<PAGE> 1
OHIO NATIONAL VARIABLE ACCOUNT A
AND
OHIO NATIONAL VARIABLE ACCOUNT B
OF
THE OHIO NATIONAL LIFE INSURANCE COMPANY
One Financial Way
Montgomery, Ohio 45242
Telephone (513) 794-6514
STATEMENT OF ADDITIONAL INFORMATION
October 6, 1999
This Statement of Additional Information is not a prospectus. Read it along with
the prospectus for Ohio National Variable Accounts A and B ("VAA" and "VAB")
single purchase payment individual variable annuity contracts dated May 1, 1999.
To get a free copy of the prospectus for VAA and VAB, write or call us at the
above address.
Table of Contents
<TABLE>
<CAPTION>
<S> <C>
Custodian ......................................................................... 2
Independent Certified Public Accountants .......................................... 2
Underwriter ....................................................................... 2
Calculation of Money Market Yield ................................................. 3
Total Return ...................................................................... 3
The Year 2000 Issue ............................................................... 4
Loans Under Tax-sheltered Annuities ............................................... 4
Financial Statements .............................................................. 5
</TABLE>
"TOP PLUS"
<PAGE> 2
CUSTODIAN
We have a custody agreement with Firstar Bank, N.A., Cincinnati, Ohio, under
which Firstar holds custody of VAA's and VAB's assets. The agreement provides
for Firstar to purchase Fund shares at their net asset value determined as of
the end of the valuation period during which we receive the deposit. At our
instruction, Firstar redeems the Fund shares held by VAA and VAB at their net
asset value determined as of the end of the valuation period during which we
receive or make a redemption request. In addition, Firstar keeps appropriate
records of all of VAA's and VAB's transactions in Fund shares.
The custody agreement requires Firstar to always have aggregate capital, surplus
and undivided profit of not less than $2 million. It does not allow Firstar to
resign until (a) a successor custodian bank having the above qualifications has
agreed to serve as custodian, or (b) VAA and VAB have been completely liquidated
and the liquidation proceeds properly distributed. Subject to these conditions,
the custody agreement may be terminated by either us or Firstar upon sixty days
written notice. We pay Firstar a fee for its services as custodian.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The financial statements of VAA and VAB as of December 31, 1998 and for the
periods indicated and our consolidated financial statements as of December 31,
1998 and 1997 and for the periods indicated have been included in reliance upon
the report of KPMG LLP, independent certified public accountants, also appearing
herein, and upon that firm's authority as experts in accounting and auditing.
UNDERWRITER
We offer the contracts continuously. Before May 1, 1997, The O. N. Equity Sales
Company ("ONESCO"), a wholly-owned subsidiary of ours, was the principal
underwriter of the contracts. Since May 1, 1997, the principal underwriter has
been Ohio National Equities, Inc. ("ONEQ"), another wholly-owned subsidiary of
ours. The aggregate amount of commissions paid to ONESCO and ONEQ for contracts
issued by VAA, and the amounts retained by ONESCO and ONEQ, for each of the last
three years have been:
<TABLE>
<CAPTION>
ONESCO ONEQ ONESCO ONEQ
Aggregate Aggregate Retained Retained
Year Commissions Commissions Commissions Commissions
- ---- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1998 None $6,658,441 None $827,720
1997 $ 903,146 2,997,646 $ 89,572 297,299
1996 2,461,096 None 239,957 None
</TABLE>
For contracts issued by VAB, those amounts have been:
2
<PAGE> 3
<TABLE>
<CAPTION>
ONESCO ONEQ ONESCO ONEQ
Aggregate Aggregate Retained Retained
Year Commissions Commissions Commissions Commissions
- ---- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1998 None $ 934,575 None $116,178
1997 $ 330,599 1,097,297 $ 32,788 108,827
1996 1,691,331 None 164,905 None
</TABLE>
CALCULATION OF MONEY MARKET YIELD
The annualized current yield of the Money Market subaccount for the seven days
ended on December 31, 1998, was 4.29%. This was calculated by determining the
net change, exclusive of capital changes, in the value of a hypothetical
pre-existing account having a balance of one Money Market accumulation unit at
the beginning of the seven-day period, dividing the net change in value by the
beginning value to obtain the seven-day return, and multiplying the difference
by 365/7. The result is rounded to the nearest hundredth of one percent.
TOTAL RETURN
The average annual compounded rate of return for a contract for each subaccount
over a given period is found by equating the initial amount invested to the
ending redeemable value using the following formula:
n
P(1 + T) = ERV
where: P = a hypothetical initial payment of $1,000,
T = the average annual total return,
n = the number of years, and
ERV = the ending redeemable value of a hypothetical $1,000
beginning-of-period payment at the end of the period (or
fractional portion thereof).
We will up-date standardized total return data based upon Fund performance in
the subaccounts within 30 days after each calendar quarter.
In addition, we may present non-standardized total return data, using the above
formula but based upon Fund performance before the date we first offered this
series of contracts (October 7, 1993). This will be presented as if the same
charges and deductions applying to these contracts had been in effect from the
inception of each Fund.
The average annual non-standardized total returns for the contracts from the
inception of each Fund and for the one-, five- and ten-year periods ending on
December 31, 1998 (assuming surrender of the contract then) are as follows:
<TABLE>
<CAPTION>
One Five Ten From Inception
Year Years Years Inception Date
---- ----- ----- --------- ----
<S> <C> <C> <C> <C> <C>
Equity 4.78% 12.51% 11.65% 9.89% 10-06-69
</TABLE>
3
<PAGE> 4
<TABLE>
<S> <C> <C> <C> <C> <C>
Money Market 4.45% 4.17% 4.42% 6.24% 03-20-80
Bond 4.28% 5.45% 7.18% 7.51% 11-02-82
Omni 3.60% 10.75% 10.50% 10.51% 09-10-84
International 2.96% 7.06% N/A 10.35% 04-30-93
Capital Appreciation 4.97% N/A N/A 12.52% 05-01-94
Small Cap 9.59% N/A N/A 18.19% 05-01-94
International Small Company 2.60% N/A N/A 8.64% 03-31-95
Aggressive Growth 6.88% N/A N/A 11.44% 03-31-95
Core Growth 7.85% N/A N/A 1.79% 01-03-97
Growth & Income 6.13% N/A N/A 43.66% 01-03-97
S&P 500 Index 28.84% N/A N/A 29.82% 01-03-97
Social Awareness (23.10%) N/A N/A (2.16%) 01-03-97
</TABLE>
THE YEAR 2000 ISSUE
We believe we have succeeded in remedying the "Year 2000" problem for all
mission critical computer systems and applications. Conversion testing and
implementation for legacy systems were completed by December 31, 1998, and Year
2000 compliant annuity processing system conversions were installed and testing
completed on June 20, 1999. Peripheral personal computer systems have also been
up-graded and tested for Year 2000 implementation. While Ohio National Fund and
its investment adviser have been assured by suppliers of financial services
(including the custodians, the transfer agent and the accounting agent) that
their systems either are already compliant or will be so in sufficient time,
internal auditors are independently testing those systems to verify their
compliance. We are also developing contingency plans to be prepared for the
possibility that one or more service providers might not be compliant. If we,
Ohio National Fund, its investment adviser or one of our service suppliers fails
to achieve timely and complete compliance, it could materially impair our
ability to conduct our business, including the ability to accurately and timely
value interests in the contracts.
LOANS UNDER TAX-SHELTERED ANNUITIES
Contracts issued as tax-sheltered annuities under plans qualifying under Section
403(b) of the Code, and allowing for voluntary contributions only, are eligible
for loans secured by a security interest in the contract. A loan must be for at
least $1,000 and may only be made from the Guaranteed Account. The loan amount
is limited by the maximum loan formula described in your contract.
We charge an annual effective rate of interest up to 7%. You must generally
repay your loans within 5 years (or 20 years if you use the loan to purchase
your primary home).
The amount of the death benefit, the amount payable on a full surrender and the
amount that will be applied to provide an annuity will all be reduced by your
loan balance, including accrued interest.
4
<PAGE> 5
OHIO NATIONAL VARIABLE ACCOUNT B
INDEPENDENT AUDITORS' REPORT
The Board of Directors of
The Ohio National Life Insurance Company
and Contract Owners of
Ohio National Variable Account B:
We have audited the accompanying statements of assets and contract owners'
equity of Ohio National Variable Account B (comprised of the Equity, Money
Market, Bond, Omni, International, Capital Appreciation, Small Cap, Global
Contrarian, Aggressive Growth, S&P 500 Index, Social Awareness, Core Growth and
Growth & Income subaccounts) as of December 31, 1998, and the related statements
of operations and changes in contract owners' equity for each of the periods
indicated herein. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1998, by correspondence with
the transfer agent of the underlying mutual funds. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Ohio National Variable Account
B as of December 31, 1998, and the results of its operations and its changes in
contract owners' equity for each of the years indicated herein in conformity
with generally accepted accounting principles.
KPMG LLP
Cincinnati, Ohio
February 5, 1999
5
<PAGE> 6
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OHIO NATIONAL VARIABLE ACCOUNT B December 31, 1998
STATEMENTS OF ASSETS AND CONTRACT OWNERS' EQUITY
<TABLE>
<CAPTION>
MONEY
EQUITY MARKET BOND OMNI INTERNATIONAL
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ---------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Assets -- Investments at market value
(note 2)....................................... $51,583,362 $4,310,280 $5,068,531 $40,132,755 $28,122,101
=========== ========== ========== =========== ===========
Contract owners' equity
Contracts in accumulation period (note 3).... $50,540,348 $3,390,678 $5,031,944 $39,612,247 $28,122,101
Annuity reserves for contact in payment
period....................................... 1,043,014 919,602 36,587 520,508 0
----------- ---------- ---------- ----------- -----------
Total contract owners' equity.................. $51,583,362 $4,310,280 $5,068,531 $40,132,755 $28,122,101
=========== ========== ========== =========== ===========
<CAPTION>
CAPITAL
APPRECIATION SMALL CAP
SUBACCOUNT SUBACCOUNT
------------ ----------
<S> <C> <C>
Assets -- Investments at market value
(note 2)....................................... $11,942,107 $9,040,394
=========== ==========
Contract owners' equity
Contracts in accumulation period (note 3).... $11,942,107 $9,040,394
Annuity reserves for contact in payment
period....................................... 0 0
----------- ----------
Total contract owners' equity.................. $11,942,107 $9,040,394
=========== ==========
</TABLE>
<TABLE>
<CAPTION>
GLOBAL AGGRESSIVE CORE GROWTH & S&P 500
CONTRARIAN GROWTH GROWTH INCOME INDEX
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Assets -- Investments at market value (note 2).......... $4,309,810 $2,966,742 $1,722,649 $7,103,497 $10,944,062
========== ========== ========== ========== ===========
Contract owners' equity
Contracts in accumulation period (note 3)............. $4,309,810 $2,966,742 $1,722,649 $7,086,385 $10,734,736
Annuity reserves for contact in payment period........ 0 0 0 17,112 209,326
---------- ---------- ---------- ---------- -----------
Total contract owners' equity........................... $4,309,810 $2,966,742 $1,722,649 $7,103,497 $10,944,062
========== ========== ========== ========== ===========
<CAPTION>
SOCIAL
AWARENESS
SUBACCOUNT
----------
<S> <C>
Assets -- Investments at market value (note 2).......... $568,915
========
Contract owners' equity
Contracts in accumulation period (note 3)............. $568,915
Annuity reserves for contact in payment period........ 0
--------
Total contract owners' equity........................... $568,915
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 7
OHIO NATIONAL VARIABLE ACCOUNT B
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
EQUITY MONEY MARKET BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT
--------------------------- ------------------------- -------------------------
1998 1997 1998 1997 1998 1997
----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment activity:
Reinvested dividends................ $ 643,736 $ 854,845 $ 201,970 $ 167,169 $ 289,292 $ 304,389
Risk & administrative expense (note
4)............................. (546,470) (532,799) (42,082) (59,121) (46,515) (37,277)
----------- ----------- ---------- ---------- ---------- ----------
Net investment activity........ 97,266 322,046 159,888 108,048 242,777 267,112
----------- ----------- ---------- ---------- ---------- ----------
Realized & Unrealized gain (loss) on
investments:
Reinvested capital gains......... 967,611 2,703,014 0 0 0 0
Realized gain (loss)............. 1,549,381 679,349 0 (4,268) 17,889 9,585
Unrealized gain (loss)........... (381,417) 3,497,534 0 0 (89,689) 9,839
----------- ----------- ---------- ---------- ---------- ----------
Net gain (loss) on
investments................. 2,135,575 6,879,897 0 (4,268) (71,800) 19,424
----------- ----------- ---------- ---------- ---------- ----------
Net increase in contract
owners' equity from
operations................ 2,232,841 7,201,943 159,888 103,780 170,977 286,536
----------- ----------- ---------- ---------- ---------- ----------
Equity transactions:
Sales:
Contract purchase payments....... 2,100,044 4,371,038 2,147,915 1,565,251 935,872 603,328
Transfers from fixed & other
subaccounts.................... 2,435,432 2,566,242 2,619,746 2,417,431 1,709,892 269,253
----------- ----------- ---------- ---------- ---------- ----------
4,535,476 6,937,280 4,767,661 3,982,682 2,645,764 872,581
----------- ----------- ---------- ---------- ---------- ----------
Redemptions:
Withdrawals & surrenders (note
5)............................. 3,364,861 2,215,297 954,565 80,128 290,032 388,407
Annuity & death benefit
payments....................... 1,078,632 855,124 83,578 81,867 48,171 94,120
Transfers to fixed & other
subaccounts.................... 1,941,051 1,819,043 2,875,688 3,918,605 1,298,182 411,379
----------- ----------- ---------- ---------- ---------- ----------
6,384,544 4,889,464 3,913,831 4,080,600 1,636,385 893,906
----------- ----------- ---------- ---------- ---------- ----------
Net equity transactions..... (1,849,068) 2,047,816 853,830 (97,918) 1,009,379 (21,325)
----------- ----------- ---------- ---------- ---------- ----------
Net change in contract
owners' equity......... 383,773 9,249,759 1,013,718 5,862 1,180,356 265,211
Contract owners' equity:
Beginning of period................. 51,199,589 41,949,830 3,296,562 3,290,700 3,888,175 3,622,964
----------- ----------- ---------- ---------- ---------- ----------
End of period....................... $51,583,362 $51,199,589 $4,310,280 $3,296,562 $5,068,531 $3,888,175
=========== =========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE> 8
OHIO NATIONAL VARIABLE ACCOUNT B
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
OMNI INTERNATIONAL CAPITAL APPRECIATION
SUBACCOUNT SUBACCOUNT SUBACCOUNT
--------------------------- --------------------------- ---------------------------
1998 1997 1998 1997 1998 1997
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment activity:
Reinvested dividends............ $ 1,083,391 $ 1,160,217 $ 1,156,082 $ 2,244,641 $ 290,823 $ 322,567
Risk & administrative expense
(note 4)..................... (427,281) (366,772) (309,250) (347,234) (117,381) (92,618)
----------- ----------- ----------- ----------- ----------- -----------
Net investment activity.... 656,110 793,445 846,832 1,897,407 173,442 229,949
----------- ----------- ----------- ----------- ----------- -----------
Realized & Unrealized gain
(loss) on investments:
Reinvested capital gains..... 6,749 1,890,389 1,161,180 3,070,013 911,853 582,279
Realized gain (loss)......... 1,039,662 336,734 (77,521) 190,288 111,752 84,309
Unrealized gain (loss)....... (397,565) 2,383,188 (927,238) (4,866,712) (664,732) 343,154
----------- ----------- ----------- ----------- ----------- -----------
Net gain (loss) on
investments............. 648,846 4,610,311 156,421 (1,606,411) 358,873 1,009,742
----------- ----------- ----------- ----------- ----------- -----------
Net increase in contract
owners' equity from
operations............ 1,304,956 5,403,756 1,003,253 290,996 532,315 1,239,691
----------- ----------- ----------- ----------- ----------- -----------
Equity transactions:
Sales:
Contract purchase payments... 2,747,209 5,250,592 1,100,574 5,276,398 1,163,240 2,516,544
Transfers from fixed & other
subaccounts................ 2,178,355 2,044,821 564,994 2,309,643 665,066 914,954
----------- ----------- ----------- ----------- ----------- -----------
4,925,564 7,295,413 1,665,568 7,586,041 1,828,306 3,431,498
----------- ----------- ----------- ----------- ----------- -----------
Redemptions:
Withdrawals & surrenders
(note 5)................... 3,192,559 1,339,733 1,562,756 1,642,899 231,140 331,493
Annuity & death benefit
payments................... 780,199 755,570 255,710 346,407 129,216 163,057
Transfers to fixed & other
subaccounts................ 1,931,656 1,143,175 5,087,977 3,450,498 1,128,899 720,874
----------- ----------- ----------- ----------- ----------- -----------
5,904,414 3,238,478 6,906,443 5,439,804 1,489,255 1,215,424
----------- ----------- ----------- ----------- ----------- -----------
Net equity transactions.... (978,850) 4,056,935 (5,240,875) 2,146,237 339,051 2,216,074
----------- ----------- ----------- ----------- ----------- -----------
Net change in contract
owners' equity........ 326,106 9,460,691 (4,237,622) 2,437,233 871,366 3,455,765
Contract owners' equity:
Beginning of period............. 39,806,649 30,345,958 32,359,723 29,922,490 11,070,741 7,614,976
----------- ----------- ----------- ----------- ----------- -----------
End of period................... $40,132,755 $39,806,649 $28,122,101 $32,359,723 $11,942,107 $11,070,741
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE> 9
OHIO NATIONAL VARIABLE ACCOUNT B
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
SMALL CAP GLOBAL CONTRARIAN AGGRESSIVE GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------------- ------------------------- -------------------------
1998 1997 1998 1997 1998 1997
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment activity:
Reinvested dividends.................. $ 0 $ 0 $ 123,763 $ 156,117 $ 0 $ 24,960
Risk & administrative expense
(note 4)........................... (76,080) (67,341) (41,755) (35,068) (27,354) (22,884)
---------- ---------- ---------- ---------- ---------- ----------
Net investment activity.......... (76,080) (67,341) 82,008 121,049 (27,354) 2,076
---------- ---------- ---------- ---------- ---------- ----------
Realized & Unrealized gain (loss) on
investments:
Reinvested capital gains........... 125 340,215 380,757 225,190 200,891 9,445
Realized gain (loss)............... 47,477 224,164 7,587 16,821 23,950 (3,600)
Unrealized gain (loss)............. 827,495 15,964 (376,963) (21,916) (14,822) 251,639
---------- ---------- ---------- ---------- ---------- ----------
Net gain (loss) on investments... 875,097 580,343 11,381 220,095 210,019 257,484
---------- ---------- ---------- ---------- ---------- ----------
Net increase in contract
owners' equity from
operations.................. 799,017 513,002 93,389 341,144 182,665 259,560
---------- ---------- ---------- ---------- ---------- ----------
Equity transactions:
Sales:
Contract purchase payments......... 702,881 2,017,304 233,524 1,251,164 365,436 918,978
Transfers from fixed & other
subaccounts...................... 700,063 1,420,443 344,948 170,573 146,582 487,071
---------- ---------- ---------- ---------- ---------- ----------
1,402,944 3,437,747 578,472 1,421,737 512,018 1,406,049
---------- ---------- ---------- ---------- ---------- ----------
Redemptions:
Withdrawals & surrenders
(note 5)......................... 193,335 199,300 77,787 73,776 101,645 156,262
Annuity & death benefit payments... 70,497 114,225 7,840 10,451 18,453 18,510
Transfers to fixed & other
subaccounts...................... 878,703 1,533,908 478,743 305,705 434,257 401,846
---------- ---------- ---------- ---------- ---------- ----------
1,142,535 1,847,433 564,370 389,932 554,355 576,618
---------- ---------- ---------- ---------- ---------- ----------
Net equity transactions....... 260,409 1,590,314 14,102 1,031,805 (42,337) 829,431
---------- ---------- ---------- ---------- ---------- ----------
Net change in contract
owners' equity........... 1,059,426 2,103,316 107,491 1,372,949 140,328 1,088,991
Contract owners' equity:
Beginning of period................... 7,980,968 5,877,652 4,202,319 2,829,370 2,826,414 1,737,423
---------- ---------- ---------- ---------- ---------- ----------
End of period......................... $9,040,394 $7,980,968 $4,309,810 $4,202,319 $2,966,742 $2,826,414
========== ========== ========== ========== ========== ==========
</TABLE>
- ---------------
(a) Period from January 3, 1997, date of commencement of operations.
The accompanying notes are an integral part of these financial statements.
9
<PAGE> 10
OHIO NATIONAL VARIABLE ACCOUNT B
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
CORE GROWTH GROWTH & INCOME S&P 500 INDEX
SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------------- ------------------------- --------------------------
1998 1997(a) 1998 1997(a) 1998 1997(a)
---------- ---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment activity:
Reinvested dividends............... $ 0 $ 677 $ 60,145 $ 17,879 $ 187,262 $ 80,558
Risk & administrative expense
(note 4)........................ (16,008) (12,251) (58,966) (15,025) (65,983) (13,199)
---------- ---------- ---------- ---------- ----------- ----------
Net investment activity....... (16,008) (11,574) 1,179 2,854 121,279 67,359
---------- ---------- ---------- ---------- ----------- ----------
Realized & Unrealized gain (loss)
on investments:
Reinvested capital gains........ 0 0 0 188,226 457,759 214,773
Realized gain (loss)............ 4,074 (1,492) (31,303) 15,141 94,319 18,269
Unrealized gain (loss).......... 147,453 (10,224) 286,998 252,549 1,128,994 (1,444)
---------- ---------- ---------- ---------- ----------- ----------
Net gain (loss) on
investments.............. 151,527 (11,716) 255,695 455,916 1,681,072 231,598
---------- ---------- ---------- ---------- ----------- ----------
Net increase (decrease)
in contract owners'
equity from
operations............ 135,519 (23,290) 256,874 458,770 1,802,351 298,957
---------- ---------- ---------- ---------- ----------- ----------
Equity transactions:
Sales:
Contract purchase payments...... 315,440 1,316,710 1,767,790 2,115,562 3,550,150 1,870,709
Transfers from fixed & other
subaccounts................... 320,848 1,012,047 2,890,406 1,542,997 4,851,282 993,810
---------- ---------- ---------- ---------- ----------- ----------
636,288 2,328,757 4,658,196 3,658,559 8,401,432 2,864,519
---------- ---------- ---------- ---------- ----------- ----------
Redemptions:
Withdrawals & surrenders
(note 5)...................... 70,806 35,495 463,117 31,579 616,453 42,369
Annuity & death benefit
payments...................... 3,721 4,808 68,077 7,519 60,889 1,497
Transfers to fixed & other
subaccounts................... 581,882 657,913 1,167,686 190,924 1,458,064 243,925
---------- ---------- ---------- ---------- ----------- ----------
656,409 698,216 1,698,880 230,022 2,135,406 287,791
---------- ---------- ---------- ---------- ----------- ----------
Net equity transactions....... (20,121) 1,630,541 2,959,316 3,428,537 6,266,026 2,576,728
---------- ---------- ---------- ---------- ----------- ----------
Net change in contract
owners' equity........... 115,398 1,607,251 3,216,190 3,887,307 8,068,377 2,875,685
Contract owners' equity:
Beginning of period................ 1,607,251 0 3,887,307 0 2,875,685 0
---------- ---------- ---------- ---------- ----------- ----------
End of period...................... $1,722,649 $1,607,251 $7,103,497 $3,887,307 $10,944,062 $2,875,685
========== ========== ========== ========== =========== ==========
<CAPTION>
SOCIAL AWARENESS
SUBACCOUNT
---------------------
1998 1997(a)
-------- --------
<S> <C> <C>
Investment activity:
Reinvested dividends............... $ 3,337 $ 1,543
Risk & administrative expense
(note 4)........................ (6,311) (893)
-------- --------
Net investment activity....... (2,974) 650
-------- --------
Realized & Unrealized gain (loss)
on investments:
Reinvested capital gains........ 0 41,906
Realized gain (loss)............ (36,029) 3,569
Unrealized gain (loss).......... (166,905) (48,651)
-------- --------
Net gain (loss) on
investments.............. (202,934) (3,176)
-------- --------
Net increase (decrease)
in contract owners'
equity from
operations............ (205,908) (2,526)
-------- --------
Equity transactions:
Sales:
Contract purchase payments...... 236,842 209,214
Transfers from fixed & other
subaccounts................... 241,588 371,231
-------- --------
478,430 580,445
-------- --------
Redemptions:
Withdrawals & surrenders (note
5)............................ 13,191 926
Annuity & death benefit
payments...................... 4,845 903
Transfers to fixed & other
subaccounts................... 196,683 64,978
-------- --------
214,719 66,807
-------- --------
Net equity transactions....... 263,711 513,638
-------- --------
Net change in contract
owners' equity........... 57,803 511,112
Contract owners' equity:
Beginning of period................ 511,112 0
-------- --------
End of period...................... $568,915 $511,112
======== ========
</TABLE>
- ---------------
(a) Period from January 3, 1997, date of commencement of operations.
The accompanying notes are an integral part of these financial statements.
10
<PAGE> 11
OHIO NATIONAL VARIABLE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Ohio National Variable Account B (the Account) is a separate account of The
Ohio National Life Insurance Company (ONLIC) and all obligations arising
under variable annuity contracts are general corporate obligations of ONLIC.
The account has been registered as a unit investment trust under the
Investment Company Act of 1940.
Assets of the Account are invested in portfolio shares of Ohio National
Fund, Inc. (The Fund), a diversified open-end management investment company.
The Fund's investments are subject to varying degrees of market, interest
and financial risks; the issuers' abilities to meet certain obligations may
be affected by economic developments in their respective industries.
Annuity reserves are computed for currently payable contracts according to
the Progressive Annuity Mortality Table. The assumed interest rate is 3.5 or
4.0 percent depending on the contract selected by the annuitant. Charges to
annuity reserves for adverse mortality and express risk experience are
reimbursed to the Account by ONLIC. Such amounts are included in risk and
administrative expenses.
Investments are valued at the net asset value of fund shares held at
December 31, 1998. Share transactions are recorded on the trade date. Income
and capital gain distributions are recorded on the ex-dividend date. Net
realized capital gains and losses are determined on the basis of average
cost.
ONLIC performs investment advisory services on behalf of the Ohio National
Fund, Inc. in which the Account invests. For these services, the Company
receives fees from the mutual funds. These fees are paid to an affiliate of
the Company.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(2) INVESTMENTS
At December 31, 1998 the aggregate cost and number of shares of Ohio
National Fund, Inc. owned by the respective subaccounts were:
<TABLE>
<CAPTION>
MONEY CAPITAL
EQUITY MARKET BOND OMNI INTERNATIONAL APPRECIATION SMALL CAP
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ----------- ----------- ----------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Aggregate Cost............... $36,685,824 $4,310,280 $5,083,482 $31,492,050 $30,607,967 $11,568,613 $7,391,027
Number of Shares............. 1,420,481 431,028 480,156 1,872,213 2,187,809 924,598 436,776
</TABLE>
<TABLE>
<CAPTION>
GLOBAL AGGRESSIVE CORE GROWTH & S&P 500 SOCIAL
CONTRARIAN GROWTH GROWTH INCOME INDEX AWARENESS
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Aggregate Cost.................. $4,624,478 $2,858,121 $1,585,420 $6,563,950 $9,816,512 $ 784,470
Number of Shares................ 400,838 266,099 163,470 521,128 768,868 64,657
</TABLE>
(3) CONTRACTS IN ACCUMULATION PERIOD
At December 31, 1998 the accumulation units and value per unit of the
respective subaccounts and products were:
<TABLE>
<CAPTION>
ACCUMULATION UNITS VALUE PER UNIT VALUE
------------------ -------------- ----------
<S> <C> <C> <C>
EQUITY SUBACCOUNT
Combination............................................... 17,170.8220 147.545413 $2,533,476
Back Load................................................. 1,141.0993 75.263201 $ 85,883
</TABLE>
11
<PAGE> 12
OHIO NATIONAL VARIABLE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
ACCUMULATION UNITS VALUE PER UNIT VALUE
------------------ -------------- -----------
<S> <C> <C> <C>
EQUITY SUBACCOUNT (CONT.)
Top I.................................................. 23,800.6431 65.316911 $ 1,554,585
Top Tradition.......................................... 670,583.5364 55.144099 $36,958,607
Top Plus............................................... 509,665.1861 18.458779 $ 9,407,797
MONEY MARKET SUBACCOUNT
VIA.................................................... 8,367.7186 28.352494 $ 237,245
Top I.................................................. 4,310.5954 21.499933 $ 92,678
Top Tradition.......................................... 54,060.1400 19.267463 $ 1,041,602
Top Plus............................................... 163,872.3812 12.321496 $ 2,019,153
BOND SUBACCOUNT
Top I.................................................. 2,868.5673 31.215693 $ 89,544
Top Tradition.......................................... 122,869.5862 26.141439 $ 3,211,988
Top Plus............................................... 133,932.9534 12.919987 $ 1,730,412
OMNI SUBACCOUNT
Top I.................................................. 24,611.1329 40.545640 $ 997,875
Top Tradition.......................................... 724,292.1261 40.290085 $29,181,791
Top Plus............................................... 558,182.7632 16.898733 $ 9,432,581
INTERNATIONAL SUBACCOUNT
Top I.................................................. 12,487.7461 17.278635 $ 215,771
Top Tradition.......................................... 1,021,071.6006 17.278635 $17,642,724
Top Plus............................................... 673,378.6446 15.241954 $10,263,606
CAPITAL APPRECIATION SUBACCOUNT
Top I.................................................. 1,541.6450 15.538473 $ 23,955
Top Tradition.......................................... 366,129.8518 15.538473 $ 5,689,099
Top Plus............................................... 358,863.4713 17.357724 $ 6,229,053
SMALL CAP SUBACCOUNT
Top Tradition.......................................... 236,230.7216 16.668731 $ 3,937,667
Top Plus............................................... 233,679.7599 21.836411 $ 5,102,727
GLOBAL CONTRARIAN SUBACCOUNT
Top Tradition.......................................... 111,351.6484 12.697451 $ 1,413,882
Top Plus............................................... 212,243.8704 13.644341 $ 2,895,928
AGGRESSIVE GROWTH SUBACCOUNT
Top Tradition.......................................... 104,678.5702 12.422862 $ 1,300,407
Top Plus............................................... 111,020.5326 15.009251 $ 1,666,335
CORE GROWTH SUBACCOUNT
Top Tradition.......................................... 97,692.3085 10.318290 $ 1,008,017
Top Plus............................................... 68,986.1086 10.359066 $ 714,632
GROWTH & INCOME SUBACCOUNT
Top Tradition.......................................... 270,509.7143 14.309421 $ 3,870,837
Top Plus............................................... 223,831.9904 14.365899 $ 3,215,548
S&P 500 INDEX SUBACCOUNT
Top Tradition.......................................... 342,015.7503 16.757375 $ 5,731,286
Top Plus............................................... 297,408.9657 16.823468 $ 5,003,450
SOCIAL AWARENESS SUBACCOUNT
Top Tradition.......................................... 35,227.9645 9.537309 $ 335,980
Top Plus............................................... 24,327.4002 9.574986 $ 232,935
</TABLE>
12
<PAGE> 13
OHIO NATIONAL VARIABLE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(4) RISK AND ADMINISTRATIVE EXPENSE
ONLIC charges the Account's assets at the end of each day, equal to 0.25% on
an annual basis, of the contract value for administrative expenses, based on
premiums established at the time the contracts are issued.
Although variable annuity payments differ according to the investment
performance of the Accounts, they are not affected by mortality or expense
experience because ONLIC assumes the expense risk and the mortality risk
under the contracts. ONLIC charges the Accounts' assets for assuming those
risks, based on the contract value at a rate presently ranging from 0.65% to
1.05% for mortality and expense risk on an annual basis.
The expense risk assumed by ONLIC is the risk that the deductions for sales
and administrative expenses provided for in the variable annuity contracts
may prove insufficient to cover the cost of those terms.
The mortality risk results from a provision in the contract in which ONLIC
agrees to make annuity payments regardless of how long a particular
annuitant or other payee lives and how long all annuitants or other payees
as a class live if payment options involving life contingencies are chosen.
Those annuity payments are determined in accordance with annuity purchase
rate provisions established at the time the contracts are issued.
(5) CONTRACT CHARGES
No deduction for a sales charge is made from purchase payments. A contingent
deferred sales charge ranging from 0% to 6% may be assessed by ONLIC when a
contract is surrendered or a partial withdrawal of accumulation value is
made before the annuity payout date.
A transfer fee is charged for each transfer from one subaccount to another.
The fee is charged against the contract owner's equity in the subaccount
from which the transfer is effected.
State premium taxes presently range from 0% to 2-1/2% for these contracts.
In those jurisdictions permitting, such taxes will be deducted when annuity
payments begin. Elsewhere, they will be deducted from purchase payments.
Each year on the contract anniversary (or at the time of surrender of the
contract), ONLIC will deduct a contract administration charge of $35 from
the accumulation value to reimburse it for the expenses relating to the
maintenance of the contract. Total contract charges for the Account amounted
to approximately $90,000 during 1998.
(6) FEDERAL INCOME TAXES
Operations of the Account form a part of, and are taxed with, operations of
ONLIC which is taxed as a life insurance company under the Internal Revenue
Code. Taxes are the responsibility of the contract owner upon termination or
withdrawal. No Federal income taxes are payable under the present law on
dividend income or capital gains distribution from the Fund shares held in
the Account or on capital gains realized by the Account on redemption of the
Fund shares.
13
