<PAGE> 1
File No. 333-05848
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. / /
Post-Effective Amendment No. 5 /X/
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. / /
(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) 794-6316
(Name and Address of Agent for Service)
Ronald L. Benedict, Corporate Vice President, Counsel and Secretary
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 amendment as is practicable.
It is proposed that this filing will become effective (check appropriate space):
immediately upon filing pursuant to paragraph (b)
---
X on May 1, 1999 pursuant to paragraph (b)(1)(ix)
---
60 days after filing pursuant to paragraph (a)(i)
---
on (date) pursuant to paragraph (a)(i)
---
75 days after filing pursuant to paragraph (a)(ii)
---
on (date) pursuant to paragraph (a)(ii) 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
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 Accumulation Unit Values
5 The Ohio National Companies
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
Montgomery, Ohio 45242
Telephone (800) 366-6654
This prospectus offers variable annuity contracts allowing you to accumulate
values and paying you benefits on a variable and/or fixed basis.
Variable annuities provide contract values and lifetime annuity payments that
vary with the investment results of the Funds you choose. You cannot be sure
that the contract value or annuity payments will equal or exceed your purchase
payments.
The variable annuity contracts are designed for:
- - 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,
- - 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,
- - individual retirement annuities qualifying for tax-deferred treatment under
Section 408 or 408A of the Code,
- - state and municipal deferred compensation plans and
- - non-tax-qualified plans.
The minimum purchase payment is $100. You may make additional payments at any
time. We may limit your total purchase payments to $1,000,000.
You may direct the allocation of your purchase payments to one or more (but not
more than 10 variable) subaccounts of Ohio National Variable Account A ("VAA").
VAA is a separate account of The Ohio National Life Insurance Company. The
assets of VAA are invested in shares of the Funds. The Funds are portfolios of
Ohio National Fund, Inc., the Variable Insurance Products Fund and Lazard
Retirement Series, Inc. See page 2 for the list of available Funds. See also the
accompanying prospectuses of the Funds. The Fund prospectuses might also contain
information about other funds that are not available for these contracts.
You may withdraw all or part of the contract's value before annuity payments
begin. You might incur federal income tax penalties for those early withdrawals.
We may charge you a surrender charge up to 7% of the amount withdrawn. After the
first year, you may withdraw up to 10% of the contract value each year without
this charge. Your exercise of contract rights may be subject to the terms of
your qualified employee trust or annuity plan. This prospectus contains no
information concerning your trust or plan.
You may revoke the contract without penalty, within 20 days of receiving it (or
a longer period if required by state law).
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE. IT SETS FORTH THE INFORMATION ABOUT
VAA AND THE VARIABLE ANNUITY CONTRACTS 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, 1999. WE HAVE
INCORPORATED THE STATEMENT OF ADDITIONAL INFORMATION BY REFERENCE. IT IS
AVAILABLE UPON REQUEST AND WITHOUT CHARGE BY WRITING OR CALLING US AT THE ABOVE
ADDRESS. THE TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL INFORMATION IS ON
THE BACK PAGE OF THIS PROSPECTUS.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
MAY 1, 1999
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<S> <C>
Available Funds............................................. 2
Fee Table................................................... 3
Accumulation Unit Values.................................... 5
Financial Statements...................................... 7
Ohio National............................................... 7
Ohio National Life........................................ 7
Ohio National Variable Account A.......................... 7
The Funds................................................. 8
Mixed and Shared Funding.................................. 8
Voting Rights............................................. 8
Distribution of Variable Annuity Contracts.................. 9
Deductions and Expenses..................................... 9
Surrender Charge.......................................... 9
Contract Administration Charge............................ 10
Deduction for Administrative Expenses..................... 10
Deduction for Risk Undertakings........................... 10
Transfer Fee.............................................. 10
Deduction for State Premium Tax........................... 10
Fund Expenses............................................. 10
Description of Variable Annuity Contracts................... 11
10-Day Free Look.......................................... 11
Accumulation Period....................................... 11
Annuity Period............................................ 15
Other Contract Provisions................................. 17
Contract Owner Inquiries.................................. 17
Performance Data.......................................... 17
Federal Tax Status.......................................... 18
IRA Disclosure Statement.................................... 22
</TABLE>
AVAILABLE FUNDS
<TABLE>
<S> <C>
OHIO NATIONAL FUND, INC. ADVISER/SUBADVISER
Equity Portfolio Ohio National Investments, Inc.
Money Market Portfolio Ohio National Investments, Inc.
Bond Portfolio Ohio National Investments, Inc.
Omni Portfolio (a flexible portfolio Ohio National Investments, Inc.
fund) Federated Global Investment Management
International Portfolio Corp.
International Small Company Portfolio Federated Global Investment Management
Capital Appreciation Portfolio Corp.
Small Cap Portfolio T. Rowe Price Associates, Inc.
Aggressive Growth Portfolio Founders Asset Management LLC
Core Growth Portfolio Strong Capital Management, Inc.
Growth & Income Portfolio Pilgrim Baxter & Associates, Ltd.
S&P 500 Index Portfolio Robertson Stephens Investment Management,
Social Awareness Portfolio L.P.
Ohio National Investments, Inc.
Ohio National Investments, Inc.
VARIABLE INSURANCE PRODUCTS FUND
VIP High Income Portfolio Fidelity Management & Research Company
VIP Equity - Income Portfolio Fidelity Management & Research Company
VIP Growth Portfolio Fidelity Management & Research Company
LAZARD RETIREMENT SERIES, INC.
Emerging Markets Portfolio Lazard Asset Management
</TABLE>
2
<PAGE> 7
FEE TABLE
<TABLE>
<CAPTION>
CONTRACTOWNER TRANSACTION EXPENSES YEARS PAYMENT
---------------------------------- ------------- ----------
<S> <C> <C>
Deferred Sales Load (as a percentage of amount withdrawn;
the percentage varies with number of years from purchase
payments to which values relate) 1st 7%
2nd 7%
3rd 6%
4th 5%
5th 4%
6th 2%
7th 1%
8th and later 0%
Exchange (transfer) Fee $3 (currently no charge for the first
4 transfers per year)
Annual Contract Fee $35
</TABLE>
<TABLE>
<S> <C>
VAA ANNUAL EXPENSES (as a percentage of average
account value)
Mortality and Expense Risk Fees*** 1.05%
Account Fees and Expenses 0.25%
----
Total VAA Annual Expenses 1.30%
</TABLE>
***The Mortality and Expense risk fees may be changed at any time, but may not
be increased to more than 1.55%. We agree that the fees will not be increased on
any contract issued pursuant to this prospectus. See Deduction for Risk
Undertakings.
Neither the table nor the examples reflect any premium taxes that may apply to a
contract. These currently range from 0% to 3.5%. For further details, see
Deduction for State Premium Tax.
FUND ANNUAL EXPENSES (after fee waiver*) (as a percentage of the Fund's average
net assets)
<TABLE>
<CAPTION>
TOTAL FUND
EXPENSES TOTAL TOTAL FUND
WITHOUT WAIVERS EXPENSES
MANAGEMENT OTHER WAIVERS OR AND WITH WAIVERS
FEES EXPENSES REDUCTIONS REDUCTIONS* OR REDUCTIONS
---------- -------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Equity 0.53% 0.11% 0.64% 0.00% 0.64%
Money Market* 0.30% 0.16% 0.46% 0.05% 0.41%
Bond 0.58% 0.14% 0.72% 0.00% 0.72%
Omni 0.54% 0.11% 0.65% 0.00% 0.65%
International* 0.90% 0.27% 1.17% 0.05% 1.12%
International Small Company 1.00% 0.40% 1.40% 0.00% 1.40%
Capital Appreciation 0.80% 0.13% 0.93% 0.00% 0.93%
Small Cap 0.80% 0.11% 0.91% 0.00% 0.91%
Aggressive Growth 0.80% 0.14% 0.94% 0.00% 0.94%
Core Growth 0.95% 0.18% 1.13% 0.00% 1.13%
Growth & Income 0.85% 0.12% 0.97% 0.00% 0.97%
S&P 500 Index 0.40% 0.09% 0.49% 0.00% 0.49%
Social Awareness 0.60% 0.21% 0.81% 0.00% 0.81%
VIP High Income 0.59% 0.11% 0.70% 0.00% 0.70%
VIP Equity-Income 0.50% 0.08% 0.58% 0.00% 0.58%
VIP Growth 0.40% 0.28% 0.68% 0.00% 0.68%
Emerging Markets* 1.00% 14.37% 15.37% 13.77% 1.60%
</TABLE>
3
<PAGE> 8
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 Fund, assuming 5% annual return:
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Equity $ 93 $123 $152 $238
Money Market* 91 117 141 214
Bond 94 126 156 246
Omni 93 124 153 239
International* 97 137 175 286
International Small Company 100 145 189 314
Capital Appreciation 95 132 166 268
Small Cap 95 131 165 266
Aggressive Growth 96 132 167 269
Core Growth 97 137 176 288
Growth & Income 96 133 168 272
S&P 500 Index 91 119 145 222
Social Awareness 94 128 160 255
VIP High Income 93 125 155 244
VIP Equity-Income 92 122 149 232
VIP Growth 93 125 154 242
Emerging Markets* 102 150 198 333
</TABLE>
EXAMPLE -- If you do not surrender your contract at the end of the applicable
time period, you would pay the following aggregate expenses on the same
investment:
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Equity $21 $64 $110 $238
Money Market* 18 57 99 214
Bond 22 67 114 246
Omni 21 65 111 239
International* 26 79 135 287
International Small Company 28 87 148 314
Capital Appreciation 24 73 125 268
Small Cap 24 72 124 266
Aggressive Growth 24 73 126 269
Core Growth 26 79 135 288
Growth & Income 24 74 127 272
S&P 500 Index 19 60 103 222
Social Awareness 23 69 119 255
VIP High Income 21 66 113 244
VIP Equity-Income 20 62 107 232
VIP Growth 21 65 112 242
Emerging Markets* 30 93 158 333
</TABLE>
*For the Money Market and International portfolios the investment adviser is
voluntarily waiving 0.05% of the management fees. For the Emerging Markets
portfolio, the investment adviser is voluntarily reimbursing all expenses in
excess of 1.60%.
4
<PAGE> 9
EXAMPLE -- Without the voluntary fee waivers and reimbursements, if you
surrendered your contract at the end of the applicable time period, you would
pay the following aggregate expense on a $1,000 investment in each Fund,
assuming 5% annual return:
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Money Market $ 91 $118 $143 $219
International 98 138 178 291
Emerging Markets 212 439 622 942
</TABLE>
EXAMPLE -- Without the voluntary fee waivers and reimbursements, if you do not
surrender your contract at the end of the applicable time period, you would pay
the following aggregate expenses on the same investment.
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Money Market $ 19 $ 59 $101 $219
International 26 80 137 291
Emerging Markets 149 401 602 942
</TABLE>
The purpose of the above table is to help you to understand the costs and
expenses that a you 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. The
above table and examples reflect only the charges for contracts currently
offered by this prospectus and not other contracts that we may offer.
The net annualized yield for the Money Market fund in these contracts was 3.89%
for the seven days ended December 31, 1998.
ACCUMULATION UNIT VALUES
This series of variable annuity contracts began January 3, 1997.
EQUITY
<TABLE>
<CAPTION>
YEAR ENDED UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS
DECEMBER 31 BEGINNING OF YEAR END OF YEAR AT END OF YEAR
- ----------- ----------------- ------------- ---------------
<S> <C> <C> <C>
1997 $ 10.000000 $ 11.847503 210,014
1998 11.847503 12.364737 417,378
</TABLE>
MONEY MARKET
<TABLE>
<CAPTION>
YEAR ENDED UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS
DECEMBER 31 BEGINNING OF YEAR END OF YEAR AT END OF YEAR
- ----------- ----------------- ------------- ---------------
<S> <C> <C> <C>
1997 $ 10.000000 $ 10.300720 102,555
1998 10.300720 10.716203 458,755
</TABLE>
BOND
<TABLE>
<CAPTION>
YEAR ENDED UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS
DECEMBER 31 BEGINNING OF YEAR END OF YEAR AT END OF YEAR
- ----------- ----------------- ------------- ---------------
<S> <C> <C> <C>
1997 $ 10.000000 $ 10.837736 47,241
1998 10.837736 11.256655 155,252
</TABLE>
OMNI
<TABLE>
<CAPTION>
YEAR ENDED UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS
DECEMBER 31 BEGINNING OF YEAR END OF YEAR AT END OF YEAR
- ----------- ----------------- ------------- ---------------
<S> <C> <C> <C>
1997 $ 10.000000 $ 11.726674 276,040
1998 11.726674 12.100620 670,925
</TABLE>
5
<PAGE> 10
INTERNATIONAL
<TABLE>
<CAPTION>
YEAR ENDED UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS
DECEMBER 31 BEGINNING OF YEAR END OF YEAR AT END OF YEAR
- ----------- ----------------- ------------- ---------------
<S> <C> <C> <C>
1997 $ 10.000000 $ 9.868874 274,724
1998 9.868874 10.120487 318,013
</TABLE>
INTERNATIONAL SMALL COMPANY
<TABLE>
<CAPTION>
YEAR ENDED UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS
DECEMBER 31 BEGINNING OF YEAR END OF YEAR AT END OF YEAR
- ----------- ----------------- ------------- ---------------
<S> <C> <C> <C>
1997 $ 10.000000 $ 10.754700 115,149
1998 10.754700 10.991242 150,832
</TABLE>
CAPITAL APPRECIATION
<TABLE>
<CAPTION>
YEAR ENDED UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS
DECEMBER 31 BEGINNING OF YEAR END OF YEAR AT END OF YEAR
- ----------- ----------------- ------------- ---------------
<S> <C> <C> <C>
1997 $ 10.000000 $ 11.402771 136,072
1998 11.402771 11.921997 392,537
</TABLE>
SMALL CAP
<TABLE>
<CAPTION>
YEAR ENDED UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS
DECEMBER 31 BEGINNING OF YEAR END OF YEAR AT END OF YEAR
- ----------- ----------------- ------------- ---------------
<S> <C> <C> <C>
1997 $ 10.000000 $ 12.723535 154,909
1998 12.723535 13.888339 322,152
</TABLE>
AGGRESSIVE GROWTH
<TABLE>
<CAPTION>
YEAR ENDED UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS
DECEMBER 31 BEGINNING OF YEAR END OF YEAR AT END OF YEAR
- ----------- ----------------- ------------- ---------------
<S> <C> <C> <C>
1997 $ 10.000000 $ 12.392742 38,689
1998 12.392742 13.192890 84,441
</TABLE>
CORE GROWTH
<TABLE>
<CAPTION>
YEAR ENDED UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS
DECEMBER 31 BEGINNING OF YEAR END OF YEAR AT END OF YEAR
- ----------- ----------------- ------------- ---------------
<S> <C> <C> <C>
1997 $ 10.000000 $ 11.353867 70,774
1998 11.353867 12.196537 79,478
</TABLE>
GROWTH & INCOME
<TABLE>
<CAPTION>
YEAR ENDED UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS
DECEMBER 31 BEGINNING OF YEAR END OF YEAR AT END OF YEAR
- ----------- ----------------- ------------- ---------------
<S> <C> <C> <C>
1997 $ 10.000000 $ 13.683786 176,611
1998 13.683786 14.465502 520,160
</TABLE>
S&P 500 INDEX
<TABLE>
<CAPTION>
YEAR ENDED UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS
DECEMBER 31 BEGINNING OF YEAR END OF YEAR AT END OF YEAR
- ----------- ----------------- ------------- ---------------
<S> <C> <C> <C>
1997 $ 10.000000 $ 12.707473 164,052
1998 12.707473 16.308232 756,235
</TABLE>
SOCIAL AWARENESS
<TABLE>
<CAPTION>
YEAR ENDED UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS
DECEMBER 31 BEGINNING OF YEAR END OF YEAR AT END OF YEAR
- ----------- ----------------- ------------- ---------------
<S> <C> <C> <C>
1997 $ 10.000000 $ 13.239397 22,155
1998 13.239397 10.140901 101,724
</TABLE>
6
<PAGE> 11
EMERGING MARKETS
<TABLE>
<CAPTION>
YEAR ENDED UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS
DECEMBER 31 BEGINNING OF YEAR END OF YEAR AT END OF YEAR
- ----------- ----------------- ------------- ---------------
<S> <C> <C> <C>
1997 $ 10.000000 $ 9.174160 56,016
1998 9.174160 5.657457 72,272
</TABLE>
VIP HIGH INCOME
<TABLE>
<CAPTION>
YEAR ENDED UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS
DECEMBER 31 BEGINNING OF YEAR END OF YEAR AT END OF YEAR
- ----------- ----------------- ------------- ---------------
<S> <C> <C> <C>
1997 $ 10.000000 $ 11.694830 118,713
1998 11.694830 11.045007 280,388
</TABLE>
VIP EQUITY-INCOME
<TABLE>
<CAPTION>
YEAR ENDED UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS
DECEMBER 31 BEGINNING OF YEAR END OF YEAR AT END OF YEAR
- ----------- ----------------- ------------- ---------------
<S> <C> <C> <C>
1997 $ 10.000000 $ 12.504442 133,739
1998 12.504442 13.779285 398,393
</TABLE>
VIP GROWTH
<TABLE>
<CAPTION>
YEAR ENDED UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS
DECEMBER 31 BEGINNING OF YEAR END OF YEAR AT END OF YEAR
- ----------- ----------------- ------------- ---------------
<S> <C> <C> <C>
1997 $ 10.000000 $ 12.484707 81,290
1998 12.484707 17.191614 263,103
</TABLE>
FINANCIAL STATEMENTS
The complete financial statements of VAA, and of Ohio National Life, including
the Independent Auditors' Reports for them, are included in the Statement of
Additional Information for VAA.
OHIO NATIONAL
OHIO NATIONAL LIFE
Ohio National Life was organized under the laws of Ohio on September 9, 1909 as
a stock life insurance company. We are now ultimately owned by a mutual holding
company (Ohio National Mutual Holdings, Inc.) with the majority ownership being
by our policyholders. We write life, accident and health insurance and annuities
in 47 states, the District of Columbia and Puerto Rico. Currently we have assets
in excess of $7 billion and equity in excess of $710 million. Our home office is
located at One Financial Way, Montgomery, Ohio 45242.
OHIO NATIONAL VARIABLE ACCOUNT A
We established VAA on August 1, 1969 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 credited to or charged against VAA without
regard to our other income, gains or losses. The assets maintained in VAA will
not be charged with any liabilities arising out of our other business.
Nevertheless, all obligations arising under the contracts, including the
commitment to make annuity payments, are our general corporate obligations.
Accordingly, all of our assets are available to meet our obligations under the
contracts. VAA is registered as a unit investment trust under the Investment
Company Act of 1940.
The assets of each subaccount of VAA are invested at net asset value in Fund
shares.
7
<PAGE> 12
THE FUNDS
The Funds are mutual funds registered under the Investment Company Act of 1940.
The value of Fund investments fluctuates daily and is subject to the risk that
Fund management may not anticipate or make changes necessary in the investments
to meet changes in economic conditions.
The Funds receive investment advice, for a fee, from their investment adviser.
Ohio National Investments, Inc. pays the following subadvisers to manage certain
Funds:
- - Federated Global Investment Management Corp. (sub-adviser to the International
and International Small
Company portfolios)
- - T. Rowe Price Associates, Inc. (sub-adviser to the Capital Appreciation
portfolio)
- - Founders Asset Management LLC (sub-adviser to the Small Cap portfolio)
- - Strong Capital Management, Inc. (sub-adviser to the Aggressive Growth
portfolio)
- - Pilgrim Baxter & Associates, Ltd. (sub-adviser to the Core Growth portfolio)
- - Robertson Stephens Investment Management, L.P. (sub-adviser to the Growth &
Income portfolio)
Affiliates of the Emerging Markets portfolio compensate us based upon a
percentage of their Fund assets allocated to VAA. This is intended to compensate
us for administrative and other services we provide to that Fund and its
affiliates.
For additional information concerning the Funds, including their investment
objectives, see the Fund prospectuses. Read them carefully before investing. The
Fund prospectuses may contain information about other funds that are not
available for these contracts.
The investment policies, objectives and/or names of some of the Funds may be
similar to those of other investment companies managed by the same investment
adviser or subadviser. However, similar funds often do not have comparable
investment performance. The investment results of the Funds may be higher or
lower than those of the other funds.
MIXED AND SHARED FUNDING
In addition to being offered to VAA, Fund shares are offered to our other
separate accounts for variable annuity contracts and a separate account of Ohio
National Life Assurance Corporation for variable life insurance contracts and
qualified plans. Fund shares also may be offered to other insurance company
separate accounts. It is conceivable that in the future it may become
disadvantageous for one or more of variable life and variable annuity separate
accounts and qualified plans to invest in the Funds. Although neither we nor the
Funds currently foresee any such disadvantage, the Board of Directors of the
Funds will monitor events to identify any material conflict among variable life
and variable annuity contract owners and qualified plan participants and to
determine if any action should be taken. That could possibly include the
withdrawal of VAA's participation in a Fund. Material conflicts could result
from such things as:
- - changes in state insurance law;
- - changes in federal income tax law;
- - changes in the investment management of any Fund; or
- - differences in voting instructions given by different types of owners.
VOTING RIGHTS
We will vote Fund shares held in VAA at Fund shareholders meetings in accordance
with voting instructions received from contract owners. We will determine the
number of Fund shares for which you are entitled to give instructions as
described below. This determination will be within 90 days before the
shareholders meeting. Fund proxy material
8
<PAGE> 13
and forms for giving voting instructions will be distributed to each owner. We
will vote Fund shares held in VAA, for which no timely instructions are
received, in proportion to the instructions that we do receive for VAA.
Until annuity payments begin, the number of Fund shares for which you may
instruct us is determined by dividing your contract value in each Fund by the
net asset value of a share of that Fund as of the same date. After annuity
payments begin, the number of Fund shares for which you may instruct us is
determined by dividing the actuarial liability for your variable annuity 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.
DISTRIBUTION OF VARIABLE ANNUITY CONTRACTS
The variable annuity contracts are sold by our insurance agents who are also
registered representatives (a) of The O.N. Equity Sales Company ("ONESCO"), a
wholly-owned subsidiary of ours, or (b) of other broker-dealers that have
entered into distribution agreements with Ohio National Equities, Inc. ("ONEQ"),
another wholly-owned subsidiary of ours. ONEQ is the principal underwriter of
the contracts. ONESCO, ONEQ and the other broker dealers are registered under
the Securities Exchange Act of 1934, and are members of the National Association
of Securities Dealers, Inc. We pay ONEQ 6.45% of purchase payments. ONEQ then
pays part of that amount to ONESCO and the other broker dealers. ONESCO and the
other broker-dealers pay their registered representatives from their own funds.
Purchase payments on which nothing is paid to registered representatives may not
be included in amounts on which we pay sales compensation to ONEQ. If our
surrender charge is not sufficient to recover the fee paid to ONEQ, any
deficiency will be made up from our general assets. These include, among other
things, any profit from the mortality and expense risk charges. The address of
ONESCO and ONEQ is One Financial Way, Montgomery, Ohio 45242.
DEDUCTIONS AND EXPENSES
SURRENDER CHARGE
There is no deduction from purchase payments to pay sales expense. We may assess
a surrender charge if you surrender the contract or withdraw part of its value.
The purpose of this charge is to defray expenses relating to the sale of the
contract, including compensation to sales personnel, cost of sales literature
and prospectuses, and other expenses related to sales activity. This surrender
charge is a percent of the amount withdrawn. The percent varies with the
contract year as follows:
<TABLE>
<CAPTION>
YEARS PAYMENT
----- -------
<S> <C>
1st 7%
2nd 7%
3rd 6%
4th 5%
5th 4%
6th 2%
7th 1%
8th and later 0%
</TABLE>
On or after the first contract anniversary, you may make a partial withdrawal of
not more than 10% of the contract value (as of the last day of the prior
contract year) once each contract year without the surrender charge. The
surrender charge will not be imposed when the values of one or more contracts
owned by the trustee of a retirement plan qualifying under Section 401, 403(b)
or 457 of the Code are transferred to one of our group annuity contracts. If you
use values of at least $250,000 from an Ohio National Life fixed annuity to
provide the initial purchase payment for a contract offered by this prospectus,
this contract will be treated (for purposes of determining the surrender charge)
as if it were issued at the same time as the fixed annuity and as if the
purchase payments made for the fixed annuity had been made for this contract.
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<PAGE> 14
CONTRACT ADMINISTRATION CHARGE
Each year on the contract anniversary (or when you surrender the contract), we
will deduct a contract administration charge of $35 from the contract value.
This helps to repay us for maintaining the contract. We guarantee not to
increase the contract administration charge. There is no contract administration
charge if your contract value is at least $50,000. The charge is not made after
annuity payments begin.
DEDUCTION FOR ADMINISTRATIVE EXPENSES
At the end of each valuation period we deduct an amount equal to 0.25% on an
annual basis of the contract value. This deduction reimburses us for expenses
not covered by the contract administration charge. Examples of these expenses
are accounting, auditing, legal, contract owner services, reports to regulatory
authorities and contract owners, contract issue, etc.
DEDUCTION FOR RISK UNDERTAKINGS
We guarantee that until annuity payments begin, the contract's value will not be
affected by any excess of sales and administrative expenses over the deductions
for them. We also guarantee to pay a death benefit in the event of the
annuitant's death before annuity payments begin. After annuity payments begin,
we guarantee that variable annuity payments will not be affected by adverse
mortality experience or expenses.
For assuming these risks, when we determine the accumulation unit values and the
annuity unit values for each subaccount, we make a deduction from the applicable
investment results equal to 1.05% of the contract value on an annual basis. We
may decrease that deduction at any time and we may increase it not more often
than annually to not more than 1.55% on an annual basis. However, we agree that
the deduction for these risk undertakings for contracts purchased on and after
November 1, 1997 shall not be increased to more than the rate in effect at the
time the contract is issued. We may discontinue this limitation on our right to
increase the deduction, but only as to any contracts purchased after notice of
the discontinuance. The risk charge is an indivisible whole of the amount
currently being deducted. However, we believe that a reasonable allocation would
be 0.55% for mortality risk, and 0.50% for expense risk. We hope to realize a
profit from this charge. However, there will be a loss if the deduction fails to
cover the actual risks involved.
TRANSFER FEE
We may charge a transfer fee of $3 (which may be increased to $15) for each
transfer from one subaccount to another. The fee is charged against the
subaccount from which the transfer is made. Currently, we do not charge for your
first four transfers each year.
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 1.0% in
Puerto Rico, West Virginia and Wyoming, 1.25% in South Dakota, 2.0% in Kansas,
Kentucky and Maine, 2.25% the District of Columbia, 2.35% in California and 3.0%
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 Fund prospectus.
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<PAGE> 15
DESCRIPTION OF VARIABLE ANNUITY CONTRACTS
FREE LOOK
You may revoke the contract at any time until the end of 20 days after you
receive the contract (or such longer period as may be required by your state
law) and get a refund of the entire purchase price. To revoke you must return
the contract to us within the free look period. In those states where required
by state law, the value of the contract as of the date of cancellation will be
returned in lieu of the entire purchase price in case of revocation during the
free look period.
ACCUMULATION PERIOD
PURCHASE PAYMENTS
Your purchase payments must be at least $100. You may make payments at any time.
We may limit your total purchase payments to $1,000,000.
WHEN WE MAY TERMINATE YOUR CONTRACT
We may terminate a contract on any anniversary when its value is less than the
lesser of (a) $1,000 or (b) $250 times the number of years the contract has been
in force. This could have adverse tax consequences to you. We will not terminate
an individual retirement annuity (IRA) if you made a purchase payment during the
preceding two years. We will not terminate an annuity funding a Section 403(b)
salary reduction agreement.
ACCUMULATION UNITS
Until the annuity payout date, the contract value is measured by accumulation
units. These units are credited to your contract when you make each purchase
payment. (See Crediting Accumulation Units, below). The number of units remains
constant between purchase payments, but their dollar value varies depending upon
the investment results of each Fund to which payments are allocated.
CREDITING ACCUMULATION UNITS
Your representative will send application forms or orders, together with the
first purchase payment, to our home office for acceptance. Upon acceptance, we
issue a contract and we credit the first purchase payment to the contract in the
form of accumulation units. If all information necessary for issuing a contract
and processing the purchase payment is complete, your first purchase payment
will be credited within two business days after receipt. If we do not receive
everything within five business days, we will return the purchase payment to you
immediately unless you specifically consent to having us retain the purchase
payment until the necessary information is completed. After that, we will credit
the purchase payment within two business days. You must send any additional
purchase payments directly to our home office. They will then be applied to
provide that number of accumulation units (for each subaccount) determined by
dividing the amount of the purchase payment by the unit value next computed
after we receive the payment at our home office.
ALLOCATION OF PURCHASE PAYMENTS
You may allocate your purchase payments among up to 10 variable subaccounts of
VAA or VAB and the Guaranteed Account. The amount allocated to any Fund or the
Guaranteed Account must equal a whole percent. You may change your allocation of
future purchase payments at any time by sending written notice to our home
office.
ACCUMULATION UNIT VALUE AND CONTRACT VALUE
We set the accumulation unit value of each subaccount of VAA at $10 when we
allocated the first payments for these contracts. We determine the unit value
for any later valuation period by multiplying the unit value for the immediately
preceding valuation period by the net investment factor (described below) for
such later valuation
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<PAGE> 16
period. We determine a contract's value by multiplying the total number of units
(for each subaccount) credited to the contract by the unit value (for such
subaccount) for the current valuation period.
NET INVESTMENT FACTOR
The net investment factor measures the investment results of each subaccount.
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 the corresponding Fund share at 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
(3) a per share charge or credit for any taxes paid or reserved for the
maintenance or operation of that subaccount, (No federal income taxes
apply under present law.)
(b) is the net asset value of the corresponding Fund share at the end of the
preceding valuation period; and
(c) is the deduction for administrative and sales expenses and risk
undertakings.
SURRENDER AND PARTIAL WITHDRAWAL
Before annuity payments begin (and also after that in the case of annuity Option
1(e) described below), you may surrender (totally withdraw the value of) your
contract or you may elect a partial (at least $100) withdrawal. The surrender
charge may apply to these transactions. That charge is a percent of the total
amount withdrawn. For example, if a partial withdrawal of $1,000 is requested,
we would pay you $1,000, but the total amount deducted from the accumulation
value would be $1,075.30 (i.e., $1,075.30 x 7% = $75.30). Unless, you specify
otherwise, the withdrawal will be made pro-rata from your values in each Fund.
The amount you may withdraw is the contract value less any charge. In the case
of a complete surrender, we subtract the contract administration charge. We will
pay you within seven days after we receive your request. However, we may defer
payment as described below. Surrenders and partial withdrawals are limited or
not permitted in connection with certain tax-qualified retirement plans. For tax
consequences of a surrender or withdrawal, see Federal Tax Status.
If you request a surrender or partial withdrawal which includes contract values
derived from purchase payments that have not yet cleared the banking system, we
may delay mailing that portion which relates to such payments until the check
for the purchase payment has cleared. We require 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:
- - for any period during which the New York Stock Exchange is closed (other than
customary weekend and holiday closings) or during which the Securities and
Exchange Commission has restricted trading on the Exchange;
- - 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 a Fund's net assets; or
- - such other periods as the Commission may order to protect security holders.
TRANSFERS AMONG SUBACCOUNTS
You may transfer contract values from one Fund to another. You may make
transfers at any time before annuity payments begin. The amount of any transfer
must be at least $300 (or the entire contract value in a Fund, if less).
We may limit the number, frequency, method or amount of transfers. We may limit
transfers from any Fund on any one day to 1% of the previous day's total net
assets of that Fund if we or the Fund, in our discretion, believe that the Fund
might otherwise be damaged. In this case, some requested transfers will not
occur. In determining which requests to honor, scheduled transfers (under a DCA
program) will be made first, followed by mailed written requests
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<PAGE> 17
in the order postmarked and, lastly, telephone and facsimile requests in the
order received. We will notify you if your requested transfer is not made.
Current SEC rules preclude us from processing at a later date those requests
that were not made. Accordingly, you would need to submit a new transfer request
in order to make a transfer that was not made because of these limitations.
Certain third parties may offer you asset allocation or timing services for your
contract. We may choose to honor transfer requests from these third parties if
you give us a written power of attorney to do so. Fees you pay for such asset
allocation or timing services are in addition to any contract charges. We do not
endorse, approve or recommend these services.
After annuity payments begin, you may make transfers among Funds only once each
calendar quarter. The transfer fee no longer applies then. Not more than 20% of
a contract's Guaranteed Account value (or $1,000, if greater) as of the
beginning of a contract year may be transferred to variable Funds during that
contract year.
SCHEDULED TRANSFERS (DOLLAR COST AVERAGING)
We administer a scheduled transfer ("DCA") program enabling you to preauthorize
automatic monthly or quarterly transfers of a specified dollar amount of at
least $300 each time. At least 12 DCA transfers must be scheduled. The transfers
may be from any variable Funds to any other Funds or to the Guaranteed Account.
Transfers may be made from the Guaranteed Account to any other Funds 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 Funds, the DCA
program may not exceed 5 years. There is no transfer fee for DCA transfers. DCA
transfers do not count against your four free transfers per year. We may
discontinue the DCA program at any time. You may also discontinue further DCA
transfers by giving us 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 Fund, 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 variable Fund, DCA has the effect of
reducing the average price of the shares being redeemed. DCA might also be used
to systematically transfer contract values from variable Funds to the Guaranteed
Account in anticipation of retirement, reducing the risk of making a single
transfer during a low market.
TELEACCESS
If you give us a pre-authorization form, your contract and unit values and
interest rates can be checked and transfers may be made by telephoning us
between 7:00 a.m. and 7:00 p.m. (Eastern time) on days we are open for business,
at 1-800-366-6654, #8. You may only make one telephone transfer per day. We will
honor pre-authorized telephone transfer instructions from anyone who provides
the personal identifying information requested via TeleAccess. We will not honor
telephone transfer requests after we receive notice of your death. For added
security, we send the contract owner a written confirmation of all telephone
transfers on the next business day. However, if we cannot complete a transfer as
requested, our customer service representative will contact the contract owner
in writing sent within 48 hours of the TeleAccess request. YOU MAY THINK THAT
YOU HAVE LIMITED THIS ACCESS TO YOURSELF, OR TO YOURSELF AND YOUR
REPRESENTATIVE. HOWEVER, ANYONE GIVING US THE NECESSARY IDENTIFYING INFORMATION
CAN USE TELEACCESS ONCE YOU AUTHORIZE ITS USE.
NURSING FACILITY CONFINEMENT
If the annuitant is, or has been, confined to a state licensed or legally
operated in-patient nursing home facility for at least 60 consecutive days, we
will not assess a surrender charge on partial withdrawals of up to $5,000 per
month. You may not withdraw more than one half of the contract value as of the
beginning of the confinement. This waiver of the surrender charge may not be
available in all states. It only applies when:
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<PAGE> 18
- - the confinement begins after the first contract anniversary and before annuity
payments begin;
- - the contract was issued before the annuitant's 80th birthday, and
- - we receive the request for withdrawal, together with proof of the confinement,
at our home office while the annuitant is confined or within 90 days after
discharge from the facility.
DEATH BENEFIT
If the annuitant (and any contingent annuitant) dies before annuity payments
begin, the contract pays a death benefit to a designated beneficiary. (This
death benefit is not available on any contract purchased through a bank in
Puerto Rico.) The amount of the death benefit will be determined as of the end
of the valuation period in which we receive written notice of death. The amount
of death benefit is the contract value or, if greater, the total purchase
payments made less any partial withdrawals.
GUARANTEED ACCOUNT
The Guaranteed Account guarantees a fixed return for a specified period of time
and guarantees the principal against loss. The Guaranteed Account is not
registered as an investment company. Interests in it are not subject to the
provisions or restrictions of federal securities laws. The staff of the
Securities and Exchange Commission has not reviewed disclosures regarding it.
The Guaranteed Account consists of all of our general assets other than those
allocated to a separate account. You may allocate purchase payments and contract
values between the Guaranteed Account and the Funds.
We will invest our general assets in our discretion as allowed by Ohio law. We
allocate the investment income from our general assets to those contracts having
guaranteed values.
The amount of investment income allocated to the contracts varies from year to
year in our sole discretion. However, we guarantee that we will credit interest
at a rate of not less than 3% per year, compounded annually, to contract values
allocated to the Guaranteed Account. We may credit interest at a rate in excess
of 3%, but any such excess interest credit will be in our sole discretion.
We guarantee that, before annuity payments begin, the guaranteed value of a
contract will never be less than:
- - the amount of purchase payments allocated to, and transfers into, the
Guaranteed Account, plus
- - interest credited at the rate of 3% per year compounded annually, plus
- - any additional excess interest we may credit to guaranteed values, minus
- - any partial withdrawals, loans and transfers from the guaranteed values, minus
- - any surrender charge on partial withdrawals, loan interest, state premium
taxes, transfer fees, and the portion of the $35 annual contract
administration charge allocable to the Guaranteed Account.
No deductions are made from the Guaranteed Account for administrative expenses
or risk undertakings.
Other than pursuant to a DCA (scheduled transfer) program, we may restrict
transfers of your Guaranteed Account value during a contract year to not more
than 20% of that value as of the beginning of a contract year (or $1,000, if
greater). As provided by state law, we may defer the payment of amounts to be
withdrawn from the Guaranteed Account for up to six months from the date we
receive your written request for withdrawal.
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<PAGE> 19
OHIO NATIONAL LIFE EMPLOYEE DISCOUNT
We and our affiliated companies offer a credit on the purchase of contracts by
any of our employees, directors or retirees, or their spouse or the surviving
spouse of a deceased retiree, 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 counts 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. We credit the
Guaranteed Account in these amounts at the time the eligible person makes each
payment.
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, a participant in the Program may not make a
surrender or partial withdrawal until the first of these events occurs.
ANNUITY PERIOD
ANNUITY PAYOUT DATE
Annuity payments begin on the annuity payout date. You may select this date when
the contract is issued. It must be at least 30 days after the contract date. You
may change it from time to time so long as it 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. This restriction may be modified by applicable state law or we
may agree to waive it.
The contracts include our guarantee that (except for option 1(e), below) we will
pay annuity payments for the lifetime of the annuitant (and any joint annuitant)
in accordance with the contract annuity rates, no matter how long you live.
Other than in connection with annuity Option 1(e) described below, once annuity
payments begin, you may not surrender the contract for cash except that, upon
the death of the annuitant, the beneficiary may surrender the contract for the
commuted value of any remaining period-certain payments. You may make surrenders
and partial withdrawals from Option 1(e) at any time.
ANNUITY OPTIONS
You may elect one or more of the following annuity options. You may change the
election anytime before the annuity payout date.
Option 1(a): Life Annuity with installment payments for the lifetime of the
annuitant (the contract has no more value after annuitant's
death).
Option 1(b): Life Annuity with installment payments guaranteed for five years
and then continuing during the remaining lifetime of the
annuitant.
Option 1(c): Life Annuity with installment payments guaranteed for ten years
and then continuing during the remaining lifetime of the
annuitant.
Option 1(d): Installment Refund Life Annuity with payments guaranteed for a
period certain and then continuing 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 annuity payments only. (Although the deduction for risk
undertakings
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<PAGE> 20
is taken from annuity unit values, we have 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 the annuitant and then continuing during the
lifetime of a contingent annuitant (the contract has no more
value after the second annuitant's death).
Option 2(b): Joint & Survivor Life Annuity with installment payments guaranteed
for ten years and then continuing during the remaining lifetime of
the annuitant or a contingent annuitant.
We may agree to other settlement options.
Unless you direct otherwise, we will apply the contract value as of the annuity
payout date to provide annuity payments pro-rata from each Fund in the same
proportion as the contract values immediately before the annuity payout date.
If no election is in effect on the annuity payout date, we will apply the
contract value under Option 1(c) with the beneficiary as payee for any remaining
period-certain installments payable after the death of the annuitant. The
Pension Reform Act of 1974 might require certain contracts to provide a Joint
and Survivor Annuity. If the contingent annuitant is not related to the
annuitant, Options 2(a) and 2(b) are available only if we agree.
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). This could result in
your payments being fully taxable to you. Should the IRS so rule, we may have to
tax report up to the full value of the annuity as your taxable income.
DETERMINATION OF AMOUNT OF THE FIRST VARIABLE ANNUITY PAYMENT
To determine the first variable annuity payment, we apply the contract value for
each Fund in accordance with the contract's settlement option tables. The rates
in those tables depend upon the annuitant's (and any contingent annuitant's) age
and sex and the option selected. The annuitant's sex is not a factor in
contracts issued to plans sponsored by employers subject to Title VII of the
Civil Rights Act of 1964 or similar state statutes. We determine the value to be
applied at the end of a valuation period (selected by us and uniformly applied)
not more than 10 valuation periods before the annuity payout date.
If the amount that would be applied under an option is less than $5,000, we will
pay the contract value to the annuitant in a single sum. If the first periodic
payment under any option would be less than $25, we may change the frequency of
payments so that the first payment is at least $25.
ANNUITY UNITS AND VARIABLE PAYMENTS
After your first annuity payment, later variable annuity payments will vary to
reflect the investment performance of your Funds. The amount of each payment
depends on the number your annuity units. To determine the number of annuity
units for each Fund, divide the dollar amount of the first annuity payment from
each Fund by the value of that Fund's annuity unit. This number of annuity units
remains constant during the annuity payment period unless you transfer among
Funds.
The annuity unit value for each Fund was set at $10 for the valuation period
when the first variable annuity was calculated for these contracts. The annuity
unit value for each later valuation period equals the annuity unit value for the
immediately preceding valuation period multiplied by the net investment factor
(described on page 14) for such later valuation period and by a factor
(0.9998925 for a one-day valuation period) to neutralize the 4% assumed interest
rate discussed below.
The dollar amount of each later variable annuity payment equals your constant
number of annuity units for each Fund multiplied by the value of the annuity
unit for the valuation period.
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The annuity rate tables contained in the contracts are based on the Progressive
Annuity Mortality Table with compound interest at the effective rate of 4% 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 stay level.
TRANSFERS DURING ANNUITY PAYOUT
After annuity payments have been made for at least 12 months, the annuitant can,
once each calendar quarter, change the Funds on which variable annuity payments
are based. On at least 30 days written notice to our home office, we will change
that portion of the periodic variable annuity payment as you direct to reflect
the investment results of different Funds. The annuity payment immediately after
a change will be the amount that would have been paid without the change. Later
payments will reflect the new mix of Funds.
OTHER CONTRACT PROVISIONS
ASSIGNMENT
Amounts payable in settlement of a contract may not be commuted, anticipated,
assigned or otherwise encumbered, or pledged as loan collateral to anyone other
than us. To the extent permitted by law, such amounts are not subject to any
legal process to pay any claims against an annuitant before annuity payments
begin. The owner of a tax-qualified contract may not, but the owner of a
non-tax-qualified contract may, collaterally assign the contract before the
annuity payout date. Ownership of a tax-qualified contract may not be
transferred except to:
- - the annuitant,
- - a trustee or successor trustee of a pension or profit-sharing trust which is
qualified under Section 401 of the Code,
- - 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
- - as otherwise permitted by laws and regulations governing plans for which the
contract may be issued.
PERIODIC REPORTS
Before the annuity payout date, we will send you semi-annual statements showing
(a) the number of units credited to the contract by Fund and (b) the value of
each unit as of the end of the last half year. In addition, as long as the
contract remains in effect, we will forward any periodic Fund reports.
SUBSTITUTION FOR FUND SHARES
If investment in a Fund is no longer possible or we believe it is inappropriate
to the purposes of the contract, we may substitute one or more other funds.
Substitution may be made as to both existing investments and the investment of
future purchase payments. However, no substitution will be made until we receive
any necessary approval of the Securities and Exchange Commission. We may also
add other Funds as eligible investments of VAA.
CONTRACT OWNER INQUIRIES
Direct any questions 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
We may advertise performance data for the various Funds showing the percentage
change in unit values based on the performance of the applicable Fund over a
period of time (usually a calendar year). We determine the percentage change by
dividing the increase (or decrease) in value for the unit by the unit value at
the beginning of the period. This percent reflects the deduction of any
asset-based contract charges but does not reflect the deduction of any
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<PAGE> 22
applicable contract administration charge or surrender charge. The deduction a
contract administration charge or surrender charge would reduce any percentage
increase or make greater any percentage decrease.
Advertising may also include average annual total return figures calculated as
shown in the Statement of Additional Information. The average annual total
return figures reflect the deduction of applicable contract administration
charges and surrender charges as well as applicable asset-based charges.
We may also distribute sales literature comparing separate account 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.
FEDERAL TAX STATUS
The following discussion of federal income tax treatment of amounts received
under a variable annuity contract does not cover all situations or issues. It is
not intended as tax advice. Consult a qualified tax adviser to apply the law to
your circumstances. Tax laws can change, even for contracts that have already
been issued. Tax law revisions, with unfavorable consequences, could have
retroactive effect on previously issued contracts or on later voluntary
transactions in previously issued contracts.
We are 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, our operations, VAA is not separately taxed as a "regulated
investment company" under Subchapter M of the Code.
As to tax-qualified contracts, the law does not now provide for payment of
federal income tax 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 years you receive the
payments.
The contracts 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 contract value 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. 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 begin each payment is taxable under Section 72 of the Code
as ordinary income in the year of receipt if you have neither paid any portion
of the purchase payments nor 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 you recover your
"investment in the contract," all further annuity payments will be included in
your taxable income.
If you elect to receive the accumulated value in a single sum in lieu of annuity
payments, any amount you receive or withdraw 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
18
<PAGE> 23
distribution of earnings first and only second as a recovery of your "investment
in the contract." Any part of the value of the contract that you assign or
pledge 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:
- - received on or after the taxpayer reaches age 59 1/2;
- - made to a beneficiary on or after the death of the annuitant;
- - attributable to the taxpayer's becoming disabled;
- - made as a series of substantially equal periodic payments for the life of the
annuitant (or joint lives of the annuitant and beneficiary);
- - from a contract that is a qualified funding asset for purposes of a structured
settlement;
- - 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 purchase of the
annuity;
- - incident to divorce, or
- - taken from an IRA for a qualified first-time home purchase (up to $10,000) or
qualified education expenses.
If you elect not to have withholding apply to an early withdrawal or if an
insufficient amount is withheld, you 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. If you fail to
provide your taxpayer identification number, any payments under the contract
will automatically be subject to withholding.
TAX-DEFERRED ANNUITIES
Under the provisions of Section 403(b) of the Code, employees may exclude from
their gross income purchase payments made for annuity contracts purchased for
them by public educational institutions and certain tax-exempt organizations
which are described in Section 501(c)(3) of the Code. You may make this
exclusion to the extent that the aggregate purchase payments plus any other
amounts contributed to purchase the contract and toward benefits under qualified
retirement plans do not exceed your exclusion allowance as determined in
Sections 403(b) and 415 of the Code. Employee contributions are, however,
subject to social security (FICA) tax withholding. All amounts you receive 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 you receive may be used to make a "tax-free
rollover" into one of the types of individual retirement arrangements permitted
under the Code. Amounts you receive that are eligible for "tax-free rollover"
will be subject to an automatic 20% withholding unless you directly roll over
such amounts from the tax-deferred annuity to the individual retirement
arrangement.
With respect to earnings accrued and purchase payments made after December 31,
1988, for a salary reduction agreement under Section 403(b) of the Code,
distributions may be paid only when the employee:
- - attains age 59 1/2,
- - separates from the employer's service,
- - dies,
- - becomes disabled as defined in the Code, or
- - incurs a financial hardship as defined in the Code.
In the case of hardship, cash distributions may not exceed the amount of your
purchase payments. These restrictions do not affect your right to transfer
investments among the Funds and do not limit the availability of transfers
between tax-deferred annuities.
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<PAGE> 24
QUALIFIED PENSION OR PROFIT-SHARING PLANS
Under present law, purchase payments made by an employer or trustee, for a plan
or trust qualified under Section 401(a) or 403(a) of the Code, are generally
excludable from the employees gross income. Any purchase payments made by the
employee, or which are considered taxable income to the employee in the year
such payments are made, constitute 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 the employee's gross income.
The Code requires plans to 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 begin 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. You
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 later no capital gains treatment is available (except that
taxpayers who were age 50 before 1986 may still elect capital gains treatment).
If you receive such a distribution you may be able to make a "tax-free rollover"
of the distribution less your "investment in the contract" into another
qualified plan in which you are a participant or into one of the types of
individual retirement arrangements permitted under the Code. Your 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.
INDIVIDUAL RETIREMENT ANNUITIES (IRA)
Section 408(b) of the Code provides that you 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
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." 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, if you are otherwise qualified for an IRA you may elect to
contribute to an IRA for yourself and for your non-working spouse, with the
total deduction limited to $4,000.
You may make non-deductible IRA contributions to the extent you 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. This 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
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<PAGE> 25
6% of the amount you contributed in excess of either the deductible limit or
nondeductible limit, as indicated above, if you do not withdraw that amount
before filing your income tax return for the year of contribution or apply that
amount as an allowable contribution for a later year. The excise tax continues
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 begin before April 1 following the year in which you reach
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 may 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
is required on annuity payments. However, recipients of annuity payments may
elect not to have the tax withheld. This election may be revoked at any time and
withholding would begin after that. If you do not give us your taxpayer
identification number any payments under the contract will automatically be
subject 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 Roth 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. 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 20 days after it is delivered. 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.
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<PAGE> 27
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.
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 for penalties imposed on withdrawal
when the contribution exceeds $2,200).
IRA FOR NON-WORKING SPOUSE
If you establish an IRA for yourself, you may 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 IRA's; (ii) $4,000; or (iii) 100%
of your combined gross income.
Contributions in excess of the contribution limits may be subject to 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 rollover 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.)
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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 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 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
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<PAGE> 29
taxpayer's gross income. If such a rollover, transfer or conversion occurred
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 under
payments), 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.
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<PAGE> 30
ILLUSTRATION OF IRA FIXED ACCUMULATIONS
<TABLE>
<CAPTION>
AGE 60 AGE 65 AGE 70
GUARANTEED GUARANTEED GUARANTEED
SURRENDER VALUE SURRENDER VALUE SURRENDER VALUE
----------------------------- ----------------------------- -----------------------------
$2,000 $2,000 $2,000
$1,000 ONE TIME $1,000 ONE TIME $1,000 ONE TIME
CONTRACT ANNUAL LUMP SUM ANNUAL LUMP SUM ANNUAL LUMP SUM
ANNIVERSARY CONTRIBUTIONS CONTRIBUTION CONTRIBUTIONS CONTRIBUTION CONTRIBUTIONS CONTRIBUTION
- ----------- ------------- ------------ ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 933 $ 1,895 $ 933 $ 1,895 $ 933 $ 1,895
2 1,917 1,955 1,917 1,955 1,917 1,955
3 2,933 2,006 2,933 2,006 2,933 2,006
4 3,990 2,058 3,990 2,058 3,990 2,058
5 5,089 2,116 5,089 2,116 5,089 2,116
6 6,234 2,177 6,234 2,177 6,234 2,177
7 7,435 2,240 7,435 2,240 7,435 2,240
8 8,686 2,306 8,686 2,306 8,868 2,306
9 10,069 2,529 10,069 2,529 10,069 2,529
10 11,506 2,600 11,506 2,600 11,506 2,600
15 19,604 3,001 19,604 3,001 19,604 3,001
20 29,456 3,489 29,456 3,489 29,456 3,489
25 41,442 4,082 41,442 4,082 41,442 4,082
30 56,026 4,804 56,026 4,804 56,026 4,804
35 73,769 5,683 73,769 5,683 73,769 5,683
40 95,356 6,751 95,356 6,751 95,356 6,751
45 121,620 8,051 121,620 8,051 121,620 8,051
50 153,574 9,633 153,574 9,633 153,574 9,633
55 192,451 11,558 192,451 11,558 192,451 11,558
60 239,751 13,900 239,751 13,900 239,751 13,900
65 297,298 16,748 297,298 16,748
70 367,313 20,215 367,313 20,215
</TABLE>
X Guaranteed Interest Rate: 3.25% is applicable to each contract anniversary.
X The Surrender Value is the Accumulation Values less the Contingent Deferred
Sales Charge.
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<PAGE> 31
STATEMENT OF ADDITIONAL INFORMATION CONTENTS
<TABLE>
<S> <C>
Custodian
Independent Certified Public Accountants
Underwriter
Calculation of Money Market Yield
Total Return
The Year 2000 Issue
Loans under Tax-Sheltered Annuities
Financial Statements for Ohio National Life and VAA
</TABLE>
<PAGE> 32
PART B
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 33
OHIO NATIONAL VARIABLE ACCOUNT A
OF
THE OHIO NATIONAL LIFE INSURANCE COMPANY
One Financial Way
Montgomery, Ohio 45242
Telephone (513) 794-6514
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1999
This Statement of Additional Information is not a prospectus. Read it along with
the prospectus for Ohio National Variable Account A ("VAA") flexible purchase
payment individual variable annuity contracts dated May 1, 1999. To get a free
copy of the prospectus for VAA, write or call us at the above address.
Table of Contents
<TABLE>
<CAPTION>
<S> <C>
Custodian ......................................................................... 2
Independent Certified Public Accountants .......................................... 2
Underwriter ....................................................................... 2
Calculation of Money Market Yield ................................................. 3
Total Return ...................................................................... 3
The Year 2000 Issue ............................................................... 4
Loans Under Tax-sheltered Annuities ............................................... 4
Financial Statements .............................................................. 5
</TABLE>
"TOP EXPLORER"
<PAGE> 34
CUSTODIAN
We have a custody agreement with Firstar Bank, N.A., Cincinnati, Ohio, under
which Firstar holds custody of VAA's assets. The agreement provides for Firstar
to purchase Fund shares at their net asset value determined as of the end of the
valuation period during which we receive the deposit. At our instruction,
Firstar redeems the Fund shares held by VAA at their net asset value determined
as of the end of the valuation period during which we receive or make a
redemption request. In addition, Firstar keeps appropriate records of all of
VAA's transactions in Fund shares.
The custody agreement requires Firstar to always have aggregate capital, surplus
and undivided profit of not less than $2 million. It does not allow Firstar to
resign until (a) a successor custodian bank having the above qualifications has
agreed to serve as custodian, or (b) VAA have been completely liquidated and the
liquidation proceeds properly distributed. Subject to these conditions, the
custody agreement may be terminated by either us or Firstar upon sixty days
written notice. We pay Firstar a fee for its services as custodian.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The financial statements of VAA as of December 31, 1998 and for the periods
indicated and our consolidated financial statements as of December 31, 1998 and
1997 and for the periods indicated have been included in reliance upon the
report of KPMG LLP, independent certified public accountants, also appearing
herein, and upon that firm's authority as experts in accounting and auditing.
UNDERWRITER
We offer the contracts continuously. Before May 1, 1997, The O. N. Equity Sales
Company ("ONESCO"), a wholly-owned subsidiary of ours, was the principal
underwriter of the contracts. Since May 1, 1997, the principal underwriter has
been Ohio National Equities, Inc. ("ONEQ"), another wholly-owned subsidiary of
ours. The aggregate amount of commissions paid to ONESCO and ONEQ for contracts
issued by VAA, and the amounts retained by ONESCO and ONEQ, for each of the last
three years have been:
<TABLE>
<CAPTION>
ONESCO ONEQ ONESCO ONEQ
Aggregate Aggregate Retained Retained
Year Commissions Commissions Commissions Commissions
- ---- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1998 None $6,658,441 None $827,720
1997 $ 903,146 2,997,646 $ 89,572 297,299
1996 2,461,096 None 239,957 None
</TABLE>
2
<PAGE> 35
CALCULATION OF MONEY MARKET YIELD
The annualized current yield of the Money Market subaccount for the seven days
ended on December 31, 1998, was 3.89%. 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 Money Market accumulation unit at
the beginning of the seven-day period, dividing the net change in value by the
beginning value to obtain the seven-day return, and multiplying the difference
by 365/7. The result is rounded to the nearest hundredth of one percent.
TOTAL RETURN
The average annual compounded rate of return for a contract for each subaccount
over a given period is found by equating the initial amount invested to the
ending redeemable value using the following formula:
n
P(1 + T) = 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).
For this purpose, note that these contracts were first offered on September 10,
1984. Hypothetical results based upon performance of the Fund underlying each
subaccount before that assume that the same charges and deductions applicable
to the current contracts were in effect from the beginning of each Fund. Using
those assumptions, the average total returns for contract investments in each
Fund from the beginning of the subaccount and for the one-, five- and ten-year
periods ending on December 31, 1998, 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>
Equity 4.37% 12.06% 11.21% 9.45% 10-06-69
Money Market 4.03% 3.76% 4.01% 5.82% 03-20-80
Bond 3.87% 5.03% 6.76% 7.09% 11-02-82
Omni 3.19% 10.31% 10.06% 10.07% 09-10-84
International 2.55% 6.64% N/A 9.91% 04-30-93
Capital Appreciation 4.55% N/A N/A 12.52% 05-01-94
Small Cap 9.15% N/A N/A 17.72% 05-01-94
International Small Company 2.20% N/A N/A 8.20% 03-31-95
Aggressive Growth 6.46% N/A N/A 10.99% 03-31-95
Core Growth 7.42% N/A N/A 1.37% 01-03-97
Growth & Income 5.71% N/A N/A 42.48% 01-03-97
S&P 500 Index 28.34% N/A N/A 29.82% 01-03-97
Social Awareness (23.40%) N/A N/A (2.56%) 01-03-97
</TABLE>
3
<PAGE> 36
THE YEAR 2000 ISSUE
We believe we have succeeded in remedying the "Year 2000" problem for all
mission critical internal computer systems and applications. Conversion testing
and implementation for those systems were completed by December 31, 1998. During
the remainder of 1999, peripheral personal computer systems will continue to be
up-graded and tested for Year 2000 implementation. While Ohio National Fund and
its investment adviser have been assured by suppliers of financial services
(including the custodians, the transfer agent and the accounting agent) that
their systems either are already compliant or will be so in sufficient time,
internal auditors intend to independently test those systems to verify their
compliance. We are also developing contingency plans to be prepared for the
possibility that one or more service providers might not be compliant. If we,
Ohio National Fund, its investment adviser or one of our service suppliers fails
to achieve timely and complete compliance, it could materially impair our
ability to conduct our business, including the ability to accurately and timely
value interests in the contracts.
LOANS UNDER TAX-SHELTERED ANNUITIES
Contracts issued as tax-sheltered annuities under 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. A loan must be for at
least $1,000 and may only be made from the Guaranteed Account. The loan amount
is limited by the maximum loan formula described in your contract.
We charge an annual effective rate of interest up to 7%. You must generally
repay your loans within 5 years (or 20 years if you use the loan to purchase
your primary home).
The amount of the death benefit, the amount payable on a full surrender and the
amount that will be applied to provide an annuity will all be reduced by your
loan balance, including accrued interest.
4
<PAGE> 37
OHIO NATIONAL VARIABLE ACCOUNT A
INDEPENDENT AUDITORS' REPORT
The Board of Directors of
The Ohio National Life Insurance Company
and Contract Owners of
Ohio National Variable Account A:
We have audited the accompanying statements of assets and contract owners'
equity of Ohio National Variable Account A (comprised of the Ohio National
Equity, Ohio National Money Market, Ohio National Bond, Ohio National Omni, Ohio
National International, Ohio National Capital Appreciation, Ohio National Small
Cap, Ohio National Global Contrarian, Ohio National Aggressive Growth, Ohio
National S&P 500 Index, Ohio National Social Awareness, Ohio National Core
Growth, Ohio National Growth & Income, Ohio National Stellar, Ohio National
Strategic Income, Ohio National Relative Value, Ohio National High Income Bond,
Ohio National Equity Income, Ohio National Blue Chip, Ohio National Small Cap
Growth, Montgomery Asset Emerging Market, Montgomery Asset Small Cap Opportunity
Trust II, Fidelity Investments VIP Growth, Fidelity Investments VIP Equity
Income, Fidelity Investments VIP High Income Bond, JP Morgan Small Company,
Janus Aspen Series Growth, Janus Aspen Series International Growth, Janus Aspen
Series Worldwide Growth, Janus Aspen Series Balanced, Salomon Brothers Variable
Series Capital, Salomon Brothers Variable Series Total Return, Salomon Brothers
Variable Series Investors, Strong Variable Funds Opportunity II, Strong Variable
Funds Schafer Value II, Strong Variable Funds Growth II, Morgan Stanley
Universal Funds Fixed Income, Morgan Stanley Universal Funds US Real Estate,
Morgan Stanley Universal Funds Value, Morgan Stanley Universal Funds Emerging
Market Debt, Goldman Sachs VIT Growth & Income, Goldman Sachs VIT Core US
Equity, Goldman Sachs VIT Global Income and Goldman Sachs VIT Capital Growth
subaccounts) as of December 31, 1998, and the related statements of operations
and changes in contract owners' equity for each of the periods indicated herein.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1998, by correspondence with
the transfer agents of the underlying mutual funds. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Ohio National Variable Account
A as of December 31, 1998, and the results of its operations and its changes in
contract owners' equity for each of the years indicated herein in conformity
with generally accepted accounting principles.
KPMG LLP
Cincinnati, Ohio
February 5, 1999
5
<PAGE> 38
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OHIO NATIONAL VARIABLE ACCOUNT A December 31, 1998
STATEMENTS OF ASSETS AND CONTRACT OWNERS' EQUITY
<TABLE>
<CAPTION>
MONEY
EQUITY MARKET BOND OMNI INTERNATIONAL
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------ ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Assets -- Investments at market value (note 2).......... $116,584,418 $19,173,429 $10,160,426 $86,988,408 $48,879,593
============ =========== =========== =========== ===========
Contract owners' equity
Contracts in accumulation period (note 3)............. $116,065,832 $19,059,891 $10,145,018 $86,852,966 $48,877,129
Annuity reserves for contract in payment period....... 518,586 113,538 15,408 135,442 2,464
------------ ----------- ----------- ----------- -----------
Total contract owners' equity........................... $116,584,418 $19,173,429 $10,160,426 $86,988,408 $48,879,593
============ =========== =========== =========== ===========
<CAPTION>
CAPITAL
APPRECIATION SMALL CAP
SUBACCOUNT SUBACCOUNT
------------ -----------
<S> <C> <C>
Assets -- Investments at market value (note 2).......... $25,818,183 $25,836,404
=========== ===========
Contract owners' equity
Contracts in accumulation period (note 3)............. $25,778,593 $25,836,404
Annuity reserves for contract in payment period....... 39,590 0
----------- -----------
Total contract owners' equity........................... $25,818,183 $25,836,404
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
GLOBAL AGGRESSIVE CORE GROWTH & S&P 500
CONTRARIAN GROWTH GROWTH INCOME INDEX
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Assets -- Investments at market value (note 2).......... $5,382,295 $6,784,243 $3,416,790 $19,357,466 $36,114,465
========== ========== ========== =========== ===========
Contract owners' equity
Contracts in accumulation period (note 3)............. $5,382,295 $6,784,243 $3,416,790 $19,357,466 $36,106,282
Annuity reserves for contract in payment period....... 0 0 0 0 8,183
---------- ---------- ---------- ----------- -----------
Total contract owners' equity........................... $5,382,295 $6,784,243 $3,416,790 $19,357,466 $36,114,465
========== ========== ========== =========== ===========
<CAPTION>
SOCIAL STRATEGIC
AWARENESS INCOME
SUBACCOUNT SUBACCOUNT
------------ -----------
<S> <C> <C>
Assets -- Investments at market value (note 2).......... $1,964,101 $ 1,874,581
========== ===========
Contract owners' equity
Contracts in accumulation period (note 3)............. $1,964,101 $ 1,874,581
Annuity reserves for contract in payment period....... 0 0
---------- -----------
Total contract owners' equity........................... $1,964,101 $ 1,874,581
========== ===========
</TABLE>
<TABLE>
<CAPTION>
HIGH
RELATIVE BLUE EQUITY INCOME
STELLAR VALUE CHIP INCOME BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Assets -- Investments at market value (note 2).......... $1,345,772 $9,995,636 $830,810 $99,695 $447,812
========== ========== ======== ======= ========
Contract owners' equity
Contracts in accumulation period (note 3)............. $1,345,772 $9,995,636 $830,810 $99,695 $447,812
Annuity reserves for contract in payment period....... 0 0 0 0 0
---------- ---------- -------- ------- --------
Total contract owners' equity........................... $1,345,772 $9,995,636 $830,810 $99,695 $447,812
========== ========== ======== ======= ========
<CAPTION>
SMALL CAP
GROWTH
SUBACCOUNT
------------
<S> <C> <C>
Assets -- Investments at market value (note 2).......... $176,952
========
Contract owners' equity
Contracts in accumulation period (note 3)............. $176,952
Annuity reserves for contract in payment period....... 0
--------
Total contract owners' equity........................... $176,952
========
</TABLE>
<TABLE>
<CAPTION>
FIDELITY INVESTMENTS
MONTGOMERY ASSET ---------------------------------------
------------------------
VIP HIGH
EMERGING SMALL CAP VIP EQUITY INCOME
MARKET OPPORTUNITY VIP GROWTH INCOME BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ----------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Assets -- Investments at market value (note 2).......... $724,872 $90,461 $4,523,170 $5,489,577 $3,096,886
======== ======= ========== ========== ==========
Contract owners' equity
Contracts in accumulation period (note 3)............. $724,872 $90,461 $4,523,170 $5,489,577 $3,096,886
======== ======= ========== ========== ==========
<CAPTION>
JP MORGAN
TRUST II
------------
SMALL CO.
SUBACCOUNT
------------
<S> <C> <C>
Assets -- Investments at market value (note 2).......... $656,502
========
Contract owners' equity
Contracts in accumulation period (note 3)............. $656,502
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 39
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OHIO NATIONAL VARIABLE ACCOUNT A December 31, 1998
STATEMENTS OF ASSETS AND CONTRACT OWNERS' EQUITY
<TABLE>
<CAPTION>
JANUS ASPEN SERIES
----------------------------------------------------
INTERNATIONAL WORLDWIDE
GROWTH GROWTH GROWTH BALANCED
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
Assets -- Investments at market value (note 2).......... $2,417,364 $225,341 $2,712,330 $4,245,160
========== ======== ========== ==========
Contract owners' equity
Contracts in accumulation period (note 3)............. $2,417,364 $225,341 $2,712,330 $4,245,160
========== ======== ========== ==========
<CAPTION>
SALOMON BROTHERS VARIABLE SERIES
------------------------------------
TOTAL
CAPITAL RETURN INVESTORS
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
<S> <C> <C> <C>
Assets -- Investments at market value (note 2).......... $298,630 $374,621 $393,172
======== ======== ========
Contract owners' equity
Contracts in accumulation period (note 3)............. $298,630 $374,621 $393,172
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
STRONG VARIABLE FUNDS
----------------------------------------
OPPORTUNITY SCHAFER
II VALUE II GROWTH II
SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ------------- ----------
<S> <C> <C> <C>
Assets -- Investments at market value (note 2).......... $775,780 $50,269 $611,718
======== ======= ========
Contract owners' equity
Contracts in accumulation period (note 3)............. $775,780 $50,269 $611,718
======== ======= ========
<CAPTION>
MORGAN STANLEY UNIVERSAL FUNDS
-------------------------------------------------
EMERGING
FIXED US REAL MARKET
INCOME ESTATE VALUE DEBT
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Assets -- Investments at market value (note 2).......... $542,625 $86,646 $422,028 $7,599
======== ======= ======== ======
Contract owners' equity
Contracts in accumulation period (note 3)............. $542,625 $86,646 $422,028 $7,599
======== ======= ======== ======
</TABLE>
<TABLE>
<CAPTION>
GOLDMAN SACHS
-----------------------------------------------------
VIT GROWTH VIT CORE VIT GLOBAL VIT CAPITAL
& INCOME US EQUITY INCOME GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ------------- ---------- -----------
<S> <C> <C> <C> <C>
Assets -- Investments at market value (note 2).......... $747,633 $849,461 $82,543 $1,058,880
======== ======== ======= ==========
Contract owners' equity
Contracts in accumulation period (note 3)............. $747,633 $849,461 $82,543 $1,058,880
======== ======== ======= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE> 40
OHIO NATIONAL VARIABLE ACCOUNT A
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
EQUITY MONEY MARKET BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------------------------- ------------------------- -------------------------
1998 1997 1998 1997 1998 1997
------------ ------------ ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment activity:
Reinvested dividends.............. $ 1,441,507 $ 1,848,791 $ 500,680 $ 330,310 $ 525,455 $ 430,461
Risk & administrative expense
(note 4)....................... (1,251,708) (1,119,990) (110,522) (61,793) (87,915) (54,587)
------------ ------------ ----------- ---------- ----------- ----------
Net investment activity...... 189,799 728,801 390,158 268,517 437,540 375,874
------------ ------------ ----------- ---------- ----------- ----------
Realized & Unrealized gain (loss)
on investments:
Reinvested capital gains....... 2,181,204 5,884,076 0 0 0 0
Realized gain (loss)........... 2,970,607 1,814,454 (14,941) (8,000) 17,380 18,355
Unrealized gain (loss)......... (363,011) 7,253,475 0 0 (152,308) 6,598
------------ ------------ ----------- ---------- ----------- ----------
Net gain (loss) on
investments............... 4,788,800 14,952,005 (14,941) (8,000) (134,928) 24,953
------------ ------------ ----------- ---------- ----------- ----------
Net increase in contract
owners' equity from
operations.............. 4,978,599 15,680,806 375,217 260,517 302,612 400,827
------------ ------------ ----------- ---------- ----------- ----------
Equity transactions:
Sales:
Contract purchase payments..... 11,458,073 12,307,774 15,381,429 5,766,812 3,493,444 1,341,058
Transfers from fixed & other
subaccounts.................. 4,018,120 4,663,120 19,865,502 4,122,546 2,139,647 617,341
------------ ------------ ----------- ---------- ----------- ----------
15,476,193 16,970,894 35,246,931 9,889,358 5,633,091 1,958,399
------------ ------------ ----------- ---------- ----------- ----------
Redemptions:
Withdrawals & surrenders (note
5)........................... 9,328,210 5,482,124 696,570 594,152 537,227 453,555
Annuity & death benefit
payments..................... 1,139,548 1,282,347 76,055 406,483 34,162 29,614
Transfers to fixed & other
subaccounts.................. 5,629,381 3,119,594 22,718,469 7,901,647 1,120,365 1,142,089
------------ ------------ ----------- ---------- ----------- ----------
16,097,139 9,884,065 23,491,094 8,902,282 1,691,754 1,625,258
------------ ------------ ----------- ---------- ----------- ----------
Net equity transactions...... (620,946) 7,086,829 11,755,837 987,076 3,941,337 333,141
------------ ------------ ----------- ---------- ----------- ----------
Net change in contract
owners' equity.......... 4,357,653 22,767,634 12,131,054 1,247,593 4,243,949 733,968
Contract Owners' Equity:
Beginning of period............... 112,226,765 89,459,131 7,042,375 5,794,782 5,916,477 5,182,509
------------ ------------ ----------- ---------- ----------- ----------
End of period..................... $116,584,418 $112,226,765 $19,173,429 $7,042,375 $10,160,426 $5,916,477
============ ============ =========== ========== =========== ==========
<CAPTION>
OMNI
SUBACCOUNT
--------------------------
1998 1997
----------- -----------
<S> <C> <C>
Investment activity:
Reinvested dividends.............. $ 2,270,073 $ 2,224,754
Risk & administrative expense
(note 4)....................... (912,754) (728,446)
----------- -----------
Net investment activity...... 1,357,319 1,496,308
----------- -----------
Realized & Unrealized gain (loss)
on investments:
Reinvested capital gains....... 13,227 3,648,542
Realized gain (loss)........... 1,000,905 739,636
Unrealized gain (loss)......... (7,903) 4,439,035
----------- -----------
Net gain (loss) on
investments............... 1,006,229 8,827,213
----------- -----------
Net increase in contract
owners' equity from
operations.............. 2,363,548 10,323,521
----------- -----------
Equity transactions:
Sales:
Contract purchase payments..... 14,036,874 11,490,950
Transfers from fixed & other
subaccounts.................. 4,779,261 3,553,594
----------- -----------
18,816,135 15,044,544
----------- -----------
Redemptions:
Withdrawals & surrenders (note
5)........................... 5,537,165 3,743,945
Annuity & death benefit
payments..................... 690,280 422,771
Transfers to fixed & other
subaccounts.................. 4,994,854 2,308,199
----------- -----------
11,222,299 6,474,915
----------- -----------
Net equity transactions...... 7,593,836 8,569,629
----------- -----------
Net change in contract
owners' equity.......... 9,957,384 18,893,150
Contract Owners' Equity:
Beginning of period............... 77,031,024 58,137,874
----------- -----------
End of period..................... $86,988,408 $77,031,024
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE> 41
OHIO NATIONAL VARIABLE ACCOUNT A
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
INTERNATIONAL CAPITAL APPRECIATION SMALL CAP
SUBACCOUNT SUBACCOUNT SUBACCOUNT
-------------------------- -------------------------- --------------------------
1998 1997 1998 1997 1998 1997
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment activity:
Reinvested dividends................ $ 2,090,475 $ 3,699,242 $ 579,186 $ 504,043 $ 0 $ 0
Risk & administrative expense (note
4)............................... (577,205) (589,401) (246,166) (142,633) (232,830) (166,773)
----------- ----------- ----------- ----------- ----------- -----------
Net investment activity........ 1,513,270 3,109,841 333,020 361,410 (232,830) (166,773)
----------- ----------- ----------- ----------- ----------- -----------
Realized & Unrealized gain (loss) on
investments:
Reinvested capital gains......... 2,018,195 5,249,079 1,968,462 930,639 339 864,625
Realized gain (loss)............. (317,892) 231,748 115,918 167,921 78,725 231,007
Unrealized gain (loss)........... (1,590,338) (8,473,446) (1,450,953) 501,093 2,368,444 391,861
----------- ----------- ----------- ----------- ----------- -----------
Net gain (loss) on
investments................. 109,965 (2,992,619) 633,427 1,599,653 2,447,508 1,487,493
----------- ----------- ----------- ----------- ----------- -----------
Net increase in contract
owners' equity from
operations................ 1,623,235 117,222 966,447 1,961,063 2,214,678 1,320,720
----------- ----------- ----------- ----------- ----------- -----------
Equity transactions:
Sales:
Contract purchase payments....... 4,212,543 12,103,624 6,782,541 5,782,541 4,808,408 5,912,170
Transfers from fixed & other
subaccounts.................... 1,579,613 3,566,352 2,789,751 2,334,977 2,315,389 2,722,141
----------- ----------- ----------- ----------- ----------- -----------
5,792,156 15,669,976 9,572,292 8,182,773 7,123,797 8,634,311
----------- ----------- ----------- ----------- ----------- -----------
Redemptions:
Withdrawals & surrenders (note
5)............................. 3,698,490 2,644,036 892,779 876,739 1,199,702 978,740
Annuity & death benefit
payments....................... 330,156 454,489 135,114 94,324 126,555 83,891
Transfers to fixed & other
subaccounts.................... 11,527,756 3,449,717 2,345,418 1,171,118 2,503,007 1,581,012
----------- ----------- ----------- ----------- ----------- -----------
15,556,402 6,548,242 3,373,311 2,142,181 3,829,264 2,643,643
----------- ----------- ----------- ----------- ----------- -----------
Net equity transactions........ (9,764,246) 9,121,734 6,198,981 6,040,592 3,294,533 5,990,668
----------- ----------- ----------- ----------- ----------- -----------
Net change in contract
owners' equity............ (8,141,011) 9,238,956 7,165,428 8,001,655 5,509,211 7,311,388
Contract owners' equity:
Beginning of period................. 57,020,604 47,781,648 18,652,755 10,651,100 20,327,193 3,015,805
----------- ----------- ----------- ----------- ----------- -----------
End of period....................... $48,879,593 $57,020,604 $25,818,183 $18,652,755 $25,836,404 $20,327,193
=========== =========== =========== =========== =========== ===========
<CAPTION>
GLOBAL CONTRARION
SUBACCOUNT
------------------------
1998 1997
---------- ----------
<S> <C> <C>
Investment activity:
Reinvested dividends................ $ 161,217 $ 149,703
Risk & administrative expense (note
4)............................... (61,043) (35,945)
---------- ----------
Net investment activity........ 100,174 113,758
---------- ----------
Realized & Unrealized gain (loss) on
investments:
Reinvested capital gains......... 475,985 259,942
Realized gain (loss)............. 3,742 21,203
Unrealized gain (loss)........... (490,547) (87,286)
---------- ----------
Net gain (loss) on
investments................. (10,820) 193,859
---------- ----------
Net increase in contract
owners' equity from
operations................ 89,354 307,617
---------- ----------
Equity transactions:
Sales:
Contract purchase payments....... 949,147 2,590,870
Transfers from fixed & other
subaccounts.................... 458,945 450,183
---------- ----------
1,408,092 3,041,053
---------- ----------
Redemptions:
Withdrawals & surrenders (note
5)............................. 220,074 49,264
Annuity & death benefit
payments....................... 47,792 22,982
Transfers to fixed & other
subaccounts.................... 1,098,960 388,564
---------- ----------
1,366,826 460,810
---------- ----------
Net equity transactions........ 41,266 2,580,243
---------- ----------
Net change in contract
owners' equity............ 130,620 2,887,860
Contract owners' equity:
Beginning of period................. 5,251,675 2,363,815
---------- ----------
End of period....................... $5,382,295 $5,251,675
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE> 42
OHIO NATIONAL VARIABLE ACCOUNT A
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH CORE GROWTH GROWTH & INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------------ ------------------------ -------------------------
1998 1997 1998 1997(a) 1998 1997(a)
---------- ---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment activity:
Reinvested dividends............. $ 0 $ 37,645 $ 0 $ 897 $ 153,872 $ 24,579
Risk & administrative expense
(note 4)....................... (65,184) (36,453) (36,181) (21,525) (157,261) (21,755)
---------- ---------- ---------- ---------- ----------- ----------
Net investment activity........ (65,184) 1,192 (36,181) (20,628) (3,389) 2,824
---------- ---------- ---------- ---------- ----------- ----------
Realized & Unrealized gain (loss)
on investments:
Reinvested capital gains....... 457,472 16,116 0 0 0 314,126
Realized gain (loss)........... 9,963 1,626 50,716 (9,324) 20,399 37,785
Unrealized gain (loss)......... (56,102) 338,859 286,587 (15,044) 628,348 164,431
---------- ---------- ---------- ---------- ----------- ----------
Net gain (loss) on
investments............... 411,333 356,601 337,303 (24,368) 648,747 516,342
---------- ---------- ---------- ---------- ----------- ----------
Net (decrease) increase in
contract owners' equity
from operations......... 346,149 357,793 301,122 (44,996) 645,358 519,166
---------- ---------- ---------- ---------- ----------- ----------
Equity transactions:
Sales:
Contract purchase payments..... 2,103,790 1,954,169 704,175 2,572,093 9,635,432 4,480,178
Transfers from fixed & other
subaccounts.................. 622,026 374,153 636,425 1,416,952 6,544,063 1,825,897
---------- ---------- ---------- ---------- ----------- ----------
2,725,816 2,328,322 1,340,600 3,989,045 16,179,495 6,306,075
---------- ---------- ---------- ---------- ----------- ----------
Redemptions:
Withdrawals & surrenders (note
5)........................... 302,085 113,256 406,459 24,689 488,326 59,931
Annuity & death benefit
payments..................... 49,662 31,455 63,396 6,903 150,793 18,886
Transfers to fixed & other
subaccounts.................. 751,284 346,549 1,249,355 418,179 3,265,077 309,615
---------- ---------- ---------- ---------- ----------- ----------
1,103,031 491,260 1,719,210 449,771 3,904,196 388,432
---------- ---------- ---------- ---------- ----------- ----------
Net equity transactions...... 1,622,785 1,837,062 (378,610) 3,539,274 12,275,299 5,917,643
---------- ---------- ---------- ---------- ----------- ----------
Net change in contract
owners' equity.......... 1,968,934 2,194,855 (77,488) 3,494,278 12,920,657 6,436,809
Contract owners' equity:
Beginning of period.............. 4,815,309 2,620,454 3,494,278 0 6,436,809 0
---------- ---------- ---------- ---------- ----------- ----------
End of period.................... $6,784,243 $4,815,309 $3,416,790 $3,494,278 $19,357,466 $6,436,809
========== ========== ========== ========== =========== ==========
<CAPTION>
S&P 500 INDEX
SUBACCOUNT
-------------------------
1998 1997(a)
----------- ----------
<S> <C> <C>
Investment activity:
Reinvested dividends............. $ 562,393 $ 160,849
Risk & administrative expense
(note 4)....................... (218,142) (25,136)
----------- ----------
Net investment activity........ 344,251 135,713
----------- ----------
Realized & Unrealized gain (loss)
on investments:
Reinvested capital gains....... 1,546,971 449,005
Realized gain (loss)........... 67,888 28,306
Unrealized gain (loss)......... 3,394,871 (171,692)
----------- ----------
Net gain (loss) on
investments............... 5,009,730 305,619
----------- ----------
Net (decrease) increase in
contract owners' equity
from operations......... 5,353,981 441,332
----------- ----------
Equity transactions:
Sales:
Contract purchase payments..... 13,945,843 4,617,012
Transfers from fixed & other
subaccounts.................. 14,612,814 1,487,498
----------- ----------
28,558,657 6,104,510
----------- ----------
Redemptions:
Withdrawals & surrenders (note
5)........................... 623,902 38,238
Annuity & death benefit
payments..................... 129,913 6,501
Transfers to fixed & other
subaccounts.................. 3,168,210 377,251
----------- ----------
3,922,025 421,990
----------- ----------
Net equity transactions...... 24,636,632 5,682,520
----------- ----------
Net change in contract
owners' equity.......... 29,990,613 6,123,852
Contract owners' equity:
Beginning of period.............. 6,123,852 0
----------- ----------
End of period.................... $36,114,465 $6,123,852
=========== ==========
</TABLE>
- ---------------
(a) Period from January 3, 1997 date of commencement of operations.
The accompanying notes are an integral part of these financial statements.
10
<PAGE> 43
OHIO NATIONAL VARIABLE ACCOUNT A
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
SOCIAL AWARENESS STRATEGIC INCOME STELLAR
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------------------- ------------------------ ----------------------
1998 1997(a) 1998 1997(a) 1998 1997(a)
---------- -------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Investment activity:
Reinvested dividends........................ $ 10,934 $ 2,789 $ 120,659 $ 27,368 $ 40,131 $ 10,225
Risk & administrative expense (note 4)...... (21,454) (2,511) (22,771) (3,454) (15,173) (3,693)
---------- -------- ---------- ---------- ---------- --------
Net investment activity.................. (10,520) 278 97,888 23,914 24,958 6,532
---------- -------- ---------- ---------- ---------- --------
Realized & Unrealized gain (loss) on
investments:
Reinvested capital gains................. 0 69,572 479 835 5,463 0
Realized gain (loss)..................... (123,673) 3,622 (10,862) 704 (4,370) 2,211
Unrealized gain (loss)................... (592,163) (58,441) (138,208) (1,145) (23,571) 14,738
---------- -------- ---------- ---------- ---------- --------
Net gain (loss) on investments......... (715,836) 14,753 (148,591) 394 (22,478) 16,949
---------- -------- ---------- ---------- ---------- --------
Net (decrease) increase in contract
owners' equity from operations.... (726,356) 15,031 (50,703) 24,308 2,480 23,481
---------- -------- ---------- ---------- ---------- --------
Equity transactions:
Sales:
Contract purchase payments............... 1,707,317 584,481 1,124,332 1,060,804 898,498 591,022
Transfers from fixed & other
subaccounts............................ 727,506... 264,875 74,905 1,498 181,594 5,839
---------- -------- ---------- ---------- ---------- --------
2,434,823 849,356 1,199,237 1,062,302 1,080,092 596,861
---------- -------- ---------- ---------- ---------- --------
Redemptions:
Withdrawals & surrenders (note 5)........ 23,700 10,008 38,754 0 21,647 1,169
Annuity & death benefit payments......... 21,559 548 14,604 1,028 5,443 1,933
Transfers to fixed & other subaccounts... 509,184 43,754 295,666 10,511 321,246 5,704
---------- -------- ---------- ---------- ---------- --------
554,443 54,310 349,024 11,539 348,336 8,806
---------- -------- ---------- ---------- ---------- --------
Net equity transactions................ 1,880,380 795,046 850,213 1,050,763 731,756 588,055
---------- -------- ---------- ---------- ---------- --------
Net change in contract owners'
equity............................ 1,154,024 810,077 799,510 1,075,071 734,236 611,536
Contract owners' equity:
Beginning of period......................... 810,077 0 1,075,071 0 3,166,554 0
---------- -------- ---------- ---------- ---------- --------
End of period............................... $1,964,101 $810,077 $1,874,581 $1,075,071 $1,345,772 $611,536
========== ======== ========== ========== ========== ========
<CAPTION>
RELATIVE VALUE
SUBACCOUNT
------------------------
1998 1997(a)
---------- ----------
<S> <C> <C>
Investment activity:
Reinvested dividends........................ $ 82,693 $ 19,612
Risk & administrative expense (note 4)...... (95,392) (15,700)
---------- ----------
Net investment activity.................. (12,699) 3,912
---------- ----------
Realized & Unrealized gain (loss) on
investments:
Reinvested capital gains................. 91,524 0
Realized gain (loss)..................... 66,563 11,830
Unrealized gain (loss)................... 1,016,582 215,699
---------- ----------
Net gain (loss) on investments......... 1,174,669 227,529
---------- ----------
Net (decrease) increase in contract
owners' equity from operations.... 1,161,970 231,441
---------- ----------
Equity transactions:
Sales:
Contract purchase payments............... 5,754,162 2,902,485
Transfers from fixed & other
subaccounts............................ 851,753 90,096
---------- ----------
6,605,915 2,992,581
---------- ----------
Redemptions:
Withdrawals & surrenders (note 5)........ 373,306 10,942
Annuity & death benefit payments......... 73,267 5,296
Transfers to fixed & other subaccounts... 492,230 41,230
---------- ----------
938,803 57,468
---------- ----------
Net equity transactions................ 5,667,112 2,935,113
---------- ----------
Net change in contract owners'
equity............................ 6,829,082 3,166,554
Contract owners' equity:
Beginning of period......................... 3,166,554 0
---------- ----------
End of period............................... $9,995,636 $3,166,554
========== ==========
</TABLE>
- ---------------
(a) Period from January 3, 1997 date of commencement of operations.
The accompanying notes are an integral part of these financial statements.
11
<PAGE> 44
OHIO NATIONAL VARIABLE ACCOUNT A
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
MONTGOMERY ASSET
-----------------------------------
EQUITY HIGH INCOME SMALL CAP EMERGING MARKET SMALL CAP
BLUE CHIP INCOME BOND GROWTH SUBACCOUNT OPPORTUNITY
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT -------------------- SUBACCOUNT
1998(c) 1998(c) 1998(c) 1998(c) 1998 1997(a) 1998(c)
---------- ---------- ----------- ---------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment activity:
Reinvested dividends............. $ 1,184 $ 614 $ 8,343 $ 0 $ 1,515 $ 1,352 $ 0
Risk & administrative expense
(note 4)...................... (2,525) (220) (838) (294) (10,644) (3,272) (204)
-------- -------- -------- -------- -------- -------- --------
Net investment activity....... (1,341) 394 7,505 (294) (9,129) (1,920) (204)
-------- -------- -------- -------- -------- -------- --------
Realized & Unrealized gain (loss)
on investments:
Reinvested capital gains...... 0 0 775 0 0 0 0
Realized gain (loss).......... 532 215 378 (1,432) (105,907) (2,389) 2,069
Unrealized gain (loss)........ 48,463 6,457 (3,712) 30,958 (288,678) (71,244) 10,248
-------- -------- -------- -------- -------- -------- --------
Net gain (loss) on
investments.............. 48,995 6,672 (2,559) 29,526 (394,585) (73,633) 12,317
-------- -------- -------- -------- -------- -------- --------
Net (decrease) increase
in contract owners'
equity from
operations............. 47,654 7,066 4,946 29,232 (403,714) (75,553) 12,113
-------- -------- -------- -------- -------- -------- --------
Equity transactions:
Sales:
Contract purchase payments.... 628,613 28,016 386,877 75,300 328,559 889,268 91,968
Transfers from fixed & other
subaccounts................. 194,014 80,100 58,490 72,481 383,220 25,538 15,485
-------- -------- -------- -------- -------- -------- --------
822,627 108,116 445,367 147,781 711,779 914,806 107,453
-------- -------- -------- -------- -------- -------- --------
Redemptions:
Withdrawals & surrenders (note
5).......................... 2,746 0 82 0 5,958 4,397 0
Annuity & death benefit
payments.................... 223 0 127 61 1,979 999 16,664
Transfers to fixed & other
subaccounts................. 36,502 15,487 2,292 0 407,864 1,249 12,441
-------- -------- -------- -------- -------- -------- --------
39,471 15,487 2,501 61 415,801 6,645 29,105
-------- -------- -------- -------- -------- -------- --------
Net equity transactions..... 783,156 92,629 442,866 147,720 295,978 908,161 78,348
-------- -------- -------- -------- -------- -------- --------
Net change in contract
owners' equity......... 830,810 99,695 447,812 176,952 (107,736) 832,608 90,461
Contract owners' equity:
Beginning of period.............. 0 0 0 0 832,608 0 0
-------- -------- -------- -------- -------- -------- --------
End of period.................... $830,810 $ 99,695 $447,812 $176,952 $724,872 $832,608 $ 90,461
======== ======== ======== ======== ======== ======== ========
</TABLE>
- ---------------
(a) Period from January 3, 1997 date of commencement of operations.
(c) Period from May 1, 1998 date of commencement of operations.
The accompanying notes are an integral part of these financial statements.
12
<PAGE> 45
OHIO NATIONAL VARIABLE ACCOUNT A
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
FIDELITY INVESTMENTS
--------------------------------------------------------------------------------
VIP GROWTH VIP EQUITY INCOME VIP HIGH INCOME BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------------ ------------------------ ------------------------
1998 1997(b) 1998 1997(b) 1998 1997(b)
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment activity:
Reinvested dividends........................ $ 6,464 $ 0 $ 26,915 $ 0 $ 104,824 $ 0
Risk & administrative expense (note 4)...... (36,874) (3,791) (47,574) (7,136) (28,705) (4,117)
---------- ---------- ---------- ---------- ---------- ----------
Net investment activity................. (30,410) (3,791) (20,659) (7,136) 76,119 (4,117)
---------- ---------- ---------- ---------- ---------- ----------
Realized & Unrealized gain (loss) on
investments:
Reinvested capital gains.................. 169,084 0 95,785 0 66,607 0
Realized gain (loss)...................... 32,996 2,373 15,254 3,136 (22,981) 12,995
Unrealized gain (loss).................... 805,443 37,791 217,112 96,293 (301,337) 29,576
---------- ---------- ---------- ---------- ---------- ----------
Net gain (loss) on investments.......... 1,007,523 40,164 328,151 99,429 (257,711) 42,571
---------- ---------- ---------- ---------- ---------- ----------
Net increase in contract owners'
equity from operations............. 977,113 36,373 307,492 92,293 (181,592) 38,454
---------- ---------- ---------- ---------- ---------- ----------
Equity transactions:
Sales:
Contract purchase payments................ 2,574,916 972,759 3,306,327 1,576,447 1,709,242 1,437,894
Transfers from fixed & other
subaccounts............................. 662,152 11,770 668,846 18,945 333,556 137,249
---------- ---------- ---------- ---------- ---------- ----------
3,237,068 984,529 3,975,173 1,595,392 2,042,798 1,575,143
---------- ---------- ---------- ---------- ---------- ----------
Redemptions:
Withdrawals & surrenders (note 5)......... 54,773 6,020 71,218 3,913 26,465 0
Annuity & death benefit payments.......... 12,293 0 3,399 5,412 791 5,499
Transfers to fixed & other subaccounts.... 638,827 0 390,802 6,029 125,389 219,773
---------- ---------- ---------- ---------- ---------- ----------
705,893 6,020 465,419 15,354 152,645 225,272
---------- ---------- ---------- ---------- ---------- ----------
Net equity transactions................. 2,531,175 978,509 3,509,754 1,580,038 1,890,153 1,349,871
---------- ---------- ---------- ---------- ---------- ----------
Net change in contract owners'
equity............................. 3,508,288 1,014,882 3,817,246 1,672,331 1,708,561 1,388,325
Contract owners' equity:
Beginning of period......................... 1,014,882 0 1,672,331 0 1,388,325 0
---------- ---------- ---------- ---------- ---------- ----------
End of period............................... $4,523,170 $1,014,882 $5,489,577 $1,672,331 $3,096,886 $1,388,325
========== ========== ========== ========== ========== ==========
<CAPTION>
JANUS ASPEN SERIES
JP MORGAN ------------------------
TRUST II
--------- INTL.
SMALL GROWTH GROWTH
COMPANY SUBACCOUNT SUBACCOUNT
1998(c) 1998(c) 1998(c)
--------- ---------- ----------
<S> <C> <C> <C>
Investment activity:
Reinvested dividends........................ $ 714 $ 1,115 $ 1,286
Risk & administrative expense (note 4)...... (1,554) (3,888) (728)
-------- ---------- ----------
Net investment activity................. (840) (2,773) 558
-------- ---------- ----------
Realized & Unrealized gain (loss) on
investments:
Reinvested capital gains.................. 11,588 139 38
Realized gain (loss)...................... (689) 46,760 14,859
Unrealized gain (loss).................... 37,863 319,539 139
-------- ---------- ----------
Net gain (loss) on investments.......... 48,762 366,438 15,036
-------- ---------- ----------
Net increase in contract owners'
equity from operations............. 47,922 363,665 15,594
-------- ---------- ----------
Equity transactions:
Sales:
Contract purchase payments................ 539,440 1,505,041 119,362
Transfers from fixed & other
subaccounts............................. 73,249 1,737,064 4,506,289
-------- ---------- ----------
612,689 3,242,105 4,625,651
-------- ---------- ----------
Redemptions:
Withdrawals & surrenders (note 5)......... 609 61 59
Annuity & death benefit payments.......... 116 185 16,112
Transfers to fixed & other subaccounts.... 3,384 1,188,160 4,399,733
-------- ---------- ----------
4,109 1,188,406 4,415,904
-------- ---------- ----------
Net equity transactions................. 608,580 2,053,699 209,747
-------- ---------- ----------
Net change in contract owners'
equity............................. 656,502 2,417,364 225,341
Contract owners' equity:
Beginning of period......................... 0 0 0
-------- ---------- ----------
End of period............................... $656,502 $2,417,364 $ 225,341
======== ========== ==========
</TABLE>
- ---------------
(b) Period from April 1, 1997 date of commencement of operations.
(c) Period from May 1, 1998 date of commencement of operations.
The accompanying notes are an integral part of these financial statements.
13
<PAGE> 46
OHIO NATIONAL VARIABLE ACCOUNT A
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
For the Year Ended December 31, 1998
<TABLE>
<CAPTION>
JANUS ASPEN SERIES
(CONTINUED) SALOMON VARIABLE FUND SERIES
----------------------- ------------------------------------
WW TOTAL
GROWTH BALANCE CAPITAL RETURN INVESTORS
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
1998(c) 1998(c) 1998(c) 1998(c) 1998(c)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Investment activity:
Reinvested dividends.............................. $ 9,702 $ 48,910 $ 1,801 $ 5,362 $ 1,601
Risk & administrative expense (note 4)............ (7,118) (10,847) (402) (825) (1,179)
---------- ---------- -------- -------- --------
Net investment activity...................... 2,584 38,063 1,399 4,537 422
---------- ---------- -------- -------- --------
Realized & Unrealized gain (loss) on investments:
Reinvested capital gains....................... 2,416 1,137 3,009 1,072 0
Realized gain (loss)........................... 36,214 8,538 762 829 1,496
Unrealized gain (loss)......................... 186,957 485,789 17,714 4,184 23,307
---------- ---------- -------- -------- --------
Net gain (loss) on investments............... 225,587 495,464 21,485 6,085 24,803
---------- ---------- -------- -------- --------
Net increase in contract owners' equity
from operations......................... 228,171 533,527 22,884 10,622 25,225
---------- ---------- -------- -------- --------
Equity transactions:
Sales:
Contract purchase payment...................... 1,786,575 2,648,081 233,419 232,678 333,783
Transfers from fixed & other subaccounts....... 3,425,697 1,383,055 42,434 151,291 36,621
---------- ---------- -------- -------- --------
5,212,272 4,031,136 275,853 383,969 370,404
---------- ---------- -------- -------- --------
Redemptions:
Withdrawals & surrenders (note 5)................. 30,747 18,758 0 0 272
Annuity & death benefit payments.................. 252 6,210 107 0 186
Transfers to fixed & other subaccounts............ 2,697,114 294,535 0 19,970 1,999
---------- ---------- -------- -------- --------
2,728,113 319,503 107 19,970 2,457
---------- ---------- -------- -------- --------
Net equity transactions...................... 2,484,159 3,711,633 275,746 363,999 367,947
---------- ---------- -------- -------- --------
Net change in contract owners' equity..... 2,712,330 4,245,160 298,630 374,621 393,172
Contract owners' equity:
Beginning of period............................... 0 0 0 0 0
---------- ---------- -------- -------- --------
End of period..................................... $2,712,330 $4,245,160 $298,630 $374,621 $393,172
========== ========== ======== ======== ========
<CAPTION>
STRONG VARIABLE ANNUITY FUNDS
------------------------------------------
SCHAFER
OPPORTUNITY II VALUE II GROWTH II
SUBACCOUNT SUBACCOUNT SUBACCOUNT
1998(c) 1998(c) 1998(c)
---------------- ---------- ----------
<S> <C> <C> <C>
Investment activity:
Reinvested dividends.............................. $ 1,436 $ 139 $ 0
Risk & administrative expense (note 4)............ (963) (190) (1,238)
---------- ------- --------
Net investment activity...................... 473 (51) (1,238)
---------- ------- --------
Realized & Unrealized gain (loss) on investments:
Reinvested capital gains....................... 0 0 0
Realized gain (loss)........................... 22,907 1,786 1,501
Unrealized gain (loss)......................... 20,918 3,845 102,974
---------- ------- --------
Net gain (loss) on investments............... 43,825 5,631 104,475
---------- ------- --------
Net increase in contract owners' equity
from operations......................... 44,298 5,580 103,237
---------- ------- --------
Equity transactions:
Sales:
Contract purchase payment...................... 234,597 35,791 360,069
Transfers from fixed & other subaccounts....... 1,443,032 24,309 158,068
---------- ------- --------
1,677,629 60,100 518,137
---------- ------- --------
Redemptions:
Withdrawals & surrenders (note 5)................. 0 0 0
Annuity & death benefit payments.................. 15,648 0 0
Transfers to fixed & other subaccounts............ 930,499 15,411 9,656
---------- ------- --------
946,147 15,411 9,656
---------- ------- --------
Net equity transactions...................... 731,482 44,689 508,481
---------- ------- --------
Net change in contract owners' equity..... 775,780 50,269 611,718
Contract owners' equity:
Beginning of period............................... 0 0 0
---------- ------- --------
End of period..................................... $ 775,780 $50,269 $611,718
========== ======= ========
</TABLE>
- ---------------
(c) Period from May 1, 1998 date of commencement of operations.
The accompanying notes are an integral part of these financial statements.
14
<PAGE> 47
OHIO NATIONAL VARIABLE ACCOUNT A
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
For the Year Ended December 31, 1998
<TABLE>
<CAPTION>
GOLDMAN SACHS
MORGAN STANLEY UNIVERSAL FUNDS ----------
------------------------------------------------- VIT
FIXED US REAL EMERGING GROWTH &
INCOME ESTATE VALUE MKT. DEBT INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
1998(c) 1998(c) 1998(c) 1998(c) 1998(c)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Investment activity:
Reinvested dividends................................ $ 14,820 $ 1,946 $ 5,516 $ 841 $ 6,481
Risk & administrative expense (note 4).............. (836) (256) (1,037) (14) (2,219)
-------- ------- -------- ------ --------
Net investment activity........................ 13,984 1,690 4,479 827 4,262
-------- ------- -------- ------ --------
Realized & Unrealized gain (loss) on investments:
Reinvested capital gains......................... 5,226 0 8,977 0 0
Realized gain (loss)............................. 13 (61) 1,409 42 (1,956)
Unrealized gain (loss)........................... (15,285) (491) (693) (546) 14,203
-------- ------- -------- ------ --------
Net gain (loss) on investments................. (10,046) (552) 9,693 (504) 12,247
-------- ------- -------- ------ --------
Net increase in contract owners' equity from
operations................................ 3,938 1,138 14,172 323 16,509
-------- ------- -------- ------ --------
Equity transactions:
Sales:
Contract purchase payments....................... 315,893 58,605 264,759 6,757 668,643
Transfers from fixed & other subaccounts......... 335,255 27,072 146,186 519 92,384
-------- ------- -------- ------ --------
651,148 85,677 410,945 7,276 761,027
-------- ------- -------- ------ --------
Redemptions:
Withdrawals & surrenders (note 5)................... 253 0 0 0 150
Annuity & death benefit payments.................... 49 0 137 0 150
Transfers to fixed & other subaccounts.............. 112,159 169 2,952 0 29,603
-------- ------- -------- ------ --------
112,461 169 3,089 0 29,903
-------- ------- -------- ------ --------
Net equity transactions........................ 538,687 85,508 407,856 7,276 731,124
-------- ------- -------- ------ --------
Net change in contract owners' equity....... 542,625 86,646 422,028 7,599 747,633
Contract owners' equity:
Beginning of period................................. 0 0 0 0 0
-------- ------- -------- ------ --------
End of period....................................... $542,625 $86,646 $422,028 $7,599 $747,633
======== ======= ======== ====== ========
<CAPTION>
GOLDMAN SACHS
------------------------------------
VIT VIT VIT
CORE US GLOBAL CAPITAL
EQUITY INCOME GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT
1998(c) 1998(c) 1998(c)
---------- ---------- ----------
<S> <C> <C> <C>
Investment activity:
Reinvested dividends................................ $ 3,505 $ 2,398 $ 2,050
Risk & administrative expense (note 4).............. (2,745) (239) (3,490)
-------- ------- ----------
Net investment activity........................ 760 2,159 (1,440)
-------- ------- ----------
Realized & Unrealized gain (loss) on investments:
Reinvested capital gains......................... 0 644 0
Realized gain (loss)............................. 1,045 57 7,124
Unrealized gain (loss)........................... 79,395 (2,172) 110,809
-------- ------- ----------
Net gain (loss) on investments................. 80,440 (1,471) 117,933
-------- ------- ----------
Net increase in contract owners' equity from
operations................................ 81,200 688 116,493
-------- ------- ----------
Equity transactions:
Sales:
Contract purchase payments....................... 760,740 75,695 781,171
Transfers from fixed & other subaccounts......... 74,272 6,926 213,959
-------- ------- ----------
835,012 82,621 995,130
-------- ------- ----------
Redemptions:
Withdrawals & surrenders (note 5)................... 249 0 9,036
Annuity & death benefit payments.................... 24,187 0 3,393
Transfers to fixed & other subaccounts.............. 42,315 766 40,314
-------- ------- ----------
66,751 766 52,743
-------- ------- ----------
Net equity transactions........................ 768,261 81,855 942,387
-------- ------- ----------
Net change in contract owners' equity....... 849,461 82,543 1,058,880
Contract owners' equity:
Beginning of period................................. 0 0 0
-------- ------- ----------
End of period....................................... $849,461 $82,543 $1,058,880
======== ======= ==========
</TABLE>
- ---------------
(c) Period from May 1, 1998 date of commencement of operations.
The accompanying notes are an integral part of these financial statements.
15
<PAGE> 48
[THIS PAGE LEFT INTENTIONALLY BLANK]
16
<PAGE> 49
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 portfolio shares of Ohio National
Fund, Inc., Montgomery Variable Series Funds III, Fidelity Variable
Insurance Products Fund, J. P. Morgan Series Trust II, Janus Aspen Series,
Salomon Brothers Variable Series Fund, Inc., Strong Variable Insurance
Funds, Inc., Morgan Stanley Universal Funds, Inc. and Goldman Sachs Variable
Insurance Trust (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, 1998. Share transactions are recorded on the trade date. Income
and capital gain distributions are recorded on the ex-dividend date. Net
realized capital gains and losses are determined on the basis of average
cost.
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, 1998 the aggregate cost and number of shares of the
underlying funds owned by the respective subaccounts were:
<TABLE>
<CAPTION>
MONEY CAPITAL
EQUITY MARKET BOND OMNI INTERNATIONAL APPRECIATION SMALL CAP
OHIO NATIONAL FUNDS SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------- ----------- ----------- ----------- ----------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Aggregate Cost............... $81,681,801 $19,173,429 $10,179,848 $69,000,855 $53,142,837 $25,765,403 $21,221,932
Number of Shares............. 3,210,454 1,917,343 962,526 4,058,052 3,802,676 1,998,930 1,248,256
</TABLE>
<TABLE>
<CAPTION>
GLOBAL AGGRESSIVE CORE GROWTH & S&P 500 SOCIAL STRATEGIC
CONTRARIAN GROWTH GROWTH INCOME INDEX AWARENESS INCOME
OHIO NATIONAL FUNDS SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Aggregate Cost.................. $5,857,370 $6,644,727 $3,145,247 $18,564,687 $32,891,286 $2,614,705 $ 2,013,934
Number of Shares................ 500,585 608,507 324,235 1,420,106 2,537,197 223,219 200,619
</TABLE>
<TABLE>
<CAPTION>
RELATIVE EQUITY HIGH INCOME SMALL CAP
STELLAR VALUE BLUE CHIP INCOME BOND GROWTH
OHIO NATIONAL FUNDS SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Aggregate Cost.................. $1,354,605 $8,763,355 $ 782,347 $ 93,238 $ 451,524 $ 145,994
Number of Shares................ 127,465 666,376 81,277 9,469 46,720 16,909
</TABLE>
<TABLE>
<CAPTION>
MONTGOMERY MONTGOMERY FIDELITY JP MORGAN
ASSET ASSET SMALL FIDELITY VIP TRUST II
EMERGING CAP FIDELITY VIP EQUITY HIGH SMALL JANUS ASPEN
MKT. OPPORTUNITY VIP GROWTH INCOME INCOME COMPANY GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Aggregate Cost.................. $1,084,794 $ 80,213 $3,679,936 $5,176,172 $3,368,647 $ 618,639 $ 2,097,825
Number of Shares................ 109,996 9,748 100,806 215,955 268,594 55,354 102,692
</TABLE>
17
<PAGE> 50
OHIO NATIONAL VARIABLE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
SALOMON
JANUS ASPEN JANUS ASPEN JANUS BROS SALOMON
INTERNATIONAL WORLDWIDE ASPEN VARIABLE BROS. VARIABLE
GROWTH GROWTH BALANCED CAPITAL TOTAL RETURN
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------- ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Aggregate Cost........................... $225,202 $2,525,373 $3,759,371 $280,916 $370,437
Number of Shares......................... 10,594 93,239 188,674 25,811 36,021
<CAPTION>
SALOMON STRONG
BROS. VARIABLE OPPORTUNITY
INVESTORS II
SUBACCOUNT SUBACCOUNT
-------------- -----------
<S> <C> <C>
Aggregate Cost........................... $369,865 $754,862
Number of Shares......................... 35,710 35,717
</TABLE>
<TABLE>
<CAPTION>
MORGAN
MORGAN MORGAN MORGAN STANLEY GOLDMAN
STRONG STANLEY STANLEY STANLEY UNIVERSAL SACHS VIT
SCHAFER STRONG UNIVERSAL UNIVERSAL US UNIVERSAL EMERGING GROWTH &
VALUE II GROWTH II FIXED INCOME REAL ESTATE VALUE MKT DEBT INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ----------- ------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Aggregate Cost................ $ 46,424 $ 508,744 $ 557,910 $ 87,137 $422,721 $ 8,145 $733,430
Number of Shares.............. 4,987 38,185 50,713 8,841 38,021 1,246 71,544
</TABLE>
<TABLE>
<CAPTION>
GOLDMAN GOLDMAN GOLDMAN
SACHS VIT SACHS VIT SACHS VIT
CORE US GLOBAL CAPITAL
EQUITY INCOME GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ----------- -----------
<S> <C> <C> <C>
Aggregate Cost.............. $770,066 $ 84,715 $ 948,071
Number of Shares............ 74,384 7,998 93,623
</TABLE>
(3) CONTRACTS IN ACCUMULATION PERIOD
At December 31, 1998 the accumulation units and value per unit of the
respective subaccounts and products were:
<TABLE>
<CAPTION>
ACCUMULATION UNITS VALUE PER UNIT VALUE
------------------ -------------- -----------
<S> <C> <C> <C>
EQUITY SUBACCOUNT
Combination............................................... 26,150.9503 139.192132 $ 3,640,007
Back Load................................................. 18,686.2740 78.143774 $ 1,460,216
Top I..................................................... 150,434.2110 62.541201 $ 9,408,336
Top Tradition............................................. 1,469,466.9466 53.820037 $79,086,765
Top Plus.................................................. 755,665.1416 18.458779 $13,948,656
Investar Vision........................................... 73,097.3122 12.093494 $ 884,002
Top Spectrum.............................................. 204,827.9703 12.093494 $ 2,477,086
Top Explorer.............................................. 417,377.5838 12.364737 $ 5,160,764
MONEY MARKET SUBACCOUNT
VIA....................................................... 15,961.1499 28.352494 $ 452,538
Top I..................................................... 24,711.8234 21.483279 $ 530,891
Top Tradition............................................. 133,824.4986 19.104543 $ 2,556,656
Top Plus.................................................. 298,676.0483 12.321496 $ 3,680,136
Investar Vision........................................... 11,211.8391 10.796720 $ 121,051
Top Spectrum.............................................. 111,469.1501 10.796720 $ 1,203,501
Top Explorer.............................................. 458,755.0389 10.716203 $ 4,916,112
Oncore Flex............................................... 354,726.2117 10.250770 $ 3,636,217
Oncore Value.............................................. 49,676.1676 10.291475 $ 511,241
Oncore Premier............................................ 141,510.6535 10.257518 $ 1,451,548
</TABLE>
18
<PAGE> 51
OHIO NATIONAL VARIABLE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
ACCUMULATION UNITS VALUE PER UNIT VALUE
------------------ -------------- -----------
<S> <C> <C> <C>
BOND SUBACCOUNT
Top I..................................................... 18,756.0110 31.234606 $ 585,837
Top Tradition............................................. 136,752.2145 28.249407 $ 3,863,169
Top Plus.................................................. 163,496.3173 12.919987 $ 2,112,370
Investar Vision........................................... 40,793.1412 11.197447 $ 456,779
Top Spectrum.............................................. 85,530.4152 11.197447 $ 957,722
Top Explorer.............................................. 155,241.5633 11.256655 $ 1,747,501
Oncore Flex............................................... 0.0000 10.211170 $ 0
Oncore Value.............................................. 9,887.4152 10.251716 $ 101,363
Oncore Premier............................................ 31,344.6853 10.217891 $ 320,277
OMNI SUBACCOUNT
Top I..................................................... 124,947.5714 40.603031 $ 5,073,250
Top Tradition............................................. 1,380,276.6861 40.510184 $55,915,263
Top Plus.................................................. 811,017.1342 16.898733 $13,705,162
Investar Vision........................................... 59,841.0789 11.966933 $ 716,114
Top Spectrum.............................................. 240,642.8038 11.966933 $ 2,879,756
Top Explorer.............................................. 670,925.2933 12.100620 $ 8,118,612
Oncore Flex............................................... 0.0000 9.373686 $ 0
Oncore Value.............................................. 28,181.1155 9.410936 $ 265,211
Oncore Premier............................................ 19,147.1651 9.379873 $ 179,598
INTERNATIONAL SUBACCOUNT
Top I..................................................... 78,452.3384 17.278635 $ 1,355,549
Top Tradition............................................. 1,878,181.4332 17.278635 $32,452,412
Top Plus.................................................. 690,871.8461 15.241954 $10,530,237
Investar Vision........................................... 39,155.7072 10.362585 $ 405,754
Top Spectrum.............................................. 81,086.6449 10.362585 $ 840,267
Top Explorer.............................................. 318,013.4051 10.120487 $ 3,218,451
Oncore Flex............................................... 0.0000 9.345821 $ 0
Oncore Value.............................................. 2,069.7149 9.382965 $ 19,420
Oncore Premier............................................ 5,885.3043 9.351988 $ 55,039
CAPITAL APPRECIATION SUBACCOUNT
Top I..................................................... 23,962.1129 15.538473 $ 372,334
Top Tradition............................................. 606,077.6818 15.538473 $ 9,417,522
Top Plus.................................................. 464,527.7607 17.357724 $ 8,063,145
Investar Vision........................................ 68,408.7734 11.872017 $ 812,150
Top Spectrum.............................................. 142,364.2479 11.872017 $ 1,690,151
Top Explorer.............................................. 392,536.8671 11.921997 $ 4,679,823
Oncore Flex............................................... 6,257.6396 9.830302 $ 61,514
Oncore Value.............................................. 12,436.3273 9.869354 $ 122,739
Oncore Premier............................................ 56,849.3316 9.836784 $ 559,215
SMALL CAP SUBACCOUNT
Top I..................................................... 27,574.1368 16.668731 $ 459,625
Top Tradition............................................. 665,332.0331 16.668731 $11,090,241
Top Plus.................................................. 369,788.2913 21.836411 $ 8,074,849
Investar Vision........................................... 76,716.2178 11.836906 $ 908,083
Top Spectrum.............................................. 70,073.1752 11.836906 $ 829,450
Top Explorer.............................................. 322,152.0037 13.888339 $ 4,474,156
</TABLE>
19
<PAGE> 52
OHIO NATIONAL VARIABLE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
ACCUMULATION UNITS VALUE PER UNIT VALUE
------------------ -------------- -----------
<S> <C> <C> <C>
GLOBAL CONTRARIAN SUBACCOUNT
Top Tradition............................................. 113,661.7885 12.697451 $ 1,443,215
Top Plus.................................................. 144,093.4893 13.644341 $ 1,966,061
Investar Vision........................................... 7,689.4885 11.268548 $ 86,649
Top Spectrum.............................................. 20,281.3963 11.268548 $ 228,542
Top Explorer.............................................. 150,831.7504 10.991242 $ 1,657,828
AGGRESSIVE GROWTH SUBACCOUNT
Top Tradition............................................. 200,720.5572 12.422862 $ 2,493,524
Top Plus.................................................. 138,326.7637 15.009251 $ 2,076,181
Investar Vision........................................... 54,397.5893 11.858619 $ 645,080
Top Spectrum.............................................. 38,405.2594 11.858619 $ 455,433
Top Explorer.............................................. 84,441.2896 13.192890 $ 1,114,025
CORE GROWTH SUBACCOUNT
Top Tradition............................................. 138,652.1868 10.318290 $ 1,430,654
Top Plus.................................................. 98,154.1597 10.359066 $ 1,016,785
Top Explorer.............................................. 79,477.5458 12.196537 $ 969,351
GROWTH & INCOME SUBACCOUNT
Top Tradition............................................. 467,062.7422 14.309421 $ 6,683,397
Top Plus.................................................. 314,341.6560 14.365899 $ 4,515,800
Top Explorer.............................................. 520,160.4255 14.465502 $ 7,524,382
Oncore Flex............................................... 3,516.7603 9.287441 $ 32,662
Oncore Value.............................................. 7,213.9052 9.324354 $ 67,265
Oncore Premier............................................ 57,454.7090 9.293575 $ 533,960
S&P 500 INDEX SUBACCOUNT
Top Tradition............................................. 684,473.5906 16.757375 $11,469,981
Top Plus.................................................. 486,237.2461 16.823468 $ 8,180,197
Top Explorer.............................................. 756,235.1851 16.308232 $12,332,859
Investar Vision........................................... 55,052.3431 11.452642 $ 630,495
Top Spectrum.............................................. 63,211.2177 11.452642 $ 723,935
Oncore Flex............................................... 14,743.1397 11.131014 $ 164,106
Oncore Value.............................................. 70,846.4001 11.175217 $ 791,724
Oncore Premier............................................ 162,769.6725 11.138349 $ 1,812,985
SOCIAL AWARENESS SUBACCOUNT
Top Tradition............................................. 49,168.5293 9.537309 $ 468,935
Top Plus.................................................. 48,417.4699 9.574986 $ 463,597
Top Explorer.............................................. 101,723.5977 10.140901 $ 1,031,569
STRATEGIC INCOME SUBACCOUNT
Investar Vision........................................... 133,871.2498 10.425769 $ 1,395,711
Top Spectrum.............................................. 45,931.4048 10.425769 $ 478,870
STELLAR SUBACCOUNT
Investar Vision........................................... 113,671.1592 10.980827 $ 1,248,203
Top Spectrum.............................................. 8,885.3913 10.980827 $ 97,569
RELATIVE VALUE SUBACCOUNT
Investar Vision........................................... 630,488.8962 15.061199 $ 9,495,918
Top Spectrum.............................................. 33,179.1595 15.061199 $ 499,718
</TABLE>
20
<PAGE> 53
OHIO NATIONAL VARIABLE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
ACCUMULATION UNITS VALUE PER UNIT VALUE
------------------ -------------- -----------
<S> <C> <C> <C>
BLUE CHIP SUBACCOUNT
Oncore Flex............................................... 2,507.9476 10.134253 $ 25,417
Oncore Value.............................................. 32,060.0222 10.174507 $ 326,195
Oncore Premier............................................ 47,253.8600 10.140937 $ 479,198
EQUITY INCOME SUBACCOUNT
Oncore Flex............................................... 0.0000 10.488837 $ 0
Oncore Value.............................................. 329.6651 10.530500 $ 3,471
Oncore Premier............................................ 9,167.8920 10.495750 $ 96,224
HIGH INCOME BOND SUBACCOUNT
Oncore Flex............................................... 0.0000 9.882097 $ 0
Oncore Value.............................................. 15,816.8839 9.921342 $ 156,925
Oncore Premier............................................ 29,416.3892 9.888612 $ 290,887
SMALL CAP GROWTH SUBACCOUNT
Oncore Flex............................................... 5,017.3301 10.359321 $ 51,977
Oncore Value.............................................. 4,359.2743 10.400462 $ 45,338
Oncore Premier............................................ 7,682.4385 10.366153 $ 79,637
MONTGOMERY ASSET EMERGING MARKET
Investar Vision........................................... 37,962.2205 6.030274 $ 228,923
Top Spectrum.............................................. 13,213.8868 6.030274 $ 79,683
Top Explorer.............................................. 72,272.3006 5.657457 $ 408,877
Oncore Flex............................................... 0.0000 6.396804 $ 0
Oncore Value.............................................. 0.0000 6.422302 $ 0
Oncore Premier............................................ 1,154.3484 6.401040 $ 7,389
MONTGOMERY ASSET SMALL CAP OPPORTUNITY
Oncore Flex............................................... 1,465.6874 9.188061 $ 13,467
Oncore Value.............................................. 2,808.2291 9.224569 $ 25,905
Oncore Premier............................................ 5,556.7813 9.194116 $ 51,090
FIDELITY VIP GROWTH SUBACCOUNT
Top Explorer.............................................. 263,103.2947 17.191614 $ 4,523,170
FIDELITY VIP EQUITY INCOME SUBACCOUNT
Top Explorer.............................................. 398,393.4229 13.779285 $ 5,489,577
FIDELITY VIP HIGH INCOME BOND SUBACCOUNT
Top Explorer.............................................. 280,387.8643 11.045007 $ 3,096,886
JP MORGAN TRUST II SMALL COMPANY SUBACCOUNT
Oncore Flex............................................... 3,544.0788 8.326677 $ 29,510
Oncore Value.............................................. 11,685.5152 8.359794 $ 97,689
Oncore Premier............................................ 63,525.2986 8.332170 $ 529,304
JANUS ASPEN GROWTH SUBACCOUNT
Oncore Flex............................................... 7,102.6219 11.550278 $ 82,037
Oncore Value.............................................. 59,299.9616 11.596125 $ 687,650
Oncore Premier............................................ 142,558.5026 11.557898 $ 1,647,677
JANUS ASPEN INTERNATIONAL GROWTH SUBACCOUNT
Oncore Flex............................................... 0.0000 9.866798 $ 0
Oncore Value.............................................. 3,168.7443 9.905969 $ 31,389
Oncore Premier............................................ 19,644.0342 9.873298 $ 193,951
</TABLE>
21
<PAGE> 54
OHIO NATIONAL VARIABLE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
ACCUMULATION UNITS VALUE PER UNIT VALUE
------------------ -------------- -----------
<S> <C> <C> <C>
JANUS ASPEN WORLDWIDE GROWTH SUBACCOUNT
Investar Vision........................................... 52,759.9618 10.308701 $ 543,887
Top Spectrum.............................................. 10,721.8067 10.308701 $ 110,528
Oncore Flex............................................... 2,062.7468 10.498008 $ 21,655
Oncore Value.............................................. 53,905.3377 10.539673 $ 568,145
Oncore Premier............................................ 139,755.1030 10.504917 $ 1,468,116
JANUS ASPEN BALANCED SUBACCOUNT
Investar Vision........................................... 79,457.8658 11.955678 $ 949,973
Top Spectrum.............................................. 63,309.0657 11.955678 $ 756,903
Oncore Flex............................................... 10,515.2557 11.619511 $ 122,182
Oncore Value.............................................. 42,914.7797 11.665611 $ 500,627
Oncore Premier............................................ 164,741.5646 11.627155 $ 1,915,476
SALOMON BROTHERS VARIABLE CAPITAL SUBACCOUNT
Oncore Flex............................................... 3,518.1965 10.660198 $ 37,505
Oncore Value.............................................. 2,810.4357 10.702534 $ 30,079
Oncore Premier............................................ 21,659.4320 10.667226 $ 231,046
SALOMON BROTHERS VAR. TOTAL RETURN SUBACCOUNT
Oncore Flex............................................... 3,756.6195 9.998263 $ 37,560
Oncore Value.............................................. 4,957.7277 10.037977 $ 49,766
Oncore Premier............................................ 28,715.7024 10.004853 $ 287,296
SALOMON BROTHERS VARIABLE INVESTORS SUBACCOUNT
Oncore Flex............................................... 4,237.0237 10.125357 $ 42,901
Oncore Value.............................................. 6,726.7725 10.165569 $ 68,381
Oncore Premier............................................ 27,821.5618 10.132029 $ 281,889
STRONG OPPORTUNITY II SUBACCOUNT
Oncore Flex............................................... 42,277.1255 9.534784 $ 403,103
Oncore Value.............................................. 10,471.1133 9.572665 $ 100,236
Oncore Premier............................................ 28,554.4675 9.541070 $ 272,440
STRONG SCHAFER VALUE II SUBACCOUNT
Oncore Flex............................................... 0.0000 9.386490 $ 0
Oncore Value.............................................. 1,864.6521 9.423801 $ 17,572
Oncore Premier............................................ 3,481.0608 9.392680 $ 32,696
STRONG GROWTH II SUBACCOUNT
Oncore Flex............................................... 0.0000 11.518881 $ 0
Oncore Value.............................................. 10,254.9972 11.564594 $ 118,595
Oncore Premier............................................ 42,781.7908 11.526465 $ 493,123
MORGAN STANLEY UNIVERSAL FIXED INCOME SUBACCOUNT
Oncore Flex............................................... 3,924.9967 10.442562 $ 40,987
Oncore Value.............................................. 3,904.7020 10.484025 $ 40,937
Oncore Premier............................................ 44,088.5946 10.449435 $ 460,701
MORGAN STANLEY UNIVERSAL US REAL ESTATE SUBACCOUNT
Oncore Flex............................................... 0.0000 8.935176 $ 0
Oncore Value.............................................. 0.0000 8.970704 $ 0
Oncore Premier............................................ 9,690.8389 8.941071 $ 86,646
MORGAN STANLEY UNIVERSAL VALUE SUBACCOUNT
Oncore Flex............................................... 0.0000 8.793779 $ 0
Oncore Value.............................................. 2,408.4800 8.828718 $ 21,264
Oncore Premier............................................ 45,543.5858 8.799574 $ 400,764
</TABLE>
22
<PAGE> 55
OHIO NATIONAL VARIABLE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
ACCUMULATION UNITS VALUE PER UNIT VALUE
------------------ -------------- -----------
<S> <C> <C> <C>
MORGAN STANLEY UNIVERSAL EMERGING MKT DEBT SUBACCOUNT
Oncore Flex............................................... 0.0000 6.715933 $ 0
Oncore Value.............................................. 0.0000 6.742711 $ 0
Oncore Premier............................................ 1,130.7346 6.720380 $ 7,599
GOLDMAN SACHS VIT GROWTH & INCOME SUBACCOUNT
Oncore Flex............................................... 10,579.1958 8.842262 $ 93,544
Oncore Value.............................................. 24,325.6525 8.877426 $ 215,949
Oncore Premier............................................ 49,517.9809 8.848103 $ 438,140
GOLDMAN SACHS VIT CORE US EQUITY SUBACCOUNT
Oncore Flex............................................... 13,701.2141 10.178701 $ 139,461
Oncore Value.............................................. 21,555.3686 10.219123 $ 220,277
Oncore Premier............................................ 48,080.8572 10.185409 $ 489,723
GOLDMAN SACHS VIT GLOBAL INCOME SUBACCOUNT
Oncore Flex............................................... 0.0000 10.562975 $ 0
Oncore Value.............................................. 1,759.2795 10.604929 $ 18,657
Oncore Premier............................................ 6,044.1431 10.569939 $ 63,886
GOLDMAN SACHS VIT CAPITAL GROWTH SUBACCOUNT
Investar Vision........................................... 9,474.7690 11.582489 $ 109,741
Top Spectrum.............................................. 27,170.3186 11.582489 $ 314,700
Oncore Flex............................................... 0.0000 11.183295 $ 0
Oncore Value 15,484.3109 11.227684 $ 173,853
Oncore Premier............................................ 41,158.0548 11.190658 $ 460,586
</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
1.25% 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.
23
<PAGE> 56
OHIO NATIONAL VARIABLE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 $300,000 during 1998.
(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.
24
<PAGE> 57
<PAGE> 1
[KPMG LOGO]
THE OHIO NATIONAL LIFE INSURANCE COMPANY
AND SUBSIDIARIES
(a wholly-owned subsidiary of
Ohio National Financial Services, Inc.)
Consolidated Financial Statements
December 31, 1998 and 1997
With Independent Auditors' Report Thereon
<PAGE> 2
[KPMG LETTERHEAD]
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 (a wholly-owned subsidiary of Ohio National
Financial Services, Inc.) and subsidiaries (the Company) as of December 31, 1998
and 1997, and the related consolidated statements of income, equity and cash
flows for each of the years in the three-year period ended December 31, 1998.
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, 1998 and 1997, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1998, 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.
/s/ KPMG LLP
Cincinnati, Ohio
January 29, 1999
<PAGE> 3
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Consolidated Balance Sheets
December 31, 1998 and 1997
(in thousands, except share amounts)
<TABLE>
<CAPTION>
ASSETS 1998 1997
------------ -----------
<S> <C> <C>
Investments (notes 5, 9 and 10):
Securities available-for-sale, at fair value:
Fixed maturities $2,600,552 2,687,847
Equity securities 93,649 81,983
Fixed maturities held-to-maturity, at amortized cost 679,528 724,892
Mortgage loans on real estate, net 1,144,424 1,230,256
Real estate, net 8,724 21,820
Policy loans 40,810 153,348
Other long-term investments 41,697 42,539
Short-term investments 98,315 37,509
---------- ----------
Total investments 4,707,699 4,980,194
Cash 9,451 14,012
Accrued investment income 58,388 64,079
Deferred policy acquisition costs 183,281 250,942
Reinsurance recoverable 75,394 61,862
Other assets 35,034 42,683
Assets held in Separate Accounts 1,154,576 916,790
Closed block assets (note 2) 636,083 -
========== ==========
Total assets $6,859,906 6,330,562
========== ==========
LIABILITIES AND EQUITY
Future policy benefits and claims (note 6) $3,968,009 4,445,474
Policyholders' dividend accumulations 46,276 62,423
Other policyholder funds 13,604 17,069
Note payable (net of unamortized discount of $722 in 1998
and $766 in 1997) (note 7) 84,278 84,234
Federal income taxes (note 8):
Current 21,230 12,658
Deferred 67,482 65,380
Other liabilities 130,208 117,537
Liabilities related to Separate Accounts 1,107,049 887,542
Closed block liabilities (note 2) 713,162 -
---------- ----------
Total liabilities $6,151,298 5,692,317
---------- ----------
Equity (notes 3 and 12):
Class A Common stock, $1 par value. 10,000,000 authorized,
issued and outstanding 10,000 -
Accumulated other comprehensive income 107,444 102,956
Retained earnings 591,164 535,289
---------- ----------
Total equity 708,608 638,245
Commitments and contingencies (notes 10 and 14)
---------- ----------
Total liabilities and equity $6,859,906 6,330,562
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 4
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Consolidated Statements of Income
Years ended December 31, 1998, 1997 and 1996
(in thousands)
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Revenues (note 15):
Traditional life insurance premiums $ 96,423 116,402 113,176
Accident and health insurance premiums 25,183 23,921 23,478
Annuity premiums and charges 45,386 37,630 28,757
Universal life policy charges 59,743 50,991 42,304
Net investment income (note 5) 376,403 390,547 370,702
Net realized gains on investments (note 5) 1,693 12,500 8,761
Other income 3,113 2,265 1,861
Contribution from the closed block (note 2) 5,851 - -
--------- --------- ---------
613,795 634,256 589,039
--------- --------- ---------
Benefits and expenses:
Benefits and claims 389,579 398,598 379,116
Provision for policyholders' dividends on
participating policies (note 12) 20,792 25,399 26,996
Amortization of deferred policy acquisition costs 19,351 23,108 19,341
Other operating costs and expenses 75,698 80,792 71,111
--------- --------- ---------
505,420 527,897 496,564
--------- --------- ---------
Income before Federal income taxes 108,375 106,359 92,475
--------- --------- ---------
Federal income taxes (note 8):
Current expense 40,824 41,373 37,443
Deferred benefit (324) (2,101) (4,571)
--------- --------- ---------
40,500 39,272 32,872
--------- --------- ---------
Net income $ 67,875 67,087 59,603
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 5
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Consolidated Statements of Equity
Years ended December 31, 1998, 1997 and 1996
(in thousands)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
COMMON COMPREHENSIVE RETAINED TOTAL
STOCK INCOME EARNINGS EQUITY
---------- ------------- ---------- ---------
1996:
<S> <C> <C> <C> <C>
Balance, beginning of year $ - 85,844 408,599 494,443
Comprehensive income:
Net income - - 59,603 59,603
Other comprehensive loss (note 4) - (39,037) - (39,037)
--------
Total comprehensive income 20,566
-------- -------- -------- --------
Balance, end of year $ - 46,807 468,202 515,009
======== ======== ======== ========
1997:
Balance, beginning of year $ - 46,807 468,202 515,009
Comprehensive income:
Net income - - 67,087 67,087
Other comprehensive income (note 4) - 56,149 - 56,149
--------
Total comprehensive income 123,236
-------- -------- -------- --------
Balance, end of year $ - 102,956 535,289 638,245
======== ======== ======== ========
1998:
Balance, beginning of year $ - 102,956 535,289 638,245
Stock issuance 10,000 - (10,000) -
Dividends paid - - (2,000) (2,000)
Comprehensive income:
Net income - - 67,875 67,875
Other comprehensive income (note 4) - 4,488 - 4,488
--------
Total comprehensive income 72,363
-------- -------- -------- --------
Balance, end of year $ 10,000 107,444 591,164 708,608
======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 6
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Consolidated Statements of Cash Flows
Years ended December 31, 1998, 1997 and 1996
(in thousands)
<TABLE>
<CAPTION>
1998 1997 1996
------------- -------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 67,875 67,087 59,603
Adjustments to reconcile net income to net cash
provided by operating activities:
Capitalization of deferred policy acquisition costs (51,502) (48,507) (43,711)
Amortization of deferred policy acquisition costs 19,351 23,108 19,341
Amortization and depreciation (278) 4,342 1,095
Realized gains on invested assets, net (1,693) (12,500) (8,761)
Deferred Federal income tax (benefit) (324) (2,101) (4,571)
(Increase) decrease in accrued investment income 5,691 (1,740) 789
(Increase) decrease in other assets (6,383) (14,548) 3,169
Net increase in separate accounts (18,279) (16,011) (958)
Increase in policyholder account balances 36,161 40,843 20,249
(Decrease) increase in policyholders' dividend
accumulations and other funds (19,612) (243) 28
Increase (decrease) in current Federal income tax payable 8,572 (2,149) (6,842)
Increase in other liabilities 16,032 3,603 11,134
Other, net (15,403) 1,946 1,885
Closed block activity (11,268) - -
----------- ----------- -----------
Net cash provided by operating activities 28,940 43,130 52,450
----------- ----------- -----------
Cash flows from investing activities:
Proceeds from maturity of fixed maturities available-for-sale 11,167 298,686 145,554
Proceeds from sale of fixed maturities available-for-sale 188,333 51,770 74,977
Proceeds from sale of equity securities 9,603 4,996 15,001
Proceeds from maturity of fixed maturities held-to-maturity 103,534 75,530 57,129
Proceeds from repayment of mortgage loans on real estate 182,845 180,745 140,831
Proceeds from sale of real estate 15,906 19,078 4,181
Cost of fixed maturities available-for-sale acquired (293,287) (367,027) (331,991)
Cost of equity securities acquired (9,425) (7,205) (4,000)
Cost of fixed maturities held-to-maturity acquired (121,886) (110,982) (76,022)
Cost of mortgage loans on real estate acquired (197,021) (321,914) (332,088)
Cost of real estate acquired (846) (1,310) (836)
Change in policy loans, net (4,321) (620) (4,045)
Change in other assets, net 5,253 312 (2,149)
Change in closed block investments, net (49,658) - -
----------- ----------- -----------
Net cash used in investing activities (159,803) (177,941) (313,458)
----------- ----------- -----------
Cash flows from financing activities:
Increase in universal life and investment product account balances 1,133,125 1,000,919 973,793
Decrease in universal life and investment product account balances (940,656) (884,395) (745,546)
Proceeds from note issue - - 49,340
Repayment of note - - (16,477)
Dividends to shareholders (2,000) - -
Other, net (3,361) 80 68
----------- ----------- -----------
Net cash provided by financing activities 187,108 116,604 261,178
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 56,245 (18,207) 170
Cash and cash equivalents, beginning of year 51,521 69,728 69,558
----------- ----------- -----------
Cash and cash equivalents, end of year $ 107,766 51,521 69,728
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 7
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
(1) ORGANIZATION, CONSOLIDATION POLICY AND BUSINESS DESCRIPTION
The Ohio National Life Insurance Company (ONLIC) is a stock 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". All significant intercompany accounts and
transactions have been eliminated in consolidation.
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 was approved by the Company's
policyholders and by the Ohio Department of Insurance and became
effective on August 1, 1998 (Effective Date). As part of the
reorganization (see footnote (1)(k)), ONLIC became a stock company 100%
owned by Ohio National Financial Services, Inc. (ONFS). ONFS is 100%
owned by Ohio National Mutual Holdings, Inc. (ONMH), an Ohio mutual
holding company.
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 the 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)
6
<PAGE> 8
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
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
securities classified as trading.
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.
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.
(Continued)
7
<PAGE> 9
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
(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 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)).
(Continued)
8
<PAGE> 10
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
(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 6).
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.
(f) PARTICIPATING BUSINESS
Participating business represents approximately 41% of the
Company's ordinary life insurance in force in 1998. In 1997 and
1996, participating business represented approximately 42% and
43%, 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, 1998.
(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 is included as part of the consolidated Federal income
tax return of its ultimate parent, OHMH. 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.
(Continued)
9
<PAGE> 11
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
(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.
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) CLOSED BLOCK
The Reorganization contained an arrangement, known as a closed
block (the Closed Block), to provide for dividends on policies
that were in force on the Effective Date and were within classes
of individual policies for which the Company had a dividend scale
in effect at the time of the Reorganization. The Closed Block was
designed to give reasonable assurance to owners of affected
policies that assets will be available to support such policies,
including maintaining dividend scales in effect at the time of the
Reorganization, if the experience underlying such scales
continues. The assets, including revenue therefrom, allocated to
the Closed Block will accrue solely to the benefit of the owners
of policies included in the Closed Block until the Closed Block is
no longer in effect. The Company will not be required to support
the payment of dividends on Closed Block policies from its general
funds.
The financial information of the Closed Block, while prepared on a
GAAP basis, reflects its contractual provisions and not its actual
results of operations and financial position. Many expenses
related to the Closed Block operations are charges to operations
outside of the Closed Block; accordingly, the contribution from
the Closed Block does not represent the actual profitability of
the Closed Block operations. Operating costs and expenses outside
of the Closed Block are, therefore, disproportionate to the
business outside of the Closed Block.
(Continued)
10
<PAGE> 12
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
Summarized financial information of the Closed Block as of December 31, 1998 and
for the five months ended December 31, 1998, is as follow:
<TABLE>
<S> <C>
Closed Block assets:
Fixed maturity securities available-for-sale, at fair value (amortized cost of $
$215,144) 233,722
Fixed maturity securities held-to-maturity, at amortized cost 70,000
Short-term investments, at fair value 3,615
Mortgage loans on real estate, net 100,756
Policy loans 116,745
Accrued investment income 6,008
Other assets 10,528
Reinsurance recoverable 2,871
Deferred policy acquisition costs 91,838
-----------
$ 636,083
===========
Closed Block liabilities:
Future policy benefits and claims 675,498
Other policyowner funds 3,656
Policyholders' dividend accumulations 27,506
Deferred Federal income tax liability 6,502
-----------
$ 713,162
===========
Closed Block revenues and expenses:
Traditional life insurance premiums 31,731
Net investment income 19,941
Net realized gains on investments 210
Other income 34
Benefits and claims (32,640)
Amortization of deferred acquisition costs (4,187)
Other operating costs and expenses (2,386)
Provision for policyholders' dividends on participating policies (6,852)
-----------
Income before Federal income taxes (1) $ 5,851
===========
</TABLE>
(1) Represents contribution from the Closed Block.
(Continued)
11
<PAGE> 13
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
(l) EMERGING ACCOUNTING ISSUES
On January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS 131). SFAS 131
establishes standards for public companies to report information
about operating segments in annual financial statements and
selected information about operating segments in interim financial
reports. SFAS 131 did not affect the results of operations of the
Company or financial position.
The segment information required by SFAS 131 is in note 15.
On January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits" (SFAS 132). SFAS 132
revises employers' disclosures about pension and other
postretirement benefit plans. SFAS 132 does not change the
measurement or recognition of benefit plans in the consolidated
financial statements. The revised disclosures required by SFAS 132
are included in Note 11.
In March 1998, the American Institute of Certified Public
Accountants' Accounting Standards Executive Committee issued
Statement of Position (SOP) 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use". SOP
98-1 provides guidance on the appropriate accounting treatment for
costs incurred to develop or obtain computer software for internal
use. Specifically, SOP 98-1 provides guidance for determining
whether computer software is for internal use and when costs
incurred for internal use software are to be capitalized. SOP 98-1
is effective for financial statements for fiscal years beginning
after December 15, 1998 with earlier application encouraged. The
Company does not believe that the adoption of SOP 98-1 will have a
material impact on consolidated results of operations or financial
condition.
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities" (SFAS 133).
SFAS 133 establishes accounting and reporting standards for
derivative instruments and for hedging activities. Contracts that
contain embedded derivatives, such as certain insurance contracts,
are also addressed by the Statement. SFAS 133 requires that an
entity recognize all derivatives as either assets or liabilities
in the statement of financial position and that those assets or
liabilities be measured at fair value. SFAS 133 is effective for
all fiscal quarters of fiscal years beginning after June 15, 1999,
with earlier application permitted. The Company is currently
reviewing the requirements of this Statement and evaluating what,
if any, impact it will have on consolidated results of operations
and financial condition.
(m) RECLASSIFICATIONS
Certain amounts in the 1997 and 1996 consolidated financial
statements have been reclassified to conform with 1998
presentation.
(Continued)
12
<PAGE> 14
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
(3) BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared in
accordance with GAAP which differs from statutory accounting practices
prescribed or permitted by regulatory authorities. Annual Statements for
ONLIC and ONLAC, insurance subsidiaries, filed with the Department of
Insurance of the State of Ohio, are prepared on a basis of accounting
practices prescribed or permitted by such regulatory authority.
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. ONLIC and ONLAC have no material permitted
statutory accounting practices.
The statutory basis net income and capital and surplus of ONLIC and ONLAC
after intercompany eliminations included in the accompanying consolidated
financial statements was $51,900, $53,696 and $44,503 for the years ended
December 31, 1998, 1997 and 1996, respectively and $408,928 and $362,565
as of December 31, 1998 and 1997, respectively.
(4) COMPREHENSIVE INCOME
Pursuant to Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income", the Consolidated Statements of
Shareholders' Equity include a new measure called "Comprehensive Income".
Comprehensive Income includes net income as well as certain items that
are reported directly within a separate component of shareholders' equity
that bypass net income. The components of other comprehensive income,
including the related Federal tax amounts, were as follows for the years
ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Unrealized gains (losses) on securities available-for-sale
arising during the period:
Net of adjustment to deferred policy acquisition costs $ 11,418 86,670 (52,485)
Related Federal tax (expense) benefit (4,003) (30,335) 18,370
-------- -------- --------
Net 7,415 56,335 (34,115)
-------- -------- --------
Less:
Reclassification adjustment for net (gains) losses on
securities available-for-sale realized during the period:
Gross 4,504 287 7,572
Related Federal tax expense (benefit) (1,577) (101) (2,650)
-------- -------- --------
Net 2,927 186 4,922
-------- -------- --------
Total other comprehensive income (loss) $ 4,488 56,149 (39,037)
======== ======== ========
</TABLE>
(Continued)
13
<PAGE> 15
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
(5) 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 INVESTMENTS
--------------------------------------- ---------------------------------------
1998 1997 1996 1998 1997 1996
---------- --------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Securities available-for-sale:
Fixed maturities $ 204,171 207,377 203,271 $ (2,132) 2,056 3,168
Equity securities 2,638 2,793 4,021 178 38 4,077
Fixed maturities held-to-maturity 59,524 62,348 61,509 5,325 2,539 1,304
Mortgage loans on real estate 106,418 103,566 89,391 371 1,863 1,262
Real estate 2,334 6,123 8,693 2,416 4,418 (605)
Policy loans 7,820 9,834 9,420 - - -
Short-term 167 5,010 3,419 - - -
Other 6,553 6,612 5,042 (4,558) (387) (1,434)
---------- ---------- ---------- ---------- ---------- ----------
Total 389,625 403,663 384,766 1,600 10,527 7,772
Investment expenses (13,222) (13,116) (14,064)
Change in valuation allowances:
Mortgage loans on real estate 93 (63) 926
Real estate and other - 2,036 63
---------- ---------- ----------
93 1,973 989
----------- ----------- -----------
Net investment income $ 376,403 390,547 370,702
=========== =========== ===========
Net realized gains on
---------- ---------- ----------
investments $ 1,693 12,500 8,761
========== ========== ==========
</TABLE>
(Continued)
14
<PAGE> 16
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
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, 1998
---------------------------------------------------------------------
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 $ 121,670 13,584 - 135,254
Obligations of states and political
subdivisions 84,564 9,671 (40) 94,195
Debt securities issued by foreign
governments 2,888 735 - 3,623
Corporate securities 1,593,332 123,019 (15,528) 1,700,823
Mortgage-backed securities 631,745 35,670 (758) 666,657
---------- ---------- ---------- ----------
Total fixed maturities $2,434,199 182,679 (16,326) 2,600,552
========== ========== ========== ==========
Equity securities $ 42,457 54,234 (3,042) 93,649
========== ========== ========== ==========
Fixed maturity securities held-to-maturity
- ------------------------------------------
Obligations of states and political $ 10,265 825 (179) 10,911
subdivisions
Corporate securities 654,447 67,185 (529) 721,102
Mortgage-backed securities 14,816 1,233 - 16,049
---------- ---------- ---------- ----------
$ 679,528 69,243 (708) 748,062
========== ========== ========== ==========
</TABLE>
(Continued)
15
<PAGE> 17
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
<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
subdivisions 53,646 4,449 (90) 58,005
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 subdivisions $ 15,018 1,551 (403) 16,166
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>
The components of unrealized gains on securities available-for-sale,
net, were as follows for the years ended December 31:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Gross unrealized gain $ 217,545 203,146
Adjustment to deferred policy acquisition costs (48,834) (41,350)
Deferred Federal income tax (61,267) (58,840)
----------- -----------
$ 107,444 102,956
=========== ===========
</TABLE>
The net unrealized gain on securities available-for-sale includes a net
unrealized gain on equity securities of $30,823 in 1998 ($24,715 in 1997)
and a net unrealized gain on fixed maturities of $76,621 in 1998 ($78,241
in 1997).
(Continued)
16
<PAGE> 18
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
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>
1998 1997 1996
---------- ---------- -----------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturities $ 3,767 91,601 (95,101)
Equity securities 10,632 15,972 4,769
Fixed maturities held-to-maturity 444 14,217 (39,811)
</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, 1998, 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 $ 48,114 49,448 27,847 29,841
Due after one year through five years 518,076 544,771 197,361 211,673
Due after five years through ten years 814,285 856,819 308,397 337,787
Due after ten years 1,053,724 1,149,514 145,923 168,761
------------- ------------- -------------- ------------
$ 2,434,199 2,600,552 679,528 748,062
============= ============= ============== ============
</TABLE>
Proceeds from the sale of securities available-for-sale (excludes calls)
during 1998, 1997 and 1996 were $3,186, $51,770, and $74,977,
respectively. Gross gains of $0 ($203 in 1997 and $1,667 in 1996) and
gross losses of $38 ($283 in 1997 and $534 in 1996) were realized on
those sales.
Investments with an amortized cost of $11,750 and $7,700 as of December
31, 1998 and 1997, respectively, were on deposit with various regulatory
agencies as required by law.
Real estate is presented at cost less accumulated depreciation of $1,730
in 1998 ($11,172 in 1997) and valuation allowances of $0 in 1998 and
1997.
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 1998 and one mortgage loan on real
estate of $570 in process of foreclosure as of December 31, 1998.
(Continued)
17
<PAGE> 19
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
(6) FUTURE POLICY BENEFITS AND CLAIMS
The liability for future policy benefits for universal life insurance
policies and investment contracts (approximately 93% of the total
liability for future policy benefits as of December 31, 1998 and
approximately 68% of the total liability for future policy benefits as of
December 31, 1997) has been established based on accumulated contract
values without reduction for surrender penalty provisions. The average
interest rate credited on investment product policies was 6.7%, 6.8% and
6.8% for the years ended December 31, 1998, 1997 and 1996, 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:
<TABLE>
<CAPTION>
YEAR OF ISSUE INTEREST RATE
------------- -------------
<S> <C>
1998, 1997 and 1996 4 - 5.5%
1995 and prior 2.25 - 6.0%
</TABLE>
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.
(7) 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, $7,356 and $6,290 during the years ended December 31,
1998, 1997 and 1996, 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.
(Continued)
18
<PAGE> 20
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
(8) 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, 1998.
Total income taxes for the years ended December 31, 1998, 1997 and 1996
were allocated as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------ ----------- -----------
<S> <C> <C> <C>
Operations $ 40,500 39,272 32,872
Unrealized gains (loss) on securities
available for sale 2,426 30,324 (22,045)
------------ ----------- -----------
$ 42,926 69,596 10,827
============ =========== ===========
</TABLE>
Total Federal income tax expense for the years ended December 31, 1998,
1997 and 1996 differs from the amount computed by applying the U.S.
Federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------------------- ---------------------- ----------------------
AMOUNT % AMOUNT % AMOUNT %
----------- -------- ----------- --------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Computed (expected)
tax expense $ 37,931 35.0 37,226 35.0 32,366 35.0
Differential earnings 1,232 1.1 3,720 3.5 3,616 3.9
Dividends received
deduction and tax
exempt interest (1,279) (1.1) (1,406) (1.3) (1,440) (1.6)
Other, net 2,616 2.4 (268) (0.3) (1,670) (1.8)
----------- -------- ----------- --------- ----------- --------
$ 40,500 37.4 39,272 36.9 32,872 35.5
=========== ======== =========== ========= =========== ========
</TABLE>
Included in other, net in 1998 are non-deductible expenses related to the
reorganization to a mutual holding company structure.
Total Federal income tax paid was $32,251, $43,522 and $44,823 (net of
refunds of $6,661, $0 and $0) during the years ended December 31, 1998,
1997 and 1996, respectively.
(Continued)
19
<PAGE> 21
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
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, 1998 and 1997 relate to the following:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Deferred tax assets:
Future policy benefits $ 64,968 57,903
Mortgage loans on real estate 3,130 1,986
Other assets and liabilities 12,722 14,063
----------- -----------
Total gross deferred tax assets 80,820 73,952
----------- -----------
Deferred tax liabilities:
Fixed maturity securities available-for-sale 59,115 57,290
Deferred policy acquisition costs 70,311 66,844
Other fixed maturities, equity securities and other
long-term investments 17,523 14,286
Other 1,353 912
----------- -----------
Total gross deferred tax liabilities 148,302 139,332
----------- -----------
Net deferred tax liability $ 67,482 65,380
=========== ===========
</TABLE>
The Company has determined that a deferred tax asset valuation allowance
was not needed as of December 31, 1998 and 1997. 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
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, 1998.
(9) 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.
(Continued)
20
<PAGE> 22
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
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 duration 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.
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.
(Continued)
21
<PAGE> 23
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
The carrying amount and estimated fair value of financial instruments
subject to SFAS 107 were as follows as of December 31:
<TABLE>
<CAPTION>
1998 1997
----------------------------- -----------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
ASSETS
Investments:
Securities available-for-sale:
Fixed maturities $ 2,600,552 2,600,552 2,687,847 2,687,847
Equity securities 93,649 93,649 81,983 81,983
Fixed maturities held-to-maturity 679,528 748,062 724,892 792,983
Mortgage loans on real estate 1,144,424 1,242,109 1,230,256 1,324,735
Policy loans 40,810 40,810 153,348 153,348
Short-term investments 98,315 98,315 37,509 37,509
Cash 9,451 9,451 14,012 14,012
Assets held in Separate Accounts 1,154,576 1,154,576 916,790 916,790
LIABILITIES
Guaranteed investment contracts $ 1,094,242 1,096,184 1,041,271 1,050,429
Individual deferred annuity contracts 1,076,504 1,063,799 1,088,355 1,056,643
Other annuity contracts 898,781 945,694 921,100 957,977
Note payable 84,278 92,732 84,234 95,544
Dividend accumulations and
other policyholder funds 59,880 59,880 79,492 79,492
Liabilities related to separate accounts 1,107,049 1,107,049 887,542 887,542
</TABLE>
(10) 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 $229,000 and $144,000 as of
December 31, 1998 and 1997, 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.
(Continued)
22
<PAGE> 24
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
(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, 1998.
The summary below depicts loan exposure of remaining principal
balances by type as of December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
Mortgage assets by type
-----------------------
Retail $ 329,040 332,621
Office 294,183 345,313
Apartment 265,746 297,647
Industrial 152,840 159,425
Other 111,243 104,886
------------- -------------
1,153,052 1,239,892
Less valuation allowances 8,628 9,636
------------- -------------
Total mortgage loans on real estate, net $ 1,144,424 1,230,256
============= =============
</TABLE>
(11) PENSIONS AND OTHER POSTRETIREMENT BENEFITS
The Company sponsors a funded pension plan covering all home office
employees. Retirement benefits are based on years of service and the
highest average earnings in five of the last ten years. The Company also
sponsors unfunded pension plans covering home office employees where
benefits exceed Code 401(a)(17) and Code 415 limits and covering general
agents. The general agents plan provides benefits based on years of
service and average compensation during the final five and ten years of
service
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 2 years of service. The health plan is
contributory with retirees contributing approximately 15% of premium
for coverage.
(Continued)
23
<PAGE> 25
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
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.
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
------------------------- -------------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year $ 45,583 39,047 14,572 14,584
Service cost 2,520 2,221 258 301
Interest cost 3,131 3,072 333 468
Actuarial gain (loss) 738 5,063 (643) (474)
Benefits paid (5,195) (3,820) (282) (307)
-------- -------- -------- --------
Benefit obligation at end of year $ 46,777 45,583 14,238 14,572
======== ======== ======== ========
CHANGE IN PLAN ASSETS
Fair value of assets at beginning of year $ 24,854 24,050 - -
Actual return on plan assets 1,335 2,273 - -
Employer contribution 701 1,226 - -
Benefits paid (3,093) (2,695) - -
-------- -------- -------- --------
Fair value of assets at end of year $ 23,797 24,854 - -
======== ======== ======== ========
CALCULATION OF FUNDED STATUS
Funded status $(22,980) (20,729) (14,238) (14,572)
Unrecognized actuarial loss 9,625 8,687 - -
Unrecognized prior service cost (745) (812) - -
-------- -------- -------- --------
Net amount recognized $(14,100) (12,854) (14,238) (14,572)
======== ======== ======== ========
</TABLE>
The following table shows the portions of the above values, in aggregate,
attributable to the pension plans whose Accumulated Benefit Obligation exceeds
Plan Assets.
<TABLE>
<CAPTION>
PENSION BENEFITS
-------------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Projected Benefit Obligation 18,708 18,299 14,613
Accumulated Benefit Obligation 13,864 14,307 11,396
Assets - 257 243
Minimum Liability 13,864 14,050 11,153
Accrued Pension Cost (10,829) (9,620) (9,221)
Unrecognized Transition Obligation 2,620 2,911 3,202
</TABLE>
(Continued)
24
<PAGE> 26
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
<TABLE>
<CAPTION>
WEIGHTED AVERAGE ASSUMPTIONS AS OF DECEMBER 31
PENSION BENEFITS OTHER BENEFITS
-------------------------------- -----------------------------
1998 1997 1998 1997
--------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Discount rate 5.80% 5.90% 6.94% 7.50%
Expected return on plan assets 9.00% 9.00% - -
Rate of compensation increase 5.70% 5.40% - -
</TABLE>
For measurement purposes, a nine percent annual rate of increase in the per
capita cost of covered health care benefits was assumed for 1999. The rate was
assumed to decrease gradually to five percent for 2001 and remain at that level
thereafter.
<TABLE>
<CAPTION>
COMPONENTS OF NET PERIODIC BENEFIT COST
PENSION BENEFITS OTHER BENEFITS
-------------------------------------- -----------------------------------
1998 1997 1996 1998 1997 1996
----------- ---------- ---------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 2,520 2,221 2,169 258 301 467
Interest cost 3,131 3,072 2,896 333 468 768
Expected return on plan assets (2,087) (2,037) (1,860) - - -
Amortization of prior service cost (67) (67) (67) (504) (367) (199)
Recognized actuarial loss 564 300 384 (139) (107) -
----------- ---------- ---------- ---------- ---------- ----------
Net periodic benefit cost $ 4,061 3,489 3,522 (52) 295 1,036
=========== ========== ========== ========== ========== ==========
</TABLE>
The health care cost trend rate assumption has a significant effect on
the amounts reported for the health care plan. A one percentage point
increase in the assumed health care cost trend rate would increase the
accumulated postretirement benefit obligation as of December 31, 1998 and
1997 by $236 and $1,078, respectively, and the net periodic
postretirement benefit cost for the years ended December 31, 1998 and
1997 by $17 and $36, respectively.
The Company also maintains a qualified contributory defined contribution
profit sharing plan covering substantially all employees. Company
contributions to the Profit Sharing Plan are 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 1998, 1997, and 1996
were $1,829, $1,825 and $1,614, respectively.
The Company has other deferred compensation and supplemental pension
plans. The expenses for these plans in 1998, 1997 and 1996 were $5,697,
$3,949 and $2,950, respectively.
(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, 1998.
The Company has designated a portion of retained earnings for separate
account contingencies and investment guarantees totaling $1,648 and
$1,673 as of December 31, 1998 and 1997, 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.
(Continued)
25
<PAGE> 27
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
(13) BANK LINES OF CREDIT
As of December 31, 1998 and 1997, ONLIC had a $10,000 unsecured line of
credit which was not utilized during 1998 and 1997.
(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. 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 $75,394 and $61,862 at December
31, 1998 and 1997, respectively. Ceded premiums approximated 9%, 11%, and
11% of gross earned life and accident and health premiums during 1998,
1997 and 1996, respectively.
(15) SEGMENT INFORMATION
The Company conducts its business in two segments: life and other
insurance and annuity and investment products. Life and other insurance
includes 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. All
products within this segment share similar distribution systems and some
degree of mortality (loss of life) or morbidity (loss of health) risk.
The products in this segment are designed to provide a vehicle for risk
management for policyholders. Annuity and investment products include
guaranteed investment and accumulated deposit contracts issued to groups
and deferred and immediate annuities issued to individuals. The products
in this segment are primarily designed for asset accumulation and
generation of investment returns. All revenue, expense, asset and
liability amounts are allocated to one of the two segments. As such, the
sum of the financial information from these segments equals the
information of the Company as a whole.
(Continued)
26
<PAGE> 28
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OR AS OF
DECEMBER 31, 1998
------------------------------------------------------------------
ANNUITY AND
LIFE AND OTHER INVESTMENT
INSURANCE PRODUCTS TOTAL
------------------ --------------------- -----------------
<S> <C> <C> <C>
Premiums, policy charges and investment income (1) $ 304,174 307,928 612,102
Net realized gains (losses) on investments (920) 2,613 1,693
------------------ --------------------- -----------------
Total revenues 303,254 310,541 613,795
================== ===================== =================
Income before Federal income taxes 44,897 63,477 108,375
================== ===================== =================
Total assets 2,389,353 4,470,553 6,859,906
================== ===================== =================
FOR THE YEAR ENDED OR AS OF
DECEMBER 31, 1997
-----------------------------------------------------------------
ANNUITY AND
LIFE AND OTHER INVESTMENT PRODUCTS
INSURANCE TOTAL
------------------ -------------------- ------------------
Premiums, policy charges and investment income $ 314,379 307,377 621,756
Net realized gains on investments 7,892 4,608 12,500
------------------ --------------------- -----------------
Total revenues $ 322,271 311,985 634,256
================== ==================== ==================
Income before Federal income taxes $ 49,013 57,346 106,359
================== ==================== ==================
Total assets $ 2,972,192 3,358,370 6,330,562
================== ==================== ==================
FOR THE YEAR ENDED OR AS OF
DECEMBER 31, 1996
-----------------------------------------------------------------
ANNUITY AND
LIFE AND OTHER INVESTMENT PRODUCTS
INSURANCE TOTAL
------------------ -------------------- ------------------
Premiums, policy charges and investment income $ 295,860 284,418 580,278
Net realized gains on investments 3,330 5,431 8,761
------------------ --------------------- -----------------
Total revenues $ 299,190 289,849 589,039
================== ==================== ==================
Income before Federal income taxes $ 45,057 47,418 92,475
================== ==================== ==================
Total assets $ 2,522,004 3,259,585 5,781,589
================== ==================== ==================
</TABLE>
(1) Premiums, policy charges and investment income for life and other insurance
includes the net contribution from Closed Block for the year ended December
31, 1998.
27
<PAGE> 29
SCHEDULE 1
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Consolidating Information - Balance Sheet
December 31, 1998
(in thousands)
<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 $1,994,118 606,434 - 2,600,552
Equity securities 305,844 - (212,195) 93,649
Fixed maturities held-to-maturity, at -
amortized cost 581,952 97,576 - 679,528
Mortgage loans on real estate, net 914,777 229,647 - 1,144,424
Real estate, net 8,724 - - 8,724
Policy loans 213 40,597 - 40,810
Other long-term investments 41,697 - - 41,697
Short-term investments 89,318 8,997 - 98,315
---------- ---------- ---------- ----------
Total investments 3,936,643 983,251 (212,195) 4,707,699
Cash 3,248 6,203 - 9,451
Accrued investment income 46,425 11,963 - 58,388
Deferred policy acquisition costs 44,699 138,582 - 183,281
Reinsurance recoverable 19,915 105,119 (49,640) 75,394
Other assets 39,838 3,791 (8,595) 35,034
Assets held in Separate Accounts 1,051,270 103,306 - 1,154,576
Closed block assets 636,083 - - 636,083
---------- ---------- ---------- ----------
Total assets $5,778,121 1,352,215 (270,430) 6,859,906
========== ========== ========== ==========
LIABILITIES AND EQUITY
Future policy benefits and claims 3,016,148 1,001,501 (49,640) 3,968,009
Policyholders' dividend accumulations 46,276 - - 46,276
Other policyholder funds 11,247 2,357 - 13,604
Note payable, net 84,278 - - 84,278
Federal income taxes:
Current 19,434 1,796 - 21,230
Deferred 56,127 11,355 - 67,482
Other liabilities 119,098 19,705 (8,595) 130,208
Liabilities related to Separate Accounts 1,003,743 103,306 - 1,107,049
Closed block liabilities 713,162 - - 713,162
---------- ---------- ---------- ----------
Total liabilities 5,069,513 1,140,020 (58,235) 6,151,298
---------- ---------- ---------- ----------
EQUITY:
Common stock and paid-in-capital 10,000 36,625 (36,625) 10,000
Accumulated other comprehensive income 107,444 12,211 (12,211) 107,444
Retained earnings 591,164 163,359 (163,359) 591,164
---------- ---------- ---------- ----------
Total equity 708,608 212,195 (212,195) 708,608
---------- ---------- ---------- ----------
Total liabilities and equity $5,778,121 1,352,215 (270,430) 6,859,906
========== ========== ========== ==========
</TABLE>
See accompanying independent auditors' report.
28
<PAGE> 30
SCHEDULE 2
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Consolidating Information - Statement of Income
Year ended December 31, 1998
(in thousands)
<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 $ 95,438 3,167 (2,182) 96,423
Accident and health insurance premiums 17,375 7,808 - 25,183
Annuity premiums and charges 44,520 866 - 45,386
Universal life policy charges - 59,743 - 59,743
Net investment income 332,588 69,547 (25,732) 376,403
Net realized gains on investments 1,492 201 - 1,693
Other income (33) 3,146 - 3,113
Contribution from the closed block 5,851 - 5,851
--------- --------- --------- ---------
497,231 144,478 (27,914) 613,795
--------- --------- --------- ---------
Benefits and expenses:
Benefits and claims 312,916 76,663 - 389,579
Provision for policyholders' dividends on
participating policies 20,792 - - 20,792
Amortization of deferred policy acquisition
costs 6,908 12,443 - 19,351
Other operating costs and expenses 62,482 15,398 (2,182) 75,698
--------- --------- --------- ---------
403,098 104,504 (2,182) 505,420
--------- --------- --------- ---------
Income before Federal income taxes 94,133 39,974 (25,732) 108,375
--------- --------- --------- ---------
Federal income taxes:
Current expense 24,811 16,013 - 40,824
Deferred (benefit) expense 1,447 (1,771) - (324)
--------- --------- --------- ---------
26,258 14,242 - 40,500
--------- --------- --------- ---------
Net income $ 67,875 25,732 (25,732) 67,875
========= ========= ========= =========
</TABLE>
See accompanying independent auditors' report.
29
<PAGE> 58
OHIO NATIONAL VARIABLE ACCOUNT A
FORM N-4
PART C
OTHER INFORMATION
<PAGE> 59
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
The following financial statements of the Registrant are to be included in Part
B of this Registration Statement:
Independent Auditors' Report of KPMG LLP dated February 5, 1999
Statements of Assets and Contract Owners' Equity as of December 31, 1998
Statement of Operations and Changes in Contract Owners' Equity for the
Years Ended December 31, 1998 and 1997
Notes to Financial Statements as of December 31, 1998
Schedules of Changes in Unit Values for the Years Ended December 31, 1998
and 1997
The following consolidated financial statements of the Depositor and its
subsidiaries are also to be included in Part B of this Registration Statement:
Independent Auditors' Report of KPMG LLP dated January 29, 1999
Consolidated Balance Sheets as of December 31, 1998 and 1997
Consolidated Statements of Income for the Years Ended December 31, 1998,
1997 and 1996
Consolidated Statements of Equity for the Years Ended December 31, 1998,
1997 and 1996
Consolidated Statements of Cash Flows for the Years Ended December 31,
1998, 1997 and 1996
Notes to Consolidated Financial Statements as of December 31, 1998, 1997
and 1996
Consents of the Following Persons:
KPMG LLP
Exhibits:
All relevant exhibits, which have previously been filed with the
Commission and are incorporated herein by reference, are as follows:
-1-
<PAGE> 60
(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).
(3)(a) Principal Underwriting Agreement for Variable Annuities between the
Depositor and Ohio National Equities, Inc. was filed as Exhibit (3)(a)
of Form N-4, Post-effective Amendment no. 21 of Ohio National Variable
Account A (File no. 2-91213).
(3)(b) Registered Representative's Sales Contract with Variable Annuity
Supplement was filed as Exhibit (3)(b) of the Registrant's Form N-4,
Post-effective Amendment no. 9 on February 27, 1991 (File no. 2-91213).
(3)(c) Variable Annuity Sales Commission Schedule was filed as Exhibit A(3)(c)
of the Registrant's registration statement on Form S-6 on May 18, 1984
(File no. 2-91213).
(3)(d) Variable Contract Distribution Agreements (with compensation schedules)
between the Depositor and Ohio National Equities, Inc. were filed as
Exhibit (3)(d) of the Registrant's Form N-4, Post-effective Amendment
no. 23 on April 27, 1998 (File no. 2-91213).
(4) Combination Annuity Contract, Form 96-VA-3, was filed as Exhibit (4) of
the Registrant's registration statement on October 2, 1996 (File no.
333-14375).
(5) Variable Annuity Application, Form V-4896-A, was filed as Exhibit (5) of
the Registrant's registration statement on October 2, 1996 (File no.
333-14375).
(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) and Exhibit (8)(a) of the
Registrant's Form N-4, Post-effective Amendment No. 2 on March 2, 1999
(File No. 333-43511).
(13) Computation of Performance Data was filed as Exhibit (13) of Form N-4,
Pre-effective Amendment no. 1, of Ohio National Variable Account A
(File no. 333-43511) on April 10, 1998.
-2-
<PAGE> 61
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
Name and Principal Positions and Offices
Business Address with Depositor
- ---------------- --------------
<S> <C>
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* Director and 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
Ronald J. Dolan* Director and 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> 62
<TABLE>
<CAPTION>
Name and Principal Positions and Offices
Business Address with Depositor
- ---------------- --------------
<S> <C>
Charles S. Mechem, Jr. Director
One East Fourth Street
Cincinnati, Ohio 45202
James I. Miller, II* Vice President, Marketing Support
Thomas O. Olson* Vice President, Underwriting
David B. O'Maley* Director, Chairman, President and Chief
Executive Officer
James F. Orr Director
201 East Fourth Street
Cincinnati, Ohio 45202
John J. Palmer* Director and Senior Vice President, Strategic
Initiatives
George B. Pearson, Jr.* Vice President, PGA Marketing
J. Donald Richardson* Senior Regional Vice President
D. Gates Smith* Director and Senior Vice President, Sales
Michael D. Stohler* Vice President, Mortgages and Real Estate
Stuart G. Summers* Director and Senior Vice President and General
Counsel
Dennis C. Twarogowski* Vice President, Career Marketing
Oliver W. Waddell Director
425 Walnut Street
Cincinnati, Ohio 45202
Dr. David S. Williams* Vice President and Medical Director
Stephen T. Williams* Vice President, Equity Investments
</TABLE>
*The principal business address for these individuals is One Financial Way,
Montgomery, Ohio 45242.
-4-
<PAGE> 63
<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. VP T. Barefield
Secy. & Dir. R. Benedict Sr. Vice Pres. A. Bowen
VP & Dir. S. Williams Sr. Vice Pres. D. Cook
Treasurer B. Turner Sr. Vice Pres. G. Smith
Treasurer D. Taney Vice Pres. & Treas. R. Broadwell
Compliance Director J. Dunn Vice President M. Boedeker
Secretary R. Benedict Vice President T. Backus
Vice President G. Pearson
VP K. Hanson Vice President M. Stohler
VP D. Hundley Vice Pres. J. Houser
VP J. Martin Vice President D. Twarogowski
VP & Secy. R. Benedict
Asst. Secy. J. Fischer
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. VP T. Barefield
- --------------------------------- -------------------------------- ---------------------------------
</TABLE>
<PAGE> 64
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 April 9, 1999, the Registrant's contracts were owned by 23,488 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> 65
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 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> 66
The directors and officers of ONEQ are:
<TABLE>
<CAPTION>
Name Position with ONEQ
<S> <C> <C>
David B. O'Maley Chairman and Director
John J. Palmer President & Chief Executive Officer and Director
Thomas A. Barefield Senior Vice President
Trudy K. Backus Vice President and Director
Joni L. Dunn Vice President and Compliance Officer
Ronald L. Benedict Secretary and Director
Barbara A. Turner Operations Vice President and Treasurer
James I. Miller II Vice President and Director
</TABLE>
The principal business address of each of the foregoing is One Financial Way,
Montgomery, 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>
$6,658,441 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
Montgomery, Ohio 45242
-7-
<PAGE> 67
Firstar Bank, N. A.
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
Representation pursuant to Section 26(e)(2)(A) of the Investment Company Act of
1940, as amended, was furnished in the Registrant's Form N-4, Post-effective
Amendment no. 1 on April 25, 1997.
-8-
<PAGE> 68
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the registrant, Ohio National Variable Account A certifies that it meets
the requirements of Securities Act Rule 485(b) for effectiveness of this
registration statement and has caused this post-effective amendment to the
registration statement to be signed on its behalf in the City of Montgomery and
the State of Ohio on this 26th day of April, 1999.
OHIO NATIONAL VARIABLE ACCOUNT A
(Registrant)
By THE OHIO NATIONAL LIFE INSURANCE COMPANY
(Depositor)
By /s/John J. Palmer
-------------------------------------------
John J. Palmer, Senior Vice President,
Strategic Initiatives
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
post-effective amendment to the registration statement to be signed on its
behalf in the City of Montgomery and the State of Ohio on the 26th day of
April, 1999.
THE OHIO NATIONAL LIFE INSURANCE COMPANY
(Depositor)
By /s/John J. Palmer
-------------------------------------------
John J. Palmer, Senior Vice President,
Strategic Initiatives
Attest:
/s/Ronald L. Benedict
- ---------------------------------
Ronald L. Benedict
Corporate Vice President, Counsel
and Secretary
<PAGE> 69
As required by the Securities Act of 1933, this pre-effective amendment to the
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/David B. O'Maley Chairman, President, April 26, 1999
-------------------------- Chief Executive Officer
David B. O'Maley and Director
/s/Joseph P. Brom Director April 26, 1999
--------------------------
Joseph P. Brom
*/s/Dale P. Brown Director April 26, 1999
--------------------------
Dale P. Brown
*/s/Jack E. Brown Director April 26, 1999
--------------------------
Jack E. Brown
*/s/William R. Burleigh Director April 26, 1999
--------------------------
William R. Burleigh
*/s/Victoria B. Buyniski Director April 26, 1999
--------------------------
Victoria B. Buyniski
*/s/Raymond R. Clark Director April 26, 1999
--------------------------
Raymond R. Clark
/s/Ronald J. Dolan Director April 26, 1999
--------------------------
Ronald J. Dolan
*/s/Charles S. Mechem, Jr. Director April 26, 1999
--------------------------
Charles S. Mechem, Jr.
*/s/James F. Orr Director April 26, 1999
--------------------------
James F. Orr
/s/John J. Palmer Director April 26, 1999
--------------------------
John J. Palmer
/s/D. Gates Smith Director April 26, 1999
--------------------------
D. Gates Smith
/s/Stuart G. Summers Director April 26, 1999
--------------------------
Stuart G. Summers
<PAGE> 70
*/s/Oliver W. Waddell Director April 26, 1999
----------------------------
Oliver W. Waddell
*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> 71
INDEX OF CONSENTS AND EXHIBITS
Page Number in
Exhibit Sequential
Number Description Numbering System
- ------ ----------- ----------------
CONSENT OF KPMG LLP
<PAGE> 72
INDEPENDENT AUDITORS' CONSENT
The Board of Directors of
The Ohio National Life Insurance Company and
Contract Owners of
Ohio National Variable Account A:
We consent to use of our reports dated February 5, 1999 for the Ohio National
Variable Account A and January 29, 1999 for The Ohio National Life Insurance
Company and subsidiaries as included herein and to the reference to our firm
under the heading "Independent Certified Public Accountants" in the Statement of
Additional Information included herein.
Cincinnati, Ohio
April 26, 1999
