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PROSPECTUS
FLEXIBLE PURCHASE PAYMENT
INDIVIDUAL VARIABLE ANNUITY CONTRACTS
OHIO NATIONAL VARIABLE ACCOUNT A
THE OHIO NATIONAL LIFE INSURANCE COMPANY
ONE FINANCIAL WAY
CINCINNATI, OHIO 45242
TELEPHONE (513) 794-6100
This prospectus offers a multiple funded, flexible purchase payment, individual
variable annuity contract that provides for the accumulation of values and the
payment of annuity benefits on a variable and/or fixed basis.
Variable annuities are designed to provide lifetime annuity payments which will
vary with the investment results of the investment vehicle chosen. The
accumulation value of a contract will vary with the investment performance of
eligible investment companies ("Funds") prior to the annuity payout date,
and the amount of each annuity payment will vary with the investment performance
of the Funds subsequent to the commencement of annuity payments. There can be no
assurance that the value of a contract during the years prior to the annuity
payout date or the aggregate amount of annuity payments received after such date
will equal or exceed the purchase payments made therefor.
The variable annuity contracts offered by this prospectus are designed for (1)
annuity purchase plans adopted by public school systems and certain tax-exempt
organizations described in Section 501(c)(3) of the Internal Revenue Code (the
"Code"), qualifying for tax-deferred treatment pursuant to Section 403(b) of
the Code, (2) other employee pension or profit-sharing trusts or plans
qualifying for tax-deferred treatment under Section 401(a), 401(k) or 403(a) of
the Code, (3) individual retirement annuities qualifying for tax-deferred
treatment under Section 408 or 408A of the Code, (4) state and municipal
deferred compensation plans and (5) non-tax-qualified retirement plans.
The minimum initial purchase payment is $25,000. Payments after the first
payment may be made in amounts of at least $500 at any time ($300 for payroll
deduction plans). Ohio National Life reserves the right to restrict total
purchase payments in excess of $1,000,000.
Purchase payments are allocated to one or more (but not more than ten)
subaccounts of Ohio National Variable Account A ("VAA") and/or the Guaranteed
Account as directed by the contract owner. VAA is a separate account
established by The Ohio National Life Insurance Company ("Ohio National Life").
The assets of VAA are invested in shares of the Funds. See page 2 for the list
of available Funds. See the accompanying prospectuses of the Funds which
might also contain information about portfolios that are not available for
these contracts.
All or part of the contract's accumulation value may be withdrawn before the
annuity payout date. Amounts withdrawn may be subject to federal income tax
penalties. A contingent deferred sales charge up to 6% of the amount withdrawn
may be assessed. Up to 10% of the accumulation value may be withdrawn each year
without this charge. Exercise of contract rights may be subject to the terms of
any qualified employee trust or annuity plan under which a contract is
purchased. This prospectus contains no information concerning such trusts or
plans.
The contracts offered hereby may be revoked by the purchaser without penalty
within 10 days of their delivery (or such longer period required by state law).
THIS PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE. IT SETS FORTH THE
INFORMATION ABOUT VAA AND THE VARIABLE ANNUITY CONTRACTS OFFERED BY THIS
PROSPECTUS THAT YOU SHOULD KNOW BEFORE INVESTING. ADDITIONAL INFORMATION ABOUT
VAA HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IN A STATEMENT
OF ADDITIONAL INFORMATION DATED JANUARY 4, 1999 THE STATEMENT OF ADDITIONAL
INFORMATION IS INCORPORATED HEREIN BY REFERENCE AND IS AVAILABLE UPON REQUEST
AND WITHOUT CHARGE BY WRITING OR CALLING OHIO NATIONAL LIFE AT THE ABOVE
ADDRESS. THE TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL INFORMATION IS
ON PAGE 2.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS SHOULD BE ACCOMPANIED BY THE CURRENT FUND PROSPECTUSES.
JANUARY 4, 1999
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Available Funds............................................2
Glossary of special Terms..................................3
Fee Table..................................................3
Financial Statements.......................................8
Ohio National Life.........................................8
Ohio National Variable Account A ..........................8
The Funds..................................................9
Distribution of Variable Annuity Contracts ...............10
Deductions and Expenses...................................10
Contingent Deferred Sales Charge ....................10
Contract Administration Charge.......................11
Deduction for Administrative Expenses ...............11
Deduction for Risk Undertakings......................11
Transfer Fee.........................................11
Deduction for State Premium Tax......................11
Fund Expenses........................................12
Description of Variable Annuity Contracts ................12
10-Day Free Look.....................................12
Accumulation Period..................................12
Annuity Period.......................................16
Contract Owner Inquiries.............................19
Performance Data.....................................19
Federal Tax Status........................................20
IRA Disclosure Statement..................................23
<CAPTION>
STATEMENT OF ADDITIONAL INFORMATION
Custodian
Independent Certified Public Accountants
Underwriter
Calculation of Money Market Subaccount Yield
Total Return
Transfer Limitations
The Year 2000 Issue
Appendix: Loans Under Tax-Sheltered Annuities
Financial Statements for VAA and Ohio National Life
<S> <C>
Available Funds
Ohio National Fund, Inc. Money Market Portfolio
Bond Portfolio
Omni Portfolio (a flexible fund)
S&P 500 Index Portfolio
International Portfolio
Global Contrarian Portfolio
Capital Appreciation Portfolio
Growth & Income Portfolio
Small Cap Growth Portfolio
High Income Bond Portfolio
Equity Income Portfolio
Blue Chip Value Portfolio
Goldman Sachs Variable Insurance Trust Goldman Sachs Growth and Income Fund
Goldman Sachs CORE U.S. Equity Fund
Goldman Sachs Capital Growth Fund
Goldman Sachs Global Income Fund
Janus Aspen Series Growth Portfolio
International Growth Portfolio
Worldwide Growth Portfolio
Balanced Portfolio
J.P. Morgan Series Trust II J.P. Morgan Small Company Portfolio
Montgomery Funds III Small Cap Opportunities Fund
Emerging Markets Fund
Morgan Stanley Universal Funds, Inc. Fixed Income Portfolio
U.S. Real Estate Portfolio
Value Portfolio
Emerging Markets Debt Portfolio
</TABLE>
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Salomon Brothers Variable
Series Funds Inc. Capital Fund
Total Return Fund
Investors Fund (a capital growth
fund)
Strong Variable Insurance Funds, Inc. Strong Growth Fund II
Strong Opportunity Fund II (a
mid/small cap fund)
Strong Schafer Value Fund II
The Dow(sm) Target Variable Fund LLC: The Dow(sm) Target 10 Portfolios
GLOSSARY OF SPECIAL TERMS
ACCUMULATION PERIOD - The period prior to the annuity payout date and during the
lifetime of the annuitant.
ACCUMULATION UNIT - A unit of measure used to determine the value of contracts
during the accumulation period.
ACCUMULATION VALUE - The cash value of an annuity contract before the annuity
payout date.
ANNUITANT - Any natural person who is to receive or is receiving annuity
payments and upon whose continuation of life annuity payments with life
contingencies depend.
ANNUITY PAYOUT DATE - The date on which annuity payments are to begin.
ANNUITY PAYMENTS - Periodic payments made to an annuitant pursuant to an annuity
contract.
ANNUITY UNIT - A unit of measure used to determine the second and subsequent
variable annuity payments and reflecting the investment performance of the Fund.
FUND - Investment portfolios of any registered open-end investment company in
which contract assets may be invested.
FUND SHARES - Shares of any available Fund.
GUARANTEED ACCOUNT - Fixed value allocations which are part of the general
assets of Ohio National Life.
OWNER - During the lifetime of the designated annuitant and prior to the
specified annuity payout date, the owner is the person in whose name the
contract is registered. On and after the annuity payout date the annuitant
becomes the owner. After the death of the annuitant, the beneficiary becomes the
owner.
PURCHASE PAYMENTS - The amount of payments made by the owner or on his behalf
under the annuity contract.
SETTLEMENT - The application of the accumulation value of an annuity contract
under the settlement provisions contained therein.
SUBACCOUNT - Subdivisions of VAA, each of which invests exclusively in shares
of a designated Fund.
VALUATION PERIOD - The period of time from one determination of accumulation
unit and annuity unit values to their next determination. Such determination is
made at the same time that the net asset value of Fund Shares is determined. See
the accompanying Fund prospectuses.
1940 ACT - The Investment Company Act of 1940, as amended, or any similar
successor federal legislation.
FEE TABLE
<TABLE>
<CAPTION>
CONTRACTOWNER TRANSACTION EXPENSES
Deferred Sales Load (as a percentage of YEARS PAYMENT
----- -------
<S> <C> <C>
value withdrawn; the 1st 6%
percentage varies with 2nd 6%
number of years from 3rd 6%
purchase payments to 4th 5%
which values relate) 5th 3%
6th 2%
7th and later 0%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Exchange (transfer) Fee $10 (currently no charge for the first transfer each calendar month)
Annual Contract Fee $30 (no fee if contract value exceeds $50,000)
</TABLE>
<TABLE>
<CAPTION>
VAA ANNUAL EXPENSES (as a percentage
of average account value)
<S> <C>
Mortality and Expense Risk Fees *** 0.65%
Account Fees and Expenses 0.25%
-----
Total VAA Annual Expenses 0.90%
</TABLE>
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FUND ANNUAL EXPENSES (after fee waiver) (as a percentage of each Fund's
average net assets)
<TABLE>
<CAPTION>
Management Other Total Fund
Fees Expenses Expenses
---------- -------- ----------
<S> <C> <C> <C>
Ohio National Fund:
Money Market Portfolio* 0.25% 0.13% 0.38%
Bond Portfolio 0.60% 0.18% 0.78%
Omni Portfolio 0.55% 0.16% 0.71%
S&P 500 Index Portfolio 0.40% 0.12% 0.52%
International Portfolio 0.90% 0.32% 1.22%
Global Contrarian Portfolio 0.90% 0.42% 1.32%
Capital Appreciation Portfolio 0.80% 0.15% 0.95%
Growth & Income Portfolio 0.85% 0.10% 0.95%
Small Cap Growth Portfolio** 0.90% 0.15% 1.05%
High Income Bond Portfolio** 0.75% 0.25% 1.00%
Equity Income Portfolio** 0.75% 0.50% 1.25%
Blue Chip Portfolio** 0.90% 0.50% 1.40%
Goldman Sachs Variable Insurance Trust:
Goldman Sachs Growth and Income Fund** 0.75% 0.15% 0.90%
Goldman Sachs CORE U.S. Equity Fund** 0.70% 0.10% 0.80%
Goldman Sachs Capital Growth Fund** 0.75% 0.15% 0.90%
Goldman Sachs Global Income Fund** 0.90% 0.15% 1.05%
Janus Aspen Series:
Growth Portfolio* 0.65% 0.05% 0.70%
International Growth Portfolio* 0.67% 0.29% 0.96%
Worldwide Growth Portfolio* 0.66% 0.08% 0.74%
Balanced Portfolio* 0.76% 0.07% 0.83%
J.P. Morgan Series Trust II:
J.P.Morgan Small Company Portfolio 0.60% 0.55% 1.15%
Montgomery Funds III:
Small Cap Opportunities Fund** 1.20% 0.30% 1.50%
Emerging Markets Fund* 1.19% 0.56% 1.75%
Morgan Stanley Universal Funds, Inc.:
Fixed Income Portfolio* (0.61%) 1.31% 0.70%
U.S. Real Estate Portfolio* (0.32%) 1.52% 1.10%
Value Portfolio* (0.40%) 1.32% 0.85%
Emerging Markets Debt Portfolio* 0.04% 1.26% 1.30%
Salomon Brothers Variable Series Fund, Inc.:
Capital Fund** 1.00% 0.25% 1.25%
Total Return Fund** 0.80% 0.45% 1.25%
Investors Fund** 0.75% 0.50% 1.25%
Strong Variable Insurance Funds, Inc.:
Strong Growth Fund II 1.00% 0.20% 1.20%
Strong Opportunity Fund II 1.00% 0.10% 1.10%
Strong Schafer Value Fund II** 1.00% 0.20% 1.20%
The Dow Target Variable Fund LLC:
The Dow Target 10 Portfolios** 0.60% 0.15% 0.75%
</TABLE>
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Example - If you surrendered your contract at the end of the applicable time
period, you would pay the following aggregate expenses on a $1,000 investment in
each subaccount, assuming 5% annual return:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Ohio National Fund, Inc.:
Money Market Portfolio* $ 67 $ 94 $ 97 $ 155
Bond Portfolio 71 106 118 199
Omni Portfolio 70 104 114 191
S&P 500 Index Portfolio 68 98 104 170
International Portfolio 75 120 140 245
Global Contrarian Portfolio 76 123 146 255
Capital Appreciation Portfolio 73 112 127 217
</TABLE>
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Growth & Income Portfolio 73 112 127 217
Small Cap Growth Portfolio** 74 115 132 227
High Income Bond Portfolio** 73 113 129 222
Equity Income Portfolio** 76 121 142 248
Blue Chip Portfolio** 77 125 150 264
Goldman Sachs Variable Insurance Trust:
Goldman Sachs Growth and Income Fund** 72 110 124 212
Goldman Sachs CORE U.S. Equity Fund** 71 107 119 201
Goldman Sachs Capital Growth Fund** 72 110 124 212
Goldman Sachs Global Income Fund** 74 115 132 227
Janus Aspen Series:
Growth Portfolio* 70 104 114 190
International Growth Portfolio* 73 112 127 218
Worldwide Growth Portfolio* 70 105 116 194
Balanced Portfolio* 71 108 120 204
J.P. Morgan Series Trust II:
J.P.Morgan Small Company Portfolio 75 118 137 238
Montgomery Funds III:
Small Cap Opportunities Fund** 78 128 155 274
Emerging Markets Fund* 81 136 167 298
Morgan Stanley Universal Funds, Inc.:
Fixed Income Portfolio* 70 104 114 190
U.S. Real Estate Portfolio* 74 116 134 233
Value Portfolio* 72 109 121 206
Emerging Markets Debt Portfolio* 76 122 145 253
Salomon Brothers Variable Series Fund, Inc.:
Capital Fund** 76 121 142 248
Total Return Fund** 76 121 142 248
Investors Fund** 76 121 142 248
Strong Variable Insurance Funds, Inc.:
Strong Growth Fund II 75 119 139 243
Strong Opportunity Fund II 74 116 134 233
Strong Schafer Value Fund II** 75 119 139 243
The Dow Target Variable Fund LLC:
The Dow Target 10 Portfolios** 71 105 116 195
</TABLE>
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Example - If you do not surrender your contract or you annuitize at the end of
the applicable time period, you would pay the following aggregate expenses on
the same investment:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Ohio National Fund, Inc.:
Money Market Portfolio* $ 13 $ 41 $ 70 $ 155
Bond Portfolio 17 53 91 199
Omni Portfolio 16 51 88 191
S&P 500 Index Portfolio 14 45 78 170
International Portfolio 22 66 114 245
Global Contrarian Portfolio 23 69 119 255
Capital Appreciation Portfolio 19 58 100 217
Growth & Income Portfolio 19 58 100 217
Small Cap Growth Portfolio** 20 61 105 227
High Income Bond Portfolio** 19 60 103 222
Equity Income Portfolio** 22 67 115 248
Blue Chip Portfolio** 23 72 123 264
Goldman Sachs Variable Insurance Trust:
Goldman Sachs Growth and Income Fund** 18 57 97 212
Goldman Sachs CORE U.S. Equity Fund** 17 54 92 201
</TABLE>
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Goldman Sachs Capital Growth Fund** 18 57 97 212
Goldman Sachs Global Income Fund** 20 61 105 227
Janus Aspen Series:
Growth Portfolio* 16 50 87 190
International Growth Portfolio* 19 58 101 218
Worldwide Growth Portfolio* 17 52 89 194
Balanced Portfolio* 18 54 94 204
J.P. Morgan Series Trust II:
J.P. Morgan Small Company Portfolio 21 64 110 238
Montgomery Funds III:
Small Cap Opportunities Fund** 24 75 128 274
Emerging Markets Fund* 27 82 141 298
Morgan Stanley Universal Funds, Inc.:
Fixed Income Portfolio* 16 50 87 190
U.S. Real Estate Portfolio* 20 63 108 233
Value Portfolio* 18 55 95 206
Emerging Markets Debt Portfolio* 22 69 118 253
Salomon Brothers Variable Series Fund, Inc.:
Capital Fund** 22 67 115 248
Total Return Fund** 22 67 115 248
Investors Fund** 22 67 115 248
Strong Variable Insurance Funds, Inc.:
Strong Growth Fund II 21 66 113 243
Strong Opportunity Fund II 20 63 108 233
Strong Schafer Value Fund II** 21 66 113 243
The Dow Target Variable Fund LLC:
The Dow Target 10 Portfolios** 17 52 90 195
</TABLE>
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* For certain Funds, management fees are presently being voluntarily waived in
part or in whole by the Fund's investment adviser (and, where the management fee
is shown as a negative, the investment adviser is further reimbursing the Fund)
in order to reduce total Fund expenses. Without those waivers and
reimbursements, the management fees would be as follows:
Ohio National Fund, Inc.
Money Market Portfolio 0.30%
Janus Aspen Series
Growth Portfolio 0.74%
International Growth Portfolio 0.72%
Worldwide Growth Portfolio 0.77%
Balanced Portfolio 0.77%
Montgomery Funds III
Emerging Markets Fund 1.25%
Morgan Stanley Universal Funds, Inc.
Fixed Income Portfolio 0.40%
U.S. Real Estate Portfolio 0.80%
Value Portfolio 0.55%
Emerging Markets Debt Portfolio 0.80%
Example - Without the voluntary fee waivers, if you surrendered your contract at
the end of the applicable time period, you would pay the following aggregate
expenses on a $1,000 investment, assuming 5% annual return:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Ohio National Fund, Inc.
Money Market Portfolio $ 67 $ 95 $ 99 $160
</TABLE>
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Janus Aspen Series
Growth Portfolio 71 107 118 200
International Growth Portfolio 73 113 130 223
Worldwide Growth Portfolio 72 109 121 206
Balanced Portfolio 71 108 121 205
Montgomery Funds III
Emerging Markets Fund 81 138 170 304
Morgan Stanley Universal Funds, Inc.
Fixed Income Portfolio 80 135 165 294
U.S. Real Estate Portfolio 86 153 195 352
Value Portfolio 82 140 173 310
Emerging Markets Debt Portfolio 84 145 182 328
</TABLE>
7
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Example - Without the voluntary fee waivers, if you do not surrender your
contract or you annuitize at the end of the applicable time period, you would
pay the following aggregate expenses on the same investment:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Ohio National Fund, Inc.
Money Market Portfolio $ 14 $ 42 $ 73 $160
Janus Aspen Series
Growth Portfolio 17 53 92 200
International Growth Portfolio 19 60 103 223
Worldwide Growth Portfolio 18 55 95 206
Balanced Portfolio 18 55 94 205
Morgan Stanley Universal Funds, Inc.
Fixed Income Portfolio 26 81 139 294
U.S. Real Estate Portfolio 32 99 168 352
Value Portfolio 28 86 146 310
Emerging Markets Debt Portfolio 30 92 156 328
</TABLE>
** The "Other Expenses" (and, accordingly, the Total Fund Expenses) for these
Funds are based on estimates.
*** The Mortality and Expense Risk fees may be changed at any time, but may not
presently be increased to more than 0.65% and for contracts issued in the
future to more than 1.55%.
The purpose of the above table is to help you to understand the costs and
expenses that a variable annuity contractowner will bear directly or
indirectly. THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSE. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Note
that the expense amounts shown in the examples are aggregate amounts for the
total number of years indicated. In the examples, the annual fee is treated as
if it were deducted as a percentage of assets, based upon the average account
value for all contracts, including ones from which a portion of the contract
fee may be paid from amounts invested in the Guaranteed Account. Neither the
table nor the examples reflect any premium taxes that may be applicable to a
contract, which currently range from 0% to 3.5%. The above table and examples
reflect only the charges for contracts currently offered by this prospectus and
not other contracts that may be offered by Ohio National Life. For further
details, see DEDUCTION For STATE PREMIUM TAX, page 11.
FINANCIAL STATEMENTS
The complete financial statements of VAA and Ohio National Life, and the
Independent Auditors' Reports thereon, may be found in the Statement of
Additional Information.
OHIO NATIONAL LIFE
Ohio National Life was organized under the laws of Ohio in 1909 as a stock life
insurance company and became a mutual life insurance company in 1959. It writes
life, accident and health insurance and annuities in 47 states, the District of
Columbia and Puerto Rico. Currently it has assets in excess of $6.3 billion and
equity in excess of $600 million. Its home office is located at One Financial
Way, Cincinnati, Ohio 45242. Ohio National Life recently reorganized as a stock
company ultimately owned by a mutual holding company (Ohio National Mutual
Holdings, Inc.) with the majority ownership of the latter being by the
policyholders.
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OHIO NATIONAL VARIABLE ACCOUNT A
VAA was established in 1969 by Ohio National Life as a separate account under
Ohio law for the purpose of funding variable annuity contracts. Purchase
payments for the variable annuity contracts are allocated to one or more
subaccounts of VAA. However, contract values may not be allocated to more than
10 variable subaccounts at any one time. Income, gains and losses, whether or
not realized, from assets allocated to VAA are, as provided in the contracts,
credited to or charged against VAA without regard to other income, gains or
losses of Ohio National Life. The assets maintained in VAA will not be charged
with any liabilities arising out of any other business conducted by Ohio
National Life. Nevertheless, all obligations arising under the contracts,
including the commitment to make annuity payments, are general corporate
obligations of Ohio National Life. Accordingly, all of Ohio National Life's
assets are available to meet its obligations under the contracts. VAA is
registered as a unit investment trust under the 1940 Act. The assets of the
subaccounts of VAA are invested at net asset value (without an initial sales
charge) in shares of corresponding Funds. Values of other contracts not offered
through this prospectus are also allocated to VAA, including some subaccounts
that are not available for the contracts offered herein.
THE FUNDS
The Funds presently available are listed on page 2. The Funds are open-end
investment companies, registered under the 1940 Act. Fund Shares are sold only
to insurance company separate accounts to fund variable annuity contracts and
variable life insurance policies and, in some cases, to qualified plans. The
value of each Fund's investments fluctuates daily and is subject to the risk of
changing economic conditions as well as the risk inherent in the ability of
management to anticipate changes necessary in such investments to meet changes
in economic conditions.
The Funds receive investment advice, for a fee, from their investment advisers.
Those fees are shown in the Fee Table beginning on page 3. For Ohio National
Fund, Inc. and the Dow Target Variable Fund LLC, the adviser is Ohio National
Investments, Inc. (with Federated Global Research Corp. as sub-adviser to the
International and Global Contrarian Portfolios, T. Rowe Price Associates, Inc.
as sub-adviser to the Capital Appreciation Portfolio, Robertson Stephens
Investment Management, L.P. as sub-adviser to the Growth & Income and Small Cap
Growth Portfolios, Federated Investment Counseling as sub-adviser to the High
Income Bond, Equity Income and Blue Chip Portfolios, and First Trust Advisors
L.P. as sub-adviser to the Dow Target Variable Fund LLC); for Goldman Sachs
Growth and Income Fund, Goldman Sachs CORE U.S. Equity Fund and Goldman Sachs
Capital Growth Fund, the adviser is Goldman Sachs Asset Management, and for
Goldman Sachs Global Income Fund, the adviser is Goldman Sachs Asset Management
International; for Janus Aspen Series, the adviser is Janus Capital Corporation;
for J.P. Morgan Series Trust II, the adviser is J.P. Morgan Investment
Management, Inc.; for Montgomery Funds III, the adviser is Montgomery Asset
Management, LLC; for Morgan Stanley Universal Funds, Inc., the adviser of the
U.S. Real Estate and Emerging Markets Equity Portfolios is Morgan Stanley Asset
Management, Inc., and the adviser of the Fixed Income and Value Portfolios is
Miller Anderson & Sherrerd, LLP; for Salomon Brothers Variable Series Funds
Inc., the adviser is Salomon Brothers Asset Management, Inc.; and for Strong
Variable Insurance Funds, Inc., the adviser is Strong Capital Management, Inc.
Affiliates of each of the Funds may compensate Ohio National Life based upon an
annual percentage of the average assets of each Fund that are allocated to VAA.
These percentage amounts vary by Fund and are intended to compensate Ohio
National Life for administrative and other services that it provides to the
Funds and their affiliates.
For additional information concerning the Funds, including the investment
objectives of each, see the Fund prospectuses. Read the Fund prospectuses
carefully before investing. The Fund prospectuses may contain information about
other portfolios that are not available as investment options for the contract
offered herein. There is no assurance that the stated objectives and policies
of any of the Funds will be achieved.
MIXED AND SHARED FUNDING
In addition to being offered to VAA, certain Fund Shares are currently offered
to other separate accounts of Ohio National Life in connection with variable
annuity contracts and a separate account of Ohio National Life Assurance
Corporation in connection with variable life insurance contracts. Fund Shares
may also be offered to other insurance company separate accounts and qualified
plans. It is conceivable that in the future it may become disadvantageous for
both variable life and variable annuity separate accounts or for separate
accounts of other life insurance companies to invest in Fund Shares. Although
neither Ohio National Life nor any of the Funds currently foresees any such
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<PAGE> 10
disadvantage, the Board of Directors or Trustees of each Fund will monitor
events in order to identify any material conflict between different types of
contractowners and to determine what action, if any, should be taken in response
thereto, including the possible withdrawal of VAA`s participation in a Fund.
Material conflicts could result from such things as (1) changes in state
insurance law; (2) changes in federal income tax law; (3) changes in the
investment management of any Fund; or (4) differences between voting
instructions given by different types of contractowners.
VOTING RIGHTS
Ohio National Life shall vote Fund Shares held in VAA at meetings of
shareholders of a Fund in accordance with voting instructions received from
contract owners. The number of Fund Shares for which an owner is entitled to
give instructions will be determined by Ohio National Life in the manner
described below, not more than 90 days prior to the meeting of shareholders.
Proxy material will be distributed to each owner together with appropriate forms
for giving voting instructions. Fund Shares held in VAA, for which no timely
instructions are received, will be voted by Ohio National Life in proportion to
the instructions which are received with respect to all contracts participating
in VAA.
During the accumulation period, the number of Fund Shares for which
instructions may be given to Ohio National Life is determined by dividing the
variable accumulation value of a subaccount of the contract by the net asset
value of a share of the corresponding Fund as of the same date. During the
annuity payment period, the number of Fund Shares for which such instructions
may be given is determined by dividing the actuarial liability for variable
annuities in the course of payment by the net asset value of a Fund Share as of
the same date. Generally, the number of votes tends to decrease as annuity
payments progress.
DISTRIBUTION OF VARIABLE ANNUITY CONTRACTS
The variable annuity contracts are sold by Ohio National Life insurance agents
who are also registered representatives of broker-dealers that have entered
into distribution agreements with Ohio National Equities, Inc. ("ONEQ," a
wholly-owned subsidiary of Ohio National Life) which is the principal
underwriter of the contracts. ONEQ and the broker-dealers are registered under
the Securities Exchange Act of 1934 and are members of the National Association
of Securities Dealers, Inc. Ohio National Life pays ONEQ 7.25% of each purchase
payment and ONEQ then pays a portion of that amount to the broker-dealers as
compensation for their sales efforts. The broker-dealers will remunerate their
registered representatives from their own funds. Purchase payments on which no
compensation is paid to registered representatives may not be included in
amounts on which the sales compensation will be paid to ONEQ. To the extent
that the amount of the contingent deferred sales charge received by Ohio
National Life is not sufficient to recover the fee paid to ONEQ, any deficiency
will be made up from Ohio National Life's general account assets which include,
among other things, any profit from the mortality and expense risk charges.
ONEQ's address is One Financial Way, Cincinnati, Ohio 45242.
DEDUCTIONS AND EXPENSES
CONTINGENT DEFERRED SALES CHARGE
No deduction for sales expense is made from purchase payments. A contingent
deferred sales charge may be assessed by Ohio National Life when a contract is
surrendered or a partial withdrawal is made to defray expenses relating to the
sale of the contract, including compensation to broker-dealers, cost of sales
literature and prospectuses, and other expenses related to sales activity. The
charge equals a percentage of the amount withdrawn. This percentage will vary
with the number of years from the date the purchase payments were made (starting
with the first purchase payment) as follows:
<TABLE>
<CAPTION>
YEARS PAYMENT
<S> <C> <C>
1st 6%
2nd 6%
3rd 6%
4th 5%
5th 3%
6th 2%
7th and later 0%
</TABLE>
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During each contract year, partial withdrawals of not more than 10% of the
accumulation value (as of the day of the first withdrawal made during that
contract year) may be made without the imposition of the contingent deferred
sales charge.
CONTRACT ADMINISTRATION CHARGE
Each year on the contract anniversary (or at the time of surrender of the
contract), Ohio National Life will deduct a contract administration charge of
$30 from the accumulation value to reimburse it for the expenses relating to the
maintenance of the contract. There is no contract administration charge (a) for
contracts having a value of at least $50,000 on the contract anniversary or (b)
after the annuity payout date. Ohio National Life guarantees not to increase the
contract administration charge.
DEDUCTION FOR ADMINISTRATIVE EXPENSES
A deduction is made at the end of each valuation period equal to 0.25% on an
annual basis of the contract value for administrative expenses. This deduction
is designed to reimburse Ohio National Life for expenses incurred for
accounting, auditing, legal, contract owner services, reports to regulatory
authorities and contract owners, contract issue, etc., not covered by the
contract administration charge.
DEDUCTION FOR RISK UNDERTAKINGS
Prior to the annuity payout date, Ohio National Life guarantees that the
accumulation value of all contracts will not be affected by any excess of sales
and administrative expenses over the deductions provided therefor. Ohio National
Life also guarantees to pay a death benefit in the event of the annuitant's
death prior to the annuity payout date (see Death Benefit, page 15). After the
annuity payout date, Ohio National Life guarantees that variable annuity
payments will not be affected by adverse mortality experience or expenses.
For assuming these risks, Ohio National Life, in determining the accumulation
unit values and the annuity unit values for each subaccount, makes a deduction
from the applicable investment results equal to 0.65% of the contract value on
an annual basis. However, Ohio National Life has agreed that the deduction for
these risk undertakings shall not be increased to more than the rate in effect
at the time the contract is issued. Ohio National Life may discontinue this
limitation on its right to increase the deduction, but only as to any contracts
purchased after notice of the discontinuance. That deduction may be decreased by
Ohio National Life at any time and may be increased not more frequently then
annually to not more than 1.55% on an annual basis. Although Ohio National Life
views the risk charge as an indivisible whole, of the amount currently being
deducted, it has estimated that a reasonable allocation would be 0.35% for
mortality risk, and 0.30% for expense risk. Although Ohio National Life hopes to
realize a profit from this charge, if the deduction is insufficient to cover the
actual risk involved, the loss will fall on Ohio National Life; conversely, if
the deduction proves more than sufficient, the excess will be a gain to Ohio
National Life.
TRANSFER FEE
A transfer fee of $10 is made for each transfer from one or more subaccounts to
one or more other subaccounts. The fee is charged pro rata against the
subaccounts from which the transfer is effected. No fee is charged for the
first transfer each calendar month.
DEDUCTION FOR STATE PREMIUM TAX
Most states do not presently charge a premium tax for these contracts. Where a
tax applies, the rates for tax-qualified contracts are presently 0.5% in
California, 1.0% in Puerto Rico and West Virginia, 2.0% in Kentucky and 2.25% in
the District of Columbia. For non-tax-qualified contracts, the rates are
presently 1.0% in Puerto Rico, West Virginia and Wyoming, 1.25% in the South
Dakota, 2.0% in Kansas, Kentucky and Maine, 2.25% in the District of Columbia,
2.35% in California and 3.5% in Nevada. The deduction for premium taxes will be
made when incurred. Normally, that is not until annuity payments begin.
However, in Kansas, South Dakota and Wyoming, they are presently being deducted
from purchase payments.
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FUND EXPENSES
There are deductions from, and expenses paid out of, the assets of the Funds.
These are described in the accompanying prospectuses of the Funds.
DESCRIPTION OF VARIABLE ANNUITY CONTRACTS
10-DAY FREE LOOK
The contract owner may revoke the contract at any time until the end of 10 days
after receipt of the contract (or such longer period as may be required by
applicable state law) and receive a refund of the value of the contract as of
the date of the cancellation. To revoke, the owner must return the contract to
Ohio National Life within the free look period. In Georgia, Idaho, Indiana,
Nebraska, Nevada, North Carolina, Oklahoma, South Carolina, Utah and
Washington, state law requires that the original purchase price be returned in
lieu of the current contract value in case of revocation during the free look
period. Any purchase payments received from these states to be allocated to
variable subaccounts will first be allocated to the Money Market subaccount
until the end of the free look period as provided in the contract.
ACCUMULATION PERIOD
PURCHASE PAYMENT PROVISIONS
The contracts provide for a minimum initial purchase payment of $25,000 and
minimum subsequent purchase payments of $500 per payment ($300 for payroll
deduction plans). Ohio National Life reserves the right to restrict total
purchase payments in excess of $1,000,000. Subject to these limits, payments may
be made at any time. Failure to make payments shall not constitute a default.
ACCUMULATION UNITS
Prior to the annuity payout date, the contract value is measured by
accumulation units. Each purchase payment results in the crediting of
accumulation units to the contract (see Crediting Accumulation Units). The
number of accumulation units so credited remains constant but the dollar value
of accumulation units will vary depending upon the investment results of the
particular subaccount to which payments are allocated.
CREDITING ACCUMULATION UNITS
Orders or applications, together with the first purchase payment, are forwarded
to the home office of Ohio National Life for acceptance. Upon acceptance, a
contract is issued to the contract owner, and the first purchase payment is then
credited to the contract in the form of accumulation units. Initial purchase
payments are credited not later than two business days after receipt if all
information necessary for issuing a contract and processing the purchase payment
is complete. If this cannot be done within five business days, the purchase
payment will be returned immediately to the applicant unless the applicant
specifically consents to having Ohio National Life retain the purchase payment
until the necessary information is completed. After that, the purchase payment
will be credited within two business days. Subsequent purchase payments are sent
directly to the home office of Ohio National Life and are applied to provide
that number of accumulation units (for each subaccount) determined by dividing
the amount of the purchase payment by the value of the appropriate accumulation
unit next computed after the payment is received at the home office of Ohio
National Life.
ALLOCATION OF PURCHASE PAYMENTS
You may direct the allocation of your purchase payments among up to 10
subaccounts of VAA and to the Guaranteed Account. The amount allocated to any
subaccount or the Guaranteed Account must equal a whole percentage. The
allocation of future purchase payments may be changed at any time upon written
notice to the home office of Ohio National Life.
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ACCUMULATION UNIT VALUE AND ACCUMULATION VALUE
The accumulation unit value of each subaccount of VAA was set at $10 when the
first payment for these contracts was allocated to each subaccount. The
accumulation unit value for any subsequent valuation period is determined by
multiplying the accumulation unit value for the immediately preceding valuation
period by the net investment factor (described below) for such subsequent
valuation period. The accumulation value is determined by multiplying the total
number of accumulation units (for each subaccount) credited to the contract by
the accumulation unit value (for such subaccount) for the valuation period for
which the accumulation value is being determined.
NET INVESTMENT FACTOR
The net investment factor is a quantitative measure of the investment results of
each subaccount of VAA. The net investment factor for each subaccount for any
valuation period is determined by dividing (a) by (b), then subtracting (c) from
the result, where:
(a) is -
(1) the net asset value of the corresponding Fund Share determined as of
the end of a valuation period, plus
(2) The per share amount of any dividends or other distributions declared
for that Fund if the "ex-dividend" date occurs during the valuation
period, plus or minus
(3) per share charge or credit for any taxes paid or reserved for which is
determined by Ohio National Life to result from the maintenance or
operation of that subaccount of VAA; (No federal income taxes are
applicable under present law.)
(b) is the net asset value of the corresponding Fund Share determined at the
end of the preceding valuation period; and
(c) is the deduction for administrative and sales expenses and risk
undertakings. (See Deduction for Administrative Expenses, page 11, and,
Deduction for Risk Undertakings, page 11.)
SURRENDER AND PARTIAL WITHDRAWAL
Prior to the annuity payout date, or thereafter in the case of annuity Option
1(e) described below, the owner of a contract may surrender (totally withdraw
the value of) his or her contract for its accumulation value or elect a partial
(at least $1,000) withdrawal therefrom. These transactions may be subject to the
contingent deferred sales charge described on page 10. That charge is a
percentage of the total amount withdrawn. For example, if a partial withdrawal
of $1,000 is requested during the first two years after the first purchase
payment for which there are contract values, and after you have received that
year's "free" withdrawal of 10% of the accumulation value, Ohio National Life
would pay you $1,000, but the total amount deducted from the accumulation value
would be $1,063.83 (i.e., $1,063.83 x 6% = $63.83). Unless otherwise specified,
the withdrawal will be made pro-rata from the values of each subaccount. The
amount available for withdrawal is the sum of the subaccount values less the
contingent deferred sales charge, if any. In the case of a complete surrender,
the amount payable is also reduced by the amount of the contract administration
charge. Payment by Ohio National Life shall be made within seven days from the
date of receipt of the request for such payment except as it may be deferred
under the circumstances described below. Surrenders and partial withdrawals are
limited or not permitted in connection with certain retirement plans. See Tax
Deferred Annuities, page 21. For tax consequences of a surrender or withdrawal,
see Federal Tax Status, page 20.
Occasionally Ohio National Life may receive a request for a surrender or partial
withdrawal which includes contract values derived from purchase payments which
have not cleared the banking system. Ohio National Life may delay mailing that
portion which relates to such payments until the check for the purchase payment
has cleared. Ohio National Life requires the return of the contract in the case
of a complete surrender.
The right to withdraw may be suspended or the date of payment postponed (1) for
any period during which the New York Stock Exchange is closed (other than
customary weekend and holiday closings) or during which trading on the Exchange,
as determined by the Securities and Exchange Commission, is restricted; (2) for
any period during which an emergency, as determined by the Commission, exists as
a result of which disposal of securities held in a Fund is not reasonably
practical, or it is not reasonably practical to determine the value of the
Fund's net assets; or (3) or such other periods as the Commission may by order
permit for the protection of security holders.
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TRANSFERS AMONG SUBACCOUNTS
Contract values may be transferred from one or more subaccounts to one or more
other subaccounts upon the request of the owner. Transfers may be made at any
time during the accumulation period. The amount of any such transfer from or to
any subaccount must be at least $300 (or the entire value of the contract's
interest in a subaccount, if less). Ohio National Life reserves the right to
limit the number, frequency, method or amount of transfers. Transfers from any
Fund on any one day may be limited to 1% of the previous day's total net assets
of that Fund if Ohio National Life or the Fund in its or their discretion,
believes that the Fund might otherwise be damaged. If and when transfers must be
so limited, some transfer requests will not be made. In determining which
requests will be made, scheduled transfers (pursuant to a pre-existing DCA
program) will be made first, followed by mailed written requests in the order
postmarked and, lastly, telephone and facsimile requests in the order received.
Contract owners whose transfer requests are not made will be so notified.
Current SEC rules preclude us from processing at a later date those requests
that were not made. Accordingly, a new transfer request would have to be
submitted in order to make a transfer that was not made because of these
limitations. After the annuity payout date, transfers among subaccounts can only
be made once each calendar quarter. Such transfers may then be made without a
transfer fee. (See Transfer Fee, page 11, and Transfers after Annuity Payout
Date, page 18). Ohio National Life may restrict transfers of a contract's
Guaranteed Account value during a contract year to not more than 20% of such
value (or $1,000 if greater) as of the beginning of that contract year.
TELEACCESS
If the contract owner first submits a pre-authorization form to Ohio National
Life, contract and unit values and interest rates can be checked and transfers
may be made by telephoning Ohio National Life between 7:00 a.m. and 7:00 p.m.
(Eastern time) on days that it is open for business, at 1-800-366-6654, #8. Ohio
National Life will honor pre-authorized telephone transfer instructions from
anyone who is able to provide the personal identifying information requested via
TeleAccess. Telephone transfer requests will not be honored after the
annuitant's death. For added security, transfers are confirmed in writing sent
to the owner on the next business day. However, if a transfer cannot be
completed as requested, a customer service representative will contact the owner
in writing sent within 48 hours of the TeleAccess request.
SCHEDULED TRANSFERS (DOLLAR COST AVERAGING)
Ohio National Life administers a scheduled transfer ("DCA") program enabling you
to preauthorize automatic monthly or quarterly transfers of a specified dollar
amount of at least $300, (a) from any variable subaccount(s) to any other
subaccount(s), including the Guaranteed Account, or (b) from the Guaranteed
Account to any other subaccount(s), if the DCA program is established at the
time the contract is issued, the DCA program is scheduled to begin within 6
months of contract issue and the term of the DCA program does not exceed 2
years. For transfers from variable subaccounts, at least 12 transfers must be
scheduled and the term of the DCA program may not exceed 5 years. Each DCA
transfer must be at least $300 and at least 12 DCA transfers must be scheduled.
No transfer fee is charged for DCA transfers. Ohio National Life may discontinue
the DCA program at any time. You may also discontinue further DCA transfers by
giving Ohio National Life written notice at least 7 business days before the
next scheduled transfer.
DCA generally has the effect of reducing the risk of purchasing at the top, and
selling at the bottom, of market cycles. DCA transfers from the Guaranteed
Account or from a fund with a stabilized net asset value, such as the Money
Market subaccount, will generally reduce the average total cost of indirectly
purchasing Fund Shares because greater numbers of shares will be purchased when
the share prices are lower than when prices are higher. However, DCA does not
assure you of a profit, nor does it protect against losses in a declining
market. Moreover, for transfers from a subaccount not having a stabilized net
asset value, DCA will have the effect of reducing the average price of the
shares being redeemed. DCA might also be used to systematically transfer
accumulation values from variable subaccounts to the Guaranteed Account, in
anticipation of retirement, in order to reduce the risk of making a single
transfer during a low market.
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PORTFOLIO REBALANCING
You may elect to have Ohio National Life automatically transfer amounts on a
quarterly, semi-annual or annual basis to maintain a specified percentage
(whole percentages only) of contract value in each of two or more designated
subaccounts. The purpose of a portfolio rebalancing strategy is to maintain,
over time, your desired allocation percentage in the designated subaccounts
having differing investment performance. Portfolio rebalancing will not
necessarily enhance future performance or protect against future losses.
To elect this option, or to discontinue it, you must provide Ohio National Life
with written authorization. Portfolio rebalancing transactions are not included
for the purpose of determining any transfer charge.
DEATH BENEFIT
In the event of the death of the annuitant and any contingent annuitant prior to
the annuity payout date, the contract provides a death benefit to be paid to a
designated beneficiary. (Death benefits are not available on any contract
purchased through a bank in Puerto Rico.) The amount of the death benefit will
be determined as of the date of the annuitant's death. It will be paid to the
beneficiary in a single sum unless the owner or beneficiary elects settlement
under one or more of the settlement options provided in the contract.
The death benefit will be the greater of: (a) the contract value; or (b) the net
of purchase payments less withdrawals; or (c) the stepped-up death benefit
amount if the contract has been in effect for at least 6 years. For the 6-year
period beginning on the sixth contract anniversary, the stepped-up death benefit
will be the greater of (i) the contract value as of the sixth anniversary or
(ii) the net of purchase payments less withdrawals made on or before the sixth
anniversary. At the beginning of each later 6-year period (until the annuitant
attains age 90), the stepped-up death benefit will be the greater of (i) the
contract value on that date or (ii) the death benefit as of the last day of the
preceding 6-year period. The stepped-up death benefit amount is increased by
purchase payments and decreased by withdrawals made during each 6-year period
after the sixth anniversary.
In those states where permitted, an optional annual stepped-up death benefit may
be elected at the time the contract is issued. With that option, the death
benefit will be increased in the manner indicated in the preceding paragraph,
until the annuitant attains age 80, on each contract anniversary on which the
contract value exceeds the death benefit for the previous year. There is an
additional charge (presently at an annual rate of 0.05% of the optional death
benefit amount, which rate may be increased to no more than 0.25% on contracts
issued in the future) for this optional benefit.
In those states where permitted, a guaranteed minimum death benefit may be
elected at the time the contract is issued. With this option, the death benefit
is the greater of (a) the contract value on the date of death or (b) the
guaranteed minimum death benefit amount. The guaranteed minimum death benefit
amount for contract values held in the Guaranteed Account and the Money Market
subaccount is the contract value as of the date of death. For all other
subaccounts, the guaranteed minimum death benefit amount is (i) the net of
purchase payments less withdrawals plus (ii) a daily increase, until the
annuitant attains age 80, at an effective annual rate of 6%. There is an
additional charge for this option of 0.25% of the guaranteed minimum death
benefit amount.
GUARANTEED ACCOUNT
The Guaranteed Account guarantees a fixed return for a specified period of time
and guarantees the principal against loss. Any portion of a contract relating to
the Guaranteed Account is not registered under the Securities Act of 1933. The
Guaranteed Account is not registered as an investment company under the 1940
Act. Accordingly, neither the Guaranteed Account nor any interests in it are
subject to the provisions or restrictions of either such Act, and the
disclosures regarding it have not been reviewed by the staff of the Securities
and Exchange Commission.
The Guaranteed Account consists of all of Ohio National Life's general assets
other than those allocated to a separate account. Purchase payments and contract
values may be allocated between the Guaranteed Account and VAA. The allocation
will be as elected by the owner at the time of purchase or as subsequently
changed.
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Ohio National Life will invest its general assets in its discretion as allowed
by applicable state law. Investment income from Ohio National Life's general
assets will be allocated to those contracts having guaranteed values in
accordance with the terms of such contracts.
The amount of investment income allocated to the contracts will vary from year
to year in Ohio National Life's sole discretion. However, Ohio National Life
guarantees that it will credit interest at a rate of not less than 3.00% per
year, compounded annually, to contract values allocated to the Guaranteed
Account. Ohio National Life may credit interest at a rate in excess of 3.00%,
but any such excess interest credit will be in Ohio National Life's sole
discretion.
Ohio National Life guarantees that, prior to the commencement of annuity payout,
the guaranteed value of a contract will never be less than (a) the amount of
purchase payments allocated to, and transfers into, the Guaranteed Account, plus
(b) interest credited at the rate of 3.00% per year compounded annually, plus
(c) any additional excess interest Ohio National Life may credit to guaranteed
values, and less (d) any partial withdrawals, loans and transfers from the
guaranteed values, and less (e) any contingent deferred sales charges on partial
withdrawals, loan interest, state premium taxes, transfer fees, and the portion
of the $30 annual contract administration charge allocable to the Guaranteed
Account. No deductions are made from the Guaranteed Account for administrative
expenses or risk undertakings. (See "Deductions and Expenses".)
Other than pursuant to a DCA (scheduled transfer) or portfolio rebalancing
program, Ohio National Life reserves the right to restrict transfers of a
contract's Guaranteed Account value during a contract year to not more than 20%
of such value as of the beginning of a contract year (or $1,000, if greater). As
provided by applicable state law, Ohio National Life reserves the right to defer
the payment of amounts withdrawn from the Guaranteed Account for a period not to
exceed six months from the date written request for such withdrawal is received
by Ohio National Life.
OHIO NATIONAL LIFE EMPLOYEE DISCOUNT
Ohio National Life and its affiliated companies offer a credit on the purchase
of contracts by any of their employees, directors or retirees, or their spouse
or the surviving spouse of a deceased retiree, covering any of the foregoing or
any of their minor children, or any of their children ages 18 to 21 who is
either (i) living in the purchaser's household or (ii) a full-time college
student being supported by the purchaser, or any of the purchaser's minor
grandchildren under the Uniform Gifts to Minors Act. This credit is treated as
additional income under the contract. The amount of the credit equals 3.2% of
all purchase payments made in the first contract year and 5.5% of purchase
payments made in the second through sixth contract years. Ohio National Life
credits the Guaranteed Account of the eligible person's contract in the
foregoing amounts at the time of each payment made by the eligible person.
TEXAS STATE OPTIONAL RETIREMENT PROGRAM
Under the Texas State Optional Retirement Program (the "Program"), purchase
payments may be excluded from the gross income of state employees for federal
tax purposes to the extent that such purchase payments do not exceed the
exclusion allowance provided by the Code. The Attorney General of Texas has
interpreted the Program as prohibiting any participating state employee from
receiving the surrender value of a contract funding benefits under the Program
prior to termination of employment or the state employee's retirement, death or
total disability. Therefore, no surrender or partial withdrawal by a participant
in the Program will be allowed until the first of these events occurs.
ANNUITY PERIOD
ANNUITY PAYOUT DATE
Annuity payments under a contract will begin on the annuity payout date. This
date is selected by the owner at the time the contract is issued and must be at
least 30 days after the contract date. It may be changed from time to time by
the owner so long as the annuity payout date selected is the first day of any
month at least 30 days after the date of such
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<PAGE> 17
change. The contract restricts the annuity payout date to not later than the
first of the month following the annuitant's 90th birthday; however, this
restriction may be modified by applicable state law or it may be waived by
mutual agreement between Ohio National Life and the owner.
The contracts include Ohio National Life's assurance that (except for option
1(e), below) annuity payments will be paid for the lifetime of the annuitant
(and joint annuitant, if any) in accordance with the annuity rates contained in
the contract, regardless of actual mortality experience.
Other than in connection with annuity Option 1(e) described below, once annuity
payments commence, the contract cannot be surrendered for cash except that, upon
the death of the annuitant, the beneficiary shall be entitled to surrender the
contract for the commuted value of any remaining period- certain payments.
Surrenders and partial withdrawals from Option 1(e) are permitted at any time.
ANNUITY OPTIONS
The owner may elect one or more of the following annuity options, and may change
such election anytime before the annuity payout date.
Option 1(a): Life Annuity with installment payments for the lifetime of the
annuitant (under this option it is possible for the annuitant to
receive only one payment; this could happen if the annuitant
should die before receiving the second payment; there is no
residual value of the contract after annuitant's death).
Option 1(b): Life Annuity with installment payments guaranteed for five years
and continuing thereafter during the remaining lifetime of the
annuitant.
Option 1(c): Life Annuity with installment payments guaranteed for ten years
and continuing thereafter during the remaining lifetime of the
annuitant.
Option 1(d): Installment Refund Life Annuity with payments guaranteed for a
period certain and continuing thereafter during the remaining
lifetime of the annuitant. The number of period-certain payments
is equal to the amount applied under this option divided by the
amount of the first payment.
Option 1(e): Installment Refund annuity with payments guaranteed for a fixed
number (up to thirty) of years. This option is available
for variable annuities only. Although the deduction for risk
undertakings is taken from annuity unit values, Ohio National
Life has no mortality risk during the annuity payout period
under this option.
Option 2(a): Joint & Survivor Life Annuity with installment payments during
the lifetime of an annuitant and continuing during the lifetime
of a designated contingent annuitant (under this option it is
possible for the annuitant and contingent annuitant to receive
only one payment; this could happen if both were to die before
receiving the second payment).
Option 2(b): Joint & Survivor Life Annuity with installment payments
guaranteed for ten years and continuing thereafter during the
remaining lifetime of the annuitant or a designated contingent
annuitant.
Other settlement options are available as agreed to by Ohio National Life.
Unless the contract owner directs otherwise, as of the annuity payout date the
contract values will be applied to provide annuity payments pro-rata from each
subaccount in the same proportion as the contract values immediately prior to
the annuity payout date.
If no election is in effect on the annuity payout date, the accumulation value
of the contract will be applied under Option 1(c) (except that certain contracts
might require a Joint and Survivor Annuity pursuant to the Pension Reform Act of
1974, as amended) with the beneficiary as payee for any remaining period-certain
installments payable after the death of the annuitant. Options 2(a) and 2(b) are
available only with the consent of Ohio National Life if the contingent
annuitant is not related to the annuitant.
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The Internal Revenue Service has not ruled on the tax treatment of a commutable
variable annuity. If you select Option 1(e), it is possible that the IRS could
determine that the entire value of the annuity is fully taxable at the time you
elect Option 1(e) or that variable annuity payments under this option should not
be taxed under the annuity rules (see Federal Tax Status, page 20), which could
result in your payments being fully taxable to you. Should the IRS so rule. Ohio
National Life may be required to tax report up to the full value of the annuity
to you as taxable income.
DETERMINATION OF AMOUNT OF THE FIRST VARIABLE ANNUITY PAYMENT
The first variable annuity payment is determined by applying the accumulation
value for each subaccount in accordance with the settlement option tables
contained in the contract. The rates contained in those tables depend upon the
annuitant's (and any contingent annuitant's) age and sex and the option
selected. Contracts issued to plans sponsored by employers subject to Title VII
of the Civil Rights Act of 1964 or similar state statutes use annuity tables
which do not vary with annuitant's sex. The accumulation value to be applied is
determined at the end of a valuation period (selected by Ohio National Life and
uniformly applied) not more than 10 valuation periods before the annuity payout
date.
If the amount to be applied under an option is less than $5,000, the option
shall not be available and the accumulation value shall be paid in a single sum
to the annuitant. If the first periodic payment under any option would be less
than $25, Ohio National Life reserves the right to change the frequency of
payments so that the first such payment is at least $25.
ANNUITY UNIT AND THE DETERMINATION OF SUBSEQUENT PAYMENTS
Subsequent variable annuity payments will vary to reflect the investment
performance of each applicable subaccount. The amount of each subsequent payment
is determined by annuity units. The number of annuity units for each subaccount
is determined by dividing the dollar amount of the first annuity payment from
each subaccount by the value of the subaccount annuity unit for the same
valuation period used to determine the accumulation value of the contract
applied to provide annuity payments. This number of annuity units remains fixed
during the annuity payment period unless changed as provided below.
The annuity unit value for each subaccount was set at $10 for the valuation
period as of which the first variable annuity payable from each subaccount of
VAA was calculated. The annuity unit value for each subsequent valuation period
equals the annuity unit value for the immediately preceding valuation period
multiplied by the net investment factor (see page 13) for such subsequent
valuation period and by a factor (0.999919 for a one-day valuation period) to
neutralize the assumed interest rate discussed below.
The dollar amount of each subsequent variable annuity payment is equal to the
fixed number of annuity units for each subaccount multiplied by the value of the
annuity unit for the valuation period.
The annuity rate tables contained in the contracts are based on the 1983(a)
Mortality Table Projected to 1996 under Scale G with compound interest at the
effective rate of 3% per year. A higher interest assumption would mean a higher
initial annuity payment but a more slowly rising series of subsequent annuity
payments if annuity unit values were increasing (or a more rapidly falling
series of subsequent annuity payments if annuity unit values were decreasing). A
lower interest assumption would have the opposite effect. If the actual net
investment rate were equal to the assumed interest rate, annuity payments would
be level.
TRANSFERS AFTER ANNUITY PAYOUT DATE
After annuity payments have been made for at least 12 months, the annuitant can,
once each calendar quarter, change the subaccount(s) on which variable annuity
payments are based. On at least 30 days written notice to Ohio National Life at
its home office, that portion of the periodic variable annuity payment directed
by the annuitant will be changed to reflect the investment results of a
different subaccount. The annuity payment immediately after such change will be
the amount that would have been paid without such change. Subsequent payments
will reflect the new mix of subaccount allocation.
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OTHER CONTRACT PROVISIONS
ASSIGNMENT
Any amount payable in settlement of the contracts may not be commuted,
anticipated, assigned or otherwise encumbered, or pledged as loan collateral to
any person other than Ohio National Life. To the extent permitted by law, no
such amounts shall be subject in any way to any legal process to subject them to
payment of any claims against an annuitant before the annuity payout date. A
tax-qualified contract may not, but a non-tax-qualified contract may, be
collaterally assigned before the annuity payout date. Ownership of a
tax-qualified contract may not be transferred except to (1) the annuitant, (2) a
trustee or successor trustee of a pension or profit-sharing trust which is
qualified under Section 401 of the Code, or (3) the employer of the annuitant
provided that the contract after transfer is maintained under the terms of a
retirement plan qualified under Section 403(a) of the Code for the benefit of
the annuitant, or (4) as otherwise permitted by laws and regulations governing
plans for which the contract may be issued. Ownership of a non-tax-qualified
contract may be transferred.
PERIODIC REPORTS
Ohio National Life will furnish each contract owner, once each calendar quarter
prior to the annuity payout date, a statement showing the number of accumulation
units credited to the contract by subaccount and the accumulation unit value of
each such unit as of the end of the preceding quarter. In addition, as long as
the contract remains in effect, Ohio National Life will forward any periodic
reports of the Funds.
SUBSTITUTION FOR FUND SHARES
If investment in a Fund is no longer possible or in Ohio National Life's
judgment becomes inappropriate to the purposes of the contract, Ohio National
Life may substitute one or more other mutual funds. Substitution may be made
with respect to both existing investments and the investment of future purchase
payments. However, no such substitution will be made without any necessary
approval of the Securities and Exchange Commission. We may also add other
investment portfolios of the Funds or of other mutual funds as eligible
investments of VAA.
CONTRACT OWNER INQUIRIES
Any questions from contract owners should be directed to Ohio National Life,
Variable Annuity Administration, P.O. Box 2669, Cincinnati, Ohio 45201;
telephone 1-800-366-6654 (8:30 a.m. to 4:30 p.m. Eastern time).
PERFORMANCE DATA
Ohio National Life may advertise performance data for the various Funds showing
the percentage change in the value of an accumulation unit based on the
performance of the applicable portfolio over a period of time (usually a
calendar year). Such percentage change is determined by dividing the increase
(or decrease) in value for the unit by the accumulation unit value at the
beginning of the period. This percentage figure will reflect the deduction of
any asset-based charges under the contract but will not reflect the deduction of
any applicable contract administration charge or contingent deferred sales
charge. The deduction of any applicable contract administration charge or
contingent deferred sales charge would reduce any percentage increase or make
greater any percentage decrease.
Any such advertising will also include average annual total return figures
calculated as shown in the Statement of Additional Information. The average
annual total return figures will reflect the deduction of applicable contract
administration charges and contingent deferred sales charges as well as
applicable asset-based charges.
Ohio National Life may also distribute sales literature comparing VAA's
performance to the Consumer Price Index or to such established market indexes as
the Dow Jones Industrial Average, the Standard & Poor's 500 Stock Index, IBC's
Money Fund Reports, Lehman Brothers Bond Indices, the Morgan Stanley Europe
Australia Far East Index, Morgan Stanley World Index, Russell 2000 Index, or
other variable annuity separate accounts or mutual funds with investment
objectives similar to those of the subaccounts.
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FEDERAL TAX STATUS
The following discussion of federal income tax treatment of amounts received
under a variable annuity contract is not exhaustive, does not purport to cover
all situations, and is not intended as tax advice. A qualified tax adviser
should always be consulted with regard to the application of law to individual
circumstances. Tax laws can change, even with respect to contracts that have
already been issued. Tax law revisions, with unfavorable consequences to
contracts offered by this prospectus, could have retroactive effect on
previously issued contracts or on subsequent voluntary transactions in
previously issued contracts.
Ohio National Life is taxed as a life insurance company under Subchapter L of
the Internal Revenue Code (the "Code"). Since the operations of VAA are a part
of, and are taxed with, the operations of Ohio National Life, VAA is not
separately taxed as a "regulated investment company" under Subchapter M of the
Code.
As to tax-qualified contracts, no federal income tax is payable under present
law on dividend income or capital gains distributions from Fund Shares held in
VAA or upon capital gains realized by VAA on redemption of Fund Shares. When a
non-tax-qualified contract is issued in connection with a deferred compensation
plan or arrangement, all rights, discretions and powers relative to the contract
are vested in the employer and you must look only to your employer for the
payment of deferred compensation benefits. Generally, in that case, an annuitant
will have no "investment in the contract" and amounts received by you from your
employer under a deferred compensation arrangement will be taxable in full as
ordinary income in the year of receipt.
The contracts described in this prospectus are considered annuity contracts
under Section 72 of the Code, which generally provides for taxation of
annuities. Under existing provisions of the Code, any increase in the
accumulation value of the contract is not taxable to you as the owner or
annuitant until you receive it, either in the form of annuity payments, as
contemplated by the contract, or in some other form of distribution (provided
that the owner of a non-tax qualified contract must be a natural person for this
purpose). With certain exceptions, where the owner of a non-tax qualified
contract is a non-natural person (corporation, partnership or trust) any
increase in the accumulation value of the contract attributable to purchase
payments made after February 28, 1986 will be treated as ordinary income
received or accrued by the contract owner during the current tax year.
When annuity payments commence under the contract each payment is taxable under
Section 72 of the Code as ordinary income in the year of receipt if the
annuitant has neither paid any portion of the purchase payments for the contract
nor has previously been taxed on any portion of the purchase payments. If any
portion of the purchase payments has been paid from or included in your taxable
income, this aggregate amount will be considered your "investment in the
contract." You will be entitled to exclude from your taxable income a portion of
each annuity payment equal to your "investment in the contract" divided by the
period of expected annuity payments, determined by your life expectancy and the
form of annuity benefit. Once your "investment in the contract" is recovered,
the entire portion of each annuity payment will be included in your taxable
income.
If an election is made to receive the accumulated value in a single sum in lieu
of annuity payments, any amount received or withdrawn in excess of the
"investment in the contract" will normally be taxed as ordinary income in the
year received. A partial withdrawal of contract values is taxable as income to
the extent that the accumulated value of the contract immediately before the
payment exceeds the "investment in the contract." Such a withdrawal is treated
as a distribution of earnings first and only second as recovery of your
"investment in the contract". Any part of the value of the contract that is
assigned or pledged to secure a loan will be taxed as if it had been a partial
withdrawal and may be subject to a penalty tax.
There is a penalty tax equal to 10% of any amount that must be included in gross
income for tax purposes. The penalty will not apply to a redemption that is (1)
received on or after the taxpayer reaches age 59-1/2; (2) made to a beneficiary
on or after the death of the annuitant; (3) attributable to the taxpayer's
becoming disabled; (4) made as a series of
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substantially equal periodic payments for the life of the annuitant (or joint
lives of the annuitant and beneficiary); (5) from a contract that is a qualified
funding asset for purposes of a structured settlement; (6) made under an annuity
contract that is purchased with a single premium and with an annuity payout date
not later than a year from the purchase of the annuity; (7) incident to divorce
or (8) taken from an IRA for a qualified first-time home purchase (up to
$10,000) or qualified higher education expenses. If an election is made not to
have withholding apply to the early withdrawal or if an insufficient amount is
withheld, the contract owner may be responsible for payment of estimated tax.
You may also incur penalties under the estimated tax rules if the withholding
and estimated tax payments are not sufficient. Failure to provide your taxpayer
identification number will automatically subject any payments under the contract
to withholding.
TAX-DEFERRED ANNUITIES
Under the provisions of Section 403(b) of the Code, purchase payments made for
annuity contracts purchased for employees by public educational institutions and
certain tax-exempt organizations which are described in Section 501(c)(3) of the
Code are excludable from the gross income of such employees to the extent that
the aggregate purchase payments plus any other amounts contributed to the
purchase of a contract and toward benefits under qualified retirement plans do
not exceed the exclusion allowance determined for the employee as set forth in
Sections 403(b) and 415 of the Code. Employee contributions are, however,
subject to social security (FICA) tax withholding. All amounts received by an
employee under a contract, either in the form of annuity payments or cash
withdrawal, will be taxed under Section 72 of the Code as ordinary income for
the year received, except for exclusion of any amounts representing "investment
in the contract." Under certain circumstances, amounts received may be used to
make a "tax-free rollover" into one of the types of individual retirement
arrangements permitted under the Code. Amounts received that are eligible for
"tax-free rollover" will be subject to an automatic 20% withholding unless such
amounts are directly rolled over from the tax-deferred annuity to the individual
retirement arrangement.
With respect to earnings accrued and purchase payments made after December 31,
1988, pursuant to a salary reduction agreement under Section 403(b) of the Code,
distributions may be paid only when the employee (a) attains age 59-1/2, (b)
separates from the employer's service, (c) dies, (d) becomes disabled as defined
in the Code, or (e) incurs a financial hardship as defined in the Code. In the
case of hardship, cash distributions may not exceed the amount of such purchase
payments. These restrictions do not affect rights to transfer investments among
the subaccounts and do not limit the availability of transfers between
tax-deferred annuities.
QUALIFIED PENSION OR PROFIT-SHARING PLANS
Under present law, purchase payments made by an employer or trustee, pursuant to
a plan or trust qualified under Section 401(a) or 403(a) of the Code, are
generally excludable from gross income of the employee. The portion, if any, of
the purchase payments made by the employee, or which is considered taxable
income to the employee in the year such payments are made, constitutes an
"investment in the contract" under Section 72 of the Code for the employee's
annuity benefits. Salary reduction payments to a profit sharing plan qualifying
under Section 401(k) of the Code are generally excludable from gross income of
the employee.
The Code requires that plans must prohibit any distribution to a plan
participant prior to age 59-1/2, except in the event of death, total disability
or separation from service (special rules apply for plan terminations).
Distributions must commence no later than April 1 of the calendar year following
the year in which the participant reaches age 70-1/2. Premature distribution of
benefits or contributions in excess of those permitted by the Code may result in
certain penalties under the Code.
If an employee, or one or more of the beneficiaries, receives the total amounts
payable with respect to an employee within one taxable year after age 59-1/2 on
account of the employee's death or separation from service of the employer, any
amount received in excess of the employee's "investment in the contract" may be
taxed under special 5-year forward
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averaging rules. Five-year averaging will no longer be available after 1999
except for certain grandfathered individuals. The taxpayer can elect to have
that portion of a lump-sum distribution attributable to years of participation
prior to January 1, 1974 given capital gains treatment. The percentage of pre-74
distribution subject to capital gains treatment decreases as follows: 100%,
1987; 95%, 1988; 75%, 1989; 50%, 1990; and 25%, 1991. For tax years 1992 and
thereafter no capital gains treatment is available (except that taxpayers who
were age 50 before 1986 may still elect capital gains treatment). The employee
receiving such a distribution may be able to make a "tax-free rollover" of the
distribution less the employee's "investment in the contract" into another
qualified plan in which the employee is a participant or into one of the types
of individual retirement arrangements permitted under the Code. An employee's
surviving spouse receiving such a distribution may be able to make a tax-free
rollover to one of the types of individual retirement arrangements permitted
under the Code. Amounts received that are eligible for "tax-free rollover" will
be subject to an automatic 20% withholding unless such amounts are directly
rolled over to another qualified plan or individual retirement arrangement.
INDIVIDUAL RETIREMENT ANNUITIES (IRA)
Section 408(b) of the Code provides that an individual may invest an amount up
to $2,000 per year of earned income in an IRA and claim it as a personal tax
deduction if such person is not an "active participant" in an employer
maintained qualified retirement plan or such person has adjusted gross income
which does not exceed the "applicable dollar limit." For a single taxpayer, the
applicable dollar limitation is $30,000, with the amount of IRA contribution
which may be deducted reduced proportionately for Adjusted Gross Income between
$30,000-$40,000. For married couples filing jointly, the applicable dollar
limitation is $50,000, with the amount of IRA contribution which may be deducted
reduced proportionately for Adjusted Gross Income between $50,000-$60,000.
There is no deduction allowed for IRA contributions when Adjusted Gross Income
reaches $40,000 for individuals and $60,000 for married couples filing jointly.
In the alternative, an individual otherwise qualified for an IRA may elect to
contribute to an IRA for the individual and for the individual's non-working
spouse, with the total deduction limited to $4,000.
Individuals are permitted to make non-deductible IRA contributions to the extent
they are ineligible to make deductible IRA contributions. Any amount received
from another qualified plan (including another individual retirement
arrangement) which is eligible as a "tax-free rollover" may be invested in an
IRA, and is not counted toward the overall contribution limit. Earnings on
nondeductible IRA contributions are not subject to tax until they are withdrawn.
The combined limit on designated nondeductible and deductible contributions for
a tax year is the lesser of 100% of compensation or $2,000 ($4,000 in the case
of an additional contribution to a spousal IRA).
Generally, distributions (all or part) made prior to age 59-1/2 (except in the
case of death or disability) will result in a penalty tax of 10% plus ordinary
income tax treatment of the amount received. Additionally, there is an excise
tax of 6% of the amount contributed in excess of either the deductible limit or
nondeductible limit, as indicated above, if such amount is not withdrawn prior
to the filing of the income tax return for the year of contribution or applied
as an allowable contribution for a subsequent year. The excise tax will continue
to apply each year until the excess contribution is corrected. Distributions
after age 59-1/2 are treated as ordinary income at the time received.
Distributions must commence before April 1 following the year in which the
individual reaches age 70-1/2. A 50% nondeductible excise tax is imposed on the
excess in any tax year of the amount that should have been distributed over the
amount actually distributed.
Section 408A of the Code provides for a special type of IRA called a Roth IRA.
No tax deduction is allowed for contributions to a Roth IRA, but assets grow on
a tax-deferred basis. Under certain circumstances, withdrawals from a Roth IRA
can be excludable from income. Eligibility for a Roth IRA is based on adjusted
gross income and filing status. Special rules apply which allow traditional
IRAs to be rolled over or converted to a Roth IRA.
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SIMPLIFIED EMPLOYEE PENSION PLANS (SEPPS)
Under Section 408 of the Code, employers may establish SEPPs for their
employees. Under these plans the employer may contribute on behalf of an
employee to an individual retirement account or annuity. The amount of the
contribution is excludable from the employee's income.
Certain employees who participate in a SEPP will be entitled to elect to have
the employer make contributions to a SEPP on their behalf or to receive the
contributions in cash. If the employee elects to have contributions made on the
employee's behalf to a SEPP, it is not treated as current taxable income to the
employee. Elective deferrals under a SEPP are subject to an inflation-indexed
limit which is $10,000 for 1998. Salary-reduction SEPPs are available only if at
least 50% of the employees elect to have amounts contributed to the SEPP and if
the employer has 25 or fewer employees at all times during the preceding year.
New salary-reduction SEPPs may not be established after 1996.
An employee may also take a deduction for individual contributions to the IRA,
subject to the limits applicable to IRAs in general. Withdrawals from the IRAs
to which the employer contributes must be permitted. These withdrawals, however,
are subject to the general rules with respect to withdrawals from IRAs.
WITHHOLDING ON DISTRIBUTION
Distributions from tax-deferred annuities or qualified pension or profit sharing
plans that are eligible for "tax-free rollover" will be subject to an automatic
20% withholding unless such amounts are directly rolled over to an individual
retirement arrangement or another qualified plan. Federal income tax withholding
on annuity payments is required. However, recipients of annuity payments are
allowed to elect not to have the tax withheld. Such an election may be revoked
at any time with respect to annuity payments and thereafter withholding would
commence. Failure to provide your taxpayer identification number will
automatically subject any payments under the contract to withholding.
APPENDIX A
IRA DISCLOSURE STATEMENT
This statement is designed to help you understand the requirements of federal
tax law which apply to your individual retirement annuity (IRA), your simplified
employee pension IRA (SEPP-IRA) for employer contributions, your Savings
Incentive Match Plan for Employees (SIMPLE) IRA, or to one you purchase for your
spouse (see "IRA for Non-working Spouse", page 24). You can obtain more
information regarding your IRA either from your sales representative or from any
district office of the Internal Revenue Service.
FREE LOOK PERIOD
The annuity contract offered by this prospectus gives you the opportunity to
return the contract for a full refund within 10 days after it is delivered (see
page 12). This is a more liberal provision than is required in connection with
IRA's. To exercise this "free-look" provision write or call the address shown
below:
The Ohio National Life Insurance Company
Variable Annuity Administration
P. O. Box 2669
Cincinnati, Ohio 45201
Telephone: 1-800-366-6654 - 8:30 a.m. - 4:30 p.m. (Eastern time zone)
ELIGIBILITY REQUIREMENTS
IRAs are intended for all persons with earned compensation whether or not they
are covered under other retirement programs. Additionally if you have a
non-working spouse (and you file a joint tax return), you may establish an IRA
on behalf of your non-working spouse. A working spouse may establish his or her
own IRA. A divorced spouse receiving taxable alimony (and no other income) may
also establish an IRA.
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CONTRIBUTIONS AND DEDUCTIONS
Contributions to your IRA will be deductible if you are not an "active
participant" in an employer maintained qualified retirement plan or you have
Adjusted Gross Income which does not exceed the "applicable dollar limit". IRA
(or SEPP-IRA) contributions must be made by no later than the time you file your
income tax return for that year. For a single taxpayer, the applicable dollar
limitation is $30,000, with the amount of IRA contribution which may be deducted
reduced proportionately for Adjusted Gross Income between $30,000-$40,000. For
married couples filing jointly, the applicable dollar limitation is $50,000,
with the amount of IRA contribution which may be deducted reduced
proportionately for Adjusted Gross Income between $50,000-$60,000. There is no
deduction allowed for IRA contributions when Adjusted Gross Income reaches
$40,000 for individuals and $60,000 for married couples filing jointly.
Contributions made by your employer to your SEPP-IRA are excludable from your
gross income for tax purposes in the calendar year for which the amount is
contributed. Certain employees who participate in a SEPP-IRA will be entitled to
elect to have their employer make contributions to their SEPP-IRA on their
behalf or to receive the contributions in cash. If the employee elects to have
contributions made on the employee's behalf to the SEPP, those funds are not
treated as current taxable income to the employee. Elective deferrals under a
SEPP-IRA are subject to an inflation-adjusted limit which is $10,000 for 1998.
Salary-reduction SEPP-IRAs (also called "SARSEPs") are available only if at
least 50% of the employees elect to have amounts contributed to the SEPP-IRA and
if the employer has 25 or fewer employees at all times during the preceding
year. New salary-reduction SEPPs may not be established after 1996.
The IRA maximum annual contribution and your tax deduction is limited to the
lesser of: (1) $2,000 or (2) 100% of your earned compensation. Contributions in
excess of the deduction limits may be subject to penalty. See below.
Under a SEPP-IRA agreement, the maximum annual contribution which your employer
may make on your behalf to a SEPP-IRA contract which is excludable from your
income is the lesser of 15% of your salary or $24,000. An employee who is a
participant in a SEPP-IRA agreement may make after-tax contributions to the
SEPP-IRA contract, subject to the contribution limits applicable to IRAs in
general. Those employee contributions will be deductible subject to the
deductibility rules described above.
The maximum tax deductible annual contribution that a divorced spouse with no
other income may make to an IRA is the lesser of (1) $2,000 or (2) 100% of
taxable alimony.
If you or your employer should contribute more than the maximum contribution
amount to your IRA or SEPP-IRA, the excess amount will be considered an "excess
contribution". You are permitted to withdraw an excess contribution from your
IRA or SEPP-IRA before your tax filing date without adverse tax consequences.
If, however, you fail to withdraw any such excess contribution before your tax
filing date, a 6% excise tax will be imposed on the excess for the tax year of
contribution.
Once the 6% excise tax has been imposed, an additional 6% penalty for the
following tax year can be avoided if the excess is (1) withdrawn before the end
of the following year, or (2) treated as a current contribution for the
following year. (See Premature Distributions, page 25, for penalties imposed on
withdrawal when the contribution exceeds $2,000).
IRA FOR NON-WORKING SPOUSE
If you establish an IRA for yourself, you will also be eligible to establish an
IRA for your "non-working" spouse. In order to be eligible to establish such a
spousal IRA, you must file a joint tax return with your spouse and if your
non-working spouse has compensation, his/her compensation must be less than
your compensation for the year. Contributions of up to $2,000 each may be made
to your IRA and the spousal IRA if the combined compensation of you and your
spouse is at least equal to the amount contributed. If requirements for
deductibility (including income levels) are met, you will be able to deduct an
amount equal to the least of (i) the amount contributed to the IRAs (ii)
$4,000, or (iii) 100% of your combined gross income.
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Contributions in excess of the contribution limits may be subject to a penalty.
See above under "Contributions and Deductions." If you contribute more than
the allowable amount, the excess portion will be considered an excess
contribution. The rules for correcting it are the same as discussed above for
regular IRAs.
Other than the items mentioned in this section, all of the requirements
generally applicable to IRAs are also applicable to IRAs established for
non-working spouses.
ROLLOVER CONTRIBUTION
Once every year, you are permitted to withdraw any portion of the value of your
IRA or SEPP-IRA and reinvest it in another IRA or bond. Withdrawals may also be
made from other IRAs and contributed to this contract. This transfer of funds
from one IRA to another is called a "rollover" IRA. To qualify as a rollover
contribution, the entire portion of the withdrawal must be reinvested in another
IRA within 60 days after the date it is received. You will not be allowed a
tax-deduction for the amount of any rollover contribution.
A similar type of rollover to an IRA can be made with the proceeds of a
qualified distribution from a qualified retirement plan or tax-sheltered
annuity. Properly made, such a distribution will not be taxable until you
receive payments from the IRA created with it. Unless you were a self-employed
participant in the distributing plan, you may later roll over such a
contribution to another qualified retirement plan as long as you have not mixed
it with IRA (or SEPP-IRA) contributions you have deducted from your income. (You
may roll less than all of a qualified distribution into an IRA, but any part of
it not rolled over will be currently includable in your income without any
capital gains treatment.)
PREMATURE DISTRIBUTIONS
At no time can your interest in your IRA or SEPP-IRA be forfeited. To insure
that your contributions will be used for your retirement, the federal tax law
does not permit you to use your IRA or SEPP-IRA as security for a loan.
Furthermore, as a general rule, you may not sell or assign your interest in your
IRA or SEPP-IRA to anyone. Use of an IRA (or SEPP-IRA) as security or assignment
of it to another will invalidate the entire annuity. It then will be includable
in your income in the year it is invalidated and will be subject to a 10%
penalty tax if you are not at least age 59-1/2 or totally disabled. (You may,
however, assign your IRA or SEPP-IRA without penalty to your former spouse in
accordance with the terms of a divorce decree.)
You may surrender any portion of the value of your IRA (or SEPP-IRA). In the
case of a partial surrender which does not qualify as a rollover, the amount
withdrawn will be includable in your income and subject to the 10% penalty if
you are not at least age 59-1/2 or totally disabled unless you comply with
special rules requiring distributions to be made at least annually over your
life expectancy.
The 10% penalty tax does not apply to the withdrawal of an excess contribution
as long as the excess is withdrawn before the due date of your tax return.
Withdrawals of excess contributions after the due date of your tax return will
generally be subject to the 10% penalty unless the excess contribution results
from erroneous information from a plan trustee making an excess rollover
contribution or unless you are over age 59-1/2 or are disabled.
DISTRIBUTION AT RETIREMENT
Once you have attained age 59-1/2 (or have become totally disabled), you may
elect to receive a distribution of your IRA (or SEPP-IRA) regardless of when you
actually retire. You may elect to receive the distribution in either one sum or
under any one of the periodic payment options available under the contract. The
distributions from your IRA under any one of the periodic payment options or in
one sum will be treated as ordinary income as you receive them.
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INADEQUATE DISTRIBUTIONS - 50% TAX
Your IRA or SEPP-IRA is intended to provide retirement benefits over your
lifetime. Thus, federal law requires that you either (1) receive a lump-sum
distribution of your IRA by April 1 of the year following the year in which you
attain age 70-1/2 or (2) start to receive periodic payments by that date. If you
elect to receive periodic payments, those payments must be sufficient to pay out
the entire value of your IRA during your life expectancy (or over the joint life
expectancies of you and your spouse). If the payments are not sufficient to meet
these requirements, an excise tax of 50% will be imposed on the amount of any
underpayment.
DEATH BENEFITS
If you, (or your surviving spouse) die before receiving the entire value of your
IRA (or SEPP-IRA), the remaining interest must be distributed to your
beneficiary (or your surviving spouse's beneficiary) in one lump-sum within 5
years of death, or applied to purchase an immediate annuity for the beneficiary.
This annuity must be payable over the life expectancy of the beneficiary
beginning within one year after your or your spouse's death. If your spouse is
the designated beneficiary, he or she is treated as the owner of the IRA. If
minimum required distributions have begun, the entire amount must be distributed
at least as rapidly as if the owner had survived. A distribution of the balance
of your IRA upon your death will not be considered a gift for federal tax
purposes, but will be included in your gross estate for purposes of federal
estate taxes.
ROTH IRAS
Section 408A of the Code now permits eligible individuals to contribute to a
type of IRA known as a "Roth IRA." Contributions may be made to a Roth IRA by
taxpayers with adjusted gross incomes of less than $160,000 for married
individuals filing jointly and less than $100,000 for single individuals.
Married individuals filing separately are not eligible to contribute to a Roth
IRA. The maximum amount of contributions allowable for any taxable year to all
Roth IRAs maintained by an individual is generally the lesser of $2,000 and 100%
of compensation for that year (the $2,000 limit is phased out for incomes
between $150,000 and $160,000 for married and between $95,000 and $110,000 for
singles). The contribution limit is reduced by the amount of any contributions
made to a non-Roth IRA. Contributions to a Roth IRA are not deductible.
For taxpayers with adjusted gross income of $100,000 or less, all or part of
amounts in a non-Roth IRA may be converted, transferred or rolled over to a Roth
IRA. Some or all of the IRA value will typically be includable in the taxpayer's
gross income. If such a rollover, transfer or conversion occurs before 1/1/99,
the portion of the amount includable in gross income must be included in income
ratably over the next four years beginning with the year in which the
transaction occurred. Provided a rollover contribution meets the requirements
for IRAs under Section 408(d)(3) of the Code, a rollover may be made from a Roth
IRA to another Roth IRA.
UNDER SOME CIRCUMSTANCES, IT MAY NOT BE ADVISABLE TO ROLL OVER, TRANSFER OR
CONVERT ALL OR PART OF A NON-ROTH IRA TO A ROTH IRA. PERSONS CONSIDERING A
ROLLOVER, TRANSFER OR CONVERSION SHOULD CONSULT THEIR OWN TAX ADVISOR.
"Qualified distributions" from a Roth IRA are excludable from gross income. A
"qualified distribution" is a distribution that satisfies two requirements: (1)
the distribution must be made (a) after the owner of the IRA attains age 59 1/2;
(b) after the owner's death; (c) due to the owner's disability; or (d) for a
qualified first time homebuyer distribution within the meaning of Section
72(t)(2)(F) of the Code; and (2) the distribution must be made in the year that
is at least five years after the first year for which a contribution was made to
any Roth IRA established for the owner or five years after a rollover, transfer
or conversion was made from a non-Roth IRA to a Roth IRA. Distributions from a
Roth IRA that are not qualified distributions will be treated as made first from
contributions and then from earnings, and taxed generally in the same manner as
distributions from a non-Roth IRA.
Distributions from a Roth IRA need not commence at age 70 1/2. However, if the
owner dies before the entire interest in a Roth IRA is distributed, any
remaining interest in the contract must be distributed by December 31 of the
calendar year containing the fifth anniversary of the owner's death subject to
certain exceptions.
26
<PAGE> 27
PROTOTYPE STATUS
The Internal Revenue Service has been requested to review the format of your
SEPP, and to issue an opinion letter to Ohio National Life stating that your IRA
qualifies as a prototype SEPP.
REPORTING TO THE IRS
Whenever you are liable for one of the penalty taxes discussed above (6% for
excess contributions, 10% for premature distributions or 50% for underpayments),
you must file Form 5329 with the Internal Revenue Service. The form is to be
attached to your federal income tax return for the tax year in which the penalty
applies. Normal contributions and distributions must be shown on your income tax
return for the year to which they relate.
27
<PAGE> 28
OHIO NATIONAL VARIABLE ACCOUNT A
OF
THE OHIO NATIONAL LIFE INSURANCE COMPANY
One Financial Way
Cincinnati, Ohio 45242
Telephone (513) 794-6452
STATEMENT OF ADDITIONAL INFORMATION
January 4, 1999
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the prospectus for Ohio National Variable Account A ("VAA")
flexible purchase payment individual variable annuity contracts dated January 4,
1999. To obtain a free copy of the VAA prospectus, write or call The Ohio
National Life Insurance Company ("Ohio National Life") at the above address.
Table of Contents
<TABLE>
<CAPTION>
<S> <C>
Custodian ........................................................... 2
Independent Certified Public Accountants ............................ 2
Underwriter ......................................................... 2
Calculation of Money Market Subaccount Yield ........................ 3
Total Return ........................................................ 3
Transfer Limitations ................................................ 4
The Year 2000 Issue ................................................. 5
Appendix:
Loans Under Tax-sheltered Annuities ........................ 6
Financial Statements ................................................ 7
</TABLE>
"ONcore Value"
Variable Annuity
<PAGE> 29
CUSTODIAN
Ohio National Life has executed an agreement with Star Bank, N.A. ("the Bank"),
Cincinnati, Ohio, pursuant to which the shares of any mutual funds in which
VAA's assets may be invested. ("Funds") and other assets credited to VAA will be
held in the custody of the Bank. The agreement provides that the Bank will
purchase Fund shares at their net asset value determined as of the end of the
valuation period of VAA during which the purchase payment is received by Ohio
National Life for outstanding contracts or, in the case of new contracts, the
value determined as of the end of the valuation period during which the contract
is issued. The Bank effects redemptions of Fund shares held by VAA upon
instructions from Ohio National Life at net asset value determined as of the end
of the valuation period of VAA during which a redemption request is received or
made by Ohio National Life. In addition, the Bank maintains appropriate records
with respect to all transactions in Fund shares relative to VAA.
The agreement requires the Bank to have at all times an aggregate capital,
surplus and undivided profit of not less than $2 million and prohibits
resignation by the Bank until (a) a successor custodian bank having the
qualifications enumerated above shall have agreed to serve as custodian, or (b)
VAA has been completely liquidated and the proceeds of such liquidation properly
distributed. Subject to these conditions the agreement of custodianship may be
terminated by either party upon sixty days written notice. For its services as
custodian, the Bank will be paid a fee to be agreed upon from time to time by
the Bank and Ohio National Life.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS The financial statements of VAA as of
December 31, 1997 and for the periods indicated herein and of Ohio National
Life's consolidated financial statements as of December 31, 1997 and 1996 and
for the periods indicated herein have been included herein in reliance upon the
reports of KPMG Peat Marwick LLP, independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.
UNDERWRITER
The offering of the contracts is continuous. Prior to May 1, 1997, The O.N.
Equity Sales Company ("ONESCO"), a wholly-owned subsidiary of Ohio National
Life, was the principal underwriter of contracts issued by VAA. The aggregate
amount of underwriting commissions paid to ONESCO with respect to contracts
issued by VAA, and the amounts retained by ONESCO, for each of the last three
years have been:
<TABLE>
<CAPTION>
Aggregate Retained
Year Commissions Commissions
---- ----------- -----------
<S> <C> <C> <C>
1997 $ 903,146 $ 89,572
1996 $2,461,096 $239,957
1995 1,645,426 151,215
</TABLE>
Since May 1, 1997, Ohio National Equities, Inc., another wholly-owned subsidiary
of Ohio National Life, has been the principal underwriter of VAA contracts. The
aggregate amount of underwriting commissions paid to and retained by Ohio
National Equities, Inc. with respect to contracts issued by VAA has been:
<TABLE>
<CAPTION>
Aggregate Retained
Year Commissions Commissions
---- ----------- -----------
<S> <C> <C>
1997 $ 2,997,646 $ 297,299
</TABLE>
-2-
<PAGE> 30
CALCULATION OF MONEY MARKET SUBACCOUNT YIELD
The current yield of the Money Market subaccount for the seven days ended on
December 31, 1997, was 4.59%. This was calculated by determining the net change,
exclusive of capital changes, in the value of a hypothetical pre-existing
account having a balance of one accumulation unit of the subaccount at the
beginning of the seven-day period, dividing the net change in subaccount value
by the value of the subaccount at the beginning of the base period to obtain the
base period return, and multiplying the difference by 365/7. The resulting
figure is carried to the nearest hundredth of one percent.
TOTAL RETURN
The average annual compounded rate of return for a contract with respect to a
particular subaccount over a given period is found by equating the initial
amount invested to the ending redeemable value using the following formula:
P(1 + T)n = ERV
where: P = a hypothetical initial payment of $1,000,
T = the average annual total return,
n = the number of years, and
ERV = the ending redeemable value of a hypothetical
$1,000 beginning-of-period payment at the end
of the period (or fractional portion thereof).
Standardized total return data based upon the performance of the subaccounts
will be up-dated within 30 days after each calendar quarter or more frequently.
In addition, non-standardized total return data, using the above formula but
based upon the performance of the Funds prior to the date this series of
contracts were initially offered (May 1, 1998), may be presented as if the same
charges and deductions applicable to these contracts had been in effect from the
inception of each corresponding Fund.
The average annual non-standardized total returns for current contracts in each
of the subaccounts from the inception of the corresponding underlying Funds and
for the one-, five- and ten-year periods ending on December 31, 1997, and
assuming surrender of the contract on the latter date, are as follows:
<TABLE>
<CAPTION>
One Five Ten From Inception
Year Years Years Inception Date
---- ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Ohio National Fund:
Money Market 4.52% 3.74% 4.69% 6.43% 3-20-80
Bond 8.39% 6.61% 7.42% 7.81% 11-02-82
Omni 17.16% 12.54% 11.64% 11.15% 9-10-84
S&P 500 Index N/A N/A N/A 30.84% 1-03-97
International 1.30% N/A N/A 12.10% 4-30-93
Capital Appreciation 14.24% N/A N/A 14.77% 5-01-94
Growth & Income N/A N/A N/A 35.66% 1-03-97
Small Cap Growth N/A N/A N/A N/A 5-01-98
High Income Bond N/A N/A N/A N/A 5-01-98
Equity Income N/A N/A N/A N/A 5-01-98
Blue Chip N/A N/A N/A N/A 5-01-98
Global Contrarian 10.63% N/A N/A 10.93% 3-31-95
Dow Target Variable Fund:
Dow Target 10 N/A N/A N/A N/A 1-04-97
Goldman Sachs Variable:
G.S. Growth & Income N/A N/A N/A N/A 1-02-98
G.S. Core U.S. Equity N/A N/A N/A N/A 1-02-98
G.S. Capital Growth N/A N/A N/A N/A 1-02-98
G.S. Global Income N/A N/A N/A N/A 1-02-98
Janus Aspen Series:
Growth 21.85% N/A N/A 16.81% 9-13-93
International Growth 17.61% N/A N/A 17.42% 5-02-94
Worldwide Growth 21.25% N/A N/A 22.06% 9-13-93
Balanced 21.20% N/A N/A 15.43% 9-13-93
J.P. Morgan Series Trust II:
Small Company 21.60% N/A N/A 24.72% 1-03-95
Montgomery Funds III:
Small Cap Opportunities N/A N/A N/A N/A 5-01-98
Emerging Markets (1.48%) N/A N/A 2.28% 2-02-96
Morgan Stanley Universal:
Fixed Income N/A N/A N/A 9.03% 1-02-97
U.S. Real Estate N/A N/A N/A 17.09% 3-03-97
Value N/A N/A N/A 20.08% 1-02-97
Emerging Markets Debt N/A N/A N/A (0.14%) 6-16-97
Salomon Brothers Variable:
Capital N/A N/A N/A N/A 1-02-98
Total Return N/A N/A N/A N/A 1-02-98
Investors N/A N/A N/A N/A 1-02-98
Strong Variable Insurance:
Growth II 28.35% N/A N/A 28.85% 12-31-96
Opportunity II 24.55% 18.42% N/A 19.17% 5-08-92
Schafer Value II N/A N/A N/A (1.71%) 10-10-97
</TABLE>
-3-
<PAGE> 31
TRANSFER LIMITATIONS
To the extent that transfers, surrenders, partial withdrawals and annuity
payments from a subaccount exceed net purchase payments and transfers into that
subaccount, securities of the corresponding Fund may have to be sold. Excessive
sales of a Fund's securities on short notice could be detrimental to that Fund
and to contractowners with values allocated to the corresponding subaccount. To
protect the interests of all contractowners, Ohio National Life reserves the
right to limit the number, frequency, method or amount of transfers. Transfers
from any Fund on any one day may be limited to 1% of the previous day's total
net assets of that Fund if Ohio National Life or the Fund, in its or their
discretion, believes that the Fund might otherwise be damaged.
If and when transfers must be so limited, some transfer requests will not be
made. In determining which requests will be made, scheduled transfers (that is,
those pursuant to a pre-existing dollar cost averaging program) will be made
first, followed by mailed written requests in the order postmarked and, lastly,
telephone and facsimile requests in the order received. Contractowners whose
transfer requests are not made will be so notified. Current SEC rules preclude
Ohio National Life from processing at a later date those requests that were not
made. Accordingly, a new transfer request would have to be submitted in order to
make a transfer that was not made because of these limitations.
The Year 2000 Issue
Ohio National Life has considered the impact on its business of "Year 2000"
issues. It has developed a remedial plan for its computer systems and
applications. Conversion activities are presently in process and Ohio National
Life expects conversion testing and implementation to be completed by July 31,
1999. While Ohio National Life has been assured by suppliers of financial
services (including underlying mutual funds, custodians, transfer agents and
accounting agents) that their mission-critical systems either are already
compliant or will be so in the first half of 1999, Ohio National Life's internal
auditors intend to independently test those systems (other than systems of
unaffiliated mutual funds and their suppliers) to verify their compliance. The
failure of Ohio National Life or one of its suppliers to achieve timely and
complete compliance could materially impair Ohio National Life's ability to
conduct its business, including its ability to accurately and timely value
interests in the contracts.
-4-
<PAGE> 32
APPENDIX
LOANS UNDER TAX-SHELTERED ANNUITIES
Contracts issued as tax-sheltered annuities pursuant to plans qualifying under
Section 403(b) of the Code, and allowing for voluntary contributions only, are
eligible for loans secured by a security interest in the contract. Any such loan
must be for at least $1,000 and may only be made from guaranteed accumulation
values (see Guaranteed Account in the prospectus). The loan amount is limited by
the maximum loan formula described in the contract.
The annual effective rate of interest charged for loans will not exceed 7%.
Loans must generally be repaid within 5 years (or 20 years if the loan is used
for the purchase of the contract owner's principal residence).
The amount of the death benefit, the amount payable on a full surrender and the
amount that will be applied to provide an annuity on the annuity payout date
will be reduced by the amount of outstanding loan balance, including accrued
interest, as of the date of any such transaction.
-6-
<PAGE> 33
OHIO NATIONAL VARIABLE ACCOUNT A December 31, 1997
INDEPENDENT AUDITORS' REPORT
The Board of Directors
The Ohio National Life Insurance Company
The Contract Owners
Ohio National Variable Account A
We have audited the accompanying statements of assets and contract owners'
equity of Ohio National Variable Account A (comprising, respectively, the
Equity, Money Market, Bond, Omni, International, Capital Appreciation, Small
Cap, Global Contrarian, Aggressive Growth, S&P 500 Index, Social Awareness, Core
Growth, Growth & Income, Stellar, Strategic Income, Relative Value, Emerging
Market, VIP Growth, VIP Equity Income and VIP High Income Bond Subaccounts) as
of December 31, 1997, and the related statements of operations and changes in
contract owners' equity and schedules of changes in unit values for each of the
periods indicated herein. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation with the underlying mutual funds of securities owned as of December
31, 1997. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Ohio National Variable Account
A at December 31, 1997, and the results of their operations, changes in contract
owners' equity and changes in unit values for each of the periods indicated
herein, in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Cincinnati, Ohio
January 30, 1998
<PAGE> 34
<TABLE>
<CAPTION>
OHIO NATIONAL VARIABLE ACCOUNT A
STATEMENTS OF ASSETS AND CONTRACT OWNERS' EQUITY DECEMBER 31, 1997
MONEY CAPITAL
EQUITY MARKET BOND OMNI INTERNATIONAL APPRECIATION
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Assets - Investments
at market value
(note 2) .................. $112,226,765 $ 7,042,375 $ 5,916,477 $ 77,031,024 $ 57,020,604 $ 18,652,755
============ ============ ============ ============ ============ ============
Contract owners' equity
Contracts in
accumulation
period (note 3) .......... $111,714,188 $ 6,931,375 $ 5,907,039 $ 76,911,629 $ 57,020,604 $ 18,607,690
Annuity reserves for
for contract in
payment period ........... 512,577 111,000 9,438 119,395 0 45,065
------------ ------------ ------------ ------------ ------------ ------------
Total contract
owners' equity ............ $112,226,765 $ 7,042,375 $ 5,916,477 $ 77,031,024 $ 57,020,604 $ 18,652,755
============ ============ ============ ============ ============ ============
GLOBAL AGGRESSIVE S&P 500
SMALL CAP CONTRARIAN GROWTH INDEX
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Assets - Investments
at market value
(note 2) .................. $ 20,327,193 $ 5,251,675 $ 4,815,309 $ 6,123,852
============ ============ ============ ============
Contract owners' equity
Contracts in
accumulation
period (note 3) .......... $ 20,327,193 $ 5,251,675 $ 4,815,309 $ 6,123,852
Annuity reserves for
for contract in
payment period ........... 0 0 0 0
------------ ------------ ------------ ------------
Total contract
owners' equity ............ $ 20,327,193 $ 5,251,675 $ 4,815,309 $ 6,123,852
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
SOCIAL CORE GROWTH & STRATEGIC RELATIVE
AWARENESS GROWTH INCOME STELLAR INCOME VALUE
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Assets - Investments
at market value
(note 2) .................. $ 810,077 $ 3,494,278 $ 6,436,809 $ 611,536 $ 1,075,071 $ 3,166,554
============ ============ ============ ============ ============ ============
Contract owners' equity
Contracts in
accumulation
period (note 3) .......... $ 810,077 $ 3,494,278 $ 6,436,809 $ 611,536 $ 1,075,071 $ 3,166,554
Annuity reserves for
for contract in
payment period ........... 0 0 0 0 0 0
------------ ------------ ------------ ------------ ------------ ------------
Total contract
owners' equity ............ $ 810,077 $ 3,494,278 $ 6,436,809 $ 611,536 $ 1,075,071 $ 3,166,554
============ ============ ============ ============ ============ ============
EMERGING VIP EQUITY VIP HIGH
MARKET VIP GROWTH INCOME INCOME BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Assets - Investments
at market value
(note 2) .................. $ 832,608 $ 1,014,882 $ 1,672,331 $ 1,388,325
============ ============ ============ ============
Contract owners' equity
Contracts in
accumulation
period (note 3) .......... $ 832,608 $ 1,014,882 $ 1,672,331 $ 1,388,325
Annuity reserves for
for contract in
payment period ........... 0 0 0 0
------------ ------------ ------------ ------------
Total contract
owners' equity ............ $ 832,608 $ 1,014,882 $ 1,672,331 $ 1,388,325
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 35
<TABLE>
<CAPTION>
OHIO NATIONAL VARIABLE ACCOUNT A
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
--------------------------- --------------------------- ---------------------------
EQUITY MONEY MARKET BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT
1997 1996 1997 1996 1997 1996
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ....... $ 1,848,791 $ 1,197,910 $ 330,310 $ 264,732 $ 430,461 $ 318,092
Risk and administrative
expense (note 4) .......... (1,119,990) (847,614) (61,793) (51,812) (54,587) (53,743)
------------ ------------ ------------ ------------ ------------ ------------
Net investment activity .. 728,801 350,296 268,517 212,920 375,874 264,349
------------ ------------ ------------ ------------ ------------ ------------
Realized and Unrealized gain
(loss) on investments:
Reinvested capital gains .. 5,884,076 2,111,104 0 0 0 0
Realized gain (loss) ...... 1,814,454 1,192,086 (8,000) (4,499) 18,355 9,435
Unrealized gain (loss) .... 7,253,475 8,919,868 0 0 6,598 (134,060)
------------ ------------ ------------ ------------ ------------ ------------
Net gain (loss) on
investments ............ 14,952,005 12,223,058 (8,000) (4,499) 24,953 (124,625)
------------ ------------ ------------ ------------ ------------ ------------
Net increase in contract
owners' equity from
operations ............ 15,680,806 12,573,354 260,517 208,421 400,827 139,724
------------ ------------ ------------ ------------ ------------ ------------
Equity transactions:
Sales:
Contract purchase payments 12,307,774 10,413,119 5,766,812 3,610,654 1,341,058 926,817
Transfers from fixed and
other subaccounts ........ 4,663,120 2,817,812 4,122,546 1,135,004 617,341 101,994
------------ ------------ ------------ ------------ ------------ ------------
16,970,894 13,230,931 9,889,358 4,745,658 1,958,399 1,028,811
------------ ------------ ------------ ------------ ------------ ------------
Redemptions:
Withdrawals and surrenders
(note 4) ................. 5,482,124 3,340,783 594,152 582,380 453,555 364,781
Annuity and death benefit
payments ................. 1,282,347 721,495 406,483 64,028 29,614 10,774
Transfers to fixed and
other subaccounts ........ 3,119,594 1,718,941 7,901,647 3,419,115 1,142,089 367,550
------------ ------------ ------------ ------------ ------------ ------------
9,884,065 5,781,219 8,902,282 4,065,523 1,625,258 743,105
------------ ------------ ------------ ------------ ------------ ------------
Net equity transactions .. 7,086,829 7,449,712 987,076 680,135 333,141 285,706
------------ ------------ ------------ ------------ ------------ ------------
Net change in contract
owners' equity ........ 22,767,634 20,023,066 1,247,593 888,556 733,968 425,430
Contract owners' equity:
Beginning of period ........ 89,459,131 69,436,065 5,794,782 4,906,226 5,182,509 4,757,079
------------ ------------ ------------ ------------ ------------ ------------
End of period .............. $112,226,765 $ 89,459,131 $ 7,042,375 $ 5,794,782 $ 5,916,477 $ 5,182,509
============ ============ ============ ============ ============ ============
--------------------------- ---------------------------
OMNI INTERNATIONAL
SUBACCOUNT SUBACCOUNT
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ....... $ 2,224,754 $ 1,431,322 $ 3,699,242 $ 1,653,883
Risk and administrative
expense (note 4) .......... (728,446) (551,635) (589,401) (434,384)
------------ ------------ ------------ ------------
Net investment activity .. 1,496,308 879,687 3,109,841 1,219,499
------------ ------------ ------------ ------------
Realized and Unrealized gain
(loss) on investments:
Reinvested capital gains .. 3,648,542 792,153 5,249,079 618,591
Realized gain (loss) ...... 739,636 577,644 231,748 224,983
Unrealized gain (loss) .... 4,439,035 4,606,392 (8,473,446) 2,790,398
------------ ------------ ------------ ------------
Net gain (loss) on
investments ............ 8,827,213 5,976,189 (2,992,619) 3,633,972
------------ ------------ ------------ ------------
Net increase in contract
owners' equity from
operations ............ 10,323,521 6,855,876 117,222 4,853,471
------------ ------------ ------------ ------------
Equity transactions:
Sales:
Contract purchase payments 11,490,950 9,082,596 12,103,624 9,913,128
Transfers from fixed and
other subaccounts ........ 3,553,594 1,632,769 3,566,352 2,659,338
------------ ------------ ------------ ------------
15,044,544 10,715,365 15,669,976 12,572,466
------------ ------------ ------------ ------------
Redemptions:
Withdrawals and surrenders
(note 4) ................. 3,743,945 2,246,180 2,644,036 1,338,114
Annuity and death benefit
payments ................. 422,771 554,361 454,489 210,138
Transfers to fixed and
other subaccounts ........ 2,308,199 992,890 3,449,717 1,226,211
------------ ------------ ------------ ------------
6,474,915 3,793,431 6,548,242 2,774,463
------------ ------------ ------------ ------------
Net equity transactions .. 8,569,629 6,921,934 9,121,734 9,798,003
------------ ------------ ------------ ------------
Net change in contract
owners' equity ........ 18,893,150 13,777,810 9,238,956 14,651,474
Contract owners' equity:
Beginning of period ........ 58,137,874 44,360,064 47,781,648 33,130,174
------------ ------------ ------------ ------------
End of period .............. $ 77,031,024 $ 58,137,874 $ 57,020,604 $ 47,781,648
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 36
<TABLE>
<CAPTION>
OHIO NATIONAL VARIABLE ACCOUNT A
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
------------------------- ------------------------- -------------------------
CAPITAL APPRECIATION SMALL CAP GLOBAL CONTRARIAN
SUBACCOUNT SUBACCOUNT SUBACCOUNT
1997 1996 1997 1996 1997 1996
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ....... $ 504,043 $ 240,787 $ 0 $ 0 $ 149,703 $ 40,003
Risk and administrative
expense (note 4) .......... (142,633) (72,491) (166,773) (87,665) (35,945) (14,459)
----------- ----------- ----------- ----------- ----------- -----------
Net investment activity .. 361,410 168,296 (166,773) (87,665) 113,758 25,544
----------- ----------- ----------- ----------- ----------- -----------
Realized and Unrealized gain
(loss) on investments:
Reinvested capital gains .. 930,639 142,667 864,625 176,709 259,942 4,572
Realized gain (loss) ...... 167,921 19,693 231,007 70,688 21,203 2,571
Unrealized gain (loss) .... 501,093 711,617 391,861 1,202,984 (87,286) 89,145
----------- ----------- ----------- ----------- ----------- -----------
Net gain (loss) on
investments ............ 1,599,653 873,977 1,487,493 1,450,381 193,859 96,288
----------- ----------- ----------- ----------- ----------- -----------
Net increase in contract
owners' equity from
operations ............ 1,961,063 1,042,273 1,320,720 1,362,716 307,617 121,832
----------- ----------- ----------- ----------- ----------- -----------
Equity transactions:
Sales:
Contract purchase payments 5,847,796 4,558,526 5,912,170 5,157,859 2,590,870 1,572,884
Transfers from fixed and
other subaccounts ........ 2,334,977 1,340,463 2,722,141 2,096,958 450,183 199,996
----------- ----------- ----------- ----------- ----------- -----------
8,182,773 5,898,989 8,634,311 7,254,817 3,041,053 1,772,880
----------- ----------- ----------- ----------- ----------- -----------
Redemptions:
Withdrawals and surrenders
(note 4) ................. 876,739 187,862 978,740 260,751 49,264 21,116
Annuity and death benefit
payments ................. 94,324 47,472 83,891 66,443 22,982 8,926
Transfers to fixed and
other subaccounts ........ 1,171,118 262,392 1,581,012 498,005 388,564 49,840
----------- ----------- ----------- ----------- ----------- -----------
2,142,181 497,726 2,643,643 825,199 460,810 79,882
----------- ----------- ----------- ----------- ----------- -----------
Net equity transactions .. 6,040,592 5,401,263 5,990,668 6,429,618 2,580,243 1,692,998
----------- ----------- ----------- ----------- ----------- -----------
Net change in contract
owners' equity ........ 8,001,655 6,443,536 7,311,388 7,792,334 2,887,860 1,814,830
Contract owners' equity:
Beginning of period ........ 10,651,100 4,207,564 13,015,805 5,223,471 2,363,815 548,985
----------- ----------- ----------- ----------- ----------- -----------
End of period .............. $18,652,755 $10,651,100 $20,327,193 $13,015,805 $ 5,251,675 $ 2,363,815
=========== =========== =========== =========== =========== ===========
------------------------- ----------- -----------
S&P 500 SOCIAL
AGGRESSIVE GROWTH INDEX AWARENESS
SUBACCOUNT SUBACCOUNT SUBACCOUNT
1997 1996 1997(A) 1997(A)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ....... $ 37,645 $ 244,914 $ 160,849 $ 2,789
Risk and administrative
expense (note 4) .......... (36,453) (15,097) (25,136) (2,511)
----------- ----------- ----------- -----------
Net investment activity .. 1,192 229,817 135,713 278
----------- ----------- ----------- -----------
Realized and Unrealized gain
(loss) on investments:
Reinvested capital gains .. 16,116 0 449,005 69,572
Realized gain (loss) ...... 1,626 (10,234) 28,306 3,622
Unrealized gain (loss) .... 338,859 (166,627) (171,692) (58,441)
----------- ----------- ----------- -----------
Net gain (loss) on
investments ............ 356,601 (176,861) 305,619 14,753
----------- ----------- ----------- -----------
Net increase in contract
owners' equity from
operations ............ 357,793 52,956 441,332 15,031
----------- ----------- ----------- -----------
Equity transactions:
Sales:
Contract purchase payments 1,954,169 1,876,917 4,617,012 584,481
Transfers from fixed and
other subaccounts ........ 374,153 228,778 1,487,498 264,875
----------- ----------- ----------- -----------
2,328,322 2,105,695 6,104,510 849,356
----------- ----------- ----------- -----------
Redemptions:
Withdrawals and surrenders
(note 4) ................. 113,256 42,393 38,238 10,008
Annuity and death benefit
payments ................. 31,455 5,231 6,501 548
Transfers to fixed and
other subaccounts ........ 346,549 115,826 377,251 43,754
----------- ----------- ----------- -----------
491,260 163,450 421,990 54,310
----------- ----------- ----------- -----------
Net equity transactions .. 1,837,062 1,942,245 5,682,520 795,046
----------- ----------- ----------- -----------
Net change in contract
owners' equity ........ 2,194,855 1,995,201 6,123,852 810,077
Contract owners' equity:
Beginning of period ........ 2,620,454 625,253 0 0
----------- ----------- ----------- -----------
End of period .............. $ 4,815,309 $ 2,620,454 $ 6,123,852 $ 810,077
=========== =========== =========== ===========
</TABLE>
(a) Period from January 3, 1997 date of commencement of operations.
The accompanying notes are an integral part of these financial statements.
<PAGE> 37
<TABLE>
<CAPTION>
OHIO NATIONAL VARIABLE ACCOUNT A
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
----------- ----------- ----------- ----------- ----------- -----------
CORE GROWTH & STRATEGIC RELATIVE EMERGING
GROWTH INCOME STELLAR INCOME VALUE MARKET
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
1997(A) 1997(A) 1997(A) 1997(A) 1997(A) 1997(A)
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ........ $ 897 $ 24,579 $ 10,225 $ 27,368 $ 19,612 $ 1,352
Risk and administrative
expense (note 4) ........... (21,525) (21,755) (3,693) (3,454) (15,700) (3,272)
----------- ----------- ----------- ----------- ----------- -----------
Net investment activity ... (20,628) 2,824 6,532 23,914 3,912 (1,920)
----------- ----------- ----------- ----------- ----------- -----------
Realized and Unrealized gain
(loss) on investments:
Reinvested capital gains ... 0 314,126 0 835 0 0
Realized gain (loss) ....... (9,324) 37,785 2,211 704 11,830 (2,389)
Unrealized gain (loss) ..... (15,044) 164,431 14,738 (1,145) 215,699 (71,244)
----------- ----------- ----------- ----------- ----------- -----------
Net gain (loss) on
investments ............. (24,368) 516,342 16,949 394 227,529 (73,633)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in
contract owners' equity
from operations ........ (44,996) 519,166 23,481 24,308 231,441 (75,553)
----------- ----------- ----------- ----------- ----------- -----------
Equity transactions:
Sales:
Contract purchase payments . 2,572,093 4,480,178 591,022 1,060,804 2,902,485 889,268
Transfers from fixed and
other subaccounts ......... 1,416,952 1,825,897 5,839 1,498 90,096 25,538
----------- ----------- ----------- ----------- ----------- -----------
3,989,045 6,306,075 596,861 1,062,302 2,992,581 914,806
----------- ----------- ----------- ----------- ----------- -----------
Redemptions:
Withdrawals and surrenders
(note 4) .................. 24,689 59,931 1,169 0 10,942 4,397
Annuity and death benefit
payments .................. 6,903 18,886 1,933 1,028 5,296 999
Transfers to fixed and
other subaccounts ......... 418,179 309,615 5,704 10,511 41,230 1,249
----------- ----------- ----------- ----------- ----------- -----------
449,771 388,432 8,806 11,539 57,468 6,645
----------- ----------- ----------- ----------- ----------- -----------
Net equity transactions ... 3,539,274 5,917,643 588,055 1,050,763 2,935,113 908,161
Net change in contract
owners' equity ......... 3,494,278 6,436,809 611,536 1,075,071 3,166,554 832,608
Contract owners' equity:
Beginning of period ......... 0 0 0 0 0 0
----------- ----------- ----------- ----------- ----------- -----------
End of period ............... $ 3,494,278 $ 6,436,809 $ 611,536 $ 1,075,071 $ 3,166,554 $ 832,608
=========== =========== =========== =========== =========== ===========
----------- ----------- -----------
VIP VIP VIP HIGH
GROWTH EQUITY INCOME INCOME BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT
1997(B) 1997(B) 1997(B)
----------- ----------- -----------
<S> <C> <C> <C>
Investment activity:
Reinvested dividends ........ $ 0 $ 0 $ 0
Risk and administrative
expense (note 4) ........... (3,791) (7,136) (4,117)
----------- ----------- -----------
Net investment activity ... (3,791) (7,136) (4,117)
----------- ----------- -----------
Realized and Unrealized gain
(loss) on investments:
Reinvested capital gains ... 0 0 0
Realized gain (loss) ....... 2,373 3,136 12,995
Unrealized gain (loss) ..... 37,791 96,293 29,576
----------- ----------- -----------
Net gain (loss) on
investments ............. 40,164 99,429 42,571
----------- ----------- -----------
Net increase (decrease) in
contract owners' equity
from operations ........ 36,373 92,293 38,454
----------- ----------- -----------
Equity transactions:
Sales:
Contract purchase payments . 972,759 1,576,447 1,437,894
Transfers from fixed and
other subaccounts ......... 11,770 18,945 137,249
----------- ----------- -----------
984,529 1,595,392 1,575,143
----------- ----------- -----------
Redemptions:
Withdrawals and surrenders
(note 4) .................. 6,020 3,913 0
Annuity and death benefit
payments .................. 0 5,412 5,499
Transfers to fixed and
other subaccounts ......... 0 6,029 219,773
----------- ----------- -----------
6,020 15,354 225,272
----------- ----------- -----------
Net equity transactions ... 978,509 1,580,038 1,349,871
Net change in contract
owners' equity ......... 1,014,882 1,672,331 1,388,325
Contract owners' equity:
Beginning of period ......... 0 0 0
----------- ----------- -----------
End of period ............... $ 1,014,882 $ 1,672,331 $ 1,388,325
=========== =========== ===========
</TABLE>
(a) Period from January 3, 1997 date of commencement of operations.
(b) Period from April 1, 1997 date of commencement of operations.
The accompanying notes are an integral part of these financial statements.
<PAGE> 38
OHIO NATIONAL VARIABLE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Ohio National Variable Account A (the Account) is a separate account of The
Ohio National Life Insurance Company (ONLIC) and all obligations arising
under variable annuity contracts are general corporate obligations of
ONLIC. The account has been registered as a unit investment trust under the
Investment Company Act of 1940.
Assets of the Account are invested in shares of Ohio National, Fund, Inc.
except for the Emerging Market subaccount which is invested in shares of
the Emerging Markets Fund of the Montgomery Variable Series and the VIP
Growth, VIP Equity Income and VIP High Income Bond subaccounts which are
invested in shares of the Variable Insurance Products Fund (collectively
the Funds). The Funds are diversified open-end management investment
companies. The Funds' investments are subject to varying degrees of market,
interest and financial risks; the issuers' abilities to meet certain
obligations may be affected by economic developments in their respective
industries.
Annuity reserves are computed for currently payable contracts according to
the Progressive Annuity Mortality Table. The assumed interest rate is 3.5
or 4.0 percent depending on the contract selected by the annuitant. Charges
to annuity reserves for adverse mortality and express risk experience are
reimbursed to the Account by ONLIC. Such amounts are included in risk and
administrative expenses.
Investments are valued at the net asset value of fund shares held at
December 31, 1997. Share transactions are recorded on the trade date.
Income and capital gain distributions are recorded on the ex-dividend date.
Net realized capital gains of loss is determined on the basis of average
cost.
ONLIC performs investment advisory services on behalf of the Ohio National
Fund, Inc. in which the Account invests. For these services, the Company
receives fees from the mutual funds. These fees are paid to an affiliate of
the Company.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(2) INVESTMENTS
At December 31, 1997 the aggregate cost and number of shares of the
underlying funds owned by the respective subaccounts were:
<TABLE>
<CAPTION>
MONEY CAPITAL
EQUITY MARKET BOND OMNI INTERNATIONAL APPRECIATION SMALL CAP
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Aggregate Cost $ 76,961,136 $ 7,042,375 $ 5,783,591 $ 59,035,568 $ 59,693,510 $ 17,149,022 $ 18,081,165
Number of Shares 3,166,491 704,237 554,081 3,656,825 4,256,857 1,378,215 1,085,912
<CAPTION>
GLOBAL AGGRESSIVE S&P 500 SOCIAL CORE GROWTH &
CONTRARIAN GROWTH INDEX AWARENESS GROWTH INCOME STELLAR
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Aggregate Cost $ 5,236,203 $ 4,619,691 $ 6,295,544 $ 868,518 $ 3,509.322 $ 6,272,378 $ 596,798
Number of Shares 447,751 434,320 522,290 71,066 360,830 500,841 57,421
<CAPTION>
STRATEGIC RELATIVE EMERGING VIP EQUITY VIP HIGH
INCOME VALUE MARKET VIP GROWTH INCOME INCOME BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Aggregate Cost $ 1,076,216 $ 2,950,855 $ 903,852 $ 977,091 $ 1,576,038 $ 1,358,749
Number of Shares 105,793 249,787 78,771 27,355 68,877 102,233
</TABLE>
113
<PAGE> 39
OHIO NATIONAL VARIABLE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(3) CONTRACTS IN ACCUMULATION PERIOD
At December 31, 1997 the accumulation units and value per unit of the
respective subaccounts and products were:
<TABLE>
<CAPTION>
ACCUMULATION UNITS VALUE PER UNIT
------------------ --------------
<S> <C> <C>
EQUITY SUBACCOUNT
Combination ................ 29,340.7990 132.974317
Back Load .................. 20,567.4400 74.726955
Top I ...................... 172,235.3620 59.806603
Top Tradition .............. 1,554,929.7927 51.466766
Top Plus ................... 709,737.7253 17.616774
Investar Vision ............ 27,719.3260 11.599062
Top Spectrum ............... 54,720.5400 11.599062
Top Explorer ............... 210,013.7824 11.847503
MONEY MARKET SUBACCOUNT
VIA ......................... 17,074.2760 27.253241
Top I ....................... 17,640.0930 20.650358
Top Tradition ............... 122,724.7618 18.327573
Top Plus .................... 179,630.2523 11.797028
Investar Vision ............. 0.0000 10.388381
Top Spectrum ................ 65,171.8660 10.388381
Top Explorer ................ 102,555.0478 10.300720
BOND SUBACCOUNT
Top I ....................... 19,545.7950 30.012823
Top Tradition ............... 128,523.1058 27.144385
Top Plus .................... 95,905.4140 12.390067
Investar Vision ............. 2,734.3336 10.791393
Top Spectrum ................ 9,448.3989 10.791393
Top Explorer ................ 47,241.4749 10.837736
OMNI SUBACCOUNT
Top I ....................... 127,405.9690 39.270518
Top Tradition ............... 1,431,183.6716 39.180721
Top Plus .................... 699,222.9353 16.311837
Investar Vision ............. 13,761.6354 11.608584
Top Spectrum ................ 88,824.9801 11.608584
Top Explorer ................ 276,039.6004 11.726674
INTERNATIONAL SUBACCOUNT
Top I ....................... 100,571.7240 16.815772
Top Tradition ............... 2,305,256.4898 16.815772
Top Plus .................... 876,939.7087 14.804324
Investar Vision ............. 20,008.8796 10.114943
Top Spectrum ................ 66,104.0624 10.114943
Top Explorer ................ 274,724.1679 9.868874
CAPITAL APPRECIATION SUBACCOUNT
Top I ....................... 21,166.4180 14.832378
Top Tradition ............... 550,059.3177 14.832378
Top Plus .................... 454,490.2577 16.536198
Investar Vision ............. 29,294.4904 11.366198
Top Spectrum ................ 64,661.0893 11.366198
Top Explorer ................ 136,071.8172 11.402771
</TABLE>
114
<PAGE> 40
OHIO NATIONAL VARIABLE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
ACCUMULATION UNITS VALUE PER UNIT
------------------ --------------
<S> <C> <C>
SMALL CAP SUBACCOUNT
Top I ....................... 21,376.8860 15.240569
Top Tradition ............... 649,957.3886 15.240569
Top Plus .................... 377,836.8228 19.926004
Investar Vision ............. 37,682.9864 10.854875
Top Spectrum ................ 17,215.2701 10.854875
Top Explorer ................ 154,908.5726 12.723535
GLOBAL CONTRARIAN SUBACCOUNT
Top Tradition ............... 115,589.5543 12.399654
Top Plus .................... 180,384.5556 13.297985
Investar Vision ............. 4,298.7827 11.036950
Top Spectrum ................ 12,124.2886 11.036950
Top Explorer ................ 115,148.9727 10.754700
AGGRESSIVE GROWTH SUBACCOUNT
Top Tradition ............... 178,650.8560 11.646359
Top Plus .................... 139,155.3699 14.043267
Investar Vision ............. 20,454.6420 11.150420
Top Spectrum ................ 6,541.1536 11.150420
Top Explorer ................ 38,689.3261 12.392742
S&P 500 INDEX SUBACCOUNT
Top Tradition ............... 152,864.3552 13.031676
Top Plus .................... 156,778.0853 13.057227
Top Explorer ................ 164,051.9727 12.707473
SOCIAL AWARENESS SUBACCOUNT
Top Tradition .............. 22,599.5131 12.426744
Top Plus ................... 18,947.3388 12.451138
Top Explorer ............... 22,155.2898 13.239397
CORE GROWTH SUBACCOUNT
Top Tradition ............... 146,611.3784 9.586403
Top Plus .................... 133,805.7916 9.605255
Top Explorer ................ 70,774.4593 11.353867
GROWTH & INCOME SUBACCOUNT
Top Tradition ............... 146,772.2220 13.509406
Top Plus .................... 150,510.0980 13.535914
Top Explorer ................ 176,611.3225 13.683786
STELLAR SUBACCOUNT
Investar Vision .............. 55,683.2203 10.818421
Top Spectrum ................. 844.0593 10.818421
STRATEGIC INCOME SUBACCOUNT
Investar Vision .............. 71,835.3721 10.724151
Top Spectrum ................. 28,412.3142 10.724151
RELATIVE VALUE SUBACCOUNT
Investar Vision ............. 241,046.8096 12.651115
Top Spectrum ................ 9251.6152 12.651115
</TABLE>
115
<PAGE> 41
OHIO NATIONAL VARIABLE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
<S> <C> <C>
EMERGING MARKET SUBACCOUNT
Investar Vision ............... 20.680.6050 9.788417
Top Spectrum .................. 11.879.0995 9.788417
Top Explorer .................. 56.016.0669 9.174160
VIP GROWTH SUBACCOUNT
Top Explorer ............... 81,289.9874 12.484707
VIP EQUITY INCOME SUBACCOUNT
Top Explorer .............. 133,738.9603 12.504442
VIP HIGH INCOME BOND SUBACCOUNT
Top Explorer 118,712.7354 11.694830
</TABLE>
(4) RISK AND ADMINISTRATIVE EXPENSE
ONLIC charges the Account's assets at the end of each day, equal to 0.25%
on an annual basis, of the contract value for administrative expenses,
based on premiums established at the time the contracts are issued.
Although variable annuity payments differ according to the investment
performance of the Accounts, they are not affected by mortality or expense
experience because ONLIC assumes the expense risk and the mortality risk
under the contracts. ONLIC charges the Accounts' assets for assuming those
risks, based on the contract value at a rate presently ranging from 0.65%
to 1.15% for mortality and expense risk on an annual basis.
The expense risk assumed by ONLIC is the risk that the deductions for sales
and administrative expenses provided for in the variable annuity contracts
may prove insufficient to cover the cost of those terms.
The mortality risk results from a provision in the contract in which ONLIC
agrees to make annuity payments regardless of how long a particular
annuitant or other payee lives and how long all annuitants or other payees
as a class live if payment options involving life contingencies are chosen.
Those annuity payments are determined in accordance with annuity purchase
rate provisions established at the time the contracts are issued.
(5) CONTRACT CHARGES
No deduction for a sales charge is made from purchase payments. A
contingent deferred sales charge ranging from 0% to 7% may be assessed by
ONLIC when a contract is surrendered or a partial withdrawal of
accumulation value is made before the annuity payout date.
A transfer fee is charged for each transfer from one subaccount to another.
The fee is charged against the contract owner's equity in the subaccount
from which the transfer is effected.
State premium taxes presently range from 0% to 2 1/2% for these contracts.
In those jurisdictions permitting, such taxes will be deducted when annuity
payments begin. Elsewhere, they will be deducted from purchase payments.
Each year on the contract anniversary (or at the time of surrender of the
contract), ONLIC will deduct a contract administration charge of $30 from
the accumulation value to reimburse it for the expense relating to the
maintenance of the contract. Total contract administration charges for the
Account amounted to approximately $260,000 during 1997.
(6) FEDERAL INCOME TAXES
Operations of the Account form a part of, and are taxed with, operations of
ONLIC which is taxed as a life insurance company under the Internal Revenue
Code. Taxes are the responsibility of the contract owner upon termination
or withdrawal. No Federal income taxes are payable under the present law on
dividend income or capital gains distribution from the Fund shares held in
the Account or on capital gains realized by the Account on redemption of
the Fund shares.
116
<PAGE> 42
OHIO NATIONAL VARIABLE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(7) NOTE TO SCHEDULE 1
Schedule 1 presents the components of the change in the unit values, which
are based on average unit values and are the basis for determining contract
owners' equity. This schedule is presented for each series, as applicable,
in the following format:
-- Beginning unit value
-- Reinvested capital gains and dividends
-- (This amount reflects the increase in the unit value due to capital gain
and dividend distributions from the underlying mutual fund.)
-- Unrealized gain (loss)
(This amount reflects the increase (decrease) in the unit value
resulting from the market appreciation (depreciation) of the fund.)
-- Expenses
(This amount reflects the decrease in the unit value due to Risk and
Administrative Expenses discussed in note 4 to the financial
statements.)
-- Ending unit value
-- Percentage increase (decrease) in unit value
117
<PAGE> 43
<TABLE>
<CAPTION>
OHIO NATIONAL VARIABLE ACCOUNT A FOR THE YEAR ENDED DECEMBER 31, 1997 AND 1996
- --------------------------------------------------------------------------------------------------------
SCHEDULES OF CHANGES IN UNIT VALUES SCHEDULE 1
EQUITY SUBACCOUNT A
-------------------
TOP
1997 COMBINATION BACK LOAD TOP I TRADITION TOP PLUS
<S> <C> <C> <C> <C> <C>
Beginning unit value................... 113.656777 63.934367 51.168913 44.033562 15.042658
Reinvested capital gains and dividends. 9.446038 5.309887 4.252151 3.664185 1.259076
Realized and unrealized gain........... 11.125256 6.260085 5.120140 4.304533 1.465593
Expenses............................... -1.253754 -0.777384 -0.734601 -0.535514 -0.150553
Ending unit value...................... 132.974317 74.726955 59.806603 51.466766 17.616774
Percentage increase in unit value*.... 17.0% 16.9% 16.9% 16.9% 17.1%
</TABLE>
<TABLE>
<CAPTION>
**INVESTAR **TOP ***TOP
1997 VISION SPECTRUM EXPLORER
<S> <C> <C> <C>
Beginning unit value................... 10.000000 10.000000 10.000000
Reinvested capital gains and dividends. 0.858985 0.872833 0.896204
Realized and unrealized gain........... 0.901212 0.889554 1.105903
Expenses............................... -0.161135 -0.163325 -0.154604
Ending unit value...................... 11.599062 11.599062 11.847503
Percentage increase in unit value*..... 16.0% 16.0% 18.5%
</TABLE>
<TABLE>
<CAPTION>
TOP
1997 COMBINATION BACK LOAD TOP 1 TRADITION TOP PLUS
<S> <C> <C> <C> <C> <C>
Beginning unit value................... 96.995665 54.616584 43.711561 37.616119 12.824740
Reinvested capital gains and dividends. 4.383678 2.460847 1.973416 1.701030 0.584226
Realized and unrealized gain........... 13.328814 7.507965 6.099801 5.165390 1.759811
Expenses............................... -1.051380 -0.651029 -0.615865 -0.448977 -0.126119
Ending unit value...................... 113.656777 63.934367 51.168913 44.033562 15.042658
Percentage increase in unit value*..... 17.2% 17.1% 17.1% 17.1% 17.3%
<FN>
* An annualized rate of return cannot be determined as expenses do not include the contract charges discussed in note (5).
** Period from January 3, 1997, date of commencement of operations.
*** Period from April 1, 1997, date of commencement of operations.
</FN>
</TABLE>
<TABLE>
<CAPTION>
MONEY MARKET SUBACCOUNT A
-------------------------
TOP
1997 VIA TOP 1 TRADITION TOP PLUS
<S> <C> <C> <C> <C>
Beginning unit value................... 26.200345 19.852565 17.584720 11.296489
Reinvested dividends................... 1.399995 1.101371 0.939926 0.604451
Expenses............................... -0.347099 -0.303578 -0.197073 -0.103912
Ending unit value...................... 27.253241 20.650358 18.327573 11.797028
Percentage increase in unit value*..... 4.0% 4.0% 4.2% 4.4%
</TABLE>
<TABLE>
<CAPTION>
**INVESTAR **TOP ***TOP
1997 VISION SPECTRUM EXPLORER
<S> <C> <C> <C>
Beginning unit value................... 10.000000 10.000000 10.000000
Reinvested dividends................... 0.532783 0.532783 0.433587
Expenses............................... -0.144402 -0.144402 -0.132867
Ending unit value...................... 10.388381 10.388381 10.300720
Percentage increase in unit value*..... 3.9% 3.9% 3.0%
</TABLE>
<TABLE>
<CAPTION>
TOP
1996 VIA TOP I TRADITION TOP PLUS
<S> <C> <C> <C> <C>
Beginning unit value................... 25.237165 19.122749 16.904534 10.837896
Reinvested dividends................... 1.297256 1.021880 0.870006 0.558334
Expenses............................... -0.334076 -0.292064 -0.189820 -0.099741
Ending unit value...................... 26.200345 19.852565 17.584720 11.296489
Percentage increase in unit value*..... 3.8% 3.8% 4.0% 4.2%
<FN>
* An annualized rate of return cannot be determined as expenses do not include the contract charges discussed in note (5).
** Period from January 3, 1997, date of commencement of operations.
*** Period from April 1, 1997, date of commencement of operations.
</FN>
</TABLE>
118
