<PAGE> 1
File No. 333-43515
--------
811-1978
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. 2 /X/
Post-Effective Amendment No. / /
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 28 /X/
(Exact Name of Registrant)
OHIO NATIONAL VARIABLE ACCOUNT A
(Name of Depositor)
THE OHIO NATIONAL LIFE INSURANCE COMPANY
(Address of Depositor's Principal Executive Offices)
One Financial Way
Cincinnati, Ohio 45242
(Depositor's Telephone Number)
(513) 794-6100
(Name and Address of Agent for Service)
Ronald L. Benedict, Second Vice President and Counsel
The Ohio National Life Insurance Company
P.O. Box 237
Cincinnati, Ohio 45201
Notice to:
W. Randolph Thompson, Esq.
Of Counsel
Jones & Blouch L.L.P.
Suite 405 West
1025 Thomas Jefferson Street, N.W.
Washington, D.C. 20007
Approximate Date of Proposed Public Offering: As soon after the effective date
of this registration statement as is practicable.
It is proposed that this filing will become effective (check appropriate space):
--- immediately upon filing pursuant to paragraph (b) of Rule 485
--- on (date) pursuant to paragraph (b) of Rule 485
--- 60 days after filing pursuant to paragraph (a)(1) of Rule 485
--- on (date) pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following box:
--- this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
<PAGE> 2
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until the registration
statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
OHIO NATIONAL VARIABLE ACCOUNT A
<TABLE>
<CAPTION>
N-4 Item Caption in Prospectus
- -------- ---------------------
<S> <C>
1 Cover Page
2 Glossary of Special Terms
3 Not applicable
4 Not applicable
5 Ohio National Life
Ohio National Variable Account A
The Funds
6 Deductions and Expenses
7 Description of Variable Annuity Contracts
8 Annuity Period
9 Death Benefit
10 Accumulation Period
11 Surrender and Partial Withdrawal
12 Federal Tax Status
13 Not applicable
14 Table of Contents
Caption in Statement of Additional Information
15 Cover Page
16 Table of Contents
17 Not applicable
18 Custodian
Independent Certified Public Accountants
19 See Prospectus (Distribution of Variable Annuity Contracts)
Loans Under Tax-Sheltered Annuities
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
20 Underwriter
21 Calculation of Money Market Subaccount Yield
Total Return
22 See Prospectus (Annuity Period)
23 Financial Statements
Caption in Part C
24 Financial Statements and Exhibits
25 Directors and Officers of the Depositor
26 Persons Controlled by or Under Common Control with the Depositor or
Registrant
27 Number of Contractowners
28 Indemnification
29 Principal Underwriter
30 Location of Accounts and Records
31 Not applicable
32 Undertakings and Representations
</TABLE>
<PAGE> 4
PART A
PROSPECTUS
<PAGE> 5
PROSPECTUS
FLEXIBLE PURCHASE PAYMENT
INDIVIDUAL VARIABLE ANNUITY CONTRACTS
OHIO NATIONAL VARIABLE ACCOUNT A
THE OHIO NATIONAL LIFE INSURANCE COMPANY
ONE FINANCIAL WAY
CINCINNATI, OHIO 45242
TELEPHONE (513) 794-6452
This prospectus offers a multiple funded, flexible purchase payment, individual
variable annuity contract that provides for the accumulation of values and the
payment of annuity benefits on a variable and/or fixed basis.
Variable annuities are designed to provide lifetime annuity payments which will
vary with the investment results of the investment vehicle chosen. The
accumulation value of a contract will vary with the investment performance of
eligible investment companies ("Funds") prior to the annuity payout date, and
the amount of each annuity payment will vary with the investment performance of
the Funds subsequent to the commencement of annuity payments. There can be no
assurance that the value of a contract during the years prior to the annuity
payout date or the aggregate amount of annuity payments received after such date
will equal or exceed the purchase payments made therefor.
The variable annuity contracts offered by this prospectus are designed for (1)
annuity purchase plans adopted by public school systems and certain tax-exempt
organizations described in Section 501(c)(3) of the Internal Revenue Code (the
"Code"), qualifying for tax-deferred treatment pursuant to Section 403(b) of the
Code, (2) other employee pension or profit-sharing trusts or plans qualifying
for tax-deferred treatment under Section 401(a), 401(k) or 403(a) of the Code,
(3) individual retirement annuities qualifying for tax-deferred treatment under
Section 408 or 408A of the Code, (4) state and municipal deferred compensation
plans and (5) non-tax-qualified retirement plans.
The minimum initial purchase payment is $5,000 ($2,000 for IRAs). Payments after
the first payment may be made in amounts of at least $500 at any time. Ohio
National Life reserves the right to restrict total purchase payments in excess
of $1,000,000.
Purchase payments are allocated to one or more (but not more than ten)
subaccounts of Ohio National Variable Account A ("VAA") and/or the Guaranteed
Account as directed by the contract owner. VAA is a separate account established
by The Ohio National Life Insurance Company ("Ohio National Life"). The assets
of VAA are invested in shares of the Funds. See page 2 for the list of
available Funds. See the accompanying prospectuses of the Funds which might
also contain information about portfolios that are not available for these
contracts.
All or part of the contract's accumulation value may be withdrawn before the
annuity payout date. Amounts withdrawn may be subject to federal income tax
penalties. A contingent deferred sales charge up to 6% of the amount withdrawn
may be assessed. Up to 10% of the accumulation value may be withdrawn each year
without this charge. Exercise of contract rights may be subject to the terms of
any qualified employee trust or annuity plan under which a contract is
purchased. This prospectus contains no information concerning such trusts or
plans.
The contracts offered hereby may be revoked by the purchaser without penalty
within 10 days of their delivery (or such longer period required by state law).
THIS PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE. IT SETS FORTH THE
INFORMATION ABOUT VAA AND THE VARIABLE ANNUITY CONTRACTS OFFERED BY THIS
PROSPECTUS THAT YOU SHOULD KNOW BEFORE INVESTING. ADDITIONAL INFORMATION ABOUT
VAA HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IN A STATEMENT OF
ADDITIONAL INFORMATION DATED MAY 1, 1998 THE STATEMENT OF ADDITIONAL
INFORMATION IS INCORPORATED HEREIN BY REFERENCE AND IS AVAILABLE UPON REQUEST
AND WITHOUT CHARGE BY WRITING OR CALLING OHIO NATIONAL LIFE AT THE ABOVE
ADDRESS. THE TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL INFORMATION IS ON
PAGE 2.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS SHOULD BE ACCOMPANIED BY THE CURRENT FUND PROSPECTUSES.
MAY 1 , 1998
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Available Funds............................................2
Glossary of Special Terms..................................3
Fee Table..................................................3
Financial Statements.......................................8
Ohio National Life.........................................8
Ohio National Variable Account A ..........................9
The Funds..................................................9
Distribution of Variable Annuity Contracts ...............10
Deductions and Expenses...................................10
Contingent Deferred Sales Charge ....................10
Contract Administration Charge.......................11
Deduction for Administrative Expenses ...............11
Deduction for Risk Undertakings......................11
Transfer Fee.........................................12
Deduction for State Premium Tax......................12
Fund Expenses........................................12
Description of Variable Annuity Contracts ................12
10-Day Free Look.....................................12
Accumulation Period..................................12
Annuity Period.......................................17
Contract Owner Inquiries.............................20
Performance Data.....................................20
Federal Tax Status........................................21
IRA Disclosure Statement..................................24
</TABLE>
STATEMENT OF ADDITIONAL INFORMATION
Custodian
Independent Certified Public Accountants
Underwriter
Calculation of Money Market Subaccount Yield
Total Return
Transfer Limitations
The Year 2000 Issue
Appendix: Loans Under Tax-Sheltered Annuities
Financial Statements for VAA and Ohio National Life
Available Funds
Ohio National Fund, Inc.: Money Market Portfolio
Bond Portfolio
Omni Portfolio (a flexible fund)
S&P 500 Index Portfolio
International Portfolio
Capital Appreciation Portfolio
Growth & Income Portfolio
Small Cap Growth Portfolio
High Income Bond Portfolio
Equity Income Portfolio
Blue Chip Value Portfolio
Goldman Sachs Variable Insurance Trust: Goldman Sachs Growth & Income Fund
Goldman Sachs CORE U.S. Equity Fund
Goldman Sachs Capital Growth Fund
Goldman Sachs Global Income Fund
Janus Aspen Series: Growth Portfolio
International Growth Portfolio
Worldwide Growth Portfolio
Balanced Portfolio
J.P. Morgan Series Trust II: J.P. Morgan Small Company Portfolio
Montgomery Funds III: Small Cap Opportunities Fund
Emerging Markets Fund
Morgan Stanley Universal Funds, Inc.: Fixed Income Portfolio
U.S. Real Estate Portfolio
Value Portfolio
Emerging Markets Debt Portfolio
Salomon Brothers Variable
Series Funds Inc.: Capital Fund
Total Return Fund
Investors Fund (a capital growth
fund)
Strong Variable Insurance Funds, Inc.: Strong Growth Fund II
Strong Opportunity Fund II (a
mid/small cap fund)
Strong Schafer Value Fund II
GLOSSARY OF SPECIAL TERMS
ACCUMULATION PERIOD - The period prior to the annuity payout date and during the
lifetime of the annuitant.
ACCUMULATION UNIT - A unit of measure used to determine the value of contracts
during the accumulation period.
ACCUMULATION VALUE - The cash value of an annuity contract before the annuity
payout date.
ANNUITANT - Any natural person who is to receive or is receiving annuity
payments and upon whose continuation of life annuity payments with life
contingencies depend.
ANNUITY PAYOUT DATE - The date on which annuity payments are to begin.
ANNUITY PAYMENTS - Periodic payments made to an annuitant pursuant to an annuity
contract.
ANNUITY UNIT - A unit of measure used to determine the second and subsequent
variable annuity payments and reflecting the investment performance of the Fund.
FUND - Investment portfolios of any registered open-end investment company in
which contract assets may be invested.
FUND SHARES - Shares of any available Fund.
GUARANTEED ACCOUNT - Fixed value allocations which are part of the general
assets of Ohio National Life.
OWNER - During the lifetime of the designated annuitant and prior to the
specified annuity payout date, the owner is the person in whose name the
contract is registered. On and after the annuity payout date the annuitant
becomes the owner. After the death of the annuitant, the beneficiary becomes the
owner.
PURCHASE PAYMENTS - The amount of payments made by the owner or on his behalf
under the annuity contract.
SETTLEMENT - The application of the accumulation value of an annuity contract
under the settlement provisions contained therein.
SUBACCOUNT - Subdivisions of VAA, each of which invests exclusively in shares
of a designated Fund.
VALUATION PERIOD - The period of time from one determination of accumulation
unit and annuity unit values to their next determination. Such determination is
made at the same time that the net asset value of Fund Shares is determined. See
the accompanying Fund prospectuses.
1940 ACT - The Investment Company Act of 1940, as amended, or any similar
successor federal legislation.
2
<PAGE> 7
FEE TABLE
<TABLE>
<CAPTION>
CONTRACTOWNER TRANSACTION EXPENSES
Deferred Sales Load (as a percentage of YEARS PAYMENT
----- -------
<S> <C> <C>
value withdrawn; the 1st 6%
percentage varies with 2nd 6%
number of years from 3rd 5%
purchase payments to 4th 4%
which values relate) 5th 2%
6th 1%
7th and later 0%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Exchange (transfer) Fee $10 (currently no charge for the first transfer each calendar month)
Annual Contract Fee $30 (no fee if contract value exceeds $50,000)
</TABLE>
<TABLE>
<CAPTION>
VAA ANNUAL EXPENSES (as a percentage
of average account value)
<S> <C>
Mortality and Expense Risk Fees *** 1.15%
Account Fees and Expenses 0.25%
-----
Total VAA Annual Expenses 1.40%
</TABLE>
FUND ANNUAL EXPENSES (after fee waiver) (as a percentage of each Fund's
average net assets)
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL FUND
FEES EXPENSES EXPENSES
---------- -------- ----------
<S> <C> <C> <C>
Ohio National Fund:
Money Market Portfolio* 0.25% 0.13% 0.38%
Bond Portfolio 0.60% 0.18% 0.78%
Omni Portfolio 0.55% 0.16% 0.71%
S&P 500 Index Portfolio 0.40% 0.12% 0.52%
International Portfolio 0.90% 0.32% 1.22%
Capital Appreciation Portfolio 0.80% 0.15% 0.95%
Growth & Income Portfolio 0.85% 0.10% 0.95%
Small Cap Growth Portfolio** 0.90% 0.15% 1.05%
High Income Bond Portfolio** 0.75% 0.25% 1.00%
Equity Income Portfolio** 0.75% 0.50% 1.25%
Blue Chip Portfolio** 0.90% 0.50% 1.40%
Goldman Sachs Variable Insurance Trust:
Goldman Sachs Growth & Income Fund** 0.75% 0.15% 0.90%
Goldman Sachs CORE U.S. Equity Fund** 0.70% 0.10% 0.80%
Goldman Sachs Capital Growth Fund** 0.75% 0.15% 0.90%
Goldman Sachs Global Income Fund** 0.90% 0.15% 1.05%
Janus Aspen Series:
Growth Portfolio* 0.65% 0.05% 0.70%
International Growth Portfolio* 0.67% 0.29% 0.96%
Worldwide Growth Portfolio* 0.66% 0.08% 0.74%
Balanced Portfolio* 0.76% 0.07% 0.83%
J.P. Morgan Series Trust II:
J.P.Morgan Small Company Portfolio 0.60% 0.55% 1.15%
Montgomery Funds III:
Small Cap Opportunities Fund** 1.20% 0.30% 1.50%
Emerging Markets Fund* 1.19% 0.56% 1.75%
Morgan Stanley Universal Funds, Inc.:
Fixed Income Portfolio* (0.61%) 1.31% 0.70%
U.S. Real Estate Portfolio* (0.32%) 1.52% 1.10%
Value Portfolio* (0.40%) 1.32% 0.85%
Emerging Markets Debt Portfolio* 0.04% 1.26% 1.30%
Salomon Brothers Variable Series Fund, Inc.:
Capital Fund** 1.00% 0.25% 1.25%
Total Return Fund** 0.80% 0.45% 1.25%
Investors Fund** 0.75% 0.50% 1.25%
Strong Variable Insurance Funds, Inc.:
Strong Growth Fund II 1.00% 0.20% 1.20%
Strong Opportunity Fund II 1.00% 0.10% 1.10%
Strong Schafer Value Fund II** 1.00% 0.20% 1.20%
</TABLE>
EXAMPLE - If you surrendered your contract at the end of the applicable time
period, you would pay the following aggregate expenses on a $1,000 investment in
each subaccount, assuming 5% annual return:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Ohio National Fund, Inc.:
Money Market Portfolio* $ 73 $105 $122 $225
Bond Portfolio 77 117 142 267
Omni Portfolio 77 115 139 260
S&P 500 Index Portfolio 75 109 129 240
International Portfolio 82 131 164 310
Capital Appreciation Portfolio 79 122 151 284
Growth & Income Portfolio 79 122 151 284
Small Cap Growth Portfolio** 80 125 156 293
High Income Bond Portfolio** 80 124 153 289
Equity Income Portfolio** 82 131 166 313
Blue Chip Portfolio** 84 136 173 327
Goldman Sachs Variable Insurance Trust:
Goldman Sachs Growth & Income Fund** 79 121 148 279
Goldman Sachs CORE U.S. Equity Fund** 78 118 143 269
Goldman Sachs Capital Growth Fund** 79 121 148 279
Goldman Sachs Global Income Fund** 80 125 156 293
Janus Aspen Series:
Growth Portfolio* 77 115 138 258
International Growth Portfolio* 79 123 151 285
Worldwide Growth Portfolio* 77 116 140 263
Balanced Portfolio* 78 119 145 272
J.P. Morgan Series Trust II:
J.P.Morgan Small Company Portfolio 81 128 161 303
Montgomery Funds III:
Small Cap Opportunities Fund** 85 139 178 336
Emerging Markets Fund* 87 146 190 359
Morgan Stanley Universal Funds, Inc.:
Fixed Income Portfolio* 77 115 138 258
U.S. Real Estate Portfolio* 81 127 158 298
Value Portfolio* 78 119 146 274
Emerging Markets Debt Portfolio* 83 133 168 318
Salomon Brothers Variable Series Fund, Inc.:
Capital Fund** 82 131 166 313
Total Return Fund** 82 131 166 313
Investors Fund** 82 131 166 313
Strong Variable Insurance Funds, Inc.:
Strong Growth Fund II 82 130 163 308
Strong Opportunity Fund II 81 127 158 298
Strong Schafer Value Fund II** 82 130 163 308
</TABLE>
EXAMPLE - If you do not surrender your contract or you annuitize at the end of
the applicable time period, you would pay the following aggregate expenses on
the same investment:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Ohio National Fund, Inc.:
Money Market Portfolio* $ 20 $ 61 $104 $225
Bond Portfolio 24 73 125 267
Omni Portfolio 23 71 121 260
S&P 500 Index Portfolio 21 65 111 240
International Portfolio 28 86 146 310
Capital Appreciation Portfolio 25 78 133 284
Growth & Income Portfolio 25 78 133 284
Small Cap Growth Portfolio** 26 81 138 293
High Income Bond Portfolio** 26 79 136 289
Equity Income Portfolio** 28 87 148 313
Blue Chip Portfolio** 30 91 155 327
Goldman Sachs Variable Insurance Trust:
Goldman Sachs Growth & Income Fund** 25 76 131 279
Goldman Sachs CORE U.S. Equity Fund** 24 73 126 269
Goldman Sachs Capital Growth Fund** 25 76 131 279
Goldman Sachs Global Income Fund** 26 81 138 293
Janus Aspen Series:
Growth Portfolio* 23 70 120 258
International Growth Portfolio* 25 78 134 285
Worldwide Growth Portfolio* 23 72 123 263
Balanced Portfolio* 24 74 127 272
J.P. Morgan Series Trust II:
J.P. Morgan Small Company Portfolio 27 84 143 303
Montgomery Funds III:
Small Cap Opportunities Fund** 31 94 160 336
Emerging Markets Fund* 33 102 172 359
Morgan Stanley Universal Funds, Inc.:
Fixed Income Portfolio* 23 70 120 258
U.S. Real Estate Portfolio* 27 82 141 298
Value Portfolio* 24 75 128 274
Emerging Markets Debt Portfolio* 29 88 150 318
Salomon Brothers Variable Series Fund, Inc.:
Capital Fund** 28 87 148 313
Total Return Fund** 28 87 148 313
Investors Fund** 28 87 148 313
Strong Variable Insurance Funds, Inc.:
Strong Growth Fund II 28 85 145 308
Strong Opportunity Fund II 27 82 141 298
Strong Schafer Value Fund II** 28 85 145 308
</TABLE>
* For certain Funds, management fees are presently being voluntarily waived in
part or in whole by the Fund's investment adviser (and, where the management fee
is shown as a negative, the investment adviser is further reimbursing the Fund)
in order to reduce total Fund expenses. Without those waivers and
reimbursements, the management fees would be as follows:
<TABLE>
<S> <C>
Ohio National Fund, Inc.
Money Market Portfolio 0.30%
Janus Aspen Series
Growth Portfolio 0.74%
International Growth Portfolio 0.72%
Worldwide Growth Portfolio 0.77%
Balanced Portfolio 0.77%
Montgomery Funds III
Emerging Markets Fund 1.25%
Morgan Stanley Universal Funds, Inc.
Fixed Income Portfolio 0.40%
U.S. Real Estate Portfolio 0.80%
Value Portfolio 0.55%
Emerging Markets Debt Portfolio 0.80%
</TABLE>
EXAMPLE - Without the voluntary fee waivers, if you surrendered your contract at
the end of the applicable time period, you would pay the following aggregate
expenses on a $1,000 investment, assuming 5% annual return:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Ohio National Fund, Inc.
Money Market Portfolio $ 74 $109 $124 $231
Janus Aspen Series
Growth Portfolio 78 118 143 268
International Growth Portfolio 80 124 154 290
Worldwide Growth Portfolio 78 119 146 274
Balanced Portfolio 78 119 145 273
Montgomery Funds III
Emerging Markets Fund 88 148 193 365
Morgan Stanley Universal Funds, Inc.
Fixed Income Portfolio 87 145 188 356
U.S. Real Estate Portfolio 93 163 217 410
Value Portfolio 88 150 196 370
Emerging Markets Debt Portfolio 90 155 205 387
</TABLE>
EXAMPLE - Without the voluntary fee waivers, if you do not surrender your
contract or you annuitize at the end of the applicable time period, you would
pay the following aggregate expenses on the same investment:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Ohio National Fund, Inc.
Money Market Portfolio $ 20 $ 62 $107 $231
Janus Aspen Series
Growth Portfolio 24 73 125 268
International Growth Portfolio 26 80 136 290
Worldwide Growth Portfolio 24 75 128 274
Balanced Portfolio 24 75 128 273
Montgomery Funds III
Emerging Markets Fund 34 103 175 365
Morgan Stanley Universal Funds, Inc.
Fixed Income Portfolio 33 100 170 356
U.S. Real Estate Portfolio 39 118 199 410
Value Portfolio 34 105 178 370
Emerging Markets Debt Portfolio 36 111 187 387
</TABLE>
** The "Other Expenses" (and, accordingly, the Total Fund Expenses) for these
Funds are based on estimates.
*** The Mortality and Expense Risk fees may be changed at any time, but may not
presently be increased to more than 1.15% and for contracts issued in the
future to more than 1.55%.
3
<PAGE> 8
The purpose of the above table is to help you to understand the costs and
expenses that a variable annuity contractowner will bear directly or indirectly.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSE. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Note that the
expense amounts shown in the examples are aggregate amounts for the total
number of years indicated. In the examples, the annual fee is treated as if it
were deducted as a percentage of assets, based upon the average account value
for all contracts, including ones from which a portion of the contract fee may
be paid from amounts invested in the Guaranteed Account. Neither the table nor
the examples reflect any premium taxes that may be applicable to a contract,
which currently range from 0% to 3.5%. The above table and examples reflect only
the charges for contracts currently offered by this prospectus and not other
contracts that may be offered by Ohio National Life. For further details, see
DEDUCTION For STATE PREMIUM TAX, page 11.
FINANCIAL STATEMENTS
The complete financial statements of VAA and Ohio National Life, and the
Independent Auditors' Reports thereon, may be found in the Statement of
Additional Information.
4
<PAGE> 9
OHIO NATIONAL LIFE
Ohio National Life was organized under the laws of Ohio in 1909 as a stock life
insurance company and became a mutual life insurance company in 1959. It writes
life, accident and health insurance and annuities in 47 states, the District of
Columbia and Puerto Rico. Currently it has assets in excess of $6.3 billion and
equity in excess of $600 million. Its home office is located at One Financial
Way, Cincinnati, Ohio 45242. Ohio National Life's policyholders have approved a
plan of reorganization that, if approved by the Ohio Superintendent of
Insurance, would convert Ohio National Life to a stock company ultimately owned
by a mutual holding company (Ohio National Mutual Holdings, Inc.) with the
majority ownership of the latter being by the policyholders.
OHIO NATIONAL VARIABLE ACCOUNT A
VAA was established in 1969 by Ohio National Life as a separate account under
Ohio law for the purpose of funding variable annuity contracts. Purchase
payments for the variable annuity contracts are allocated to one or more
subaccounts of VAA. However, contract values may not be allocated to more than
10 variable subaccounts at any one time. Income, gains and losses, whether or
not realized, from assets allocated to VAA are, as provided in the contracts,
credited to or charged against VAA without regard to other income, gains or
losses of Ohio National Life. The assets maintained in VAA will not be charged
with any liabilities arising out of any other business conducted by Ohio
National Life. Nevertheless, all obligations arising under the contracts,
including the commitment to make annuity payments, are general corporate
obligations of Ohio National Life. Accordingly, all of Ohio National Life's
assets are available to meet its obligations under the contracts. VAA is
registered as a unit investment trust under the 1940 Act. The assets of the
subaccounts of VAA are invested at net asset value (without an initial sales
charge) in shares of corresponding Funds. Values of other contracts not offered
through this prospectus are also allocated to VAA, including some subaccounts
that are not available for the contracts offered herein.
THE FUNDS
The Funds presently available are listed on page 2. The Funds are open-end
investment companies registered under the 1940 Act. Fund Shares are sold only to
insurance company separate accounts to fund variable annuity contracts and
variable life insurance policies and, in some cases, to qualified plans. The
value of each Fund's investments fluctuates daily and is subject to the risk of
changing economic conditions as well as the risk inherent in the ability of
management to anticipate changes necessary in such investments to meet changes
in economic conditions.
The Funds receive investment advice, for a fee, from their investment advisers.
Those fees are shown in the Fee Table beginning on page 3. For Ohio National
Fund, Inc., the adviser is Ohio National Investments, Inc. (with Societe
Generale Asset Management Corp. as sub-adviser to the International Portfolio,
T. Rowe Price Associates, Inc. as sub-adviser to the Capital Appreciation
Portfolio, Robertson Stephens Investment Management, L.P. as sub-adviser to the
Growth & Income and Small Cap Growth Portfolios, and Federated Investment
Counseling as sub-adviser to the High Income Bond, Equity Income and Blue Chip
Portfolios); for Goldman Sachs Variable Insurance Trust, the adviser is Goldman,
Sachs & Co.; for Janus Aspen Series, the adviser is Janus Capital Corporation;
for J.P. Morgan Series Trust II, the adviser is J.P. Morgan Investment
Management, Inc.; for Montgomery Funds III, the advisor is Montgomery Asset
Management, LLC; for Morgan Stanley Universal Funds, Inc., the adviser of the
U.S. Real Estate and Emerging Markets Equity Portfolios is Morgan Stanley Asset
Management, Inc., and the adviser of the Fixed Income and Value Portfolios is
Miller Anderson & Sherrerd, LLP; for Salomon Brothers Variable Series Funds
Inc., the adviser is Salomon Brothers Asset Management, Inc.; and for Strong
Variable Insurance Funds, Inc., the adviser is Strong Capital Management, Inc.
Affiliates of each of the Funds may compensate Ohio National Life based upon an
annual percentage of the average assets of each Fund that are allocated to VAA.
These percentage amounts vary by Fund and are intended to compensate Ohio
National Life for administrative and other services that it provides to the
Funds and their affiliates.
For additional information concerning the Funds, including the investment
objectives of each, see the Fund prospectuses. Read the Fund prospectuses
carefully before investing. The Fund prospectuses may contain information about
other portfolios that are not available as investment options for the contract
offered herein. There is no assurance that the stated objectives and policies
of any of the Funds will be achieved.
5
<PAGE> 10
MIXED AND SHARED FUNDING
In addition to being offered to VAA, certain Fund Shares are currently offered
to other separate accounts of Ohio National Life in connection with variable
annuity contracts and a separate account of Ohio National Life Assurance
Corporation in connection with variable life insurance contracts. Fund Shares
may also be offered to other insurance company separate accounts and qualified
plans. It is conceivable that in the future it may become disadvantageous for
both variable life and variable annuity separate accounts or for separate
accounts of other life insurance companies to invest in Fund Shares. Although
neither Ohio National Life nor any of the Funds currently foresees any such
disadvantage, the Board of Directors or Trustees of each Fund will monitor
events in order to identify any material conflict between different types of
contractowners and to determine what action, if any, should be taken in response
thereto, including the possible withdrawal of VAA`s participation in a Fund.
Material conflicts could result from such things as (1) changes in state
insurance law; (2) changes in federal income tax law; (3) changes in the
investment management of any Fund; or (4) differences between voting
instructions given by different types of contractowners.
VOTING RIGHTS
Ohio National Life shall vote Fund Shares held in VAA at meetings of
shareholders of a Fund in accordance with voting instructions received from
contract owners. The number of Fund Shares for which an owner is entitled to
give instructions will be determined by Ohio National Life in the manner
described below, not more than 90 days prior to the meeting of shareholders.
Proxy material will be distributed to each owner together with appropriate forms
for giving voting instructions. Fund Shares held in VAA, for which no timely
instructions are received, will be voted by Ohio National Life in proportion to
the instructions which are received with respect to all contracts participating
in VAA.
During the accumulation period, the number of Fund Shares for which instructions
may be given to Ohio National Life is determined by dividing the variable
accumulation value of a subaccount of the contract by the net asset value of a
share of the corresponding Fund as of the same date. During the annuity payment
period, the number of Fund Shares for which such instructions may be given is
determined by dividing the actuarial liability for variable annuities in the
course of payment by the net asset value of a Fund Share as of the same date.
Generally, the number of votes tends to decrease as annuity payments progress.
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DISTRIBUTION OF VARIABLE ANNUITY CONTRACTS
The variable annuity contracts are sold by Ohio National Life insurance agents
who are also registered representatives of broker-dealers that have entered into
distribution agreements with Ohio National Equities, Inc. ("ONEQ," a
wholly-owned subsidiary of Ohio National Life) which is the principal
underwriter of the contracts. ONEQ and the broker-dealers are registered under
the Securities Exchange Act of 1934 and are members of the National Association
of Securities Dealers, Inc. Ohio National Life pays ONEQ 7.25% of each purchase
payment and ONEQ then pays a portion of that amount to the broker-dealers as
compensation for their sales efforts. The broker-dealers will remunerate their
registered representatives from their own funds. Purchase payments on which no
compensation is paid to registered representatives may not be included in
amounts on which the sales compensation will be paid to ONEQ. To the extent
that the amount of the contingent deferred sales charge received by Ohio
National Life is not sufficient to recover the fee paid to ONEQ, any deficiency
will be made up from Ohio National Life's general account assets which include,
among other things, any profit from the mortality and expense risk charges.
ONEQ's address is One Financial Way, Cincinnati, Ohio 45242.
DEDUCTIONS AND EXPENSES
SALES CHARGE
No deduction is made for sales expense from purchase payments. A contingent
deferred sales charge may be assessed by Ohio National Life when a contract is
surrendered or a partial withdrawal is made to defray expenses relating to the
sale of the contract, including compensation to broker-dealers, cost of sales
literature and prospectuses, and other expenses related to sales activity. The
charge equals a percentage of the amount withdrawn. This percentage will vary
with the number of years from the date the purchase payments were made (starting
with the first purchase payment) as follows:
<TABLE>
<CAPTION>
YEARS PAYMENT
<S> <C> <C>
1st 6%
2nd 6%
3rd 5%
4th 4%
5th 2%
6th 1%
7th and later 0%
</TABLE>
During each contract year, partial withdrawals of not more than 10% of the
accumulation value (as of the day of the first withdrawal made during that
contract year) may be made without the imposition of the contingent deferred
sales charge.
CONTRACT ADMINISTRATION CHARGE
Each year on the contract anniversary (or at the time of surrender of the
contract), Ohio National Life will deduct a contract administration charge of
$30 from the accumulation value to reimburse it for the expenses relating to the
maintenance of the contract. There is no contract administration charge (a) for
contracts having a value of at least $50,000 on the contract anniversary or (b)
after the annuity payout date. Ohio National Life guarantees not to increase the
contract administration charge.
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DEDUCTION FOR ADMINISTRATIVE EXPENSES
A deduction is made at the end of each valuation period equal to 0.25% on an
annual basis of the contract value for administrative expenses. This deduction
is designed to reimburse Ohio National Life for expenses incurred for
accounting, auditing, legal, contract owner services, reports to regulatory
authorities and contract owners, contract issue, etc., not covered by the
contract administration charge.
DEDUCTION FOR RISK UNDERTAKINGS
Prior to the annuity payout date, Ohio National Life guarantees that the
accumulation value of all contracts will not be affected by any excess of sales
and administrative expenses over the deductions provided therefor. Ohio National
Life also guarantees to pay a death benefit in the event of the annuitant's
death prior to the annuity payout date (see Death Benefit, page 15). After the
annuity payout date, Ohio National Life guarantees that variable annuity
payments will not be affected by adverse mortality experience or expenses.
For assuming these risks, Ohio National Life, in determining the accumulation
unit values and the annuity unit values for each subaccount, makes a deduction
from the applicable investment results equal to 1.15% of the contract value on
an annual basis. However, Ohio National Life has agreed that the deduction for
these risk undertakings shall not be increased to more than the rate in effect
at the time the contract is issued. Ohio National Life may discontinue this
limitation on its right to increase the deduction, but only as to any contracts
purchased after notice of the discontinuance. That deduction may be decreased by
Ohio National Life at any time and may be increased not more frequently then
annually to not more than 1.55% on an annual basis. Although Ohio National Life
views the risk charge as an indivisible whole, of the amount currently being
deducted, it has estimated that a reasonable allocation would be 0.65% for
mortality risk, and 0.50% for expense risk. Although Ohio National Life hopes to
realize a profit from this charge, if the deduction is insufficient to cover the
actual risk involved, the loss will fall on Ohio National Life; conversely, if
the deduction proves more than sufficient, the excess will be a gain to Ohio
National Life.
TRANSFER FEE
A transfer fee of $10 is made for each transfer from one or more subaccounts to
one or more other subaccounts. The fee is charged pro rata against the
subaccounts from which the transfer is effected. No fee is charged for the
first transfer each calendar month.
DEDUCTION FOR STATE PREMIUM TAX
Most states do not presently charge a premium tax for these contracts. Where a
tax applies, the rates for tax-qualified contracts are presently 0.5% in
California, 1.0% in Puerto Rico and West Virginia, 2.0% in Kentucky and 2.25% in
the District of Columbia. For non-tax-qualified contracts, the rates are
presently 1.0% in Puerto Rico, West Virginia and Wyoming, 1.25% in the South
Dakota, 2.0% in Kansas, Kentucky and Maine, 2.25% in the District of Columbia,
2.35% in California and 3.5% in Nevada. The deduction for premium taxes will be
made when incurred. Normally, that is not until annuity payments begin. However,
in Kansas, South Dakota and Wyoming, they are presently being deducted from
purchase payments.
FUND EXPENSES
There are deductions from, and expenses paid out of, the assets of the Funds.
These are described in the accompanying prospectuses of the Funds.
DESCRIPTION OF VARIABLE ANNUITY CONTRACTS
10-DAY FREE LOOK
The contract owner may revoke the contract at any time until the end of 10 days
after receipt of the contract (or such longer period as may be required by
applicable state law) and receive a refund of the value of the contract as of
the date of the cancellation. To revoke, the owner must return the contract to
Ohio National Life within the free look period. In those states where state law
requires that the original purchase price be returned in lieu of the current
contract value in case of revocation during the free look period, any purchase
payments will be allocated to the Money Market subaccount until the end of the
free look period.
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ACCUMULATION PERIOD
PURCHASE PAYMENT PROVISIONS
The contracts provide for a minimum initial purchase payment of $5,000 ($2,000
for IRAs), and minimum subsequent purchase payments of $500 per payment. Ohio
National Life reserves the right to restrict total purchase payments in excess
of $1,000,000. Subject to these limits, payments may be made at any time.
Failure to make payments shall not constitute a default.
ACCUMULATION UNITS
Prior to the annuity payout date, the contract value is measured by accumulation
units. Each purchase payment results in the crediting of accumulation units to
the contract (see Crediting Accumulation Units). The number of accumulation
units so credited remains constant but the dollar value of accumulation units
will vary depending upon the investment results of the particular subaccount to
which payments are allocated.
CREDITING ACCUMULATION UNITS
Orders or applications, together with the first purchase payment, are forwarded
to the home office of Ohio National Life for acceptance. Upon acceptance, a
contract is issued to the contract owner, and the first purchase payment is then
credited to the contract in the form of accumulation units. Initial purchase
payments are credited not later than two business days after receipt if all
information necessary for issuing a contract and processing the purchase payment
is complete. If this cannot be done within five business days, the purchase
payment will be returned immediately to the applicant unless the applicant
specifically consents to having Ohio National Life retain the purchase payment
until the necessary information is completed. After that, the purchase payment
will be credited within two business days. Subsequent purchase payments are sent
directly to the home office of Ohio National Life and are applied to provide
that number of accumulation units (for each subaccount) determined by dividing
the amount of the purchase payment by the value of the appropriate accumulation
unit next computed after the payment is received at the home office of Ohio
National Life.
ALLOCATION OF PURCHASE PAYMENTS
You may direct the allocation of your purchase payments among up to 10
subaccounts of VAA and to the Guaranteed Account. The amount allocated to any
subaccount or the Guaranteed Account must equal a whole percentage. The
allocation of future purchase payments may be changed at any time upon written
notice to the home office of Ohio National Life.
ACCUMULATION UNIT VALUE AND ACCUMULATION VALUE
The accumulation unit value of each subaccount of VAA was set at $10 when the
first payment for these contracts was allocated to each subaccount. The
accumulation unit value for any subsequent valuation period is determined by
multiplying the accumulation unit value for the immediately preceding valuation
period by the net investment factor (described below) for such subsequent
valuation period. The accumulation value is determined by multiplying the total
number of accumulation units (for each subaccount) credited to the contract by
the accumulation unit value (for such subaccount) for the valuation period for
which the accumulation value is being determined.
NET INVESTMENT FACTOR
The net investment factor is a quantitative measure of the investment results of
each subaccount of VAA. The net investment factor for each subaccount for any
valuation period is determined by dividing (a) by (b), then subtracting (c) from
the result, where:
(a) is -
(1) the net asset value of the corresponding Fund Share determined as of
the end of a valuation period, plus
(2) The per share amount of any dividends or other distributions declared
for that Fund if the "ex-dividend" date occurs during the valuation
period, plus or minus
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<PAGE> 14
(3) per share charge or credit for any taxes paid or reserved for which is
determined by Ohio National Life to result from the maintenance or
operation of that subaccount of VAA; (No federal income taxes are
applicable under present law.)
(b) is the net asset value of the corresponding Fund Share determined at the
end of the preceding valuation period; and
(c) is the deduction for administrative and sales expenses and risk
undertakings. (See Deduction for Administrative Expenses, page 10, and,
Deduction for Risk Undertakings, page 11.)
SURRENDER AND PARTIAL WITHDRAWAL
Prior to the annuity payout date, or thereafter in the case of annuity Option
1(e) described below, the owner of a contract may surrender (totally withdraw
the value of) his or her contract for its accumulation value or elect a partial
(at least $1,000) withdrawal therefrom. These transactions may be subject to the
contingent deferred sales charge described on page 10. That charge is a
percentage of the total amount withdrawn. For example, if a partial withdrawal
of $1,000 is requested during the first two years after the first purchase
payment for which there are contract values, and after you have received that
year's "free" withdrawal of 10% of the accumulation value, Ohio National Life
would pay you $1,000, but the total amount deducted from the accumulation value
would be $1,063.83 (i.e., $1,063.83 x 6% = $63.83). Unless otherwise specified,
the withdrawal will be made pro-rata from the values of each subaccount. The
amount available for withdrawal is the sum of the subaccount values less the
contingent deferred sales charge, if any. In the case of a complete surrender,
the amount payable is also reduced by the amount of the contract administration
charge. Payment by Ohio National Life shall be made within seven days from the
date of receipt of the request for such payment except as it may be deferred
under the circumstances described below. Surrenders and partial withdrawals are
limited or not permitted in connection with certain retirement plans. See Tax
Deferred Annuities, page 21. For tax consequences of a surrender or withdrawal,
see Federal Tax Status, page 20.
Occasionally Ohio National Life may receive a request for a surrender or partial
withdrawal which includes contract values derived from purchase payments which
have not cleared the banking system. Ohio National Life may delay mailing that
portion which relates to such payments until the check for the purchase payment
has cleared. Ohio National Life requires the return of the contract in the case
of a complete surrender.
The right to withdraw may be suspended or the date of payment postponed (1) for
any period during which the New York Stock Exchange is closed (other than
customary weekend and holiday closings) or during which trading on the Exchange,
as determined by the Securities and Exchange Commission, is restricted; (2) for
any period during which an emergency, as determined by the Commission, exists as
a result of which disposal of securities held in a Fund is not reasonably
practical, or it is not reasonably practical to determine the value of the
Fund's net assets; or (3) or such other periods as the Commission may by order
permit for the protection of security holders.
TRANSFERS AMONG SUBACCOUNTS
Contract values may be transferred from one or more subaccounts to one or more
other subaccounts upon the request of the owner. Transfers may be made at any
time during the accumulation period. The amount of any such transfer from or to
any subaccount must be at least $300 (or the entire value of the contract's
interest in a subaccount, if less). Ohio National Life reserves the right to
limit the number, frequency, method or amount of transfers. Transfers from any
Fund on any one day may be limited to 1% of the previous day's total net assets
of that Fund if Ohio National Life or the Fund in its or their discretion,
believes that the Fund might otherwise be damaged. If and when transfers must
be so limited, some transfer requests will not be made. In determining which
requests will be made, scheduled transfers (pursuant to a pre-existing DCA
program) will be made first, followed by mailed written requests in the order
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<PAGE> 15
postmarked and, lastly, telephone and facsimile requests in the order received.
Contract owners whose transfer requests are not made will be so notified.
Current SEC rules preclude us from processing at a later date those requests
that were not made. Accordingly, a new transfer request would have to be
submitted in order to make a transfer that was not made because of these
limitations. After the annuity payout date, transfers among subaccounts can only
be made once each calendar quarter. Such transfers may then be made without a
transfer fee. (See Transfer Fee, page 11, and Transfers after Annuity Payout
Date, page 18). Ohio National Life may restrict transfers of a contract's
Guaranteed Account value during a contract year to not more than 20% of such
value (or $1,000, if greater) as of the beginning of that contract year.
TELEACCESS
If the contract owner first submits a pre-authorization form to Ohio National
Life, contract and unit values and interest rates can be checked and transfers
may be made by telephoning Ohio National Life between 7:00 a.m. and 7:00 p.m.
(Eastern time) on days that it is open for business, at 1-800-366-6654, #8. Ohio
National Life will honor pre-authorized telephone transfer instructions from
anyone who is able to provide the personal identifying information requested via
TeleAccess. Telephone transfer requests will not be honored after the
annuitant's death. For added security, transfers are confirmed in writing sent
to the owner on the next business day. However, if a transfer cannot be
completed as requested, a customer service representative will contact the owner
in writing sent within 48 hours of the TeleAccess request.
SCHEDULED TRANSFERS (DOLLAR COST AVERAGING)
Ohio National Life administers a scheduled transfer ("DCA") program enabling you
to preauthorize automatic monthly or quarterly transfers of a specified dollar
amount of at least $300, (a) from any variable subaccount(s) to any other
subaccount(s), including the Guaranteed Account, or (b) from the Guaranteed
Account to any other subaccount(s), if the DCA program is established at the
time the contract is issued, the DCA program is scheduled to begin within 6
months of contract issue and the term of the DCA program does not exceed 2
years. For transfers from variable subaccounts, at least 12 transfers must be
scheduled and the term of the DCA program may not exceed 5 years. Each DCA
transfer must be at least $300 and at least 12 DCA transfers must be scheduled.
No transfer fee is charged for DCA transfers. Ohio National Life may discontinue
the DCA program at any time. You may also discontinue further DCA transfers by
giving Ohio National Life written notice at least 7 business days before the
next scheduled transfer.
DCA generally has the effect of reducing the risk of purchasing at the top, and
selling at the bottom, of market cycles. DCA transfers from the Guaranteed
Account or from a fund with a stabilized net asset value, such as the Money
Market subaccount, will generally reduce the average total cost of indirectly
purchasing Fund Shares because greater numbers of shares will be purchased when
the share prices are lower than when prices are higher. However, DCA does not
assure you of a profit, nor does it protect against losses in a declining
market. Moreover, for transfers from a subaccount not having a stabilized net
asset value, DCA will have the effect of reducing the average price of the
shares being redeemed. DCA might also be used to systematically transfer
accumulation values from variable subaccounts to the Guaranteed Account, in
anticipation of retirement, in order to reduce the risk of making a single
transfer during a low market.
PORTFOLIO REBALANCING
You may elect to have Ohio National Life automatically transfer amounts on a
quarterly, semi-annual or annual basis to maintain a specified percentage (whole
percentages only) of contract value in each of two or more designated
subaccounts. The purpose of a portfolio rebalancing strategy is to maintain,
over time, your desired allocation percentage in the designated subaccounts
having differing investment performance. Portfolio rebalancing will not
necessarily enhance future performance or protect against future losses.
To elect this option, or to discontinue it, you must provide Ohio National Life
with written authorization. Portfolio rebalancing transactions are not included
for the purpose of determining any transfer charge.
NURSING FACILITY CONFINEMENT
The contingent deferred sales charge will be waived if the annuitant is, or has
been, confined to a state-licensed or legally-operated inpatient nursing
facility for at least 30 consecutive days and (1) the confinement begins after
the first contract anniversary, (2) the contract was issued before the
annuitant's 80th birthday, and (3) the request for surrender or partial
withdrawal, together with proof of the confinement, is received at Ohio National
Life's home office while the annuitant is confined or within 90 days after
discharge from the facility. This waiver of the contingent deferred sales charge
may not be available in all states.
DEATH BENEFIT
In the event of the death of the annuitant and any contingent annuitant prior to
the annuity payout date, the contract provides a death benefit to be paid to a
designated beneficiary. The amount of the death benefit will be determined as of
the date of the annuitant's death. It will be paid to the beneficiary in a
single sum unless the owner or beneficiary elects settlement under one or more
of the settlement options provided in the contract.
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<PAGE> 16
The death benefit will be the greatest of: (a) the contract value; or (b) the
net of purchase payments less withdrawals; or (c) the stepped-up death benefit
amount if the contract has been in effect for at least 3 years. For the 3-year
period beginning on the third contract anniversary, the stepped-up death benefit
will be the greater of (i) the contract value as of the third anniversary or
(ii) the net of purchase payments less withdrawals made on or before the third
anniversary. At the beginning of each later 3-year period (until the annuitant
attains age 90), the stepped-up death benefit will be the greater of (i) the
contract value on that date or (ii) the death benefit as of the last day of the
preceding 3-year period. The stepped-up death benefit amount is increased by
purchase payments and decreased by withdrawals made during each 3-year period
after the third anniversary.
In those states where permitted, an optional annual stepped-up death benefit may
be elected at the time the contract is issued. With that option, the death
benefit will be increased in the manner indicated in the preceding paragraph,
until the annuitant attains age 80, on each contract anniversary on which the
contract value exceeds the death benefit for the previous year. There is an
additional charge (presently at an annual rate of 0.10% of the contract value,
which rate may be increased to no more than 0.25% on contracts issued in the
future) for this optional benefit.
In those states where permitted, an optional death benefit may be elected by
the beneficiary within 90 days after the annuitant's death prior to age 90.
With this elective option, the death benefit is the greater of (a) the contract
value on the date of death or (b) the guaranteed minimum death benefit amount.
The guaranteed minimum death benefit amount for contract values held in the
Guaranteed Account and the Money Market subaccount is the contract value as of
the date of death. For all other subaccounts, the guaranteed minimum death
benefit amount is (i) the net of purchase payments less withdrawals plus (ii) a
daily increase at an effective annual rate of 6%.
GUARANTEED ACCOUNT
The Guaranteed Account guarantees a fixed return for a specified period of time
and guarantees the principal against loss. Any portion of a contract relating to
the Guaranteed Account is not registered under the Securities Act of 1933. The
Guaranteed Account is not registered as an investment company under the 1940
Act. Accordingly, neither the Guaranteed Account nor any interests in it are
subject to the provisions or restrictions of either such Act, and the
disclosures regarding it have not been reviewed by the staff of the Securities
and Exchange Commission.
The Guaranteed Account consists of all of Ohio National Life's general assets
other than those allocated to a separate account. Purchase payments and contract
values may be allocated between the Guaranteed Account and VAA. The allocation
will be as elected by the owner at the time of purchase or as subsequently
changed.
Ohio National Life will invest its general assets in its discretion as allowed
by applicable state law. Investment income from Ohio National Life's general
assets will be allocated to those contracts having guaranteed values in
accordance with the terms of such contracts.
The amount of investment income allocated to the contracts will vary from year
to year in Ohio National Life's sole discretion. However, Ohio National Life
guarantees that it will credit interest at a rate of not less than 3.00% per
year, compounded annually, to contract values allocated to the Guaranteed
Account. Ohio National Life may credit interest at a rate in excess of 3.00%,
but any such excess interest credit will be in Ohio National Life's sole
discretion.
Ohio National Life guarantees that, prior to the commencement of annuity payout,
the guaranteed value of a contract will never be less than (a) the amount of
purchase payments allocated to, and transfers into, the Guaranteed Account, plus
(b) interest credited at the rate of 3.00% per year compounded annually, plus
(c) any additional excess interest Ohio National Life may credit to guaranteed
values, and less (d) any partial withdrawals, loans and transfers from the
guaranteed values, and less (e) any contingent deferred sales charges on partial
withdrawals, loan interest, state premium taxes, transfer fees, and the portion
of the $30 annual contract administration charge allocable to the Guaranteed
Account. No deductions are made from the Guaranteed Account for administrative
expenses or risk undertakings. (See "Deductions and Expenses".)
Other than pursuant to a DCA (scheduled transfer) or portfolio rebalancing
program, Ohio National Life reserves the right to restrict transfers of a
contract's Guaranteed Account value during a contract year to not more than 20%
of such value as of the beginning of a contract year (or $1,000, if greater). As
provided by applicable state law, Ohio National Life reserves the right to defer
the payment of amounts withdrawn from the Guaranteed Account for a period not to
exceed six months from the date written request for such withdrawal is received
by Ohio National Life.
OHIO NATIONAL LIFE EMPLOYEE DISCOUNT
Ohio National Life and its affiliated companies offer a credit on the purchase
of contracts by any of their employees, directors or retirees, or their spouse
or the surviving spouse of a deceased retiree, covering any of the foregoing or
any of their minor children, or any of their children ages 18 to 21 who is
either (i) living in the purchaser's household or (ii) a full-time college
student being supported by the purchaser, or any of the purchaser's minor
grandchildren under the Uniform Gifts to Minors Act. This credit is treated as
additional income under the contract. The amount of the credit equals 3.2% of
all purchase payments made in the first contract year and 5.5% of purchase
payments made in the second through sixth contract years. Ohio National Life
credits the Guaranteed Account of the eligible person's contract in the
foregoing amounts at the time of each payment made by the eligible person.
TEXAS STATE OPTIONAL RETIREMENT PROGRAM
Under the Texas State Optional Retirement Program (the "Program"), purchase
payments may be excluded from the gross income of state employees for federal
tax purposes to the extent that such purchase payments do not exceed the
exclusion allowance provided by the Code. The Attorney General of Texas has
interpreted the Program as prohibiting any participating state employee from
receiving the surrender value of a contract funding benefits under the Program
prior to termination of employment or the state employee's retirement, death or
total disability. Therefore, no surrender or partial withdrawal by a participant
in the Program will be allowed until the first of these events occurs.
ANNUITY PERIOD
ANNUITY PAYOUT DATE
Annuity payments under a contract will begin on the annuity payout date. This
date is selected by the owner at the time the contract is issued and must be at
least 30 days after the contract date. It may be changed from time to time by
the owner so long as the annuity payout date selected is the first day of any
month at least 30 days after the date of such change. The contract restricts the
annuity payout date to not later than the first of the month following the
annuitant's 90th birthday; however, this restriction may be modified by
applicable state law or it may be waived by mutual agreement between Ohio
National Life and the owner.
The contracts include Ohio National Life's assurance that (except for option
1(e), below) annuity payments will be paid for the lifetime of the annuitant
(and joint annuitant, if any) in accordance with the annuity rates contained in
the contract, regardless of actual mortality experience.
Other than in connection with annuity Option 1(e) described below, once annuity
payments commence, the contract cannot be surrendered for cash except that, upon
the death of the annuitant, the beneficiary shall be entitled to surrender the
contract for the commuted value of any remaining period- certain payments.
Surrenders and partial withdrawals from Option 1(e) are permitted at any time.
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ANNUITY OPTIONS
The owner may elect one or more of the following annuity options, and may change
such election anytime before the annuity payout date.
Option 1(a): Life Annuity with installment payments for the lifetime of the
annuitant (under this option it is possible for the annuitant to
receive only one payment; this could happen if the annuitant
should die before receiving the second payment; there is no
residual value of the contract after annuitant's death).
Option 1(b): Life Annuity with installment payments guaranteed for five years
and continuing thereafter during the remaining lifetime of the
annuitant.
Option 1(c): Life Annuity with installment payments guaranteed for ten years
and continuing thereafter during the remaining lifetime of the
annuitant.
Option 1(d): Installment Refund Life Annuity with payments guaranteed for a
period certain and continuing thereafter during the remaining
lifetime of the annuitant. The number of period-certain payments
is equal to the amount applied under this option divided by the
amount of the first payment.
Option 1(e): Installment Refund annuity with payments guaranteed for a fixed
number (up to thirty) of years. This option is available
for variable annuities only. Although the deduction for risk
undertakings is taken from annuity unit values, Ohio National
Life has no mortality risk during the annuity payout period
under this option.
Option 2(a): Joint & Survivor Life Annuity with installment payments during
the lifetime of an annuitant and continuing during the lifetime
of a designated contingent annuitant (under this option it is
possible for the annuitant and contingent annuitant to receive
only one payment; this could happen if both were to die before
receiving the second payment).
Option 2(b): Joint & Survivor Life Annuity with installment payments
guaranteed for ten years and continuing thereafter during the
remaining lifetime of the annuitant or a designated contingent
annuitant.
Other settlement options are available as agreed to by Ohio National Life.
Unless the contract owner directs otherwise, as of the annuity payout date the
contract values will be applied to provide annuity payments pro-rata from each
subaccount in the same proportion as the contract values immediately prior to
the annuity payout date.
If no election is in effect on the annuity payout date, the accumulation value
of the contract will be applied under Option 1(c) (except that certain contracts
might require a Joint and Survivor Annuity pursuant to the Pension Reform Act of
1974, as amended) with the beneficiary as payee for any remaining period-certain
installments payable after the death of the annuitant. Options 2(a) and 2(b) are
available only with the consent of Ohio National Life if the contingent
annuitant is not related to the annuitant.
The Internal Revenue Service has not ruled on the tax treatment of a commutable
variable annuity. If you select Option 1(e), it is possible that the IRS could
determine that the entire value of the annuity is fully taxable at the time you
elect Option 1(e) or that variable annuity payments under this option should not
be taxed under the annuity rules (see Federal Tax Status, page 20), which could
result in your payments being fully taxable to you. Should the IRS so rule. Ohio
National Life may be required to tax report up to the full value of the annuity
to you as taxable income.
DETERMINATION OF AMOUNT OF THE FIRST VARIABLE ANNUITY PAYMENT
The first variable annuity payment is determined by applying the accumulation
value for each subaccount in accordance with the settlement option tables
contained in the contract. The rates contained in those tables depend upon the
annuitant's (and any contingent annuitant's) age and sex and the option
selected. Contracts issued to plans sponsored by employers subject to Title VII
of the Civil Rights Act of 1964 or similar state statutes use annuity tables
which do not vary with annuitant's sex. The accumulation value to be applied is
determined at the end of a valuation period (selected by Ohio National Life and
uniformly applied) not more than 10 valuation periods before the annuity payout
date.
If the amount to be applied under an option is less than $5,000, the option
shall not be available and the accumulation value shall be paid in a single sum
to the annuitant. If the first periodic payment under any option would be less
than $25, Ohio National Life reserves the right to change the frequency of
payments so that the first such payment is at least $25.
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ANNUITY UNIT AND THE DETERMINATION OF SUBSEQUENT PAYMENTS
Subsequent variable annuity payments will vary to reflect the investment
performance of each applicable subaccount. The amount of each subsequent payment
is determined by annuity units. The number of annuity units for each subaccount
is determined by dividing the dollar amount of the first annuity payment from
each subaccount by the value of the subaccount annuity unit for the same
valuation period used to determine the accumulation value of the contract
applied to provide annuity payments. This number of annuity units remains fixed
during the annuity payment period unless changed as provided below.
The annuity unit value for each subaccount was set at $10 for the valuation
period as of which the first variable annuity payable from each subaccount of
VAA was calculated. The annuity unit value for each subsequent valuation period
equals the annuity unit value for the immediately preceding valuation period
multiplied by the net investment factor (see page 12) for such subsequent
valuation period and by a factor (0.999919 for a one-day valuation period) to
neutralize the assumed interest rate discussed below.
The dollar amount of each subsequent variable annuity payment is equal to the
fixed number of annuity units for each subaccount multiplied by the value of the
annuity unit for the valuation period.
The annuity rate tables contained in the contracts are based on the 1983(a)
Mortality Table Projected to 1996 under Scale G with compound interest at the
effective rate of 3% per year. A higher interest assumption would mean a higher
initial annuity payment but a more slowly rising series of subsequent annuity
payments if annuity unit values were increasing (or a more rapidly falling
series of subsequent annuity payments if annuity unit values were decreasing). A
lower interest assumption would have the opposite effect. If the actual net
investment rate were equal to the assumed interest rate, annuity payments would
be level.
TRANSFERS AFTER ANNUITY PAYOUT DATE
After annuity payments have been made for at least 12 months, the annuitant can,
once each calendar quarter, change the subaccount(s) on which variable annuity
payments are based. On at least 30 days written notice to Ohio National Life at
its home office, that portion of the periodic variable annuity payment directed
by the annuitant will be changed to reflect the investment results of a
different subaccount. The annuity payment immediately after such change will be
the amount that would have been paid without such change. Subsequent payments
will reflect the new mix of subaccount allocation.
OTHER CONTRACT PROVISIONS
ASSIGNMENT
Any amount payable in settlement of the contracts may not be commuted,
anticipated, assigned or otherwise encumbered, or pledged as loan collateral to
any person other than Ohio National Life. To the extent permitted by law, no
such amounts shall be subject in any way to any legal process to subject them to
payment of any claims against an annuitant before the annuity payout date. A
tax-qualified contract may not, but a non-tax-qualified contract may, be
collaterally assigned before the annuity payout date. Ownership of a
tax-qualified contract may not be transferred except to (1) the annuitant, (2) a
trustee or successor trustee of a pension or profit-sharing trust which is
qualified under Section 401 of the Code, or (3) the employer of the annuitant
provided that the contract after transfer is maintained under the terms of a
retirement plan qualified under Section 403(a) of the Code for the benefit of
the annuitant, or (4) as otherwise permitted by laws and regulations governing
plans for which the contract may be issued. Ownership of a non-tax-qualified
contract may be transferred.
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PERIODIC REPORTS
Ohio National Life will furnish each contract owner, once each calendar quarter
prior to the annuity payout date, a statement showing the number of accumulation
units credited to the contract by subaccount and the accumulation unit value of
each such unit as of the end of the preceding quarter. In addition, as long as
the contract remains in effect, Ohio National Life will forward any periodic
reports of the Funds.
SUBSTITUTION FOR FUND SHARES
If investment in a Fund is no longer possible or in Ohio National Life's
judgment becomes inappropriate to the purposes of the contract, Ohio National
Life may substitute one or more other mutual funds. Substitution may be made
with respect to both existing investments and the investment of future purchase
payments. However, no such substitution will be made without any necessary
approval of the Securities and Exchange Commission. We may also add other
investment portfolios of the Funds or of other mutual funds as eligible
investments of VAA.
CONTRACT OWNER INQUIRIES
Any questions from contract owners should be directed to Ohio National Life,
Variable Annuity Administration, P.O. Box 2669, Cincinnati, Ohio 45201;
telephone 1-800-366-6654 (8:30 a.m. to 4:30 p.m. Eastern time).
PERFORMANCE DATA
Ohio National Life may advertise performance data for the various Funds showing
the percentage change in the value of an accumulation unit based on the
performance of the applicable portfolio over a period of time (usually a
calendar year). Such percentage change is determined by dividing the increase
(or decrease) in value for the unit by the accumulation unit value at the
beginning of the period. This percentage figure will reflect the deduction of
any asset-based charges under the contract but will not reflect the deduction of
any applicable contract administration charge or contingent deferred sales
charge. The deduction of any applicable contract administration charge or
contingent deferred sales charge would reduce any percentage increase or make
greater any percentage decrease.
Any such advertising will also include average annual total return figures
calculated as shown in the Statement of Additional Information. The average
annual total return figures will reflect the deduction of applicable contract
administration charges and contingent deferred sales charges as well as
applicable asset-based charges.
Ohio National Life may also distribute sales literature comparing VAA's
performance to the Consumer Price Index or to such established market indexes as
the Dow Jones Industrial Average, the Standard & Poor's 500 Stock Index, IBC's
Money Fund Reports, Lehman Brothers Bond Indices, the Morgan Stanley Europe
Australia Far East Index, Morgan Stanley World Index, Russell 2000 Index, or
other variable annuity separate accounts or mutual funds with investment
objectives similar to those of the Funds.
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FEDERAL TAX STATUS
The following discussion of federal income tax treatment of amounts received
under a variable annuity contract is not exhaustive, does not purport to cover
all situations, and is not intended as tax advice. A qualified tax adviser
should always be consulted with regard to the application of law to individual
circumstances. Tax laws can change, even with respect to contracts that have
already been issued. Tax law revisions, with unfavorable consequences to
contracts offered by this prospectus, could have retroactive effect on
previously issued contracts or on subsequent voluntary transactions in
previously issued contracts.
Ohio National Life is taxed as a life insurance company under Subchapter L of
the Internal Revenue Code (the "Code"). Since the operations of VAA are a part
of, and are taxed with, the operations of Ohio National Life, VAA is not
separately taxed as a "regulated investment company" under Subchapter M of the
Code.
As to tax-qualified contracts, no federal income tax is payable under present
law on dividend income or capital gains distributions from Fund Shares held in
VAA or upon capital gains realized by VAA on redemption of Fund Shares. When a
non-tax-qualified contract is issued in connection with a deferred compensation
plan or arrangement, all rights, discretions and powers relative to the contract
are vested in the employer and you must look only to your employer for the
payment of deferred compensation benefits. Generally, in that case, an annuitant
will have no "investment in the contract" and amounts received by you from your
employer under a deferred compensation arrangement will be taxable in full as
ordinary income in the year of receipt.
The contracts described in this prospectus are considered annuity contracts
under Section 72 of the Code, which generally provides for taxation of
annuities. Under existing provisions of the Code, any increase in the
accumulation value of the contract is not taxable to you as the owner or
annuitant until you receive it, either in the form of annuity payments, as
contemplated by the contract, or in some other form of distribution (provided
that the owner of a non-tax qualified contract must be a natural person for this
purpose). With certain exceptions, where the owner of a non-tax qualified
contract is a non-natural person (corporation, partnership or trust) any
increase in the accumulation value of the contract attributable to purchase
payments made after February 28, 1986 will be treated as ordinary income
received or accrued by the contract owner during the current tax year.
When annuity payments commence under the contract each payment is taxable under
Section 72 of the Code as ordinary income in the year of receipt if the
annuitant has neither paid any portion of the purchase payments for the contract
nor has previously been taxed on any portion of the purchase payments. If any
portion of the purchase payments has been paid from or included in your taxable
income, this aggregate amount will be considered your "investment in the
contract." You will be entitled to exclude from your taxable income a portion of
each annuity payment equal to your "investment in the contract" divided by the
period of expected annuity payments, determined by your life expectancy and the
form of annuity benefit. Once your "investment in the contract" is recovered,
the entire portion of each annuity payment will be included in your taxable
income.
If an election is made to receive the accumulated value in a single sum in lieu
of annuity payments, any amount received or withdrawn in excess of the
"investment in the contract" will normally be taxed as ordinary income in the
year received. A partial withdrawal of contract values is taxable as income to
the extent that the accumulated value of the contract immediately before the
payment exceeds the "investment in the contract." Such a withdrawal is treated
as a distribution of earnings first and only second as recovery of your
"investment in the contract". Any part of the value of the contract that is
assigned or pledged to secure a loan will be taxed as if it had been a partial
withdrawal and may be subject to a penalty tax.
There is a penalty tax equal to 10% of any amount that must be included in gross
income for tax purposes. The penalty will not apply to a redemption that is (1)
received on or after the taxpayer reaches age 59-1/2; (2) made to a beneficiary
on or after the death of the annuitant; (3) attributable to the taxpayer's
becoming disabled; (4) made as a series of substantially equal periodic payments
for the life of the annuitant (or joint lives of the annuitant and beneficiary);
(5) from a contract that is a qualified funding asset for purposes of a
structured settlement; (6) made under an annuity contract that is purchased with
a single premium and with an annuity payout date not later than a year from the
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purchase of the annuity; (7) incident to divorce or (8) taken from an IRA for a
qualified first-time home purchase (up to $10,000) or qualified higher education
expenses. If an election is made not to have withholding apply to the early
withdrawal or if an insufficient amount is withheld, the contract owner may be
responsible for payment of estimated tax. You may also incur penalties under the
estimated tax rules if the withholding and estimated tax payments are not
sufficient. Failure to provide your taxpayer identification number will
automatically subject any payments under the contract to withholding.
TAX-DEFERRED ANNUITIES
Under the provisions of Section 403(b) of the Code, purchase payments made for
annuity contracts purchased for employees by public educational institutions and
certain tax-exempt organizations which are described in Section 501(c)(3) of the
Code are excludable from the gross income of such employees to the extent that
the aggregate purchase payments plus any other amounts contributed to the
purchase of a contract and toward benefits under qualified retirement plans do
not exceed the exclusion allowance determined for the employee as set forth in
Sections 403(b) and 415 of the Code. Employee contributions are, however,
subject to social security (FICA) tax withholding. All amounts received by an
employee under a contract, either in the form of annuity payments or cash
withdrawal, will be taxed under Section 72 of the Code as ordinary income for
the year received, except for exclusion of any amounts representing "investment
in the contract." Under certain circumstances, amounts received may be used to
make a "tax-free rollover" into one of the types of individual retirement
arrangements permitted under the Code. Amounts received that are eligible for
"tax-free rollover" will be subject to an automatic 20% withholding unless such
amounts are directly rolled over from the tax-deferred annuity to the individual
retirement arrangement.
With respect to earnings accrued and purchase payments made after December 31,
1988, pursuant to a salary reduction agreement under Section 403(b) of the Code,
distributions may be paid only when the employee (a) attains age 59-1/2, (b)
separates from the employer's service, (c) dies, (d) becomes disabled as defined
in the Code, or (e) incurs a financial hardship as defined in the Code. In the
case of hardship, cash distributions may not exceed the amount of such purchase
payments. These restrictions do not affect rights to transfer investments among
the subaccounts and do not limit the availability of transfers between
tax-deferred annuities.
QUALIFIED PENSION OR PROFIT-SHARING PLANS
Under present law, purchase payments made by an employer or trustee, pursuant to
a plan or trust qualified under Section 401(a) or 403(a) of the Code, are
generally excludable from gross income of the employee. The portion, if any, of
the purchase payments made by the employee, or which is considered taxable
income to the employee in the year such payments are made, constitutes an
"investment in the contract" under Section 72 of the Code for the employee's
annuity benefits. Salary reduction payments to a profit sharing plan qualifying
under Section 401(k) of the Code are generally excludable from gross income of
the employee.
The Code requires that plans must prohibit any distribution to a plan
participant prior to age 59-1/2, except in the event of death, total disability
or separation from service (special rules apply for plan terminations).
Distributions must commence no later than April 1 of the calendar year following
the year in which the participant reaches age 70-1/2. Premature distribution of
benefits or contributions in excess of those permitted by the Code may result in
certain penalties under the Code.
If an employee, or one or more of the beneficiaries, receives the total amounts
payable with respect to an employee within one taxable year after age 59-1/2 on
account of the employee's death or separation from service of the employer, any
amount received in excess of the employee's "investment in the contract" may be
taxed under special 5-year forward averaging rules. Five-year averaging will no
longer be available after 1999 except for certain grandfathered individuals. The
taxpayer can elect to have that portion of a lump-sum distribution attributable
to years of participation prior to January 1, 1974 given capital gains
treatment. The percentage of pre-74 distribution subject to capital gains
treatment decreases as follows: 100%, 1987; 95%, 1988; 75%, 1989; 50%, 1990; and
25%, 1991. For tax years 1992 and thereafter no capital gains treatment is
available (except that taxpayers who were age 50 before 1986 may still elect
capital gains treatment). The employee receiving such a distribution may be able
to make a "tax-free rollover" of the distribution less the employee's
"investment in the contract" into another qualified plan in which the employee
is a participant or into one of the types of individual retirement arrangements
permitted under the Code. An employee's surviving spouse receiving such a
distribution may be able to make a tax-free rollover to one of the types of
individual retirement arrangements permitted under the Code. Amounts received
that are eligible for "tax-free rollover" will be subject to an automatic 20%
withholding unless such amounts are directly rolled over to another qualified
plan or individual retirement arrangement.
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INDIVIDUAL RETIREMENT ANNUITIES (IRA)
Section 408(b) of the Code provides that an individual may invest an amount up
to $2,000 per year of earned income in an IRA and claim it as a personal tax
deduction if such person is not an "active participant" in an employer
maintained qualified retirement plan or such person has adjusted gross income
which does not exceed the "applicable dollar limit." For a single taxpayer, the
applicable dollar limitation is $30,000, with the amount of IRA contribution
which may be deducted reduced proportionately for Adjusted Gross Income between
$30,000-$40,000. For married couples filing jointly, the applicable dollar
limitation is $50,000, with the amount of IRA contribution which may be deducted
reduced proportionately for Adjusted Gross Income between $50,000-$60,000.
There is no deduction allowed for IRA contributions when Adjusted Gross Income
reaches $40,000 for individuals and $60,000 for married couples filing jointly.
In the alternative, an individual otherwise qualified for an IRA may elect to
contribute to an IRA for the individual and for the individual's non-working
spouse, with the total deduction limited to $4,000.
Individuals are permitted to make non-deductible IRA contributions to the extent
they are ineligible to make deductible IRA contributions. Any amount received
from another qualified plan (including another individual retirement
arrangement) which is eligible as a "tax-free rollover" may be invested in an
IRA, and is not counted toward the overall contribution limit. Earnings on
nondeductible IRA contributions are not subject to tax until they are withdrawn.
The combined limit on designated nondeductible and deductible contributions for
a tax year is the lesser of 100% of compensation or $2,000 ($4,000 in the case
of an additional contribution to a spousal IRA).
Generally, distributions (all or part) made prior to age 59-1/2 (except in the
case of death or disability) will result in a penalty tax of 10% plus ordinary
income tax treatment of the amount received. Additionally, there is an excise
tax of 6% of the amount contributed in excess of either the deductible limit or
nondeductible limit, as indicated above, if such amount is not withdrawn prior
to the filing of the income tax return for the year of contribution or applied
as an allowable contribution for a subsequent year. The excise tax will continue
to apply each year until the excess contribution is corrected. Distributions
after age 59-1/2 are treated as ordinary income at the time received.
Distributions must commence before April 1 following the year in which the
individual reaches age 70-1/2. A 50% nondeductible excise tax is imposed on the
excess in any tax year of the amount that should have been distributed over the
amount actually distributed.
Section 408A of the Code provides for a special type of IRA called a Roth IRA.
No tax deduction is allowed for contributions to a Roth IRA, but assets grow on
a tax-deferred basis. Under certain circumstances, withdrawals from a Roth IRA
can be excludable from income. Eligibility for a Roth IRA is based on adjusted
gross income and filing status. Special rules apply which allow traditional
IRAs to be rolled over or converted to a Roth IRA.
SIMPLIFIED EMPLOYEE PENSION PLANS (SEPPS)
Under Section 408 of the Code, employers may establish SEPPs for their
employees. Under these plans the employer may contribute on behalf of an
employee to an individual retirement account or annuity. The amount of the
contribution is excludable from the employee's income.
Certain employees who participate in a SEPP will be entitled to elect to have
the employer make contributions to a SEPP on their behalf or to receive the
contributions in cash. If the employee elects to have contributions made on the
employee's behalf to a SEPP, it is not treated as current taxable income to the
employee. Elective deferrals under a SEPP are subject to an inflation-indexed
limit which is $10,000 for 1998. Salary-reduction SEPPs are available only if at
least 50% of the employees elect to have amounts contributed to the SEPP and if
the employer has 25 or fewer employees at all times during the preceding year.
New salary-reduction SEPPs may not be established after 1996.
An employee may also take a deduction for individual contributions to the IRA,
subject to the limits applicable to IRAs in general. Withdrawals from the IRAs
to which the employer contributes must be permitted. These withdrawals, however,
are subject to the general rules with respect to withdrawals from IRAs.
WITHHOLDING ON DISTRIBUTION
Distributions from tax-deferred annuities or qualified pension or profit sharing
plans that are eligible for "tax-free rollover" will be subject to an automatic
20% withholding unless such amounts are directly rolled over to an individual
retirement arrangement or another qualified plan. Federal income tax withholding
on annuity payments is required. However, recipients of annuity payments are
allowed to elect not to have the tax withheld. Such an election may be revoked
at any time with respect to annuity payments and thereafter withholding would
commence. Failure to provide your taxpayer identification number will
automatically subject any payments under the contract to withholding.
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APPENDIX A
IRA DISCLOSURE STATEMENT
This statement is designed to help you understand the requirements of federal
tax law which apply to your individual retirement annuity (IRA), your simplified
employee pension IRA (SEPP-IRA) for employer contributions, your Savings
Incentive Match Plan for Employees (SIMPLE) IRA, or to one you purchase for your
spouse (see "IRA for Non-working Spouse", page 24). You can obtain more
information regarding your IRA either from your sales representative or from any
district office of the Internal Revenue Service.
FREE LOOK PERIOD
The annuity contract offered by this prospectus gives you the opportunity to
return the contract for a full refund within 10 days after it is delivered (see
page 11). This is a more liberal provision than is required in connection with
IRA's. To exercise this "free-look" provision write or call the address shown
below:
The Ohio National Life Insurance Company
Variable Annuity Administration
P. O. Box 2669
Cincinnati, Ohio 45201
Telephone: 1-800-366-6654 - 8:30 a.m. - 4:30 p.m. (Eastern time zone)
ELIGIBILITY REQUIREMENTS
IRAs are intended for all persons with earned compensation whether or not they
are covered under other retirement programs. Additionally if you have a
non-working spouse (and you file a joint tax return), you may establish an IRA
on behalf of your non-working spouse. A working spouse may establish his or her
own IRA. A divorced spouse receiving taxable alimony (and no other income) may
also establish an IRA.
CONTRIBUTIONS AND DEDUCTIONS
Contributions to your IRA will be deductible if you are not an "active
participant" in an employer maintained qualified retirement plan or you have
Adjusted Gross Income which does not exceed the "applicable dollar limit". IRA
(or SEPP-IRA) contributions must be made by no later than the time you file your
income tax return for that year. For a single taxpayer, the applicable dollar
limitation is $30,000, with the amount of IRA contribution which may be deducted
reduced proportionately for Adjusted Gross Income between $30,000-$40,000. For
married couples filing jointly, the applicable dollar limitation is $50,000,
with the amount of IRA contribution which may be deducted reduced
proportionately for Adjusted Gross Income between $50,000-$60,000. There is no
deduction allowed for IRA contributions when Adjusted Gross Income reaches
$40,000 for individuals and $60,000 for married couples filing jointly.
Contributions made by your employer to your SEPP-IRA are excludable from your
gross income for tax purposes in the calendar year for which the amount is
contributed. Certain employees who participate in a SEPP-IRA will be entitled to
elect to have their employer make contributions to their SEPP-IRA on their
behalf or to receive the contributions in cash. If the employee elects to have
contributions made on the employee's behalf to the SEPP, those funds are not
treated as current taxable income to the employee. Elective deferrals under a
SEPP-IRA are subject to an inflation-adjusted limit which is $10,000 for 1998.
Salary-reduction SEPP-IRAs (also called "SARSEPs") are available only if at
least 50% of the employees elect to have amounts contributed to the SEPP-IRA and
if the employer has 25 or fewer employees at all times during the preceding
year. New salary-reduction SEPPs may not be established after 1996.
The IRA maximum annual contribution and your tax deduction is limited to the
lesser of: (1) $2,000 or (2) 100% of your earned compensation. Contributions in
excess of the deduction limits may be subject to penalty. See below.
Under a SEPP-IRA agreement, the maximum annual contribution which your employer
may make on your behalf to a SEPP-IRA contract which is excludable from your
income is the lesser of 15% of your salary or $24,000. An employee who is a
participant in a SEPP-IRA agreement may make after-tax contributions to the
SEPP-IRA contract, subject to the contribution limits applicable to IRAs in
general. Those employee contributions will be deductible subject to the
deductibility rules described above.
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The maximum tax deductible annual contribution that a divorced spouse with no
other income may make to an IRA is the lesser of (1) $2,000 or (2) 100% of
taxable alimony.
If you or your employer should contribute more than the maximum contribution
amount to your IRA or SEPP-IRA, the excess amount will be considered an "excess
contribution". You are permitted to withdraw an excess contribution from your
IRA or SEPP-IRA before your tax filing date without adverse tax consequences.
If, however, you fail to withdraw any such excess contribution before your tax
filing date, a 6% excise tax will be imposed on the excess for the tax year of
contribution.
Once the 6% excise tax has been imposed, an additional 6% penalty for the
following tax year can be avoided if the excess is (1) withdrawn before the end
of the following year, or (2) treated as a current contribution for the
following year. (See Premature Distributions, page 26, for penalties imposed on
withdrawal when the contribution exceeds $2,000).
IRA FOR NON-WORKING SPOUSE
If you establish an IRA for yourself, you will also be eligible to establish an
IRA for your "non-working" spouse. In order to be eligible to establish such a
spousal IRA, you must file a joint tax return with your spouse and if your
non-working spouse has compensation, his/her compensation must be less than
your compensation for the year. Contributions of up to $2,000 each may be made
to your IRA and the spousal IRA if the combined compensation of you and your
spouse is at least equal to the amount contributed. If requirements for
deductibility (including income levels) are met, you will be able to deduct an
amount equal to the least of (i) the amount contributed to the IRAs (ii)
$4,000, or (iii) 100% of your combined gross income.
Contributions in excess of the contribution limits may be subject to a penalty.
See above under "Contributions and Deductions." If you contribute more than
the allowable amount, the excess portion will be considered an excess
contribution. The rules for correcting it are the same as discussed above for
regular IRAs.
Other than the items mentioned in this section, all of the requirements
generally applicable to IRAs are also applicable to IRAs established for
non-working spouses.
ROLLOVER CONTRIBUTION
Once every year, you are permitted to withdraw any portion of the value of your
IRA or SEPP-IRA and reinvest it in another IRA or bond. Withdrawals may also be
made from other IRAs and contributed to this contract. This transfer of funds
from one IRA to another is called a "rollover" IRA. To qualify as a rollover
contribution, the entire portion of the withdrawal must be reinvested in another
IRA within 60 days after the date it is received. You will not be allowed a
tax-deduction for the amount of any rollover contribution.
A similar type of rollover to an IRA can be made with the proceeds of a
qualified distribution from a qualified retirement plan or tax-sheltered
annuity. Properly made, such a distribution will not be taxable until you
receive payments from the IRA created with it. Unless you were a self-employed
participant in the distributing plan, you may later roll over such a
contribution to another qualified retirement plan as long as you have not mixed
it with IRA (or SEPP-IRA) contributions you have deducted from your income. (You
may roll less than all of a qualified distribution into an IRA, but any part of
it not rolled over will be currently includable in your income without any
capital gains treatment.)
PREMATURE DISTRIBUTIONS
At no time can your interest in your IRA or SEPP-IRA be forfeited. To insure
that your contributions will be used for your retirement, the federal tax law
does not permit you to use your IRA or SEPP-IRA as security for a loan.
Furthermore, as a general rule, you may not sell or assign your interest in your
IRA or SEPP-IRA to anyone. Use of an IRA (or SEPP-IRA) as security or assignment
of it to another will invalidate the entire annuity. It then will be includable
in your income in the year it is invalidated and will be subject to a 10%
penalty tax if you are not at least age 59-1/2 or totally disabled. (You may,
however, assign your IRA or SEPP-IRA without penalty to your former spouse in
accordance with the terms of a divorce decree.)
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You may surrender any portion of the value of your IRA (or SEPP-IRA). In the
case of a partial surrender which does not qualify as a rollover, the amount
withdrawn will be includable in your income and subject to the 10% penalty if
you are not at least age 59-1/2 or totally disabled unless you comply with
special rules requiring distributions to be made at least annually over your
life expectancy.
The 10% penalty tax does not apply to the withdrawal of an excess contribution
as long as the excess is withdrawn before the due date of your tax return.
Withdrawals of excess contributions after the due date of your tax return will
generally be subject to the 10% penalty unless the excess contribution results
from erroneous information from a plan trustee making an excess rollover
contribution or unless you are over age 59-1/2 or are disabled.
DISTRIBUTION AT RETIREMENT
Once you have attained age 59-1/2 (or have become totally disabled), you may
elect to receive a distribution of your IRA (or SEPP-IRA) regardless of when you
actually retire. You may elect to receive the distribution in either one sum or
under any one of the periodic payment options available under the contract. The
distributions from your IRA under any one of the periodic payment options or in
one sum will be treated as ordinary income as you receive them.
INADEQUATE DISTRIBUTIONS - 50% TAX
Your IRA or SEPP-IRA is intended to provide retirement benefits over your
lifetime. Thus, federal law requires that you either (1) receive a lump-sum
distribution of your IRA by April 1 of the year following the year in which you
attain age 70-1/2 or (2) start to receive periodic payments by that date. If you
elect to receive periodic payments, those payments must be sufficient to pay out
the entire value of your IRA during your life expectancy (or over the joint life
expectancies of you and your spouse). If the payments are not sufficient to meet
these requirements, an excise tax of 50% will be imposed on the amount of any
underpayment.
DEATH BENEFITS
If you, (or your surviving spouse) die before receiving the entire value of your
IRA (or SEPP-IRA), the remaining interest must be distributed to your
beneficiary (or your surviving spouse's beneficiary) in one lump-sum within 5
years of death, or applied to purchase an immediate annuity for the beneficiary.
This annuity must be payable over the life expectancy of the beneficiary
beginning within one year after your or your spouse's death. If your spouse is
the designated beneficiary, he or she is treated as the owner of the IRA. If
minimum required distributions have begun, the entire amount must be distributed
at least as rapidly as if the owner had survived. A distribution of the balance
of your IRA upon your death will not be considered a gift for federal tax
purposes, but will be included in your gross estate for purposes of federal
estate taxes.
ROTH IRAS
Section 408A of the Code now permits eligible individuals to contribute to a
type of IRA known as a "Roth IRA." Contributions may be made to a Roth IRA by
taxpayers with adjusted gross incomes of less than $160,000 for married
individuals filing jointly and less than $100,000 for single individuals.
Married individuals filing separately are not eligible to contribute to a Roth
IRA. The maximum amount of contributions allowable for any taxable year to all
Roth IRAs maintained by an individual is generally the lesser of $2,000 and 100%
of compensation for that year (the $2,000 limit is phased out for incomes
between $150,000 and $160,000 for married and between $95,000 and $110,000 for
singles). The contribution limit is reduced by the amount of any contributions
made to a non-Roth IRA. Contributions to a Roth IRA are not deductible.
For taxpayers with adjusted gross income of $100,000 or less, all or part of
amounts in a non-Roth IRA may be converted, transferred or rolled over to a Roth
IRA. Some or all of the IRA value will typically be includable in the taxpayer's
gross income. If such a rollover, transfer or conversion occurs before 1/1/99,
the portion of the amount includable in gross income must be included in income
ratably over the next four years beginning with the year in which the
transaction occurred. Provided a rollover contribution meets the requirements
for IRAs under Section 408(d)(3) of the Code, a rollover may be made from a Roth
IRA to another Roth IRA.
UNDER SOME CIRCUMSTANCES, IT MAY NOT BE ADVISABLE TO ROLL OVER, TRANSFER OR
CONVERT ALL OR PART OF A NON-ROTH IRA TO A ROTH IRA. PERSONS CONSIDERING A
ROLLOVER, TRANSFER OR CONVERSION SHOULD CONSULT THEIR OWN TAX ADVISOR.
"Qualified distributions" from a Roth IRA are excludable from gross income. A
"qualified distribution" is a distribution that satisfies two requirements: (1)
the distribution must be made (a) after the owner of the IRA attains age 59 1/2;
(b) after the owner's death; (c) due to the owner's disability; or (d) for a
qualified first time homebuyer distribution within the meaning of Section
72(t)(2)(F) of the Code; and (2) the distribution must be made in the year that
is at least five years after the first year for which a contribution was made to
any Roth IRA established for the owner or five years after a rollover, transfer
or conversion was made from a non-Roth IRA to a Roth IRA. Distributions from a
Roth IRA that are not qualified distributions will be treated as made first from
contributions and then from earnings, and taxed generally in the same manner as
distributions from a non-Roth IRA.
Distributions from a Roth IRA need not commence at age 70 1/2. However, if the
owner dies before the entire interest in a Roth IRA is distributed, any
remaining interest in the contract must be distributed by December 31 of the
calendar year containing the fifth anniversary of the owner's death subject to
certain exceptions.
PROTOTYPE STATUS
The Internal Revenue Service has been requested to review the format of your
SEPP, and to issue an opinion letter to Ohio National Life stating that your IRA
qualifies as a prototype SEPP.
REPORTING TO THE IRS
Whenever you are liable for one of the penalty taxes discussed above (6% for
excess contributions, 10% for premature distributions or 50% for underpayments),
you must file Form 5329 with the Internal Revenue Service. The form is to be
attached to your federal income tax return for the tax year in which the penalty
applies. Normal contributions and distributions must be shown on your income tax
return for the year to which they relate.
21
<PAGE> 26
PART B
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 27
OHIO NATIONAL VARIABLE ACCOUNT A
OF
THE OHIO NATIONAL LIFE INSURANCE COMPANY
One Financial Way
Cincinnati, Ohio 45242
Telephone (513) 794-6452
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1998
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the prospectus for Ohio National Variable Account A ("VAA")
flexible purchase payment individual variable annuity contracts dated May 1,
1998. To obtain a free copy of the VAA prospectus, write or call The Ohio
National Life Insurance Company ("Ohio National Life") at the above address.
Table of Contents
<TABLE>
<CAPTION>
<S> <C>
Custodian ........................................................... 2
Independent Certified Public Accountants ............................ 2
Underwriter ......................................................... 2
Calculation of Money Market Subaccount Yield ........................ 3
Total Return ........................................................ 3
Transfer Limitations ................................................ 4
The Year 2000 Issue ................................................. 5
Appendix:
Loans Under Tax-sheltered Annuities ........................ 6
Financial Statements ................................................ 7
</TABLE>
"ONcore Premier"
Variable Annuity
<PAGE> 28
CUSTODIAN
Ohio National Life has executed an agreement with Star Bank, N.A. ("the Bank"),
Cincinnati, Ohio, pursuant to which the shares of any mutual funds in which
VAA's assets may be invested ("Funds") and other assets credited to VAA will be
held in the custody of the Bank. The agreement provides that the Bank will
purchase Fund shares at their net asset value determined as of the end of the
valuation period of VAA during which the purchase payment is received by Ohio
National Life for outstanding contracts or, in the case of new contracts, the
value determined as of the end of the valuation period during which the contract
is issued. The Bank effects redemptions of Fund shares held by VAA upon
instructions from Ohio National Life at net asset value determined as of the end
of the valuation period of VAA during which a redemption request is received or
made by Ohio National Life. In addition, the Bank maintains appropriate records
with respect to all transactions in Fund shares relative to VAA.
The agreement requires the Bank to have at all times an aggregate capital,
surplus and undivided profit of not less than $2 million and prohibits
resignation by the Bank until (a) a successor custodian bank having the
qualifications enumerated above shall have agreed to serve as custodian, or (b)
VAA has been completely liquidated and the proceeds of such liquidation properly
distributed. Subject to these conditions the agreement of custodianship may be
terminated by either party upon sixty days written notice. For its services as
custodian, the Bank will be paid a fee to be agreed upon from time to time by
the Bank and Ohio National Life.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The financial statements of VAA as of December 31, 1997 and for the periods
indicated herein and of Ohio National Life's consolidated financial statements
as of December 31, 1997 and 1996 and for the periods indicated herein have been
included herein in reliance upon the reports of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
UNDERWRITER
The offering of the contracts is continuous. Prior to May 1, 1997, The O.N.
Equity Sales Company ("ONESCO"), a wholly-owned subsidiary of Ohio National
Life, was the principal underwriter of contracts issued by VAA. The aggregate
amount of underwriting commissions paid to ONESCO with respect to contracts
issued by VAA, and the amounts retained by ONESCO, for each of the last three
years have been:
<TABLE>
<CAPTION>
Aggregate Retained
Year Commissions Commissions
---- ----------- -----------
<S> <C> <C> <C>
1997 $ 903,146 $ 89,572
1996 2,461,096 239,957
1995 1,645,426 151,215
</TABLE>
Since May 1, 1997, Ohio National Equities, Inc., another wholly-owned subsidiary
of Ohio National Life, has been the principal underwriter of VAA contracts. The
aggregate amount of underwriting commissions paid to and retained by Ohio
National Equities, Inc. with respect to contracts issued by VAA has been:
<TABLE>
<CAPTION>
Aggregate Retained
Year Commissions Commissions
---- ----------- -----------
<S> <C> <C> <C>
1997 $ 2,997,646 $ 297,299
</TABLE>
-2-
<PAGE> 29
CALCULATION OF MONEY MARKET SUBACCOUNT YIELD
The current yield of the Money Market subaccount for the seven days ended on
December 31, 1997, was 4.09%. This was calculated by determining the net change,
exclusive of capital changes, in the value of a hypothetical pre-existing
account having a balance of one accumulation unit of the subaccount at the
beginning of the seven-day period, dividing the net change in subaccount value
by the value of the subaccount at the beginning of the base period to obtain the
base period return, and multiplying the difference by 365/7. The resulting
figure is carried to the nearest hundredth of one percent.
TOTAL RETURN
The average annual compounded rate of return for a contract with respect to a
particular subaccount over a given period is found by equating the initial
amount invested to the ending redeemable value using the following formula:
P(1 + T)n = ERV
where: P = a hypothetical initial payment of $1,000,
T = the average annual total return,
n = the number of years, and
ERV = the ending redeemable value of a hypothetical
$1,000 beginning-of-period payment at the end
of the period (or fractional portion thereof).
Standardized total return data based upon the performance of the subaccounts
will be up-dated within 30 days after each calendar quarter or more frequently.
In addition, non-standardized total return data, using the above formula but
based upon the performance of the Funds prior to the date this series of
contracts were initially offered (May 1, 1998), may be presented as if the same
charges and deductions applicable to these contracts had been in effect from the
inception of each corresponding Fund. Note that, for purposes of these
calculations, the annual contract administration charge of $30 is converted to
an annual percentage charge of 0.15%. This is based upon an estimated average
accumulation value of $20,000 for contracts in this series. The actual effect
that the contract administration charge would have on total returns would be
less than that percentage for contracts having a higher accumulation value and
greater than that percentage for contracts having a lower accumulation value.
The average annual non-standardized total returns for current contracts in each
of the subaccounts from the inception of the corresponding underlying Funds and
for the one-, five- and ten-year periods ending on December 31, 1997, and
assuming surrender of the contract on the latter date, are as follows:
<TABLE>
<CAPTION>
One Five Ten From Inception
Year Years Years Inception Date
---- ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Ohio National Fund:
Money Market 3.87% 3.09% 4.04% 5.78% 3-20-80
Bond 7.74% 5.96% 6.77% 7.16% 11-02-82
Omni 16.51% 11.89% 10.99% 10.50% 9-10-84
S&P 500 Index N/A N/A N/A 30.19% 1-03-97
International 0.65% N/A N/A 11.45% 4-30-93
Capital Appreciation 13.59% N/A N/A 14.12% 5-01-94
Growth & Income N/A N/A N/A 35.01% 1-03-97
Small Cap Growth N/A N/A N/A N/A 5-01-98
High Income Bond N/A N/A N/A N/A 5-01-98
Equity Income N/A N/A N/A N/A 5-01-98
Blue Chip N/A N/A N/A N/A 5-01-98
Goldman Sachs Variable:
G.S. Growth & Income N/A N/A N/A N/A 1-02-98
G.S. Core U.S. Equity N/A N/A N/A N/A 1-02-98
G.S. Capital Growth N/A N/A N/A N/A 1-02-98
G.S. Global Income N/A N/A N/A N/A 1-02-98
Janus Aspen Series:
Growth 21.20% N/A N/A 16.16% 9-13-93
International Growth 16.96% N/A N/A 17.77% 5-02-94
Worldwide Growth 20.60% N/A N/A 21.41% 9-13-93
Balanced 20.55% N/A N/A 14.78% 9-13-93
J.P. Morgan Series Trust II:
Small Company 20.95% N/A N/A 24.07% 1-03-95
Montgomery Funds III:
Small Cap Opportunities N/A N/A N/A N/A 5-01-98
Emerging Markets (2.13%) N/A N/A 1.63% 2-02-96
Morgan Stanley Universal:
Fixed Income N/A N/A N/A 8.38% 1-02-97
U.S. Real Estate N/A N/A N/A 16.44% 3-03-97
Value N/A N/A N/A 19.43% 1-02-97
Emerging Markets Debt N/A N/A N/A (0.79%) 6-16-97
Salomon Brothers Variable:
Capital N/A N/A N/A N/A 1-02-98
Total Return N/A N/A N/A N/A 1-02-98
Investors N/A N/A N/A N/A 1-02-98
Strong Variable Insurance:
Growth II 28.20% N/A N/A 28.20% 12-31-96
Opportunity II 23.90% 17.77% N/A 18.52% 5-08-92
Schafer Value II N/A N/A N/A (2.36%) 10-10-97
</TABLE>
-3-
<PAGE> 30
TRANSFER LIMITATIONS
To the extent that transfers, surrenders, partial withdrawals and annuity
payments from a subaccount exceed net purchase payments and transfers into that
subaccount, securities of the corresponding Fund may have to be sold. Excessive
sales of a Fund's securities on short notice could be detrimental to that Fund
and to contractowners with values allocated to the corresponding subaccount. To
protect the interests of all contractowners, Ohio National Life reserves the
right to limit the number, frequency, method or amount of transfers. Transfers
from any Fund on any one day may be limited to 1% of the previous day's total
net assets of that Fund if Ohio National Life or the Fund, in its or their
discretion, believes that the Fund might otherwise be damaged.
If and when transfers must be so limited, some transfer requests will not be
made. In determining which requests will be made, scheduled transfers (that is,
those pursuant to a pre-existing dollar cost averaging program) will be made
first, followed by mailed written requests in the order postmarked and, lastly,
telephone and facsimile requests in the order received. Contractowners whose
transfer requests are not made will be so notified. Current SEC rules preclude
Ohio National Life from processing at a later date those requests that were not
made. Accordingly, a new transfer request would have to be submitted in order to
make a transfer that was not made because of these limitations.
The Year 2000 Issue
Ohio National Life has considered the impact on its business of "Year 2000"
issues. It has developed a remedial plan for its computer systems and
applications. Conversion activities are presently in process and Ohio National
Life expects conversion testing and implementation to be completed by December
31, 1998. While Ohio National Life has been assured by suppliers of financial
services (including underlying mutual funds, custodians, transfer agents and
accounting agents) that their systems either are already compliant or will be so
by December 31, 1998, Ohio National Life's internal auditors intend to
independently test those systems (other than systems of unaffiliated mutual
funds and their suppliers) to verify their compliance. The failure of Ohio
National Life or one of its suppliers to achieve timely and complete compliance
could materially impair Ohio National Life's ability to conduct its business,
including its ability to accurately and timely value interests in the contracts.
-4-
<PAGE> 31
APPENDIX
LOANS UNDER TAX-SHELTERED ANNUITIES
Contracts issued as tax-sheltered annuities pursuant to plans qualifying under
Section 403(b) of the Code, and allowing for voluntary contributions only, are
eligible for loans secured by a security interest in the contract. Any such loan
must be for at least $1,000 and may only be made from guaranteed accumulation
values (see Guaranteed Account in the prospectus). The loan amount is limited
by the maximum loan formula described in the contract.
The annual effective rate of interest charged for loans will not exceed 7%.
Loans must generally be repaid within 5 years (or 20 years if the loan is used
for the purchase of the contract owner's principal residence).
The amount of the death benefit, the amount payable on a full surrender and the
amount that will be applied to provide an annuity on the annuity payout date
will be reduced by the amount of outstanding loan balance, including accrued
interest, as of the date of any such transaction.
-6-
<PAGE> 32
OHIO NATIONAL VARIABLE ACCOUNT A December 31, 1997
INDEPENDENT AUDITORS' REPORT
The Board of Directors
The Ohio National Life Insurance Company
The Contract Owners
Ohio National Variable Account A
We have audited the accompanying statements of assets and contract owners'
equity of Ohio National Variable Account A (comprising, respectively, the
Equity, Money Market, Bond, Omni, International, Capital Appreciation, Small
Cap, Global Contrarian, Aggressive Growth, S&P 500 Index, Social Awareness, Core
Growth, Growth & Income, Stellar, Strategic Income, Relative Value, Emerging
Market, VIP Growth, VIP Equity Income and VIP High Income Bond Subaccounts) as
of December 31, 1997, and the related statements of operations and changes in
contract owners' equity and schedules of changes in unit values for each of the
periods indicated herein. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation with the underlying mutual funds of securities owned as of December
31, 1997. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Ohio National Variable Account
A at December 31, 1997, and the results of their operations, changes in contract
owners' equity and changes in unit values for each of the periods indicated
herein, in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Cincinnati, Ohio
January 30, 1998
<PAGE> 33
<TABLE>
<CAPTION>
OHIO NATIONAL VARIABLE ACCOUNT A
STATEMENTS OF ASSETS AND CONTRACT OWNERS' EQUITY DECEMBER 31, 1997
MONEY CAPITAL
EQUITY MARKET BOND OMNI INTERNATIONAL APPRECIATION
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Assets - Investments
at market value
(note 2) .................. $112,226,765 $ 7,042,375 $ 5,916,477 $ 77,031,024 $ 57,020,604 $ 18,652,755
============ ============ ============ ============ ============ ============
Contract owners' equity
Contracts in
accumulation
period (note 3) .......... $111,714,188 $ 6,931,375 $ 5,907,039 $ 76,911,629 $ 57,020,604 $ 18,607,690
Annuity reserves for
for contract in
payment period ........... 512,577 111,000 9,438 119,395 0 45,065
------------ ------------ ------------ ------------ ------------ ------------
Total contract
owners' equity ............ $112,226,765 $ 7,042,375 $ 5,916,477 $ 77,031,024 $ 57,020,604 $ 18,652,755
============ ============ ============ ============ ============ ============
GLOBAL AGGRESSIVE S&P 500
SMALL CAP CONTRARIAN GROWTH INDEX
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Assets - Investments
at market value
(note 2) .................. $ 20,327,193 $ 5,251,675 $ 4,815,309 $ 6,123,852
============ ============ ============ ============
Contract owners' equity
Contracts in
accumulation
period (note 3) .......... $ 20,327,193 $ 5,251,675 $ 4,815,309 $ 6,123,852
Annuity reserves for
for contract in
payment period ........... 0 0 0 0
------------ ------------ ------------ ------------
Total contract
owners' equity ............ $ 20,327,193 $ 5,251,675 $ 4,815,309 $ 6,123,852
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
SOCIAL CORE GROWTH & STRATEGIC RELATIVE
AWARENESS GROWTH INCOME STELLAR INCOME VALUE
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Assets - Investments
at market value
(note 2) .................. $ 810,077 $ 3,494,278 $ 6,436,809 $ 611,536 $ 1,075,071 $ 3,166,554
============ ============ ============ ============ ============ ============
Contract owners' equity
Contracts in
accumulation
period (note 3) .......... $ 810,077 $ 3,494,278 $ 6,436,809 $ 611,536 $ 1,075,071 $ 3,166,554
Annuity reserves for
for contract in
payment period ........... 0 0 0 0 0 0
------------ ------------ ------------ ------------ ------------ ------------
Total contract
owners' equity ............ $ 810,077 $ 3,494,278 $ 6,436,809 $ 611,536 $ 1,075,071 $ 3,166,554
============ ============ ============ ============ ============ ============
EMERGING VIP EQUITY VIP HIGH
MARKET VIP GROWTH INCOME INCOME BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Assets - Investments
at market value
(note 2) .................. $ 832,608 $ 1,014,882 $ 1,672,331 $ 1,388,325
============ ============ ============ ============
Contract owners' equity
Contracts in
accumulation
period (note 3) .......... $ 832,608 $ 1,014,882 $ 1,672,331 $ 1,388,325
Annuity reserves for
for contract in
payment period ........... 0 0 0 0
------------ ------------ ------------ ------------
Total contract
owners' equity ............ $ 832,608 $ 1,014,882 $ 1,672,331 $ 1,388,325
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 34
<TABLE>
<CAPTION>
OHIO NATIONAL VARIABLE ACCOUNT A
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
--------------------------- --------------------------- ---------------------------
EQUITY MONEY MARKET BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT
1997 1996 1997 1996 1997 1996
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ....... $ 1,848,791 $ 1,197,910 $ 330,310 $ 264,732 $ 430,461 $ 318,092
Risk and administrative
expense (note 4) .......... (1,119,990) (847,614) (61,793) (51,812) (54,587) (53,743)
------------ ------------ ------------ ------------ ------------ ------------
Net investment activity .. 728,801 350,296 268,517 212,920 375,874 264,349
------------ ------------ ------------ ------------ ------------ ------------
Realized and Unrealized gain
(loss) on investments:
Reinvested capital gains .. 5,884,076 2,111,104 0 0 0 0
Realized gain (loss) ...... 1,814,454 1,192,086 (8,000) (4,499) 18,355 9,435
Unrealized gain (loss) .... 7,253,475 8,919,868 0 0 6,598 (134,060)
------------ ------------ ------------ ------------ ------------ ------------
Net gain (loss) on
investments ............ 14,952,005 12,223,058 (8,000) (4,499) 24,953 (124,625)
------------ ------------ ------------ ------------ ------------ ------------
Net increase in contract
owners' equity from
operations ............ 15,680,806 12,573,354 260,517 208,421 400,827 139,724
------------ ------------ ------------ ------------ ------------ ------------
Equity transactions:
Sales:
Contract purchase payments 12,307,774 10,413,119 5,766,812 3,610,654 1,341,058 926,817
Transfers from fixed and
other subaccounts ........ 4,663,120 2,817,812 4,122,546 1,135,004 617,341 101,994
------------ ------------ ------------ ------------ ------------ ------------
16,970,894 13,230,931 9,889,358 4,745,658 1,958,399 1,028,811
------------ ------------ ------------ ------------ ------------ ------------
Redemptions:
Withdrawals and surrenders
(note 4) ................. 5,482,124 3,340,783 594,152 582,380 453,555 364,781
Annuity and death benefit
payments ................. 1,282,347 721,495 406,483 64,028 29,614 10,774
Transfers to fixed and
other subaccounts ........ 3,119,594 1,718,941 7,901,647 3,419,115 1,142,089 367,550
------------ ------------ ------------ ------------ ------------ ------------
9,884,065 5,781,219 8,902,282 4,065,523 1,625,258 743,105
------------ ------------ ------------ ------------ ------------ ------------
Net equity transactions .. 7,086,829 7,449,712 987,076 680,135 333,141 285,706
------------ ------------ ------------ ------------ ------------ ------------
Net change in contract
owners' equity ........ 22,767,634 20,023,066 1,247,593 888,556 733,968 425,430
Contract owners' equity:
Beginning of period ........ 89,459,131 69,436,065 5,794,782 4,906,226 5,182,509 4,757,079
------------ ------------ ------------ ------------ ------------ ------------
End of period .............. $112,226,765 $ 89,459,131 $ 7,042,375 $ 5,794,782 $ 5,916,477 $ 5,182,509
============ ============ ============ ============ ============ ============
--------------------------- ---------------------------
OMNI INTERNATIONAL
SUBACCOUNT SUBACCOUNT
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ....... $ 2,224,754 $ 1,431,322 $ 3,699,242 $ 1,653,883
Risk and administrative
expense (note 4) .......... (728,446) (551,635) (589,401) (434,384)
------------ ------------ ------------ ------------
Net investment activity .. 1,496,308 879,687 3,109,841 1,219,499
------------ ------------ ------------ ------------
Realized and Unrealized gain
(loss) on investments:
Reinvested capital gains .. 3,648,542 792,153 5,249,079 618,591
Realized gain (loss) ...... 739,636 577,644 231,748 224,983
Unrealized gain (loss) .... 4,439,035 4,606,392 (8,473,446) 2,790,398
------------ ------------ ------------ ------------
Net gain (loss) on
investments ............ 8,827,213 5,976,189 (2,992,619) 3,633,972
------------ ------------ ------------ ------------
Net increase in contract
owners' equity from
operations ............ 10,323,521 6,855,876 117,222 4,853,471
------------ ------------ ------------ ------------
Equity transactions:
Sales:
Contract purchase payments 11,490,950 9,082,596 12,103,624 9,913,128
Transfers from fixed and
other subaccounts ........ 3,553,594 1,632,769 3,566,352 2,659,338
------------ ------------ ------------ ------------
15,044,544 10,715,365 15,669,976 12,572,466
------------ ------------ ------------ ------------
Redemptions:
Withdrawals and surrenders
(note 4) ................. 3,743,945 2,246,180 2,644,036 1,338,114
Annuity and death benefit
payments ................. 422,771 554,361 454,489 210,138
Transfers to fixed and
other subaccounts ........ 2,308,199 992,890 3,449,717 1,226,211
------------ ------------ ------------ ------------
6,474,915 3,793,431 6,548,242 2,774,463
------------ ------------ ------------ ------------
Net equity transactions .. 8,569,629 6,921,934 9,121,734 9,798,003
------------ ------------ ------------ ------------
Net change in contract
owners' equity ........ 18,893,150 13,777,810 9,238,956 14,651,474
Contract owners' equity:
Beginning of period ........ 58,137,874 44,360,064 47,781,648 33,130,174
------------ ------------ ------------ ------------
End of period .............. $ 77,031,024 $ 58,137,874 $ 57,020,604 $ 47,781,648
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 35
<TABLE>
<CAPTION>
OHIO NATIONAL VARIABLE ACCOUNT A
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
------------------------- ------------------------- -------------------------
CAPITAL APPRECIATION SMALL CAP GLOBAL CONTRARIAN
SUBACCOUNT SUBACCOUNT SUBACCOUNT
1997 1996 1997 1996 1997 1996
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ....... $ 504,043 $ 240,787 $ 0 $ 0 $ 149,703 $ 40,003
Risk and administrative
expense (note 4) .......... (142,633) (72,491) (166,773) (87,665) (35,945) (14,459)
----------- ----------- ----------- ----------- ----------- -----------
Net investment activity .. 361,410 168,296 (166,773) (87,665) 113,758 25,544
----------- ----------- ----------- ----------- ----------- -----------
Realized and Unrealized gain
(loss) on investments:
Reinvested capital gains .. 930,639 142,667 864,625 176,709 259,942 4,572
Realized gain (loss) ...... 167,921 19,693 231,007 70,688 21,203 2,571
Unrealized gain (loss) .... 501,093 711,617 391,861 1,202,984 (87,286) 89,145
----------- ----------- ----------- ----------- ----------- -----------
Net gain (loss) on
investments ............ 1,599,653 873,977 1,487,493 1,450,381 193,859 96,288
----------- ----------- ----------- ----------- ----------- -----------
Net increase in contract
owners' equity from
operations ............ 1,961,063 1,042,273 1,320,720 1,362,716 307,617 121,832
----------- ----------- ----------- ----------- ----------- -----------
Equity transactions:
Sales:
Contract purchase payments 5,847,796 4,558,526 5,912,170 5,157,859 2,590,870 1,572,884
Transfers from fixed and
other subaccounts ........ 2,334,977 1,340,463 2,722,141 2,096,958 450,183 199,996
----------- ----------- ----------- ----------- ----------- -----------
8,182,773 5,898,989 8,634,311 7,254,817 3,041,053 1,772,880
----------- ----------- ----------- ----------- ----------- -----------
Redemptions:
Withdrawals and surrenders
(note 4) ................. 876,739 187,862 978,740 260,751 49,264 21,116
Annuity and death benefit
payments ................. 94,324 47,472 83,891 66,443 22,982 8,926
Transfers to fixed and
other subaccounts ........ 1,171,118 262,392 1,581,012 498,005 388,564 49,840
----------- ----------- ----------- ----------- ----------- -----------
2,142,181 497,726 2,643,643 825,199 460,810 79,882
----------- ----------- ----------- ----------- ----------- -----------
Net equity transactions .. 6,040,592 5,401,263 5,990,668 6,429,618 2,580,243 1,692,998
----------- ----------- ----------- ----------- ----------- -----------
Net change in contract
owners' equity ........ 8,001,655 6,443,536 7,311,388 7,792,334 2,887,860 1,814,830
Contract owners' equity:
Beginning of period ........ 10,651,100 4,207,564 13,015,805 5,223,471 2,363,815 548,985
----------- ----------- ----------- ----------- ----------- -----------
End of period .............. $18,652,755 $10,651,100 $20,327,193 $13,015,805 $ 5,251,675 $ 2,363,815
=========== =========== =========== =========== =========== ===========
------------------------- ----------- -----------
S&P 500 SOCIAL
AGGRESSIVE GROWTH INDEX AWARENESS
SUBACCOUNT SUBACCOUNT SUBACCOUNT
1997 1996 1997(A) 1997(A)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ....... $ 37,645 $ 244,914 $ 160,849 $ 2,789
Risk and administrative
expense (note 4) .......... (36,453) (15,097) (25,136) (2,511)
----------- ----------- ----------- -----------
Net investment activity .. 1,192 229,817 135,713 278
----------- ----------- ----------- -----------
Realized and Unrealized gain
(loss) on investments:
Reinvested capital gains .. 16,116 0 449,005 69,572
Realized gain (loss) ...... 1,626 (10,234) 28,306 3,622
Unrealized gain (loss) .... 338,859 (166,627) (171,692) (58,441)
----------- ----------- ----------- -----------
Net gain (loss) on
investments ............ 356,601 (176,861) 305,619 14,753
----------- ----------- ----------- -----------
Net increase in contract
owners' equity from
operations ............ 357,793 52,956 441,332 15,031
----------- ----------- ----------- -----------
Equity transactions:
Sales:
Contract purchase payments 1,954,169 1,876,917 4,617,012 584,481
Transfers from fixed and
other subaccounts ........ 374,153 228,778 1,487,498 264,875
----------- ----------- ----------- -----------
2,328,322 2,105,695 6,104,510 849,356
----------- ----------- ----------- -----------
Redemptions:
Withdrawals and surrenders
(note 4) ................. 113,256 42,393 38,238 10,008
Annuity and death benefit
payments ................. 31,455 5,231 6,501 548
Transfers to fixed and
other subaccounts ........ 346,549 115,826 377,251 43,754
----------- ----------- ----------- -----------
491,260 163,450 421,990 54,310
----------- ----------- ----------- -----------
Net equity transactions .. 1,837,062 1,942,245 5,682,520 795,046
----------- ----------- ----------- -----------
Net change in contract
owners' equity ........ 2,194,855 1,995,201 6,123,852 810,077
Contract owners' equity:
Beginning of period ........ 2,620,454 625,253 0 0
----------- ----------- ----------- -----------
End of period .............. $ 4,815,309 $ 2,620,454 $ 6,123,852 $ 810,077
=========== =========== =========== ===========
</TABLE>
(a) Period from January 3, 1997 date of commencement of operations.
The accompanying notes are an integral part of these financial statements.
<PAGE> 36
<TABLE>
<CAPTION>
OHIO NATIONAL VARIABLE ACCOUNT A
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
----------- ----------- ----------- ----------- ----------- -----------
CORE GROWTH & STRATEGIC RELATIVE EMERGING
GROWTH INCOME STELLAR INCOME VALUE MARKET
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
1997(A) 1997(A) 1997(A) 1997(A) 1997(A) 1997(A)
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ........ $ 897 $ 24,579 $ 10,225 $ 27,368 $ 19,612 $ 1,352
Risk and administrative
expense (note 4) ........... (21,525) (21,755) (3,693) (3,454) (15,700) (3,272)
----------- ----------- ----------- ----------- ----------- -----------
Net investment activity ... (20,628) 2,824 6,532 23,914 3,912 (1,920)
----------- ----------- ----------- ----------- ----------- -----------
Realized and Unrealized gain
(loss) on investments:
Reinvested capital gains ... 0 314,126 0 835 0 0
Realized gain (loss) ....... (9,324) 37,785 2,211 704 11,830 (2,389)
Unrealized gain (loss) ..... (15,044) 164,431 14,738 (1,145) 215,699 (71,244)
----------- ----------- ----------- ----------- ----------- -----------
Net gain (loss) on
investments ............. (24,368) 516,342 16,949 394 227,529 (73,633)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in
contract owners' equity
from operations ........ (44,996) 519,166 23,481 24,308 231,441 (75,553)
----------- ----------- ----------- ----------- ----------- -----------
Equity transactions:
Sales:
Contract purchase payments . 2,572,093 4,480,178 591,022 1,060,804 2,902,485 889,268
Transfers from fixed and
other subaccounts ......... 1,416,952 1,825,897 5,839 1,498 90,096 25,538
----------- ----------- ----------- ----------- ----------- -----------
3,989,045 6,306,075 596,861 1,062,302 2,992,581 914,806
----------- ----------- ----------- ----------- ----------- -----------
Redemptions:
Withdrawals and surrenders
(note 4) .................. 24,689 59,931 1,169 0 10,942 4,397
Annuity and death benefit
payments .................. 6,903 18,886 1,933 1,028 5,296 999
Transfers to fixed and
other subaccounts ......... 418,179 309,615 5,704 10,511 41,230 1,249
----------- ----------- ----------- ----------- ----------- -----------
449,771 388,432 8,806 11,539 57,468 6,645
----------- ----------- ----------- ----------- ----------- -----------
Net equity transactions ... 3,539,274 5,917,643 588,055 1,050,763 2,935,113 908,161
Net change in contract
owners' equity ......... 3,494,278 6,436,809 611,536 1,075,071 3,166,554 832,608
Contract owners' equity:
Beginning of period ......... 0 0 0 0 0 0
----------- ----------- ----------- ----------- ----------- -----------
End of period ............... $ 3,494,278 $ 6,436,809 $ 611,536 $ 1,075,071 $ 3,166,554 $ 832,608
=========== =========== =========== =========== =========== ===========
----------- ----------- -----------
VIP VIP VIP HIGH
GROWTH EQUITY INCOME INCOME BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT
1997(B) 1997(B) 1997(B)
----------- ----------- -----------
<S> <C> <C> <C>
Investment activity:
Reinvested dividends ........ $ 0 $ 0 $ 0
Risk and administrative
expense (note 4) ........... (3,791) (7,136) (4,117)
----------- ----------- -----------
Net investment activity ... (3,791) (7,136) (4,117)
----------- ----------- -----------
Realized and Unrealized gain
(loss) on investments:
Reinvested capital gains ... 0 0 0
Realized gain (loss) ....... 2,373 3,136 12,995
Unrealized gain (loss) ..... 37,791 96,293 29,576
----------- ----------- -----------
Net gain (loss) on
investments ............. 40,164 99,429 42,571
----------- ----------- -----------
Net increase (decrease) in
contract owners' equity
from operations ........ 36,373 92,293 38,454
----------- ----------- -----------
Equity transactions:
Sales:
Contract purchase payments . 972,759 1,576,447 1,437,894
Transfers from fixed and
other subaccounts ......... 11,770 18,945 137,249
----------- ----------- -----------
984,529 1,595,392 1,575,143
----------- ----------- -----------
Redemptions:
Withdrawals and surrenders
(note 4) .................. 6,020 3,913 0
Annuity and death benefit
payments .................. 0 5,412 5,499
Transfers to fixed and
other subaccounts ......... 0 6,029 219,773
----------- ----------- -----------
6,020 15,354 225,272
----------- ----------- -----------
Net equity transactions ... 978,509 1,580,038 1,349,871
Net change in contract
owners' equity ......... 1,014,882 1,672,331 1,388,325
Contract owners' equity:
Beginning of period ......... 0 0 0
----------- ----------- -----------
End of period ............... $ 1,014,882 $ 1,672,331 $ 1,388,325
=========== =========== ===========
</TABLE>
(a) Period from January 3, 1997 date of commencement of operations.
(b) Period from April 1, 1997 date of commencement of operations.
The accompanying notes are an integral part of these financial statements.
<PAGE> 37
OHIO NATIONAL VARIABLE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Ohio National Variable Account A (the Account) is a separate account of The
Ohio National Life Insurance Company (ONLIC) and all obligations arising
under variable annuity contracts are general corporate obligations of
ONLIC. The account has been registered as a unit investment trust under the
Investment Company Act of 1940.
Assets of the Account are invested in shares of Ohio National, Fund, Inc.
except for the Emerging Market subaccount which is invested in shares of
the Emerging Markets Fund of the Montgomery Variable Series and the VIP
Growth, VIP Equity Income and VIP High Income Bond subaccounts which are
invested in shares of the Variable Insurance Products Fund (collectively
the Funds). The Funds are diversified open-end management investment
companies. The Funds' investments are subject to varying degrees of market,
interest and financial risks; the issuers' abilities to meet certain
obligations may be affected by economic developments in their respective
industries.
Annuity reserves are computed for currently payable contracts according to
the Progressive Annuity Mortality Table. The assumed interest rate is 3.5
or 4.0 percent depending on the contract selected by the annuitant. Charges
to annuity reserves for adverse mortality and express risk experience are
reimbursed to the Account by ONLIC. Such amounts are included in risk and
administrative expenses.
Investments are valued at the net asset value of fund shares held at
December 31, 1997. Share transactions are recorded on the trade date.
Income and capital gain distributions are recorded on the ex-dividend date.
Net realized capital gains of loss is determined on the basis of average
cost.
ONLIC performs investment advisory services on behalf of the Ohio National
Fund, Inc. in which the Account invests. For these services, the Company
receives fees from the mutual funds. These fees are paid to an affiliate of
the Company.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(2) INVESTMENTS
At December 31, 1997 the aggregate cost and number of shares of the
underlying funds owned by the respective subaccounts were:
<TABLE>
<CAPTION>
MONEY CAPITAL
EQUITY MARKET BOND OMNI INTERNATIONAL APPRECIATION SMALL CAP
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Aggregate Cost $ 76,961,136 $ 7,042,375 $ 5,783,591 $ 59,035,568 $ 59,693,510 $ 17,149,022 $ 18,081,165
Number of Shares 3,166,491 704,237 554,081 3,656,825 4,256,857 1,378,215 1,085,912
<CAPTION>
GLOBAL AGGRESSIVE S&P 500 SOCIAL CORE GROWTH &
CONTRARIAN GROWTH INDEX AWARENESS GROWTH INCOME STELLAR
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Aggregate Cost $ 5,236,203 $ 4,619,691 $ 6,295,544 $ 868,518 $ 3,509.322 $ 6,272,378 $ 596,798
Number of Shares 447,751 434,320 522,290 71,066 360,830 500,841 57,421
<CAPTION>
STRATEGIC RELATIVE EMERGING VIP EQUITY VIP HIGH
INCOME VALUE MARKET VIP GROWTH INCOME INCOME BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Aggregate Cost $ 1,076,216 $ 2,950,855 $ 903,852 $ 977,091 $ 1,576,038 $ 1,358,749
Number of Shares 105,793 249,787 78,771 27,355 68,877 102,233
</TABLE>
113
<PAGE> 38
OHIO NATIONAL VARIABLE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(3) CONTRACTS IN ACCUMULATION PERIOD
At December 31, 1997 the accumulation units and value per unit of the
respective subaccounts and products were:
<TABLE>
<CAPTION>
ACCUMULATION UNITS VALUE PER UNIT
------------------ --------------
<S> <C> <C>
EQUITY SUBACCOUNT
Combination ................ 29,340.7990 132.974317
Back Load .................. 20,567.4400 74.726955
Top I ...................... 172,235.3620 59.806603
Top Tradition .............. 1,554,929.7927 51.466766
Top Plus ................... 709,737.7253 17.616774
Investar Vision ............ 27,719.3260 11.599062
Top Spectrum ............... 54,720.5400 11.599062
Top Explorer ............... 210,013.7824 11.847503
MONEY MARKET SUBACCOUNT
VIA ......................... 17,074.2760 27.253241
Top I ....................... 17,640.0930 20.650358
Top Tradition ............... 122,724.7618 18.327573
Top Plus .................... 179,630.2523 11.797028
Investar Vision ............. 0.0000 10.388381
Top Spectrum ................ 65,171.8660 10.388381
Top Explorer ................ 102,555.0478 10.300720
BOND SUBACCOUNT
Top I ....................... 19,545.7950 30.012823
Top Tradition ............... 128,523.1058 27.144385
Top Plus .................... 95,905.4140 12.390067
Investar Vision ............. 2,734.3336 10.791393
Top Spectrum ................ 9,448.3989 10.791393
Top Explorer ................ 47,241.4749 10.837736
OMNI SUBACCOUNT
Top I ....................... 127,405.9690 39.270518
Top Tradition ............... 1,431,183.6716 39.180721
Top Plus .................... 699,222.9353 16.311837
Investar Vision ............. 13,761.6354 11.608584
Top Spectrum ................ 88,824.9801 11.608584
Top Explorer ................ 276,039.6004 11.726674
INTERNATIONAL SUBACCOUNT
Top I ....................... 100,571.7240 16.815772
Top Tradition ............... 2,305,256.4898 16.815772
Top Plus .................... 876,939.7087 14.804324
Investar Vision ............. 20,008.8796 10.114943
Top Spectrum ................ 66,104.0624 10.114943
Top Explorer ................ 274,724.1679 9.868874
CAPITAL APPRECIATION SUBACCOUNT
Top I ....................... 21,166.4180 14.832378
Top Tradition ............... 550,059.3177 14.832378
Top Plus .................... 454,490.2577 16.536198
Investar Vision ............. 29,294.4904 11.366198
Top Spectrum ................ 64,661.0893 11.366198
Top Explorer ................ 136,071.8172 11.402771
</TABLE>
114
<PAGE> 39
OHIO NATIONAL VARIABLE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
ACCUMULATION UNITS VALUE PER UNIT
------------------ --------------
<S> <C> <C>
SMALL CAP SUBACCOUNT
Top I ....................... 21,376.8860 15.240569
Top Tradition ............... 649,957.3886 15.240569
Top Plus .................... 377,836.8228 19.926004
Investar Vision ............. 37,682.9864 10.854875
Top Spectrum ................ 17,215.2701 10.854875
Top Explorer ................ 154,908.5726 12.723535
GLOBAL CONTRARIAN SUBACCOUNT
Top Tradition ............... 115,589.5543 12.399654
Top Plus .................... 180,384.5556 13.297985
Investar Vision ............. 4,298.7827 11.036950
Top Spectrum ................ 12,124.2886 11.036950
Top Explorer ................ 115,148.9727 10.754700
AGGRESSIVE GROWTH SUBACCOUNT
Top Tradition ............... 178,650.8560 11.646359
Top Plus .................... 139,155.3699 14.043267
Investar Vision ............. 20,454.6420 11.150420
Top Spectrum ................ 6,541.1536 11.150420
Top Explorer ................ 38,689.3261 12.392742
S&P 500 INDEX SUBACCOUNT
Top Tradition ............... 152,864.3552 13.031676
Top Plus .................... 156,778.0853 13.057227
Top Explorer ................ 164,051.9727 12.707473
SOCIAL AWARENESS SUBACCOUNT
Top Tradition .............. 22,599.5131 12.426744
Top Plus ................... 18,947.3388 12.451138
Top Explorer ............... 22,155.2898 13.239397
CORE GROWTH SUBACCOUNT
Top Tradition ............... 146,611.3784 9.586403
Top Plus .................... 133,805.7916 9.605255
Top Explorer ................ 70,774.4593 11.353867
GROWTH & INCOME SUBACCOUNT
Top Tradition ............... 146,772.2220 13.509406
Top Plus .................... 150,510.0980 13.535914
Top Explorer ................ 176,611.3225 13.683786
STELLAR SUBACCOUNT
Investar Vision .............. 55,683.2203 10.818421
Top Spectrum ................. 844.0593 10.818421
STRATEGIC INCOME SUBACCOUNT
Investar Vision .............. 71,835.3721 10.724151
Top Spectrum ................. 28,412.3142 10.724151
RELATIVE VALUE SUBACCOUNT
Investar Vision ............. 241,046.8096 12.651115
Top Spectrum ................ 9251.6152 12.651115
</TABLE>
115
<PAGE> 40
OHIO NATIONAL VARIABLE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
<S> <C> <C>
EMERGING MARKET SUBACCOUNT
Investar Vision ............... 20.680.6050 9.788417
Top Spectrum .................. 11.879.0995 9.788417
Top Explorer .................. 56.016.0669 9.174160
VIP GROWTH SUBACCOUNT
Top Explorer ............... 81,289.9874 12.484707
VIP EQUITY INCOME SUBACCOUNT
Top Explorer .............. 133,738.9603 12.504442
VIP HIGH INCOME BOND SUBACCOUNT
Top Explorer 118,712.7354 11.694830
</TABLE>
(4) RISK AND ADMINISTRATIVE EXPENSE
ONLIC charges the Account's assets at the end of each day, equal to 0.25%
on an annual basis, of the contract value for administrative expenses,
based on premiums established at the time the contracts are issued.
Although variable annuity payments differ according to the investment
performance of the Accounts, they are not affected by mortality or expense
experience because ONLIC assumes the expense risk and the mortality risk
under the contracts. ONLIC charges the Accounts' assets for assuming those
risks, based on the contract value at a rate presently ranging from 0.65%
to 1.15% for mortality and expense risk on an annual basis.
The expense risk assumed by ONLIC is the risk that the deductions for sales
and administrative expenses provided for in the variable annuity contracts
may prove insufficient to cover the cost of those terms.
The mortality risk results from a provision in the contract in which ONLIC
agrees to make annuity payments regardless of how long a particular
annuitant or other payee lives and how long all annuitants or other payees
as a class live if payment options involving life contingencies are chosen.
Those annuity payments are determined in accordance with annuity purchase
rate provisions established at the time the contracts are issued.
(5) CONTRACT CHARGES
No deduction for a sales charge is made from purchase payments. A
contingent deferred sales charge ranging from 0% to 7% may be assessed by
ONLIC when a contract is surrendered or a partial withdrawal of
accumulation value is made before the annuity payout date.
A transfer fee is charged for each transfer from one subaccount to another.
The fee is charged against the contract owner's equity in the subaccount
from which the transfer is effected.
State premium taxes presently range from 0% to 2 1/2% for these contracts.
In those jurisdictions permitting, such taxes will be deducted when annuity
payments begin. Elsewhere, they will be deducted from purchase payments.
Each year on the contract anniversary (or at the time of surrender of the
contract), ONLIC will deduct a contract administration charge of $30 from
the accumulation value to reimburse it for the expense relating to the
maintenance of the contract. Total contract administration charges for the
Account amounted to approximately $260,000 during 1997.
(6) FEDERAL INCOME TAXES
Operations of the Account form a part of, and are taxed with, operations of
ONLIC which is taxed as a life insurance company under the Internal Revenue
Code. Taxes are the responsibility of the contract owner upon termination
or withdrawal. No Federal income taxes are payable under the present law on
dividend income or capital gains distribution from the Fund shares held in
the Account or on capital gains realized by the Account on redemption of
the Fund shares.
116
<PAGE> 41
OHIO NATIONAL VARIABLE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(7) NOTE TO SCHEDULE 1
Schedule 1 presents the components of the change in the unit values, which
are based on average unit values and are the basis for determining contract
owners' equity. This schedule is presented for each series, as applicable,
in the following format:
-- Beginning unit value
-- Reinvested capital gains and dividends
-- (This amount reflects the increase in the unit value due to capital gain
and dividend distributions from the underlying mutual fund.)
-- Unrealized gain (loss)
(This amount reflects the increase (decrease) in the unit value
resulting from the market appreciation (depreciation) of the fund.)
-- Expenses
(This amount reflects the decrease in the unit value due to Risk and
Administrative Expenses discussed in note 4 to the financial
statements.)
-- Ending unit value
-- Percentage increase (decrease) in unit value
117
<PAGE> 42
<TABLE>
<CAPTION>
OHIO NATIONAL VARIABLE ACCOUNT A FOR THE YEAR ENDED DECEMBER 31, 1997 AND 1996
- --------------------------------------------------------------------------------------------------------
SCHEDULES OF CHANGES IN UNIT VALUES SCHEDULE 1
EQUITY SUBACCOUNT A
-------------------
TOP
1997 COMBINATION BACK LOAD TOP I TRADITION TOP PLUS
<S> <C> <C> <C> <C> <C>
Beginning unit value................... 113.656777 63.934367 51.168913 44.033562 15.042658
Reinvested capital gains and dividends. 9.446038 5.309887 4.252151 3.664185 1.259076
Realized and unrealized gain........... 11.125256 6.260085 5.120140 4.304533 1.465593
Expenses............................... -1.253754 -0.777384 -0.734601 -0.535514 -0.150553
Ending unit value...................... 132.974317 74.726955 59.806603 51.466766 17.616774
Percentage increase in unit value*.... 17.0% 16.9% 16.9% 16.9% 17.1%
</TABLE>
<TABLE>
<CAPTION>
**INVESTAR **TOP ***TOP
1997 VISION SPECTRUM EXPLORER
<S> <C> <C> <C>
Beginning unit value................... 10.000000 10.000000 10.000000
Reinvested capital gains and dividends. 0.858985 0.872833 0.896204
Realized and unrealized gain........... 0.901212 0.889554 1.105903
Expenses............................... -0.161135 -0.163325 -0.154604
Ending unit value...................... 11.599062 11.599062 11.847503
Percentage increase in unit value*..... 16.0% 16.0% 18.5%
</TABLE>
<TABLE>
<CAPTION>
TOP
1997 COMBINATION BACK LOAD TOP1 TRADITION TOP PLUS
<S> <C> <C> <C> <C> <C>
Beginning unit value................... 96.995665 54.616584 43.711561 37.616119 12.824740
Reinvested capital gains and dividends. 4.383678 2.460847 1.973416 1.701030 0.584226
Realized and unrealized gain........... 13.328814 7.507965 6.099801 5.165390 1.759811
Expenses............................... -1.051380 -0.651029 -0.615865 -0.448977 -0.126119
Ending unit value...................... 113.656777 63.934367 51.168913 44.033562 15.042658
Percentage increase in unit value*..... 17.2% 17.1% 17.1% 17.1% 17.3%
<FN>
* An annualized rate of return cannot be determined as expenses do not include the contract charges discussed in note (5).
** Period from January 3, 1997, date of commencement of operations.
*** Period from April 1, 1997, date of commencement of operations.
</FN>
</TABLE>
<TABLE>
<CAPTION>
MONEY MARKET SUBACCOUNT A
-------------------------
TOP
1997 VIA TOP 1 TRADITION TOP PLUS
<S> <C> <C> <C> <C>
Beginning unit value................... 26.200345 19.852565 17.584720 11.296489
Reinvested dividends................... 1.399995 1.101371 0.939926 0.604451
Expenses............................... -0.347099 -0.303578 -0.197073 -0.103912
Ending unit value...................... 27.253241 20.650358 18.327573 11.797028
Percentage increase in unit value*..... 4.0% 4.0% 4.2% 4.4%
</TABLE>
<TABLE>
<CAPTION>
**INVESTAR **TOP ***TOP
1997 VISION SPECTRUM EXPLORER
<S> <C> <C> <C>
Beginning unit value................... 10.000000 10.000000 10.000000
Reinvested dividends................... 0.532783 0.532783 0.433587
Expenses............................... -0.144402 -0.144402 -0.132867
Ending unit value...................... 10.388381 10.388381 10.300720
Percentage increase in unit value*..... 3.9% 3.9% 3.0%
</TABLE>
<TABLE>
<CAPTION>
TOP
1996 VIA TOP I TRADITION TOP PLUS
<S> <C> <C> <C> <C>
Beginning unit value................... 25.237165 19.122749 16.904534 10.837896
Reinvested dividends................... 1.297256 1.021880 0.870006 0.558334
Expenses............................... -0.334076 -0.292064 -0.189820 -0.099741
Ending unit value...................... 26.200345 19.852565 17.584720 11.296489
Percentage increase in unit value*..... 3.8% 3.8% 4.0% 4.2%
<FN>
* An annualized rate of return cannot be determined as expenses do not include the contract charges discussed in note (5).
** Period from January 3, 1997, date of commencement of operations.
*** Period from April 1, 1997, date of commencement of operations.
</FN>
</TABLE>
118
<PAGE> 43
<TABLE>
<CAPTION>
OHIO NATIONAL VARIABLE ACCOUNT A FOR THE YEAR ENDED DECEMBER 31, 1997 AND 1996
- --------------------------------------------------------------------------------------------------------
SCHEDULES OF CHANGES IN UNIT VALUES SCHEDULE 1 (CONTINUED)
BOND SUBACCOUNT A
-----------------
TOP **INVESTAR **TOP ***TOP
1997 TOP I TRADITION TOP PLUS VISION SPECTRUM EXPLORER
<S> <C> <C> <C> <C> <C> <C>
Beginning unit value................... 27.765946 25.112262 11.439849 10.000000 10.000000 10.000000
Reinvested capital gains and dividends. 2.351782 2.132586 0.975053 0.897364 0.880119 0.881982
Realized and unrealized gain........... 0.382601 0.185054 0.081962 0.043160 0.060925 0.095277
Expenses............................... -0.372099 -0.285517 -0.106797 -0.149131 -0.149651 -0.139523
Ending unit value...................... 30.128230 27.144385 12.390067 10.791393 10.791393 10.837736
Percentage increase in unit value*..... 8.5% 8.1% 8.3% 7.9% 7.9% 8.4%
</TABLE>
<TABLE>
<CAPTION>
TOP
1996 TOP I TRADITION TOP PLUS
<S> <C> <C> <C>
Beginning unit value................... 27.068171 24.481177 11.130129
Reinvested capital gains and dividends. 1.705519 1.543729 0.703105
Realized and unrealized loss........... -0.657822 -0.644767 -0.293575
Expenses............................... -0.349922 -0.267877 -0.099810
Ending unit value...................... 27.765946 25.112262 11.439849
Percentage increase in unit value*..... 2.6% 2.6% 2.8%
<FN>
* An annualized rate of return cannot be determined as expenses do not include the contract charges discussed in note (5).
** Period from January 3, 1997, date of commencement of operations.
*** Period from April 1, 1997, date of commencement of operations.
</FN>
</TABLE>
<TABLE>
<CAPTION>
OMNI SUBACCOUNT A
-----------------
TOP **INVESTAR **TOP ***TOP
1997 TOP I TRADITION TOP PLUS VISION SPECTRUM EXPLORER
<S> <C> <C> <C> <C> <C> <C>
Beginning unit value................... 33.604216 33.527373 13.930650 10.000000 10.000000 10.000000
Reinvested capital gains and dividends. 3.166256 3.163164 1.322260 1.063927 0.984247 1.003848
Realized and unrealized gain........... 2.979048 2.894970 1.197361 0.705664 0.785882 0.874403
Expenses............................... -0.479002 -0.404786 -0.138434 -0.161007 -0.161545 -0.151577
Ending unit value...................... 39.270518 39.180721 16.311837 11.608584 11.608584 11.726674
Percentage increase in unit value*..... 16.9% 16.9% 17.1% 16.1% 16.1% 17.3%
</TABLE>
<TABLE>
<CAPTION>
TOP
1996 TOP I TRADITION TOP PLUS
<S> <C> <C> <C>
Beginning unit value................... 29.404272 29.337035 12.165280
Reinvested capital gains and dividends. 1.366386 1.365250 0.570619
Realized and unrealized gain........... 3.240941 3.169328 1.312455
Expenses............................... -0.407383 -0.344240 -0.117704
Ending unit value...................... 33.604216 33.527373 13.930650
Percentage increase in unit value*..... 14.3% 14.3% 14.5%
<FN>
* An annualized rate of return cannot be determined as expenses do not include the contract charges discussed in note (5).
** Period from January 3, 1997, date of commencement of operations.
*** Period from April 1, 1997, date of commencement of operations.
</FN>
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL SUBACCOUNT A
--------------------------
TOP **INVESTAR **TOP ***TOP
1997 TOP I TRADITION TOP PLUS VISION SPECTRUM EXPLORER
<S> <C> <C> <C> <C> <C> <C>
Beginning unit value................... 16.648702 16.648702 14.628252 10.000000 10.000000 10.000000
Reinvested capital gains and dividends. 2.797462 2.794401 2.459598 1.664018 1.660618 1.636955
Realized and unrealized loss........... -2.402931 -2.435038 -2.145051 -1.401420 -1.398734 -1.634932
Expenses............................... -0.227461 -0.192293 -0.138475 -0.147655 -0.146941 -0.133149
Ending unit value...................... 16.815772 16.815772 14.804324 10.114943 10.114943 9.868874
Percentage increase (decrease)
in unit value*....................... 1.0% 1.0% 1.2% 1.1% 1.1% -1.3%
</TABLE>
<TABLE>
<CAPTION>
TOP
1996 TOP I TRADITION TOP PLUS
<S> <C> <C> <C>
Beginning unit value................... 14.702847 14.702847 12.892796
Reinvested capital gains and dividends. 0.885797 0.887963 0.782224
Realized and unrealized gain........... 1.266926 1.233157 1.079559
Expenses............................... -0.206868 -0.175265 -0.126327
Ending unit value...................... 16.648702 16.648702 14.628252
Percentage increase in unit value*..... 13.2% 13.2% 13.5%
<FN>
* An annualized rate of return cannot be determined as expenses do not include the contract charges discussed in note (5).
** Period from January 3, 1997, date of commencement of operations.
*** Period from April 1, 1997, date of commencement of operations. (continued)
</FN>
</TABLE>
119
<PAGE> 44
<TABLE>
<CAPTION>
OHIO NATIONAL VARIABLE ACCOUNT A FOR THE YEAR ENDED DECEMBER 31, 1997 AND 1996
- --------------------------------------------------------------------------------------------------------
SCHEDULES OF CHANGES IN UNIT VALUES SCHEDULE 1 (CONTINUED)
CAPITAL APPRECIATION SUBACCOUNT A
---------------------------------
TOP **INVESTAR **TOP ***TOP
1997 TOP I TRADITION TOP PLUS VISION SPECTRUM EXPLORER
<S> <C> <C> <C> <C> <C> <C>
Beginning unit value................... 13.018249 13.018249 14.484990 10.000000 10.000000 10.000000
Reinvested capital gains and dividends. 1.443749 1.347617 1.501298 1.072753 1.081459 1.082231
Realized and unrealized gain........... 0.563201 0.619089 0.688970 0.448452 0.440983 0.465434
Expenses............................... -0.192821 -0.152577 -0.139060 -0.155007 -0.156244 -0.144894
Ending unit value...................... 14.832378 14.832378 16.536198 11.366198 11.366198 11.402771
Percentage increase in unit value*..... 13.9% 13.9% 14.2% 13.7% 13.7% 14.0%
</TABLE>
<TABLE>
<CAPTION>
TOP
1996 TOP I TRADITION TOP PLUS
<S> <C> <C> <C>
Beginning unit value................... 11.370573 11.370573 12.626458
Reinvested capital gains and dividends. 0.638865 0.639735 0.708459
Realized and unrealized gain........... 1.167969 1.142613 1.272079
Expenses............................... -0.159158 -0.134672 -0.122006
Ending unit value...................... 13.018249 13.018249 14.484990
Percentage increase in unit value*..... 14.5% 14.5% 14.7%
<FN>
* An annualized rate of return cannot be determined as expenses do not include the contract charges discussed in note (5).
** Period from January 3, 1997, date of commencement of operations.
*** Period from April 1, 1997, date of commencement of operations.
</FN>
</TABLE>
<TABLE>
<CAPTION>
SMALL CAP SUBACCOUNT A
----------------------
TOP **INVESTAR **TOP ***TOP
1997 TOP I TRADITION TOP PLUS VISION SPECTRUM EXPLORER
<S> <C> <C> <C> <C> <C> <C>
Beginning unit value................... 14.205207 14.205207 18.535631 10.000000 10.000000 10.000000
Reinvested capital gains and dividends. 0.800865 0.753638 0.970631 0.567866 0.576603 0.673406
Realized and unrealized gain........... 0.432624 0.439272 0.585765 0.437338 0.431177 2.216379
Expenses............................... -0.198127 -0.157548 -0.166023 -0.150329 -0.152905 -0.166250
Ending unit value...................... 15.240569 15.240569 19.926004 10.854875 10.854875 12.723535
Percentage increase in unit value*..... 7.3% 7.3% 7.5% 8.5% 8.5% 27.2%
</TABLE>
<TABLE>
<CAPTION>
TOP
1996 TOP I TRADITION TOP PLUS
<S> <C> <C> <C>
Beginning unit value................... 12.201273 12.201273 15.889068
Reinvested capital gains and dividends. 0.267105 0.266757 0.345849
Realized and unrealized gain........... 1.911186 1.884710 2.457224
Expenses............................... -0.174357 -0.147533 -0.156510
Ending unit value...................... 14.205207 14.205207 18.535631
Percentage increase in unit value*..... 16.4% 16.4% 16.7%
<FN>
* An annualized rate of return cannot be determined as expenses do not include the contract charges discussed in note (5).
** Period from January 3, 1997, date of commencement of operations.
*** Period from April 1, 1997, date of commencement of operations.
</FN>
</TABLE>
<TABLE>
<CAPTION>
GLOBAL CONTRARIAN SUBACCOUNT A
------------------------------
TOP **INVESTAR **TOP ***TOP
1997 TRADITION TOP PLUS VISION SPECTRUM EXPLORER
<S> <C> <C> <C> <C> <C>
Beginning unit value................... 11.226306 12.015818 10.000000 10.000000 10.000000
Reinvested capital gains and dividends. 1.374813 1.469687 1.254894 1.254369 1.220091
Realized and unrealized loss........... -0.068179 -0.070956 -0.063374 -0.062907 -0.325676
Expenses............................... -0.133286 -0.116564 -0.154570 -0.154512 -0.139715
Ending unit value...................... 12.399654 13.297985 11.036950 11.036950 10.754700
Percentage increase in unit value*..... 10.5% 10.7% 10.4% 10.4% 7.5%
</TABLE>
<TABLE>
<CAPTION>
TOP
1996 TRADITION TOP PLUS
<S> <C> <C>
Beginning unit value................... 10.125502 10.816003
Reinvested capital gains and dividends. 0.323131 0.343793
Realized and unrealized gain........... 0.898359 0.961076
Expenses............................... -0.120686 -0.105054
Ending unit value...................... 11.226306 12.015818
Percentage increase in unit value*..... 10.9% 11.1%
<FN>
* An annualized rate of return cannot be determined as expenses do not include the contract charges discussed in note (5).
** Period from January 3, 1997, date of commencement of operations.
*** Period from April 1, 1997, date of commencement of operations. (continued)
</FN>
</TABLE>
120
<PAGE> 45
<TABLE>
<CAPTION>
OHIO NATIONAL VARIABLE ACCOUNT A FOR THE YEAR ENDED DECEMBER 31, 1997 AND 1996
- --------------------------------------------------------------------------------------------------------
SCHEDULES OF CHANGES IN UNIT VALUES SCHEDULE 1 (CONTINUED)
AGGRESSIVE GROWTH SUBACCOUNT A
------------------------------
TOP **INVESTAR **TOP ***TOP
1997 TRADITION TOP PLUS VISION SPECTRUM EXPLORER
<S> <C> <C> <C> <C> <C>
Reinvested capital gains and dividends. 0.165753 0.193965 0.165218 0.167328 0.185112
Realized and unrealized gain........... 1.141214 1.376012 1.142693 1.143464 2.371976
Expenses............................... -0.124409 -0.119100 -0.157491 -0.160372 -0.164346
Ending unit value...................... 11.646359 14.043267 11.150420 11.150420 12.392742
Percentage increase in unit value*..... 11.3% 11.5% 11.5% 11.5% 23.9%
</TABLE>
<TABLE>
<CAPTION>
TOP
1996 TRADITION TOP PLUS
<S> <C> <C>
Beginning unit value................... 10.499375 12.610012
Reinvested capital gains and dividends. 1.572778 1.894804
Realized and unrealized loss........... -1.495659 -1.801326
Expenses............................... -0.112693 -0.111100
Ending unit value...................... 10.463801 12.592390
Percentage decrease in unit value*..... -0.3% -0.1%
<FN>
* An annualized rate of return cannot be determined as expenses do not include the contract charges discussed in note (5).
** Period from January 3, 1997, date of commencement of operations.
*** Period from April 1, 1997, date of commencement of operations.
</FN>
</TABLE>
<TABLE>
<CAPTION>
S&P 500 INDEX A SOCIAL AWARENESS
------------------------------------ ----------------------------------
**TOP **TOP ***TOP **TOP **TOP ***TOP
1997 TRADITION PLUS EXPLORER TRADITION PLUS EXPLORER
<S> <C> <C> <C> <C> <C> <C>
Beginning unit value................... 10.000000 10.000000 10.000000 10.000000 10.000000 10.000000
Reinvested capital gains and dividends. 2.635147 2.638296 2.621413 3.003894 3.094940 3.344922
Realized and unrealized gain (loss).... 0.532788 0.530542 0.246285 -0.443846 -0.531413 0.069886
Expenses............................... -0.136259 -0.111611 -0.160225 -0.133304 -0.112389 -0.175411
Ending unit value...................... 13.031676 13.057227 12.707473 12.426744 12.451138 13.239397
Percentage increase in unit value*..... 30.3% 30.6% 27.1% 24.3% 24.5% 32.4%
<FN>
* An annualized rate of return cannot be determined as expenses do not include the contract charges discussed in note (5).
** Period from January 3, 1997, date of commencement of operations.
*** Period from April 1, 1997, date of commencement of operations.
</FN>
</TABLE>
<TABLE>
<CAPTION>
CORE GROWTH A GROWTH & INCOME A
---------------------------------- ------------------------------------
**TOP **TOP ***TOP **TOP **TOP ***TOP
1997 TRADITION PLUS EXPLORER TRADITION PLUS EXPLORER
<S> <C> <C> <C> <C> <C> <C>
Beginning unit value................... 10.000000 10.000000 10.000000 10.000000 10.000000 10.000000
Reinvested capital gains and dividends. 0.003786 0.003815 0.004547 1.688434 1.708924 1.793149
Realized and unrealized gain (loss)... -0.309274 -0.309585 1.503139 1.958928 1.941217 2.063774
Expenses............................... -0.108109 -0.088975 -0.153819 -0.137956 -0.114227 -0.173137
Ending unit value...................... 9.586403 9.605255 11.353867 13.509406 13.535914 13.683786
Percentage increase (decrease) in
unit value*........................... -4.1% -3.9% 13.5% 35.1% 35.4% 36.8%
<FN>
* An annualized rate of return cannot be determined as expenses do not include the contract charges discussed in note (5).
** Period from January 3, 1997, date of commencement of operations.
*** Period from April 1, 1997, date of commencement of operations.
</FN>
</TABLE>
<TABLE>
<CAPTION>
STELLAR A STRATEGIC INCOME A RELATIVE VALUE A
------------------------ ----------------------- ---------------------
**INVESTAR **TOP **INVESTAR **TOP **INVESTAR **TOP
1997 VISION SPECTRUM VISION SPECTRUM VISION SPECTRUM
<S> <C> <C> <C> <C> <C> <C>
Beginning unit value................... 10.000000 10.000000 10.000000 10.000000 10.000000 10.000000
Reinvested capital gains and dividends. 0.379294 0.378377 0.993510 1.006221 0.188515 0.189945
Realized and unrealized gain (loss).... 0.587971 0.589191 -0.122364 -0.133181 2.631371 2.631298
Expenses............................... -0.148844 -0.149147 -0.146995 -0.148889 -0.168771 -0.170128
Ending unit value...................... 10.818421 10.818421 10.724151 10.724151 12.651115 12.651115
Percentage increase in unit value*..... 8.2% 8.2% 7.2% 7.2% 26.5% 26.5%
<FN>
* An annualized rate of return cannot be determined as expenses do not include the contract charges discussed in note (5).
** Period from January 3, 1997, date of commencement of operations.
</FN>
</TABLE>
(continued)
121
<PAGE> 46
<TABLE>
<CAPTION>
OHIO NATIONAL VARIABLE ACCOUNT A FOR THE YEAR ENDED DECEMBER 31, 1997 AND 1996
- --------------------------------------------------------------------------------------------------------
SCHEDULES OF CHANGES IN UNIT VALUES SCHEDULE 1 (CONTINUED)
VIP VIP EQUITY VIP HIGH
GROWTH A INCOME A INCOME BOND A
---------- --------- -------------
***TOP ***TOP ***TOP
1997 EXPLORER EXPLORER EXPLORER
<S> <C> <C> <C>
Beginning unit value................... 10.000000 10.000000 10.000000
Reinvested capital gains and dividends. 0.000000 0.000000 0.000000
Realized and unrealized gain........... 2.644242 2.661373 1.846520
Expenses............................... -0.159535 -0.156931 -0.151690
Ending unit value...................... 12.484707 12.504442 11.694830
Percentage increase in unit value*..... 24.8% 25.0% 16.9%
<FN>
* An annualized rate of return cannot be determined as expenses do not include the contract charges discussed in note (5).
*** Period from April 1, 1997, date of commencement of operations.
</FN>
</TABLE>
<TABLE>
<CAPTION>
EMERGING MARKET A
------------------------------------
**INVESTAR **TOP ***TOP
1997 VISION SPECTRUM EXPLORER
<S> <C> <C> <C>
Beginning unit value................... 10.000000 10.000000 10.000000
Reinvested capital gains and dividends. 0.041443 0.041634 0.038257
Realized and unrealized loss........... -0.107505 -0.106937 -0.739399
Expenses............................... -0.145521 -0.146280 -0.124698
Ending unit value...................... 9.788417 9.788417 9.174160
Percentage decrease in unit value*..... -2.1% -2.1% -8.3%
<FN>
* An annualized rate of return cannot be determined as expenses do not include the contract charges discussed in note (5).
** Period from January 3, 1997, date of commencement of operations.
*** Period from April 1, 1997, date of commencement of operations.
</FN>
</TABLE>
The accompanying notes are a integral part of these financial statements.
<PAGE> 47
<PAGE> 1
[KPMG PEAT MARWICK LLP LOGO]
1600 PNC Center
201 East Fifth Street
Cincinnati, OH 45202
Dayton, OH
Independent Auditors' Report
The Board of Directors
The Ohio National Life Insurance Company:
We have audited the accompanying consolidated balance sheets of The Ohio
National Life Insurance Company and subsidiaries (the Company) as of December
31, 1997 and 1996, and the related consolidated statements of income, equity and
cash flows for each of the years in the three-year period ended December 31,
1997. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The Ohio National
Life Insurance Company and subsidiaries as of December 31, 1997 and 1996, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1997, in conformity with generally
accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the consolidated
financial statements of the Company taken as a whole. The consolidating
information included in Schedules 1 and 2 is presented for purposes of
additional analysis of the consolidated financial statements rather than to
present the financial position, results of operations, and cash flows of the
individual companies. The consolidating information has been subjected to the
auditing procedures applied in the audits of the consolidated financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the consolidated financial statements taken as a whole.
KPMG Peat Marwick LLP
Cincinnati, Ohio
February 12, 1998
<PAGE> 2
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1997 and 1996
(000's omitted)
<TABLE>
<CAPTION>
Assets 1997 1996
------ ---- ----
<S> <C> <C>
Investments (notes 4, 8 and 9):
Securities available-for-sale, at fair value:
Fixed maturities $2,687,847 2,572,550
Equity securities 81,983 63,763
Fixed maturities held-to-maturity, at amortized cost 724,892 692,572
Mortgage loans on real estate, net 1,230,256 1,087,287
Real estate, net 21,820 40,759
Policy loans 153,348 151,229
Other long-term investments 42,539 42,851
Short-term investments 37,509 36,016
---------- ---------
Total investments 4,980,194 4,687,027
Cash 14,012 33,712
Accrued investment income 64,079 62,339
Deferred policy acquisition costs 250,942 246,643
Reinsurance recoverable 61,862 52,260
Other assets 42,683 37,737
Assets held in Separate Accounts 916,790 661,871
---------- ---------
Total assets $6,330,562 5,781,589
========== =========
Liabilities and Equity
Future policy benefits and claims (note 5) $4,445,474 4,288,107
Policyholders' dividend accumulations 62,423 63,574
Other policyholder funds 17,069 16,161
Note payable (net of unamortized discount of $766 in 1997
and $809 in 1996) (note 6) 84,234 84,191
Accrued Federal income tax (note 7):
Current 12,658 14,807
Deferred 65,380 37,252
Other liabilities 117,537 113,854
Liabilities related to Separate Accounts 887,542 648,634
---------- ---------
Total liabilities 5,692,317 5,266,580
---------- ---------
Equity (notes 3 and 12):
Unrealized gains on securities available-for-sale, net 102,956 46,807
Retained earnings 535,289 468,202
---------- ---------
Total equity 638,245 515,009
---------- ---------
Commitments and contingencies (notes 9 and 14)
Total liabilities and equity $6,330,562 5,781,589
========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Statements of Income
Years ended December 31, 1997, 1996 and 1995
(000's omitted)
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Revenues (note 15):
Traditional life insurance premiums $116,402 113,176 104,514
Accident and health insurance premiums 23,921 23,478 22,455
Annuity premiums and charges 37,630 28,757 31,203
Universal life and investment product policy
charges 50,991 42,304 37,064
Net investment income (note 4) 390,547 370,702 355,027
Net realized gain (loss) on investments (note 4) 12,500 8,761 (2,751)
Other income 2,265 1,861 1,372
-------- ------- -------
634,256 589,039 548,884
-------- ------- -------
Benefits and expenses:
Benefits and claims 398,598 379,116 373,108
Provision for policyholders' dividends on
participating policies (note 12) 25,399 26,996 23,047
Amortization of deferred policy acquisition costs 23,108 19,341 21,471
Other operating costs and expenses 80,792 71,111 67,438
-------- ------- -------
527,897 496,564 485,064
-------- ------- -------
Income before Federal income tax 106,359 92,475 63,820
-------- ------- -------
Federal income tax (note 7):
Current expense 41,373 37,443 31,233
Deferred benefit (2,101) (4,571) (6,330)
-------- ------- -------
39,272 32,872 24,903
-------- ------- -------
Net income $ 67,087 59,603 38,917
======== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Statements of Equity
Years ended December 31, 1997, 1996 and 1995
(000's omitted)
<TABLE>
<CAPTION>
Unrealized
gains (losses)
on securities
available- Retained Total
for-sale, net earnings equity
------------- -------- ------
<S> <C> <C> <C>
1995:
Balance, beginning of year $(29,300) 369,682 340,382
Net income - 38,917 38,917
Unrealized gain on securities available-for-sale,
net of adjustment to deferred policy acquisition
costs and deferred Federal income taxes 115,144 - 115,144
-------- ------- -------
Balance, end of year $ 85,844 408,599 494,443
======== ======= =======
1996:
Balance, beginning of year $ 85,844 408,599 494,443
Net income 59,603 59,603
Unrealized loss on securities available-for-sale,
net of adjustment to deferred policy
acquisition costs and deferred Federal
income tax (39,037) - (39,037)
-------- ------- -------
Balance, end of year $ 46,807 468,202 515,009
======== ======= =======
1997:
Balance, beginning of year $ 46,807 468,202 515,009
Net income - 67,087 67,087
Unrealized gain on securities available-for- sale,
net of adjustment to deferred policy
acquisition costs and deferred Federal
income tax 56,149 - 56,149
-------- ------- -------
Balance, end of year $102,956 535,289 638,245
======== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1997, 1996 and 1995
(000's omitted)
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net Income $ 67,087 59,603 38,917
Adjustments to reconcile net income to net cash
provided by operating activities:
Capitalization of deferred policy acquisition costs (48,507) (43,711) (41,403)
Amortization of deferred policy acquisition costs 23,108 19,341 21,471
Amortization and depreciation 4,342 1,095 1,342
Realized gains on invested assets, net (10,527) (7,772) (3,077)
Deferred Federal income tax (benefit) (2,101) (4,571) (6,330)
(Increase) decrease in accrued investment income (1,740) 789 (4,977)
(Increase) decrease in other assets (14,548) 3,169 (19,051)
Net increase in separate accounts (16,011) (958) (3,993)
Increase in policyholder account balances 40,843 20,249 52,265
(Decrease) increase in policyholders' dividend
accumulations and other funds (243) 28 (215)
Increase (decrease) in current Federal income tax payable (2,149) (6,842) 10,088
Increase in other liabilities 3,603 11,134 9,126
Other, net (27) 896 4,369
---------- -------- --------
Net cash provided by operating activities 43,130 52,450 58,532
---------- -------- --------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 298,686 145,554 83,956
Proceeds from sale of debt securities available-for-sale 51,770 74,977 46,372
Proceeds from sale of equity securities 4,996 15,001 7,245
Proceeds from maturity of fixed maturities held-to-maturity 75,530 57,129 102,565
Proceeds from repayment of mortgage loans on real estate 180,745 140,831 93,714
Proceeds from sale of real estate 19,078 4,181 15,791
Proceeds from repayment of policy loans and sale of
other invested assets 17,882 11,812 14,003
Cost of debt securities available-for-sale acquired (367,027) (331,991) (281,828)
Cost of equity securities acquired (7,205) (4,000) (12,258)
Cost of fixed maturities held-to-maturity acquired (110,982) (76,022) (226,541)
Cost of mortgage loans on real estate acquired (321,914) (332,088) (233,003)
Cost of real estate acquired (1,310) (836) (1,283)
Policy loans issued and other invested assets acquired (18,190) (18,006) (23,046)
---------- -------- --------
Net cash used in investing activities (177,941) (313,458) (414,313)
---------- -------- --------
Cash flows from financing activities:
Increase in universal life and investment product account balances 1,000,919 973,793 957,776
Decrease in universal life and investment product account balances (884,395) (745,546) (583,852)
Proceeds from note issue - 49,340 -
Repayment of note - (16,477) -
Other, net 80 68 69
---------- -------- --------
Net cash provided by financing activities 116,604 261,178 373,993
---------- -------- --------
Net increase (decrease) in cash and cash equivalents (18,207) 170 18,212
Cash and cash equivalents, beginning of year 69,728 69,558 51,346
========== ======== ========
Cash and cash equivalents, end of year $ 51,521 69,728 69,558
========== ======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 6
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1997, 1996 and 1995
(000's omitted)
(1) Organization, Consolidation Policy and Business Description
The Ohio National Life Insurance Company (ONLIC) is a mutual life
insurance company. Ohio National Life Assurance Corporation
(ONLAC) is a wholly-owned stock life insurance subsidiary included
in the consolidated financial statements. The Company's other
wholly-owned subsidiaries are not life insurance enterprises and
are included in the consolidated financial statements on an equity
basis. These non-insurance subsidiaries are not material to the
Company's consolidated results of operations or financial
position. ONLIC and its subsidiaries are collectively referred to
as the "Company".
On February 12, 1998, ONLIC's Board of Directors approved a plan of
reorganization for the Company under the provision of sections
3913.25 to 3913.38 of the Ohio Revised Code relating to mutual
insurance holding companies. The plan of reorganization must be
approved by the Company's policyholders and by the Ohio Department
of Insurance before it is effective.
ONLIC and ONLAC are life and health insurers licensed in 47 states, the
District of Columbia and Puerto Rico. The Company offers a full
range of life, health and annuity products through exclusive
agents and other distribution channels and is subject to
competition from other insurers throughout the United States. The
Company is subject to regulation by the Insurance Departments of
states in which it is licensed and undergoes periodic examinations
by those departments.
The following is a description of the most significant risks facing life
and health insurers and how the Company mitigates those risks:
Legal/Regulatory Risk is the risk that changes in the legal or
regulatory environment in which an insurer operates will create
additional expenses not anticipated by the insurer in pricing its
products. That is, regulatory initiatives designed to reduce
insurer profits, new legal theories or insurance company
insolvencies through guaranty fund assessments may create costs
for the insurer beyond those recorded in the consolidated
financial statements. The Company mitigates this risk by offering
a wide range of products and by operating throughout the United
States, thus reducing its exposure to any single product or
jurisdiction, and also by employing underwriting practices which
identify and minimize the adverse impact of this risk.
Credit Risk is that risk that issuers of securities owned by the
Company or mortgagors on mortgage loans on real estate owned by
the Company will default or that other parties, including
reinsurers, which owe the Company money, will not pay. The Company
minimizes this risk by adhering to a conservative investment
strategy, by maintaining sound reinsurance and credit and
collection policies and by providing for any amounts deemed
uncollectible.
(Continued)
<PAGE> 7
2
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(1) Organization, Consolidation Policy and Business Description, Continued
Interest Rate Risk is the risk that interest rates will change and
cause a decrease in the value of an insurer's investments. This
change in rates may cause certain interest-sensitive products to
become uncompetitive or may cause disintermediation. The Company
mitigates this risk by charging fees for non-conformance with
certain policy provisions, by offering products that transfer this
risk to the purchaser, and/or by attempting to match the maturity
schedule of its assets with the expected payouts of its
liabilities. To the extent that liabilities come due more quickly
than assets mature, an insurer would have to borrow funds or sell
assets prior to maturity and potentially recognize a gain or loss.
(2) Summary of Significant Accounting Policies
The significant accounting policies followed by the Company that
materially affect financial reporting are summarized below. The
accompanying consolidated financial statements have been prepared
in accordance with generally accepted accounting principles (GAAP)
which differ from statutory accounting practices prescribed or
permitted by regulatory authorities (see Note 3).
(a) Valuation of Investments and Related Gains and Losses
Fixed maturity securities are classified as held-to-maturity when
the Company has the positive intent and ability to hold the
securities to maturity and are stated at amortized cost.
Fixed maturity securities not classified as held-to-maturity
and all equity securities are classified as
available-for-sale and are stated at fair value, with the
unrealized gains and losses, net of adjustments to deferred
policy acquisition costs and deferred Federal income tax,
reported as a separate component of equity that would have
been required as a charge or credit to operations had such
unrealized amounts been realized. The Company has no trading
securities.
Mortgage loans on real estate are carried at the unpaid principal
balance less valuation allowances. The Company provides
valuation allowances for impairments of mortgage loans on
real estate based on a review by portfolio managers. The
measurement of impaired loans is based on the present value
of expected future cash flows discounted at the loan's
effective interest rate or, at the fair value of the
collateral, if the loan is collateral dependent. Loans in
foreclosure and loans considered to be impaired as of the
balance sheet date are placed on non-accrual status and
written down to the fair value of the existing property to
derive a new cost basis. Cash receipts on non-accrual status
mortgage loans on real estate are included in interest income
in the period received.
(Continued)
<PAGE> 8
3
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(2) Summary of Significant Accounting Policies, Continued
(a) Valuation of Investments and Related Gains and Losses, Continued
Real estate is carried at cost less accumulated depreciation and
valuation allowances. Other long-term investments are carried
on the equity basis, adjusted for valuation allowances.
Realized gains and losses on the sale of investments are
determined on the basis of specific security identification.
Estimates for valuation allowances and other than temporary
declines are included in realized gains and losses on
investments.
(b) Revenues and Benefits
Traditional life insurance products include those products with
fixed and guaranteed premiums and benefits and consist
primarily of whole life, limited-payment life, term life and
certain annuities with life contingencies. Premiums for
traditional life insurance products are recognized as revenue
when due and collected. Benefits and expenses are associated
with earned premiums so as to result in recognition of
profits over the life of the contract. This association is
accomplished by the provision for future policy benefits and
the deferral and amortization of policy acquisition costs.
Universal life products include universal life, variable universal
life and other interest-sensitive life insurance policies.
Investment products consist primarily of individual and group
deferred annuities, annuities without life contingencies and
guaranteed investment contracts. Revenues for universal life
and investment products consist of net investment income and
cost of insurance, policy administration and surrender
charges that have been earned and assessed against policy
account balances during the period. Policy benefits and
claims that are charged to expense include benefits and
claims incurred in the period in excess of related policy
account balances, maintenance costs and interest credited to
policy account balances.
Accident and health insurance premiums are recognized as revenue
in accordance with the terms of the policies. Policy claims
are charged to expense in the period that the claims are
incurred.
(c) Deferred Policy Acquisition Costs
The costs of acquiring new business, principally commissions,
certain expenses of the policy issue and underwriting
department and certain variable agency expenses have been
deferred. For traditional non-participating life insurance
products, these deferred acquisition costs are predominantly
being amortized with interest over the premium paying period
of the related policies in proportion to premium revenue.
Such anticipated premium revenue was estimated using the same
assumptions as were used for computing liabilities
(Continued)
<PAGE> 9
4
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(2) Summary of Significant Accounting Policies, Continued
(c) Deferred Policy Acquisition Costs, Continued
for future policy benefits. For participating life insurance
products, deferred policy acquisition costs are being
amortized in proportion to gross margins of the related
policies. Gross margins are determined for each issue year
and are equal to premiums plus investment income less death
claims, surrender benefits, administrative costs, expected
policyholder dividends, and the increase in reserve for
future policy benefits. For universal life and investment
products, deferred policy acquisition costs are being
amortized with interest over the lives of the policies in
relation to the present value of the estimated future gross
profits from projected interest margins, cost of insurance,
policy administration and surrender charges. Deferred policy
acquisition costs for participating life and universal life
business are adjusted to reflect the impact of unrealized
gains and losses on fixed maturity securities
available-for-sale (see Note 2(a)).
(d) Separate Accounts
Separate Account assets and liabilities represent contractholders'
funds which have been segregated into accounts with specific
investment objectives. The investment income and gains or
losses of these accounts accrue directly to the
contractholders. The activity of the Separate Accounts is not
reflected in the consolidated statements of income and cash
flows except for the fees the Company receives for
administrative services and risks assumed. Amounts provided
by the Company to establish Separate Account investment
portfolios, seed money, are not included in Separate Account
liabilities.
(e) Future Policy Benefits
Future policy benefits for traditional life have been calculated
using a net level premium method based on estimates of
mortality, morbidity, investment yields and withdrawals which
were used or which were being experienced at the time the
policies were issued, rather than the assumptions prescribed
by state regulatory authorities (see Note 5).
Future policy benefits for annuity policies in the accumulation
phase, universal life and variable universal life policies
have been calculated based on participants' aggregate account
values.
(Continued)
<PAGE> 10
5
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(2) Summary of Significant Accounting Policies, Continued
(f) Participating Business
Participating business represents approximately 42% of the
Company's ordinary life insurance in force in 1997. In 1996
and 1995, participating business represented approximately
43% and 45%, respectively, of the Company's ordinary life
insurance in force. The provision for policyholder dividends
is based on current dividend scales. Future dividends are
provided for in future policy benefits based on dividend
scales in effect as of December 31, 1997.
(g) Reinsurance Ceded
Reinsurance premiums ceded and reinsurance recoveries on benefits
and claims incurred are deducted from the respective income
and expense accounts. Assets and liabilities related to
reinsurance ceded are reported on a gross basis.
(h) Federal Income Tax
The Company files a consolidated Federal income tax return. The
Company uses the asset and liability method of accounting for
income tax. Under the asset and liability method, deferred
tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss
and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under
this method, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income
in the period that includes the enactment date. Valuation
allowances are established when necessary to reduce the
deferred tax assets to the amounts expected to be realized.
(i) Cash Equivalents
For purposes of the consolidated statements of cash flows, the
Company considers all short-term investments with original
maturities of three months or less to be cash equivalents.
(j) Use of Estimates
In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities as of the date of the
consolidated financial statements and revenues and expenses
for the reporting period. Actual results could differ
significantly from those estimates.
(Continued)
<PAGE> 11
6
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(2) Summary of Significant Accounting Policies, Continued
(j) Use of Estimates, Continued
The estimates susceptible to significant change are those used in
determining deferred policy acquisition costs, the liability
for future policy benefits and claims and contingencies, and
those used in determining valuation allowances for mortgage
loans on real estate and real estate. Although some
variability is inherent in these estimates, management
believes the amounts provided are adequate.
(k) Reclassifications
Certain amounts in the 1996 and 1995 financial statements have
been reclassified to conform with 1997 presentation.
(3) Basis of Presentation
The consolidated financial statements have been prepared in accordance
with GAAP. Annual Statements on ONLIC and ONLAC, filed with the
Department of Insurance of the State of Ohio, are prepared on the
basis of accounting practices prescribed or permitted by such
regulatory authorities. Prescribed statutory accounting practices
include a variety of publications of the National Association of
Insurance Commissioners (NAIC), as well as state laws, regulations
and general administrative rules. Permitted statutory accounting
practices encompass all accounting practices not so prescribed.
The Company has no material permitted statutory accounting
practices.
The following reconciles the statutory net income of ONLIC as reported to
regulatory authorities to the net income as shown in the
accompanying consolidated financial statements:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Statutory net income $ 53,696 44,503 24,468
Adjustments to restate to the basis of GAAP:
Increase in deferred policy acquisition costs, net 25,399 24,018 19,485
Future policy benefits (14,868) (14,050) (10,723)
Deferred Federal income tax 2,101 4,571 6,330
Valuation allowances and other than temporary
declines accounted for directly in surplus 1,974 990 (5,829)
Interest maintenance reserve 791 383 (208)
Other, net (2,006) (812) 5,394
-------- ------ ------
Net income per accompanying consolidated
statements of income $ 67,087 59,603 38,917
======== ====== ======
</TABLE>
(Continued)
<PAGE> 12
7
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(3) Basis of Presentation, Continued
The following reconciles the statutory capital and surplus of ONLIC as
reported to regulatory authorities to the equity as shown in the
accompanying consolidated financial statements:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Statutory capital and surplus $ 362,565 313,746
Add (deduct) cumulative effect of adjustments:
Deferred policy acquisition costs 250,942 246,643
Asset valuation reserve 94,391 77,604
Interest maintenance reserve 23,163 22,372
Future policy benefits (86,186) (71,318)
Deferred Federal income tax (65,380) (37,252)
Difference between amortized cost and fair value of fixed
maturity securities available-for-sale, gross 162,586 70,985
Surplus note (84,234) (84,191)
Other, net (19,602) (23,580)
--------- --------
Equity per accompanying consolidated balance sheets $ 638,245 515,009
========= ========
</TABLE>
(4) Investments
An analysis of investment income and realized gains/(losses) by
investment type follows for the years ended December 31:
<TABLE>
<CAPTION>
Realized gains (losses)
Investment income on disposition of investments
------------------------------------- -------------------------------------
1997 1996 1995 1997 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Securities available-for-sale:
Fixed maturities $207,377 203,271 105,928 $ 2,056 3,168 (1,062)
Equity securities 2,793 4,021 3,710 38 4,077 459
Fixed maturities held-to-mature 62,348 61,509 149,465 2,539 1,304 2,319
Mortgage loans on real estate 103,566 89,391 76,608 1,863 1,262 548
Real estate 6,123 8,693 7,771 4,418 (605) 813
Policy Loans 9,834 9,420 9,096 -- -- --
Short-term 5,010 3,419 3,779 -- -- --
Other 6,612 5,042 6,808 (387) (1,434) --
-------- ------- ------- ------- ----- ------
Total 403,663 384,766 363,165 10,527 7,772 3,077
(Deduct) Add:
Investment expenses (13,116) (14,064) (8,138)
Valuation allowances:
Mortgage loans on real estate (63) 926 (6,462)
Real estate and other 2,036 63 634
------- ----- ------
1,973 989 (5,828)
-------- ------- -------
Net investment income $390,547 370,702 355,027
======== ======= =======
Net realized gains (losses)
on disposition of
investments ------- ----- ------
$12,500 8,761 (2,751)
======= ===== ======
</TABLE>
(Continued)
<PAGE> 13
8
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(4) Investments, Continued
The amortized cost and estimated fair value of securities available-for-
sale and fixed maturities held-to-maturity were as follows:
<TABLE>
<CAPTION>
December 31, 1997
-----------------------------------------------------------
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
------------- -------------- ----------- ---------------
<S> <C> <C> <C> <C>
Securities available-for-sale
Fixed maturities:
U.S. Treasury securities and obligations of
U.S. government operations and agencies $ 125,785 7,976 (184) 133,577
Obligations of states and political 53,646 4,449 (90) 58,005
subdivisions
Debt securities issued by foreign - - - -
governments
Corporate securities 1,657,487 128,028 (1,565) 1,783,950
Mortgage-backed securities 688,343 25,142 (1,170) 712,315
----------- ------- ------- ---------
Total fixed maturities $ 2,525,261 165,595 (3,009) 2,687,847
=========== ======= ======= =========
Equity securities $ 41,423 41,369 (809) 81,983
=========== ======= ======= =========
Fixed maturity securities held-to-maturity
Obligations of states and political $ 15,018 1,551 (403) 16,166
subdivisions
Corporate securities 695,480 69,463 (3,248) 761,695
Mortgage-backed securities 14,394 775 (47) 15,122
----------- ------- ------- --------
$ 724,892 71,789 (3,698) 792,983
=========== ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1996
---------------------------------------------------------
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
------------ -------------- ------------- --------------
<S> <C> <C> <C> <C>
Securities available-for-sale
Fixed maturities:
U.S. Treasury securities and obligations of
U.S. government operations and agencies $ 176,364 3,703 (4,321) 175,746
Obligations of states and political 29,119 1,538 (229) 30,428
subdivisions
Debt securities issued by foreign 8,078 1,920 - 9,998
governments
Corporate securities 1,675,596 75,859 (14,097) 1,737,358
Mortgage-backed securities 612,408 12,528 (5,916) 619,020
----------- ------ ------- ---------
Total fixed maturities $ 2,501,565 95,548 (24,563) 2,572,550
=========== ====== ======= =========
Equity securities $ 39,175 24,588 - 63,763
=========== ====== ======= =========
Fixed maturity securities held-to-maturity
Obligations of states and political $ 8,659 218 - 8,877
divisions
Corporate securities 677,161 58,366 (4,785) 730,742
Mortgage-backed securities 6,752 177 (102) 6,827
----------- ------ ------- ---------
$ 692,572 58,761 (4,887) 746,446
=========== ====== ======= =========
</TABLE>
(Continued)
<PAGE> 14
9
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(4) Investments, Continued
The components of unrealized gains on securities available-for-sale, net,
were as follows for the years ended December 31:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Gross unrealized gain $ 203,146 95,573
Adjustment to deferred policy acquisition costs (41,350) (20,250)
Deferred federal income tax (58,840) (28,516)
========= =======
$ 102,956 46,807
========= =======
</TABLE>
The net unrealized gain on securities available for sale includes a net
unrealized gain on equity securities of $24,715 in 1997
($14,256 in 1996) and a net unrealized gain on fixed maturities
(net SFAS 115 and related transactions) of $78,241 in 1997
($32,551 in 1996).
An analysis of the change in gross unrealized gains (losses) on
securities available-for-sale and fixed maturities
held-to-maturity follows for the years ended December 31:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturities $ 91,601 (95,101) 209,108
Equity securities 15,972 4,769 13,046
Fixed maturities held-to-maturity 14,217 (39,811) 148,026
</TABLE>
The amortized cost and estimated fair value of fixed maturity securities
available-for-sale and fixed maturity securities held-to-maturity
as of December 31, 1997, by contractual maturity, are shown below.
Expected maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Fixed Maturity Securities
----------------------------------------------------------------
Available-for-Sale Held-to-Maturity
------------------------------- -----------------------------
Amortized Estimated Amortized Estimated
cost fair value cost fair value
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Due in one year or less $ 61,648 67,102 24,188 26,457
Due after one year through five years 382,609 407,099 188,535 206,249
Due after five years through ten years 912,222 970,410 334,080 365,474
Due after ten years 1,168,782 1,243,236 178,089 194,803
============ ========= ======= =======
$ 2,525,261 2,687,847 724,892 792,983
============ ========= ======= =======
</TABLE>
(Continued)
<PAGE> 15
10
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(4) Investments, Continued
Proceeds from the sale of securities available-for-sale (excludes calls)
during 1997, 1996 and 1995 were $51,770, $74,977, and $46,372,
respectively. Gross gains of $203 ($1,667 in 1996 and $510 in
1995) and gross losses of $283 ($534 in 1996 and $2,293 in 1995)
were realized on those sales.
Investments with an amortized cost of $7,700 and $6,857 as of
December 31, 1997 and 1996, respectively, were on deposit with
various regulatory agencies as required by law.
Real estate is presented at cost less accumulated depreciation of
$11,172 in 1997 ($20,405 in 1996) and valuation allowances of $0
in 1997 and $2,100 in 1996.
The Company generally initiates foreclosure proceedings on all mortgage
loans on real estate delinquent sixty days. There were no
foreclosures of mortgage loans on real estate in 1997 and one
mortgage loan on real estate of $570 in process of foreclosure as
of December 31, 1997. In 1996, foreclosures of mortgage loans on
real estate totaled $4,099.
(5) Future Policy Benefits and Claims
The liability for future policy benefits for universal life insurance
policies and investment contracts (approximately 68% of the total
liability for future policy benefits as of December 31, 1997 and
1996) has been established based on accumulated contract values
without reduction for surrender penalty provisions. The average
interest rate credited on investment product policies was 6.8%,
6.8% and 7.0% for the years ended December 31, 1997, 1996 and
1995, respectively.
The liability for future policy benefits for traditional life policies
has been established based upon the net level premium method using
the following assumptions:
Interest rates: Interest rates vary as follows:
Year of issue Interest Rate
------------- -------------
1997, 1996 and 1995 4 - 5.5%
1994 and prior 2.25 - 6.0%
Withdrawals: Rates, which vary by issue age, type of coverage
and policy duration, are based on Company experience
Mortality: Mortality and morbidity rates are based on published
tables, guaranteed in insurance contracts.
(Continued)
<PAGE> 16
11
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(6) Notes Payable
On July 11, 1994, the Company issued $50,000, 8.875% surplus notes, due
July 15, 2004. On May 21, 1996, the Company issued $50,000,
8.5% surplus notes, due May 15, 2026. Concurrent with the issue of
the new notes, $15,000 of the notes issued on July 11, 1994 were
retired. Total interest paid was $7,356, $6,290 and $4,437 during
the years ended December 31, 1997, 1996 and 1995, respectively.
The notes have been issued in accordance with Section 3941.13 of the
Ohio Revised Code. Interest payments, scheduled semi-annually,
must be approved for payment by the Director of the Department of
Insurance of the State of Ohio. All issuance costs have been
capitalized and are being amortized over the terms of the notes.
(7) Federal Income Tax
Prior to 1984, the Life Insurance Company Income Tax Act of 1959, as
amended by the Deficit Reduction Act of 1984 (DRA), permitted the
deferral from taxation of a portion of statutory income under
certain circumstances. In these situations, the deferred income
was accumulated in the Policyholders' Surplus Account (PSA).
Management considers the likelihood of distributions from the PSA
to be remote; therefore, no Federal income tax has been provided
for such distributions in the financial statements. The DRA
eliminated any additional deferrals to the PSA. Any distributions
from the PSA, however, will continue to be taxable at the then
current tax rate. The pre-tax balance of the PSA is approximately
$5,257 as of December 31, 1997.
Total income taxes for the years ended December 31, 1997, 1996 and 1995
were allocated as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Income from continuing operations $ 39,272 32,872 24,903
Equity for unrealized gains (loss) on securities
available for sale 30,324 (22,045) 46,540
======== ======= ======
$ 69,596 10,827 71,443
======== ======= ======
</TABLE>
(Continued)
<PAGE> 17
12
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(7) Federal Income Tax, Continued
Total Federal income tax expense for the years ended December 31, 1997,
1996 and 1995 differs from the amount computed by applying the
U.S. Federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------------------- ----------------------- -----------------------
Amount % Amount % Amount %
------------ --------- ------------ --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Computed (expected)
tax expense $ 37,226 35.0 32,366 35.0 22,337 35.0
Differential earnings 3,720 3.5 3,616 3.9 5,676 8.9
Dividends received
deduction and tax
exempt interest (1,406) (1.3) (1,440) (1.6) (1,585) (2.5)
Other, net (268) (0.3) (1,670) (1.8) (1,525) (2.4)
-------- ---- ------ ---- ------ ----
$ 39,272 36.9 32,872 35.5 24,903 39.0
======== ==== ====== ==== ====== ====
</TABLE>
Total Federal income tax paid was $43,522, $44,823 and $21,145 during
the years ended December 31, 1997, 1996 and 1995, respectively.
The tax effects of temporary differences between the financial
statement carrying amounts and tax basis of assets and liabilities
that give rise to significant components of the net deferred tax
liability as of December 31, 1997 and 1996 relate to the
following:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Deferred tax assets:
Future policy benefits $ 57,903 51,461
Mortgage loans on real estate 1,986 1,950
Other assets and liabilities 14,063 11,650
--------- ---------
Total gross deferred tax assets 73,952 65,061
--------- ---------
Deferred tax liabilities:
Fixed maturity securities available-for-sale 57,290 25,604
Deferred policy acquisition costs 66,844 67,603
Other fixed maturities, equity securities and other
long-term investments 14,286 8,343
Other 912 763
--------- ---------
Total gross deferred tax liabilities 139,332 102,313
========= =========
Net deferred tax liability $ 65,380 37,252
========= =========
</TABLE>
The Company has determined that a deferred tax asset valuation allowance
was not needed as of December 31, 1997 and 1996. In assessing the
realization of deferred tax assets, management considers whether
it is more likely than not that the deferred tax assets will be
realized. The
(Continued)
<PAGE> 18
13
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(7) Federal Income Tax, Continued
ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which
those temporary differences become deductible. Management
considers primarily the scheduled reversal of deferred tax
liabilities and tax planning strategies in making this assessment
and believes it is more likely than not the Company will realize
the benefits of the deductible differences remaining as of
December 31, 1997.
(8) Disclosures about Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, Disclosures about
Fair Value of Financial Instruments (SFAS 107) requires disclosure
of fair value information about existing on and off-balance sheet
financial instruments. SFAS 107 excludes certain assets and
liabilities, including insurance contracts, other than policies
such as annuities that are classified as investment contracts,
from its disclosure requirements. Accordingly, the aggregate fair
value amounts presented do not represent the underlying value of
the Company. The tax ramifications of the related unrealized gains
and losses can have a significant effect on fair value estimates
and have not been considered in the estimates.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures:
Cash, Short-Term Investments and Policy Loans - The carrying
amount reported in the balance sheets for these instruments
approximate their fair value.
Investment Securities - Fair value for equity securities and fixed
maturity securities are the same as market value. Market value
generally represents quoted market prices traded in the public
market place. For fixed maturity securities not actively traded,
or in the case of private placements, fair value is estimated by
discounting expected future cash flows using a current market rate
applicable to the yield, credit quality and maturity of
investments.
Separate Account Assets and Liabilities - The fair value of assets
held in Separate Accounts is based on quoted market prices. The
fair value of liabilities related to Separate Accounts is the
accumulated contract values in the Separate Account portfolios.
Mortgage Loans on Real Estate - The fair value for mortgage loans
on real estate is estimated using discounted cash flow analyses,
using interest rates currently being offered for similar loans to
borrowers with similar credit ratings. Loans with similar
characteristics are aggregated for purposes of the calculations.
(Continued)
<PAGE> 19
14
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(8) Disclosures about Fair Value of Financial Instruments, Continued
Investment Contracts - Fair value for the Company's liabilities
under investment type contracts is disclosed using two methods.
For investment contracts without defined maturities, fair value is
the amount payable on demand. For investment contracts with known
or determined maturities, fair value is estimated using discounted
cash flow analysis. Interest rates used are similar to currently
offered contracts with maturities consistent with those remaining
for the contracts being valued.
Note Payable - The fair value for the note payable was determined
by discounting the scheduled cash flows of the note using a market
rate applicable to the yield, credit quality and maturity of a
similar debt instrument.
Policyholders' Dividend Accumulation and Other Policyholder Funds
- The carrying amount reported in the consolidated balance sheets
for these instruments approximates their fair value.
The carrying amount and estimated fair value of financial instruments
subject to SFAS 107 were as follows as of December 31:
<TABLE>
<CAPTION>
1997 1996
----------------------------- -----------------------------
Carrying Estimated Carrying Estimated
Assets amount fair value amount fair value
-------------- -------------- -------------- ------------
<S> <C> <C> <C> <C>
Investments:
Securities available-for-sale:
Fixed maturities $ 2,687,847 2,687,847 2,572,550 2,572,550
Equity securities 81,983 81,983 63,763 63,763
Fixed maturities held-to-
maturity 724,892 792,983 692,572 746,446
Mortgage loans on real estate 1,230,256 1,324,735 1,087,287 1,130,717
Policy loans 153,348 153,348 151,229 151,229
Short-term investments 37,509 37,509 36,016 36,016
Cash 14,012 14,012 33,712 33,712
Assets held in Separate Accounts 916,790 916,790 661,871 661,871
Liabilities
Guaranteed investment contracts $ 1,041,271 1,050,429 1,028,129 1,025,298
Individual deferred annuity contracts 1,088,355 1,056,643 1,081,048 1,056,372
Other annuity contracts 921,100 957,977 910,941 911,897
Note payable 84,234 95,544 84,191 90,037
Dividend accumulations and
other policyholder funds 79,492 79,492 79,735 79,735
Liabilities related to separate 887,542 887,542 648,634 648,634
accounts
</TABLE>
(Continued)
<PAGE> 20
15
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(9) Additional Financial Instruments Disclosure
(a) Financial Instruments with Off-Balance-Sheet Risk
The Company is a party to financial instruments with off-balance-
sheet risk in a normal course of business through management
of its investment portfolio. The Company had outstanding
commitments to fund mortgage loans, bonds and venture capital
partnerships of approximately $144,000 and $182,000 as of
December 31, 1997 and 1996, respectively. These commitments
involve, in varying degrees, elements of credit and market
risk in excess of amounts recognized in the financial
statements. The credit risk of all financial instruments,
whether on- or off-balance sheet, is controlled through
credit approvals, limits, and monitoring procedures.
(b) Significant Concentrations of Credit Risk
Mortgage loans are collateralized by the underlying properties.
Collateral must meet or exceed 125% of the loan at the time
the loan is made. The Company grants mainly commercial
mortgage loans to customers throughout the United States. The
Company has a diversified loan portfolio, and total loans in
any state do not exceed 10% of the total loan portfolio as of
December 31, 1997. The summary below depicts loan exposure of
remaining principal balances by type as of December 31, 1997
and 1996:
<TABLE>
<CAPTION>
1997 1996
Mortgage assets by type ---- ----
-----------------------
<S> <C> <C>
Office $ 345,313 300,158
Retail 332,621 291,341
Apartment 297,647 251,720
Industrial 159,425 152,175
Other 104,886 101,467
---------- ----------
1,239,892 1,096,861
Less valuation allowances 9,636 9,574
---------- ----------
Total mortgage loans on real estate, net $1,230,256 1,087,287
========== ==========
</TABLE>
(10) Pension Plans
The Company sponsors pension plans covering all eligible employees and
certain general agents. Retirement benefits are based on years of
service and either the highest average earnings in five of the
last ten years or specific elements of compensation earned in the
last five and ten years of service. Other pension plans covering
employees where benefits exceed 401(a)(17) and Code 415 limits are
also in effect.
(Continued)
<PAGE> 21
16
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(10) Pension Plans, Continued
The net periodic pension cost for the plans for the years ended
December 31, 1997, 1996 and 1995 follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Service cost (benefits earned
during the period) $ 2,596 2,169 1,725
Interest cost on projected
benefit obligations 3,072 2,896 2,720
Actual return on plan assets (2,269) (2,447) (2,811)
Net amortization and deferral 466 904 1,639
======== ======= =======
Net periodic pension cost $ 3,865 3,522 3,273
======== ======= =======
</TABLE>
Basis for measurements, net periodic pension cost:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Weighted average discount rate 6.70% 6.25% 6.90%
Rate of increase in future compensation levels 5.50% 5.50% 4.75%
Expected long-term rate of return on plan assets 9.00% 8.50% 7.25%
</TABLE>
The following table sets forth the funded status and amounts
recognized in the accompanying consolidated financial statements
as of December 31, 1997 and 1996 for the Company's pension plans.
<TABLE>
<CAPTION>
Assets Exceed Accumulated Benefits
Accumulated Benefits Exceed Assets
-------------------------- --------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Accumulated benefit obligation:
Vested $ 17,551 15,585 13,675 10,747
Nonvested 353 247 631 661
========= ========= ========= ========
$ 17,904 15,832 14,306 11,408
========= ========= ========= ========
Projected benefit obligation for services rendered
to date $ 27,283 24,434 18,300 14,614
Plan assets at fair value 24,597 23,807 257 243
--------- --------- --------- --------
Plan assets less projected benefit
obligation (2,686) (627) (18,043) (14,371)
Unrecognized prior service cost (1,617) (1,741) 31 35
Unrecognized net losses 5,677 3,783 3,010 375
Unrecognized net transitional assets (2,138) (2,375) 2,911 3,202
Amount to recognize additional liability - - (2,471) (1,537)
========= ========= ========= ========
Net pension liability $ (764) (960) (14,562) (12,296)
========= ========= ========= ========
Measurement basis:
Weighted average discount rate 5.90% 6.50% 6.40% 7.00%
Rate of increase in future compensation levels 6.00% 6.00% 4.60% 4.60%
</TABLE>
(Continued)
<PAGE> 22
17
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(10) Pension Plans, Continued
Career Agent and Other Plans
Contributions to the Career Agent's Pension Plan are subject to the
minimum funding required under Internal Revenue Code Section 412.
The expense reported for contributions to the plan for 1997, 1996,
and 1995 were $576, $590, and $497, respectively.
The Company has other deferred compensation and supplemental pension
plans. The expenses for these plans in 1997, 1996 and 1995 were
$3,949, $2,950 and $1,936, respectively.
The Company also maintains a qualified contributory defined contribution
profit sharing plan covering substantially all of its employees.
Company contributions to the Profit Sharing Plan are in part based on the
net earnings of the Company and are payable at the sole discretion
of management. The expense reported for contributions to the plan
for 1997, 1996, and 1995 were $1,825, $1,614 and $1,609,
respectively.
(11) Postretirement Benefits Other Than Pensions
The Company currently offers eligible retirees the opportunity to
participate in a health plan. The Company has two health plans,
one is offered to home office employees, the other is offered to
career agents.
Home Office Employee Health Plan
The Company provides a declining service schedule. Only home
office employees hired prior to January 1, 1996, may become
eligible for these benefits provided that the employee meets the
age and years of service requirements. The plan states that an
employee becomes eligible as follows: age 55 with 20 years of
credited service at retirement, age 56 with 18 years of service,
age 57 with 16 years of service grading to age 64 with two years
of service. The health plan is contributory with retirees
contributing approximately 15% of premium for coverage.
Career Agents Health Plan
Only career agents with contracts effective prior to January 1,
1996, may become eligible for these benefits provided that the
agent is at least age 55 and has 15 years of credited service at
retirement. The health plan is contributory, with retirees
contributing approximately 47% of medical costs.
(Continued)
<PAGE> 23
18
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(11) Postretirement Benefits Other Than Pensions, Continued
Actuarial assumptions for the measurement of the December 31, 1997
accumulated postretirement benefit obligation include a discount
rate of 6.9% (7.5% in 1996 and 1995) and an assumed health care
cost trend rate of 10% (11% in 1996 and 12% in 1995), declining 1%
each year to an ultimate rate of 5%.
Information regarding the funded status of the plan as a whole as of
December 31, 1997 and 1996 follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Accumulated postretirement benefit obligations:
Retirees $ 3,034 2,926
Fully eligible, active plan participants 1,235 1,051
Other active plan participants 2,734 2,256
-------- --------
Accumulated postretirement benefit obligation 7,003 6,233
Unrecognized net gains 1,651 2,066
Unrecognized plan amendments 5,918 6,285
======== ========
Accrued postretirement benefit obligation $ 14,572 14,584
======== ========
</TABLE>
The amount of net periodic postretirement benefit cost for the plan as a
whole for the years ended December 31, 1997 and 1996 is as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net periodic postretirement benefit cost:
Service cost - benefits attributed to
employee service during the year $ 301 467 497
Interest cost on accumulated postretirement
benefit obligation 468 768 869
Actual return on plan assets - - -
Net amortization and deferral (474) (199) (82)
======= ====== =======
Net periodic postretirement benefit cost $ 295 1,036 1,284
======= ====== =======
</TABLE>
The health care cost trend rate assumption has a significant effect on
the amounts reported. A one percentage point increase in the
assumed health care cost trend rate would increase the accumulated
postretirement benefit obligation as of December 31, 1997 and 1996
by $1,078 and $943, respectively, and the net periodic
postretirement benefit cost for the years ended December 31, 1997,
1996, and 1995 by $36, $111 and $149, respectively.
(Continued)
<PAGE> 24
19
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(12) Regulatory Risk-Based Capital, Retained Earnings and Dividend
Restrictions
ONLIC and ONLAC exceed the minimum risk-based capital requirements as
established by the NAIC as of December 31, 1997.
The Company has designated a portion of retained earnings for separate
account contingencies and investment guarantees totaling $1,673
and $1,688 as of December 31, 1997 and 1996, respectively.
The payment of dividends by the Company to its participating
policyholders is based on the dividend scale declared at least
annually by the Company's Board of Directors.
(13) Bank Lines of Credit
As of December 31, 1997 and 1996, ONLIC had a $10,000 unsecured line of
credit which was not utilized during 1997 and 1996.
(14) Contingencies
The Company and its subsidiaries are defendants in various legal actions
arising in the normal course of business. While the outcome of
such matters cannot be predicted with certainty, management
believes such matters will be resolved without material adverse
impact on the financial condition of the Company.
The Company routinely enters into reinsurance transactions with other
insurance companies which are not material to the consolidated
financial statements. This reinsurance involves either ceding
certain risks to or assuming risks from other insurance companies.
The primary purpose of ceded reinsurance is to protect the Company
from potential losses in excess of levels that it is prepared to
accept. Reinsurance does not discharge the Company from its
primary liability to policyholders and to the extent that a
reinsurer should be unable to meet its obligations, the Company
would be liable to policyholders. The Company has reinsurance
recoverables of $61,862 and $52,260 at December 31, 1997 and 1996,
respectively. Ceded premiums approximated 11%, 11%, and 10% of
gross earned life and accident and health premiums during 1997,
1996 and 1995, respectively.
(15) Major Lines of Business
The Company operates in the life and annuity lines of business in the
life insurance industry. Life insurance operations include whole
life, universal life, variable universal life, and endowments, as
well as term life, health insurance, and other miscellaneous
insurance products provided to individuals and groups. Annuity
operations include guaranteed investment and accumulated deposit
contracts issued to groups and deferred and immediate annuities
issued to individuals.
(Continued)
<PAGE> 25
20
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(15) Major Lines of Business, Continued
The following table summarizes the revenues and income before Federal
income tax for the years ended December 31, 1997, 1996 and 1995
and assets as of December 31, 1997, 1996 and 1995, by line of
business.
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Revenues:
Premiums, policy charges and net investment income:
Life and other insurance $ 314,379 295,860 270,782
Annuities 307,377 284,418 280,853
---------- --------- ---------
621,756 580,278 551,635
---------- --------- ---------
Realized capital gains (losses):
Life and other insurance 7,892 3,330 (771)
Annuities 4,608 5,431 (1,980)
---------- --------- ---------
12,500 8,761 (2,751)
---------- --------- ---------
Total revenues:
Life and other insurance 322,271 299,190 270,011
Annuities 311,985 289,849 278,873
---------- --------- ---------
$ 634,256 589,039 548,884
========== ========= =========
Total income before Federal income tax:
Life and other insurance $ 49,013 45,057 33,475
Annuities 57,346 47,418 30,345
========== ========= =========
$ 106,359 92,475 63,820
========== ========= =========
Assets:
Life and other insurance $2,972,192 2,522,004 2,213,391
Annuities 3,358,370 3,259,585 3,078,984
========== ========= =========
$6,330,562 5,781,589 5,292,375
========== ========= =========
</TABLE>
<PAGE> 26
Schedule 1
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidating Information - Balance Sheet
December 31, 1997
(000's omitted)
<TABLE>
<CAPTION>
The Ohio Ohio
National Life National Life
Insurance Assurance
Assets Company Corporation Eliminations Consolidated
------ ---------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C>
Investments:
Securities available-for-sale at fair value:
Fixed maturities $2,177,401 510,446 - 2,687,847
Equity securities 266,562 - (184,579) 81,983
Fixed maturities held-to-maturity, at
amortized cost 667,538 57,354 - 724,892
Mortgage loans on real estate, net 1,015,026 215,230 - 1,230,256
Real estate, net 21,820 - - 21,820
Policy loans 115,222 38,126 - 153,348
Other long-term investments 42,539 - - 42,539
Short-term investments 18,516 18,993 - 37,509
----------- ----------- ----------- -----------
Total investments 4,324,624 840,149 (184,579) 4,980,194
Cash 6,924 7,088 - 14,012
Accrued investment income 53,896 10,183 - 64,079
Deferred policy acquisition costs 127,281 123,661 - 250,942
Reinsurance recoverable 19,566 81,378 (39,082) 61,862
Other assets 43,880 2,863 (4,060) 42,683
Assets held in Separate Accounts 840,856 75,934 - 916,790
----------- ----------- ----------- -----------
Total assets $5,417,027 1,141,256 (227,721) 6,330,562
=========== =========== =========== ===========
Liabilities and Equity
Future policy benefits and claims $3,634,243 850,313 (39,082) 4,445,474
Policyholders' dividend accumulations 62,423 - - 62,423
Other policyholder funds 14,567 2,502 - 17,069
Note payable, net 84,234 - - 84,234
Accrued Federal income tax:
Current 11,784 874 - 12,658
Deferred 53,201 12,179 - 65,380
Other liabilities 106,722 14,875 (4,060) 117,537
Liabilities related to Separate Accounts 811,608 75,934 - 887,542
---------- --------- -------- ---------
Total liabilities 4,778,782 956,677 (43,142) 5,692,317
---------- --------- -------- ---------
Equity:
Common stock and paid-in-capital - 336,625 (36,625) -
Unrealized gains on securities
available-for-sale, net 102,956 10,327 (10,327) 102,956
Retained earnings 535,289 137,627 (137,627) 535,289
---------- --------- -------- ---------
Total equity 638,245 184,579 (184,579) 638,245
---------- --------- -------- ---------
Total liabilities and equity $5,417,027 1,141,256 (227,721) 6,330,562
========== ========= ======== =========
</TABLE>
See accompanying independent auditors' report.
<PAGE> 27
Schedule 2
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidating Information - Statement of Income
Year ended December 31, 1997
(000's omitted)
<TABLE>
<CAPTION>
The Ohio Ohio
National Life National Life
Insurance Assurance
Company Corporation Eliminations Consolidated
---------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C>
Revenues:
Traditional life insurance premiums $115,437 3,147 (2,182) 116,402
Accident and health insurance premiums 16,000 7,921 - 23,921
Annuity premiums and charges 37,205 425 - 37,630
Universal life and investment policy charges - 50,991 - 50,991
Net investment income 352,941 61,348 (23,742) 390,547
Net realized gain on investments 11,089 1,411 - 12,500
Other income - 2,265 - 2,265
--------- --------- ---------- ---------
532,672 127,508 (25,924) 634,256
--------- --------- ---------- ---------
Benefits and expenses:
Benefits and claims 330,971 67,627 - 398,598
Provision for policyholders' dividends on
participating policies 25,399 - - 25,399
Amortization of deferred policy acquisition
costs 17,321 5,787 - 23,108
Other operating costs and expenses 67,298 15,676 (2,182) 80,792
--------- --------- ---------- ---------
440,989 89,090 (2,182) 527,897
--------- --------- ---------- ---------
Income before Federal income tax 91,683 38,418 (23,742) 106,359
--------- --------- ---------- ---------
Federal income tax:
Current expense 27,012 14,361 - 41,373
Deferred (benefit) expense (2,416) 315 - (2,101)
--------- --------- ---------- ---------
24,596 14,676 - 39,272
--------- --------- ---------- ---------
Net income $ 67,087 23,742 (23,742) 67,087
========= ========= ========== =========
</TABLE>
See accompanying independent auditors' report.
<PAGE> 48
OHIO NATIONAL VARIABLE ACCOUNT A
FORM N-4
PART C
OTHER INFORMATION
<PAGE> 49
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
The following financial statements of the Registrant are included in Part B of
this Registration Statement:
Independent Auditors' Report of KPMG Peat Marwick LLP dated January 30,
1998
Statements of Assets and Contract Owners' Equity dated December 31, 1997
Statement of Operations and Changes in Contract Owners' Equity for the
Years Ended December 31, 1997 and 1996
Notes to Financial Statements dated December 31, 1997
Schedules of Changes in Unit Values for the Years Ended December 31, 1997
and 1996
The following consolidated financial statements of the Depositor and its
subsidiaries are also included in Part B of this Registration Statement:
Independent Auditors' Report of KPMG Peat Marwick LLP dated February 12,
1998
Consolidated Balance Sheets dated December 31, 1997 and 1996
Consolidated Statements of Income for the Years Ended December 31, 1997,
1996 and 1995
Consolidated Statements of Equity for the Years Ended December 31, 1997,
1996 and 1995
Consolidated Statements of Cash Flows for the Years Ended December 31,
1997, 1996 and 1995
Notes to Consolidated Financial Statements dated December 31, 1997, 1996
and 1995
Consent of the following:
KPMG Peat Marwick LLP
Exhibits:
(3)(d) Selling Agreement and commission schedules between Ohio National
Equities, Inc. and other broker-dealers for the distribution of "ONcore"
Variable Annuities.
All other relevant exhibits, which have previously been filed with the
Commission and are incorporated herein by reference, are as follows:
(1) Resolution of Board of Directors of the Depositor authorizing
establishment of the Registrant was filed as Exhibit A(1) of the
Registrant's registration statement on Form S-6 on August 3, 1982
(File no. 2-78652).
-1-
<PAGE> 50
(3)(a) Principal Underwiting Agreement for Variable Annuities between the
Depositor and Ohio National Equities, Inc. was filed as Exhibit
(3)(a) of the Registrant's Form N-4 on December 30, 1997 (File no.
333-43515).
(3)(b) Registered Representative's Sales Contract with Variable Annuity
Supplement was filed as Exhibit (3)(b) of the Registrant's Form
N-4, Post-effective Amendment no. 9 on February 27, 1991 (File no.
2-91213).
(3)(c) Variable Annuity Sales Commission Schedule was filed as Exhibit
A(3)(c) of the Registrant's registration statement on Form S-6 on
May 18, 1984 (File no. 2-91213).
(3)(e) Fund Participation Agreement between the Depositor and Janus Aspen
Series was filed as Exhibit (3)(e) of the Registrant's Form N-4,
Pre-effective Amendment no. 1 on April 10, 1998
(File no. 333-43515).
(3)(f) Participation Agreement between the Depositor and Strong Variable
Insurance Funds, Inc. was filed as Exhibit (3)(f) of the
Registrant's Form N-4, Pre-effective Amendment no. 1 on
April 10, 1998 (File no. 333-43515).
(4) Variable Deferred Annuity Contract, Form 98-VA-2, was filed as
Exhibit (4) of the Registrant's Form N-4 on December 30, 1997
(File no. 333-43515).
(5)(a) Tax-Qualified Variable Annuity Application, Form V-4890-A, was
filed as Exhibit (5)(a) of the Registrant's registration statement
on Form N-4, Post-effective Amendment no. 18 on April 25, 1996
(File No. 2-91213).
(6)(a) Articles of Incorporation of the Depositor were filed as Exhibit
A(6)(a) of Ohio National Variable Interest Account registration
statement on Form N-8B-2 on July 11, 1980 (File no. 811-3060).
(6)(b) Code of Regulations (by-laws) of the Depositor were filed as
Exhibit A(6)(b) of Ohio National Variable Interest Account
registration statement on Form N-8B-2 on July 11, 1980 (File no.
811-3060).
(8) Powers of Attorney by certain Directors of the Depositor were filed
as Exhibit (8) of the Registrant's Form N-4, Post-effective
Amendment no. 22 on March 2, 1998 (File no. 2-91213).
(13) Computation of Performance Data was filed as Exhibit (13) of the
Registrant's Form N-4, Pre-effective Amendment no. 1 on
April 10, 1998 (File no. 333-43515).
-2-
<PAGE> 51
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
Name and Principal Positions and Offices
Business Address with Depositor
- ---------------- --------------
<S> <C>
Neil A. Armstrong Director
4635 Drake Road
Cincinnati, Ohio 45243
Trudy K. Backus* Vice President, Individual Insurance Services
Thomas A. Barefield* Senior Vice President, Institutional Sales
Howard C. Becker* Senior Vice President, Individual Insurance
& Corporate Services
Ronald L. Benedict* Corporate Vice President, Counsel and
Secretary
Michael A. Boedeker* Vice President, Fixed Income Securities
Robert A. Bowen* Senior Vice President, Information Systems
Roylene M. Broadwell* Vice President & Treasurer
Joseph P. Brom* Senior Vice President & Chief Investment
Officer
Dale P. Brown Director
36 East Seventh Street
Cincinnati, Ohio 45202
Jack E. Brown Director
50 E. Rivercenter Blvd.
Covington, Kentucky 41011
William R. Burleigh Director
One West Fourth Street
Suite 1100
Cincinnati, Ohio 45202
Victoria B. Buyniski Director
2343 Auburn Avenue
Cincinnati, Ohio 45219
Raymond R. Clark Director
201 East Fourth Street
Cincinnati, Ohio 45202
David W. Cook* Senior Vice President and Actuary
Dr. Alvin H. Crawford Director
Children's Hospital Medical
Center
Department of Orthopedics
Elland and Bethesda Avenues
Cincinnati, Ohio 45229
Robert M. DiTommaso* Vice President, Career Marketing
Ronald J. Dolan* Senior Vice President and Chief Financial
Officer
Michael J. Ferry* Vice President, Information Systems
Michael F. Haverkamp* Vice President and Counsel
John A. Houser III* Vice President, Claims
</TABLE>
-3-
<PAGE> 52
<TABLE>
<CAPTION>
Name and Principal Positions and Offices
Business Address with Depositor
- ---------------- --------------
<S> <C>
Bannus B. Hudson Director
One Eastwood Drive
Cincinnati, Ohio 45227
David G. McClure* Vice President, Equity Product Sales
Charles S. Mechem, Jr. Director
One East Fourth Street
Cincinnati, Ohio 45202
James I. Miller, II* Vice President, Marketing Support
Thomas O. Olson* Vice President, Underwriting
David B. O'Maley* Director, Chairman, President and Chief
Executive Officer
James F. Orr Director
201 East Fourth Street
Cincinnati, Ohio 45202
John J. Palmer* Senior Vice President, Strategic Initiatives
George B. Pearson, Jr.* Vice President, PGA Marketing
J. Donald Richardson* Senior Regional Vice President
D. Gates Smith* Senior Vice President, Sales
Michael D. Stohler* Vice President, Mortgages and Real Estate
Stuart G. Summers* Senior Vice President and General Counsel
Oliver W. Waddell Director
425 Walnut Street
Cincinnati, Ohio 45202
Dr. David S. Williams* Vice President and Medical Director
Stephen T. Williams* Vice President, Equity Investments
</TABLE>
*The principal business address for these individuals is One Financial Way,
Cincinnati, Ohio 45242.
-4-
<PAGE> 53
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
THE OHIO NATIONAL LIFE INSURANCE COMPANY/CINCINNATI
A MUTUAL LIFE INSURANCE COMPANY INCORPORATED UNDER THE LAWS OF OHIO
- --------------------------------------------------------------------------------
<S> <C>
- ------------------------------- -----------------------------
ENTERPRISE PARK, INC. OHIO NATIONAL EQUITIES INC.
A GEORGIA CORPORATION A BROKER/DEALER
REAL ESTATE DEVELOPMENT COMPANY CAPITALIZED BY ONLI @ $30,000
CAPITALIZED BY ONLI $50,000
- ------------------------------- --------------------------------
Pres. & Dir. M. Stohler Chm. & Dir. D. O'Maley
V.P. & Dir. J. Brom Pres. & Dir. J. Palmer
Secy. & Dir. J. Fischer VP & Dir. T. Backus
Treas. & Dir. D. Taney VP & Dir. J. Miller
Sr. VP T. Barefield
Secretary & Dir. R. Benedict
Treasurer B. Turner
Compliance Officer J. Dunn
Asst. Secy. M. Haverkamp
- ------------------------------- --------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
THE OHIO NATIONAL LIFE INSURANCE COMPANY/CINCINNATI
A MUTUAL LIFE INSURANCE COMPANY INCORPORATED UNDER THE LAWS OF OHIO
- -------------------------------------------------------------------------------------------------------------------
S E P A R A T E A C C O U N T S
--------------------------------
A B C D E F
--------------------------------
<S> <C> <C>
- ------------------------------- ------------------------------ -------------------------------------
OHIO NATIONAL INVESTMENTS, INC. THE O.N. EQUITY SALES COMPANY OHIO NATIONAL LIFE
ASSURANCE CORPORATION
AN INVESTMENT ADVISER AN OHIO CORPORATION AN OHIO CORPORATION
CAPITALIZED BY ONLI @ $10,000 A BROKER/DEALER A STOCK LIFE INSURANCE COMPANY
CAPITALIZED BY ONLI @ $790,000 CAPITALIZED BY ONLI @ $32,000,000
INCORPORATED UNDER THE LAWS OF OHIO
- ------------------------------- ------------------------------ ------------------------------------
Chm. & Dir. D. O'Maley Chm./Pres/.CEO & Dir. D. O'Maley
Pres. & Dir. J. Brom Sr. VP & Dir. R. Dolan
Pres. & Dir. J. Palmer Sr. VP & Dir. J. Palmer
VP & Dir. M. Boedeker Sr. VP & Dir. S. Summers
V.P. & Dir. M. Haverkamp Sr. VP & Dir. J. Brom
VP & Dir. M. Stohler Sr. Vice Pres. T. Barefield
Secy. & Dir. R. Benedict Sr. Vice Pres. D. Cook
VP & Dir. S. Williams Sr. Vice Pres. G. Smith
Director B. DiTommaso Vice Pres. & Treas. R. Broadwell
Treasurer D. Taney Vice President M. Boedeker
Treasurer B. Turner Vice President R. DiTommaso
Secretary R. Benedict Vice President T. Backus
Compliance Director J. Dunn Vice President G. Pearson
VP K. Hanson Vice President M. Stohler
Vice Pres. J. Houser
VP D. Hundley Vice Pres & Secy. R. Benedict
Asst. Secy. J. Fischer
VP J. Martin Asst. Actuary K. Flischel
- ------------------------------- ------------------------------ ------------------------------------
SEPARATE ACCOUNT
-------------------------------------
R
---
<CAPTION>
<= Advisor to Advisor to =>
--------------------------------------------------------
<S> <C> <C>
- ----------------------------- -------------------------------- --------------------------------
ONE FUND, INC. O.N. INVESTMENT MANAGEMENT CO. OHIO NATIONAL FUND
A MARYLAND CORPORATION AN OHIO CORPORATION A MARYLAND CORPORATION
AN OPEN END DIVISIFIED A FINANCIAL ADVISORY SERVICE AN OPEN END DIVERSIFIED
MANAGEMENT INVESTMENT COMPANY CAPITALIZED BY ONESCO @ $145,000 MANAGEMENT INVESTMENT COMPANY
- ----------------------------- -------------------------------- --------------------------------
Pres. & Dir. J. Palmer Pres. & Dir. J. Palmer Pres. & Dir. J. Palmer
Vice. Pres. M. Boedeker ----- Vice President M. Boedeker
Vice Pres. J. Brom VP & Dir. G. Smith Vice President J.Brom
Vice Pres. T. Barefield Vice President S. Williams
Vice Pres. S. Williams VP & Dir. D. McClure Treasurer D. Taney
Treasurer D. Taney -------- Secy. & Dir. R. Benedict
Secy. & Dir. R. Benedict Treasurer K. Jaeger Director R. Love
Director R. Love Director G. Castrucci
Director G. Castrucci Secretary M. Haverkamp Director G. Vredeveld
Director G. Vredeveld Sr. Vice Pres. T. Barefield
- --------------------------------- -------------------------------- ---------------------------------
</TABLE>
<PAGE> 54
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
The Organization Chart showing the relationships among the Depositor, the
Registrant and their affiliated entities is on page 4A hereof.
ITEM 27. NUMBER OF CONTRACTOWNERS
As of March 31, 1998, the Registrant's contracts were owned by 20,475 owners.
ITEM 28. INDEMNIFICATION
The sixth article of the Depositor's Articles of Incorporation, as amended,
provides as follows:
Each former, present and future Director, Officer or Employee of the
Corporation (and his heirs, executors or administrators), or any such
person (and his heirs, executors or administrators) who serves at the
Corporation's request as a director, officer, partner, member or employee
of another corporation, partnership or business organization or
association of any type whatsoever shall be indemnified by the Corporation
against reasonable expenses, including attorneys' fees, judgments, fine
and amounts paid in settlement actually and reasonably incurred by him in
connection with the defense of any contemplated, pending or threatened
action, suit or proceeding, civil, criminal, administrative or
investigative, other than an action by or in the right of the corporation,
to which he is or may be made a party by reason of being or having been
such Director, Officer, or Employee of the Corporation or having served at
the Corporation's request as such director, officer, partner, member or
employee of any other business organization or association, or in
connection with any appeal therein, provided a determination is made by
majority vote of a disinterested quorum of the Board of Directors (a) that
such a person acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Corporation, and (b)
that, in any matter the subject of criminal action, suit or proceeding,
such person had no reasonable cause to believe his conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself create a presumption that the person did
not act in good faith in any manner which he reasonably believed to be in
or not opposed to the best interests of the Corporation, and with respect
to any criminal action or proceeding, he had reasonable cause to believe
that his conduct was unlawful. Such right of indemnification shall not be
deemed exclusive of any other rights to which such person may be entitled.
The manner by which the right to indemnification shall be determined in
the absence of a disinterested quorum of the Board of Directors shall be
set forth in the Code of Regulations or in such other manner as permitted
by law. Each former, present, and future Director, Officer or Employee of
the Corporation (and his heirs, executors or administrators) who serves at
the Corporation's request as a director, officer, partner, member or
employee of another corporation, partnership or business organization or
association of any type whatsoever shall be indemnified by the Corporation
against reasonable expenses, including attorneys' fees, actually and
reasonably incurred by him in connection with the defense or settlement of
any contemplated, pending or threatened action, suit or proceeding, by or
in the right of the Corporation to procure a judgment in its favor, to
which he is or may be a party by reason of being or having been such
Director, Officer or Employee of the Corporation or having served at the
Corporation's request as such director, officer, partner, member or
employee of any other business organization or association, or in
connection with any appeal therein, provided a determination is made by
majority vote of a disinterested quorum of the Board of Directors (a) that
such person was not, and has not been adjudicated to have been negligent
or guilty of misconduct in the performance of his duty to the Corporation
or to such other business organization or association, and (b) that such
person acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation.
-5-
<PAGE> 55
Such right of indemnification shall not be deemed exclusive of any other
rights to which such person may be entitled. The manner by which the right
of indemnification shall be determined in the absence of a disinterested
quorum of the Board of Directors shall be as set forth in the Code of
Regulations or in such other manner as permitted by law.
In addition, Article XII of the Depositor's Code of Regulations states as
follows:
If any director, officer or employee of the Corporation may be entitled to
indemnification by reason of Article Sixth of the Amended Articles of
Corporation, indemnification shall be made upon either (a) a determination
in writing of the majority of disinterested directors present, at a
meeting of the Board at which all disinterested directors present
constitute a quorum, that the director, officer or employee in question
was acting in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of this Corporation or of such other
business organization or association in which he served at the
Corporation's request, and that, in any matter which is the subject of a
criminal action, suit or proceeding, he had no reasonable cause to believe
that his conduct was unlawful and in an action by or in the right of the
Corporation to procure a judgment in its favor that such person was not
and has not been adjudicated to have been negligent or guilty of
misconduct in the performance of his duty to the Corporation or to such
other business organization or association; or (b) if the number of all
disinterested directors would not be sufficient at any time to constitute
a quorum, or if the number of disinterested directors present at two
consecutive meetings of the Board has not been sufficient to constitute a
quorum, a determination to the same effect as set forth in the foregoing
clause (a) shall be made in a written opinion by independent legal counsel
other than an attorney, or a firm having association with it an attorney,
who has been retained by or who has performed services for this
Corporation, or any person to be indemnified within the past five years,
or by the majority vote of the policyholders, or by the Court of Common
Pleas or the court in which such action, suit or proceeding was brought.
Prior to making any such determination, the Board of Directors shall first
have received the written opinion of General Counsel that a number of
directors sufficient to constitute a quorum, as named therein, are
disinterested directors. Any director who is a party to or threatened with
the action, suit or proceeding in question, or any related action, suit or
proceeding, or has had or has an interest therein adverse to that of the
Corporation, or who for any other reason has been or would be affected
thereby, shall not be deemed a disinterested director and shall not be
qualified to vote on the question of indemnification. Anything in this
Article to the contrary notwithstanding, if a judicial or administrative
body determines as part of the settlement of any action, suit or
proceeding that the Corporation should indemnify a director, officer or
employee for the amount of the settlement, the Corporation shall so
indemnify such person in accordance with such determination. Expenses
incurred with respect to any action, suit or proceeding which may qualify
for indemnification may be advanced by the Corporation prior to final
disposition thereof upon receipt of an undertaking by or on behalf of the
director, officer or employee to repay such amount if it is ultimately
determined hereunder that he is not entitled to indemnification or to the
extent that the amount so advanced exceeds the indemnification to which he
is ultimately determined to be entitled.
ITEM 29. PRINCIPAL UNDERWRITERS
The principal underwriter of the Registrant's securities is presently Ohio
National Equities, Inc. ("ONEQ"). ONEQ is a wholly-owned subsidiary of the
Depositor. ONEQ also serves as the principal underwriter of securities issued by
Ohio National Variable Accounts B and D, other separate accounts of the
Depositor which are registered as unit investment trusts; and Ohio National
Variable Account R, a separate account of the Depositor's subsidiary, Ohio
National Life Assurance Corporation, which separate account is also registered
as a unit investment trust; and ONE Fund, Inc., an open-end investment company
of the management type.
-6-
<PAGE> 56
The directors and officers of ONEQ are:
<TABLE>
<CAPTION>
Name Position with ONE, Inc.
---- -----------------------
<S> <C>
David B. O'Maley Chairman and Director
John J. Palmer President and Director
Thomas A. Barefield Senior Vice President
James I. Miller Vice President and Director
Trudy K. Backus Vice President and Director
Joni L. Dunn Vice President and Compliance Officer
Ronald L. Benedict Secretary and Director
Barbara A. Turner Treasurer
</TABLE>
The principal business address of each of the foregoing is One Financial Way,
Cincinnati, Ohio 45242.
During the last fiscal year, ONEQ received the following commissions and other
compensation, directly or indirectly, from the Registrant:
<TABLE>
<CAPTION>
Net Underwriting Compensation
Discounts and on Redemption Brokerage
Commissions or Annuitization Commissions Compensation
- ----------- ---------------- ----------- ------------
<S> <C> <C> <C>
$2,997,646 None None None
</TABLE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The books and records of the Registrant which are required under Section 31(a)
of the 1940 Act and Rules thereunder are maintained in the possession of the
following persons:
(1) Journals and other records of original entry:
The Ohio National Life Insurance Company ("Depositor")
One Financial Way
Cincinnati, Ohio 45242
-7-
<PAGE> 57
Star Bank, N.A. ("Custodian")
425 Walnut Street
Cincinnati, Ohio 45202
(2) General and auxiliary ledgers:
Depositor and Custodian
(3) Securities records for portfolio securities:
Custodian
(4) Corporate charter, by-laws and minute books:
Registrant has no such documents.
(5) Records of brokerage orders:
Not applicable.
(6) Records of other portfolio transactions:
Custodian
(7) Records of options:
Not applicable
(8) Records of trial balances:
Custodian
(9) Quarterly records of allocation of brokerage orders and commissions:
Not applicable
(10) Records identifying persons or group authorizing portfolio transactions:
Depositor
(11) Files of advisory materials:
Not applicable
(12) Other records
Custodian and Depositor
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS AND REPRESENTATIONS
(a) Pursuant to Section 26(e)(2)(A) of the Investment Company Act of 1940, as
amended, The Ohio National Life
-8-
<PAGE> 58
Insurance Company represents that the fees and charges deducted under the
contract, in the aggregate, are reasonable in relation to the services rendered,
the expenses expected to be incurred and the risks assumed by The Ohio National
Life Insurance Company.
(b) The Registrant hereby undertakes to file a post-effective amendment to this
registration statement as frequently as is necessary to ensure audited
financial statements in this registration statement are never more than 16
months old for so long as payments under variable annuity contracts may be
accepted.
(c) The Registration hereby undertakes to include either (1) as part of any
application to purchase any contract offered by the prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
post card or similar written communication affixed to or included in the
prospectus that the applicant can remove to send for a Statement of Additional
Information.
(d) The Registration hereby undertakes to deliver any Statement of Additional
Information and any financial statements required to be made under Form N-4
promptly upon written or oral request.
-9-
<PAGE> 59
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the registrant, Ohio National Variable Account A has caused this
registration statement to be signed on its behalf in the City of Montgomery and
the State of Ohio on this 15th day of April, 1998.
OHIO NATIONAL VARIABLE ACCOUNT A
(Registrant)
By THE OHIO NATIONAL LIFE INSURANCE COMPANY
(Depositor)
By /s/ Thomas A. Barefield
-----------------------------------------
Thomas A. Barefield, Senior Vice President,
Institutional Sales
Attest:
/s/Ronald L. Benedict
- --------------------------------
Ronald L. Benedict
Corporate Vice President, Counsel
and Secretary
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the depositor, The Ohio National Life Insurance Company, has caused this
registration statement to be signed on its behalf in the City of Montgomery and
the State of Ohio on the 15th day of April, 1998.
THE OHIO NATIONAL LIFE INSURANCE COMPANY
(Depositor)
By /s/ Thomas A. Barefield
------------------------------------------
Thomas A. Barefield, Senior Vice President,
Institutional Sales
Attest:
/s/Ronald L. Benedict
- ---------------------------------
Ronald L. Benedict
Corporate Vice President, Counsel
and Secretary
<PAGE> 60
As required by the Securities Act of 1933, this registration statement has been
signed below by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
s/David B. O'Maley Chairman, President, April 15, 1998
- ------------------------- Chief Executive Officer
David B. O'Maley and Director
*/s/ Neil A. Armstrong
- ------------------------- Director April 15, 1998
Neil A. Armstrong
*s/Dale P. Brown Director April 15, 1998
- -------------------------
Dale P. Brown
*s/Jack E. Brown Director April 15, 1998
- -------------------------
Jack E. Brown
*s/William R. Burleigh Director April 15, 1998
- -------------------------
William R. Burleigh
*s/Victoria B. Buyniski Director April 15, 1998
- -------------------------
Victoria B. Buyniski
*s/Raymond R. Clark Director April 15, 1998
- -------------------------
Raymond R. Clark
*s/Alvin H. Crawford Director April 15, 1998
- -------------------------
Alvin H. Crawford
*s/Bannus B. Hudson Director April 15, 1998
- -------------------------
Bannus B. Hudson
*s/Charles S. Mechem, Jr. Director April 15, 1998
- -------------------------
Charles S. Mechem, Jr.
Director
- -------------------------
James F. Orr
</TABLE>
<PAGE> 61
<TABLE>
<S> <C> <C>
*s/Oliver W. Waddell Director April 15, 1998
- -------------------------
Oliver W. Waddell
</TABLE>
*By s/John J. Palmer
- -------------------------
John J. Palmer
-------------------, Attorney in Fact pursuant to Powers of Attorney, copies
of which have previously been filed as exhibits to the Registrant's
registration statement.
<PAGE> 62
INDEX OF CONSENTS AND EXHIBITS
<TABLE>
<CAPTION>
Page Number in
Exhibit Sequential
Number Description Numbering System
- ------ ----------- ----------------
<S> <C> <C>
Consent of KPMG Peat Marwick LLP
(3)(d) Selling Agreement and commission schedule between Ohio National
Equities, Inc. and other broker-dealers for the distribution of
"ONcore" Variable Annuities.
</TABLE>
<PAGE> 63
INDEPENDENT AUDITOR'S CONSENT
The Board of Directors
The Ohio National Life Insurance Company
The Contract Owners
Ohio National Variable Account A:
We consent to the inclusion of our reports included herein and to the reference
to our firm under the heading "Independent Certified Public Accountants" in the
Statement of Additional Information.
KPMG Peat Marwick LLP
Cincinnati, Ohio
April 15, 1998
<PAGE> 1
Exhibit (3)(d)
SELLING AGREEMENT
Agreement, made this __________________ date of _____________________, 199____,
by and between The Ohio National Life Insurance Company, an Ohio Corporation;
Ohio National Life Assurance Corporation, an Ohio corporation; Ohio National
Equities, Inc. ("ONEQ"), an Ohio Corporation, and _______________________
("BD"), a ___________ Corporation.
Whereas, The Ohio National Life Insurance Company and its subsidiary, Ohio
National Life Assurance Corporation (collectively referred to as "ONL"), issue
certain variable insurance contracts/policies ("Contracts") described in this
Agreement, which are deemed securities under the Securities Act of 1933 ("1933
Act"); and
Whereas, ONEQ is duly licensed as a Broker/Dealer with the National Association
of Securities Dealers, Inc. ("NASD") and the Securities and Exchange Commission
("SEC"); and
Whereas, ONL has appointed ONEQ as the Underwriter of the Contracts; and
Whereas, ONL and ONEQ propose to have BD's representatives ("Representatives")
who are, or will become, duly licensed insurance agents solicit sales of the
Contracts; and
Whereas, ONEQ delegates to BD, to the extent legally permitted, training and
certain administrative responsibilities and duties in connection with sales of
the Contracts;
NOW THEREFORE, in consideration of the premises and mutual promises contained
herein, the parties hereto agree as follows:
1. APPOINTMENT
ONL and ONEQ hereby appoint BD to supervise solicitations of the Contracts, and
to facilitate solicitations of sales of the Contracts which are described in the
Schedule(s) of Commissions attached hereto.
2. REPRESENTATIONS
a. ONL, ONEQ and BD each represents to the others that it and the above signed
officers have full power and authority to enter into this Agreement.
b. ONEQ represents to BD that it is registered as a Broker/Dealer under the
Securities Exchange Act of 1934 ("1934 Act") and under the Blue Sky Laws of
each jurisdiction in which such registration is required for the sale of
the Contracts and that ONEQ is a member of the NASD.
c. BD represents to ONEQ that it is registered as a Broker/Dealer under the
1934 Act and under the Blue Sky Laws of each jurisdiction in which such
registration is required for the sale of the Contracts, and that the BD is
a member of the NASD.
d. ONL represents to BD that the Contracts, including related separate
accounts, shall comply with the registration and all other applicable
requirements of the 1933 Act and the Investment Company Act of 1940, and
the rules and regulations thereunder, including the terms of any order of
the SEC with respect thereto.
e. ONL represents to BD that the Contracts it issues have been duly filed and
approved by the state insurance departments in such jurisdictions where it
is authorized to transact business, unless otherwise indicated in the
Schedule of Commissions.
f. ONL represents to BD that the Contract prospectuses included in ONL's
Registration Statement and in post-effective amendments thereto, and any
supplements thereto, as filed or to be filed with the SEC, as of their
respective dates, contain or will contain, all statements and information
which are required to be stated therein by the 1933 Act and in all respects
conform or will conform, to the requirements thereof.
3. COMPLIANCE WITH NASD CONDUCT RULES AND FEDERAL AND STATE SECURITIES AND
STATE INSURANCE LAWS
BD agrees to abide by all rules and regulations of the NASD, including its
Conduct Rules, and to comply with all applicable state and federal laws and the
rules and regulations of authorized regulatory agencies affecting the sale of
the Contracts.
4. LICENSING AND/OR APPOINTMENT OF REPRESENTATIVES
BD certifies that any Representative who requests appointment from ONL has not
been convicted of a felony or a misdemeanor involving fraud or dishonesty. BD
shall assist ONL and ONEQ in the licensing and/or appointment of Representatives
under applicable insurance laws to sell the Contracts (see attached General
Letter of Recommendation). BD understands that ONL
<PAGE> 2
reserves the right to refuse to appoint any Representative or, once appointed,
to thereafter terminate the same. BD shall notify ONEQ if any Representative
ceases to be a registered representative of BD, or if any Representative becomes
the subject of adverse action (e.g., an amended U-4).
5. SUPERVISION OF REPRESENTATIVES
BD shall have full responsibility for training and supervision of all
Representatives associated with BD who are engaged directly or indirectly in the
offer or sale of the Contracts and all such persons shall be subject to the
control of BD with respect to such persons' activities in connection with the
sale of the Contracts. BD shall comply with the administrative procedures of ONL
and ONEQ involving federal securities law and state insurance law.
Before Representatives engage in the solicitation of applications for the
Contracts, BD will cause: (1) the Representatives to be registered
representatives of BD; (2) the Representatives to qualify under applicable
federal and state laws to engage in the sale of the Contracts; (3) the
Representatives to be trained in the sale of the Contracts; and (4) such
Representatives to limit solicitations for the Contracts to jurisdictions where
ONL has authorized such solicitation.
BD is specifically charged with the responsibility of supervising and reviewing
its Representatives' use of sales literature and advertising and all other
communications with the public in connection with the Contracts. No sales
solicitation, including the delivery of supplemental sales literature or other
such materials, shall occur, be delivered to, or used with a prospective
purchaser unless accompanied or preceded by appropriate then current
prospectus(es).
In the event a Representative fails to meet the BD's rules and standards, BD
shall notify ONL and shall act to terminate the sales activities of such
Representative relating to the Contracts.
Upon request by ONL, BD shall furnish appropriate records or other documentation
to evidence BD's diligent supervision.
6. SALES PROMOTION MATERIAL AND ADVERTISING
No sales promotion materials or advertising relating to the Contracts shall be
used by BD unless the specific items have been approved in writing by ONL.
7. SECURING APPLICATIONS
All applications for Contracts shall be made on application forms supplied by
ONL. BD will review all sales for suitability and all applications for
completeness and correctness as to form. BD will promptly, but in no case later
than the end of the next business day following receipt by BD, forward to ONL
all complete and correct applications for suitable transactions, together with
any payments received with the applications. ONL reserves the right to reject
any Contract application and return any payment made in connection with an
application which is rejected. Contracts issued on accepted applications will be
forwarded to BD or its Representatives for delivery to the Contract Owner within
five (5) days of the date of issue, unless otherwise agreed by the parties
hereto.
8. PAYMENTS RECEIVED BY BD
All premium payments (hereinafter collectively referred to as "Payments") are
the property of ONL and shall be transmitted to ONL by BD immediately in
accordance with the administrative procedures of ONL without any deduction or
offset for any reason, unless otherwise agreed by the parties hereto. CUSTOMER
CHECKS SHALL BE MADE PAYABLE TO THE ORDER OF "THE OHIO NATIONAL LIFE INSURANCE
COMPANY."
9. COMMISSIONS PAYABLE
Commissions payable in connection with the contracts shall be paid to BD
according to the Commission Schedule(s) relating to this Agreement as they may
be amended from time to time and in effect at the time the Contract Payments are
received by ONL. ONL reserves the right to: revise the Commission Schedules at
any time upon at least thirty (30) days prior written notice to BD;adjust the
compensation payable on sales of ONL products that replace existing ONL
contracts; and offset future compensation payable to BD against any compensation
to be returned to ONL by BD. Compensation to the BD's Representatives for
Contracts solicited by the Representatives and issued by ONL will be governed by
agreement between BD and its Representatives and its payment will be the BD's
responsibility. In those states where express assignment of commissions is
required, BD hereby assigns its representatives' commissions to its affiliated
insurance agency for those states.
BD will not pay any compensation to an agent licensed pursuant to this Agreement
until such agent is authorized to receive such compensation under applicable
state law.
10. CANCELLATION OF POLICY
If ONL is required to refund premiums or return contract values and waive
surrender charges on any Contract for any reason, then no commission will be
payable with respect to said premiums and any commission previously paid for
said premiums must be refunded to ONEQ. ONEQ agrees to notify BD within thirty
(30) days after it receives notice from ONL of any premium refund or a
commission chargeback.
<PAGE> 3
11. ADDITIONAL PARTY TO THIS AGREEMENT
In the event that BD is not licensed as an insurance agency in any state where
it wishes to solicit contracts, but utilizes an affiliated entity to satisfy
state insurance laws, such affiliated entity shall sign this Agreement and BD
shall countersign this Agreement, and BD and its affiliated entity shall be duly
bound thereby. All references to BD in this Agreement shall include any
affiliated insurance entity.
12. HOLD HARMLESS AND INDEMNIFICATION PROVISIONS
No party to this Agreement will be liable for any obligation, act or omission of
the other. Each party to this Agreement will hold harmless and indemnify ONL,
ONEQ, and BD as appropriate, for any loss or expense suffered as a result of the
violation of, or noncompliance with, any applicable law or regulation by a party
or by an Associated Person of that party. The term "Associated Person" as used
herein shall be defined consistently with the definition of such term as
contained in Article I of the NASD By-laws.
13. NON-ASSIGNABILITY PROVISION
This Agreement may not be assigned by any party except by mutual consent.
14. NON-WAIVER PROVISION
Failure of any party to terminate the Agreement for any of the causes set forth
in this Agreement will not constitute a waiver of the right to terminate this
Agreement at a later time for any of these causes.
15. AMENDMENTS
Except as stated in Paragraph 9, no amendment to this Agreement will be
effective unless it is in writing and signed by all the parties hereto.
16. INDEPENDENT CONTRACTORS
BD and its Representatives are independent contractors with respect to ONL and
ONEQ.
17. NOTIFICATION OF DISCIPLINARY PROCEEDINGS
BD agrees to notify ONEQ in a timely fashion of any disciplinary proceedings
against any of BD's Representatives arising from the solicitation of sales of
the Contracts or any threatened or filed arbitration action or civil litigation
arising out of BD's solicitation of the Contracts.
18. BOOKS AND RECORDS
ONL, ONEQ and BD agree to maintain their books, accounts and records so as to
clearly and accurately disclose the nature and details of transactions and to
assist each other in the timely preparation of records. ONEQ and BD shall each
submit such records to the regulatory and administrative bodies which have
jurisdiction over ONL or the underlying mutual fund shares.
Each party to this Agreement shall promptly furnish to the other party any
reports and information which the other party may request for the purpose of
meeting its reporting and recordkeeping requirements under the insurance laws of
any state, and under federal and state securities laws or the rules of the NASD.
19. LIMITATIONS
No party other than ONL shall have the authority on behalf of ONL to make,
alter, or discharge any Contract issued by ONL, to waive any forfeiture or to
grant, permit, or extend the time of making any Payments, or to alter the forms
which ONL may prescribe, or to substitute other forms in place of those
prescribed by ONL; or to enter into any proceeding in a court of law or before a
regulatory agency in the name of or on behalf of ONL.
20. TERMINATION
This Agreement may be terminated at the option of any party upon sixty (60) days
written notice to the other parties, or without notice at the option of any
party hereto upon a material breach by any party of the covenants and terms of
this Agreement.
21. NOTICE
All notices to ONL and ONEQ relating to this Agreement should be sent to One
Financial Way, Cincinnati, Ohio 45242, ATTN: Legal Department. All notices to BD
will be duly given if mailed to the address shown below.
22. GOVERNING LAW/ SEVERABILITY
This agreement will be construed in accordance with the laws of the State of
Ohio. Should any provision of this Agreement be held unenforceable, those
provisions not affected by the determination of unenforceability shall remain in
full force and effect.
23. GENERAL CONDUCT OF BD
BD expressly agrees that neither it nor its Representatives will: induce agents
to leave ONL; engage in any course of conduct to systematically replace
Contracts issued by ONL; or recommend or cause the surrenders of cash values of
the Contracts to purchase or exchange for insurance policies or annuities issued
by other insurance companies, unless such action is in the best interests of the
Contract Owner; or otherwise do anything prejudicial to ONL's interests or that
of its Contract Owners. This provision will continue in force after the
termination of this Agreement.
<PAGE> 4
24. REQUIRED ELEMENTS OF THIS AGREEMENT
This agreement is not complete unless it includes a Commission Schedule, and the
General Letter of Recommendation, both of which are incorporated herein by
reference.
THE OHIO NATIONAL LIFE INSURANCE COMPANY
OHIO NATIONAL LIFE ASSURANCE CORPORATION
BY:
-------------------------------------------
Title:
------------------------------
OHIO NATIONAL EQUITIES, INC.
BY:
-------------------------------------------
Title:
------------------------------
BROKER DEALER
- -----------------------------------------
(Name)
- -----------------------------------------
(Street Address)
- -----------------------------------------
(City, State, Zip)
BY:
-------------------------------------------
Title:
------------------------------
BROKER-DEALER INSURANCE AFFILIATE
BY:
-------------------------------------------
Title:
------------------------------
<PAGE> 5
SCHEDULE OF COMMISSIONS
(EFFECTIVE 5/1/1998)
ONCORE PREMIERE FPDA
- -----------------------------------------------------------------------
Option 1 Option 2 Option 3
- -----------------------------------------------------------------------
Initial premium 6.00% 5.00% 1.00%
- -----------------------------------------------------------------------
Add-on premiums 6.00% 5.00% 1.00%
- -----------------------------------------------------------------------
Trails*
Deposit Yrs 2-6 0% .25% 1.00%
Deposit Yrs 7+ 1.00% 1.00% 1.00%
- -----------------------------------------------------------------------
No commission chargeback will occur at death of annuitant. There will be a 100%
chargeback if the policy is not taken. After the free look period, there will
be no chargeback. We reserve the right to adjust commissions on policies
annuitized with the first contract year.
COMMISSIONS FOR PURCHASERS AGE 81 AND OVER:
- -----------------------------------------
Initial premium 3.00%
- -----------------------------------------
Add-on premiums 3.00%
- -----------------------------------------
Trails*
Deposit Yrs 2-6 0%
Deposit Yrs 7+ 1.00%
- -----------------------------------------
ONCORE VALUE FPDA
- -----------------------------------------------------------------------
Option 1 Option 2 Option 3
- -----------------------------------------------------------------------
Initial premium 5.00% 4.00% .70%
- -----------------------------------------------------------------------
Add-on premiums 5.00% 4.00% .70%
- -----------------------------------------------------------------------
Trails*
Deposit Yrs 2-6 0% .50% .70%
Deposit Yrs 7+ 0% .50% .70%
- -----------------------------------------------------------------------
No commission chargeback will occur at death of annuitant. There will be a 100%
chargeback if the policy is not taken during the free look period. After the
free look period, there will be no chargeback. We reserve the right to adjust
commissions on policies annuitized with the first contract year.
COMMISSIONS FOR PURCHASERS AGE 81 AND OVER:
- -----------------------------------------
Initial premium 2.50%
- -----------------------------------------
Add-on premiums 2.50%
- -----------------------------------------
Trails*
Deposit Yrs 2-6 0%
Deposit Yrs 7+ .50%
- -----------------------------------------
ONCORE FLE FPDA
- -----------------------------------------
Initial premium 1.00%
- -----------------------------------------
Add-on premiums 1.00%
- -----------------------------------------
Trails*
Deposit Yrs 2+ 1.00%
- -----------------------------------------
No commission chargeback will occur at death of annuitant. There will be a 100%
chargeback if the policy is not taken. After the free look period, there will
be a 100% chargeback if the contract is surrendered during the first six months
following the issuance of the contract and a 50% chargeback if it is
surrendered during months seven to twelve of the first contract year.
COMMISSIONS FOR PURCHASERS AGE 81 AND OVER:
- -----------------------------------------
Initial premium .50%
- -----------------------------------------
Add-on premiums .50%
- -----------------------------------------
Trails*
Deposit Yrs 2+ 50%
- -----------------------------------------
* Trial commissions, stated above in annual percentages, will be paid quarterly
on or around the fifteenth of January, April, July and October for the period
ending with the last business day of the prior month.
Trail commissions will be based on premiums and the earnings thereon that have
been deposited with ONL for at least the number of years mentioned above. Trail
commissions will continue to be paid while the Selling Agreement remains in
force and will be paid on a particular contract until the contract is
surrendered or annuitized.
