<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. 1 /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
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%
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
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
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%
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
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
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 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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<PAGE> 13
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
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)(e) Fund Participation Agreement between the Depositor and Janus Aspen
Series
(3)(f) Participation Agreement between the Depositor and Strong Variable
Insurance Funds, Inc.
(13) Computation of Performance Data.
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).
(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).
-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
James W. Nethercott Director
8431 Concord Hills Circle
Cincinnati, Ohio 45243
Thomas O. Olson* Vice President, Underwriting
David B. O'Maley* Director, Chairman, President and Chief
Executive Officer
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
Bradley L. Warnemunde Director and Chairman Emeritus
250 William Howard Taft Road
Cincinnati, Ohio 45219
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 8th 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 8th 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 8, 1998
- ------------------------- Chief Executive Officer
David B. O'Maley and Director
*/s/ Neil A. Armstrong
- ------------------------- Director April 8, 1998
Neil A. Armstrong
*s/Dale P. Brown Director April 8, 1998
- -------------------------
Dale P. Brown
*s/Jack E. Brown Director April 8, 1998
- -------------------------
Jack E. Brown
*s/William R. Burleigh Director April 8, 1998
- -------------------------
William R. Burleigh
*s/Victoria B. Buyniski Director April 8, 1998
- -------------------------
Victoria B. Buyniski
*s/Raymond R. Clark Director April 8, 1998
- -------------------------
Raymond R. Clark
*s/Alvin H. Crawford Director April 8, 1998
- -------------------------
Alvin H. Crawford
*s/Bannus B. Hudson Director April 8, 1998
- -------------------------
Bannus B. Hudson
*s/Charles S. Mechem, Jr. Director April 8, 1998
- -------------------------
Charles S. Mechem, Jr.
*s/James W. Nethercott Director April 8, 1998
- -------------------------
James W. Nethercott
</TABLE>
<PAGE> 61
<TABLE>
<S> <C> <C>
*s/Oliver W. Waddell Director April 8, 1998
- -------------------------
Oliver W. Waddell
*s/Bradley L. Warnemunde Chairman Emeritus and April 8, 1998
- -------------------------
Bradley L. Warnemunde Director
</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)(e) Fund Participation Agreement between the Depositor and Janus Aspen
Series.
(3)(f) Participation Agreement between the Depositor and Strong Variable
Insurance Funds, Inc.
(13) Computation of Performance Data.
</TABLE>
<PAGE> 63
INDEPENDENT AUDITOR'S CONSENT
The Board of Directors
The Ohio National Life Insurance Company
The Contract Owners
Ohio National Variable Account:
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 8, 1998
<PAGE> 1
Exhibit (3)(e)
JANUS ASPEN SERIES
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT is made this 1st day of May, 1998, between JANUS ASPEN
SERIES, an open-end management investment company organized as a Delaware
business trust (the "Trust"), and THE OHIO NATIONAL LIFE INSURANCE COMPANY, a
life insurance company organized under the laws of the State of Ohio (the
"Company"), on its own behalf and on behalf of each segregated asset account of
the Company set forth on Schedule A, as may be amended from time to time (the
"Accounts").
W I T N E S S E T H:
WHEREAS, the Trust has registered with the Securities and Exchange
Commission as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), and has registered the offer
and sale of its shares under the Securities Act of 1933, as amended (the "1933
Act"); and
WHEREAS, the Trust desires to act as an investment vehicle for separate
accounts established for variable life insurance policies and variable annuity
contracts to be offered by insurance companies that have entered into
participation agreements with the Trust (the "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each series representing an interest in a particular managed
portfolio of securities and other assets (the "Portfolios"); and
WHEREAS, the Trust has received an order from the Securities and
Exchange Commission granting Participating Insurance Companies and their
separate accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a)
and 15(b) of the 1940 Act, and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder,
to the extent necessary to permit shares of the Trust to be sold to and held by
variable annuity and variable life insurance separate accounts of both
affiliated and unaffiliated life insurance companies and certain qualified
pension and retirement plans (the "Exemptive Order"); and
WHEREAS, the Company has registered or will register (unless
registration is not required under applicable law) certain variable life
insurance policies and/or variable annuity contracts under the 1933 Act (the
"Contracts"); and
WHEREAS, the Company has registered or will register (unless
registration is not required under applicable law) each Account as a unit
investment trust under the 1940 Act; and
-1-
<PAGE> 2
WHEREAS, the Company desires to utilize shares of one or more
Portfolios as an investment vehicle of the Accounts;
NOW, THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
ARTICLE I
Sale of Trust Shares
1.1 The Trust shall make shares of its Portfolios available to the
Accounts at the net asset value next computed after receipt of such purchase
order by the Trust (or its agent), as established in accordance with the
provisions of the then current prospectus of the Trust. Shares of a particular
Portfolio of the Trust shall be ordered in such quantities and at such times as
determined by the Company to be necessary to meet the requirements of the
Contracts. The Trustees of the Trust (the "Trustees") may refuse to sell shares
of any Portfolio to any person, or suspend or terminate the offering of shares
of any Portfolio if such action is required by law or by regulatory authorities
having jurisdiction or is, in the sole discretion of the Trustees acting in good
faith and in light of their fiduciary duties under federal and any applicable
state laws, necessary in the best interests of the shareholders of such
Portfolio.
1.2 The Trust will redeem any full or fractional shares of any
Portfolio when requested by the Company on behalf of an Account at the net asset
value next computed after receipt by the Trust (or its agent) of the request for
redemption, as established in accordance with the provisions of the then current
prospectus of the Trust. The Trust shall make payment for such shares in the
manner established from time to time by the Trust, but in no event shall payment
be delayed for a greater period than is permitted by the 1940 Act.
1.3 For the purposes of Sections 1.1 and 1.2, the Trust hereby appoints
the Company as its agent for the limited purpose of receiving and accepting
purchase and redemption orders resulting from investment in and payments under
the Contracts. Receipt by the Company shall constitute receipt by the Trust
provided that i) such orders are received by the Company in good order prior to
the time the net asset value of each Portfolio is priced in accordance with its
prospectus and ii) the Trust receives notice of such orders by 11:00 a.m. New
York time on the next following Business Day. "Business Day" shall mean any day
on which the New York Stock Exchange is open for trading and on which the Trust
calculates its net asset value pursuant to the rules of the Securities and
Exchange Commission.
1.4 Purchase orders that are transmitted to the Trust in accordance
with Section 1.3 shall be paid for no later than 12:00 noon New York time on the
same Business Day that the Trust receives notice of the order. Payments shall be
made in federal funds transmitted by wire.
-2-
<PAGE> 3
1.5 Issuance and transfer of the Trust's shares will be by book entry
only. Stock certificates will not be issued to the Company or the Account.
Shares ordered from the Trust will be recorded in the appropriate title for each
Account or the appropriate subaccount of each Account.
1.6 The Trust shall furnish prompt notice to the Company of any income
dividends or capital gain distributions payable on the Trust's shares. The
Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on a Portfolio's shares in additional shares of
that Portfolio. The Trust shall notify the Company of the number of shares so
issued as payment of such dividends and distributions.
1.7 The Trust shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by 6 p.m. New York
time.
1.8 The Trust agrees that its shares will be sold only to Participating
Insurance Companies and their separate accounts and to certain qualified pension
and retirement plans to the extent permitted by the Exemptive Order. No shares
of any Portfolio will be sold directly to the general public. The Company agrees
that Trust shares will be used only for the purposes of funding the Contracts
and Accounts listed in Schedule A, as amended from time to time.
1.9 The Trust agrees that all Participating Insurance Companies shall
have the obligations and responsibilities regarding pass-through voting and
conflicts of interest corresponding to those contained in Section 2.8 and
Article IV of this Agreement.
ARTICLE II
Obligations of the Parties
2.1 The Trust shall prepare and be responsible for filing with the
Securities and Exchange Commission and any state regulators requiring such
filing all shareholder reports, notices, proxy materials (or similar materials
such as voting instruction solicitation materials), prospectuses and statements
of additional information of the Trust. The Trust shall bear the costs of
registration and qualification of its shares, preparation and filing of the
documents listed in this Section 2.1 and all taxes to which an issuer is subject
on the issuance and transfer of its shares.
2.2 At the option of the Company, the Trust shall either (a) provide
the Company (at the Company's expense) with as many copies of the Trust's
current prospectus, annual report, semi-annual report and other shareholder
communications, including any amendments
-3-
<PAGE> 4
or supplements to any of the foregoing, as the Company shall reasonably request;
or (b) provide the Company with a camera ready copy of such documents in a form
suitable for printing. The Trust shall provide the Company with a copy of its
statement of additional information in a form suitable for duplication by the
Company. The Trust (at its expense) shall provide the Company with copies of any
Trust-sponsored proxy materials in such quantity as the Company shall reasonably
require for distribution to Contract owners.
2.3 The Company shall bear the costs of printing and distributing the
Trust's prospectus, statement of additional information, shareholder reports and
other shareholder communications to owners of and applicants for policies for
which the Trust is serving or is to serve as an investment vehicle. The Company
shall bear the costs of distributing proxy materials (or similar materials such
as voting solicitation instructions) to Contract owners. The Company assumes
sole responsibility for ensuring that such materials are delivered to Contract
owners in accordance with applicable federal and state securities laws.
2.4 The Company agrees and acknowledges that the Trust's adviser, Janus
Capital Corporation ("Janus Capital"), is the sole owner of the name and mark
"Janus" and that all use of any designation comprised in whole or part of Janus
(a "Janus Mark") under this Agreement shall inure to the benefit of Janus
Capital. Except as provided in Section 2.5, the Company shall not use any Janus
Mark on its own behalf or on behalf of the Accounts or Contracts in any
registration statement, advertisement, sales literature or other materials
relating to the Accounts or Contracts without the prior written consent of Janus
Capital. Upon termination of this Agreement for any reason, the Company shall
cease all use of any Janus Mark(s) as soon as reasonably practicable.
2.5 The Company shall furnish, or cause to be furnished, to the Trust
or its designee, a copy of each Contract prospectus or statement of additional
information in which the Trust or its investment adviser is named prior to the
filing of such document with the Securities and Exchange Commission. The Company
shall furnish, or shall cause to be furnished, to the Trust or its designee,
each piece of sales literature or other promotional material in which the Trust
or its investment adviser is named, at least fifteen Business Days prior to its
use. No such material shall be used if the Trust or its designee reasonably
objects to such use within fifteen Business Days after receipt of such material.
2.6 The Company shall not give any information or make any
representations or statements on behalf of the Trust or concerning the Trust or
its investment adviser in connection with the sale of the Contracts other than
information or representations contained in and accurately derived from the
registration statement or prospectus for the Trust shares (as such registration
statement and prospectus may be amended or supplemented from time to time),
reports of the Trust, Trust-sponsored proxy statements, or in sales literature
or other promotional material approved by the Trust or its designee, except as
required by legal process or regulatory authorities or with the written
permission of the Trust or its designee.
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<PAGE> 5
2.7 The Trust shall not give any information or make any
representations or statements on behalf of the Company or concerning the
Company, the Accounts or the Contracts other than information or representations
contained in and accurately derived from the registration statement or
prospectus for the Contracts (as such registration statement and prospectus may
be amended or supplemented from time to time), or in materials approved by the
Company for distribution including sales literature or other promotional
materials, except as required by legal process or regulatory authorities or with
the written permission of the Company.
2.8 So long as, and to the extent that the Securities and Exchange
Commission interprets the 1940 Act to require pass-through voting privileges for
variable policyowners, the Company will provide pass-through voting privileges
to owners of policies whose cash values are invested, through the Accounts, in
shares of the Trust. The Trust shall require all Participating Insurance
Companies to calculate voting privileges in the same manner and the Company
shall be responsible for assuring that the Accounts calculate voting privileges
in the manner established by the Trust. With respect to each Account, the
Company will vote shares of the Trust held by the Account and for which no
timely voting instructions from policyowners are received as well as shares it
owns that are held by that Account, in the same proportion as those shares for
which voting instructions are received. The Company and its agents will in no
way recommend or oppose or interfere with the solicitation of proxies for Trust
shares held by Contract owners without the prior written consent of the Trust,
which consent may be withheld in the Trust's sole discretion.
2.9 The Company shall notify the Trust of any applicable state
insurance laws that restrict the Portfolios' investments or otherwise affect the
operation of the Trust and shall notify the Trust of any changes in such laws.
ARTICLE III
Representations and Warranties
3.1 The Company represents and warrants that it is an insurance company
duly organized and in good standing under the laws of the State of Ohio and that
it has legally and validly established each Account as a segregated asset
account under such law on the date set forth in Schedule A.
3.2 The Company represents and warrants that each Account (1) has been
registered or, prior to any issuance or sale of the Contracts, will be
registered as a unit investment trust in accordance with the provisions of the
1940 Act or, alternatively (2) has not been registered in proper reliance upon
an exclusion from registration under the 1940 Act.
3.3 The Company represents and warrants that the Contracts or interests
in the Accounts (1) are or, prior to issuance, will be registered as securities
under the 1933 Act or,
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<PAGE> 6
alternatively (2) are not registered because they are properly exempt from
registration under the 1933 Act or will be offered exclusively in transactions
that are properly exempt from registration under the 1933 Act. The Company
further represents and warrants that the Contracts will be issued and sold in
compliance in all material respects with all applicable federal and state laws;
and the sale of the Contracts shall comply in all material respects with state
insurance suitability requirements.
3.4 The Trust represents and warrants that it is duly organized and
validly existing under the laws of the State of Delaware.
3.5 The Trust represents and warrants that the Trust shares offered and
sold pursuant to this Agreement will be registered under the 1933 Act and the
Trust shall be registered under the 1940 Act prior to any issuance or sale of
such shares. The Trust shall amend its registration statement under the 1933 Act
and the 1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Trust shall register and qualify its shares for sale
in accordance with the laws of the various states only if and to the extent
deemed advisable by the Trust.
3.6 The Trust represents and warrants that the investments of each
Portfolio will comply with the diversification requirements set forth in Section
817(h) of the Internal Revenue Code of 1986, as amended, and the rules and
regulations thereunder.
ARTICLE IV
Potential Conflicts
4.1 The parties acknowledge that the Trust's shares may be made
available for investment to other Participating Insurance Companies. In such
event, the Trustees will monitor the Trust for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
Participating Insurance Companies. An irreconcilable material conflict may arise
for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by variable annuity contract and variable life insurance contract owners; or (f)
a decision by an insurer to disregard the voting instructions of contract
owners. The Trustees shall promptly inform the Company if they determine that an
irreconcilable material conflict exists and the implications thereof.
4.2 The Company agrees to promptly report any potential or existing
conflicts of which it is aware to the Trustees. The Company will assist the
Trustees in carrying out their
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<PAGE> 7
responsibilities under the Exemptive Order by providing the Trustees with all
information reasonably necessary for the Trustees to consider any issues raised
including, but not limited to, information as to a decision by the Company to
disregard Contract owner voting instructions.
4.3 If it is determined by a majority of the Trustees, or a majority of
its disinterested Trustees, that a material irreconcilable conflict exists that
affects the interests of Contract owners, the Company shall, in cooperation with
other Participating Insurance Companies whose contract owners are also affected,
at its expense and to the extent reasonably practicable (as determined by the
Trustees) take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, which steps could include: (a) withdrawing the
assets allocable to some or all of the Accounts from the Trust or any Portfolio
and reinvesting such assets in a different investment medium, including (but not
limited to) another Portfolio of the Trust, or submitting the question of
whether or not such segregation should be implemented to a vote of all affected
Contract owners and, as appropriate, segregating the assets of any appropriate
group (i.e., annuity contract owners, life insurance contract owners, or
variable contract owners of one or more Participating Insurance Companies) that
votes in favor of such segregation, or offering to the affected Contract owners
the option of making such a change; and (b) establishing a new registered
management investment company or managed separate account.
4.4 If a material irreconcilable conflict arises because of a decision
by the Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Trust's election, to withdraw the affected Account's
investment in the Trust and terminate this Agreement with respect to such
Account; provided, however that such withdrawal and termination shall be limited
to the extent required by the foregoing material irreconcilable conflict as
determined by a majority of the disinterested Trustees. Any such withdrawal and
termination must take place within six (6) months after the Trust gives written
notice that this provision is being implemented. Until the end of such six (6)
month period, the Trust shall continue to accept and implement orders by the
Company for the purchase and redemption of shares of the Trust.
4.5 If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Trust and terminate this Agreement with
respect to such Account within six (6) months after the Trustees inform the
Company in writing that it has determined that such decision has created an
irreconcilable material conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested
Trustees. Until the end of such six (6) month period, the Trust shall continue
to accept and implement orders by the Company for the purchase and redemption of
shares of the Trust.
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<PAGE> 8
4.6 For purposes of Sections 4.3 through 4.6 of this Agreement, a
majority of the disinterested Trustees shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Company be required to establish a new funding medium for the Contracts
if an offer to do so has been declined by vote of a majority of Contract owners
materially adversely affected by the irreconcilable material conflict. In the
event that the Trustees determine that any proposed action does not adequately
remedy any irreconcilable material conflict, then the Company will withdraw the
Account's investment in the Trust and terminate this Agreement within six (6)
months after the Trustees inform the Company in writing of the foregoing
determination; provided, however, that such withdrawal and termination shall be
limited to the extent required by any such material irreconcilable conflict as
determined by a majority of the disinterested Trustees.
4.7 The Company shall at least annually submit to the Trustees such
reports, materials or data as the Trustees may reasonably request so that the
Trustees may fully carry out the duties imposed upon them by the Exemptive
Order, and said reports, materials and data shall be submitted more frequently
if deemed appropriate by the Trustees.
4.8 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Exemptive Order) on terms and conditions materially
different from those contained in the Exemptive Order, then the Trust and/or the
Participating Insurance Companies, as appropriate, shall take such steps as may
be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3,
as adopted, to the extent such rules are applicable.
ARTICLE V
Indemnification
5.1 Indemnification By the Company. The Company agrees to indemnify and
hold harmless the Trust and each of its Trustees, officers, employees and agents
and each person, if any, who controls the Trust within the meaning of Section 15
of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this
Article V) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Company) or expenses
(including the reasonable costs of investigating or defending any alleged loss,
claim, damage, liability or expense and reasonable legal counsel fees incurred
in connection therewith) (collectively, "Losses"), to which the Indemnified
Parties may become subject under any statute or regulation, or at common law or
otherwise, insofar as such Losses:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in a
registration statement or prospectus for the Contracts or in the
Contracts themselves or in sales literature generated or approved
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<PAGE> 9
by the Company on behalf of the Contracts or Accounts (or any
amendment or supplement to any of the foregoing) (collectively,
"Company Documents" for the purposes of this Article V), or arise out
of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, provided that this
indemnity shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made
in reliance upon and was accurately derived from written information
furnished to the Company by or on behalf of the Trust for use in
Company Documents or otherwise for use in connection with the sale of
the Contracts or Trust shares; or
(b) arise out of or result from statements or representations
(other than statements or representations contained in and accurately
derived from Trust Documents as defined in Section 5.2(a)) or wrongful
conduct of the Company or persons under its control, with respect to
the sale or acquisition of the Contracts or Trust shares; or
(c) arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in Trust
Documents as defined in Section 5.2(a) or the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading if such
statement or omission was made in reliance upon and accurately derived
from written information furnished to the Trust by or on behalf of the
Company; or
(d) arise out of or result from any failure by the Company to
provide the services or furnish the materials required under the terms
of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Company.
5.2 Indemnification By the Trust. The Trust agrees to indemnify and
hold harmless the Company and each of its directors, officers, employees and
agents and each person, if any, who controls the Company within the meaning of
Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes
of this Article V) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Trust) or
expenses (including the reasonable costs of investigating or defending any
alleged loss, claim, damage, liability or expense and reasonable legal counsel
fees incurred in connection therewith) (collectively, "Losses"), to which the
Indemnified Parties may become subject under any statute or regulation, or at
common law or otherwise, insofar as such Losses:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
registration statement or prospectus for
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<PAGE> 10
the Trust (or any amendment or supplement thereto), (collectively,
"Trust Documents" for the purposes of this Article V), or arise out of
or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, provided that this
indemnity shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made
in reliance upon and was accurately derived from written information
furnished to the Trust by or on behalf of the Company for use in Trust
Documents or otherwise for use in connection with the sale of the
Contracts or Trust shares; or
(b) arise out of or result from statements or representations
(other than statements or representations contained in and accurately
derived from Company Documents) or wrongful conduct of the Trust or
persons under its control, with respect to the sale or acquisition of
the Contracts or Trust shares; or
(c) arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in Company
Documents or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading if such statement or omission was
made in reliance upon and accurately derived from written information
furnished to the Company by or on behalf of the Trust; or
(d) arise out of or result from any failure by the Trust to
provide the services or furnish the materials required under the terms
of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Trust.
5.3 Neither the Company nor the Trust shall be liable under the
indemnification provisions of Sections 5.1 or 5.2, as applicable, with respect
to any Losses incurred or assessed against an Indemnified Party that arise from
such Indemnified Party's willful misfeasance, bad faith or negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement.
5.4 Neither the Company nor the Trust shall be liable under the
indemnification provisions of Sections 5.1 or 5.2, as applicable, with respect
to any claim made against an Indemnified Party unless such Indemnified Party
shall have notified the other party in writing within a reasonable time after
the summons, or other first written notification, giving information of the
nature of the claim shall have been served upon or otherwise received by such
Indemnified Party (or after such Indemnified Party shall have received notice of
service upon or other notification to any designated agent), but failure to
notify the party against
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<PAGE> 11
whom indemnification is sought of any such claim shall not relieve that party
from any liability which it may have to the Indemnified Party in the absence of
Sections 5.1 and 5.2.
5.5 In case any such action is brought against the Indemnified Parties,
the indemnifying party shall be entitled to participate, at its own expense, in
the defense of such action. The indemnifying party also shall be entitled to
assume the defense thereof, with counsel reasonably satisfactory to the party
named in the action. After notice from the indemnifying party to the Indemnified
Party of an election to assume such defense, the Indemnified Party shall bear
the fees and expenses of any additional counsel retained by it, and the
indemnifying party will not be liable to the Indemnified Party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
ARTICLE VI
Termination
6.1 This Agreement may be terminated by either party for any reason by
ninety (90) days advance written notice delivered to the other party.
6.2 Notwithstanding any termination of this Agreement, the Trust shall,
at the option of the Company, continue to make available additional shares of
the Trust (or any Portfolio) pursuant to the terms and conditions of this
Agreement for all Contracts in effect on the effective date of termination of
this Agreement, provided that the Company continues to pay the costs set forth
in Section 2.3.
6.3 The provisions of Article V shall survive the termination of this
Agreement, and the provisions of Article IV and Section 2.8 shall survive the
termination of this Agreement as long as shares of the Trust are held on behalf
of Contract owners in accordance with Section 6.2.
ARTICLE VII
Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
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If to the Trust:
Janus Aspen Series
100 Fillmore Street
Denver, Colorado 80206
Attention: General Counsel
If to the Company:
The Ohio National Life Insurance Company
1 Financial Way
Cincinnati, Ohio 45242
Attention: John J. Palmer
Senior Vice President, Strategic Initiatives
ARTICLE VIII
Miscellaneous
8.1 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
8.2 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
8.3 If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
8.4 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of State of Colorado.
8.5 The parties to this Agreement acknowledge and agree that all
liabilities of the Trust arising, directly or indirectly, under this Agreement,
of any and every nature whatsoever, shall be satisfied solely out of the assets
of the Trust and that no Trustee, officer, agent or holder of shares of
beneficial interest of the Trust shall be personally liable for any such
liabilities.
8.6 Each party shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the National Association of Securities
Dealers, Inc., and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in
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connection with any investigation or inquiry relating to this Agreement or the
transactions contemplated hereby.
8.7 The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
8.8 The parties to this Agreement acknowledge and agree that this
Agreement shall not be exclusive in any respect.
8.9 Neither this Agreement nor any rights or obligations hereunder may
be assigned by either party without the prior written approval of the other
party.
8.10 No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties.
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Participation Agreement as of the date and year first
above written.
JANUS ASPEN SERIES
By: /s/ BONNIE M. HOWE
-------------------------------------
Name: Bonnie M. Howe
Title: Assistant Vice President
THE OHIO NATIONAL LIFE INSURANCE
COMPANY
By: /s/ JOHN J. PALMER
-------------------------------------
Name: John J. Palmer
Title: Senior Vice President,
Strategic Initiatives
\
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<PAGE> 14
Schedule A
Separate Accounts and Associated Contracts
Name of Separate Account and Contracts Funded
Date Established by Board of Directors By Separate Account
- -------------------------------------- -------------------
Ohio National Variable Account A ONcore Flex
established August 1, 1969 ONcore Premier
ONcore Value
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<PAGE> 1
Exhibit (3)(f)
PARTICIPATION AGREEMENT
THIS AGREEMENT, is made as of May 1, 1998, by and among The
Ohio National Life Insurance Company ("Company"), on its own behalf and on
behalf of The Ohio National Variable Account A, a segregated asset account of
the Company ("Account"), Strong Variable Insurance Funds, Inc. ("Strong
Variable") on behalf of the Portfolios of Strong Variable listed on the attached
Exhibit A as such Exhibit may be amended from time to time (the "Designated
Portfolios"), Strong Opportunity Fund II, Inc. ("Opportunity Fund II"), Strong
Capital Management, Inc. (the "Adviser"), the investment adviser and transfer
agent for the Opportunity Fund II and Strong Variable, and Strong Funds
Distributors, Inc. ("Distributors"), the distributor for Strong Variable and the
Opportunity Fund II (each, a "Party" and collectively, the "Parties").
PRELIMINARY STATEMENTS
A. Beneficial interests in Strong Variable are divided into several
series of shares, each representing the interest in a particular managed
portfolio of securities and other assets (each, a "Portfolio").
B. To the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares of Opportunity Fund II and
the Designated Portfolios ("Fund" or "Funds" shall be deemed to refer to each
Designated Portfolio and to the Opportunity Fund II to the extent the context
requires), on behalf of the Account to fund the variable annuity contracts that
use the Funds as an underlying investment medium (the "Contracts").
C. The Company, Adviser and Distributors desire to facilitate the
purchase and redemption of shares of the Funds by the Company for the Account
through one account in each Fund (each an "Omnibus Account") to be maintained of
record by the Company, subject to the terms and conditions of this Agreement.
D. The Company desires to provide administrative services and functions
(the "Services") for purchasers of Contracts ("Owners") who are beneficial
owners of shares of the Funds on the terms and conditions set forth in this
Agreement.
AGREEMENTS
The parties to this Agreement agree as follows:
1. Performance of Services. Company agrees to perform the administrative
functions and services specified in Exhibit B attached to this Agreement with
respect to the shares of the Funds beneficially owned by the Owners and included
in the Account.
<PAGE> 2
2. The Omnibus Accounts.
2.1 Each Omnibus Account will be opened based upon the information
contained in Exhibit C to this Agreement. In connection with each Omnibus
Account, Company represents and warrants that it is authorized to act on behalf
of each Owner effecting transactions in the Omnibus Account and that the
information specified on Exhibit C to this Agreement is correct.
2.2 Each Fund shall designate each Omnibus Account with an account
number. These account numbers will be the means of identification when the
Parties are transacting in the Omnibus Accounts. The assets in the Accounts are
segregated from the Company's own assets. The Adviser agrees to cause the
Omnibus Accounts to be kept open on each Fund's books, as applicable, regardless
of a lack of activity or small position size except to the extent the Company
takes specific action to close an Omnibus Account or to the extent a Fund's
prospectus reserves the right to close accounts which are inactive or of a small
position size. In the latter two cases, the Adviser will give prior notice to
the Company before closing an Omnibus Account.
2.3 The Company agrees to provide Adviser such information as Adviser
or Distributors may reasonably request concerning Owners as may be necessary or
advisable to enable Company and Distributors to comply with applicable laws,
including state "Blue Sky" laws relating to the sales of shares of the Funds to
the Accounts.
3. Fund Shares Transactions.
3.1 In General. Shares of the Funds shall be sold on behalf of the
Funds by Distributors and purchased by Company for the Account and, indirectly
for the appropriate subaccount thereof at the net asset value next computed
after receipt by Distributors of each order of the Company or its designee, in
accordance with the provisions of this Agreement, the then current prospectuses
of the Funds, and the Contracts. Company may purchase shares of the Funds for
its own account subject to (a) receipt of prior written approval by
Distributors; and (b) such purchases being in accordance with the then current
prospectuses of the Fund and the Contracts. The Board of Directors of each Fund
("Directors") may refuse to sell shares of the applicable Fund to any person, or
suspend or terminate the offering of shares of the Fund if such action is
required by law or by regulatory authorities having jurisdiction. Company agrees
to purchase and redeem the shares of the Funds in accordance with the provisions
of this Agreement, of the Contracts and of the then current prospectuses for the
Contracts and Funds. Except as necessary to implement transactions initiated by
Owners, or as otherwise permitted by state or federal laws or regulations,
Company shall not redeem shares of Funds attributable to the Contracts.
3.2 Purchase and Redemption Orders. On each day that a Fund is open for
business (a "Business Day"), the Company shall aggregate and calculate the net
purchase or redemption order it receives for the Account from the Owners for
shares of the Fund that it received prior to
2
<PAGE> 3
the close of trading on the New York Stock Exchange (the "NYSE") (i.e. 3:00
p.m., Central time, unless the NYSE closes at an earlier time in which case such
earlier time shall apply) and communicate to Distributors, by telephone or
facsimile (or by such other means as the Parties to this Agreement may agree to
in writing), the net aggregate purchase or redemption order (if any) for the
Omnibus Account for such Business Day (such Business Day is sometimes referred
to herein as the "Trade Date"). The Company will communicate such orders to
Distributors prior to 9:00 a.m., Central time, on the next Business Day
following the Trade Date. All trades communicated to Distributors by the
foregoing deadline shall be treated by Distributors as if they were received by
Distributors prior to the close of trading on the Trade Date.
3.3 Settlement of Transactions.
(a) Purchases. Company will wire, or arrange for the wire of,
the purchase price of each purchase order to the custodian for the Fund in
accordance with written instructions provided by Distributors to the Company so
that either (1) such funds are received by the custodian for the Fund prior to
10:30 a.m., Central time, on the next Business Day following the Trade Date, or
(2) Distributors is provided with a Federal Funds wire system reference number
prior to such 10:30 a.m. deadline evidencing the entry of the wire transfer of
the purchase price to the applicable custodian into the Federal Funds wire
system prior to such time. Company agrees that if it fails to provide funds to
the Fund's custodian by the close of business on the next Business Day following
the Trade Date, then, at the option of Distributors, (i) the transaction may be
canceled, or (ii) the transaction may be processed at the next-determined net
asset value for the applicable Fund after purchase order funds are received. In
such event, the Company shall indemnify and hold harmless Distributors, Adviser
and the Funds from any liabilities, costs and damages either may suffer as a
result of such failure.
(b) Redemptions. The Adviser will use its best efforts to
cause to be transmitted to such custodial account as Company shall direct in
writing, the proceeds of all redemption orders placed by Company by 9:00 a.m.,
Central time, on the Business Day immediately following the Trade Date, by wire
transfer on that Business Day. Should Company need to extend the settlement on a
trade, it will contact Adviser to discuss the extension. For purposes of
determining the length of settlement, Adviser agrees to treat the Account no
less favorably than other shareholders of the Funds. Each wire transfer of
redemption proceeds shall indicate, on the Federal Funds wire system, the amount
thereof attributable to each Fund; provided, however, that if the number of
entries would be too great to be transmitted through the Federal Funds wire
system, the Adviser shall, on the day the wire is sent, fax such entries to
Company or if possible, send via direct or indirect systems access until
otherwise directed by the Company in writing.
3
<PAGE> 4
(c) Authorized Persons. The following persons are each duly
authorized to act on behalf of the Company under this Agreement. The Funds,
Adviser and Distributors are entitled to conclusively rely on verbal or written
instructions that Adviser or Distributors reasonably believes were originated by
any one of said persons. The Company shall inform Adviser and Distributors of
additions to or subtractions from this list of authorized persons pursuant to
Section 13, hereof:
Dennis Taney
Dawn Caine
Bill Hilbert
3.4 Book Entry Only. Issuance and transfer of shares of a Fund will be
by book entry only. Stock certificates will not be issued to the Company or the
Account. Shares of the Funds ordered from Distributors will be recorded in the
appropriate book entry title for the Account.
3.5 Distribution Information. The Adviser or Distributors shall provide
the Company with all distribution announcement information as soon as it is
announced by the Funds. The distribution information shall set forth, as
applicable, ex-dates, record date, payable date, distribution rate per share,
record date share balances, cash and reinvested payment amounts and all other
information reasonably requested by the Company. Where possible, the Adviser or
Distributors shall provide the Company with direct or indirect systems access to
the Adviser's systems for obtaining such distribution information.
3.6 Reinvestment. All dividends and capital gains distributions will be
automatically reinvested on the payable date in additional shares of the
applicable Fund at net asset value in accordance with each Fund's then current
prospectus.
3.7 Pricing Information. Distributors shall use its best efforts to
furnish to the Company prior to 6:00 p.m., Central time, on each Business Day
each Fund's closing net asset value for that day, and for those Funds for which
such information is calculated, the daily accrual for interest rate factor (mil
rate). Such information shall be communicated via fax, or indirect or direct
systems access acceptable to the Company.
3.8 Price Errors.
(a) Notification. If an adjustment is required in accordance
with a Fund's then current policies on reimbursement ("Fund Reimbursement
Policies") to correct any error in the computation of the net asset value of
Fund shares ("Price Error"), Adviser or Distributors shall notify Company as
soon as practicable after discovering the Price Error. Notice may be made via
facsimile or via direct or indirect systems access and shall state the incorrect
price, the correct price and, to the extent communicated to the Fund's
shareholders, the reason for the price change.
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<PAGE> 5
(b) Underpayments. If a Price Error causes an Account to
receive less than the amount to which it otherwise would have been entitled,
Adviser shall make all necessary adjustments (subject to the Fund Reimbursement
Policies) so that the Account receives the amount to which it would have been
entitled
(c) Overpayments. If a Price Error causes an Account to
receive more than the amount to which it otherwise would have been entitled,
Company, when requested by Adviser (in accordance with the Fund Reimbursement
Policies), will use its best efforts to collect such excess amounts from the
applicable Owners.
(d) Fund Reimbursement Policies. Adviser agrees to treat
Company's customers no less favorably than Adviser treats its retail
shareholders in applying the provisions of paragraphs 3.8(b) and 3.8(c).
(e) Expenses. Adviser shall reimburse Company for all
reasonable and necessary out-of-pocket expenses incurred by Company for payroll
overtime, stationery and postage in adjusting Owner accounts affected by a Price
Error described in paragraphs 3.8(b) and 3.8(c). Company shall use its best
efforts to mitigate all expenses which may be reimbursable under this section
3.8(e) and agrees that payroll overtime shall not include any time spent
programming computers or otherwise customizing Company's recordkeeping system.
Upon requesting reimbursement, Company shall present an itemized bill to Adviser
detailing the costs for which it seeks reimbursement.
3.9 Agency. Distributors hereby appoints the Company as its agent for
the limited purpose of accepting purchase and redemption instructions from the
Owners for the purchase and redemption of shares of the Funds by the Company on
behalf of Account.
3.10 Quarterly Reports. Adviser agrees to provide Company a statement
of Fund assets as soon as practicable and in any event within 30 days after the
end of each fiscal quarter, and a statement certifying the compliance by the
Funds during that fiscal quarter with the diversification requirements and
qualification as a regulated investment company. In the event of a breach of
Section 6.4(a), Adviser will take all reasonable steps (a) to notify Company of
such breach and (b) to adequately diversify the Fund so as to achieve compliance
within the grace period afforded by Treasury Regulation 1.817-5.
4. Proxy Solicitations and Voting. The Company shall, at its expense, distribute
or arrange for the distribution of all proxy materials furnished by the Funds to
the Account and shall: (i) solicit voting instructions from Owners; (ii) vote
the Fund shares in accordance with instructions received from Owners; and (iii)
vote the Fund shares for which no instructions have been received, as well as
shares attributable to it, in the same proportion as Fund shares for which
instructions have been received from Owners, so long as and to the extent that
the Securities and Exchange Commission (the "SEC") continues to interpret the
Investment Company Act of 1940, as amended (the "1940 Act"), to require
pass-through voting privileges for various contract
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<PAGE> 6
owners. The Company and its agents will not recommend action in connection with,
or oppose or interfere with, the solicitation of proxies for the Fund shares
held for Owners.
5. Customer Communications.
5.1 Prospectuses. The Adviser or Distributors, at its expense, will
provide the Company with as many copies of the current prospectus for the Funds
as the Company may reasonably request for distribution, at the Company's
expense, to existing or prospective Owners.
5.2 Shareholder Materials. The Adviser and Distributors shall, as
applicable, provide in bulk to the Company or its authorized representative, at
a single address and at no expense to the Company, the following shareholder
communications materials prepared for circulation to Owners in quantities
requested by the Company which are sufficient to allow mailing thereof by the
Company and, to the extent required by applicable law, to all Owners: proxy or
information statements, annual reports, semi-annual reports, and all initial and
updated prospectuses, supplements and amendments thereof. None of the Funds, the
Adviser or Distributors shall be responsible for the cost of distributing such
materials to Owners.
6. Representations and Warranties.
6.1 The Company represents and warrants that:
(a) It is an insurance company duly organized and in good
standing under the laws of the State of Ohio and that it has legally and validly
established the Account prior to any issuance or sale thereof as a segregated
asset account and that the Company has and will maintain the capacity to issue
all Contracts that may be sold; and that it is and will remain duly registered,
licensed, qualified and in good standing to sell the Contracts in all the
jurisdictions in which such Contracts are to be offered or sold;
(b) It is and will remain duly registered and licensed in all
material respects under all applicable federal and state securities and
insurance laws and shall perform its obligations under this Agreement in
compliance in all material respects with any applicable state and federal laws;
(c) The Contracts are and will be registered under the
Securities Act of 1933, as amended (the "1933 Act"), and are and will be
registered and qualified for sale in the states where so required; and the
Account is and will be registered as a unit investment trust in accordance with
the 1940 Act and shall be a segregated investment account for the Contracts;
(d) The Contracts are currently treated as annuity contracts,
under applicable provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), and the Company will maintain such treatment and will notify
Adviser, Distributors and Funds promptly upon
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<PAGE> 7
having a reasonable basis for believing that the Contracts have ceased to be so
treated or that they might not be so treated in the future;
(e) It is registered as a transfer agent pursuant to Section
17A of the Securities Exchange Act of 1934, as amended (the "1934 Act"), or is
not required to be registered as such;
(f) The arrangements provided for in this Agreement will be
disclosed to the Owners; and
(g) It is registered as a broker-dealer under the 1934 Act and
any applicable state securities laws, including as a result of entering into and
performing the Services set forth in this Agreement, or is not required to be
registered as such.
6.2 The Funds each represent and warrant that Fund shares sold pursuant
to this Agreement are and will be registered under the 1933 Act and the Fund is
and will be registered as a registered investment company under the Investment
Company Act of 1940, in each case, except to the extent the Company is so
notified in writing;
6.3 Distributors represents and warrants that:
(a) It is and will be a member in good standing of the
National Association of Securities Dealers, Inc. ("NASD")and is and will be
registered as a broker-dealer with the SEC; and
(b) It will sell and distribute Fund shares in accordance with
all applicable state and federal laws and regulations.
6.4 Adviser represents and warrants that:
(a) It will cause each Fund to invest money from the Contracts
in such a manner as to ensure that the Contracts will be treated as variable
annuity contracts under the Code and the regulations issued thereunder, and that
each Fund will comply with Section 817(h) of the Code as amended from time to
time and with all applicable regulations promulgated thereunder;
(b) It is and will remain duly registered and licensed in all
material respects under all applicable federal and state securities and
insurance laws and shall perform its obligations under this Agreement in
compliance in all material respects with any applicable state and federal laws;
and
6.5 Each of the Parties to this Agreement represents and warrants to
the others that:
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<PAGE> 8
(a) It has full power and authority under applicable law, and
has taken all action necessary, to enter into and perform this Agreement and the
person executing this Agreement on its behalf is duly authorized and empowered
to execute and deliver this Agreement;
(b) This Agreement constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms and it shall
comply in all material respects with all laws, rules and regulations applicable
to it by virtue of entering into this Agreement;
(c) No consent or authorization of, filing with, or other act
by or in respect of any governmental authority, is required in connection with
the execution, delivery, performance, validity or enforceability of this
Agreement;
(d) The execution, performance and delivery of this Agreement
will not result in it violating any applicable law or breaching or otherwise
impairing any of its contractual obligations;
(e) Each Party to this Agreement is entitled to rely on any
written records or instructions provided to it by another Party; and
(f) Its directors, officers, employees, and investment
advisers, and other individuals/entities dealing with the money or securities of
a Fund are and shall continue to be at all times covered by a blanket fidelity
bond or similar coverage for the benefit of the Fund in an amount not less than
the amount required by the applicable rules of the NASD and the federal
securities laws, which bond shall include coverage for larceny and embezzlement
and shall be issued by a reputable bonding company.
7. Sales Material and Information
7.1 NASD Filings. The Company shall promptly inform Distributors as to
the status of all sales literature filings pertaining to the Funds and shall
promptly notify Distributors of all approvals or disapprovals of sales
literature filings with the NASD. For purposes of this Section 7, the phrase
"sales literature or other promotional material" shall be construed in
accordance with all applicable securities laws and regulations.
7.2 Company Representations. The Company shall not make any material
representations concerning the Adviser, the Distributors, or a Fund other than
the information or representations contained in: (a) a registration statement of
the Fund or prospectus of a Fund, as amended or supplemented from time to time;
(b) published reports or statements of the Funds which are in the public domain
or are approved by Distributors or the Funds; or (c) sales literature or other
promotional material of the Funds.
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<PAGE> 9
7.3 Adviser, Distributors and Fund Representations. None of Adviser,
Distributors or any Fund shall make any material representations concerning the
Company other than the information or representations contained in: (a) a
registration statement or prospectus for the Contracts, as amended or
supplemented from time to time; (b) published reports or statements of the
Contracts or the Account which are in the public domain or are approved by the
Company; or (c) sales literature or other promotional material of the Company.
7.4 Trademarks, etc. Except to the extent required by applicable law,
no Party shall use any other Party's names, logos, trademarks or service marks,
whether registered or unregistered, without the prior consent of such Party.
7.5 Information From Distributors and Adviser. Distributors or Adviser
will provide to Company at least one complete copy of all registration
statements, prospectuses, prospectus stickers, Statements of Additional
Information, reports, proxy statements, solicitations for voting instructions,
and upon request, applications for exemptions, requests for no action letters,
and all amendments to any of the above, that relate to the Funds, in final form
as filed with the SEC, NASD and other regulatory authorities.
7.6 Information From Company. Company will provide to Distributors at
least one complete copy of all registration statements, prospectuses, Statements
of Additional Information, reports, solicitations for voting instructions, sales
literature and other promotional materials, applications for exemptions,
requests for no action letters and all amendments to any of the above, that
relate to a Fund and the Contracts, in final form as filed with the SEC, NASD
and other regulatory authorities.
7.7 Review of Marketing Materials. If so requested by Company, the
Adviser or Distributors will use its best efforts to review sales literature and
other marketing materials prepared by Company which relate to the Funds, the
Adviser or Distributors for factual accuracy as to such entities, provided that
the Adviser or Distributors is provided at least five (5) Business Days to
review such materials. Neither the Adviser nor Distributors will review such
materials for compliance with applicable laws. Company shall provide the Adviser
with copies of all sales literature and other marketing materials which refer to
the Funds, the Company or Distributors within five (5) Business Days after their
first use, regardless of whether the Adviser or Distributors has previously
reviewed such materials. If so requested by the Adviser or Distributors, Company
shall cease to use any sales literature or marketing materials which refer to
the Funds, the Adviser or Distributors that the Adviser or Distributors
determines to be inaccurate, misleading or otherwise unacceptable.
8. Fees and Expenses.
8.1 Fund Registration Expenses. Fund or Distributors shall bear the
cost of registration and qualification of Fund shares; preparation and filing of
Fund prospectuses and registration statements, proxy materials and reports;
preparation of all other statements and
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<PAGE> 10
notices relating to the Fund or Distributors required by any federal or state
law; payment of all applicable fees, including, without limitation, any fees due
under Rule 24f-2 of the 1940 Act, relating to a Fund; and all taxes on the
issuance or transfer of Fund shares on the Fund's records.
8.2 Contract Registration Expenses. The Company shall bear the expenses
for the costs of preparation and filing of the Company's prospectus and
registration statement with respect to the Contracts; preparation of all other
statements and notices relating to the Account or the Contracts required by any
federal or state law; expenses for the solicitation and sale of the Contracts
including all costs of printing and distributing all copies of advertisements,
prospectuses, Statements of Additional Information, proxy materials, and reports
to Owners or potential purchasers of the Contracts as required by applicable
state and federal law; payment of all applicable fees relating to the Contracts;
all costs of drafting, filing and obtaining approvals of the Contracts in the
various states under applicable insurance laws; filing of annual reports on form
N-SAR, and all other costs associated with ongoing compliance with all such laws
and its obligations under this Agreement.
9. Indemnification.
9.1 Indemnification By Company.
(a) Company agrees to indemnify and hold harmless the Funds,
Adviser and Distributors and each of their directors, officers, employees and
agents, and each person, if any, who controls any of them within the meaning of
Section 15 of the 1933 Act (each, an "Indemnified Party" and collectively, the
"Indemnified Parties" for purposes of this Section 9.1) from and against any and
all losses, claims, damages, liabilities (including amounts paid in settlement
with the written consent of Company), and expenses including reasonable legal
fees and expenses, (collectively, hereinafter "Losses"), to which the
Indemnified Parties may become subject under any statute, regulation, at common
law or otherwise insofar as such Losses:
(i) arise out of or are based upon any untrue
statements or alleged untrue statements of any material fact contained in the
registration statement, prospectus or sales literature for the Contracts or
contained in the Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that this
paragraph 9.1(a) shall not apply as to any Indemnified Party if such statement
or omission or such alleged statement or omission was made in reliance upon and
in conformity with written information furnished to Company by or on behalf of a
Fund, Distributors or Adviser for use in the registration statement or
prospectus for the Contracts or in the Contracts (or any amendment or
supplement) or otherwise for use in connection with the sale of the Contracts or
Fund shares; or
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(ii) arise out of, or as a result of, statements or
representations or wrongful conduct of Company or its agents, with respect to
the sale or distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact contained in a registration statement,
prospectus, or sales literature covering a Fund or any amendment thereof or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, if such a statement or omission was made in reliance
upon written information furnished to a Fund, Adviser or Distributors by or on
behalf of Company; or
(iv) arise out of, or as a result of, any failure by
Company or persons under its control to provide the Services and furnish the
materials contemplated under the terms of this Agreement; or
(v) arise out of, or result from, any material breach
of any representation or warranty made by Company or persons under its control
in this Agreement or arise out of or result from any other material breach of
this Agreement by Company or persons under its control; as limited by and in
accordance with the provisions of Sections 9.1(b) and 9.1(c) hereof; or
(vi) arise out of, or as a result of, adherence by
Adviser or Distributors to instructions that it reasonably believes were
originated by persons specified in Section 3.3(c), hereof.
This indemnification provision is in addition to any liability
which the Company may otherwise have.
(b) Company shall not be liable under this indemnification
provision with respect to any Losses to which an Indemnified Party would
otherwise be subject by reason of such Indemnified Party's willful misfeasance,
bad faith, or gross negligence in the performance of such Indemnified Party's
duties or by reason of such Indemnified Party's reckless disregard of
obligations or duties under this Agreement.
(c) Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify Company of any such
claim shall not relieve Company from any liability which it may have to the
Indemnified Party otherwise than on account of this indemnification provision.
In case any such action is brought against any Indemnified Party, and it
notified the indemnifying Party of the commencement thereof, the
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<PAGE> 12
indemnifying Party will be entitled to participate therein and, to the extent
that it may wish, assume the defense thereof, with counsel satisfactory to such
Indemnified Party. After notice from the indemnifying Party of its intention to
assume the defense of an action, the Indemnified Party shall bear the expenses
of any additional counsel obtained by it, and the indemnifying Party shall not
be liable to such Indemnified Party under this Section for any legal or other
expenses subsequently incurred by such Indemnified Party in connection with the
defense thereof other than reasonable costs of investigation. The Indemnified
Party may not settle any action without the written consent of the indemnifying
Party. The indemnifying Party may not settle any action without the written
consent of the Indemnified Party unless such settlement completely and finally
releases the Indemnified Party from any and all liability. In either event,
consent shall not be unreasonably withheld.
(d) The Indemnified Parties will promptly notify Company of
the commencement of any litigation or proceedings against the Indemnified
Parties in connection with the issuance or sale of Fund shares or the Contracts
or the operation of a Fund.
9.2 Indemnification by Adviser and Distributors.
(a) Adviser and Distributors agrees to indemnify and hold
harmless Company and each of its directors, officers, employees and agents and
each person, if any, who controls Company within the meaning of Section 15 of
the 1933 Act (each, an "Indemnified Party" and collectively, the "Indemnified
Parties" for purposes of this Section 9.2) from and against any and all Losses
to which the Indemnified Parties may become subject under any statute,
regulation, at common law or otherwise, insofar as such Losses:
(i) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in the
registration statement or prospectus or sales literature of a Fund (or any
amendment or supplement to any of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, provided that this Section 9.2(a) shall not apply as to any
Indemnified Party if such statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with written information
furnished to a Fund, Adviser or Distributors by or on behalf of Company for use
in the registration statement or prospectus for a Fund or in sales literature
(or any amendment or supplement) or otherwise for use in connection with the
sale of the Contracts or Fund shares; or
(ii) arise out of, or as a result of, statements or
representations or wrongful conduct of Adviser or Distributors or persons under
its control, with respect to the sale or distribution of Fund shares; or
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact contained in a registration statement,
prospectus, or sales literature covering the Contracts, or any amendment thereof
or supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
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<PAGE> 13
therein not misleading, if such statement or omission was made in reliance upon
written information furnished to Company by or on behalf of Adviser or
Distributors; or
(iv) arise out of, or as a result of, any failure by
Adviser or Distributors or persons under its control to provide the services and
furnish the materials contemplated under the terms of this Agreement; or
(v) arise out of or result from any material breach
of any representation or warranty made by Adviser or Distributors or persons
under its control in this Agreement or arise out of or result from any other
material breach of this Agreement by Adviser or Distributors or persons under
its control; as limited by and in accordance with the provisions of Sections
9.2(b) and 9.2(c) hereof.
This indemnification provision is in addition to any liability
which Adviser and Distributors may otherwise have.
(b) Adviser and Distributors shall not be liable under this
indemnification provision with respect to any Losses to which an Indemnified
Party would otherwise be subject by reason of such Indemnified Party's willful
misfeasance, bad faith, or gross negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's reckless
disregard of obligations and duties under this Agreement.
(c) Adviser and Distributors shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified Adviser and Distributors
in writing within a reasonable time after the summons or other first legal
process giving information of the nature of the claim shall have been served
upon such Indemnified Party (or after such Indemnified Party shall have received
notice of such service on any designated agent), but failure to notify Adviser
and Distributors of any such claim shall not relieve Adviser and Distributors
from any liability which it may have to the Indemnified Party otherwise than on
account of this indemnification provision. In case any such action is brought
against any Indemnified Party, and it notified the indemnifying Party of the
commencement thereof, the indemnifying Party will be entitled to participate
therein and, to the extent that it may wish, assume the defense thereof, with
counsel satisfactory to such Indemnified Party. After notice from the
indemnifying Party of its intention to assume the defense of an action, the
Indemnified Party shall bear the expenses of any additional counsel obtained by
it, and the indemnifying Party shall not be liable to such Indemnified Party
under this Section for any legal or other expenses subsequently incurred by such
Indemnified Party in connection with the defense thereof other than reasonable
costs of investigation. The Indemnified Party may not settle any action without
the written consent of the indemnifying Party. The indemnifying Party may not
settle any action without the written consent of the Indemnified Party unless
such settlement completely and finally releases the Indemnified Party from any
and all liability. In either event, consent shall not be unreasonably withheld.
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(d) The Indemnified Parties will promptly notify Adviser and
Distributors of the commencement of any litigation or proceedings against the
Indemnified Parties in connection with the issuance or sale of the Contracts or
the operation of the Account.
10. Potential Conflicts.
10.1 Monitoring by Directors for Conflicts of Interest. The Directors
of each Fund will monitor the Fund for any potential or existing material
irreconcilable conflict of interest between the interests of the contract owners
of all separate accounts investing in the Fund, including such conflict of
interest with any other separate account of any other insurance company
investing in the Fund. An irreconcilable material conflict may arise for a
variety of reasons, including: (a) an action by any state insurance regulatory
authority; (b) a change in applicable federal or state insurance, tax, or
securities laws or regulations, or a public ruling, private letter ruling,
no-action or interpretive letter, or any similar action by insurance, tax or
securities regulatory authorities; (c) an administrative or judicial decision in
any relevant proceeding; (d) the manner in which the investments of the Fund are
being managed; (e) a difference in voting instructions given by variable annuity
contract owners and variable life insurance contract owners or by contract
owners of different life insurance companies utilizing the Fund; or (f) a
decision by Company to disregard the voting instructions of Owners. The
Directors shall promptly inform the Company, in writing, if they determine that
an irreconcilable material conflict exists and the implications thereof.
10.2 Monitoring by the Company for Conflicts of Interest. The Company
will promptly notify the Directors, in writing, of any potential or existing
material irreconcilable conflicts of interest, as described in Section 10.1
above, of which it is aware. The Company will assist the Directors in carrying
out their responsibilities under any applicable provisions of the federal
securities laws and any exemptive orders granted by the SEC ("Exemptive Order"),
by providing the Directors, in a timely manner, with all information reasonably
necessary for the Directors to consider any issues raised. This includes, but is
not limited to, an obligation by the Company to inform the Directors whenever
Owner voting instructions are disregarded.
10.3 Remedies. If it is determined by a majority of the Directors, or a
majority of disinterested Directors, that a material irreconcilable conflict
exists, as described in Section 10.1 above, the Company shall, at its own
expense take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, up to and including, but not limited to: (a),
withdrawing the assets allocable to some or all of the separate accounts from
the applicable Fund and reinvesting such assets in a different investment
medium, including (but not limited to) another fund managed by the Adviser, or
submitting the question whether such segregation should be implemented to a vote
of all affected Owners and, as appropriate, segregating the assets of any
particular group that votes in favor of such segregation, or offering to the
affected owners the option of making such a change; and (b), establishing a new
registered management investment company or managed separate account.
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10.4 Causes of Conflicts of Interest.
(a) State Insurance Regulators. If a material irreconcilable
conflict arises because a particular state insurance regulator's decision
applicable to the Company conflicts with the majority of other state regulators,
then the Company will withdraw the affected Account's investment in the
applicable Fund and terminate this Agreement with respect to such Account within
the period of time permitted by such decision, but in no event later than six
months after the Directors inform the Company in writing that it has determined
that such decision has created an irreconcilable material conflict; provided,
however, that such withdrawal and termination shall be limited to the extent
required by the foregoing material irreconcilable conflict as determined by a
majority of the disinterested Directors. Until the end of the foregoing period,
the Distributors and Funds shall continue to accept and implement orders by the
Company for the purchase (and redemption) of shares of the Fund to the extent
such actions do not violate applicable law.
(b) Disregard of Owner Voting. If a material irreconcilable
conflict arises because of Company's decision to disregard Owner voting
instructions and that decision represents a minority position or would preclude
a majority vote, Company may be required, at the applicable Fund's election, to
withdraw the Account's investment in said Fund. No charge or penalty will be
imposed against the Account as a result of such withdrawal.
10.5 Limitations on Consequences. For purposes of Sections 10.3 through
10.5 of this Agreement, a majority of the disinterested Directors shall
determine whether any proposed action adequately remedies any irreconcilable
material conflict. In no event will a Fund, the Adviser or the Distributors be
required to establish a new funding medium for any of the Contracts. The Company
shall not be required by Section 10.3 to establish a new funding medium for the
Contracts if an offer to do so has been declined by vote of a majority of Owners
affected by the irreconcilable material conflict. In the event that the
Directors determine that any proposed action does not adequately remedy any
irreconcilable material conflict, then the Company will withdraw the Account's
investment in the applicable Fund and terminate this Agreement as quickly as may
be required to comply with applicable law, but in no event later than six (6)
months after the Directors inform the Company in writing of the foregoing
determination, provided, however, that such withdrawal and termination shall be
limited to the extent required by any such material irreconcilable conflict.
10.6 Changes in Laws. If and to the extent that Rule 6e-2 and Rule
6e-3(T) are amended, or Rule 6e-3 is adopted, to provide exemptive relief from
any provision of the Act or the rules promulgated thereunder with respect to
mixed or shared funding (as defined in the Funds' Exemptive Order) on terms and
conditions materially different from those contained in the Funds' Exemptive
Order, then (a) the Funds and/or the Company, as appropriate, shall take such
steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and
Rule 6e-3, as adopted, to the extent such rules are applicable; and (b) Sections
10.1, 10.2, 10.3 and
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10.4 of this Agreement shall continue in effect only to the extent that terms
and conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
11. Maintenance of Records.
(a) Recordkeeping and other administrative services to Owners
shall be the responsibility of the Company and shall not be the responsibility
of the Funds, Adviser or Distributors. None of the Funds, the Adviser or
Distributors shall maintain separate accounts or records for Owners. Company
shall maintain and preserve all records as required by law to be maintained and
preserved in connection with providing the Services and in making shares of the
Funds available to the Account.
(b) Upon the request of the Adviser or Distributors, the
Company shall provide copies of all the historical records relating to
transactions between the Funds and the Account, written communications regarding
the Funds to or from the Account and other materials, in each case (1) as are
maintained by the Company in the ordinary course of its business and in
compliance with applicable law, and (2) as may reasonably be requested to enable
the Adviser and Distributors, or its representatives, including without
limitation its auditors or legal counsel, to (A) monitor and review the
Services, (B) comply with any request of a governmental body or self-regulatory
organization or the Owners, (C) verify compliance by the Company with the terms
of this Agreement, (D) make required regulatory reports, or (E) perform general
customer supervision. The Company agrees that it will permit the Adviser and
Distributors or such representatives of either to have reasonable access to its
personnel and records in order to facilitate the monitoring of the quality of
the Services.
(c) Upon the request of the Company, the Adviser and
Distributors shall provide copies of all the historical records relating to
transactions between the Funds and the Account, written communications regarding
the Funds to or from the Account and other materials, in each case (1) as are
maintained by the Adviser and Distributors, as the case may be, in the ordinary
course of its business and in compliance with applicable law, and (2) as may
reasonably be requested to enable the Company, or its representatives, including
without limitation its auditors or legal counsel, to (A) comply with any request
of a governmental body or self-regulatory organization or the Owners, (B) verify
compliance by the Adviser and Distributors with the terms of this Agreement, (C)
make required regulatory reports, or (D) perform general customer supervision.
(d) The Parties agree to cooperate in good faith in providing
records to one another pursuant to this Section 11.
12. Term and Termination.
12.1 Term and Termination Without Cause. The initial term of this
Agreement shall be for a period of one year from the date hereof. Unless
terminated as to any Fund upon not less
16
<PAGE> 17
than thirty (30) days prior written notice to the other Parties, this Agreement
shall thereafter automatically renew for the remaining Funds from year to year,
subject to termination at the next applicable renewal date upon not less than 30
days prior written notice. Any Party may terminate this Agreement as to any Fund
following the initial term upon six (6) months advance written notice to the
other Parties.
12.2 Termination by Fund, Distributors or Adviser for Cause. Adviser,
Fund or Distributors may terminate this Agreement by written notice to the
Company, if any of them shall determine, in its sole judgment exercised in good
faith, that (a) the Company has suffered a material adverse change in its
business, operations, financial condition or prospects since the date of this
Agreement or is the subject of material adverse publicity; or (b) any of the
Contracts are not registered, issued or sold in accordance with applicable state
and federal law or such law precludes the use of Fund shares as the underlying
investment media of the Contracts issued or to be issued by the Company.
12.3 Termination by Company for Cause. Company may terminate this
Agreement by written notice to the Adviser, Funds and Distributors in the event
that (a) any of the Fund shares are not registered, issued or sold in accordance
with applicable state or federal law or such law precludes the use of such
shares as the underlying investment media of the Contracts issued or to be
issued by the Company; (b) the Funds cease to qualify as Regulated Investment
Companies under Subchapter M of the Code or under any successor or similar
provision, or if the Company reasonably believes that the Funds may fail to so
qualify; or (c) a Fund fails to meet the diversification requirements specified
in Section 6.4(a).
12.4 Termination by any Party. This Agreement may be terminated as to
any Fund by any Party at any time (A) by giving 30 days' written notice to the
other Parties in the event of a material breach of this Agreement by the other
Party or Parties that is not cured during such 30-day period, and (B) (i) upon
institution of formal proceedings relating to the legality of the terms and
conditions of this Agreement against the Account, Company, Funds, Adviser or
Distributors by the NASD, the SEC or any other regulatory body provided that the
terminating Party has a reasonable belief that the institution of formal
proceedings is not without foundation and will have a material adverse impact on
the terminating Party, (ii) by the non-assigning Party upon the assignment of
this Agreement in contravention of the terms hereof, or (iii) as is required by
law, order or instruction by a court of competent jurisdiction or a regulatory
body or self-regulatory organization with jurisdiction over the terminating
Party.
12.5 Limit on Termination. Notwithstanding the termination of this
Agreement with respect to any or all Funds, for so long as any Contracts remain
outstanding and invested in a Fund each Party to this Agreement shall continue
to perform such of its duties under this Agreement as are necessary to ensure
the continued tax deferred status thereof and the payment of benefits
thereunder, except to the extent proscribed by law, the SEC or other regulatory
body. Notwithstanding the foregoing, nothing in this Section 12.5 obligates a
Fund to continue in existence. In the event that any Fund elects to terminate
its operations, the Company shall, as
17
<PAGE> 18
soon as practicable, obtain an exemptive order or order of substitution from the
SEC to remove all Owners from the applicable Fund.
13. Notices.
All notices under this Agreement shall be given in writing (and shall
be deemed to have been duly given upon receipt) by delivery in person, by
facsimile, by registered or certified mail or by overnight delivery (postage
prepaid, return receipt requested) to the respective Parties as follows:
If to Strong Variable:
Strong Variable Insurance Funds, Inc.
100 Heritage Reserve
Milwaukee, Wisconsin 53051
Attention: General Counsel
Facsimile No.: 414/359-3948
If to Opportunity Fund II:
Strong Opportunity Fund II, Inc.
100 Heritage Reserve
Milwaukee, Wisconsin 53051
Attention: General Counsel
Facsimile No.: 414/359-3948
If to Adviser:
Strong Capital Management, Inc.
100 Heritage Reserve
Milwaukee, Wisconsin 53051
Attention: General Counsel
Facsimile No.: 414/359-3948
If to Distributors:
Strong Funds Distributors, Inc.
100 Heritage Reserve
Milwaukee, Wisconsin 53051
Attention: General Counsel
Facsimile No.: 414/359-3948
18
<PAGE> 19
If to Company:
Ohio National Life Insurance Company
One Financial Way
Cincinnati, OH 45242
Attention: John J. Palmer
Facsimile No.: (513) 794-4519
14. Miscellaneous.
14.1. Captions. The captions in this Agreement are included for
convenience of reference only and in no way affect the construction or effect of
any provisions hereof.
14.2. Enforceability. If any portion of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
the Agreement shall not be affected thereby.
14.3. Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which taken together shall constitute one and
the same instrument.
14.4. Remedies not Exclusive. The rights, remedies and obligations
contained in this Agreement are cumulative and are in addition to any and all
rights, remedies and obligations, at law or in equity, which the Parties to this
Agreement are entitled to under state and federal laws.
14.5. Confidentiality. Subject to the requirements of legal process and
regulatory authority, the Funds and Distributors shall treat as confidential the
names and addresses of the owners of the Contracts and all information
reasonably identified as confidential in writing by the Company to this
Agreement and, except as permitted by this Agreement, shall not disclose,
disseminate or utilize such names and addresses and other confidential
information without the express written consent of the Company until such time
as it may come into the public domain.
14.6. Governing Law. This Agreement shall be governed by and
interpreted in accordance with the internal laws of the State of Wisconsin
applicable to agreements fully executed and to be performed therein; exclusive
of conflicts of laws.
14.7. Survivability. Sections 6, 7.2, 7.3, 7.4, 9, 11 and 12.5 hereof
shall survive termination of this Agreement. In addition, all provisions of this
Agreement shall survive termination of this Agreement in the event that any
Contracts are invested in a Fund at the time the termination becomes effective
and shall survive for so long as such Contracts remain so invested.
14.8. Amendment and Waiver. No modification of any provision of this
Agreement will be binding unless in writing and executed by the Party to be
bound thereby. No waiver of
19
<PAGE> 20
any provision of this Agreement will be binding unless in writing and executed
by the Party granting such waiver. Notwithstanding anything in this Agreement to
the contrary, the Company may unilaterally amend Exhibit A to this Agreement to
add additional series of Strong Variable Funds ("New Funds") as Funds by sending
to the Company a written notice of the New Funds. Any valid waiver of a
provision set forth herein shall not constitute a waiver of any other provision
of this Agreement. In addition, any such waiver shall constitute a present
waiver of such provision and shall not constitute a permanent future waiver of
such provision.
14.9. Assignment. This Agreement shall be binding upon and shall inure
to the benefit of the Parties and their respective successors and assigns;
provided, however, that neither this Agreement nor any rights, privileges,
duties or obligations of the Parties may be assigned by any Party without the
written consent of the other Parties or as expressly contemplated by this
Agreement.
14.10. Entire Agreement. This Agreement contains the full and complete
understanding between the Parties with respect to the transactions covered and
contemplated under this Agreement, and supersedes all prior agreements and
understandings between the Parties relating to the subject matter hereof,
whether oral or written, express or implied.
14.11. Relationship of Parties; No Joint Venture, Etc. Except for the
limited purpose provided in Section 3.8, it is understood and agreed that the
Company shall be acting as an independent contractor and not as an employee or
agent of the Adviser, Distributors or the Funds, and none of the Parties shall
hold itself out as an agent of any other Party with the authority to bind such
Party. Neither the execution nor performance of this Agreement shall be deemed
to create a partnership or joint venture by and among any of the Company, Funds,
Adviser, or Distributors.
14.12. Expenses. All expenses incident to the performance by each Party
of its respective duties under this Agreement shall be paid by that Party.
14.13. Time of Essence. Time shall be of the essence in this Agreement.
14.14. Non-Exclusivity. Each of the Parties acknowledges and agrees
that this Agreement and the arrangements described herein are intended to be
non-exclusive and that each of the Parties is free to enter into similar
agreements and arrangements with other entities.
20
<PAGE> 21
14.15. Operations of Funds. In no way shall the provisions of this
Agreement limit the authority of the Funds, the Company or Distributors to take
such action as it may deem appropriate or advisable in connection with all
matters relating to the operation of such Fund and the sale of its shares. In no
way shall the provisions of this Agreement limit the authority of the Company to
take such action as it may deem appropriate or advisable in connection with all
matters relating to the provision of Services or the shares of funds other than
the Funds offered to the Account.
THE OHIO NATIONAL LIFE INSURANCE COMPANY
/s/ JOHN J. PALMER
-------------------------------------------
Name: John J. Palmer
Title: Senior V.P., Strategic Initiatives
STRONG CAPITAL MANAGEMENT, INC.
/s/ DONALD G. TYLER
-------------------------------------------
Donald G. Tyler, Senior Vice President
Strong Intermediary Services
STRONG FUNDS DISTRIBUTORS, INC.
/s/ STEPHEN J. SHENKENBERG
-------------------------------------------
Stephen J. Shenkenberg, Vice President
STRONG VARIABLE INSURANCE FUNDS,
INC. on behalf of the Designated Portfolios
/s/ STEPHEN J. SHENKENBERG
----------------------------------------
Stephen J. Shenkenberg, Vice President
STRONG OPPORTUNITY FUND II, INC.
/s/ STEPHEN J. SHENKENBERG
----------------------------------------
Stephen J. Shenkenberg, Vice President
21
<PAGE> 22
EXHIBIT A
The following is a list of Designated Portfolios under this Agreement:
Strong Growth Fund II
Strong Schafer Value Fund II
22
<PAGE> 23
EXHIBIT B
THE SERVICES
Company shall perform the following services. Such services
shall be the responsibility of the Company and shall not be the responsibility
of the Funds, Adviser or Distributors.
1. Maintain separate records for each Account, which records shall
reflect Fund shares ("Shares") purchased and redeemed, including the date and
price for all transactions, Share balances, and the name and address of each
Owner, including zip codes and tax identification numbers.
2. Credit contributions to individual Owner accounts and invest such
contributions in shares of the Funds to the extent so designated by the Owner.
3. Disburse or credit to the Owners, and maintain records of, all
proceeds of redemptions of Fund shares and all other distributions not
reinvested in shares.
4. Prepare and transmit to the Owners, periodic account statements
showing, among other things, the total number of Fund shares owned as of the
statement closing date, purchases and redemptions of shares during the period
covered by the statement, the net asset value of the Funds as of a recent date,
and the dividends and other distributions paid during the statement period
(whether paid in cash or reinvested in shares).
5. Transmit to the Owners, as required by applicable law, prospectuses,
proxy materials, shareholder reports, and other information provided by the
Adviser, Distributors or Funds and required to be sent to shareholders under the
Federal securities laws.
6. Transmit to Distributors purchase orders and redemption requests
placed by the Account and arrange for the transmission of funds to and from the
Funds.
7. Transmit to Distributors such periodic reports as Distributors shall
reasonably conclude is necessary to enable the Funds to comply with applicable
Federal securities and state Blue Sky requirements.
8. Transmit to each Account confirmations of purchase orders and
redemption requests placed by each Account.
9. Maintain all account balance information for the Account and daily
and monthly purchase summaries expressed in shares and dollar amounts.
10. Prepare, transmit and file any Federal, state and local government
reports and returns as required by law with respect to each account maintained
on behalf of the Account.
23
<PAGE> 24
11. Respond to Owners' inquiries regarding, among other things, share
prices, account balances, dividend options, dividend amounts, and dividend
payment dates.
24
<PAGE> 25
EXHIBIT C
ACCOUNT INFORMATION
<TABLE>
<S> <C>
1. Entity in whose name each Account will be opened: The Ohio National Life Insurance Company
----------------------------------------
Mailing address: One Financial Way
----------------------------------------
Cincinnati, Ohio 45242
----------------------------------------
2. Employer ID number (For internal usage only): 31-0397080
----------------------------------------
3. Authorized contact persons: The following persons are authorized on behalf of
the Company to effect transactions in each Account:
Name: Dennis R. Taney Name: Dawn M. Caine
------------------------------------------- ---------------------------------
Phone: 513-794-6251 Phone: 513-794-6280
------------------------------------------- ---------------------------------
</TABLE>
4. Will the Accounts have telephone exchange? X Yes No
--- ---
(This option lets Company redeem shares by telephone and apply the proceeds
for purchase in another identically registered Strong Funds account.)
5. Will the Accounts have telephone redemption? X Yes No
--- ---
(This option lets Company sell shares by telephone. The proceeds will be
wired to the bank account specified below.)
6. All dividends and capital gains will be reinvested automatically.
7. Instructions for all outgoing wire transfers:
-----------------------------
-----------------------------
-----------------------------
-----------------------------
8. If this Account Information Form contains changed information, the
undersigned authorized officer has executed this amended Account Information
Form as of the date set forth below and acknowledges the agreements and
representations set forth in the Participation Agreement between the Company,
the Funds, Adviser and Distributors:
25
<PAGE> 26
9. Company represents under penalty of perjury that:
(i) The employer ID number on this form is correct; and
(ii) Company is not subject to backup withholding because (a) Company
is exempt from backup withholding, (b) Company has not been notified by the IRS
that it is subject to backup withholding as a result of failure to report all
interest or dividends, or (c) the IRS has notified the Company that it is no
longer subject to backup withholding. (Cross out (ii) if Company has been
notified by the IRS that it is subject to backup withholding because of
underreporting interest or dividends on its tax return.)
/s/ JOHN J. PALMER March 23, 1998
- -------------------------------------- --------------------------------
(Signature of Authorized Officer) (Date)
Please Note: Distributors employs reasonable procedures to confirm that
instructions communicated by telephone are genuine and may not be liable for
losses due to unauthorized or fraudulent instructions. Please see the prospectus
for the applicable Fund for more information on the telephone exchange and
redemption privileges.
For Strong Internal Use: This Account Information Form may be a copy. The
original Account Information Form is attached to the Participation Agreement
with the Adviser and retained in the legal department.
26
<PAGE> 27
Re: Fee Letter Relating to the Ohio National Life Insurance
Company Participation Agreement.
Dear John:
Pursuant to the Participation Agreement by and among Strong Capital
Management, Inc. ("Strong"), Ohio National Life Insurance Company (the
"Company"), Strong Variable Insurance Funds, Inc., Strong Opportunity Fund II,
Inc. and Strong Funds Distributors, Inc. ("Distributors") dated as of May 1,
1998 (the "Participation Agreement"), the Company will provide certain
administrative services on behalf of the registered investment companies or
series thereof specified in Exhibit A (each a "Fund" and collectively the
"Funds").
In recognition of the reduction in administrative expenses that derives
from the performance of said administrative services, Strong agrees to pay the
Company the fee specified below for each Fund specified in Exhibit A to this
Agreement.
(a) For average aggregate amounts (as calculated in paragraph
(b), below) invested through variable insurance products issued by the
Company with the Funds, the monthly fee shall equal the percentage
(calculated in paragraph (b), below) of the applicable annual fee for
each Fund specified in Exhibit A.
(b) For purposes of computing the fee contemplated in
paragraph (a) above, Strong shall calculate and pay to the Company an
amount with respect to each Fund equal to the product of: (a) the
product of (i) the number of calendar days in the applicable month
divided by the number of calendar days in that year (365 or 366 as
applicable) and (ii) the applicable percentage specified in Exhibit A,
to this Agreement, multiplied by (b) the average daily market value of
the investments held in such Fund pursuant to the Participation
Agreement computed by totaling the aggregate investment (share net
asset value multiplied by the total number of shares held) on each day
during the calendar month and dividing by the total number of days
during such month.
(c) Strong shall calculate the amount of the payment to be
made pursuant to this Letter Agreement at the end of each calendar
month and will make such payment to the Company within 30 days after
receiving the report referenced in paragraph (e), below. Fees will be
paid, at Strong's election, by wire transfer or by check. All payments
under this Agreement shall be considered final unless disputed by the
Company in writing within 60 days of receipt.
(d) The parties agree that the fees contemplated herein are
solely for shareholder servicing and other administrative services
provided by the Company and do not constitute payment in any manner for
investment advisory, distribution, trustee, or custodial services.
27
<PAGE> 28
(e) The Company agrees to provide Strong by the 15th day of
each month with a report which indicates the number of Owners that hold
through a Contract interests in each Account as of the last day of the
prior month.
(f) If requested in writing by Strong, and at Strong's
expense, the Company shall provide to Strong, by February 14th of each
year, a "Special Report" from a nationally recognized accounting firm
reasonably acceptable to Strong which substantiates for each month of
the prior calendar year: (a) the number of Owners that hold, through an
Account, interests in each Account maintained by the Company on the
last day of each month which held shares for which the fee provided for
in this Letter Agreement was received by the Company, (b) that any fees
billed to Strong for such month were accurately determined in
accordance with this Letter Agreement, and (c) such other information
in connection with this Agreement and the Participation Agreement as
may be reasonably requested by Strong.
(g) The parties to this Agreement agree that Strong may
unilaterally amend Schedule A to this Agreement to add additional
investment companies or series thereof ("New Funds") as Funds subject
to the provisions of this Letter Agreement by sending to the Company a
written notice of the New Funds and indicating therein the fees to be
paid to the Company with respect to the administrative services
provided pursuant to the Participation Agreement in connection with
such New Funds.
(h) This Letter Agreement shall terminate upon termination of
the Participation Agreement. Accordingly, all payments pursuant to this
Letter Agreement shall cease upon termination of the Participation
Agreement.
(i) Capitalized terms not otherwise defined herein shall have
the meaning assigned to them in the Participation Agreement.
If you are in agreement with the foregoing, please sign and date below
where indicated and return one copy of this signed letter agreement to me.
Very truly yours,
--------------------------------------
Donald G. Tyler, Senior Vice President
Strong Intermediary Services
Accepted and agreed to this 26 day of
March, 1998.
OHIO NATIONAL LIFE INSURANCE COMPANY
/s/ JOHN J. PALMER
- ----------------------------------------
Name: John J. Palmer
Title: Senior V.P., Strategic Initiatives
28
<PAGE> 29
EXHIBIT A TO FEE LETTER
The Funds subject to this Agreement and applicable annual fees are as follows:
Fund Annual Fee
- ---- ----------
Strong Opportunity Fund II, Inc. .25%
Strong Variable Insurance Funds, Inc.
Strong Growth Fund II .25%
Strong Schafer Value Fund II .25%
29
<PAGE> 1
Exhibit 13
Annual Report Calculations
Equity
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Fund
Top Top Top Retirement Fund Fund
Year ROR Value Combined Top Plus Explorer Spectrum Advantage Cumulative Annualized
- -------- ====== ========== ======== ======== ======== ======== ========== ========== ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/68 10.000000 9.86% 10.08% 9.65% 9.54% 9.59% 1595.59% 11.07%
12/31/69 1.0090 10.090000
12/31/70 1.0763 10.859867
12/31/71 1.0766 11.691733
12/31/72 1.1340 13.258425
12/31/73 0.8989 11.917998
12/31/74 0.8047 9.590413
12/31/75 1.1985 11.494110
12/31/76 1.1680 13.425121
12/31/77 0.9116 12.238340
12/31/78 1.0726 13.126844
12/31/79 1.1587 15.210074
12/31/80 1.4147 21.517691
12/31/81 0.9707 20.887223
12/31/82 1.2874 26.890211
12/31/83 1.1849 31.862211
12/31/84 0.9912 31.581823
12/31/85 1.2369 39.063557
12/31/86 1.2331 48.169272
12/31/87 1.1082 53.381187 12.38% 12.60% 12.16% 12.04% 12.10% 258.23% 13.61%
12/31/88 1.1503 61.404380
12/31/89 1.2321 75.656336
12/31/90 0.9614 72.736002
12/31/91 1.2018 87.414127
12/31/92 1.0754 94.005152 14.01% 14.24% 13.79% 13.67% 13.73% 103.42% 15.26%
12/31/93 1.1409 107.250478
12/31/94 1.0025 107.518604
12/31/95 1.2720 136.763665
12/31/96 1.1835 161.859797 16.88% 17.11% 16.65% 16.53% 16.59% 18.17% 18.17%
12/31/97 1.1817 191.269722
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
Money Market
- -----------------------------------------------------------------------------------------------------------------------------
Fund
Top Top Top Retirement Fund Fund
Year ROR Value Combined Top Plus Explorer Spectrum Advantage Cumulative Annualized
- --------- ====== ========= ======== ========= ======== ======== ========== ========== ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
7/31/80 10.000000 6.13% 6.34% 5.92% 5.82% 5.87% 241.30% 7.30%
12/31/80 1.0483 10.483000
12/31/81 1.1625 12.186488
12/31/82 1.1227 13.681770
12/31/83 1.0861 14.859770
12/31/84 1.1011 16.362093
12/31/85 1.0775 17.630155
12/31/86 1.0630 18.740855
12/31/87 1.0628 19.917780 4.39% 4.59% 4.18% 4.08% 4.13% 71.30% 5.53%
12/31/88 1.0713 21.337918
12/31/89 1.0889 23.234859
12/31/90 1.0789 25.068089
12/31/91 1.0554 26.456861
12/31/92 1.0317 27.295544 3.44% 3.64% 3.23% 3.13% 3.18% 25.04% 4.57%
12/31/93 1.0274 28.043442
12/31/94 1.0400 29.165179
12/31/95 1.0562 30.804262
12/31/96 1.0517 32.396843 4.22% 4.43% 4.02% 3.92% 3.97% 5.37% 5.37%
12/31/97 1.0537 34.136553
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Bond
- --------------------------------------------------------------------------------------------------------------------------------
Fund
Top Top Top Retirement Fund Fund
Year ROR Value Combined Top Plus Explorer Spectrum Advantage Cumulative Annualized
- -------- ====== ========= ======== ======== ======== ======== ========== ========== ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/02/82 10.000000 7.73% 7.31% 7.20% 7.25% 254.28% 8.70%
12/31/82 1.0060 10.060000
12/31/83 1.0263 10.324578
12/31/84 1.1215 11.579014
12/31/85 1.2153 14.071976
12/31/86 1.1249 15.829566
12/31/87 1.0081 15.957785 7.12% 7.34% 6.91% 6.81% 6.86% 121.97% 8.30%
12/31/88 1.0674 17.033340
12/31/89 1.1071 18.857611
12/31/90 1.0782 20.332276
12/31/91 1.1296 22.967339
12/31/92 1.0754 24.699076 6.31% 6.52% 6.10% 6.00% 6.05% 43.43% 7.48%
12/31/93 1.1069 27.339407
12/31/94 0.9616 26.289574
12/31/95 1.1890 31.258304
12/31/96 1.0371 32.417987 8.09% 8.31% 7.88% 7.77% 7.83% 9.28% 9.28%
12/31/97 1.0928 35.426376
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Omni
- ---------------------------------------------------------------------------------------------------------------------------
Fund
Top Top Top Retirement Fund Fund
Year ROR Value Combined Top Plus Explorer Spectrum Advantage Cumulative Annualized
- -------- ====== ========= ======== ======== ======== ======== ========== ========== ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9/10/84 10.000000 10.85% 11.05% 10.61% 10.50% 10.55% 354.24% 12.05%
12/31/84 1.0374 10.374000
12/31/85 1.1559 11.991307
12/31/86 1.1794 14.142547
12/31/87 0.9832 13.904952 11.34% 11.56% 11.12% 11.01% 11.07% 226.76% 12.57%
12/31/88 1.1503 15.994867
12/31/89 1.1546 18.467673
12/31/90 1.0191 18.820405
12/31/91 1.1815 22.236309
12/31/92 1.0860 24.148632 12.24% 12.46% 12.01% 11.90% 11.96% 88.11% 13.47%
12/31/93 1.1285 27.251731
12/31/94 0.9947 27.107297
12/31/95 1.2275 33.274207
12/31/96 1.1554 38.445018 16.86% 17.09% 16.63% 16.52% 16.57% 18.15% 18.15%
12/31/97 1.1815 45.422789
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
International
- ---------------------------------------------------------------------------------------------------------------------------
Fund
Top Top Top Retirement Fund Fund
Year ROR Value Combined Top Plus Explorer Spectrum Advantage Cumulative Annualized
- -------- ====== ========= ======== ======== ======== ======== ========== ========== ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5/03/93 10.000000 11.80% 12.02% 11.58% 11.47% 11.52% 76.97% 13.03%
12/31/93 1.2496 12.496000
12/31/94 1.0807 13.504427
12/31/95 1.1210 15.138463
12/31/96 1.1448 17.330512 1.00% 1.20% 0.80% 0.70% 0.75% 2.11% 2.11%
12/31/97 1.0211 17.696186
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Small Cap
- ---------------------------------------------------------------------------------------------------------------------------
Fund
Top Top Top Retirement Fund Fund
Year ROR Value Combined Top Plus Explorer Spectrum Advantage Cumulative Annualized
- -------- ====== ========= ======== ======== ======== ======== ========== ========== ==========
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
4/30/94 10.000000 20.44% 20.68% 20.20% 20.08% 20.14% 105.92% 21.76%
12/31/94 1.2012 12.012000
12/31/95 1.3115 15.753738
12/31/96 1.1606 18.283788 7.29% 7.50% 7.08% 6.97% 7.02% 8.47% 8.47%
12/31/97 1.0847 19.832425
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
Capital Appreciation
- -------------------------------------------------------------------------------------------------------------------------
Fund
Top Top Top Retirement Fund Fund
Year ROR Value Combined Top Plus Explorer Spectrum Advantage Cumulative Annualized
======== ===== ========= ======== ======== ======== ======== ========== ========== ==========
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
4/30/94 10.000000 14.47% 14.70% 14.24% 14.13% 14.19% 70.89% 15.73%
2/31/94 1.0354 10.354000
2/31/95 1.2090 12.517986
2/31/96 1.1413 14.286777 13.94% 14.16% 13.71% 13.60% 13.65% 15.19% 15.19%
2/31/97 1.1519 16.456939
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Aggressive Growth
- -------------------------------------------------------------------------------------------------------------------------
Fund
Top Top Top Retirement Fund Fund
Year ROR Value Combined Top Plus Explorer Spectrum Advantage Cumulative Annualized
======== ====== ========= ======== ======== ======== ========= =========== =========== ==========
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3/31/95 10.000000 12.92% 13.15% 13.12% 13.00% 12.64% 43.94% 14.17%
12/31/95 1.2561 12.561000
12/31/96 0.9935 12.479354 11.30% 11.52% 11.08% 10.97% 11.03% 12.53% 12.53%
12/31/97 1.1253 14.043016
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Global Contrarian
- -------------------------------------------------------------------------------------------------------------------------
Fund
Top Top Top Retirement Fund Fund
Year ROR Value Combined Top Plus Explorer Spectrum Advantage Cumulative Annualized
======== ====== ========= ======== ======== ======== ========= =========== =========== ==========
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3/31/95 10.000000 10.71% 10.93% 10.49% 10.38% 10.43% 36.30% 11.93%
12/31/95 1.0774 10.774000
12/31/96 1.1052 11.907425 10.45% 10.67% 10.23% 10.12% 10.18% 11.67% 11.67%
12/31/97 1.1167 13.297021
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Growth & Income
- -------------------------------------------------------------------------------------------------------------------------
Fund
Top Top Top Retirement Fund Fund
Year ROR Value Combined Top Plus Explorer Spectrum Advantage Cumulative Annualized
======== ====== ========= ======== ======== ======== ========= =========== =========== ==========
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1/03/97 10.000000 35.36% 35.63% 34.82% 34.69% 34.76% 36.58%
12/31/97 1.3658 13.658000
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000073981
<NAME> OHIO NATIONAL VARIABLE ACCOUNT A
<SERIES>
<NUMBER> 001
<NAME> EQUITY
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 76,961,136
<INVESTMENTS-AT-VALUE> 112,226,765
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 112,226,765
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 512,577
<TOTAL-LIABILITIES> 512,577
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 2,779,265
<SHARES-COMMON-PRIOR> 2,278,952
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 111,714,188
<DIVIDEND-INCOME> 1,848,791
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (1,119,990)
<NET-INVESTMENT-INCOME> 728,801
<REALIZED-GAINS-CURRENT> 1,814,454
<APPREC-INCREASE-CURRENT> 7,253,475
<NET-CHANGE-FROM-OPS> 14,952,005
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 16,970,894
<NUMBER-OF-SHARES-REDEEMED> 9,884,065
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 22,767,634
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<GROSS-EXPENSE> 0
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<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
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<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000073981
<NAME> OHIO NATIONAL VARIABLE ACCOUNT A
<SERIES>
<NUMBER> 002
<NAME> MONEY MARKET
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 7,042,375
<INVESTMENTS-AT-VALUE> 7,042,375
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<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 7,042,375
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 111,000
<TOTAL-LIABILITIES> 111,000
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 504,796
<SHARES-COMMON-PRIOR> 364,271
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 6,931,375
<DIVIDEND-INCOME> 330,310
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (61,793)
<NET-INVESTMENT-INCOME> 268,517
<REALIZED-GAINS-CURRENT> (8,000)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 260,517
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9,889,358
<NUMBER-OF-SHARES-REDEEMED> 8,902,282
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,247,593
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000073981
<NAME> OHIO NATIONAL VARIABLE ACCOUNT A
<SERIES>
<NUMBER> 003
<NAME> BOND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 5,783,591
<INVESTMENTS-AT-VALUE> 5,916,477
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,916,477
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9,438
<TOTAL-LIABILITIES> 9,438
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 303,399
<SHARES-COMMON-PRIOR> 248,349
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 5,907,039
<DIVIDEND-INCOME> 430,461
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (54,587)
<NET-INVESTMENT-INCOME> 375,874
<REALIZED-GAINS-CURRENT> 18,355
<APPREC-INCREASE-CURRENT> 6,598
<NET-CHANGE-FROM-OPS> 400,827
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,958,399
<NUMBER-OF-SHARES-REDEEMED> 1,625,258
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 733,968
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000073981
<NAME> OHIO NATIONAL VARIABLE ACCOUNT A
<SERIES>
<NUMBER> 004
<NAME> OMNI
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 59,035,568
<INVESTMENTS-AT-VALUE> 77,031,024
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<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 77,031,024
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 119,395
<TOTAL-LIABILITIES> 119,395
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 2,636,439
<SHARES-COMMON-PRIOR> 2,029,118
<ACCUMULATED-NII-CURRENT> 0
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<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 77,031,024
<DIVIDEND-INCOME> 2,224,754
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (728,446)
<NET-INVESTMENT-INCOME> 1,496,308
<REALIZED-GAINS-CURRENT> 739,636
<APPREC-INCREASE-CURRENT> 4,439,035
<NET-CHANGE-FROM-OPS> 10,323,521
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 15,044,544
<NUMBER-OF-SHARES-REDEEMED> 6,474,915
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 18,893,150
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
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<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000073981
<NAME> OHIO NATIONAL VARIABLE ACCOUNT A
<SERIES>
<NUMBER> 005
<NAME> INTERNATIONAL
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 59,693,510
<INVESTMENTS-AT-VALUE> 57,020,604
<RECEIVABLES> 0
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<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 57,020,604
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<SHARES-COMMON-STOCK> 3,643,605
<SHARES-COMMON-PRIOR> 2,952,321
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<NET-ASSETS> 57,020,604
<DIVIDEND-INCOME> 3,699,242
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<EXPENSES-NET> (589,401)
<NET-INVESTMENT-INCOME> 3,109,841
<REALIZED-GAINS-CURRENT> 231,748
<APPREC-INCREASE-CURRENT> (8,473,446)
<NET-CHANGE-FROM-OPS> 117,222
<EQUALIZATION> 0
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<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 15,669,976
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<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 9,238,956
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
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<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000073981
<NAME> OHIO NATIONAL VARIABLE ACCOUNT A
<SERIES>
<NUMBER> 006
<NAME> CAPITAL APPRECIATION
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000073981
<NAME> OHIO NATIONAL VARIABLE ACCOUNT A
<SERIES>
<NUMBER> 007
<NAME> SMALL CAP
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000073981
<NAME> OHIO NATIONAL VARIABLE ACCOUNT A
<SERIES>
<NUMBER> 008
<NAME> GLOBAL CONTRARIAN
<S> <C>
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<CIK> 0000073981
<NAME> OHIO NATIONAL VARIABLE ACCOUNT A
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<CIK> 0000073981
<NAME> OHIO NATIONAL VARIABLE ACCOUNT A
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<CIK> 0000073981
<NAME> OHIO NATIONAL VARIABLE ACCOUNT A
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<CIK> 0000073981
<NAME> OHIO NATIONAL VARIABLE ACCOUNT A
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<NAME> S&P 500 INDEX
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<CIK> 0000073981
<NAME> OHIO NATIONAL VARIABLE ACCOUNT A
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<NAME> SOCIAL AWARENESS
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<CIK> 0000073981
<NAME> OHIO NATIONAL VARIABLE ACCOUNT A
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<NAME> STRATEGIC INCOME
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<CIK> 0000073981
<NAME> OHIO NATIONAL VARIABLE ACCOUNT A
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<NAME> STELLAR
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<CIK> 0000073981
<NAME> OHIO NATIONAL VARIABLE ACCOUNT A
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<NAME> RELATIVE VALUE
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<CIK> 0000073981
<NAME> OHIO NATIONAL VARIABLE ACCOUNT A
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<NAME> VIP HIGH INCOME BOND
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