<PAGE> 1
PROSPECTUS AMENDMENT
THE OHIO NATIONAL LIFE INSURANCE COMPANY
OHIO NATIONAL VARIABLE ACCOUNT A
SEPTEMBER 1, 1999
This amends the prospectus dated July 1, 1999. The prospectus and Statement of
Additional Information are now dated September 1, 1999.
EQUITY PORTFOLIO
The subadviser for the Equity portfolio of Ohio National Fund, Inc. is Legg
Mason Fund Adviser, Inc.
SMALL CAP GROWTH PORTFOLIO
The name of the Small Cap Growth portfolio of Ohio National Fund, Inc. has been
changed to CAPITAL GROWTH portfolio.
THE DOW(SM) TARGET 5 PORTFOLIOS
The Dow Target 5 portfolios of The Dow(SM) Target Variable Fund LLC have been
added as available Funds. Their subadviser is First Trust Advisors L.P.
The Fund Annual Expenses for the Dow Target 5 portfolios are identical to those
for the Dow Target 10 portfolios. The aggregate expenses on a $1,000 investment
in the Dow Target 5 portfolios for 1 year, 3 years, 5 years and 10 years are
identical to those shown for the Dow Target 10 portfolios.
SURRENDER CHARGE
The following sentence is added to the second paragraph of the Surrender Charge
provision for ONcore Premier and Value variable annuities:
You may take this 10% annual free withdrawal in up to 12 installments.
<PAGE> 2
PROSPECTUS
FLEXIBLE PURCHASE PAYMENT
INDIVIDUAL VARIABLE ANNUITY CONTRACTS
OHIO NATIONAL VARIABLE ACCOUNT A
THE OHIO NATIONAL LIFE INSURANCE COMPANY
One Financial Way
Montgomery, Ohio 45242
Telephone (888) 744-7355
This prospectus offers a variable annuity contract allowing you to accumulate
values and paying you benefits on a variable and/or fixed basis.
Variable annuities provide contract values and lifetime annuity payments that
vary with the investment results of the Funds you choose. You cannot be sure
that the contract value or annuity payments will equal or exceed your purchase
payments.
The variable annuity contracts are designed for:
- - annuity purchase plans adopted by public school systems and certain tax-exempt
organizations described in Section 501(c)(3) of the Internal Revenue Code (the
"Code"), qualifying for tax-deferred treatment pursuant to Section 403(b) of
the Code,
- - other employee pension or profit-sharing trusts or plans qualifying for
tax-deferred treatment under Section 401(a), 401(k) or 403(a) of the Code,
- - individual retirement annuities qualifying for tax-deferred treatment under
Section 408 or 408A of the Code, (4) state and municipal deferred compensation
plans and
- - non-tax-qualified retirement plans.
The minimum initial purchase payment is $5,000 ($2,000 for IRAs). You may make
additional payments of at least $500 at any time ($300 for payroll deduction
plans). We may limit your total purchase payments to $1,000,000.
You may direct the allocation of your purchase payments to one or more (but not
more than 10) subaccounts of Ohio National Variable Account A ("VAA") and/or the
Guaranteed Account. VAA is a separate account of The Ohio National Life
Insurance Company. The assets of VAA are invested in shares of the Funds. The
Funds are portfolios of Ohio National Fund, Inc., the Dow Target Variable Fund
LLC, Goldman Sachs Variable Insurance Trust, Janus Aspen Series, J.P. Morgan
Series Trust II, Lazard Retirement Series, Inc., Morgan Stanley Dean Witter
Universal Funds, Inc., Salomon Brothers Variable Series Funds Inc and Strong
Variable Insurance Funds, Inc. See page 2 for the list of available Funds. See
also the accompanying prospectuses of the Funds. The Fund prospectuses might
also contain information about funds that are not available for these contracts.
You may withdraw all or part of the contract's value before annuity payments
begin. You might incur federal income tax penalties for these early withdrawals.
We may charge you a surrender charge up to 6% of the amount withdrawn. You may
withdraw up to 10% of the contract value each year without this charge. Your
exercise of contract rights may be subject to the terms of your qualified
employee trust or annuity plan. This prospectus contains no information
concerning your trust or plan.
You may revoke the contract, without penalty, within 10 days of receiving it (or
a longer period if required by state law).
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE. IT SETS FORTH THE INFORMATION ABOUT
VAA AND THE VARIABLE ANNUITY CONTRACTS THAT YOU SHOULD KNOW BEFORE INVESTING.
ADDITIONAL INFORMATION ABOUT VAA HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION IN A STATEMENT OF ADDITIONAL INFORMATION DATED JULY 1, 1999. WE HAVE
INCORPORATED THE STATEMENT OF ADDITIONAL INFORMATION BY REFERENCE. IT IS
AVAILABLE UPON REQUEST AND WITHOUT CHARGE BY WRITING OR CALLING US AT THE ABOVE
ADDRESS. THE TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL INFORMATION IS ON
THE BACK PAGE OF THIS PROSPECTUS.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THIS PROSPECTUS SHOULD BE
ACCOMPANIED BY THE CURRENT FUND PROSPECTUSES.
JULY 1, 1999
Form 8521
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
Available Funds............................................. 2
Fee Table................................................... 3
Financial Statements...................................... 9
Ohio National Life........................................ 10
Ohio National Variable Account A.......................... 10
The Funds................................................. 11
Distribution of Variable Annuity Contracts.................. 12
Deductions and Expenses..................................... 12
Surrender Charge.......................................... 12
Contract Administration Charge............................ 12
Deduction for Administrative Expenses..................... 13
Deduction for Risk Undertakings........................... 13
Transfer Fee.............................................. 13
Deduction for State Premium Tax........................... 13
Fund Expenses............................................. 13
Description of Variable Annuity Contracts................... 13
10-Day Free Look.......................................... 13
Accumulation Period....................................... 14
Annuity Period............................................ 19
Contract Owner Inquiries.................................. 21
Performance Data.......................................... 21
Federal Tax Status.......................................... 21
IRA Disclosure Statement.................................... 26
</TABLE>
AVAILABLE FUNDS
<TABLE>
<S> <C>
OHIO NATIONAL FUND, INC. INVESTMENT ADVISER (SUBADVISER)
Money Market Portfolio Ohio National Investments, Inc.
Equity Portfolio Ohio National Investments, Inc.
Bond Portfolio Ohio National Investments, Inc.
Omni Portfolio (a flexible portfolio fund) Ohio National Investments, Inc.
S&P 500 Index Portfolio Ohio National Investments, Inc.
International Portfolio (Federated Global Investment Management Corp.)
International Small Company Portfolio (Federated Global Investment Management Corp.)
Capital Appreciation Portfolio (T. Rowe Price Associates, Inc.)
Growth & Income Portfolio (RS Investment Management, L.P.)
Small Cap Growth Portfolio (RS Investment Management, L.P.)
High Income Bond Portfolio (Federated Investment Counseling)
Equity Income Portfolio (Federated Investment Counseling)
Blue Chip Portfolio (Federated Investment Counseling)
THE DOW(SM) TARGET VARIABLE FUND LLC
The Dow(SM) Target 10 Portfolios (First Trust Advisors L.P.)
GOLDMAN SACHS VARIABLE INSURANCE TRUST
Goldman Sachs Growth and Income Fund Goldman Sachs Asset Management
Goldman Sachs CORE U.S. Equity Fund Goldman Sachs Asset Management
Goldman Sachs Capital Growth Fund Goldman Sachs Asset Management
Goldman Sachs Global Income Fund Goldman Sachs Asset Management International
</TABLE>
2
<PAGE> 4
<TABLE>
<S> <C>
JANUS ASPEN SERIES
Growth Portfolio Janus Capital Corporation
International Growth Portfolio Janus Capital Corporation
Worldwide Growth Portfolio Janus Capital Corporation
Balanced Portfolio Janus Capital Corporation
J.P. MORGAN SERIES TRUST II
J.P. Morgan Small Company Portfolio J.P. Morgan Investment Management, Inc.
LAZARD RETIREMENT SERIES, INC.
Small Cap Portfolio Lazard Asset Management
Emerging Markets Portfolio Lazard Asset Management
MITCHELL HUTCHINS SERIES TRUST
Strategic Income Portfolio Mitchell Hutchins Assets Management Inc.
Growth & Income Portfolio Mitchell Hutchins Assets Management Inc.
Tactical Allocation Portfolio Mitchell Hutchins Assets Management Inc.
Small Cap Portfolio Mitchell Hutchins Assets Management Inc.
MORGAN STANLEY DEAN WITTER UNIVERSAL
FUNDS, INC.
Fixed Income Portfolio Miller Anderson Sherrerd, LLP
Value Portfolio Miller Anderson Sherrerd, LLP
U.S. Real Estate Portfolio Morgan Stanley Dean Witter Investment Management, Inc.
Emerging Markets Debt Portfolio Morgan Stanley Dean Witter Investment Management, Inc.
SALOMON BROTHERS VARIABLE SERIES FUNDS INC
Capital Fund Salomon Brothers Asset Management Inc
Total Return Fund Salomon Brothers Asset Management Inc
Investors Fund (a capital growth fund) Salomon Brothers Asset Management Inc
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Mid Cap Growth Fund II Strong Capital Management, Inc.
Strong Opportunity Fund II (a mid Strong Capital Management, Inc.
cap/small cap fund)
Strong Schafer Value Fund II Strong Capital Management, Inc.
</TABLE>
FEE TABLE
<TABLE>
<CAPTION>
CONTRACTOWNER TRANSACTION EXPENSES YEARS PAYMENT
---------------------------------- ----- -------
<S> <C> <C>
Deferred Sales Load (this "surrender charge" is a percentage
of value withdrawn; the 1st 6%
percentage varies with number of years from purchase
payments to which values relate) 2nd 6%
3rd 5%
4th 4%
5th 2%
6th 1%
7th and later 0%
</TABLE>
<TABLE>
<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>
<S> <C>
VAA ANNUAL EXPENSES (as a percentage of average
account value)
Mortality and Expense Risk Fees*** 1.15%
Account Fees and Expenses 0.25%
Total VAA Annual Expenses 1.40%
</TABLE>
*** The Mortality and Expense Risk fees may be changed at any time, but may not
be increased to more than 1.15%.
Neither the table nor the examples reflect any premium taxes that may apply to a
contract. These currently range from 0% to 3.5%. For further details, see
Deduction for State Premium Tax.
In those states permitting an optional increasing death benefit, we may charge
up to 0.25% of the death benefit amount if you choose one of those options. See
Death Benefit for details.
3
<PAGE> 5
FUND ANNUAL EXPENSES (as a percentage of the Fund average net assets)
<TABLE>
<CAPTION>
TOTAL FUND
EXPENSES TOTAL TOTAL FUND
WITHOUT WAIVERS EXPENSES
MANAGEMENT OTHER WAIVERS OR AND WITH WAIVERS
FEES EXPENSES REDUCTIONS REDUCTIONS* OR REDUCTIONS
---------- -------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
OHIO NATIONAL FUND:
Money Market* 0.30% 0.16% 0.46% 0.05% 0.41%
Equity 0.80% 0.11% 0.91% 0.00% 0.91%
Bond 0.58% 0.14% 0.72% 0.00% 0.72%
Omni 0.54% 0.11% 0.65% 0.00% 0.65%
S&P 500 Index 0.40% 0.09% 0.49% 0.00% 0.49%
International* 0.90% 0.27% 1.17% 0.05% 1.12%
International Small Company 1.00% 0.40% 1.40% 0.00% 1.40%
Capital Appreciation 0.80% 0.13% 0.93% 0.00% 0.93%
Growth & Income 0.85% 0.12% 0.97% 0.00% 0.97%
Small Cap Growth 0.90% 0.40% 1.30% 0.00% 1.30%
High Income Bond 0.75% 0.05% 0.80% 0.00% 0.80%
Equity Income 0.75% 0.43% 1.18% 0.00% 1.18%
Blue Chip 0.90% 0.32% 1.22% 0.00% 1.22%
DOW TARGET VARIABLE FUND LLC:
Dow Target 10** 0.60% 0.15% 0.75% 0.00% 0.75%
GOLDMAN SACHS VARIABLE INSURANCE TRUST:
Goldman Sachs Growth and Income* 0.75% 1.94% 2.69% 1.79% 0.90%
Goldman Sachs CORE U.S. Equity* 0.70% 2.13% 2.83% 2.03% 0.80%
Goldman Sachs Capital Growth* 0.75% 1.03% 1.78% 0.68% 0.90%
Goldman Sachs Global Income* 0.90% 2.40% 3.30% 2.25% 1.05%
JANUS ASPEN SERIES:
Growth* 0.72% 0.03% 0.75% 0.07% 0.68%
International Growth* 0.75% 0.20% 0.95% 0.09% 0.86%
Worldwide Growth* 0.67% 0.07% 0.74% 0.02% 0.72%
Balanced 0.72% 0.02% 0.74% 0.00% 0.74%
J.P. MORGAN SERIES TRUST II:
J.P. Morgan Small Company* 0.60% 2.83% 3.43% 2.28% 1.15%
LAZARD RETIREMENT SERIES, INC.:
Small Cap* 0.75% 16.20% 16.95% 15.70% 1.25%
Emerging Markets* 1.00% 14.37% 15.37% 13.77% 1.60%
MITCHELL HUTCHINS SERIES TRUST:
Strategic Income 0.75% 0.94% 1.69% 0.25% 1.44%
Growth & Income 0.70% 0.59% 1.29% 0.25% 1.04%
Tactical Allocation 0.50% 0.70% 1.20% 0.25% 0.95%
Small Cap 1.00% 1.19% 2.19% 0.25% 1.94%
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS,
INC.:
Fixed Income* 0.40% 1.31% 1.71% 1.01% 0.70%
Value* 0.55% 1.32% 1.87% 1.02% 0.85%
U.S. Real Estate* 0.80% 1.52% 2.32% 1.22% 1.10%
Emerging Markets Debt* 0.80% 1.26% 2.06% 0.54% 1.52%
</TABLE>
4
<PAGE> 6
<TABLE>
<CAPTION>
TOTAL FUND
EXPENSES TOTAL TOTAL FUND
WITHOUT WAIVERS EXPENSES
MANAGEMENT OTHER WAIVERS OR AND WITH WAIVERS
FEES EXPENSES REDUCTIONS REDUCTIONS* OR REDUCTIONS
---------- -------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
SALOMON BROTHERS VARIABLE SERIES FUNDS INC:
Capital* 1.00% 2.26% 3.26% 2.26% 1.00%
Total Return* 0.80% 1.90% 2.70% 1.70% 1.00%
Investors* 0.75% 1.07% 1.82% 0.82% 1.00%
STRONG VARIABLE INSURANCE FUNDS, INC.:
Strong Mid Cap Growth II 1.00% 0.20% 1.20% 0.00% 1.20%
Strong Opportunity II 1.00% 0.10% 1.16% 0.00% 1.16%
Strong Schafer Value II 1.00% 0.20% 1.20% 0.00% 1.20%
</TABLE>
EXAMPLE -- If you surrendered your contract at the end of the applicable time
period, you would pay the following aggregate expenses on a $1,000 investment in
each Fund, 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* $72 $101 $116 $213
Equity 77 116 141 265
Bond 75 111 132 245
Omni 75 109 128 238
S&P 500 Index 73 104 120 221
International* 79 123 152 286
International Small Company 82 131 166 313
Capital Appreciation 77 117 142 267
Growth & Income 77 115 139 261
Small Cap Growth 79 121 148 279
High Income Bond 76 113 136 253
Equity Income 80 125 155 291
Blue Chip 80 126 157 295
DOW TARGET VARIABLE FUND LLC:
Dow Target 10** 76 112 133 248
GOLDMAN SACHS VARIABLE INSURANCE TRUST:
Goldman Sachs Growth and Income* 77 116 141 264
Goldman Sachs CORE U.S. Equity* 76 113 136 253
Goldman Sachs Capital Growth* 77 116 141 264
Goldman Sachs Global Income* 79 121 148 279
JANUS ASPEN SERIES:
Growth* 75 110 129 231
International Growth* 77 115 138 259
Worldwide Growth* 75 111 132 245
Balanced 75 111 132 245
J.P. MORGAN SERIES TRUST II:
J.P. Morgan Small Company* 80 124 153 289
LAZARD RETIREMENT SERIES, INC.:
Small Cap* 81 127 158 298
Emerging Markets* 84 137 175 332
</TABLE>
5
<PAGE> 7
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
MITCHELL HUTCHINS SERIES TRUST:
Strategic Income $83 $133 $168 $317
Growth & Income 79 121 148 278
Tactical Allocation 78 118 143 269
Small Cap 88 147 192 363
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.:
Fixed Income* 75 110 131 243
Value* 77 115 138 258
U.S. Real Estate* 79 122 151 284
Emerging Markets Debt* 83 135 172 324
SALOMON BROTHERS VARIABLE SERIES FUNDS INC:
Capital* 78 119 146 274
Total Return* 78 119 146 274
Investors* 78 119 146 274
STRONG VARIABLE INSURANCE FUNDS, INC.:
Strong Mid Cap Growth II 80 125 156 293
Strong Opportunity II 80 124 154 290
Strong Schafer Value II 80 125 156 293
</TABLE>
EXAMPLE -- If you do not surrender your contract or if 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* $18 $57 $98 $213
Equity 23 72 121 265
Bond 22 66 114 245
Omni 21 64 110 238
S&P 500 Index 19 59 102 221
International* 26 78 134 286
International Small Company 28 87 148 313
Capital Appreciation 24 73 125 267
Growth & Income 23 71 121 261
Small Cap Growth 25 76 131 279
High Income Bond 22 69 118 253
Equity Income 26 80 137 291
Blue Chip 27 81 139 295
DOW TARGET VARIABLE FUND LLC:
Dow Target 10** 22 67 115 248
GOLDMAN SACHS VARIABLE INSURANCE TRUST:
Goldman Sachs Growth and Income* 23 72 123 264
Goldman Sachs CORE U.S. Equity* 22 69 118 253
Goldman Sachs Capital Growth* 23 72 123 264
Goldman Sachs Global Income* 25 76 131 279
JANUS ASPEN SERIES:
Growth* 21 65 113 231
International Growth* 23 70 120 259
Worldwide Growth* 22 66 114 245
Balanced 22 66 114 245
J.P. MORGAN SERIES TRUST II:
J.P. Morgan Small Company* 26 79 136 289
</TABLE>
6
<PAGE> 8
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
LAZARD RETIREMENT SERIES, INC.:
Small Cap* 27 82 141 298
Emerging Markets* 30 93 158 332
MITCHELL HUTCHINS SERIES TRUST:
Strategic Income 29 88 150 317
Growth & Income 25 76 130 278
Tactical Allocation 24 73 126 269
Small Cap 34 103 174 363
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.:
Fixed Income* 21 66 113 243
Value* 23 70 120 258
U.S. Real Estate* 25 78 133 284
Emerging Markets Debt* 30 90 154 324
SALOMON BROTHERS VARIABLE SERIES FUNDS INC:
Capital* 24 75 128 274
Total Return* 24 75 128 274
Investors* 24 75 128 274
STRONG VARIABLE INSURANCE FUNDS, INC.:
Strong Mid Cap Growth II 26 81 138 293
Strong Opportunity II 26 80 136 290
Strong Schafer Value II 26 81 138 293
</TABLE>
*The investment advisers of certain Funds are voluntarily waiving part or all of
their management fees and/or reimbursing certain Funds in order to reduce total
Fund expenses.
EXAMPLE -- Without the voluntary fee waivers or reimbursements by investment
advisers, 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 of the following Funds, 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 $73 $103 $118 $218
International 80 125 154 290
GOLDMAN SACHS VARIABLE INSURANCE TRUST:
Goldman Sachs Growth and Income 95 169 227 428
Goldman Sachs CORE U.S. Equity 96 173 234 440
Goldman Sachs Capital Growth 86 143 184 348
Goldman Sachs Global Income 101 187 255 477
JANUS ASPEN SERIES:
Growth 76 112 133 248
International Growth 78 118 143 269
Worldwide Growth 76 112 133 247
J.P. MORGAN SERIES TRUST II:
J.P. Morgan Small Company 102 190 261 487
LAZARD RETIREMENT SERIES, INC.:
Small Cap 220 482 660 968
Emerging Markets 204 448 621 942
</TABLE>
7
<PAGE> 9
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
MITCHELL HUTCHINS SERIES TRUST:
Strategic Income 85 140 180 340
Growth & Income 81 128 160 302
Tactical Allocation 80 125 156 293
Small Cap 90 155 204 385
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.:
Fixed Income 79 121 148 278
Value 81 129 162 305
U.S. Real Estate 85 141 182 344
Emerging Markets Debt 89 151 197 373
SALOMON BROTHERS VARIABLE SERIES FUNDS INC:
Capital 101 185 253 474
Total Return 97 175 237 445
Investors 89 151 198 375
</TABLE>
EXAMPLE -- Without the voluntary fee waivers or reimbursements by investment
advisers, if you do not surrender your contract or if 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 $19 $58 $101 $218
International 26 80 137 290
GOLDMAN SACHS VARIABLE INSURANCE TRUST:
Goldman Sachs Growth and Income 41 124 209 428
Goldman Sachs CORE U.S. Equity 42 128 216 440
Goldman Sachs Capital Growth 32 98 166 348
Goldman Sachs Global Income 47 142 237 477
JANUS ASPEN SERIES:
Growth 22 67 115 248
International Growth 24 73 126 269
Worldwide Growth 22 67 115 247
J.P. MORGAN SERIES TRUST II:
J.P. Morgan Small Company 48 145 243 487
LAZARD RETIREMENT SERIES, INC.:
Small Cap 165 435 641 968
Emerging Markets 149 401 602 942
MITCHELL HUTCHINS SERIES TRUST:
Strategic Income 31 95 162 340
Growth & Income 27 84 142 302
Tactical Allocation 26 81 138 293
Small Cap 36 110 186 385
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.:
Fixed Income 25 76 130 278
Value 28 84 144 305
U.S. Real Estate 32 97 164 344
Emerging Markets Debt 35 106 179 373
</TABLE>
8
<PAGE> 10
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
SALOMON BROTHERS VARIABLE SERIES FUNDS INC:
Capital 47 141 235 474
Total Return 43 130 219 445
Investors 35 107 180 375
</TABLE>
** The "Other Expenses" (and, accordingly, the Total Fund Expenses) for these
Funds are based on estimates.
The purpose of the above table is to help you to understand the costs and
expenses that you will bear directly or indirectly. THESE EXAMPLES SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSE. ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE SHOWN. Note that the expense amounts shown in the
examples are aggregate amounts for the total number of years indicated. 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. The above table and examples reflect only the charges
for contracts currently offered by this prospectus and not other contracts that
we may offer.
FINANCIAL STATEMENTS
The complete financial statements of VAA and Ohio National Life, including the
Independent Auditors' Reports for them, are included in the Statement of
Additional Information.
ACCUMULATION UNIT VALUES
This series of variable annuity contracts began on May 1, 1998. The Dow Target
Variable Fund was first used in these contracts January 6, 1999. Ohio National
Fund International Small Company Portfolio and Lazard Retirement Series, Small
Cap and Emerging Markets Portfolios were first used in these contracts May 1,
1999.
OHIO NATIONAL FUND:
<TABLE>
<CAPTION>
YEAR ENDED UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS
DECEMBER 31 BEGINNING OF YEAR END OF YEAR AT END OF YEAR
----------- ----------------- ------------- ---------------
<S> <C> <C> <C> <C>
Money Market 1998 $10.000000 $10.257518 141,511
Bond 1998 $10.000000 $10.217891 31,345
Omni 1998 $10.000000 $ 9.379873 19,147
S&P 500 Index 1998 $10.000000 $11.138349 162,770
International 1998 $10.000000 $ 9.351988 5,885
Capital Appreciation 1998 $10.000000 $ 9.836784 56,849
Growth & Income 1998 $10.000000 $ 9.293575 57,455
Small Cap Growth 1998 $10.000000 $10.366153 7,682
High Income Bond 1998 $10.000000 $ 9.888612 29,416
Equity Income 1998 $10.000000 $10.495750 9,168
Blue Chip 1998 $10.000000 $10.140937 47,254
</TABLE>
GOLDMAN SACHS VARIABLE INSURANCE TRUST:
<TABLE>
<CAPTION>
YEAR ENDED UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS
DECEMBER 31 BEGINNING OF YEAR END OF YEAR AT END OF YEAR
----------- ----------------- ------------- ---------------
<S> <C> <C> <C> <C>
Goldman Sachs Growth and Income 1998 $10.000000 $ 8.848103 49,518
Goldman Sachs CORE U.S. Equity 1998 $10.000000 $10.185409 48,081
Goldman Sachs Capital Growth 1998 $10.000000 $11.190658 41,158
Goldman Sachs Global Income 1998 $10.000000 $10.569939 6,044
</TABLE>
9
<PAGE> 11
JANUS ASPEN SERIES:
<TABLE>
<CAPTION>
YEAR ENDED UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS
DECEMBER 31 BEGINNING OF YEAR END OF YEAR AT END OF YEAR
----------- ----------------- ------------- ---------------
<S> <C> <C> <C> <C>
Growth 1998 $10.000000 $11.557898 142,559
International Growth 1998 $10.000000 $ 9.873298 19,644
Worldwide Growth 1998 $10.000000 $10.504917 139,755
Balanced 1998 $10.000000 $11.627155 164,472
</TABLE>
J.P. MORGAN SERIES TRUST II:
<TABLE>
<CAPTION>
YEAR ENDED UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS
DECEMBER 31 BEGINNING OF YEAR END OF YEAR AT END OF YEAR
----------- ----------------- ------------- ---------------
<S> <C> <C> <C> <C>
J.P. Morgan Small Company 1998 $10.000000 $ 8.332170 63,525
</TABLE>
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS:
<TABLE>
<CAPTION>
YEAR ENDED UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS
DECEMBER 31 BEGINNING OF YEAR END OF YEAR AT END OF YEAR
----------- ----------------- ------------- ---------------
<S> <C> <C> <C> <C>
Fixed Income 1998 $10.000000 $10.449435 44,089
Value 1998 $10.000000 $ 8.799574 45,544
U.S. Real Estate 1998 $10.000000 $ 8.941071 9,691
Emerging Markets Debt 1998 $10.000000 $ 6.720380 1,131
</TABLE>
SALOMON BROTHERS VARIABLE SERIES FUNDS:
<TABLE>
<CAPTION>
YEAR ENDED UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS
DECEMBER 31 BEGINNING OF YEAR END OF YEAR AT END OF YEAR
----------- ----------------- ------------- ---------------
<S> <C> <C> <C> <C>
Capital 1998 $10.000000 $10.667226 21,659
Total Return 1998 $10.000000 $10.004853 28,716
Investors 1998 $10.000000 $10.132029 27,822
</TABLE>
STRONG VARIABLE INSURANCE:
<TABLE>
<CAPTION>
YEAR ENDED UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS
DECEMBER 31 BEGINNING OF YEAR END OF YEAR AT END OF YEAR
----------- ----------------- ------------- ---------------
<S> <C> <C> <C> <C>
Strong Mid Cap Growth II 1998 $10.000000 $11.526465 42,782
Strong Opportunity II 1998 $10.000000 $ 9.541070 28,554
Strong Schafer Value II 1998 $10.000000 $ 9.392680 3,481
</TABLE>
OHIO NATIONAL LIFE
Ohio National Life was organized under the laws of Ohio on September 9, 1909. We
write life, accident and health insurance and annuities in 47 states, the
District of Columbia and Puerto Rico. Currently we have assets in excess of $7
billion and equity in excess of $710 million. Our home office is located at One
Financial Way, Montgomery, Ohio 45242. We are a stock life insurance company
ultimately owned by a mutual insurance holding company (Ohio National Mutual
Holdings, Inc.). Our policyholders own the majority voting interest of the
holding company.
OHIO NATIONAL VARIABLE ACCOUNT A
We established VAA on August 1, 1969 as a separate account for funding variable
annuity contracts. Purchase payments for the variable annuity contracts are
allocated to one or more subaccounts of VAA. However, contract values may not be
allocated to more than 10 variable subaccounts at any one time. Income, gains
and losses, whether or not realized, from assets allocated to VAA are credited
to or charged against VAA without regard to our other income, gains or losses.
The assets maintained in VAA will not be charged with any liabilities arising
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<PAGE> 12
out of any of our other business. Nevertheless, all obligations arising under
the contracts, including the commitment to make annuity payments, are our
general corporate obligations. Accordingly, all our assets are available to meet
our obligations under the contracts. VAA is registered as a unit investment
trust under the Investment Company Act of 1940. The assets of the subaccounts of
VAA are invested at net asset value in Fund shares. Values of other contracts
not offered through this prospectus are also allocated to VAA, including some
subaccounts that are not available for these contracts.
THE FUNDS
The Funds are mutual funds registered under the Investment Company Act 1940.
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 that Fund management may not anticipate or make
changes necessary in the investments to meet changes in economic conditions.
The Funds receive investment advice from their investment advisers. The Funds
pay each of the investment advisers a fee as shown in the fee table beginning on
page 3. In some cases, the investment adviser pays part of its fee to a
subadviser.
Affiliates of certain Funds may compensate us based upon a percentage of the
Fund's average daily net assets that are allocated to VAA. These percentages
vary by Fund. This is intended to compensate us for administrative and other
services we provide to the Funds and their affiliates.
For additional information concerning the Funds, including their investment
objectives, see the Fund prospectuses. Read them carefully before investing.
They may contain information about other funds that are not available as
investment options for these contracts. You cannot be sure that any Fund will
achieve its stated objectives and policies.
The investment policies, objectives and/or names of some of the Funds may be
similar to those of other investment companies managed by the same investment
adviser or subadviser. However, similar funds often do not have comparable
investment performance. The investment results of the Funds may be higher or
lower than those of the other funds.
MIXED AND SHARED FUNDING
In addition to being offered to VAA, certain Fund shares are offered to our
other separate accounts for variable annuity contracts and a separate account of
Ohio National Life Assurance Corporation for variable life insurance contracts.
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 one or more of variable life and variable annuity separate
accounts, or separate accounts of other life insurance companies, and qualified
plans to invest in Fund shares. Although neither we nor any of the Funds
currently foresee any such disadvantage, the Board of Directors or Trustees of
each Fund will monitor events to identify any material conflict among different
types of owners and to determine if any action should be taken. That could
possibly include the withdrawal of VAA's participation in a Fund. Material
conflicts could result from such things as:
- - changes in state insurance law;
- - changes in federal income tax law;
- - changes in the investment management of any Fund; or
- - differences in voting instructions given by different types of owners.
VOTING RIGHTS
We will vote Fund shares held in VAA at shareholders Fund meetings in accordance
with voting instructions received from contract owners. We will determine the
number of Fund shares for which you are entitled to give
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<PAGE> 13
instructions as described below. This determination will be within 90 days
before the shareholders meeting. Proxy material and forms for giving voting
instructions will be distributed to each owner. We will vote Fund shares held in
VAA, for which no timely instructions are received, in proportion to the
instructions that we do receive.
Until annuity payments begin, the number of Fund shares for which you may
instruct us is determined by dividing your contract value in each Fund by the
net asset value of a share of that Fund as of the same date. After annuity
payments begin, the number of Fund shares for which you may instruct us is
determined by dividing the actuarial liability for your variable annuity by the
net asset value of a Fund share as of the same date. Generally, the number of
votes tends to decrease as annuity payments progress.
DISTRIBUTION OF VARIABLE ANNUITY CONTRACTS
The variable annuity contracts are sold by our insurance agents who are also
registered representatives of broker-dealers that have entered into distribution
agreements with Ohio National Equities, Inc. "ONEQ" is a wholly-owned subsidiary
of ours. ONEQ 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. We pay ONEQ
7.25% of each purchase payment and ONEQ then pays part of that to the broker-
dealers. The broker-dealers pay their registered representatives from their own
funds. Purchase payments on which nothing is paid to registered representatives
may not be included in amounts on which we pay the sales compensation to ONEQ.
If our surrender charge is not sufficient to recover the fee paid to ONEQ, any
deficiency will be made up from our general assets. These include, among other
things, any profit from the mortality and expense risk charges. ONEQ's address
is One Financial Way, Montgomery, Ohio 45242.
DEDUCTIONS AND EXPENSES
SURRENDER CHARGE
There is no deduction from purchase payments to pay sales expense. We may assess
a surrender charge if you surrender the contract or withdraw part of its value.
The purpose of this charge is to defray expenses relating to the sale of the
contract, including compensation to broker-dealers, cost of sales literature and
prospectuses, and other expenses related to sales activity. The surrender charge
is a percent of the amount you withdraw or surrender. This percentage varies
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>
1st 6%
2nd 6%
3rd 5%
4th 4%
5th 2%
6th 1%
7th and later 0%
</TABLE>
During each contract year, you may make partial withdrawals of not more than 10%
of the contract value (as of the day of the first withdrawal made during that
contract year) without a surrender charge.
CONTRACT ADMINISTRATION CHARGE
Each year on the contract anniversary (or when you surrender of the contract),
we will deduct a contract administration charge of $30 from the contract value.
This helps to repay us for maintaining the contract. There is no contract
administration charge for contracts having a value of at least $50,000. There is
no charge after annuity payments begin. We guarantee not to increase the
contract administration charge.
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<PAGE> 14
DEDUCTION FOR ADMINISTRATIVE EXPENSES
At the end of each valuation period we deduct an amount equal to 0.25% on an
annual basis of the contract value. This deduction reimburses us for expenses
not covered by the contract administration charge. Examples of these expenses
are accounting, auditing, legal, contract owner services, reports to regulatory
authorities and contract owners, contract issue, etc.
DEDUCTION FOR RISK UNDERTAKINGS
We guarantee that, until annuity payments begin, the contract's value will not
be affected by any excess of sales and administrative expenses over the
deductions for them. We also guarantee to pay a death benefit if the annuitant
dies before annuity payments begin. After annuity payments begin, we guarantee
that variable annuity payments will not be affected by adverse mortality
experience or expenses.
For assuming these risks, when we determine the accumulation unit values and the
annuity unit values for each subaccount, we make a deduction from the applicable
investment results equal to 1.15% of the contract value on an annual basis. We
may decrease that deduction at any time and we may increase it not more often
than annually to not more than 1.15% on an annual basis. We agree 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. We may discontinue this
limitation on our right to increase the deduction, but only as to contracts
purchased after notice of the discontinuance. The risk charge is an indivisible
whole of the amount currently being deducted. However, we believe that a
reasonable allocation would be 0.65% for mortality risk, and 0.50% for expense
risk. We hope to realize a profit from this charge. However there will be a loss
if the deduction fails to cover the actual risks involved.
TRANSFER FEE
We may charge a transfer fee of $10 for each transfer from one or more
subaccounts to other subaccounts. The fee is charged pro rata against the
subaccounts from which the transfer is made. We do not charge for your first
transfer each calendar month.
DEDUCTION FOR STATE PREMIUM TAX
Most states do not presently charge a premium tax for these contracts. Where a
tax applies, the rates for tax-qualified contracts are presently 0.5% in
California, 1.0% in Puerto Rico and West Virginia, 2.0% in Kentucky and 2.25% in
the District of Columbia. For non-tax-qualified contracts, the rates are
presently 1.0% in Puerto Rico, West Virginia and Wyoming, 1.25% in the South
Dakota, 2.0% in Kansas, Kentucky and Maine, 2.25% in the District of Columbia,
2.35% in California and 3.5% in Nevada. The deduction for premium taxes will be
made when incurred. Normally, that is not until annuity payments begin. However,
in Kansas, South Dakota and Wyoming, they are presently being deducted from
purchase payments.
FUND EXPENSES
There are deductions from, and expenses paid out of, the assets of the Funds.
These are described in the Fund prospectuses.
DESCRIPTION OF VARIABLE ANNUITY CONTRACTS
10-DAY FREE LOOK
You may revoke the contract at any time until the end of 10 days after you
receive it (or such longer period as may be required by your state law) and get
a refund of the contract value as of the date of cancellation. To revoke, you
must return the contract to us 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 if you exercise your free look. Any purchase
13
<PAGE> 15
payments in these states to be allocated to variable Funds will first be
allocated to the Money Market Fund until the end of the free look period.
ACCUMULATION PERIOD
PURCHASE PAYMENTS
Your first purchase payment must be at least $5,000 ($2,000 for IRAs). You do
not have to make any more payments after that. But you may make additional
purchase payments at any time of at least $500 each ($300 for payroll deduction
plans). We may limit your total purchase payments to $1,000,000.
ACCUMULATION UNITS
Until the annuity payout date, the contract value is measured by accumulation
units. As you make each purchase payment, we credit units to the contract (see
Crediting Accumulation Units). The number of units remains constant between
purchase payments but their dollar value varies depending upon the investment
results of each Fund to which payments are allocated.
CREDITING ACCUMULATION UNITS
Your representative will send an order or application, together with the first
purchase payment, to our home office for acceptance. Upon acceptance, we issue a
contract and we credit the first purchase payment to the contract in the form of
accumulation units. If all information necessary for issuing a contract and
processing the purchase payment is complete, we will credit your first purchase
payment within two business days after receipt. If we do not receive everything
within five business days, we will return the purchase payment to you
immediately unless you specifically consent to having us retain the purchase
payment until the necessary information is completed. After that, we will credit
the purchase payment within two business days.
You must send any additional purchase payments directly to our home office. They
will then be applied to provide that number of accumulation units (for each
subaccount) determined by dividing the amount of the purchase payment by the
unit value next computed after we receive the payment at our home office.
ALLOCATION OF PURCHASE PAYMENTS
You may allocate your purchase payments among up to 10 variable subaccounts of
VAA and to the Guaranteed Account. The amount you allocate to any Fund or the
Guaranteed Account must equal a whole percent You may change your allocation of
future purchase payments at any time by sending written notice to our home
office.
ACCUMULATION UNIT VALUE AND ACCUMULATION VALUE
We set the accumulation unit value of each subaccount of VAA at $10 when we
credited the first payments for these contracts. We determine the unit value for
any later valuation period by multiplying the unit value for the immediately
preceding valuation period by the net investment factor (described below) for
such later valuation period. We determine a contract's value by multiplying the
total number of units (for each subaccount) credited to the contract by the unit
value (for such subaccount) for the current valuation period.
NET INVESTMENT FACTOR
The net investment factor measures the investment results of each subaccount.
The net investment factor for each subaccount for any valuation period is
determined by dividing (a) by (b), then subtracting (c) from the result, where:
(a) is
(1) the net asset value of the corresponding Fund share at the end of a
valuation period, plus
(2) the per share amount of any dividends or other distributions declared
for that Fund if the "ex-dividend" date occurs during the valuation
period, plus or minus
14
<PAGE> 16
(3) a per share charge or credit for any taxes paid or reserved for the
maintenance or operation of that subaccount; (No federal income taxes
apply under present law.)
(b) is the net asset value of the corresponding Fund share at the end of the
preceding valuation period; and
(c) is the deduction for administrative and sales expenses and risk
undertakings.
SURRENDER AND PARTIAL WITHDRAWAL
Before annuity payments begin (and also after that in the case of annuity Option
1(e) described below) you may surrender (totally withdraw the value of) your
contract or elect a partial withdrawal (at least $1,000). The surrender charge
may then apply. That charge is a percent of the total amount withdrawn. For
example, if you request a partial withdrawal of $1,000 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, we would pay you $1,000, but the total amount deducted from the contract
value would be $1,063.83 (i.e., $1,063.83 x 6% = $63.83). Unless you specify
otherwise, the withdrawal will be made pro-rata from your values in each Fund.
The amount you may withdraw is the contract value less any surrender charge. In
the case of a complete surrender, we subtract any contract administration
charge. We will pay you within seven days after we receive your request.
However, we may defer payment described below. Surrenders and partial
withdrawals are limited or not permitted in connection with certain retirement
plans. For tax consequences of a surrender or withdrawal, see Federal Tax
Status.
If you request a surrender or partial withdrawal which includes contract values
derived from purchase payments that have not yet cleared the banking system, we
may delay mailing the portion relating to such payments until your check has
cleared. We require the return of the contract in the case of a complete
surrender.
Your 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 the Securities
and Exchange Commission has restricted trading on the Exchange;
(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 a Fund's net assets; or
(3) such other periods as the Commission may order to protect security holders.
TRANSFERS AMONG SUBACCOUNTS
You may transfer contract values from one or more Funds to one or more other
Funds. You may make transfers at any time before annuity payments begin. The
amount of any transfer must be at least $300 (or the entire value of the
contract's interest in a Fund, if less).
We may limit the number, frequency, method or amount of transfers. We may limit
transfers from any Fund on any one day to 1% of the previous day's total net
assets of that Fund if we or the Fund in our discretion, believe that the Fund
might otherwise be damaged. In determining which requests to honor, scheduled
transfers (under a 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. We will notify you if your requested transfer is not
made. Current SEC rules preclude us from processing at a later date those
requests that were not made. Accordingly, you would need to submit a new
transfer request in order to make a transfer that was not made because of these
limitations.
Certain third parties may offer you asset allocation or timing services for your
contract. We may choose to honor transfer requests from these third parties if
you give us a written power of attorney to do so. Fees you pay for such asset
allocation or timing services are in addition to any contract charges. WE DO NOT
ENDORSE, APPROVE OR RECOMMEND THESE SERVICES.
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<PAGE> 17
After annuity payments begin, you may make transfers among Funds only once each
calendar quarter. The transfer fee no longer applies then. Not more than 20% of
a contract's Guaranteed Account value (or $1,000, if greater) as of the
beginning of a contract year may be transferred to variable Funds during that
contract year.
TELEACCESS
If you give us a pre-authorization form, your contract and unit values and
interest rates can be checked and transfers may be made by telephoning us
between 7:00 a.m. and 7:00 p.m. (Eastern time) on days that we are open for
business, at 1-800-366-6654, #8. You may only make one telephone transfer per
day. We will honor pre-authorized telephone transfer instructions from anyone
who provides the personal identifying information requested via TeleAccess. We
will not honor telephone transfer requests after we receive notice of your
death. For added security, we send the contract owner a written confirmation of
all telephone transfers on the next business day. However, if we cannot complete
a transfer as requested, our customer service representative will contact the
owner in writing sent within 48 hours of the TeleAccess request. YOU MAY THINK
THAT YOU HAVE LIMITED THIS ACCESS TO YOURSELF, OR TO YOURSELF AND YOUR
REPRESENTATIVE. HOWEVER, ANYONE GIVING US THE NECESSARY IDENTIFYING INFORMATION
CAN USE TELEACCESS ONCE YOU AUTHORIZE IT.
SCHEDULED TRANSFERS (DOLLAR COST AVERAGING)
We administer a scheduled transfer ("DCA") program enabling you to preauthorize
automatic monthly or quarterly transfers of a specified dollar amount of at
least $300 each time. At least 12 DCA transfers must be scheduled. The transfers
may be from any variable Funds to any other Funds or to the Guaranteed Account.
Transfers may be made from the Guaranteed Account to any other Funds if the DCA
program is established at the time the contract is issued, the DCA program is
scheduled to begin within 6 months of contract issue and the term of the DCA
program does not exceed 2 years. For transfers from variable Funds, the DCA
program may not exceed 5 years. There is no transfer fee for DCA transfers. DCA
transfers do not count as the free transfer you are allowed once each calendar
month. We may discontinue the DCA program at any time. You may also discontinue
further DCA transfers by giving us written notice at least 7 business days
before the next scheduled transfer.
DCA generally has the effect of reducing the risk of purchasing at the top, and
selling at the bottom, of market cycles. DCA transfers from the Guaranteed
Account or from a Fund with a stabilized net asset value, such as the Money
Market Fund, will generally reduce the average total cost of indirectly
purchasing Fund shares because greater numbers of shares will be purchased when
the share prices are lower than when prices are higher. However, DCA does not
assure you of a profit, nor does it protect against losses in a declining
market. Moreover, for transfers from a variable Fund, DCA has the effect of
reducing the average price of the shares being redeemed. DCA might also be used
to systematically transfer contract values from variable Funds to the Guaranteed
Account in anticipation of retirement, reducing the risk of making a single
transfer during a low market.
PORTFOLIO REBALANCING
You may have us 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 Funds. The purpose of a
portfolio rebalancing strategy is to maintain, over time, your desired
allocation percentage in the designated Funds 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 give us written
authorization. The transfer charge does not apply to portfolio rebalancing
transactions. These transactions do not count against the free transfer you are
allowed once each calendar month. You may not have portfolio rebalancing for any
Funds that are part of a DCA program.
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<PAGE> 18
NURSING FACILITY CONFINEMENT
If the annuitant is, or has been, confined to a state licensed or legally
operated in-patient nursing home facility for at least 30 consecutive days, we
will not assess a surrender charge on partial withdrawals of up to $5,000 per
month. You may not withdraw more than one half of the contract value as of the
beginning of the confinement. This waiver of the surrender charge may not be
available in all states. It only applies when:
- - the confinement begins after the first contract anniversary and before annuity
payments begin;
- - the contract was issued before the annuitant's 80th birthday, and
- - we receive the request for withdrawal, together with proof of the confinement,
at our home office while the annuitant is confined or within 90 days after
discharge from the facility.
DEATH BENEFIT
If the annuitant (and any contingent annuitant) dies before annuity payments
begin, the contract pays a death benefit to a designated beneficiary. (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 you
elect settlement under one or more of the settlement options. If the death
benefit is not claimed within 90 days after the date of death, we will pay the
contract value instead of any greater death benefit.
This death benefit will be the greatest of:
- - the contract value; or
- - the net of purchase payments less withdrawals; or
- - the stepped-up death benefit amount if the contract has been in effect for at
least 3 years.
For the 3-year period beginning on the third contract anniversary, the
stepped-up death benefit will be the greater of (i) the contract value as of the
third anniversary or (ii) the net of purchase payments less withdrawals made on
or before the third anniversary. At the beginning of each later 3-year period
(until the annuitant attains age 90), the stepped up death benefit will be the
greater of (i) the contract value on that date or (ii) the death benefit as of
the last day of the preceding 3-year period. The stepped-up death benefit amount
is increased by purchase payments and decreased by withdrawals made during each
3-year period after the third anniversary.
In those states where permitted, you may elect an optional annual stepped-up
death benefit 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, you may elect a guaranteed minimum death
benefit 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
Fund 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. The Guaranteed Account is not
registered as an investment company. Interests in it are not subject to
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<PAGE> 19
the provisions or restrictions of federal securities laws. The staff of the
Securities and Exchange Commission has not reviewed disclosures regarding it.
The Guaranteed Account consists of all of our general assets other than those
allocated to a separate account. You may allocate purchase payments and contract
values between the Guaranteed Account and the Funds.
We invest our general assets in our discretion as allowed by Ohio law. We
allocate the investment income from our general assets to those contracts having
guaranteed values.
The amount of investment income allocated to the contracts varies from year to
year in our sole discretion. However, we guarantee that we will credit interest
at a rate of not less than 3% per year, compounded annually, to contract values
allocated to the Guaranteed Account. We may credit interest at a rate in excess
of 3%, but any such excess interest credit will be in our sole discretion.
We guarantee that, before annuity payments begin, the guaranteed value of a
contract will never be less than:
- - the amount of purchase payments allocated to, and transfers into, the
Guaranteed Account, plus
- - interest credited at the rate of 3% per year compounded annually, plus
- - any additional excess interest we may credit to guaranteed values, minus
- - any partial withdrawals, loans and transfers from the guaranteed values, minus
- - any surrender charge on partial withdrawals, loan interest, state premium
taxes, transfer fees, and the portion of the $30 annual contract
administration charge allocable to the Guaranteed Account.
No deductions are made from the Guaranteed Account for administrative expenses
or risk undertakings.
Other than pursuant to a DCA (scheduled transfer) or portfolio rebalancing
program, we may restrict transfers of your Guaranteed Account value during a
contract year to not more than 20% of that value as of the beginning of a
contract year (or $1,000, if greater). As provided by state law, we may defer
the payment of amounts to be withdrawn from the Guaranteed Account for up to six
months from the date we receive your written request for withdrawal.
OHIO NATIONAL LIFE EMPLOYEE DISCOUNT
We and our affiliated companies offer a credit on the purchase of contracts by
any of our employees, directors or retirees, or their spouse or the surviving
spouse of a deceased retiree, their minor children, or any of their children
ages 18 to 21 who is either (i) living in the purchaser's household or (ii) a
full-time college student being supported by the purchaser, or any of the
purchaser's minor grandchildren under the Uniform Gifts to Minors Act. This
credit counts as additional income under the contract. The amount of the credit
equals 3.2% of all purchase payments made in the first contract year and 5.5% of
purchase payments made in the second through sixth contract years. We credit the
Guaranteed Account in these amounts at the time the eligible person makes each
payment.
TEXAS STATE OPTIONAL RETIREMENT PROGRAM
Under the Texas State Optional Retirement Program (the "Program"), purchase
payments may be excluded from the gross income of state employees for federal
tax purposes to the extent that such purchase payments do not exceed the
exclusion allowance provided by the Code. The Attorney General of Texas has
interpreted the Program as prohibiting any participating state employee from
receiving the surrender value of a contract funding benefits under the Program
prior to termination of employment or the state employee's retirement, death or
total disability. Therefore, a participant in the Program may not make a
surrender or partial withdrawal until the first of these events occurs.
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<PAGE> 20
ANNUITY PERIOD
ANNUITY PAYOUT DATE
Annuity payments begin on the annuity payout date. You may select this date when
the contract is issued. It must be at least 30 days after the contract date. You
may change it from time to time so long as it is the first day of any month at
least 30 days after the date of such change. The contract restricts the annuity
payout date to not later than the first of the month following the annuitant's
90th birthday. This restriction may be modified by applicable state law or we
may agree to waive it.
The contracts include our guarantee (except for option 1(e) below) that we will
pay annuity payments for the lifetime of the annuitant (and any joint annuitant)
in accordance with the contract's annuity rates, no matter how long you live.
Other than in connection with annuity Option 1(e) described below, once annuity
payments begin, you may not surrender the contract for cash except that, upon
the death of the annuitant, the beneficiary may surrender the contract for the
commuted value of any remaining period-certain payments. You may make surrenders
and partial withdrawals from Option 1(e) at any time.
ANNUITY OPTIONS
You may elect one or more of the following annuity options. You may change the
election anytime before the annuity payout date.
<TABLE>
<S> <C>
Option 1(a): Life Annuity with installment payments for the lifetime of
the annuitant. (The contract has no more value after the
annuitant's death).
Option 1(b): Life Annuity with installment payments guaranteed for five
years and then continuing during the remaining lifetime of
the annuitant.
Option 1(c): Life Annuity with installment payments guaranteed for ten
years and then continuing during the remaining lifetime of
the annuitant.
Option 1(d): Installment Refund Life Annuity with payments guaranteed for
a period certain and then continuing during the remaining
lifetime of the annuitant. The number of period-certain
payments is equal to the amount applied under this option
divided by the amount of the first payment.
Option 1(e): Installment Refund Annuity with payments guaranteed for a
fixed number (up to thirty) of years. This option is
available for variable annuity payments only. (Although the
deduction for risk undertakings is taken from annuity unit
values, we have no mortality risk during the annuity payout
period under this option.)
Option 2(a): Joint & Survivor Life Annuity with installment payments
during the lifetime of the annuitant and then continuing
during the lifetime of a contingent annuitant. (The contract
has no more value after the second annuitant's death.)
Option 2(b): Joint & Survivor Life Annuity with installment payments
guaranteed for ten years and then continuing during the
remaining lifetime of the annuitant or a contingent
annuitant.
</TABLE>
We may agree to other settlement options.
Unless you direct otherwise, we will apply the contract value as of the annuity
payout date to provide annuity payments pro-rata from each Fund in the same
proportion as the contract values immediately before the annuity payout date.
If no election is in effect on the annuity payout date, we will apply contract
value under Option 1(c) with the beneficiary as payee for any remaining
period-certain installments payable after the death of the annuitant. The
Pension Reform Act of 1974 might require certain contracts to provide a Joint
and Survivor Annuity. If the contingent annuitant is not related to the
annuitant, Options 2(a) and 2(b) are available only if we agree.
The Internal Revenue Service has not ruled on the tax treatment of a commutable
variable annuity. If you select Option 1(e), it is possible that the IRS could
determine that the entire value of the annuity is fully taxable at the
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time you elect Option 1(e) or that variable annuity payments under this option
should not be taxed under the annuity rules (see Federal Tax Status). This could
result in your payments being fully taxable to you. Should the IRS so rule, we
may have to tax report up to the full value of the annuity as your taxable
income.
DETERMINATION OF AMOUNT OF THE FIRST VARIABLE ANNUITY PAYMENT
To determine the first variable annuity payment we apply the contract value for
each Fund in accordance with the contract's settlement option tables. The rates
in those tables depend upon the annuitant's (and any contingent annuitant's) age
and sex and the option selected. The annuitant's sex is not a factor in
contracts issued to plans sponsored by employers subject to Title VII of the
Civil Rights Act of 1964 or similar state statutes. We determine the value to be
applied at the end of a valuation period (selected by us and uniformly applied)
not more than 10 valuation periods before the annuity payout date.
If the amount that would be applied under an option is less than $5,000, we will
pay the contract value to the annuitant in a single sum. If the first periodic
payment under any option would be less than $25, we may change the frequency of
payments so that the first payment is at least $25.
ANNUITY UNITS AND VARIABLE PAYMENTS
After your first annuity payment, later variable annuity payments will vary to
reflect the investment performance of your Funds. The amount of each payment
depends on the number of your annuity units. To determine the number of annuity
units for each Fund, divide the dollar amount of the first annuity payment from
each Fund by the value that Fund's annuity unit. This number of annuity units
remains constant during the annuity payment period unless you transfer among
Funds.
The annuity unit value for each Fund was set at $10 for the valuation period
when the first variable annuity was calculated for these contracts. The annuity
unit value for each later valuation period equals the annuity unit value for the
immediately preceding valuation period multiplied by the net investment factor
(described on page 15) for such later valuation period and by a factor (0.999919
for a one-day valuation period) to neutralize the 3% assumed interest rate
discussed below.
The dollar amount of each later variable annuity payment equals your constant
number of annuity units for each Fund multiplied by the value of the annuity
unit for the valuation period.
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
stay level.
TRANSFERS DURING ANNUITY PAYOUT
After annuity payments have been made for at least 12 months, the annuitant can,
once each calendar quarter, change the Funds on which variable annuity payments
are based. On at least 30 days written notice our home office we will change
that portion of the periodic variable annuity payment as you direct to reflect
the investment results of different Funds. The annuity payment immediately after
a change will be the amount that would have been paid without the change. Later
payments will reflect the new mix of Funds.
OTHER CONTRACT PROVISIONS
ASSIGNMENT
Amounts payable in settlement of a contract may not be commuted, anticipated,
assigned or otherwise encumbered, or pledged as loan collateral to anyone other
than us. To the extent permitted by law, such amounts are not subject to any
legal process to pay any claims against an annuitant before annuity payments
begin. The
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owner of a tax-qualified contract may not, but the owner of a non-tax-qualified
contract may, collaterally assign the contract before the annuity payout date.
Ownership of a tax-qualified contract may not be transferred except to:
- - the annuitant,
- - a trustee or successor trustee of a pension or profit-sharing trust which is
qualified under Section 401 of the Code,
- - the employer of the annuitant provided that the contract after transfer is
maintained under the terms of a retirement plan qualified under Section 403(a)
of the Code for the benefit of the annuitant, or
- - as otherwise permitted by laws and regulations governing plans for which the
contract may be issued.
PERIODIC REPORTS
Before the annuity payout date, we will send you quarterly statements showing
the number of units credited to the contract by Fund and the value of each unit
as of the end of the last quarter. In addition, as long as the contract remains
in effect, we will forward any periodic Fund reports.
SUBSTITUTION FOR FUND SHARES
If investment in a Fund is no longer possible or we believe it is inappropriate
to the purposes of the contract, we may substitute one or more other funds.
Substitution may be made as to both existing investments and the investment of
future purchase payments. However, no substitution will be made until we receive
any necessary approval of the Securities and Exchange Commission. We may also
add other Funds as eligible investments of VAA.
CONTRACT OWNER INQUIRIES
Direct any questions to Ohio National Life, Variable Annuity Administration,
P.O. Box 2669, Cincinnati, Ohio 45201; telephone 1-800-366-6654 (8:30 a.m. to
4:30 p.m., Eastern time).
PERFORMANCE DATA
We may advertise performance data for the various Funds showing the percentage
change in unit values based on the performance of the applicable Fund over a
period of time (usually a calendar year). We determine the percentage change by
dividing the increase (or decrease) in value for the unit by the unit value at
the beginning of the period. This percent reflects the deduction of any
asset-based contract but does not reflect the deduction of any applicable
contract administration charge or surrender charge. The deduction of a contract
administration charge or surrender charge would reduce any percentage increase
or make greater any percentage decrease.
Advertising may also include average annual total return figures calculated as
shown in the Statement of Additional Information. The average annual total
return figures reflect the deduction of applicable contract administration
charges and surrender charges as well as applicable asset-based charges.
We may also distribute sales literature comparing separate account performance
to the Consumer Price Index or to such established market indexes as the Dow
Jones Industrial Average, the Standard & Poor's 500 Stock Index, IBC's Money
Fund Reports, Lehman Brothers Bond Indices, the Morgan Stanley Europe Australia
Far East Index, Morgan Stanley World Index, Russell 2000 Index, or other
variable annuity separate accounts or mutual funds with investment objectives
similar to those of the Funds.
FEDERAL TAX STATUS
The following discussion of federal income tax treatment of amounts received
under a variable annuity contract does not cover all situations or issues. It is
not intended as tax advice. Consult a qualified tax adviser to apply the law to
your circumstances. Tax laws can change, even for contracts that have already
been issued. Tax law
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revisions, with unfavorable consequences, could have retroactive effect on
previously issued contracts or on later voluntary transactions in previously
issued contracts.
We are taxed as a life insurance company under Subchapter L of the Internal
Revenue Code (the "Code"). Since the operations of VAA are a part of, and are
taxed with, our operations, VAA is not separately taxed as a "regulated
investment company" under Subchapter M of the Code.
As to tax-qualified contracts, the law does not now provide for payment of
federal income tax on dividend income or capital gains distributions from Fund
shares held in VAA or upon capital gains realized by VAA on redemption of Fund
shares. When a non-tax-qualified contract is issued in connection with a
deferred compensation plan or arrangement, all rights, discretions and powers
relative to the contract are vested in the employer and you must look only to
your employer for the payment of deferred compensation benefits. Generally, in
that case, an annuitant will have no "investment in the contract" and amounts
received by you from your employer under a deferred compensation arrangement
will be taxable in full as ordinary income in the years you receive the
payments.
The contracts are considered annuity contracts under Section 72 of the Code,
which generally provides for taxation of annuities. Under existing provisions of
the Code, any increase in the contract value is not taxable to you as the owner
or annuitant until you receive it, either in the form of annuity payments, as
contemplated by the contract, or in some other form of distribution. The owner
of a non-tax qualified contract must be a natural person for this purpose. With
certain exceptions, where the owner of a non-tax qualified contract is a
non-natural person (corporation, partnership or trust) any increase in the
accumulation value of the contract attributable to purchase payments made after
February 28, 1986 will be treated as ordinary income received or accrued by the
contract owner during the current tax year.
When annuity payments begin each payment is taxable under Section 72 of the Code
as ordinary income in the year of receipt if you have neither paid any portion
of the purchase payments nor previously been taxed on any portion of the
purchase payments. If any portion of the purchase payments has been paid from or
included in your taxable income, this aggregate amount will be considered your
"investment in the contract." You will be entitled to exclude from your taxable
income a portion of each annuity payment equal to your "investment in the
contract" divided by the period of expected annuity payments, determined by your
life expectancy and the form of annuity benefit. Once you recover your
"investment in the contract," all further annuity payments will be included in
your taxable income.
If you elect to receive the accumulated value in a single sum in lieu of annuity
payments, any amount you receive or withdraw in excess of the "investment in the
contract" will normally be taxed as ordinary income in the year received. A
partial withdrawal of contract values is taxable as income to the extent that
the accumulated value of the contract immediately before the payment exceeds the
"investment in the contract." Such a withdrawal is treated as a distribution of
earnings first and only second as a recovery of your "investment in the
contract." Any part of the value of the contract that you assign or pledge to
secure a loan will be taxed as if it had been a partial withdrawal and may be
subject to a penalty tax.
There is a penalty tax equal to 10% of any amount that must be included in gross
income for tax purposes. The penalty will not apply to a redemption that is:
- - received on or after the taxpayer reaches age 59 1/2;
- - made to a beneficiary on or after the death of the annuitant;
- - attributable to the taxpayer's becoming disabled;
- - made as a series of substantially equal periodic payments for the life of the
annuitant (or joint lives of the annuitant and beneficiary);
- - from a contract that is a qualified funding asset for purposes of a structured
settlement;
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- - made under an annuity contract that is purchased with a single premium and
with an annuity payout date not later than a year from the purchase of the
annuity;
- - incident to divorce, or
- - taken from an IRA for a qualified first-time home purchase (up to $10,000) or
qualified education expenses.
If you elect not to have withholding apply to an early withdrawal or if an
insufficient amount is withheld, you may be responsible for payment of estimated
tax. You may also incur penalties under the estimated tax rules if the
withholding and estimated tax payments are not sufficient. If you fail to
provide your taxpayer identification number, any payments under the contract
will automatically be subject to withholding.
TAX-DEFERRED ANNUITIES
Under the provisions of Section 403(b) of the Code, employees may exclude from
their gross income purchase payments made for annuity contracts purchased for
them by public educational institutions and certain tax-exempt organizations
which are described in Section 501(c)(3) of the Code. You may make this
exclusion to the extent that the aggregate purchase payments plus any other
amounts contributed to purchase the contract and toward benefits under qualified
retirement plans do not exceed your exclusion allowance as determined in
Sections 403(b) and 415 of the Code. Employee contributions are, however,
subject to social security (FICA) tax withholding. All amounts you receive under
a contract, either in the form of annuity payments or cash withdrawal, will be
taxed under Section 72 of the Code as ordinary income for the year received,
except for exclusion of any amounts representing "investment in the contract."
Under certain circumstances, amounts you receive may be used to make a "tax-free
rollover" into one of the types of individual retirement arrangements permitted
under the Code. Amounts you receive that are eligible for "tax-free rollover"
will be subject to an automatic 20% withholding unless you directly roll over
such amounts from the tax-deferred annuity to the individual retirement
arrangement.
With respect to earnings accrued and purchase payments made after December 31,
1988, for a salary reduction agreement under Section 403(b) of the Code,
distributions may be paid only when the employee:
- - attains age 59 1/2,
- - separates from the employer's service,
- - dies,
- - becomes disabled as defined in the Code, or
- - incurs a financial hardship as defined in the Code.
In the case of hardship, cash distributions may not exceed the amount of your
purchase payments. These restrictions do not affect your right to transfer
investments among the Funds and do not limit the availability of transfers
between tax-deferred annuities.
QUALIFIED PENSION OR PROFIT-SHARING PLANS
Under present law, purchase payments made by an employer or trustee, for a plan
or trust qualified under Section 401(a) or 403(a) of the Code, are generally
excludable from the employees gross income. Any purchase payments made by the
employee, or which are considered taxable income to the employee in the year
such payments are made, constitute an "investment in the contract" under Section
72 of the Code for the employee's annuity benefits. Salary reduction payments to
a profit sharing plan qualifying under Section 401(k) of the Code are generally
excludable from the employee's gross income.
The Code requires plans to prohibit any distribution to a plan participant prior
to age 59 1/2, except in the event of death, total disability or separation from
service (special rules apply for plan terminations). Distributions must begin no
later than April 1 of the calendar year following the year in which the
participant reaches age 70 1/2. Premature distribution of benefits or
contributions in excess of those permitted by the Code may result in certain
penalties under the Code.
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If an employee, or one or more of the beneficiaries, receives the total amounts
payable with respect to an employee within one taxable year after age 59 1/2 on
account of the employee's death or separation from service of the employer, any
amount received in excess of the employee's "investment in the contract" may be
taxed under special 5-year forward averaging rules. Five-year averaging will no
longer be available after 1999 except for certain grandfathered individuals. You
can elect to have that portion of a lump-sum distribution attributable to years
of participation prior to January 1, 1974 given capital gains treatment. The
percentage of pre-74 distribution subject to capital gains treatment decreases
as follows: 100%, 1987; 95%, 1988; 75%, 1989; 50%, 1990; and 25%, 1991. For tax
years 1992 and later no capital gains treatment is available (except that
taxpayers who were age 50 before 1986 may still elect capital gains treatment).
If you receive such a distribution you may be able to make a "tax-free rollover"
of the distribution less your "investment in the contract" into another
qualified plan in which you are a participant or into one of the types of
individual retirement arrangements permitted under the Code. Your surviving
spouse receiving such a distribution may be able to make a tax-free rollover to
one of the types of individual retirement arrangements permitted under the Code.
Amounts received that are eligible for "tax-free rollover" will be subject to an
automatic 20% withholding unless such amounts are directly rolled over to
another qualified plan or individual retirement arrangement.
INDIVIDUAL RETIREMENT ANNUITIES (IRA)
Section 408(b) of the Code provides that 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.
You may 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
is required on annuity payments. However, recipients of annuity payments are
allowed to elect not to have the tax withheld. This election may be revoked at
any time and withholding would begin after that. If you do not give us your
taxpayer identification number any payments under the contract will
automatically be subject to withholding.
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APPENDIX A
IRA DISCLOSURE STATEMENT
This statement is designed to help you understand the requirements of federal
tax law which apply to your individual retirement annuity (IRA), your Roth IRA,
your simplified employee pension IRA (SEPP-IRA) for employer contributions, your
Savings Incentive Match Plan for Employees (SIMPLE) IRA, or to one you purchase
for your spouse. You can obtain more information regarding your IRA either from
your sales representative or from any district office of the Internal Revenue
Service.
FREE LOOK PERIOD
The annuity contract offered by this prospectus gives you the opportunity to
return the contract for a full refund within 10 days after it is delivered. This
is a more liberal provision than is required in connection with IRAs. To
exercise this "free-look" provision write or call the address shown below:
The Ohio National Life Insurance Company
Variable Annuity Administration
P. O. Box 2669
Cincinnati, Ohio 45201
Telephone: 1-800-366-6654 -- 8:30 a.m. -- 4:30 p.m. (Eastern time zone)
ELIGIBILITY REQUIREMENTS
IRAs are intended for all persons with earned compensation whether or not they
are covered under other retirement programs. Additionally if you have a
non-working spouse (and you file a joint tax return), you may establish an IRA
on behalf of your non-working spouse. A working spouse may establish his or her
own IRA. A divorced spouse receiving taxable alimony (and no other income) may
also establish an IRA.
CONTRIBUTIONS AND DEDUCTIONS
Contributions to your IRA will be deductible if you are not an "active
participant" in an employer maintained qualified retirement plan or you have
Adjusted Gross Income which does not exceed the "applicable dollar limit". IRA
(or SEPP-IRA) contributions must be made by no later than the time you file your
income tax return for that year. For a single taxpayer, the applicable dollar
limitation is $30,000, with the amount of IRA contribution which may be deducted
reduced proportionately for Adjusted Gross Income between $30,000-$40,000. For
married couples filing jointly, the applicable dollar limitation is $50,000,
with the amount of IRA contribution which may be deducted reduced
proportionately for Adjusted Gross Income between $50,000-$60,000. There is no
deduction allowed for IRA contributions when Adjusted Gross Income reaches
$40,000 for individuals and $60,000 for married couples filing jointly.
Contributions made by your employer to your SEPP-IRA are excludable from your
gross income for tax purposes in the calendar year for which the amount is
contributed. Certain employees who participate in a SEPP-IRA will be entitled to
elect to have their employer make contributions to their SEPP-IRA on their
behalf or to receive the contributions in cash. If the employee elects to have
contributions made on the employee's behalf to the SEPP, those funds are not
treated as current taxable income to the employee. Elective deferrals under a
SEPP-IRA are subject to an inflation-adjusted limit which is $10,000 for 1998.
Salary-reduction SEPP-IRAs (also called "SARSEPs") are available only if at
least 50% of the employees elect to have amounts contributed to the SEPP-IRA and
if the employer has 25 or fewer employees at all times during the preceding
year. New salary-reduction SEPPs may not be established after 1996.
The IRA maximum annual contribution and your tax deduction is limited to the
lesser of: (1) $2,000 or (2) 100% of your earned compensation. Contributions in
excess of the deduction limits may be subject to penalty. See below.
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Under a SEPP-IRA agreement, the maximum annual contribution which your employer
may make on your behalf to a SEPP-IRA contract which is excludable from your
income is the lesser of 15% of your salary or $24,000. An employee who is a
participant in a SEPP-IRA agreement may make after-tax contributions to the
SEPP-IRA contract, subject to the contribution limits applicable to IRAs in
general. Those employee contributions will be deductible subject to the
deductibility rules described above.
The maximum tax deductible annual contribution that a divorced spouse with no
other income may make to an IRA is the lesser of (1) $2,000 or (2) 100% of
taxable alimony.
If you or your employer should contribute more than the maximum contribution
amount to your IRA or SEPP-IRA, the excess amount will be considered an "excess
contribution". You are permitted to withdraw an excess contribution from your
IRA or SEPP-IRA before your tax filing date without adverse tax consequences.
If, however, you fail to withdraw any such excess contribution before your tax
filing date, a 6% excise tax will be imposed on the excess for the tax year of
contribution.
Once the 6% excise tax has been imposed, an additional 6% penalty for the
following tax year can be avoided if the excess is (1) withdrawn before the end
of the following year, or (2) treated as a current contribution for the
following year. (See Premature Distributions for penalties imposed on withdrawal
when the contribution exceeds $2,000).
IRA FOR NON-WORKING SPOUSE
If you establish an IRA for yourself, you may also be eligible to establish an
IRA for your "non-working" spouse. In order to be eligible to establish such a
spousal IRA, you must file a joint tax return with your spouse and if your
non-working spouse has compensation, his/her compensation must be less than your
compensation for the year. Contributions of up to $2,000 each may be made to
your IRA and the spousal IRA if the combined compensation of you and your spouse
is at least equal to the amount contributed. If requirements for deductibility
(including income levels) are met, you will be able to deduct an amount equal to
the least of (i) the amount contributed to the IRA's; (ii) $4,000; or (iii) 100%
of your combined gross income.
Contributions in excess of the contribution limits may be subject to penalty.
See above under "Contributions and Deductions". If you contribute more than the
allowable amount, the excess portion will be considered an excess contribution.
The rules for correcting it are the same as discussed above for regular IRAs.
Other than the items mentioned in this section, all of the requirements
generally applicable to IRAs are also applicable to IRAs established for
non-working spouses.
ROLLOVER CONTRIBUTION
Once every year, you are permitted to withdraw any portion of the value of your
IRA or SEPP-IRA and reinvest it in another IRA or bond. Withdrawals may also be
made from other IRAs and contributed to this contract. This transfer of funds
from one IRA to another is called a "rollover" IRA. To qualify as a rollover
contribution, the entire portion of the withdrawal must be reinvested in another
IRA within 60 days after the date it is received. You will not be allowed a
tax-deduction for the amount of any rollover contribution.
A similar type of rollover to an IRA can be made with the proceeds of a
qualified distribution from a qualified retirement plan or tax-sheltered
annuity. Properly made, such a distribution will not be taxable until you
receive payments from the IRA created with it. Unless you were a self-employed
participant in the distributing plan, you may later 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.)
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PREMATURE DISTRIBUTIONS
At no time can your interest in your IRA or SEPP-IRA be forfeited. To insure
that your contributions will be used for your retirement, the federal tax law
does not permit you to use your IRA or SEPP-IRA as security for a loan.
Furthermore, as a general rule, you may not sell or assign your interest in your
IRA or SEPP-IRA to anyone. Use of an IRA (or SEPP-IRA) as security or assignment
of it to another will invalidate the entire annuity. It then will be includable
in your income in the year it is invalidated and will be subject to a 10%
penalty tax if you are not at least age 59 1/2 or totally disabled. (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 or 59 1/2 totally disabled unless you comply with
special rules requiring distributions to be made at least annually over your
life expectancy.
The 10% penalty tax does not apply to the withdrawal of an excess contribution
as long as the excess is withdrawn before the due date of your tax return.
Withdrawals of excess contributions after the due date of your tax return will
generally be subject to the 10% penalty unless the excess contribution results
from erroneous information from a plan trustee making an excess rollover
contribution or unless you are over age 59 1/2 or are disabled.
DISTRIBUTION AT RETIREMENT
Once you have attained age 59 1/2 (or have become totally disabled), you may
elect to receive a distribution of your IRA (or SEPP-IRA) regardless of when you
actually retire. You may elect to receive the distribution in either one sum or
under any one of the periodic payment options available under the contract. The
distributions from your IRA under any one of the periodic payment options or in
one sum will be treated as ordinary income as you receive them.
INADEQUATE DISTRIBUTIONS -- 50% TAX
Your IRA or SEPP-IRA is intended to provide retirement benefits over your
lifetime. Thus, federal law requires that you either (1) receive a lump-sum
distribution of your IRA by April 1 of the year following the year in which you
attain age 70 1/2 or (2) start to receive periodic payments by that date. If you
elect to receive periodic payments, those payments must be sufficient to pay out
the entire value of your IRA during your life expectancy (or over the joint life
expectancies of you and your spouse). If the payments are not sufficient to meet
these requirements, an excise tax of 50% will be imposed on the amount of any
underpayment.
DEATH BENEFITS
If you, (or your surviving spouse) die before receiving the entire value of your
IRA (or SEPP-IRA), the remaining interest must be distributed to your
beneficiary (or your surviving spouse's beneficiary) in one lump-sum within 5
years of death, or applied to purchase an immediate annuity for the beneficiary.
This annuity must be payable over the life expectancy of the beneficiary
beginning within one year after your or your spouse's death. If your spouse is
the designated beneficiary, he or she is treated as the owner of the IRA. If
minimum required distributions have begun, the entire amount must be distributed
at least as rapidly as if the owner had survived. A distribution of the balance
of your IRA upon your death will not be considered a gift for federal tax
purposes, but will be included in your gross estate for purposes of federal
estate taxes.
ROTH IRAS
Section 408A of the Code permits eligible individuals to contribute to a type of
IRA known as a "Roth IRA." Contributions may be made to a Roth IRA by taxpayers
with adjusted gross incomes of less than $160,000 for married individuals filing
jointly and less than $100,000 for single individuals. Married individuals
filing separately are not eligible to contribute to a Roth IRA. The maximum
amount of contributions allowable for any
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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 occurred before 1/1/99,
the portion of the amount includable in gross income must be included in income
ratably over the next four years beginning with the year in which the
transaction occurred. Provided a rollover contribution meets the requirements
for IRAs under Section 408(d)(3) of the Code, a rollover may be made from a Roth
IRA to another Roth IRA.
UNDER SOME CIRCUMSTANCES, IT MAY NOT BE ADVISABLE TO ROLL OVER, TRANSFER OR
CONVERT ALL OR PART OF A NON-ROTH IRA TO A ROTH IRA. PERSONS CONSIDERING A
ROLLOVER, TRANSFER OR CONVERSION SHOULD CONSULT THEIR OWN TAX ADVISOR.
"Qualified distributions" from a Roth IRA are excludable from gross income. A
"qualified distribution" is a distribution that satisfies two requirements: (1)
the distribution must be made (a) after the owner of the IRA attains age 59 1/2;
(b) after the owner's death; (c) due to the owner's disability; or (d) for a
qualified first time homebuyer distribution within the meaning of Section
72(t)(2)(F) of the Code; and (2) the distribution must be made in the year that
is at least five years after the first year for which a contribution was made to
any Roth IRA established for the owner or five years after a rollover, transfer
or conversion was made from a non-Roth IRA to a Roth IRA. Distributions from a
Roth IRA that are not qualified distributions will be treated as made first from
contributions and then from earnings, and taxed generally in the same manner as
distributions from a non-Roth IRA.
Distributions from a Roth IRA need not commence at age 70 1/2. However, if the
owner dies before the entire interest in a Roth IRA is distributed, any
remaining interest in the contract must be distributed by December 31 of the
calendar year containing the fifth anniversary of the owner's death subject to
certain exceptions.
PROTOTYPE STATUS
The Internal Revenue Service has been requested to review the format of your
SEPP, and to issue an opinion letter to Ohio National Life stating that your IRA
qualifies as a prototype SEPP.
REPORTING TO THE IRS
Whenever you are liable for one of the penalty taxes discussed above (6% for
excess contributions, 10% for premature distributions or 50% for 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.
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<PAGE> 31
ILLUSTRATION OF IRA FIXED ACCUMULATIONS
<TABLE>
<CAPTION>
AGE 60 AGE 65 AGE 70
GUARANTEED GUARANTEED GUARANTEED
SURRENDER VALUE SURRENDER VALUE SURRENDER VALUE
---------------------------- ---------------------------- ----------------------------
$2,000 $2,000 $2,000
$1,000 ONE TIME $1,000 ONE TIME $1,000 ONE TIME
CONTRACT ANNUAL LUMP SUM ANNUAL LUMP SUM ANNUAL LUMP SUM
ANNIVERSARY CONTRIBUTIONS CONTRIBUTION CONTRIBUTIONS CONTRIBUTION CONTRIBUTIONS CONTRIBUTION
----------- ------------- ------------ ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
1 $ 925.35 $2,027.45 $ 925.35 $2,027.45 $ 925.35 $2,027.45
2 1,878.46 2,055.72 1,878.46 2,055.72 1,878.46 2,055.72
3 2,870.01 2,083.76 2,870.01 2,083.76 2,870.01 2,083.76
4 3,901.83 2,111.91 3,901.83 2,111.91 3,901.83 2,111.91
5 4,975.45 2,140.16 4,975.45 2,104.16 4,975.45 2,140.16
6 6,102.14 2,166.24 6,102.14 2,166.24 6,102.14 2,166.24
7 7,276.08 2,194.24 7,276.08 2,194.24 7,276.08 2,194.24
8 8,497.12 2,222.31 8,497.12 2,222.31 8,497.12 2,222.31
9 9,757.56 2,253.98 9,757.56 2,253.98 9,757.56 2,253.98
10 11,055.81 2,286.60 11,055.81 2,286.60 11,055.81 2,286.60
15 18,155.17 2,464.97 18,155.17 2,464.97 18,155.17 2,464.97
20 26,385.27 2,671.76 26,385.27 2,671.76 26,385.27 2,671.76
25 35,926.22 2,911.48 35,926.22 2,911.48 35,926.22 2,911.48
30 46,986.79 3,189.39 46,986.79 3,189.39 46,986.79 3,189.39
35 59,809.02 3,511.55 59,809.02 3,511.55 59,809.02 3,511.55
40 74,673.50 3,885.03 74,673.50 3,885.03 74,673.50 3,885.03
45 91,905.51 4,318.00 91,905.51 4,318.00 91,905.51 4,318.00
50 111,882.13 4,819.92 111,882.13 4,819.92 111,882.13 4,819.92
55 135,040.51 5,401.79 135,040.51 5,401.79 135,040.51 5,401.79
60 161,887.42 6,076.34 161,887.42 6,076.34 161,887.42 6,076.34
65 193,010.34 6,858.32 193,010.34 6,858.32
70 229,090.34 7,764.85
</TABLE>
- - Guaranteed Interest Rate: 3.00% is applicable to each contract anniversary.
- - The Surrender Value is the Accumulation Values less the Contingent Deferred
Sales Charge.
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<TABLE>
<S> <C>
STATEMENT OF ADDITIONAL INFORMATION CONTENTS
Custodian
Independent Certified Public Accountants
Underwriter
Calculation of Money Market Subaccount Yield
Total Return
The Year 2000 Issue
Loans under Tax-Sheltered Annuities
Financial Statements for VAA and Ohio National Life
</TABLE>
