | 334,097 | ||||||
The Coca-Cola Co. | 6,800 | 307,836 | ||||||
999,049 | ||||||||
Food & Staples Retailing – 1.0% | ||||||||
Wal-Mart Stores, Inc. | 6,400 | 358,784 | ||||||
Food Products – 0.8% | ||||||||
The J.M. Smucker Co. | 6,100 | 264,496 | ||||||
Household Products – 0.9% | ||||||||
The Clorox Co. | 5,900 | 327,804 | ||||||
TOTAL CONSUMER STAPLES | 1,950,133 | |||||||
ENERGY – 6.7% | ||||||||
Energy Equipment & Services – 0.7% | ||||||||
Transocean Ltd (a) | 5,400 | 255,150 | ||||||
Oil, Gas & Consumable Fuels – 6.0% | ||||||||
Anadarko Petroleum Corp. | 4,800 | 185,040 | ||||||
Apache Corp. | 4,200 | 313,026 | ||||||
Devon Energy Corp. | 4,900 | 321,979 | ||||||
Exxon Mobil Corp. | 8,650 | 690,530 | ||||||
Marathon Oil Corp. | 6,700 | 183,312 | ||||||
XTO Energy, Inc. | 10,900 | 384,443 | ||||||
2,078,330 | ||||||||
TOTAL ENERGY | 2,333,480 | |||||||
FINANCIALS – 7.2% | ||||||||
Capital Markets – 0.7% | ||||||||
Morgan Stanley | 16,000 | 256,640 | ||||||
Diversified Financial Services – 1.9% | ||||||||
Bank of America Corp. | 20,700 | 291,456 | ||||||
JPMorgan Chase & Co. | 11,200 | 353,136 | ||||||
644,592 | ||||||||
Insurance – 4.6% | ||||||||
Lincoln National Corp. | 12,900 | 243,036 | ||||||
MetLife, Inc. | 13,000 | 453,180 | ||||||
Prudential Financial, Inc. | 7,700 | 233,002 | ||||||
The Hartford Financial Services Group, Inc. | 17,400 | 285,708 | ||||||
Travelers Companies, Inc. | 8,800 | 397,760 | ||||||
1,612,686 | ||||||||
TOTAL FINANCIALS | 2,513,918 | |||||||
HEALTH CARE – 8.9% | ||||||||
Biotechnology – 1.2% | ||||||||
Vertex Pharmaceuticals, Inc. (a) | 13,700 | 416,206 | ||||||
Health Care Equipment & Supplies – 0.9% | ||||||||
Baxter International, Inc. | 5,800 | 310,822 | ||||||
Health Care Providers & Services – 1.8% | ||||||||
Aetna, Inc. | 9,100 | 259,350 | ||||||
McKesson Corp. | 9,800 | 379,554 | ||||||
638,904 | ||||||||
Life Sciences Tools & Services – 2.8% | ||||||||
Life Technologies Corp. (a) | 15,300 | 356,643 | ||||||
Sequenom, Inc. (a) | 13,500 | 267,840 | ||||||
Thermo Fisher Scientific, Inc. (a) | 10,100 | 344,107 | ||||||
968,590 | ||||||||
Pharmaceuticals – 2.2% | ||||||||
Mylan, Inc. (a) | 40,200 | 397,578 | ||||||
Pfizer, Inc. | 21,300 | 377,223 | ||||||
774,801 | ||||||||
TOTAL HEALTH CARE | 3,109,323 | |||||||
INDUSTRIALS – 9.7% | ||||||||
Aerospace & Defense – 5.8% | ||||||||
Honeywell International, Inc. | 12,100 | 397,243 | ||||||
Lockheed Martin Corp. | 5,400 | 454,032 | ||||||
Precision Castparts Corp. | 6,600 | 392,568 | ||||||
Raytheon Co. | 7,700 | 393,008 | ||||||
United Technologies Corp. | 7,300 | 391,280 | ||||||
2,028,131 | ||||||||
Construction & Engineering – 1.0% | ||||||||
Quanta Services, Inc. (a) | 17,100 | 338,580 | ||||||
Electrical Equipment – 0.8% | ||||||||
SunPower Corp. (a) | 9,617 | 292,741 | ||||||
Industrial Conglomerates – 2.1% | ||||||||
General Electric Co. | 22,400 | 362,880 | ||||||
Tyco International Ltd. | 17,000 | 367,200 | ||||||
730,080 | ||||||||
TOTAL INDUSTRIALS | 3,389,532 | |||||||
INFORMATION TECHNOLOGY – 12.7% | ||||||||
Communications Equipment – 3.4% | ||||||||
Cisco Systems, Inc. (a) | 29,300 | 477,590 | ||||||
Corning, Inc. | 31,300 | 298,289 | ||||||
QUALCOMM, Inc. | 11,800 | 422,794 | ||||||
1,198,673 | ||||||||
Computers & Peripherals – 3.6% | ||||||||
Apple, Inc. (a) | 4,500 | 384,075 | ||||||
Hewlett-Packard Co. | 13,200 | 479,028 | ||||||
International Business Machines Corp. | 4,800 | 403,968 | ||||||
1,267,071 | ||||||||
Internet Software & Services – 1.1% | ||||||||
Google, Inc. Class A (a) | 1,250 | 384,563 | ||||||
IT Services – 0.5% | ||||||||
Mastercard, Inc. Class A | 1,100 | 157,223 | ||||||
(continued)
24
Ohio National Fund, Inc.
Omni Portfolio (Continued)
Omni Portfolio (Continued)
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 55.7% | Shares | Value | ||||||
Semiconductors & Semiconductor Equipment – 2.1% | ||||||||
Applied Materials, Inc. | 40,300 | $ | 408,239 | |||||
Maxim Integrated Products, Inc. | 30,100 | 343,742 | ||||||
751,981 | ||||||||
Software – 2.0% | ||||||||
Electronic Arts, Inc. (a) | 19,900 | 319,196 | ||||||
Microsoft Corp. | 19,400 | 377,136 | ||||||
696,332 | ||||||||
TOTAL INFORMATION TECHNOLOGY | 4,455,843 | |||||||
MATERIALS – 3.8% | ||||||||
Chemicals – 3.6% | ||||||||
Air Products and Chemicals, Inc. | 8,000 | 402,160 | ||||||
Celanese Corp. Class A | 22,400 | 278,432 | ||||||
Mosaic Co. | 8,200 | 283,720 | ||||||
Potash Corp. of Saskatchewan, Inc. | 1,200 | 87,864 | ||||||
Praxair, Inc. | 3,300 | 195,888 | ||||||
1,248,064 | ||||||||
Metals & Mining – 0.2% | ||||||||
Nucor Corp. | 1,700 | 78,540 | ||||||
TOTAL MATERIALS | 1,326,604 | |||||||
Total Common Stocks (Cost $26,429,898) | $ | 19,446,411 | ||||||
Face | Fair | |||||||
Corporate Bonds – 36.2% | Amount | Value | ||||||
CONSUMER DISCRETIONARY – 3.3% | ||||||||
Automobiles – 0.6% | ||||||||
Daimler Finance North America LLC 6.500%, 11/15/2013 | $ | 250,000 | $ | 195,193 | ||||
Media – 2.5% | ||||||||
Clear Channel Communications Inc. 4.250%, 05/15/2009 | 100,000 | 88,500 | ||||||
Comcast Corp. 5.875%, 02/15/2018 | 150,000 | 142,385 | ||||||
Cox Communications, Inc. 6.750%, 03/15/2011 | 250,000 | 243,476 | ||||||
Rogers Cable, Inc. 5.500%, 03/15/2014 | 150,000 | 138,536 | ||||||
The Walt Disney Co. 6.200%, 06/20/2014 | 250,000 | 265,654 | ||||||
878,551 | ||||||||
Multiline Retail – 0.2% | ||||||||
Macy’s Retail Holdings, Inc. 5.900%, 12/01/2016 | 150,000 | 91,192 | ||||||
TOTAL CONSUMER DISCRETIONARY | 1,164,936 | |||||||
CONSUMER STAPLES – 2.9% | ||||||||
Beverages – 0.4% | ||||||||
Anheuser-Busch Cos., Inc. 5.500%, 01/15/2018 | 150,000 | 136,579 | ||||||
Food & Staples Retailing – 1.2% | ||||||||
CVS/Caremark Corp. 5.750%, 06/01/2017 | 150,000 | 141,450 | ||||||
Kroger Co. 6.400%, 08/15/2017 | 150,000 | 151,518 | ||||||
Safeway, Inc. 6.350%, 08/15/2017 | 150,000 | 148,546 | ||||||
441,514 | ||||||||
Food Products – 0.8% | ||||||||
Bunge N.A. Finance LP 5.900%, 04/01/2017 | 150,000 | 109,347 | ||||||
Kraft Foods, Inc. 6.500%, 08/11/2017 | 150,000 | 151,017 | ||||||
260,364 | ||||||||
Household Products – 0.5% | ||||||||
Kimberly-Clark Corp. 6.125%, 08/01/2017 | 150,000 | 160,077 | ||||||
TOTAL CONSUMER STAPLES | 998,534 | |||||||
ENERGY – 3.3% | ||||||||
Energy Equipment & Services – 0.3% | ||||||||
Weatherford International Ltd. 6.000%, 03/15/2018 | 150,000 | 126,175 | ||||||
Oil, Gas & Consumable Fuels – 3.0% | ||||||||
Anadarko Petroleum Corp. 5.950%, 09/15/2016 | 150,000 | 132,693 | ||||||
Boardwalk Pipelines LP 5.500%, 02/01/2017 | 250,000 | 202,462 | ||||||
Enterprise Products Operating LP 5.000%, 03/01/2015 | 150,000 | 122,393 | ||||||
Magellan Midstream Partners LP 6.400%, 07/15/2018 | 150,000 | 127,141 | ||||||
Valero Energy Corp. 4.750%, 06/15/2013 | 250,000 | 229,932 | ||||||
XTO Energy, Inc. 4.900%, 02/01/2014 | 250,000 | 225,565 | ||||||
1,040,186 | ||||||||
TOTAL ENERGY | 1,166,361 | |||||||
FINANCIALS – 12.8% | ||||||||
Capital Markets – 2.7% | ||||||||
Jefferies Group Inc. 5.875%, 06/08/2014 | 150,000 | 115,723 | ||||||
Mellon Funding Corp. 5.500%, 11/15/2018 | 250,000 | 215,904 | ||||||
Merrill Lynch & Co., Inc. 6.050%, 05/16/2016 | 150,000 | 140,524 | ||||||
Morgan Stanley 4.750%, 04/01/2014 | 250,000 | 190,680 | ||||||
Nuveen Investments, Inc. 5.500%, 09/15/2015 | 250,000 | 39,063 | ||||||
The Goldman Sachs Group, Inc. 5.150%, 01/15/2014 | 250,000 | 225,399 | ||||||
927,293 | ||||||||
Commercial Banks – 2.2% | ||||||||
BB&T Corp. 5.200%, 12/23/2015 | 150,000 | 142,767 |
(continued)
25
Ohio National Fund, Inc.
Omni Portfolio (Continued)
Omni Portfolio (Continued)
Schedule of Investments | December 31, 2008 |
Face | Fair | |||||||
Corporate Bonds – 36.2% | Amount | Value | ||||||
Commercial Banks (continued) | ||||||||
Deutsche Bank Capital Funding Trust VII 5.628%, Perpetual (b) (c) | $ | 250,000 | $ | 106,962 | ||||
KeyBank NA 5.700%, 11/01/2017 | 150,000 | 109,524 | ||||||
PNC Funding Corp. 5.250%, 11/15/2015 | 150,000 | 144,674 | ||||||
RBS Capital Trust III 5.512%, Perpetual (c) | 250,000 | 100,037 | ||||||
Wachovia Capital Trust III | ||||||||
5.800%, Perpetual (c) | 250,000 | 147,565 | ||||||
751,529 | ||||||||
Consumer Finance – 2.1% | ||||||||
American General Finance Corp. 5.400%, 12/01/2015 | 150,000 | 56,099 | ||||||
Capital One Bank USA NA 5.125%, 02/15/2014 | 250,000 | 231,553 | ||||||
Discover Financial Services 6.450%, 06/12/2017 | 150,000 | 105,407 | ||||||
HSBC Finance Corp. 6.375%, 11/27/2012 | 250,000 | 244,802 | ||||||
SLM Corp. 5.375%, 05/15/2014 | 150,000 | 101,339 | ||||||
739,200 | ||||||||
Diversified Financial Services – 2.3% | ||||||||
Bank of America Corp. 5.750%, 08/15/2016 | 150,000 | 140,404 | ||||||
Capmark Financial Group, Inc. 6.300%, 05/10/2017 | 150,000 | 41,302 | ||||||
Citigroup, Inc. 5.850%, 08/02/2016 | 150,000 | 145,486 | ||||||
General Electric Capital Corp. 5.000%, 01/08/2016 | 250,000 | 242,455 | ||||||
JP Morgan Chase & Co. 5.150%, 10/01/2015 | 250,000 | 236,393 | ||||||
806,040 | ||||||||
Insurance – 1.7% | ||||||||
Assurant, Inc. 5.625%, 02/15/2014 | 250,000 | 190,186 | ||||||
Liberty Mutual Group, Inc. 5.750%, 03/15/2014 (b) | 250,000 | 161,774 | ||||||
MetLife, Inc. 5.375%, 12/15/2012 | 250,000 | 235,765 | ||||||
587,725 | ||||||||
Real Estate Investment Trusts – 1.8% | ||||||||
Colonial Realty LP 6.050%, 09/01/2016 | 150,000 | 87,522 | ||||||
Duke Realty LP 4.625%, 05/15/2013 | 250,000 | 157,423 | ||||||
HCP, Inc. 6.000%, 01/30/2017 | 150,000 | 72,385 | ||||||
iStar Financial, Inc. 6.000%, 12/15/2010 | 250,000 | 105,038 | ||||||
Post Apartment Homes LP 5.125%, 10/12/2011 | 250,000 | 198,956 | ||||||
621,324 | ||||||||
TOTAL FINANCIALS | 4,433,111 | |||||||
HEALTH CARE – 1.9% | ||||||||
Health Care Equipment & Supplies – 0.3% | ||||||||
Hospira, Inc. 6.050%, 03/30/2017 | 150,000 | 122,019 | ||||||
Health Care Providers & Services – 0.8% | ||||||||
UnitedHealth Group, Inc. 6.000%, 02/15/2018 | 150,000 | 138,631 | ||||||
WellPoint, Inc. 5.875%, 06/15/2017 | 150,000 | 136,740 | ||||||
275,371 | ||||||||
Pharmaceuticals – 0.8% | ||||||||
Abbott Laboratories 5.600%, 11/30/2017 | 150,000 | 162,614 | ||||||
Wyeth 6.950%, 03/15/2011 | 100,000 | 104,191 | ||||||
266,805 | ||||||||
TOTAL HEALTH CARE | 664,195 | |||||||
INDUSTRIALS – 1.8% | ||||||||
Building Products – 0.3% | ||||||||
Owens Corning, Inc. 6.500%, 12/01/2016 | 150,000 | 108,784 | ||||||
Commercial Services & Supplies – 0.4% | ||||||||
Waste Management, Inc. 6.100%, 03/15/2018 | 150,000 | 129,960 | ||||||
Industrial Conglomerates – 0.4% | ||||||||
Hutchison Whampoa International (03/33) Ltd. 6.250%, 01/24/2014 (b) | 150,000 | 143,761 | ||||||
Road & Rail – 0.7% | ||||||||
CSX Corp. 5.600%, 05/01/2017 | 150,000 | 133,472 | ||||||
ERAC USA Finance Co. 6.375%, 10/15/2017 (b) | 150,000 | 104,259 | ||||||
237,731 | ||||||||
TOTAL INDUSTRIALS | 620,236 | |||||||
INFORMATION TECHNOLOGY – 0.4% | ||||||||
IT Services – 0.4% | ||||||||
Computer Sciences Corp. 6.500%, 03/15/2018 (b) | 150,000 | 129,427 | ||||||
TOTAL INFORMATION TECHNOLOGY | 129,427 | |||||||
TELECOMMUNICATION SERVICES – 3.3% | ||||||||
Diversified Telecommunication Services – 2.6% | ||||||||
AT&T Corp. 7.300%, 11/15/2011 | 250,000 | 259,908 | ||||||
Embarq Corp. 6.738%, 06/01/2013 | 150,000 | 126,865 |
(continued)
26
Ohio National Fund, Inc.
Omni Portfolio (Continued)
Omni Portfolio (Continued)
Schedule of Investments | December 31, 2008 |
Face | Fair | |||||||
Corporate Bonds – 36.2% | Amount | Value | ||||||
Diversified Telecommunication Services (continued) | ||||||||
Telecom Italia Capital SA 5.250%, 10/01/2015 | $ | 100,000 | $ | 76,227 | ||||
Telefonos de Mexico S.A.B. de C.V. 5.500%, 01/27/2015 | 250,000 | 226,725 | ||||||
Verizon Florida LLC 6.125%, 01/15/2013 | 250,000 | 238,471 | ||||||
928,196 | ||||||||
Wireless Telecommunication Services – 0.7% | ||||||||
America Movil S.A.B. de C.V. 5.750%, 01/15/2015 | 250,000 | 230,325 | ||||||
TOTAL TELECOMMUNICATION SERVICES | 1,158,521 | |||||||
UTILITIES – 6.5% | ||||||||
Electric Utilities – 4.8% | ||||||||
Commonwealth Edison Co. 5.950%, 08/15/2016 | 150,000 | 140,189 | ||||||
Duke Energy Carolinas LLC 6.050%, 04/15/2038 | 150,000 | 165,142 | ||||||
Kansas City Power & Light Co. 5.850%, 06/15/2017 | 150,000 | 137,569 | ||||||
Nevada Power Co. 5.950%, 03/15/2016 | 150,000 | 143,984 | ||||||
Pennsylvania Electric Co. 6.050%, 09/01/2017 | 150,000 | 134,775 | ||||||
Potomac Power Co. 6.500%, 11/15/2037 | 150,000 | 146,887 | ||||||
PSEG Power LLC 5.000%, 04/01/2014 | 250,000 | 224,562 | ||||||
Southern Power Co. | ||||||||
4.875%, 07/15/2015 | 250,000 | 222,846 | ||||||
Union Electric Co. 6.400%, 06/15/2017 | 150,000 | 136,964 | ||||||
Virginia Electric and Power Co. 4.750%, 03/01/2013 | 250,000 | 240,666 | ||||||
1,693,584 | ||||||||
Gas Utilities – 0.6% | ||||||||
Spectra Energy Capital LLC 5.500%, 03/01/2014 | 250,000 | 219,173 | ||||||
Multi-Utilities – 0.7% | ||||||||
Consumers Energy Co. 6.000%, 02/15/2014 | 250,000 | 249,710 | ||||||
Water Utilities – 0.4% | ||||||||
American Water Capital Corp. 6.085%, 10/15/2017 | 150,000 | 130,869 | ||||||
TOTAL UTILITIES | 2,293,336 | |||||||
Total Corporate Bonds (Cost $15,209,044) | $ | 12,628,657 | ||||||
Face | Fair | |||||||
Repurchase Agreements – 7.1% | Amount | Value | ||||||
U.S. Bank 0.010% 01/02/2009 | $ | 2,497,000 | $ | 2,497,000 | ||||
Repurchase price $2,497,001 | ||||||||
Collateralized by: | ||||||||
Various Agency Mortgage- Backed Securities 2.395% to 5.000%, Due 09/01/2018 through 05/15/2033 | ||||||||
Fair Value: $2,546,818 | ||||||||
Total Repurchase Agreements (Cost $2,497,000) | $ | 2,497,000 | ||||||
Total Investments – 99.0% (Cost $44,135,942) (d) | $ | 34,572,068 | ||||||
Other Assets in Excess of Liabilities – 1.0% | 342,748 | |||||||
Net Assets – 100.0% | $ | 34,914,816 | ||||||
Percentages are stated as a percent of net assets.
Footnotes:
(a) | Non-income producing security. | |
(b) | Security exempt from registration under Regulation D of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified buyers. At December 31, 2008, the value of these securities totaled $646,183 or 1.9% of the Portfolio’s net assets. These securities were deemed liquid pursuant to procedures approved by the Board of Directors. | |
(c) | Fixed-to-floating rate, callable, perpetual life trust preferred security. Interest rates stated are those in effect at December 31, 2008. | |
(d) | Represents cost for financial reporting purposes, which may differ from cost basis for Federal income tax purposes. See also Note 8 of the Notes to Financial Statements. |
The accompanying notes are an integral part of these financial statements.
27
Ohio National Fund, Inc.
Omni Portfolio
Omni Portfolio
Statement of Assets and Liabilities
December 31, 2008
Assets: | ||||
Investments in securities, at fair value (Cost $41,638,942) | $ | 32,075,068 | ||
Repurchase agreements | 2,497,000 | |||
Cash | 301 | |||
Receivable for securities sold | 602,821 | |||
Receivable for fund shares sold | 61,833 | |||
Dividends and accrued interest receivable | 266,674 | |||
Prepaid expenses and other assets | 767 | |||
Total assets | 35,504,464 | |||
Liabilities: | ||||
Payable for securities purchased | 467,470 | |||
Payable for fund shares redeemed | 84,826 | |||
Payable for investment management services | 17,243 | |||
Accrued custody expense | 1,195 | |||
Accrued professional fees | 11,018 | |||
Accrued accounting fees | 5,043 | |||
Accrued printing and filing fees | 2,853 | |||
Total liabilities | 589,648 | |||
Net assets | $ | 34,914,816 | ||
Net assets consist of: | ||||
Par value, $1 per share | $ | 3,167,887 | ||
Paid-in capital in excess of par value | 49,620,812 | |||
Accumulated net realized loss on investments | (8,446,693 | ) | ||
Net unrealized depreciation on investments | (9,563,874 | ) | ||
Undistributed net investment income | 136,684 | |||
Net assets | $ | 34,914,816 | ||
Shares outstanding | 3,167,887 | |||
Authorized Fund shares allocated to Portfolio | 10,000,000 | |||
Net asset value per share | $ | 11.02 | ||
Statement of Operations
For the Year Ended December 31, 2008
Investment income: | ||||
Interest | $ | 945,487 | ||
Dividends (net of withholding tax of $2,692) | 637,701 | |||
Total investment income | 1,583,188 | |||
Expenses: | ||||
Management fees | 300,634 | |||
Custodian fees | 7,289 | |||
Directors’ fees | 4,166 | |||
Professional fees | 14,328 | |||
Accounting fees | 32,485 | |||
Printing and filing fees | 6,061 | |||
Compliance expense | 4,911 | |||
Other | 947 | |||
Total expenses | 370,821 | |||
Net investment income | 1,212,367 | |||
Realized/unrealized gain (loss) on investments: | ||||
Net realized gain (loss) on investments | (8,024,274 | ) | ||
Change in unrealized appreciation/depreciation on investments | (10,555,311 | ) | ||
Net realized/unrealized gain (loss) on investments | (18,579,585 | ) | ||
Change in net assets from operations | $ | (17,367,218 | ) | |
The accompanying notes are an integral part of these financial statements.
28
Ohio National Fund, Inc.
Omni Portfolio
Omni Portfolio
Statements of Changes in Net Assets
Years Ended December 31, | ||||||||
2008 | 2007 | |||||||
Increase (Decrease) in Net Assets: | ||||||||
Operations: | ||||||||
Net investment income | $ | 1,212,367 | $ | 1,205,475 | ||||
Net realized gain (loss) on investments | (8,024,274 | ) | 5,991,485 | |||||
Change in unrealized appreciation/depreciation on investments | (10,555,311 | ) | (2,742,797 | ) | ||||
Change in net assets from operations | (17,367,218 | ) | 4,454,163 | |||||
Distributions to shareholders: | ||||||||
Distributions from net investment income | (1,075,689 | ) | (1,077,718 | ) | ||||
Capital transactions: | ||||||||
Received from shares sold | 6,110,882 | 3,211,250 | ||||||
Received from dividends reinvested | 1,075,689 | 1,077,718 | ||||||
Paid for shares redeemed | (15,662,751 | ) | (12,909,788 | ) | ||||
Change in net assets from capital transactions | (8,476,180 | ) | (8,620,820 | ) | ||||
Change in net assets | (26,919,087 | ) | (5,244,375 | ) | ||||
Net Assets: | ||||||||
Beginning of year | 61,833,903 | 67,078,278 | ||||||
End of year | $ | 34,914,816 | $ | 61,833,903 | ||||
Undistributed net investment income | $ | 136,684 | $ | 127,757 | ||||
Financial Highlights
Years Ended December 31, | ||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
Selected Per-Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 16.60 | $ | 15.79 | $ | 14.11 | $ | 13.05 | $ | 12.35 | ||||||||||
Operations: | ||||||||||||||||||||
Net investment income | 0.40 | 0.34 | 0.27 | 0.25 | 0.24 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (5.63 | ) | 0.76 | 1.61 | 0.99 | 0.64 | ||||||||||||||
Total from operations | (5.23 | ) | 1.10 | 1.88 | 1.24 | 0.88 | ||||||||||||||
Distributions: | ||||||||||||||||||||
Distributions from net investment income | (0.35 | ) | (0.29 | ) | (0.20 | ) | (0.18 | ) | (0.18 | ) | ||||||||||
Net asset value, end of year | $ | 11.02 | $ | 16.60 | $ | 15.79 | $ | 14.11 | $ | 13.05 | ||||||||||
Total return | –31.46 | % | 6.99 | % | 13.32 | % | 9.49 | % | 7.11 | % | ||||||||||
Ratios and supplemental data: | ||||||||||||||||||||
Net assets at end of year (millions) | $ | 34.9 | $ | 61.8 | $ | 67.1 | $ | 66.2 | $ | 71.4 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Expenses | 0.74 | % | 0.71 | % | 0.71 | % | 0.71 | % | 0.71 | % | ||||||||||
Net investment income | 2.43 | % | 1.85 | % | 1.69 | % | 1.66 | % | 1.97 | % | ||||||||||
Portfolio turnover rate | 128 | % | 143 | % | 178 | % | 180 | % | 240 | % |
The accompanying notes are an integral part of these financial statements.
29
Ohio National Fund, Inc.
International Portfolio
International Portfolio
Objective/Strategy
The International Portfolio seeks total return on assets by investing primarily in equity securities of foreign companies.
Performance as of December 31, 2008
Average Annual Total Returns: | ||||
One year | -46.08% | |||
Five years | -2.76% | |||
Ten years | -1.74% |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price and reinvestment of dividends and capital gains. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost.
The Portfolio is not open to direct retail investment. Beneficial interest in shares is obtained solely by purchase of variable life insurance policies and variable annuity contracts. Actual performance results for variable annuity and variable universal life contracts will be lower due to contract charges. Consult your contract for applicable charges.
Comments
For the year ended December 31, 2008, the International Portfolio returned -46.08% versus -42.70% for the current benchmark, the MSCI EAFE Growth Index (Net-USD).
Escalating volatility continued to affect global equity markets during the first quarter. The first quarter’s poor equity returns were accompanied by a plethora of negative news events and an overall deterioration of investment confidence. After a January lull, commodity prices resumed their upward trajectory in February and reached periodic peaks in the first half of March. The strength of the gold price was almost perfectly mirrored by the continuing weakness of the U.S. dollar. Its relative attractiveness weakened by aggressive Federal Reserve rate cuts and increasingly negative sentiment, the dollar managed to drop in excess of 10% relative to the Japanese yen and plumbed new all-time lows versus the euro.
The bottom in international equity performance for the first quarter came near the end of January. Global markets were given positive signals by the Federal Reserve in the form of two consecutive rate cuts totaling 125 basis points for the benchmark Federal Funds rate. The rate cuts followed on the heels of a major trading scandal involving the French bank, Societe Generale, leading to increased doubts about the overall health of the world financial system. Many major global financial institutions continued to write-off their exposures to low quality U.S. mortgages. The staggering degree of magnitude of these write-offs caused most market participants to rediscover the concept of counter-party risk, leading to almost total paralysis in short-term credit markets. The crisis climaxed in the middle of March as U.S. broker, Bear Stearns, collapsed and was subsequently rescued by a combined action of JPMorgan Chase and the Federal Reserve.
After gaining some traction in April, equities ended flat for the second quarter, as international markets reacted negatively to accelerating inflation and decelerating global growth. The market became increasingly concerned about stagflation. Oil continued its record assent, piercing the $140/barrel mark in late June. The credit crisis also persisted. Bond insurers MBIA and Ambac, saw their credit ratings downgraded by Standard & Poor’s and Moody’s.
Market confidence was shaken further in the third quarter by bank failures in the U.S. and Europe, as the global credit crisis has re-emerged with a vengeance. During the quarter, several U.S. institutions including Freddie Mac, Fannie Mae, IndyMac, Merrill Lynch, Wachovia, Washington Mutual, and Lehman Brothers became casualties of this insidious financial crisis. The contagion spread across the Atlantic where, in the closing weeks of the quarter, European governments were forced to save failing institutions including Fortis, Dexia, Bradford & Bingley, Glitnir, and Hypo Real Estate.
As a result, investors became increasingly concerned about the possibility of a protracted global recession. These fears, along with evidence of demand destruction in the developed world, effectively reversed the commodity surge. After climbing to record levels, commodities hit an inflection point in early July and subsequently fell precipitously. These price declines have eased concerns over inflation, thus allowing the world’s central banks to support financial markets by providing liquidity to the system. At the same time, the turnaround in commodity prices mirrored the reversal of the U.S. dollar. After reaching record lows, the dollar rebounded strongly in the second half.
The fourth quarter of 2008 proved to be the most difficult global economic environment in the post-World War II period as the financial crisis spread to all corners of the economy. The quarter was marked with bank failures, frozen credit markets, rising unemployment, political instability, plummeting commodity prices, and the near collapse of the “Big 3” automakers. U.S. and European governments were forced into de-facto nationalization of the Financials sector in order to save major financial institutions including Citigroup, Goldman Sachs, Morgan Stanley, JPMorgan Chase, Bank of America, Merrill Lynch, Wells Fargo, Bank of New York Mellon, State Street, Royal Bank of Scotland, HBOS, Lloyds, UBS, Credit Suisse, Credit Agricole, BNP Paribas, Societe Generale, Landsbanki, Glitner, and Kaupthing.
Meanwhile, the crisis spread to the real economy, as the major developed economies entered into a severe recession. Gross Domestic Product (“GDP”) growth in the U.S., Europe, and Japan turned negative while emerging economies also experienced severe slowdowns. Several countries, including Iceland, Ukraine, Hungary, Belarus, and Pakistan, bordered on collapse and required emergency International Monetary Fund bailout packages.
In response to rapidly deteriorating economic conditions, governments around the globe pushed back with unprecedented vigor, utilizing the full range of available policy tools. Through a series of largely coordinated actions, central banks cut interest rates with extreme prejudice. The U.S. and Japan cut rates to nearly 0% while the European Central Bank lowered rates by 225
(continued)
30
Ohio National Fund, Inc.
International Portfolio (Continued)
International Portfolio (Continued)
basis points. Additionally, the U.S., European and Asian governments enacted a wide range of economic bailout measures including the guaranteeing of bank deposits and money market investments, direct investment into financial institutions, nationalization of failing banks, direct purchases of commercial paper, and economic stimulus plans.
The Portfolio benefited from strong stock selection and a relative underweight position in the United Kingdom, strong stock selection and an overweight position in Israel, and strong stock selection in Australia.
Individual stocks that contributed most significantly to the Portfolio’s performance included: St. George Bank Ltd., an Australian bank that was acquired in May by rival firm Westpac Banking, which gained 32.53% during the reporting period; iShares MSCI Japan, which produced a 1.05% return, as Japan outperformed largely due to the strength of the Yen, and OAO TMK, a Russian seamless steel pipe producer, as the firm performed well in the first half of the year as energy prices reached record highs.(1)
Stock selection in Japan, Canada and the Portfolio’s over-weighted position in India adversely affected the Portfolio’s performance. On a sector basis, relative underperformance was delivered by stock selection in Financials, Consumer Discretionary and Materials.(1)
Stocks that most significantly held back performance included: China Cosco Holdings Co. Ltd., a Chinese shipping firm, which fell 79.32% during the reporting period, Yara International ASA, a Norwegian fertilizer producer, which fell 70.66% during the reporting period, and Nikon Corp., a Japanese camera producer, which was down 61.36% for the reporting period.(1)
We expect the financial crisis to continue into 2009 with an increased possibility of a global recession. Given the instability in the world’s financial markets and the deterioration of economic fundamentals in the developed world, we expect equity markets to continue to experience increased volatility and heightened levels of risk in the short term. Concurrently, we view the successful passage of the Paulson bailout package as a potential catalyst for global equity markets, and we would not be surprised to see a sharp counter-trend rally in the not too distant future.
While the Portfolio remains over-weighted in emerging markets versus the benchmark, we have paired this overweight significantly given political instability in emerging Europe and the negative impact of falling commodity prices on petroleum exporting emerging markets. Consistent with our previous comments, we continue to maintain a significant underweight in Europe. The continent has already reached recessionary territory, having just completed its second quarter of negative GDP growth. Although European equity markets appear inexpensive on several valuation measures, consensus earnings estimates for 2009 and 2010 appear to be excessively optimistic given the economic backdrop discussed above. At the same time, we are concerned that the European Central Bank’s singular focus on inflation will continue to hamper the central bank’s ability to deal proactively with the global financial crisis. Japanese markets, on the other hand, have held up relatively well given the deteriorating macro-economic environment, and we continue to find interesting stock-specific opportunities.(1)
(1) | The Portfolio’s composition is subject to change. Holdings and weightings are as of December 31, 2008. |
Change in Value of $10,000 Investment
Hypothetical illustration based on past performance. Future performance will vary. The Portfolio’s returns reflect reinvested dividends. The Portfolio’s holdings may differ significantly from the securities in the index. The index is unmanaged and therefore does not reflect the cost of portfolio management and accounting.
The MSCI EAFE Growth Index (Net-USD) is a subset of securities derived from the MSCI EAFE Index, which is generally representative of performance of stock markets in that region, using a two dimensional framework for style segmentation. The index presented herein includes the effect of minimum reinvestment of dividends.
(continued)
31
Ohio National Fund, Inc.
International Portfolio (Continued)
International Portfolio (Continued)
Portfolio Composition as of December 31, 2008 (1)
% of Net Assets | |||
Common Stocks (3) | 88.5 | ||
Preferred Stocks (3) | 1.5 | ||
Exchange Traded Funds (3) | 4.2 | ||
Repurchase Agreements and Other Net Assets | 5.8 | ||
100.0 | |||
Top 10 Portfolio Holdings as of December 31, 2008 (1) (2)
% of Net Assets | |||||||
1. | iShares MSCI Japan Index Fund | 4.2 | |||||
2. | Nestle SA | 3.8 | |||||
3. | Roche Holding AG – Genusschien | 3.7 | |||||
4. | Telefonica SA | 2.8 | |||||
5. | BHP Billiton Ltd. | 2.6 | |||||
6. | Imperial Tobacco Group PLC | 2.5 | |||||
7. | Yamada Denki Co. Ltd. | 2.3 | |||||
8. | ABB Ltd. | 2.3 | |||||
9. | Komatsu Ltd. | 2.3 | |||||
10. | E.ON AG | 2.1 |
(1) | Composition of Portfolio subject to change. | |
(2) | Short-term investments have been excluded from the list of Top 10 Portfolio holdings. | |
(3) | Top 10 Country Weightings (combined): |
% of Net Assets | |||
Japan | 17.0 | ||
Switzerland | 15.2 | ||
United Kingdom | 14.2 | ||
Spain | 7.5 | ||
Canada | 5.9 | ||
Australia | 4.1 | ||
Germany | 3.3 | ||
France | 3.3 | ||
Taiwan | 3.2 | ||
Hong Kong | 3.0 |
32
Ohio National Fund, Inc.
International Portfolio
International Portfolio
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 88.5% | Shares | Value | ||||||
Switzerland – 15.2% | ||||||||
ABB Ltd. (a) (b) | 268,400 | $ | 4,093,138 | |||||
Compagnie Financiere Richemont SA (b) | 166,200 | 3,166,755 | ||||||
Nestle SA (b) | 172,500 | 6,830,680 | ||||||
Novartis AG – ADR | 60,100 | 2,990,576 | ||||||
Roche Holding AG – Genusschein (b) | 42,900 | 6,641,654 | ||||||
Syngenta AG (b) | 18,557 | 3,604,986 | ||||||
27,327,789 | ||||||||
United Kingdom – 14.2% | ||||||||
AMEC PLC (b) | 276,000 | 1,992,494 | ||||||
Autonomy Corp. PLC (a) (b) | 224,000 | 3,116,988 | ||||||
Diageo PLC (b) | 203,000 | 2,852,320 | ||||||
Icon PLC – ADR (a) | 88,600 | 1,744,534 | ||||||
Imperial Tobacco Group PLC (b) | 166,500 | 4,447,376 | ||||||
Reckitt Benckiser Group PLC (b) | 52,400 | 1,963,476 | ||||||
Reed Elsevier PLC (b) | 284,200 | 2,086,547 | ||||||
Serco Group PLC (b) | 441,300 | 2,888,769 | ||||||
Shire PLC (b) | 121,200 | 1,785,271 | ||||||
Smiths Group PLC (b) | 210,200 | 2,701,061 | ||||||
25,578,836 | ||||||||
Japan – 12.8% | ||||||||
Keyence Corp. (b) | 13,200 | 2,712,758 | ||||||
Komatsu Ltd. (b) | 318,100 | 4,057,847 | ||||||
Panasonic Corp. (b) | 160,000 | 1,966,757 | ||||||
Shimano, Inc. (b) | 90,500 | 3,562,686 | ||||||
Sumitomo Mitsui Financial Group, Inc. (b) | 712 | 2,953,249 | ||||||
Terumo Corp. (b) | 77,100 | 3,611,784 | ||||||
Yamada Denki Co. Ltd. (b) | 60,300 | 4,215,071 | ||||||
23,080,152 | ||||||||
Spain – 7.5% | ||||||||
Banco Santander SA (b) | 297,700 | 2,875,991 | ||||||
Enagas (b) | 124,000 | 2,738,082 | ||||||
Indra Sistemas SA (b) | 120,767 | 2,771,942 | ||||||
Telefonica SA (b) | 224,700 | 5,071,859 | ||||||
13,457,874 | ||||||||
Canada – 5.9% | ||||||||
Nexen, Inc. (b) | 131,100 | 2,277,922 | ||||||
Potash Corp. of Saskatchewan | 41,900 | 3,067,918 | ||||||
Shoppers Drug Mart Corp. (b) | 66,400 | 2,584,463 | ||||||
Talisman Energy, Inc. (b) | 267,580 | 2,640,036 | ||||||
10,570,339 | ||||||||
Australia – 4.1% | ||||||||
BHP Billiton Ltd. (b) | 220,700 | 4,688,592 | ||||||
CSL Ltd. (b) | 115,700 | 2,728,421 | ||||||
7,417,013 | ||||||||
Germany – 3.3% | ||||||||
E.ON AG (b) | 96,400 | 3,729,458 | ||||||
SGL Carbon AG (a) (b) | 67,900 | 2,273,376 | ||||||
6,002,834 | ||||||||
France – 3.3% | ||||||||
Groupe Danone (b) | 59,800 | 3,613,108 | ||||||
Nexans SA (b) | 38,900 | 2,329,421 | ||||||
5,942,529 | ||||||||
Taiwan – 3.2% | ||||||||
HTC Corp. (b) | 310,100 | 3,112,738 | ||||||
Taiwan Semiconductor Manufacturing Co. Ltd. – ADR | 329,000 | 2,599,100 | ||||||
5,711,838 | ||||||||
Hong Kong – 3.0% | ||||||||
Hong Kong Exchanges & Clearing Ltd. (b) | 299,300 | 2,873,560 | ||||||
Sun Hung Kai Properties Ltd. (b) | 307,000 | 2,583,264 | ||||||
5,456,824 | ||||||||
Netherlands – 2.8% | ||||||||
Koninklijke KPN NV (b) | 177,600 | 2,582,029 | ||||||
Qiagen NV (a) | 140,000 | 2,458,400 | ||||||
5,040,429 | ||||||||
Brazil – 2.4% | ||||||||
Cia Vale do Rio Doce – ADR | 245,300 | 2,612,445 | ||||||
Petroleo Brasileiro SA – ADR | 89,300 | 1,822,613 | ||||||
4,435,058 | ||||||||
Turkey – 1.9% | ||||||||
Turkcell Iletisim Hizmet AS – ADR | 229,400 | 3,344,652 | ||||||
Norway – 1.8% | ||||||||
Yara International ASA (b) | 144,000 | 3,167,535 | ||||||
China – 1.8% | ||||||||
China Railway Construction Corp. Ltd. (a) (b) | 2,112,500 | 3,162,644 | ||||||
Israel – 1.5% | ||||||||
Teva Pharmaceutical Industries Ltd. – ADR | 64,200 | 2,732,994 | ||||||
Singapore – 1.4% | ||||||||
Singapore Exchange Ltd. (b) | 723,000 | 2,575,464 | ||||||
Italy – 1.4% | ||||||||
ENI SpA (b) | 101,000 | 2,430,431 | ||||||
Portugal – 1.0% | ||||||||
Galp Energia SGPS SA (b) | 170,000 | 1,706,833 | ||||||
Total Common Stocks (Cost $211,121,579) | $ | 159,142,068 | ||||||
Fair | ||||||||
Preferred Stocks – 1.5% | Shares | Value | ||||||
Brazil – 1.5% | ||||||||
Banco Itau Holding Financeira SA, Preference (b) | 233,300 | $ | 2,611,119 | |||||
Total Preferred Stocks (Cost $3,796,029) | $ | 2,611,119 | ||||||
(continued)
33
Ohio National Fund, Inc.
International Portfolio (Continued)
International Portfolio (Continued)
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Exchange Traded Funds – 4.2% | Shares | Value | ||||||
Japan – 4.2% | ||||||||
iShares MSCI Japan Index Fund | 793,400 | $ | 7,600,772 | |||||
Total Exchange Traded Funds (Cost $6,707,555) | $ | 7,600,772 | ||||||
Face | Fair | |||||||
Repurchase Agreements – 4.5% | Amount | Value | ||||||
State Street Bank 0.010% 01/02/2009 | $ | 8,075,000 | $ | 8,075,000 | ||||
Repurchase price $8,075,004 | ||||||||
Collateralized by: | ||||||||
U.S. Treasury Bill 0.100%, 02/19/2009 Fair Value: $8,240,000 | ||||||||
Total Repurchase Agreements (Cost $8,075,000) | 8,075,000 | |||||||
Total Investments – 98.7% (Cost $229,700,163) (c) | $ | 177,428,959 | ||||||
Other Assets in Excess of Liabilities – 1.3% | 2,318,659 | |||||||
Net Assets – 100.0% | $ | 179,747,618 | ||||||
Percentages are stated as a percent of net assets.
Abbreviations:
ADR: American Depository Receipts
Footnotes:
(a) | Non-Income producing security. | |
(b) | Securities denominated in foreign currency and traded on a foreign exchange have been subjected to fair value procedures approved by the Fund Board of Directors. These securities represent $138,379,955 or 77.0% of the Portfolio’s net assets. As discussed in Note 2 of the Notes to Financial Statements, not all investments are valued at an estimate of fair value that is different from the local close price. In some instances the independent fair valuation service uses the local close price because the confidence interval associated with a holding is below the 75% threshold. The Portfolio’s securities that are not subjected to fair value procedures are traded on exchanges whose local close times are consistent with the 4:00 pm Eastern Time U.S. market close. | |
(c) | Represents cost for financial reporting purposes, which may differ from cost basis for Federal income tax purposes. See also Note 8 of the Notes to Financial Statements. |
Sector Classifications: (Common and Preferred Stocks)
Health Care | 13.7% | ||
Consumer Staples | 12.4% | ||
Industrials | 12.0% | ||
Materials | 9.5% | ||
Financials | 9.2% | ||
Consumer Discretionary | 8.3% | ||
Information Technology | 8.0% | ||
Energy | 7.2% | ||
Telecommunication Services | 6.1% | ||
Utilities | 3.6% | ||
90.0% | |||
The accompanying notes are an integral part of these financial statements.
34
Ohio National Fund, Inc.
International Portfolio
International Portfolio
Statement of Assets and Liabilities
December 31, 2008
Assets: | ||||
Investments in securities, at fair value (Cost $221,625,163) | $ | 169,353,959 | ||
Repurchase agreements | 8,075,000 | |||
Cash | 809 | |||
Foreign currency (Cost $86,174) | 81,516 | |||
Receivable for fund shares sold | 3,449,097 | |||
Dividends and accrued interest receivable | 157,339 | |||
Foreign tax reclaim receivable | 102,383 | |||
Prepaid expenses and other assets | 74,875 | |||
Total assets | 181,294,978 | |||
Liabilities: | ||||
Payable for securities purchased | 448,774 | |||
Payable for fund shares redeemed | 908,946 | |||
Payable for investment management services | 126,482 | |||
Accrued custody expenses | 34,275 | |||
Accrued professional fees | 10,242 | |||
Accrued accounting fees | 1,293 | |||
Accrued printing and filing fees | 17,348 | |||
Total liabilities | 1,547,360 | |||
Net assets | $ | 179,747,618 | ||
Net assets consist of: | ||||
Par value, $1 per share | $ | 23,779,411 | ||
Paid-in capital in excess of par value | 296,545,095 | |||
Accumulated net realized loss on investments | (89,317,531 | ) | ||
Net unrealized depreciation on: | ||||
Investments | (52,271,204 | ) | ||
Foreign currency related transactions | (9,983 | ) | ||
Undistributed net investment income | 1,021,830 | |||
Net assets | $ | 179,747,618 | ||
Shares outstanding | 23,779,411 | |||
Authorized Fund shares allocated to Portfolio | 30,000,000 | |||
Net asset value per share | $ | 7.56 | ||
Statement of Operations
For the Year Ended December 31, 2008
Investment income: | ||||
Interest | $ | 64,407 | ||
Dividends (net of $644,212 foreign taxes withheld) | 5,534,081 | |||
Total investment income | 5,598,488 | |||
Management fees | 2,262,434 | |||
Custodian fees | 192,694 | |||
Directors’ fees | 23,374 | |||
Professional fees | 27,645 | |||
Accounting fees | 72,485 | |||
Printing and filing fees | 38,336 | |||
Compliance expense | 4,911 | |||
Other | 5,121 | |||
Total expenses | 2,627,000 | |||
Net investment income | 2,971,488 | |||
Realized/unrealized gain (loss) on investments, foreign currency contracts, futures contracts, and other foreign currency related transactions: | ||||
Net realized gain (loss) on: | ||||
Investments | (85,797,626 | ) | ||
Foreign currency contracts | (5,980 | ) | ||
Futures contracts | (938,512 | ) | ||
Foreign currency related transactions | (937,819 | ) | ||
Change in unrealized appreciation/depreciation on: | ||||
Investments | (74,848,364 | ) | ||
Foreign currency related transactions | (70,669 | ) | ||
Net realized/unrealized gain (loss) on investments, foreign currency contracts, futures contracts, and other foreign currency related transactions | (162,598,970 | ) | ||
Change in net assets from operations | $ | (159,627,482 | ) | |
The accompanying notes are an integral part of these financial statements.
35
Ohio National Fund, Inc.
International Portfolio
International Portfolio
Statements of Changes in Net Assets
Years Ended December 31, | ||||||||
2008 | 2007 | |||||||
Increase (Decrease) in Net Assets: | ||||||||
Operations: | ||||||||
Net investment income | $ | 2,971,488 | $ | 2,499,793 | ||||
Net realized gain (loss) on investments, foreign currency contracts, futures contracts, and other foreign currency related transactions | (87,679,937 | ) | 49,733,679 | |||||
Change in unrealized appreciation/depreciation on investments, foreign currency contracts, and other foreign currency related transactions | (74,919,033 | ) | (18,847,590 | ) | ||||
Change in net assets from operations | (159,627,482 | ) | 33,385,882 | |||||
Capital transactions: | ||||||||
Received from shares sold | 86,201,321 | 82,963,061 | ||||||
Paid for shares redeemed | (135,986,904 | ) | (60,146,527 | ) | ||||
Change in net assets from capital transactions | (49,785,583 | ) | 22,816,534 | |||||
Change in net assets | (209,413,065 | ) | 56,202,416 | |||||
Net Assets: | ||||||||
Beginning of year | 389,160,683 | 332,958,267 | ||||||
End of year | $ | 179,747,618 | $ | 389,160,683 | ||||
Undistributed net investment income | $ | 1,021,830 | $ | 1,342,358 | ||||
Financial Highlights
Years Ended December 31, | ||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
Selected Per-Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 14.02 | $ | 12.81 | $ | 10.76 | $ | 9.84 | $ | 8.71 | ||||||||||
Operations: | ||||||||||||||||||||
Net investment income | 0.13 | 0.09 | 0.05 | 0.05 | 0.03 | |||||||||||||||
Net realized and unrealized gain (loss) on investments, foreign currency contracts, futures contracts, and other foreign currency related transactions | (6.59 | ) | 1.12 | 2.02 | 0.87 | 1.10 | ||||||||||||||
Total from operations | (6.46 | ) | 1.21 | 2.07 | 0.92 | 1.13 | ||||||||||||||
Distributions: | ||||||||||||||||||||
Distributions from net investment income | — | — | (0.02 | ) | — | — | ||||||||||||||
Net asset value, end of year | $ | 7.56 | $ | 14.02 | $ | 12.81 | $ | 10.76 | $ | 9.84 | ||||||||||
Total return | –46.08 | % | 9.45 | % | 19.23 | % | 9.40 | % | 12.97 | % | ||||||||||
Ratios and supplemental data: | ||||||||||||||||||||
Net assets at end of year (millions) | $ | 179.7 | $ | 389.2 | $ | 333.0 | $ | 212.2 | $ | 123.1 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Ratios net of expenses voluntarily reduced or reimbursed by adviser: | ||||||||||||||||||||
Expenses | 0.91 | % | 0.99 | % | 1.03 | % | 1.11 | % | 1.11 | % | ||||||||||
Net investment income | 1.03 | % | 0.66 | % | 0.58 | % | 0.61 | % | 0.36 | % | ||||||||||
Ratios assuming no expenses voluntarily reduced or reimbursed by adviser: | ||||||||||||||||||||
Expenses | 0.91 | % | 0.99 | % | 1.03 | % | 1.12 | % | 1.16 | % | ||||||||||
Portfolio turnover rate | 214 | % | 123 | % | 72 | % | 117 | % | 76 | % |
The accompanying notes are an integral part of these financial statements.
36
Ohio National Fund, Inc.
Capital Appreciation Portfolio
Capital Appreciation Portfolio
Objective/Strategy
The Capital Appreciation Portfolio seeks long-term capital growth by investing primarily in common stocks of established companies with either current or emerging earnings growth not fully appreciated or recognized by the market.
Performance as of December 31, 2008
Average Annual Total Returns: | ||||
One year | -39.01% | |||
Five years | -2.69% | |||
Ten years | 3.48% |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price and reinvestment of dividends and capital gains. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost.
The Portfolio is not open to direct retail investment. Beneficial interest in shares is obtained solely by purchase of variable life insurance policies and variable annuity contracts. Actual performance results for variable annuity and variable universal life contracts will be lower due to contract charges. Consult your contract for applicable charges.
Comments
For the year ended December 31, 2008, the Capital Appreciation Portfolio returned -39.01% versus -37.00% for the current benchmark, the S&P 500 Index.
The fiscal year ended December 31, 2008 was a difficult time for virtually all equity styles and sectors. Problems in the sub-prime mortgage market spread throughout the financial system, creating a full-blown liquidity/credit crisis that roiled global markets. The third quarter of the year proved exceptionally tumultuous, culminating in an alarming series of events: the U.S. government’s takeover of Fannie Mae, Freddie Mac, and American International Group (“AIG”); the failure of Lehman Brothers; the distressed sales of the commercial banking franchises of Washington Mutual and Wachovia; Bank of America’s acquisition of Merrill Lynch; and the conversion of investment banks, Goldman Sachs and Morgan Stanley, to commercial banks.
With an unprecedented level of coordination and cooperation, the U.S. Treasury Department and the Federal Reserve presided over efforts to resuscitate credit markets and stabilize the financial system, culminating in the creation of the $700 billion Troubled Asset Relief Program. Toward the end of the year, financial market liquidity conditions showed some improvement from the panicked conditions of the fall, but this did little to rekindle either borrowers’ demand for funds or lenders’ willingness to lend.
The ongoing correction in the housing market, debt deflation, rising unemployment, and sluggish production and consumption patterns increasingly pointed to the most severe recession in recent history, as the effects of the credit crisis worked through the real economy. Inflation worries dissipated, as commodity prices fell sharply. Crude oil closed the year at just under $45 per barrel, leading to a five-year low in U.S. gasoline prices. In an effort to stimulate growth, the Federal Open Market Committee lowered the Federal Funds rate over the year, from 4.25% to a record low 0.25%.
Corporations across the globe offered cautious outlooks for 2009. Significant cost-savings plans were announced, including both workforce reductions and capital-expenditure cuts. Completing the worst year since 1937, stock markets fell along with corporate bond prices, reflecting the difficult outlook and expectations of reduced solvency.
Liquidation-driven selling appears to have abated at the year’s end, and the market seems to have stopped trading equities as an asset class. Although the Portfolio’s positions were not able to sidestep the market meltdown, we believe the strong balance sheets and high free cash flow characteristics of many of our companies could support higher valuations as this market stabilizes and returns focus to company fundamentals.
While we avoided the high profile financial debacles, the Financials sector was still the biggest detriment to the Portfolio’s absolute return. Shares of XL Capital Ltd., a Bermuda-based insurer and reinsurer, fell as worries about the health of the insurance industry intensified. On a company-specific level, concern over whether Fitch and Moody’s would downgrade XL Capital Ltd.’s credit rating put incremental pressure on an already challenging situation. However, the two most important insurance ratings agencies, A.M. Best and S&P, affirmed XL Capital Ltd.’s rating following its announcement of third quarter 2008 results. Additionally, XL Capital Ltd. suffered catastrophe losses and further realized and unrealized losses in its investment portfolio.(1)
Consumer Discretionary positions meaningfully detracted from absolute and relative performance; however, individual holdings had mixed results. Many of our media names, such as Warner Music Group Corp., declined on fears of advertising cuts, but there has been little in the way of estimate cuts for our holdings for the media portion of the Consumer Discretionary sector, especially relative to the stock price declines.(1)
Ticketmaster Entertainment, Inc., a spin-off from IAC/InterActiveCorp, fell due to investor concern over the company’s competitive position versus rival LiveNation. Ticket sales are less economically sensitive than most industries, and Ticketmaster Entertainment, Inc. is trying to add revenue streams with venues by starting a secondary market. We view the stock’s valuation as a multiple of cash flow as trading at illogical levels. We are also encouraged by the company’s affirmation of its commitment to reduce 2009 operating expenses by $35 million, the performance of the ticketing business in prior weak economic environments, and the ability of the business to generate large amounts of free cash flow.(1)
On the positive side, H&R Block, Inc. and Bally Technologies, Inc. advanced. H&R Block, Inc.’s new management has restructured the company so that its prospects are dominated by its industry-leading tax preparation franchise, which is energized and taking share under new leadership. The remaining business is RSM McGladrey, the fifth largest accounting firm in the U.S. Earlier in 2008, H&R Block, Inc. sold its Option One mortgage business and securities brokerage unit, H&R Block Financial Advisors. While
(continued)
37
Ohio National Fund, Inc.
Capital Appreciation Portfolio (Continued)
Capital Appreciation Portfolio (Continued)
the $800 million of mortgages on the balance sheet still poses a risk, we noted that none of the mortgages were sub-prime.(1)
Energy positions Schlumberger Ltd., Newfield Exploration Co. and National Oilwell Varco, Inc. posted double-digit losses, but we have maintained these positions given strong valuation support as well as solid intermediate-term fundamentals. While we believe the secular supply/demand imbalance for many commodities will persist, we have taken profits and trimmed the Portfolio’s Energy weighting over the past few months in order to protect it from a cyclical correction as demand moderated. We were concerned that the economic slowdown and malaise that the developed Organization for Economic Co-operation & Development (“OECD”) countries have been experiencing could spread to the emerging markets, which have been the biggest drivers of demand for those commodities. The energy markets have seen inventories increase in the U.S. because of the economic slowdown, causing the resultant pullback of prices of crude and natural gas from peak levels. Within the oil and gas complex, we continue to focus on companies with solid international production growth, exposure to newly defined resource plays or compelling valuation.(1)
Materials and Telecommunication Services underperformed the S&P 500 Index due to losses in Smurfit-Stone Container Corp. and Sprint Nextel Corp.(1)
Industrials, largely on the strength of JetBlue Airways Corp. and Delta Air Lines, Inc., were a strong source of relative gain. Crude oil declined 55% over the past twelve months, causing a moderation in jet fuel prices. JetBlue Airways Corp. and Delta Air Lines, Inc. benefited from this moderation as well as from continued aggressive domestic capacity reductions, which increased revenue per available seat mile (“RASM”). Delta Air Lines, Inc.’s buyout of Northwest Airlines, which created the world’s biggest airline, has prompted new speculation about further industry consolidation.(1)
Health Care, led by Barr Pharmaceuticals, Inc., outperformed the S&P 500 Index. We originally purchased shares of the pharmaceuticals manufacturer in May 2008. We thought the stock was undervalued, given a strong core U.S. generic product cycle on the horizon which should accelerate earnings per share in the second half of 2008 and beyond. Furthermore, with the Pliva acquisition integration risk behind Barr Pharmaceuticals, Inc., the company could once again focus on upcoming opportunities, such as the launches of generic versions of Yasmin and Adderall XR and potential settlements and/or launches of generic versions of Yaz, Ortho-Tricyclen Lo, Mirapex and Allegra D. The announcement by Teva Pharmaceuticals Industries Ltd. that it intends to acquire Barr Pharmaceuticals, Inc. took Barr Pharmaceuticals, Inc. shares higher and effectively shortened our investment horizon. We closed the position at a substantial profit in July.(1)
The Portfolio’s stock selection in Information Technology benefited relative return. An underweight position in Consumer Staples was the primary reason for the Portfolio’s relative loss in this sector. Wal-Mart Stores, Inc. was a bright spot in the Consumer Staples sector, gaining approximately 20%.(1)
The five best performers were Bally Technologies, Inc., Delta Air Lines, Inc., Goldcorp, Inc., QUALCOMM, Inc. and H&R Block, Inc. The five worst performers were Smurfit-Stone Container Corp., Sprint Nextel Corp., XL Capital Ltd., Domtar Corp. and Ticketmaster Entertainment, Inc. The top five contributors to absolute return were Delta Air Lines, Inc., JetBlue Airways Corp., Barr Pharmaceuticals, Inc., H&R Block, Inc. and Goldcorp, Inc. The bottom five detractors from absolute return were Smurfit-Stone Container Corp., Sprint Nextel Corp., XL Capital Ltd., Ticketmaster Entertainment, Inc. and Newfield Exploration Co.(1)
While in the near term changes in the macroeconomic environment drive market performance, as we come out of this crises-driven market, we believe stock selection will ultimately be the key driver for outperformance over market indices. As in 2002 and prior severely negative market environments, turmoil can create tremendous investment opportunities. Our benchmark-agnostic approach enables us to capitalize on these dislocations and find the hidden gems amongst the rubble. Through our fundamental research, we are identifying new ideas in a variety of sectors that we believe have been overlooked by the market and possess catalysts that we believe will drive value realization. While the recession is currently underway, there are a growing number of company and industry specific investment stories where a weak economic backdrop is more than priced into valuations. At present time, many of these stock opportunities are in sectors where we have a long history of investing experience. Despite the economic and market challenges, we are confident we will continue to prudently craft a robust Portfolio to lead us into significant upside versus current market expectations.
(1) | The Portfolio’s composition is subject to change. Holdings and weightings are as of December 31, 2008. |
Change in Value of $10,000 Investment
Hypothetical illustration based on past performance. Future performance will vary. The Portfolio’s returns reflect reinvested dividends. The Portfolio’s holdings may differ significantly from the securities in the index. The index is unmanaged and therefore does not reflect the cost of portfolio management and accounting.
The S&P 500 Index is a capitalization-weighted index designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The index presented herein includes the effects of reinvested dividends.
(continued)
38
Ohio National Fund, Inc.
Capital Appreciation Portfolio (Continued)
Capital Appreciation Portfolio (Continued)
Portfolio Composition as of December 31, 2008 (1)
% of Net Assets | |||
Common Stocks (3) | 95.1 | ||
Repurchase Agreements and Other Net Assets | 4.9 | ||
100.0 | |||
Top 10 Portfolio Holdings as of December 31, 2008 (1) (2)
% of Net Assets | |||||||
1. | ConAgra Foods, Inc. | 2.3 | |||||
2. | Wyeth | 2.2 | |||||
3. | Time Warner Cable, Inc. | 2.2 | |||||
4. | Pinnacle Entertainment, Inc. | 2.1 | |||||
5. | Republic Services, Inc. | 2.1 | |||||
6. | The Charles Schwab Corp. | 2.1 | |||||
7. | JetBlue Airways Corp. | 2.0 | |||||
8. | Discovery Communications, Inc. Class A | 2.0 | |||||
9. | Watson Pharmaceuticals, Inc. | 2.0 | |||||
10. | Cadbury PLC | 1.9 |
(1) | Composition of Portfolio subject to change. | |
(2) | Short-term investments have been excluded from the list of Top 10 Portfolio holdings. | |
(3) | Sectors: |
% of Net Assets | |||
Consumer Discretionary | 21.6 | ||
Industrials | 14.8 | ||
Financials | 13.0 | ||
Health Care | 11.8 | ||
Information Technology | 11.8 | ||
Energy | 8.1 | ||
Consumer Staples | 7.7 | ||
Materials | 4.1 | ||
Utilities | 1.6 | ||
Telecommunication Services | 0.6 | ||
95.1 | |||
39
Ohio National Fund, Inc.
Capital Appreciation Portfolio
Capital Appreciation Portfolio
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 95.1% | Shares | Value | ||||||
CONSUMER DISCRETIONARY – 21.6% | ||||||||
Auto Components – 2.1% | ||||||||
Gentex Corp. | 180,400 | $ | 1,592,932 | |||||
The Goodyear Tire & Rubber Co. (a) | 97,200 | 580,284 | ||||||
2,173,216 | ||||||||
Diversified Consumer Services – 3.9% | ||||||||
Career Education Corp. (a) | 66,200 | 1,187,628 | ||||||
H&R Block, Inc. | 75,300 | 1,710,816 | ||||||
Weight Watchers International, Inc. | 37,400 | 1,100,308 | ||||||
3,998,752 | ||||||||
Hotels, Restaurants & Leisure – 2.8% | ||||||||
Bally Technologies, Inc. (a) | 30,100 | 723,303 | ||||||
Pinnacle Entertainment, Inc. (a) | 289,200 | 2,221,056 | ||||||
2,944,359 | ||||||||
Household Durables – 2.6% | ||||||||
Ryland Group, Inc. | 87,800 | 1,551,426 | ||||||
Sony Corp. – ADR | 52,800 | 1,154,736 | ||||||
2,706,162 | ||||||||
Internet & Catalog Retail – 1.3% | ||||||||
HSN, Inc. (a) | 49,980 | 363,355 | ||||||
Ticketmaster Entertainment, Inc. (a) | 162,080 | 1,040,553 | ||||||
1,403,908 | ||||||||
Media – 8.2% | ||||||||
Discovery Communications, Inc. Class A (a) | 146,800 | 2,078,688 | ||||||
Liberty Global, Inc. Series C (a) | 65,296 | 991,193 | ||||||
Pearson PLC – ADR | 80,200 | 765,108 | ||||||
Time Warner Cable, Inc. (a) | 103,900 | 2,228,655 | ||||||
Viacom, Inc. Class B (a) | 87,144 | 1,660,965 | ||||||
Warner Music Group Corp. | 253,600 | 765,872 | ||||||
8,490,481 | ||||||||
Specialty Retail – 0.7% | ||||||||
Urban Outfitters, Inc. (a) | 46,600 | 698,068 | ||||||
TOTAL CONSUMER DISCRETIONARY | 22,414,946 | |||||||
CONSUMER STAPLES – 7.7% | ||||||||
Food & Staples Retailing – 1.0% | ||||||||
Wal-Mart Stores, Inc. | 19,300 | 1,081,958 | ||||||
Food Products – 5.3% | ||||||||
Cadbury PLC (b) | 227,835 | 2,013,253 | ||||||
ConAgra Foods, Inc. | 141,700 | 2,338,050 | ||||||
Tyson Foods, Inc. Class A | 127,600 | 1,117,776 | ||||||
5,469,079 | ||||||||
Household Products – 1.4% | ||||||||
Kimberly-Clark Corp. | 27,400 | 1,445,076 | ||||||
TOTAL CONSUMER STAPLES | 7,996,113 | |||||||
ENERGY – 8.1% | ||||||||
Energy Equipment & Services – 2.3% | ||||||||
National Oilwell Varco, Inc. (a) | 47,300 | 1,156,012 | ||||||
Schlumberger Ltd. | 28,400 | 1,202,172 | ||||||
2,358,184 | ||||||||
Oil, Gas & Consumable Fuels – 5.8% | ||||||||
Marathon Oil Corp. | 40,500 | 1,108,080 | ||||||
Newfield Exploration Co. (a) | 65,700 | 1,297,575 | ||||||
Occidental Petroleum Corp. | 31,400 | 1,883,686 | ||||||
Peabody Energy Corp. | 29,400 | 668,850 | ||||||
XTO Energy, Inc. | 30,000 | 1,058,100 | ||||||
6,016,291 | ||||||||
TOTAL ENERGY | 8,374,475 | |||||||
FINANCIALS – 13.0% | ||||||||
Capital Markets – 7.3% | ||||||||
Eaton Vance Corp. | 29,600 | 621,896 | ||||||
KKR Private Equity Investors LP – RDU (a) (b) (c) | 75,200 | 264,286 | ||||||
Lazard Ltd. Class A | 37,400 | 1,112,276 | ||||||
Morgan Stanley | 56,300 | 903,052 | ||||||
The Bank Of New York Mellon Corp. | 26,151 | 740,858 | ||||||
The Charles Schwab Corp. | 134,100 | 2,168,397 | ||||||
The Goldman Sachs Group, Inc. | 21,300 | 1,797,507 | ||||||
7,608,272 | ||||||||
Consumer Finance – 1.7% | ||||||||
SLM Corp. (a) | 193,700 | 1,723,930 | ||||||
Insurance – 4.0% | ||||||||
Axis Capital Holdings Ltd. | 40,700 | 1,185,184 | ||||||
StanCorp Financial Group, Inc. | 40,000 | 1,670,800 | ||||||
White Mountains Insurance Group Ltd. | 3,800 | 1,015,018 | ||||||
XL Capital Ltd. Class A | 76,500 | 283,050 | ||||||
4,154,052 | ||||||||
TOTAL FINANCIALS | 13,486,254 | |||||||
HEALTH CARE – 11.8% | ||||||||
Health Care Equipment & Supplies – 2.6% | ||||||||
Advanced Medical Optics, Inc. (a) | 140,400 | 928,044 | ||||||
Alcon, Inc. | 20,000 | 1,783,800 | ||||||
2,711,844 | ||||||||
Health Care Providers & Services – 1.6% | ||||||||
Humana, Inc. (a) | 43,200 | 1,610,496 | ||||||
Pharmaceuticals – 7.6% | ||||||||
Novartis AG – ADR | 20,000 | 995,200 | ||||||
Pfizer, Inc. | 57,800 | 1,023,638 | ||||||
Shire PLC – ADR | 35,100 | 1,571,778 | ||||||
Watson Pharmaceuticals, Inc. (a) | 76,300 | 2,027,291 | ||||||
Wyeth | 60,500 | 2,269,355 | ||||||
7,887,262 | ||||||||
TOTAL HEALTH CARE | 12,209,602 | |||||||
INDUSTRIALS – 14.8% | ||||||||
Aerospace & Defense – 2.2% | ||||||||
Hexcel Corp. (a) | 79,100 | 584,549 | ||||||
Honeywell International, Inc. | 52,500 | 1,723,575 | ||||||
2,308,124 | ||||||||
Airlines – 4.0% | ||||||||
Delta Air Lines, Inc. (a) | 174,600 | 2,000,916 | ||||||
JetBlue Airways Corp. (a) | 298,300 | 2,117,930 | ||||||
4,118,846 | ||||||||
(continued)
40
Ohio National Fund, Inc.
Capital Appreciation Portfolio (Continued)
Capital Appreciation Portfolio (Continued)
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 95.1% | Shares | Value | ||||||
Commercial Services & Supplies – 3.3% | ||||||||
Republic Services, Inc. | 89,415 | $ | 2,216,598 | |||||
Waste Management, Inc. | 36,100 | 1,196,354 | ||||||
3,412,952 | ||||||||
Machinery – 2.7% | ||||||||
Dover Corp. | 50,600 | 1,665,752 | ||||||
IDEX Corp. | 45,700 | 1,103,655 | ||||||
2,769,407 | ||||||||
Trading Companies & Distributors – 2.6% | ||||||||
Aircastle Ltd. | 169,900 | 812,122 | ||||||
RSC Holdings, Inc. (a) | 218,200 | 1,859,064 | ||||||
2,671,186 | ||||||||
TOTAL INDUSTRIALS | 15,280,515 | |||||||
INFORMATION TECHNOLOGY – 11.8% | ||||||||
Communications Equipment – 4.0% | ||||||||
Cisco Systems, Inc. (a) | 112,800 | 1,838,640 | ||||||
Motorola, Inc. | 144,200 | 638,806 | ||||||
Nokia Corp. – ADR | 108,900 | 1,698,840 | ||||||
4,176,286 | ||||||||
Computers & Peripherals – 1.5% | ||||||||
Diebold, Inc. | 55,000 | 1,544,950 | ||||||
Internet Software & Services – 1.1% | ||||||||
IAC/InterActiveCorp (a) | 75,950 | 1,194,693 | ||||||
IT Services – 1.2% | ||||||||
CACI International, Inc. Class A (a) | 27,500 | 1,239,975 | ||||||
Software – 4.0% | ||||||||
Check Point Software Technologies Ltd. (a) | 87,400 | 1,659,726 | ||||||
Manhattan Associates, Inc. (a) | 41,600 | 657,696 | ||||||
Symantec Corp. (a) | 131,600 | 1,779,232 | ||||||
4,096,654 | ||||||||
TOTAL INFORMATION TECHNOLOGY | 12,252,558 | |||||||
MATERIALS – 4.1% | ||||||||
Chemicals – 2.4% | ||||||||
E.I. du Pont de Nemours & Co. | 66,900 | 1,692,570 | ||||||
Nalco Holding Co. | 64,300 | 742,022 | ||||||
2,434,592 | ||||||||
Containers & Packaging – 0.1% | ||||||||
Smurfit-Stone Container Corp. (a) | 443,100 | 112,991 | ||||||
Metals & Mining – 1.5% | ||||||||
Goldcorp, Inc. | 49,700 | 1,567,041 | ||||||
Paper & Forest Products – 0.1% | ||||||||
Domtar Corp. (a) | 80,500 | 134,435 | ||||||
TOTAL MATERIALS | 4,249,059 | |||||||
TELECOMMUNICATION SERVICES – 0.6% | ||||||||
Wireless Telecommunication Services – 0.6% | ||||||||
Sprint Nextel Corp. (a) | 355,100 | 649,833 | ||||||
TOTAL TELECOMMUNICATIONS SERVICES | 649,833 | |||||||
UTILITIES – 1.6% | ||||||||
Independent Power Producers & Energy Traders – 1.6% | ||||||||
NRG Energy, Inc. (a) | 71,600 | 1,670,428 | ||||||
TOTAL UTILITIES | 1,670,428 | |||||||
Total Common Stocks (Cost $148,384,545) | $ | 98,583,783 | ||||||
Face | Fair | |||||||
Repurchase Agreements – 1.8% | Amount | Value | ||||||
US Bank 0.010% 01/02/2009 | $ | 1,862,000 | $ | 1,862,000 | ||||
Repurchase price $1,862,001 | ||||||||
Collateralized by: | ||||||||
Various Agency Mortgage- Backed Securities 2.395% to 5.000%, Due 09/01/2018 through 05/15/2033 Fair Value: $1,899,149 | ||||||||
Total Repurchase Agreements (Cost $1,862,000) | $ | 1,862,000 | ||||||
Total Investments – 96.9% (Cost $150,246,545) (d) | $ | 100,445,783 | ||||||
Other Assets in Excess of Liabilities – 3.1% | 3,188,961 | |||||||
Net Assets – 100.0% | $ | 103,634,744 | ||||||
Percentages are stated as a percent of net assets.
Abbreviations:
ADR: American Depository Receipts
RDU: Restricted Depository Unit
Footnotes:
(a) | Non-income producing security. | |
(b) | Security traded on a foreign exchange has been subjected to fair value procedures approved by the Fund Board of Directors. These securities represent $2,277,539 or 2.2% of the Portfolio’s net assets. As discussed in Note 2 of the Notes to Financial Statements, not all investments are valued at an estimate of fair value that is different from the local close price. In some instances the independent fair valuation service uses the local close price because the confidence interval associated with a holding is below the 75% threshold. | |
(c) | Security exempt from registration under Regulation D of the Securities Act of 1933. This security may be resold in transactions exempt from registration, normally to qualified buyers. At December 31, 2008, the value of this security totaled $264,286 or 0.3% of the Portfolio’s net assets. This security was deemed liquid pursuant to procedures approved by the Board of Directors. | |
(d) | Represents cost for financial reporting purposes, which may differ from cost basis for Federal income tax purposes. See also Note 8 of the Notes to Financial Statements. |
The accompanying notes are an integral part of these financial statements.
41
Ohio National Fund, Inc.
Capital Appreciation Portfolio
Capital Appreciation Portfolio
Statement of Assets and Liabilities
December 31, 2008
Assets: | ||||
Investments in securities, at fair value (Cost $148,384,545) | $ | 98,583,783 | ||
Repurchase agreements | 1,862,000 | |||
Cash | 385 | |||
Receivable for securities sold | 391,442 | |||
Receivable for fund shares sold | 3,520,148 | |||
Dividends and accrued interest receivable | 110,630 | |||
Prepaid expenses and other assets | 2,336 | |||
Total assets | 104,470,724 | |||
Liabilities: | ||||
Payable for securities purchased | 720,415 | |||
Payable for fund shares redeemed | 22,127 | |||
Payable for investment management services | 63,745 | |||
Accrued custody expense | 1,767 | |||
Accrued professional fees | 12,325 | |||
Accrued accounting fees | 7,516 | |||
Accrued printing and filing fees | 8,085 | |||
Total liabilities | 835,980 | |||
Net assets | $ | 103,634,744 | ||
Net assets consist of: | ||||
Par value, $1 per share | $ | 8,394,356 | ||
Paid-in capital in excess of par value | 165,120,157 | |||
Accumulated net realized loss on investments | (20,212,066 | ) | ||
Net unrealized depreciation on investments | (49,800,762 | ) | ||
Undistributed net investment income | 133,059 | |||
Net assets | $ | 103,634,744 | ||
Shares outstanding | 8,394,356 | |||
Authorized Fund shares allocated to Portfolio | 15,000,000 | |||
Net asset value per share | $ | 12.35 | ||
Statement of Operations
For the Year Ended December 31, 2008
Investment income: | ||||
Interest | $ | 75,196 | ||
Dividends (net of withholding tax of $21,846) | 2,324,456 | |||
Other | 1,592 | |||
Total investment income | 2,401,244 | |||
Expenses: | ||||
Management fees | 1,191,940 | |||
Custodian fees | 11,395 | |||
Directors’ fees | 12,415 | |||
Professional fees | 20,445 | |||
Accounting fees | 55,769 | |||
Printing and filing fees | 17,616 | |||
Compliance expense | 4,911 | |||
Other | 3,038 | |||
Total expenses | 1,317,529 | |||
Net investment income | 1,083,715 | |||
Realized/unrealized gain (loss) on investments and foreign currency related transactions: | ||||
Net realized gain (loss) on: | ||||
Investments | (17,972,884 | ) | ||
Foreign currency related transactions | (13,766 | ) | ||
Change in unrealized appreciation/depreciation on investments | (52,485,931 | ) | ||
Net realized/unrealized gain (loss) on investments and foreign currency related transactions | (70,472,581 | ) | ||
Change in net assets from operations | $ | (69,388,866 | ) | |
The accompanying notes are an integral part of these financial statements.
42
Ohio National Fund, Inc.
Capital Appreciation Portfolio
Capital Appreciation Portfolio
Statements of Changes in Net Assets
Years Ended December 31, | ||||||||
2008 | 2007 | |||||||
Increase (Decrease) in Net Assets: | ||||||||
Operations: | ||||||||
Net investment income | $ | 1,083,715 | $ | 1,016,768 | ||||
Net realized gain (loss) on investments and foreign currency related transactions | (17,986,650 | ) | 27,776,195 | |||||
Change in unrealized appreciation/depreciation on investments and foreign currency related transactions | (52,485,931 | ) | (18,903,998 | ) | ||||
Change in net assets from operations | (69,388,866 | ) | 9,888,965 | |||||
Distributions to shareholders: | ||||||||
Distributions from net investment income | (936,890 | ) | (919,601 | ) | ||||
Capital transactions: | ||||||||
Received from shares sold | 20,186,486 | 17,898,192 | ||||||
Received from dividends reinvested | 936,890 | 919,601 | ||||||
Paid for shares redeemed | (44,797,966 | ) | (52,658,929 | ) | ||||
Change in net assets from capital transactions | (23,674,590 | ) | (33,841,136 | ) | ||||
Change in net assets | (94,000,346 | ) | (24,871,772 | ) | ||||
Net Assets: | ||||||||
Beginning of year | 197,635,090 | 222,506,862 | ||||||
End of year | $ | 103,634,744 | $ | 197,635,090 | ||||
Undistributed net investment income | $ | 133,059 | $ | 90,823 | ||||
Financial Highlights
Years Ended December 31, | ||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
Selected Per-Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 20.45 | $ | 19.79 | $ | 17.08 | $ | 16.31 | $ | 14.55 | ||||||||||
Operations: | ||||||||||||||||||||
Net investment income | 0.14 | 0.11 | 0.12 | 0.08 | 0.08 | |||||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency related transactions | (8.12 | ) | 0.65 | 2.68 | 0.78 | 1.74 | ||||||||||||||
Total from operations | (7.98 | ) | 0.76 | 2.80 | 0.86 | 1.82 | ||||||||||||||
Distributions: | ||||||||||||||||||||
Distributions from net investment income | (0.12 | ) | (0.10 | ) | (0.09 | ) | (0.09 | ) | (0.06 | ) | ||||||||||
Net asset value, end of year | $ | 12.35 | $ | 20.45 | $ | 19.79 | $ | 17.08 | $ | 16.31 | ||||||||||
Total return | –39.01 | % | 3.82 | % | 16.37 | % | 5.27 | % | 12.50 | % | ||||||||||
Ratios and supplemental data: | ||||||||||||||||||||
Net assets at end of year (millions) | $ | 103.6 | $ | 197.6 | $ | 222.5 | $ | 169.6 | $ | 129.4 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Expenses | 0.87 | % | 0.84 | % | 0.85 | % | 0.88 | % | 0.91 | % | ||||||||||
Net investment income | 0.71 | % | 0.46 | % | 0.64 | % | 0.60 | % | 0.54 | % | ||||||||||
Portfolio turnover rate | 79 | % | 69 | % | 80 | % | 86 | % | 100 | % |
The accompanying notes are an integral part of these financial statements.
43
Ohio National Fund, Inc.
Millennium Portfolio
Millennium Portfolio
Objective/Strategy
The Millennium Portfolio seeks maximum capital growth by investing primarily in common stocks of small sized companies.
Performance as of December 31, 2008
Average Annual Total Returns: | ||||
One year | -42.54% | |||
Five years | -2.91% | |||
Ten years | 1.80% |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price and reinvestment of dividends and capital gains. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost.
The Portfolio is not open to direct retail investment. Beneficial interest in shares is obtained solely by purchase of variable life insurance policies and variable annuity contracts. Actual performance results for variable annuity and variable universal life contracts will be lower due to contract charges. Consult your contract for applicable charges.
Comments
For the year ended December 31, 2008, the Millennium Portfolio returned -42.54% versus -38.54% for the current benchmark, the Russell 2000 Growth Index.
The Portfolio underperformed the Russell 2000 Growth Index. During what became the worst year on record for small cap stocks since 1973, and a year in which value significantly outperformed growth, it was the quality bias in our Portfolio–which we believe is the key to our long-term outperformance–that held us back versus the Russell 2000 Growth Index.(1)
During the year, small cap stocks with the highest growth rates were the most out of favor with investors, with five growth sectors finishing the year down by over 40 percent. As investors favored the lower quality growth companies we tend to avoid, Information Technology and Energy companies were among the worst performers. Our Portfolio performed well relative to the benchmark during the fourth quarter, but it was not enough to erase a deficit for the year. In addition, stocks with long-term growth rates over 20% were the worst performers, whereas the slowest growers handed in better results. This performance differential on a growth rate basis was a trend that was seen for most of 2008.(1)
We saw our strongest performance within the Energy and Industrials sectors. Within Industrials, Bucyrus International, Inc., a mining equipment firm, and Lindsay Corp., an irrigation company, performed well early in the year, and Allegiant Travel Co. performed well in the second half. Allegiant Travel Co. is a low-cost leisure air travel company serving smaller markets that has been able to take market share from mainstream airlines as they pull out of some of the secondary markets in order to cut costs. AeroVironment, Inc. also performed well. AeroVironment, Inc. designs and develops fuel-efficient unmanned aircraft used for surveillance, intelligence gathering, and reconnaissance. We continue to believe in the longer-term prospects of our prison services theme, with companies such as The Geo Group, Inc. and Cornell Companies, Inc. Unfortunately, performance of these stocks disappointed this period as the weakening economy put public sector projects on hold.(1)
Within Energy, Alpha Natural Resources, Inc., an Appalachian coal producer, performed extremely well. Plains Exploration and Production Co., an oil and gas properties company, also benefited the Portfolio. Looking forward, to avoid being too directly attached to volatile commodity price movements, we are remaining sector-neutral in Energy, focusing on well-run companies with good earnings visibility.(1)
The biggest detriment to performance came from the Information Technology sector. Negative earnings surprises during the first quarter were primarily responsible for our poor performance within this sector.(1)
Telecommunication Services was another area of weakness this past year, but as it’s an area we believe will perform well as the climate begins to improve, we have been selectively adding to holdings within the sector. We own Leap Wireless International, Inc., a low-cost wireless provider with great subscriber growth numbers, that performed well, and SBA Communications Corp., a cell tower company whose performance was poor as a result of what we think are overblown concerns about the company’s access to financing. We are very positive on SBA Communications Corp. – in fact, at year end, it was the largest holding within the Portfolio.(1)
Within Consumer Staples, typically considered a defensive area, Central European Distribution Corp., an importer and distributor of alcoholic beverages in Poland, was among our poorest performers. While the stock suffered during the global economic slowdown, we continue to believe in the company and its prospects, and we continue to own the stock.(1)
The Consumer Discretionary sector was also detrimental during the period. We continued to invest in our secondary education theme, but consolidated holdings in this area selling the weaker links: American Public Education Inc. and Capella Education Company. However, we continue to hold Strayer Education, Inc., DeVry, Inc., and ITT Educational Services, Inc., all of which performed well during the period. Another segment of the Consumer Discretionary sector we find interesting is gaming, with companies such as WMS Industries, Inc., a manufacturer of casino and lottery game terminals. While there is a perception that the gaming industry is in a downturn, casinos continue to spend on new machines and equipment to remain competitive with one another. WMS Industries, Inc. has a high quality product line and a diversified revenue stream, and we believe they will continue to exceed expectations moving forward.(1)
As we look at the coming year, we are more constructive on the outlook for small cap growth stocks. As such, we are selectively shifting the Portfolio away from last year’s defensive stance, and beginning to position the Portfolio for a more typical market environment. We are looking for opportunities for the Portfolio, through investments in companies and sectors that tend to move with the market.
(continued)
44
Ohio National Fund, Inc.
Millennium Portfolio (Continued)
Millennium Portfolio (Continued)
We think the market will turn on positive changes in credit and housing, and we expect to see improvement there by the second half of 2009. We believe that once the financial rescue package begins to loosen credit, and as fiscal stimulus begins to flow through the economy, the tailwind that impacted small cap growth stocks in 2008 will begin to dissipate. Despite runs in performance that we have seen in the lower quality stocks, we continue to believe that longer term, stock selection will be a key and that the market will reward companies that possess strong fundamentals and quality growth characteristics. The companies that meet our fundamental criteria generally have strong balance sheets in that they posses good cash flow characteristics and are under leveraged and, therefore, do not have to go to the market for financing which should benefit them on a competitive basis longer term.
(1) | The Portfolio’s composition is subject to change. Holdings and weightings are as of December 31, 2008. |
Change in Value of $10,000 Investment
Hypothetical illustration based on past performance. Future performance will vary. The Portfolio’s returns reflect reinvested dividends. The Portfolio’s holdings may differ significantly from the securities in the index. The index is unmanaged and therefore does not reflect the cost of portfolio management and accounting.
The Russell 2000 Growth Index is a market-weighted total return index that measures the performance of companies within the Russell 2000 Index having higher price to book ratios and higher forecasted growth values. The Russell 2000 Index includes the 2000 firms from the Russell 3000 Index with the smallest market capitalizations. The Russell 3000 Index represents 98% of the investable U.S. equity markets. The index presented herein includes the effects of reinvested dividends.
Portfolio Composition as of December 31, 2008 (1)
% of Net Assets | |||
Common Stocks (3) | 98.3 | ||
Repurchase Agreements Less Net Liabilities | 1.7 | ||
100.0 | |||
Top 10 Portfolio Holdings as of December 31, 2008 (1) (2)
% of Net Assets | |||||||
1. | SBA Communications Corp. Class A | 3.9 | |||||
2. | Leap Wireless International, Inc. | 2.1 | |||||
3. | WMS Industries, Inc. | 2.1 | |||||
4. | Comstock Resources, Inc. | 2.1 | |||||
5. | ITT Educational Services, Inc. | 2.0 | |||||
6. | Strayer Education, Inc. | 2.0 | |||||
7. | DeVry, Inc. | 1.9 | |||||
8. | Myriad Genetics, Inc. | 1.9 | |||||
9. | Equinix, Inc. | 1.9 | |||||
10. | The GEO Group, Inc. | 1.9 |
(1) | Composition of Portfolio subject to change. | |
(2) | Short-term investments have been excluded from the list of Top 10 Portfolio holdings. | |
(3) | Sectors: |
% of Net Assets | |||
Health Care | 25.9 | ||
Information Technology | 19.2 | ||
Consumer Discretionary | 13.9 | ||
Industrials | 13.8 | ||
Financials | 6.9 | ||
Energy | 6.5 | ||
Consumer Staples | 6.1 | ||
Telecommunication Services | 6.0 | ||
98.3 | |||
45
Ohio National Fund, Inc.
Millennium Portfolio
Millennium Portfolio
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 98.3% | Shares | Value | ||||||
CONSUMER DISCRETIONARY – 13.9% | ||||||||
Diversified Consumer Services – 6.0% | ||||||||
DeVry, Inc. | 11,500 | $ | 660,215 | |||||
ITT Educational Services, Inc. (a) | 7,300 | 693,354 | ||||||
Strayer Education, Inc. | 3,200 | 686,112 | ||||||
2,039,681 | ||||||||
Hotels, Restaurants & Leisure – 4.3% | ||||||||
Bally Technologies, Inc. (a) | 18,100 | 434,943 | ||||||
Panera Bread Co. (a) | 6,300 | 329,112 | ||||||
WMS Industries, Inc. (a) | 27,050 | 727,645 | ||||||
1,491,700 | ||||||||
Specialty Retail – 3.6% | ||||||||
GameStop Corp. Class A (a) | 23,000 | 498,180 | ||||||
Gymboree Corp. (a) | 12,300 | 320,907 | ||||||
Tractor Supply Co. (a) | 11,400 | 411,996 | ||||||
1,231,083 | ||||||||
TOTAL CONSUMER DISCRETIONARY | 4,762,464 | |||||||
CONSUMER STAPLES – 6.1% | ||||||||
Beverages – 1.6% | ||||||||
Central European Distribution Corp. (a) | 27,200 | 535,840 | ||||||
Food & Staples Retailing – 1.2% | ||||||||
BJ’s Wholesale Club, Inc. (a) | 12,500 | 428,250 | ||||||
Food Products – 1.8% | ||||||||
Diamond Foods, Inc. | 12,000 | 241,800 | ||||||
Flowers Foods, Inc. | 15,200 | 370,272 | ||||||
612,072 | ||||||||
Personal Products – 1.5% | ||||||||
Chattem, Inc. (a) | 7,100 | 507,863 | ||||||
TOTAL CONSUMER STAPLES | 2,084,025 | |||||||
ENERGY – 6.5% | ||||||||
Oil, Gas & Consumable Fuels – 6.5% | ||||||||
Arena Resources, Inc. (a) | 21,200 | 595,508 | ||||||
Comstock Resources, Inc. (a) | 15,200 | 718,200 | ||||||
Concho Resources, Inc. (a) | 24,400 | 556,808 | ||||||
Plains Exploration & Production Co. (a) | 15,100 | 350,924 | ||||||
2,221,440 | ||||||||
TOTAL ENERGY | 2,221,440 | |||||||
FINANCIALS – 6.9% | ||||||||
Capital Markets – 5.2% | ||||||||
Greenhill & Co., Inc. | 7,300 | 509,321 | ||||||
KBW, Inc. (a) | 21,700 | 499,100 | ||||||
Riskmetrics Group, Inc. (a) | 33,300 | 495,837 | ||||||
Stifel Financial Corp. (a) | 6,300 | 288,855 | ||||||
1,793,113 | ||||||||
Commercial Banks – 1.7% | ||||||||
PrivateBancorp, Inc. | 17,600 | 571,296 | ||||||
TOTAL FINANCIALS | 2,364,409 | |||||||
HEALTH CARE – 25.9% | ||||||||
Biotechnology – 6.1% | ||||||||
Cubist Pharmaceuticals, Inc. (a) | 14,000 | 338,240 | ||||||
Emergent Biosolutions, Inc. (a) | 20,800 | 543,088 | ||||||
Martek Biosciences Corp. | 18,500 | 560,735 | ||||||
Myriad Genetics, Inc. (a) | 9,900 | 655,974 | ||||||
2,098,037 | ||||||||
Health Care Equipment & Supplies – 8.5% | ||||||||
Greatbatch, Inc. (a) | 15,100 | 399,546 | ||||||
Immucor, Inc. (a) | 16,500 | 438,570 | ||||||
Masimo Corp. (a) | 19,300 | 575,719 | ||||||
Meridian Bioscience, Inc. | 15,300 | 389,691 | ||||||
NuVasive, Inc. (a) | 15,100 | 523,215 | ||||||
ResMed, Inc. (a) | 15,100 | 565,948 | ||||||
2,892,689 | ||||||||
Health Care Providers & Services – 4.1% | ||||||||
Almost Family, Inc. (a) | 9,400 | 422,812 | ||||||
athenahealth, Inc. (a) | 11,600 | 436,392 | ||||||
LHC Group, Inc. (a) | 15,100 | 543,600 | ||||||
1,402,804 | ||||||||
Health Care Technology – 1.4% | ||||||||
MedAssets, Inc. (a) | 33,800 | 493,480 | ||||||
Life Sciences Tools & Services – 1.5% | ||||||||
Techne Corp. | 8,000 | 516,160 | ||||||
Pharmaceuticals – 4.3% | ||||||||
Optimer Pharmaceuticals, Inc. (a) | 49,100 | 594,601 | ||||||
Perrigo Co. | 13,700 | 442,647 | ||||||
Viropharma, Inc. (a) | 33,000 | 429,660 | ||||||
1,466,908 | ||||||||
TOTAL HEALTH CARE | 8,870,078 | |||||||
INDUSTRIALS – 13.8% | ||||||||
Aerospace & Defense – 4.5% | ||||||||
Aerovironment, Inc. (a) | 14,600 | 537,426 | ||||||
Axsys Technologies, Inc. (a) | 10,400 | 570,544 | ||||||
Heico Corp. | 10,800 | 419,364 | ||||||
1,527,334 | ||||||||
Airlines – 2.4% | ||||||||
Allegiant Travel Co. (a) | 10,600 | 514,842 | ||||||
Continental Airlines, Inc. (a) | 17,400 | 314,244 | ||||||
829,086 | ||||||||
Commercial Services & Supplies – 4.4% | ||||||||
Clean Harbors, Inc. (a) | 7,600 | 482,144 | ||||||
Cornell Companies, Inc. (a) | 21,400 | 397,826 | ||||||
The GEO Group, Inc. (a) | 35,300 | 636,459 | ||||||
1,516,429 | ||||||||
Road & Rail – 1.1% | ||||||||
Old Dominion Freight Line, Inc. (a) | 13,000 | 369,980 | ||||||
Trading Companies & Distributors – 1.4% | ||||||||
Beacon Roofing Supply, Inc. (a) | 34,600 | 480,248 | ||||||
TOTAL INDUSTRIALS | 4,723,077 | |||||||
INFORMATION TECHNOLOGY – 19.2% | ||||||||
Communications Equipment – 3.0% | ||||||||
Avocent Corp. (a) | 29,200 | 522,972 |
(continued)
46
Ohio National Fund, Inc.
Millennium Portfolio (Continued)
Millennium Portfolio (Continued)
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 98.3% | Shares | Value | ||||||
Communications Equipment (continued) | ||||||||
F5 Networks, Inc. (a) | 22,000 | $ | 502,920 | |||||
1,025,892 | ||||||||
Electronic Equipment & Instruments – 1.5% | ||||||||
Cogent, Inc. (a) | 36,900 | 500,733 | ||||||
Internet Software & Services – 5.5% | ||||||||
Equinix, Inc. (a) | 12,200 | 648,918 | ||||||
IAC/InterActiveCorp (a) | 25,100 | 394,823 | ||||||
Omniture, Inc. (a) | 48,900 | 520,296 | ||||||
Vocus, Inc. (a) | 17,900 | 325,959 | ||||||
1,889,996 | ||||||||
IT Services – 1.3% | ||||||||
Alliance Data Systems Corp. (a) | 9,100 | 423,423 | ||||||
Semiconductor & Semiconductor Equipment – 3.9% | ||||||||
Hittite Microwave Corp. (a) | 14,300 | 421,278 | ||||||
Silicon Laboratories, Inc. (a) | 14,400 | 356,832 | ||||||
Varian Semiconductor Equipment Associates, Inc. (a) | 31,000 | 561,720 | ||||||
1,339,830 | ||||||||
Software – 4.0% | ||||||||
Ansys, Inc. (a) | 13,900 | 387,671 | ||||||
Concur Technologies, Inc. (a) | 15,200 | 498,864 | ||||||
Nuance Communications, Inc. (a) | 46,200 | 478,632 | ||||||
1,365,167 | ||||||||
TOTAL INFORMATION TECHNOLOGY | 6,545,041 | |||||||
TELECOMMUNICATION SERVICES – 6.0% | ||||||||
Wireless Telecommunication Services – 6.0% | ||||||||
Leap Wireless International, Inc. (a) | 27,200 | 731,408 | ||||||
SBA Communications Corp. Class A (a) | 81,500 | 1,330,080 | ||||||
2,061,488 | ||||||||
TOTAL TELECOMMUNICATION SERVICES | 2,061,488 | |||||||
Total Common Stocks | ||||||||
(Cost $35,689,229) | $ | 33,632,022 | ||||||
Face | Fair | |||||||
Repurchase Agreements – 2.2% | Amount | Value | ||||||
U.S. Bank 0.010% 01/02/2009 | $ | 732,000 | $ | 732,000 | ||||
Repurchase price $732,000 | ||||||||
Collateralized by: | ||||||||
Various Agency Mortgage- Backed Securities 2.395% to 5.000%, Due 09/01/2018 through 05/15/2033 Fair Value: $746,604 | ||||||||
Total Repurchase Agreements (Cost $732,000) | $ | 732,000 | ||||||
Total Investments – 100.5% (Cost $36,421,229) (b) | $ | 34,364,022 | ||||||
Liabilities in Excess of Other Assets – (0.5)% | (158,374 | ) | ||||||
Net Assets – 100.0% | $ | 34,205,648 | ||||||
Percentages are stated as a percent of net assets.
Footnotes:
(a) | Non-income producing security. | |
(b) | Represents cost for financial reporting purposes, which may differ from cost basis for Federal income tax purposes. See also Note 8 of the Notes to Financial Statements. |
The accompanying notes are an integral part of these financial statements.
47
Ohio National Fund, Inc.
Millennium Portfolio
Millennium Portfolio
Statement of Assets and Liabilities
December 31, 2008
Assets: | ||||
Investments in securities, at fair value | ||||
(Cost $35,689,229) | $ | 33,632,022 | ||
Repurchase agreements | 732,000 | |||
Cash | 395 | |||
Receivable for securities sold | 344,216 | |||
Receivable for fund shares sold | 24,761 | |||
Dividends and accrued interest receivable | 920 | |||
Prepaid expenses and other assets | 839 | |||
Total assets | 34,735,153 | |||
Liabilities: | ||||
Payable for securities purchased | 403,523 | |||
Payable for fund shares redeemed | 84,536 | |||
Payable for investment management services | 22,586 | |||
Accrued custody expense | 1,677 | |||
Accrued professional fees | 11,005 | |||
Accrued accounting fees | 3,332 | |||
Accrued printing and filing fees | 2,846 | |||
Total liabilities | 529,505 | |||
Net assets | $ | 34,205,648 | ||
Net assets consist of: | ||||
Par value, $1 per share | $ | 2,368,447 | ||
Paid-in capital in excess of par value | 65,856,637 | |||
Accumulated net realized loss on investments | (31,962,229 | ) | ||
Net unrealized depreciation on investments | (2,057,207 | ) | ||
Net assets | $ | 34,205,648 | ||
Shares outstanding | 2,368,447 | |||
Authorized Fund shares allocated to Portfolio | 10,000,000 | |||
Net asset value per share | $ | 14.44 | ||
Statement of Operations
For the Year Ended December 31, 2008
Investment income: | ||||
Interest | $ | 13,153 | ||
Dividends (net of withholding tax of $691) | 104,755 | |||
Total investment income | 117,908 | |||
Expenses: | ||||
Management fees | 423,041 | |||
Custodian fees | 8,072 | |||
Directors’ fees | 4,305 | |||
Professional fees | 14,492 | |||
Accounting fees | 22,789 | |||
Printing and filing fees | 6,508 | |||
Compliance expense | 4,911 | |||
Other | 979 | |||
Total expenses | 485,097 | |||
Net investment loss | (367,189 | ) | ||
Realized/unrealized gain (loss) on investments and foreign currency related transactions: | ||||
Net realized gain (loss) on: | ||||
Investments | (13,216,348 | ) | ||
Foreign currency related transactions | 12 | |||
Change in unrealized appreciation/depreciation on investments and foreign currency related transactions | (14,574,651 | ) | ||
Net realized/unrealized gain (loss) on investments and foreign currency related transactions | (27,790,987 | ) | ||
Change in net assets from operations | $ | (28,158,176 | ) | |
The accompanying notes are an integral part of these financial statements.
48
Ohio National Fund, Inc.
Millennium Portfolio
Millennium Portfolio
Statements of Changes in Net Assets
Years Ended December 31, | ||||||||
2008 | 2007 | |||||||
Increase (Decrease) in Net Assets: | ||||||||
Operations: | ||||||||
Net investment loss | $ | (367,189 | ) | $ | (461,103 | ) | ||
Net realized gain (loss) on investments and foreign currency related transactions | (13,216,336 | ) | 8,867,184 | |||||
Change in unrealized appreciation/depreciation on investments and foreign currency related transactions | (14,574,651 | ) | 6,632,410 | |||||
Change in net assets from operations | (28,158,176 | ) | 15,038,491 | |||||
Capital transactions: | ||||||||
Received from shares sold | 12,734,336 | 10,902,795 | ||||||
Paid for shares redeemed | (21,422,842 | ) | (17,478,958 | ) | ||||
Change in net assets from capital transactions | (8,688,506 | ) | (6,576,163 | ) | ||||
Change in net assets | (36,846,682 | ) | 8,462,328 | |||||
Net Assets: | ||||||||
Beginning of year | 71,052,330 | 62,590,002 | ||||||
End of year | $ | 34,205,648 | $ | 71,052,330 | ||||
Financial Highlights
Years Ended December 31, | ||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
Selected Per-Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 25.13 | $ | 19.94 | $ | 18.57 | $ | 18.57 | $ | 16.74 | ||||||||||
Operations: | ||||||||||||||||||||
Net investment loss | (0.16 | ) | (0.16 | ) | (0.13 | ) | (0.10 | ) | (0.12 | ) | ||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency related transactions | (10.53 | ) | 5.35 | 1.50 | 0.10 | 1.95 | ||||||||||||||
Total from operations | (10.69 | ) | 5.19 | 1.37 | — | 1.83 | ||||||||||||||
Net asset value, end of year | $ | 14.44 | $ | 25.13 | $ | 19.94 | $ | 18.57 | $ | 18.57 | ||||||||||
Total return | –42.54 | % | 26.03 | % | 7.38 | % | 0.00 | % | 10.93 | % | ||||||||||
Ratios and supplemental data: | ||||||||||||||||||||
Net assets at end of year (millions) | $ | 34.2 | $ | 71.1 | $ | 62.6 | $ | 71.4 | $ | 89.0 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Expenses | 0.92 | % | 0.89 | % | 0.89 | % | 0.90 | % | 0.91 | % | ||||||||||
Net investment loss | (0.70 | )% | (0.70 | )% | (0.59 | )% | (0.53 | )% | (0.64 | )% | ||||||||||
Portfolio turnover rate | 224 | % | 156 | % | 219 | % | 179 | % | 104 | % |
The accompanying notes are an integral part of these financial statements.
49
Ohio National Fund, Inc.
International Small-Mid Company Portfolio
(formerly the International Small Company Portfolio)
International Small-Mid Company Portfolio
(formerly the International Small Company Portfolio)
Objective/Strategy
The International Small-Mid Company Portfolio seeks long-term growth of capital by investing at least 80% of its assets in equity securities of foreign small and mid-cap companies.
Performance as of December 31, 2008
Average Annual Total Returns: | ||||
One year | -51.30% | |||
Five years | 2.42% | |||
Ten years | 4.25% |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price and reinvestment of dividends and capital gains. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost.
The Portfolio is not open to direct retail investment. Beneficial interest in shares is obtained solely by purchase of variable life insurance policies and variable annuity contracts. Actual performance results for variable annuity and variable universal life contracts will be lower due to contract charges. Consult your contract for applicable charges.
Comments
For the year ended December 31, 2008, the International Small-Mid Company Portfolio returned -51.30% versus -49.02% for the current benchmark, the S&P Developed Small Cap Ex-U.S. Growth Index.
International small caps had an extremely challenging year of performance. The severe slowdown in global growth coupled with the acute onset of the credit crisis put unrelenting pressure on revenues and earnings. On a regional basis, Japan had the best relative performance of all small cap regional markets. The S&P Japan SmallCap Growth Index declined 27.19%. By comparison, the S&P Europe SmallCap Growth Index slid 51.31%, while the S&P Asia Pacific Ex-Japan SmallCap Growth Index tumbled 60.35%.
In response to rapidly deteriorating economic conditions, governments around the globe pushed back with unprecedented vigor, utilizing the full range of available policy tools. Through a series of largely coordinated actions, central banks cut interest rates with extreme prejudice. The U.S. and Japan cut rates to nearly 0% while the European Central Bank has also lowered rates aggressively. Additionally, the U.S., European and Asian governments enacted a wide range of economic bailout measures including the guaranteeing of bank deposits and money market investments, direct investment into financial institutions, nationalization of failing banks, direct purchases of commercial paper, and economic stimulus plans.
Top performing relative markets in the Portfolio included Canada, Germany and Israel. Weaker relative investments were in Japan, the United Kingdom, and Singapore.(1)
Relative outperforming sectors came from investments in Information Technology, Materials, and Consumer Staples. Eldorado Gold Corporation, a Canadian gold miner, which gained 72.8% during the period, as the firm cash cost structure continued to provide solid margins even in a declining gold price environment. Hokuto Corp., a Japanese mushroom producer, rose 31.75% during the reporting period while Shoppers Drug Mart Corp., a Canadian drugstore retailer, also performed relatively well, gaining 17.8% as both names lived up to their historically defensive characteristics.(1)
On a relative basis, underperformance came from Industrials, Energy, and Consumer Discretionary. Q-Cells AG, a German solar cell producer, was down 75.5% during the period as solar demand was negatively impacted by declining energy prices. Gildan Activewear Inc., a Canadian manufacturer of branded basic active wear, also hurt relative performance, declining 71.4% during the period. Shares were hit hard, as the firm issued its first profit warning since 2001 and production disruptions during the year. John Wood Group plc, a United Kingdom-based international energy service company, slid 68.3% for the year, on energy price declines.(1)
Going forward, we believe that the global economy will likely face continued challenges in 2009. Credit conditions remain relatively tight, equity valuations continue to be overly optimistic, and unemployment is likely to rise further. Major developed economies in the U.S. and Europe will likely face negative growth at least through the first half of the year. While we believe that equity markets remain in the midst of a bear market, we also believe that after considerable declines in 2008, the environment for equity markets may prove to be more positive early in the first quarter. Additionally, the inauguration of President-Elect Barack Obama and the likely passage of a significant stimulus package thereafter may serve as positive catalysts for equity markets.
We continue to remain cautious in regards to Europe as evidenced by the Portfolio’s significant underweight position. Despite several large cuts during the fourth quarter, interest rates in the European Union remain high relative to the U.S. and Japan which have moved towards zero rate environments. Additionally, we still believe that valuations are challenging given the state of the global economy. We are particularly bearish towards Eastern Europe which has been hit hard by the global economic slowdown and is also facing an increasing level of political instability. As of year end, the Portfolio had no exposure to Emerging Europe.(1)
While the Portfolio continues to be under-weighted in Japan, we are finding an increasing number of opportunities to purchase high quality names at relatively attractive valuations. Additionally, we believe that select emerging markets may provide some interesting investment opportunities after suffering sharp downward pressure in 2008. At year end, the Portfolio had positions in Latin America and Emerging Asia.(1)
From a sector perspective, the Portfolio ended the year with over-weighted positions in Consumer Staples, Materials, Health Care and Information Technology with relative underweights in Financials, Consumer Discretionary, Industrials, Energy, and Telecommunication Services.(1)
(1) | The Portfolio’s composition is subject to change. Holdings and weightings are as of December 31, 2008. |
(continued)
50
Ohio National Fund, Inc.
International Small-Mid Company Portfolio
(formerly the International Small Company Portfolio) (Continued)
International Small-Mid Company Portfolio
(formerly the International Small Company Portfolio) (Continued)
Change in Value of $10,000 Investment
Hypothetical illustration based on past performance. Future performance will vary. The Portfolios returns reflect reinvested dividends. The Portfolios holdings may differ significantly from the securities in the index. The index is unmanaged and therefore does not reflect the cost of portfolio management and accounting.
Effective October 1, 2008, the Portfolio’s index, the S&P/Citigroup Extended Market (EMI) Growth World ex-U.S. Index was renamed the S&P Developed Small Cap Ex-U.S. Growth Index. S&P Developed Small Cap Ex-U.S. Growth Index is a subset of the S&P Global Broad Market Index (BMI), a broad index including all publicly listed equities with float-adjusted market values of US$ 100 million or more and annual dollar value traded of at least US$ 50 million in all included countries. The Developed small Cap component of the BMI includes the equities in the bottom 15% of the market capitalization within each “developed” local market. Ex-U.S .denotes the use of all developed markets excluding the United States. The “Growth” subset includes those companies in each local market that exhibit the characteristics of growth. The index presented includes the effects of reinvested dividends.
Portfolio Composition as of December 31, 2008 (1)
% of Net Assets | |||
Common Stocks (3) | 88.9 | ||
Repurchase Agreements and Other Net Assets | 11.1 | ||
100.0 | |||
Top 10 Portfolio Holdings as of December 31, 2008 (1) (2)
% of Net Assets | |||||||
1. | Indra Sistemas SA | 2.5 | |||||
2. | K+S AG | 2.4 | |||||
3. | Nice Systems Ltd. - ADR | 2.4 | |||||
4. | Toyo Suisan Kaisha Ltd. | 2.4 | |||||
5. | Square Enix Holdings Co. Ltd. | 2.2 | |||||
6. | JGC Corp. | 2.2 | |||||
7. | Autonomy Corp. PLC | 2.1 | |||||
8. | Grifols SA | 1.9 | |||||
9. | Shionogi & Co. Ltd. | 1.9 | |||||
10. | Hokuto Corp. | 1.8 |
(1) | Composition of Portfolio subject to change. | |
(2) | Short-term investments have been excluded from the list of Top 10 Portfolio holdings. | |
(3) | Top 10 Country Weightings: |
% of Net Assets | |||
Japan | 20.8 | ||
Canada | 12.9 | ||
United Kingdom | 9.2 | ||
Spain | 8.3 | ||
France | 5.2 | ||
Germany | 4.3 | ||
Switzerland | 4.0 | ||
China | 3.2 | ||
Hong Kong | 2.6 | ||
Australia | 2.6 |
51
Ohio National Fund, Inc.
International Small-Mid Company Portfolio
(formerly the International Small Company Portfolio)
International Small-Mid Company Portfolio
(formerly the International Small Company Portfolio)
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 88.9% | Shares | Value | ||||||
Japan – 20.8% | ||||||||
Air Water, Inc. (b) | 65,000 | $ | 579,494 | |||||
Capcom Co. Ltd. (b) | 36,500 | 825,745 | ||||||
Hokuto Corp. (b) | 33,900 | 962,320 | ||||||
JGC Corp. (b) | 78,000 | 1,167,344 | ||||||
NPC, Inc. (b) | 14,500 | 739,084 | ||||||
Shimano, Inc. (b) | 18,900 | 744,030 | ||||||
Shionogi & Co. Ltd. (b) | 38,000 | 981,353 | ||||||
Square Enix Holdings Co. Ltd. (b) | 36,200 | 1,168,084 | ||||||
Sugi Holdings Co. Ltd. (b) | 21,500 | 574,741 | ||||||
Sundrug Co. Ltd. (b) | 19,500 | 541,723 | ||||||
Terumo Corp. (b) | 14,000 | 655,836 | ||||||
Toyo Suisan Kaisha Ltd. (b) | 43,000 | 1,239,105 | ||||||
Yamada Denki Co. Ltd. (b) | 10,800 | 754,938 | ||||||
10,933,797 | ||||||||
Canada – 12.9% | ||||||||
Agnico-Eagle Mines Ltd. | 13,500 | 692,955 | ||||||
Agrium, Inc. (b) | 21,400 | 718,881 | ||||||
Eldorado Gold Corp. (a) | 91,800 | 728,892 | ||||||
Gildan Activewear, Inc. (a) | 31,475 | 370,146 | ||||||
Kinross Gold Corp. | 23,400 | 431,028 | ||||||
Shoppers Drug Mart Corp. (b) | 22,400 | 871,867 | ||||||
Silver Wheaton Corp. (a) (b) | 98,700 | 639,611 | ||||||
SNC-Lavalin Group, Inc. (b) | 27,318 | 878,292 | ||||||
TMX Group, Inc. (b) | 17,600 | 359,128 | ||||||
Viterra, Inc. (a) (b) | 57,400 | 441,717 | ||||||
Yamana Gold, Inc. | 87,000 | 671,640 | ||||||
6,804,157 | ||||||||
United Kingdom – 9.2% | ||||||||
Aggreko PLC (b) | 58,966 | 384,952 | ||||||
AMEC PLC (b) | 78,289 | 565,182 | ||||||
Autonomy Corp. PLC (a) (b) | 80,422 | 1,119,082 | ||||||
Cobham PLC (b) | 175,570 | 524,802 | ||||||
Game Group PLC (b) | 321,636 | 595,948 | ||||||
Icon PLC – ADR (a) | 22,500 | 443,025 | ||||||
John Wood Group PLC (b) | 157,187 | 428,938 | ||||||
Shire PLC – ADR | 13,200 | 591,096 | ||||||
Wellstream Holdings PLC (b) | 41,565 | 213,974 | ||||||
4,866,999 | ||||||||
Spain – 8.3% | ||||||||
Abengoa SA (b) | 47,195 | 795,408 | ||||||
Enagas (b) | 27,589 | 609,201 | ||||||
Gamesa Corporacion Tecnologica SA (b) | 34,860 | 635,610 | ||||||
Grifols SA (b) | 58,165 | 1,019,147 | ||||||
Indra Sistemas SA (b) | 56,530 | 1,297,522 | ||||||
4,356,888 | ||||||||
France – 5.2% | ||||||||
Cie Generale d’Optique Essilor International SA (b) | 10,558 | 495,962 | ||||||
Ipsen SA (b) | 18,970 | 741,475 | ||||||
Neopost SA (b) | 6,798 | 616,839 | ||||||
Nexans SA (b) | 4,651 | 278,513 | ||||||
UBISOFT Entertainment SA (a) (b) | 29,684 | 582,389 | ||||||
2,715,178 | ||||||||
Germany – 4.3% | ||||||||
Bauer AG (b) | 9,793 | 421,446 | ||||||
K+S AG (b) | 21,599 | 1,247,434 | ||||||
SGL Carbon AG (a) (b) | 17,506 | 586,123 | ||||||
2,255,003 | ||||||||
Switzerland – 4.0% | ||||||||
Actelion Ltd. (a) (b) | 16,477 | 932,129 | ||||||
Givaudan (b) | 703 | 555,508 | ||||||
Lindt & Spruengli AG (b) | 343 | 641,777 | ||||||
2,129,414 | ||||||||
China – 3.2% | ||||||||
China South Locomotive and Rolling Stock Corp. (a) (b) | 1,532,900 | 832,689 | ||||||
Giant Interactive Group, Inc. – ADR (a) | 60,400 | 391,996 | ||||||
Tsingtao Brewery Co. Ltd. (b) | 224,000 | 470,703 | ||||||
1,695,388 | ||||||||
Hong Kong – 2.6% | ||||||||
China Everbright International Ltd. (b) | 2,878,000 | 536,578 | ||||||
Hong Kong Exchanges & Clearing Ltd. (b) | 89,200 | 856,403 | ||||||
1,392,981 | ||||||||
Australia – 2.6% | ||||||||
Computershare Ltd. (b) | 115,009 | 628,429 | ||||||
CSL Ltd. (b) | 32,414 | 764,382 | ||||||
1,392,811 | ||||||||
Israel – 2.4% | ||||||||
Nice Systems Ltd. – ADR (a) | 55,300 | 1,242,591 | ||||||
Norway – 2.2% | ||||||||
Fred Olsen Energy ASA (b) | 11,000 | 296,653 | ||||||
Yara International ASA (b) | 39,050 | 858,974 | ||||||
1,155,627 | ||||||||
Singapore – 2.1% | ||||||||
Raffles Education Corp. Ltd. (b) | 1,138,000 | 450,727 | ||||||
Singapore Exchange Ltd. (b) | 191,000 | 680,378 | ||||||
1,131,105 | ||||||||
Netherlands – 2.0% | ||||||||
Fugro NV (b) | 9,699 | 278,779 | ||||||
Imtech NV (b) | 23,753 | 400,837 | ||||||
Qiagen NV (a) (b) | 21,126 | 371,230 | ||||||
1,050,846 | ||||||||
Italy – 2.0% | ||||||||
Davide Campari – Milano SpA (b) | 85,524 | 592,831 | ||||||
ERG SpA (b) | 36,219 | 446,746 | ||||||
1,039,577 | ||||||||
(continued)
52
Ohio National Fund, Inc.
International Small-Mid Company Portfolio
(formerly the International Small Company Portfolio) (Continued)
International Small-Mid Company Portfolio
(formerly the International Small Company Portfolio) (Continued)
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 88.9% | Shares | Value | ||||||
Chile – 1.4% | ||||||||
Sociedad Quimica y Minera de Chile SA – ADR | 30,100 | $ | 734,139 | |||||
Cayman Islands – 1.0% | ||||||||
China Medical Technologies, Inc. – ADR | 24,900 | 504,474 | ||||||
Bermuda – 0.9% | ||||||||
Pacific Basin Shipping Ltd. (b) | 1,023,000 | 470,925 | ||||||
Sweden – 0.8% | ||||||||
Getinge AB (b) | 33,511 | 406,635 | ||||||
Finland – 0.7% | ||||||||
Konecranes Oyj (b) | 22,350 | 389,078 | ||||||
Malaysia – 0.3% | ||||||||
Mah Sing Group BHD (b) | 380,900 | 176,297 | ||||||
Total Common Stocks (Cost $52,395,495) | $ | 46,843,910 | ||||||
Face | Fair | |||||||
Repurchase Agreements – 11.1% | Amount | Value | ||||||
State Street Bank 0.010% 01/02/2009 | $ | 5,853,000 | $ | 5,853,000 | ||||
Repurchase price $5,853,003 | ||||||||
Collateralized by: | ||||||||
U.S. Treasury Bill 0.100%, 02/12/2009 | ||||||||
Fair Value: $5,975,000 | ||||||||
Total Repurchase Agreements (Cost $5,853,000) | $ | 5,853,000 | ||||||
Total Investments – 100.0% (Cost $58,248,495) (c) | $ | 52,696,910 | ||||||
Other Assets in Excess of Liabilities – 0.0% | 3,474 | |||||||
Net Assets – 100.0% | $ | 52,700,384 | ||||||
Abbreviations:
ADR: American Depository Receipts
Footnotes:
(a) | Non-Income producing security. | |
(b) | Securities denominated in foreign currency and traded on a foreign exchange have been subjected to fair value procedures approved by the Fund Board of Directors. These securities represent $40,041,928 or 76.0% of the Portfolio’s net assets. As discussed in Note 2 of the Notes to Financial Statements, not all investments are valued at an estimate of fair value that is different from the local close price. In some instances the independent fair valuation service uses the local close price because the confidence interval associated with a holding is below the 75% threshold. The Portfolio’s securities that are not subjected to fair value procedures are traded on exchanges whose local close times are consistent with the 4:00 pm Eastern Time U.S. market close. | |
(c) | Represents cost for financial reporting purposes, which may differ from cost basis for Federal income tax purposes. See also Note 8 of the Notes to Financial Statements. |
Sector Classifications:
Industrials | 17.2% | ||
Health Care | 15.0% | ||
Information Technology | 14.9% | ||
Materials | 14.9% | ||
Consumer Staples | 12.0% | ||
Consumer Discretionary | 5.5% | ||
Energy | 4.2% | ||
Financials | 4.0% | ||
Utilities | 1.2% | ||
88.9% | |||
The accompanying notes are an integral part of these financial statements.
53
Ohio National Fund, Inc.
International Small-Mid Company Portfolio
(formerly the International Small Company Portfolio)
International Small-Mid Company Portfolio
(formerly the International Small Company Portfolio)
Statement of Assets and Liabilities
December 31, 2008
Assets: | ||||
Investments in securities, at fair value (Cost $52,395,495) | $ | 46,843,910 | ||
Repurchase agreements | 5,853,000 | |||
Cash | 635 | |||
Receivable for fund shares sold | 54,617 | |||
Dividends and accrued interest receivable | 13,705 | |||
Foreign tax reclaim receivable | 49,291 | |||
Prepaid expenses and other assets | 1,222 | |||
Total assets | 52,816,380 | |||
Liabilities: | ||||
Payable for fund shares redeemed | 42,374 | |||
Payable for investment management services | 44,427 | |||
Accrued custody expense | 12,841 | |||
Accrued professional fees | 10,242 | |||
Accrued accounting fees | 1,934 | |||
Accrued printing and filing fees | 4,178 | |||
Total liabilities | 115,996 | |||
Net assets | $ | 52,700,384 | ||
Net assets consist of: | ||||
Par value, $1 per share | $ | 3,964,382 | ||
Paid-in capital in excess of par value | 80,393,931 | |||
Accumulated net realized loss on investments | (26,035,087 | ) | ||
Net unrealized depreciation on: | ||||
Investments | (5,551,585 | ) | ||
Foreign currency related transactions | (3,867 | ) | ||
Accumulated net investment loss | (67,390 | ) | ||
Net assets | $ | 52,700,384 | ||
Shares outstanding | 3,964,382 | |||
Authorized Fund shares allocated to Portfolio | 10,000,000 | |||
Net asset value per share | $ | 13.29 | ||
Statement of Operations
For the Year Ended December 31, 2008
Investment income: | ||||
Interest | $ | 45,212 | ||
Dividends (net of $174,531 foreign taxes withheld) | 1,294,038 | |||
Total investment income | 1,339,250 | |||
Expenses: | ||||
Management fees | 862,906 | |||
Custodian fees | 82,600 | |||
Directors’ fees | 7,043 | |||
Professional fees | 16,311 | |||
Accounting fees | 38,570 | |||
Printing and filing fees | 10,434 | |||
Compliance expense | 4,911 | |||
Other | 1,506 | |||
Total expenses | 1,024,281 | |||
Net investment income | 314,969 | |||
Realized/unrealized gain (loss) on investments, foreign currency contracts, and other foreign currency related transactions: | ||||
Net realized gain (loss) on: | ||||
Investments | (25,849,442 | ) | ||
Foreign currency contracts | 8,494 | |||
Foreign currency related transactions | (427,203 | ) | ||
Change in unrealized appreciation/depreciation on: | ||||
Investments | (31,079,212 | ) | ||
Foreign currency related transactions | 902 | |||
Net realized/unrealized gain (loss) on investments, foreign currency contracts, and other foreign currency related transactions | (57,346,461 | ) | ||
Change in net assets from operations | $ | (57,031,492 | ) | |
The accompanying notes are an integral part of these financial statements.
54
Ohio National Fund, Inc.
International Small-Mid Company Portfolio
(formerly the International Small Company Portfolio)
International Small-Mid Company Portfolio
(formerly the International Small Company Portfolio)
Statements of Changes in Net Assets
Years Ended December 31, | ||||||||
2008 | 2007 | |||||||
Increase (Decrease) in Net Assets: | ||||||||
Operations: | ||||||||
Net investment income | $ | 314,969 | $ | 263,211 | ||||
Net realized gain (loss) on investments, foreign currency contracts, and other foreign currency related transactions | (26,268,151 | ) | 9,459,350 | |||||
Change in unrealized appreciation/depreciation on investments and foreign currency related transactions | (31,078,310 | ) | 3,708,344 | |||||
Change in net assets from operations | (57,031,492 | ) | 13,430,905 | |||||
Capital transactions: | ||||||||
Received from shares sold | 32,910,125 | 47,970,507 | ||||||
Paid for shares redeemed | (36,157,399 | ) | (23,797,656 | ) | ||||
Change in net assets from capital transactions | (3,247,274 | ) | 24,172,851 | |||||
Change in net assets | (60,278,766 | ) | 37,603,756 | |||||
Net Assets: | ||||||||
Beginning of year | 112,979,150 | 75,375,394 | ||||||
End of year | $ | 52,700,384 | $ | 112,979,150 | ||||
Undistributed net investment income (Accumulated net investment loss) | $ | (67,390 | ) | $ | 106,154 | |||
Financial Highlights
Years Ended December 31, | ||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
Selected Per-Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 27.29 | $ | 23.23 | $ | 18.87 | $ | 14.69 | $ | 12.27 | ||||||||||
Operations: | ||||||||||||||||||||
Net investment income (loss) | 0.08 | 0.07 | (0.01 | ) | 0.03 | 0.02 | ||||||||||||||
Net realized and unrealized gain (loss) on investments, foreign currency contracts, and other foreign currency related transactions | (14.08 | ) | 3.99 | 4.98 | 4.23 | 2.54 | ||||||||||||||
Total from operations | (14.00 | ) | 4.06 | 4.97 | 4.26 | 2.56 | ||||||||||||||
Distributions: | ||||||||||||||||||||
Distributions from net investment income | — | — | (0.03 | ) | (0.08 | ) | (0.14 | ) | ||||||||||||
Distributions of net realized capital gains | — | — | (0.58 | ) | — | — | ||||||||||||||
Total distributions | — | — | (0.61 | ) | (0.08 | ) | (0.14 | ) | ||||||||||||
Net asset value, end of year | $ | 13.29 | $ | 27.29 | $ | 23.23 | $ | 18.87 | $ | 14.69 | ||||||||||
Total return | –51.30 | % | 17.48 | % | 26.35 | % | 28.99 | % | 20.87 | % | ||||||||||
Ratios and supplemental data: | ||||||||||||||||||||
Net assets at end of year (millions) | $ | 52.7 | $ | 113.0 | $ | 75.4 | $ | 49.9 | $ | 30.4 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Expenses | 1.19 | % | 1.29 | % | 1.34 | % | 1.47 | % | 1.47 | % | ||||||||||
Net investment income (loss) | 0.36 | % | 0.27 | % | (0.01 | )% | 0.36 | % | 0.16 | % | ||||||||||
Portfolio turnover rate | 75 | % | 53 | % | 69 | % | 85 | % | 82 | % |
The accompanying notes are an integral part of these financial statements.
55
Ohio National Fund, Inc.
Aggressive Growth Portfolio
Aggressive Growth Portfolio
Objective/Strategy
The Aggressive Growth Portfolio seeks long-term capital growth by investing primarily in equity securities with attractive growth opportunities.
Performance as of December 31, 2008
Average Annual Total Returns: | ||||
One year | -43.68% | |||
Five years | -0.96% | |||
Ten years | -7.21% |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price and reinvestment of dividends and capital gains. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost.
The Portfolio is not open to direct retail investment. Beneficial interest in shares is obtained solely by purchase of variable life insurance policies and variable annuity contracts. Actual performance results for variable annuity and variable universal life contracts will be lower due to contract charges. Consult your contract for applicable charges.
Comments
For the year ended December 31, 2008, the Aggressive Growth Portfolio returned -43.68% versus -37.00% for the current benchmark, the S&P 500 Index.
Turmoil from the credit crisis and concerns over a prolonged recession characterized U.S. equity markets during the year ended December 31, 2008. U.S. stock prices began the period lower, as stresses in the credit markets, negative sentiment and volatility grew. While the aggressive attempts to address the credit crisis by the U.S. Federal Reserve (“Fed”) helped markets gain their footing in March and April, rising energy prices (oil hit a record in July) and more evidence of slowing economic growth weighed on sentiment. In mid-September, the full weight of the credit crisis seized the global markets leading to the demise of several long-standing financial institutions. This gave rise to a crisis of confidence that pervaded the markets and led to a dramatic sell-off in September and early October. In response, the U.S. Treasury and the Fed, along with central banks around the world, took unprecedented steps to support markets and global financial institutions. The S&P 500 Index touched an eleven year low in November before rebounding modestly to end the year. Volatility eased by December, but most domestic indices finished the period over 30% lower. In expectation of significant declines in demand due to the global economic slowdown, commodity prices dropped precipitously from their peaks in the summer, led by oil, to finish the period significantly lower. Financials were easily the worst performing sector due to the ongoing credit crisis, while the Materials sector was the second worst, reflecting the decline in commodity prices. Consumer Staples and Health Care, meanwhile, outperformed, but posted double digit declines as well. Growth outperformed valued-oriented indices during the period, although both performed similarly during the worst of the market’s decline.
Weak performing selections across a number of sectors drove the Portfolio’s underperformance during the period. Our holdings in Financials, Consumer Staples and Materials were notable detractors. On a positive note, our selections within Health Care aided comparable results.(1)
The Portfolio’s top individual detractor was Apple, Inc. The company declined in the period due to concerns that the economic slowdown would negatively impact sales of its key computer, iPhone and iPod products. While we recognize that sales could be impacted in the short term, we believe that Apple, Inc.’s competitive position remained intact, driven by what we feel is its superior engineering and vertically integrated, closed loop architecture, which seamlessly combines hardware and software into a generally positive user experience. We believe the continued success of the iPhone and further market share gains in its core computer division will be the key drivers of Apple, Inc.’s future growth.(1)
Lehman Brothers Holdings, Inc. was a top detractor amid turmoil in the credit markets and a bankruptcy protection filing in September. Our thesis on Lehman Brothers Holdings, Inc. centered on the premise that it had sufficient liquidity to weather the market storms. In fact, we evaluated the downside risk through multiple scenario analyses, including a stand-alone valuation of Neuberger Berman, its asset management arm. We built our own model of Lehman Brothers Holdings, Inc.’s balance sheet with as much detail as we found available to try to independently assess the value of the assets held by Lehman Brothers Holdings, Inc. We were attracted by the substantial discount to our determination of book value the market was placing on the company. Unfortunately, we did not appropriately anticipate the dramatic value decline in residential mortgages, commercial mortgages, and whole loans would have on Lehman Brothers Holdings, Inc.’s balance sheet. In the end, the crisis of confidence that hit Lehman Brothers Holdings, Inc. went beyond share price and created a “run on the bank” by Lehman Brothers Holdings, Inc.’s clients and counterparties. What we believe should have been a liquidity issue became a solvency issue and the company filed for bankruptcy protection. After an extremely frustrating turn of events, we exited the position.(1)
ABB Ltd. fell during the period. This provider of power and automation technologies to utility and industrial customers posted lower-than-expected results and suffered from delays in industrial and infrastructure projects due to the financials crisis and the slowing economy. We believe the company will benefit from the long-term trends in global infrastructure development and that the company has a strong market position in automation technologies.(1)
Gilead Sciences, Inc. benefited from studies that showed better results for patients who began using its HIV drug, Truvada, earlier in treatment, suggesting a larger addressable market. Celgene Corp. received a mid-year boost from a strong European rollout of its cancer-fighting drug Revlimid. We think the company is on track to continue to dominate the multiple myeloma (bone marrow cancer) market with Revlimid.(1)
Yahoo!, Inc. was another contributor during the period, benefiting from a buyout offer from Microsoft Corp. early in the year. We exited the position in February after the deal was announced as we felt the offer was a fair bid for Yahoo!, Inc. given the
(continued)
56
Ohio National Fund, Inc.
Aggressive Growth Portfolio (Continued)
Aggressive Growth Portfolio (Continued)
company’s challenges against Google, Inc.’s superior search technology.(1)
In terms of positioning, the Portfolio was over-weighted in Health Care and Materials and under-weighted in Energy and consumer-related sectors at the end of the time period. Looking ahead, it is difficult to determine how deep or protracted this recession will be or the pace of the recovery. Credit availability, employment growth and the housing market represent major headwinds to a quick recovery in our view. Given the high uncertainty in the markets at year end, we were favoring companies with recurring revenue streams that we think have great valuations and growth prospects. We want to own companies that can deliver solid results, even in a tough economy, and have the potential to gain market share from weaker competitors.(1)
(1) | The Portfolio’s composition is subject to change. Holdings and weightings are as of December 31, 2008. |
Change in Value of $10,000 Investment
Hypothetical illustration based on past performance. Future performance will vary. The Portfolio’s returns reflect reinvested dividends. The Portfolio’s holdings may differ significantly from the securities in the index. The index is unmanaged and therefore does not reflect the cost of portfolio management and accounting.
The S&P 500 Index is a capitalization-weighted index designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The index presented herein includes the effects of reinvested dividends.
Portfolio Composition as of December 31, 2008 (1)
% of Net Assets | |||
Common Stocks (3) | 92.1 | ||
Repurchase Agreements Less Net Liabilities | 7.9 | ||
100.0 | |||
Top 10 Portfolio Holdings as of December 31, 2008 (1) (2)
% of Net Assets | |||||||
1. | Gilead Sciences, Inc. | 8.1 | |||||
2. | Celgene Corp. | 6.7 | |||||
3. | CVS/Caremark Corp. | 5.9 | |||||
4. | ABB Ltd. | 4.8 | |||||
5. | Apple, Inc. | 4.5 | |||||
6. | Oracle Corp. | 4.0 | |||||
7. | Anheuser-Busch InBev | 3.5 | |||||
8. | Cisco Systems, Inc. | 3.4 | |||||
9. | America Movil S.A.B. de C.V. – ADR | 3.2 | |||||
10. | Davide Campari-Milano SpA | 3.0 |
(1) | Composition of Portfolio subject to change. | |
(2) | Short-term investments have been excluded from the list of Top 10 Portfolio holdings. | |
(3) | Sectors: |
% of Net Assets | |||
Information Technology | 26.6 | ||
Health Care | 21.6 | ||
Consumer Staples | 14.9 | ||
Industrials | 9.3 | ||
Financials | 8.8 | ||
Telecommunication Services | 7.9 | ||
Consumer Discretionary | 1.6 | ||
Materials | 1.4 | ||
92.1 | |||
57
Ohio National Fund, Inc.
Aggressive Growth Portfolio
Aggressive Growth Portfolio
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 92.1% | Shares | Value | ||||||
CONSUMER DISCRETIONARY – 1.6% | ||||||||
Media – 1.6% | ||||||||
News Corp. Class A | 31,765 | $ | 288,744 | |||||
TOTAL CONSUMER DISCRETIONARY | 288,744 | |||||||
CONSUMER STAPLES – 14.9% | ||||||||
Beverages – 6.5% | ||||||||
Anheuser-Busch InBev (b) | 26,992 | 626,840 | ||||||
Davide Campari-Milano SpA (b) | 78,060 | 541,092 | ||||||
1,167,932 | ||||||||
Food & Staples Retailing – 5.9% | ||||||||
CVS/Caremark Corp. | 36,840 | 1,058,782 | ||||||
Food Products – 2.5% | ||||||||
Bunge Ltd. | 8,680 | 449,363 | ||||||
TOTAL CONSUMER STAPLES | 2,676,077 | |||||||
FINANCIALS – 8.8% | ||||||||
Capital Markets – 1.7% | ||||||||
The Goldman Sachs Group, Inc. | 1,510 | 127,429 | ||||||
UBS AG (a) | 136 | 1,945 | ||||||
UBS AG (UBSN VX) (a) (b) | 12,155 | 176,847 | ||||||
306,221 | ||||||||
Commercial Banks – 1.0% | ||||||||
Wells Fargo & Co. | 6,140 | 181,007 | ||||||
Diversified Financial Services – 4.1% | ||||||||
CME Group, Inc. | 1,355 | 281,989 | ||||||
JPMorgan Chase & Co. | 9,945 | 313,566 | ||||||
MarketAxess Holdings, Inc. (a) | 16,755 | 136,721 | ||||||
732,276 | ||||||||
Insurance – 0.8% | ||||||||
ACE Ltd. | 2,815 | 148,970 | ||||||
Real Estate Investment Trusts – 1.2% | ||||||||
CapitalSource, Inc. | 46,134 | 213,139 | ||||||
TOTAL FINANCIAL | 1,581,613 | |||||||
HEALTH CARE – 21.6% | ||||||||
Biotechnology – 15.6% | ||||||||
Celgene Corp. (a) | 21,765 | 1,203,169 | ||||||
Genentech, Inc. (a) | 1,835 | 152,140 | ||||||
Gilead Sciences, Inc. (a) | 28,460 | 1,455,445 | ||||||
2,810,754 | ||||||||
Health Care Equipment & Supplies – 2.6% | ||||||||
Intuitive Surgical, Inc. (a) | 3,684 | 467,831 | ||||||
Health Care Providers & Services – 1.6% | ||||||||
UnitedHealth Group, Inc. | 10,875 | 289,275 | ||||||
Pharmaceuticals – 1.8% | ||||||||
Roche Holding AG (b) | 2,032 | 314,588 | ||||||
TOTAL HEALTH CARE | 3,882,448 | |||||||
INDUSTRIALS – 9.3% | ||||||||
Air Freight & Logistics – 2.6% | ||||||||
FedEx Corp. | 3,815 | 244,732 | ||||||
United Parcel Service, Inc. Class B | 4,130 | 227,811 | ||||||
472,543 | ||||||||
Electrical Equipment – 5.6% | ||||||||
ABB Ltd. (b) | 56,963 | 868,694 | ||||||
SunPower Corp. (a) | 4,767 | 145,107 | ||||||
1,013,801 | ||||||||
Professional Services – 1.1% | ||||||||
CoStar Group, Inc. (a) | 5,870 | 193,358 | ||||||
TOTAL INDUSTRIALS | 1,679,702 | |||||||
INFORMATION TECHNOLOGY – 26.6% | ||||||||
Communications Equipment – 10.6% | ||||||||
Cisco Systems, Inc. (a) | 37,405 | 609,701 | ||||||
Corning, Inc. | 53,375 | 508,664 | ||||||
QUALCOMM, Inc. | 10,065 | 360,629 | ||||||
Research In Motion Ltd. (a) | 10,595 | 429,945 | ||||||
1,908,939 | ||||||||
Computers & Peripherals – 4.5% | ||||||||
Apple, Inc. (a) | 9,545 | 814,666 | ||||||
Electronic Equipment, Instruments & Components – 2.9% | ||||||||
Trimble Navigation Ltd. (a) | 23,870 | 515,831 | ||||||
Internet Software & Services – 4.2% | ||||||||
Equinix, Inc. (a) | 4,595 | 244,408 | ||||||
Google, Inc. Class A (a) | 1,130 | 347,644 | ||||||
VistaPrint Limited (a) | 8,160 | 151,858 | ||||||
743,910 | ||||||||
Semiconductor & Semiconductor Equipment – 0.4% | ||||||||
Cypress Semiconductor Corp. (a) | 16,490 | 73,710 | ||||||
Software – 4.0% | ||||||||
Oracle Corp. (a) | 40,615 | 720,104 | ||||||
TOTAL INFORMATION TECHNOLOGY | 4,777,160 | |||||||
MATERIALS – 1.4% | ||||||||
Metals & Mining – 1.4% | ||||||||
Companhia Vale do Rio Doce – ADR | 21,260 | 257,459 | ||||||
TOTAL MATERIALS | 257,459 | |||||||
TELECOMMUNICATION SERVICES – 7.9% | ||||||||
Diversified Telecommunication Services – 1.0% | ||||||||
tw telecom, inc. (a) | 22,005 | 186,382 | ||||||
Wireless Telecommunication Services – 6.9% | ||||||||
America Movil S.A.B. de C.V. – ADR | 18,610 | 576,724 | ||||||
Cellcom Israel Ltd. | 8,420 | 186,082 | ||||||
Crown Castle International Corp. (a) | 26,860 | 472,199 | ||||||
1,235,005 | ||||||||
TOTAL TELECOMMUNICATION SERVICES | 1,421,387 | |||||||
Total Common Stocks (Cost $22,167,963) | $ | 16,564,590 | ||||||
Fair | ||||||||
VVPR Strips – 0.0% (c) | Quantity | Value | ||||||
CONSUMER STAPLES – 0.0% | ||||||||
Beverages – 0.0% | ||||||||
Anheuser-Busch InBev (a) (b) | 6,992 | $ | 39 | |||||
TOTAL VVPR Strips (Cost $0) | $ | 39 | ||||||
(continued)
58
Ohio National Fund, Inc.
Aggressive Growth Portfolio (Continued)
Aggressive Growth Portfolio (Continued)
Schedule of Investments | December 31, 2008 |
Face | Fair | |||||||
Repurchase Agreements – 8.2% | Amount | Value | ||||||
U.S. Bank 0.010% 01/02/2009 | $ | 1,473,000 | $ | 1,473,000 | ||||
Repurchase price $1,473,001 | ||||||||
Collateralized by: | ||||||||
Various Agency Mortgage- Backed Securities 2.395% to 5.000%, Due 09/01/2018 through 05/15/2033 Fair Value: $1,502,388 | ||||||||
Total Repurchase Agreements (Cost $1,473,000) | $ | 1,473,000 | ||||||
Total Investments – 100.3% (Cost $23,640,963) (d) | $ | 18,037,629 | ||||||
Liabilities in Excess of Other Assets – (0.3)% | (52,611 | ) | ||||||
Net Assets – 100.0% | $ | 17,985,018 | ||||||
Percentages are stated as a percent of net assets.
Abbreviations:
ADR: American Depository Receipts
Footnotes:
(a) | Non-income producing security. | |
(b) | Security denominated in foreign currency and traded on a foreign exchange has been subjected to fair value procedures approved by the Fund Board of Directors. These securities represent $2,528,100 or 14.1% of the Portfolio’s net assets. As discussed in Note 2 of the Notes to Financial Statements, not all investments are valued at an estimate of fair value that is different from the local close price. In some instances the independent fair valuation service uses the local close price because the confidence interval associated with a holding is below the 75% threshold. | |
(c) | A VVPR Strip is a coupon attached to specific ordinary common shares that offers tax advantages. The coupon entitles a holder to reduced withholding tax rates on the dividends generated from the related common shares. | |
(d) | Represents cost for financial reporting purposes, which may differ from cost basis for Federal income tax purposes. See also Note 8 of the Notes to Financial Statements. |
The accompanying notes are an integral part of these financial statements.
59
Ohio National Fund, Inc.
Aggressive Growth Portfolio
Aggressive Growth Portfolio
Statement of Assets and Liabilities
December 31, 2008
Assets: | ||||
Investments in securities, at fair value (Cost $22,167,963) | $ | 16,564,629 | ||
Repurchase agreements | 1,473,000 | |||
Cash | 933 | |||
Receivable for securities sold | 47,346 | |||
Receivable for fund shares sold | 47,221 | |||
Dividends and accrued interest receivable | 16,687 | |||
Prepaid expenses and other assets | 374 | |||
Total assets | 18,150,190 | |||
Liabilities: | ||||
Payable for securities purchased | 134,588 | |||
Payable for fund shares redeemed | 3,694 | |||
Payable for investment management services | 11,472 | |||
Accrued custody expense | 866 | |||
Accrued professional fees | 10,616 | |||
Accrued accounting fees | 2,512 | |||
Accrued printing and filing fees | 1,424 | |||
Total liabilities | 165,172 | |||
Net assets | $ | 17,985,018 | ||
Net assets consist of: | ||||
Par value, $1 per share | $ | 3,452,831 | ||
Paid-in capital in excess of par value | 34,117,913 | |||
Accumulated net realized loss on investments | (14,068,195 | ) | ||
Net unrealized appreciation/depreciation on: | ||||
Investments | (5,603,334 | ) | ||
Foreign currency related transactions | 1,198 | |||
Undistributed net investment income | 84,605 | |||
Net assets | $ | 17,985,018 | ||
Shares outstanding | 3,452,831 | |||
Authorized Fund shares allocated to Portfolio | 10,000,000 | |||
Net asset value per share | $ | 5.21 | ||
Statement of Operations
For the Year Ended December 31, 2008
Investment income: | ||||
Interest | $ | 40,409 | ||
Dividends (net of withholding tax of $15,312) | 203,475 | |||
Other income | 59 | |||
Total investment income | 243,943 | |||
Expenses: | ||||
Management fees | 206,899 | |||
Custodian fees | 7,540 | |||
Directors’ fees | 2,140 | |||
Professional fees | 12,847 | |||
Accounting fees | 15,783 | |||
Printing and filing fees | 3,394 | |||
Compliance expense | 4,911 | |||
Other | 357 | |||
Total expenses | 253,871 | |||
Net investment loss | (9,928 | ) | ||
Realized/unrealized gain (loss) on investments and foreign currency related transactions: | ||||
Net realized gain (loss) on: | ||||
Investments | (2,278,119 | ) | ||
Foreign currency related transactions | 5,763 | |||
Change in unrealized appreciation/depreciation on investments and foreign currency related transactions | (11,572,466 | ) | ||
Net realized/unrealized gain (loss) on investments and foreign currency related transactions | (13,844,822 | ) | ||
Change in net assets from operations | $ | (13,854,750 | ) | |
The accompanying notes are an integral part of these financial statements.
60
Ohio National Fund, Inc.
Aggressive Growth Portfolio
Aggressive Growth Portfolio
Statements of Changes in Net Assets
Years Ended December 31, | ||||||||
2008 | 2007 | |||||||
Increase (Decrease) in Net Assets: | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | (9,928 | ) | $ | 72,553 | |||
Net realized gain (loss) on investments and foreign currency related transactions | (2,272,356 | ) | 1,493,428 | |||||
Change in unrealized appreciation/depreciation on investments and foreign currency related transactions | (11,572,466 | ) | 3,786,767 | |||||
Change in net assets from operations | (13,854,750 | ) | 5,352,748 | |||||
Capital transactions: | ||||||||
Received from shares sold | 15,640,261 | 11,216,356 | ||||||
Paid for shares redeemed | (12,559,831 | ) | (5,580,550 | ) | ||||
Change in net assets from capital transactions | 3,080,430 | 5,635,806 | ||||||
Change in net assets | (10,774,320 | ) | 10,988,554 | |||||
Net Assets: | ||||||||
Beginning of year | 28,759,338 | 17,770,784 | ||||||
End of year | $ | 17,985,018 | $ | 28,759,338 | ||||
Undistributed net investment income | $ | 84,605 | $ | 72,277 | ||||
Financial Highlights
Years Ended December 31, | ||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
Selected Per-Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 9.25 | $ | 7.14 | $ | 6.75 | $ | 5.96 | $ | 5.47 | ||||||||||
Operations: | ||||||||||||||||||||
Net investment income (loss) | (0.01 | ) | 0.02 | 0.02 | (0.02 | ) | — | |||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency related transactions | (4.03 | ) | 2.09 | 0.37 | 0.81 | 0.49 | ||||||||||||||
Total from operations | (4.04 | ) | 2.11 | 0.39 | 0.79 | 0.49 | ||||||||||||||
Net asset value, end of year | $ | 5.21 | $ | 9.25 | $ | 7.14 | $ | 6.75 | $ | 5.96 | ||||||||||
Total return | –43.68 | % | 29.55 | % | 5.78 | % | 13.28 | % | 8.96 | % | ||||||||||
Ratios and supplemental data: | ||||||||||||||||||||
Net assets at end of year (millions) | $ | 18.0 | $ | 28.8 | $ | 17.8 | $ | 16.6 | $ | 16.1 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Expenses | 0.98 | % | 0.97 | % | 1.06 | % | 1.03 | % | 0.95 | % | ||||||||||
Net investment income (loss) | (0.04 | )% | 0.34 | % | 0.22 | % | (0.35 | )% | 0.03 | % | ||||||||||
Portfolio turnover rate | 43 | % | 29 | % | 105 | % | 139 | % | 87 | % |
The accompanying notes are an integral part of these financial statements.
61
Ohio National Fund, Inc.
Small Cap Growth Portfolio
Small Cap Growth Portfolio
Objective/Strategy
The Small Cap Growth Portfolio seeks long-term capital appreciation by investing in stocks of small companies with strong business franchises and competitive positions that generate rapidly rising earnings or profits.
Performance as of December 31, 2008
Average Annual Total Returns: | ||||
One year | -47.69% | |||
Five years | -2.22% | |||
Ten years | -0.52% |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price and reinvestment of dividends and capital gains. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost.
The Portfolio is not open to direct retail investment. Beneficial interest in shares is obtained solely by purchase of variable life insurance policies and variable annuity contracts. Actual performance results for variable annuity and variable universal life contracts will be lower due to contract charges. Consult your contract for applicable charges.
Comments
For the year ended December 31, 2008, the Small Cap Growth Portfolio returned -47.69% versus -38.54% for the current benchmark, the Russell 2000 Growth Index.
Turmoil from the credit crisis and concerns over a prolonged recession characterized U.S. equity markets during the twelve month period ending December 31, 2008. U.S. stock prices began the period lower, as stresses in the credit markets, negative sentiment and volatility grew. While the aggressive attempts to address the credit crisis by the U.S. Federal Reserve (“Fed”) helped markets gain their footing in March and April, rising energy prices (oil hit a record in July) and more evidence of slowing economic growth weighed on sentiment. In mid-September, the full weight of the credit crisis seized the global markets leading to the demise of several long-standing financial institutions. This gave rise to a crisis of confidence that pervaded the markets and led to a dramatic sell-off in September and early October. In response, the U.S. Treasury and the Fed, along with central banks around the world, took unprecedented steps to support markets and global financial institutions. The S&P 500 Index touched an eleven year low in November before rebounding modestly to end the year. Volatility eased by December, but most domestic indices finished the period over 30% lower. In expectation of significant declines in demand due to the global economic slowdown, commodity prices dropped precipitously from their peaks in the summer, led by oil, to finish the period significantly lower. Financials were the worst performing sector due to the ongoing credit crisis, while the Materials sector was the second worst, reflecting the decline in commodity prices. Consumer Staples and Health Care, meanwhile, outperformed, but posted double digit declines as well. Growth outperformed valued-oriented indices during the period, although both performed similarly during the worst of the market’s decline.
Individual holdings within Information Technology, Financials, and Consumer Discretionary were key drivers of underperformance during the period. Overall selections within Energy and Materials topped the list of contributors. Select names in Health Care also aided relative results.(1)
Our investment in VistaPrint Limited finished the volatile period in negative territory. Late in the period, this internet supplier of graphics and printed products lowered its full-year profit and sales forecasts, which pressured the stock. We believe the company’s differentiated business model of leveraging high volume production to serve customers that place low volume orders should benefit returns over the longer term. Shorter term, we believe a potential savings of 20-40% to the end customer should drive growth as customers look for a lower price alternative.(1)
Ultimate Software Group, Inc. declined during the year as well, suffering largely from weakening employment and economic conditions. Additionally in July, the company reported an earnings miss attributable to longer implementation times for its human resources software contracts. We see the longer implementation times, while negative to earnings in the short run, as a positive since they are likely a result of the company winning contracts from customers with a larger workforce. In our opinion, this provider of payroll software solutions’ recurring revenue model should provide transparency into future results. Furthermore, we think Ultimate Software Group, Inc.’s growth profile remains intact. However we did trim the position late in the period to right size it for the risk/reward profile.(1)
Individual contributors to performance included health care services company LHC Group, Inc. This provider of skilled home-based health care services gained during the period amid strong quarterly earnings reports, which were largely driven by high volumes and accretive acquisitions. Management also raised its full-year forecast late in the period.(1)
Oil and gas exploration and production company PetroHawk Energy Corp. was another contributor during the period. Rising oil and natural gas prices over the first half of the year provided a tailwind for the shares of the company. In addition, PetroHawk Energy Corp. benefited from better-than-expected productivity reports from new wells in the Haynesville natural gas shale area. While we believe the market undervalued the full potential of PetroHawk Energy Corp.’s underlying assets, we exited the position early in the third quarter (prior to the sell off in energy prices) in favor of what we believe were better risk/reward opportunities.(1)
After starting the year on a strong note, Marvel Entertainment, Inc., a distributor of movies and comics, continued its upward momentum over the first half of the year. While the stock suffered from higher volatility in September and October, it held on to most of its gains. The company’s recent success can be attributed to improved distribution agreements and the release of popular movies like “Iron Man.” We think the company continues to execute its strategy well, but recognize there may not be a strong catalyst for further strength in the stock over the near-term. As such, we trimmed our position in the company.(1)
We do not think the U.S. economy is likely to improve over the near term in part because of weak labor markets and the
(continued)
62
Ohio National Fund, Inc.
Small Cap Growth Portfolio (Continued)
Small Cap Growth Portfolio (Continued)
deleveraging that was occurring through the end of the year. However, we think the unprecedented global cooperation by governments and central banks will help to thaw the banking system and increase the availability of credit. Additionally, valuations across many markets reached attractive levels. More specifically, our research found many individual companies with low earnings multiples relative to our estimate of their long-term outlooks. Lastly, we believe there is significant cash sitting on the sidelines in money market funds and bank deposits.
We continue to manage the Portfolio with the same research-driven process and long term discipline throughout the current market environment. We have seen tumultuous markets in the past and believe the best way to manage client assets through them is to identify high quality small cap growth companies with good management teams trading at attractive risk/reward profiles. The unwinding of leverage, credit concerns, and forced selling continue to dominate market sentiment and that has hurt our performance as fundamental quality has likely not been valued in the short term. Longer term, we expect our collection of stocks – both proven and unproven business models – to emerge as winners from this period of market volatility.(1)
(1) | The Portfolio’s composition is subject to change. Holdings and weightings are as of December 31, 2008. |
Change in Value of $10,000 Investment
Hypothetical illustration based on past performance. Future performance will vary. The Portfolio’s returns reflect reinvested dividends. The Portfolio’s holdings may differ significantly from the securities in the index. The index is unmanaged and therefore does not reflect the cost of portfolio management and accounting.
The Russell 2000 Growth Index is a market-weighted total return index that measures the performance of companies within the Russell 2000 Index having higher price to book ratios and higher forecasted growth values. The Russell 2000 Index includes the 2000 firms from the Russell 3000 Index with the smallest market capitalizations. The Russell 3000 Index represents 98% of the investable U.S. equity markets. The index presented herein includes the effects of reinvested dividends.
Portfolio Composition as of December 31, 2008 (1)
% of Net Assets | |||
Common Stocks (3) | 95.5 | ||
Repurchase Agreements and Other Net Assets | 4.5 | ||
100.0 | |||
Top 10 Portfolio Holdings as of December 31, 2008 (1) (2)
% of Net Assets | |||||||
1. | CoStar Group, Inc. | 3.4 | |||||
2. | VistaPrint Limited | 3.3 | |||||
3. | Equinix, Inc. | 3.2 | |||||
4. | Solera Holdings, Inc. | 3.1 | |||||
5. | Ultimate Software Group, Inc. | 2.7 | |||||
6. | LHC Group, Inc. | 2.3 | |||||
7. | Lions Gate Entertainment Corp. | 2.3 | |||||
8. | World Fuel Services Corp. | 2.1 | |||||
9. | PSS World Medical, Inc. | 2.1 | |||||
10. | Marvel Entertainment, Inc. | 2.1 |
(1) | Composition of Portfolio subject to change. | |
(2) | Short-term investments have been excluded from the list of Top 10 Portfolio holdings. | |
(3) | Sectors: |
% of Net Assets | |||
Information Technology | 33.6 | ||
Health Care | 22.0 | ||
Industrials | 16.7 | ||
Consumer Discretionary | 14.7 | ||
Financials | 4.4 | ||
Energy | 2.6 | ||
Telecommunication Services | 1.3 | ||
Consumer Staples | 0.2 | ||
95.5 | |||
63
Ohio National Fund, Inc.
Small Cap Growth Portfolio
Small Cap Growth Portfolio
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 95.5% | Shares | Value | ||||||
CONSUMER DISCRETIONARY – 14.7% | ||||||||
Auto Components – 0.3% | ||||||||
Motorcar Parts of America Inc. (a) | 10,070 | $ | 39,273 | |||||
Diversified Consumer Services – 2.3% | ||||||||
American Public Education, Inc. (a) | 5,685 | 211,425 | ||||||
Corinthian Colleges, Inc. (a) | 4,820 | 78,904 | ||||||
Sotheby’s | 1,035 | 9,201 | ||||||
299,530 | ||||||||
Hotels, Restaurants & Leisure – 2.2% | ||||||||
Great Canadian Gaming Corp. (a) (b) | 14,325 | 41,890 | ||||||
Kingdom Hotel Investments – GDR (a) (b) | 30,180 | 30,307 | ||||||
Morgans Hotel Group Co. (a) | 3,205 | 14,935 | ||||||
Orient-Express Hotels Ltd. Class A | 9,135 | 69,974 | ||||||
PokerTek, Inc. (a) | 7,139 | 9,281 | ||||||
Vail Resorts, Inc. (a) | 4,815 | 128,079 | ||||||
294,466 | ||||||||
Household Durables – 1.5% | ||||||||
Jarden Corp. (a) | 16,810 | 193,315 | ||||||
Leisure Equipment & Products – 1.2% | ||||||||
Smith & Wesson Holding Corp. (a) | 25,330 | 57,499 | ||||||
Sturm, Ruger & Co, Inc. (a) | 17,140 | 102,326 | ||||||
159,825 | ||||||||
Media – 6.1% | ||||||||
Genius Products, Inc. (a) | 104,665 | 1,047 | ||||||
Lamar Advertising Co. Class A (a) | 1,605 | 20,159 | ||||||
Lions Gate Entertainment Corp. (a) | 54,580 | 300,190 | ||||||
Marvel Entertainment, Inc. (a) | 8,995 | 276,596 | ||||||
MDC Partners, Inc. (a) | 8,610 | 26,174 | ||||||
National CineMedia, Inc. | 17,485 | 177,298 | ||||||
801,464 | ||||||||
Specialty Retail – 1.1% | ||||||||
Bebe Stores, Inc. | 19,415 | 145,030 | ||||||
TOTAL CONSUMER DISCRETIONARY | 1,932,903 | |||||||
CONSUMER STAPLES – 0.2% | ||||||||
Beverages – 0.2% | ||||||||
Heckmann Corp. (a) | 4,975 | 28,109 | ||||||
TOTAL CONSUMER STAPLES | 28,109 | |||||||
ENERGY – 2.6% | ||||||||
Oil, Gas & Consumable Fuels – 2.6% | ||||||||
Carrizo Oil & Gas, Inc. (a) | 4,350 | 70,035 | ||||||
World Fuel Services Corp. | 7,555 | 279,535 | ||||||
TOTAL ENERGY | 349,570 | |||||||
FINANCIALS – 4.4% | ||||||||
Capital Markets – 2.4% | ||||||||
FCStone Group, Inc. (a) | 4,125 | 18,274 | ||||||
Hercules Technology Growth Capital, Inc. | 10,571 | 83,722 | ||||||
optionsXpress Holdings, Inc. | 6,185 | 82,631 | ||||||
Riskmetrics Group, Inc. (a) | 8,775 | 130,660 | ||||||
315,287 | ||||||||
Diversified Financial Services – 1.6% | ||||||||
MarketAxess Holdings, Inc. (a) | 20,690 | 168,831 | ||||||
MSCI, Inc. (a) | 2,245 | 39,871 | ||||||
208,702 | ||||||||
Real Estate Management & Development – 0.4% | ||||||||
LPS Brasil Consultoria de Imoveis SA (b) | 19,256 | 54,498 | ||||||
TOTAL FINANCIALS | 578,487 | |||||||
HEALTH CARE – 22.0% | ||||||||
Biotechnology – 3.3% | ||||||||
Acorda Therapeutics, Inc. (a) | 7,440 | 152,595 | ||||||
Genomic Health, Inc. (a) | 10,000 | 194,800 | ||||||
Myriad Genetics, Inc. (a) | 1,255 | 83,156 | ||||||
430,551 | ||||||||
Health Care Equipment & Supplies – 1.7% | ||||||||
CONMED Corp. (a) | 4,270 | 102,224 | ||||||
I-Flow Corp. (a) | 15,780 | 75,744 | ||||||
TomoTherapy, Inc. (a) | 22,950 | 54,621 | ||||||
232,589 | ||||||||
Health Care Providers & Services – 14.8% | ||||||||
athenahealth, Inc. (a) | 3,600 | 135,432 | ||||||
Bio-Reference Labs, Inc. (a) | 3,325 | 87,215 | ||||||
Catalyst Health Solutions, Inc. (a) | 9,420 | 229,377 | ||||||
Genoptix, Inc. (a) | 3,840 | 130,867 | ||||||
Health Grades, Inc. (a) | 27,835 | 57,340 | ||||||
Healthways, Inc. (a) | 7,170 | 82,312 | ||||||
HMS Holdings Corp. (a) | 5,220 | 164,535 | ||||||
Hythiam, Inc. (a) | 41,521 | 16,193 | ||||||
LHC Group, Inc. (a) | 8,445 | 304,020 | ||||||
MWI Veterinary Supply, Inc. (a) | 3,795 | 102,313 | ||||||
Pediatrix Medical Group, Inc. (a) | 3,960 | 125,532 | ||||||
PSS World Medical, Inc. (a) | 14,795 | 278,442 | ||||||
Psychiatric Solutions, Inc. (a) | 4,405 | 122,679 | ||||||
RadNet, Inc. (a) | 11,975 | 40,116 | ||||||
Skilled Healthcare Group, Inc. Class A (a) | 7,880 | 66,507 | ||||||
The Providence Service Corp. (a) | 3,525 | 5,111 | ||||||
1,947,991 | ||||||||
Health Care Technology – 2.2% | ||||||||
MedAssets, Inc. (a) | 4,330 | 63,218 | ||||||
Phase Forward, Inc. (a) | 2,805 | 35,118 | ||||||
SXC Health Solutions Corp. (a) | 10,095 | 187,868 | ||||||
286,204 | ||||||||
TOTAL HEALTH CARE | 2,897,335 | |||||||
INDUSTRIALS – 16.7% | ||||||||
Air Freight & Logistics – 1.1% | ||||||||
Forward Air Corp. | 5,945 | 144,285 | ||||||
Commercial Services & Supplies – 3.7% | ||||||||
Ritchie Bros. Auctioneers, Inc. | 1,255 | 26,882 | ||||||
Standard Parking Corp. (a) | 12,465 | 241,073 | ||||||
The GEO Group, Inc. (a) | 11,895 | 214,467 | ||||||
482,422 | ||||||||
Electrical Equipment – 1.5% | ||||||||
Fushi Copperweld, Inc. (a) | 11,373 | 59,936 | ||||||
Harbin Electric, Inc. (a) | 9,200 | 73,508 |
(continued)
64
Ohio National Fund, Inc.
Small Cap Growth Portfolio (Continued)
Small Cap Growth Portfolio (Continued)
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 95.5% | Shares | Value | ||||||
Electrical Equipment (continued) | ||||||||
JA Solar Holdings Co. Ltd. – ADR (a) | 16,455 | $ | 71,908 | |||||
205,352 | ||||||||
Machinery – 0.6% | ||||||||
Barnes Group, Inc. | 5,215 | 75,618 | ||||||
Marine – 0.8% | ||||||||
Horizon Lines, Inc. | 31,060 | 108,399 | ||||||
Professional Services – 7.8% | ||||||||
CoStar Group, Inc. (a) | 13,471 | 443,735 | ||||||
Huron Consulting Group, Inc. (a) | 4,400 | 251,988 | ||||||
Odyssey Marine Exploration, Inc. (a) | 25,775 | 82,995 | ||||||
Resources Connection, Inc. (a) | 12,360 | 202,457 | ||||||
UTEK Corp. (a) | 5,410 | 48,149 | ||||||
1,029,324 | ||||||||
Road & Rail – 1.2% | ||||||||
Old Dominion Freight Line, Inc. (a) | 5,605 | 159,518 | ||||||
TOTAL INDUSTRIALS | 2,204,918 | |||||||
INFORMATION TECHNOLOGY – 33.6% | ||||||||
Communications Equipment – 2.3% | ||||||||
ARRIS Group, Inc. (a) | 11,710 | 93,095 | ||||||
CommScope, Inc. (a) | 13,550 | 210,567 | ||||||
303,662 | ||||||||
Computers & Peripherals – 0.9% | ||||||||
Data Domain, Inc. (a) | 6,765 | 127,182 | ||||||
Electronic Equipment, Instruments & Components – 2.2% | ||||||||
Amphenol Corp. Class A | 870 | 20,863 | ||||||
DTS, Inc. (a) | 9,350 | 171,572 | ||||||
L-1 Identity Solutions, Inc. (a) | 14,080 | 94,899 | ||||||
287,334 | ||||||||
Internet Software & Services – 15.6% | ||||||||
Bankrate, Inc. (a) | 4,050 | 153,900 | ||||||
Constant Contact, Inc. (a) | 4,445 | 58,896 | ||||||
DealerTrack Holdings, Inc. (a) | 10,605 | 126,093 | ||||||
Equinix, Inc. (a) | 7,925 | 421,531 | ||||||
GSI Commerce, Inc. (a) | 11,925 | 125,451 | ||||||
Kowabunga, Inc. (a) | 44,475 | 2,669 | ||||||
LivePerson, Inc. (a) | 52,900 | 96,278 | ||||||
MercadoLibre, Inc. (a) | 5,250 | 86,153 | ||||||
NaviSite, Inc. (a) | 62,105 | 24,842 | ||||||
NIC, Inc. | 9,785 | 45,011 | ||||||
Omniture, Inc. (a) | 14,575 | 155,078 | ||||||
SAVVIS, Inc. (a) | 8,560 | 58,978 | ||||||
Switch & Data Facilities Co., Inc. (a) | 6,710 | 49,587 | ||||||
TechTarget, Inc. (a) | 6,780 | 29,290 | ||||||
VistaPrint Limited (a) | 23,600 | 439,196 | ||||||
Vocus, Inc. (a) | 10,040 | 182,828 | ||||||
2,055,781 | ||||||||
IT Services – 2.8% | ||||||||
Euronet Worldwide, Inc. (a) | 8,810 | 102,284 | ||||||
Information Services Group, Inc. (a) | 40,135 | 136,459 | ||||||
Yucheng Technologies Ltd. (a) | 17,760 | 129,471 | ||||||
368,214 | ||||||||
Semiconductors & Semiconductor Equipment – 1.4% | ||||||||
Microsemi Corp. (a) | 14,235 | 179,930 | ||||||
Monolithic Power Systems, Inc. (a) | 1,250 | 15,762 | ||||||
195,692 | ||||||||
Software – 8.3% | ||||||||
Concur Technologies, Inc. (a) | 6,910 | 226,786 | ||||||
Monotype Imaging Holdings, Inc. (a) | 16,720 | 96,976 | ||||||
Salary.com, Inc. (a) | 3,550 | 7,704 | ||||||
Solera Holdings, Inc. (a) | 16,960 | 408,736 | ||||||
Ultimate Software Group, Inc. (a) | 24,050 | 351,130 | ||||||
1,091,332 | ||||||||
TOTAL INFORMATION TECHNOLOGY | 4,429,197 | |||||||
TELECOMMUNICATION SERVICES – 1.3% | ||||||||
Diversified Telecommunication Services – 0.3% | ||||||||
UCN, Inc. (a) | 26,215 | 33,555 | ||||||
Wireless Telecommunication Services – 1.0% | ||||||||
SBA Communications Corp. Class A (a) | 8,495 | 138,639 | ||||||
TOTAL TELECOMMUNICATION SERVICES | 172,194 | |||||||
Total Common Stocks (Cost $19,434,661) | $ | 12,592,713 | ||||||
Underlying | Fair | |||||||
Warrants – 0.0% | Shares | Value | ||||||
CONSUMER DISCRETIONARY – 0.0% | ||||||||
Hotels, Restaurants & Leisure – 0.0% | ||||||||
PokerTek, Inc. (Private Placement) (Acquired 04/23/2007, Cost $10,537) (a) (c) (d) | ||||||||
Expiration: April, 2012, Exercise Price: $10.80 | 2,172 | $ | — | |||||
Total Warrants (Cost $10,537) | $ | — | ||||||
Face | Fair | |||||||
Repurchase Agreements – 4.4% | Amount | Value | ||||||
U.S. Bank 0.010% 01/02/2009 | $ | 583,000 | $ | 583,000 | ||||
Repurchase price $583,000 | ||||||||
Collateralized by: | ||||||||
Various Agency Mortgage- Backed Securities 2.395% to 5.000%, Due 09/01/2018 through 05/15/2033 Fair Value: $594,631 | ||||||||
Total Repurchase Agreements (Cost $583,000) | $ | 583,000 | ||||||
Total Investments – 99.9% (Cost $20,028,198) (e) | $ | 13,175,713 | ||||||
Other Assets in Excess of Liabilities – 0.1% | 7,223 | |||||||
Net Assets – 100.0% | $ | 13,182,936 | ||||||
(continued)
65
Ohio National Fund, Inc.
Small Cap Growth Portfolio (Continued)
Small Cap Growth Portfolio (Continued)
Schedule of Investments | December 31, 2008 |
Percentages are stated as a percent of net assets.
Abbreviations:
ADR: American Depository Receipts
GDR: Global Depository Receipts
Footnotes:
(a) | Non-income producing security. | |
(b) | Security traded on a foreign exchange has been subjected to fair value procedures approved by the Fund Board of Directors. These securities represent $126,695 or 1.0% of the Portfolio’s net assets. As discussed in Note 2 of the Notes to Financial Statements, not all investments are valued at an estimate of fair value that is different from the local close price. In some instances the independent fair valuation service uses the local close price because the confidence interval associated with a holding is below the 75% threshold. | |
(c) | A market quotation for this investment was not readily available at December 31, 2008. As discussed in Note 2 of the Notes to Financial Statements, the price for this issue was derived from an estimate of fair market value using methods determined in good faith by the Fund’s Pricing Committee under the supervision of the Board. This security represents $0 or 0.0% of the Portfolio’s net assets. | |
(d) | Represents a security deemed to be illiquid. At December 31, 2008, the value of illiquid securities in the Portfolio totaled $0 or 0.0% of the Portfolio’s net assets. | |
(e) | Represents cost for financial reporting purposes, which may differ from cost basis for Federal income tax purposes. See also Note 8 of the Notes to Financial Statements. |
The accompanying notes are an integral part of these financial statements.
66
Ohio National Fund, Inc.
Small Cap Growth Portfolio
Small Cap Growth Portfolio
Statement of Assets and Liabilities
December 31, 2008
Assets: | ||||
Investments in securities, at fair value (Cost $19,445,198) | $ | 12,592,713 | ||
Repurchase agreements | 583,000 | |||
Cash | 2,322 | |||
Receivable for securities sold | 56,687 | |||
Receivable for fund shares sold | 12,831 | |||
Dividends and accrued interest receivable | 283 | |||
Prepaid expenses and other assets | 330 | |||
Total assets | 13,248,166 | |||
Liabilities: | ||||
Payable for securities purchased | 20,149 | |||
Payable for fund shares redeemed | 19,961 | |||
Payable for investment management services | 10,025 | |||
Accrued custody expense | 1,033 | |||
Accrued professional fees | 10,521 | |||
Accrued accounting fees | 2,468 | |||
Accrued printing and filing fees | 1,073 | |||
Total liabilities | 65,230 | |||
Net assets | $ | 13,182,936 | ||
Net assets consist of: | ||||
Par value, $1 per share | $ | 2,010,913 | ||
Paid-in capital in excess of par value | 31,455,427 | |||
Accumulated net realized loss on investments | (13,430,830 | ) | ||
Net unrealized depreciation on investments | (6,852,485 | ) | ||
Accumulated net investment loss | (89 | ) | ||
Net assets | $ | 13,182,936 | ||
Shares outstanding | 2,010,913 | |||
Authorized Fund shares allocated to Portfolio | 10,000,000 | |||
Net asset value per share | $ | 6.56 | ||
Statement of Operations
For the Year Ended December 31, 2008
Investment income: | ||||
Interest | $ | 5,317 | ||
Dividends (net of withholding tax of $129) | 58,851 | |||
Total investment income | 64,168 | |||
Expenses: | ||||
Management fees | 180,660 | |||
Custodian fees | 6,115 | |||
Directors’ fees | 1,519 | |||
Professional fees | 12,459 | |||
Accounting fees | 15,333 | |||
Printing and filing fees | 2,312 | |||
Compliance expense | 4,911 | |||
Other | 372 | |||
Total expenses | 223,681 | |||
Net investment loss | (159,513 | ) | ||
Realized/unrealized gain (loss) on investments and foreign currency related transactions: | ||||
Net realized gain (loss) on: | ||||
Investments | (2,177,456 | ) | ||
Foreign currency related transactions | (1,198 | ) | ||
Change in unrealized appreciation/depreciation on investments | (10,295,555 | ) | ||
Net realized/unrealized gain (loss) on investments and foreign currency related transactions | (12,474,209 | ) | ||
Change in net assets from operations | $ | (12,633,722 | ) | |
The accompanying notes are an integral part of these financial statements.
67
Ohio National Fund, Inc.
Small Cap Growth Portfolio
Small Cap Growth Portfolio
Statements of Changes in Net Assets
Years Ended December 31, | ||||||||
2008 | 2007 | |||||||
Increase (Decrease) in Net Assets: | ||||||||
Operations: | ||||||||
Net investment loss | $ | (159,513 | ) | $ | (185,718 | ) | ||
Net realized gain (loss) on investments and foreign currency related transactions | (2,178,654 | ) | 3,367,556 | |||||
Change in unrealized appreciation/depreciation on investments and foreign currency related transactions | (10,295,555 | ) | (70,880 | ) | ||||
Change in net assets from operations | (12,633,722 | ) | 3,110,958 | |||||
Capital transactions: | ||||||||
Received from shares sold | 6,841,384 | 9,339,953 | ||||||
Paid for shares redeemed | (8,002,206 | ) | (6,224,621 | ) | ||||
Change in net assets from capital transactions | (1,160,822 | ) | 3,115,332 | |||||
Change in net assets | (13,794,544 | ) | 6,226,290 | |||||
Net Assets: | ||||||||
Beginning of year | 26,977,480 | 20,751,190 | ||||||
End of year | $ | 13,182,936 | $ | 26,977,480 | ||||
Accumulated net investment loss | $ | (89 | ) | $ | (1,636 | ) | ||
Financial Highlights
Years Ended December 31, | ||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
Selected Per-Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 12.54 | $ | 10.94 | $ | 8.71 | $ | 8.18 | $ | 7.34 | ||||||||||
Operations: | ||||||||||||||||||||
Net investment loss | (0.08 | ) | (0.09 | ) | (0.09 | ) | (0.07 | ) | (0.05 | ) | ||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency related transactions | (5.90 | ) | 1.69 | 2.32 | 0.60 | 0.89 | ||||||||||||||
Total from operations | (5.98 | ) | 1.60 | 2.23 | 0.53 | 0.84 | ||||||||||||||
Net asset value, end of year | $ | 6.56 | $ | 12.54 | $ | 10.94 | $ | 8.71 | $ | 8.18 | ||||||||||
Total return | –47.69 | % | 14.63 | % | 25.60 | % | 6.48 | % | 11.44 | % | ||||||||||
Ratios and supplemental data: | ||||||||||||||||||||
Net assets at end of year (millions) | $ | 13.2 | $ | 27.0 | $ | 20.8 | $ | 17.1 | $ | 18.2 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Expenses | 1.18 | % | 1.15 | % | 1.16 | % | 1.11 | % | 1.11 | % | ||||||||||
Net investment loss | (0.84 | )% | (0.77 | )% | (0.92 | )% | (0.77 | )% | (0.69 | )% | ||||||||||
Portfolio turnover rate | 37 | % | 74 | % | 93 | % | 93 | % | 38 | % |
The accompanying notes are an integral part of these financial statements.
68
Ohio National Fund, Inc.
Mid Cap Opportunity Portfolio
Mid Cap Opportunity Portfolio
Objective/Strategy
The Mid Cap Opportunity Portfolio seeks 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.
Performance as of December 31, 2008
Average Annual Total Returns: | ||||
One year | -51.29% | |||
Five years | -4.70% | |||
Ten years | 1.03% |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price and reinvestment of dividends and capital gains. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost.
The Portfolio is not open to direct retail investment. Beneficial interest in shares is obtained solely by purchase of variable life insurance policies and variable annuity contracts. Actual performance results for variable annuity and variable universal life contracts will be lower due to contract charges. Consult your contract for applicable charges.
Comments
For the year ended December 31, 2008, the Mid Cap Opportunity Portfolio returned -51.29% versus -44.32% for the current benchmark, the Russell Midcap Growth Index.
The past year offered few safe havens for investors worried over a global economic slowdown. Despite an aggressive response by the Federal Reserve, which cut the federal funds rate to effectively zero by year end, credit conditions remained tight even as asset prices continued to fall. Meanwhile, the outlook for weaker economic growth continued to cast a shadow over commodities markets, as raw materials prices and shares corrected sharply after strong performance in the first half of 2008.
While we are disappointed with our results, we recognize that this has been an extraordinary period, as the rapidity and severity of the market response to the broadening credit crisis caught many investors by surprise. Growth shares, in particular, have fallen out of favor in this environment, given worried investors’ flight to more defensive, stable growing names. Nonetheless, we have not changed our style or philosophy to chase market performance. Our focus remains on identifying companies that we believe can grow revenues, earnings and cash flow, even in a sluggish economic environment.
Industrials was among the Portfolio’s worst-performing relative sectors over the year, due in part to our investment in EnergySolutions, a provider of technology-based decommissioning and disposal services to the nuclear industry. As the only nuclear waste disposal facility in the United States, we believe the company has a real competitive advantage. Nonetheless, given the uncertain near-term outlook for the economy and energy-related shares, and the sharp recent drop in its share price, we liquidated our position in the stock.(1)
In the Health Care sector, our performance was hindered by our investment in Covance, Inc., a leading drug development services company. In the second half of 2008, Covance, Inc. experienced a slowdown in its early stage drug development business as large pharmaceutical companies re-prioritized drug development spending and smaller biotech firms were unable to fund several projects. While we trimmed shares of the company late in the year, we remain constructive on the potential for a rebound in drug development demand later in 2009 as large pharmaceutical firms seek to rebuild their drug pipelines as several established branded drug franchises transition to generic status.(1)
Other major detractors for the year included digital wireless telecommunications provider NII Holdings, Inc. and raw materials transport company Genco Shipping & Trading Ltd., which has suffered from a weak environment for commodities-related investments.(1)
In the Information Technology area, we continued to own a balanced mix of high quality semiconductor and software companies, including two of our better contributors in the fourth quarter, security software company McAfee, Inc. and semiconductor manufacturer Broadcom Corp., a diversified communications chip company with exposure to wireless LAN, Bluetooth, Gigabit Ethernet, video, and cell phones. While Information Technology shares have recently been pressured by cutbacks in business and consumer information technology spending, we remain over-weighted in the sector given its prospects for outperformance once the economy begins to recover.(1)
The Consumer Discretionary area was another weak relative performer for the Portfolio, though we did have a few bright spots despite the toll a weakening labor market and falling home prices continued to take on discretionary consumer spending. These positive performers included online movie distributor Netflix, Inc. and post-secondary education provider DeVry, Inc. DeVry, Inc. is benefiting from the growing interest in retraining and education spurred by the weakening employment market. DeVry, Inc. reported new student enrollment growth of around 20% in the fourth quarter, which bodes well for its earnings visibility and enrollment growth going forward. While we believe dislocations in the market are creating buying opportunities in the Consumer Discretionary sector, we remain selective given the growing headwinds facing consumers and have focused on financially healthy companies that offer unique products or services.(1)
Now that the credit malaise has shifted from Wall Street to Main Street, we expect that many areas of the global economy will experience slowing growth in the near-term as consumers and businesses alike conserve cash and wait for more clarity on prospects for 2009. While we expect to see forward earnings estimates dramatically reduced to reflect slowing consumer and business capital spending, we believe that many stocks are already discounting these dramatic revisions. Indeed, we believe that some interesting opportunities may emerge due to the violent compression in valuations.
In this environment, we remain more committed than ever to our investment discipline, using bottom-up stock selection to identify companies with durable business models that can not only insulate themselves from economic weakness but potentially continue growing despite the contraction. As fellow investors
(continued)
69
Ohio National Fund, Inc.
Mid Cap Opportunity Portfolio (Continued)
Mid Cap Opportunity Portfolio (Continued)
in the strategy, we remain committed to our investment goal of delivering long-term growth of capital.
(1) | The Portfolio’s composition is subject to change. Holdings and weightings are as of December 31, 2008. |
Change in Value of $10,000 Investment
Hypothetical illustration based on past performance. Future performance will vary. The Portfolio’s returns reflect reinvested dividends. The Portfolio’s holdings may differ significantly from the securities in the index. The index is unmanaged and therefore does not reflect the cost of portfolio management and accounting.
The Russell Midcap Growth Index is a subset of the Russell Midcap Index, which measures the performance of the 800 smallest companies in the Russell 1000 Index. The Russell Midcap Growth Index measures the performance of those stocks of the Russell Midcap Index with higher price-to-book ratios and higher relative forecasted growth rates. The index presented herein includes the effects of reinvested dividends.
Portfolio Composition as of December 31, 2008 (1)
% of Net Assets | |||
Common Stocks (3) | 88.5 | ||
Repurchase Agreements and | |||
Other Net Assets | 11.5 | ||
100.0 | |||
Top 10 Portfolio Holdings as of December 31, 2008 (1) (2)
% of Net Assets | |||||||
1. | Quest Diagnostics, Inc. | 3.5 | |||||
2. | McAfee, Inc. | 3.5 | |||||
3. | ResMed, Inc. | 2.9 | |||||
4. | priceline.com, Inc. | 2.7 | |||||
5. | Flir Systems, Inc. | 2.7 | |||||
6. | IntercontinentalExchange Inc. | 2.7 | |||||
7. | Harris Corp. | 2.6 | |||||
8. | Comstock Resources, Inc. | 2.4 | |||||
9. | Precision Castparts Corp. | 2.2 | |||||
10. | Akamai Technologies, Inc. | 2.2 |
(1) | Composition of Portfolio subject to change. | |
(2) | Short-term investments have been excluded from the list of Top 10 Portfolio holdings. | |
(3) | Sectors: |
% of Net Assets | |||
Information Technology | 27.6 | ||
Health Care | 21.1 | ||
Consumer Discretionary | 12.3 | ||
Energy | 8.7 | ||
Industrials | 7.6 | ||
Financials | 7.2 | ||
Materials | 2.4 | ||
Telecommunication Services | 1.6 | ||
88.5 | |||
70
Ohio National Fund, Inc.
Mid Cap Opportunity Portfolio
Mid Cap Opportunity Portfolio
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 88.5% | Shares | Value | ||||||
CONSUMER DISCRETIONARY – 12.3% | ||||||||
Diversified Consumer Services – 2.3% | ||||||||
DeVry, Inc. | 19,340 | $ | 1,110,309 | |||||
Strayer Education, Inc. | 3,400 | 728,994 | ||||||
1,839,303 | ||||||||
Internet & Catalog Retail – 4.1% | ||||||||
NetFlix, Inc. (a) | 36,770 | 1,099,055 | ||||||
priceline.com, Inc. (a) | 29,610 | 2,180,777 | ||||||
3,279,832 | ||||||||
Specialty Retail – 4.2% | ||||||||
Aeropostale, Inc. (a) | 43,186 | 695,295 | ||||||
Ross Stores, Inc. | 45,450 | 1,351,228 | ||||||
Urban Outfitters, Inc. (a) | 82,720 | 1,239,146 | ||||||
3,285,669 | ||||||||
Textiles, Apparel & Luxury Goods – 1.7% | ||||||||
Fossil, Inc. (a) | 82,140 | 1,371,738 | ||||||
TOTAL CONSUMER DISCRETIONARY | 9,776,542 | |||||||
ENERGY – 8.7% | ||||||||
Energy Equipment & Services – 4.1% | ||||||||
Core Laboratories N.V. | 19,120 | 1,144,523 | ||||||
FMC Technologies, Inc. (a) | 48,430 | 1,154,087 | ||||||
Smith International, Inc. | 42,250 | 967,103 | ||||||
3,265,713 | ||||||||
Oil, Gas & Consumable Fuels – 4.6% | ||||||||
Comstock Resources, Inc. (a) | 40,250 | 1,901,812 | ||||||
Range Resources Corp. | 27,080 | 931,281 | ||||||
Southwestern Energy Co. (a) | 29,210 | 846,214 | ||||||
3,679,307 | ||||||||
TOTAL ENERGY | 6,945,020 | |||||||
FINANCIALS – 7.2% | ||||||||
Capital Markets – 2.6% | ||||||||
Lazard Ltd. Class A | 37,350 | 1,110,789 | ||||||
Northern Trust Corp. | 19,020 | 991,703 | ||||||
2,102,492 | ||||||||
Diversified Financial Services – 4.6% | ||||||||
IntercontinentalExchange Inc. (a) | 25,610 | 2,111,289 | ||||||
Nasdaq OMX Group, Inc. (a) | 62,530 | 1,545,116 | ||||||
3,656,405 | ||||||||
TOTAL FINANCIALS | 5,758,897 | |||||||
HEALTH CARE – 21.1% | ||||||||
Biotechnology – 7.1% | ||||||||
Biogen Idec, Inc. (a) | 28,560 | 1,360,313 | ||||||
Celgene Corp. (a) | 24,880 | 1,375,366 | ||||||
OSI Pharmaceuticals, Inc. (a) | 39,550 | 1,544,427 | ||||||
United Therapeutics Corp. (a) | 21,850 | 1,366,718 | ||||||
5,646,824 | ||||||||
Health Care Equipment & Supplies – 5.4% | ||||||||
ResMed, Inc. (a) | 60,790 | 2,278,409 | ||||||
St. Jude Medical, Inc. (a) | 51,080 | 1,683,597 | ||||||
Thoratec Corp. (a) | 11,610 | 377,209 | ||||||
4,339,215 | ||||||||
Health Care Providers & Services – 3.5% | ||||||||
Quest Diagnostics, Inc. | 53,910 | 2,798,468 | ||||||
Life Sciences Tools & Services – 3.1% | ||||||||
Covance, Inc. (a) | 28,090 | 1,292,983 | ||||||
Illumina, Inc. (a) | 43,930 | 1,144,376 | ||||||
2,437,359 | ||||||||
Pharmaceuticals – 2.0% | ||||||||
Allergan, Inc. | 38,620 | 1,557,159 | ||||||
TOTAL HEALTH CARE | 16,779,025 | |||||||
INDUSTRIALS – 7.6% | ||||||||
Aerospace & Defense – 2.2% | ||||||||
Precision Castparts Corp. | 29,850 | 1,775,478 | ||||||
Air Freight & Logistics – 1.4% | ||||||||
C.H. Robinson Worldwide, Inc. | 20,990 | 1,155,080 | ||||||
Machinery – 1.9% | ||||||||
Flowserve Corp. | 28,820 | 1,484,230 | ||||||
Professional Services – 2.1% | ||||||||
FTI Consulting, Inc. (a) | 37,180 | 1,661,202 | ||||||
TOTAL INDUSTRIALS | 6,075,990 | |||||||
INFORMATION TECHNOLOGY – 27.6% | ||||||||
Communications Equipment – 3.5% | ||||||||
Harris Corp. | 53,470 | 2,034,533 | ||||||
Juniper Networks, Inc. (a) | 43,460 | 760,985 | ||||||
2,795,518 | ||||||||
Electronic Equipment, Instruments & Components – 2.6% | ||||||||
Flir Systems, Inc. (a) | 68,840 | 2,112,011 | ||||||
Internet Software & Services – 2.2% | ||||||||
Akamai Technologies, Inc. (a) | 117,180 | 1,768,246 | ||||||
IT Services – 6.1% | ||||||||
Alliance Data Systems Corp. (a) | 17,660 | 821,720 | ||||||
Gartner, Inc. (a) | 77,060 | 1,373,980 | ||||||
Genpact Limited (a) | 189,220 | 1,555,388 | ||||||
Global Payments, Inc. | 32,600 | 1,068,954 | ||||||
4,820,042 | ||||||||
Semiconductors & Semiconductor Equipment – 2.6% | ||||||||
Broadcom Corp. Class A (a) | 83,480 | 1,416,655 | ||||||
Marvell Technology Group Ltd. (a) | 101,140 | 674,604 | ||||||
2,091,259 | ||||||||
Software – 10.6% | ||||||||
Activision Blizzard, Inc. (a) | 159,450 | 1,377,648 | ||||||
Adobe Systems, Inc. (a) | 68,000 | 1,447,720 | ||||||
Ansys, Inc. (a) | 52,810 | 1,472,871 | ||||||
FactSet Research Systems, Inc. | 29,810 | 1,318,795 | ||||||
McAfee, Inc. (a) | 80,560 | 2,784,959 | ||||||
8,401,993 | ||||||||
TOTAL INFORMATION TECHNOLOGY | 21,989,069 | |||||||
(continued)
71
Ohio National Fund, Inc.
Mid Cap Opportunity Portfolio (Continued)
Mid Cap Opportunity Portfolio (Continued)
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 88.5% | Shares | Value | ||||||
MATERIALS – 2.4% | ||||||||
Chemicals – 1.0% | ||||||||
FMC Corp. | 16,920 | $ | 756,832 | |||||
Metals & Mining – 1.4% | ||||||||
Compass Minerals International, Inc. | 19,650 | 1,152,669 | ||||||
TOTAL MATERIALS | 1,909,501 | |||||||
TELECOMMUNICATION SERVICES – 1.6% | ||||||||
Wireless Telecommunication Services – 1.6% | ||||||||
NII Holdings, Inc. (a) | 67,880 | 1,234,058 | ||||||
TOTAL TELECOMMUNICATION SERVICES | 1,234,058 | |||||||
Total Common Stocks (Cost $81,563,903) | $ | 70,468,102 | ||||||
Face | Fair | |||||||
Repurchase Agreements – 5.9% | Amount | Value | ||||||
U.S. Bank 0.010% 01/02/2009 | $ | 4,665,000 | $ | 4,665,000 | ||||
Repurchase price $4,665,003 | ||||||||
Collateralized by: | ||||||||
Various Agency Mortgage- Backed Securities 2.395% to 5.000%, Due 09/01/2018 through 05/15/2033 Fair Value: $4,758,071 | ||||||||
Total Repurchase Agreements (Cost $4,665,000) | $ | 4,665,000 | ||||||
Total Investments – 94.4% (Cost $86,228,903) (b) | $ | 75,133,102 | ||||||
Other Assets in Excess of Liabilities – 5.6% | 4,475,228 | |||||||
Net Assets – 100.0% | $ | 79,608,330 | ||||||
Percentages are stated as a percent of net assets.
Footnotes:
(a) | Non-income producing security. | |
(b) | Represents cost for financial reporting purposes, which may differ from cost basis for Federal income tax purposes. See also Note 8 of the Notes to Financial Statements. |
The accompanying notes are an integral part of these financial statements.
72
Ohio National Fund, Inc.
Mid Cap Opportunity Portfolio
Mid Cap Opportunity Portfolio
Statement of Assets and Liabilities
December 31, 2008
Assets: | ||||||||
Investments in securities, at fair value (Cost $81,563,903) | $ | 70,468,102 | ||||||
Repurchase agreements | 4,665,000 | |||||||
Cash | 463 | |||||||
Receivable for fund shares sold | 4,573,017 | |||||||
Dividends and accrued interest receivable | 24,740 | |||||||
Prepaid expenses and other assets | 1,538 | |||||||
Total assets | 79,732,860 | |||||||
Liabilities: | ||||||||
Payable for fund shares redeemed | 49,129 | |||||||
Payable for investment management services | 50,518 | |||||||
Accrued custody expense | 1,889 | |||||||
Accrued professional fees | 11,786 | |||||||
Accrued accounting fees | 5,583 | |||||||
Accrued printing and filing fees | 5,625 | |||||||
Total liabilities | 124,530 | |||||||
Net assets | $ | 79,608,330 | ||||||
Net assets consist of: | ||||||||
Par value, $1 per share | $ | 7,266,536 | ||||||
Paid-in capital in excess of par value | 131,343,301 | |||||||
Accumulated net realized loss on investments | (47,905,706 | ) | ||||||
Net unrealized depreciation on investments | (11,095,801 | ) | ||||||
Net assets | $ | 79,608,330 | ||||||
Shares outstanding | 7,266,536 | |||||||
Authorized Fund shares allocated to Portfolio | 15,000,000 | |||||||
Net asset value per share | $ | 10.96 | ||||||
Statement of Operations
For the Year Ended December 31, 2008
Investment income: | ||||||||
Interest | $ | 95,093 | ||||||
Dividends (net of withholding tax of $291) | 316,639 | |||||||
Total investment income | 411,732 | |||||||
Expenses: | ||||||||
Management fees | 836,602 | |||||||
Custodian fees | 12,900 | |||||||
Directors’ fees | 8,247 | |||||||
Professional fees | 17,462 | |||||||
Accounting fees | 38,070 | |||||||
Printing and filing fees | 12,271 | |||||||
Compliance expense | 4,911 | |||||||
Other | 1,606 | |||||||
Total expenses | 932,069 | |||||||
Net investment loss | (520,337 | ) | ||||||
Realized/unrealized gain (loss) on investments: | ||||||||
Net realized gain (loss) on investments | (47,248,842 | ) | ||||||
Change in unrealized appreciation/depreciation on investments | (21,088,898 | ) | ||||||
Net realized/unrealized gain (loss) on investments | (68,337,740 | ) | ||||||
Change in net assets from operations | $ | (68,858,077 | ) | |||||
The accompanying notes are an integral part of these financial statements.
73
Ohio National Fund, Inc.
Mid Cap Opportunity Portfolio
Mid Cap Opportunity Portfolio
Statements of Changes in Net Assets
Years Ended December 31, | ||||||||
2008 | 2007 | |||||||
Increase (Decrease) in Net Assets: | ||||||||
Operations: | ||||||||
Net investment loss | $ | (520,337 | ) | $ | (441,172 | ) | ||
Net realized gain (loss) on investments | (47,248,842 | ) | 13,393,811 | |||||
Change in unrealized appreciation/depreciation on investments | (21,088,898 | ) | 2,033,871 | |||||
Change in net assets from operations | (68,858,077 | ) | 14,986,510 | |||||
Capital transactions: | ||||||||
Received from shares sold | 66,864,431 | 35,444,938 | ||||||
Paid for shares redeemed | (33,801,822 | ) | (21,640,740 | ) | ||||
Change in net assets from capital transactions | 33,062,609 | 13,804,198 | ||||||
Change in net assets | (35,795,468 | ) | 28,790,708 | |||||
Net Assets: | ||||||||
Beginning of year | 115,403,798 | 86,613,090 | ||||||
End of year | $ | 79,608,330 | $ | 115,403,798 | ||||
Financial Highlights
Years Ended December 31, | ||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
Selected Per-Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 22.50 | $ | 19.09 | $ | 17.40 | $ | 15.83 | $ | 13.94 | ||||||||||
Operations: | ||||||||||||||||||||
Net investment loss | (0.07 | ) | (0.09 | ) | (0.09 | ) | (0.07 | ) | (0.05 | ) | ||||||||||
Net realized and unrealized gain (loss) on investments | (11.47 | ) | 3.50 | 1.78 | 1.64 | 1.94 | ||||||||||||||
Total from operations | (11.54 | ) | 3.41 | 1.69 | 1.57 | 1.89 | ||||||||||||||
Net asset value, end of year | $ | 10.96 | $ | 22.50 | $ | 19.09 | $ | 17.40 | $ | 15.83 | ||||||||||
Total return | –51.29 | % | 17.86 | % | 9.71 | % | 9.92 | % | 13.56 | % | ||||||||||
Ratios and supplemental data: | ||||||||||||||||||||
Net assets at end of year (millions) | $ | 79.6 | $ | 115.4 | $ | 86.6 | $ | 90.0 | $ | 96.6 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Expenses | 0.94 | % | 0.93 | % | 0.94 | % | 0.95 | % | 0.96 | % | ||||||||||
Net investment loss | (0.53 | )% | (0.45 | )% | (0.45 | )% | (0.40 | )% | (0.36 | )% | ||||||||||
Portfolio turnover rate | 297 | % | 267 | % | 209 | % | 205 | % | 206 | % |
The accompanying notes are an integral part of these financial statements.
74
Ohio National Fund, Inc.
S&P 500 Index Portfolio
S&P 500 Index Portfolio
Objective/Strategy
The S&P 500 Index Portfolio seeks total return that approximates the total return of the Standard & Poor’s 500 Index.
Performance as of December 31, 2008
Average Annual Total Returns: | ||||
One year | -37.30% | |||
Five years | -2.63% | |||
Ten years | -1.59% |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price and reinvestment of dividends and capital gains. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost.
The Portfolio is not open to direct retail investment. Beneficial interest in shares is obtained solely by purchase of variable life insurance policies and variable annuity contracts. Actual performance results for variable annuity and variable universal life contracts will be lower due to contract charges. Consult your contract for applicable charges.
Comments
For the year ended December 31, 2008, the S&P 500 Index Portfolio returned -37.30% versus -37.00% for the current benchmark, the S&P 500 Index.
The Portfolio’s correlation with the S&P 500 Index was 99.9%. The high correlation is due to the fact that the Portfolio invests in each of the 500 stocks in the benchmark index. The Portfolio also invests in S&P 500 Depository Receipts, an exchange traded fund that mimics the return of the S&P 500 Index.
The top five holdings in the Portfolio were Exxon Mobil Corp., The Procter & Gamble Co., General Electric Co., AT&T, Inc. and Johnson & Johnson. The largest contributors to the index return for 2008 were Wal-Mart Stores, Inc., Amgen, Inc., Anheuser-Busch Companies, Inc., Wm. Wrigley Jr. Co., and Gilead Sciences, Inc. The largest detractors for the index in 2008 were General Electric Co., American International Group, Inc., Microsoft Corp., Bank of America Corp. and Citigroup, Inc.(1)
The world economy is in the midst of a global recession. Bank failures, high unemployment, and poor corporate results will put downward pressure on U.S. equity indices for at least the first six months of the year. Equities could rally the second part of the year as the new administration’s fiscal stimulus package starts to take effect.
(1) | The Portfolio’s composition is subject to change. Holdings and weightings are as of December 31, 2008. |
Change in Value of $10,000 Investment
Hypothetical illustration based on past performance. Future performance will vary. The Portfolio’s returns reflect reinvested dividends. The Portfolio’s holdings may differ significantly from the securities in the index. The index is unmanaged and therefore does not reflect the cost of portfolio management and accounting. Investors cannot invest directly in an index, although they can invest in its underlying securities or funds.
The S&P 500 Index is a capitalization-weighted index designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The index presented herein includes the effects of reinvested dividends.
(continued)
75
Ohio National Fund, Inc.
S&P 500 Index Portfolio (Continued)
S&P 500 Index Portfolio (Continued)
Portfolio Composition as of December 31, 2008 (1)
% of Net Assets | |||
Common Stocks (3) | 96.7 | ||
Exchange Traded Funds | 2.5 | ||
Repurchase Agreements | |||
Less Net Liabilities | 0.8 | ||
100.0 | |||
Top 10 Portfolio Holdings as of December 31, 2008 (1) (2)
% of Net Assets | |||||||
1. | Exxon Mobil Corp. | 5.0 | |||||
2. | Standard & Poor’s Depository Receipts | 2.5 | |||||
3. | The Procter & Gamble Co. | 2.3 | |||||
4. | General Electric Co. | 2.1 | |||||
5. | AT&T, Inc. | 2.1 | |||||
6. | Johnson & Johnson | 2.0 | |||||
7. | Chevron Corp. | 1.8 | |||||
8. | Microsoft Corp. | 1.8 | |||||
9. | Wal-Mart Stores, Inc. | 1.5 | |||||
10. | Pfizer, Inc. | 1.5 |
(1) | Composition of Portfolio subject to change. | |
(2) | Short-term investments have been excluded from the list of Top 10 Portfolio holdings. | |
(3) | Sectors: |
% of Net Assets | |||
Information Technology | 14.8 | ||
Health Care | 14.3 | ||
Energy | 12.9 | ||
Financials | 12.8 | ||
Consumer Staples | 12.4 | ||
Industrials | 10.7 | ||
Consumer Discretionary | 8.1 | ||
Utilities | 4.1 | ||
Telecommunication Services | 3.7 | ||
Materials | 2.9 | ||
96.7 | |||
76
Ohio National Fund, Inc.
S&P 500 Index Portfolio
S&P 500 Index Portfolio
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 96.7% | Shares | Value | ||||||
CONSUMER DISCRETIONARY – 8.1% | ||||||||
Auto Components – 0.2% | ||||||||
Johnson Controls, Inc. | 7,800 | $ | 141,648 | |||||
The Goodyear Tire & Rubber Co. (a) | 3,200 | 19,104 | ||||||
160,752 | ||||||||
Automobiles – 0.1% | ||||||||
Ford Motor Co. (a) | 31,187 | 71,418 | ||||||
General Motors Corp. | 8,000 | 25,600 | ||||||
Harley-Davidson, Inc. | 3,000 | 50,910 | ||||||
147,928 | ||||||||
Distributors – 0.1% | ||||||||
Genuine Parts Co. | 2,100 | 79,506 | ||||||
Diversified Consumer Services – 0.2% | ||||||||
Apollo Group, Inc. Class A (a) | 1,400 | 107,268 | ||||||
H&R Block, Inc. | 4,400 | 99,968 | ||||||
207,236 | ||||||||
Hotels, Restaurants & Leisure – 1.5% | ||||||||
Carnival Corp. | 5,700 | 138,624 | ||||||
Darden Restaurants, Inc. | 1,800 | 50,724 | ||||||
International Game Technology | 3,900 | 46,371 | ||||||
Marriott International, Inc. Class A | 3,800 | 73,910 | ||||||
McDonald’s Corp. | 14,600 | 907,974 | ||||||
Starbucks Corp. (a) | 9,600 | 90,816 | ||||||
Starwood Hotels & Resorts Worldwide, Inc. | 2,400 | 42,960 | ||||||
Wyndham Worldwide Corp. | 2,360 | 15,458 | ||||||
Wynn Resorts Ltd. (a) | 800 | 33,808 | ||||||
Yum! Brands, Inc. | 6,000 | 189,000 | ||||||
1,589,645 | ||||||||
Household Durables – 0.4% | ||||||||
Centex Corp. | 1,600 | 17,024 | ||||||
D.R. Horton, Inc. | 3,600 | 25,452 | ||||||
Fortune Brands, Inc. | 2,000 | 82,560 | ||||||
Harman International Industries, Inc. | 800 | 13,384 | ||||||
KB Home | 1,000 | 13,620 | ||||||
Leggett & Platt, Inc. | 2,000 | 30,380 | ||||||
Lennar Corp. Class A | 1,800 | 15,606 | ||||||
Newell Rubbermaid, Inc. | 3,600 | 35,208 | ||||||
Pulte Homes, Inc. | 2,800 | 30,604 | ||||||
Snap-On, Inc. | 800 | 31,504 | ||||||
The Black & Decker Corp. | 800 | 33,448 | ||||||
The Stanley Works | 1,000 | 34,100 | ||||||
Whirlpool Corp. | 955 | 39,489 | ||||||
402,379 | ||||||||
Internet & Catalog Retail – 0.2% | ||||||||
Amazon.com, Inc. (a) | 4,200 | 215,376 | ||||||
Expedia, Inc. (a) | 2,700 | 22,248 | ||||||
237,624 | ||||||||
Leisure Equipment & Products – 0.1% | ||||||||
Eastman Kodak Co. | 3,500 | 23,030 | ||||||
Hasbro, Inc. | 1,600 | 46,672 | ||||||
Mattel, Inc. | 4,700 | 75,200 | ||||||
144,902 | ||||||||
Media – 2.5% | ||||||||
CBS Corp. Class B | 8,850 | 72,482 | ||||||
Comcast Corp. Class A | 37,653 | 635,583 | ||||||
Gannett Co., Inc. | 3,000 | 24,000 | ||||||
Interpublic Group of Companies, Inc. (a) | 6,223 | 24,643 | ||||||
Meredith Corp. | 500 | 8,560 | ||||||
News Corp. Class A | 30,100 | 273,609 | ||||||
Omnicom Group, Inc. | 4,100 | 110,372 | ||||||
Scripps Networks Interact, Inc. | 1,200 | 26,400 | ||||||
The DIRECTV Group, Inc. (a) | 7,100 | 162,661 | ||||||
The McGraw-Hill Companies, Inc. | 4,100 | 95,079 | ||||||
The New York Times Co. Class A | 1,500 | 10,995 | ||||||
The Walt Disney Co. | 24,200 | 549,098 | ||||||
The Washington Post Co. Class B | 50 | 19,512 | ||||||
Time Warner, Inc. | 46,900 | 471,814 | ||||||
Viacom, Inc. Class B (a) | 8,050 | 153,433 | ||||||
2,638,241 | ||||||||
Multiline Retail – 0.7% | ||||||||
Big Lots, Inc. (a) | 1,100 | 15,939 | ||||||
Family Dollar Stores, Inc. | 1,800 | 46,926 | ||||||
J.C. Penney Co., Inc. | 2,900 | 57,130 | ||||||
Kohl’s Corp. (a) | 4,000 | 144,800 | ||||||
Macy’s, Inc. | 5,476 | 56,676 | ||||||
Nordstrom, Inc. | 2,100 | 27,951 | ||||||
Sears Holdings Corp. (a) | 701 | 27,248 | ||||||
Target Corp. | 9,800 | 338,394 | ||||||
715,064 | ||||||||
Specialty Retail – 1.7% | ||||||||
Abercrombie & Fitch Co. Class A | 1,100 | 25,377 | ||||||
AutoNation, Inc. (a) | 1,400 | 13,832 | ||||||
AutoZone, Inc. (a) | 500 | 69,735 | ||||||
Bed Bath & Beyond, Inc. (a) | 3,400 | 86,428 | ||||||
Best Buy Co., Inc. | 4,375 | 122,981 | ||||||
GameStop Corp. Class A (a) | 2,100 | 45,486 | ||||||
Limited Brands, Inc. | 3,500 | 35,140 | ||||||
Lowe’s Companies, Inc. | 19,200 | 413,184 | ||||||
Office Depot, Inc. (a) | 3,600 | 10,728 | ||||||
RadioShack Corp. | 1,600 | 19,104 | ||||||
Staples, Inc. | 9,300 | 166,656 | ||||||
The Gap, Inc. | 6,050 | 81,010 | ||||||
The Home Depot, Inc. | 22,200 | 511,044 | ||||||
The Sherwin-Williams Co. | 1,300 | 77,675 | ||||||
The TJX Cos., Inc. | 5,400 | 111,078 | ||||||
Tiffany & Co. | 1,600 | 37,808 | ||||||
1,827,266 | ||||||||
Textiles, Apparel & Luxury Goods – 0.4% | ||||||||
Coach, Inc. (a) | 4,300 | 89,311 | ||||||
Jones Apparel Group, Inc. | 1,100 | 6,446 | ||||||
NIKE, Inc. Class B | 5,100 | 260,100 | ||||||
Polo Ralph Lauren Corp. | 700 | 31,787 |
(continued)
77
Ohio National Fund, Inc.
S&P 500 Index Portfolio (Continued)
S&P 500 Index Portfolio (Continued)
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 96.7% | Shares | Value | ||||||
Textiles, Apparel & Luxury Goods (continued) | ||||||||
V.F. Corp. | 1,200 | $ | 65,724 | |||||
453,368 | ||||||||
TOTAL CONSUMER DISCRETIONARY | 8,603,911 | |||||||
CONSUMER STAPLES – 12.4% | ||||||||
Beverages – 2.5% | ||||||||
Brown-Forman Corp. Class B | 1,250 | 64,363 | ||||||
Coca-Cola Enterprises, Inc. | 4,100 | 49,323 | ||||||
Constellation Brands, Inc. Class A (a) | 2,500 | 39,425 | ||||||
Dr Pepper Snapple Group, Inc. (a) | 3,300 | 53,625 | ||||||
Molson Coors Brewing Co. Class B | 1,900 | 92,948 | ||||||
PepsiCo, Inc. | 20,300 | 1,111,831 | ||||||
The Coca-Cola Co. | 26,000 | 1,177,020 | ||||||
The Pepsi Bottling Group, Inc. | 1,800 | 40,518 | ||||||
2,629,053 | ||||||||
Food & Staples Retailing – 3.2% | ||||||||
Costco Wholesale Corp. | 5,600 | 294,000 | ||||||
CVS/Caremark Corp. | 18,720 | 538,013 | ||||||
Safeway, Inc. | 5,600 | 133,112 | ||||||
SUPERVALU, Inc. | 2,719 | 39,697 | ||||||
SYSCO Corp. | 7,800 | 178,932 | ||||||
The Kroger Co. | 8,500 | 224,485 | ||||||
Walgreen Co. | 12,900 | 318,243 | ||||||
Wal-Mart Stores, Inc. | 29,200 | 1,636,952 | ||||||
Whole Foods Market, Inc. | 1,800 | 16,992 | ||||||
3,380,426 | ||||||||
Food Products – 1.7% | ||||||||
Archer-Daniels-Midland Co. | 8,350 | 240,730 | ||||||
Campbell Soup Co. | 2,700 | 81,027 | ||||||
ConAgra Foods, Inc. | 5,800 | 95,700 | ||||||
Dean Foods Co. (a) | 2,000 | 35,940 | ||||||
General Mills, Inc. | 4,400 | 267,300 | ||||||
H.J. Heinz Co. | 4,100 | 154,160 | ||||||
Kellogg Co. | 3,300 | 144,705 | ||||||
Kraft Foods, Inc. Class A | 19,176 | 514,876 | ||||||
McCormick & Co., Inc. | 1,700 | 54,162 | ||||||
Sara Lee Corp. | 9,200 | 90,068 | ||||||
The Hershey Company | 2,200 | 76,428 | ||||||
The J.M. Smucker Co. | 1,500 | 65,040 | ||||||
Tyson Foods, Inc. Class A | 3,900 | 34,164 | ||||||
1,854,300 | ||||||||
Household Products – 3.0% | ||||||||
Colgate-Palmolive Co. | 6,600 | 452,364 | ||||||
Kimberly-Clark Corp. | 5,400 | 284,796 | ||||||
The Clorox Co. | 1,800 | 100,008 | ||||||
The Procter & Gamble Co. | 39,022 | 2,412,340 | ||||||
3,249,508 | ||||||||
Personal Products – 0.2% | ||||||||
Avon Products, Inc. | 5,600 | 134,568 | ||||||
The Estee Lauder Cos., Inc. Class A | 1,500 | 46,440 | ||||||
181,008 | ||||||||
Tobacco – 1.8% | ||||||||
Altria Group, Inc. | 26,900 | 405,114 | ||||||
Lorillard, Inc. | 2,197 | 123,801 | ||||||
Philip Morris International, Inc. | 26,400 | 1,148,664 | ||||||
Reynolds American, Inc. | 2,200 | 88,682 | ||||||
UST, Inc. | 1,900 | 131,822 | ||||||
1,898,083 | ||||||||
TOTAL CONSUMER STAPLES | 13,192,378 | |||||||
ENERGY – 12.9% | ||||||||
Energy Equipment & Services – 1.5% | ||||||||
Baker Hughes, Inc. | 4,000 | 128,280 | ||||||
BJ Services Co. | 3,800 | 44,346 | ||||||
Cameron International Corp. (a) | 2,900 | 59,450 | ||||||
ENSCO International, Inc. | 1,900 | 53,941 | ||||||
Halliburton Co. | 11,700 | 212,706 | ||||||
Nabors Industries Ltd. (a) | 3,700 | 44,289 | ||||||
National Oilwell Varco, Inc. (a) | 5,500 | 134,420 | ||||||
Noble Corp. | 3,400 | 75,106 | ||||||
Rowan Cos., Inc. | 1,500 | 23,850 | ||||||
Schlumberger Ltd. | 15,600 | 660,348 | ||||||
Smith International, Inc. | 2,900 | 66,381 | ||||||
Weatherford International Ltd. (a) | 8,900 | 96,298 | ||||||
1,599,415 | ||||||||
Oil, Gas & Consumable Fuels – 11.4% | ||||||||
Anadarko Petroleum Corp. | 6,000 | 231,300 | ||||||
Apache Corp. | 4,422 | 329,572 | ||||||
Cabot Oil & Gas Corp. | 1,400 | 36,400 | ||||||
Chesapeake Energy Corp. | 7,100 | 114,807 | ||||||
Chevron Corp. | 26,538 | 1,963,016 | ||||||
ConocoPhillips | 19,500 | 1,010,100 | ||||||
CONSOL Energy, Inc. | 2,400 | 68,592 | ||||||
Devon Energy Corp. | 5,800 | 381,118 | ||||||
El Paso Corp. | 9,200 | 72,036 | ||||||
EOG Resources, Inc. | 3,300 | 219,714 | ||||||
Exxon Mobil Corp. | 66,500 | 5,308,695 | ||||||
Hess Corp. | 3,700 | 198,468 | ||||||
Marathon Oil Corp. | 9,220 | 252,259 | ||||||
Massey Energy Co. | 1,100 | 15,169 | ||||||
Murphy Oil Corp. | 2,500 | 110,875 | ||||||
Noble Energy, Inc. | 2,300 | 113,206 | ||||||
Occidental Petroleum Corp. | 10,600 | 635,894 | ||||||
Peabody Energy Corp. | 3,500 | 79,625 | ||||||
Pioneer Natural Resources Co. | 1,500 | 24,270 | ||||||
Range Resources Corp. | 2,000 | 68,780 | ||||||
Southwestern Energy Co. (a) | 4,500 | 130,365 | ||||||
Spectra Energy Corp. | 8,018 | 126,203 | ||||||
Sunoco, Inc. | 1,500 | 65,190 | ||||||
Tesoro Corp. | 1,800 | 23,706 | ||||||
Valero Energy Corp. | 6,700 | 144,988 | ||||||
Williams Cos., Inc. | 7,600 | 110,048 | ||||||
XTO Energy, Inc. | 7,566 | 266,853 | ||||||
12,101,249 | ||||||||
TOTAL ENERGY | 13,700,664 | |||||||
(continued)
78
Ohio National Fund, Inc.
S&P 500 Index Portfolio (Continued)
S&P 500 Index Portfolio (Continued)
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 96.7% | Shares | Value | ||||||
FINANCIALS – 12.8% | ||||||||
Capital Markets – 2.3% | ||||||||
American Capital Ltd. | 2,700 | $ | 8,748 | |||||
Ameriprise Financial, Inc. | 2,880 | 67,277 | ||||||
E*TRADE Financial Corp. (a) | 7,400 | 8,510 | ||||||
Federated Investors, Inc. Class B | 1,200 | 20,352 | ||||||
Franklin Resources, Inc. | 2,000 | 127,560 | ||||||
Invesco Ltd. | 5,000 | 72,200 | ||||||
Janus Capital Group, Inc. | 2,100 | 16,863 | ||||||
Legg Mason, Inc. | 1,900 | 41,629 | ||||||
Merrill Lynch & Co., Inc. | 20,900 | 243,276 | ||||||
Morgan Stanley | 13,900 | 222,956 | ||||||
Northern Trust Corp. | 2,900 | 151,206 | ||||||
State Street Corp. | 5,600 | 220,248 | ||||||
T. Rowe Price Group, Inc. | 3,400 | 120,496 | ||||||
The Bank Of New York Mellon Corp. | 15,011 | 425,261 | ||||||
The Charles Schwab Corp. | 12,200 | 197,274 | ||||||
The Goldman Sachs Group, Inc. | 5,800 | 489,462 | ||||||
2,433,318 | ||||||||
Commercial Banks – 3.0% | ||||||||
BB&T Corp. | 7,200 | 197,712 | ||||||
Comerica, Inc. | 2,000 | 39,700 | ||||||
Fifth Third Bancorp | 7,550 | 62,363 | ||||||
First Horizon National Corp. | 2,722 | 28,772 | ||||||
Huntington Bancshares, Inc. | 4,800 | 36,768 | ||||||
KeyCorp | 6,500 | 55,380 | ||||||
M&T Bank Corp. | 1,000 | 57,410 | ||||||
Marshall & Ilsley Corp. | 3,400 | 46,376 | ||||||
National City Corp. | 26,600 | 48,146 | ||||||
PNC Financial Services Group, Inc. | 4,500 | 220,500 | ||||||
Regions Financial Corp. | 9,075 | 72,237 | ||||||
SunTrust Banks, Inc. | 4,600 | 135,884 | ||||||
U.S. Bancorp | 22,890 | 572,479 | ||||||
Wachovia Corp. | 28,194 | 156,195 | ||||||
Wells Fargo & Co. | 49,500 | 1,459,260 | ||||||
Zions Bancorporation | 1,500 | 36,765 | ||||||
3,225,947 | ||||||||
Consumer Finance – 0.5% | ||||||||
American Express Co. | 15,200 | 281,960 | ||||||
Capital One Financial Corp. | 5,073 | 161,778 | ||||||
Discover Financial Services | 6,250 | 59,563 | ||||||
SLM Corp. (a) | 6,100 | 54,290 | ||||||
557,591 | ||||||||
Diversified Financial Services – 3.3% | ||||||||
Bank of America Corp. | 65,564 | 923,141 | ||||||
CIT Group, Inc. | 3,700 | 16,798 | ||||||
Citigroup, Inc. | 71,269 | 478,215 | ||||||
CME Group, Inc. | 850 | 176,893 | ||||||
IntercontinentalExchange, Inc. (a) | 900 | 74,196 | ||||||
JPMorgan Chase & Co. | 48,743 | 1,536,867 | ||||||
Leucadia National Corp. (a) | 2,300 | 45,540 | ||||||
Moody’s Corp. | 2,500 | 50,225 | ||||||
NASDAQ OMX Group, Inc. (a) | 1,800 | 44,478 | ||||||
NYSE Euronext, Inc. | 3,500 | 95,830 | ||||||
3,442,183 | ||||||||
Insurance – 2.6% | ||||||||
AFLAC, Inc. | 6,100 | 279,624 | ||||||
American International Group, Inc. | 35,100 | 55,107 | ||||||
AON Corp. | 3,500 | 159,880 | ||||||
Assurant, Inc. | 1,500 | 45,000 | ||||||
Cincinnati Financial Corp. | 2,166 | 62,966 | ||||||
Genworth Financial, Inc. Class A | 5,700 | 16,131 | ||||||
Lincoln National Corp. | 3,386 | 63,792 | ||||||
Loews Corp. | 4,761 | 134,498 | ||||||
Marsh & McLennan Companies, Inc. | 6,700 | 162,609 | ||||||
MBIA, Inc. | 2,500 | 10,175 | ||||||
MetLife, Inc. | 10,400 | 362,544 | ||||||
Principal Financial Group, Inc. | 3,400 | 76,738 | ||||||
Prudential Financial, Inc. | 5,500 | 166,430 | ||||||
The Allstate Corp. | 7,000 | 229,320 | ||||||
The Chubb Corp. | 4,600 | 234,600 | ||||||
The Hartford Financial Services Group, Inc. | 3,900 | 64,038 | ||||||
The Progressive Corp. | 8,800 | 130,328 | ||||||
Torchmark Corp. | 1,100 | 49,170 | ||||||
Travelers Companies, Inc. | 7,659 | 346,187 | ||||||
Unum Group | 4,300 | 79,980 | ||||||
XL Capital Ltd. Class A | 4,300 | 15,910 | ||||||
2,745,027 | ||||||||
Real Estate Investment Trusts – 0.9% | ||||||||
Apartment Investment & Management Co. Class A | 1,283 | 14,819 | ||||||
AvalonBay Communities, Inc. | 1,000 | 60,580 | ||||||
Boston Properties, Inc. | 1,600 | 88,000 | ||||||
Developers Diversified Realty Corp. | 1,600 | 7,808 | ||||||
Equity Residential | 3,600 | 107,352 | ||||||
HCP, Inc. | 3,300 | 91,641 | ||||||
Host Hotels & Resorts, Inc. | 6,800 | 51,476 | ||||||
Kimco Realty Corp. | 3,000 | 54,840 | ||||||
Plum Creek Timber Co., Inc. | 2,200 | 76,428 | ||||||
ProLogis | 3,500 | 48,615 | ||||||
Public Storage | 1,600 | 127,200 | ||||||
Simon Property Group, Inc. | 3,000 | 159,390 | ||||||
Vornado Realty Trust | 1,800 | 108,630 | ||||||
996,779 | ||||||||
Real Estate Management & Development – 0.0% | ||||||||
CB Richard Ellis Group, Inc. (a) | 2,900 | 12,528 | ||||||
Thrifts & Mortgage Finance – 0.2% | ||||||||
Hudson City Bancorp, Inc. | 6,800 | 108,528 | ||||||
Peoples United Financial, Inc. | 4,500 | 80,235 | ||||||
Sovereign Bancorp, Inc. (a) | 7,070 | 21,069 | ||||||
209,832 | ||||||||
TOTAL FINANCIALS | 13,623,205 | |||||||
HEALTH CARE – 14.3% | ||||||||
Biotechnology – 2.1% | ||||||||
Amgen, Inc. (a) | 13,806 | 797,297 |
(continued)
79
Ohio National Fund, Inc.
S&P 500 Index Portfolio (Continued)
S&P 500 Index Portfolio (Continued)
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 96.7% | Shares | Value | ||||||
Biotechnology (continued) | ||||||||
Biogen Idec, Inc. (a) | 3,845 | $ | 183,137 | |||||
Celgene Corp. (a) | 6,000 | 331,680 | ||||||
Cephalon, Inc. (a) | 900 | 69,336 | ||||||
Genzyme Corp. (a) | 3,500 | 232,295 | ||||||
Gilead Sciences, Inc. (a) | 12,000 | 613,680 | ||||||
2,227,425 | ||||||||
Health Care Equipment & Supplies – 2.1% | ||||||||
Baxter International, Inc. | 8,100 | 434,079 | ||||||
Becton, Dickinson & Co. | 3,200 | 218,848 | ||||||
Boston Scientific Corp. (a) | 19,603 | 151,727 | ||||||
C.R. Bard, Inc. | 1,300 | 109,538 | ||||||
Covidien Ltd. | 6,550 | 237,372 | ||||||
DENTSPLY International, Inc. | 1,900 | 53,656 | ||||||
Hospira, Inc. (a) | 2,110 | 56,590 | ||||||
Intuitive Surgical, Inc. (a) | 500 | 63,495 | ||||||
Medtronic, Inc. | 14,600 | 458,732 | ||||||
St. Jude Medical, Inc. (a) | 4,500 | 148,320 | ||||||
Stryker Corp. | 3,200 | 127,840 | ||||||
Varian Medical Systems, Inc. (a) | 1,600 | 56,064 | ||||||
Zimmer Holdings, Inc. (a) | 2,970 | 120,048 | ||||||
2,236,309 | ||||||||
Health Care Providers & Services – 2.1% | ||||||||
Aetna, Inc. | 6,000 | 171,000 | ||||||
AmerisourceBergen Corp. | 2,000 | 71,320 | ||||||
Cardinal Health, Inc. | 4,700 | 162,009 | ||||||
CIGNA Corp. | 3,600 | 60,660 | ||||||
Coventry Health Care, Inc. (a) | 1,900 | 28,272 | ||||||
DaVita, Inc. (a) | 1,400 | 69,398 | ||||||
Express Scripts, Inc. (a) | 3,200 | 175,936 | ||||||
Humana, Inc. (a) | 2,200 | 82,016 | ||||||
Laboratory Corp. of America Holdings (a) | 1,400 | 90,174 | ||||||
McKesson Corp. | 3,600 | 139,428 | ||||||
Medco Health Solutions, Inc. (a) | 6,476 | 271,409 | ||||||
Patterson Cos., Inc. (a) | 1,200 | 22,500 | ||||||
Quest Diagnostics, Inc. | 2,100 | 109,011 | ||||||
Tenet Healthcare Corp. (a) | 5,450 | 6,268 | ||||||
UnitedHealth Group, Inc. | 15,800 | 420,280 | ||||||
WellPoint, Inc. (a) | 6,700 | 282,271 | ||||||
2,161,952 | ||||||||
Health Care Technology – 0.0% | ||||||||
IMS Health, Inc. | 2,400 | 36,384 | ||||||
Life Sciences Tools & Services – 0.3% | ||||||||
Life Technologies Corp. (a) | 2,217 | 51,678 | ||||||
Millipore Corp. (a) | 700 | 36,064 | ||||||
PerkinElmer, Inc. | 1,500 | 20,865 | ||||||
Thermo Fisher Scientific, Inc. (a) | 5,500 | 187,385 | ||||||
Waters Corp. (a) | 1,300 | 47,645 | ||||||
343,637 | ||||||||
Pharmaceuticals – 7.7% | ||||||||
Abbott Laboratories | 20,300 | 1,083,411 | ||||||
Allergan, Inc. | 4,000 | 161,280 | ||||||
Bristol-Myers Squibb Co. | 25,900 | 602,175 | ||||||
Eli Lilly & Co. | 13,100 | 527,537 | ||||||
Forest Laboratories, Inc. (a) | 3,900 | 99,333 | ||||||
Johnson & Johnson | 36,300 | 2,171,829 | ||||||
King Pharmaceuticals, Inc. (a) | 3,200 | 33,984 | ||||||
Merck & Co., Inc. | 27,600 | 839,040 | ||||||
Mylan, Inc. (a) | 4,000 | 39,560 | ||||||
Pfizer, Inc. | 88,130 | 1,560,782 | ||||||
Schering-Plough Corp. | 21,200 | 361,036 | ||||||
Watson Pharmaceuticals, Inc. (a) | 1,400 | 37,198 | ||||||
Wyeth | 17,400 | 652,674 | ||||||
8,169,839 | ||||||||
TOTAL HEALTH CARE | 15,175,546 | |||||||
INDUSTRIALS – 10.7% | ||||||||
Aerospace & Defense – 2.7% | ||||||||
General Dynamics Corp. | 5,100 | 293,709 | ||||||
Goodrich Corp. | 1,600 | 59,232 | ||||||
Honeywell International, Inc. | 9,500 | 311,885 | ||||||
L-3 Communications Holdings, Inc. | 1,600 | 118,048 | ||||||
Lockheed Martin Corp. | 4,400 | 369,952 | ||||||
Northrop Grumman Corp. | 4,300 | 193,672 | ||||||
Precision Castparts Corp. | 1,800 | 107,064 | ||||||
Raytheon Co. | 5,400 | 275,616 | ||||||
Rockwell Collins, Inc. | 2,100 | 82,089 | ||||||
The Boeing Co. | 9,600 | 409,632 | ||||||
United Technologies Corp. | 12,400 | 664,640 | ||||||
2,885,539 | ||||||||
Air Freight & Logistics – 1.1% | ||||||||
C.H. Robinson Worldwide, Inc. | 2,200 | 121,066 | ||||||
Expeditors International of Washington, Inc. | 2,800 | 93,156 | ||||||
FedEx Corp. | 4,100 | 263,015 | ||||||
United Parcel Service, Inc. Class B | 13,000 | 717,080 | ||||||
1,194,317 | ||||||||
Airlines – 0.1% | ||||||||
Southwest Airlines Co. | 9,700 | 83,614 | ||||||
Building Products – 0.0% | ||||||||
Masco Corp. | 4,700 | 52,311 | ||||||
Commercial Services & Supplies – 0.5% | ||||||||
Avery Dennison Corp. | 1,400 | 45,822 | ||||||
Cintas Corp. | 1,700 | 39,491 | ||||||
Pitney Bowes, Inc. | 2,700 | 68,796 | ||||||
R.R. Donnelley & Sons Co. | 2,700 | 36,666 | ||||||
Republic Services, Inc. | 4,180 | 103,622 | ||||||
Stericycle, Inc. (a) | 1,100 | 57,288 | ||||||
Waste Management, Inc. | 6,400 | 212,096 | ||||||
563,781 | ||||||||
Construction & Engineering – 0.2% | ||||||||
Fluor Corp. | 2,400 | 107,688 | ||||||
Jacobs Engineering Group, Inc. (a) | 1,600 | 76,960 | ||||||
184,648 | ||||||||
Electrical Equipment – 0.5% | ||||||||
Cooper Industries Ltd. Class A | 2,300 | 67,229 | ||||||
Emerson Electric Co. | 10,000 | 366,100 |
(continued)
80
Ohio National Fund, Inc.
S&P 500 Index Portfolio (Continued)
S&P 500 Index Portfolio (Continued)
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 96.7% | Shares | Value | ||||||
Electrical Equipment (continued) | ||||||||
Rockwell Automation, Inc. | 1,800 | $ | 58,032 | |||||
491,361 | ||||||||
Industrial Conglomerates – 2.8% | ||||||||
3M Co. | 9,100 | 523,614 | ||||||
General Electric Co. | 137,300 | 2,224,260 | ||||||
Textron, Inc. | 3,200 | 44,384 | ||||||
Tyco International Ltd. | 6,150 | 132,840 | ||||||
2,925,098 | ||||||||
Machinery – 1.6% | ||||||||
Caterpillar, Inc. | 7,900 | 352,893 | ||||||
Cummins, Inc. | 2,600 | 69,498 | ||||||
Danaher Corp. | 3,300 | 186,813 | ||||||
Deere & Co. | 5,600 | 214,592 | ||||||
Dover Corp. | 2,400 | 79,008 | ||||||
Eaton Corp. | 2,200 | 109,362 | ||||||
Flowserve Corp. | 700 | 36,050 | ||||||
Illinois Tool Works, Inc. | 5,100 | 178,755 | ||||||
Ingersoll-Rand Co. Ltd. Class A | 4,129 | 71,638 | ||||||
ITT Corp. | 2,400 | 110,376 | ||||||
Manitowoc Co., Inc. | 1,700 | 14,722 | ||||||
PACCAR, Inc. | 4,712 | 134,764 | ||||||
Pall Corp. | 1,500 | 42,645 | ||||||
Parker Hannifin Corp. | 2,100 | 89,334 | ||||||
1,690,450 | ||||||||
Professional Services – 0.1% | ||||||||
Dun & Bradstreet Corp. | 700 | 54,040 | ||||||
Equifax, Inc. | 1,700 | 45,084 | ||||||
Monster Worldwide, Inc. (a) | 1,600 | 19,344 | ||||||
Robert Half International, Inc. | 2,000 | 41,640 | ||||||
160,108 | ||||||||
Road & Rail – 1.0% | ||||||||
Burlington Northern Santa Fe Corp. | 3,700 | 280,127 | ||||||
CSX Corp. | 5,200 | 168,844 | ||||||
Norfolk Southern Corp. | 4,800 | 225,840 | ||||||
Ryder System, Inc. | 700 | 27,146 | ||||||
Union Pacific Corp. | 6,600 | 315,480 | ||||||
1,017,437 | ||||||||
Trading Companies & Distributors – 0.1% | ||||||||
Fastenal Co. | 1,700 | 59,245 | ||||||
W.W. Grainger, Inc. | 800 | 63,072 | ||||||
122,317 | ||||||||
TOTAL INDUSTRIALS | 11,370,981 | |||||||
INFORMATION TECHNOLOGY – 14.8% | ||||||||
Communications Equipment – 2.4% | ||||||||
Ciena Corp. (a) | 1,142 | 7,651 | ||||||
Cisco Systems, Inc. (a) | 76,500 | 1,246,950 | ||||||
Corning, Inc. | 20,300 | 193,459 | ||||||
Harris Corp. | 1,800 | 68,490 | ||||||
JDS Uniphase Corp. (a) | 2,875 | 10,494 | ||||||
Juniper Networks, Inc. (a) | 6,900 | 120,819 | ||||||
Motorola, Inc. | 29,600 | 131,128 | ||||||
QUALCOMM, Inc. | 21,600 | 773,928 | ||||||
Tellabs, Inc. (a) | 5,200 | 21,424 | ||||||
2,574,343 | ||||||||
Computers & Peripherals – 4.1% | ||||||||
Apple, Inc. (a) | 11,600 | 990,060 | ||||||
Dell, Inc. (a) | 22,600 | 231,424 | ||||||
EMC Corp. (a) | 26,700 | 279,549 | ||||||
Hewlett-Packard Co. | 32,000 | 1,161,280 | ||||||
International Business Machines Corp. | 17,600 | 1,481,216 | ||||||
Lexmark International, Inc. Class A (a) | 1,000 | 26,900 | ||||||
NetApp, Inc. (a) | 4,300 | 60,071 | ||||||
QLogic Corp. (a) | 1,700 | 22,848 | ||||||
SanDisk Corp. (a) | 3,000 | 28,800 | ||||||
Sun Microsystems, Inc. (a) | 9,650 | 36,863 | ||||||
Teradata Corp. (a) | 2,300 | 34,109 | ||||||
4,353,120 | ||||||||
Electronic Equipment, Instruments & Components – 0.3% | ||||||||
Agilent Technologies, Inc. (a) | 4,600 | 71,898 | ||||||
Amphenol Corp. Class A | 2,300 | 55,154 | ||||||
Flir Systems, Inc. (a) | 1,800 | 55,224 | ||||||
Jabil Circuit, Inc. | 2,800 | 18,900 | ||||||
Molex, Inc. | 1,800 | 26,082 | ||||||
Tyco Electronics Ltd. | 5,950 | 96,450 | ||||||
323,708 | ||||||||
Internet Software & Services – 1.4% | ||||||||
Akamai Technologies, Inc. (a) | 2,200 | 33,198 | ||||||
eBay, Inc. (a) | 14,000 | 195,440 | ||||||
Google, Inc. Class A (a) | 3,125 | 961,406 | ||||||
VeriSign, Inc. (a) | 2,500 | 47,700 | ||||||
Yahoo!, Inc. (a) | 18,100 | 220,820 | ||||||
1,458,564 | ||||||||
IT Services – 0.9% | ||||||||
Affiliated Computer Services, Inc. Class A (a) | 1,300 | 59,735 | ||||||
Automatic Data Processing, Inc. | 6,600 | 259,644 | ||||||
Cognizant Technology Solutions Corp. Class A (a) | 3,800 | 68,628 | ||||||
Computer Sciences Corp. (a) | 2,000 | 70,280 | ||||||
Convergys Corp. (a) | 1,600 | 10,256 | ||||||
Fidelity National Information Services, Inc. | 2,500 | 40,675 | ||||||
Fiserv, Inc. (a) | 2,100 | 76,377 | ||||||
Mastercard, Inc. Class A | 900 | 128,637 | ||||||
Paychex, Inc. | 4,200 | 110,376 | ||||||
The Western Union Co. | 9,347 | 134,036 | ||||||
Total System Services, Inc. | 2,577 | 36,078 | ||||||
994,722 | ||||||||
Office Electronics – 0.1% | ||||||||
Xerox Corp. | 11,300 | 90,061 | ||||||
Semiconductors & Semiconductor Equipment – 2.1% | ||||||||
Advanced Micro Devices, Inc. (a) | 8,000 | 17,280 | ||||||
Altera Corp. | 3,900 | 65,169 | ||||||
Analog Devices, Inc. | 3,800 | 72,276 |
(continued)
81
Ohio National Fund, Inc.
S&P 500 Index Portfolio (Continued)
S&P 500 Index Portfolio (Continued)
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 96.7% | Shares | Value | ||||||
Semiconductors & Semiconductor Equipment (continued) | ||||||||
Applied Materials, Inc. | 17,500 | $ | 177,275 | |||||
Broadcom Corp. Class A (a) | 5,850 | 99,274 | ||||||
Intel Corp. | 72,700 | 1,065,782 | ||||||
KLA-Tencor Corp. | 2,200 | 47,938 | ||||||
Linear Technology Corp. | 2,900 | 64,148 | ||||||
LSI Corp. (a) | 8,400 | 27,636 | ||||||
MEMC Electronic Materials, Inc. (a) | 2,900 | 41,412 | ||||||
Microchip Technology, Inc. | 2,400 | 46,872 | ||||||
Micron Technology, Inc. (a) | 10,000 | 26,400 | ||||||
National Semiconductor Corp. | 2,500 | 25,175 | ||||||
Novellus Systems, Inc. (a) | 1,300 | 16,042 | ||||||
NVIDIA Corp. (a) | 7,000 | 56,490 | ||||||
Teradyne, Inc. (a) | 2,200 | 9,284 | ||||||
Texas Instruments, Inc. | 16,900 | 262,288 | ||||||
Xilinx, Inc. | 3,600 | 64,152 | ||||||
2,184,893 | ||||||||
Software – 3.5% | ||||||||
Adobe Systems, Inc. (a) | 6,900 | 146,901 | ||||||
Autodesk, Inc. (a) | 3,000 | 58,950 | ||||||
BMC Software, Inc. (a) | 2,500 | 67,275 | ||||||
CA, Inc. | 5,100 | 94,503 | ||||||
Citrix Systems, Inc. (a) | 2,400 | 56,568 | ||||||
Compuware Corp. (a) | 3,200 | 21,600 | ||||||
Electronic Arts, Inc. (a) | 4,200 | 67,368 | ||||||
Intuit, Inc. (a) | 4,200 | 99,918 | ||||||
McAfee, Inc. (a) | 2,000 | 69,140 | ||||||
Microsoft Corp. | 100,000 | 1,944,000 | ||||||
Novell, Inc. (a) | 4,500 | 17,505 | ||||||
Oracle Corp. (a) | 51,200 | 907,776 | ||||||
Salesforce.com, Inc. (a) | 1,400 | 44,814 | ||||||
Symantec Corp. (a) | 10,894 | 147,287 | ||||||
3,743,605 | ||||||||
TOTAL INFORMATION TECHNOLOGY | 15,723,016 | |||||||
MATERIALS – 2.9% | ||||||||
Chemicals – 1.7% | ||||||||
Air Products and Chemicals, Inc. | 2,700 | 135,729 | ||||||
CF Industries Holdings, Inc. | 700 | 34,412 | ||||||
E.I. du Pont de Nemours & Co. | 11,800 | 298,540 | ||||||
Eastman Chemical Co. | 900 | 28,539 | ||||||
Ecolab, Inc. | 2,200 | 77,330 | ||||||
International Flavors & Fragrances, Inc. | 1,000 | 29,720 | ||||||
Monsanto Co. | 7,186 | 505,535 | ||||||
PPG Industries, Inc. | 2,100 | 89,103 | ||||||
Praxair, Inc. | 4,000 | 237,440 | ||||||
Rohm & Haas Co. | 1,600 | 98,864 | ||||||
Sigma-Aldrich Corp. | 1,600 | 67,584 | ||||||
The Dow Chemical Co. | 12,100 | 182,589 | ||||||
1,785,385 | ||||||||
Construction Materials – 0.1% | ||||||||
Vulcan Materials Co. | 1,400 | 97,412 | ||||||
Containers & Packaging – 0.2% | ||||||||
Ball Corp. | 1,200 | 49,908 | ||||||
Bemis Co., Inc | 1,300 | 30,784 | ||||||
Owens-Illinois, Inc. (a) | 2,100 | 57,393 | ||||||
Pactiv Corp. (a) | 1,700 | 42,296 | ||||||
Sealed Air Corp. | 2,100 | 31,374 | ||||||
211,755 | ||||||||
Metals & Mining – 0.7% | ||||||||
AK Steel Holding Corp. | 1,500 | 13,980 | ||||||
Alcoa, Inc. | 10,500 | 118,230 | ||||||
Allegheny Technologies, Inc. | 1,300 | 33,189 | ||||||
Freeport-McMoRan Copper & Gold, Inc. | 4,976 | 121,613 | ||||||
Newmont Mining Corp. | 5,900 | 240,130 | ||||||
Nucor Corp. | 4,100 | 189,420 | ||||||
Titanium Metals Corp. | 1,100 | 9,691 | ||||||
United States Steel Corp. | 1,500 | 55,800 | ||||||
782,053 | ||||||||
Paper & Forest Products – 0.2% | ||||||||
International Paper Co. | 5,600 | 66,080 | ||||||
MeadWestvaco Corp. | 2,200 | 24,618 | ||||||
Weyerhaeuser Co. | 2,800 | 85,708 | ||||||
176,406 | ||||||||
TOTAL MATERIALS | 3,053,011 | |||||||
TELECOMMUNICATION SERVICES – 3.7% | ||||||||
Diversified Telecommunication Services – 3.5% | ||||||||
AT&T, Inc. | 76,978 | 2,193,873 | ||||||
CenturyTel, Inc. | 1,300 | 35,529 | ||||||
Embarq Corp. | 1,851 | 66,562 | ||||||
Frontier Communications Corp. | 4,100 | 35,834 | ||||||
Qwest Communications International, Inc. | 19,100 | 69,524 | ||||||
Verizon Communications, Inc. | 37,100 | 1,257,690 | ||||||
Windstream Corp. | 5,696 | 52,403 | ||||||
3,711,415 | ||||||||
Wireless Telecommunication Services – 0.2% | ||||||||
American Tower Corp. Class A (a) | 5,200 | 152,464 | ||||||
Sprint Nextel Corp. (a) | 37,332 | 68,318 | ||||||
220,782 | ||||||||
TOTAL TELECOMMUNICATION SERVICES | 3,932,197 | |||||||
UTILITIES – 4.1% | ||||||||
Electric Utilities – 2.4% | ||||||||
Allegheny Energy, Inc. | 2,200 | 74,492 | ||||||
American Electric Power Co., Inc. | 5,300 | 176,384 | ||||||
Duke Energy Corp. | 16,536 | 248,205 | ||||||
Edison International | 4,300 | 138,116 | ||||||
Entergy Corp. | 2,500 | 207,825 | ||||||
Exelon Corp. | 8,600 | 478,246 | ||||||
FirstEnergy Corp. | 4,000 | 194,320 | ||||||
FPL Group, Inc. | 5,300 | 266,749 | ||||||
Pepco Holdings, Inc. | 2,800 | 49,728 | ||||||
Pinnacle West Capital Corp. | 1,300 | 41,769 | ||||||
PPL Corp. | 4,900 | 150,381 | ||||||
Progress Energy, Inc. | 3,400 | 135,490 | ||||||
The Southern Co. | 10,100 | 373,700 | ||||||
2,535,405 | ||||||||
(continued)
82
Ohio National Fund, Inc.
S&P 500 Index Portfolio (Continued)
S&P 500 Index Portfolio (Continued)
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 96.7% | Shares | Value | ||||||
Gas Utilities – 0.1% | ||||||||
Equitable Resources, Inc. | 1,700 | $ | 57,035 | |||||
Nicor, Inc. | 600 | 20,844 | ||||||
Questar Corp. | 2,300 | 75,187 | ||||||
153,066 | ||||||||
Independent Power Producers & Energy Traders – 0.1% | ||||||||
Constellation Energy Group, Inc. | 2,300 | 57,707 | ||||||
Dynegy, Inc. Class A (a) | 6,599 | 13,198 | ||||||
The AES Corp. (a) | 8,800 | 72,512 | ||||||
143,417 | ||||||||
Multi-Utilities – 1.5% | ||||||||
Ameren Corp. | 2,800 | 93,128 | ||||||
CenterPoint Energy, Inc. | 4,500 | 56,790 | ||||||
CMS Energy Corp. | 3,000 | 30,330 | ||||||
Consolidated Edison, Inc. | 3,600 | 140,148 | ||||||
Dominion Resources, Inc. | 7,600 | 272,384 | ||||||
DTE Energy Co. | 2,100 | 74,907 | ||||||
Integrys Energy Group, Inc. | 1,012 | 43,496 | ||||||
NiSource, Inc. | 3,600 | 39,492 | ||||||
PG&E Corp. | 4,700 | 181,937 | ||||||
Public Service Enterprise Group, Inc. | 6,600 | 192,522 | ||||||
SCANA Corp. | 1,500 | 53,400 | ||||||
Sempra Energy | 3,200 | 136,416 | ||||||
TECO Energy, Inc. | 2,800 | 34,580 | ||||||
Wisconsin Energy Corp. | 1,500 | 62,970 | ||||||
Xcel Energy, Inc. | 5,900 | 109,445 | ||||||
1,521,945 | ||||||||
TOTAL UTILITIES | 4,353,833 | |||||||
Total Common Stocks (Cost $130,186,709) | $ | 102,728,742 | ||||||
Fair | ||||||||
Exchange Traded Funds – 2.5% | Shares | Value | ||||||
Standard & Poor’s Depository Receipts (SPDRs) | 29,525 | $ | 2,664,336 | |||||
Total Exchange Traded Funds (Cost $2,604,661) | $ | 2,664,336 | ||||||
Face | Fair | |||||||
Repurchase Agreements – 0.8% | Amount | Value | ||||||
US Bank 0.010% 01/02/2009 | $ | 834,000 | $ | 834,000 | ||||
Repurchase price $834,000 | ||||||||
Collateralized by: Various Agency Mortgage- Backed Securities 2.395% to 5.000%, Due 09/01/2018 through 05/15/2033 Fair Value: $850,639 | ||||||||
Total Repurchase Agreements (Cost $834,000) | $ | 834,000 | ||||||
Total Investments – 100.0% (Cost $133,625,370) (b) | $ | 106,227,078 | ||||||
Liabilities in Excess of Other Assets – 0.0% | (18,250 | ) | ||||||
Net Assets – 100.0% | $ | 106,208,828 | ||||||
Percentages are stated as a percent of net assets.
Footnotes:
(a) | Non-income producing security. | |
(b) | Represents cost for financial reporting purposes, which may differ from cost basis for Federal income tax purposes. See also Note 8 of the Notes to Financial Statements. |
The accompanying notes are an integral part of these financial statements.
83
Ohio National Fund, Inc.
S&P 500 Index Portfolio
S&P 500 Index Portfolio
Statement of Assets and Liabilities
December 31, 2008
Assets: | ||||
Investments in securities, at fair value (Cost $132,791,370) | $ | 105,393,078 | ||
Repurchase agreements | 834,000 | |||
Cash | 239 | |||
Receivable for securities sold | 36,496 | |||
Receivable for fund shares sold | 118,403 | |||
Dividends and accrued interest receivable | 251,476 | |||
Prepaid expenses and other assets | 2,222 | |||
Total assets | 106,635,914 | |||
Liabilities: | ||||
Payable for securities purchased | 346,770 | |||
Payable for fund shares redeemed | 12,596 | |||
Payable for investment management services | 34,533 | |||
Accrued custody expense | 1,276 | |||
Accrued professional fees | 12,562 | |||
Accrued accounting fees | 10,677 | |||
Accrued printing and filing fees | 8,672 | |||
Total liabilities | 427,086 | |||
Net assets | $ | 106,208,828 | ||
Net assets consist of: | ||||
Par value, $1 per share | $ | 11,282,307 | ||
Paid-in capital in excess of par value | 150,430,195 | |||
Accumulated net realized loss on investments | (28,390,427 | ) | ||
Net unrealized depreciation on investments | (27,398,292 | ) | ||
Undistributed net investment income | 285,045 | |||
Net assets | $ | 106,208,828 | ||
Shares outstanding | 11,282,307 | |||
Authorized Fund shares allocated to Portfolio | 20,000,000 | |||
Net asset value per share | $ | 9.41 | ||
Statement of Operations
For the Year Ended December 31, 2008
Investment income: | ||||
Interest | $ | 3,722 | ||
Dividends | 3,334,538 | |||
Total investment income | 3,338,260 | |||
Expenses: | ||||
Management fees | 549,961 | |||
Custodian fees | 16,649 | |||
Directors’ fees | 11,923 | |||
Professional fees | 20,272 | |||
Accounting fees | 68,392 | |||
Printing and filing fees | 17,499 | |||
Compliance expense | 4,911 | |||
Other | 2,710 | |||
Total expenses | 692,317 | |||
Net investment income | 2,645,943 | |||
Realized/unrealized gain (loss) on investments: | ||||
Net realized gain (loss) on investments | (2,389,253 | ) | ||
Change in unrealized appreciation/depreciation on investments | (63,273,864 | ) | ||
Net realized/unrealized gain (loss) on investments | (65,663,117 | ) | ||
Change in net assets from operations | $ | (63,017,174 | ) | |
The accompanying notes are an integral part of these financial statements.
84
Ohio National Fund, Inc.
S&P 500 Index Portfolio
S&P 500 Index Portfolio
Statements of Changes in Net Assets
Years Ended December 31, | ||||||||
2008 | 2007 | |||||||
Increase (Decrease) in Net Assets: | ||||||||
Operations: | ||||||||
Net investment income | $ | 2,645,943 | $ | 2,760,037 | ||||
Net realized gain (loss) on investments | (2,389,253 | ) | 2,911,630 | |||||
Change in unrealized appreciation/depreciation on investments | (63,273,864 | ) | 3,310,664 | |||||
Change in net assets from operations | (63,017,174 | ) | 8,982,331 | |||||
Distributions to shareholders: | ||||||||
Distributions from net investment income | (2,337,448 | ) | (2,436,493 | ) | ||||
Capital transactions: | ||||||||
Received from shares sold | 38,152,445 | 21,330,432 | ||||||
Received from dividends reinvested | 2,337,448 | 2,436,493 | ||||||
Paid for shares redeemed | (48,360,668 | ) | (32,990,849 | ) | ||||
Change in net assets from capital transactions | (7,870,775 | ) | (9,223,924 | ) | ||||
Change in net assets | (73,225,397 | ) | (2,678,086 | ) | ||||
Net Assets: | ||||||||
Beginning of year | 179,434,225 | 182,112,311 | ||||||
End of year | $ | 106,208,828 | $ | 179,434,225 | ||||
Undistributed net investment income | $ | 285,045 | $ | 311,482 | ||||
Financial Highlights
Years Ended December 31, | ||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
Selected Per-Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 15.36 | $ | 14.82 | $ | 12.99 | $ | 12.56 | $ | 11.51 | ||||||||||
Operations: | ||||||||||||||||||||
Net investment income | 0.24 | 0.24 | 0.22 | 0.19 | 0.18 | |||||||||||||||
Net realized and unrealized gain (loss) on investments and futures contracts | (5.98 | ) | 0.51 | 1.77 | 0.37 | 1.00 | ||||||||||||||
Total from operations | (5.74 | ) | 0.75 | 1.99 | 0.56 | 1.18 | ||||||||||||||
Distributions: | ||||||||||||||||||||
Distributions from net investment income | (0.21 | ) | (0.21 | ) | (0.16 | ) | (0.13 | ) | (0.13 | ) | ||||||||||
Net asset value, end of year | $ | 9.41 | $ | 15.36 | $ | 14.82 | $ | 12.99 | $ | 12.56 | ||||||||||
Total return | –37.30 | % | 5.06 | % | 15.30 | % | 4.47 | % | 10.30 | % | ||||||||||
Ratios and supplemental data: | ||||||||||||||||||||
Net assets at end of year (millions) | $ | 106.2 | $ | 179.4 | $ | 182.1 | $ | 190.5 | $ | 195.9 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Expenses | 0.48 | % | 0.45 | % | 0.47 | % | 0.47 | % | 0.50 | % | ||||||||||
Net investment income | 1.85 | % | 1.50 | % | 1.45 | % | 1.39 | % | 1.52 | % | ||||||||||
Portfolio turnover rate | 12 | % | 7 | % | 7 | % | 9 | % | 8 | % |
The accompanying notes are an integral part of these financial statements.
85
Ohio National Fund, Inc.
Strategic Value Portfolio (formerly the Blue Chip Portfolio)
Strategic Value Portfolio (formerly the Blue Chip Portfolio)
Objective/Strategy
The Strategic Value Portfolio seeks growth of capital and income by investing primarily in securities of high dividend yielding companies.
Performance as of December 31, 2008
Average Annual Total Returns: | ||||
One year | -28.27% | |||
Five years | -2.65% | |||
Ten years | -0.89% |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price and reinvestment of dividends and capital gains. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost.
The Portfolio is not open to direct retail investment. Beneficial interest in shares is obtained solely by purchase of variable life insurance policies and variable annuity contracts. Actual performance results for variable annuity and variable universal life contracts will be lower due to contract charges. Consult your contract for applicable charges.
Comments
For the year ended December 31, 2008, the Strategic Value Portfolio returned -28.27% versus -30.97% for the current benchmark, the Dow Jones U.S. Select Dividend Index.
On an absolute performance basis, the Portfolio continued to deliver on its objective of providing a substantially higher than market yield. The Portfolio also continued to deliver on its goal of investing in those stocks that provide growth in dividend income over time. To this point, the Portfolio experienced thirty dividend increases and two dividend cuts for the calendar year. Overall, we believe that dividend increases are a clear indicator of management confidence as our companies continue to raise their dividends in the face of market turmoil surrounding credit and housing.(1)
Negative absolute performance was largely attributed to the Portfolio’s exposure to the Financials sector. However, as the group was progressively stripped of its dividend opportunity, we reduced our position from a month-end high of 31.11% at the end of February to a 10.27% exposure at year end. Names that were penalized in the year included Wachovia Corp. and Deutsche Bank AG, posting returns of -75.29% and -62.76%, respectively.
In spite of a negative total return, the Portfolio significantly outperformed both the universe of dividend-paying stocks, as represented by the Dow Jones U.S. Select Dividend Index, and the broad market as measured by the S&P 500 Index. Outperformance was due to the rotation of high yield back into market favor by calendar year end. Specifically, the Portfolio benefited from over-weighted positions in defensive areas such as Consumer Staples and Telecommunication Services. Within Consumer Staples, U.S.T, Inc. gained 28.80% on news that they were targeted for acquisition by tobacco competitor, Altria Group, Inc. The Portfolio gained further relative performance with its 15.37% exposure to the Telecommunication Services sector, a defensive group that held up well for the period yet had little representation in either benchmark.(1)
Positive stock selection relative to both benchmarks was noted in the Utilities sector as our stocks posted better than market results. The Portfolio held the defensive, regulated distribution utilities rather than the lower-yielding, energy linked companies that plummeted along with the rest of the cyclicals late in the year. The Portfolio also outpaced both benchmarks in another defensive group, the Health Care sector. Names such as Eli Lilly & Co. and Wyeth posted returns of 16.25% and 5.84% each in the Portfolio.(1)
The fiscal year ended December 31, 2008 was filled with challenges throughout the financial markets. Chief among these was a steep decline in the credit quality and performance of real estate investments as housing prices sharply declined after years of rising steadily. This led in turn to a broader downturn in the credit markets. The financial problems of the banking industry came to a head in September with the collapses of Fannie Mae, Freddie Mac, American International Group (“AIG”), and Lehman Brothers. In response to the credit markets slowing dramatically and generalized concerns about a recession that would result, the Federal Reserve acted aggressively to provide liquidity to the markets. The Federal government has followed suit with an investment plan (Troubled Asset Relief Program) to help re-capitalize the financial services industry. The actions taken domestically have been mirrored in most large markets across the globe.
Other factors added further to market volatility. A speculative bubble in the price of oil and other commodities has contributed to demand destruction and lower levels of economic activity. The currency markets have been equally unstable. The U.S. dollar made a strong comeback versus the euro and Sterling, but much of that strength was due to a flight to quality and the weaker economic outlook in Europe rather than strength on our shores.
Not surprisingly, given this environment, equity markets at home and abroad sold off sharply. Still, there were notable patterns. For the first half of the fiscal year, while the commodity bubble was still expanding and the Financials sector was struggling, dividend stocks were very much out of favor. By the middle of 2008, however, high dividend yielding sectors experienced some much-needed relief as the selling shifted to the more cyclical sectors. For the calendar year, those areas that eventually gave up the least ground in the S&P 500 Index were dividend-friendly sectors such as Consumer Staples (down 15.55%), Health Care (down 22.81%) and Utilities (down 28.98%). Further to the Portfolio’s benefit, investors shunned the yield-starved Information Technology (down 43.15%) and Materials (down 45.66%) sectors. Once a yield-rich sector, Financials (down 55.32%) led the market down as financial institutions slashed dividends and the Federal government capped dividend growth in those companies seeking government funding.
Lost amid the financial and job losses of recent months is the reality of knowing that, eventually, recessions end and better days return. As the economy shakes off the excesses that inevitably build up when times are good, it lays the groundwork for renewal as consumers and businesses start spending again, confidence starts growing again and, later in the cycle, companies start hiring again.
(continued)
86
Ohio National Fund, Inc.
Strategic Value Portfolio (formerly the Blue Chip Portfolio) (Continued)
Strategic Value Portfolio (formerly the Blue Chip Portfolio) (Continued)
Abetting the normal course of healing this time around are unprecedented government intervention in the markets and a prospective massive stimulus package from the incoming administration – estimates have ranged from $650 billion to nearly a $1 trillion, led by shovel-ready infrastructure projects. Despite unknown and potentially negative long-term implications, these moves will provide near term support to economic activity.
Looking ahead, Federated believes that over the next several quarters U.S. growth will continue to slow, and the credit market freeze of 2008 will most likely show up in weaker economic statistics across the economy into 2009. Assuming government measures to address the financial crisis are effective, we believe improved confidence should prevent a deep and long economic pullback. By the middle of 2009 a modest recovery could be underway, driven by the many economic stimulus measures already taken, continued weakness in energy prices, better inflation news and the anticipated bottoming of the housing sector.
Of course, in volatile and uncertain periods such as now, we believe it is useful to revisit the foundation of the Portfolio’s strategy. Simply put, we focus on dividend-paying companies with an emphasis on those we believe will increase payouts over time. This is crucial for investors who want a dependable income stream regardless of the macroeconomic environment. This underlying tenet of our approach results in investments in strong and stable corporations with the financial muscle to provide steady income and weather tough economic times.
(1) | The Portfolio’s composition is subject to change. Holdings and weightings are as of December 31, 2008. |
Change in Value of $10,000 Investment
Hypothetical illustration based on past performance. Future performance will vary. The Portfolio’s returns reflect reinvested dividends. The Portfolio’s holdings may differ significantly from the securities in the index. The index is unmanaged and therefore does not reflect the cost of portfolio management and accounting.
The Dow Jones U.S. Select Dividend Index is comprised of all dividend-paying companies in the Dow Jones U.S. Index that have a non-negative historical five-year dividend-per-share growth rate, a five-year average dividend to earnings-per-share ratio of less than or equal to 60%, and a three-month average daily trading volume of 200,000 shares. Current index components are included in the universe regardless of their dividend payout ratio. The Dow Jones U.S. Index aims to consistently represent the top 95% of U.S. companies based on float-adjusted market capitalization, excluding the very smallest and least-liquid stocks. The index presented includes the effects of reinvested dividends.
The S&P 500/Citigroup Value Index methodology measures style across seven different growth and value factors, and acknowledges that some companies exhibit neither strong growth nor value attributes, whereas the S&P/Barra methodology assigns stocks to value or growth indices based on price-to-book ratios, and only identifies stocks as pure growth or pure value. The new methodology’s manner of arriving at stock-level style scores is the same as that for the S&P 500/Citigroup benchmark series style methodology, although the index construction is different and there are two style series (Style and Pure Style) to which stocks may be assigned. The index has a relatively low turnover. The index presented herein includes the effects of reinvested dividends.
We are now using the Dow Jones U.S. Select Dividend Index as the Portfolio’s primary benchmark because we believe the Portfolio’s investments more closely resemble the securities represented in that index than those in the S&P 500/Citigroup Value Index.
(continued)
87
Ohio National Fund, Inc.
Strategic Value Portfolio (formerly the Blue Chip Portfolio) (Continued)
Strategic Value Portfolio (formerly the Blue Chip Portfolio) (Continued)
Portfolio Composition as of December 31, 2008 (1)
% of Net Assets | |||
Common Stocks (3) | 96.4 | ||
Repurchase Agreements and Other Net Assets | 3.6 | ||
100.0 | |||
Top 10 Portfolio Holdings as of December 31, 2008 (1) (2)
% of Net Assets | |||||||
1. | Pfizer, Inc. | 4.8 | |||||
2. | Kraft Foods, Inc. Class A | 4.2 | |||||
3. | Bristol-Myers Squibb Co. | 4.0 | |||||
4. | H.J. Heinz Co. | 3.7 | |||||
5. | Progress Energy, Inc. | 3.5 | |||||
6. | Verizon Communications, Inc. | 3.4 | |||||
7. | ENI SpA | 3.3 | |||||
8. | Kimberly-Clark Corp. | 3.1 | |||||
9. | Philip Morris International, Inc. | 3.1 | |||||
10. | Royal Dutch Shell PLC – B Shares | 3.1 |
(1) | Composition of Portfolio subject to change. | |
(2) | Short-term investments have been excluded from the list of Top 10 Portfolio holdings. | |
(3) | Sectors: |
% of Net Assets | |||
Consumer Staples | 23.0 | ||
Telecommunication Services | 19.4 | ||
Health Care | 17.3 | ||
Utilities | 15.2 | ||
Financials | 10.3 | ||
Energy | 9.3 | ||
Industrials | 1.9 | ||
96.4 | |||
88
Ohio National Fund, Inc.
Strategic Value Portfolio (formerly the Blue Chip Portfolio)
Strategic Value Portfolio (formerly the Blue Chip Portfolio)
Schedule of Investments | December 31, 2008 |
Fair | ||||||||||||
Common Stocks - 96.4% | Shares | Value | ||||||||||
CONSUMER STAPLES – 23.0% | ||||||||||||
Beverages – 1.9% | ||||||||||||
Diageo PLC (a) | 13,610 | $ | 191,232 | |||||||||
The Coca-Cola Co. | 1,470 | 66,547 | ||||||||||
257,779 | ||||||||||||
Food Products – 10.4% | ||||||||||||
ConAgra Foods, Inc. | 3,980 | 65,670 | ||||||||||
H.J. Heinz Co. | 12,975 | 487,860 | ||||||||||
Kraft Foods, Inc. Class A | 21,080 | 565,998 | ||||||||||
Unilever PLC (a) | 11,710 | 268,976 | ||||||||||
1,388,504 | ||||||||||||
Household Products – 3.1% | ||||||||||||
Kimberly-Clark Corp. | 7,805 | 411,636 | ||||||||||
Tobacco – 7.6% | ||||||||||||
Altria Group, Inc. | 13,220 | 199,093 | ||||||||||
Philip Morris International, Inc. | 9,385 | 408,341 | ||||||||||
Reynolds American, Inc. | 10,070 | 405,922 | ||||||||||
1,013,356 | ||||||||||||
TOTAL CONSUMER STAPLES | 3,071,275 | |||||||||||
ENERGY – 9.3% | ||||||||||||
Oil, Gas & Consumable Fuels – 9.3% | ||||||||||||
BP PLC – ADR | 6,130 | 286,516 | ||||||||||
ENI SpA (a) | 18,225 | 438,560 | ||||||||||
Royal Dutch Shell PLC – B Shares (a) | 16,095 | 407,983 | ||||||||||
Total S.A. (a) | 1,965 | 108,034 | ||||||||||
TOTAL ENERGY | 1,241,093 | |||||||||||
FINANCIALS – 10.3% | ||||||||||||
Commercial Banks – 5.3% | ||||||||||||
HSBC Holdings PLC (a) | 10,970 | 107,366 | ||||||||||
PNC Financial Services Group, Inc. | 4,920 | 241,080 | ||||||||||
U.S. Bancorp | 10,020 | 250,600 | ||||||||||
Wells Fargo & Co. | 3,900 | 114,972 | ||||||||||
714,018 | ||||||||||||
Insurance – 2.9% | ||||||||||||
Arthur J. Gallagher & Co. | 7,930 | 205,466 | ||||||||||
Mercury General Corp. | 3,895 | 179,131 | ||||||||||
384,597 | ||||||||||||
Thrifts & Mortgage Finance – 2.1% | ||||||||||||
New York Community Bancorp, Inc. | 23,280 | 278,429 | ||||||||||
TOTAL FINANCIALS | 1,377,044 | |||||||||||
HEALTH CARE – 17.3% | ||||||||||||
Pharmaceuticals – 17.3% | ||||||||||||
Bristol-Myers Squibb Co. | 23,075 | 536,494 | ||||||||||
Eli Lilly & Co. | 9,300 | 374,511 | ||||||||||
GlaxoSmithKline PLC (a) | 21,080 | 392,041 | ||||||||||
Merck & Co., Inc. | 2,420 | 73,568 | ||||||||||
Pfizer, Inc. | 36,185 | 640,836 | ||||||||||
Wyeth | 7,775 | 291,640 | ||||||||||
TOTAL HEALTH CARE | 2,309,090 | |||||||||||
INDUSTRIALS – 1.9% | ||||||||||||
Industrial Conglomerates – 1.9% | ||||||||||||
General Electric Co. | 15,105 | 244,701 | ||||||||||
TOTAL INDUSTRIALS | 244,701 | |||||||||||
TELECOMMUNICATION SERVICES – 19.4% | ||||||||||||
Diversified Telecommunication Services – 16.4% | ||||||||||||
AT&T, Inc. | 14,100 | 401,850 | ||||||||||
CenturyTel, Inc. | 4,425 | 120,935 | ||||||||||
Deutsche Telekom AG (a) | 21,795 | 328,912 | ||||||||||
France Telecom SA (a) | 11,545 | 321,790 | ||||||||||
Frontier Communications Corp. | 27,060 | 236,504 | ||||||||||
Verizon Communications, Inc. | 13,320 | 451,548 | ||||||||||
Windstream Corp. | 35,350 | 325,220 | ||||||||||
2,186,759 | ||||||||||||
Wireless Telecommunication Services – 3.0% | ||||||||||||
Vodafone Group PLC – ADR | 19,770 | 404,099 | ||||||||||
TOTAL TELECOMMUNICATION SERVICES | 2,590,858 | |||||||||||
UTILITIES – 15.2% | ||||||||||||
Electric Utilities – 10.9% | ||||||||||||
Duke Energy Corp. | 26,720 | 401,067 | ||||||||||
Pinnacle West Capital Corp. | 8,050 | 258,646 | ||||||||||
Progress Energy, Inc. | 11,690 | 465,847 | ||||||||||
The Southern Co. | 9,010 | 333,370 | ||||||||||
1,458,930 | ||||||||||||
�� | ||||||||||||
Gas Utilities – 2.0% | ||||||||||||
AGL Resources, Inc. | 8,310 | 260,519 | ||||||||||
Multi-Utilities – 2.3% | ||||||||||||
SCANA Corp. | 8,575 | 305,270 | ||||||||||
TOTAL UTILITIES | 2,024,719 | |||||||||||
Total Common Stocks (Cost $15,913,659) | $ | 12,858,780 | ||||||||||
Face | Fair | |||||||||||
Repurchase Agreements – 3.5% | Amount | Value | ||||||||||
US Bank 0.010% 01/02/2009 | $ | 469,000 | $ | 469,000 | ||||||||
Repurchase price $469,000 | ||||||||||||
Collateralized by: | ||||||||||||
Various Agency Mortgage- Backed Securities 2.395% to 5.000%, Due 09/01/2018 through 05/15/2033 Fair Value: $478,357 | ||||||||||||
Total Repurchase Agreements (Cost $469,000) | $ | 469,000 | ||||||||||
Total Investments – 99.9% (Cost $16,382,659) (b) | $ | 13,327,780 | ||||||||||
Other Assets in Excess of Liabilities – 0.1% | 16,858 | |||||||||||
Net Assets – 100.0% | $ | 13,344,638 | ||||||||||
(continued)
89
Ohio National Fund, Inc.
Strategic Value Portfolio (formerly the Blue Chip Portfolio) (Continued)
Strategic Value Portfolio (formerly the Blue Chip Portfolio) (Continued)
Schedule of Investments | December 31, 2008 |
Percentages are stated as a percent of net assets.
Abbreviations:
ADR: American Depository Receipts
Footnotes:
(a) | Security denominated in foreign currency and traded on a foreign exchange has been subjected to fair value procedures approved by the Fund Board of Directors. These securities represent $2,564,894 or 19.2% of the Portfolio’s net assets. As discussed in Note 2 of the Notes to Financial Statements, not all investments are valued at an estimate of fair value that is different from the local close price. In some instances the independent fair valuation service uses the local close price because the confidence interval associated with a holding is below the 75% threshold. | |
(b) | Represents cost for financial reporting purposes, which may differ from cost basis for Federal income tax purposes. See also Note 8 of the Notes to Financial Statements. |
The accompanying notes are an integral part of these financial statements.
90
Ohio National Fund, Inc.
Strategic Value Portfolio (formerly the Blue Chip Portfolio)
Strategic Value Portfolio (formerly the Blue Chip Portfolio)
Statement of Assets and Liabilities
December 31, 2008
Assets: | ||||
Investments in securities, at fair value (Cost $15,913,659) | $ | 12,858,780 | ||
Repurchase agreements | 469,000 | |||
Cash | 435 | |||
Receivable for fund shares sold | 9,734 | |||
Dividends and accrued interest receivable | 81,308 | |||
Prepaid expenses and other assets | 288 | |||
Total assets | 13,419,545 | |||
Liabilities: | ||||
Payable for fund shares redeemed | 51,711 | |||
Payable for investment management services | 8,257 | |||
Accrued custody expense | 1,460 | |||
Accrued professional fees | 10,541 | |||
Accrued accounting fees | 1,838 | |||
Accrued printing and filing fees | 1,100 | |||
Total liabilities | 74,907 | |||
Net assets | $ | 13,344,638 | ||
Net assets consist of: | ||||
Par value, $1 per share | $ | 1,674,609 | ||
Paid-in capital in excess of par value | 22,186,346 | |||
Accumulated net realized loss on investments | (7,565,201 | ) | ||
Net unrealized depreciation on: | ||||
Investments | (3,054,879 | ) | ||
Foreign currency related transactions | (697 | ) | ||
Undistributed net investment income | 104,460 | |||
Net assets | $ | 13,344,638 | ||
Shares outstanding | 1,674,609 | |||
Authorized Fund shares allocated to Portfolio | 10,000,000 | |||
Net asset value per share | $ | 7.97 | ||
Statement of Operations
For the Year Ended December 31, 2008
Investment income: | ||||
Interest | $ | 23,117 | ||
Dividends (net of withholding tax of $30,442) | 1,035,125 | |||
Total investment income | 1,058,242 | |||
Expenses: | ||||
Management fees | 140,655 | |||
Custodian fees | 4,761 | |||
Directors’ fees | 1,538 | |||
Professional fees | 12,424 | |||
Accounting fees | 13,486 | |||
Printing and filing fees | 2,095 | |||
Compliance expense | 4,911 | |||
Other | 452 | |||
Total expenses | 180,322 | |||
Net investment income | 877,920 | |||
Realized/unrealized gain (loss) on investments and foreign currency related transactions: | ||||
Net realized gain (loss) on: | ||||
Investments | (6,316,960 | ) | ||
Foreign currency related transactions | (1,656 | ) | ||
Change in unrealized appreciation/depreciation on investments and foreign currency related transactions | (634,959 | ) | ||
Net realized/unrealized gain (loss) on investments and foreign currency related transactions | (6,953,575 | ) | ||
Change in net assets from operations | $ | (6,075,655 | ) | |
The accompanying notes are an integral part of these financial statements.
91
Ohio National Fund, Inc.
Strategic Value Portfolio (formerly the Blue Chip Portfolio)
Strategic Value Portfolio (formerly the Blue Chip Portfolio)
Statements of Changes in Net Assets
Years Ended December 31, | ||||||||
2008 | 2007 | |||||||
Increase (Decrease) in Net Assets: | ||||||||
Operations: | ||||||||
Net investment income | $ | 877,920 | $ | 396,455 | ||||
Net realized gain (loss) on investments and foreign currency related transactions | (6,318,616 | ) | 3,849,423 | |||||
Change in unrealized appreciation/depreciation on investments and foreign currency related transactions | (634,959 | ) | (7,144,854 | ) | ||||
Change in net assets from operations | (6,075,655 | ) | (2,898,976 | ) | ||||
Distributions to shareholders: | ||||||||
Distributions from net investment income | (771,804 | ) | (349,213 | ) | ||||
Capital transactions: | ||||||||
Received from shares sold | 3,545,632 | 3,722,156 | ||||||
Received from dividends reinvested | 771,804 | 349,213 | ||||||
Paid for shares redeemed | (12,524,636 | ) | (7,215,135 | ) | ||||
Change in net assets from capital transactions | (8,207,200 | ) | (3,143,766 | ) | ||||
Change in net assets | (15,054,659 | ) | (6,391,955 | ) | ||||
Net Assets: | ||||||||
Beginning of year | 28,399,297 | 34,791,252 | ||||||
End of year | $ | 13,344,638 | $ | 28,399,297 | ||||
Undistributed net investment income | $ | 104,460 | $ | 47,242 | ||||
Financial Highlights
Years Ended December 31, | ||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
Selected Per-Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 11.81 | $ | 13.10 | $ | 11.36 | $ | 10.95 | $ | 10.12 | ||||||||||
Operations: | ||||||||||||||||||||
Net investment income | 0.56 | 0.17 | 0.16 | 0.15 | 0.15 | |||||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency related transactions | (3.91 | ) | (1.31 | ) | 1.70 | 0.37 | 0.82 | |||||||||||||
Total from operations | (3.35 | ) | (1.14 | ) | 1.86 | 0.52 | 0.97 | |||||||||||||
Distributions: | ||||||||||||||||||||
Distributions from net investment income | (0.49 | ) | (0.15 | ) | (0.12 | ) | (0.11 | ) | (0.14 | ) | ||||||||||
Net asset value, end of year | $ | 7.97 | $ | 11.81 | $ | 13.10 | $ | 11.36 | $ | 10.95 | ||||||||||
Total return | –28.27 | % | –8.74 | % | 16.35 | % | 4.74 | % | 9.61 | % | ||||||||||
Ratios and supplemental data: | ||||||||||||||||||||
Net assets at end of year (millions) | $ | 13.3 | $ | 28.4 | $ | 34.8 | $ | 30.1 | $ | 32.2 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Ratios net of expenses voluntarily reduced or reimbursed by adviser: | ||||||||||||||||||||
Expenses | 0.96 | % | 0.87 | % | 0.88 | % | 0.92 | % | 0.84 | % | ||||||||||
Net investment income | 4.68 | % | 1.18 | % | 1.38 | % | 1.27 | % | 1.45 | % | ||||||||||
Ratios assuming no expenses voluntarily reduced or reimbursed by adviser: | ||||||||||||||||||||
Expenses | 0.96 | % | 0.87 | % | 0.88 | % | 0.92 | % | 0.99 | % | ||||||||||
Portfolio turnover rate | 162 | % | 63 | % | 65 | % | 55 | % | 52 | % |
The accompanying notes are an integral part of these financial statements.
92
Ohio National Fund, Inc.
High Income Bond Portfolio
High Income Bond Portfolio
Objective/Strategy
The High Income Bond Portfolio seeks high current income by investing primarily in lower rated corporate debt obligations commonly referred to as “junk bonds”. The Portfolio’s investments are generally rated Baa or lower by Moodys, or BBB or lower by Standard & Poor’s or Fitch.
Performance as of December 31, 2008
Average Annual Total Returns: | ||||
One year | -25.52% | |||
Five years | -0.65% | |||
Ten years | 2.02% |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price and reinvestment of dividends and capital gains. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost.
The Portfolio is not open to direct retail investment. Beneficial interest in shares is obtained solely by purchase of variable life insurance policies and variable annuity contracts. Actual performance results for variable annuity and variable universal life contracts will be lower due to contract charges. Consult your contract for applicable charges.
Comments
For the year ended December 31, 2008, the High Income Bond Portfolio returned -25.52% versus -25.88% for the current benchmark, the Barclays Capital High Yield 2% Issuer Constrained Index (“BCHY2%ICI”).
The Portfolio outperformed the BCHY2%ICI for the year. Compared to the BCHY2%ICI, security selection positively impacted performance. This was especially true in the consumer products, energy and retail sectors. Strong security selection in the chemical and gaming sectors offset industry overweights in these underperforming sectors. The Portfolio also benefited from being over-weighted in the strong performing aerospace and defense and industrial - other sectors while being underweight the poor performing financial institutions and paper sectors. An over-weighted position in the strong performing food and beverage sector and an underweight in the underperforming automotive sector were somewhat offset by poor security selection in these sectors. Given the substantial negative returns for the market, modest cash positions held by the Portfolio positively impacted performance. Specific Portfolio holdings that significantly outperformed the BCHY2%ICI included: ALLTEL Communications Corp., FTD Inc., Norcross Safety Products, Compass Minerals International, Inc., Centennial Communications Corp., U.S. Unwired, Superior Essex Corp. and DRS Technologies, Inc.(1)
The Portfolio’s performance was negatively impacted by an underweight in the strong relative performing electric utility, home construction and supermarket sectors. The Portfolio was also over-weighted in the poor performing media non-cable sector. The Portfolio was negatively impacted by poor security selection in the health care sector somewhat offset by its over-weighted position in this strong performing sector. Compared to the BCHY2%ICI, the Portfolio’s over-weighted position in the poor-performing B-rated and CCC-rated quality sectors negatively impacted performance. Specific Portfolio holdings that substantially underperformed the BCHY2%ICI included: Herbst Gaming, Inc., Pilgrims Pride Corp., Idearc, Inc., Fontainebleau Las Vegas Holdings LLC/Fontainebleau Las Vegas Capital Corp., Nell AF S.A.R.L., HRP Myrtle Beach Operations, LLC, and Aleris International, Inc.(1)
The high yield market performed poorly over the reporting period as a global credit crisis negatively impacted the market for most risk based assets including high yield bonds. The BCHY2%ICI experienced its three worst individual months ever in September, October and November of 2008 registering total returns of -7.68%, -16.09% and -8.77% respectively. The global credit crisis, which started in the mortgage and structured products markets, quickly spread through most sectors of the security markets resulting in the bankruptcy of Lehman Brothers and Washington Mutual, the propping up/bailing out of Fannie Mae, Freddie Mac and American International Group as well as the “Big 3” U.S. automakers. Governments worldwide were forced to inject money into their banking systems to keep them solvent. Financial institutions unwillingness to lend - even to each another - given the uncertainty caused a contraction of private credit availability resulting in a substantial slowing of the U.S. and world economies. Third quarter U.S. Gross Domestic Product contracted .5%, with expectations for the fourth quarter of 2008 and the first quarter of 2009 to be substantially worse. These economic concerns coupled with lenders’ unwillingness to extend credit and a general trend toward deleveraging by financial entities (banks, hedge funds, insurance companies and Wall Street brokers) put substantial pressure on the high yield market. As an indication, the spread between the Credit Suisse High Yield Bond Index and comparable Treasury’s increased from 5.89% on December 31, 2007 to 17.06% on December 31, 2008. Interestingly, default activity continues to be somewhat muted given the substantial pressure in the lending markets. According to the Altman High Yield Bond Default and Return Report, the default rate for the high yield market for the first nine months of 2008 was only 2.03% well below the average rate of 4.03% between 1985 and 2007.
Within the high yield market during the reporting period, major industry sectors that substantially outperformed the overall BCHY2%ICI included: environmental, food and beverage, wireless telecommunications, aerospace and defense, electric utilities, packaging and health care. The major industry sectors that underperformed the overall BCHY2%ICI included: paper, chemicals, automotive, building materials, media non- cable and gaming. Higher credit quality sectors of the market outperformed with BB-rated securities returning -17.3% compared to -26.4% and -43.9% for the B-rated and CCC-rated sector respectively.
As we enter 2009, the key question facing high yield investors is “Do yield spreads well above historical norms - not to mention well above historical peaks by several hundred basis points - compensate investors for rising default rates and uncertain economic conditions?”
(1) | The Portfolio’s composition is subject to change. Holdings and weightings are as of December 31, 2008. |
(continued)
93
Ohio National Fund, Inc.
High Income Bond Portfolio (Continued)
High Income Bond Portfolio (Continued)
Change in Value of $10,000 Investment
Hypothetical illustration based on past performance. Future performance will vary. All returns reflect reinvested dividends. The Portfolio’s holdings may differ significantly from the securities in the index. The index is unmanaged and therefore does not reflect the cost of Portfolio management or trading. Neither the Portfolio nor the index is open to direct investment.
As a result of the integration of the fixed income businesses of Lehman Brothers into Barclays Capital, the benchmark has been renamed from the Lehman Brothers 2% Issuer Constrained High Yield Index to the Barclays Capital High Yield 2% Issuer Constrained Index. The benchmark is the 2% Issuer Cap component of the Barclays Capital U.S. Corporate High Yield Bond Index. The Barclays Capital U.S. Corporate High Yield Bond Index is an unmanaged index that includes all fixed income securities having a maximum quality rating of Ba1, a minimum amount outstanding of $150 million, and a least 1 year to maturity. The 2% Issuer Cap component limits an issuer to 2% of the aggregate market capitalization. The index is presented on a total return basis.
Top 10 Portfolio Holdings as of December 31, 2008 (1) (2)
% of Net Assets | |||||||
1. | HCA, Inc. 9.625%, 11/15/2016 | 1.6 | |||||
2. | Intelsat Jackson Holdings Ltd. 11.250%, 06/15/2016 | 1.3 | |||||
3. | GMAC LLC 6.875%, 09/15/2011 | 1.1 | |||||
4. | Qwest Corp. 8.875%, 03/15/2012 | 1.1 | |||||
5. | Texas Competitive Electric Holdings Co. LLC 10.500%, 11/01/2015 | 1.1 | |||||
6. | Biomet, Inc. 11.625%, 10/15/2017 | 1.0 | |||||
7. | Visant Holding Corp. 7.625%, 10/01/2012 | 1.0 | |||||
8. | Crown Americas LLC/Crown Americas Capital Corp. 7.750%, 11/15/2015 | 0.8 | |||||
9. | Visant Holding Corp. 8.750%, 12/01/2013 | 0.8 | |||||
10. | B&G Foods, Inc. 8.000%, 10/01/2011 | 0.8 |
Portfolio Composition as of December 31, 2008 (1)
% of Net Assets | |||
Corporate Bonds (3) (4) | 90.0 | ||
Preferred Stocks (3) | 0.2 | ||
Repurchase Agreements and Other Net Assets | 9.8 | ||
100.0 | |||
(1) | Composition of Portfolio subject to change. | |
(2) | Short-term investments have been excluded from the list of Top 10 Portfolio holdings. | |
(3) | Sectors (Combined): |
% of Net Assets | |||
Consumer Discretionary | 22.8 | ||
Industrials | 13.4 | ||
Health Care | 8.7 | ||
Energy | 8.7 | ||
Materials | 6.7 | ||
Telecommunication Services | 6.6 | ||
Consumer Staples | 6.1 | ||
Financials | 6.1 | ||
Information Technology | 5.8 | ||
Utilities | 5.3 | ||
90.2 | |||
(4) | Bond Credit Quality (Standard & Poor’s Ratings): |
% of Total Bonds | |||
BBB | 2.6 | ||
BB | 24.4 | ||
B | 40.6 | ||
CCC | 28.6 | ||
CC & Below | 3.8 | ||
100.0 | |||
94
Ohio National Fund, Inc.
High Income Bond Portfolio
High Income Bond Portfolio
Schedule of Investments | December 31, 2008 |
Face | Fair | |||||||
Corporate Bonds – 90.0% | Amount | Value | ||||||
CONSUMER DISCRETIONARY – 22.8% | ||||||||
Auto Components – 0.7% | ||||||||
Cooper-Standard Automotive, Inc. 8.375%, 12/15/2014 | $ | 250,000 | $ | 45,000 | ||||
Hawk Corp. 8.750%, 11/01/2014 | 100,000 | 102,000 | ||||||
Tenneco, Inc. 8.625%, 11/15/2014 | 325,000 | 125,125 | ||||||
United Components, Inc. 9.375%, 06/15/2013 | 475,000 | 201,875 | ||||||
474,000 | ||||||||
Automobiles – 0.5% | ||||||||
Ford Motor Co. 7.450%, 07/16/2031 | 350,000 | 99,750 | ||||||
General Motors Corp. 7.400%, 09/01/2025 | 1,150,000 | 195,500 | ||||||
8.375%, 07/15/2033 | 275,000 | 49,500 | ||||||
344,750 | ||||||||
Distributors – 0.2% | ||||||||
Baker & Taylor, Inc. 11.500%, 07/01/2013 (b) | 400,000 | 170,500 | ||||||
Diversified Consumer Services – 1.2% | ||||||||
Education Management LLC/Education Management Finance Corp. 10.250%, 06/01/2016 | 525,000 | 383,250 | ||||||
KAR Holdings, Inc. 10.000%, 05/01/2015 | 475,000 | 159,125 | ||||||
Knowledge Learning Corp. 7.750%, 02/01/2015 (b) | 425,000 | 299,625 | ||||||
842,000 | ||||||||
Hotels, Restaurants & Leisure – 6.0% | ||||||||
Dave & Busters, Inc. 11.250%, 03/15/2014 | 225,000 | 120,375 | ||||||
Fontainebleau Las Vegas Holdings LLC/Fontainebleau Las Vegas Capital Corp. 11.000%, 06/15/2015 (b) | 375,000 | 38,437 | ||||||
Great Canadian Gaming Corp. 7.250%, 02/15/2015 (b) | 400,000 | 274,000 | ||||||
Herbst Gaming, Inc. 7.000%, 11/15/2014 (Acquired 11/05/2004 through 01/03/2008, Cost $352,676) (a) (d) (e) | 375,000 | 3,281 | ||||||
Indianapolis Downs LLC & Indiana Downs Capital Corp. | ||||||||
11.000%, 11/01/2012 (b) | 500,000 | 275,000 | ||||||
15.500%, 11/01/2013 (b) | 87,109 | 34,408 | ||||||
Jacobs Entertainment, Inc. 9.750%, 06/15/2014 | 325,000 | 157,625 | ||||||
Mandalay Resort Group 9.375%, 02/15/2010 | 190,000 | 139,650 | ||||||
MGM Mirage, Inc. 8.500%, 09/15/2010 | 75,000 | 63,375 | ||||||
8.375%, 02/01/2011 | 200,000 | 120,000 | ||||||
13.000%, 11/15/2013 (b) | 75,000 | 71,813 | ||||||
5.875%, 02/27/2014 | 700,000 | 451,500 | ||||||
7.500%, 06/01/2016 | 325,000 | 207,594 | ||||||
NPC International, Inc. 9.500%, 05/01/2014 | 450,000 | 328,500 | ||||||
Penn National Gaming, Inc. 6.750%, 03/01/2015 | 425,000 | 325,125 | ||||||
Royal Caribbean Cruises Ltd. 7.000%, 06/15/2013 | 175,000 | 100,625 | ||||||
7.250%, 06/15/2016 | 275,000 | 151,250 | ||||||
San Pasqual Casino Development Group 8.000%, 09/15/2013 (b) | 350,000 | 255,500 | ||||||
Seminole Hard Rock International Inc./Seminole Hard Rock International LLC 4.496%, 03/15/2014 (b) (c) | 250,000 | 128,125 | ||||||
Shingle Springs Tribal Gaming Authority 9.375%, 06/15/2015 (b) | 325,000 | 164,125 | ||||||
Tunica-Biloxi Gaming Authority 9.000%, 11/15/2015 (b) | 200,000 | 159,000 | ||||||
Universal City Development Partners, Ltd./UCDP Finance, Inc. 11.750%, 04/01/2010 | 175,000 | 113,313 | ||||||
Universal City Florida Holding Co. I/II 7.943%, 05/01/2010 (c) | 525,000 | 228,375 | ||||||
Wynn Las Vegas LLC / Wynn Las Vegas Capital Corp. 6.625%, 12/01/2014 | 500,000 | 380,000 | ||||||
4,290,996 | ||||||||
Household Durables – 1.2% | ||||||||
Da-Lite Screen Co, Inc. 9.500%, 05/15/2011 | 150,000 | 132,750 | ||||||
Jarden Corp. 7.500%, 05/01/2017 | 525,000 | 360,937 | ||||||
Norcraft Companies LP/Norcraft Capital Corp. 9.750%, 09/01/2012 | 150,000 | 112,500 | ||||||
Sealy Mattress Co. 8.250%, 06/15/2014 | 450,000 | 267,750 | ||||||
873,937 | ||||||||
Leisure Equipment & Products – 2.2% | ||||||||
True Temper Sports, Inc. 8.375%, 09/15/2011 | 275,000 | 89,375 | ||||||
Visant Holding Corp. 7.625%, 10/01/2012 | 875,000 | 721,875 | ||||||
10.250%, 12/01/2013 | 250,000 | 186,250 | ||||||
8.750%, 12/01/2013 | 800,000 | 596,000 | ||||||
1,593,500 | ||||||||
Media – 9.2% | ||||||||
AAC Group Holding Corp. 10.250%, 10/01/2012 (b) | 350,000 | 232,750 | ||||||
16.750%, 10/01/2012 | 137,284 | 33,635 | ||||||
Affinity Group Holding, Inc. 9.000%, 02/15/2012 | 175,000 | 88,375 | ||||||
10.875%, 02/15/2012 | 225,490 | 118,382 |
(continued)
95
Ohio National Fund, Inc.
High Income Bond Portfolio (Continued)
High Income Bond Portfolio (Continued)
Schedule of Investments | December 31, 2008 |
Face | Fair | |||||||
Corporate Bonds – 90.0% | Amount | Value | ||||||
Media (continued) | ||||||||
American Achievement Corp. 8.250%, 04/01/2012 (b) | $ | 275,000 | $ | 213,125 | ||||
CCH II LLC/CCH II Capital Corp. 10.250%, 09/15/2010 | 575,000 | 267,375 | ||||||
Cinemark, Inc. 0.000% to 03/15/2009 then 9.750%, 03/15/2014 | 425,000 | 345,844 | ||||||
Dex Media West LLC/Dex Media Finance Co. 9.875%, 08/15/2013 | 422,000 | 101,280 | ||||||
Dex Media, Inc. 9.000%, 11/15/2013 | 275,000 | 52,250 | ||||||
DIRECTV Holdings LLC/DIRECTV Financing Co., Inc. 8.375%, 03/15/2013 | 325,000 | 325,000 | ||||||
6.375%, 06/15/2015 | 200,000 | 185,500 | ||||||
EchoStar DBS Corp. 6.625%, 10/01/2014 | 650,000 | 544,375 | ||||||
FoxCo Acquisition Sub. LLC 13.375%, 07/15/2016 (b) | 350,000 | 148,750 | ||||||
Idearc, Inc. 8.000%, 11/15/2016 | 625,000 | 50,000 | ||||||
Intelsat Intermediate Holding Co. Ltd 0.000% to 02/01/2010 then 9.500%, 02/01/2015 (b) | 525,000 | 401,625 | ||||||
Intelsat Jackson Holdings Ltd. 11.250%, 06/15/2016 | 1,050,000 | 960,750 | ||||||
Kabel Deutschland GmbH 10.625%, 07/01/2014 | 350,000 | 313,250 | ||||||
Lamar Media Corp. 7.250%, 01/01/2013 | 50,000 | 40,125 | ||||||
6.625%, 08/15/2015 | 550,000 | 400,125 | ||||||
MediMedia USA, Inc. 11.375%, 11/15/2014 (b) | 475,000 | 287,375 | ||||||
Newport Television LLC/NTV Finance Corp. 13.000%, 03/15/2017 (b) | 400,000 | 32,500 | ||||||
Nexstar Broadcasting, Inc. 7.000%, 01/15/2014 | 375,000 | 163,594 | ||||||
Quebecor Media, Inc. 7.750%, 03/15/2016 | 325,000 | 221,000 | ||||||
R.H. Donnelley Corp. 6.875%, 01/15/2013 | 375,000 | 52,500 | ||||||
6.875%, 01/15/2016 | 150,000 | 23,250 | ||||||
8.875%, 10/15/2017 | 450,000 | 69,750 | ||||||
Rainbow National Services LLC 10.375%, 09/01/2014 (b) | 414,000 | 370,530 | ||||||
The Readers Digest Association, Inc. 9.000%, 02/15/2017 | 725,000 | 66,156 | ||||||
TruVo Subsidiary Corp. 8.375%, 12/01/2014 (b) (e) (f) | 500,000 | 175,000 | ||||||
Univision Communications Inc. 9.750%, 03/15/2015 (b) | 375,000 | 48,750 | ||||||
Videotron Ltee 6.375%, 12/15/2015 | 100,000 | 79,000 | ||||||
9.125%, 04/15/2018 (b) | 75,000 | 70,125 | ||||||
XM Satellite Radio Holdings, Inc. 13.000%, 08/01/2014 (b) | 200,000 | 47,000 | ||||||
6,529,046 | ||||||||
Multiline Retail – 0.5% | ||||||||
Dollar General Corp. 11.875%, 07/15/2017 | 425,000 | 365,500 | ||||||
Specialty Retail – 1.1% | ||||||||
AutoNation, Inc. 6.753%, 04/15/2013 (c) | 100,000 | 69,000 | ||||||
7.000%, 04/15/2014 | 250,000 | 183,750 | ||||||
NBC Acquisition Corp. 11.000%, 03/15/2013 | 350,000 | 161,000 | ||||||
Nebraska Book Co., Inc. 8.625%, 03/15/2012 | 525,000 | 238,875 | ||||||
Penske Auto Group, Inc. 7.750%, 12/15/2016 | 275,000 | 129,250 | ||||||
781,875 | ||||||||
TOTAL CONSUMER DISCRETIONARY | 16,266,104 | |||||||
CONSUMER STAPLES – 6.1% | ||||||||
Beverages – 0.6% | ||||||||
Constellation Brands, Inc. 8.375%, 12/15/2014 | 150,000 | 143,250 | ||||||
7.250%, 09/01/2016 | 175,000 | 166,250 | ||||||
7.250%, 05/15/2017 | 150,000 | 142,500 | ||||||
452,000 | ||||||||
Food & Staples Retailing – 0.8% | ||||||||
Couche-Tard U.S. LP/Couche-Tard Finance Corp. 7.500%, 12/15/2013 | 300,000 | 238,500 | ||||||
General Nutrition Centers, Inc. 7.584%, 03/15/2014 (c) | 550,000 | 310,750 | ||||||
549,250 | ||||||||
Food Products – 4.3% | ||||||||
ASG Consolidated LLC/ASG Finance, Inc. 11.500%, 11/01/2011 | 600,000 | 513,000 | ||||||
B&G Foods, Inc. 8.000%, 10/01/2011 | 650,000 | 555,750 | ||||||
Dean Foods Co. 7.000%, 06/01/2016 | 550,000 | 470,250 | ||||||
Eurofresh, Inc. 11.500%, 01/15/2013 (b) | 175,000 | 42,875 | ||||||
Michael Foods, Inc. 8.000%, 11/15/2013 | 500,000 | 432,500 | ||||||
Pilgrims Pride Corp. 7.625%, 05/01/2015 (Acquired 10/02/2008, Cost $61,743) (a) (d) | 125,000 | 34,375 | ||||||
8.375%, 05/01/2017 (Acquired 05/04/2007 through 07/15/2008, Cost $564,329) (a) (d) | 575,000 | 37,375 | ||||||
Pinnacle Foods Finance LLC / Pinnacle Foods Finance Corp. 9.250%, 04/01/2015 | 350,000 | 227,500 | ||||||
10.625%, 04/01/2017 | 300,000 | 163,500 |
(continued)
96
Ohio National Fund, Inc.
High Income Bond Portfolio (Continued)
High Income Bond Portfolio (Continued)
Schedule of Investments | December 31, 2008 |
Face | Fair | |||||||
Corporate Bonds – 90.0% | Amount | Value | ||||||
Food Products (continued) | ||||||||
Reddy Ice Holdings, Inc. 10.500%, 11/01/2012 | $ | 550,000 | $ | 244,750 | ||||
Smithfield Foods, Inc. 7.750%, 05/15/2013 | 250,000 | 161,875 | ||||||
7.750%, 07/01/2017 | 325,000 | 186,875 | ||||||
3,070,625 | ||||||||
Tobacco – 0.4% | ||||||||
Reynolds American, Inc. 7.750%, 06/01/2018 | 325,000 | 267,054 | ||||||
TOTAL CONSUMER STAPLES | 4,338,929 | |||||||
ENERGY – 8.7% | ||||||||
Energy Equipment & Services – 0.8% | ||||||||
Basic Energy Services, Inc. 7.125%, 04/15/2016 | 375,000 | 215,625 | ||||||
CGG-Veritas 7.750%, 05/15/2017 | 375,000 | 219,375 | ||||||
Complete Production Services, Inc. 8.000%, 12/15/2016 | 225,000 | 142,875 | ||||||
577,875 | ||||||||
Oil, Gas & Consumable Fuels – 7.9% | ||||||||
Chesapeake Energy Corp. 7.500%, 09/15/2013 | 325,000 | 281,125 | ||||||
6.875%, 01/15/2016 | 250,000 | 201,250 | ||||||
6.875%, 11/15/2020 | 425,000 | 308,125 | ||||||
Forest Oil Corp. 7.250%, 06/15/2019 | 450,000 | 330,750 | ||||||
Hilcorp Energy I LP/Hilcorp Finance Co. 7.750%, 11/01/2015 (b) | 400,000 | 284,000 | ||||||
Holly Energy Partners LP 6.250%, 03/01/2015 | 475,000 | 320,625 | ||||||
Inergy LP/Inergy Finance Corp. 6.875%, 12/15/2014 | 575,000 | 451,375 | ||||||
MarkWest Energy Partners LP/ MarkWest Energy Finance 8.750%, 04/15/2018 | 450,000 | 281,250 | ||||||
Pacific Energy Partners LP/Pacific Energy Finance Corp. 7.125%, 06/15/2014 | 100,000 | 87,438 | ||||||
6.250%, 09/15/2015 | 100,000 | 74,463 | ||||||
Petroplus Finance Ltd. 6.750%, 05/01/2014 (b) | 200,000 | 128,000 | ||||||
7.000%, 05/01/2017 (b) | 225,000 | 138,375 | ||||||
Pioneer Natural Resources Co. 6.875%, 05/01/2018 | 300,000 | 211,321 | ||||||
Plains Exploration & Production Co. 7.750%, 06/15/2015 | 450,000 | 342,000 | ||||||
7.000%, 03/15/2017 | 125,000 | 86,250 | ||||||
Range Resources Corp. 7.375%, 07/15/2013 | 125,000 | 109,687 | ||||||
6.375%, 03/15/2015 | 100,000 | 81,500 | ||||||
7.500%, 05/15/2016 | 150,000 | 130,875 | ||||||
Regency Energy Partners LP/Regency Energy Finance Corp. 8.375%, 12/15/2013 | 375,000 | 258,750 | ||||||
SandRidge Energy, Inc. 8.000%, 06/01/2018 (b) | 250,000 | 140,000 | ||||||
Southern Star Central Corp. 6.750%, 03/01/2016 | 225,000 | 187,875 | ||||||
Southwestern Energy Co. 7.500%, 02/01/2018 (b) | 150,000 | 132,000 | ||||||
Tennessee Gas Pipeline Co. 8.375%, 06/15/2032 | 560,000 | 486,019 | ||||||
Williams Cos., Inc. 7.625%, 07/15/2019 | 450,000 | 352,143 | ||||||
7.875%, 09/01/2021 | 250,000 | 191,592 | ||||||
5,596,788 | ||||||||
TOTAL ENERGY | 6,174,663 | |||||||
FINANCIALS – 5.9% | ||||||||
Capital Markets – 0.2% | ||||||||
Nuveen Investments, Inc. 10.500%, 11/15/2015 (b) | 600,000 | 135,750 | ||||||
Consumer Finance – 3.5% | ||||||||
Ford Motor Credit Co. LLC 9.875%, 08/10/2011 | 325,000 | 239,883 | ||||||
7.250%, 10/25/2011 | 550,000 | 402,012 | ||||||
7.500%, 01/13/2012 (c) | 550,000 | 358,187 | ||||||
8.000%, 12/15/2016 | 450,000 | 293,489 | ||||||
GMAC LLC 6.875%, 09/15/2011 | 997,000 | 817,271 | ||||||
7.000%, 02/01/2012 | 332,000 | 265,275 | ||||||
8.000%, 11/01/2031 | 260,000 | 154,825 | ||||||
2,530,942 | ||||||||
Real Estate Investment Trusts – 1.9% | ||||||||
Host Hotels & Resorts LP 7.125%, 11/01/2013 | 200,000 | 162,000 | ||||||
6.875%, 11/01/2014 | 250,000 | 193,750 | ||||||
6.375%, 03/15/2015 | 175,000 | 131,250 | ||||||
6.750%, 06/01/2016 | 100,000 | 73,500 | ||||||
Ventas Realty LP/Ventas Capital Corp. 9.000%, 05/01/2012 | 125,000 | 111,875 | ||||||
6.625%, 10/15/2014 | 475,000 | 363,375 | ||||||
7.125%, 06/01/2015 | 175,000 | 137,812 | ||||||
6.500%, 06/01/2016 | 75,000 | 55,313 | ||||||
6.750%, 04/01/2017 | 125,000 | 95,625 | ||||||
1,324,500 | ||||||||
Real Estate Management & Development – 0.3% | ||||||||
HRP Myrtle Beach Operations LLC/HRP Myrtle Beach Capital Corp. 7.383%, 04/01/2012 (Acquired 03/23/2006, Cost $150,000) (b) (c) (d) (e) | 275,000 | 15,125 | ||||||
lcahn Enterprises LP/lcahn Enterprises Finance Corp. 7.125%, 02/15/2013 | 250,000 | 173,750 | ||||||
188,875 | ||||||||
TOTAL FINANCIALS | 4,180,067 | |||||||
(continued)
97
Ohio National Fund, Inc.
High Income Bond Portfolio (Continued)
High Income Bond Portfolio (Continued)
Schedule of Investments | December 31, 2008 |
Face | Fair | |||||||
Corporate Bonds – 90.0% | Amount | Value | ||||||
HEALTH CARE – 8.7% | ||||||||
Health Care Equipment & Supplies – 2.4% | ||||||||
Accellent, Inc. 10.500%, 12/01/2013 | $ | 375,000 | $ | 258,750 | ||||
Bausch & Lomb, Inc. 9.875%, 11/01/2015 (b) | 350,000 | 263,375 | ||||||
Biomet, Inc. 10.375%, 10/15/2017 | 75,000 | 59,625 | ||||||
11.625%, 10/15/2017 | 850,000 | 731,000 | ||||||
VWR Funding, Inc. 10.250%, 07/15/2015 | 600,000 | 381,000 | ||||||
1,693,750 | ||||||||
Health Care Providers & Services – 6.0% | ||||||||
AMR HoldCo, Inc./EmCare HoldCo, Inc. 10.000%, 02/15/2015 | 300,000 | 280,500 | ||||||
CRC Health Corp. 10.750%, 02/01/2016 | 325,000 | 197,437 | ||||||
HCA, Inc. 9.250%, 11/15/2016 | 550,000 | 506,000 | ||||||
9.625%, 11/15/2016 | 1,475,000 | 1,154,187 | ||||||
7.500%, 11/06/2033 | 225,000 | 105,750 | ||||||
National Mentor Holdings, Inc. 11.250%, 07/01/2014 | 425,000 | 336,813 | ||||||
Omnicare, Inc. 6.875%, 12/15/2015 | 375,000 | 309,375 | ||||||
United Surgical Partners International, Inc. 9.250%, 05/01/2017 | 425,000 | 263,500 | ||||||
Universal Hospital Services, Inc. 5.943%, 06/01/2015 (c) | 150,000 | 92,250 | ||||||
8.500%, 06/01/2015 | 250,000 | 178,750 | ||||||
Vanguard Health Holding Co. I LLC 9.000%, 10/01/2014 | 375,000 | 315,000 | ||||||
0.000% to 10/01/09 then 11.250%, 10/01/2015 | 150,000 | 118,500 | ||||||
Viant Holdings, Inc. 10.125%, 07/15/2017 (b) | 525,000 | 175,875 | ||||||
Yankee Acquisition Corp. 9.750%, 02/15/2017 | 650,000 | 276,250 | ||||||
4,310,187 | ||||||||
Life Sciences Tools & Services – 0.3% | ||||||||
Bio-Rad Laboratories, Inc. 6.125%, 12/15/2014 | 275,000 | 222,063 | ||||||
TOTAL HEALTH CARE | 6,226,000 | |||||||
INDUSTRIALS – 13.4% | ||||||||
Aerospace & Defense – 2.9% | ||||||||
Alliant Techsystems, Inc. 6.750%, 04/01/2016 | 350,000 | 316,750 | ||||||
DRS Technologies, Inc. 6.625%, 02/01/2016 | 200,000 | 201,000 | ||||||
Hawker Beechcraft Acquisition Co. LLC / Hawker Beechcraft Notes Co. 8.875%, 04/01/2015 | 150,000 | 51,750 | ||||||
9.750%, 04/01/2017 | 200,000 | 55,000 | ||||||
L-3 Communications Corp. 6.125%, 07/15/2013 | 175,000 | 161,875 | ||||||
6.125%, 01/15/2014 | 450,000 | 410,625 | ||||||
5.875%, 01/15/2015 | 100,000 | 90,500 | ||||||
6.375%, 10/15/2015 | 225,000 | 211,500 | ||||||
Sequa Corporation 11.750%, 12/01/2015 (b) | 300,000 | 115,500 | ||||||
13.500%, 12/01/2015 (b) | 160,295 | 52,096 | ||||||
TransDigm, Inc. 7.750%, 07/15/2014 | 450,000 | 371,250 | ||||||
2,037,846 | ||||||||
Air Freight & Logistics – 0.4% | ||||||||
CEVA Group PLC 10.000%, 09/01/2014 (b) | 350,000 | 261,188 | ||||||
Building Products – 0.4% | ||||||||
Nortek, Inc. 10.000%, 12/01/2013 | 75,000 | 51,375 | ||||||
8.500%, 09/01/2014 | 250,000 | 58,750 | ||||||
Panolam Industries International, Inc. 10.750%, 10/01/2013 | 225,000 | 91,125 | ||||||
Ply Gem Industries, Inc. 11.750%, 06/15/2013 | 200,000 | 109,000 | ||||||
310,250 | ||||||||
Commercial Services & Supplies – 4.2% | ||||||||
Allied Waste North America, Inc. 7.125%, 05/15/2016 | 375,000 | 341,723 | ||||||
ARAMARK Corp. 6.693%, 02/01/2015 (c) | 250,000 | 190,000 | ||||||
8.500%, 02/01/2015 | 575,000 | 523,250 | ||||||
Browning-Ferris Industries, Inc. 9.250%, 05/01/2021 | 225,000 | 222,755 | ||||||
Global Cash Access LLC/Global Cash Finance Corp. 8.750%, 03/15/2012 | 431,000 | 346,955 | ||||||
RSC Equipment Rental, Inc./RSC Holdings III, LLC 9.500%, 12/01/2014 | 500,000 | 277,500 | ||||||
SGS International, Inc. 12.000%, 12/15/2013 | 575,000 | 291,094 | ||||||
U.S. Investigations Services, Inc. 10.500%, 11/01/2015 (b) | 225,000 | 165,375 | ||||||
11.750%, 05/01/2016 (b) | 225,000 | 142,875 | ||||||
West Corp. 9.500%, 10/15/2014 | 300,000 | 166,500 | ||||||
11.000%, 10/15/2016 | 750,000 | 352,500 | ||||||
3,020,527 | ||||||||
Electrical Equipment – 1.7% | ||||||||
Baldor Electric Co. 8.625%, 02/15/2017 | 400,000 | 300,000 | ||||||
Belden, Inc. 7.000%, 03/15/2017 | 450,000 | 339,750 | ||||||
General Cable Corp. 6.258%, 04/01/2015 (c) | 325,000 | 153,563 | ||||||
7.125%, 04/01/2017 | 250,000 | 166,250 |
(continued)
98
Ohio National Fund, Inc.
High Income Bond Portfolio (Continued)
High Income Bond Portfolio (Continued)
Schedule of Investments | December 31, 2008 |
Face | Fair | |||||||
Corporate Bonds – 90.0% | Amount | Value | ||||||
Electrical Equipment (continued) | ||||||||
Sensus Metering Systems, Inc. 8.625%, 12/15/2013 | $ | 350,000 | $ | 257,250 | ||||
1,216,813 | ||||||||
Machinery – 2.0% | ||||||||
ALH Finance LLC/ALH Finance Corp. 8.500%, 01/15/2013 | 500,000 | 387,500 | ||||||
Esco Corp. 5.871%, 12/15/2013 (b) (c) | 75,000 | 48,375 | ||||||
8.625%, 12/15/2013 (b) | 250,000 | 176,250 | ||||||
Mueller Water Products, Inc. 7.375%, 06/01/2017 | 250,000 | 171,250 | ||||||
SPX Corp. 7.625%, 12/15/2014 (b) | 325,000 | 283,156 | ||||||
Valmont Industries, Inc. 6.875%, 05/01/2014 | 375,000 | 320,625 | ||||||
1,387,156 | ||||||||
Marine – 0.3% | ||||||||
Stena AB 7.500%, 11/01/2013 | 100,000 | 66,625 | ||||||
7.000%, 12/01/2016 | 275,000 | 177,375 | ||||||
244,000 | ||||||||
Road & Rail – 0.8% | ||||||||
Hertz Corp. 8.875%, 01/01/2014 | 400,000 | 248,000 | ||||||
10.500%, 01/01/2016 | 300,000 | 138,375 | ||||||
Kansas City Southern Railway Co. 8.000%, 06/01/2015 | 250,000 | 198,750 | ||||||
585,125 | ||||||||
Trading Companies & Distributors – 0.7% | ||||||||
American Tire Distributors Holdings, Inc. 10.750%, 04/01/2013 | 175,000 | 132,125 | ||||||
Interline Brands, Inc. 8.125%, 06/15/2014 | 475,000 | 377,625 | ||||||
509,750 | ||||||||
TOTAL INDUSTRIALS | 9,572,655 | |||||||
INFORMATION TECHNOLOGY – 5.8% | ||||||||
Computers & Peripherals – 0.5% | ||||||||
Seagate Technology HDD Holdings 6.800%, 10/01/2016 | 450,000 | 236,250 | ||||||
Smart Modular Technologies, Inc. 9.383%, 04/01/2012 (c) | 114,000 | 109,155 | ||||||
345,405 | ||||||||
IT Services – 3.7% | ||||||||
Ceridian Corp. 11.500%, 11/15/2015 (b) | 550,000 | 293,562 | ||||||
CompuCom Systems, Inc. 12.500%, 10/01/2015 (b) | 450,000 | 306,000 | ||||||
First Data Corp. 9.875%, 09/24/2015 | 575,000 | 350,750 | ||||||
Intergen NV 9.000%, 06/30/2017 (b) | 475,000 | 391,875 | ||||||
iPayment, Inc. 9.750%, 05/15/2014 | 350,000 | 176,750 | ||||||
Lender Processing Services, Inc. 8.125%, 07/01/2016 | 175,000 | 156,844 | ||||||
SunGard Data Systems, Inc. 9.125%, 08/15/2013 | 350,000 | 304,500 | ||||||
10.625%, 05/15/2015 (b) | 100,000 | 86,000 | ||||||
10.250%, 08/15/2015 | 750,000 | 498,750 | ||||||
Unisys Corp. 12.500%, 01/15/2016 | 350,000 | 99,750 | ||||||
2,664,781 | ||||||||
Office Electronics – 0.1% | ||||||||
Xerox Corp. 7.625%, 06/15/2013 | 100,000 | 83,534 | ||||||
Semiconductor & Semiconductor Equipment – 0.4% | ||||||||
Freescale Semiconductor, Inc. 8.875%, 12/15/2014 | 375,000 | 166,875 | ||||||
9.125%, 12/15/2014 | 475,000 | 111,625 | ||||||
278,500 | ||||||||
Software – 1.1% | ||||||||
Activant Solutions, Inc. 9.500%, 05/01/2016 | 400,000 | 188,000 | ||||||
Open Solutions, Inc. 9.750%, 02/01/2015 (b) | 375,000 | 58,125 | ||||||
Serena Software, Inc. 10.375%, 03/15/2016 | 375,000 | 192,188 | ||||||
SS&C Technologies, Inc. 11.750%, 12/01/2013 | 350,000 | 309,312 | ||||||
747,625 | ||||||||
TOTAL INFORMATION TECHNOLOGY | 4,119,845 | |||||||
MATERIALS – 6.7% | ||||||||
Chemicals – 2.7% | ||||||||
Airgas, Inc. 7.125%, 10/01/2018 (b) | 100,000 | 85,750 | ||||||
LyondellBasell Industries AF SCA 8.375%, 08/15/2015 (b) | 225,000 | 6,750 | ||||||
Chemtura Corp. 6.875%, 06/01/2016 | 350,000 | 180,250 | ||||||
Hexion US Finance Corp./Hexion Nova Scotia Finance ULC 9.750%, 11/15/2014 | 375,000 | 108,750 | ||||||
Invista 9.250%, 05/01/2012 (b) | 275,000 | 193,875 | ||||||
Koppers, Inc. 9.875%, 10/15/2013 | 200,000 | 185,000 | ||||||
Nalco Finance Holdings LLC/Nalco Finance Holdings, Inc. 0.000% to 02/01/2009 then | 66,000 | 47,850 | ||||||
9.000%, 02/01/2014 | ||||||||
Nalco Co. 7.750%, 11/15/2011 | 125,000 | 120,625 | ||||||
8.875%, 11/15/2013 | 425,000 | 361,250 | ||||||
Terra Capital, Inc. 7.000%, 02/01/2017 | 525,000 | 388,500 |
(continued)
99
Ohio National Fund, Inc.
High Income Bond Portfolio (Continued)
High Income Bond Portfolio (Continued)
Schedule of Investments | December 31, 2008 |
Face | Fair | |||||||
Corporate Bonds – 90.0% | Amount | Value | ||||||
Chemicals (continued) | ||||||||
The Mosaic Co. 7.625%, 12/01/2016 (b) | $ | 175,000 | $ | 140,193 | ||||
Union Carbide Corp. 7.875%, 04/01/2023 | 100,000 | 89,615 | ||||||
7.500%, 06/01/2025 | 50,000 | 41,210 | ||||||
1,949,618 | ||||||||
Containers & Packaging – 2.7% | ||||||||
Ball Corp. 6.625%, 03/15/2018 | 250,000 | 224,375 | ||||||
Berry Plastic Holdings Corp. 8.875%, 09/15/2014 | 375,000 | 165,000 | ||||||
Crown Americas LLC/Crown Americas Capital Corp. 7.750%, 11/15/2015 | 600,000 | 600,000 | ||||||
Graphic Packaging International Corp. 9.500%, 08/15/2013 | 650,000 | 451,750 | ||||||
Owens-Brockway Glass Container, Inc. 8.250%, 05/15/2013 | 250,000 | 247,500 | ||||||
Rock-Tenn Co. 9.250%, 03/15/2016 (b) | 250,000 | 233,750 | ||||||
Russell-Stanley Holdings, Inc. 9.000%, 11/30/2008 (Acquired 11/20/2001 and 05/30/2005, Cost $4,325) (a) (b) (d) (e) (f) | 3,643 | 423 | ||||||
1,922,798 | ||||||||
Metals & Mining – 1.1% | ||||||||
Aleris International, Inc. 9.000%, 12/15/2014 | 175,000 | 11,375 | ||||||
10.000%, 12/15/2016 | 250,000 | 41,875 | ||||||
Compass Minerals International, Inc. 12.000%, 06/01/2013 | 249,000 | 250,868 | ||||||
Freeport-McMoRan Copper & Gold, Inc. 8.375%, 04/01/2017 | 400,000 | 328,454 | ||||||
Novelis, Inc. 7.250%, 02/15/2015 | 209,000 | 122,265 | ||||||
754,837 | ||||||||
Paper & Forest Products – 0.2% | ||||||||
NewPage Corp. 10.000%, 05/01/2012 | 100,000 | 44,500 | ||||||
12.000%, 05/01/2013 | 425,000 | 123,250 | ||||||
167,750 | ||||||||
TOTAL MATERIALS | 4,795,003 | |||||||
TELECOMMUNICATION SERVICES – 6.6% | ||||||||
Diversified Telecommunication Services – 1.9% | ||||||||
Fairpoint Communications, Inc. 13.125%, 04/01/2018 (b) | 375,000 | 181,875 | ||||||
Qwest Corp. 8.875%, 03/15/2012 | 875,000 | 813,750 | ||||||
Valor Telecommunications Enterprises, LLC/Valor Telecommunications Finance Corp. 7.750%, 02/15/2015 | 100,000 | 83,569 | ||||||
Windstream Corp. 8.625%, 08/01/2016 | 300,000 | 267,000 | ||||||
1,346,194 | ||||||||
Wireless Telecommunication Services – 4.7% | ||||||||
ALLTEL Communications, Inc. 10.375%, 12/01/2017 (b) | 300,000 | 337,500 | ||||||
Centennial Communications Corp. 9.633%, 01/01/2013 (c) | 275,000 | 268,125 | ||||||
10.000%, 01/01/2013 | 175,000 | 182,000 | ||||||
8.125%, 02/01/2014 | 100,000 | 102,000 | ||||||
Digicel Group Ltd. 9.125%, 01/15/2015 (b) | 487,000 | 309,245 | ||||||
Digicel Ltd. 9.250%, 09/01/2012 (b) | 200,000 | 171,000 | ||||||
MetroPCS Wireless, Inc. 9.250%, 11/01/2014 | 575,000 | 517,500 | ||||||
Nextel Communications, Inc. 7.375%, 08/01/2015 | 425,000 | 178,581 | ||||||
Rogers Wireless, Inc. 8.000%, 12/15/2012 | 325,000 | 312,813 | ||||||
Sprint Capital Corp. 6.900%, 05/01/2019 | 675,000 | 480,037 | ||||||
Sprint Nextel Corp. 6.000%, 12/01/2016 | 725,000 | 511,857 | ||||||
3,370,658 | ||||||||
TOTAL TELECOMMUNICATION SERVICES | 4,716,852 | |||||||
UTILITIES – 5.3% | ||||||||
Electric Utilities – 2.7% | ||||||||
Edison Mission Energy 7.750%, 06/15/2016 | 425,000 | 380,375 | ||||||
7.000%, 05/15/2017 | 500,000 | 437,500 | ||||||
NV Energy, Inc. 6.750%, 08/15/2017 | 425,000 | 328,372 | ||||||
Texas Competitive Electric Holdings Co. LLC 10.500%, 11/01/2015 (b) | 1,100,000 | 786,500 | ||||||
1,932,747 | ||||||||
Gas Utilities – 0.6% | ||||||||
AmeriGas Partners LP 7.250%, 05/20/2015 | 150,000 | 123,000 | ||||||
7.125%, 05/20/2016 | 400,000 | 322,000 | ||||||
445,000 | ||||||||
Independent Power Producers & Energy Traders – 1.9% | ||||||||
Dynegy Holdings, Inc. 7.750%, 06/01/2019 | 675,000 | 469,125 | ||||||
Energy Future Competitive Holdings Co. 10.875%, 11/01/2017 (b) | 100,000 | 71,500 | ||||||
NRG Energy, Inc. 7.250%, 02/01/2014 | 375,000 | 351,563 | ||||||
7.375%, 02/01/2016 | 300,000 | 279,750 | ||||||
7.375%, 01/15/2017 | 200,000 | 184,500 | ||||||
1,356,438 | ||||||||
(continued)
100
Ohio National Fund, Inc.
High Income Bond Portfolio (Continued)
High Income Bond Portfolio (Continued)
Schedule of Investments | December 31, 2008 |
Face | Fair | |||||||
Corporate Bonds – 90.0% | Amount | Value | ||||||
Multi-Utilities – 0.1% | ||||||||
FPL Energy National Wind Portfolio 6.125%, 03/25/2019 (b) | $ | 75,576 | $ | 65,773 | ||||
Teco Finance, Inc. 6.750%, 05/01/2015 | 50,000 | 41,235 | ||||||
107,008 | ||||||||
TOTAL UTILITIES | 3,841,193 | |||||||
Total Corporate Bonds (Cost $96,329,842) | $ | 64,231,311 | ||||||
Fair | ||||||||
Preferred Stocks – 0.2% | Shares | Value | ||||||
FINANCIALS – 0.2% | ||||||||
Consumer Finance – 0.2% | ||||||||
Preferred Blocker Inc. 9.000%, cumulative (b) (f) | 346 | $ | 166,080 | |||||
Total Preferred Stocks (Cost $0) | $ | 166,080 | ||||||
Fair | ||||||||
Common Stocks – 0.0% | Shares | Value | ||||||
CONSUMER DISCRETIONARY – 0.0% | ||||||||
Media – 0.0% | ||||||||
Virgin Media, Inc. | 507 | $ | 2,530 | |||||
TOTAL CONSUMER DISCRETIONARY | 2,530 | |||||||
INDUSTRIALS – 0.0% | ||||||||
Building Products – 0.0% | ||||||||
Neenah Enterprises, Inc. (a) | 1,989 | 358 | ||||||
TOTAL INDUSTRIALS | 358 | |||||||
Total Common Stocks (Cost $3,739) | $ | 2,888 | ||||||
Fair | ||||||||
Warrants – 0.0% | Contracts | Value | ||||||
CONSUMER DISCRETIONARY – 0.0% | ||||||||
Media – 0.0% | ||||||||
Sirius XM Radio, Inc. Expiration: March 2010, Exercise Price: $9.83 (a) | 50 | $ | 26 | |||||
Total Warrants (Cost $0) | $ | 26 | ||||||
Face | Fair | |||||||
Repurchase Agreements – 4.1% | Amount | Value | ||||||
U.S. Bank 0.010% 01/02/2009 | $ | 2,908,000 | $ | 2,908,000 | ||||
Repurchase price $2,908,002 | ||||||||
Collateralized by: | ||||||||
Various Agency Mortgage- Backed Securities 2.395% to 5.000%, Due 09/01/2018 through 05/15/2033 | ||||||||
Fair Value: $2,966,017 | ||||||||
Total Repurchase Agreements (Cost $2,908,000) | $ | 2,908,000 | ||||||
Total Investments – 94.3% (Cost $99,241,581) (g) | $ | 67,308,305 | ||||||
Other Assets in Excess of Liabilities – 5.7% | 4,035,129 | |||||||
Net Assets – 100.0% | $ | 71,343,434 | ||||||
Percentages are stated as a percent of net assets.
Footnotes:
(a) | Non-income producing security. | |
(b) | Security exempt from registration under Regulation D of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified buyers. At December 31, 2008, the value of these securities totaled $10,484,029 or 14.7% of the Portfolio’s net assets. Unless otherwise noted by (e) below, these securities were deemed liquid pursuant to procedures approved by the Board of Directors. | |
(c) | Security is a variable rate instrument in which the coupon rate is adjusted quarterly or semi-annually in concert with U.S. LIBOR. Interest rates stated are those in effect at December 31, 2008. | |
(d) | Represents a security that is in default. | |
(e) | Represents a security deemed to be illiquid. At December 31, 2008, the value of illiquid securities in the Portfolio totaled $193,829 or 0.3% of the Portfolio’s net assets. | |
(f) | Market quotations for these investments were not readily available at December 31, 2008. As discussed in Note 2 of the Notes to Financial Statements, prices for theses issues were derived from estimates of fair market value using methods determined in good faith by the Fund’s Pricing Committee under the supervision of the Board. At December 31, 2008, the value of these securities totaled $341,503 or 0.5% of the Portfolio’s net assets. | |
(g) | Represents cost for financial reporting purposes, which may differ from cost basis for Federal income tax purposes. See also Note 8 of the Notes to Financial Statements. |
The accompanying notes are an integral part of these financial statements.
101
Ohio National Fund, Inc.
High Income Bond Portfolio
High Income Bond Portfolio
Statement of Assets and Liabilities
December 31, 2008
Assets: | ||||
Investments in securities, at fair value (Cost $96,333,581) | $ | 64,400,305 | ||
Repurchase agreements | 2,908,000 | |||
Cash | 290 | |||
Receivable for securities sold | 374,169 | |||
Receivable for fund shares sold | 1,854,178 | |||
Dividends and accrued interest receivable | 1,923,506 | |||
Prepaid expenses and other assets | 128 | |||
Total assets | 71,460,576 | |||
Liabilities: | ||||
Payable for fund shares redeemed | 47,296 | |||
Payable for investment management services | 41,012 | |||
Accrued custody expense | 870 | |||
Accrued professional fees | 11,744 | |||
Accrued accounting fees | 11,377 | |||
Accrued printing and filing fees | 4,843 | |||
Total liabilities | 117,142 | |||
Net assets | $ | 71,343,434 | ||
Net assets consist of: | ||||
Par value, $1 per share | $ | 9,894,782 | ||
Paid-in capital in excess of par value | 89,201,477 | |||
Accumulated net realized loss on investments | (2,993,731 | ) | ||
Net unrealized depreciation on investments | (31,933,276 | ) | ||
Undistributed net investment income | 7,174,182 | |||
Net assets | $ | 71,343,434 | ||
Shares outstanding | 9,894,782 | |||
Authorized Fund shares allocated to Portfolio | 15,000,000 | |||
Net asset value per share | $ | 7.21 | ||
Statement of Operations
For the Year Ended December 31, 2008
Investment income: | ||||
Interest | $ | 7,897,071 | ||
Dividends | 81 | |||
Total investment income | 7,897,152 | |||
Expenses: | ||||
Management fees | 611,233 | |||
Custodian fees | 5,638 | |||
Directors’ fees | 7,029 | |||
Professional fees | 16,640 | |||
Accounting fees | 66,787 | |||
Printing and filing fees | 9,741 | |||
Compliance expense | 4,911 | |||
Other | 991 | |||
Total expenses | 722,970 | |||
Net investment income | 7,174,182 | |||
Realized/unrealized gain (loss) on investments: | ||||
Net realized gain (loss) on investments | (516,850 | ) | ||
Change in unrealized appreciation/depreciation on investments | (29,655,248 | ) | ||
Net realized/unrealized gain (loss) on investments | (30,172,098 | ) | ||
Change in net assets from operations | $ | (22,997,916 | ) | |
The accompanying notes are an integral part of these financial statements.
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High Income Bond Portfolio
High Income Bond Portfolio
Statements of Changes in Net Assets
Years Ended December 31, | ||||||||
2008 | 2007 | |||||||
Increase (Decrease) in Net Assets: | ||||||||
Operations: | ||||||||
Net investment income | $ | 7,174,182 | $ | 6,120,633 | ||||
Net realized gain (loss) on investments and foreign currency related transactions | (516,850 | ) | 663,311 | |||||
Change in unrealized appreciation/depreciation on investments | (29,655,248 | ) | (4,275,593 | ) | ||||
Change in net assets from operations | (22,997,916 | ) | 2,508,351 | |||||
Capital transactions: | ||||||||
Received from shares sold | 46,469,522 | 39,080,391 | ||||||
Paid for shares redeemed | (41,091,673 | ) | (26,929,894 | ) | ||||
Change in net assets from capital transactions | 5,377,849 | 12,150,497 | ||||||
Change in net assets | (17,620,067 | ) | 14,658,848 | |||||
Net Assets: | ||||||||
Beginning of year | 88,963,501 | 74,304,653 | ||||||
End of year | $ | 71,343,434 | $ | 88,963,501 | ||||
Undistributed net investment income | $ | 7,174,182 | $ | 6,080,780 | ||||
Financial Highlights
Years Ended December 31, | ||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
Selected Per-Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 9.68 | $ | 9.35 | $ | 8.49 | $ | 8.65 | $ | 7.84 | ||||||||||
Operations: | ||||||||||||||||||||
Net investment income | 0.68 | 0.59 | 0.47 | 0.60 | (a) | 0.52 | ||||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency related transactions | (3.15 | ) | (0.26 | ) | 0.39 | (0.34 | ) | 0.32 | ||||||||||||
Total from operations | (2.47 | ) | 0.33 | 0.86 | 0.26 | 0.84 | ||||||||||||||
Distributions: | ||||||||||||||||||||
Distributions from net investment income | — | — | — | (0.42 | ) | (0.03 | ) | |||||||||||||
Net asset value, end of year | $ | 7.21 | $ | 9.68 | $ | 9.35 | $ | 8.49 | $ | 8.65 | ||||||||||
Total return | –25.52 | % | 3.53 | % | 10.13 | % | 2.99 | % | 10.67 | % | ||||||||||
Ratios and supplemental data: | ||||||||||||||||||||
Net assets at end of year (millions) | $ | 71.3 | $ | 89.0 | $ | 74.3 | $ | 54.0 | $ | 42.0 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Expenses | 0.88 | % | 0.87 | % | 0.91 | % | 0.97 | % | 0.93 | % | ||||||||||
Net investment income | 8.77 | % | 7.05 | % | 7.12 | % | 6.89 | % | 7.20 | % | ||||||||||
Portfolio turnover rate | 18 | % | 32 | % | 32 | % | 36 | % | 40 | % |
(a) | Calculated using the average daily shares method. |
The accompanying notes are an integral part of these financial statements.
103
Ohio National Fund, Inc.
Capital Growth Portfolio
Capital Growth Portfolio
Objective/Strategy
The Capital Growth Portfolio seeks capital appreciation by investing in and actively managing equity securities of small-cap growth companies.
Performance as of December 31, 2008
Average Annual Total Returns: | ||||
One year | -36.36% | |||
Five years | 0.88% | |||
Ten years | 4.95% |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price and reinvestment of dividends and capital gains. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost.
The Portfolio is not open to direct retail investment. Beneficial interest in shares is obtained solely by purchase of variable life insurance policies and variable annuity contracts. Actual performance results for variable annuity and variable universal life contracts will be lower due to contract charges. Consult your contract for applicable charges.
Comments
For the year ended December 31, 2008, the Capital Growth Portfolio returned -36.36% versus -38.54% for the current benchmark, the Russell 2000 Growth Index.
The Portfolio outperformed the benchmark Russell 2000 Growth Index during the fourth quarter and the full year of 2008. The average small-cap growth manager is down more than forty-two percent for 2008, with fewer than eighteen percent beating the benchmark over the full year, according to Merrill Lynch research. Relative to the benchmark, Information Technology and Consumer Discretionary outperformed during 2008 due to strong stock selection, while Financials, Energy and Industrials lagged. In Information Technology, the Portfolio had strong relative performance from a number of stocks, including Quality Systems, Inc., EMS Technologies, Inc. and Eagle Test Systems, Inc. In Financials, we lagged due in large part to our investment in risk-management consultant FCStone Group, Inc., which traded down due to disappointing earnings; consequently, we sold the stock. In Energy, the Portfolio lagged due in part to OYO Geospace Corp., which sold off during the first quarter due to delays in receiving anticipated contracts. We continue to hold the stock because we believe it will rebound due to the launch of the company’s new wireless data-acquisition system. Polypore International, Inc. pulled down returns in Industrials after announcing that it lost a major contract. We sold the stock.(1)
Our strongest stocks for the year were Thoratec Corp., Quality Systems, Inc., EMS Technologies, Inc., Mentor Corp. and Myriad Genetics, Inc. After years of development, Thoratec Corp. received U.S. Food and Drug Administration approval for expanded use of its artificial heart in April and the company continues to exceed earnings expectations. Quality Systems, Inc. markets information-processing systems to medical and dental group practices. The company has exceeded revenue and profit expectations and the stock recently got a boost after President-elect Barack Obama indicated that he believes investment in healthcare information technology will help decrease overall healthcare costs. EMS Technologies, Inc. provides products to the satellite and wireless communications markets. The company beat earnings expectations and reiterated full-year guidance, which is notable given current macroeconomic headwinds. Mentor Corp. develops, manufactures and markets a range of products serving the aesthetic medical market, including plastic and reconstructive surgery. The company was purchased during the fourth quarter at a ninety percent premium. Myriad Genetics, Inc. is a profitable biotechnology company. The company funds drug development using cash generated from its diagnostic business. During the third quarter, the company announced that their board of directors is considering splitting the two business units, which attracted significant investor interest due to the strength and growth potential of its diagnostic business.(1)
Laggards for the year included OYO Geospace Corp., FCStone Group, Inc., Eclipsys Corp., Icon PLC and Lufkin Industries, Inc. Eclipsys Corp. is a global healthcare information technology provider. The company’s primary customers are hospitals implementing clinical- and financial-management systems. Concerns over hospital capital expenditures in 2009 due to the credit crisis caused the stock to sell off dramatically. We believe the stock will rebound because healthcare information technology is one of the cornerstones of Obama’s healthcare-reform plan. A majority of the company’s revenues are recurring and highly visible and we believe the company will continue to meet or exceed guidance. Icon PLC is a contract-research organization that sold off with its peers during the fourth quarter due to concerns that a tight market for biotech funding would decrease the group’s earnings. We continue to hold the stock because we believe Icon PLC is a leader in this area and that the vast majority of its clients are well-capitalized. Lufkin Industries, Inc., a producer of oil pump-jack units, suffered in the fourth quarter due to the continued decline in oil prices that could negatively impact demand for the company’s products. We continue to hold the stock because the company has a large backlog, it is the supplier of choice in the Bakken Shale region and it also has exposure to wind energy.(1)
Equity markets continue to face headwinds with news of declining economic conditions (e.g., deteriorating home values, rising unemployment, credit-market illiquidity, weak Gross Domestic Product (“GDP”) numbers and expectations of disappointing fourth-quarter earnings and earnings guidance). These concerns could continue to pressure equity markets. We believe that we are entering 2009 on steadier ground with the Federal Reserve setting a near-zero target interest rate, deploying bailout money, a new president with a focus on economic stabilization and on-going worldwide governmental efforts to dampen the financial crisis. We expect this recession to be deeper and last longer than average but we are already more than a year into it. In October, consumers stopped spending, energy and materials prices collapsed and GDP contracted sharply. This should at least set up some easy economic comparisons beginning in the fourth quarter of 2009. Historically, markets tend to recover six to nine months before the economy; therefore, equity markets could begin recovering early in the year.
The era of healthcare reform is at hand, in our view. Healthcare costs have been spiraling out of control for so long that it finally
(continued)
104
Ohio National Fund, Inc.
Capital Growth Portfolio (Continued)
Capital Growth Portfolio (Continued)
reached the threshold of pain for all stakeholders: patients, politicians, providers and payers. What form healthcare reform will take is, at best, a guess. What is certain, however, is that the United States must get healthcare costs under control or risk having healthcare expenditures crowd out other investments the country must make to remain competitive. Therefore, we are focused on companies that will benefit from government investments in healthcare information technology (e.g., Eclipsys Corp.) and those that have developed cost-effective medical technologies for large unmet medical needs (e.g., Thoratec Corp).
In the face of a sharply weakening global economy, the prices of virtually all commodities have collapsed in the past months. We expect energy demand to remain anemic in the near term but supplies should begin to tighten over the next 12 months following a dramatic cutback in capital spending. If the economy begins to recover in the second half of 2009, commodity prices could snap back in a V-shaped bottom as the market shifts its focus back to supply-side challenges. In the current environment, we believe exploration-and-production (“E&P”) companies will outperform oil services. We also believe that oil prices likely will recover before natural gas prices, given the aggressive production cuts by the Organization of the Petroleum Exporting Countries (“OPEC”)
Financial services stocks at some point should see the benefits of the many different policy responses the U.S. government has adopted to deal with the present economic downturn. Unfortunately, when the financial companies report fourth-quarter earnings results we are likely to see some continued asset write-downs. We are still concerned that the fundamentals for most financial-services industries are not yet showing signs of recovery but, as always, we continue to look for those rare niches of the sector where revenue and earnings growth remain possible, such as pawn-shop operator Cash America International, Inc.
During the fourth quarter, consumer spending continued to deteriorate as equity and home prices continued to fall and unemployment picked up. With that said, we are beginning to see some encouraging signs on the consumer front in the form of sharply lower gas prices, the lowest conforming mortgage rates in decades and the potential for improved consumer confidence as an incoming president with high approval ratings replaces one with the lowest on record. With Consumer Discretionary names, we continue to favor companies with strong competitive positions and balance sheets.
The near-term fundamental outlook for the Information Technology sector is negative, as data points continue to suggest a worsening global demand climate from both consumers and businesses. Over the course of 2009, however, investors may anticipate an economic stabilization several quarters ahead of the data. Therefore, we will remain defensive in the early part of the year, investing in less economically sensitive companies. We will look to gradually increase our exposure to cyclicals over the course of the year when we have conviction that the environment is, in fact, stabilizing. Currently, we like companies with exposure to government, healthcare and education channels; companies with a large portion of recurring revenue; and companies that provide products that help reduce costs. For example, Compellent Technologies, Inc. provides cheap storage systems, serving a market where data is growing exponentially, independent of the economy.
(1) | The Portfolio’s composition is subject to change. Holdings and weightings are as of December 31, 2008. |
Change in Value of $10,000 Investment
Hypothetical illustration based on past performance. Future performance will vary. The Portfolio’s returns reflect reinvested dividends. The Portfolio’s holdings may differ significantly from the securities in the index. The index is unmanaged and therefore does not reflect the cost of portfolio management and accounting.
The Russell 2000 Growth Index is a market-weighted total return index that measures the performance of companies within the Russell 2000 Index having higher price-to-book ratios and higher forecasted growth values. The Russell 2000 Index includes the 2000 firms from the Russell 3000 Index with the smallest market capitalizations. The Russell 3000 Index represents 98% of the investable U.S. equity market. The index presented herein includes the effects of reinvested dividends.
(continued)
105
Ohio National Fund, Inc.
Capital Growth Portfolio (Continued)
Capital Growth Portfolio (Continued)
Portfolio Composition as of December 31, 2008 (1)
% of Net Assets | |||
Common Stocks (3) | 97.5 | ||
Repurchase Agreements | |||
Less Net Liabilities | 2.5 | ||
100.0 | |||
Top 10 Portfolio Holdings as of December 31, 2008 (1) (2)
% of Net Assets | |||||||
1. | Thoratec Corp. | 4.8 | |||||
2. | EMS Technologies, Inc. | 3.6 | |||||
3. | Eclipsys Corp. | 3.6 | |||||
4. | Quality Systems, Inc. | 3.2 | |||||
5. | Bally Technologies, Inc. | 2.8 | |||||
6. | FTI Consulting, Inc. | 2.7 | |||||
7. | Genesco, Inc. | 2.6 | |||||
8. | Waste Connections, Inc. | 2.6 | |||||
9. | Ansys, Inc. | 2.6 | |||||
10. | Coherent, Inc. | 2.4 |
(1) | Composition of Portfolio subject to change. | |
(2) | Short-term investments have been excluded from the list of Top 10 Portfolio holdings. | |
(3) | Sectors: |
% of Net Assets | |||
Health Care | 26.5 | ||
Information Technology | 23.7 | ||
Consumer Discretionary | 16.1 | ||
Industrials | 14.4 | ||
Energy | 5.9 | ||
Materials | 5.9 | ||
Financials | 4.2 | ||
Consumer Staples | 0.8 | ||
97.5 | |||
106
Ohio National Fund, Inc.
Capital Growth Portfolio
Capital Growth Portfolio
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 97.5% | Shares | Value | ||||||
CONSUMER DISCRETIONARY – 16.1% | ||||||||
Diversified Consumer Services – 1.4% | ||||||||
American Public Education, Inc. (a) | 7,830 | $ | 291,198 | |||||
K12, Inc. (a) | 4,180 | 78,375 | ||||||
369,573 | ||||||||
Hotels, Restaurants & Leisure – 7.0% | ||||||||
Bally Technologies, Inc. (a) | 31,445 | 755,623 | ||||||
BJ’s Restaurants, Inc. (a) | 28,745 | 309,584 | ||||||
Red Robin Gourmet Burgers, Inc. (a) | 4,480 | 75,398 | ||||||
Shuffle Master, Inc. (a) | 63,870 | 316,795 | ||||||
WMS Industries, Inc. (a) | 16,355 | 439,950 | ||||||
1,897,350 | ||||||||
Household Durables – 2.2% | ||||||||
Universal Electronics, Inc. (a) | 37,200 | 603,384 | ||||||
Internet & Catalog Retail – 0.1% | ||||||||
U.S. Auto Parts Network, Inc. (a) | 16,475 | 22,900 | ||||||
Media – 2.8% | ||||||||
Entravision Communications Corp. Class A (a) | 60,615 | 94,559 | ||||||
John Wiley & Sons, Inc. | 12,305 | 437,812 | ||||||
Lions Gate Entertainment Corp. (a) | 43,880 | 241,340 | ||||||
773,711 | ||||||||
Specialty Retail – 2.6% | ||||||||
Genesco, Inc. (a) | 41,925 | 709,371 | ||||||
TOTAL CONSUMER DISCRETIONARY | 4,376,289 | |||||||
CONSUMER STAPLES – 0.8% | ||||||||
Personal Products – 0.8% | ||||||||
Herbalife Ltd. | 9,930 | 215,282 | ||||||
TOTAL CONSUMER STAPLES | 215,282 | |||||||
ENERGY – 5.9% | ||||||||
Energy Equipment & Services – 4.3% | ||||||||
Core Laboratories N.V. | 4,465 | 267,275 | ||||||
Lufkin Industries, Inc. | 16,545 | 570,803 | ||||||
OYO Geospace Corp. (a) | 19,205 | 335,511 | ||||||
1,173,589 | ||||||||
Oil, Gas & Consumable Fuels – 1.6% | ||||||||
Denbury Resources, Inc. (a) | 9,150 | 99,918 | ||||||
McMoRan Exploration Co. (a) | 21,830 | 213,934 | ||||||
Petroleum Development Corp. (a) | 4,325 | 104,103 | ||||||
417,955 | ||||||||
TOTAL ENERGY | 1,591,544 | |||||||
FINANCIALS – 4.2% | ||||||||
Capital Markets – 1.2% | ||||||||
Investment Technology Group, Inc. (a) | 14,815 | 336,597 | ||||||
Commercial Banks – 1.0% | ||||||||
First Commonwealth Financial Corp. | 21,230 | 262,828 | ||||||
Consumer Finance – 2.0% | ||||||||
Cash America International, Inc. | 19,315 | 528,265 | ||||||
TOTAL FINANCIALS | 1,127,690 | |||||||
HEALTH CARE – 26.5% | ||||||||
Biotechnology – 3.8% | ||||||||
BioMarin Pharmaceutical, Inc. (a) | 15,720 | 279,816 | ||||||
Cubist Pharmaceuticals, Inc. (a) | 16,510 | 398,882 | ||||||
Myriad Genetics, Inc. (a) | 3,470 | 229,922 | ||||||
Onyx Pharmaceuticals, Inc. (a) | 3,845 | 131,345 | ||||||
1,039,965 | ||||||||
Health Care Equipment & Supplies – 10.6% | ||||||||
American Medical System Holdings, Inc. (a) | 61,670 | 554,413 | ||||||
Cutera, Inc. (a) | 33,645 | 298,431 | ||||||
Hansen Medical, Inc. (a) | 7,185 | 51,876 | ||||||
ResMed, Inc. (a) | 9,490 | 355,685 | ||||||
SurModics, Inc. (a) | 12,320 | 311,326 | ||||||
Thoratec Corp. (a) | 40,340 | 1,310,647 | ||||||
2,882,378 | ||||||||
Health Care Providers & Services – 5.4% | ||||||||
Amedisys, Inc. (a) | 6,325 | 261,475 | ||||||
Centene Corp. (a) | 31,035 | 611,700 | ||||||
Lincare Holdings, Inc. (a) | 15,825 | 426,167 | ||||||
MWI Veterinary Supply, Inc. (a) | 5,560 | 149,898 | ||||||
1,449,240 | ||||||||
Health Care Technology – 4.5% | ||||||||
Eclipsys Corp. (a) | 68,920 | 977,975 | ||||||
Vital Images, Inc. (a) | 16,815 | 233,897 | ||||||
1,211,872 | ||||||||
Life Sciences Tools & Services – 2.2% | ||||||||
ICON PLC – ADR (a) | 30,590 | 602,317 | ||||||
TOTAL HEALTH CARE | 7,185,772 | |||||||
INDUSTRIALS – 14.4% | ||||||||
Building Products – 1.1% | ||||||||
Ameron International Corp. | 4,860 | 305,791 | ||||||
Commercial Services & Supplies – 6.2% | ||||||||
Corrections Corp. of America (a) | 26,389 | 431,724 | ||||||
The GEO Group, Inc. (a) | 29,900 | 539,097 | ||||||
Waste Connections, Inc. (a) | 22,413 | 707,578 | ||||||
1,678,399 | ||||||||
Construction & Engineering – 2.3% | ||||||||
Northwest Pipe Co. (a) | 14,465 | 616,354 | ||||||
Professional Services – 4.8% | ||||||||
FTI Consulting, Inc. (a) | 16,550 | 739,454 | ||||||
Monster Worldwide, Inc. (a) | 22,250 | 269,003 | ||||||
School Specialty, Inc. (a) | 14,895 | 284,792 | ||||||
1,293,249 | ||||||||
TOTAL INDUSTRIALS | 3,893,793 | |||||||
INFORMATION TECHNOLOGY – 23.7% | ||||||||
Communications Equipment – 3.6% | ||||||||
EMS Technologies, Inc. (a) | 37,815 | 978,274 | ||||||
Computers & Peripherals – 3.2% | ||||||||
Compellent Technologies, Inc. (a) | 59,335 | 577,330 |
(continued)
107
Ohio National Fund, Inc.
Capital Growth Portfolio (Continued)
Capital Growth Portfolio (Continued)
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 97.5% | Shares | Value | ||||||
Computers & Peripherals (continued) | ||||||||
Netezza Corp. (a) | 42,655 | $ | 283,229 | |||||
860,559 | ||||||||
Electronic Equipment, Instruments & Components – 3.3% | ||||||||
Coherent, Inc. (a) | 30,225 | 648,629 | ||||||
Dolby Laboratories, Inc. Class A (a) | 7,815 | 256,019 | ||||||
904,648 | ||||||||
Internet Software & Services – 0.5% | ||||||||
Internet Capital Group, Inc. (a) | 24,445 | 133,225 | ||||||
IT Services – 0.7% | ||||||||
Lender Processing Services, Inc. | 6,535 | 192,456 | ||||||
Semiconductors & Semiconductor Equipment – 1.0% | ||||||||
Advanced Energy Industries, Inc. (a) | 26,980 | 268,451 | ||||||
Software – 11.4% | ||||||||
Ansys, Inc. (a) | 24,985 | 696,832 | ||||||
FactSet Research Systems, Inc. | 12,407 | 548,886 | ||||||
Macrovision Solutions Corp. (a) | 33,040 | 417,956 | ||||||
Quality Systems, Inc. | 19,880 | 867,165 | ||||||
TIBCO Software, Inc. (a) | 106,160 | 550,970 | ||||||
3,081,809 | ||||||||
TOTAL INFORMATION TECHNOLOGY | 6,419,422 | |||||||
MATERIALS – 5.9% | ||||||||
Chemicals – 4.6% | ||||||||
Huntsman Corp. | 77,455 | 266,445 | ||||||
Intrepid Potash, Inc. (a) | 26,485 | 550,093 | ||||||
Quaker Chemical Corp. | 10,825 | 178,071 | ||||||
Terra Industries, Inc. | 15,335 | 255,635 | ||||||
1,250,244 | ||||||||
Construction Materials – 1.3% | ||||||||
Texas Industries, Inc. | 9,875 | 340,688 | ||||||
TOTAL MATERIALS | 1,590,932 | |||||||
Total Common Stocks (Cost $31,158,664) | $ | 26,400,724 | ||||||
Underlying | Fair | |||||||
Warrants – 0.0% | Shares | Value | ||||||
INFORMATION TECHNOLOGY – 0.0% | ||||||||
Communications Equipment – 0.0% | ||||||||
Lantronix, Inc. | ||||||||
Expiration: February 2011, Exercise Price: $1.00 (a) | 305 | $ | — | |||||
Total Warrants (Cost $0) | $ | — | ||||||
Face | Fair | |||||||
Repurchase Agreements – 4.5% | Amount | Value | ||||||
U.S. Bank 0.010% 01/02/2009 | $ | 1,217,000 | $ | 1,217,000 | ||||
Repurchase price $1,217,001 | ||||||||
Collateralized by: Various Agency Mortgage- Backed Securities 2.395% to 5.000%, Due 09/01/2018 through 05/15/2033 Fair Value: $1,241,280 | ||||||||
Total Repurchase Agreements (Cost $1,217,000) | $ | 1,217,000 | ||||||
Total Investments – 102.0% (Cost $32,375,664) (b) | $ | 27,617,724 | ||||||
Liabilities in Excess of Other Assets – (2.0)% | (533,765 | ) | ||||||
Net Assets – 100.0% | $ | 27,083,959 | ||||||
Percentages are stated as a percent of net assets.
Abbreviations:
ADR: American Depository Receipts
Footnotes:
(a) | Non-income producing security. | |
(b) | Represents cost for financial reporting purposes, which may differ from cost basis for Federal income tax purposes. See also Note 8 of the Notes to Financial Statements. |
The accompanying notes are an integral part of these financial statements.
108
Ohio National Fund, Inc.
Capital Growth Portfolio
Capital Growth Portfolio
Statement of Assets and Liabilities
December 31, 2008
Assets: | ||||
Investments in securities, at fair value (Cost $31,158,664) | $ | 26,400,724 | ||
Repurchase agreements | 1,217,000 | |||
Cash | 181 | |||
Receivable for fund shares sold | 73,713 | |||
Dividends and accrued interest receivable | 11,173 | |||
Prepaid expenses and other assets | 579 | |||
Total assets | 27,703,370 | |||
Liabilities: | ||||
Payable for securities purchased | 535,443 | |||
Payable for fund shares redeemed | 47,666 | |||
Payable for investment management services | 19,470 | |||
Accrued custody expense | 1,130 | |||
Accrued professional fees | 10,813 | |||
Accrued accounting fees | 2,748 | |||
Accrued printing and filing fees | 2,141 | |||
Total liabilities | 619,411 | |||
Net assets | $ | 27,083,959 | ||
Net assets consist of: | ||||
Par value, $1 per share | $ | 1,805,682 | ||
Paid-in capital in excess of par value | 45,359,083 | |||
Accumulated net realized loss on investments | (15,322,866 | ) | ||
Net unrealized depreciation on investments | (4,757,940 | ) | ||
Net assets | $ | 27,083,959 | ||
Shares outstanding | 1,805,682 | |||
Authorized Fund shares allocated to Portfolio | 10,000,000 | |||
Net asset value per share | $ | 15.00 | ||
Statement of Operations
For the Year Ended December 31, 2008
Investment income: | ||||
Interest | $ | 19,083 | ||
Dividends (Net of withholding tax of $543) | 109,973 | |||
Total investment income | 129,056 | |||
Expenses: | ||||
Management fees | 303,594 | |||
Custodian fees | 4,767 | |||
Directors’ fees | 2,823 | |||
Professional fees | 13,472 | |||
Accounting fees | 17,331 | |||
Printing and filing fees | 4,406 | |||
Compliance expense | 4,911 | |||
Other | 578 | |||
Total expenses | 351,882 | |||
Net investment loss | (222,826 | ) | ||
Realized/unrealized gain (loss) on investments: | ||||
Net realized gain (loss) on investments | (3,527,322 | ) | ||
Change in unrealized appreciation/depreciation on investments | (10,934,251 | ) | ||
Net realized/unrealized gain (loss) on investments | (14,461,573 | ) | ||
Change in net assets from operations | $ | (14,684,399 | ) | |
The accompanying notes are an integral part of these financial statements.
109
Ohio National Fund, Inc.
Capital Growth Portfolio
Capital Growth Portfolio
Statements of Changes in Net Assets
Years Ended December 31, | ||||||||
2008 | 2007 | |||||||
Increase (Decrease) in Net Assets: | ||||||||
Operations: | ||||||||
Net investment loss | $ | (222,826 | ) | $ | (252,285 | ) | ||
Net realized gain (loss) on investments | (3,527,322 | ) | 5,130,505 | |||||
Change in unrealized appreciation/depreciation on investments | (10,934,251 | ) | (1,203,316 | ) | ||||
Change in net assets from operations | (14,684,399 | ) | 3,674,904 | |||||
Capital transactions: | ||||||||
Received from shares sold | 15,704,298 | 10,064,694 | ||||||
Paid for shares redeemed | (12,143,882 | ) | (8,478,996 | ) | ||||
Change in net assets from capital transactions | 3,560,416 | 1,585,698 | ||||||
Change in net assets | (11,123,983 | ) | 5,260,602 | |||||
Net Assets: | ||||||||
Beginning of year | 38,207,942 | 32,947,340 | ||||||
End of year | $ | 27,083,959 | $ | 38,207,942 | ||||
Financial Highlights
Years Ended December 31, | ||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
Selected Per-Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 23.57 | $ | 21.19 | $ | 17.64 | $ | 17.19 | $ | 14.36 | ||||||||||
Operations: | ||||||||||||||||||||
Net investment loss | (0.12 | ) | (0.16 | ) | (0.16 | ) | (0.14 | ) | (0.12 | ) | ||||||||||
Net realized and unrealized gain (loss) on investments | (8.45 | ) | 2.54 | 3.71 | 0.59 | 2.95 | ||||||||||||||
Total from operations | (8.57 | ) | 2.38 | 3.55 | 0.45 | 2.83 | ||||||||||||||
Net asset value, end of year | $ | 15.00 | $ | 23.57 | $ | 21.19 | $ | 17.64 | $ | 17.19 | ||||||||||
Total return | –36.36 | % | 11.23 | % | 20.12 | % | 2.62 | % | 19.71 | % | ||||||||||
Ratios and supplemental data: | ||||||||||||||||||||
Net assets at end of year (millions) | $ | 27.1 | $ | 38.2 | $ | 32.9 | $ | 28.2 | $ | 30.0 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Expenses | 1.04 | % | 1.02 | % | 1.03 | % | 1.03 | % | 1.03 | % | ||||||||||
Net investment loss | (0.66 | )% | (0.70 | )% | (0.81 | )% | (0.78 | )% | (0.74 | )% | ||||||||||
Portfolio turnover rate | 63 | % | 63 | % | 69 | % | 52 | % | 64 | % |
The accompanying notes are an integral part of these financial statements.
110
Ohio National Fund, Inc.
Nasdaq-100 Index Portfolio
Nasdaq-100 Index Portfolio
Objective/Strategy
The Nasdaq-100 Index Portfolio seeks long-term growth of capital by investing primarily in stocks that are included in the Nasdaq-100 Index. Unlike other Portfolios, the Nasdaq-100 Index Portfolio is a non-diversified portfolio for purposes of Section 5(b)(1) of the 1940 Act.
Performance as of December 31, 2008
Average Annual Total Returns: | ||||
One year | -41.98% | |||
Five years | -3.93% | |||
Since inception (5/1/00) | -12.61% |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price and reinvestment of dividends and capital gains. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost.
The Portfolio is not open to direct retail investment. Beneficial interest in shares is obtained solely by purchase of variable life insurance policies and variable annuity contracts. Actual performance results for variable annuity and variable universal life contracts will be lower due to contract charges. Consult your contract for applicable charges.
Comments
For the year ended December 31, 2008, the Nasdaq-100 Index Portfolio returned -41.98% versus -41.57% for the current benchmark, the Nasdaq-100 Index.
The correlation to the index for the year was 99.9%. The high correlation is due to the fact that the Portfolio invests in each of the 100 stocks in the index. The Portfolio also invests in Powershares QQQ, an exchange traded fund that mimics the return of the Nasdaq-100 Index.
The top five stock holdings at year end were Apple, Inc., QUALCOMM, Inc., Microsoft Corp., Gilead Sciences, Inc., and Google, Inc. The largest contributors to the index return for 2008 were Amgen, Inc., Gilead Sciences, Inc., Celgene Corp., BEA Systems, Inc. and Vertex Pharmaceuticals, Inc. The largest detractors for the index in 2008 were Apple, Inc., Google, Inc., Microsoft Corp., Research In Motion Ltd. and Intel Corp.(1)
The world economy is in the midst of a global recession. Bank failures, high unemployment, and poor corporate results will put downward pressure on U.S. equity indices for at least the first six months of the year. Equities could rally the second part of the year as the new administration’s fiscal stimulus package starts to take effect.
(1) | The Portfolio’s composition is subject to change. Holdings and weightings are as of December 31, 2008. |
Change in Value of $10,000 Investment
Hypothetical illustration based on past performance. Future performance will vary. The Portfolio’s returns reflect reinvested dividends. The Portfolio’s holdings may differ significantly from the securities in the index. The index is unmanaged and therefore does not reflect the cost of portfolio management and accounting. Investors cannot invest in an index. Although they can invest in its underlying securities or funds.
The Nasdaq-100 Index is a modified capitalization-weighted index of the 100 largest domestic and international non-financial companies listed on the National Market tier of the NASDAQ stock market. The index presented herein includes the effects of reinvested dividends.
(continued)
111
Ohio National Fund, Inc.
Nasdaq-100 Index Portfolio (Continued)
Nasdaq-100 Index Portfolio (Continued)
Portfolio Composition as of December 31, 2008 (1)
% of Net Assets | |||
Common Stocks (3) | 94.5 | ||
Exchange Traded Funds | 3.0 | ||
Repurchase Agreements and | |||
Other Net Assets | 2.5 | ||
100.0 | |||
Top 10 Portfolio Holdings as of December 31, 2008 (1) (2)
% of Net Assets | |||||||
1. | Apple, Inc. | 9.3 | |||||
2. | QUALCOMM, Inc. | 6.3 | |||||
3. | Microsoft Corp. | 5.2 | |||||
4. | Gilead Sciences, Inc. | 4.0 | |||||
5. | Google, Inc. Class A | 3.9 | |||||
6. | Oracle Corp. | 3.3 | |||||
7. | PowerShares QQQ | 3.0 | |||||
8. | Cisco Systems, Inc. | 3.0 | |||||
9. | Intel Corp. | 2.5 | |||||
10. | Amgen, Inc. | 2.5 |
(1) | Composition of Portfolio subject to change. | |
(2) | Short-term investments have been excluded from the list of Top 10 Portfolio holdings. | |
(3) | Sectors: |
% of Net Assets | |||
Information Technology | 55.7 | ||
Health Care | 19.2 | ||
Consumer Discretionary | 11.4 | ||
Industrials | 5.6 | ||
Consumer Staples | 1.3 | ||
Telecommunication Services | 0.7 | ||
Materials | 0.6 | ||
94.5 | |||
112
Ohio National Fund, Inc.
Nasdaq-100 Index Portfolio
Nasdaq-100 Index Portfolio
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 94.5% | Shares | Value | ||||||
CONSUMER DISCRETIONARY – 11.4% | ||||||||
Diversified Consumer Services – 1.1% | ||||||||
Apollo Group, Inc. Class A (a) | 3,975 | $ | 304,564 | |||||
Hotels, Restaurants & Leisure – 1.3% | ||||||||
Starbucks Corp. (a) | 25,150 | 237,919 | ||||||
Wynn Resorts Ltd. (a) | 3,000 | 126,780 | ||||||
364,699 | ||||||||
Household Durables – 0.3% | ||||||||
Garmin Ltd. | 4,625 | 88,661 | ||||||
Internet & Catalog Retail – 1.6% | ||||||||
Amazon.com, Inc. (a) | 7,025 | 360,242 | ||||||
Expedia, Inc. (a) | 6,950 | 57,268 | ||||||
Liberty Media Corp. - Interactive (a) | 13,425 | 41,886 | ||||||
459,396 | ||||||||
Media – 4.2% | ||||||||
Comcast Corp. Class A | 35,572 | 600,455 | ||||||
DISH Network Corp. (a) | 5,310 | 58,888 | ||||||
Focus Media Holding Ltd. - ADR (a) | 2,825 | 25,679 | ||||||
Liberty Global, Inc. Class A (a) | 3,750 | 59,700 | ||||||
The DIRECTV Group, Inc. (a) | 18,850 | 431,854 | ||||||
1,176,576 | ||||||||
Multiline Retail – 0.4% | ||||||||
Sears Holdings Corp. (a) | 3,200 | 124,384 | ||||||
Specialty Retail – 2.5% | ||||||||
Bed Bath & Beyond, Inc. (a) | 8,600 | 218,612 | ||||||
O’Reilly Automotive, Inc. (a) | 3,300 | 101,442 | ||||||
Ross Stores, Inc. | 3,275 | 97,366 | ||||||
Staples, Inc. | 11,825 | 211,904 | ||||||
Urban Outfitters, Inc. (a) | 4,100 | 61,418 | ||||||
690,742 | ||||||||
TOTAL CONSUMER DISCRETIONARY | 3,209,022 | |||||||
CONSUMER STAPLES – 1.3% | ||||||||
Beverages – 0.3% | ||||||||
Hansen Natural Corp. (a) | 2,250 | 75,442 | ||||||
Food & Staples Retailing – 1.0% | ||||||||
Costco Wholesale Corp. | 5,610 | 294,525 | ||||||
TOTAL CONSUMER STAPLES | 369,967 | |||||||
HEALTH CARE – 19.2% | ||||||||
Biotechnology – 12.9% | ||||||||
Amgen, Inc. (a) | 12,172 | 702,933 | ||||||
Biogen Idec, Inc. (a) | 7,825 | 372,705 | ||||||
Celgene Corp. (a) | 11,200 | 619,136 | ||||||
Cephalon, Inc. (a) | 1,650 | 127,116 | ||||||
Genzyme Corp. (a) | 8,375 | 555,849 | ||||||
Gilead Sciences, Inc. (a) | 22,100 | 1,130,194 | ||||||
Vertex Pharmaceuticals, Inc. (a) | 3,875 | 117,722 | ||||||
3,625,655 | ||||||||
Health Care Equipment & Supplies – 1.1% | ||||||||
DENTSPLY International, Inc. | 3,525 | 99,546 | ||||||
Hologic, Inc. (a) | 6,650 | 86,916 | ||||||
Intuitive Surgical, Inc. (a) | 975 | $ | 123,815 | |||||
310,277 | ||||||||
Health Care Providers & Services – 1.6% | ||||||||
Express Scripts, Inc. (a) | 5,450 | 299,641 | ||||||
Henry Schein, Inc. (a) | 2,200 | 80,718 | ||||||
Patterson Cos., Inc. (a) | 2,880 | 54,000 | ||||||
434,359 | ||||||||
Life Sciences Tools & Services – 0.9% | ||||||||
Illumina, Inc. (a) | 3,000 | 78,150 | ||||||
Life Technologies Corp. (a) | 4,325 | 100,816 | ||||||
Pharmaceutical Product Development, Inc. | 2,825 | 81,953 | ||||||
260,919 | ||||||||
Pharmaceuticals – 2.7% | ||||||||
Teva Pharmaceutical Industries, Ltd. - ADR | 15,735 | �� | 669,839 | |||||
Warner Chilcott Ltd. Class A (a) | 6,150 | 89,175 | ||||||
759,014 | ||||||||
TOTAL HEALTH CARE | 5,390,224 | |||||||
INDUSTRIALS – 5.6% | ||||||||
Air Freight & Logistics – 1.4% | ||||||||
C.H. Robinson Worldwide, Inc. | 4,125 | 226,999 | ||||||
Expeditors International of Washington, Inc. | 5,125 | 170,509 | ||||||
397,508 | ||||||||
Airlines – 0.3% | ||||||||
Ryanair Holdings PLC - ADR (a) | 2,875 | 83,605 | ||||||
Commercial Services & Supplies – 0.8% | ||||||||
Cintas Corp. | 4,525 | 105,116 | ||||||
Stericycle, Inc. (a) | 2,225 | 115,878 | ||||||
220,994 | ||||||||
Construction & Engineering – 0.3% | ||||||||
Foster Wheeler Ltd. (a) | 3,250 | 75,985 | ||||||
Electrical Equipment – 0.9% | ||||||||
First Solar, Inc. (a) | 1,750 | 241,430 | ||||||
Machinery – 1.2% | ||||||||
Joy Global, Inc. | 2,500 | 57,225 | ||||||
PACCAR, Inc. | 10,014 | 286,400 | ||||||
343,625 | ||||||||
Road & Rail – 0.3% | ||||||||
J.B. Hunt Transport Services, Inc. | 3,100 | 81,437 | ||||||
Trading Companies & Distributors – 0.4% | ||||||||
Fastenal Co. | 3,500 | 121,975 | ||||||
TOTAL INDUSTRIALS | 1,566,559 | |||||||
INFORMATION TECHNOLOGY – 55.7% | ||||||||
Communications Equipment – 11.8% | ||||||||
Cisco Systems, Inc. (a) | 51,575 | 840,672 | ||||||
Juniper Networks, Inc. (a) | 8,550 | 149,711 | ||||||
QUALCOMM, Inc. | 49,245 | 1,764,448 |
(continued)
113
Ohio National Fund, Inc.
Nasdaq-100 Index Portfolio (Continued)
Nasdaq-100 Index Portfolio (Continued)
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 94.5% | Shares | Value | ||||||
Communications Equipment (continued) | ||||||||
Research In Motion Ltd. (a) | 13,950 | $ | 566,091 | |||||
3,320,922 | ||||||||
Computers & Peripherals – 10.9% | ||||||||
Apple, Inc. (a) | 30,570 | 2,609,149 | ||||||
Dell, Inc. (a) | 17,650 | 180,736 | ||||||
Logitech International SA (a) | 4,300 | 66,994 | ||||||
NetApp, Inc. (a) | 8,510 | 118,885 | ||||||
Seagate Technology | 12,000 | 53,160 | ||||||
Sun Microsystems, Inc. (a) | 7,930 | 30,293 | ||||||
3,059,217 | ||||||||
Electronic Equipment, Instruments & Components – 0.6% | ||||||||
Flextronics International Ltd. (a) | 21,650 | 55,424 | ||||||
Flir Systems, Inc. (a) | 3,575 | 109,681 | ||||||
165,105 | ||||||||
Internet Software & Services – 6.8% | ||||||||
Akamai Technologies, Inc. (a) | 4,000 | 60,360 | ||||||
Baidu.com - ADR (a) | 650 | 84,870 | ||||||
eBay, Inc. (a) | 23,485 | 327,851 | ||||||
Google, Inc. Class A (a) | 3,600 | 1,107,540 | ||||||
IAC/InterActiveCorp (a) | 3,601 | 56,644 | ||||||
VeriSign, Inc. (a) | 4,505 | 85,955 | ||||||
Yahoo!, Inc. (a) | 16,460 | 200,812 | ||||||
1,924,032 | ||||||||
IT Services – 3.4% | ||||||||
Automatic Data Processing, Inc. | 8,850 | 348,159 | ||||||
Cognizant Technology Solutions Corp. Class A (a) | 7,000 | 126,420 | ||||||
Fiserv, Inc. (a) | 4,937 | 179,559 | ||||||
Infosys Technologies Ltd. - ADR | 2,775 | 68,182 | ||||||
Paychex, Inc. | 8,445 | 221,934 | ||||||
944,254 | ||||||||
Semiconductors & Semiconductor Equipment – 7.4% | ||||||||
Altera Corp. | 10,325 | 172,531 | ||||||
Applied Materials, Inc. | 17,100 | 173,223 | ||||||
Broadcom Corp. Class A (a) | 10,050 | 170,548 | ||||||
Intel Corp. | 48,020 | 703,973 | ||||||
KLA-Tencor Corp. | 5,050 | 110,040 | ||||||
Lam Research Corp. (a) | 3,175 | 67,564 | ||||||
Linear Technology Corp. | 7,305 | 161,587 | ||||||
Marvell Technology Group Ltd. (a) | 14,375 | 95,881 | ||||||
Maxim Integrated Products, Inc. | 7,675 | 87,649 | ||||||
Microchip Technology, Inc. | 3,725 | 72,749 | ||||||
NVIDIA Corp. (a) | 13,012 | 105,007 | ||||||
Xilinx, Inc. | 8,955 | 159,578 | ||||||
2,080,330 | ||||||||
Software – 14.8% | ||||||||
Activision Blizzard, Inc. (a) | 29,150 | 251,856 | ||||||
Adobe Systems, Inc. (a) | 12,830 | 273,151 | ||||||
Autodesk, Inc. (a) | 5,825 | 114,461 | ||||||
CA, Inc. | 12,275 | 227,456 | ||||||
Check Point Software Technologies Ltd. (a) | 5,220 | 99,128 | ||||||
Citrix Systems, Inc. (a) | 5,325 | 125,510 | ||||||
Electronic Arts, Inc. (a) | 7,980 | 127,999 | ||||||
Intuit, Inc. (a) | 9,930 | 236,235 | ||||||
Microsoft Corp. | 75,500 | 1,467,720 | ||||||
Oracle Corp. (a) | 52,985 | 939,424 | ||||||
Symantec Corp. (a) | 21,548 | 291,329 | ||||||
4,154,269 | ||||||||
TOTAL INFORMATION TECHNOLOGY | 15,648,129 | |||||||
MATERIALS – 0.6% | ||||||||
Chemicals – 0.4% | ||||||||
Sigma-Aldrich Corp. | 2,975 | 125,664 | ||||||
Metals & Mining – 0.2% | ||||||||
Steel Dynamics, Inc. | 4,625 | 51,707 | ||||||
TOTAL MATERIALS | 177,371 | |||||||
TELECOMMUNICATION SERVICES – 0.7% | ||||||||
Wireless Telecommunication Services – 0.7% | ||||||||
Millicom International Cellular S.A. | 2,575 | 115,643 | ||||||
NII Holdings, Inc. (a) | 3,975 | 72,266 | ||||||
TOTAL TELECOMMUNICATION SERVICES | 187,909 | |||||||
Total Common Stocks (Cost $32,762,438) | $ | 26,549,181 | ||||||
Fair | ||||||||
Exchange Traded Funds – 3.0% | Shares | Value | ||||||
PowerShares QQQ | 28,565 | $ | 849,523 | |||||
Total Exchange Traded Funds (Cost $824,053) | $ | 849,523 | ||||||
Face | Fair | |||||||
Repurchase Agreements – 0.9% | Amount | Value | ||||||
U.S. Bank 0.010% 01/02/2009 | $ | 237,000 | $ | 237,000 | ||||
Repurchase price $237,000 | ||||||||
Collateralized by: Various Agency Mortgage- Backed Securities 2.395% to 5.000%, Due 09/01/2018 through 05/15/2033 Fair Value: $241,728 | ||||||||
Total Repurchase Agreements (Cost $237,000) | $ | 237,000 | ||||||
Total Investments – 98.4% (Cost $33,823,491) (b) | $ | 27,635,704 | ||||||
Other Assets in Excess of Liabilities – 1.6% | 453,138 | |||||||
Net Assets – 100.0% | $ | 28,088,842 | ||||||
(continued)
114
Ohio National Fund, Inc.
Nasdaq-100 Index Portfolio (Continued)
Nasdaq-100 Index Portfolio (Continued)
Schedule of Investments | December 31, 2008 |
Percentages are stated as a percent of net assets.
Abbreviations:
ADR: American Depository Receipts
Footnotes:
(a) | Non-income producing security. | |
(b) | Represents cost for financial reporting purposes, which may differ from cost basis for Federal income tax purposes. See also Note 8 of the Notes to Financial Statements. |
The accompanying notes are an integral part of these financial statements.
115
Ohio National Fund, Inc.
Nasdaq-100 Index Portfolio
Nasdaq-100 Index Portfolio
Statement of Assets and Liabilities
December 31, 2008
Assets: | ||||
Investments in securities, at fair value (Cost $33,586,491) | $ | 27,398,704 | ||
Repurchase agreements | 237,000 | |||
Cash | 199 | |||
Receivable for securities sold | 6,961 | |||
Receivable for fund shares sold | 683,327 | |||
Dividends and accrued interest receivable | 10,775 | |||
Prepaid expenses and other assets | 602 | |||
Total assets | 28,337,568 | |||
Liabilities: | ||||
Payable for securities purchased | 119,010 | |||
Payable for fund shares redeemed | 103,325 | |||
Payable for investment management services | 9,069 | |||
Accrued custody expense | 1,121 | |||
Accrued professional fees | 10,841 | |||
Accrued accounting fees | 3,038 | |||
Accrued printing and filing fees | 2,322 | |||
Total liabilities | 248,726 | |||
Net assets | $ | 28,088,842 | ||
Net assets consist of: | ||||
Par value, $1 per share | $ | 9,030,273 | ||
Paid-in capital in excess of par value | 31,416,805 | |||
Accumulated net realized loss on investments | (6,177,297 | ) | ||
Net unrealized depreciation on investments | (6,187,787 | ) | ||
Undistributed net investment income | 6,848 | |||
Net assets | $ | 28,088,842 | ||
Shares outstanding | 9,030,273 | |||
Authorized Fund shares allocated to Portfolio | 15,000,000 | |||
Net asset value per share | $ | 3.11 | ||
Statement of Operations
For the Year Ended December 31, 2008
Investment income: | ||||
Interest | $ | 2,411 | ||
Dividends (net of withholding tax of $2,485) | 214,044 | |||
Total investment income | 216,455 | |||
Expenses: | ||||
Management fees | 157,829 | |||
Custodian fees | 6,320 | |||
Directors’ fees | 3,316 | |||
Professional fees | 13,747 | |||
Accounting fees | 19,780 | |||
Printing and filing fees | 4,963 | |||
Compliance expense | 4,911 | |||
Other | 719 | |||
Total expenses | 211,585 | |||
Net investment income | 4,870 | |||
Realized/unrealized gain (loss) on investments: | ||||
Net realized gain (loss) on investments | (1,406,553 | ) | ||
Change in unrealized appreciation/depreciation on investments | (18,845,859 | ) | ||
Net realized/unrealized gain (loss) on investments | (20,252,412 | ) | ||
Change in net assets from operations | $ | (20,247,542 | ) | |
The accompanying notes are an integral part of these financial statements.
116
Ohio National Fund, Inc.
Nasdaq-100 Index Portfolio
Nasdaq-100 Index Portfolio
Statements of Changes in Net Assets
Years Ended December 31, | ||||||||
2008 | 2007 | |||||||
Increase (Decrease) in Net Assets: | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 4,870 | $ | (6,434 | ) | |||
Net realized gain (loss) on investments | (1,406,553 | ) | 62,064 | |||||
Change in unrealized appreciation/depreciation on investments | (18,845,859 | ) | 8,194,542 | |||||
Change in net assets from operations | (20,247,542 | ) | 8,250,172 | |||||
Capital transactions: | ||||||||
Received from shares sold | 17,536,823 | 8,066,954 | ||||||
Paid for shares redeemed | (17,821,298 | ) | (13,351,721 | ) | ||||
Change in net assets from capital transactions | (284,475 | ) | (5,284,767 | ) | ||||
Change in net assets | (20,532,017 | ) | 2,965,405 | |||||
Net Assets: | ||||||||
Beginning of year | 48,620,859 | 45,655,454 | ||||||
End of year | $ | 28,088,842 | $ | 48,620,859 | ||||
Undistributed net investment income | $ | 6,848 | $ | 3,040 | ||||
Financial Highlights
Years Ended December 31, | ||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
Selected Per-Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 5.36 | $ | 4.52 | $ | 4.24 | $ | 4.18 | $ | 3.80 | ||||||||||
Operations: | ||||||||||||||||||||
Net investment income (loss) | — | — | — | — | 0.03 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (2.25 | ) | 0.84 | 0.28 | 0.06 | 0.35 | ||||||||||||||
Total from operations | (2.25 | ) | 0.84 | 0.28 | 0.06 | 0.38 | ||||||||||||||
Net asset value, end of year | $ | 3.11 | $ | 5.36 | $ | 4.52 | $ | 4.24 | $ | 4.18 | ||||||||||
Total return | –41.98 | % | 18.58 | % | 6.60 | % | 1.44 | % | 10.00 | % | ||||||||||
Ratios and supplemental data: | ||||||||||||||||||||
Net assets at end of year (millions) | $ | 28.1 | $ | 48.6 | $ | 45.7 | $ | 31.3 | $ | 19.5 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Ratios net of expenses voluntarily reduced or reimbursed by adviser: | ||||||||||||||||||||
Expenses | 0.54 | % | 0.51 | % | 0.53 | % | 0.54 | % | 0.58 | % | ||||||||||
Net investment income (loss) | 0.01 | % | (0.01 | )% | 0.00 | % | 0.05 | % | 0.67 | % | ||||||||||
Ratios assuming no expenses voluntarily reduced or reimbursed by adviser: | ||||||||||||||||||||
Expenses | 0.54 | % | 0.51 | % | 0.53 | % | 0.64 | % | 0.93 | % | ||||||||||
Portfolio turnover rate | 27 | % | 13 | % | 36 | % | 45 | % | 20 | % |
The accompanying notes are an integral part of these financial statements.
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Bristol Portfolio
Objective/Strategy
The Bristol Portfolio seeks long-term growth of capital by investing primarily in common stocks of the 1,000 largest publicly traded U.S. companies in terms of market capitalization.
Performance as of December 31, 2008
Average Annual Total Returns: | ||||
One year | -40.54% | |||
Five years | -1.92% | |||
Since inception (5/1/02) | -0.77% |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price and reinvestment of dividends and capital gains. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost.
The Portfolio is not open to direct retail investment. Beneficial interest in shares is obtained solely by purchase of variable life insurance policies and variable annuity contracts. Actual performance results for variable annuity and variable universal life contracts will be lower due to contract charges. Consult your contract for applicable charges.
Comments
For the year ended December 31, 2008, the Bristol Portfolio returned -40.54% versus -37.00% for the current benchmark, the S&P 500 Index.
Suffice it to say, 2008 was the beginning of the great leverage unwinding; leverage that had permeated households, financial firms and corporations. The ramifications of the deleveraging were markedly visible in the financial services industry contraction, but will now permeate the entire world’s economy. Whether or not the U.S. government and its counterparts around the world have the acumen, the wherewithal, and the perseverance to mollify this great unwinding remains to be seen. Whether stocks have discounted the global recession that will follow is debatable. With much uncertainty still facing the financial markets, investors must focus beyond 2009, as it will hopefully prove a year of economic transition, and move their sights to 2010 or later, as the world’s economy recovers with less debt and possibly less volatility.
With respect to 2008 performance, an abysmal fourth quarter destroyed what had been a reasonable year-to-date period, as our over-weighted position in insurance stocks resulted in underperformance for the year. As we moved into the fourth quarter, we had avoided most of the financial disasters by not owning Fannie Mae, Freddie Mac, Bear Stearns or Lehman Brothers. The life insurers we did own (The Hartford Financial Services Group, Inc., Lincoln National Corp., Prudential Financial, Inc. and MetLife, Inc.) looked financially sound, very inexpensive on all measures, and minimally affected by credit problems in the housing sector. Unfortunately, their balance sheets were impacted first by the Fannie Mae/Freddie Mac collapses, and then by owning Lehman Brothers debt. As the market sank, the potential liabilities in their guaranteed annuity businesses, as well as potential charges for their life policies, rose considerably. Each shock to the financial markets was met swiftly with falling prices, and consequently even cheaper valuations on traditional measures such as price-to-book, so we decided to hold on to the positions, and in some instances add to them, bringing weightings back to 2% as their market capitalizations sank.(1)
All five of the largest detractors to performance in 2008 were in the Financials sector and affected by the issues described above. These include American International Group, Inc. which negatively impacted performance by 247 basis points, and The Hartford Financial Services Group, Inc., which hurt performance by 225 basis points. Bank of America Corp. cost the Portfolio 152 basis points, Prudential Financial, Inc. hurt the Portfolio by 153 basis points, and Lincoln National Corp. detracted 147 basis points from performance.(1)
The greatest positive contributors to Portfolio performance included Rohm & Haas Co., which added 69 basis points, and Quanta Services, Inc., which contributed 38 basis points, both benefiting from optimism that President-elect Barack Obama’s plans to revitalize the economy could provide a direct benefit to their businesses. Wells Fargo & Co. contributed 46 basis points to the Portfolio’s performance, as the company experienced fewer non-performing loans than other regional banks through the third quarter. Wal-Mart Stores, Inc. added 33 basis points to performance, as the retailer’s value positioning proved a benefit in a tough economy, and Imclone Systems added 31 basis points, as it received approval for a key drug and was subsequently bought out by Eli Lilly.(1)
As we enter 2009, the Portfolio is over-weighted in Industrials, including positions in Air Products and Chemicals, Inc., Praxair, Inc., Tyco International Ltd., United Technologies Corp., Honeywell International, Inc., General Electric Co. and Celanese Corp. We believe their valuations are not reflective of their normalized earnings, and that once investors have visibility to the economy’s bottom, both in terms of scope and timing, these stocks will recover strongly. Our other over-weighted position continues to be the insurers, though we are slightly under-weighted in Financials in general, and remain under-weighted in the banking industry. We are still under-weighted in retail, as we were for all of 2008, owning only Wal-Mart Stores, Inc. and Nike Inc. We believe consumer spending will not bounce back rapidly and strongly, as unemployment levels grow to perhaps over 15%, and retail sales continue to disappoint. The valuations seem attractive, but there still appears to be time for the sector to come to grips with the deleveraging process and consequent drop in spending.(1)
When we are in the throes of a recession, it is sometimes difficult to see clearly a way out. There are, however, factors in the current environment which have the potential to prompt the economy into a recovery. Credit is thawing, as the spread between London Interbank Offered Rate and Treasuries has narrowed to under 100 basis points. This in turn allows banks to lend between one another, thus making credit more available to the consumer and to corporations. Energy savings are also stimulating the economy, as the price of a barrel of oil has fallen $100 from its peak. The result is a fiscal stimulus effect of around $250 billion dollars annually. Finally, we do have a major stimulus package being worked on by Washington in the range of
(continued)
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Ohio National Fund, Inc.
Bristol Portfolio (Continued)
Bristol Portfolio (Continued)
$400 billion per year, for at least two years. As these policies and factors take affect, we could see the economy bottom and turn. It is possible that the robustness of the turn would be moderated by the Federal Reserve, which could attempt to keep inflation at bay in an economy flooded with dollars. We’ll be prepared to cross that bridge when, or if, we come to it.
(1) | The Portfolio’s composition is subject to change. Holdings and weightings are as of December 31, 2008. |
Change in Value of $10,000 Investment
Hypothetical illustration based on past performance. Future performance will vary. The Portfolio’s returns reflect reinvested dividends. The Portfolio’s holdings may differ significantly from the securities in the index. The index is unmanaged and therefore does not reflect the cost of portfolio management and accounting.
The S&P 500 Index is a capitalization-weighted index designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The index presented herein includes the effects of reinvested dividends.
Portfolio Composition as of December 31, 2008 (1)
% of Net Assets | |||
Common Stocks (3) | 88.6 | ||
Repurchase Agreements and | |||
Other Net Assets | 11.4 | ||
100.0 | |||
Top 10 Portfolio Holdings as of December 31, 2008 (1) (2)
% of Net Assets | |||||||
1. | Exxon Mobil Corp. | 3.0 | |||||
2. | Hewlett-Packard Co. | 2.2 | |||||
3. | Mylan, Inc. | 2.1 | |||||
4. | Lockheed Martin Corp. | 2.0 | |||||
5. | United Technologies Corp. | 2.0 | |||||
6. | Air Products and Chemicals, Inc. | 2.0 | |||||
7. | Cisco Systems, Inc. | 2.0 | |||||
8. | QUALCOMM, Inc. | 1.9 | |||||
9. | MetLife, Inc. | 1.9 | |||||
10. | General Electric Co. | 1.9 |
(1) | Composition of Portfolio subject to change. | |
(2) | Short-term investments have been excluded from the list of Top 10 Portfolio holdings. | |
(3) | Sectors: |
% of Net Assets | |||
Information Technology | 19.3 | ||
Industrials | 15.6 | ||
Health Care | 14.4 | ||
Financials | 11.8 | ||
Energy | 10.4 | ||
Consumer Staples | 9.2 | ||
Materials | 6.1 | ||
Consumer Discretionary | 1.8 | ||
88.6 | |||
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Bristol Portfolio
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 88.6% | Shares | Value | ||||||
CONSUMER DISCRETIONARY – 1.8% | ||||||||
Media – 1.8% | ||||||||
The Walt Disney Co. | 63,000 | $ | 1,429,470 | |||||
TOTAL CONSUMER DISCRETIONARY | 1,429,470 | |||||||
CONSUMER STAPLES – 9.2% | ||||||||
Beverages – 4.5% | ||||||||
Molson Coors Brewing Co. Class B | 25,800 | 1,262,136 | ||||||
PepsiCo, Inc. | 21,800 | 1,193,986 | ||||||
The Coca-Cola Co. | 27,300 | 1,235,871 | ||||||
3,691,993 | ||||||||
Food & Staples Retailing – 1.7% | ||||||||
Wal-Mart Stores, Inc. | 24,700 | 1,384,682 | ||||||
Food Products – 1.4% | ||||||||
The J.M. Smucker Co. | 26,600 | 1,153,376 | ||||||
Household Products – 1.6% | ||||||||
The Clorox Co. | 22,600 | 1,255,656 | ||||||
TOTAL CONSUMER STAPLES | 7,485,707 | |||||||
ENERGY – 10.4% | ||||||||
Energy Equipment & Services – 1.1% | ||||||||
Transocean Ltd (a) | 19,600 | 926,100 | ||||||
Oil, Gas & Consumable Fuels – 9.3% | ||||||||
Anadarko Petroleum Corp. | 20,100 | 774,855 | ||||||
Apache Corp. | 15,100 | 1,125,403 | ||||||
Devon Energy Corp. | 17,300 | 1,136,783 | ||||||
Exxon Mobil Corp. | 30,600 | 2,442,798 | ||||||
Marathon Oil Corp. | 22,300 | 610,128 | ||||||
XTO Energy, Inc. | 41,600 | 1,467,232 | ||||||
7,557,199 | ||||||||
TOTAL ENERGY | 8,483,299 | |||||||
FINANCIALS – 11.8% | ||||||||
Capital Markets – 1.1% | ||||||||
Morgan Stanley | 56,200 | 901,448 | ||||||
Diversified Financial Services – 3.0% | ||||||||
Bank of America Corp. | 78,150 | 1,100,352 | ||||||
JPMorgan Chase & Co. | 42,600 | 1,343,178 | ||||||
2,443,530 | ||||||||
Insurance – 7.7% | ||||||||
Lincoln National Corp. | 44,600 | 840,264 | ||||||
MetLife, Inc. | 44,600 | 1,554,756 | ||||||
Prudential Financial, Inc. | 27,300 | 826,098 | ||||||
The Chubb Corp. | 11,400 | 581,400 | ||||||
The Hartford Financial Services Group, Inc. | 62,400 | 1,024,608 | ||||||
Travelers Companies, Inc. | 32,900 | 1,487,080 | ||||||
6,314,206 | ||||||||
TOTAL FINANCIALS | 9,659,184 | |||||||
HEALTH CARE – 14.4% | ||||||||
Biotechnology – 1.8% | ||||||||
Vertex Pharmaceuticals, Inc. (a) | 49,200 | 1,494,696 | ||||||
Health Care Equipment & Supplies – 1.3% | ||||||||
Baxter International, Inc. | 20,200 | 1,082,518 | ||||||
Health Care Providers & Services – 3.1% | ||||||||
Aetna, Inc. | 33,900 | 966,150 | ||||||
McKesson Corp. | 39,300 | 1,522,089 | ||||||
2,488,239 | ||||||||
Life Sciences Tools & Services – 4.5% | ||||||||
Life Technologies Corp. (a) | 59,700 | 1,391,607 | ||||||
Sequenom, Inc. (a) | 45,000 | 892,800 | ||||||
Thermo Fisher Scientific, Inc. (a) | 40,700 | 1,386,649 | ||||||
3,671,056 | ||||||||
Pharmaceuticals – 3.7% | ||||||||
Mylan, Inc. (a) | 172,000 | 1,701,080 | ||||||
Pfizer, Inc. | 74,700 | 1,322,937 | ||||||
3,024,017 | ||||||||
TOTAL HEALTH CARE | 11,760,526 | |||||||
INDUSTRIALS – 15.6% | ||||||||
Aerospace & Defense – 9.5% | ||||||||
Honeywell International, Inc. | 45,300 | 1,487,199 | ||||||
Lockheed Martin Corp. | 19,800 | 1,664,784 | ||||||
Precision Castparts Corp. | 24,900 | 1,481,052 | ||||||
Raytheon Co. | 27,800 | 1,418,912 | ||||||
United Technologies Corp. | 31,050 | 1,664,280 | ||||||
7,716,227 | ||||||||
Construction & Engineering – 1.4% | ||||||||
Quanta Services, Inc. (a) | 58,800 | 1,164,240 | ||||||
Electrical Equipment – 1.3% | ||||||||
SunPower Corp. (a) | 35,753 | 1,088,321 | ||||||
Industrial Conglomerates – 3.4% | ||||||||
General Electric Co. | 94,100 | 1,524,420 | ||||||
Tyco International Ltd. | 57,600 | 1,244,160 | ||||||
2,768,580 | ||||||||
TOTAL INDUSTRIALS | 12,737,368 | |||||||
INFORMATION TECHNOLOGY – 19.3% | ||||||||
Communications Equipment – 5.2% | ||||||||
Cisco Systems, Inc. (a) | 97,600 | 1,590,880 | ||||||
Corning, Inc. | 111,600 | 1,063,548 | ||||||
QUALCOMM, Inc. | 43,800 | 1,569,354 | ||||||
4,223,782 | ||||||||
Computers & Peripherals – 5.7% | ||||||||
Apple, Inc. (a) | 16,400 | 1,399,740 | ||||||
Hewlett-Packard Co. | 49,500 | 1,796,355 | ||||||
International Business Machines Corp. | 17,200 | 1,447,552 | ||||||
4,643,647 | ||||||||
Internet Software & Services – 1.4% | ||||||||
Google, Inc. Class A (a) | 3,600 | 1,107,540 | ||||||
IT Services – 0.8% | ||||||||
Mastercard, Inc. Class A | 4,800 | 686,064 | ||||||
(continued)
120
Ohio National Fund, Inc.
Bristol Portfolio (Continued)
Bristol Portfolio (Continued)
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 88.6% | Shares | Value | ||||||
Semiconductors & Semiconductor Equipment – 2.9% | ||||||||
Applied Materials, Inc. | 130,000 | $ | 1,316,900 | |||||
Maxim Integrated Products, Inc. | 94,600 | 1,080,332 | ||||||
2,397,232 | ||||||||
Software – 3.3% | ||||||||
Electronic Arts, Inc. (a) | 72,500 | 1,162,900 | ||||||
Microsoft Corp. | 76,900 | 1,494,936 | ||||||
2,657,836 | ||||||||
TOTAL INFORMATION TECHNOLOGY | 15,716,101 | |||||||
MATERIALS – 6.1% | ||||||||
Chemicals – 5.8% | ||||||||
Air Products and Chemicals, Inc. | 31,700 | 1,593,559 | ||||||
Celanese Corp. Class A | 88,100 | 1,095,083 | ||||||
Mosaic Co. | 29,300 | 1,013,780 | ||||||
Potash Corp. of Saskatchewan, Inc. | 4,400 | 322,168 | ||||||
Praxair, Inc. | 11,900 | 706,384 | ||||||
4,730,974 | ||||||||
Metals & Mining – 0.3% | ||||||||
Nucor Corp. | 6,100 | 281,820 | ||||||
TOTAL MATERIALS | 5,012,794 | |||||||
Total Common Stocks (Cost $94,959,880) | $ | 72,284,449 | ||||||
Face | Fair | |||||||
Repurchase Agreements – 3.2% | Amount | Value | ||||||
U.S. Bank 0.010% 01/02/2009 | $ | 2,599,000 | $ | 2,599,000 | ||||
Repurchase price $2,599,001 | ||||||||
Collateralized by: Various Agency Mortgage- Backed Securities 2.395% to 5.000%, Due 09/01/2018 through 05/15/2033 | ||||||||
Fair Value: $2,650,853 | ||||||||
Total Repurchase Agreements (Cost $2,599,000) | $ | 2,599,000 | ||||||
Total Investments – 91.8% (Cost $97,558,880) (b) | $ | 74,883,449 | ||||||
Other Assets in Excess of Liabilities – 8.2% | 6,660,026 | |||||||
Net Assets – 100.0% | $ | 81,543,475 | ||||||
Percentages are stated as a percent of net assets.
Footnotes:
(a) | Non-income producing security. | |
(b) | Represents cost for financial reporting purposes, which may differ from cost basis for Federal income tax purposes. See also Note 8 of the Notes to Financial Statements. |
The accompanying notes are an integral part of these financial statements.
121
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Bristol Portfolio
Bristol Portfolio
Statement of Assets and Liabilities
December 31, 2008
Assets: | ||||
Investments in securities, at fair value (Cost $94,959,880) | $ | 72,284,449 | ||
Repurchase agreements | 2,599,000 | |||
Cash | 123 | |||
Receivable for securities sold | 1,744,819 | |||
Receivable for fund shares sold | 7,026,977 | |||
Dividends and accrued interest receivable | 154,101 | |||
Prepaid expenses and other assets | 1,520 | |||
Total assets | 83,810,989 | |||
Liabilities: | ||||
Payable for securities purchased | 2,133,294 | |||
Payable for fund shares redeemed | 61,725 | |||
Payable for investment management services | 47,789 | |||
Accrued custody expense | 1,549 | |||
Accrued professional fees | 11,805 | |||
Accrued accounting fees | 5,455 | |||
Accrued printing and filing fees | 5,897 | |||
Total liabilities | 2,267,514 | |||
Net assets | $ | 81,543,475 | ||
Net assets consist of: | ||||
Par value, $1 per share | $ | 9,911,786 | ||
Paid-in capital in excess of par value | 116,185,464 | |||
Accumulated net realized loss on investments | (22,010,866 | ) | ||
Net unrealized depreciation on investments | (22,675,431 | ) | ||
Undistributed net investment income | 132,522 | |||
Net assets | $ | 81,543,475 | ||
Shares outstanding | 9,911,786 | |||
Authorized Fund shares allocated to Portfolio | 15,000,000 | |||
Net asset value per share | $ | 8.23 | ||
Statement of Operations
For the Year Ended December 31, 2008
Investment income: | ||||
Interest | $ | 42,951 | ||
Dividends (net of withholding tax of $6,925) | 1,819,828 | |||
Total investment income | 1,862,779 | |||
Expenses: | ||||
Management fees | 734,295 | |||
Custodian fees | 9,754 | |||
Directors’ fees | 7,778 | |||
Professional fees | 17,266 | |||
Accounting fees | 36,300 | |||
Printing and filing fees | 11,978 | |||
Compliance expense | 4,911 | |||
Other | 1,444 | |||
Total expenses | 823,726 | |||
Net investment income | 1,039,053 | |||
Realized/unrealized gain (loss) on investments: | ||||
Net realized gain (loss) on investments | (21,019,200 | ) | ||
Change in unrealized appreciation/depreciation on investments | (25,860,147 | ) | ||
Net realized/unrealized gain (loss) on investments | (46,879,347 | ) | ||
Change in net assets from operations | $ | (45,840,294 | ) | |
The accompanying notes are an integral part of these financial statements.
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Bristol Portfolio
Bristol Portfolio
Statements of Changes in Net Assets
Years Ended December 31, | ||||||||
2008 | 2007 | |||||||
Increase (Decrease) in Net Assets: | ||||||||
Operations: | ||||||||
Net investment income | $ | 1,039,053 | $ | 559,453 | ||||
Net realized gain (loss) on investments | (21,019,200 | ) | 6,553,033 | |||||
Change in unrealized appreciation/depreciation on investments | (25,860,147 | ) | (1,432,275 | ) | ||||
Change in net assets from operations | (45,840,294 | ) | 5,680,211 | |||||
Distributions to shareholders: | ||||||||
Distributions from net investment income | (906,531 | ) | (508,005 | ) | ||||
Capital transactions: | ||||||||
Received from shares sold | 53,323,139 | 38,961,676 | ||||||
Received from dividends reinvested | 906,531 | 508,005 | ||||||
Paid for shares redeemed | (23,005,171 | ) | (10,024,785 | ) | ||||
Change in net assets from capital transactions | 31,224,499 | 29,444,896 | ||||||
Change in net assets | (15,522,326 | ) | 34,617,102 | |||||
Net Assets: | ||||||||
Beginning of year | 97,065,801 | 62,448,699 | ||||||
End of year | $ | 81,543,475 | $ | 97,065,801 | ||||
Undistributed net investment income | $ | 132,522 | $ | 51,448 | ||||
Financial Highlights
Years Ended December 31, | ||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
Selected Per-Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 14.02 | $ | 13.08 | $ | 11.27 | $ | 10.06 | $ | 10.43 | ||||||||||
Operations: | ||||||||||||||||||||
Net investment income | 0.11 | 0.08 | 0.04 | 0.01 | 0.13 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (5.80 | ) | 0.93 | 1.81 | 1.20 | 0.63 | ||||||||||||||
Total from operations | (5.69 | ) | 1.01 | 1.85 | 1.21 | 0.76 | ||||||||||||||
Distributions: | ||||||||||||||||||||
Distributions from net investment income | (0.10 | ) | (0.07 | ) | (0.04 | ) | — | (0.10 | ) | |||||||||||
Distributions of net realized capital gains | — | — | — | — | (1.03 | ) | ||||||||||||||
Total distributions | (0.10 | ) | (0.07 | ) | (0.04 | ) | — | (1.13 | ) | |||||||||||
Net asset value, end of year | $ | 8.23 | $ | 14.02 | $ | 13.08 | $ | 11.27 | $ | 10.06 | ||||||||||
Total return | –40.54 | % | 7.75 | % | 16.42 | % | 12.03 | % | 8.62 | % | ||||||||||
Ratios and supplemental data: | ||||||||||||||||||||
Net assets at end of year (millions) | $ | 81.5 | $ | 97.1 | $ | 62.4 | $ | 30.0 | $ | 8.1 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Ratios net of expenses reduced or reimbursed by adviser: | ||||||||||||||||||||
Expenses | 0.90 | % | 0.89 | % | 0.92 | % | 0.96 | % | 0.27 | % | ||||||||||
Net investment income | 1.13 | % | 0.69 | % | 0.56 | % | 0.54 | % | 1.45 | % | ||||||||||
Ratios assuming no expenses reduced or reimbursed by adviser: | ||||||||||||||||||||
Expenses | 0.90 | % | 0.89 | % | 0.92 | % | 0.96 | % | 1.07 | % | ||||||||||
Portfolio turnover rate | 184 | % | 176 | % | 216 | % | 224 | % | 300 | % |
The accompanying notes are an integral part of these financial statements.
123
Ohio National Fund, Inc.
Bryton Growth Portfolio
Bryton Growth Portfolio
Objective/Strategy
The Bryton Growth Portfolio seeks long-term growth of capital by investing primarily in common stocks of growth-oriented U.S. companies smaller than the 500 largest publicly traded U.S. companies in terms of market capitalization.
Performance as of December 31, 2008
Average Annual Total Returns: | ||||
One year | -39.53% | |||
Five years | -2.75% | |||
Since inception (5/1/02) | -3.08% |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price and reinvestment of dividends and capital gains. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more, or less than the original cost.
The Portfolio is not open to direct retail investment. Beneficial interest in shares is obtained solely by purchase of variable life insurance policies and variable annuity contracts. Actual performance results for variable annuity and variable universal life contracts will be lower due to contract charges. Consult your contract for applicable charges.
Comments
For the year ended December 31, 2008, the Bryton Growth Portfolio returned -39.53% versus -38.54% for the current benchmark, the Russell 2000 Growth Index.
During 2008, investors witnessed a worldwide economic slowdown, steadily climbing unemployment, the collapse of major financial institutions, and frozen credit markets. Equity markets turned in one of the worst performance years in history, and 80% of the stocks in the Russell 2000 Index ended the year in negative territory.
Throughout the year, the Portfolio maintained an underweight position in Consumer Discretionary stocks, as declining home prices, uncertain employment prospects and falling equity markets pressured consumer spending. The underweight position resulted in a net positive contribution to the Portfolio’s performance, as the sector underperformed the market. However, a few of the Consumer Discretionary stocks we did own were among the worst performers in the Portfolio. Among these, Pacific Sunwear of California, Inc. hurt annual performance by 126 basis points and Charlotte Russe Holding, Inc. detracted 95 basis points from performance.(1)
The Energy sector was a volatile group in 2008, with the price of oil peaking at an all time high of $147 per barrel and subsequently collapsing to the mid-$40s, as the onset of a global recession resulted in weaker demand for the commodity. The Portfolio was somewhat underweighted in the Energy sector in 2008 which resulted in a net positive impact to performance; the Energy stocks we owned outperformed the group on average, and our underweight position limited the impact of this underperforming sector. The best performers included PetroHawk Energy Corp., which contributed 128 basis points to performance, and Comstock Resources, Inc., which added 19 basis points. Some of the worst performers included Berry Petroleum Co., which hurt performance by 152 basis points, and EXCO Resources, Inc., which cost the Portfolio 83 basis points of performance.(1)
The percentage of the Portfolio invested in the Health Care sector rose from 22% to 27% in 2008, but remained in line with the benchmark weighting. Sequenom, Inc., a molecular diagnostic company with a promising test for prenatal genetic disorders, was a new addition to the Portfolio mid-year and a strong contributor to performance, contributing 69 basis points. Other new additions in the Health Care space included Alexion Pharmaceuticals, Inc., a biotech company with a drug for a life-threatening blood disease in an under-penetrated market, Celera Corp., a diagnostic company with a robust pipeline, and Eclipsys Corp., a healthcare information technology company that we expect to benefit from increased adoption of electronic medical records.(1)
The Portfolio benefited from acquisition activity during the year, as two of the top five contributors were acquisition targets: DRS Technologies, Inc. was bought by Italian firm Finmeccanica and added 52 basis points to performance, and TriZetto Group was bought by Apax Partners and contributed 30 basis points to performance.(1)
Despite the turmoil in the Financials sector, one of the top five contributors to performance for the Portfolio emerged from this sector. KBW, Inc. is an investment bank specializing in financial companies that stands to benefit from bank recapitalizations, and this position added 36 basis points to performance.(1)
Notable detractors to the Portfolio not already mentioned included Hansen Medical, Inc., which hurt performance by 131 basis points as hospitals reduced spending on capital equipment and the company missed expectations. RF Micro Devices, Inc. cost the Portfolio 115 basis points, based on slowing handset growth and market share loss to competition, and a position in ValueClick, Inc. detracted from Portfolio performance by 108 basis points as the company’s display advertising came under pressure and weak e-commerce trends hurt comparison shopping.(1)
As we enter a new year, the majority of headlines regarding the state of the economy are discouraging. In addition, political unrest, global wars, and recent investment scandals have further eroded investor confidence. However, we believe the equity markets have discounted some of this bad news. Valuations are more reasonable, earnings expectations have come down (though still perhaps slightly higher than we would like), and credit markets have begun to thaw. For consumers, gas prices are lower, and the Federal Reserve’s actions have driven down mortgage rates for home owners. Additional stimulus plans are working their way through Congress. We remain optimistic that policy actions will help the economy and stock market returns will improve in 2009.
(1) | The Portfolio’s composition is subject to change. Holdings and weightings are as of December 31, 2008. |
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Ohio National Fund, Inc.
Bryton Growth Portfolio (Continued)
Bryton Growth Portfolio (Continued)
Change in Value of $10,000 Investment
Hypothetical illustration based on past performance. Future performance will vary. The Portfolio’s returns reflect reinvested dividends. The Portfolio’s holdings may differ significantly from the securities in the index. The index is unmanaged and therefore does not reflect the cost of portfolio management and accounting.
The Russell 2000 Growth Index is a market-weighted total return index that measures the performance of companies within the Russell 2000 Index having higher price-to-book ratios and higher forecasted growth values. The Russell 2000 Index includes the 2000 firms from the Russell 3000 Index with the smallest market capitalizations. The Russell 3000 Index represents 98% of the investable U.S. equity market. The index presented herein includes the effects of reinvested dividends.
Portfolio Composition as of December 31, 2008 (1)
% of Net Assets | ||||
Common Stocks (3) | 85.9 | |||
Repurchase Agreements and Other Net Assets | 14.1 | |||
100.0 | ||||
Top 10 Portfolio Holdings as of December 31, 2008 (1) (2)
% of Net Assets | |||||||
1. | Integra LifeSciences Holdings Corp. | 1.8 | |||||
2. | Sequenom, Inc. | 1.7 | |||||
3. | Comstock Resources, Inc. | 1.6 | |||||
4. | OSI Pharmaceuticals, Inc. | 1.6 | |||||
5. | Flir Systems, Inc. | 1.6 | |||||
6. | PMC – Sierra, Inc. | 1.5 | |||||
7. | Westinghouse Air Brake Technologies Corp. | 1.5 | |||||
8. | Wright Medical Group, Inc. | 1.5 | |||||
9. | Calgon Carbon Corp. | 1.4 | |||||
10. | Sohu.com, Inc. | 1.4 |
(1) | Composition of Portfolio subject to change. | |
(2) | Short-term investments have been excluded from the list of Top 10 Portfolio holdings. | |
(3) | Sectors: |
% of Net Assets | |||
Information Technology | 26.5 | ||
Health Care | 22.7 | ||
Industrials | 14.0 | ||
Consumer Discretionary | 7.0 | ||
Financials | 5.4 | ||
Energy | 4.1 | ||
Consumer Staples | 4.1 | ||
Materials | 2.1 | ||
85.9 | |||
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Bryton Growth Portfolio
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 85.9% | Shares | Value | ||||||
CONSUMER DISCRETIONARY – 7.0% | ||||||||
Distributors – 1.2% | ||||||||
LKQ Corp. (a) | 60,000 | $ | 699,600 | |||||
Hotels, Restaurants & Leisure – 2.4% | ||||||||
Burger King Holdings, Inc. | 35,000 | 835,800 | ||||||
WMS Industries, Inc. (a) | 22,000 | 591,800 | ||||||
1,427,600 | ||||||||
Specialty Retail – 2.7% | ||||||||
Aeropostale, Inc. (a) | 23,000 | 370,300 | ||||||
Charlotte Russe Holding, Inc. (a) | 70,000 | 454,300 | ||||||
The Childrens Place Retail Stores, Inc. (a) | 11,000 | 238,480 | ||||||
Genesco, Inc. (a) | 20,000 | 338,400 | ||||||
Pacific Sunwear of California, Inc. (a) | 140,000 | 222,600 | ||||||
1,624,080 | ||||||||
Textiles, Apparel & Luxury Goods – 0.7% | ||||||||
The Warnaco Group, Inc. (a) | 20,000 | 392,600 | ||||||
TOTAL CONSUMER DISCRETIONARY | 4,143,880 | |||||||
CONSUMER STAPLES – 4.1% | ||||||||
Beverages – 0.5% | ||||||||
Central European Distribution Corp. (a) | 14,000 | 275,800 | ||||||
Food & Staples Retailing – 1.4% | ||||||||
BJ’s Wholesale Club, Inc. (a) | 23,000 | 787,980 | ||||||
Food Products – 1.0% | ||||||||
Flowers Foods, Inc. | 25,000 | 609,000 | ||||||
Personal Products – 1.2% | ||||||||
Chattem, Inc. (a) | 10,000 | 715,300 | ||||||
TOTAL CONSUMER STAPLES | 2,388,080 | |||||||
ENERGY – 4.1% | ||||||||
Oil, Gas & Consumable Fuels – 4.1% | ||||||||
Arena Resources, Inc. (a) | 29,000 | 814,610 | ||||||
Comstock Resources, Inc. (a) | 20,000 | 945,000 | ||||||
Concho Resources, Inc. (a) | 28,000 | 638,960 | ||||||
TOTAL ENERGY | 2,398,570 | |||||||
FINANCIALS – 5.4% | ||||||||
Capital Markets – 1.2% | ||||||||
Affiliated Managers Group, Inc. (a) | 7,000 | 293,440 | ||||||
Jefferies Group, Inc. | 30,000 | 421,800 | ||||||
715,240 | ||||||||
Commercial Banks – 2.3% | ||||||||
Prosperity Bancshares, Inc. | 27,000 | 798,930 | ||||||
Texas Capital Bancshares, Inc. (a) | 43,000 | 574,480 | ||||||
1,373,410 | ||||||||
Diversified Financial Services – 1.0% | ||||||||
Portfolio Recovery Associates, Inc. (a) | 17,000 | 575,280 | ||||||
Insurance – 1.0% | ||||||||
Horace Mann Educators Corp. | 60,000 | 551,400 | ||||||
TOTAL FINANCIALS | 3,215,330 | |||||||
HEALTH CARE – 22.7% | ||||||||
Biotechnology – 5.8% | ||||||||
Alexion Pharmaceuticals, Inc. (a) | 23,000 | 832,370 | ||||||
Celera Corp. (a) | 60,000 | 667,800 | ||||||
Incyte Corp. (a) | 90,000 | 341,100 | ||||||
Isis Pharmaceuticals, Inc. (a) | 47,000 | 666,460 | ||||||
OSI Pharmaceuticals, Inc. (a) | 24,000 | 937,200 | ||||||
3,444,930 | ||||||||
Health Care Equipment & Supplies – 8.9% | ||||||||
American Medical Systems Holdings, Inc. (a) | 73,000 | 656,270 | ||||||
Conceptus, Inc. (a) | 25,000 | 380,500 | ||||||
Hansen Medical, Inc. (a) | 60,000 | 433,200 | ||||||
Hologic, Inc. (a) | 36,000 | 470,520 | ||||||
Integra LifeSciences Holdings Corp. (a) | 30,000 | 1,067,100 | ||||||
Micrus Endovascular Corp. (a) | 58,000 | 673,380 | ||||||
NuVasive, Inc. (a) | 20,000 | 693,000 | ||||||
Wright Medical Group, Inc. (a) | 42,000 | 858,060 | ||||||
5,232,030 | ||||||||
Health Care Providers & Services – 3.9% | ||||||||
CardioNet, Inc. (a) | 34,000 | 838,100 | ||||||
MWI Veterinary Supply, Inc. (a) | 30,000 | 808,800 | ||||||
PSS World Medical, Inc. (a) | 35,000 | 658,700 | ||||||
2,305,600 | ||||||||
Health Care Technology – 1.1% | ||||||||
Eclipsys Corp. (a) | 45,000 | 638,550 | ||||||
Life Sciences Tools & Services – 3.0% | ||||||||
Luminex Corp. (a) | 37,000 | 790,320 | ||||||
Sequenom, Inc. (a) | 50,200 | 995,968 | ||||||
1,786,288 | ||||||||
TOTAL HEALTH CARE | 13,407,398 | |||||||
INDUSTRIALS – 14.0% | ||||||||
Aerospace & Defense – 0.7% | ||||||||
Triumph Group, Inc. | 10,000 | 424,600 | ||||||
Commercial Services & Supplies – 3.3% | ||||||||
Clean Harbors, Inc. (a) | 12,000 | 761,280 | ||||||
Copart, Inc. (a) | 17,000 | 462,230 | ||||||
The GEO Group, Inc. (a) | 40,000 | 721,200 | ||||||
1,944,710 | ||||||||
Construction & Engineering – 1.3% | ||||||||
Quanta Services, Inc. (a) | 38,000 | 752,400 | ||||||
Electrical Equipment – 1.5% | ||||||||
Baldor Electric Co. | 31,000 | 553,350 | ||||||
Energy Conversion Devices, Inc. (a) | 13,000 | 327,730 | ||||||
881,080 | ||||||||
Machinery – 7.2% | ||||||||
Astec Industries, Inc. (a) | 21,000 | 657,930 | ||||||
Columbus McKinnon Corp. (a) | 39,000 | 532,350 | ||||||
Dynamic Materials Corp. | 37,000 | 714,470 | ||||||
Kaydon Corp. | 15,000 | 515,250 | ||||||
Lincoln Electric Holdings, Inc. | 11,000 | 560,230 | ||||||
The Middleby Corp. (a) | 14,500 | 395,415 |
(continued)
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Bryton Growth Portfolio (Continued)
Bryton Growth Portfolio (Continued)
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 85.9% | Shares | Value | ||||||
Machinery (continued) | ||||||||
Westinghouse Air Brake Technologies Corp. | 22,000 | $ | 874,500 | |||||
4,250,145 | ||||||||
TOTAL INDUSTRIALS | 8,252,935 | |||||||
INFORMATION TECHNOLOGY – 26.5% | ||||||||
Communications Equipment – 3.6% | ||||||||
Harmonic, Inc. (a) | 100,000 | 561,000 | ||||||
Infinera Corporation (a) | 90,000 | 806,400 | ||||||
Riverbed Technology, Inc. (a) | 65,000 | 740,350 | ||||||
2,107,750 | ||||||||
Computers & Peripherals – 1.2% | ||||||||
Data Domain, Inc. (a) | 38,000 | 714,400 | ||||||
Electronic Equipment, Instruments & Components – 2.0% | ||||||||
China Security & Surveillance Technology, Inc. (a) | 60,000 | 265,800 | ||||||
Flir Systems, Inc. (a) | 30,000 | 920,400 | ||||||
1,186,200 | ||||||||
Internet Software & Services – 5.6% | ||||||||
Bankrate, Inc. (a) | 20,000 | 760,000 | ||||||
Gmarket, Inc. - ADR (a) | 11,900 | 205,275 | ||||||
MercadoLibre, Inc. (a) | 43,000 | 705,630 | ||||||
Sohu.com, Inc. (a) | 18,000 | 852,120 | ||||||
ValueClick, Inc. (a) | 115,000 | 786,600 | ||||||
3,309,625 | ||||||||
IT Services – 1.3% | ||||||||
Sapient Corp. (a) | 150,000 | 666,000 | ||||||
Wright Express Corp. (a) | 7,000 | 88,200 | ||||||
754,200 | ||||||||
Semiconductors & Semiconductor Equipment – 10.5% | ||||||||
Advanced Energy Industries, Inc. (a) | 80,000 | 796,000 | ||||||
Applied Micro Circuits Corp. (a) | 125,000 | 491,250 | ||||||
Atheros Communications, Inc. (a) | 29,000 | 414,990 | ||||||
Micrel, Inc. | 110,000 | 804,100 | ||||||
Microsemi Corp. (a) | 43,000 | 543,520 | ||||||
PMC - Sierra, Inc. (a) | 180,000 | 874,800 | ||||||
Semtech Corp. (a) | 70,000 | 788,900 | ||||||
Silicon Laboratories, Inc. (a) | 33,000 | 817,740 | ||||||
Skyworks Solutions, Inc. (a) | 120,000 | 664,800 | ||||||
6,196,100 | ||||||||
Software – 2.3% | ||||||||
Informatica Corp. (a) | 60,000 | 823,800 | ||||||
Quest Software, Inc. (a) | 43,000 | 541,370 | ||||||
1,365,170 | ||||||||
TOTAL INFORMATION TECHNOLOGY | 15,633,445 | |||||||
MATERIALS – 2.1% | ||||||||
Chemicals – 2.1% | ||||||||
Calgon Carbon Corp. (a) | 55,500 | 852,480 | ||||||
Intrepid Potash, Inc. (a) | 19,100 | 396,707 | ||||||
TOTAL MATERIALS | 1,249,187 | |||||||
Total Common Stocks (Cost $66,398,405) | $ | 50,688,825 | ||||||
Face | Fair | |||||||
Repurchase Agreements – 3.6% | Amount | Value | ||||||
U.S. Bank 0.010% 01/02/2009 | $ | 2,162,000 | $ | 2,162,000 | ||||
Repurchase price $2,162,001 | ||||||||
Collateralized by: | ||||||||
Various Agency Mortgage- Backed Securities 2.395% to 5.000%, Due 09/01/2018 through 05/15/2033 Fair Value: $2,205,134 | ||||||||
Total Repurchase Agreements (Cost $2,162,000) | $ | 2,162,000 | ||||||
Total Investments – 89.5% (Cost $68,560,405) (b) | $ | 52,850,825 | ||||||
Other Assets in Excess of Liabilities – 10.5% | 6,168,702 | |||||||
Net Assets – 100.0% | $ | 59,019,527 | ||||||
Percentages are stated as a percent of net assets.
Abbreviations:
ADR: American Depository Receipts
Footnotes:
(a) | Non-income producing security. | |
(b) | Represents cost for financial reporting purposes, which may differ from cost basis for Federal income tax purposes. See also Note 8 of the Notes to Financial Statements. |
The accompanying notes are an integral part of these financial statements.
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Ohio National Fund, Inc.
Bryton Growth Portfolio
Bryton Growth Portfolio
Statement of Assets and Liabilities
December 31, 2008
Assets: | ||||
Investments in securities, at fair value (Cost $66,398,405) | $ | 50,688,825 | ||
Repurchase agreements | 2,162,000 | |||
Cash | 89 | |||
Receivable for securities sold | 482,979 | |||
Receivable for fund shares sold | 6,743,468 | |||
Dividends and accrued interest receivable | 14,503 | |||
Prepaid expenses and other assets | 1,116 | |||
Total assets | 60,092,980 | |||
Liabilities: | ||||
Payable for securities purchased | 951,018 | |||
Payable for fund shares redeemed | 66,612 | |||
Payable for investment management services | 34,854 | |||
Accrued custody expense | 980 | |||
Accrued professional fees | 11,290 | |||
Accrued accounting fees | 4,376 | |||
Accrued printing and filing fees | 4,323 | |||
Total liabilities | 1,073,453 | |||
Net assets | $ | 59,019,527 | ||
Net assets consist of: | ||||
Par value, $1 per share | $ | 7,321,544 | ||
Paid-in capital in excess of par value | 77,640,243 | |||
Accumulated net realized loss on investments | (10,232,680 | ) | ||
Net unrealized depreciation on investments | (15,709,580 | ) | ||
Net assets | $ | 59,019,527 | ||
Shares outstanding | 7,321,544 | |||
Authorized Fund shares allocated to Portfolio | 15,000,000 | |||
Net asset value per share | $ | 8.06 | ||
Statement of Operations
For the Year Ended December 31, 2008
Investment income: | ||||
Interest | $ | 43,675 | ||
Dividends | 173,341 | |||
Total investment income | 217,016 | |||
Expenses: | ||||
Management fees | 546,195 | |||
Custodian fees | 5,908 | |||
Directors’ fees | 5,419 | |||
Professional fees | 15,494 | |||
Accounting fees | 28,077 | |||
Printing and filing fees | 8,943 | |||
Compliance expense | 4,911 | |||
Other | 948 | |||
Total expenses | 615,895 | |||
Net investment loss | (398,879 | ) | ||
Realized/unrealized gain (loss) on investments: | ||||
Net realized gain (loss) on investments | (9,701,458 | ) | ||
Change in unrealized appreciation/depreciation on investments | (19,649,484 | ) | ||
Net realized/unrealized gain (loss) on investments | (29,350,942 | ) | ||
Change in net assets from operations | $ | (29,749,821 | ) | |
The accompanying notes are an integral part of these financial statements.
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Bryton Growth Portfolio
Bryton Growth Portfolio
Statements of Changes in Net Assets
Years Ended December 31, | ||||||||
2008 | 2007 | |||||||
Increase (Decrease) in Net Assets: | ||||||||
Operations: | ||||||||
Net investment loss | $ | (398,879 | ) | $ | (256,301 | ) | ||
Net realized gain (loss) on investments | (9,701,458 | ) | 1,701,363 | |||||
Change in unrealized appreciation/depreciation on investments | (19,649,484 | ) | 1,921,733 | |||||
Change in net assets from operations | (29,749,821 | ) | 3,366,795 | |||||
Capital transactions: | ||||||||
Received from shares sold | 46,393,507 | 37,547,345 | ||||||
Paid for shares redeemed | (22,858,481 | ) | (4,940,730 | ) | ||||
Change in net assets from capital transactions | 23,535,026 | 32,606,615 | ||||||
Change in net assets | (6,214,795 | ) | 35,973,410 | |||||
Net Assets: | ||||||||
Beginning of year | 65,234,322 | 29,260,912 | ||||||
End of year | $ | 59,019,527 | $ | 65,234,322 | ||||
Accumulated net investment loss | $ | — | $ | (18,148 | ) | |||
Financial Highlights
Years Ended December 31, | ||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
Selected Per-Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 13.33 | $ | 12.13 | $ | 10.46 | $ | 10.03 | $ | 9.33 | ||||||||||
Operations: | ||||||||||||||||||||
Net investment income (loss) | (0.05 | ) | (0.05 | ) | (0.03 | ) | (0.06 | ) | — | |||||||||||
Net realized and unrealized gain (loss) on investments | (5.22 | ) | 1.25 | 1.78 | 0.49 | 0.70 | ||||||||||||||
Total from operations | (5.27 | ) | 1.20 | 1.75 | 0.43 | 0.70 | ||||||||||||||
Distributions: | ||||||||||||||||||||
Distributions of net realized capital gains | — | — | (0.08 | ) | — | — | ||||||||||||||
Net asset value, end of year | $ | 8.06 | $ | 13.33 | $ | 12.13 | $ | 10.46 | $ | 10.03 | ||||||||||
Total return | –39.53 | % | 9.89 | % | 16.74 | % | 4.30 | % | 7.50 | % | ||||||||||
Ratios and supplemental data: | ||||||||||||||||||||
Net assets at end of year (millions) | $ | 59.0 | $ | 65.2 | $ | 29.3 | $ | 11.2 | $ | 7.0 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Ratios net of expenses reduced or reimbursed by adviser: | ||||||||||||||||||||
Expenses | 0.96 | % | 0.96 | % | 1.04 | % | 1.11 | % | 0.30 | % | ||||||||||
Net investment income (loss) | (0.62 | )% | (0.54 | )% | (0.67 | )% | (0.74 | )% | 0.03 | % | ||||||||||
Ratios assuming no expenses reduced or reimbursed by adviser: | ||||||||||||||||||||
Expenses | 0.96 | % | 0.96 | % | 1.04 | % | 1.11 | % | 1.15 | % | ||||||||||
Portfolio turnover rate | 54 | % | 55 | % | 99 | % | 155 | % | 150 | % |
The accompanying notes are an integral part of these financial statements.
129
Ohio National Fund, Inc.
U.S. Equity Portfolio
U.S. Equity Portfolio
Objective/Strategy
The U.S. Equity Portfolio seeks capital appreciation with a secondary objective of capital preservation to provide long term growth by investing within under-priced sectors and industries.
Performance as of December 31, 2008
Average Annual Total Returns: | ||||
One year | -47.98% | |||
Since inception (5/1/04) | -4.44% |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price and reinvestment of dividends and capital gains. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost.
The Portfolio is not open to direct retail investment. Beneficial interest in shares is obtained solely by purchase of variable life insurance policies and variable annuity contracts. Actual performance results for variable annuity and variable universal life contracts will be lower due to contract charges. Consult your contract for applicable charges.
Comments
For the year ended December 31, 2008, the U.S. Equity Portfolio returned -47.98% versus -36.72% for the current benchmark, the S&P Composite 1500 Index.
With many equity indexes recording the second worst year in the history of the stock market, 2008 presented both a challenging and disappointing environment for the Portfolio. The combination of an economic recession and a historical credit crisis caused the collapse of many prevalent financial firms such as Bear Stearns, Merrill Lynch, Washington Mutual, Wachovia, and Lehman Brothers. In response, equity markets experienced broad based selling in all sectors.
As mentioned above, all sectors within the market were negative in 2008 giving equity investors no place to hide. The two sectors that fell the least were Consumer Staples and Health Care returning -15.65% and -23.76% respectively; and the two worst performing sectors for 2008 were Financials and Materials returning -52.24% and -45.48% respectively. In addition to equities, many other asset classes experienced substantial losses during 2008; the RJ/CRB Index, a broad based measurement of all types of commodities, lost over 36% and high-yield corporate bonds had poor performance as investors priced in increased corporate default risk. Conversely, U.S. Treasuries produced positive returns in 2008 as investors fled towards the highest quality assets in order to avoid further losses.
The year began with a significant sell off, with the S&P 1500 Composite Index dropping by almost 13%. The Telecommunication Services, Financials, and Information Technology sectors lead the way down, as each lost approximately 18 to 20%.
This initial sell-off was quickly reversed between March and May as the market rebounded with a 13% gain in just over two months. Both the Energy and Materials sectors lead the rebound, returning approximately 23% and 21% respectively. Additionally, the Health Care, Consumer Staples, and Utilities sectors, which held up better during the first part of the year, lagged on the upside during this rebound.
Next, from May to July the S&P 1500 Composite Index fell another 14% as the Financials and Consumer Discretionary sectors offset their earlier gains due to sub-prime write-offs and recessionary concerns. Financials lost over 31% while Consumer Discretionary lost approximately 20%. This sell off also sent the S&P 1500 Composite Index into official correction territory on a year-to-date basis as the index was down almost 16%.
The next two months consisted of an extremely sideways and choppy market as investors waited for the next shoe to drop. Unfortunately, in mid-September investors fears came to fruition as Lehman Brothers collapsed sending the market into a free-fall. The Financials sector led the fall, losing over 57% of its value during this two month period. As of market close on November 20th, the S&P 1500 Composite Index had fallen over 47% in 2008.
Ending the year on a relatively good note, the market rallied from November 20th to year end. The Financials and Consumer Discretionary sectors lead this final move.
The top industry contributors to performance were airlines, automotive retail, oil & gas refining & marketing, pharmaceuticals, and construction materials. In general, both over-weighted positions and stock selection helped the Portfolio’s over performance in these industries. (1)
The largest industry detractors to performance were other diversified financial services, managed health care, apparel retail, regional banks, and oil & gas drilling. Over-weighted positions in these underperforming industries significantly detracted from the Portfolio’s overall performance.(1)
Based on valuations, the Portfolio began 2008 with approximately 81% of the Portfolio in large-cap issues. The large cap tilt was maintained throughout the majority of 2008. Going into 2009, the Portfolio may begin to venture into more mid and small-cap names as there are attractive values in those areas. At year end, the Portfolio consisted of approximately 70% large-cap, 20% mid-cap, and 10% small-cap issues.(1)
The five best performers were Norfolk Southern Corp., Old Dominion Freight Line, Inc., Ross Stores, Inc., Texas Industries Inc, and Anworth Mortgage Asset Corp. The five worst performers were Bank of America Corp., Thornburg Mortgage, Inc., CIGNA Corp., Cracker Barrel Old Country Store, Inc., and D.R. Horton, Inc. The five largest contributors to performance were SkyWest, Inc., Delta Air Lines, Inc., Exxon Mobil Corp., AutoZone, Inc., and Sunoco, Inc. The five largest detractors to performance were Bank of America Corp., JPMorgan Chase & Co., Collective Brands, Inc., CIGNA Corp., and Foot Locker, Inc.(1)
At year end, our system measured a significant amount of value in the market place and we expect to see a rally moving into 2009. Looking forward, we are actively adding to specific industries within the Industrials, Materials, and Consumer Discretionary sectors, as very attractive industry-based valuations make those
(continued)
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Ohio National Fund, Inc.
U.S. Equity Portfolio (Continued)
U.S. Equity Portfolio (Continued)
three sectors more and more attractive. While talks of future bank failures, recession, stagflation, etc. might resonate throughout the market throughout 2009, we will maintain our disciplined value based industry rotation investing style. (1)
(1) | The Portfolio’s composition is subject to change. Holdings and weightings are as of December 31, 2008. |
Change in Value of $10,000 Investment
Hypothetical illustration based on past performance. Future performance will vary. The Portfolio’s returns reflect reinvested dividends. The Portfolio’s holdings may differ significantly from the securities in the index. The index is unmanaged and therefore does not reflect the cost of portfolio management and accounting.
The S&P Composite 1500 Index is a broad-based capitalization-weighted Index of 1500 U.S. Companies and is comprised of the S&P 400, S&P 500, and the S&P 600. The index was developed with a base value of 100 as of December 30, 1994. The index presented herein includes the effects of reinvested dividends.
Portfolio Composition as of December 31, 2008 (1)
% of Net Assets | |||
Common Stocks (3) | 98.4 | ||
Repurchase Agreements Less Net Liabilities | 1.6 | ||
100.0 | |||
Top 10 Portfolio Holdings as of December 31, 2008 (1) (2)
% of Net Assets | |||||||
1. | AT&T, Inc. | 2.6 | |||||
2. | Chevron Corp. | 2.4 | |||||
3. | Exxon Mobil Corp. | 2.4 | |||||
4. | JPMorgan Chase & Co. | 2.1 | |||||
5. | SkyWest, Inc. | 2.1 | |||||
6. | Delta Air Lines, Inc. | 2.1 | |||||
7. | Pfizer, Inc. | 2.1 | |||||
8. | International Business Machines Corp. | 2.0 | |||||
9. | Sunoco, Inc. | 1.9 | |||||
10. | Bank of America Corp. | 1.8 |
(1) | Composition of Portfolio subject to change. | |
(2) | Short-term investments have been excluded from the list of Top 10 Portfolio holdings. | |
(3) | Sectors: |
% of Net Assets | |||
Financials | 20.5 | ||
Consumer Discretionary | 18.7 | ||
Industrials | 18.0 | ||
Energy | 11.8 | ||
Information Technology | 9.3 | ||
Materials | 5.8 | ||
Health Care | 5.6 | ||
Telecommunication Services | 4.9 | ||
Utilities | 2.2 | ||
Consumer Staples | 1.6 | ||
98.4 | |||
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U.S. Equity Portfolio
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 98.4% | Shares | Value | ||||||
CONSUMER DISCRETIONARY – 18.7% | ||||||||
Auto Components – 0.9% | ||||||||
BorgWarner, Inc. | 5,360 | $ | 116,687 | |||||
Household Durables – 4.7% | ||||||||
Centex Corp. | 7,950 | 84,588 | ||||||
Helen of Troy Ltd. (a) | 7,200 | 124,992 | ||||||
Ryland Group, Inc. | 5,180 | 91,531 | ||||||
Snap-On, Inc. | 3,440 | 135,467 | ||||||
The Stanley Works | 4,970 | 169,477 | ||||||
606,055 | ||||||||
Media – 3.0% | ||||||||
Comcast Corp. Class A | 11,650 | 196,652 | ||||||
The DIRECTV Group, Inc. (a) | 8,650 | 198,172 | ||||||
394,824 | ||||||||
Specialty Retail – 5.6% | ||||||||
Advance Auto Parts Inc. | 5,850 | 196,852 | ||||||
AutoZone, Inc. (a) | 1,570 | 218,968 | ||||||
Lowe’s Companies, Inc. | 7,360 | 158,387 | ||||||
The Home Depot, Inc. | 6,690 | 154,004 | ||||||
728,211 | ||||||||
Textiles, Apparel & Luxury Goods – 4.5% | ||||||||
Deckers Outdoor Corp. (a) | 2,420 | 193,286 | ||||||
V.F. Corp. | 3,600 | 197,172 | ||||||
Wolverine World Wide, Inc. | 9,160 | 192,726 | ||||||
583,184 | ||||||||
TOTAL CONSUMER DISCRETIONARY | 2,428,961 | |||||||
CONSUMER STAPLES – 1.6% | ||||||||
Food Products – 1.6% | ||||||||
ConAgra Foods, Inc. | 4,060 | 66,990 | ||||||
Hormel Foods Corp. | 2,140 | 66,511 | ||||||
Nestle SA – ADR | 1,795 | 70,158 | ||||||
TOTAL CONSUMER STAPLES | 203,659 | |||||||
ENERGY – 11.8% | ||||||||
Oil, Gas & Consumable Fuels – 11.8% | ||||||||
Arch Coal, Inc. | 7,690 | 125,270 | ||||||
Chevron Corp. | 4,220 | 312,153 | ||||||
ConocoPhillips | 2,370 | 122,766 | ||||||
CONSOL Energy, Inc. | 2,220 | 63,448 | ||||||
Exxon Mobil Corp. | 3,890 | 310,539 | ||||||
Noble Energy, Inc. | 3,360 | 165,379 | ||||||
San Juan Basin Royalty Trust | 5,930 | 183,652 | ||||||
Sunoco, Inc. | 5,800 | 252,068 | ||||||
TOTAL ENERGY | 1,535,275 | |||||||
FINANCIALS – 20.5% | ||||||||
Capital Markets – 3.9% | ||||||||
Federated Investors, Inc. Class B | 10,490 | 177,911 | ||||||
The Bank Of New York Mellon Corp. | 6,640 | 188,111 | ||||||
The Goldman Sachs Group, Inc. | 1,590 | 134,180 | ||||||
500,202 | ||||||||
Commercial Banks – 3.3% | ||||||||
Huntington Bancshares, Inc. | 15,050 | 115,283 | ||||||
U.S. Bancorp | 3,300 | 82,533 | ||||||
Webster Financial Corp. | 5,010 | 69,038 | ||||||
Wells Fargo & Co. | 5,680 | 167,446 | ||||||
434,300 | ||||||||
Consumer Finance – 1.3% | ||||||||
Capital One Financial Corp. | 2,630 | 83,871 | ||||||
Discover Financial Services | 8,270 | 78,813 | ||||||
162,684 | ||||||||
Diversified Financial Services – 3.9% | ||||||||
Bank of America Corp. | 16,560 | 233,165 | ||||||
JPMorgan Chase & Co. | 8,860 | 279,355 | ||||||
512,520 | ||||||||
Insurance – 3.6% | ||||||||
AFLAC, Inc. | 4,110 | 188,403 | ||||||
StanCorp Financial Group, Inc. | 3,490 | 145,777 | ||||||
Unum Group | 7,170 | 133,362 | ||||||
467,542 | ||||||||
Real Estate Investment Trusts – 3.3% | ||||||||
Annaly Mortgage Management, Inc. | 8,190 | 129,975 | ||||||
Anworth Mortgage Asset Corp. | 22,680 | 145,833 | ||||||
MFA Mortgage Investments, Inc. | 27,050 | 159,324 | ||||||
435,132 | ||||||||
Thrifts & Mortgage Finance – 1.2% | ||||||||
Astoria Financial Corp. | 9,420 | 155,242 | ||||||
TOTAL FINANCIALS | 2,667,622 | |||||||
HEALTH CARE – 5.6% | ||||||||
Pharmaceuticals – 5.6% | ||||||||
Bristol-Myers Squibb Co. | 5,320 | 123,690 | ||||||
Eli Lilly & Co. | 3,100 | 124,837 | ||||||
Merck & Co., Inc. | 6,810 | 207,024 | ||||||
Pfizer, Inc. | 15,280 | 270,609 | ||||||
TOTAL HEALTH CARE | 726,160 | |||||||
INDUSTRIALS – 18.0% | ||||||||
Air Freight & Logistics – 1.4% | ||||||||
FedEx Corp. | 2,810 | 180,261 | ||||||
Airlines – 5.5% | ||||||||
Delta Air Lines, Inc. (a) | 23,900 | 273,894 | ||||||
Republic Airways Holdings, Inc. (a) | 15,580 | 166,239 | ||||||
SkyWest, Inc. | 14,860 | 276,396 | ||||||
716,529 | ||||||||
Building Products – 1.1% | ||||||||
Ameron International Corp. | 1,040 | 65,437 | ||||||
Apogee Enterprises, Inc. | 7,130 | 73,867 | ||||||
139,304 | ||||||||
Commercial Services & Supplies – 1.9% | ||||||||
Knoll, Inc. | 11,890 | 107,248 | ||||||
Pitney Bowes, Inc. | 5,600 | 142,688 | ||||||
249,936 | ||||||||
Construction & Engineering – 3.7% | ||||||||
Fluor Corp. | 4,230 | 189,800 | ||||||
Foster Wheeler Ltd. (a) | 4,330 | 101,235 |
(continued)
132
Ohio National Fund, Inc.
U.S. Equity Portfolio (Continued)
U.S. Equity Portfolio (Continued)
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 98.4% | Shares | Value | ||||||
Construction & Engineering (continued) | ||||||||
Jacobs Engineering Group, Inc. (a) | 4,130 | $ | 198,653 | |||||
489,688 | ||||||||
Machinery – 2.4% | ||||||||
Caterpillar, Inc. | 4,250 | 189,848 | ||||||
Manitowoc Co., Inc. | 13,840 | 119,854 | ||||||
309,702 | ||||||||
Marine – 2.0% | ||||||||
DryShips, Inc. | 10,240 | 109,158 | ||||||
Genco Shipping & Trading Ltd. | 5,560 | 82,288 | ||||||
Navios Maritime Holdings, Inc. | 22,560 | 71,290 | ||||||
262,736 | ||||||||
TOTAL INDUSTRIALS | 2,348,156 | |||||||
INFORMATION TECHNOLOGY – 9.3% | ||||||||
Communications Equipment – 1.4% | ||||||||
Cisco Systems, Inc. (a) | 11,550 | 188,265 | ||||||
Computers & Peripherals – 3.0% | ||||||||
Hewlett-Packard Co. | 3,490 | 126,652 | ||||||
International Business Machines Corp. | 3,100 | 260,896 | ||||||
387,548 | ||||||||
IT Services – 2.7% | ||||||||
Accenture Ltd. | 4,400 | 144,276 | ||||||
Automatic Data Processing, Inc. | 5,190 | 204,175 | ||||||
348,451 | ||||||||
Semiconductors & Semiconductor Equipment – 0.9% | ||||||||
Intel Corp. | 7,540 | 110,536 | ||||||
Software – 1.3% | ||||||||
Oracle Corp. (a) | 9,880 | 175,172 | ||||||
TOTAL INFORMATION TECHNOLOGY | 1,209,972 | |||||||
MATERIALS – 5.8% | ||||||||
Chemicals – 2.8% | ||||||||
Monsanto Co. | 1,190 | 83,717 | ||||||
Potash Corp. of Saskatchewan, Inc. | 860 | 62,969 | ||||||
Syngenta AG – ADR | 2,610 | 102,155 | ||||||
Westlake Chemical Corp. | 7,430 | 121,035 | ||||||
369,876 | ||||||||
Construction Materials – 1.1% | ||||||||
Texas Industries, Inc. | 4,070 | 140,415 | ||||||
Metals & Mining – 1.9% | ||||||||
Commercial Metals Co. | 9,980 | 118,462 | ||||||
United States Steel Corp. | 3,540 | 131,688 | ||||||
250,150 | ||||||||
TOTAL MATERIALS | 760,441 | |||||||
TELECOMMUNICATION SERVICES – 4.9% | ||||||||
Diversified Telecommunication Services – 3.7% | ||||||||
AT&T, Inc. | 11,800 | 336,300 | ||||||
Telefonica SA – ADR | 2,240 | 150,954 | ||||||
487,254 | ||||||||
Wireless Telecommunication Services – 1.2% | ||||||||
China Mobile Ltd. – ADR | 3,030 | 154,075 | ||||||
TOTAL TELECOMMUNICATION SERVICES | 641,329 | |||||||
UTILITIES – 2.2% | ||||||||
Electric Utilities – 2.2% | ||||||||
DPL, Inc. | 2,880 | 65,779 | ||||||
Entergy Corp. | 1,060 | 88,118 | ||||||
FPL Group, Inc. | 1,310 | 65,932 | ||||||
Pepco Holdings, Inc. | 3,650 | 64,824 | ||||||
TOTAL UTILITIES | 284,653 | |||||||
Total Common Stocks (Cost $13,666,684) | $ | 12,806,228 | ||||||
Face | Fair | |||||||
Repurchase Agreements – 5.0% | Amount | Value | ||||||
U.S. Bank 0.010%, 01/02/2009 | $ | 657,000 | $ | 657,000 | ||||
Repurchase price $657,000 | ||||||||
Collateralized by: Various Agency Mortgage- Backed Securities 2.395% to 5.000%, Due 09/01/2018 through 05/15/2033 Fair Value: $670,108 | ||||||||
Total Repurchase Agreements (Cost $657,000) | $ | 657,000 | ||||||
Total Investments – 103.4% (Cost $14,323,684) (b) | $ | 13,463,228 | ||||||
Liabilities in Excess of Other Assets – (3.4)% | (442,637 | ) | ||||||
Net Assets – 100.0% | $ | 13,020,591 | ||||||
Percentages are stated as a percent of net assets.
Abbreviations:
ADR: American Depository Receipts
Footnotes:
(a) | Non-income producing security. | |
(b) | Represents cost for financial reporting purposes, which may differ from cost basis for Federal income tax purposes. See also Note 8 of the Notes to Financial Statements. |
The accompanying notes are an integral part of these financial statements.
133
Ohio National Fund, Inc.
U.S. Equity Portfolio
U.S. Equity Portfolio
Statement of Assets and Liabilities
December 31, 2008
Assets: | ||||
Investments in securities, at fair value (Cost $13,666,684) | $ | 12,806,228 | ||
Repurchase agreements | 657,000 | |||
Cash | 192 | |||
Receivable for fund shares sold | 985 | |||
Dividends and accrued interest receivable | 33,518 | |||
Prepaid expenses and other assets | 290 | |||
Total assets | 13,498,213 | |||
Liabilities: | ||||
Payable for securities purchased | 445,970 | |||
Payable for fund shares redeemed | 9,317 | |||
Payable for investment management services | 7,888 | |||
Accrued custody expense | 938 | |||
Accrued professional fees | 10,527 | |||
Accrued accounting fees | 1,915 | |||
Accrued printing and filing fees | 1,067 | |||
Total liabilities | 477,622 | |||
Net assets | $ | 13,020,591 | ||
Net assets consist of: | ||||
Par value, $1 per share | $ | 1,646,683 | ||
Paid-in capital in excess of par value | 20,088,577 | |||
Accumulated net realized loss on investments | (7,890,421 | ) | ||
Net unrealized depreciation on investments | (860,456 | ) | ||
Undistributed net investment income | 36,208 | |||
Net assets | $ | 13,020,591 | ||
Shares outstanding | 1,646,683 | |||
Authorized Fund shares allocated to Portfolio | 10,000,000 | |||
Net asset value per share | $ | 7.91 | ||
Statement of Operations
For the Year Ended December 31, 2008
Investment income: | ||||
Interest | $ | 8,590 | ||
Dividends (net of withholding tax of $7,805) | 410,765 | |||
Total investment income | 419,355 | |||
Expenses: | ||||
Management fees | 146,457 | |||
Custodian fees | 5,562 | |||
Directors’ fees | 1,612 | |||
Professional fees | 12,473 | |||
Accounting fees | 12,849 | |||
Printing and filing fees | 2,301 | |||
Compliance expense | 4,911 | |||
Other | 382 | |||
Total expenses | 186,547 | |||
Net investment income | 232,808 | |||
Realized/unrealized gain (loss) on investments and foreign currency related transactions: | ||||
Net realized gain (loss) on: | ||||
Investments | (7,848,086 | ) | ||
Foreign currency related transactions | 20 | |||
Change in unrealized appreciation/depreciation on investments and foreign currency related transactions | (4,466,554 | ) | ||
Net realized/unrealized gain (loss) on investments and foreign currency related transactions | (12,314,620 | ) | ||
Change in net assets from operations | $ | (12,081,812 | ) | |
The accompanying notes are an integral part of these financial statements.
134
Ohio National Fund, Inc.
U.S. Equity Portfolio
U.S. Equity Portfolio
Statements of Changes in Net Assets
Years Ended December 31, | ||||||||
2008 | 2007 | |||||||
Increase (Decrease) in Net Assets: | ||||||||
Operations: | ||||||||
Net investment income | $ | 232,808 | $ | 96,464 | ||||
Net realized gain (loss) on investments and foreign currency related transactions | (7,848,066 | ) | 1,432,253 | |||||
Change in unrealized appreciation/depreciation on investments and foreign currency related transactions | (4,466,554 | ) | 1,401,604 | |||||
Change in net assets from operations | (12,081,812 | ) | 2,930,321 | |||||
Distributions to shareholders: | ||||||||
Distributions from net investment income | (195,588 | ) | (87,722 | ) | ||||
Capital transactions: | ||||||||
Received from shares sold | 5,488,668 | 4,702,778 | ||||||
Received from dividends reinvested | 195,588 | 87,722 | ||||||
Paid for shares redeemed | (5,158,816 | ) | (4,597,095 | ) | ||||
Change in net assets from capital transactions | 525,440 | 193,405 | ||||||
Change in net assets | (11,751,960 | ) | 3,036,004 | |||||
Net Assets: | ||||||||
Beginning of year | 24,772,551 | 21,736,547 | ||||||
End of year | $ | 13,020,591 | $ | 24,772,551 | ||||
Undistributed net investment income | $ | 36,208 | $ | 8,742 | ||||
Financial Highlights
For the Period | ||||||||||||||||||||
Years Ended December 31, | from May 1, 2004* | |||||||||||||||||||
2008 | 2007 | 2006 | 2005 | to December 31, 2004 | ||||||||||||||||
Selected Per-Share Data: | ||||||||||||||||||||
Net asset value, beginning of period | $ | 15.45 | $ | 13.70 | $ | 12.73 | $ | 11.71 | $ | 10.00 | ||||||||||
Operations: | ||||||||||||||||||||
Net investment income (loss) | 0.14 | 0.06 | 0.05 | — | (0.01 | ) | ||||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency related transactions | (7.56 | ) | 1.74 | 0.96 | 1.02 | 1.72 | ||||||||||||||
Total from operations | (7.42 | ) | 1.80 | 1.01 | 1.02 | 1.71 | ||||||||||||||
Distributions: | ||||||||||||||||||||
Distributions from net investment income | (0.12 | ) | (0.05 | ) | (0.04 | ) | — | — | ||||||||||||
Net asset value, end of period | $ | 7.91 | $ | 15.45 | $ | 13.70 | $ | 12.73 | $ | 11.71 | ||||||||||
Total return | –47.98 | % | 13.17 | % | 7.93 | % | 8.71 | % | 17.10 | %(b) | ||||||||||
Ratios and supplemental data: | ||||||||||||||||||||
Net assets at end of period (millions) | $ | 13.0 | $ | 24.8 | $ | 21.7 | $ | 12.7 | $ | 4.8 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Ratios net of expenses voluntarily reduced or reimbursed by adviser: | ||||||||||||||||||||
Expenses | 0.96 | % | 0.91 | % | 0.96 | % | 1.05 | % | 1.40 | %(a) | ||||||||||
Net investment income (loss) | 1.19 | % | 0.41 | % | 0.47 | % | 0.03 | % | (0.30 | )%(a) | ||||||||||
Ratios assuming no expenses voluntarily reduced or reimbursed by adviser: | ||||||||||||||||||||
Expenses | 0.96 | % | 0.91 | % | 0.96 | % | 1.05 | % | 2.02 | %(a) | ||||||||||
Portfolio turnover rate | 216 | % | 128 | % | 139 | % | 136 | % | 39 | % |
(a) | Annualized. |
(b) | Not annualized. |
* | Represents date of commencement of operations. |
The accompanying notes are an integral part of these financial statements.
135
Ohio National Fund, Inc.
Balanced Portfolio
Balanced Portfolio
Objective/Strategy
The Balanced Portfolio seeks capital appreciation and income by investing within under-priced sectors and industries while maintaining a minimum of 25% of its assets in fixed income securities.
Performance as of December 31, 2008
Average Annual Total Returns: | ||||
One year | -26.94% | |||
Since inception (5/1/04) | 1.83% |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price and reinvestment of dividends and capital gains. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost.
The Portfolio is not open to direct retail investment. Beneficial interest in shares is obtained solely by purchase of variable life insurance policies and variable annuity contracts. Actual performance results for variable annuity and variable universal life contracts will be lower due to contract charges. Consult your contract for applicable charges.
Comments
For the year ended December 31, 2008, the Balanced Portfolio returned -26.94% versus -22.76% for the current benchmark, which is composed of 60% S&P Composite 1500 Index and 40% Barclays Capital U.S. Universal Index.
The dominant theme in 2008 was fear. At the outset of the year, investors sold off cyclical equities fearing a global recession and punished financial stocks and bonds fearing more fallout from the sub-prime debacle. These fears were validated as companies like Bear Stearns, IndyMac, Washington Mutual, Wachovia, Merrill Lynch, Fannie Mae, Freddie Mac, and American International Group were rocked by the growing credit crisis. Finally, Lehman Brothers’ bankruptcy in mid September turned fear into panic as investors fled from all risky assets for the safety of cash and Treasury obligations. Looking back on 2008, there were few places to hide. Every S&P Composite 1500 Index sector experienced double digit losses. Corporate bond spreads widened to unprecedented levels. Treasury obligations, however, had one of their best years ever as fearful investors poured their money into essentially risk free U.S. Treasuries.
The major factor leading to this year’s underperformance was an underweight position in bonds versus the benchmark. The Portfolio’s average weighted position in bonds for the year was 31.6% versus 40% for its benchmark. Furthermore, the Portfolio’s bond holdings, which did not include Treasury obligations, fell just over 4% while its bond benchmark, the Barclays Capital U.S. Universal Index, rose 2.38% due to the index’s tilt toward Treasury obligations. On the equity side, the Portfolio’s over-weighted positions in the more cyclical Consumer Discretionary, Industrials, and Financials sectors versus the S&P Composite 1500 Index benchmark hindered relative performance.(1)
The five best performing stocks held by the Portfolio were America’s Car-Mart, Inc., Corn Products International, Inc., Biovail Corp., Polo Ralph Lauren Corp., and Ezcorp, Inc. The top five contributors to the Portfolio’s returns were America’s Car-Mart, Inc., Ezcorp, Inc., Eli Lilly & Co., Mentor Corp., and Benchmark Electronics, Inc.(1)
The Portfolio’s five worst performing stocks were Desarrolladora Homex S.A.B. de C.V., Anthracite Capital, Inc., Bank of America Corp., General Electric Co., and Prudential Financial, Inc. The five largest detractors from the Portfolio’s returns were Anthracite Capital, Inc., World Acceptance Corp., Aetna, Inc., Bank of America Corp., and General Electric Co.(1)
Despite a disappointing year, we are still encouraged by our long term track record. The strong sell off in corporate bonds toward the end of 2008 has however made bonds more enticing versus equities and the Portfolio has increased its fixed income holdings to around 40%. This move may have reduced the overall risk of the Portfolio while still leaving it with some upside.(1)
Going into 2009 we are cautiously optimistic. We believe that the sell off in corporate bonds at the end of 2008 was overdone. We expect corporate bond spreads to narrow over the coming years and for corporate bonds to outperform their Treasury counterparts. We also believe that the fear baked into equity prices today has been overdone and our Portfolio is still weighted toward the cyclical sectors that we expect will do best when this fear subsides.(1)
(1) | The Portfolio’s composition is subject to change. Holdings and weightings are as of December 31, 2008. |
(continued)
136
Ohio National Fund, Inc.
Balanced Portfolio (Continued)
Balanced Portfolio (Continued)
Change in Value of $10,000 Investment
Hypothetical illustration based on past performance. Future performance will vary. The Portfolio’s returns reflect reinvested dividends. The Portfolio’s holdings may differ significantly from the securities in the index. The index is unmanaged and therefore does not reflect the cost of portfolio management and accounting.
The S&P Composite 1500 Index is a broad-based capitalization-weighted Index of 1500 U.S. Companies and is comprised of the S&P 400, S&P 500, and the S&P 600. The index was developed with a base value of 100 as of December 30, 1994. The index presented herein includes the effects of reinvested dividends.
As a result of the integration of the fixed income businesses of Lehman Brothers into Barclays Capital, the bond component of the benchmark has been renamed from the Lehman Brothers U.S. Universal Index to the Barclays Capital U.S. Universal Index. The Barclays Capital U.S. Universal Index represents the union of the U.S. Aggregate Index, the U.S. High-Yield Corporate Index, the 144A Index, the Eurodollar Index, the Emerging Markets Index, the non-ERISA portion of the Commercial Mortgage-Backed Securities (CMBS) Index and the CMBS High-Yield Index. All securities in this market-value weighted index have at least one year remaining to maturity and meet certain minimum issue size criteria.
Portfolio Composition as of December 31, 2008 (1)
% of Net Assets | |||
Common Stocks (3) | 60.9 | ||
Preferred Stocks (3) | 3.8 | ||
Corporate Bonds (3) | 28.4 | ||
U.S. Government Agency Issues | 4.6 | ||
Repurchase Agreements and Other Net Assets | 2.3 | ||
100.0 | |||
Top 10 Portfolio Holdings as of December 31, 2008 (1) (2)
% of Net Assets | |||||||
1. | Wachovia Bank NA 7.800%, 08/18/2010 | 5.2 | |||||
2. | General Electric Capital Corp. 1.961%, 03/16/2009 | 3.1 | |||||
3. | Exxon Mobil Corp. | 2.7 | |||||
4. | Benchmark Electronics, Inc. | 2.7 | |||||
5. | Daimler Finance North America LLC 8.000%, 06/15/2010 | 2.4 | |||||
6. | Rent-A-Center, Inc. 7.500%, 05/01/2010 | 2.4 | |||||
7. | Alliant Energy Corp. | 2.3 | |||||
8. | Wells Fargo Capital XI, 6.250% cumulative preferred stock | 2.2 | |||||
9. | AT&T, Inc. | 2.0 | |||||
10. | Ezcorp, Inc. | 2.0 |
(1) | Composition of Portfolio subject to change. | |
(2) | Short-term investments have been excluded from the list of Top 10 Portfolio holdings. | |
(3) | Sectors (combined): |
% of Net Assets | |||
Financials | 30.5 | ||
Information Technology | 12.7 | ||
Industrials | 11.4 | ||
Health Care | 9.0 | ||
Consumer Discretionary | 8.0 | ||
Consumer Staples | 6.3 | ||
Telecommunication Services | 4.9 | ||
Energy | 4.4 | ||
Utilities | 4.3 | ||
Materials | 1.6 | ||
93.1 | |||
137
Ohio National Fund, Inc.
Balanced Portfolio
Balanced Portfolio
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 60.9% | Shares | Value | ||||||
CONSUMER DISCRETIONARY – 2.1% | ||||||||
Specialty Retail – 1.3% | ||||||||
The TJX Cos., Inc. | 6,000 | $ | 123,420 | |||||
Textiles, Apparel & Luxury Goods – 0.8% | ||||||||
NIKE, Inc. Class B | 1,500 | 76,500 | ||||||
TOTAL CONSUMER DISCRETIONARY | 199,920 | |||||||
CONSUMER STAPLES – 6.3% | ||||||||
Beverages – 1.9% | ||||||||
PepsiAmericas, Inc. | 2,500 | 50,900 | ||||||
The Coca-Cola Co. | 3,000 | 135,810 | ||||||
186,710 | ||||||||
Food & Staples Retailing – 2.6% | ||||||||
CVS/Caremark Corp. | 5,000 | 143,700 | ||||||
The Kroger Co. | 4,000 | 105,640 | ||||||
249,340 | ||||||||
Household Products – 0.6% | ||||||||
Energizer Holdings, Inc. (a) | 1,000 | 54,140 | ||||||
Tobacco – 1.2% | ||||||||
Lorillard, Inc. | 2,000 | 112,700 | ||||||
TOTAL CONSUMER STAPLES | 602,890 | |||||||
ENERGY – 3.3% | ||||||||
Energy Equipment & Services – 0.6% | ||||||||
Diamond Offshore Drilling, Inc. | 1,000 | 58,940 | ||||||
Oil, Gas & Consumable Fuels – 2.7% | ||||||||
Exxon Mobil Corp. | 3,250 | 259,448 | ||||||
TOTAL ENERGY | 318,388 | |||||||
FINANCIALS – 8.1% | ||||||||
Commercial Banks – 0.8% | ||||||||
U.S. Bancorp | 3,000 | 75,030 | ||||||
Consumer Finance – 3.5% | ||||||||
Ezcorp, Inc. (a) | 12,500 | 190,125 | ||||||
World Acceptance Corp. (a) | 7,500 | 148,200 | ||||||
338,325 | ||||||||
Diversified Financial Services – 1.3% | ||||||||
Bank of America Corp. | 3,960 | 55,757 | ||||||
JPMorgan Chase & Co. | 2,250 | 70,942 | ||||||
126,699 | ||||||||
Insurance – 2.5% | ||||||||
AFLAC, Inc. | 2,500 | 114,600 | ||||||
Reinsurance Group America, Inc. | 1,000 | 42,820 | ||||||
Willis Group Holdings Ltd. | 3,500 | 87,080 | ||||||
244,500 | ||||||||
TOTAL FINANCIALS | 784,554 | |||||||
HEALTH CARE – 9.0% | ||||||||
Health Care Providers & Services – 2.1% | ||||||||
McKesson Corp. | 2,000 | 77,460 | ||||||
Medco Health Solutions, Inc. (a) | 3,000 | 125,730 | ||||||
203,190 | ||||||||
Health Care Technology – 0.6% | ||||||||
Cerner Corp. (a) | 1,500 | 57,675 | ||||||
Pharmaceuticals – 6.3% | ||||||||
Abbott Laboratories | 2,500 | 133,425 | ||||||
Biovail Corp. | 7,500 | 70,875 | ||||||
Eli Lilly & Co. | 3,000 | 120,810 | ||||||
Merck & Co., Inc. | 3,500 | 106,400 | ||||||
Pfizer, Inc. | 10,000 | 177,100 | ||||||
608,610 | ||||||||
TOTAL HEALTH CARE | 869,475 | |||||||
INDUSTRIALS – 10.2% | ||||||||
Aerospace & Defense – 2.2% | ||||||||
Lockheed Martin Corp. | 1,500 | 126,120 | ||||||
Northrop Grumman Corp. | 2,000 | 90,080 | ||||||
216,200 | ||||||||
Commercial Services & Supplies – 2.0% | ||||||||
Pitney Bowes, Inc. | 3,000 | 76,440 | ||||||
Waste Management, Inc. | 3,500 | 115,990 | ||||||
192,430 | ||||||||
Electrical Equipment – 0.7% | ||||||||
Hubbell, Inc. | 2,000 | 65,360 | ||||||
Machinery – 0.7% | ||||||||
Parker Hannifin Corp. | 1,500 | 63,810 | ||||||
Marine – 1.1% | ||||||||
DryShips, Inc. | 10,000 | 106,600 | ||||||
Road & Rail – 3.5% | ||||||||
Burlington Northern Santa Fe Corp. | 2,500 | 189,275 | ||||||
Union Pacific Corp. | 3,000 | 143,400 | ||||||
332,675 | ||||||||
TOTAL INDUSTRIALS | 977,075 | |||||||
INFORMATION TECHNOLOGY – 12.1% | ||||||||
Computers & Peripherals – 1.4% | ||||||||
International Business Machines Corp. | 1,600 | 134,656 | ||||||
Electronic Equipment & Instruments – 2.7% | ||||||||
Benchmark Electronics, Inc. (a) | 20,000 | 255,400 | ||||||
Electronic Equipment, Instruments & Components – 2.2% | ||||||||
Avnet, Inc. (a) | 2,500 | 45,525 | ||||||
Ingram Micro, Inc. Class A (a) | 7,500 | 100,425 | ||||||
Tech Data Corp. (a) | 3,500 | 62,440 | ||||||
208,390 | ||||||||
Internet Software & Services – 0.6% | ||||||||
Google, Inc. Class A (a) | 180 | 55,377 | ||||||
IT Services – 3.2% | ||||||||
Accenture Ltd. | 3,380 | 110,830 | ||||||
Cognizant Technology Solutions Corp. Class A (a) | 3,810 | 68,808 | ||||||
Lender Processing Services, Inc. | 2,000 | 58,900 | ||||||
Mastercard, Inc. Class A | 520 | 74,324 | ||||||
312,862 | ||||||||
Software – 2.0% | ||||||||
Microsoft Corp. | 5,020 | 97,589 |
(continued)
138
Ohio National Fund, Inc.
Balanced Portfolio (Continued)
Balanced Portfolio (Continued)
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 60.9% | Shares | Value | ||||||
Software (continued) | ||||||||
The9 Ltd. – ADR (a) | 7,500 | $ | 99,900 | |||||
197,489 | ||||||||
TOTAL INFORMATION TECHNOLOGY | 1,164,174 | |||||||
MATERIALS – 1.1% | ||||||||
Chemicals – 1.1% | ||||||||
Potash Corp. of Saskatchewan, Inc. | 1,500 | 109,830 | ||||||
TOTAL MATERIALS | 109,830 | |||||||
TELECOMMUNICATION SERVICES – 4.4% | ||||||||
Diversified Telecommunication Services – 3.1% | ||||||||
AT&T, Inc. | 6,700 | 190,950 | ||||||
Telefonica SA – ADR | 1,520 | 102,433 | ||||||
293,383 | ||||||||
Wireless Telecommunication Services – 1.3% | ||||||||
China Mobile Ltd. – ADR | 2,500 | 127,125 | ||||||
TOTAL TELECOMMUNICATION SERVICES | 420,508 | |||||||
UTILITIES – 4.3% | ||||||||
Electric Utilities – 0.7% | ||||||||
Edison International | 2,000 | 64,240 | ||||||
Multi-Utilities – 3.0% | ||||||||
Alliant Energy Corp. | 7,500 | 218,850 | ||||||
Public Service Enterprise Group, Inc. | 2,500 | 72,925 | ||||||
291,775 | ||||||||
Water Utilities – 0.6% | ||||||||
Companhia de Saneamento Basico do Estado de Sao Paulo – ADR | 2,500 | 60,525 | ||||||
TOTAL UTILITIES | 416,540 | |||||||
Total Common Stocks (Cost $6,982,337) | $ | 5,863,354 | ||||||
Fair | ||||||||
Preferred Stocks – 3.8% | Shares | Value | ||||||
FINANCIALS – 3.8% | ||||||||
Capital Markets – 1.6% | ||||||||
Morgan Stanley Capital Trust VI, 6.600%, cumulative | 10,000 | $ | 155,100 | |||||
Commercial Banks – 2.2% | ||||||||
Wells Fargo Capital XI, 6.250%, cumulative | 10,000 | 210,000 | ||||||
Total Preferred Stocks (Cost $357,210) | $ | 365,100 | ||||||
Face | Fair | |||||||
Corporate Bonds – 28.4% | Amount | Value | ||||||
CONSUMER DISCRETIONARY – 5.9% | ||||||||
Automobiles – 2.7% | ||||||||
Daimler Finance North America LLC 6.500%, 11/15/2013 | $ | 30,000 | $ | 23,423 | ||||
8.000%, 06/15/2010 | 250,000 | 235,297 | ||||||
258,720 | ||||||||
Leisure Equipment & Products – 0.3% | ||||||||
Eastman Kodak Co. 7.250%, 11/15/2013 | 50,000 | 32,500 | ||||||
Multiline Retail – 0.5% | ||||||||
Dillard’s, Inc. 9.500%, 09/01/2009 | 15,000 | 14,532 | ||||||
9.125%, 08/01/2011 | 46,000 | 31,740 | ||||||
46,272 | ||||||||
Specialty Retail – 2.4% | ||||||||
Rent-A-Center, Inc. 7.500%, 05/01/2010 | 250,000 | 231,250 | ||||||
TOTAL CONSUMER DISCRETIONARY | 568,742 | |||||||
ENERGY – 1.1% | ||||||||
Oil, Gas & Consumable Fuels – 1.1% | ||||||||
El Paso Corp. 6.750%, 05/15/2009 | 50,000 | 49,536 | ||||||
Petrobras International Finance Co. 7.750%, 09/15/2014 | 50,000 | 53,750 | ||||||
TOTAL ENERGY | 103,286 | |||||||
FINANCIALS – 18.6% | ||||||||
Capital Markets – 4.2% | ||||||||
Merrill Lynch & Co., Inc. 6.990%, 05/05/2014 (b) | 150,000 | 122,555 | ||||||
5.000%, 02/03/2014 | 10,000 | 9,706 | ||||||
Morgan Stanley 5.032%, 01/15/2010 (b) | 100,000 | 93,187 | ||||||
5.375%, 10/15/2015 | 100,000 | 86,198 | ||||||
The Goldman Sachs Group, Inc. 5.125%, 01/15/2015 | 100,000 | 91,862 | ||||||
403,508 | ||||||||
Commercial Banks – 5.2% | ||||||||
Wachovia Bank NA 7.800%, 08/18/2010 | 500,000 | 496,439 | ||||||
Consumer Finance – 3.5% | ||||||||
American Express Credit Corp. 0.591%, 02/24/2012 (b) | 200,000 | 167,889 | ||||||
HSBC Finance Corp. | ||||||||
7.000%, 05/15/2012 | 50,000 | 50,113 | ||||||
6.375%, 11/27/2012 | 50,000 | 48,960 | ||||||
5.860%, 11/10/2013 (b) | 100,000 | 65,125 | ||||||
332,087 | ||||||||
Diversified Financial Services – 5.1% | ||||||||
Bank of America NA 2.296%, 06/15/2017 (b) | 50,000 | 32,241 | ||||||
Caterpillar Financial Services Corp. 4.000%, 07/15/2009 | 10,000 | 9,901 | ||||||
CIT Group, Inc. 5.850%, 09/15/2016 | 100,000 | 70,513 | ||||||
Citigroup, Inc. 5.125%, 05/05/2014 | 40,000 | 37,630 |
(continued)
139
Ohio National Fund, Inc.
Balanced Portfolio (Continued)
Balanced Portfolio (Continued)
Schedule of Investments | December 31, 2008 |
Face | Fair | |||||||
Corporate Bonds – 28.4% | Amount | Value | ||||||
Diversified Financial Services (continued) | ||||||||
General Electric Capital Corp. 1.961%, 03/16/2009 (b) | $ | 300,000 | $ | 299,117 | ||||
3.643%, 02/01/2011 (b) | 50,000 | 45,448 | ||||||
494,850 | ||||||||
Insurance – 0.6% | ||||||||
GE Insurance Solutions Corp. 7.000%, 02/15/2026 | 40,000 | 37,980 | ||||||
Unum Group 7.190%, 02/01/2028 | 30,000 | 24,029 | ||||||
62,009 | ||||||||
TOTAL FINANCIALS | 1,788,893 | |||||||
INDUSTRIALS – 1.2% | ||||||||
Industrial Conglomerates – 0.2% | ||||||||
General Electric Co. 5.000%, 02/01/2013 | 15,000 | 15,183 | ||||||
Machinery – 1.0% | ||||||||
Case New Holland, Inc. 6.000%, 06/01/2009 | 100,000 | 97,500 | ||||||
TOTAL INDUSTRIALS | 112,683 | |||||||
INFORMATION TECHNOLOGY – 0.6% | ||||||||
Computers & Peripherals – 0.6% | ||||||||
International Business Machines Corp. 8.375%, 11/01/2019 | 50,000 | 63,267 | ||||||
TOTAL INFORMATION TECHNOLOGY | 63,267 | |||||||
MATERIALS – 0.5% | ||||||||
Chemicals – 0.5% | ||||||||
E.I. Du Pont De Nemours & Co. 5.000%, 07/15/2013 | 50,000 | 50,351 | ||||||
TOTAL MATERIALS | 50,351 | |||||||
TELECOMMUNICATION SERVICES – 0.5% | ||||||||
Diversified Telecommunication Services – 0.5% | ||||||||
AT&T, Inc. 4.125%, 09/15/2009 | 50,000 | 50,213 | ||||||
TOTAL TELECOMMUNICATION SERVICES | 50,213 | |||||||
Total Corporate Bonds (Cost $2,957,565) | $ | 2,737,435 | ||||||
Face | Fair | |||||||
U.S. Government Agency Issues – 4.6% | Amount | Value | ||||||
Federal Home Loan Bank 4.500%, 09/16/2013 | $ | 20,000 | $ | 21,818 | ||||
5.375%, 08/15/2018 | 20,000 | 23,466 | ||||||
Federal Home Loan Mortgage Corporation 5.000%, 09/09/2016 | 15,000 | 15,004 | ||||||
5.250%, 07/27/2017 | 25,000 | 25,065 | ||||||
Federal National Mortgage Association 4.875%, 04/15/2009 | 100,000 | 101,265 | ||||||
5.500%, 03/15/2011 | 100,000 | 109,394 | ||||||
5.250%, 08/01/2012 | 100,000 | 105,488 | ||||||
5.000%, 07/09/2018 | 25,000 | 24,393 | ||||||
5.250%, 04/15/2019 | 20,000 | 20,018 | ||||||
Total U.S. Government Agency Issues (Cost $424,838) | $ | 445,911 | ||||||
Face | Fair | |||||||
Repurchase Agreements – 1.7% | Amount | Value | ||||||
U.S. Bank 0.010% 01/02/2009 | $ | 158,000 | $ | 158,000 | ||||
Repurchase price $158,000 | ||||||||
Collateralized by: | ||||||||
Various Agency Mortgage- Backed Securities 2.395% to 5.000%, Due 09/01/2018 through 05/15/2033 Fair Value: $161,152 | ||||||||
Total Repurchase Agreements (Cost $158,000) | $ | 158,000 | ||||||
Total Investments – 99.4% (Cost $10,879,950) (c) | $ | 9,569,800 | ||||||
Other Assets in Excess of Liabilities – 0.6% | 55,771 | |||||||
Net Assets – 100.0% | $ | 9,625,571 | ||||||
Percentages are stated as a percent of net assets.
Abbreviations:
ADR: American Depository Receipts
Footnotes:
(a) | Non-income producing security. | |
(b) | Security is a variable-rate instrument in which the coupon rate is adjusted monthly or quarterly in concert with U.S. LIBOR or Consumer Price Index. Interest rates stated are those in effect at December 31, 2008. | |
(c) | Represents cost for financial reporting purposes, which may differ from cost basis for Federal income tax purposes. See also Note 8 of the Notes to Financial Statements. |
The accompanying notes are an integral part of these financial statements.
140
Ohio National Fund, Inc.
Balanced Portfolio
Balanced Portfolio
Statement of Assets and Liabilities
December 31, 2008
Assets: | ||||
Investments in securities, at fair value (Cost $10,721,950) | $ | 9,411,800 | ||
Repurchase agreements | 158,000 | |||
Cash | 733 | |||
Receivable for fund shares sold | 42,569 | |||
Dividends and accrued interest receivable | 57,131 | |||
Prepaid expenses and other assets | 206 | |||
Total assets | 9,670,439 | |||
Liabilities: | ||||
Payable for fund shares redeemed | 24,133 | |||
Payable for investment management services | 5,858 | |||
Accrued custody expense | 312 | |||
Accrued professional fees | 10,453 | |||
Accrued accounting fees | 2,461 | |||
Accrued printing and filing fees | 760 | |||
Other accrued expenses | 891 | |||
Total liabilities | 44,868 | |||
Net assets | $ | 9,625,571 | ||
Net assets consist of: | ||||
Par value, $1 per share | $ | 895,945 | ||
Paid-in capital in excess of par value | 11,318,343 | |||
Accumulated net realized loss on investments | (1,529,696 | ) | ||
Net unrealized depreciation on investments | (1,310,150 | ) | ||
Undistributed net investment income | 251,129 | |||
Net assets | $ | 9,625,571 | ||
Shares outstanding | 895,945 | |||
Authorized Fund shares allocated to Portfolio | 5,000,000 | |||
Net asset value per share | $ | 10.74 | ||
Statement of Operations
For the Year Ended December 31, 2008
Investment income: | ||||
Interest | $ | 189,427 | ||
Dividends (net of withholding tax of $3,020) | 181,414 | |||
Total investment income | 370,841 | |||
Expenses: | ||||
Management fees | 82,542 | |||
Custodian fees | 2,868 | |||
Directors’ fees | 951 | |||
Professional fees | 12,004 | |||
Accounting fees | 14,419 | |||
Printing and filing fees | 1,464 | |||
Compliance expense | 4,911 | |||
Other | 142 | |||
Total expenses | 119,301 | |||
Net investment income | 251,540 | |||
Realized/unrealized gain (loss) on investments and foreign currency related transactions: | ||||
Net realized gain (loss) on: | ||||
Investments | (1,530,112 | ) | ||
Foreign currency related transactions | 5 | |||
Change in unrealized appreciation/depreciation on investments | (2,184,764 | ) | ||
Net realized/unrealized gain (loss) on investments | (3,714,871 | ) | ||
Change in net assets from operations | $ | (3,463,331 | ) | |
The accompanying notes are an integral part of these financial statements.
141
Ohio National Fund, Inc.
Balanced Portfolio
Balanced Portfolio
Statements of Changes in Net Assets
Years Ended December 31, | ||||||||
2008 | 2007 | |||||||
Increase (Decrease) in Net Assets: | ||||||||
Operations: | ||||||||
Net investment income | $ | 251,540 | $ | 157,993 | ||||
Net realized gain (loss) on investments and foreign currency related transactions | (1,530,107 | ) | 559,405 | |||||
Change in unrealized appreciation/depreciation on investments | (2,184,764 | ) | 300,375 | |||||
Change in net assets from operations | (3,463,331 | ) | 1,017,773 | |||||
Capital transactions: | ||||||||
Received from shares sold | 5,969,464 | 4,698,040 | ||||||
Paid for shares redeemed | (3,837,953 | ) | (2,402,259 | ) | ||||
Change in net assets from capital transactions | 2,131,511 | 2,295,781 | ||||||
Change in net assets | (1,331,820 | ) | 3,313,554 | |||||
Net Assets: | ||||||||
Beginning of year | 10,957,391 | 7,643,837 | ||||||
End of year | $ | 9,625,571 | $ | 10,957,391 | ||||
Undistributed net investment income | $ | 251,129 | $ | 157,993 | ||||
Financial Highlights
Period from | ||||||||||||||||||||
Years Ended December 31, | May 1, 2004* to | |||||||||||||||||||
2008 | 2007 | 2006 | 2005 | December 31, 2004 | ||||||||||||||||
Selected Per-Share Data: | ||||||||||||||||||||
Net asset value, beginning of period | $ | 14.70 | $ | 13.09 | $ | 11.70 | $ | 11.33 | $ | 10.00 | ||||||||||
Operations: | ||||||||||||||||||||
Net investment income | 0.25 | 0.20 | 0.17 | 0.06 | 0.04 | |||||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency related transactions | (4.21 | ) | 1.41 | 1.37 | 0.33 | 1.29 | ||||||||||||||
Total from operations | (3.96 | ) | 1.61 | 1.54 | 0.39 | 1.33 | ||||||||||||||
Distributions: | ||||||||||||||||||||
Distributions from net investment income | — | — | (0.15 | ) | (0.02 | ) | — | |||||||||||||
Net asset value, end of period | $ | 10.74 | $ | 14.70 | $ | 13.09 | $ | 11.70 | $ | 11.33 | ||||||||||
Total return | –26.94 | % | 12.30 | % | 13.12 | % | 3.47 | % | 13.30 | %(b) | ||||||||||
Ratios and supplemental data: | ||||||||||||||||||||
Net assets at end of period (millions) | $ | 9.6 | $ | 11.0 | $ | 7.6 | $ | 4.1 | $ | 1.7 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Ratios net of expenses voluntarily reduced or reimbursed by adviser: | ||||||||||||||||||||
Expenses | 1.09 | % | 1.13 | % | 1.31 | % | 1.50 | % | 1.46 | %(a) | ||||||||||
Net investment income | 2.29 | % | 1.77 | % | 1.95 | % | 0.99 | % | 0.78 | %(a) | ||||||||||
Ratios assuming no expenses voluntarily reduced or reimbursed by adviser: | ||||||||||||||||||||
Expenses | 1.09 | % | 1.13 | % | 1.31 | % | 1.55 | % | 3.52 | %(a) | ||||||||||
Portfolio turnover rate | 80 | % | 81 | % | 105 | % | 118 | % | 39 | % |
(a) | Annualized. |
(b) | Not annualized. |
* | Represents date of commencement of operations. |
The accompanying notes are an integral part of these financial statements.
142
Ohio National Fund, Inc.
Income Opportunity Portfolio
Income Opportunity Portfolio
Objective/Strategy
The Income Opportunity Portfolio seeks modest capital appreciation and maximization of realized gains by investing within under-priced industries.
Performance as of December 31, 2008
Average Annual Total Returns:
One year | -20.82% | |||
Since inception (5/1/04) | -0.24% |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price and reinvestment of dividends and capital gains. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost.
The Portfolio is not open to direct retail investment. Beneficial interest in shares is obtained solely by purchase of variable life insurance policies and variable annuity contracts. Actual performance results for variable annuity and variable universal life contracts will be lower due to contract charges. Consult your contract for applicable charges.
Comments
For the year ended December 31, 2008, the Income Opportunity Portfolio returned -20.82% versus -36.72% for the current benchmark, the S&P Composite 1500 Index.
2008 was marked by a financial crisis arguably the likes of which we have not seen since the Great Depression. The catalyst for the melt down was the unraveling of the housing market. Home prices fell dramatically and mortgage-backed securities held by major financial institutions lost almost all of their value. Volatility reached unprecedented levels as major financial institutions went bankrupt or were saved by the Federal government.
The largest investment bank to go belly-up was Lehman Brothers, which filed for bankruptcy in mid-September. Merrill Lynch agreed to be taken over by Bank of America. The government stepped in to save American International Group and Citigroup as well as helping JPMorgan to take over Bear Stearns. The stunning unraveling in the Financials sector was summed up in stark terms by Peter G. Peterson, co-founder of the private equity firm The Blackstone Group, when he said: “My goodness. I’ve been in the business 35 years, and these are the most extraordinary events I’ve ever seen.” Peterson was the CEO of Lehman in the 1970’s.
The Financials sector led the broad market downturn with the S&P 1500 Financials Index falling 52.2% and the S&P Composite 1500 Index declining 36.7%. The precipitous fall in the broad stock market caused a “flight to quality” amongst many investors. This term is used to describe investors’ selling stocks, which historically have more risk than fixed income investments, and using the proceeds to purchase essentially risk free U.S. Treasuries. At the start of the year, the U.S. 10-year Treasury Note was yielding 4.0%. By the end of 2008, the yield was 2.2%.
As the year unfolded, the financial crisis ripped across the entire economy slowing consumer spending, spurring rising unemployment, and ultimately causing the U.S. Gross Domestic Product to go negative. Obviously, all of these events combined had an extremely negative impact on the Portfolio.
One of the primary risks of the Portfolio is how much index option market-makers are willing to pay for the call options that are sold to hedge the Portfolio. The volatility of the market has a significant affect on how options are priced. If market volatility falls, option market-makers generally will not pay as much for call options as they would when market volatility rises.
During the first half of the year, market volatility was high relative to historical averages, which was positive for the Portfolio. The increase in volatility caused market-makers to increase the price they were willing to pay for call options relative to lower volatility environments in the past. By the fall of 2008, market volatility exploded, and option market-makers were paying some of the highest premiums in history. The increasing amount of premium earned as a result of this phenomenon helped to dampen a portion of the decline in the long equity positions held in the Portfolio.
During the one year period the Portfolio outperformed its benchmark. The primary factor that led to the Portfolio holding up better during this down market period was its use of options. Our underlying equity positions actually fell more than our broad based index, but the Portfolio’s use of options as a hedge was pivotal with respect to the Portfolio being able to hold up better than its benchmark index.(1)
Like the broad market, all nine sector positions in the Portfolio had a negative impact on performance. However, at the industry level there were a few bright spots. The top three industries that were positive contributors to the Portfolio’s performance were construction & engineering, oil & gas refining & marketing, and automotive retail. Overall, however, 88 of the 113 industry positions held in the Portfolio over the course of the year detracted from performance. Nevertheless and once again, the use of options in the Portfolio during this down market blunted some of the losses suffered on the equity portion of the Portfolio.(1)
With respect to individual stocks, the five largest contributors to the Portfolio’s performance were Bristol-Myers Squibb Co., Norfolk Southern Corp., Sunoco, Inc., URS Corp., and Ross Stores, Inc. The five largest detractors to the Portfolio’s performance were Aetna, Inc., JPMorgan Chase & Co., Google, Inc., Goldman Sachs Group, Inc., and Bank of America Corp.(1)
On a pure total return basis, the five best performers in the Portfolio were Ross Stores, Inc., Helmerich & Payne, Inc., Norfolk Southern Corp., Old Dominion Freight Line, Inc. and URS Corp. The five worst performers in the Portfolio were Anixter International, Inc., MetLife, Inc., CIGNA Corp., Goldman Sachs Group, Inc. and Thornburg Mortgage Inc.(1)
As of the end of the year our quantitative analysis indicated that U.S. equities were trading at levels significantly below our estimation of fair or intrinsic value based on our model. We believe that the market has priced in a doomsday scenario that seems unjustified based on our best estimates of value on the approximately 1900 stocks we track in our domestic database. Because stocks are trading in an almost unprecedented negative environment we believe that investors in general have sold stocks
(continued)
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Income Opportunity Portfolio (Continued)
down to now irrational levels. Barring any extraordinary event financially, geopolitically, or otherwise it is our belief that opportunity now abounds in the U.S. equity market. We are not market timers and therefore cannot pinpoint the exact date when the market may turn and run higher, but based on our numbers we believe the rally will come.
(1) | The Portfolio’s composition is subject to change. Holdings and weightings are as of December 31, 2008. |
Change in Value of $10,000 Investment
Hypothetical illustration based on past performance. Future performance will vary. The Portfolio’s returns reflect reinvested dividends. The Portfolio’s holdings may differ significantly from the securities in the index. The index is unmanaged and therefore does not reflect the cost of portfolio management and accounting.
The S&P Composite 1500 Index is a broad-based capitalization-weighted index of 1500 U.S. Companies and is comprised of the S&P 400, S&P 500, and the S&P 600. The index was developed with a base value of 100 as of December 30, 1994. The index presented herein includes the effects of reinvested dividends.
Portfolio Composition as of December 31, 2008 (1)
% of Net Assets | |||
Common Stocks (3) | 95.0 | ||
Purchased Options | 0.2 | ||
Written Options Outstanding | (3.2) | ||
Repurchase Agreements Other Net Assets | 8.0 | ||
100.0 | |||
Top 10 Portfolio Holdings as of December 31, 2008 (1) (2)
% of Net Assets | |||||||
1. | JPMorgan Chase & Co. | 2.0 | |||||
2. | Sunoco, Inc. | 1.8 | |||||
3. | Bristol-Myers Squibb Co. | 1.6 | |||||
4. | Wells Fargo & Co. | 1.6 | |||||
5. | EMCOR Group, Inc. | 1.3 | |||||
6. | BB&T Corp. | 1.3 | |||||
7. | International Business Machines Corp. | 1.3 | |||||
8. | Jacobs Engineering Group, Inc. | 1.3 | |||||
9. | SkyWest, Inc. | 1.3 | |||||
10. | Nordic American Tanker Shipping | 1.3 |
(1) | Composition of Portfolio subject to change. | |
(2) | Short-term investments have been excluded from the list of Top 10 Portfolio holdings. | |
(3) | Sectors: |
% of Net Assets | |||
Financials | 23.0 | ||
Industrials | 17.3 | ||
Consumer Discretionary | 13.1 | ||
Energy | 10.8 | ||
Information Technology | 7.0 | ||
Materials | 6.9 | ||
Health Care | 6.1 | ||
Consumer Staples | 5.6 | ||
Utilities | 4.1 | ||
Telecommunication Services | 1.1 | ||
95.0 | |||
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Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 95.0% | Shares | Value | ||||||
CONSUMER DISCRETIONARY – 13.1% | ||||||||
Auto Components – 0.6% | ||||||||
BorgWarner, Inc. (b) | 1,300 | $ | 28,301 | |||||
Diversified Consumer Services – 0.9% | ||||||||
Capella Education Company (a) | 400 | 23,504 | ||||||
ITT Educational Services, Inc. (a) | 200 | 18,996 | ||||||
42,500 | ||||||||
Hotels, Restaurants & Leisure – 1.7% | ||||||||
Bally Technologies, Inc. (a) | 1,100 | 26,433 | ||||||
CEC Entertainment, Inc. (a) (b) | 700 | 16,975 | ||||||
Jack in the Box, Inc. (a) (b) | 1,500 | 33,135 | ||||||
76,543 | ||||||||
Household Durables – 3.3% | ||||||||
Centex Corp. (b) | 4,200 | 44,688 | ||||||
Helen of Troy Ltd. (a) (b) | 900 | 15,624 | ||||||
Jarden Corp. (a) | 1,900 | 21,850 | ||||||
KB Home (b) | 2,200 | 29,964 | ||||||
Ryland Group, Inc. | 1,200 | 21,204 | ||||||
Toll Brothers, Inc. (a) | 700 | 15,001 | ||||||
148,331 | ||||||||
Media – 0.9% | ||||||||
Comcast Corp. Class A (b) | 2,400 | 40,512 | ||||||
Specialty Retail – 4.7% | ||||||||
Abercrombie & Fitch Co. Class A | 1,300 | 29,991 | ||||||
AutoZone, Inc. (a) (b) | 400 | 55,788 | ||||||
Jos. A. Bank Clothiers, Inc. (a) | 1,100 | 28,765 | ||||||
O’Reilly Automotive, Inc. (a) (b) | 1,100 | 33,814 | ||||||
Staples, Inc. | 1,800 | 32,256 | ||||||
The Home Depot, Inc. | 1,300 | 29,926 | ||||||
210,540 | ||||||||
Textiles, Apparel & Luxury Goods – 1.0% | ||||||||
V.F. Corp. (b) | 800 | 43,816 | ||||||
TOTAL CONSUMER DISCRETIONARY | 590,543 | |||||||
CONSUMER STAPLES – 5.6% | ||||||||
Beverages – 0.6% | ||||||||
PepsiAmericas, Inc. | 800 | 16,288 | ||||||
PepsiCo, Inc. (b) | 200 | 10,954 | ||||||
27,242 | ||||||||
Food & Staples Retailing – 3.9% | ||||||||
CVS/Caremark Corp. (b) | 1,300 | 37,362 | ||||||
Nash Finch Co. | 800 | 35,912 | ||||||
Sysco Corp. | 800 | 18,352 | ||||||
The Kroger Co. | 1,100 | 29,051 | ||||||
Wal-Mart Stores, Inc. (b) | 1,000 | 56,060 | ||||||
176,737 | ||||||||
Food Products – 0.7% | ||||||||
Archer-Daniels-Midland Co. | 1,100 | 31,713 | ||||||
Tobacco – 0.4% | ||||||||
Altria Group, Inc. | 1,000 | 15,060 | ||||||
TOTAL CONSUMER STAPLES | 250,752 | |||||||
ENERGY – 10.8% | ||||||||
Oil, Gas & Consumable Fuels – 10.8% | ||||||||
Arch Coal, Inc. (b) | 1,500 | 24,435 | ||||||
Chevron Corp. (b) | 500 | 36,985 | ||||||
ConocoPhillips (b) | 400 | 20,720 | ||||||
CONSOL Energy, Inc. (b) | 1,000 | 28,580 | ||||||
Exxon Mobil Corp. (b) | 500 | 39,915 | ||||||
Hess Corp. | 1,000 | 53,640 | ||||||
Nordic American Tanker Shipping (b) | 1,700 | 57,375 | ||||||
Occidental Petroleum Corp. (b) | 800 | 47,992 | ||||||
SAN Juan Basin Royalty Trust | 1,200 | 37,164 | ||||||
Southwestern Energy Co. (a) | 800 | 23,176 | ||||||
Sunoco, Inc. | 1,900 | 82,574 | ||||||
Teekay LNG Partners LP | 2,400 | 35,880 | ||||||
TOTAL ENERGY | 488,436 | |||||||
FINANCIALS – 23.0% | ||||||||
Capital Markets – 1.1% | ||||||||
Deutsche Bank AG | 700 | 28,483 | ||||||
UBS AG (a) | 1,600 | 22,880 | ||||||
51,363 | ||||||||
Commercial Banks – 3.4% | ||||||||
BB&T Corp. (b) | 2,200 | 60,412 | ||||||
First Midwest Bancorp, Inc. | 1,100 | 21,967 | ||||||
Wells Fargo & Co. (b) | 2,400 | 70,752 | ||||||
153,131 | ||||||||
Consumer Finance – 0.8% | ||||||||
Capital One Financial Corp. | 800 | 25,512 | ||||||
Cash America International, Inc. (b) | 400 | 10,940 | ||||||
36,452 | ||||||||
Diversified Financial Services – 2.7% | ||||||||
Bank of America Corp. | 2,300 | 32,384 | ||||||
JPMorgan Chase & Co. (b) | 2,800 | 88,284 | ||||||
120,668 | ||||||||
Insurance – 8.7% | ||||||||
ACE Ltd. (b) | 700 | 37,044 | ||||||
AFLAC, Inc. | 800 | 36,672 | ||||||
American Financial Group, Inc. | 1,500 | 34,320 | ||||||
Delphi Financial Group (b) | 2,800 | 51,632 | ||||||
Everest Re Group Ltd. | 300 | 22,842 | ||||||
Hanover Insurance Group, Inc. (b) | 700 | 30,079 | ||||||
Loews Corp. (b) | 1,000 | 28,250 | ||||||
MetLife, Inc. | 1,400 | 48,804 | ||||||
PartnerRe Ltd. (b) | 600 | 42,762 | ||||||
Tower Group, Inc. | 1,300 | 36,673 | ||||||
Willis Group Holdings Ltd. (b) | 1,000 | 24,880 | ||||||
393,958 | ||||||||
Real Estate Investment Trusts – 6.3% | ||||||||
Annaly Mortgage Management, Inc. (b) | 2,900 | 46,023 | ||||||
Anworth Mortgage Asset Corp. | 7,100 | 45,653 | ||||||
Duke Realty Corp. | 2,100 | 23,016 | ||||||
Entertainment Properties Trust | 1,700 | 50,660 | ||||||
Kimco Realty Corp. (b) | 2,400 | 43,872 |
(continued)
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Income Opportunity Portfolio (Continued)
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 95.0% | Shares | Value | ||||||
Real Estate Investment Trusts (continued) | ||||||||
Liberty Property Trust | 2,100 | $ | 47,943 | |||||
Mack-Cali Realty Corp. | 1,000 | 24,500 | ||||||
281,667 | ||||||||
TOTAL FINANCIALS | 1,037,239 | |||||||
HEALTH CARE – 6.1% | ||||||||
Biotechnology – 0.6% | ||||||||
Cubist Pharmaceuticals, Inc. (a) | 1,100 | 26,576 | ||||||
Health Care Equipment & Supplies – 0.3% | ||||||||
Baxter International, Inc. | 300 | 16,077 | ||||||
Health Care Providers & Services – 2.3% | ||||||||
Express Scripts, Inc. (a) | 700 | 38,486 | ||||||
Medco Health Solutions, Inc. (a) | 700 | 29,337 | ||||||
Quest Diagnostics, Inc. (b) | 700 | 36,337 | ||||||
104,160 | ||||||||
Pharmaceuticals – 2.9% | ||||||||
Abbott Laboratories | 300 | 16,011 | ||||||
Bristol-Myers Squibb Co. | 3,200 | 74,400 | ||||||
Pfizer, Inc. | 2,200 | 38,962 | ||||||
129,373 | ||||||||
TOTAL HEALTH CARE | 276,186 | |||||||
INDUSTRIALS – 17.3% | ||||||||
Aerospace & Defense – 1.6% | ||||||||
Lockheed Martin Corp. (b) | 500 | 42,040 | ||||||
United Technologies Corp. (b) | 600 | 32,160 | ||||||
74,200 | ||||||||
Airlines – 1.9% | ||||||||
Delta Air Lines, Inc. (a) | 2,400 | 27,504 | ||||||
SkyWest, Inc. (b) | 3,100 | 57,660 | ||||||
85,164 | ||||||||
Building Products – 1.5% | ||||||||
Gibraltar Industries, Inc. | 2,200 | 26,268 | ||||||
Lennox International, Inc. (b) | 1,200 | 38,748 | ||||||
65,016 | ||||||||
Commercial Services & Supplies – 2.5% | ||||||||
Consolidated Graphics, Inc. (a) | 1,400 | 31,696 | ||||||
HNI Corp. | 1,300 | 20,592 | ||||||
Mobile Mini, Inc. (a) | 900 | 12,978 | ||||||
SYKES Enterprises, Inc. (a) | 1,600 | 30,592 | ||||||
The Standard Register Co. | 2,000 | 17,860 | ||||||
113,718 | ||||||||
Construction & Engineering – 4.6% | ||||||||
EMCOR Group, Inc. (a) (b) | 2,700 | 60,561 | ||||||
Jacobs Engineering Group, Inc. (a) (b) | 1,200 | 57,720 | ||||||
Perini Corp. (a) | 1,400 | 32,732 | ||||||
URS Corp. (a) (b) | 1,400 | 57,078 | ||||||
208,091 | ||||||||
Electrical Equipment – 2.3% | ||||||||
Acuity Brands, Inc. (b) | 500 | 17,455 | ||||||
Cooper Industries Ltd. Class A | 1,300 | 37,999 | ||||||
First Solar, Inc. (a) | 200 | 27,592 | ||||||
Hubbell, Inc. (b) | 600 | 19,608 | ||||||
102,654 | ||||||||
Marine – 0.7% | ||||||||
Genco Shipping & Trading Ltd. | 2,200 | 32,560 | ||||||
Professional Services – 0.8% | ||||||||
Huron Consulting Group, Inc. (a) | 600 | 34,362 | ||||||
Road & Rail – 0.7% | ||||||||
Arkansas Best Corp. (b) | 1,100 | 33,121 | ||||||
Trading Companies & Distributors – 0.7% | ||||||||
MSC Industrial Direct Co., Inc. Class A (b) | 900 | 33,147 | ||||||
TOTAL INDUSTRIALS | 782,033 | |||||||
INFORMATION TECHNOLOGY – 7.0% | ||||||||
Communications Equipment – 0.6% | ||||||||
Harris Corp. (b) | 700 | 26,635 | ||||||
Computers & Peripherals – 1.3% | ||||||||
International Business Machines Corp. (b) | 700 | 58,912 | ||||||
Electronic Equipment & Instruments – 0.7% | ||||||||
National Instruments Corp. (b) | 600 | 14,616 | ||||||
Rogers Corp. (a) (b) | 600 | 16,662 | ||||||
31,278 | ||||||||
IT Services – 3.4% | ||||||||
Accenture Ltd. (b) | 1,600 | 52,464 | ||||||
Cognizant Technology Solutions Corp. Class A (a) | 1,600 | 28,896 | ||||||
Fiserv, Inc. (a) | 700 | 25,459 | ||||||
Heartland Payment Systems, Inc. | 1,000 | 17,500 | ||||||
Mastercard, Inc. Class A | 200 | 28,586 | ||||||
152,905 | ||||||||
Semiconductors & Semiconductor Equipment – 0.3% | ||||||||
Intel Corp. | 1,000 | 14,660 | ||||||
Software – 0.7% | ||||||||
Microsoft Corp. (b) | 1,700 | 33,048 | ||||||
TOTAL INFORMATION TECHNOLOGY | 317,438 | |||||||
MATERIALS – 6.9% | ||||||||
Chemicals – 2.8% | ||||||||
Albemarle Corp. | 1,400 | 31,220 | ||||||
Mosaic Co. | 1,000 | 34,600 | ||||||
PPG Industries, Inc. (b) | 500 | 21,215 | ||||||
Valspar Corp. (b) | 2,200 | 39,798 | ||||||
126,833 | ||||||||
Construction Materials – 1.1% | ||||||||
Texas Industries, Inc. | 1,500 | 51,750 | ||||||
Containers & Packaging – 1.0% | ||||||||
Bemis Co., Inc | 700 | 16,576 | ||||||
Myers Industries, Inc. | 2,000 | 16,000 | ||||||
Sonoco Products Co. | 600 | 13,896 | ||||||
46,472 | ||||||||
Metals & Mining – 2.0% | ||||||||
Aluminum Corp. of China Ltd. – ADR | 1,700 | 22,967 |
(continued)
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Income Opportunity Portfolio (Continued)
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 95.0% | Shares | Value | ||||||
Metals & Mining (continued) | ||||||||
Schnitzer Steel Industries, Inc. | 600 | $ | 22,590 | |||||
Steel Dynamics, Inc. | 1,800 | 20,124 | ||||||
United States Steel Corp. | 500 | 18,600 | ||||||
84,281 | ||||||||
TOTAL MATERIALS | 309,336 | |||||||
TELECOMMUNICATION SERVICES – 1.1% | ||||||||
Diversified Telecommunication Services – 1.1% | ||||||||
AT&T, Inc. (b) | 600 | 17,100 | ||||||
Telefonos de Mexico S.A.B. de C.V. – ADR (b) | 800 | 16,752 | ||||||
Verizon Communications, Inc. | 500 | 16,950 | ||||||
TOTAL TELECOMMUNICATION SERVICES | 50,802 | |||||||
UTILITIES – 4.1% | ||||||||
Electric Utilities – 2.8% | ||||||||
DPL, Inc. | 2,200 | 50,248 | ||||||
FirstEnergy Corp. | 500 | 24,290 | ||||||
Pinnacle West Capital Corp. | 700 | 22,491 | ||||||
Progress Energy, Inc. | 700 | 27,895 | ||||||
124,924 | ||||||||
Gas Utilities – 0.9% | ||||||||
AGL Resources, Inc. | 1,300 | 40,755 | ||||||
Multi-Utilities – 0.4% | ||||||||
Xcel Energy, Inc. | 1,000 | 18,550 | ||||||
TOTAL UTILITIES | 184,229 | |||||||
Total Common Stocks (Cost $4,560,563) | $ | 4,286,994 | ||||||
Fair | ||||||||
Purchased Options – 0.2% | Contracts | Value | ||||||
S&P 500 Index Put Option Expiration: January 2009, Exercise Price: $815.00 | 16 | $ | 10,080 | |||||
Total Purchased Options (Cost $27,738) | $ | 10,080 | ||||||
Face | Fair | |||||||
Repurchase Agreements – 6.9% | Amount | Value | ||||||
U.S. Bank 0.010% 01/02/2009 | $ | 313,000 | $ | 313,000 | ||||
Repurchase price $313,000 Collateralized by: | ||||||||
Various Agency Mortgage- Backed Securities 2.395% to 5.000%, Due 09/01/2018 through 05/15/2033 Fair Value: $319,245 | ||||||||
Total Repurchase Agreements (Cost $313,000) | $ | 313,000 | ||||||
Total Investments – 102.1% (Cost $4,901,301) (c) | $ | 4,610,074 | ||||||
Total Written Options Outstanding – (3.2%) (see following schedule) | (144,000 | ) | ||||||
Other Assets in Excess of Liabilities – 1.1% | 47,461 | |||||||
Net Assets – 100.0% | $ | 4,513,535 | ||||||
Percentages are stated as a percent of net assets.
Abbreviations:
ADR: American Depository Receipts
Footnotes:
(a) | Non-income producing security. | |
(b) | Security is fully or partially pledged as collateral for written call options outstanding at December 31, 2008. Outstanding written call options are presented in the following schedule. | |
(c) | Represents cost for financial reporting purposes, which may differ from cost basis for Federal income tax purposes. See also Note 8 of the Notes to Financial Statements. |
The accompanying notes are an integral part of these financial statements.
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Income Opportunity Portfolio
Schedule of Written Options Outstanding — Call Options | December 31, 2008 |
Fair | ||||||||
Contracts | Value | |||||||
S&P 500 Index Call Option | ||||||||
Expiration: January, 2009, | ||||||||
Exercise Price: $895.00 | 45 | $ | 144,000 | |||||
Total Options Written (Premiums received $117,749) | $ | 144,000 | ||||||
The accompanying notes are an integral part of these financial statements.
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Income Opportunity Portfolio
Statement of Assets and Liabilities
December 31, 2008
Assets: | ||||
Investments in securities, at fair value (Cost $4,588,301) | $ | 4,297,074 | ||
Repurchase agreements | 313,000 | |||
Cash | 139,067 | |||
Receivable for securities sold | 254,657 | |||
Receivable for fund shares sold | 165 | |||
Dividends and accrued interest receivable | 12,363 | |||
Prepaid expenses and other assets | 84 | |||
Total assets | 5,016,410 | |||
Liabilities: | ||||
Options written, at fair value (premiums received of $117,749) | 144,000 | |||
Payable for securities purchased | 311,120 | |||
Payable for fund shares redeemed | 30,345 | |||
Payable for investment management services | 2,969 | |||
Accrued custody expense | 2,067 | |||
Accrued professional fees | 10,341 | |||
Accrued accounting fees | 1,658 | |||
Accrued printing and filing fees | 361 | |||
Other accrued expenses | 14 | |||
Total liabilities | 502,875 | |||
Net assets | $ | 4,513,535 | ||
Net assets consist of: | ||||
Par value, $1 per share | $ | 456,256 | ||
Paid-in capital in excess of par value | 4,514,573 | |||
Accumulated net realized loss on investments | (185,553 | ) | ||
Net unrealized appreciation/depreciation on: | ||||
Investments | (291,227 | ) | ||
Foreign currency related transactions | 2 | |||
Written options | (26,251 | ) | ||
Undistributed net investment income | 45,735 | |||
Net assets | $ | 4,513,535 | ||
Shares outstanding | 456,256 | |||
Authorized Fund shares allocated to Portfolio | 5,000,000 | |||
Net asset value per share | $ | 9.89 | ||
Statement of Operations
For the Year Ended December 31, 2008
Investment income: | ||||
Interest | $ | 6,147 | ||
Dividends (net of withholding tax of $1,858) | 117,639 | |||
Total investment income | 123,786 | |||
Expenses: | ||||
Management fees | 38,176 | |||
Custodian fees | 12,963 | |||
Directors’ fees | 416 | |||
Professional fees | 11,589 | |||
Accounting fees | 8,435 | |||
Printing and filing fees | 666 | |||
Compliance expense | 4,911 | |||
Other | 72 | |||
Total expenses | 77,228 | |||
Net investment income | 46,558 | |||
Realized/unrealized gain (loss) on investments, foreign currency related transactions, and written options: | ||||
Net realized gain (loss) on: | ||||
Investments and written options | (109,705 | ) | ||
Foreign currency related transactions | 4 | |||
Change in unrealized appreciation/depreciation on investments, foreign currency related transactions, and written options | (1,018,989 | ) | ||
Net realized/unrealized gain (loss) on investments, foreign currency related transactions, and written options | (1,128,690 | ) | ||
Change in net assets from operations | $ | (1,082,132 | ) | |
The accompanying notes are an integral part of these financial statements.
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Income Opportunity Portfolio
Statements of Changes in Net Assets
Years Ended December 31, | ||||||||
2008 | 2007 | |||||||
Increase (Decrease) in Net Assets: | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | 46,558 | $ | (1,922 | ) | |||
Net realized gain (loss) on investments, foreign currency related transactions, and written options | (109,701 | ) | 213,928 | |||||
Change in unrealized appreciation/depreciation on investments, foreign currency related transactions, and written options | (1,018,989 | ) | 188,903 | |||||
Change in net assets from operations | (1,082,132 | ) | 400,909 | |||||
Capital transactions: | ||||||||
Received from shares sold | 1,537,866 | 1,519,385 | ||||||
Paid for shares redeemed | (1,124,981 | ) | (2,407,019 | ) | ||||
Change in net assets from capital transactions | 412,885 | (887,634 | ) | |||||
Change in net assets | (669,247 | ) | (486,725 | ) | ||||
Net Assets: | ||||||||
Beginning of year | 5,182,782 | 5,669,507 | ||||||
End of year | $ | 4,513,535 | $ | 5,182,782 | ||||
Undistributed net investment income | $ | 45,735 | $ | — | ||||
Financial Highlights
For the Period | ||||||||||||||||||||
Years Ended December 31, | from May 1, 2004* | |||||||||||||||||||
2008 | 2007 | 2006 | 2005 | to December 31, 2004 | ||||||||||||||||
Selected Per-Share Data: | ||||||||||||||||||||
Net asset value, beginning of period | $ | 12.49 | $ | 11.53 | $ | 11.07 | $ | 10.75 | $ | 10.00 | ||||||||||
Operations: | ||||||||||||||||||||
Net investment income (loss) | 0.10 | — | 0.01 | (0.04 | ) | (0.03 | ) | |||||||||||||
Net realized and unrealized gain (loss) on investments, foreign currency related transactions, and written options | (2.70 | ) | 0.96 | 0.45 | 0.36 | 0.78 | ||||||||||||||
Total from operations | (2.60 | ) | 0.96 | 0.46 | 0.32 | 0.75 | ||||||||||||||
Net asset value, end of period | $ | 9.89 | $ | 12.49 | $ | 11.53 | $ | 11.07 | $ | 10.75 | ||||||||||
Total return | –20.82 | % | 8.33 | % | 4.16 | % | 2.98 | % | 7.50 | %(b) | ||||||||||
Ratios and supplemental data: | ||||||||||||||||||||
Net assets at end of period (millions) | $ | 4.5 | $ | 5.2 | $ | 5.7 | $ | 4.2 | $ | 2.0 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Ratios net of expenses voluntarily reduced or reimbursed by adviser: | ||||||||||||||||||||
Expenses | 1.62 | % | 1.46 | % | 1.52 | % | 1.60 | % | 1.49 | %(a) | ||||||||||
Net investment income (loss) | 0.98 | % | (0.04 | )% | 0.12 | % | (0.48 | )% | (0.53 | )%(a) | ||||||||||
Ratios assuming no expenses voluntarily reduced or reimbursed by adviser: | ||||||||||||||||||||
Expenses | 1.62 | % | 1.46 | % | 1.52 | % | 1.67 | % | 2.91 | %(a) | ||||||||||
Portfolio turnover rate | 203 | % | 159 | % | 140 | % | 158 | % | 70 | % |
(a) | Annualized. |
(b) | Not annualized. |
* | Represents date of commencement of operations. |
The accompanying notes are an integral part of these financial statements.
150
Ohio National Fund, Inc.
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Target VIP Portfolio
Objective/Strategy
The Target VIP Portfolio seeks an above average total return by investing in the common stocks of companies which are identified by a model which applies separate uniquely specialized strategies.
Performance as of December 31, 2008
Average Annual Total Returns: | ||||
One Year | -43.34% | |||
Since inception (11/2/05) | -10.73% |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price and reinvestment of dividends and capital gains. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost.
The Portfolio is not open to direct retail investment. Beneficial interest in shares is obtained solely by purchase of variable life insurance policies and variable annuity contracts. Actual performance results for variable annuity and variable universal life contracts will be lower due to contract charges. Consult your contract for applicable charges.
Comments
For the year ended December 31, 2008, the Target VIP Portfolio returned -43.34% versus -37.31% for the current benchmark, the Russell 3000 Index.
Stocks posted their worst showing in seven decades in 2008. The damage was broad-based in that 469 constituents (94%) in the S&P 500 Index posted a loss, according to S&P’s Capital IQ. Only 6 out of 128 sub-sectors in the S&P 500 Index were in positive territory for the year. Nearly 90% of the stocks in the S&P 1500 Index, which declined by 36.7%, were down. All in all, U.S. stocks lost $6.9 trillion and equity markets plunged by more than $30 trillion globally. About the only securities to make money were those “backed by the full faith and credit of the U.S. government.” If there is a silver lining for stocks heading into 2009 it very well could be the huge amount of cash sitting on the sidelines. Americans were holding $8.85 trillion in cash and equivalents (low-yielding) at the end of November 2008. That is almost three-quarters the combined market value of the S&P 500 Index, the highest it has been since 1990, according to Bloomberg.
The combination of the sub-prime mortgage meltdown, corresponding credit crunch, historically low levels of consumer confidence and job losses pushed the U.S. economy into recession. In fact, the recession actually commenced in December 2007, according to the National Bureau of Economic Research. This pronouncement is crucial to investors because it establishes a timeline and timelines often have historical precedence. This one surely does.
Since 1953, the U.S. has endured nine recessions not counting the one we are in now, according to Ernie Ankrim, Ph.D., and Chief Investment Strategist at Russell Investments. The average duration for these recessions was 10.3 months, with the longest lasting 16 months. Using the Ibbotson Associates Equity Index (1952-January 1962) and the S&P 500 Index (February 1962-2002) to track the performance of stocks during these recessions, Ankrim discovered the following: If an investor would have bought stocks at the trough of each recession they would have enjoyed an average return of 17.6% for the 12 months following; however, had they bought 6 months prior to the bottom of the recession they would have reaped a return of 27.8%.
The Portfolio significantly lagged the Russell 3000 Index in 2008. The top performing stocks were the following: Axsys Technologies, Inc. up 49.7%; Emergency Medical Services Corp. up 25.0%; AutoZone, Inc. up 16.3%; Apollo Group, Inc. up 9.2%; and FLIR Systems, Inc. down 2.0%. The worst performing stocks were the following: Fortis NL down 95.5%; MEMC Electronic Materials, Inc. down 83.9%; McDermott International, Inc. down 83.3%; Sigma Designs, Inc. down 82.8%; and TheStreet.com down 81.3%.(1)
In addition to underweighting Consumer Staples, the underperformance of the Portfolio was influenced by a sizable over-weighted position/stock selection in Information Technology. The S&P Information Technology Index returned -43.1% in 2008.(1)
The fourth quarter of 2008 edition of the Investment Manager Outlook, a survey of investment managers conducted by Russell Investment Group, says that money managers continue to be most bullish on U.S. large-cap growth stocks over all other asset classes. Sixty-seven percent of those managers polled are bullish, up from sixty-two percent in the third quarter of 2008. Rounding out the top five are U.S. mid-cap growth and U.S. large-cap value (both at 61%), corporate bonds (60%) and U.S. small-cap growth (56%). The sector managers are most bullish on is Health Care (66%). The Portfolio’s holdings for 2009 are over-weighted in growth stocks and Health Care.(1)
According to Thomson First Call, the year-over-year estimated earnings growth rates for the companies in the S&P 500 Index, S&P 400 Index (mid-caps), and S&P 600 Index (small-caps) are expected to be -8.80%, -3.90% and -1.08%, respectively, in 2009. Due to today’s challenging economic climate, these earnings targets more than likely will be subject to change, in our opinion.
(1) | The Portfolio’s composition is subject to change. Holdings and weightings are as of December 31, 2008. |
(continued)
151
Ohio National Fund, Inc.
Target VIP Portfolio (Continued)
Target VIP Portfolio (Continued)
Change in Value of $10,000 Investment
Hypothetical illustration based on past performance. Future performance will vary. The Portfolio’s returns reflect reinvested dividends. The Portfolio’s holdings may differ significantly from the securities in the index. The index is unmanaged and therefore does not reflect the cost of portfolio management and accounting.
The Russell 3000 Index measures the performance of the largest 3000 U.S. companies representing approximately 98% of the investable U.S. equity market. The Russell 3000 Index is constructed to provide a comprehensive, unbiased, and stable barometer of the broad market and is completely reconstituted annually to ensure new and growing equities are reflected. The index presented includes the effects of reinvested dividends.
The S&P Composite 1500 Index is a broad-based capitalization-weighted index of 1500 U.S. Companies and is comprised of the S&P 400, S&P 500, and S&P 600. The index was developed with a base value of 100 as of December 30, 1994. The index presented herein includes the effects of reinvested dividends.
We are now using the Russell 3000 Index as the Portfolio’s primary benchmark because we believe the Portfolio’s investments more closely resemble the securities represented in that index than those in the S&P Composite 1500 Index.
Portfolio Composition as of December 31, 2008 (1)
% of Net Assets | |||
Common Stocks (3) | 97.4 | ||
Repurchase Agreements and Other Net Assets | 2.6 | ||
100.0 | |||
Top 10 Portfolio Holdings as of December 31, 2008 (1) (2)
% of Net Assets | |||||||
1. | International Business Machines Corp. | 4.5 | |||||
2. | The Walt Disney Co. | 4.0 | |||||
3. | JPMorgan Chase & Co. | 3.8 | |||||
4. | Microsoft Corp. | 3.8 | |||||
5. | Honeywell International, Inc. | 3.7 | |||||
6. | Telefonica SA – ADR | 3.6 | |||||
7. | Intel Corp. | 3.5 | |||||
8. | Apple, Inc. | 3.4 | |||||
9. | Exxon Mobil Corp. | 3.2 | |||||
10. | Google, Inc. Class A | 2.9 |
(1) | Composition of Portfolio subject to change. | |
(2) | Short-term investments have been excluded from the list of Top 10 Portfolio holdings. | |
(3) | Sectors: |
% of Net Assets | |||
Information Technology | 30.1 | ||
Financials | 15.2 | ||
Industrials | 12.9 | ||
Telecommunication Services | 10.1 | ||
Consumer Discretionary | 8.6 | ||
Health Care | 6.8 | ||
Energy | 6.4 | ||
Materials | 5.3 | ||
Consumer Staples | 2.0 | ||
97.4 | |||
152
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Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 97.4% | Shares | Value | ||||||
CONSUMER DISCRETIONARY – 8.6% | ||||||||
Diversified Consumer Services – 2.0% | ||||||||
Apollo Group, Inc. Class A (a) | 4,897 | $ | 375,208 | |||||
Household Durables – 0.6% | ||||||||
Garmin Ltd. | 3,153 | 60,443 | ||||||
Universal Electronics, Inc. (a) | 2,747 | 44,556 | ||||||
104,999 | ||||||||
Internet & Catalog Retail – 0.2% | ||||||||
priceline.com, Inc. (a) | 515 | 37,930 | ||||||
Media – 4.0% | ||||||||
The Walt Disney Co. | 31,792 | 721,360 | ||||||
Specialty Retail – 1.5% | ||||||||
AutoZone, Inc. (a) | 778 | 108,508 | ||||||
Best Buy Co., Inc. | 5,107 | 143,558 | ||||||
GameStop Corp. Class A (a) | 975 | 21,118 | ||||||
273,184 | ||||||||
Textiles, Apparel & Luxury Goods – 0.3% | ||||||||
Deckers Outdoor Corp. (a) | 379 | 30,271 | ||||||
Fossil, Inc. (a) | 1,424 | 23,781 | ||||||
54,052 | ||||||||
TOTAL CONSUMER DISCRETIONARY | 1,566,733 | |||||||
CONSUMER STAPLES – 2.0% | ||||||||
Beverages – 1.9% | ||||||||
PepsiCo, Inc. | 6,231 | 341,272 | ||||||
Household Products – 0.1% | ||||||||
The Clorox Co. | 539 | 29,947 | ||||||
TOTAL CONSUMER STAPLES | 371,219 | |||||||
ENERGY – 6.4% | ||||||||
Energy Equipment & Services – 0.6% | ||||||||
Bolt Technology Corp. (a) | 1,604 | 11,164 | ||||||
ENSCO International, Inc. | 197 | 5,593 | ||||||
NATCO Group, Inc. (a) | 3,409 | 51,749 | ||||||
National Oilwell Varco, Inc. (a) | 2,142 | 52,350 | ||||||
120,856 | ||||||||
Oil, Gas & Consumable Fuels – 5.8% | ||||||||
ENI SpA – ADR | 5,121 | 244,886 | ||||||
Exxon Mobil Corp. | 7,354 | 587,070 | ||||||
StatoilHydro ASA – ADR | 12,182 | 202,952 | ||||||
Valero Energy Corp. | 746 | 16,143 | ||||||
1,051,051 | ||||||||
TOTAL ENERGY | 1,171,907 | |||||||
FINANCIALS – 15.2% | ||||||||
Capital Markets – 0.2% | ||||||||
Janus Capital Group, Inc. | 4,490 | 36,055 | ||||||
Commercial Banks – 4.0% | ||||||||
Barclays PLC – ADR | 9,382 | 91,944 | ||||||
HSBC Holdings PLC – ADR | 4,502 | 219,112 | ||||||
Intesa Sanpaolo SpA – ADR | 7,951 | 168,271 | ||||||
Lloyds TSB Group PLC – ADR | 10,012 | 77,092 | ||||||
Royal Bank Scotland Group PLC – ADR | 2,162 | 33,057 | ||||||
Societe Generale – ADR | 13,000 | 135,200 | ||||||
724,676 | ||||||||
Diversified Financial Services – 4.5% | ||||||||
Fortis NL – ADR | 14,128 | 18,245 | ||||||
ING Groep NV – ADR | 9,614 | 106,715 | ||||||
JPMorgan Chase & Co. | 22,172 | 699,083 | ||||||
824,043 | ||||||||
Insurance – 6.5% | ||||||||
Aegon NV – ADR | 21,180 | 128,139 | ||||||
Amtrust Financial Services, Inc. | 11,315 | 131,254 | ||||||
AON Corp. | 7,690 | 351,279 | ||||||
eHealth, Inc. (a) | 4,445 | 59,030 | ||||||
The Chubb Corp. | 9,984 | 509,184 | ||||||
1,178,886 | ||||||||
TOTAL FINANCIALS | 2,763,660 | |||||||
HEALTH CARE – 6.8% | ||||||||
Health Care Equipment & Supplies – 0.9% | ||||||||
Cynosure, Inc. (a) | 1,616 | 14,754 | ||||||
Intuitive Surgical, Inc. (a) | 554 | 70,353 | ||||||
SurModics, Inc. (a) | 3,400 | 85,918 | ||||||
171,025 | ||||||||
Health Care Providers & Services – 5.2% | ||||||||
Air Methods Corp. (a) | 2,218 | 35,466 | ||||||
Amedisys, Inc. (a) | 4,876 | 201,574 | ||||||
Emergency Medical Services Corp. (a) | 1,784 | 65,312 | ||||||
Express Scripts, Inc. (a) | 6,078 | 334,168 | ||||||
Medco Health Solutions, Inc. (a) | 7,303 | 306,069 | ||||||
942,589 | ||||||||
Life Sciences Tools & Services – 0.7% | ||||||||
Kendle International, Inc. (a) | 2,719 | 69,933 | ||||||
Waters Corp. (a) | 1,351 | 49,514 | ||||||
119,447 | ||||||||
TOTAL HEALTH CARE | 1,233,061 | |||||||
INDUSTRIALS – 12.9% | ||||||||
Aerospace & Defense – 6.2% | ||||||||
Axsys Technologies, Inc. (a) | 1,675 | 91,891 | ||||||
Honeywell International, Inc. | 20,512 | 673,409 | ||||||
Lockheed Martin Corp. | 4,226 | 355,322 | ||||||
1,120,622 | ||||||||
Commercial Services & Supplies – 0.3% | ||||||||
GeoEye, Inc. (a) | 3,278 | 63,036 | ||||||
Construction & Engineering – 1.5% | ||||||||
Foster Wheeler Ltd. (a) | 1,072 | 25,063 | ||||||
Jacobs Engineering Group, Inc. (a) | 738 | 35,498 | ||||||
Layne Christensen Co. (a) | 3,937 | 94,527 | ||||||
Perini Corp. (a) | 5,205 | 121,693 | ||||||
276,781 | ||||||||
Electrical Equipment – 0.9% | ||||||||
EnerSys (a) | 8,938 | 98,318 | ||||||
Rockwell Automation, Inc. | 1,529 | 49,295 |
(continued)
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Target VIP Portfolio (Continued)
Target VIP Portfolio (Continued)
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 97.4% | Shares | Value | ||||||
Electrical Equipment (continued) | ||||||||
SunPower Corp. (a) | 468 | $ | 14,246 | |||||
161,859 | ||||||||
Industrial Conglomerates – 0.1% | ||||||||
McDermott International, Inc. (a) | 1,366 | 13,496 | ||||||
Machinery – 2.8% | ||||||||
Columbus McKinnon Corp. (a) | 3,467 | 47,324 | ||||||
Dynamic Materials Corp. | 999 | 19,291 | ||||||
Parker Hannifin Corp. | 1,685 | 71,680 | ||||||
RBC Bearings, Inc. (a) | 3,971 | 80,532 | ||||||
Robbins & Myers, Inc. | 6,022 | 97,376 | ||||||
Sun Hydraulics Corp. | 3,113 | 58,649 | ||||||
Tennant Co. | 3,504 | 53,961 | ||||||
The Middleby Corp. (a) | 3,052 | 83,228 | ||||||
512,041 | ||||||||
Professional Services – 0.4% | ||||||||
ICF International, Inc. (a) | 2,693 | 66,167 | ||||||
Trading Companies & Distributors – 0.7% | ||||||||
Kaman Corp. | 4,629 | 83,924 | ||||||
Rush Enterprises, Inc. Class A (a) | 4,812 | 41,239 | ||||||
125,163 | ||||||||
TOTAL INDUSTRIALS | 2,339,165 | |||||||
INFORMATION TECHNOLOGY – 30.1% | ||||||||
Communications Equipment – 4.3% | ||||||||
Harmonic, Inc. (a) | 17,216 | 96,582 | ||||||
Nokia Corp. – ADR | 23,458 | 365,945 | ||||||
Research In Motion Ltd. (a) | 8,053 | 326,790 | ||||||
789,317 | ||||||||
Computers & Peripherals – 8.3% | ||||||||
Apple, Inc. (a) | 7,227 | 616,824 | ||||||
International Business Machines Corp. | 9,623 | 809,872 | ||||||
Novatel Wireless, Inc. (a) | 6,108 | 28,341 | ||||||
Stratasys, Inc. (a) | 3,880 | 41,710 | ||||||
Western Digital Corp. (a) | 2,029 | 23,232 | ||||||
1,519,979 | ||||||||
Electronic Equipment, Instruments & Components – 0.6% | ||||||||
Flir Systems, Inc. (a) | 1,865 | 57,218 | ||||||
Methode Electronics, Inc. | 6,794 | 45,792 | ||||||
103,010 | ||||||||
Internet Software & Services – 3.2% | ||||||||
Baidu.com – ADR (a) | 173 | 22,589 | ||||||
Google, Inc. Class A (a) | 1,744 | 536,541 | ||||||
TheStreet.com | 5,420 | 15,718 | ||||||
574,848 | ||||||||
IT Services – 1.4% | ||||||||
Cybersource Corp. (a) | 12,319 | 147,705 | ||||||
Sapient Corp. (a) | 23,155 | 102,808 | ||||||
250,513 | ||||||||
Semiconductors & Semiconductor Equipment – 7.4% | ||||||||
Altera Corp. | 10,555 | 176,374 | ||||||
Cypress Semiconductor Corp. (a) | 1,651 | 7,380 | ||||||
Intel Corp. | 43,539 | 638,282 | ||||||
MEMC Electronic Materials, Inc. (a) | 8,522 | 121,694 | ||||||
National Semiconductor Corp. | 8,427 | 84,860 | ||||||
Netlogic Microsystems, Inc. (a) | 3,903 | 85,905 | ||||||
NVIDIA Corp. (a) | 4,168 | 33,636 | ||||||
Power Integrations, Inc. | 5,277 | 104,907 | ||||||
Sigma Designs, Inc. (a) | 1,053 | 10,003 | ||||||
TriQuint Semiconductor, Inc. (a) | 26,401 | 90,819 | ||||||
1,353,860 | ||||||||
Software – 4.9% | ||||||||
EPIQ Systems, Inc. (a) | 6,505 | 108,699 | ||||||
JDA Software Group, Inc. (a) | 5,658 | 74,290 | ||||||
Microsoft Corp. | 35,483 | 689,789 | ||||||
Radiant Systems, Inc. (a) | 5,735 | 19,327 | ||||||
892,105 | ||||||||
TOTAL INFORMATION TECHNOLOGY | 5,483,632 | |||||||
MATERIALS – 5.3% | ||||||||
Chemicals – 2.0% | ||||||||
Koppers Holdings, Inc. | 3,783 | 81,788 | ||||||
Mosaic Co. | 2,661 | 92,071 | ||||||
Potash Corp. of Saskatchewan, Inc. | 1,928 | 141,168 | ||||||
Sigma-Aldrich Corp. | 1,243 | 52,504 | ||||||
367,531 | ||||||||
Metals & Mining – 3.3% | ||||||||
BHP Billiton Ltd. – ADR | 10,134 | 434,749 | ||||||
Olympic Steel, Inc. | 1,980 | 40,333 | ||||||
Southern Copper Corp. | 5,391 | 86,579 | ||||||
Steel Dynamics, Inc. | 2,284 | 25,535 | ||||||
587,196 | ||||||||
TOTAL MATERIALS | 954,727 | |||||||
TELECOMMUNICATION SERVICES – 10.1% | ||||||||
Diversified Telecommunication Services – 9.9% | ||||||||
BT Group PLC – ADR | 6,986 | 139,580 | ||||||
CenturyTel, Inc. | 166 | 4,537 | ||||||
Deutsche Telekom AG – ADR | 17,205 | 263,236 | ||||||
France Telecom SA – ADR | 10,481 | 294,202 | ||||||
Premiere Global Services, Inc. (a) | 11,123 | 95,769 | ||||||
Qwest Communications International, Inc. | 2,739 | 9,970 | ||||||
Telecom Italia SpA – ADR | 12,108 | 196,755 | ||||||
Telefonica SA – ADR | 9,627 | 648,764 | ||||||
Verizon Communications, Inc. | 4,304 | 145,906 | ||||||
1,798,719 | ||||||||
Wireless Telecommunication Services – 0.2% | ||||||||
Millicom International Cellular S.A. | 764 | 34,311 | ||||||
TOTAL TELECOMMUNICATION SERVICES | 1,833,030 | |||||||
Total Common Stocks (Cost $30,060,123) | $ | 17,717,134 | ||||||
(continued)
154
Ohio National Fund, Inc.
Target VIP Portfolio (Continued)
Target VIP Portfolio (Continued)
Schedule of Investments | December 31, 2008 |
Face | Fair | |||||||
Repurchase Agreements – 2.5% | Amount | Value | ||||||
US Bank 0.010% 01/02/2009 | $ | 459,000 | $ | 459,000 | ||||
Repurchase price $459,000 Collateralized by: | ||||||||
Various Agency Mortgage- Backed Securities 2.395% to 5.00%, Due 09/01/2018 through 05/15/2033 Fair Value: $468,158 | ||||||||
Total Repurchase Agreements (Cost $459,000) | $ | 459,000 | ||||||
Total Investments – 99.9% (Cost $30,519,123) (b) | $ | 18,176,134 | ||||||
Other Assets in Excess of Liabilities – 0.1% | 21,066 | |||||||
Net Assets – 100.0% | $ | 18,197,200 | ||||||
Percentages are stated as a percent of net assets.
Abbreviations:
ADR: American Depository Receipts
Footnotes:
(a) | Non-income producing security. | |
(b) | Represents cost for financial reporting purposes, which may differ from cost basis for Federal income tax purposes. See also Note 8 of the Notes to Financial Statements. |
The accompanying notes are an integral part of these financial statements.
155
Ohio National Fund, Inc.
Target VIP Portfolio
Target VIP Portfolio
Statement of Assets and Liabilities
December 31, 2008
Assets: | ||||
Investments in securities, at fair value (Cost $30,060,123) | $ | 17,717,134 | ||
Repurchase agreements | 459,000 | |||
Cash | 898 | |||
Receivable for fund shares sold | 18,319 | |||
Dividends and accrued interest receivable | 29,765 | |||
Prepaid expenses and other assets | 369 | |||
Total assets | 18,225,485 | |||
Liabilities: | ||||
Payable for fund shares redeemed | 3,698 | |||
Payable for investment management services | 8,867 | |||
Accrued custody expense | 1,007 | |||
Accrued professional fees | 10,630 | |||
Accrued accounting fees | 2,478 | |||
Accrued printing and filing fees | 1,465 | |||
Other accrued expenses | 140 | |||
Total liabilities | 28,285 | |||
Net assets | $ | 18,197,200 | ||
Net assets consist of: | ||||
Par value, $1 per share | $ | 2,672,673 | ||
Paid-in capital in excess of par value | 27,503,046 | |||
Accumulated net realized gain on investments | 330,209 | |||
Net unrealized depreciation on investments | (12,342,989 | ) | ||
Undistributed net investment income | 34,261 | |||
Net assets | $ | 18,197,200 | ||
Shares outstanding | 2,672,673 | |||
Authorized Fund shares allocated to Portfolio | 10,000,000 | |||
Net asset value per share | $ | 6.81 | ||
Statement of Operations
For the Year Ended December 31, 2008
Investment income: | ||||
Interest | $ | 9,720 | ||
Dividends (net of withholding tax of $45,165) | 513,297 | |||
Total investment income | 523,017 | |||
Expenses: | ||||
Management fees | 139,938 | |||
Custodian fees | 7,086 | |||
Directors’ fees | 1,986 | |||
Professional fees | 12,778 | |||
Accounting fees | 15,479 | |||
Printing and filing fees | 3,036 | |||
Compliance expense | 4,911 | |||
Other | 331 | |||
Total expenses | 185,545 | |||
Net investment income | 337,472 | |||
Realized/unrealized gain (loss) on investments: | ||||
Net realized gain (loss) on investments | 330,868 | |||
Change in unrealized appreciation/depreciation on investments | (13,398,858 | ) | ||
Net realized/unrealized gain (loss) on investments | (13,067,990 | ) | ||
Change in net assets from operations | $ | (12,730,518 | ) | |
The accompanying notes are an integral part of these financial statements.
156
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Target VIP Portfolio
Statements of Changes in Net Assets
Years Ended December 31, | ||||||||
2008 | 2007 | |||||||
Increase (Decrease) in Net Assets: | ||||||||
Operations: | ||||||||
Net investment income | $ | 337,472 | $ | 201,924 | ||||
Net realized gain (loss) on investments | 330,868 | 823,032 | ||||||
Change in unrealized appreciation/depreciation on investments | (13,398,858 | ) | 328,577 | |||||
Change in net assets from operations | (12,730,518 | ) | 1,353,533 | |||||
Distributions to shareholders: | ||||||||
Distributions from net investment income | (303,211 | ) | (175,630 | ) | ||||
Capital transactions: | ||||||||
Received from shares sold | 13,635,800 | 12,908,446 | ||||||
Received from dividends reinvested | 303,211 | 175,630 | ||||||
Paid for shares redeemed | (5,830,040 | ) | (1,724,818 | ) | ||||
Change in net assets from capital transactions | 8,108,971 | 11,359,258 | ||||||
Change in net assets | (4,924,758 | ) | 12,537,161 | |||||
Net Assets: | ||||||||
Beginning of year | 23,121,958 | 10,584,797 | ||||||
End of year | $ | 18,197,200 | $ | 23,121,958 | ||||
Undistributed net investment income | $ | 34,261 | $ | 25,276 | ||||
Financial Highlights
For the Period | ||||||||||||||||
Years Ended December 31, | from November 2, 2005* | |||||||||||||||
2008 | 2007 | 2006 | to December 31, 2005 | |||||||||||||
Selected Per-Share Data: | ||||||||||||||||
Net asset value, beginning of period | $ | 12.23 | $ | 11.23 | $ | 10.14 | $ | 10.00 | ||||||||
Operations: | ||||||||||||||||
Net investment income | 0.12 | 0.09 | 0.02 | 0.01 | ||||||||||||
Net realized and unrealized gain (loss) on investments | (5.42 | ) | 1.00 | 1.07 | 0.13 | |||||||||||
Total from operations | (5.30 | ) | 1.09 | 1.09 | 0.14 | |||||||||||
Distributions: | ||||||||||||||||
Distributions from net investment income | (0.12 | ) | (0.09 | ) | — | — | ||||||||||
Net asset value, end of period | $ | 6.81 | $ | 12.23 | $ | 11.23 | $ | 10.14 | ||||||||
Total return | –43.34 | % | 9.74 | % | 10.76 | % | 1.40 | %(b) | ||||||||
Ratios and supplemental data: | ||||||||||||||||
Net assets at end of period (millions) | $ | 18.2 | $ | 23.1 | $ | 10.6 | $ | 1.5 | ||||||||
Ratios to average net assets: | ||||||||||||||||
Ratios net of expenses voluntarily reduced or reimbursed by adviser: | ||||||||||||||||
Expenses | 0.80 | % | 0.83 | % | 1.26 | % | 1.60 | %(a) | ||||||||
Net investment income | 1.45 | % | 1.22 | % | 0.53 | % | 0.74 | %(a) | ||||||||
Ratios assuming no expenses voluntarily reduced or reimbursed by adviser: | ||||||||||||||||
Expenses | 0.80 | % | 0.83 | % | 1.30 | % | 7.39 | %(a) | ||||||||
Portfolio turnover rate | 79 | % | 52 | % | 24 | % | 0 | % |
(a) | Annualized. | |
(b) | Not annualized. | |
* | Represents date of commencement of operations. |
The accompanying notes are an integral part of these financial statements.
157
Ohio National Fund, Inc.
Target Equity/Income Portfolio
Target Equity/Income Portfolio
Objective/Strategy
The Target Equity/Income Portfolio seeks an above average total return by adhering to a disciplined, quantitative investment process that incorporates two distinct strategy methodologies.
Performance as of December 31, 2008
Average Annual Total Returns: | ||||
One year | -45.07% | |||
Since inception (11/2/05) | -11.82% |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price and reinvestment of dividends and capital gains. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost.
The Portfolio is not open to direct retail investment. Beneficial interest in shares is obtained solely by purchase of variable life insurance policies and variable annuity contracts. Actual performance results for variable annuity and variable universal life contracts will be lower due to contract charges. Consult your contract for applicable charges.
Comments
For the year ended December 31, 2008, the Target Equity/Income Portfolio returned -45.07% versus -37.31% for the current benchmark, the Russell 3000 Index.
Stocks posted their worst showing in seven decades in 2008. The damage was broad-based in that 469 constituents (94%) in the S&P 500 Index posted a loss, according to S&P’s Capital IQ. Only 6 out of 128 sub-sectors in the S&P 500 Index were in positive territory for the year. All in all, U.S. stocks lost $6.9 trillion and equity markets plunged by more than $30 trillion globally. About the only securities to make money were those “backed by the full faith and credit of the U.S. government.” If there is a silver lining for stocks heading into 2009 it very well could be the huge amount of cash sitting on the sidelines. Americans were holding $8.85 trillion in cash and equivalents (low-yielding) at the end of November 2008. That is almost three-quarters the combined market value of the S&P 500 Index, the highest it has been since 1990, according to Bloomberg.
Approximately 7,000 publicly owned companies report dividend information to Standard & Poor’s Dividend Record. In the fourth quarter of 2008, 475 companies increased their dividend distributions — a 40% decline from the 792 increases registered in the fourth quarter of 2007, according to S&P. The number of companies that decreased their dividends totaled 288 — a 454% increase from the 52 decreases registered in the fourth quarter of 2007. It was the worst quarter for stock dividends since the firm started keeping records in 1956, according to Howard Silverblatt, Senior Index Analyst at S&P. The non-financial companies in the S&P 500 Index were holding as much as $650 billion in cash during 2008, according to Standard & Poors. That is in the vicinity of the all-time high. Companies have been stockpiling cash just like individuals.
The combination of the sub-prime mortgage meltdown, corresponding credit crunch, historically low levels of consumer confidence and job losses pushed the U.S. economy into recession. In fact, the recession actually commenced in December 2007, according to the National Bureau of Economic Research. This pronouncement is crucial to investors because it establishes a timeline and timelines often have historical precedence. This one surely does.
Since 1953, the U.S. has endured nine recessions not counting the one we are in now, according to Ernie Ankrim, Ph.D., and Chief Investment Strategist at Russell Investments. The average duration for these recessions was 10.3 months, with the longest lasting 16 months. Using the Ibbotson Associates Equity Index (1952-January 1962) and the S&P 500 Index (February 1962-2002) to track the performance of stocks during these recessions, Ankrim discovered the following: If an investor would have bought stocks at the trough of each recession they would have enjoyed an average return of 17.6% for the 12 months following; however, had they bought 6 months prior to the bottom of the recession they would have reaped a return of 27.8%.
The Portfolio significantly lagged the S&P 500 Index and Russell 3000 Index in 2008. The top performing stocks were the following: First Bancorp/Puerto Rico up 55.7%; Axsys Technologies, Inc. up 49.7%; First Niagara Financial Group, Inc. up 39.0%; Apollo Group, Inc. up 9.2%; and Peoples United Financial, Inc. up 3.4%. The worst performing stocks were the following: Washington Mutual, Inc. down 98.6%; Lee Enterprises, Inc. down 93.3%; MEMC Electronic Materials, Inc. down 83.9%; McDermott International, Inc. down 83.3%; and Sigma Designs, Inc. down 82.8%.(1)
In addition to stock selection in the Consumer Discretionary and Information Technology sectors, the underperformance of the Portfolio relative to its benchmark was influenced by a sizable over-weighted position in Materials. The S&P Materials Index returned -45.6% in 2008.(1)
According to Thomson First Call, the year-over-year estimated earnings growth rate for the companies in the S&P 500 Index is expected be -8.80% in 2009. Due to today’s challenging economic climate, this earnings target more than likely will be subject to change, in our opinion.
(1) | The Portfolio’s composition is subject to change. Holdings and weightings are as of December 31, 2008. |
(continued)
158
Ohio National Fund, Inc.
Target Equity/Income Portfolio (Continued)
Target Equity/Income Portfolio (Continued)
Change in Value of $10,000 Investment
Hypothetical illustration based on past performance. Future performance will vary. The Portfolio’s returns reflect reinvested dividends. The Portfolio’s holdings may differ significantly from the securities in the index. The index is unmanaged and therefore does not reflect the cost of portfolio management and accounting.
The Russell 3000 Index measures the performance of the largest 3000 U.S. companies representing approximately 98% of the investable U.S. equity market. The Russell 3000 index is constructed to provide a comprehensive, unbiased, and stable barometer of the broad market and is completely reconstituted annually to ensure new and growing equities are reflected. The index presented includes the effects of reinvested dividends.
The S&P 500 Index is a capitalization-weighted index designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The index presented herein includes the effects of reinvested dividends.
We are now using the Russell 3000 Index as the Portfolio’s primary benchmark because we believe that the Portfolio’s investments more closely resemble the securities represented in that index than those in the S&P 500 Index.
Portfolio Composition as of December 31, 2008 (1)
% of Net Assets | |||
Common Stocks (3) | 97.8 | ||
Repurchase Agreements Less Net Liabilities | 2.2 | ||
100.0 | |||
Top 10 Portfolio Holdings as of December 31, 2008 (1) (2)
% of Net Assets | |||||||
1. | Telefonica SA – ADR | 7.0 | |||||
2. | First Bancorp/Puerto Rico | 6.5 | |||||
3. | First Niagara Financial Group, Inc. | 5.8 | |||||
4. | Apple, Inc. | 4.8 | |||||
5. | BHP Billiton Ltd. – ADR | 4.5 | |||||
6. | Umpqua Holdings Corp. | 4.4 | |||||
7. | Peoples United Financial, Inc. | 4.3 | |||||
8. | Nokia Corp. – ADR | 4.2 | |||||
9. | Sensient Technologies Corp. | 4.0 | |||||
10. | DTE Energy Co. | 3.9 |
(1) | Composition of Portfolio subject to change. | |
(2) | Short-term investments have been excluded from the list of Top 10 Portfolio holdings. | |
(3) | Sectors: |
% of Net Assets | |||
Financials | 32.6 | ||
Materials | 20.1 | ||
Information Technology | 14.4 | ||
Consumer Discretionary | 8.8 | ||
Telecommunication Services | 7.0 | ||
Utilities | 6.7 | ||
Industrials | 3.7 | ||
Consumer Staples | 2.8 | ||
Energy | 1.1 | ||
Health Care | 0.6 | ||
97.8 | |||
159
Ohio National Fund, Inc.
Target Equity/Income Portfolio
Target Equity/Income Portfolio
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 97.8% | Shares | Value | ||||||
CONSUMER DISCRETIONARY – 8.8% | ||||||||
Auto Components – 2.8% | ||||||||
Superior Industries International, Inc. | 63,991 | $ | 673,185 | |||||
Diversified Consumer Services – 1.7% | ||||||||
Apollo Group, Inc. Class A (a) | 5,246 | 401,949 | ||||||
Household Durables – 1.7% | ||||||||
Garmin Ltd. | 6,882 | 131,928 | ||||||
La-Z-Boy, Inc. | 132,796 | 288,167 | ||||||
420,095 | ||||||||
Internet & Catalog Retail – 0.8% | ||||||||
priceline.com, Inc. (a) | 2,656 | 195,614 | ||||||
Media – 0.1% | ||||||||
Lee Enterprises, Inc. | 80,417 | 32,971 | ||||||
Specialty Retail – 0.5% | ||||||||
GameStop Corp. Class A (a) | 5,028 | 108,907 | ||||||
Textiles, Apparel & Luxury Goods – 1.2% | ||||||||
Deckers Outdoor Corp. (a) | 1,957 | 156,306 | ||||||
Fossil, Inc. (a) | 7,342 | 122,611 | ||||||
278,917 | ||||||||
TOTAL CONSUMER DISCRETIONARY | 2,111,638 | |||||||
CONSUMER STAPLES – 2.8% | ||||||||
Tobacco – 2.8% | ||||||||
Universal Corp. | 22,393 | 668,879 | ||||||
TOTAL CONSUMER STAPLES | 668,879 | |||||||
ENERGY – 1.1% | ||||||||
Energy Equipment & Services – 1.1% | ||||||||
National Oilwell Varco, Inc. (a) | 11,045 | 269,940 | ||||||
TOTAL ENERGY | 269,940 | |||||||
FINANCIALS – 32.6% | ||||||||
Commercial Banks – 15.5% | ||||||||
First Bancorp/Puerto Rico | 140,536 | 1,565,571 | ||||||
KeyCorp | 49,404 | 420,922 | ||||||
The Colonial BancGroup, Inc. | 88,052 | 182,267 | ||||||
The South Financial Group, Inc. | 75,043 | 324,186 | ||||||
Umpqua Holdings Corp. | 73,381 | 1,061,823 | ||||||
Wachovia Corp. | 30,707 | 170,117 | ||||||
3,724,886 | ||||||||
Diversified Financial Services – 3.5% | ||||||||
JPMorgan Chase & Co. | 27,011 | 851,657 | ||||||
Insurance – 3.5% | ||||||||
Zenith National Insurance Corp. | 26,495 | 836,447 | ||||||
Thrifts & Mortgage Finance – 10.1% | ||||||||
First Niagara Financial Group, Inc. | 86,139 | 1,392,868 | ||||||
Peoples United Financial, Inc. | 57,883 | 1,032,054 | ||||||
Washington Mutual, Inc. | 86,014 | 1,849 | ||||||
2,426,771 | ||||||||
TOTAL FINANCIALS | 7,839,761 | |||||||
HEALTH CARE – 0.6% | ||||||||
Health Care Equipment & Supplies – 0.6% | ||||||||
Intuitive Surgical, Inc. (a) | 1,209 | 153,531 | ||||||
TOTAL HEALTH CARE | 153,531 | |||||||
INDUSTRIALS – 3.7% | ||||||||
Aerospace & Defense – 2.0% | ||||||||
Axsys Technologies, Inc. (a) | 8,640 | 473,990 | ||||||
Construction & Engineering – 0.7% | ||||||||
Jacobs Engineering Group, Inc. (a) | 3,805 | 183,021 | ||||||
Electrical Equipment – 0.3% | ||||||||
SunPower Corp. (a) | 2,336 | 71,108 | ||||||
Industrial Conglomerates – 0.3% | ||||||||
McDermott International, Inc. (a) | 7,044 | 69,595 | ||||||
Machinery – 0.4% | ||||||||
Dynamic Materials Corp. | 5,149 | 99,427 | ||||||
TOTAL INDUSTRIALS | 897,141 | |||||||
INFORMATION TECHNOLOGY – 14.4% | ||||||||
Communications Equipment – 7.1% | ||||||||
Nokia Corp. – ADR | 64,567 | 1,007,245 | ||||||
Research In Motion Ltd. (a) | 17,025 | 690,875 | ||||||
1,698,120 | ||||||||
Computers & Peripherals – 5.3% | ||||||||
Apple, Inc. (a) | 13,530 | 1,154,786 | ||||||
Western Digital Corp. (a) | 10,461 | 119,778 | ||||||
1,274,564 | ||||||||
Electronic Equipment, Instruments & Components – 1.2% | ||||||||
Flir Systems, Inc. (a) | 9,615 | 294,988 | ||||||
Semiconductor & Semiconductor Equipment – 0.8% | ||||||||
Cypress Semiconductor Corp. (a) | 8,517 | 38,071 | ||||||
MEMC Electronic Materials, Inc. (a) | 7,200 | 102,816 | ||||||
Sigma Designs, Inc. (a) | 5,432 | 51,604 | ||||||
192,491 | ||||||||
TOTAL INFORMATION TECHNOLOGY | 3,460,163 | |||||||
MATERIALS – 20.1% | ||||||||
Chemicals – 12.0% | ||||||||
Mosaic Co. | 13,203 | 456,824 | ||||||
Potash Corp. of Saskatchewan, Inc. | 9,651 | 706,646 | ||||||
RPM International, Inc. | 57,333 | 761,955 | ||||||
Sensient Technologies Corp. | 40,627 | 970,173 | ||||||
2,895,598 | ||||||||
Metals & Mining – 6.4% | ||||||||
BHP Billiton Ltd. – ADR | 25,502 | 1,094,036 | ||||||
Southern Copper Corp. | 27,803 | 446,516 | ||||||
1,540,552 | ||||||||
Paper & Forest Products – 1.7% | ||||||||
MeadWestvaco Corp. | 36,836 | 412,195 | ||||||
TOTAL MATERIALS | 4,848,345 | |||||||
(continued)
160
Ohio National Fund, Inc.
Target Equity/Income Portfolio (Continued)
Target Equity/Income Portfolio (Continued)
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 97.8% | Shares | Value | ||||||
TELECOMMUNICATION SERVICES – 7.0% | ||||||||
Diversified Telecommunication Services – 7.0% | ||||||||
Telefonica SA – ADR | 24,937 | $ | 1,680,504 | |||||
TOTAL TELECOMMUNICATION SERVICES | 1,680,504 | |||||||
UTILITIES – 6.7% | ||||||||
Multi-Utilities – 6.7% | ||||||||
DTE Energy Co. | 26,159 | 933,092 | ||||||
NiSource, Inc. | 61,953 | 679,624 | ||||||
TOTAL UTILITIES | 1,612,716 | |||||||
Total Common Stocks (Cost $42,455,000) | $ | 23,542,618 | ||||||
Face | Fair | |||||||
Repurchase Agreements – 2.2% | Amount | Value | ||||||
U.S. Bank 0.010% 01/02/2009 Repurchase price $541,000 | $ | 541,000 | $ | 541,000 | ||||
Collateralized by: | ||||||||
Various Agency Mortgage-Backed Securities 2.395% to 5.000%, Due 09/01/2018 through 05/15/2033 Fair Value: $551,793 | ||||||||
Total Repurchase Agreements (Cost $541,000) | $ | 541,000 | ||||||
Total Investments – 100.0% (Cost $42,996,000) (b) | $ | 24,083,618 | ||||||
Liabilities in Excess of Other Assets – 0.0% | (6,386 | ) | ||||||
Net Assets – 100.0% | $ | 24,077,232 | ||||||
Percentages are stated as a percent of net assets.
Abbreviations:
ADR: American Depository Receipts
Footnotes:
(a) | Non-income producing security. | |
(b) | Represents cost for financial reporting purposes, which may differ from cost basis for Federal income tax purposes. See Also Note 8 of the Notes to Financial Statements. |
The accompanying notes are an integral part of these financial statements.
161
Ohio National Fund, Inc.
Target Equity/Income Portfolio
Target Equity/Income Portfolio
Statement of Assets and Liabilities
December 31, 2008
Assets: | ||||
Investments in securities, at fair value | ||||
(Cost $42,455,000) | $ | 23,542,618 | ||
Repurchase agreements | 541,000 | |||
Cash | 9,718 | |||
Receivable for fund shares sold | 9,353 | |||
Dividends and accrued interest receivable | 27,247 | |||
Prepaid expenses and other assets | 526 | |||
Total assets | 24,130,462 | |||
Liabilities: | ||||
Payable for fund shares redeemed | 25,627 | |||
Payable for investment management services | 11,836 | |||
Accrued custody expense | 567 | |||
Accrued professional fees | 10,767 | |||
Accrued accounting fees | 2,448 | |||
Accrued printing and filing fees | 1,985 | |||
Total liabilities | 53,230 | |||
Net assets | $ | 24,077,232 | ||
Net assets consist of: | ||||
Par value, $1 per share | $ | 3,755,691 | ||
Paid-in capital in excess of par value | 39,324,026 | |||
Accumulated net realized loss on investments | (171,655 | ) | ||
Net unrealized depreciation on investments | (18,912,382 | ) | ||
Undistributed net investment income | 81,552 | |||
Net assets | $ | 24,077,232 | ||
Shares outstanding | 3,755,691 | |||
Authorized Fund shares allocated to Portfolio | 10,000,000 | |||
Net asset value per share | $ | 6.41 | ||
Statement of Operations
For the Year Ended December 31, 2008
Investment income: | ||||
Interest | $ | 13,238 | ||
Dividends (net of withholding tax of $31,197) | 962,904 | |||
Total investment income | 976,142 | |||
Expenses: | ||||
Management fees | 210,247 | |||
Custodian fees | 4,550 | |||
Directors’ fees | 2,938 | |||
Professional fees | 13,435 | |||
Accounting fees | 16,555 | |||
Printing and filing fees | 4,295 | |||
Compliance expense | 4,911 | |||
Other | 550 | |||
Total expenses | 257,481 | |||
Net investment income | 718,661 | |||
Realized/unrealized gain (loss) on investments: | ||||
Net realized gain (loss) on investments | (164,334 | ) | ||
Change in unrealized appreciation/depreciation on investments | (20,301,401 | ) | ||
Net realized/unrealized gain (loss) on investments | (20,465,735 | ) | ||
Change in net assets from operations | $ | (19,747,074 | ) | |
The accompanying notes are an integral part of these financial statements.
162
Ohio National Fund, Inc.
Target Equity/Income Portfolio
Target Equity/Income Portfolio
Statements of Changes in Net Assets
Years Ended December 31, | ||||||||
2008 | 2007 | |||||||
Increase (Decrease) in Net Assets: | ||||||||
Operations: | ||||||||
Net investment income | $ | 718,661 | $ | 574,329 | ||||
Net realized gain (loss) on investments | (164,334 | ) | 1,865,153 | |||||
Change in unrealized appreciation/depreciation on investments | (20,301,401 | ) | 394,795 | |||||
Change in net assets from operations | (19,747,074 | ) | 2,834,277 | |||||
Distributions to shareholders: | ||||||||
Distributions from net investment income | (637,109 | ) | (519,601 | ) | ||||
Capital transactions: | ||||||||
Received from shares sold | 14,780,603 | 19,700,073 | ||||||
Received from dividends reinvested | 637,109 | 519,601 | ||||||
Paid for shares redeemed | (11,395,135 | ) | (3,021,658 | ) | ||||
Change in net assets from capital transactions | 4,022,577 | 17,198,016 | ||||||
Change in net assets | (16,361,606 | ) | 19,512,692 | |||||
Net Assets: | ||||||||
Beginning of year | 40,438,838 | 20,926,146 | ||||||
End of year | $ | 24,077,232 | $ | 40,438,838 | ||||
Undistributed net investment income | $ | 81,552 | $ | 54,728 | ||||
Financial Highlights
For the Period from | ||||||||||||||||
Years Ended December 31, | November 2, 2005* to | |||||||||||||||
2008 | 2007 | 2006 | December 31, 2005 | |||||||||||||
Selected Per-Share Data: | ||||||||||||||||
Net asset value, beginning of period | $ | 12.00 | $ | 11.01 | $ | 10.13 | $ | 10.00 | ||||||||
Operations: | ||||||||||||||||
Net investment income | 0.19 | 0.16 | 0.08 | 0.01 | ||||||||||||
Net realized and unrealized gain (loss) on investments | (5.61 | ) | 0.99 | 0.87 | 0.12 | |||||||||||
Total from operations | (5.42 | ) | 1.15 | 0.95 | 0.13 | |||||||||||
Distributions: | ||||||||||||||||
Distributions from net investment income | (0.17 | ) | (0.16 | ) | (0.07 | ) | — | |||||||||
Net asset value, end of period | $ | 6.41 | $ | 12.00 | $ | 11.01 | $ | 10.13 | ||||||||
Total return | –45.07 | % | 10.42 | % | 9.36 | % | 1.30 | %(b) | ||||||||
Ratios and supplemental data: | ||||||||||||||||
Net assets at end of period (millions) | $ | 24.1 | $ | 40.4 | $ | 20.9 | $ | 3.6 | ||||||||
Ratios to average net assets: | ||||||||||||||||
Ratios net of expenses voluntarily reduced or reimbursed by adviser: | ||||||||||||||||
Expenses | 0.74 | % | 0.73 | % | 0.88 | % | 1.60 | %(a) | ||||||||
Net investment income | 2.05 | % | 1.83 | % | 1.28 | % | 1.22 | %(a) | ||||||||
Ratios assuming no expenses voluntarily reduced or reimbursed by adviser: | ||||||||||||||||
Expenses | 0.74 | % | 0.73 | % | 0.88 | % | 3.38 | %(a) | ||||||||
Portfolio turnover rate | 105 | % | 54 | % | 52 | % | 0 | % |
(a) | Annualized. | |
(b) | Not annualized. | |
* | Represents date of commencement of operations. |
The accompanying notes are an integral part of these financial statements.
163
Ohio National Fund, Inc.
Bristol Growth Portfolio
Bristol Growth Portfolio
Objective/Strategy
The Bristol Growth Portfolio seeks long-term growth by investing primarily in common stocks of the 1,000 largest publicly traded U.S. companies in term of market capitalization.
Performance as of December 31, 2008
Average Annual Total Returns: | ||||
One year | -40.58% | |||
Since inception (5/1/07) | -25.32% |
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price and reinvestment of dividends and capital gains. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed may be worth more or less than the original cost.
The Portfolio is not open to direct retail investment. Beneficial interest in shares is obtained solely by purchase of variable life insurance policies and variable annuity contracts. Actual performance results for variable annuity and variable universal life contracts will be lower due to contract charges. Consult your contract for applicable charges.
Comments
For the year ended December 31, 2008, the Bristol Growth Portfolio returned -40.58% versus -38.44% for the current benchmark, the Russell 1000 Growth Index.
Suffice it to say, 2008 was the beginning of the great leverage unwinding; leverage that had permeated households, financial firms and corporations. The ramifications of the deleveraging were markedly visible in the financial services industry contraction, but will now permeate the entire world’s economy. Whether or not the U.S government and its counterparts around the world have the acumen, the wherewithal, and the perseverance to mollify this great unwinding remains to be seen. Whether stocks have discounted the global recession that will follow is debatable. With much uncertainty still facing the financial markets, investors must focus beyond 2009, as it will hopefully prove a year of economic transition, and move their sights to 2010 or later, as the world’s economy recovers with less debt and possibly less volatility.
With respect to 2008 performance, an abysmal fourth quarter destroyed what had been a reasonable year-to-date period, as our over-weighted position in insurance stocks resulted in underperformance for the year. As we moved into the fourth quarter, we had avoided most of the financial disasters, by not owning Fannie Mae, Freddie Mac, Bear Stearns or Lehman Brothers. The life insurers we did own (The Hartford Financial Services Group, Inc. and Prudential Financial, Inc.) looked financially sound, very inexpensive on all measures, and minimally affected by credit problems in the housing sector. Unfortunately, their balance sheets were impacted first by the Fannie Mae/Freddie Mac collapses, and then by owning Lehman Brothers debt. As the market sank, the potential liabilities in their guaranteed annuity businesses, as well as potential charges for their life policies, rose considerably. Each shock to the financial markets was met swiftly with falling prices, and consequently even cheaper valuations on traditional measures such as price-to-book, so we decided to hold on to the positions, and in some instances add to them, bringing weightings back to 2% as their market capitalizations sank.(1)
Two of the five largest detractors to performance for the full year were in the Financials sector and affected by the issues described above. These were American International Group, Inc., which cost the portfolio 156 basis points, and The Hartford Financial Group, Inc., which negatively impacted performance by 144 basis points. Electronic Arts, Inc. hurt the Portfolio by 148 basis points, based on some weak sales and the delayed launch of a game, and Microsoft Corp. hurt performance by 179 basis points due to the market’s negative perception of a failed bid for Yahoo!, Inc., and reluctance by major corporations to adopt the Vista operating system. Google, Inc. hurt performance by 160 basis points, as the company was negatively impacted by slowing growth in paid search advertising and ecommerce.(1)
The greatest positive contributors to Portfolio performance included Rohm & Haas Co., which added 70 basis points, and Quanta Services, Inc., which contributed 39 basis points, both benefiting from optimism that President Obama’s plans to revitalize the economy could provide a direct benefit to their businesses. Genentech, Inc. contributed 43 basis points to the Portfolio’s performance, based on expected positive drug data and a bid from Roche to acquire the company for $89 a share. Wal-Mart Stores, Inc. added 34 basis points, as the retailer’s value positioning proved a benefit in a tough economy, and Imclone Systems added 31 basis points, as it received approval for a key drug and was subsequently bought out by Eli Lilly.(1)
As we enter 2009, the Portfolio is over-weighted in Industrials, including positions in Air Products and Chemicals, Inc., Praxair, Inc., Tyco International Ltd., United Technologies Corp., Honeywell International, Inc., General Electric Co. and Celanese Corp. We believe their valuations are not reflective of their normalized earnings, and that once investors have visibility to the economy’s bottom, both in terms of scope and timing, these stocks will recover strongly. Our other over-weighted position continues to be the insurers, though we are slightly under-weighted in Financials in general, and remain under-weighted in the banking industry. We are still under-weighted in retail, as we were for all of 2008, owning only Wal-Mart Stores, Inc. and Nike Inc. We believe consumer spending will not bounce back rapidly and strongly, as unemployment levels grow to perhaps over 15%, and retail sales continue to disappoint. The valuations seem attractive, but there still appears to be time for the sector to come to grips with the deleveraging process and consequent drop in spending.(1)
When we are in the throes of a recession, it is sometimes difficult to see clearly a way out. There are, however, factors in the current environment which have the potential to prompt the economy into a recovery. Credit is thawing, as the spread between London Interbank Offered Rate and Treasuries has narrowed to under 100 basis points. This in turn allows banks to lend between one another, thus making credit more available to the consumer and to corporations. Energy savings are also stimulating the economy, as the price of a barrel of oil has fallen $100 from its peak. The result is a fiscal stimulus effect of around $250 billion dollars annually. Finally, we do have a major stimulus package being worked on by Washington in the range of
(continued)
164
Ohio National Fund, Inc.
Bristol Growth Portfolio (Continued)
Bristol Growth Portfolio (Continued)
$400 billion a year, for at least two years. As these policies and factors take affect, we should see the economy bottom and turn. It is possible that the robustness of the turn would be moderated by the Federal Reserve, which could attempt to keep inflation at bay in an economy flooded with dollars. We’ll be prepared to cross that bridge when, or if, we come to it.
(1) | The Portfolio’s composition is subject to change. Holdings and weightings are as of December 31, 2008. |
Change in Value of $10,000 Investment
Hypothetical illustration based on past performance. Future performance will vary. The Portfolio’s returns reflect reinvested dividends. The Portfolio’s holdings may differ significantly from the securities in the index. The index is unmanaged and therefore does not reflect the cost of portfolio management and accounting.
The Russell 1000 Growth Index is a market-capitalization weighted index of those firms in the Russell 1000 with higher price-to-book ratios and higher forecasted growth values. The index presented herein includes the effects of requested dividends.
Portfolio Composition as of December 31, 2008 (1)
% of Net Assets | |||
Common Stocks (3) | 100.0 | ||
Top 10 Portfolio Holdings as of December 31, 2008 (1) (2)
% of Net Assets | |||||||
1. | Microsoft Corp. | 4.0 | |||||
2. | Cisco Systems, Inc. | 3.1 | |||||
3. | International Business Machines Corp. | 3.1 | |||||
4. | Hewlett-Packard Co. | 2.8 | |||||
5. | QUALCOMM, Inc. | 2.7 | |||||
6. | Mylan, Inc. | 2.6 | |||||
7. | Wal-Mart Stores, Inc. | 2.5 | |||||
8. | Apple, Inc. | 2.5 | |||||
9. | United Technologies Corp. | 2.4 | |||||
10. | Lockheed Martin Corp. | 2.4 |
(1) | Composition of Portfolio subject to change. | |
(2) | Short-term investments have been excluded from the list of Top 10 Portfolio holdings. | |
(3) | Sectors: |
% of Net Assets | |||
Information Technology | 31.6 | ||
Industrials | 18.6 | ||
Health Care | 17.4 | ||
Consumer Staples | 11.6 | ||
Energy | 8.5 | ||
Materials | 6.6 | ||
Financials | 3.7 | ||
Consumer Discretionary | 2.0 | ||
100.0 | |||
165
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Bristol Growth Portfolio
Bristol Growth Portfolio
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 100.0% | Shares | Value | ||||||
CONSUMER DISCRETIONARY – 2.0% | ||||||||
Media – 2.0% | ||||||||
The Walt Disney Co. | 4,300 | $ | 97,567 | |||||
TOTAL CONSUMER DISCRETIONARY | 97,567 | |||||||
CONSUMER STAPLES – 11.6% | ||||||||
Beverages – 4.1% | ||||||||
PepsiCo, Inc. | 1,900 | 104,063 | ||||||
The Coca-Cola Co. | 2,100 | 95,067 | ||||||
199,130 | ||||||||
Food & Staples Retailing – 2.5% | ||||||||
Wal-Mart Stores, Inc. | 2,200 | 123,332 | ||||||
Food Products – 1.5% | ||||||||
The J.M. Smucker Co. | 1,700 | 73,712 | ||||||
Household Products – 3.5% | ||||||||
The Clorox Co. | 1,700 | 94,452 | ||||||
The Procter & Gamble Co. | 1,200 | 74,184 | ||||||
168,636 | ||||||||
TOTAL CONSUMER STAPLES | 564,810 | |||||||
ENERGY – 8.5% | ||||||||
Energy Equipment & Services – 2.3% | ||||||||
Schlumberger Ltd. | 1,200 | 50,796 | ||||||
Transocean Ltd. (a) | 1,300 | 61,425 | ||||||
112,221 | ||||||||
Oil, Gas & Consumable Fuels – 6.2% | ||||||||
Devon Energy Corp. | 1,250 | 82,138 | ||||||
Exxon Mobil Corp. | 1,400 | 111,762 | ||||||
Marathon Oil Corp. | 500 | 13,680 | ||||||
XTO Energy, Inc. | 2,600 | 91,702 | ||||||
299,282 | ||||||||
TOTAL ENERGY | 411,503 | |||||||
FINANCIALS – 3.7% | ||||||||
Capital Markets – 0.9% | ||||||||
Morgan Stanley | 2,800 | 44,912 | ||||||
Diversified Financial Services – 0.6% | ||||||||
Bank of America Corp. | 2,100 | 29,568 | ||||||
Insurance – 2.2% | ||||||||
Prudential Financial, Inc. | 1,900 | 57,494 | ||||||
The Hartford Financial Services Group, Inc. | 2,800 | 45,976 | ||||||
103,470 | ||||||||
TOTAL FINANCIALS | 177,950 | |||||||
HEALTH CARE – 17.4% | ||||||||
Biotechnology – 2.2% | ||||||||
Vertex Pharmaceuticals, Inc. (a) | 3,500 | 106,330 | ||||||
Health Care Equipment & Supplies – 2.0% | ||||||||
Baxter International, Inc. | 1,800 | 96,462 | ||||||
Health Care Providers & Services – 3.6% | ||||||||
Aetna, Inc. | 2,300 | 65,550 | ||||||
McKesson Corp. | 2,800 | 108,444 | ||||||
173,994 | ||||||||
Life Sciences Tools & Services – 4.9% | ||||||||
Life Technologies Corp. (a) | 4,000 | 93,240 | ||||||
Sequenom, Inc. (a) | 3,100 | 61,504 | ||||||
Thermo Fisher Scientific, Inc. (a) | 2,400 | 81,768 | ||||||
236,512 | ||||||||
Pharmaceuticals – 4.7% | ||||||||
Abbott Laboratories | 1,900 | 101,403 | ||||||
Mylan, Inc. (a) | 12,800 | 126,592 | ||||||
227,995 | ||||||||
TOTAL HEALTH CARE | 841,293 | |||||||
INDUSTRIALS – 18.6% | ||||||||
Aerospace & Defense – 11.3% | ||||||||
Honeywell International, Inc. | 3,500 | 114,905 | ||||||
Lockheed Martin Corp. | 1,400 | 117,712 | ||||||
Precision Castparts Corp. | 1,700 | 101,116 | ||||||
Raytheon Co. | 1,900 | 96,976 | ||||||
United Technologies Corp. | 2,200 | 117,920 | ||||||
548,629 | ||||||||
Construction & Engineering – 1.7% | ||||||||
Quanta Services, Inc. (a) | 4,200 | 83,160 | ||||||
Electrical Equipment – 1.5% | ||||||||
SunPower Corp. (a) | 2,305 | 70,164 | ||||||
Industrial Conglomerates – 3.0% | ||||||||
General Electric Co. | 2,800 | 45,360 | ||||||
Tyco International Ltd. | 4,600 | 99,360 | ||||||
144,720 | ||||||||
Machinery – 1.1% | ||||||||
SPX Corp. | 1,300 | 52,715 | ||||||
TOTAL INDUSTRIALS | 899,388 | |||||||
INFORMATION TECHNOLOGY – 31.6% | ||||||||
Communications Equipment – 7.3% | ||||||||
Cisco Systems, Inc. (a) | 9,300 | 151,590 | ||||||
Corning, Inc. | 7,600 | 72,428 | ||||||
QUALCOMM, Inc. | 3,600 | 128,988 | ||||||
353,006 | ||||||||
Computers & Peripherals – 8.4% | ||||||||
Apple, Inc. (a) | 1,400 | 119,490 | ||||||
Hewlett-Packard Co. | 3,800 | 137,902 | ||||||
International Business Machines Corp. | 1,800 | 151,488 | ||||||
408,880 | ||||||||
Internet Software & Services – 2.4% | ||||||||
Google, Inc. Class A (a) | 370 | 113,830 | ||||||
IT Services – 0.9% | ||||||||
Mastercard, Inc. Class A | 300 | 42,879 | ||||||
Semiconductors & Semiconductor Equipment – 5.9% | ||||||||
Applied Materials, Inc. | 10,300 | 104,339 | ||||||
Intel Corp. | 3,300 | 48,378 | ||||||
Maxim Integrated Products, Inc. | 5,900 | 67,378 | ||||||
Varian Semiconductor Equipment Associates, Inc. (a) | 3,700 | 67,044 | ||||||
287,139 | ||||||||
(continued)
166
Ohio National Fund, Inc.
Bristol Growth Portfolio (Continued)
Bristol Growth Portfolio (Continued)
Schedule of Investments | December 31, 2008 |
Fair | ||||||||
Common Stocks – 100.0% | Shares | Value | ||||||
Software – 6.7% | ||||||||
Electronic Arts, Inc. (a) | 5,100 | $ | 81,804 | |||||
Microsoft Corp. | 10,000 | 194,400 | ||||||
Oracle Corp. (a) | 2,800 | 49,644 | ||||||
325,848 | ||||||||
TOTAL INFORMATION TECHNOLOGY | 1,531,582 | |||||||
MATERIALS – 6.6% | ||||||||
Chemicals – 6.2% | ||||||||
Air Products and Chemicals, Inc. | 1,900 | 95,513 | ||||||
Celanese Corp. Class A | 5,400 | 67,122 | ||||||
Potash Corp. of Saskatchewan, Inc. | 300 | 21,966 | ||||||
Praxair, Inc. | 800 | 47,488 | ||||||
The Mosaic Co. | 2,000 | 69,200 | ||||||
301,289 | ||||||||
Metals & Mining – 0.4% | ||||||||
Nucor Corp. | 400 | 18,480 | ||||||
TOTAL MATERIALS | 319,769 | |||||||
Total Common Stocks (Cost $6,467,247) | $ | 4,843,862 | ||||||
Total Investments – 100.0% (Cost $6,467,247) (b) | $ | 4,843,862 | ||||||
Liabilities in Excess of Other Assets – 0.0% | (207 | ) | ||||||
Net Assets – 100.0% | $ | 4,843,655 | ||||||
Percentages are stated as a percent of net assets.
Footnotes:
(a) | Non-income producing security. | |
(b) | Represents cost for financial reporting purposes, which may differ from cost basis for Federal income tax purposes. See also Note 8 of the Notes to Financial Statements. |
The accompanying notes are an integral part of these financial statements.
167
Ohio National Fund, Inc.
Bristol Growth Portfolio
Bristol Growth Portfolio
Statement of Assets and Liabilities
December 31, 2008
Assets: | ||||
Investments in securities, at fair value (Cost $6,467,247) | $ | 4,843,862 | ||
Receivable for securities sold | 116,766 | |||
Receivable for fund shares sold | 570 | |||
Dividends and accrued interest receivable | 9,513 | |||
Prepaid expenses and other assets | 103 | |||
Total assets | 4,970,814 | |||
Liabilities: | ||||
Cash overdraft | 9,878 | |||
Payable for securities purchased | 101,348 | |||
Payable for fund shares redeemed | 35 | |||
Payable for investment management services | 3,150 | |||
Accrued custody expense | 750 | |||
Accrued professional fees | 10,346 | |||
Accrued accounting fees | 1,260 | |||
Accrued printing and filing fees | 392 | |||
Total liabilities | 127,159 | |||
Net assets | $ | 4,843,655 | ||
Net assets consist of: | ||||
Par value, $1 per share | $ | 788,227 | ||
Paid-in capital in excess of par value | 7,194,070 | |||
Accumulated net realized loss on investments | (1,527,212 | ) | ||
Net unrealized depreciation on investments | (1,623,385 | ) | ||
Undistributed net investment income | 11,955 | |||
Net assets | $ | 4,843,655 | ||
Shares outstanding | 788,227 | |||
Authorized Fund shares allocated to Portfolio | 5,000,000 | |||
Net asset value per share | $ | 6.15 | ||
Statement of Operations
For the Year Ended December 31, 2008
Investment income: | ||||
Interest | $ | 1,511 | ||
Dividends (net of withholding tax of $36) | 92,330 | |||
Total investment income | 93,841 | |||
Expenses: | ||||
Management fees | 51,856 | |||
Custodian fees | 4,282 | |||
Directors’ fees | 547 | |||
Professional fees | 11,679 | |||
Accounting fees | 7,675 | |||
Printing and filing fees | 828 | |||
Compliance expense | 4,911 | |||
Other | 108 | |||
Total expenses | 81,886 | |||
Net investment income | 11,955 | |||
Realized/unrealized gain (loss) on investments: | ||||
Net realized gain (loss) on investments | (1,469,277 | ) | ||
Change in unrealized appreciation/depreciation on investments | (1,710,774 | ) | ||
Net realized/unrealized gain (loss) on investments | (3,180,051 | ) | ||
Change in net assets from operations | $ | (3,168,096 | ) | |
The accompanying notes are an integral part of these financial statements.
168
Ohio National Fund, Inc.
Bristol Growth Portfolio
Bristol Growth Portfolio
Statement of Changes in Net Assets
Period from | ||||||||
Year Ended | May 1, 2007* to | |||||||
December 31, 2008 | December 31, 2007 | |||||||
Increase (Decrease) in Net Assets: | ||||||||
Operations: | ||||||||
Net investment income | $ | 11,955 | $ | 4,525 | ||||
Net realized gain (loss) on investments | (1,469,277 | ) | 133,320 | |||||
Change in unrealized appreciation/depreciation on investments | (1,710,774 | ) | 87,389 | |||||
Change in net assets from operations | (3,168,096 | ) | 225,234 | |||||
Capital transactions: | ||||||||
Received from shares sold | 998,652 | 7,201,582 | ||||||
Paid for shares redeemed | (332,498 | ) | (81,219 | ) | ||||
Change in net assets from capital transactions | 666,154 | 7,120,363 | ||||||
Change in net assets | (2,501,942 | ) | 7,345,597 | |||||
Net Assets: | ||||||||
Beginning of period | 7,345,597 | — | ||||||
End of period | $ | 4,843,655 | $ | 7,345,597 | ||||
Undistributed net investment income | $ | 11,955 | $ | 4,525 | ||||
Financial Highlights
Period from | ||||||||
Year Ended | May 1, 2007* to | |||||||
December 31, 2008 | December 31, 2007 | |||||||
Selected Per-Share Data: | ||||||||
Net asset value, beginning of period | $ | 10.35 | $ | 10.00 | ||||
Operations: | ||||||||
Net investment income | 0.01 | 0.01 | ||||||
Net realized and unrealized gain (loss) on investments | (4.21 | ) | 0.34 | |||||
Total from operations | (4.20 | ) | 0.35 | |||||
Net asset value, end of period | $ | 6.15 | $ | 10.35 | ||||
Total return | –40.58 | % | 3.50 | %(b) | ||||
Ratios and supplemental data: | ||||||||
Net assets at end of period (millions) | $ | 4.8 | $ | 7.3 | ||||
Ratios to average net assets: | ||||||||
Expenses | 1.26 | % | 1.30 | %(a) | ||||
Net investment income | 0.18 | % | 0.10 | %(a) | ||||
Portfolio turnover rate | 175 | % | 107 | % |
(a) | Annualized. | |
(b) | Not annualized. |
* | Represents date of commencement of operations. |
The accompanying notes are an integral part of these financial statements.
169
Ohio National Fund, Inc.
Notes to Financial Statements | December 31, 2008 |
(1) | Organization |
Ohio National Fund, Inc. (the “Fund”) is a Maryland corporation registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Fund consists of twenty four separate investment portfolios (the “Portfolios”) that seek the following objectives and strategies:
n | Equity Portfolio — Long-term growth of capital by investing primarily in common stocks or other equity securities. | |
n | Money Market Portfolio — Maximum current income consistent with preservation of capital and liquidity by investing in high quality money market instruments. | |
n | Bond Portfolio �� High level of income and opportunity for capital appreciation consistent with preservation of capital by investing primarily in intermediate-term and long-term fixed income securities. | |
n | Omni Portfolio — High level of long-term total return consistent with preservation of capital by investing in stocks, bonds, and money market instruments. | |
n | International Portfolio — Total return on assets by investing primarily in equity securities of foreign companies. | |
n | Capital Appreciation Portfolio — Long term capital growth by investing primarily in common stocks of established companies with either current or emerging earnings growth not fully appreciated or recognized by the market. | |
n | Millennium Portfolio — Maximum capital growth by investing primarily in common stocks of small sized companies. | |
n | International Small-Mid Company Portfolio (formerly the International Small Company Portfolio) — Long-term growth of capital by investing at least 80% of its assets in equity securities of foreign small and mid-cap companies. | |
n | Aggressive Growth Portfolio — Long-term capital growth by investing primarily in equity securities with attractive growth opportunities. | |
n | Small Cap Growth Portfolio — Long-term capital appreciation by investing in stocks of small companies with strong business franchises and competitive positions that generate rapidly rising earnings or profits. | |
n | Mid Cap Opportunity Portfolio — Long-term total return by investing primarily in equity and debt securities focusing on small- and mid-cap companies that offer potential for capital appreciation, current income, or both. | |
n | S&P 500 Index Portfolio — Total return that approximates the total return of the Standard & Poor’s 500 Index. | |
n | Strategic Value Portfolio (formerly the Blue Chip Portfolio) — Growth of capital and income by investing primarily in securities of high dividend yielding companies. | |
n | High Income Bond Portfolio — High current income by investing primarily in lower rated corporate debt obligations commonly referred to as “junk bonds”. The Portfolio’s investments are generally rated Baa or lower by Moody’s, or BBB or lower by Standard & Poor’s or Fitch. | |
n | Capital Growth Portfolio — Long-term capital appreciation by investing in and actively managing equity securities of small cap growth companies. | |
n | Nasdaq-100 Index Portfolio — Long-term growth of capital by investing primarily in stocks that are included in the Nasdaq-100 Index. Unlike the other Portfolios of the Fund, the Nasdaq-100 Index Portfolio is a non-diversified portfolio for purposes of Section 5 (b)(1) of the 1940 Act. | |
n | Bristol Portfolio — Long-term growth of capital by investing primarily in common stocks of the 1,000 largest publicly traded U.S. companies in terms of market capitalization. | |
n | Bryton Growth Portfolio — Long-term growth of capital by investing primarily in common stocks of growth-oriented U.S. companies smaller than the 500 largest publicly traded U.S. companies in terms of market capitalization. |
(continued)
170
Ohio National Fund, Inc.
Notes to Financial Statements (Continued) | December 31, 2008 |
n | U.S. Equity Portfolio — Capital appreciation with a secondary objective of capital preservation to provide long term growth by investing within under-priced sectors and industries. | |
n | Balanced Portfolio — Capital appreciation and income by investing within under-priced sectors and industries while maintaining a minimum of 25% of its assets in fixed income securities. | |
n | Income Opportunity Portfolio — Modest capital appreciation and maximization of realized gains by investing within under-priced industries. | |
n | Target VIP Portfolio — Above average total return by investing in the common stocks of companies which are identified by a model that applies separate uniquely specialized strategies. | |
n | Target Equity/Income Portfolio — Above average total return by adhering to a disciplined, quantitative investment process that incorporates two distinct strategy methodologies. | |
n | Bristol Growth Portfolio — Long-term growth of capital by investing primarily in common stocks of the 1,000 largest publicly traded U.S. companies in terms of market capitalization. |
Additional detail regarding portfolio-specific objectives, policies, and investment strategies is provided in the prospectus and Statement of Additional Information of Ohio National Fund, Inc. There are no assurances these objectives will be met. Each Portfolio, except the Nasdaq-100 Index Portfolio, is classified as diversified for purposes of Section 5 (b)(1) of the 1940 Act.
At present, the Fund sells its shares only to separate accounts of The Ohio National Life Insurance Company (“ONLIC”), Ohio National Life Assurance Corporation (“ONLAC”), and National Security Life and Annuity Company (“NSLA”) to support certain benefits under variable contracts issued by those entities. In the future, Fund shares may be used for other purposes but, unless there is a change in applicable law, they will not be sold directly to the public.
Interest in each Portfolio is represented by a separate class of the Fund’s capital stock, par value $1. Each share of a Portfolio may participate equally in the Portfolio’s dividends, distributions, net assets, and voting matters.
The Fund is authorized to issue 350 million of its capital shares. These authorized shares have been allocated to specific Portfolios of the Fund as follows:
Portfolio | Authorized Shares | ||||
Equity | 25,000,000 | ||||
Money Market | 50,000,000 | ||||
Bond | 20,000,000 | ||||
Omni | 10,000,000 | ||||
International | 30,000,000 | ||||
Capital Appreciation | 15,000,000 | ||||
Millennium | 10,000,000 | ||||
International Small-Mid Company | 10,000,000 | ||||
Aggressive Growth | 10,000,000 | ||||
Small Cap Growth | 10,000,000 | ||||
Mid Cap Opportunity | 15,000,000 | ||||
S&P 500 Index | 20,000,000 | ||||
Portfolio | Authorized Shares | ||||
Strategic Value | 10,000,000 | ||||
High Income Bond | 15,000,000 | ||||
Capital Growth | 10,000,000 | ||||
Nasdaq-100 Index | 15,000,000 | ||||
Bristol | 15,000,000 | ||||
Bryton Growth | 15,000,000 | ||||
U.S. Equity | 10,000,000 | ||||
Balanced | 5,000,000 | ||||
Income Opportunity | 5,000,000 | ||||
Target VIP | 10,000,000 | ||||
Target Equity/Income | 10,000,000 | ||||
Bristol Growth | 5,000,000 | ||||
The Fund’s Board of Directors (the “Board”) periodically reallocates authorized shares among the Portfolios of the Fund as deemed necessary.
Under the Fund’s organizational documents, its Officers and Directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Fund enters into contracts with its
(continued)
171
Ohio National Fund, Inc.
Notes to Financial Statements (Continued) | December 31, 2008 |
vendors and others that provide for general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund. However, based on experience, the risk of loss to the Fund is expected to be remote.
(2) | Significant Accounting Policies |
The following is a summary of significant accounting policies followed by the Fund in preparation of its financial statements:
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) 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.
Security Valuation
Investments are valued using pricing procedures approved by the Board.
All investments in the Money Market Portfolio are valued at amortized cost in accordance with Rule 2a-7 of the 1940 Act. Should the short-term debt securities held in the Omni Portfolio maintain a dollar-weighted average maturity of 120 days or less and have no maturities greater than one year, such instruments will be valued at amortized cost. In all Portfolios of the Fund, fixed income instruments that mature in sixty days or less are consistently valued at amortized cost. Amortized cost valuation involves valuing a security at its cost initially and thereafter amortizing to maturity any discounts or premiums on the level-yield method, regardless of the impact of fluctuating market interest rates on the fair value of the security. In these instances, amortized cost approximates fair value.
Investments, other than those securities aforementioned, are valued as follows:
Domestic equity securities that are traded on U.S. exchanges, with the exception of options, are valued at the last trade price on the exchange on which each security is principally traded. Option securities are currently valued on a composite close price basis. Over-the-counter domestic equity securities are valued at the last trade price reported daily as of 4:00 pm Eastern Time. Over-the-counter traded ADRs may be valued at an evaluated price based on the value of the underlying securities. If a domestic equity security is not traded on a particular day, the mean between the bid and ask prices reported at 4:00 pm Eastern Time by the primary exchange will generally be used for valuation purposes. The principal sources for market quotations are independent national pricing services that have been approved by the Board. | ||
Fixed income securities with a remaining maturity exceeding sixty days are generally valued at the mean between the daily close bid and ask prices, as provided by independent pricing services approved by the Board. | ||
Repurchase agreements are valued at amortized cost, which approximates fair value. | ||
Restricted securities, illiquid securities, and other investments for which market quotations are not readily available are valued at estimated fair market value using methods determined in good faith by the Fund’s Pricing Committee under the supervision of the Board. | ||
Foreign equity securities are initially priced at the last sale price at the close of the exchange on which a security is primarily traded. Securities not traded on a particular day are valued at the mean between the last reported bid and ask quotes at daily close, or the last sale price when appropriate. The principal sources for market quotations are independent pricing services that have been approved by the Board. | ||
Securities that are primarily traded on foreign exchanges are further subjected to fair valuation pricing procedures provided by an independent fair valuation service. The service provides data that can be used to estimate the price of a foreign issue that would prevail in a liquid market given market information available daily at 4:00 pm Eastern Time. Multiple factors may be |
(continued)
172
Ohio National Fund, Inc.
Notes to Financial Statements (Continued) | December 31, 2008 |
considered in performing this valuation, including an issue’s local close price, relevant general and sector indices, currency fluctuations, and pricing of related ADRs, New York registered shares, iShares, and futures. The assumptions selected by the Fund that are used in the valuation include a zero-basis trigger using the S&P 500 Index and a 75% confidence interval. These assumptions result in the performance of the pricing procedures each day there is a change in the S&P 500 Index from the time of local close to the 4:00 pm Eastern Time U.S. market close for each individual security for which there is a fairly large degree of certainty that the local close price is not the liquid market price at the time of U.S. market close. Backtesting analysis is performed on a quarterly basis to monitor the effectiveness of these procedures. The testing is reviewed by the management of the Fund as well as the Fund’s Board. Prior results have indicated that the fair value procedures have been effective in reaching valuation objectives.
The differences between the aggregate cost and fair market values of investments are reflected as unrealized appreciation or unrealized depreciation.
In September 2006, the Financial Accounting Standards Board (FASB) issued Statement on Financial Accounting Standards (SFAS) No. 157, “Fair Value Measurements.” This standard establishes a single authoritative definition of fair value, sets out a three-tier hierarchy framework for measuring fair value and requires additional disclosures about fair value measurements. SFAS No. 157 applies to fair value measurements already required or permitted by existing standards and is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years.
Effective January 1, 2008, the Fund adopted SFAS No. 157, as required. The hierarchy of pricing inputs is summarized in three broad levels:
Level 1: | Quoted prices in active markets for identical securities. | |
Level 2: | Other significant observable inputs, including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc. | |
Level 3: | Significant unobservable inputs, including the Fund’s own assumptions used to determine the fair value of securities. |
The following is a summary of the inputs used in valuing each of the Portfolio’s assets (liabilities) at fair value as of December 31, 2008:
Portfolio | Financial Instrument Type | Level 1 | Level 2 | Level 3 | ||||||||||
Equity | Investments in Securities, Repurchase Agreements | $ | 169,455,149 | $ | 14,120,954 | $ | — | |||||||
Money Market * | Investments in Securities, Repurchase Agreements | — | 413,318,420 | — | ||||||||||
Bond | Investments in Securities, Repurchase Agreements | — | 113,826,522 | — | ||||||||||
Omni | Investments in Securities, Repurchase Agreements | 19,446,411 | 15,125,657 | — | ||||||||||
International | Investments in Securities, Repurchase Agreements | 47,207,549 | 130,221,410 | — | ||||||||||
Capital Appreciation | Investments in Securities, Repurchase Agreements | 96,306,244 | 4,139,539 | — | ||||||||||
Millennium | Investments in Securities, Repurchase Agreements | 33,632,022 | 732,000 | — | ||||||||||
International Small-Mid Company | Investments in Securities, Repurchase Agreements | 11,544,168 | 41,152,742 | — | ||||||||||
Aggressive Growth | Investments in Securities, Repurchase Agreements | 14,036,529 | 4,001,100 | — |
(continued)
173
Ohio National Fund, Inc.
Notes to Financial Statements (Continued) | December 31, 2008 |
Portfolio | Financial Instrument Type | Level 1 | Level 2 | Level 3 | ||||||||||
Small Cap Growth | Investments in Securities, Repurchase Agreements | $ | 12,562,406 | $ | 613,307 | $ | — | |||||||
Mid Cap Opportunity | Investments in Securities, Repurchase Agreements | 70,468,102 | 4,665,000 | — | ||||||||||
S&P 500 Index | Investments in Securities, Repurchase Agreements | 105,393,078 | 834,000 | — | ||||||||||
Strategic Value | Investments in Securities, Repurchase Agreements | 10,293,886 | 3,033,894 | — | ||||||||||
High Income Bond | Investments in Securities, Repurchase Agreements | 2,888 | 66,963,914 | 341,503 | ||||||||||
Capital Growth | Investments in Securities, Repurchase Agreements | 26,400,724 | 1,217,000 | — | ||||||||||
Nasdaq-100 Index | Investments in Securities, Repurchase Agreements | 27,398,704 | 237,000 | — | ||||||||||
Bristol | Investments in Securities, Repurchase Agreements | 72,284,449 | 2,599,000 | — | ||||||||||
Bryton Growth | Investments in Securities, Repurchase Agreements | 50,688,825 | 2,162,000 | — | ||||||||||
U.S. Equity | Investments in Securities, Repurchase Agreements | 12,736,070 | 727,158 | — | ||||||||||
Balanced | Investments in Securities, Repurchase Agreements | 6,228,454 | 3,341,346 | — | ||||||||||
Income Opportunity | Investments in Securities, Repurchase Agreements | 4,297,074 | 313,000 | — | ||||||||||
Outstanding written options | (144,000 | ) | — | — | ||||||||||
Target VIP | Investments in Securities, Repurchase Agreements | 17,530,618 | 645,516 | — | ||||||||||
Target Equity/Income | Investments in Securities, Repurchase Agreements | 23,542,618 | 541,000 | — | ||||||||||
Bristol Growth | Investments in Securities | 4,843,862 | — | — |
* | At December 31, 2008, 100% of the Money Market Portfolio’s investments were valued using amortized cost, in accordance with rules under the Investment Company Act of 1940. Amortized cost approximates the current fair value of a security, but since the value is not obtained from a quoted price in an active market, such securities are considered to be valued using Level 2 inputs. |
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Ohio National Fund, Inc.
Notes to Financial Statements (Continued) | December 31, 2008 |
Below is a reconciliation that details the activity of securities in Level 3 since the adoption of the pronouncement on January 1, 2008 to December 31, 2008:
High Income Bond | Small Cap Growth | |||||||
(Investments in Securities) | (Investments in Securities) | |||||||
Beginning Balance – January 1, 2008 | $ | 438,643 | $ | 622,491 | ||||
Total gains or losses (realized/unrealized): | ||||||||
Included in earnings (or changes in net assets) | (250,586 | ) | (607,096 | ) | ||||
Purchases, issuances, and settlements | 157,424 | 123,586 | ||||||
Transfers in and/or out of Level 3 | (3,978 | ) | (138,981 | ) | ||||
Ending Balance – December 31, 2008 | $ | 341,503 | $ | — | ||||
The amount of total gains or losses for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at the reporting date | $ | (273,997 | ) | $ | — | |||
Foreign Securities and Currency
The books and records of all the Portfolios are maintained in U.S. dollars. All investments and cash quoted in foreign currencies are valued daily in U.S. dollars on the basis of the foreign currency exchange rates provided by an independent source. These exchange rates are currently determined daily at 4:00 pm Eastern Time. Purchases and sales of foreign-denominated investments are recorded at rates of exchange prevailing on the respective dates of such transactions.
The Fund may not fully isolate that portion of the results of operations resulting from changes in foreign exchange rates from fluctuations arising from changes in market prices on foreign currency-denominated investments. However, for tax purposes, the Fund does fully isolate the effect of fluctuations in foreign exchange rates when determining the gain or loss upon sale or maturity of such investments to the extent required by Federal income tax regulations.
All Portfolios of the Fund, other than the Target VIP and Target Equity/Income Portfolios, may invest in securities of foreign issuers, although foreign securities purchased by the Money Market Portfolio must be denominated in U.S. dollars and held in custody in the United States of America. The International and International Small-Mid Company Portfolios may be invested entirely in foreign securities. Investments in securities of foreign issuers, including investments in foreign companies through the use of depository receipts, carry certain risks not ordinarily associated with investments in securities of domestic issuers. Such risks include future political and economic developments, and the possible imposition of exchange controls or other foreign governmental laws and restrictions. In addition, with respect to certain countries, there is the possibility of expropriation of assets, confiscatory taxation, political or social instability, or diplomatic developments that could adversely affect capital investment within those countries.
Options
Each Portfolio, other than the Money Market Portfolio, for hedging purposes, 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 fair value, may be used for premiums on open options and initial margin deposits on futures contracts. The S&P 500 Index and Income Opportunity Portfolios are not subject to the above limitations, as these Portfolios may engage in the purchase or selling of put or call options in accordance with the Portfolios’ stated investment objectives. Options are recorded at fair value, and the related realized and unrealized gains and losses, if any, are included in the Statements of Operations. The Portfolios
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175
Ohio National Fund, Inc.
Notes to Financial Statements (Continued) | December 31, 2008 |
making use of options bear the market risk of an unfavorable change in the price of securities or indices underlying the options and are subject to the risk that the options will expire before being exercised. A further risk associated with investing in options is that there may not be enough buyers and sellers in the market to permit a Portfolio to close a position. To limit the risk, a Portfolio will invest only where there is an established market.
Futures Contracts
Each Portfolio, other than the Money Market Portfolio may, for hedging purposes, purchase and sell financial futures contracts. Futures contracts are used for the purpose of hedging its existing Portfolio securities, or securities that the Portfolio intends to purchase, against fluctuations in fair value caused by changes in prevailing market interest rates. Upon entering into a financial futures contract, a Portfolio is required to pledge to the broker an amount of cash, commercial paper, or receivables for securities sold equal to a percentage of the contract amount, known as the initial margin deposit. Subsequent payments, known as “variation margin”, are made or received by the Portfolios each day, depending on the daily fluctuations in the fair value of the underlying security. The Portfolios recognize a gain or loss equal to the daily variation margin. Should market conditions move unexpectedly, the Portfolios may not achieve the anticipated benefits of the financial futures contracts and may realize a loss. The use of futures transactions involves the risk of imperfect correlation in movements in the price of futures contracts interest rates, and the underlying hedged assets. A further risk associated with investing in futures contracts is that there may not be enough buyers and sellers in the market to permit a Portfolio to close a position when it wants to do so. To limit the risk, a Portfolio will invest only where there is an established market. The S&P 500 Index Portfolio may purchase or sell stock index futures contracts, and options thereon, and the Nasdaq-100 Index Portfolio may purchase or sell derivative securities designed to replicate the Nasdaq-100 Index in accordance with their stated investment objectives.
Foreign Currency Contracts, Futures, and Options
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 exchange contracts, foreign currency options, and foreign currency futures contracts in connection with the purchase, sale or ownership of a specific security. Buyers and sellers of foreign currency options and futures contracts are subject to the same risks previously described for options and futures, generally. A forward contract involves an obligation to purchase or sell a foreign currency at a future date, at a negotiated rate. These contracts are recorded at fair 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 Portfolios could be exposed to foreign currency fluctuations. The use of foreign currency hedging transactions might not successfully protect a Portfolio against a loss resulting from the movements of foreign currency in relation to the U.S. dollar and does not eliminate fluctuations in the prices of other securities.
Repurchase Agreements
The Portfolios routinely acquire repurchase agreements from member banks of the Federal Reserve System which are deemed creditworthy under guidelines approved by the Board, 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 a Portfolio plus interest negotiated on the basis of current short-term rates, which may be more or less than the rate on the underlying securities. The maturities of these instruments vary from overnight to one week. 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 Portfolio’s custodian or another qualified custodian or in the Federal Reserve/Treasury book-entry system. In the event of counterparty default, the Fund has the right to use the collateral to offset losses incurred. There is potential for loss to the Fund in the event the Fund is delayed or prevented from exercising its rights to dispose of the collateral securities, including the risk of a possible decline in the fair value of the underlying securities during the period while the Fund seeks to assert its rights.
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176
Ohio National Fund, Inc.
Notes to Financial Statements (Continued) | December 31, 2008 |
Restricted and Illiquid Securities
Restricted securities are those securities purchased through a private offering and cannot be resold to the general public without prior registration under the Securities Act of 1933 (“the 1933 Act”) or pursuant to the resale limitations provided by Rule 144A under the 1933 Act, or an exemption from the registration requirements of the 1933 Act. 144A securities are issued by corporations without registration in reliance on 1933 Act provisions allowing for the private resale of unregistered securities to qualified institutional buyers. Section 4(2) commercial paper is issued pursuant to Section 4(2) of the 1933 Act which exempts an issue from registration. This paper is used to finance non-current transactions, such as acquisitions, stock repurchase programs, and other long-term assets. Investments by a portfolio in Rule 144A and Section 4(2) securities could have the effect of decreasing the liquidity of a portfolio during any period in which qualified institutional investors were no longer interested in purchasing these securities.
Typically, the restricted securities noted above are not considered illiquid. The criteria used to determine if a restricted security is illiquid includes frequency of trades and quotes, available dealers willing to make transactions, availability of market makers in the security, and the nature of the security and its trades. The Money Market, Bond, and Omni Portfolios may invest up to 10% of assets in illiquid securities. Each of the other Portfolios of the Fund may invest up to 15% of its assets in illiquid securities.
When-issued Securities
The Portfolios may purchase or sell securities on a when-issued or forward commitment basis. The price of the underlying securities and date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. Losses may arise due to changes in the market value of the securities or from the inability of counterparties to meet the terms of the contract. In connection with such purchases, the Portfolios may hold liquid assets as collateral that is deemed to be sufficient to cover the purchase price.
Borrowing and Securities Lending
Certain Portfolios in the Fund are allowed to borrow for investment purposes. Borrowings would generally be unsecured, except to the extent the Portfolios enter into reverse repurchase agreements. The 1940 Act requires the Portfolios to maintain continuous asset coverage equal to three times the amount borrowed. No borrowings were conducted by any of the Fund’s Portfolios during the year ended December 31, 2008.
All Portfolios, with the exception of the Money Market Portfolio, are able to lend securities if the loan is adequately secured, is immediately callable and allows for all interest and dividend payments; and the aggregate value of securities loaned does not exceed one third of the total assets. There were no securities lent by any of the Portfolios during the year ended December 31, 2008.
Investment Transactions and Related Income
For financial reporting purposes, investment transactions are accounted for on a trade date basis. For purposes of executing separate account shareholder transactions in the normal course of business, however, the Fund’s investment transactions are recorded no later than the first calculation on the first business day following the trade date in accordance with Rule 2a-4 of the 1940 Act. Accordingly, differences between the net asset values for financial reporting and for executing separate account shareholder transactions may arise. Dividend income is recognized on the ex-dividend date, except in the case of those Portfolios holding foreign securities, in which dividends are recorded as soon after the ex-dividend date as the Fund’s information agents become aware of such dividends. Interest income is accrued daily as earned and includes the amortization of premium and accretion of discount. Net realized gain or loss on investments and foreign exchange transactions are determined using the specific identification method.
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177
Ohio National Fund, Inc.
Notes to Financial Statements (Continued) | December 31, 2008 |
Distributions to Shareholders and Federal Taxes
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 and net capital gains from the remaining Portfolios are declared and paid to shareholders periodically as required for each of the Portfolios to continue to qualify as a regulated investment company pursuant to Subchapter M of the Internal Revenue Code. The Fund, excluding the Money Market Portfolio, may also satisfy its distribution requirements by using consent dividends rather than cash dividends. The Fund has the intent to continue to comply with tax provisions pertaining to regulated investment companies and make distributions of taxable income sufficient to relieve it from substantially all Federal income and excise taxes. As such, no provisions for Federal income or excise taxes have been recorded.
The character of income and realized capital gains distributions are determined in accordance with Federal income tax regulations and may differ from net investment income and realized gains for financial reporting purposes. These “book/tax” differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature they are reclassified within the composition of net assets; temporary differences do not require such reclassification. Distributions to shareholders that exceed taxable income and net taxable realized gains are reported as return of capital distributions.
Expense Allocation
Expenses directly attributable to a Portfolio are charged to that Portfolio. Expenses that cannot be directly attributed to a Portfolio are allocated among all the benefited Portfolios on a basis of relative net assets or other appropriate method.
Foreign Withholding Taxes
Certain Portfolios in the Fund may be subject to taxes imposed by countries in which they invest with respect to their investments in issuers existing or operating in such countries. Such taxes are generally based on income earned. These Portfolios accrue such taxes as the related income is earned.
New Accounting Pronouncements
In March 2008, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“SFAS No. 161”), which requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. SFAS No. 161 is effective for financial statements issued for fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. Management is evaluating the impact of SFAS No. 161 on the Fund’s financial statement disclosures.
In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS 162”). SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with U.S. generally accepted accounting principles. The Fund adopted SFAS 162 effective November 15, 2008. On the date of adoption, there was no impact on the Fund’s current practices.
(3) | Related Party and Other Transactions |
The Fund has an Investment Advisory Agreement with Ohio National Investments, Inc. (“ONI”), a wholly-owned subsidiary of ONLIC. Under the terms of this agreement, ONI provides portfolio management and investment advice to the Fund and administers its operations, subject to the supervision of the Fund’s Board. This agreement is renewed annually upon the approval by the Board. Typically, contract renewals are approved by the Board in the meeting held subsequent to the close of the Fund’s second quarter. As compensation for its services, ONI receives advisory fees from the Fund calculated on the basis of each Portfolio’s average daily net assets and the following current schedule of Board-approved annualized fee breakpoints.
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178
Ohio National Fund, Inc.
Notes to Financial Statements (Continued) | December 31, 2008 |
Equity 0.79% of first $200 million 0.74% of next $800 million 0.70% over $1 billion Bond 0.60% of first $100 million 0.50% of next $150 million 0.45% of next $250 million 0.40% of next $500 million 0.30% of next $1 billion 0.25% over $2 billion International 0.85% of first $100 million 0.80% of next $100 million 0.70% over $200 million Millennium 0.80% of first $150 million 0.75% of next $150 million 0.70% of next $300 million 0.65% over $600 million Aggressive Growth 0.80% of first $100 million 0.75% of next $400 million 0.70% over $500 million Mid Cap Opportunity 0.85% of first $100 million 0.80% of next $100 million 0.75% of next $300 million 0.70% over $500 million Strategic Value 0.75% of first $100 million 0.70% of next $400 million 0.65% over $500 million Capital Growth 0.90% of first $100 million 0.85% of next $100 million 0.80% of next $300 million 0.75% over $500 million Bristol 0.80% of first $100 million 0.70% of next $400 million 0.65% over $500 million U.S. Equity 0.75% of first $200 million 0.70% of next $300 million 0.65% over $500 million | Money Market 0.30% of first $100 million* 0.25% of next $150 million 0.23% of next $250 million 0.20% of next $500 million 0.15% over $1 billion Omni 0.60% of first $100 million 0.50% of next $150 million 0.45% of next $250 million 0.40% of next $500 million 0.30% of next $1 billion 0.25% over $2 billion Capital Appreciation 0.80% of first $100 million 0.75% of next $300 million 0.65% of next $600 million 0.60% over $1 billion International Small-Mid Company 1.00% of first $100 million 0.90% of next $100 million 0.85% over $200 million Small Cap Growth 0.95% of first $100 million 0.90% of next $50 million 0.80% of next $150 million 0.75% over $300 million S&P 500 Index 0.40% of first $100 million 0.35% of next $150 million 0.33% over $250 million High Income Bond 0.75% of first $75 million 0.70% of next $75 million 0.65% of next $75 million 0.60% over $225 million Nasdaq-100 Index 0.40% of first $100 million 0.35% of next $150 million 0.33% over $250 million Bryton Growth 0.85% of first $100 million 0.75% of next $400 million 0.70% over $500 million Balanced 0.75% of first $200 million 0.70% of next $300 million 0.65% over $500 million |
(continued)
179
Ohio National Fund, Inc.
Notes to Financial Statements (Continued) | December 31, 2008 |
Income Opportunity 0.80% of first $200 million 0.75% of next $300 million 0.70% over $500 million Target Equity/Income 0.60% of first $100 million 0.55% of next $400 million 0.50% over $500 million | Target VIP 0.60% of first $100 million 0.55% of next $400 million 0.50% over $500 million Bristol Growth 0.80% of first $100 million 0.70% of next $400 million 0.65% over $500 million |
* | For the year ended December 31, 2008, ONI waived advisory fees in excess of the following amounts: |
Money Market | 0.25% of average daily net assets | |
Waivers related to the Money Market Portfolio are voluntary and are not subject to recoupment in subsequent fiscal periods. | ||
If ONI did not agree to reimburse these expenses, the total expenses incurred by the Money Market Portfolio for the year ended December 31, 2008 would have been higher than the net expenses reflected in the financial statements. |
Under the Investment Advisory Agreement, the Fund authorizes ONI to retain sub-advisers for the Equity, Omni, International, Capital Appreciation, Millennium, International Small-Mid Company, Aggressive Growth, Small Cap Growth, Mid Cap Growth, Strategic Value, High Income Bond, Capital Growth, Bristol, Bryton Growth, U.S. Equity, Balanced, Income Opportunity, Target VIP, Target Equity/Income, and Bristol Growth Portfolios subject to the approval of the Board. ONI has entered into sub-advisory agreements with Legg Mason Capital Management, Inc. (“Legg Mason”), Suffolk Capital Management, LLC (“Suffolk”), Federated Global Investment Management Corp. (“Federated Global”), Jennison Associates LLC (“Jennison”), Neuberger Berman Management, Inc. (“Neuberger Berman”), Janus Capital Management LLC (“Janus”), RS Investment Management, L.P. (“RSIM”), Federated Equity Management Company of Pennsylvania (“Federated Equity”), Federated Investment Management Company (“Federated Investment”), Eagle Asset Management, Inc. (“Eagle”), ICON Advisers, Inc. (“ICON”), and First Trust Advisors L.P. (“First Trust”), to manage the investment of those Portfolios’ assets, subject to the supervision of ONI. As compensation for their services, the Sub-Advisers receive from ONI a sub-advisory fee calculated on the basis of each of the aforementioned Portfolio’s average daily net assets and the following current Board-approved schedule of annualized fee breakpoints.
Equity (Legg Mason) 0.40% of first $200 million 0.38% over $200 million International (Federated Global) 0.40% of first $200 million 0.35% over $200 million Capital Appreciation (Jennison) 0.75% of first $10 million 0.50% of next $30 million 0.35% of next $25 million 0.25% of next $335 million 0.22% of next $600 million 0.20% over $1 billion Aggressive Growth (Janus) 0.55% of first $100 million 0.50% of next $400 million 0.45% over $500 million Mid Cap Opportunity (RSIM) 0.60% of first $100 million 0.55% of next $100 million 0.50% over $200 million | Omni (Suffolk) 0.30% of first $100 million 0.25% of next $150 million 0.225% of next $250 million 0.20% of next $500 million 0.15% of next $1 billion 0.125% over $2 billion Millennium (Neuberger Berman) 0.55% of first $150 million 0.50% of next $150 million 0.40% over $300 million International Small-Mid Company (Federated Global) 0.75% of first $100 million 0.65% over $100 million Small Cap Growth (Janus) 0.65% of first $50 million 0.60% of next $100 million 0.50% over $150 million Strategic Value (Federated Equity) 0.50% of first $35 million 0.35% of next $65 million 0.25% over $100 million |
(continued)
180
Ohio National Fund, Inc.
Notes to Financial Statements (Continued) | December 31, 2008 |
High Income Bond (Federated Investment) 0.50% of first $30 million 0.40% of next $20 million 0.30% of next $25 million 0.25% over $75 million Bristol (Suffolk) 0.45% of first $100 million 0.40% of next $400 million 0.35% over $500 million U.S. Equity and Balanced (ICON) 0.50% of first $200 million 0.45% of next $300 million 0.40% over $500 million Target VIP and Target Equity/Income (First Trust) 0.35% of first $500 million 0.25% over $500 million | Capital Growth (Eagle) 0.59% of first $100 million 0.55% of next $100 million 0.50% over $200 million Bryton Growth (Suffolk) 0.50% of first $100 million 0.45% of next $400 million 0.40% over $500 million Income Opportunity (ICON) 0.55% of first $200 million 0.50% of next $300 million 0.45% over $500 million Bristol Growth (Suffolk) 0.45% of first $100 million 0.40% of next $400 million 0.35% over $500 million |
Suffolk, the sub-adviser for the Omni, Bristol, Bryton Growth, and Bristol Growth Portfolios has an affiliation with ONI. Ohio National Financial Services, Inc. (ONFS) owns 100% of ONLIC, the parent company of ONI, and also owns 81% of the voting securities of Suffolk. There were no Fund liabilities payable to Suffolk at December 31, 2008 and fees paid to Suffolk are an expense of ONI, not of the Fund.
Pursuant to the Investment Advisory Agreement, if in any calendar quarter the total of all ordinary expenses of any Portfolio should exceed approximately one quarter of one percent of the average daily net assets, ONI shall reimburse the Portfolio for such excess expenses. Ordinary expenses for purposes of this calculation exclude the advisory fee paid to ONI, taxes, brokerage commissions, and interest. There were no expenses reimbursed by ONI for the year ended December 31, 2008 other than the aforementioned voluntary reimbursements related to the Money Market Portfolio.
Under a service agreement among ONI, ONLIC and the Fund, ONLIC has agreed to provide personnel and facilities to ONI on a cost-reimbursement basis. These personnel members include officers of the Fund. ONLIC also provides clerical and administrative services and such supplies and equipment as may be reasonably required in order for ONI to properly perform its advisory function pursuant to the Investment Advisory Agreement. ONLIC further performs duties to fulfill the transfer agent function on behalf of the Fund. Performance of these duties by ONLIC and availability of facilities, personnel, supplies, and equipment does not represent an expense to the Fund in excess of the advisory fees paid to ONI.
Effective August 12, 2006, the Investment Advisory Agreement was amended upon approval of the Fund’s shareholders and ONLIC, ONLAC, and NSLA variable contract owners. The amendment allows for a portion of the expenses related to the Fund’s Chief Compliance Officer and staff to be incurred by the Fund and paid from the Fund to the Fund’s adviser, ONI. Pursuant to the service agreement among ONI, ONLIC and the Fund, ONLIC has provided the personnel, services, and equipment necessary to perform the Fund’s regulation-mandated compliance function and ONI has reimbursed ONLIC for such costs. For the year ended December 31, 2008, the Fund incurred compliance expense totaling $117,864, equally allocated to the Portfolios. Expenses incurred by the Portfolios are reflected on the Statements of Operations as “Compliance expense”.
Each director of the Board who is not an officer of the Fund nor an employee of ONI or its corporate affiliates is currently paid a quarterly retainer fee of $7,500, $2,000 for each Board meeting attended, $1,000 for each Audit Committee meeting attended, and $500 for each other Board committee or independent directors meetings attended. The lead independent director of the Board receives an additional quarterly retainer fee of $3,125 and the Audit Committee chair receives an additional quarterly retainer fee of $1,250. For the year ended December 31, 2008, compensation of these directors by the Fund totaled $184,000.
U.S. Bancorp Fund Services, LLC, 615 East Michigan Street, Milwaukee, Wisconsin, serves as the accounting agent for all but the International and International Small-Mid Company Portfolios. U.S. Bank Institutional Trust & Custody, 425 Walnut Street,
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181
Ohio National Fund, Inc.
Notes to Financial Statements (Continued) | December 31, 2008 |
Cincinnati, Ohio serves as the custodian for all but the International and International Small-Mid Company Portfolios. The accounting agent and custodian for the International and International Small-Mid Company Portfolios is State Street Bank-Kansas City, 801 Pennsylvania Ave., Kansas City, Missouri. For assets held outside the United States, U.S. Bank and State Street Bank-Kansas City enter into sub-custodial agreements, subject to approval by the Board.
(4) | Capital Share Transactions |
Capital share transactions for the years (or periods) ended December 31, 2008 and 2007 were as follows:
Equity | Money Market | Bond | ||||||||||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||||||
12/31/2008 | 12/31/2007 | 12/31/2008 | 12/31/2007 | 12/31/2008 | 12/31/2007 | |||||||||||||||||||
Capital shares issued on sales | 4,134,758 | 2,411,750 | 87,727,402 | 58,324,992 | 3,099,909 | 3,546,774 | ||||||||||||||||||
Capital shares issued on reinvested dividends | 211,054 | 7,713 | 663,868 | 1,455,601 | — | — | ||||||||||||||||||
Capital shares redeemed | (7,168,214 | ) | (2,836,632 | ) | (81,757,541 | ) | (51,597,161 | ) | (7,989,964 | ) | (3,539,091 | ) | ||||||||||||
Net increase/(decrease) | (2,822,402 | ) | (417,169 | ) | 6,633,729 | 8,183,432 | (4,890,055 | ) | 7,683 | |||||||||||||||
Omni | International | Capital Appreciation | ||||||||||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||||||
12/31/2008 | 12/31/2007 | 12/31/2008 | 12/31/2007 | 12/31/2008 | 12/31/2007 | |||||||||||||||||||
Capital shares issued on sales | 421,723 | 193,760 | 7,833,032 | 6,049,120 | 1,255,285 | 844,146 | ||||||||||||||||||
Capital shares issued on reinvested dividends | 99,786 | 64,689 | — | — | 80,282 | 44,859 | ||||||||||||||||||
Capital shares redeemed | (1,078,713 | ) | (781,233 | ) | (11,805,937 | ) | (4,282,045 | ) | (2,604,708 | ) | (2,467,737 | ) | ||||||||||||
Net increase/(decrease) | (557,204 | ) | (522,784 | ) | (3,972,905 | ) | 1,767,075 | (1,269,141 | ) | (1,578,732 | ) | |||||||||||||
Millennium | International Small-Mid Company | Aggressive Growth | ||||||||||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||||||
12/31/2008 | 12/31/2007 | 12/31/2008 | 12/31/2007 | 12/31/2008 | 12/31/2007 | |||||||||||||||||||
Capital shares issued on sales | 612,449 | 456,467 | 1,566,704 | 1,779,463 | 1,924,740 | 1,288,738 | ||||||||||||||||||
Capital shares issued on reinvested dividends | — | — | — | — | — | — | ||||||||||||||||||
Capital shares redeemed | (1,070,957 | ) | (768,342 | ) | (1,742,571 | ) | (883,746 | ) | (1,582,602 | ) | (667,265 | ) | ||||||||||||
Net increase/(decrease) | (458,508 | ) | (311,875 | ) | (175,867 | ) | 895,717 | 342,138 | 621,473 | |||||||||||||||
Small Cap Growth | Mid Cap Opportunity | S&P 500 Index | ||||||||||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||||||
12/31/2008 | 12/31/2007 | 12/31/2008 | 12/31/2007 | 12/31/2008 | 12/31/2007 | |||||||||||||||||||
Capital shares issued on sales | 734,032 | 764,771 | 4,178,560 | 1,598,392 | 3,164,333 | 1,369,406 | ||||||||||||||||||
Capital shares issued on reinvested dividends | — | — | — | — | 257,996 | 157,498 | ||||||||||||||||||
Capital shares redeemed | (874,270 | ) | (509,745 | ) | (2,040,368 | ) | (1,007,034 | ) | (3,820,480 | ) | (2,134,193 | ) | ||||||||||||
Net increase/(decrease) | (140,238 | ) | 255,026 | 2,138,192 | 591,358 | (398,151 | ) | (607,289 | ) | |||||||||||||||
(continued)
182
Ohio National Fund, Inc.
Notes to Financial Statements (Continued) | December 31, 2008 |
Strategic Value | High Income Bond | Capital Growth | ||||||||||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||||||
12/31/2008 | 12/31/2007 | 12/31/2008 | 12/31/2007 | 12/31/2008 | 12/31/2007 | |||||||||||||||||||
Capital shares issued on sales | 357,815 | 287,554 | 5,290,215 | 4,046,820 | 798,530 | 429,971 | ||||||||||||||||||
Capital shares issued on reinvested dividends | 99,459 | 29,445 | — | — | — | — | ||||||||||||||||||
Capital shares redeemed | (1,187,546 | ) | (568,110 | ) | (4,584,159 | ) | (2,807,414 | ) | (613,810 | ) | (363,563 | ) | ||||||||||||
Net increase/(decrease) | (730,272 | ) | (251,111 | ) | 706,056 | 1,239,406 | 184,720 | 66,408 | ||||||||||||||||
Nasdaq-100 Index | Bristol | Bryton Growth | ||||||||||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||||||
12/31/2008 | 12/31/2007 | 12/31/2008 | 12/31/2007 | 12/31/2008 | 12/31/2007 | |||||||||||||||||||
Capital shares issued on sales | 4,154,173 | 1,585,378 | 4,903,913 | 2,818,290 | 4,446,981 | 2,849,339 | ||||||||||||||||||
Capital shares issued on reinvested dividends | — | — | 114,606 | 35,978 | — | — | ||||||||||||||||||
Capital shares redeemed | (4,197,643 | ) | (2,619,323 | ) | (2,027,717 | ) | (706,885 | ) | (2,018,949 | ) | (367,350 | ) | ||||||||||||
Net increase/(decrease) | (43,470 | ) | (1,033,945 | ) | 2,990,802 | 2,147,383 | 2,428,032 | 2,481,989 | ||||||||||||||||
U.S. Equity | Balanced | Income Opportunity | ||||||||||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||||||
12/31/2008 | 12/31/2007 | 12/31/2008 | 12/31/2007 | 12/31/2008 | 12/31/2007 | |||||||||||||||||||
Capital shares issued on sales | 464,056 | 320,646 | 455,908 | 333,004 | 145,839 | 126,720 | ||||||||||||||||||
Capital shares issued on reinvested dividends | 26,044 | 5,638 | — | — | — | — | ||||||||||||||||||
Capital shares redeemed | (446,366 | ) | (309,461 | ) | (305,499 | ) | (171,361 | ) | (104,661 | ) | (203,158 | ) | ||||||||||||
Net increase/(decrease) | 43,734 | 16,823 | 150,409 | 161,643 | 41,178 | (76,438 | ) | |||||||||||||||||
Target VIP | Target Equity/Income | Bristol Growth | ||||||||||||||||||||||
Period from | ||||||||||||||||||||||||
5/1/07 | ||||||||||||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | (inception) to | |||||||||||||||||||
12/31/2008 | 12/31/2007 | 12/31/2008 | 12/31/2007 | 12/31/2008 | 12/31/2007 | |||||||||||||||||||
Capital shares issued on sales | 1,365,372 | 1,073,827 | 1,490,104 | 1,672,244 | 117,062 | 717,455 | ||||||||||||||||||
Capital shares issued on reinvested dividends | 46,221 | 14,210 | 103,259 | 42,871 | — | — | ||||||||||||||||||
Capital shares redeemed | (629,173 | ) | (140,398 | ) | (1,206,350 | ) | (247,785 | ) | (38,489 | ) | (7,801 | ) | ||||||||||||
Net increase/(decrease) | 782,420 | 947,639 | 387,013 | 1,467,330 | 78,573 | 709,654 | ||||||||||||||||||
(5) | Investment Transactions |
Purchases and sales of investments (excluding short-term and government securities) for the year ended December 31, 2008 were as follows:
Capital | ||||||||||||||||||||
Equity | Bond | Omni | International | Appreciation | ||||||||||||||||
Stocks and Bonds: | ||||||||||||||||||||
Purchases | $ | 129,013,180 | $ | 21,872,330 | $ | 61,230,037 | $ | 593,575,754 | $ | 117,525,287 | ||||||||||
Sales | $ | 192,244,679 | $ | 58,663,805 | $ | 70,022,411 | $ | 637,029,659 | $ | 134,713,147 |
(continued)
183
Ohio National Fund, Inc.
Notes to Financial Statements (Continued) | December 31, 2008 |
Millennium | International Small-Mid Company | Aggressive Growth | Small Cap Growth | Mid Cap Opportunity | ||||||||||||||||
Stocks and Bonds: | ||||||||||||||||||||
Purchases | $ | 118,053,087 | $ | 60,260,379 | $ | 15,152,943 | $ | 7,046,254 | $ | 306,860,714 | ||||||||||
Sales | $ | 126,058,518 | $ | 62,168,944 | $ | 10,121,741 | $ | 8,049,515 | $ | 278,465,156 | ||||||||||
S&P 500 Index | Strategic Value | High Income Bond | Capital Growth | Nasdaq-100 Index | ||||||||||||||||
Stocks and Bonds: | ||||||||||||||||||||
Purchases | $ | 16,903,200 | $ | 29,855,314 | $ | 23,911,720 | $ | 25,073,174 | $ | 10,545,193 | ||||||||||
Sales | $ | 22,739,418 | $ | 37,385,770 | $ | 13,833,879 | $ | 20,686,385 | $ | 10,836,984 | ||||||||||
Bristol | Bryton Growth | U.S. Equity | Balanced | Income Opportunity | ||||||||||||||||
Stocks and Bonds: | ||||||||||||||||||||
Purchases | $ | 190,875,582 | $ | 51,689,773 | $ | 42,155,704 | $ | 10,962,452 | $ | 11,236,219 | ||||||||||
Sales | $ | 164,416,349 | $ | 33,394,352 | $ | 41,504,163 | $ | 7,318,894 | $ | 9,582,600 | ||||||||||
Target VIP | Target Equity/Income | Bristol Growth | ||||||||||||||||||
Stocks and Bonds: | ||||||||||||||||||||
Purchases | $ | 26,206,193 | $ | 40,879,621 | $ | 12,135,727 | ||||||||||||||
Sales | $ | 17,851,865 | $ | 36,150,945 | $ | 11,218,355 |
Purchases and sales of government securities for the year ended December 31, 2008 were as follows:
Balanced | ||||
Purchases | $ | 176,156 | ||
Sales | $ | 663,875 |
(6) | Option Contracts Written |
The activity in the option contracts written and the premiums received by the Income Opportunity Portfolio for year ended December 31, 2008 is detailed as follows:
Number of | Premiums | |||||||
Contracts | Received | |||||||
Options outstanding, beginning of year | 33 | $ | 151,689 | |||||
Options written during year | 2,239 | 9,589,675 | ||||||
Options exercised during year | — | — | ||||||
Options expired during year | — | — | ||||||
Options closed during year | (2,227 | ) | (9,623,615 | ) | ||||
Options outstanding, end of year | 45 | $ | 117,749 | |||||
(7) | Temporary Guarantee Program |
On October 9, 2008, the Board approved the participation of the Money Market Portfolio in the U.S. Department of the Treasury’s Temporary Guarantee Program for Money Market Funds (the “Program”). Participation in the initial three months of the Program required a payment to the U.S. Department of the Treasury (the “Treasury”) in the amount of 0.01% of the net asset value of the Money Market Portfolio as of the close of business on September 19, 2008. This expense was borne by the Money Market Portfolio and is fully included in its Statement of Operations as “Temporary guarantee program expense”.
(continued)
184
Ohio National Fund, Inc.
Notes to Financial Statements (Continued) | December 31, 2008 |
On November 24, 2008, the Treasury announced that the Secretary of the Treasury elected to extend the Program until April 30, 2009 (the “Program Extension”) to support ongoing stability in the market. On December 4, 2008, the Board of Directors approved the participation of the Money Market Portfolio in the Program Extension. Continued participation in the Program required a payment to the Treasury in the amount of 0.015% of the net asset value of the Money Market Portfolio as of the close of business on September 19, 2008. As with the payment for the initial term of the Program, the Program Extension payment was borne by the Money Market Portfolio. The pro-rated portion of the payment for the period from December 19, 2008 to December 31, 2008 is included in the Statement of Operations of the Money Market Portfolio. The remainder of the payment is included in the Statement of Assets and Liabilities as a prepaid asset.
Subject to certain conditions and limitations, any shares of the Money Market Portfolio held by a shareholder as of the close of business on September 19, 2008 are insured against loss under the Program in the event the Money Market Portfolio’s per share net asset value falls below $9.950 (a “Guarantee Event”), the Guarantee Event is not cured by the Fund’s adviser, and there is a subsequent liquidation to the shareholders of the Portfolio. The Program provides a guarantee for the lesser of (a) the number of shares owned by the shareholder at the close of September 19, 2008, or (b) the number of shares owned by the shareholder on the date of a Guarantee Event (“protected shares”). A shareholder who has continuously maintained an account with the Money Market Portfolio since September 19, 2008 would receive a payment for each protected share equal to the shortfall between the amount received in the liquidation and $10.00 per share in the case of a Guarantee Event. The coverage provided under the Program (and amount available to a shareholder in the event of a Guarantee Event and subsequent liquidation) is subject to an overall limit of $50 billion for all money market funds participating in the Program.
The Secretary of the Treasury may further extend the Program beyond April 30, 2009 through the close of business on September 18, 2009; however, no decision has yet been made to extend the Program beyond April 30, 2009. If the Program is further extended, the Board will consider whether to continue participation in the Program.
Shares of other Fund Portfolios are not included in the Program.
(continued)
185
Ohio National Fund, Inc.
Notes to Financial Statements (Continued) | December 31, 2008 |
(8) | Federal Income Tax Information |
At December 31, 2008, the components of accumulated earnings (deficit) on a tax basis were as follows:
Undistributed | Total | |||||||||||||||||||||||
Undistributed | Long-Term | Accumulated | Unrealized | Accumulated | ||||||||||||||||||||
Ordinary | Capital Gains | Accumulated | Capital and | Appreciation | Earnings | |||||||||||||||||||
Portfolio | Income | (Losses) | Earnings | Other Losses | (Depreciation)(1) | (Deficit) | ||||||||||||||||||
Equity | $ | 328,718 | $ | — | $ | 328,718 | $ | (69,749,938 | ) | $ | (114,112,978 | ) | $ | (183,534,198 | ) | |||||||||
Money Market | — | — | — | — | — | — | ||||||||||||||||||
Bond | 8,183,385 | — | 8,183,385 | (9,875,608 | ) | (19,673,858 | ) | (21,366,081 | ) | |||||||||||||||
Omni | 136,684 | — | 136,684 | (7,694,785 | ) | (10,315,782 | ) | (17,873,883 | ) | |||||||||||||||
International | 1,176,974 | — | 1,176,974 | (85,031,515 | ) | (56,722,347 | ) | (140,576,888 | ) | |||||||||||||||
Capital Appreciation | 133,059 | — | 133,059 | (19,262,181 | ) | (50,750,647 | ) | (69,879,769 | ) | |||||||||||||||
Millennium | — | — | — | (30,373,739 | ) | (3,645,697 | ) | (34,019,436 | ) | |||||||||||||||
International Small-Mid Company | — | — | — | (26,030,006 | ) | (5,627,923 | ) | (31,657,929 | ) | |||||||||||||||
Aggressive Growth | — | — | — | (13,863,990 | ) | (5,721,736 | ) | (19,585,726 | ) | |||||||||||||||
Small Cap Growth | — | — | — | (13,396,142 | ) | (6,887,262 | ) | (20,283,404 | ) | |||||||||||||||
Mid Cap Opportunity | — | — | — | (41,655,585 | ) | (17,345,922 | ) | (59,001,507 | ) | |||||||||||||||
S&P 500 Index | 269,391 | — | 269,391 | (27,176,880 | ) | (28,596,185 | ) | (55,503,674 | ) | |||||||||||||||
Strategic Value | 113,519 | — | 113,519 | (7,547,753 | ) | (3,082,083 | ) | (10,516,317 | ) | |||||||||||||||
High Income Bond | 7,174,182 | — | 7,174,182 | (2,992,007 | ) | (31,935,000 | ) | (27,752,825 | ) | |||||||||||||||
Capital Growth | — | — | — | (15,086,421 | ) | (4,994,385 | ) | (20,080,806 | ) | |||||||||||||||
Nasdaq-100 Index | 4,870 | — | 4,870 | (4,941,132 | ) | (7,421,974 | ) | (12,358,236 | ) | |||||||||||||||
Bristol | 132,522 | — | 132,522 | (19,082,885 | ) | (25,603,412 | ) | (44,553,775 | ) | |||||||||||||||
Bryton Growth | — | — | — | (9,987,256 | ) | (15,955,004 | ) | (25,942,260 | ) | |||||||||||||||
U.S. Equity | 36,208 | — | 36,208 | (7,467,102 | ) | (1,283,775 | ) | (8,714,669 | ) | |||||||||||||||
Balanced | 251,129 | — | 251,129 | (1,529,696 | ) | (1,310,150 | ) | (2,588,717 | ) | |||||||||||||||
Income Opportunity | 120,641 | — | 120,641 | (253,907 | ) | (324,028 | ) | (457,294 | ) | |||||||||||||||
Target VIP | 73,693 | 318,885 | 392,578 | — | (12,371,097 | ) | (11,978,519 | ) | ||||||||||||||||
Target Equity/Income | 81,552 | 254,198 | 335,750 | (168,464 | ) | (19,169,771 | ) | (19,002,485 | ) | |||||||||||||||
Bristol Growth | 11,955 | — | 11,955 | (1,281,448 | ) | (1,869,149 | ) | (3,138,642 | ) |
(1) | The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributed primarily to tax deferral of losses on wash sales and the realization for tax purposes of unrealized gains/(losses) on certain instruments. |
(continued)
186
Ohio National Fund, Inc.
Notes to Financial Statements (Continued) | December 31, 2008 |
Under current tax regulations, capital losses realized after October 31 of a Portfolio’s fiscal year may be deferred and treated as occurring on the first business day or the following fiscal year. The following Portfolios had deferred post-October capital losses, which will be treated as arising on the first business day of the fiscal year ending December 31, 2009:
Post-October | ||||||||
Post-October | Currency | |||||||
Portfolio | Losses | Losses | ||||||
Equity | $ | 1,002,149 | $ | — | ||||
Bond | 2,086,000 | — | ||||||
Omni | 2,721,135 | — | ||||||
International | 25,516,178 | 155,144 | ||||||
Capital Appreciation | 8,872,489 | — | ||||||
Millennium | 4,121,077 | — | ||||||
International Small-Mid Company | 10,178,962 | 67,390 | ||||||
Aggressive Growth | 1,403,491 | — | ||||||
Small Cap Growth | 1,376,872 | 89 | ||||||
Mid Cap Opportunity | 14,950,847 | — | ||||||
S&P 500 Index | 280,966 | — | ||||||
Strategic Value | 527,467 | 9,059 | ||||||
High Income Bond | 7,195 | — | ||||||
Capital Growth | 3,464,777 | — | ||||||
Nasdaq-100 Index | 1,435,966 | — | ||||||
Bristol | 7,186,254 | — | ||||||
Bryton Growth | 6,567,436 | — | ||||||
U.S. Equity | 2,985,273 | — | ||||||
Balanced | 350,487 | — | ||||||
Income Opportunity | 253,907 | — | ||||||
Target Equity/Income | 168,464 | — | ||||||
Bristol Growth | 444,976 | — |
(continued)
187
Ohio National Fund, Inc.
Notes to Financial Statements (Continued) | December 31, 2008 |
For Federal income tax purposes, the following Portfolios had capital loss carry forwards as of December 31, 2008, which are available to offset future realized gains, if any:
Total Loss | Expiration Amount by Year | |||||||||||||||||||||||||||||||||||
Portfolio | Carryforward | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | |||||||||||||||||||||||||||
Equity | $ | 68,747,789 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 68,747,789 | ||||||||||||||||||
Bond | 7,789,608 | — | — | 1,386,670 | 560,097 | 733,695 | — | — | 5,109,146 | |||||||||||||||||||||||||||
Omni | 4,973,650 | — | — | — | — | — | — | — | 4,973,650 | |||||||||||||||||||||||||||
International | 59,360,193 | — | — | — | — | — | — | — | 59,360,193 | |||||||||||||||||||||||||||
Capital Appreciation | 10,389,692 | — | — | — | — | — | — | — | 10,389,692 | |||||||||||||||||||||||||||
Millennium | 26,252,662 | — | �� | 17,131,037 | 1,610,585 | — | — | — | — | 7,511,040 | ||||||||||||||||||||||||||
International Small-Mid Company | 15,783,654 | — | — | — | — | — | — | — | 15,783,654 | |||||||||||||||||||||||||||
Aggressive Growth | 12,460,499 | 7,350,425 | 4,415,159 | — | — | — | — | — | 694,915 | |||||||||||||||||||||||||||
Small Cap Growth | 12,019,181 | 7,561,943 | 3,671,938 | — | — | — | — | — | 785,300 | |||||||||||||||||||||||||||
Mid Cap Opportunity | 26,704,738 | — | — | — | — | — | — | — | 26,704,738 | |||||||||||||||||||||||||||
S&P 500 Index | 26,895,914 | 11,619,142 | 13,544,388 | 134,482 | — | — | — | — | 1,597,902 | |||||||||||||||||||||||||||
Strategic Value | 7,011,227 | — | 1,170,471 | 75,015 | — | — | — | — | 5,765,741 | |||||||||||||||||||||||||||
High Income Bond | 2,984,812 | 628,788 | 1,284,828 | 563,088 | — | — | — | — | 508,108 | |||||||||||||||||||||||||||
Capital Growth | 11,621,644 | 2,302,862 | 9,318,782 | — | — | — | — | — | — | |||||||||||||||||||||||||||
Nasdaq-100 Index | 3,505,166 | — | 915,546 | 1,110,252 | 701,524 | 531,984 | 215,042 | 30,818 | — | |||||||||||||||||||||||||||
Bristol | 11,896,631 | — | — | — | — | — | — | — | 11,896,631 | |||||||||||||||||||||||||||
Bryton Growth | 3,419,820 | — | — | — | — | — | — | — | 3,419,820 | |||||||||||||||||||||||||||
U.S. Equity | 4,481,829 | — | — | — | — | — | — | — | 4,481,829 | |||||||||||||||||||||||||||
Balanced | 1,179,209 | — | — | — | — | — | — | — | 1,179,209 | |||||||||||||||||||||||||||
Bristol Growth | 836,472 | — | — | — | — | — | — | — | 836,472 |
The Board does not intend to authorize a distribution of any realized gain for a Portfolio until the capital loss carry over has been offset or expires.
During the year ended December 31, 2008, the Fund recorded reclassifications within the composition of net assets for permanent book/tax differences. These reclassifications were due principally to net operating losses, which for tax purposes cannot be used to offset future taxable income, and consent dividends. Consent dividends are constructive dividends in which distributions are deemed, for tax purposes, to be passed through from the Fund to shareholders upon written consent from all shareholders of the Fund. These reclassifications have no impact on the net asset values of the Fund and are designed to present the Fund’s accumulated net realized income and gain(loss) accounts on a tax basis.
The tax characteristics of dividends paid to shareholders for the year ended December 31, 2008, were as follows:
Net | Net | Total | ||||||||||||||
Ordinary | Short-Term | Long-Term | Distribution | |||||||||||||
Portfolio | Income | Capital Gains | Capital Gains | Paid | ||||||||||||
Equity | $ | 2,642,397 | $ | — | $ | — | $ | 2,642,397 | ||||||||
Money Market | 6,638,684 | — | — | 6,638,684 | ||||||||||||
Omni | 1,075,689 | — | — | 1,075,689 | ||||||||||||
Capital Appreciation | 936,890 | — | — | 936,890 | ||||||||||||
S&P 500 Index | 2,337,448 | — | — | 2,337,448 | ||||||||||||
Strategic Value | 771,804 | — | — | 771,804 | ||||||||||||
Bristol | 906,531 | — | — | 906,531 | ||||||||||||
U.S. Equity | 195,588 | — | — | 195,588 | ||||||||||||
Target VIP | 303,211 | — | — | 303,211 | ||||||||||||
Target Equity/Income | 637,109 | — | — | 637,109 |
(continued)
188
Ohio National Fund, Inc.
Notes to Financial Statements (Continued) | December 31, 2008 |
Cost basis for Federal income tax purposes differs from the cost basis for financial reporting purposes. The table below details the unrealized appreciation (depreciation) and aggregate cost of securities at December 31, 2008 for Federal income tax purposes.
Capital | ||||||||||||||||||||||||
Equity | Bond | Omni | International | Appreciation | Millennium | |||||||||||||||||||
Gross unrealized: | ||||||||||||||||||||||||
Appreciation | $ | 19,096,505 | $ | 862,582 | $ | 643,797 | $ | 2,573,789 | $ | 3,279,089 | $ | 2,179,864 | ||||||||||||
Depreciation | (133,209,483 | ) | (20,536,440 | ) | (10,959,579 | ) | (59,286,153 | ) | (54,029,736 | ) | (5,825,561 | ) | ||||||||||||
Net unrealized depreciation | $ | (114,112,978 | ) | $ | (19,673,858 | ) | $ | (10,315,782 | ) | $ | (56,712,364 | ) | $ | (50,750,647 | ) | $ | (3,645,697 | ) | ||||||
Aggregate cost of securities: | $ | 297,689,081 | $ | 133,500,380 | $ | 44,887,850 | $ | 234,141,323 | $ | 151,196,430 | $ | 38,009,719 | ||||||||||||
International | ||||||||||||||||||||||||
Small-Mid Company | Aggressive Growth | Small Cap Growth | Mid Cap Opportunity | S&P 500 Index | Strategic Value | |||||||||||||||||||
Gross unrealized: | ||||||||||||||||||||||||
Appreciation | $ | 4,526,401 | $ | 1,002,436 | $ | 1,078,048 | $ | 3,278,611 | $ | 17,859,297 | $ | 153,371 | ||||||||||||
Depreciation | (10,154,324 | ) | (6,724,172 | ) | (7,965,310 | ) | (20,624,533 | ) | (46,455,482 | ) | (3,234,757 | ) | ||||||||||||
Net unrealized depreciation | $ | (5,627,923 | ) | $ | (5,721,736 | ) | $ | (6,887,262 | ) | $ | (17,345,922 | ) | $ | (28,596,185 | ) | $ | (3,081,386 | ) | ||||||
Aggregate cost of securities: | $ | 58,324,833 | $ | 23,759,365 | $ | 20,062,975 | $ | 92,479,024 | $ | 134,823,263 | $ | 16,409,166 | ||||||||||||
High Income Bond | Capital Growth | Nasdaq-100 Index | Bristol | Bryton Growth | U.S. Equity | |||||||||||||||||||
Gross unrealized: | ||||||||||||||||||||||||
Appreciation | $ | (58,666 | ) | $ | 2,554,443 | $ | 3,333,349 | $ | 2,174,919 | $ | 2,791,019 | $ | 697,465 | |||||||||||
Depreciation | (31,876,334 | ) | (7,548,828 | ) | (10,755,323 | ) | (27,778,331 | ) | (18,746,023 | ) | (1,981,240 | ) | ||||||||||||
Net unrealized depreciation | $ | (31,935,000 | ) | $ | (4,994,385 | ) | $ | (7,421,974 | ) | $ | (25,603,412 | ) | $ | (15,955,004 | ) | $ | (1,283,775 | ) | ||||||
Aggregate cost of securities: | $ | 99,243,305 | $ | 32,612,109 | $ | 35,057,677 | $ | 100,486,861 | $ | 68,805,829 | $ | 14,747,003 | ||||||||||||
Balanced | Income Opportunity | Target VIP | Target Equity/Income | Bristol Growth | ||||||||||||||||||||
Gross unrealized: | ||||||||||||||||||||||||
Appreciation | $ | 231,702 | $ | 243,184 | $ | 194,436 | $ | 1,031,536 | $ | 114,350 | ||||||||||||||
Depreciation | (1,541,852 | ) | (567,214 | ) | (12,565,533 | ) | (20,201,307 | ) | (1,983,499 | ) | ||||||||||||||
Net unrealized depreciation | $ | (1,310,150 | ) | $ | (324,030 | ) | $ | (12,371,097 | ) | $ | (19,169,771 | ) | $ | (1,869,149 | ) | |||||||||
Aggregate cost of securities: | $ | 10,879,950 | $ | 4,924,024 | $ | 30,547,231 | $ | 43,253,389 | $ | 6,713,011 | ||||||||||||||
As required, the Fund previously adopted Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the affirmative evaluation of tax positions taken or expected to be taken in the course of preparing the Funds’ tax returns to determine whether it is more-likely-than-not (i.e. greater than 50-percent) that each tax position will be sustained upon examination by a taxing authority based on the technical merits of the position. A tax position that meets the more-than-likely-than-not recognition threshold is measured to determine the amount of benefit to
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Notes to Financial Statements (Continued) | December 31, 2008 |
recognize in the financial statements. Differences between tax positions taken in a tax return and amounts recognized in the financial statements will generally result in an increase in a liability for taxes payable (or a reduction of a tax refund receivable), including the recognition of any related interest and penalties as an operating expense. Implementation of FIN 48 included a review of tax positions taken in tax years that remain subject to examination by all major tax jurisdictions, including federal tax and the state of Maryland (i.e. the last 4 tax year ends and the interim tax period since then).
(9) | Subsequent Event |
On December 3, 2008, a group consisting of Neuberger Berman’s portfolio managers, management team and senior professionals (“NB Management Group”) agreed to acquire substantially all of the Neuberger Berman business and the fixed income and alternative asset management business of Lehman Brothers’ Investment Management Division. This transaction will create a new investment management company. The transaction is expected to close in the first quarter of 2009.
The change in control event would constitute an assignment under the 1940 Act, causing the existing Sub-Advisory Agreement to be effectively terminated. Pending the Board’s review and approval, a new Sub-Advisory Agreement is expected to be executed for the purpose of appointing the new management company as the Sub-Adviser of the Millennium Portfolio.
190
Ohio National Fund, Inc.
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of
Ohio National Fund, Inc.:
Ohio National Fund, Inc.:
We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Ohio National Fund, Inc., comprising the Equity Portfolio, Money Market Portfolio, Bond Portfolio, Omni Portfolio, International Portfolio, Capital Appreciation Portfolio, Millennium Portfolio, International Small-Mid Company Portfolio (formerly the International Small Company Portfolio), Aggressive Growth Portfolio, Small Cap Growth Portfolio, Mid Cap Opportunity Portfolio, S&P 500 Index Portfolio, Strategic Value Portfolio (formerly the Blue Chip Portfolio), High Income Bond Portfolio, Capital Growth Portfolio, Nasdaq - 100 Index Portfolio, Bristol Portfolio, Bryton Growth Portfolio, U.S. Equity Portfolio, Balanced Portfolio, Income Opportunity Portfolio, Target VIP Portfolio, Target Equity/Income Portfolio and Bristol Growth Portfolio (each a Portfolio and collectively, the Portfolios), as of December 31, 2008, and the related statements of operations for the year then ended, the statements of changes in net assets for each period in the two-year period then ended, and the financial highlights for each period in the five-year period then ended. These financial statements and financial highlights are the responsibility of the Portfolios’ 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights 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, 2008, by correspondence with custodians and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Portfolios as of December 31, 2008, the results of their operations for the year then ended, the changes in their net assets for each period in the two-year period then ended, and the financial highlights for each period in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
KPMG LLP
Columbus, Ohio
February 16, 2009
191
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Additional Information (Unaudited) | December 31, 2008 |
(1) | Review and Approval of Advisory and Sub-Advisory Agreements |
At a meeting held on August 21, 2008, the Board of Directors, including a majority of the Directors who are not “interested persons” of the Fund (the “Independent Directors”), approved the Investment Advisory Agreement with ONI and, as applicable, the Sub-Advisory Agreement with the Sub-Adviser (each a “Sub-Adviser,” and together the “Sub-Advisers”) for each of the Portfolios identified below. The Independent Directors were separately represented by independent legal counsel in connection with their consideration of the approval of these agreements.
In considering the Investment Advisory and Sub-Advisory Agreements, the Directors reviewed a variety of information relating to each Portfolio, ONI and the Sub-Advisers, including comparative performance, fee and expense information for each Portfolio’s Morningstar peer group; performance information for relevant benchmarks and other information regarding the nature, extent and quality of services provided by ONI and, as applicable, the Sub-Adviser. The Directors also took into account information on the services provided by ONI and each Sub-Adviser and performance, fee and expense information regarding each Portfolio provided to them periodically throughout the year. The Board evaluated all of the information available to it on a Portfolio-by-Portfolio basis, and its deliberations were made separately with respect to each Portfolio.
Prior to voting, the Independent Directors: (1) received materials from independent legal counsel discussing the legal standards applicable to their consideration of the Investment Advisory and Sub-Advisory Agreements; (2) reviewed the information relating to the Portfolios, ONI and the Sub-Advisers with their independent legal counsel and with management; and (3) met with their independent legal counsel in a private session at which no representatives of management were present.
Nature, extent and quality of services. The Board considered the nature, extent and quality of services provided to the Portfolios by ONI. The Directors reviewed information relating to ONI’s operations and personnel. Among other information, the Directors reviewed financial information about ONI and biographical information on its investment, supervisory and professional staff. The Directors also took into account information provided periodically throughout the previous year by ONI relating to the performance of its duties with respect to the Portfolios and the Directors’ familiarity with ONI’s management through Board meetings, discussions and reports. The quality of administrative services, including ONI’s role in coordinating the activities of the Portfolios’ other service providers, was also considered. The Directors also took into account ONI’s compliance program. The Directors also considered ONI’s financial condition and whether it had the financial wherewithal to continue to provide services to the Portfolios. The Board concluded that it was satisfied with the nature, extent and quality of services provided each Portfolio by ONI under the Investment Advisory Agreement.
For each Portfolio (other than Money Market Portfolio, Bond Portfolio, S&P 500 Index Portfolio, Nasdaq-100 Index Portfolio and the fixed-income portion of the Omni Portfolio, together the “Adviser Managed Portfolios”), the Board also considered the nature, extent and quality of services to be provided to the Portfolio by its Sub-Adviser. The Directors reviewed information relating to each Sub-Adviser’s operations and personnel and the investment philosophy, strategies and techniques used by the Sub-Adviser in managing the Portfolio or the portion of the Portfolio for which the Sub-Adviser had portfolio management responsibility. Among other information, the Directors reviewed biographical information on each Sub-Adviser’s portfolio management and other professional staff, information regarding each Sub-Adviser’s organizational and management structure and each Sub-Adviser’s brokerage practices. The Directors also reviewed the performance record of each Portfolio or portion of a Portfolio managed by the applicable Sub-Adviser. The Directors also considered each Sub-Adviser’s compliance program and its regulatory and compliance history. The Directors also took into account each Sub-Adviser’s financial condition or that of its parent company and its ability to continue to provide services to the applicable Portfolio(s). Based on the foregoing, the Board concluded that it was satisfied with the nature, extent and quality of services provided to each Portfolio by its Sub-Adviser under the applicable Sub-Advisory Agreement.
Investment Performance. The Board considered each Portfolio’s performance for the 1-, 3-, 5- and 10-year periods ended June 30, 2008, as applicable, as compared to the Portfolio’s Morningstar peer group and benchmark(s). The Board noted that on a quarterly basis it reviews detailed information about each Portfolio’s performance results, portfolio composition and investment strategies. The Board also considered ONI’s effectiveness in monitoring the performance of each Sub-Adviser and ONI’s timeliness in responding to performance issues. A Portfolio-by-Portfolio discussion regarding each Portfolio’s performance and the Board’s conclusions regarding that performance is set forth below.
Fees and Expenses. The Board considered each Portfolio’s advisory fee, sub-advisory fee (as applicable) and total expense ratio as of May 31, 2008 as compared to those of its Morningstar peer group. A Portfolio-by-Portfolio discussion regarding each Portfolio’s advisory fee, sub-advisory fee (as applicable) and total expense ratio and the Board’s conclusions regarding those fees and expenses is set forth below.
Profitability. The Board considered the reasonableness of the advisory fee charged by ONI for managing each Portfolio. The Directors noted that ONI, and not the Portfolios, is responsible for paying sub-advisory fees to the Portfolios’ Sub-Advisers. During their deliberations, the Directors reviewed information regarding all revenues and other benefits, both direct and indirect, received by ONI and its affiliates attributable to the services provided to the Portfolios, the costs of providing those services and the resulting profitability to ONI and its affiliates from those relationships. The Directors took into account management’s discussion of the current advisory fee structure and the fact that ONI is
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Additional Information (Unaudited) (Continued) | December 31, 2008 |
contractually obligated to reimburse each Portfolio certain of its expenses should they exceed a specified amount. Based on the foregoing, the Board concluded that the profitability to ONI from it relationship with each Portfolio was reasonable.
The Board also considered the reasonableness of the sub-advisory fees paid by ONI to each Sub-Adviser. The Directors relied on the ability of ONI to negotiate the terms of each Sub-Advisory Agreement, including the sub-advisory fee, at arm’s length, noting that ONI is not affiliated with the Portfolios’ Sub-Advisers (other than Suffolk). Accordingly, the cost of services provided by each unaffiliated Sub-Adviser, and the profitability to the Sub-Adviser of its relationship with the applicable Portfolio, were not material factors in the Board’s deliberations. For similar reasons, the Board concluded that the potential realization of economies of scale by the Portfolios from the sub-advisory arrangements with the unaffiliated Sub-Advisers was not a material factor in the Board’s deliberations.
In considering the reasonableness of the sub-advisory fees payable by ONI to its affiliate Suffolk, the Directors reviewed information regarding the cost to Suffolk of providing services to the applicable Portfolios and the resulting profitability to Suffolk of those relationships. Noting that the Adviser, and not the Portfolios, is responsible for paying sub-advisory fees to Suffolk, the cost of services provided by Suffolk and the profitability to Suffolk of its relationship to the applicable Portfolios were not material factors in the Board’s deliberations. For similar reasons, the Board concluded that the potential realization of economies of scale by the applicable Portfolios from the sub-advisory arrangement with Suffolk was not a material factor in the Board’s deliberations.
Economies of Scale. The Board considered the effect of each Portfolio’s current size and potential growth on it performance and fees. The Directors noted that all of the advisory and sub-advisory fee schedules contained breakpoints that would reduce the applicable advisory or sub-advisory fee on assets above a specified level as the applicable Portfolio’s assets increased. The Directors also noted that if a Portfolio’s assets increased over time, the Portfolio might realize additional economies of scale if the Portfolio’s assets increased proportionately more than certain other expenses. The Directors took into account that many of the Portfolios had relatively few assets under management. After considering each Portfolio’s current size and potential for growth, the Board concluded that each Portfolio is likely to benefit from economies of scale as the Portfolio’s assets increase.
In addition to the foregoing, the Directors considered the specific factors and related conclusions set forth below with respect to each Portfolio’s performance and fees and expenses.
Equity Portfolio (Adviser — ONI, Sub-Adviser — Legg Mason)
The Portfolio’s advisory fee, sub-advisory fee and total expense ratio were each above the average of its Morningstar peer group. The Portfolio underperformed its benchmark and its Morningstar peer group for the 1-, 3-, 5- and 10-year periods ended June 30, 2008. The Directors took into account management’s discussion of the Portfolio’s performance and management’s close monitoring of that performance. Based upon its review, the Board concluded that appropriate action was being taken to address the Portfolio’s performance and that the advisory and sub-advisory fees were reasonable in view of the services received by the Portfolio from ONI and Legg Mason.
Money Market Portfolio (Adviser — ONI)
The Portfolio’s advisory fee and total expense ratio were each below the average of its Morningstar peer group. The Directors noted that ONI had waived fees for the Portfolio during the year. The Portfolio underperformed its Morningstar peer group for the 1-year period and outperformed its peer group for 3-, 5-, and 10-year periods ended June 30, 2008. The Board took into account the relatively small difference in performance among the funds in the Portfolio’s Morningstar peer group. Based upon its review, the Board concluded that the Portfolio’s performance was satisfactory and that the advisory fee was reasonable in view of the services received by the Portfolio from ONI.
Bond Portfolio (Adviser — ONI)
The Portfolio’s advisory fee and total expense ratio were above and below, respectively, the average of its Morningstar peer group. The Portfolio underperformed its two benchmarks for the 1-, 3-, 5- and 10-year periods ended June 30, 2008. The Portfolio underperformed its Morningstar peer group for the 1-, 3- and 5-year periods and outperformed its peer group for the 10-year period ended June 30, 2008. The Directors took into account management’s discussion of the Portfolio’s performance. Based upon its review, the Board concluded that appropriate action was being taken to address the Portfolio’s performance and that the advisory fee was reasonable in view of the services received by the Portfolio from ONI.
Omni Portfolio (Adviser — ONI, Sub-Adviser — Suffolk)
The Portfolio’s advisory fee, sub-advisory fee and total expense ratio were each above the average of its Morningstar peer group. The Portfolio outperformed its benchmark for the 1-, 3- and 5-year periods and underperformed for the 10-year period ended June 30, 2008. The Portfolio underperformed its Morningstar peer group for the 1-, 3- and 10-year periods and outperformed its peer group for the 5-year period ended June 30, 2008. Based upon its review, the Board concluded that the Portfolio’s performance was satisfactory and that the advisory and sub-advisory fees were reasonable in view of the services received by the Portfolio from ONI and Suffolk.
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Additional Information (Unaudited) (Continued) | December 31, 2008 |
International Portfolio (Adviser — ONI, Sub-Adviser — Federated Global)
The Portfolio’s advisory fee, sub-advisory fee and total expense ratio were each below the average of its Morningstar peer group. The Portfolio underperformed one of its two benchmarks and its Morningstar peer group for the 1-, 3-, 5- and 10-year periods ended June 30, 2008. The Portfolio underperformed its other benchmark for the 1-, 3- and 5-year periods (benchmark performance was unavailable for the 10-year period). The Directors took into account management’s close monitoring of the Portfolio’s performance and management’s discussion of measures it was considering taking in an effort to improve the Portfolio’s performance. Based upon its review, the Board concluded that appropriate action was being taken to address the Portfolio’s performance and that the advisory and sub-advisory fees were reasonable in view of the services received by the Portfolio from ONI and Federated Global.
Capital Appreciation Portfolio (Adviser — ONI, Sub-Adviser — Jennison)
The Portfolio’s advisory fee, sub-advisory fee and total expense ratio were above, below, and below, respectively, the average of its Morningstar peer group. The Portfolio underperformed one of its benchmarks and outperformed its other benchmark for the 1-year period ended June 30, 2008. The Portfolio outperformed both benchmarks for the 3-, 5- and 10-year periods ended June 30, 2008. The Portfolio underperformed its Morningstar peer group for the 1-, 3-, 5- and 10-year periods ended June 30, 2008. The Directors took into account management’s discussion of the Portfolio’s performance, particularly in 2007. Based upon its review, the Board concluded that the Portfolio’s performance was satisfactory and that the advisory and sub-advisory fees were reasonable in view of the services received by the Portfolio from ONI and Jennison.
Millennium Portfolio (Adviser — ONI, Sub-Adviser — Neuberger Berman)
The Portfolio’s advisory fee, sub-advisory fee and total expense ratio were below, above, and below, respectively, the average of its Morningstar peer group. The Portfolio outperformed its benchmark for the 1-, 3- and 10-year periods and underperformed for the 5-year period ended June 30, 2008. The Portfolio outperformed its Morningstar peer group for the 1- and 10-year periods and underperformed for the 3- and 5-year periods ended June 30, 2008. Based upon its review, the Board concluded that the Portfolio’s performance was satisfactory and that the advisory and sub-advisory fees were reasonable in view of the services received by the Portfolio from ONI and Neuberger Berman.
International Small-Mid Company Portfolio (Adviser — ONI, Sub-Adviser — Federated Global)
The Portfolio’s advisory fee, sub-advisory fee and total expense ratio were below, above and above, respectively, the average of its Morningstar peer group. The Portfolio outperformed one of its benchmarks for the 1-, 3-, 5- and 10-year periods ended June 30, 2008. The Portfolio underperformed its other benchmark for the 1-year period and outperformed for the 3-and 5-year periods ended June 30, 2008 (benchmark performance was unavailable for the 10-year period). The Portfolio underperformed its Morningstar peer group for the 1-, 3-, 5- and 10-year periods ended June 30, 2008. The Directors noted that certain modifications to the Portfolio’s investment strategy had been implemented on August 1, 2008. Based upon its review, the Board concluded that the Portfolio’s performance was satisfactory and that the advisory and sub-advisory fees were reasonable in view of the services received by the Portfolio from ONI and Federated Global.
Aggressive Growth Portfolio (Adviser — ONI, Sub-Adviser — Janus)
The Portfolio’s advisory fee, sub-advisory fee and total expense ratio were each above the average of its Morningstar peer group. The Portfolio outperformed its two benchmarks and Morningstar peer group for the 1-, 3- and 5-year periods and underperformed its two benchmarks and peer group for the 10-year period ended June 30, 2008. Based upon its review, the Board concluded that the Portfolio’s performance was satisfactory and that the advisory and sub-advisory fees were reasonable in view of the services received by the Portfolio from ONI and Janus.
Small Cap Growth Portfolio (Adviser — ONI, Sub-Adviser — Janus)
The Portfolio’s advisory fee, sub-advisory fee and total expense ratio were each above the average of its Morningstar peer group. The Portfolio underperformed its benchmark for the 1- and 3-year periods and outperformed for the 5- and 10-year periods ended June 30, 2008. The Portfolio underperformed its Morningstar peer group for the 1-, 3-, 5- and 10-year periods ended June 30, 2008. The Directors took into account management’s discussion of the Portfolio’s recent performance. Based upon its review, the Board concluded that the Portfolio’s performance was satisfactory and that the advisory and sub-advisory fees were reasonable in view of the services received by the Portfolio from ONI and Janus.
Mid Cap Opportunity Portfolio (Adviser — ONI, Sub-Adviser — RSIM)
The Portfolio’s advisory fee, sub-advisory fee and total expenses were above, above and below, respectively, the average of its Morningstar peer group. The Portfolio underperformed its benchmark and Morningstar peer group for the 1-, 3- and 5-year periods and outperformed its benchmark and peer group for the 10-year period ended June 30, 2008. The Directors took into account management’s discussion of the Portfolio’s performance. Based upon its review, the Board concluded that the Portfolio’s performance was satisfactory and that the advisory and sub-advisory fees were reasonable in view of the services received by the Portfolio from ONI and RSIM.
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Additional Information (Unaudited) (Continued) | December 31, 2008 |
S&P 500 Index Portfolio (Adviser — ONI)
The Portfolio’s advisory fee and total expense ratio were above and below, respectively, the average of its Morningstar peer group. The Portfolio underperformed one of its benchmarks and its Morningstar peer group for the 1-, 3-, 5- and 10-year periods ended June 30, 2008. The Portfolio outperformed its other benchmark for the 1- and 10-year periods and underperformed the benchmark for the 3- and 5-year periods ended June 30, 2008. The Directors took into account management’s discussion of the Portfolio’s performance, noting that the Portfolio’s performance generally was in line with the S&P 500® Index when expenses were excluded. Based upon its review, the Board concluded that the Portfolio’s performance was satisfactory and that the advisory fee was reasonable in view of the services received by the Portfolio from ONI.
Strategic Value Portfolio (Adviser — ONI, Sub-Adviser — Federated Equity)
The Portfolio’s advisory fee, sub-advisory fee and total expense ratio were above, above and below, respectively, the average of its Morningstar peer group. The Portfolio underperformed one of its benchmarks and its Morningstar peer group for the 1-, 3-, 5- and 10-year periods ended June 30, 2008. The Portfolio outperformed its other benchmark for the 1- and 3-year periods and underperformed the benchmark for the 5- and 10-year periods ended June 30, 2008. The Directors took into account that new portfolio managers had begun managing the Portfolio in January 2008 and that certain modifications to the Portfolio’s investment strategies had been implemented at that time. Based upon its review, the Board concluded that the Portfolio’s performance was satisfactory and that the advisory and sub-advisory fees were reasonable in view of the services received by the Portfolio from ONI and Federated Equity.
High Income Bond Portfolio (Adviser — ONI, Sub-Adviser — Federated Investment)
The Portfolio’s advisory fee, sub-advisory fee and total expense ratio were each above the average of its Morningstar peer group. The Portfolio outperformed both of its benchmarks for the 1- and 3-year periods and underperformed its benchmarks for the 5- and 10-year periods ended June 30, 2008. The Portfolio outperformed its Morningstar peer group for 1- and 10-year periods and underperformed for the 3- and 5-year periods ended June 30, 2008. Based upon its review, the Board concluded that the Portfolio’s performance was satisfactory and that the advisory and sub-advisory fees were reasonable in view of the services received by the Portfolio from ONI and Federated Investment.
Capital Growth Portfolio (Adviser — ONI, Sub-Adviser — Eagle)
The Portfolio’s advisory fee, sub-advisory fee and total expenses were above, above and below, respectively, the average of its Morningstar peer group. The Portfolio outperformed its benchmark for the 1-, 3-, 5-, and 10-year periods ended June 30, 2008. The Portfolio underperformed its Morningstar peer group for the 1-year period and outperformed for the 3-, 5-, and 10-year periods ended June 30, 2008. Based upon its review, the Board concluded that the Portfolio’s performance was satisfactory and that the advisory and sub-advisory fees were reasonable in view of the services received by the Portfolio from ONI and Eagle.
Nasdaq-100 Index Portfolio (Adviser — ONI)
The Portfolio’s advisory fee and total expense ratio were each below the average of its Morningstar peer group. The Portfolio underperformed one of its benchmarks and its Morningstar peer group for the 1-, 3- and 5-year periods ended June 30, 2008. The Portfolio underperformed its other benchmark for the 1-year period ended June 30, 2008 (benchmark performance was unavailable for the 3- and 5-year periods). The Directors took into account management’s discussion of the Portfolio’s performance, noting that the Portfolio’s performance generally was in line with the Nasdaq-100 Index when expenses were excluded. Based upon its review, the Board concluded that the Portfolio’s performance was satisfactory and that the advisory fee was reasonable in view of the services received by the Portfolio from ONI.
Bristol Portfolio (Adviser — ONI, Sub-Adviser — Suffolk)
The Portfolio’s advisory fee, sub-advisory fee and total expense ratio were each above the average of its Morningstar peer group. The Portfolio outperformed its benchmark for the 1-, 3- and 5-year periods ended June 30, 2008. The Portfolio underperformed its Morningstar peer group for the 1- and 3-year periods and outperformed its peer group for the 5-year period ended June 30, 2008. Based upon its review, the Board concluded that the Portfolio’s performance was satisfactory and that the advisory and sub-advisory fees were reasonable in view of the services received by the Portfolio from ONI and Suffolk.
Bryton Growth Portfolio (Adviser — ONI, Sub-Adviser — Suffolk)
The Portfolio’s advisory fee, sub-advisory fee and total expense ratio were above, above and below, respectively, the average of its Morningstar peer group. The Portfolio outperformed its benchmark for the 1- and 3-year periods and underperformed its benchmark for the 5-year period ended June 30, 2008. The Portfolio underperformed its Morningstar peer group for the 1- and 5-year periods and outperformed its peer group for the 3-year period ended June 30, 2008. Based upon its review, the Board concluded that the Portfolio’s performance was satisfactory and that the advisory and sub-advisory fees were reasonable in view of the services received by the Portfolio from ONI and Suffolk.
(continued)
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Ohio National Fund, Inc.
Additional Information (Unaudited) (Continued) | December 31, 2008 |
U.S. Equity Portfolio (Adviser — ONI, Sub-Adviser — ICON)
The Portfolio’s advisory fee, sub-advisory fee and total expense ratio were each above the average of its Morningstar peer group. The Portfolio underperformed its benchmark for the 1- and 3-year periods ended June 30, 2008. The Portfolio underperformed its Morningstar peer group for the 1- and 3-year periods ended June 30, 2008. The Directors took into account ONI’s discussion of the Portfolio’s performance and ONI’s monitoring of that performance. Based upon its review, the Board concluded that appropriate action was being taken to address the Portfolio’s performance and that the advisory and sub-advisory fees were reasonable in view of the services received by the Portfolio from ONI and ICON.
Balanced Portfolio (Adviser — ONI, Sub-Adviser — ICON)
The Portfolio’s advisory fee, sub-advisory fee and total expense ratio were each above the average of its Morningstar peer group. The Portfolio outperformed its benchmark for the 1- and 3-year periods ended June 30, 2008. The Portfolio underperformed its Morningstar peer group for the 1- and 3-year periods ended June 30, 2008. Based upon its review, the Board concluded that the Portfolio’s performance was satisfactory and that the advisory and sub-advisory fees were reasonable in view of the services received by the Portfolio from ONI and ICON.
Income Opportunity Portfolio (Adviser — ONI, Sub-Adviser — ICON)
The Portfolio’s advisory fee, sub-advisory fee and total expense ratio were each above the average of its Morningstar peer group. The Portfolio outperformed its benchmark for the 1-year period and underperformed for the 3-year period ended June 30, 2008. The Portfolio outperformed its Morningstar peer group for the 1-year period and underperformed for the 3-year period ended June 30, 2008. Based upon its review, the Board concluded that the Portfolio’s performance was satisfactory and that the advisory and sub-advisory fees were reasonable in view of the services received by the Portfolio from ONI and ICON.
Target VIP Portfolio (Adviser — ONI, Sub-Adviser — First Trust)
The Portfolio’s advisory fee, sub-advisory fee and total expense ratio were below, above, and below, respectively, the average of its Morningstar peer group. The Portfolio outperformed its two benchmarks for the 1-year period ended June 30, 2008. The Portfolio underperformed its Morningstar peer group for the 1-year period ended June 30, 2008. The Directors took into account management’s discussion of the Portfolio’s performance. Based upon its review, the Board concluded that the Portfolio’s performance was satisfactory and that the advisory and sub-advisory fees were reasonable in view of the services received by the Portfolio from ONI and First Trust.
Target Equity/Income Portfolio (Adviser — ONI, Sub-Adviser — First Trust)
The Portfolio’s advisory fee, sub-advisory fee and total expense ratio were each above the average of its Morningstar peer group. The Portfolio underperformed its two benchmarks and Morningstar peer group for the 1-year period ended June 30, 2008. The Directors took into account management’s discussion of the Portfolio’s performance. Based upon its review, the Board concluded that the Portfolio’s performance was satisfactory and that the advisory and sub-advisory fees were reasonable in view of the services received by the Portfolio from ONI and First Trust.
Bristol Growth Portfolio (Adviser — ONI, Sub-Adviser — Suffolk)
The Portfolio’s advisory fee, sub-advisory fee and total expense ratio were each above the average of its Morningstar peer group. The Portfolio underperformed its benchmark and Morningstar peer group for the 1-year period ended June 30, 2008. The Directors took into account management’s discussion of the Portfolio’s performance. Based upon its review, the Board concluded that the Portfolio’s performance was satisfactory and that the advisory and sub-advisory fees were reasonable in view of the services received by the Portfolio from ONI and Suffolk.
* * *
After consideration of the foregoing, the Board reached the following conclusions regarding the Investment Advisory Agreement and, as applicable, the Sub-Advisory Agreement with respect to each Portfolio, in addition to the conclusions set forth above: (a) ONI and the Sub-Adviser had demonstrated that they possessed the capability and resources to perform the duties required of them under the Investment Advisory Agreement and applicable Sub-Advisory Agreement, respectively; (b) the investment philosophy, strategies and techniques of ONI (with respect to the Adviser Managed Portfolios) and the Sub-Adviser were appropriate for pursuing the applicable Portfolio’s investment objective; (c) ONI (with respect to the Adviser Managed Portfolios) and the Sub-Adviser were likely to execute their investment philosophy, strategies and techniques consistently over time; and (d) ONI and the Sub-Adviser maintained appropriate compliance programs. Based on all of the above-mentioned factors and their related conclusions, with no single factor or conclusion being determinative and with each Director not necessarily attributing the same weight to each factor, the Board concluded that approval of the Investment Advisory Agreement and, as applicable, the Sub-Advisory Agreement was in the best interests of each Portfolio and its shareholders.
(continued)
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Additional Information (Unaudited) (Continued) | December 31, 2008 |
Accordingly, the Board, including a majority of the Independent Directors, voted to approve the Investment Advisory Agreement and, as applicable, the Sub-Advisory Agreement for each Portfolio.
(2) | Expense Disclosure |
An individual may not buy or own shares of the Fund directly. An individual acquires an indirect interest in the Fund by purchasing a variable annuity contract or variable insurance policy and allocating premiums or purchase payments to Fund Portfolios available through the separate accounts of ONLIC, ONLAC, and NSLA. Separate accounts of these entities are the shareholders of the Fund.
As a shareholder of the Fund, a separate account incurs ongoing costs, including management fees and other Fund expenses. This example is intended to help a policy/contract owner understand ongoing costs (in dollars) associated with the underlying investment in the Fund’s Portfolios by the separate account shareholder and to compare these costs with the ongoing costs associated with investing in other mutual funds.
The example is based on an investment of $1,000 invested at July 1, 2008 and held through December 31, 2008.
Actual Expenses
The table below provides information about investment values and actual expenses associated with each Portfolio of the Fund. The information below, together with the amount of an underlying investment, can be used to estimate expenses paid over the period. An estimate can be obtained by simply dividing an underlying investment value by $1,000 (for example, an $8,600 investment value divided by $1,000 = 8.6), then multiplying the result by the number in the table under the heading entitled “Expenses Paid During Period”.
Beginning | Ending | Expense Paid | Expense Ratio | |||||||||||||
Investment | Investment | During | During Period (net) | |||||||||||||
Value | Value | Period* | 7/1/08 – 12/31/08 | |||||||||||||
Portfolio | 7/1/08 | 12/31/08 | 7/1/08 – 12/31/08 | (Annualized) | ||||||||||||
Equity | $ | 1,000.00 | $ | 623.14 | $ | 3.54 | 0.87 | % | ||||||||
Money Market | 1,000.00 | 1,005.70 | 1.61 | 0.32 | % | |||||||||||
Bond | 1,000.00 | 894.09 | 3.23 | 0.68 | % | |||||||||||
Omni | 1,000.00 | 737.39 | 3.31 | 0.76 | % | |||||||||||
International | 1,000.00 | 610.17 | 3.85 | 0.95 | % | |||||||||||
Capital Appreciation | 1,000.00 | 678.27 | 3.73 | 0.88 | % | |||||||||||
Millennium | 1,000.00 | 653.10 | 3.89 | 0.94 | % | |||||||||||
International Small-Mid Company | 1,000.00 | 524.26 | 4.60 | 1.20 | % | |||||||||||
Aggressive Growth | 1,000.00 | 588.70 | 3.97 | 0.99 | % | |||||||||||
Small Cap Growth | 1,000.00 | 669.39 | 5.08 | 1.21 | % | |||||||||||
Mid Cap Opportunity | 1,000.00 | 572.92 | 3.76 | 0.95 | % | |||||||||||
S&P 500 Index | 1,000.00 | 712.86 | 2.15 | 0.50 | % | |||||||||||
Strategic Value | 1,000.00 | 858.35 | 4.71 | 1.01 | % | |||||||||||
High Income Bond | 1,000.00 | 759.45 | 3.96 | 0.90 | % | |||||||||||
Capital Growth | 1,000.00 | 675.68 | 4.46 | 1.06 | % | |||||||||||
Nasdaq-100 Index | 1,000.00 | 658.90 | 2.28 | 0.55 | % | |||||||||||
Bristol | 1,000.00 | 658.95 | 3.76 | 0.90 | % | |||||||||||
Bryton Growth | 1,000.00 | 647.91 | 4.01 | 0.97 | % | |||||||||||
U.S. Equity | 1,000.00 | 628.44 | 3.99 | 0.97 | % | |||||||||||
Balanced | 1,000.00 | 786.81 | 4.91 | 1.09 | % | |||||||||||
Income Opportunity | 1,000.00 | 834.60 | 7.46 | 1.62 | % | |||||||||||
Target VIP | 1,000.00 | 655.64 | 3.31 | 0.80 | % | |||||||||||
Target Equity/Income | 1,000.00 | 648.75 | 3.10 | 0.75 | % | |||||||||||
Bristol Growth | 1,000.00 | 645.33 | 5.18 | 1.25 | % |
* | Expenses are equal to the average account value times the Fund’s annualized expense ratio multiplied by the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year. Please note that the expenses shown in these tables are meant to highlight ongoing fund costs only and do not reflect any contract-level expenses or fund transactional costs, such as sales charges (loads), or exchange fees (if any). Therefore, these tables are useful in comparing ongoing fund costs only, and will not fully assist a policy/contract owner in determining the relative total expenses of different funds. In addition, if transactional costs were included, costs may be higher for these Portfolios as well as for a fund being compared. |
(continued)
197
Ohio National Fund, Inc.
Additional Information (Unaudited) (Continued) | December 31, 2008 |
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical investment values and hypothetical expenses based on each respective Portfolio’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not an actual return. The hypothetical investment values and expenses may not be used to estimate the actual ending investment balance or expenses actually paid for the period by the shareholders. A policy/contract holder may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Beginning | Ending | Expense Paid | Expense Ratio | |||||||||||||
Investment | Investment | During | During Period (net) | |||||||||||||
Value | Value | Period* | 7/1/08 – 12/31/08 | |||||||||||||
Portfolio | 7/1/08 | 12/31/08 | 7/1/08 – 12/31/08 | (Annualized) | ||||||||||||
Equity | $ | 1,000.00 | $ | 1,020.78 | $ | 4.41 | 0.87 | % | ||||||||
Money Market | 1,000.00 | 1,023.53 | 1.63 | 0.32 | % | |||||||||||
Bond | 1,000.00 | 1,021.73 | 3.45 | 0.68 | % | |||||||||||
Omni | 1,000.00 | 1,021.33 | 3.85 | 0.76 | % | |||||||||||
International | 1,000.00 | 1,020.36 | 4.83 | 0.95 | % | |||||||||||
Capital Appreciation | 1,000.00 | 1,020.70 | 4.49 | 0.88 | % | |||||||||||
Millennium | 1,000.00 | 1,020.43 | 4.76 | 0.94 | % | |||||||||||
International Small-Mid Company | 1,000.00 | 1,019.10 | 6.09 | 1.20 | % | |||||||||||
Aggressive Growth | 1,000.00 | 1,020.14 | 5.04 | 0.99 | % | |||||||||||
Small Cap Growth | 1,000.00 | 1,019.04 | 6.15 | 1.21 | % | |||||||||||
Mid Cap Opportunity | 1,000.00 | 1,020.35 | 4.83 | 0.95 | % | |||||||||||
S&P 500 Index | 1,000.00 | 1,022.62 | 2.54 | 0.50 | % | |||||||||||
Strategic Value | 1,000.00 | 1,020.07 | 5.12 | 1.01 | % | |||||||||||
High Income Bond | 1,000.00 | 1,020.63 | 4.55 | 0.90 | % | |||||||||||
Capital Growth | 1,000.00 | 1,019.81 | 5.38 | 1.06 | % | |||||||||||
Nasdaq-100 Index | 1,000.00 | 1,022.39 | 2.78 | 0.55 | % | |||||||||||
Bristol | 1,000.00 | 1,020.60 | 4.58 | 0.90 | % | |||||||||||
Bryton Growth | 1,000.00 | 1,020.27 | 4.91 | 0.97 | % | |||||||||||
U.S. Equity | 1,000.00 | 1,020.24 | 4.95 | 0.97 | % | |||||||||||
Balanced | 1,000.00 | 1,019.64 | 5.55 | 1.09 | % | |||||||||||
Income Opportunity | 1,000.00 | 1,017.00 | 8.21 | 1.62 | % | |||||||||||
Target VIP | 1,000.00 | 1,021.14 | 4.04 | 0.80 | % | |||||||||||
Target Equity/Income | 1,000.00 | 1,021.38 | 3.80 | 0.75 | % | |||||||||||
Bristol Growth | 1,000.00 | 1,018.84 | 6.35 | 1.25 | % |
* | Expenses are equal to the average account value times the Fund’s annualized expense ratio multiplied by the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year. Please note that the expenses shown in these tables are meant to highlight ongoing fund costs only and do not reflect any contract-level expenses or fund transactional costs, such as sales charges (loads), or exchange fees (if any). Therefore, these tables are useful in comparing ongoing fund costs only, and will not fully assist a policy/contract owner in determining the relative total expenses of different funds. In addition, if transactional costs were included, costs may be higher for these Portfolios as well as for a fund being compared. |
(continued)
198
Ohio National Fund, Inc.
Additional Information (Unaudited) (Continued) | December 31, 2008 |
(3) | Other Federal Tax Information |
For corporate shareholders, the percentages of the total ordinary income dividends paid in 2008, and ordinary income consent dividends that were incurred in the 2008 tax year, that qualify for the corporate dividends received deduction are as follows:
Equity | 100.0 | % | ||
Money Market | 0.0 | % | ||
Bond | 0.0 | % | ||
Omni | 49.5 | % | ||
International | 0.0 | % | ||
Capital Appreciation | 100.0 | % | ||
International Small-Mid Company | 0.0 | % | ||
Aggressive Growth | 0.0 | % | ||
Mid Cap Opportunity | 0.0 | % | ||
S&P 500 Index | 100.0 | % | ||
Strategic Value | 81.9 | % | ||
High Income Bond | 0.0 | % | ||
Nasdaq-100 Index | 100.0 | % | ||
Bristol | 100.0 | % | ||
Bryton Growth | 0.0 | % | ||
U.S. Equity | 100.0 | % | ||
Balanced | 49.3 | % | ||
Income Opportunity | 39.7 | % | ||
Target VIP | 50.6 | % | ||
Target Equity/Income | 100.0 | % | ||
Bristol Growth | 100.0 | % |
The Fund designates the following as long-term capital gain distributions, pursuant to Internal Revenue Code Section 852(b)(3), the amount necessary to reduce the earnings and profits of the fund related to net capital gain to zero for the tax year ended December 31, 2008.
The following distributions will be made in the form of consent dividends:
Target VIP | $ | 318,885 | ||
Target Equity/Income | 254,198 |
Pursuant to Section 853 of the Internal Revenue Code, the Fund designates the following amounts as foreign taxes paid for the year ended December 31, 2008:
Portion of Ordinary | ||||||||||||
Creditable Foreign | Per Share | Income Distribution Derived | ||||||||||
Taxes Paid | Amount | from Foreign Sourced Income | ||||||||||
International | $ | 480,758 | 0.0202 | 87.63 | % |
Foreign taxes paid for purposes of Section 853 may be less than actual foreign taxes paid for financial statement purposes. None of the Portfolios listed above derived any income from ineligible foreign sources, as defined under Section 901(j) of the Internal Revenue Code.
199
Ohio National Fund, Inc.
Information about Directors and Officers (Unaudited) | December 31, 2008 |
Term served | Number of | |||||||||||
as Officer | Portfolios in | Principal Occupation and Other | ||||||||||
Name and Address | Age | Position with the Fund | or Director | Fund Complex | Directorships During Past Five Years | |||||||
Independent Directors | ||||||||||||
James E. Bushman 100 W. Rivercenter Boulevard, 2C Covington, Kentucky | 64 | Director, Chairman of Audit Committee and Member of Independent Directors Committee | Since March 2000 | 32 | Director, Chairman and CEO: Cast-Fab Technologies, Inc. (a manufacturing company); Director: The Midland Company (1998-2008), Air Transport Services Group, Inc., The Littleford Group, Inc., Hilltop Basic Resources, Inc., The Elizabeth Gamble Deaconess Home Association, The Christ Hospital and The University of Cincinnati Foundation. | |||||||
L. Ross Love 2121 Alpine Place Cincinnati, Ohio | 62 | Director, Member of Audit and Independent Directors Committees | Since October 1998 | 32 | Director, President and CEO: Blue Chip Enterprises LLC (a company with holdings in the communications and medical equipment industries.); Trustee: Syracuse University, Greater Cincinnati Chamber of Commerce. | |||||||
George M. Vredeveld University of Cincinnati Economics Center for Education & Research 90 West Daniels Cincinnati, Ohio | 66 | Lead Independent Director, Member of Audit and Independent Directors Committees | Since March 1996 | 32 | Alpaugh Professor of Economics: University of Cincinnati; President: Economics Center for Education & Research. | |||||||
John I. Von Lehman 10 Creek Side Drive Cincinnati, Ohio | 56 | Director, Member of Audit and Independent Directors Committees | Since August 2007 | 32 | Former Executive Vice President, CFO, Secretary, and Director. The Midland Company (1988-2007); Director and Audit Committee Member: American Financial Group, Inc.; Director: Life Enriching Communities; Audit Committee Member: Health Alliance of Cincinnati, Red Cross Cincinnati Chapter; Investment Committee: Xavier University Foundation. | |||||||
Interested Director and Officers | ||||||||||||
John J. Palmer One Financial Way Cincinnati, Ohio | 69 | President, Chairman of the Board and Director | Since July 1997 | 32 | Director and Vice Chairman: ONLIC; President, CEO and Director: NSLA; Director: ONI and various other Ohio National-affiliated companies; Director. Cincinnati Symphony Orchestra; Trustee: Cincinnati Opera. | |||||||
Thomas A. Barefield One Financial Way Cincinnati, Ohio | 56 | Vice President | Since February 1998 | 32 | Executive Vice President and Chief Marketing Officer - Institutional Sales: ONLIC; Director and Vice President - Marketing: NSLA; Director: ONI; Senior Vice President: Ohio National Equities, Inc.; Recent graduate of class XXIX of Leadership Cincinnati. | |||||||
Christopher A. Carlson One Financial Way Cincinnati, Ohio | 49 | Vice President | Since March 2000 | 32 | Senior Vice President and Chief Investment Officer: ONLIC; President and Director: ONI; Chief Investment Officer: NSLA; Officer and Director of various other Ohio National-affiliated companies. | |||||||
Dennis R. Taney One Financial Way Cincinnati, Ohio | 61 | Chief Compliance Officer | Since June 2004 | 32 | Second Vice President: ONLIC, Chief Compliance Officer: ONLIC, ONI, NSLA, and other Ohio National-affiliated companies; Prior to August 2004 was Treasurer of the Fund. | |||||||
R. Todd Brockman One Financial Way Cincinnati, Ohio | 40 | Treasurer | Since August 2004 | 32 | Second Vice President, Mutual Fund Operations: ONLIC and NSLA; Treasurer: ONI, Prior to July 2004 was Assurance Manager with Grant Thornton LLP, a certified public accounting firm. | |||||||
200
Ohio National Fund, Inc.
Information about Directors and Officers (Unaudited) (Continued) | December 31, 2008 |
Term served | Number of | |||||||||||
as Officer | Portfolios in | Principal Occupation and Other | ||||||||||
Name and Address | Age | Position with the Fund | or Director | Fund Complex | Directorships During Past Five Years | |||||||
Kimberly A. Plante One Financial Way Cincinnati, Ohio | 34 | Secretary | Since March 2005 | 32 | Prior to August 2007 was Assistant Secretary, Associate Counsel: ONLIC; Secretary: ONI; Prior to December 2004 was Associate with Dinsmore & Shohl LLP, attorneys at law. | |||||||
Catherine E. Gehr One Financial Way Cincinnati, Ohio | 36 | Assistant Treasurer | Since March 2005 | 32 | Manager, Mutual Fund Operations: ONLIC; Prior to April 2004 was an Accounting Consultant in the Financial Control Department of ONLIC. | |||||||
Katherine L. Carter One Financial Way Cincinnati, Ohio | 29 | Assistant Secretary | Since August 2007 | 32 | Assistant Counsel: ONLIC; Prior to July 2007 was Compliance Officer with Fifth Third Securities, Inc. |
201
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202
Ohio National Fund, Inc. Post Office BOx 371 Cincinnati, Ohio 45201 From 1320 Rev. 2-09 |
Item 2. Code Of Ethics.
As of the end of the period covered by this report, Ohio National Fund, Inc. (the “Fund”) has adopted a code of ethics that applies to the Fund’s principal executive officer and principal financial officer. There were no substantive amendments or waivers to the Code of Ethics during the period covered by this report.
A copy of this Code of Ethics is filed as Exhibit EX-99.CODE to this Form N-CSR and is also available, without charge, upon request, by calling 877-781-6392 toll free.
Item 3. Audit Committee Financial Expert.
The Fund’s Board of Directors has determined that the Fund has an audit committee financial expert serving on its Audit Committee. The Audit Committee financial expert is Mr. James E. Bushman. Mr. Bushman is independent for purposes of Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees And Services.
The aggregate fees for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the Fund’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years are listed below.
(a) | Audit Fees. | ||
Fiscal year ended December 31, 2008: $265,800 Fiscal year ended December 31, 2007: $255,600 |
(b) | Audit-Related Fees. | ||
Professional services rendered in connection with the consent on the Fund’s N1A filing. Fiscal year ended December 31, 2008: $4,600 Fiscal year ended December 31, 2007: $4,600 |
(c) | Tax Fees. None. | ||
(d) | All Other Fees. None. |
(e)(1) | Audit Committee Pre-Approval Policies and Procedures: |
The Fund’s Audit Committee has adopted an Audit Committee Charter that requires that the Audit Committee oversee the quality and appropriateness of the accounting methods used in the preparation of the Fund’s financial statements, and the independent audit thereof; approve the selection and compensation of the independent auditors; and pre-approve the performance, by the independent auditors, of non-audit services for the Fund, its investment adviser, or any affiliated entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the Fund.
(e)(2) | Services Approved Pursuant to Paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X: |
During the fiscal years ended December 31, 2007 and 2006, there were no non-audit services provided by the Fund’s principal accountant that would have required pre-approval by the Fund’s Audit Committee. The audit related fees aforementioned were pre-approved by the Fund’s Audit Committee, although not required by paragraph (c) (7) (ii) of Regulation S-X as the audit-related fees were less than five percent of the total amount of revenues paid to the Fund’s principal accountant.
(f) | Not applicable. | ||
(g) | There were no non-audit services provided by the Fund’s principal accountant, other than items disclosed in item (b) above, in which a fee was billed to the Fund, the Fund’s adviser, and any entity controlling, |
controlled by, or under common control with the adviser that provides ongoing services to the registrant for the last two fiscal years. |
(h) | Not applicable, as there were no non-audit services performed by the Fund’s principal accountant that were rendered to the Fund, the Fund’s adviser, or any entity controlling, controlled by, or under common control with the adviser that provided ongoing services to the registrant that were not pre-approved for the last two fiscal years. |
Item 5. Audit Committee Of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments.
Not applicable.
Item 7. Disclosure Of Proxy Voting Policies And Procedures For Closed-End Management Investment Companies.
Not Applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not Applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not Applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
There were no material changes to the procedures by which shareholders may recommend nominees to the Fund’s Board of Directors.
Item 11. Controls and Procedures.
(a) | The Fund’s principal executive officer and principal financial officer have concluded, based on their evaluation conducted as of a date within 90 days of the filing of this report, that the Fund’s disclosure controls and procedures are adequately designed and are operating effectively to ensure (i) that material information relating to the Fund, including its consolidated subsidiaries, is made known to them by others within those entities, particularly during the period in which this report is being prepared; and (ii) that information required to be disclosed by the Fund on Form N-CSR is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. | ||
(b) | There were no changes in the Fund’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Fund’s internal control over financial reporting. |
Item 12. Exhibits.
(a)(1) | The Fund’s Code of Ethics pursuant to Item 2 of Form N-CSR is filed and attached hereto as EX-99.CODE. |
(a)(2) | A separate certification for each principal executive officer and principal financial officer of the Fund as required by Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) is attached hereto as EX-99.CERT. | |
The certifications required by Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto as EX-99.906CERT. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Ohio National Fund, Inc. | ||||
By: | /s/ John J. Palmer | |||
John J. Palmer President and Director March 9, 2009 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Ohio National Fund, Inc. | ||||
By: | /s/ John J. Palmer | |||
John J. Palmer President and Director March 9, 2009 |
By: | /s/ R. Todd Brockman | |||
R. Todd Brockman Treasurer March 9, 2009 |