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File No. 2-98265
811-4320
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 11 TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
Exact name of trust: OHIO NATIONAL VARIABLE ACCOUNT R
Name of depositor: OHIO NATIONAL LIFE ASSURANCE CORPORATION
Complete address of depositor's principal executive offices:
237 William Howard Taft Road
Cincinnati, Ohio 45219
Name and complete address of agent for service:
Ronald L. Benedict, Esq.
Ohio National Life Assurance Corporation
P.O. Box 237
Cincinnati, Ohio 45201
Notice to: W. Randolph Thompson, Esq.
Of Counsel
Jones & Blouch L.L.P.
Suite 405 West
1025 Thomas Jefferson Street, N.W.
Washington, D.C. 20007
It is proposed that this filing will become effective (check appropriate box):
immediately upon filing pursuant to paragraph (b)
-----
on (date) pursuant to paragraph (b)
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60 days after filing pursuant to paragraph (a)(i)
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X on May 1, 1996, pursuant to paragraph (a)(i)
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75 days after filing pursuant to paragraph (a)(ii)
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on (date) pursuant to paragraph (a)(ii) of Rule 485.
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If appropriate, check the following box:
This post-effective amendment designates a new effective date for
----- a previously filed post-effective amendment.
Title and amount of securities being registered: FLEXIBLE PREMIUM VARIABLE
LIFE INSURANCE CONTRACTS ("VARI-VEST II"). Registrant has heretofore
registered an indefinite amount of such flexible premium variable life
insurance contracts under the Securities Act of l933 pursuant to Rule 24f-2 and
on February 23, l996 filed its Rule 24f-2 Notice for its most recent fiscal
year.
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PART I
PROSPECTUS
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PROSPECTUS
VARI-VEST II
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT
OHIO NATIONAL LIFE ASSURANCE CORPORATION
OHIO NATIONAL LIFE VARIABLE ACCOUNT R
237 WILLIAM HOWARD TAFT ROAD
CINCINNATI, OHIO 45219
TELEPHONE (513) 861-3600
This prospectus describes a flexible premium variable life insurance contract
(the "contract") offered through Ohio National Variable Account R (the
"variable account"), a separate account of Ohio National Life Assurance
Corporation (the "Company"). The Company is a subsidiary of The Ohio National
Life Insurance Company ("Ohio National Life").
The contract described herein has a minimum stated amount of $100,000 and a
sales charge which is deducted in part from premium payments and in part from
cash value upon surrender, partial surrender or a decrease in stated amount
during the first ten contract years. Because of the substantial nature of the
surrender charge, the contract is not suitable for short term investment
purposes. The contract generally will not be issued to a person over age 70. In
addition, the Company offers contracts which provide for a reduction of sales
load for certain existing policyholders of the Company and Ohio National Life.
The contract is "flexible" because, subject to certain restrictions, it
permits you to adjust the timing and amount of your premium payments, to direct
net premiums to one or more of the subaccounts of the variable account or to
the general account, to choose from two death benefit plans, and to increase or
decrease the level of death benefits under such plans. The contract is
"variable" because the value of the contract will change with the performance
of the investment media selected. The flexible and variable features of the
contract give you the opportunity throughout your lifetime to meet your
changing life insurance needs and to accommodate to changing economic
conditions within the framework of a single insurance policy. For this reason,
it may not be to your advantage to purchase a contract as a means of obtaining
additional insurance if you already own another flexible premium variable life
insurance policy.
The contract provides life insurance coverage to age 95. You may choose either a
level or variable death benefit plan. The level plan provides a fixed benefit
(the "stated amount") to be paid on the death of the insured. The level plan
contract operates in a manner similar to a whole life insurance policy, except
that its cash value varies with investment performance. The variable plan
contract provides a death benefit equal to the sum of the stated amount and the
contract's cash value. Accordingly, the variable plan death benefit generally
varies dollar for dollar with the contract's cash value. Under either plan, the
Company offers to insure the death benefit against adverse investment
performance by guaranteeing that the death benefit will never be less than the
contract's stated amount, provided you satisfy a minimum premium requirement.
When you purchase a contract, you will be required to pay an initial premium.
During the first two contract years you must pay minimum premiums to keep the
contract in force. Thereafter, you must satisfy the minimum premium
requirement if you wish to keep the death benefit guarantee in effect. In
addition, there is a guideline annual premium which is used to determine the
amount of sales charge we may deduct from your premium payments.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE. IT SHOULD BE
ACCOMPANIED BY THE CURRENT PROSPECTUS OF THE FUND.
MAY 1, 1996
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As a planning device, you will be asked to adopt a planned premium schedule
that indicates the level of your intended payments under the contract. The
planned premium will generally fall somewhere between the minimum and guideline
annual premium amounts. The exact amount of such premium will depend upon your
objectives and your estimate of long-term investment performance. The minimum,
guideline and planned premiums will be set forth on the specification page of
your contract. While such premiums affect the amount and timing of your
premium payments in limited ways, the contract is designed to afford you
substantial flexibility with respect to such premium payments. After the first
two contract years, in the absence of premium payments, including the minimum
premium required to keep the death benefit guarantee in effect, the contract
will remain in force as long as the cash surrender value (less any contract
indebtedness) is sufficient to pay the next monthly deduction for contract
charges.
Net premiums will be allocated at your direction among the investment accounts
offered by the Company. Currently, the Company offers ten such investment
accounts: the nine subaccounts of the variable account and the Company's
general account. Each of the variable subaccounts invests in a corresponding
portfolio of Ohio National Fund, Inc. (the "Fund"). The Fund is a series
mutual fund which includes equity, money market, bond, flexible,
international, capital appreciation, small cap, global contrarian and
aggressive growth portfolios. The investment portfolios are described in the
attached Fund prospectus. Your contract's cash value will reflect the
investment performance of the subaccounts you select and is not guaranteed.
Should the need arise, you may obtain access to the cash surrender value of
your contract after the first contract year through loans or, after the second
contract year, partial surrenders, without terminating your insurance coverage.
In addition, you may surrender your contract at any time and receive its cash
surrender value.
The Company offers another flexible premium variable life policy (the
"policy") which is substantially similar to the contract except that it
includes a "wash loan" feature (for insureds over age 65 who have held their
policy for 10 years or more) and has a different charge structure. If you are
interested in the "wash-loan" feature, consult your agent concerning whether
the contract or the policy would better suit your needs.
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TABLE OF CONTENTS
<TABLE>
<S> <C>
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Assumptions And Scope Of Prospectus . . . . . . . . . . . . . . . . . . . . 8
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Ohio National Companies . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Ohio National Life Assurance Corporation (the "Company") . . . . . . . 12
The Ohio National Life Insurance Company ("Ohio National Life") . . . . 12
Ohio National Variable Account R (the "variable account") . . . . . . . 13
Ohio National Fund, Inc. (the "Fund") . . . . . . . . . . . . . . . . 13
Death Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Plan A - Level Benefit . . . . . . . . . . . . . . . . . . . . . . . . . 15
Plan B - Variable Benefit . . . . . . . . . . . . . . . . . . . . . . . 16
Change in Death Benefit Plan . . . . . . . . . . . . . . . . . . . . . . 16
Death Benefit Guarantee . . . . . . . . . . . . . . . . . . . . . . . . 17
Changes in Stated Amount . . . . . . . . . . . . . . . . . . . . . . . . 17
Cash Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Determination of Variable Account Cash Values . . . . . . . . . . . . . 18
Accumulation Unit Values . . . . . . . . . . . . . . . . . . . . . . . . 19
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Surrender Privileges . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Purchasing a Contract . . . . . . . . . . . . . . . . . . . . . . . . . 21
Payment of Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Initial Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Minimum Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Planned Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Allocation of Premiums . . . . . . . . . . . . . . . . . . . . . . . . . 23
Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Dollar Cost Averaging . . . . . . . . . . . . . . . . . . . . . . . . . 24
Telephone Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Lapse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Free Look . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Refund Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Charges And Deductions . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Premium Expense Charge . . . . . . . . . . . . . . . . . . . . . . . . . 26
Reduction of Sales Load . . . . . . . . . . . . . . . . . . . . . . . . 27
Ohio National Life Employee Discount . . . . . . . . . . . . . . . . . . 27
Monthly Deduction . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Risk Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Surrender Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Service Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Other Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
</TABLE>
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<TABLE>
<S> <C>
General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Additions, Deletions or Substitutions of Investments . . . . . . . . . . 31
Annual Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Limitation on Right to Contest . . . . . . . . . . . . . . . . . . . . . 32
Misstatements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Suicide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Postponement of Payments . . . . . . . . . . . . . . . . . . . . . . . . 33
Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Non-Participating Contract . . . . . . . . . . . . . . . . . . . . . . . 33
The General Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
General Description . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Cash Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Optional Insurance Benefits . . . . . . . . . . . . . . . . . . . . . . 34
Settlement Options . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Distribution Of The Contract . . . . . . . . . . . . . . . . . . . . . . . . 34
Management Of The Company . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
State Regulation Of The Company . . . . . . . . . . . . . . . . . . . . . . . 36
Federal Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Contract Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Correction of Modified Endowment Contract . . . . . . . . . . . . . . . 37
Right to Charge for Company Taxes . . . . . . . . . . . . . . . . . . . 37
Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. THE COMPANY DOES NOT AUTHORIZE ANY
INFORMATION OR REPRESENTATIONS REGARDING THE VARIABLE ASPECTS OF THE CONTRACT
DESCRIBED IN THIS PROSPECTUS OTHER THAN AS CONTAINED IN THIS PROSPECTUS, THE
PROSPECTUS OF THE FUND OR THE STATEMENT OF ADDITIONAL INFORMATION OF THE FUND.
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DEFINITIONS
Age - the insured's age at his or her nearest birthday.
Attained Age - the insured's age at the end of the most recent contract year.
Beneficiary - the beneficiary designated by the contractowner in the
application or in the latest notification of change of beneficiary
filed with us. If the contractowner is the insured and if no
beneficiary survives the insured, the insured's estate will be the
beneficiary. If the contractowner is not the insured and no
beneficiary survives the insured, the contractowner or his estate will
be the beneficiary.
Cash Value - the sum of the contract cash values in the subaccounts of the
variable account, the general account and the loan collateral account.
Cash Surrender Value - the cash value less any applicable surrender charges.
Code - the Internal Revenue Code of 1954, as amended, and all regulations
promulgated thereunder.
Commission - the Securities and Exchange Commission.
Contract - the flexible premium variable life insurance contract offered by
this prospectus.
Contract Date - the date as of which insurance coverage and contract charges
begin. The contract date is used to determine contract months and
years.
Contract Month - each contract month starts on the same date in each calendar
month as the contract date.
Contract Year - each contract year starts on the same date in each calendar
years as the contract date.
Contract Indebtedness - the total of any unpaid contract loans.
Contractowner - the person so designated on the specification page of the
contract.
Corridor Percentage Test - a method of determining the death benefit as
required by the Code to qualify the contract as a "life insurance
contract" thereunder. The death benefit so determined equals the cash
value plus the cash value multiplied by a percentage which varies with
age as specified by the Code.
Death Benefit - the amount payable upon the death of the insured, before
deductions for contract indebtedness and unpaid monthly deductions.
Death Benefit Guarantee - our guarantee that the contract will never lapse if
you have met the minimum premium requirement.
Free Look - your right to cancel the contract or any increase for a specified
period and to obtain a full refund of premiums paid with respect to
such contract or increase.
Fund - Ohio National Fund, Inc.
General Account - our assets other than those allocated to the variable account
or any other separate account we may establish.
Guideline Annual Premium - the level annual premium that would be payable
through the contract maturity date for a specified stated amount of
coverage if we scheduled premiums as to both timing and amount and such
premiums were based on the 1980 Commissioners Standard Ordinary
Mortality Table, net investment earnings at an annual effective rate of
5%, and fees and charges as set forth in the contract.
Home Office - our principal executive offices located at 237 William Howard
Taft Road, Cincinnati, Ohio 45219.
Initial Premium - an amount required to commence contract coverage at least
equal to one monthly minimum premium.
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Insured - the person upon whose life the contract is issued.
Issue Date - the date we approve your application and issue your contract. The
issue date will be the same as the contract date except for backdated
contracts for which the contract date will be prior to the issue date.
Loan Collateral Account - an account to which cash value in an amount equal to
a contract loan is transferred pro rata from the subaccounts of the
variable account and the general account.
Loan Value - the maximum amount that may be borrowed under the contract. The
loan value equals the cash surrender value less the cost of insurance
charges for the balance of the contract year. The loan value less
contract indebtedness equals the amount you borrow at any time.
Maturity Date - unless otherwise specified in the contract, the maturity date
is the end of the contract year nearest the insured's 95th birthday.
Minimum Premium - the monthly premium set forth on the contract specification
page necessary to keep the contract in force during the first two
contract years and to maintain the death benefit guarantee thereafter.
Although the minimum premium is expressed as a monthly amount, you need
not pay it each month. Rather, you must pay, cumulatively, premiums
which equal or exceed the sum of the minimum premiums required during
the applicable time period.
Monthly Deduction - the monthly charge against cash value which includes the
cost of insurance, an administration charge, a risk charge for the
death benefit guarantee and the cost of any optional insurance benefits
added by rider.
Net Premiums - the premiums you pay less the premium expense charge.
Planned Premium - a schedule indicating the contractowner's planned premium
payments under the contract. The schedule is a planning device only
and need not be adhered to.
Portfolio - a portion of the Fund's assets represented by a separate class or
series of stock and having a specified investment objective.
Premium Expense Charge - an amount deducted from gross premiums consisting of a
sales load and the state premium tax and other state and local taxes
applicable to your contract.
Proceeds - the amount payable on surrender, maturity or death.
Process Day - the first day of each contract month. Monthly deductions and
any credits are made on this day.
Pronouns - "our", "us" or "we" means Ohio National Life Assurance Corporation.
"You", "your" or "yours" means the insured. If the insured is not the
contractowner, "you", "your" or "yours" means the contractowner when
referring to contract rights, payments and notices.
Receipt - with respect to transactions requiring valuation of variable account
assets, a notice or request is deemed received by us on the date
actually received if received on a valuation date prior to the close of
trading on the New York Stock Exchange. If received on a day that is
not a valuation date or after the close of trading on the New York
Stock Exchange on a valuation date, it is deemed received on the next
valuation date.
Risk Charge - the charge imposed by the Company against variable account assets
for assuming the expense and mortality risks under the contract.
Settlement Options - methods of paying the proceeds other than in a lump sum.
Stated Amount - the minimum death benefit payable under the contract as long as
the contract remains in force and which is set forth on the contract
specification page.
Subaccount - a subdivision of the variable account which invests exclusively
in the shares of a corresponding portfolio of the Fund.
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Surrender Charge - a two part charge assessed in connection with contract
surrenders, lapses and decreases in stated amount, consisting of a
contingent deferred sales charge applicable for ten years, and a
contingent deferred insurance underwriting charge applicable for seven
years, from the contract date with respect to your initial stated
amount and from the date of any increase in stated amount with respect
to such increase.
Valuation Date - each day on which the net asset value of Fund shares is
determined. See page 17 of the accompanying Fund prospectus.
Valuation Period - the period between two successive valuation dates which
begins as of the close of trading on the New York Stock Exchange on one
valuation date and ends on the close of such trading on the next
valuation date.
Variable Account - Ohio National Variable Account R.
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INTRODUCTION
As described on the cover page of this prospectus, the contract offered hereby
is a flexible premium variable life insurance contract which enables you
throughout your lifetime to accommodate to your changing insurance needs and to
changing economic conditions within the framework of a single insurance policy.
The contract provides for death benefits, cash values, loans, a variety of
settlement options and other features traditionally associated with life
insurance.
The contract is similar to traditional life insurance in a number of respects.
You receive insurance coverage to age 95 at least equal to the stated amount as
long as the contract has a positive cash surrender value or the death benefit
guarantee is in effect. You may surrender the contract at any time and receive
its cash surrender value. After the first contract year, you may borrow up to
the loan value of the contract. To the extent that you elect to allocate net
premiums to the general account, the investment return on the contract is
guaranteed.
The contract also has several significant features which differentiate it from
traditional life insurance. There is no schedule of required premiums to keep
the contract in force. Instead, within certain limits, you may adjust the
timing and amount of your premium payments to suit your individual
circumstances. In addition, you direct the investment of your net premiums and
resulting cash values, which will vary with the investment performance of the
subaccounts of the variable account you select. However, unlike traditional
insurance, such values are neither guaranteed nor limited to an assumed rate of
interest. The contract also permits you to elect a variable death benefit plan
as an alternative to a level plan, the latter being similar in many respects to
a traditional whole life policy. Finally, the contract under either plan
permits you to increase the stated amount of insurance coverage any time after
the first contract year and to decrease the stated amount two years after the
issue date.
ASSUMPTIONS AND SCOPE OF PROSPECTUS
This prospectus relates principally to the variable account and contains only
selected information regarding the general account. (See "The General Account"
at page 33.) For details regarding elements of the contract involving the
general account, see your contract.
Unless otherwise indicated or required by the context, the discussion
throughout this prospectus assumes: that (1) "you", the "contractowner" and
the "insured" are the same person (such terms generally being used
interchangeably), (2) the death benefit guarantee is in effect, (3) the cash
surrender value of your contract is sufficient to pay the next monthly
deduction, (4) there is no outstanding contract indebtedness, (5) the death
benefit is not determined by the corridor percentage test, (6) the contract is
not backdated, and (7) payments under the contract have not been made in a way
that would cause the contract to be treated as a modified endowment contract
under federal law.
SUMMARY
The following summary is intended to provide you with a general description of
the most important features of the contract. To understand this summary,
reference should be made to the preceding "Definitions" section for the
meaning of various terms. This summary is not comprehensive and is qualified
in its entirety by the more specific information contained in this prospectus,
the attached Fund prospectus and the statement of additional information
referred to therein. This summary presents selected information in the same
sequence and employs the same headings as the body of the prospectus. Consult
the table of contents to locate the fuller discussion of each item included
herein.
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OHIO NATIONAL COMPANIES
OHIO NATIONAL LIFE ASSURANCE CORPORATION (the "Company") - a stock life
insurance company established under the laws of Ohio on June 26, 1979.
THE OHIO NATIONAL LIFE INSURANCE COMPANY ("Ohio National Life") - a mutual
life insurance company organized in 1909 under the laws of Ohio which currently
has assets in excess of $5.5 billion. Ohio National Life controls the Company
and the Fund. While Ohio National Life's experienced personnel and facilities
are available to assist in administering the Company and its flexible product
program, its assets do not back the contract.
OHIO NATIONAL VARIABLE ACCOUNT R (the "variable account") - established by the
Company on May 6, 1985 as a means of offering the types of contract described
in this prospectus. Net premiums allocated to the variable account are
segregated from the Company's other assets and are protected from claims and
liabilities arising from the Company's other lines of business. The Company's
general account assets, however, are available to support benefits under the
contract.
There are currently nine separate subaccounts within the variable account. The
assets of each are invested exclusively in shares of a corresponding investment
portfolio of the Fund.
OHIO NATIONAL FUND, INC. (the "Fund") - is an open-end diversified management
investment company, commonly referred to as a mutual fund. The Fund currently
has nine investment portfolios in which the contracts' assets may be invested:
the Growth Portfolio, Money Market Portfolio, Bond Portfolio, Omni Portfolio,
International Portfolio, Capital Appreciation Portfolio, Small Cap Portfolio,
Global Contrarian Portfolio and Aggressive Growth Portfolio (the
"portfolios"). The operations of the Fund, its investment adviser and the
investment objectives and policies of each portfolio are described in the
attached Fund prospectus. Net premiums under the contract may be allocated to
the subaccounts of the variable account which invest exclusively in Fund
shares. Accordingly, to the extent you allocate net premiums to the
subaccounts, the cash value of your contract will vary with the investment
performance of Fund shares.
DEATH BENEFITS
You may select one of two death benefit plans -- the level plan (Plan A) or the
variable plan (Plan B). With certain limitations, you may also change death
benefit plans during the life of the contract. The death benefit under the
level plan is the stated amount. The death benefit under the variable plan is
the stated amount plus the cash value on the date of death. Under either plan,
we may be required to increase the death benefit to satisfy the corridor
percentage test included in the Code's definition of a "life insurance
contract." Generally, favorable investment performance is reflected in
increased cash value under the level plan and in increased insurance coverage
under the variable plan. The death benefit will never be less than the stated
amount as long as the contract has a positive cash surrender value or the death
benefit guarantee is in force. The death benefit will be paid into an
interest-bearing checking account established in your beneficiary's name or, at
your option, applied in whole or in part under one or more settlement options.
After the first contract year you may increase your stated amount, and two
years after the issue date you may decrease your stated amount. You cannot
decrease the stated amount below the minimum stated amount shown on the
contract specification page. Any increase or decrease in the stated amount
must equal at least $5,000 and an increase will require additional evidence of
insurability.
The contract includes a death benefit guarantee. Under this provision, we
guarantee that the death benefit will never be less than the stated amount,
provided you satisfy the minimum premium requirement. Accordingly, a cash
surrender value insufficient to meet the current monthly deduction as a result
of adverse subaccount investment performance will not cause the contract to
lapse as long as the death benefit guarantee is in effect.
9
<PAGE> 12
CASH VALUE
The cash value of your contract equals the sum of the cash values in the
general account, the subaccounts of the variable account and the loan
collateral account. The general account cash value will reflect the amount and
timing of net premiums allocated to the general account and interest thereon.
The cash value in the variable subaccounts will reflect deductions for a risk
charge, the amount and timing of net premiums allocated to such subaccounts and
the investment experience associated therewith. Such investment experience is
not guaranteed. In addition, the subaccount and the general account cash
values will be charged pro rata in connection with contract loans, partial
surrenders and monthly deductions. The loan collateral account will reflect
amounts borrowed against the loan value of the contract.
Loans - after the first contract year, you may borrow against the loan value of
your contract. The loan value will never be less than 75% of your cash
surrender value. Loan interest is payable in advance at a rate of 7.4% (an
effective compound annual rate of 8%). Any outstanding contract indebtedness
will be deducted from proceeds payable at the insured's death or upon maturity
or surrender.
Loan amounts and any unpaid interest thereon will be withdrawn pro rata from
the variable subaccounts and the general account. Cash value in each
subaccount equal to the contract indebtedness so withdrawn will be transferred
to the loan collateral account. If loan interest is not paid when due, it
becomes loan principal. Cash value held in the loan collateral account earns
interest daily at an annual rate guaranteed to be at least 5%. Currently, we
credit interest at an annual rate of 6.75%.
A loan may be repaid in whole or in part at any time while the contract is in
force. When a loan repayment is made, cash value securing contract
indebtedness in the loan collateral account equal to the loan repayment will be
allocated first to the general account until the amount borrowed has been
replaced. The balance of the repayment will then be allocated to the general
account and the variable subaccounts using the same percentages as then in
effect to allocate net premiums.
Surrender Privileges - at any time you may surrender your contract in full and
receive the proceeds. Your contract also gives you a partial surrender right.
At any time after two years from the issue date, you may withdraw part of your
cash surrender value. Such withdrawals will reduce your contract's death
benefit and may be subject to a surrender charge.
Withholding Payment After Premium Payment - The Company may withhold payment of
any increased cash value or loan value resulting from a recent premium payment
until your premium check has cleared. This could take-up to 15 days after we
receive your check.
PREMIUMS
An initial premium is required to purchase a contract. In addition, you must
satisfy a minimum premium requirement during the first two contract years to
keep the contract in force, and thereafter to keep the death benefit guarantee
in effect. To satisfy the minimum premium requirement at any time, you must
have paid, cumulatively, total premiums that equal or exceed the monthly
minimum premium indicated on the contract specification page multiplied by the
number of complete contract months the contract has been in effect. The
monthly minimum premium indicated on the contract specification page will
remain a level amount until you reach age 70, or ten years from the contract
date, if later. At such time, the monthly minimum premium to maintain the
death benefit guarantee will be substantially increased. Such increase may
affect your ability to keep the death benefit guarantee or the contract in
force.
We may, at our discretion, refuse to accept a premium payment of less than $25
or one that would cause the contract, without an increase in death benefit, to
be disqualified as life insurance or to be treated as a modified endowment
contract under federal law. Otherwise, the amount and timing or premium
payments is left to your discretion.
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<PAGE> 13
To aid you in formulating your insurance plan under the contract, you will
adopt a planned premium schedule at the time of purchase indicating your
intended level of payments. Such premium will generally be an amount greater
than your minimum premium and less than your guideline annual premium. Such
schedule is a planning device only and need not be adhered to.
Allocation of Premiums - you may allocate your net premiums to any of the
variable subaccounts and to the general account in any combination of whole
percentages. You indicate your initial allocation in the contract application.
Thereafter, you may transfer cash values and reallocate future premiums.
Transfers - we allow transfers of cash values among the subaccounts of the
variable account and to the general account at any time. Transfers from the
general account to the subaccounts are subject to certain restrictions.
Lapse - provided you pay the minimum premiums required to maintain the death
benefit guarantee, your contract will never lapse. If you fail to satisfy the
minimum premium requirement in the first two contract years, your contract will
lapse after a 61 day grace period. In such case, you may be entitled to a
refund of a portion of the surrender charge otherwise applicable to your
contract.
If you fail to satisfy the minimum premium requirement after the second
contract year and, as a result, the death benefit guarantee is not in effect,
the duration of your contract depends on its cash surrender value. The
contract will remain in force as long as the cash surrender value less any
outstanding contract indebtedness is sufficient to pay the next monthly
deduction. If such is not the case, you will have a 61 day grace period in
which to increase your cash surrender value through the payment of additional
premiums. If you do not pay sufficient additional premiums during the grace
period, the contract will lapse and terminate without value.
Reinstatement - once a contract has lapsed, you may request reinstatement of
the contract any time within five years of the lapse. Satisfactory proof of
insurability and payment of a reinstatement premium are required for
reinstatement.
Free Look - following the initial purchase of your contract or any subsequent
increase in the stated amount, you are entitled to a free look period. During
the free look period, you may cancel the contract or increase, as applicable,
and we will refund all the money you have paid therefor. In some states,
applicable law requires that your refund be adjusted by any investment gains or
losses. The free look period expires on the latest of 45 days from the date of
your application for the contract or increase, 20 days from your receipt of the
contract or increase and 10 days after we mail or deliver a written notice of
your right to cancel.
Refund Right - if your contract lapses or you surrender it during the first two
years following the issue date or the date of any increase, you may be entitled
to a refund of a portion of the surrender charge otherwise applicable to your
contract.
CHARGES AND DEDUCTIONS
We make charges against or deductions from premium payments, cash values and
contract surrenders as follows:
(a) from premiums we deduct a premium expense charge. The premium expense
charge includes a 4% deduction from premium payments for the life of the
contract. Such charge and the contingent deferred sales charge referred to
in paragraph (d) below are intended to compensate us for sales and
distribution expenses. The premium expense charge also includes a
deduction for the state premium tax and any other state and local taxes
applicable to your contract. Currently, state premium taxes vary from 2%
to 4%.
(b) against the cash value we make a monthly deduction covering the cost of
insurance, administrative expenses ($5), the risk of providing the death
benefit guarantee ($.01 per thousand of stated amount), and the cost of any
optional insurance benefit added by rider;
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<PAGE> 14
(c) against the assets of the variable subaccounts we assess a daily charge
equal to an annualized rate of .75% of such assets to compensate us for
assuming certain mortality and expense risks; and
(d) from cash value we deduct surrender charges in the event of full surrender,
certain partial surrenders and decreases in stated amount. Such surrender
charges only apply during the first ten contract years following the
contract date and the date of any increase in stated amount. The surrender
charges consist of a contingent deferred sales charge and a contingent
deferred insurance underwriting charge. The contingent deferred sales
charge is 46% of premiums paid during the first two contract years up to
two guideline annual premiums. For issue ages above age 55, this
percentage scales down and reaches 13% by age 74. The contingent deferred
insurance underwriting charge varies with age at issue or increase from $3
to $6 per thousand dollars of your first $500,000 of stated amount.
Because the contingent deferred sales charge only applies to premiums paid
during the first two contract years, a contractowner may incur the smallest
amount of such charge by paying only the required minimum premium during such
period. Similarly, only premiums allocated to an increase within two years
after the date of such increase are subject to the contingent deferred sales
charge. Accordingly, premiums paid either before or after such two year period
will not be subject to the contingent deferred sales charge.
In addition to the foregoing charges and deductions, we assess the following
three service charges: (i) for partial surrenders the lesser of $25 or 2% of
the amount surrendered, (ii) up to $15 (currently the charge is $3 and is
waived on the first four transfers during any contract year) for transfers of
cash value among the subaccounts and the general account and (iii) $25 for any
special illustration of contract benefits that you may request. Currently we
impose lesser charges for transfers and illustrations, but we only guarantee
that such charges will never exceed the amounts stated above. We also reserve
the right to assess the assets of each subaccount to provide for any taxes
payable by us on account of such assets. Certain expenses and an investment
advisory fee will be assessed against Fund assets, as described in the attached
Fund prospectus.
FEDERAL TAX MATTERS
All death benefits paid under the contract will generally be excludable from
the beneficiary's gross income for federal income tax purposes. Under current
federal tax law, as long as the contract qualifies as a "life insurance
contract" as defined therein, any increases in cash value attributable to
favorable investment performance should accumulate on a tax deferred basis in
the same manner as with traditional whole life insurance. Partial withdrawals
and surrenders, however, may result in the taxation of the portion of such
withdrawals or surrenders attributable to the increase in cash value resulting
from favorable investment performance. If payments are made in excess of a
rate that would pay up a contract after 7 level annual payments, there may be
taxation of, including a penalty tax on, portions of the proceeds of loans,
withdrawals or surrenders.
OHIO NATIONAL COMPANIES
OHIO NATIONAL LIFE ASSURANCE CORPORATION (THE "COMPANY")
The Company was established on June 26, 1979 under the laws of Ohio to
facilitate the issuance of certain nonparticipating insurance policies. It is
a wholly-owned stock subsidiary of The Ohio National Life Insurance Company.
The Company is currently licensed to sell life insurance in 45 states and the
District of Columbia. (See page 38 for the Company's financial statements.)
THE OHIO NATIONAL LIFE INSURANCE COMPANY ("OHIO NATIONAL LIFE")
Ohio National Life was organized under the laws of Ohio on September 9, 1909 as
a stock life insurance company and became a mutual life insurance company on
August 7, 1959. It writes life, accident and health insurance and annuities in
46 states and the District of Columbia. Currently it has assets in excess of
$5.5 billion and equity in excess of $500 million. Ohio National Life provided
the Company with the initial capital to finance its operations. From time to
time, Ohio National Life may make additional capital contributions to the
Company, although it is under no legal obligation to do so and its assets do
not support the benefits provided under the contract.
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<PAGE> 15
OHIO NATIONAL VARIABLE ACCOUNT R (THE "VARIABLE ACCOUNT")
The Company established the variable account on May 6, 1985 pursuant to the
insurance laws of the State of Ohio. The variable account is registered with
the Securities and Exchange Commission (the "Commission") under the Investment
Company Act of 1940 ("1940 Act") as a unit investment trust. Such
registration does not involve supervision by the Commission of the management
or investment policies of the variable account or the Company. Under Ohio law,
the variable account assets are held exclusively for the benefit of
contractowners and persons entitled to payments under the contract. Variable
account assets are not chargeable with liabilities arising out of any other
business of the Company.
The Company keeps the variable account assets physically segregated from assets
of the Company's general account. The Company maintains records of all
purchases and redemptions of Fund shares by each of the subaccounts of the
variable account.
The variable account currently has seven investment subaccounts, but may in the
future add or delete investment subaccounts. Each investment subaccount will
invest exclusively in shares representing interests in a portfolio of the Fund.
The income and realized and unrealized gains or losses on the assets of each
subaccount are credited to or charged against that subaccount without regard to
income or gains or losses from any other subaccount.
OHIO NATIONAL FUND, INC. (THE "FUND")
The Fund is organized as a Maryland corporation and is registered as an
open-end diversified management investment company under the 1940 Act. The
Fund currently has nine portfolios in which the contracts' assets may be
invested. Each portfolio has different investment objectives. Each portfolio
operates as a separate investment fund, and the income or loss of one portfolio
generally has no effect on the investment performance of any other portfolio.
In addition to being offered to the variable account, Fund shares are currently
offered to separate accounts of Ohio National Life in connection with variable
annuity contracts and may in the future be offered to other insurance company
separate accounts. It is conceivable that in the future it may become
disadvantageous for both variable life and variable annuity separate accounts
to invest in the Fund. Although neither the Company, Ohio National Life nor
the Fund currently foresees any such disadvantage, the Board of Directors of
the Fund will monitor events in order to identify any material conflict between
variable life and variable annuity contractowners and to determine what action,
if any, should be taken in response thereto, including the possible withdrawal
of the variable account's participation in the Fund. Material conflicts could
result from such things as (1) changes in state insurance law; (2) changes in
federal income tax law; (3) changes in the investment management of any
portfolio of the Fund; or (4) differences between voting instructions given by
variable life and variable annuity contractowners.
The investment objectives of each portfolio are set forth below. There can be
no assurance that any portfolio will achieve its stated objectives.
Equity Portfolio - long-term capital growth by investing principally in common
stocks or other equity securities. Current income is a secondary objective.
Money Market Portfolio - maximum current income consistent with preservation of
capital and liquidity by investing in high quality money market instruments.
Bond Portfolio - high level of return consistent with preservation of capital
by investing primarily in high quality intermediate and long-term debt
securities.
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<PAGE> 16
Omni Portfolio - high level of long-term total return consistent with
preservation of capital by investing in stocks, bonds and money market
instruments.
International Portfolio - long-term capital growth by investing primarily in
common stocks of foreign companies.
Capital Appreciation Portfolio - maximum capital growth by investing primarily
in common stocks that are (1) considered to be undervalued or temporarily out
of favor with investors, or (2) expected to increase in price over the short
term.
Small Cap Portfolio - maximum capital growth by investing primarily in common
stocks of small and medium size companies.
Global Contrarian Portfolio - long-term growth of capital by investing in
foreign and domestic securities believed to be undervalued or presently out of
favor.
Aggressive Growth Portfolio - capital growth.
The investment and reinvestment of Fund assets is directed by Ohio National
Investments, Inc. (the "Adviser"), a wholly-owned subsidiary of Ohio National
Life which makes use of the investment personnel and administrative systems of
Ohio National Life. The investment and reinvestment of the assets of the
following portfolios is managed by the firms indicated as subadvisers.
<TABLE>
<CAPTION>
PORTFOLIO SUBADVISER
--------- ----------
<S> <C>
International and Global Contrarian Societe Generale Asset Management Corp. ("SGAM")
Capital Appreciation T. Rowe Price Associates, Inc. ("TRPA")
Small Cap Founders Asset Management, Inc. ("FAM")
Aggressive Growth Strong Capital Management, Inc. ("SCM")
</TABLE>
SGAM is a wholly-owned subsidiary of Societe Generale, one of the largest banks
in Europe. TRPA manages assets for various individual and institutional
investors, particularly the T. Rowe Price group of mutual funds. FAM manages
the assets of the Founders group of mutual funds as well as private accounts.
SCM manages the assets of the Strong group of mutual funds as well as pension
funds and private accounts. Each of the Adviser, SGAM, TRPA, FAM and SCM is
registered under the Investment Advisers Act of 1940. For more detailed
information concerning each portfolio, including a description of investment
risks, reference is made to the prospectus of the Fund which accompanies this
prospectus.
The Company will purchase and redeem Fund shares for the variable account at
net asset value without the imposition of any sales or redemption charge. Such
shares represent an interest in one of the portfolios of the Fund. Each
portfolio corresponds to a subaccount of the variable account. Any dividend or
capital gain distributions received from the Fund will be reinvested in Fund
shares at net asset value as of the dates paid.
On each valuation date, shares of each portfolio are purchased or redeemed by
the Company for the variable account based on, among other things, the amount
of net premiums allocated to the variable account, dividends and distributions
reinvested, transfers to and among the subaccounts, loans, loan repayments and
benefit payments to be made pursuant to the terms of the contract as of that
date. Purchases and redemptions for the variable account are effected at the
net asset value per share for each portfolio determined in the manner and at
the time set forth in the accompanying Fund prospectus.
A full description of the Fund, its investment policies and restrictions, fees
and expenses paid by it and other aspects of its operations are contained in
the attached prospectus for the Fund and in the statement of additional
information referred to therein.
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<PAGE> 17
DEATH BENEFITS
As long as the contract remains in force (see "Premiums - Lapse" at page 25),
we will, upon receipt of due proof of the insured's death, pay the contract
proceeds to the beneficiary. The amount of the death benefit payable will be
determined as of the date of death, or on the next following valuation date if
the date of death is not a valuation date. Unless a settlement option is
elected, the proceeds will be paid in one lump sum with interest from the date
of the insured's death to the date of payment at a rate we determine which will
not be less than an annual rate of 4%. Such proceeds will be paid into an
interest- bearing checking account established in your beneficiary's name with
Bank One, Springfield, Illinois. The account will bear interest based upon
then current money market rates. The beneficiary will then be able to write
checks against such account at any time and in any amount up to the total in
the account. Such checks must be for a minimum amount of $250. We also offer
beneficiaries and contractowners a wide variety of settlement options. (See
"The General Account - Settlement Options" at page 34.)
The contract provides for two death benefit plans: a level plan ("Plan A") and
a variable plan ("Plan B"). Generally, you designate the death benefit plan in
your contract application. Subject to certain restrictions, you may change the
death benefit plan from time to time. As long as the contract remains in
force, the death benefit under either plan will never be less than the stated
amount of the contract.
PLAN A - LEVEL BENEFIT
The death benefit is the greater of (a) the contract's stated amount on the
date of death or (b) the death benefit determined by the corridor percentage
test. The death benefit determined by the corridor percentage test equals the
cash value of the contract on the date of death plus such cash value multiplied
by the corridor percentage. The corridor percentage varies with attained age,
as indicated in the following table:
<TABLE>
<CAPTION>
CORRIDOR CORRIDOR CORRIDOR CORRIDOR
ATTAINED PERCEN- ATTAINED PERCEN- ATTAINED PERCEN ATTAINED PERCEN
AGE TAGE AGE TAGE AGE TAGE AGE TAGE
-------- -------- -------- -------- -------- -------- --- ----
<S> <C> <C> <C> <C> <C> <C> <C>
40 & below 150% 52 71% 64 22% 91 4%
41 143% 53 64% 65 20% 92 3%
42 136% 54 57% 66 19% 93 2%
43 129% 55 50% 67 18% 94 1%
44 122% 56 46% 68 17% 95 0%
45 115% 57 42% 69 16%
46 109% 58 38% 70 15%
47 103% 59 34% 71 13%
48 97% 60 30% 72 11%
49 91% 61 28% 73 9%
50 85% 62 26% 74 7%
51 78% 63 24% 75-90 5%
</TABLE>
Illustration of Plan A. Assume that the insured's attained age at time of
death is 40 and that the stated amount of the contract is $100,000.
Under these circumstances, any time the cash value of the contract is less than
$40,000, the death benefit will be the stated amount. However, any time the
cash value exceeds $40,000, the death benefit will be greater than the
contract's $100,000 stated amount due to the corridor percentage test. This is
because the death benefit for an insured who dies at age 40 must be at least
equal to the cash value plus 150% of the cash value. Consequently, each
additional dollar added to cash value above $40,000 will increase the death
benefit by $2.50. Similarly, to the extent cash value exceeds $40,000, each
dollar taken out of cash value will reduce the death benefit by $2.50. If, for
example, the cash value is reduced from $48,000 to $40,000, the death benefit
will be reduced from $120,000 to $100,000. However, further reductions in the
cash value below the $40,000 level will not affect the death benefit.
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<PAGE> 18
In the foregoing example, the breakpoint of $40,000 of cash value for using the
corridor percentage test to calculate the death benefit was determined by
dividing the $100,000 stated amount by 100% plus 150% (the corridor percentage
at age 40, as shown in the table above). For your contract, you may make the
corresponding determination by dividing your stated amount by 100% plus the
corridor percentage for your age (see the table above). The calculation will
yield a dollar amount which will be your breakpoint for using the corridor
percentage test. If your cash value is greater than such dollar figure, your
death benefit will be determined by the corridor percentage test. If it is
less, your death benefit will be your stated amount.
PLAN B - VARIABLE BENEFIT
The death benefit is equal to the greater of (a) the stated amount plus the
cash value on the date of death or (b) the death benefit determined by the
corridor percentage as described above and using the foregoing table of
corridor percentages.
Illustration of Plan B. Again assume that the insured's attained age at the
time of death is 40 and that the stated amount of the contract is $100,000.
Under these circumstances, a contract with cash value of $20,000 will have a
death benefit of $120,000 ($100,000 + $20,000). A cash value of $60,000 will
yield a death benefit of $160,000 ($100,000 + $60,000). The death benefit
under this illustration, however, must be at least equal to the cash value plus
150% of the contract's cash value. As a result, if the cash value of the
contract exceeds $66,667, the death benefit will be greater than the stated
amount plus cash value. Each additional dollar of cash value above $66,667
will increase the death benefit by $2.50. Under this illustration, a contract
with a cash value of $80,000 will provide a death benefit of $200,000 ($80,000
+ 150% X $80,000). Similarly, to the extent that cash value exceeds $66,667,
each dollar taken out of cash value reduces the death benefit by $2.50. If,
for example, the cash value is reduced from $80,000 to $68,000, the death
benefit will be reduced from $200,000 to $170,000.
In the foregoing example, the breakpoint of $66,667 of cash value for using the
corridor percentage test to calculate the death benefit was determined by
dividing the $100,000 stated amount by 150% (the corridor percentage at age 40,
as shown in the table above). For your contract, you may make the
corresponding determination by dividing your stated amount by the corridor
percentage for your age (see the table above). The calculation will yield a
dollar amount which will be your breakpoint for using the corridor percentage
test. If your cash value is greater than such dollar figure, your death
benefit will be determined by the corridor percentage test. If it is less,
your death benefit will be your stated amount plus your cash value.
CHANGE IN DEATH BENEFIT PLAN
Generally, after the first contract year, you may change your death benefit
plan on any process day by sending us a written request. Changing death
benefit plans will not require evidence of insurability. The effective date of
any such change will be the process day on or following the date of receipt of
your request.
As a general rule, at times when you wish to have favorable investment
performance reflected in higher cash value, rather than increased insurance
coverage, you should elect the Plan A death benefit. Conversely, at times when
you wish to have favorable investment performance reflected in increased
insurance coverage, rather than higher cash value, you should generally elect
the Plan B death benefit.
If you change your death benefit plan from Plan B to Plan A, your stated amount
will be increased by the amount of your cash value to equal the death benefit
which would have been payable under Plan B on the effective date of the change.
For example, a Plan B contract with a $100,000 stated amount and $20,000 cash
value ($120,000 death benefit) would be converted to a Plan A contract with
$120,000 stated amount. Again, the death benefit would remain the same on the
effective date of the change.
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<PAGE> 19
A change in the death benefit option will not alter the amount of the cash
value or the death benefit payable under the contract on the effective date of
the change. However, switching between the variable and the level plans will
alter your insurance program with consequent effects on the level of your
future death benefits, cash values and premiums. While the death benefit under
Plan B will be greater than under Plan A for a given stated amount, since the
cash value is added to stated amount under Plan B but not under Plan A, the
cost of insurance included in the monthly deduction will be greater under Plan
B than under Plan A assuming the same stated amount. (See "Charges and
Deductions - Monthly Deduction" at page 27.) Furthermore, assuming your cash
value continues to increase, your future cost of insurance charges will be
higher after a change from Plan A to Plan B and lower after a change from Plan
B to Plan A. If your cash value decreases in the future, the opposite will be
true. Changes in the cost of insurance charges have no effect on your death
benefit under Plan A. Under Plan B, however, increased cost of insurance
charges will reduce the future cash value and death benefit to less than they
otherwise would be, and vice versa.
DEATH BENEFIT GUARANTEE
We guarantee that the contract will never lapse provided you meet the minimum
premium requirement. (See "Premiums - Minimum Premiums" at Page 22.)
Accordingly, as long as the death benefit guarantee is in effect, the contract
will not lapse even if, because of adverse investment performance, the cash
surrender value falls below the amount needed to pay the next monthly
deduction. A charge of $.01 per $1,000 of stated amount will be made for each
month the death benefit guarantee is in effect.
If on any process day the minimum premium requirement is not met, we will send
you a notice of the required payment. If we do not receive the required
payment within 61 days of the date of the mailing of such notice, the death
benefit guarantee will no longer be in effect. Generally, the death benefit
guaranteed may not be reinstated once it has been lost. However, we may at our
discretion permit you to reinstate the death benefit guarantee if you (a)
double your stated amount or (b) increase your stated amount by $100,000 or
more. A new minimum premium will be required to maintain the reinstated death
benefit guarantee.
CHANGES IN STATED AMOUNT
Subject to certain limitations, you may at any time after the first contract
year increase your contract's stated amount and after two years from the issue
date decrease your stated amount by sending us a written request. We may limit
you to two such changes in each contract year. Any change must be of at least
$5,000. The effective date of the increase or decrease will be the process day
on or following approval of the request. A change in stated amount will affect
the monthly insurance charges and surrender charges. (See "Charges and
Deductions - Monthly Deduction" at page 27 and "Surrender Charge" at page
28.)
Increases. An increase is treated in a similar manner to the purchase to a new
contract. To obtain an increase, you must submit a supplemental application to
us with evidence demonstrating insurability. Depending on your cash value, you
may or may not have to pay additional premiums to obtain an increase. If you
must pay an additional premium, we must receive it by the effective date of the
increase.
After an increase, a portion of premium payments will be allocated to such
increase. The amount so allocated will bear the same relationship to total
premium payments as the guideline annual premium for such increase bears to the
guideline annual premium for your initial stated amount plus the guideline
annual premiums for all increases.
The pattern of surrender charges with respect to premiums allocated to an
increase will be the same as with a new contract. (See "Charges and Deductions
- - Surrender Charge" at page 28.) This means that only premiums allocated to an
increase within two years after such increase up to two guideline annual
premiums for such increase will be subject to the contingent deferred sales
charge. Accordingly, any premiums paid either before or after such two year
period will not be subject to the contingent deferred sales charge.
With respect to premiums allocated to an increase, you will have the same free
look, conversion and refund rights with respect to an increase as with the
initial purchase of your contract. (See "Premiums - Free Look; Conversion;
Refund Right " at page 25.)
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<PAGE> 20
Decreases. You may decrease your stated amount after two years from the issue
date or the date of any increase, subject to the following limitations. The
stated amount after any requested decrease may not be less than the minimum
stated amount of $100,000. Moreover, we will not permit a decrease in stated
amount if the contract's cash value is such that reducing the stated amount
would cause the death benefit after the decrease to be determined by the
corridor percentage test. If you decrease your stated amount and there are
applicable surrender charges (see "Charges and Deductions - Surrender Charge"
at page 28), we will assess the portion of such surrender charge attributable
to the stated amount cancelled by the decrease against the cash value of your
contract. For purposes of determining the surrender charges on the amount
decreased and your cost of insurance charge on your remaining coverage (see
"Charges and Deductions - Surrender Charge at page 28; Monthly Deduction" at
page 27), a decrease in stated amount will reduce your existing stated amount
in the following order: (a) the stated amount provided by your most recent
increase, (b) your next most recent increases successively, and (c) your
initial stated amount.
CASH VALUE
Your contract provides certain cash value benefits. Subject to certain
limitations, you may obtain access to the cash value of your contract. You may
borrow against your contract's loan value and you may surrender your contract
in whole or in part.
The cash value of your contract is the sum of the cash values in the
subaccounts, the general account and the loan collateral account. The
following discussion relates only to the variable account. The general account
and the loan collateral account are discussed elsewhere in this prospectus.
(See "The General Account - Cash Value" at page 33 and "Cash Value - Loans" at
page 19.)
DETERMINATION OF VARIABLE ACCOUNT CASH VALUES
The contract's cash value in the variable account may increase or decrease
depending on the investment performance of the subaccounts you choose. There
is no guaranteed minimum cash value in the variable account.
The cash value of the contract will be calculated initially on the later of the
issue date or when we first receive a premium payment, and thereafter on each
valuation date. On such initial valuation date, your cash value will equal the
initial premium paid less the premium expense charge and the first monthly
deduction. (See "Charges and Deductions - Premium Expense Charge" at page 26
and "Monthly Deduction" at page 27.) On each subsequent valuation date, your
cash value will be (1) plus any transactions referred to in (2), (3) and (4)
and minus any transactions referred to in (5), (6) and (7) which occur during
the current valuation period, where:
(1) is the sum of each subaccount's cash value as of the previous valuation
date multiplied by each subaccount's net investment factor for the
current valuation period;
(2) is net premiums allocated to the variable account;
(3) is transfers from the loan collateral account as a result of loan
repayments and reallocations of cash value from the general account;
(4) is interest on contract indebtedness credited to the variable
subaccounts;
(5) is transfers to the loan collateral account in connection with contract
loans and reallocations of cash value to the general account;
(6) is any partial surrender made (and any surrender charge imposed); and
(7) is the monthly deduction.
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ACCUMULATION UNIT VALUES
We use accumulation units as a measure of value for bookkeeping purposes. When
you allocate net premiums to a subaccount, we credit your contract with
accumulation units. In addition, other transactions, including loans, partial
and full surrenders, transfers, surrender and service charges, and monthly
deductions, affect the number of accumulation units credited to your contract.
The number of units credited or debited in connection with any such transaction
is determined by dividing the dollar amount of such transaction by the unit
value of the affected subaccount. We determine the unit value of each
subaccount on each valuation date. The number of units so credited or debited
will be based on the unit value on the valuation date on which the premium
payment or transaction request is received by us at our home office. The
number of units credited will not change because of subsequent changes in unit
value. The dollar value of each subaccount's units will reflect asset charges
and the investment performance of the corresponding portfolio of the Fund.
The accumulation unit value of each subaccount's unit initially was $10. The
unit value of a subaccount on any valuation date is calculated by multiplying
the subaccount unit value on the previous valuation date by its net investment
factor for the current valuation period.
NET INVESTMENT FACTOR
We use a net investment factor to measure investment performance of each
subaccount and to determine changes in unit value from one valuation period to
the next. The net investment factor for a valuation period is (a) divided by
(b) minus (c) where:
(a) is (i) the value of the assets of the subaccount at the end of the
preceding valuation period, plus (ii) the investment income and capital
gains, realized or unrealized, credited to the assets of the subaccount
during the valuation period for which the net investment factor is being
determined, minus, (iii) any amount charged against the subaccount for
taxes or any amount set aside during the valuation period by us to provide
for taxes we determine are attributable to the operation or maintenance of
that subaccount (currently there are no such taxes);
(b) is the value of the assets of the subaccount at the end of the preceding
valuation period; and
(c) is a charge no greater than 0.0020471% on a daily basis. This corresponds
to 0.75% on an annual basis for mortality and expense risks.
LOANS
After the first contract year, you may borrow up to the loan value of your
contract. The loan value is the cash surrender value less the cost of
insurance charges on your contract to the end of the current contract year.
The loan value will never be less than 75% of the cash surrender value. We
will generally distribute the loan proceeds to you within seven days from
receipt of your request for the loan at our home office, although payment of
the proceeds may be postponed under certain circumstances. (See "General
Provisions - Postponement of Payments" at page 33.) In some circumstances,
loans may involve tax liability. (See "Federal Tax Matters" at page 36.)
When a loan is made, cash value in an amount equal to the loan will be taken
from the general account and each subaccount in proportion to your cash value
in the general account and each subaccount. This value is then held in the
loan collateral account and earns interest at an effective rate guaranteed to
be at least 5% per year. Currently, we credit interest to the loan collateral
account at a rate of 6.75% per year, but we may reduce such rate to 5% at any
time. Such interest is credited to the subaccounts and the general account in
accordance with the premium allocation then in effect.
We charge interest on loans in advance each year at a rate of 7.4% per year,
equivalent to an effective annual rate of 8%. When we make a loan, we add to
the amount of the loan the interest covering the period until the end of the
contract year. At the beginning of each subsequent contract year, if you fail
to pay the interest in cash, we will transfer sufficient cash value from the
general account and each subaccount to pay the interest for the following
contract year. The allocation will be in proportion to your cash value in each
subaccount.
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You may repay a loan at any time, in whole or in part, before we pay the
contract proceeds. When you repay a loan, interest already charged covering
any period after the repayment will reduce the amount necessary to repay the
loan. Premiums paid in excess of any planned premiums when there is a loan
outstanding will be first applied to reduce or repay such loan. Upon repayment
of a loan, the loan collateral account will be reduced by the amount of the
repayment and the repayment will be allocated first to the general account,
until the amount borrowed from the general account has been repaid. Unless we
are instructed otherwise, the balance of the repayment will then be applied to
the subaccounts and the general account according to the premium allocation
then in effect.
Any outstanding contract indebtedness will be subtracted from the proceeds
payable at the insured's death and from cash surrender value upon complete
surrender or maturity.
A loan, whether or not repaid, will have a permanent effect on a contract's
cash surrender value (and the death benefit under Plan B contracts) because the
investment results of the subaccounts will apply only to the amount remaining
in the subaccounts. The longer the loan is outstanding, the greater the effect
is likely to be. The effect could be favorable or unfavorable. If investment
results are greater than the rate being credited upon the amount of the loan
while the loan is outstanding, contract values will not increase as rapidly as
they would have if no loan had been made. If investment results are below that
rate, contract values will be higher than they would have been had no loan been
made. A loan that is repaid will not have any effect upon the guaranteed
minimum death benefit.
SURRENDER PRIVILEGES
As an alternative to obtaining access to your cash value by using the loan
provisions described above, you may obtain your cash surrender value by
exercising your surrender or partial surrender privileges. Surrenders,
however, may involve tax liability. (See "Federal Tax Matters - Contract
Proceeds" at page 36.)
You may surrender your contract in full at any time by sending us a written
request together with the contract to our home office. The cash surrender
value of the contract equals the cash value less any applicable surrender
charges. (See "Charges and Deductions - Surrender Charge" at page 28.) Upon
surrender, the amount of any outstanding loans will be deducted from the cash
surrender value to determine the proceeds. The proceeds will be determined on
the valuation date on which the request for a surrender is received. Proceeds
will generally be paid within seven days of receipt of a request for surrender.
(See "General Provisions - Postponement of Payments" at page 33.)
After two years from issue date, you may obtain a portion of your cash value
upon partial surrender of the contract. Partial surrenders cannot be made more
than twice during any contract year. The amount of any partial surrender may
not exceed the cash surrender value, less (a) any outstanding contract
indebtedness, (b) an amount sufficient to cover the next two monthly deductions
and (c) the service charge of $25 or 2% of the amount surrendered, if less.
We will reduce the cash value of your contract by the amount of any partial
surrender. In doing so, we will deduct the cash value taken by a partial
surrender from each increase and your initial stated amount in proportion to
the amount such increases and initial stated amount bear to the total stated
amount.
Under Plan A, a partial surrender reduces your stated amount. Such surrender
will result in a dollar for dollar reduction in the death proceeds except when
the death proceeds of your contract are determined by the corridor percentage
test. The stated amount remaining after a partial surrender may be no less
than the minimum stated amount of $100,000. If increases in stated amount have
occurred previously, a partial surrender will first reduce the stated amount of
the most recent increase, then the most recent increases successively, then the
initial stated amount.
Under Plan B, a partial surrender reduces your cash value. Such reduction will
result in a dollar for dollar reduction in the death proceeds except when the
death proceeds are determined by the corridor percentage test. Because the
Plan B death benefit is the sum of the contract cash value and stated amount, a
partial surrender under Plan B does not reduce your stated amount but instead
reduces cash value.
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If the proceeds payable under either death benefit option both before and after
the partial surrender are determined by the corridor percentage test, a partial
surrender generally will result in a reduction in proceeds equal to the amount
paid upon such surrender plus such amount multiplied by the applicable corridor
percentage. (See "Death Benefits - Plan A - Level Benefit" at page 15.)
During the first ten contract years and for ten years after the effective date
of an increase, a partial surrender charge in addition to the service charge of
the lesser of $25 or 2% of the amount surrendered will be made on the amount of
partial surrenders in any contract year that exceeds 10% of the cash surrender
value as of the end of the previous contract year. (For an illustration of the
surrender charges applied to partial surrenders of cash value, see "Charges and
Deductions - Surrender Charge" at page 28.)
MATURITY
We will pay you your cash value on the maturity date, reduced by any
outstanding contract indebtedness. The maturity date is listed on the
specification page and is the end of the contract year nearest your 95th
birthday. If we consent, you may continue your contract for up to ten years
after the maturity date. In such case, the death benefit after the maturity
date will equal your contract's cash surrender value.
PREMIUMS
PURCHASING A CONTRACT
To purchase a contract, you must complete an application and submit it to us at
our home office through the agent selling the contract. Generally, we will not
issue a contract to a person older than age 70, but we may do so at our sole
discretion. Non- smoker rates are not available unless you are age 18 or over.
We will only issue contracts with stated amounts of $100,000 or more. All
applications require evidence of insurability. Acceptance of any application
is subject to our insurance underwriting rules. The review period for routine
applications will generally last one week. Approval of applications that
require supplemental medical information, however, may be delayed six weeks or
more while such information is obtained and reviewed.
You must pay an initial premium in order for your contract to take effect. The
contract takes effect as of the contract date. However, if you pay the initial
premium at the time you submit your application, we will, pursuant to the
premium receipt agreement contained in such application, provide you with
insurance coverage equal to your stated amount (up to $500,000) for a period of
up to 60 days, starting on the later of the date of your application and the
date you complete any required medical examination and ending on the date we
approve or reject your application. We do not pay interest on initial premiums
during the review period.
The contract date will be the same as the issue date, except in the case of a
backdated contract where the contract date will be earlier than the issue date.
At your request, we will backdate a contract as much as six months. This
procedure may be to your advantage where backdating will lower your age at
issue and thereby lower your cost of insurance and surrender charges which are
scaled by age. (See "Charges and Deductions - Monthly Deduction" at page 27
and "Surrender Charge" at page 28.) A backdated contract will be treated as
though it had been in force since the contract date. Consequently, the initial
premium required for a backdated contract will be larger than for a contract
which is not backdated inasmuch as you must satisfy the minimum premium
requirement, pay monthly deductions and pay all other charges associated with
the contract for the period between the contract date and the issue date.
On the later of the issue date and the date we receive your initial premium,
net premiums are allocated to the Money Market subaccount in connection with
the free look right. (See "Premiums - Free Look" at page 25.) On the first
process day following the issue date or, if later, when we receive your initial
premium, such net premiums will be allocated among the subaccounts and the
general account in accordance with your instructions as indicated in your
application.
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If we reject your application during the review period or you choose to cancel
your contract during the free look period, we will refund to you all amounts
you have paid under the contract. Consequently, during the application review
and free look periods, we bear the investment risk with respect to any amounts
you pay under the contract. However, if you do not exercise your free look
privilege, your cash value will reflect investment performance during the free
look period.
PAYMENT OF PREMIUMS
Premiums must be paid to us at our home office. Unlike a traditional insurance
policy, the contract does not require a fixed schedule of premium payments.
Within certain limits, you may determine the amount and timing of your premium
payments. As described below, such limits include an initial premium
requirement and a minimum premium requirement. Your contract specification
page will also include a schedule of planned premiums.
INITIAL PREMIUMS
You must pay an initial premium before we will make your contract effective.
Such premium may be submitted with your contract application or sent directly
to us at our home office. The amount of the initial premium will be at least
one monthly minimum premium. The initial premium for a backdated contract may
be substantially greater.
MINIMUM PREMIUMS
During the first two contract years, you must satisfy the minimum premium
requirement to keep the contract in force. Failure to satisfy the minimum
premium requirement during the first two contract years will result in the
termination of your contract after expiration of a 61 day grace period. (See
"Premiums - Lapse" at page 24.) After the second contract year, you must
satisfy the minimum premium requirement to keep the death benefit guarantee in
effect. Failure to make premium payments sufficient to maintain the death
benefit guarantee will not necessarily cause your contract to lapse. However,
once the death benefit guarantee does not apply to your contract, it may not be
reinstated. (See "Death Benefits - Death Benefit Guarantee" at page 17.) The
component of the monthly deduction which is the charge for the death benefit
guarantee will not be imposed on contracts for which the death benefit
guarantee is no longer in effect. (See "Charges and Deductions - Monthly
Deduction" at page 27.)
To satisfy the minimum premium requirement, you must have paid at any time
cumulative premiums, less any partial surrenders and contract indebtedness,
equal to the monthly minimum premium multiplied by the number of complete
contract months the contract has been in effect. The monthly minimum premium
indicated on the contract specification page will remain a level amount until
you reach age 70, or ten years from the contract date, if later. At such time,
the monthly minimum premium will be substantially increased.
PLANNED PREMIUMS
When you purchase a contract, you will be asked to adopt a planned premium
schedule. Such schedule is a planning device which indicates the level of
premiums you intend to pay under the contract. You are not required to adhere
to such schedule. You may adopt, in consultation with your agent, any planned
premium schedule that you wish. The amount of scheduled payments, however,
should generally be set between the minimum premium and the guideline annual
premium for your contract. The minimum premium is a level amount necessary to
keep the death benefit guarantee in effect. The guideline annual premium is a
level amount which should provide the benefits under the contract through age
95 and is based on guaranteed assumptions with respect to expenses and cost of
insurance charges and investment performance of 5%.
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In choosing your planned premium schedule, you will need to make a judgment as
to the long-term rate of investment return which you expect under the contract.
The higher your assumption as to the long-term rate of investment return, the
lower your planned premium needs to be for a given insurance objective, and
vice versa. There is no assurance that such planned premiums will provide the
death proceeds or other benefits sought under the contract. By definition, the
value of such benefits depends on the investment performance of the subaccounts
which cannot be predicted. In any event, you may need to pay greater or lesser
premiums than are indicated in the planned premium schedule to attain your
insurance objectives.
We will furnish you an annual report which will show the cash value of your
contract one year from the date of the report based on planned premiums,
guaranteed cost of insurance and guaranteed interest with respect to the
general account. We may charge for this report.
As previously indicated, at any time you may pay more or less than the amount
indicated in the planned premium schedule. We may at our discretion, however,
refuse to accept any premium payment of less than $25 or so large that it would
cause the contract, without an increase in death benefit, to be disqualified as
life insurance or to be treated as a modified endowment contract under federal
law.
ALLOCATION OF PREMIUMS
In the contract application, you may direct the allocation of your premium
payments, net of the premium expense charge (see "Charges and Deductions -
Premium Expense Charge" at page 26) among the subaccounts of the variable
account and the general account. Your initial allocation will take effect on
the first process day following the issue date or, if later, when we receive
your initial premium payment. Pending such allocation, net premiums will be
held in the money market subaccount. If you fail to indicate an allocation in
your contract application, we will leave your net premiums in the money market
subaccount until we receive allocation instructions. The amount allocated to
any subaccount or the general account must equal a whole percentage. You may
change the allocation of your future net premiums at any time upon written
notice to us. Premiums allocated to an increase will be credited to the
subaccounts and the general account in accordance with your premium allocation
then in effect on the later of the date of the increase or the date we receive
such a premium.
TRANSFERS
You may transfer the cash value of your contract among the subaccounts of the
variable account and to the general account at any time. Each amount
transferred must be at least $300 unless a smaller amount constitutes the
entire cash value of the subaccount from which the transfer is being made, in
which case you may only transfer the entire amount. There is a service charge
of $3 for each transfer, but we are presently waiving that charge for the first
four transfers during a contract year. Such fee is guaranteed not to exceed
$15 in the future. Transfers from the general account to the subaccounts are
subject to additional restrictions. No more than 25% of the cash value in the
general account as of the end of the previous contract year, or $1,000, if
greater, may be transferred to one or more of the subaccounts in any contract
year.
To the extent that transfers, surrenders and loans from a subaccount exceed net
purchase payments and transfers into that subaccount, securities of the
corresponding portfolio of the Fund may have to be sold. Excessive sales of a
portfolio's securities on short notice could be detrimental to that portfolio
and to contractowners with values allocated to the corresponding subaccount.
To protect the interests of all contractowners, the Company reserves the right
to limit the number, frequency, method or amount of transfers. Transfers from
any portfolio of the Fund on any one day may be limited to 1% of the previous
day's total net assets of that portfolio if the Company or the Fund, in its or
their discretion, believes that the portfolio might otherwise be damaged.
If and when transfers must be so limited, some transfer requests will not be
made. In determining which requests will be made, scheduled transfers
(pursuant to a preexisting Dollar Cost Averaging program) will be made first,
followed by mailed written requests in the order postmarked and, lastly,
telephone and facsimile requests in the order received. Contractowners whose
transfer requests are not made will be so notified. Current SEC rules preclude
the Company from processing at a later date those requests that were not made.
Accordingly, a new transfer request would have to be submitted in order to make
a transfer that was not made because of these limitations.
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DOLLAR COST AVERAGING
The Company administers a Dollar Cost Averaging ("DCA") program enabling you
to preauthorize automatic monthly or quarterly transfers of a specified dollar
amount from either the Money Market subaccount or the Bond subaccount to any of
the other variable subaccounts. The DCA program is only available on contracts
having a total cash value of at least $10,000. Each transfer under the DCA
program must be at least $500, and at least 12 transfers must be scheduled. No
transfer fee will be charged for DCA transfers. The Company may discontinue
the DCA program at any time.
DCA generally has the effect of reducing the risk of purchasing at the top of a
market cycle by reducing the average cost of indirectly purchasing Fund shares
through the subaccounts to less than the average price of the shares on the
same purchase dates. This is because greater numbers of shares are 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 the Bond subaccount, DCA will have the
effect of reducing the average price of Bond shares redeemed.
TELEPHONE TRANSFERS
If the contract owner first submits a pre-authorization form to the Company,
transfers may be made by telephoning the Company at 1-800-635-3225. The
Company will honor pre-authorized telephone transfer instructions from anyone
who is able to provide the personal identifying information requested, but
reserves the right to refuse to honor any such request if that seems prudent.
The Company will use reasonable procedures to confirm that telephone
instructions are genuine. (Otherwise, the Company may be liable for any losses
due to unauthorized or fraudulent instructions.) A written confirmation will be
sent following each telephone transfer.
LAPSE
Provided you satisfy the minimum premium requirement and thereby keep the death
benefit guarantee in effect, your contract will never lapse. If you fail to
satisfy the minimum premium requirement during the first two contract years,
your contract will lapse after a 61 day grace period. If your contract lapses
at any time within two years from the issue date or the date of any increase,
you may be entitled to a refund of a portion of the total sales charge
otherwise applicable to your contract. (See "Premiums - Refund Right" at page
25.)
If you fail to satisfy the minimum premium requirement after the second
contract year and, as a result, the death benefit guarantee is not in effect,
the contract will remain in force as long as the cash surrender value less any
contract indebtedness is sufficient to pay the next monthly deduction. If the
cash surrender value less any contract indebtedness is insufficient to pay the
next monthly deduction, you will be given a 61 day grace period within which to
make a premium payment to avoid lapse. The premium required to avoid lapse
will be equal to the amount needed to allow the cash surrender value less any
contract indebtedness to cover the monthly deduction for two contract months.
This required premium will be indicated in a written notice which we will send
to you at the beginning of the grace period. The grace period commences when
we mail such notice. The contract will continue in force throughout the grace
period, but if the required premium is not forthcoming, the contract will
terminate without value at the end of the grace period. If death occurs during
the grace period, the death benefit payable under the contract will be reduced
by the amount of any unpaid monthly deduction. However, the contract will
never lapse due to insufficient cash surrender value as long as the death
benefit guarantee is in effect.
REINSTATEMENT
If the contract lapses, you may apply for reinstatement anytime within five
years. Your contract will be reinstated provided you supply proof of
insurability and pay the monthly cost of insurance charges from the grace
period plus a reinstatement premium. The reinstatement premium, after
deduction of the premium expense charge, must be sufficient to cover the
monthly deduction for two contract months following the effective date of
reinstatement. If a loan was outstanding at the time of lapse, we will require
reinstatement or repayment of the loan and accrued interest at 6% per year
before permitting reinstatement of the contract.
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CONVERSION
Once during the first two years following the issue date and the date of any
increase in stated amount, you may convert your contract or increase, as
applicable, to a fixed benefit flexible premium policy by transferring all of
your cash value to the general account. After such a transfer, values and
death benefits under your contract will be determinable and guaranteed. Cash
values will be determined as of the date we receive a conversion request at our
home office. There will be no change in stated amount as a result of the
conversion and no evidence of insurability is required. Outstanding loans need
not be repaid in order to convert your contract. Transfers of cash value to
the general account in connection with such a conversion will be made without
charge.
FREE LOOK
You have a limited right to cancel your contract or any increase in stated
amount. We will cancel the contract or increase if you notify us or our agent
before the latest of 45 days from the date of your application, 20 days from
the date you receive the contract or increase and 10 days after we mail notice
of your right to cancel. Within seven days after we receive your notice to
cancel, we will return all of the money you paid for the cancelled contract or
increase. In some states, applicable law requires that your refund be adjusted
by any investment gains or losses.
REFUND RIGHT
Generally, we assess a contingent deferred sales charge if you surrender your
contract within the first ten contract years following the contract date or the
date of any increase. This is in addition to the 4% of premiums deducted for
sales load as a component of the premium expense charge. (See "Charges and
Deductions - Premium Expense Charge" at page 26.) The contingent deferred
sales charge is a percentage of your premium payments made during the first two
contract years up to a maximum of two guideline annual premiums. Such
percentage varies with age at issue or increase. (See "Charges and Deductions
- - Surrender Charge" at page 28.) If the surrender takes place during the first
two years following the issue date or the date of any increase, however, you
will be entitled to a refund of a portion of the total sales charge that
otherwise would be assessed: the 4% front-end load plus the contingent deferred
sales charge imposed as part of the surrender charge.
The amount of your refund will be the difference between the combined 4%
front-end charge and the contingent deferred sales charge described above and
the maximum sales charge deductions for the first two contract years described
below. The maximum sales charge during the first contract year is the lesser
of 30% of premiums paid or 30% of one guideline annual premium plus 9% of any
premium payment in excess of such guideline annual premium. During the second
contract year, the maximum sales charge is 10% of premium payments up to the
guideline annual premium and 9% of any excess. Consequently, if you surrender
your contract in full during the second contract year, the contingent deferred
sales charge will be limited to 30% of premiums paid in the first contract year
up to a guideline annual premium, 10% of premiums paid during the second
contract year up to a guideline annual premium and 9% of any premiums paid in
excess of a guideline annual premium in either or both years.
Legal requirements in connection with the refund right give rise to a timing
disparity for backdated contracts. The contract date is prior to the issue
date for a backdated contract. As a result, the refund right will extend
beyond the end of the second contract year for such contracts. To avoid any
difference in treatment between backdated and non-backdated contracts, we have
structured the contingent deferred sales charge to apply only to certain
premium payments made during the first two contract years. As a result, the
refund right applies to the same premium payments for both backdated and
non-backdated contracts, even though the right lasts longer in terms of
contract months and years for the latter type of contract.
Illustration of Refund. Assume that you are 45 years old, have paid $1,500 in
premiums in each of the first two contract years; your guideline annual premium
is $1,000; and still in the second contract year you decide to surrender your
contract.
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In the absence of a refund right, we would assess a contingent deferred sales
charge of $920 (46% of $2,000, which is actual premiums paid up to two
guideline annual premiums in the first two contract years, there being no
contingent deferred sales charge on the $1,000 of premium payments in excess of
two guideline annual premiums). The $920 contingent deferred sales charge is
in addition to the $120 (4% of $3,000) charged as front-end sales load. Thus,
in the absence of a refund right, a total of $1,040 would be charged.
Based on the formula described above, however, the maximum allowable sales
charge in the second contract year is $490, which is the sum of $300 (30% of
$1,000, which is actual payments in the first contract year up to a guideline
annual premium) plus $100 (10% of $1,000, which is actual payments in the
second contract year up to a guideline annual premium) plus $90 (9% of $1,000,
which is actual payments in excess of a guideline annual premium in both
contract years). Consequently, upon surrender, you would receive your cash
surrender value plus $550 ($1,040 less $490, which is the difference between
the combined 4% front-end sales load ($120) plus the contingent deferred sales
charge generally applicable ($920) (totaling $1,040) and the maximum allowable
sales charge in the second contract year ($490)).
In addition, if your contract lapses within two years of the issue date or the
date of any increase, you will be entitled to a refund of a portion of the
combined 4% front-end sales load and the contingent deferred sales charge
allocated to your initial contract or increase during the first two contract
years. The amount of such refund will be calculated in the same manner as
described above with respect to surrenders, except that any amounts applied to
keep your contract in force during the grace period will be offset against such
refund. (See "Premiums - Lapse" at page 24).
CHARGES AND DEDUCTIONS
We make charges against or deductions from premium payments, cash values and
contract surrenders in the manner described below.
PREMIUM EXPENSE CHARGE
Each premium payment is subject to a premium expense charge. The premium
expense charge has two components: a sales load and a charge for the state
premium tax and any other state and local taxes applicable to your contract.
Sales Load. The contract is subject to a level sales load of 4% of all premiums
paid. Such sales load partially compensates us for our sales and distribution
expenses, including agents' commissions, advertising and the printing of
prospectuses and sales literature. Upon full and certain partial surrenders
and decreases in your stated amount during the first ten contract years, we
also impose a contingent deferred sales charge. (See "Charges and Deductions -
Surrender Charge" at page 28.)
The same loading pattern is applied to the portion of premiums paid subsequent
to an increase which are allocated to such increase. (See "Death Benefits -
Changes in Stated Amount" at page 17.)
The sales charge in any contract year is not necessarily related to actual
distribution expenses incurred in that year. Instead, we expect to incur the
majority of distribution expenses in the first contract year and to recover any
deficiency over the life of the contract and from our general assets, including
amounts derived from the mortality and expense risk charge and from mortality
gains. We have reviewed this arrangement and concluded that the distribution
financing arrangement will benefit the variable account and contractowners.
State Premium Tax. Your premium payments will be subject to the state premium
tax and any other state or local taxes applicable to your contract. Currently,
most state premium taxes range from 2% to 4%.
26
<PAGE> 29
REDUCTION OF SALES LOAD
We also offer contracts which provide for reduction of the sales load for some
policyholders of the Company or Ohio National Life who roll over existing
universal or whole life insurance policies which they have owned for at least
one year. No sales load is assessed against existing cash value rolled over at
issue of the contract. In addition, future premium payments allocated to the
rolled over stated amount will be assessed only the level 4% sales load. No
contingent deferred sales charge is assessed in connection with the rolled over
stated amount.
OHIO NATIONAL LIFE EMPLOYEE DISCOUNT
Ohio National Life and its affiliated companies offer a credit on the purchase
of contracts by any of their employees, directors or retirees, or their spouse
or the surviving spouse of a deceased retiree, covering any of the foregoing or
any of their minor children, or any of their children ages 18 to 21 who is
either (i) living in the purchaser's household or (ii) a full-time college
student being supported by the purchaser, or any of the purchaser's minor
grandchildren under the Uniform Gifts to Minors Act. This credit is treated as
additional premium under the contract.
The amount of the credit equals 45% of the first contract year's minimum
premium and 45% of the minimum premium attributable to any increase in stated
amount for the year of such increase, plus 6.5% of any first year premium paid
in excess of the minimum premium, and 6.5% of the total premiums paid in the
second through sixth contract years. The Company credits the general account
of the employee's contract in the foregoing amounts at the times premium
payments are made by the employee.
MONTHLY DEDUCTION
As of the contract date and each subsequent process day, we will deduct from
the cash value of your contract a monthly deduction to cover certain charges
and expenses incurred in connection with the contract.
The monthly deduction consists of (1) the cost of insurance, (2) an
administration charge of $5 for the cost of establishing and maintaining
contract records and processing applications and notices, (3) a risk charge of
$.01 per $1,000 of your stated amount for the risk associated with the death
benefit guarantee, and (4) the cost of additional insurance benefits provided
by rider.
Your cost of insurance is determined on a monthly basis, and is determined
separately for your initial stated amount and each subsequent increase in the
stated amount. The monthly cost of insurance rate is based on your sex,
attained age, rate class and the length of time since issue. The cost of
insurance is calculated by multiplying (i) by the result of (ii) minus (iii),
where:
(i) is the cost of insurance rate as described in the contract. Such actual
cost will be based on our expectations as to future mortality experience.
It will not, however, be greater than the guaranteed cost of insurance
rates set forth in the contract. Such rates for smokers and non-smokers
are based on the 1980 Commissioner's Standard Ordinary mortality table,
with assumed interest at the rate of 5% per year. The cost of insurance
charge is guaranteed not to exceed such table rates for the insured's
risk class;
(ii) is the death benefit at the beginning of the contract month divided by
1.0040741; and
(iii) is cash value at the beginning of the contract month.
In connection with certain employer-related plans, cost of insurance rates may
not be based on sex. (See "Employee Benefit Plans" at page 37.)
27
<PAGE> 30
RISK CHARGE
Your cash value in the variable account, but not your cash value in the general
account, will also be subject to a risk charge intended to compensate us for
assuming certain mortality and expense risks in connection with the contract.
Such charge will be assessed at a daily rate of 0.0020471% against each of the
variable subaccounts. This corresponds to an annual rate of 0.75%. The risks
assumed by us include the risks of greater than anticipated mortality and
expenses.
SURRENDER CHARGE
After the free look period and during the early years of your contract and
following any increase in stated amount, a surrender charge is assessed in
connection with all complete surrenders, all decreases in stated amount and
certain partial surrenders. Such surrender charge consists of two components:
(1) a contingent deferred sales charge, which applies to your initial contract
for ten years from the contract date and to any increase for ten years from the
effective date of such increase, and (2) a contingent deferred insurance
underwriting charge, which applies for seven years from such dates.
If you surrender your contract in full when a surrender charge applies, we will
deduct the total charge from your cash value, except during the first two years
from the date of issue or increase. If you surrender your contract in full
during the two years following the issue date and the effective date of any
increase, you are entitled to a refund of a portion of the total sales charge
applicable to your initial contract or increase. (See "Premiums - Refund
Right" at page 25.) If you decrease the stated amount of your contract while a
surrender charge applies, your cash value will be charged with the portion of
the total surrender charge attributable to the stated amount cancelled by the
decrease.
Partial surrenders in any contract year totaling 10% or less of the cash
surrender value of your contract as of the end of the previous contract year are
not subject to any surrender charge. Partial surrenders in any contract year
in excess of 10% of the cash surrender value of your contract as of the end of
the previous contract year will be subject to that percentage of the total
surrender charges that is equal to the percentage of cash surrender value
withdrawn minus 10%.
For example, assume a contract which now has, and at the end of the previous
contract year had, a cash value of $11,100 and a surrender charge of $1,100.
The cash surrender value of the contract is therefore $10,000. If you decide
to withdraw 25% of such cash surrender value ($2,500), we will impose a charge
equal to 15% (25%-10%) of the total surrender charge. (.15 x $1,100 $165) and
reduce your cash value by that amount.
Contingent Deferred Sales Charge. The contingent deferred sales charge for
your initial contract is a percentage of premiums paid in the first two
contract years up to two guideline annual premiums. You are only required to
pay a minimum premium. If you pay higher premiums in the first two contract
years, your contract will be subject to a higher contingent deferred sales
charge then if you paid only such minimums. Similarly, only premiums allocated
to an increase within two years after such increase up to two guideline annual
premiums for such increase will be subject to the contingent deferred sales
charge. Accordingly, any premium paid either before or after such two year
period will not be subject to the contingent deferred sales charge. The
contingent deferred sales charge takes effect only if you surrender your
contract, in whole or in part, or decrease your stated amount, during the first
ten contract years following the issue date or the date of any increase.
28
<PAGE> 31
The contingent deferred sales charge for an increase is a percentage of
premiums allocated to such increase during the two years following the
effective date of such increase. (See "Death Benefits - Changes in Stated
Amount" at page 17.) The contingent deferred sales charge percentages are
scaled by age at issue or increase, as set forth in the following table:
<TABLE>
<CAPTION>
AGE AT
ISSUE OR 74 AND
INCREASE 0-55 55-60 61-65 66-68 69-73 OVER
-------- ---- ----- ----- ----- ----- ----
<S> <C> <C> <C> <C> <C> <C>
Charge 46% 38% 30% 26% 20% 13%
</TABLE>
This charge is in addition to the 4% of premiums deducted for sales load as a
component of the premium expense charge. (See "Charges and Deductions -
Premium Expense Charge" at page 26.)
While we are not obligated to do so under the contract, it is our current
intention to grade-off the contingent deferred sales charge over the ten year
period to which it applies. The table below shows the percentage of the total
of such charge that we intend to impose on surrenders, decreases and certain
partial surrenders in each year such charge applies.
<TABLE>
<CAPTION>
YEAR PERCENTAGE OF TOTAL CHARGE
---- --------------------------
<S> <C>
1 100%
2 100%
3 100%
4 100%
5 100%
6 100%
7 80%
8 60%
9 40%
10 20%
</TABLE>
Pursuant to the terms of your contract, we reserve the right to impose 100% of
the contingent deferred sales charge in each of the ten years. We guarantee
only that we will not impose such a charge more than ten years after issue or
an increase in stated amount.
Contingent Deferred Insurance Underwriting Charge. The contingent deferred
insurance underwriting charge varies with age at issue or increase and is
expressed as an amount per thousand dollars of your stated amount and therefore
varies with the size of your contract as well. Such variation is limited,
however, in that such charge only applies to the first $500,000 of your stated
amount. The charges per thousand dollars of stated amount and the maximum
charges by virtue of the $500,000 cap are set forth in the following table:
<TABLE>
<CAPTION>
AGE AT ISSUE 61 AND
OR INCREASE 0-40 41-50 51-60 OVER
----------- ---- ----- ----- ----
<S> <C> <C> <C> <C>
Charge per $3.00 $4.00 $5.00 $6.00
$1.000 of
Stated Amount
Maximum $1,500 $2,000 $2,500 $3,000
</TABLE>
29
<PAGE> 32
While we are not obligated to do so under the contract, it is our current
intention to grade-off the contingent deferred insurance underwriting charge in
accordance with the following table. The table shows the percentage to total
such charge we intend to impose on surrenders, decreases and certain partial
surrenders in each year such charge applies.
<TABLE>
<CAPTION>
YEAR PERCENTAGE OF TOTAL CHARGE
---- --------------------------
<S> <C>
1 100%
2 100%
3 100%
4 100%
5 75%
6 50%
7 25%
</TABLE>
Under the terms of your contract, we reserve the right to impose 100% of the
contingent deferred insurance underwriting charge in each of seven successive
years. We guarantee only that we will not impose such a charge more than seven
years after issue or an increase in stated amount.
The contingent deferred insurance underwriting charge is intended to compensate
us for certain insurance underwriting costs, including the selection and
classification of risks and processing medical evidence of insurability.
SERVICE CHARGES
A charge that is currently $3 and is guaranteed not to exceed $15 will be
imposed on each transfer of cash values among the subaccounts of the variable
account and the general account. Currently, the Company is not assessing this
charge on the first four transfers made in any contract year. For partial
surrenders, a service fee will be charged equal to the lesser of $25 or 2% of
the amount surrendered. A fee, not to exceed $25, is charged for any
illustration of benefits and values that you may request after the issue date.
All such fees are no greater than anticipated expenses in providing such
services.
OTHER CHARGES
We also reserve the right to charge the assets of each subaccount and the
general account to provide for any taxes that may become payable by us in
respect of such assets. Under current law, no such taxes are anticipated. In
addition, the Fund pays certain expenses that affect the value of your
contract. The principal expense at the Fund level is an investment advisory
fee which, for the Equity, Bond and Omni Portfolios is at the annual rate of
0.60% of the first $100 million of average daily net assets of each of those
portfolios, 0.50% of the next $150 million, 0.45% of the next $250 million,
0.40% of the next $500 million, 0.30% of the next $1 billion, and 0.25% of all
portfolio assets in excess of $2 billion. For the Money Market Portfolio, the
fee is 0.30% of the first $100 million of average daily net assets, 0.25% of
the next $150 million, 0.23% of the next $250 million, 0.20% of the next $500
million, and 0.15% of all assets in excess of $1 billion. Presently, with
respect to the Money Market Portfolio, the Adviser is waiving any of its fee in
excess of 0.25%. For the International and Global Contrarian Portfolios, the
fee is 0.90% of each portfolio's average daily net assets, of which 0.75% is
paid by the Adviser to SGAM. For the Capital Appreciation, Small Cap, and
Aggressive Growth Portfolios, the fee is 0.80% of the average daily net assets
of each of those portfolios. The Adviser then pays TRPA a fee at an annual
rate of 0.70% of the first $5 million and 0.50% of average daily net asset
value in excess of $5 million for the Capital Appreciation Portfolio; the
Adviser pays FAM a fee at an annual rate of 0.65% of the first $75 million,
0.60% of the next $75 million, and 0.55% of average daily net asset value in
excess of $150 million, and the Adviser pays SCM a fee at an annual rate of
0.70% of the first $50 million and 0.50% of average daily net asset value in
excess of $50 million. (See the attached Fund prospectus for a full
description of all expenses and fees payable by the Fund.)
30
<PAGE> 33
GENERAL PROVISIONS
VOTING RIGHTS
We will vote the Fund shares held in the various subaccounts of the variable
account at regular and special shareholder meetings of the Fund in accordance
with your instructions. If, however, the 1940 Act or any regulation thereunder
should change and we determine that it is permissible to vote the Fund shares
in our own right, we may elect to do so. The number of votes as to which you
have the right to instruct will be determined by dividing your contract's cash
value in a subaccount by the net asset value per share of the corresponding
Fund portfolio. Fractional shares will be counted. The number of votes as to
which you have the right to instruct will be determined as of the date
coincident with the date established by the Fund for determining shareholders
eligible to vote at the meeting of the Fund. Voting instructions will be
solicited in writing prior to such meeting in accordance with procedures
established by the Fund. We will vote Fund shares attributable to contracts as
to which no instructions are received, and any Fund shares held by the variable
account which are not attributable to contracts, in proportion to the voting
instructions which are received with respect to contracts participating in the
variable account. Each person having a voting interest will receive proxy
material, reports and other material relating to the Fund.
Similarly, we will vote Fund shares held by variable annuity separate accounts
in accordance with instructions received from annuity owners. Certain Fund
shares owned by Ohio National Life that are held by such variable annuity
separate accounts will be voted in proportion to the voting instructions
received from contractowners.
We may, when required by state insurance regulatory authorities, disregard
voting instructions if the instructions require that shares be voted so as to
cause a change in subclassification or investment objective of the Fund or
disapprove an investment advisory contract of the Fund. In addition, we may
disregard voting instructions in favor of changes initiated by a contractowner
in the investment policy or the investment adviser of the Fund if we reasonably
disapprove of such changes. A change would be disapproved only if the proposed
change is contrary to state law or prohibited by state regulatory authorities
or we determined that the change would be inconsistent with the investment
objectives of the variable account or would result in the purchase of
securities for the variable account which vary from the general quality and
nature of investments and investment techniques utilized by other separate
accounts created by us or any of our affiliates which have similar investment
objectives. In the event that we disregard voting instructions, a summary of
that action and the reason for such action will be included in your next
semi-annual report.
ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS
We reserve the right, subject to compliance with applicable law, to make
additions to, deletions from or substitutions for the shares held by any
subaccount or which any subaccount may purchase. If shares of the Fund should
no longer be available for investment or if, in the judgment of management,
further investment in shares of the Fund would be inappropriate in view of the
purposes of the contract, we may substitute shares of any other investment
company for shares already purchased, or to be purchased in the future. No
substitution of securities will take place without notice to and the consent of
contractowners and without prior approval of the Commission, all to the extent
required by the 1940 Act. In addition, the investment policy of the variable
account will not be changed without the approval of the Ohio Superintendent of
Insurance and such approval will be on file with the state insurance regulator
of the state where your contract was delivered.
Each class of Fund shares is subject to certain investment restrictions which
may not be changed without the approval of the majority of such shares. For
details concerning such restrictions, see the accompanying prospectus for the
Fund.
31
<PAGE> 34
ANNUAL REPORT
Each year we will send you a report which shows the current cash value, the
cash surrender value, the stated amount, any contract indebtedness, any partial
withdrawals since the date of the last report, investment experience credited
since the last report, premiums paid and all charges imposed since the last
annual report. We will also send you all reports required by the 1940 Act.
We will also make available a projection report. This report will be based on
planned premiums, guaranteed cost of insurance and guaranteed interest, if any.
It will show the cash value of your contract one year from the date of the
report. We may charge a fee of not more than $25 for this report and if you
ask for more than one annual report.
LIMITATION ON RIGHT TO CONTEST
We will not contest the insurance coverage provided under the contract, except
for any subsequent increase in stated amount, after the contract has been in
force during your lifetime for a period of two years from the contract date.
This provision does not apply to any rider which grants disability or
accidental death benefits. Any increase in the stated amount will not be
contested after such increase has been in force during your lifetime for two
years following the effective date of the increase. Any increase will be
contestable within the two year period only with regard to statements
concerning the increase.
MISSTATEMENTS
If the age or sex of the insured has been misstated in an application,
including a reinstatement application, the amount payable under the contract by
reason of the death of the insured will be 1.0032737 multiplied by the sum of
(i) and (ii) where:
(i) is the cash value on the date of death; and
(ii) is the death benefit, less the cash value on the date of death,
multiplied by the ratio of (a) the cost of insurance actually
deducted at the beginning of the contract month in which the death
occurs to (b) the cost of insurance that should have been deducted
at the insured's true age or sex.
SUICIDE
The contract does not cover the risk of suicide within two years from the
contract date or two years from the date of any increase in stated amount with
respect to such increase, whether the insured is sane or insane. In the event
of suicide within two years of the contract date, we will refund premiums paid,
without interest, less any contract indebtedness and less any partial
surrender. In the event of suicide within two years of an increase in stated
amount, we will refund any premiums allocated to the increase, without
interest, less a deduction for a share of any contract indebtedness outstanding
and any partial surrenders made since the increase. The share of indebtedness
and partial surrenders so deducted will be determined by dividing the total
face amount at the time of death by the face amount of the increase.
BENEFICIARIES
The primary and contingent beneficiaries are designated by the contractowner on
the application. If changed, the primary beneficiary or contingent beneficiary
is as shown in the latest change filed with us. If more than one beneficiary
survives the insured, the proceeds of the contract will be paid in equal shares
to the survivors in the appropriate beneficiary class unless requested
otherwise by the contractowner.
32
<PAGE> 35
POSTPONEMENT OF PAYMENTS
Payment of any amount upon a complete or partial surrender, a contract loan, or
benefits payable at death or maturity may be postponed whenever: (i) the New
York Stock Exchange is closed other than customary week-end and holiday
closings, or trading on the Exchange is restricted as determined by the
Commission; (ii) the Commission by order permits postponement for the
protection of contractowners; or (iii) an emergency exists, as determined by
the Commission, as a result of which disposal of securities is not reasonably
practicable or it is not reasonably practicable to determine the value of the
variable account's net assets. The Company may also withhold payment of any
increased cash value or loan value resulting from a recent premium payment
until your premium check has cleared. This could take up to 15 days after we
receive your check.
ASSIGNMENT
The contract may be assigned as collateral security. We must be notified in
writing if the contract has been assigned. Each assignment will be subject to
any payments made or action taken by us prior to our notification of such
assignment. We are not responsible for the validity of an assignment. The
contractowner's rights and the rights of the beneficiary may be affected by an
assignment.
NON-PARTICIPATING CONTRACT
The contract does not share in our surplus distributions. No dividends are
payable with respect to the contract.
THE GENERAL ACCOUNT
By virtue of exclusionary provisions, interests in the general account have not
been registered under the Securities Act of 1933 and the general account has
not been registered as an investment company under the 1940 Act. Accordingly,
neither the general account nor any interests therein are subject to the
provisions of these Acts.
GENERAL DESCRIPTION
The general account consists of all assets owned by us other than those in the
variable account and any other separate accounts we may establish. Subject to
applicable law, we have sole discretion over the investment of the assets of
the general account.
You may elect to allocate net premiums to the general account or to transfer
cash value to the general account from the subaccounts of the variable account.
The allocation or transfer of funds to the general account does not entitle a
contractowner to share in the investment experience of the general account.
Instead, we guarantee that your cash value in the general account will accrue
interest daily at an effective annual rate of at least 4%, without regard to
the actual investment experience of the general account. Consequently, if you
pay the planned premiums, allocate all net premiums only to the general account
and make no transfers, partial surrenders, or contract loans, the minimum
amount and duration of your death benefit will be determinable and guaranteed.
Transfers from the general account to the variable account are partially
restricted and allocation of substantial sums to the general account reduces
the flexibility of the contract. (See "Premiums - Transfers" at page 23.)
CASH VALUE
The cash value in the general account on the later of the issue date or the day
we receive your initial premium is equal to the portion of the net premium
allocated to the general account, less a pro rata portion of the first monthly
deduction.
Thereafter, until the maturity date, we guarantee that the cash value in the
general account will not be less than the amount of the net premiums allocated
or cash value transferred to the general account, plus interest at the rate of
5% per year, plus any excess interest which we credit, less the sum of all
charges and interest thereon allocable to the general account and any amounts
deducted from the general account in connection with partial surrenders and
interest thereon or transfers to the variable account.
33
<PAGE> 36
We guarantee that interest credited to your cash value in the general account
will not be less than an effective annual rate of 5% per year. We may, at our
sole discretion, credit a higher rate of interest, although we are not
obligated to do so. The contractowner assumes the risk that interest credited
may not exceed the guaranteed minimum rate of 5% per year. The cash value in
the general account will be calculated on each valuation date.
OPTIONAL INSURANCE BENEFITS
Subject to certain requirements, one or more optional insurance benefits may be
added to your contract, including riders providing additional term insurance,
spouse term insurance, family plan _ children insurance, a guaranteed purchase
option, accidental death, waiver of cost of insurance, waiver of premium, and
accelerated death benefit. More detailed information concerning such riders
may be obtained from your agent. The cost of any optional insurance benefits
will be deducted as part of the monthly deduction. (See "Charges and
Deductions - Monthly Deduction" at page 27.)
SETTLEMENT OPTIONS
In addition to a lump sum payment of benefits under the contract (see "Death
Benefits" at page 15), any proceeds may be paid in any of the five methods
described in your contract. For more details, contact your agent. A
settlement option may be designated by notifying us in writing at our home
office. Any amount left with us for payment under a settlement option will be
transferred to the general account. During the life of the insured, the
contractowner may select a settlement option. If a settlement option has not
been chosen at the insured's death, the beneficiary may choose one. If a
beneficiary is changed, the settlement option selection will no longer be in
effect unless the contractowner requests that it continue. A settlement option
may be elected only if the amount of the proceeds is $5,000 or more. We
reserve the right to change the interval of payments if necessary to increase
the payments to at least $25 each.
DISTRIBUTION OF THE CONTRACT
The contract is sold by individuals who, in addition to being licensed as life
insurance agents, are also registered representatives (a) of The O.N. Equity
Sales Company ("ONESCO"), a wholly-owned subsidiary of Ohio National Life, or
(b) of other broker-dealers that have entered into distribution agreements with
the principal underwriter of the contracts. ONESCO and the other
broker-dealers are responsible for supervising and controlling the conduct of
their registered representatives in connection with the offer and sale of the
contract. ONESCO and the other broker-dealers are registered with the
Commission under the Securities Exchange Act of 1934 and are members of the
National Association of Securities Dealers, Inc.
At the date of this prospectus, ONESCO was the principal underwriter of the
contracts. However, pending receipt of necessary regulatory approvals, Ohio
National Equities, Inc., a new wholly-owned subsidiary of Ohio National Life,
will become the principal underwriter. The Company, pursuant to a distribution
and service agreement with the principal underwriter, reimburses the principal
underwriter for any expenses incurred by it in connection with the distribution
of the contracts. At the end of each calendar quarter, the principal
underwriter pays the Company an amount equal to one-sixteenth of one percent of
the average daily amount of assets of the contract maintained in the Fund
during that quarter. This agreement may be terminated at any time by either
party on 60 days' written notice.
34
<PAGE> 37
MANAGEMENT OF THE COMPANY
<TABLE>
<CAPTION>
OFFICERS AND DIRECTORS
RELATIONSHIP PRINCIPAL OCCUPATION
NAME WITH COMPANY AND BUSINESS ADDRESS
- -------------------------------- ---------------------------------- ----------------------
<S> <C> <C>
Paul L. Bergmann Vice President, Financial The Ohio National Life
Control Insurance Company*
Michael A. Boedeker Vice President, Fixed Income The Ohio National Life
Securities Insurance Company*
Joseph P. Brom Director and Senior Vice President The Ohio National Life
& Chief Investment Officer Insurance Company*
David W. Cook Senior Vice President and Actuary The Ohio National Life
Insurance Company*
Robert M. DiTommaso Vice President, Career Marketing The Ohio National Life
Insurance Company*
Ronald J. Dolan Director and Senior Vice President The Ohio National Life
& Chief Financial Officer Insurance Company*
David B. O'Maley Director and Chairman, The Ohio National Life
President & Chief Executive Officer Insurance Company*
George B. Pearson Vice President, PGA Marketing The Ohio National Life
Insurance Company*
Dallas L. Pennington Vice President, Information The Ohio National Life
Systems Insurance Company*
D. Gates Smith Senior Vice President, Sales The Ohio National Life
Insurance Company*
Michael D. Stohler Vice President, Mortgages & The Ohio National Life
Real Estate Insurance Company*
Stuart G. Summers Director and Senior Vice President The Ohio National Life
and General Counsel Insurance Company*
Donald J. Zimmerman Director, Senior Vice President, The Ohio National Life
Insurance Operations Insurance Company*
and Secretary
</TABLE>
*Principal Business Address is:
237 William Howard Taft Road
Cincinnati, Ohio 45219
The officers, directors and employees of the Company who have access to the
assets of the variable account are covered by fidelity bonds issued by United
States Fidelity & Guaranty Company in the aggregate amount of $3,000,000.
CUSTODIAN
Pursuant to a written agreement, The Provident Bank, One East Fourth Street,
Cincinnati, Ohio, serves as custodian of the assets of the variable account.
The fee of the custodian for services rendered to the variable account is paid
by the Company. The custodian also provides valuation and certain
recordkeeping services to the variable account, which include, without
limitation, maintaining a record of all purchases, redemptions and
distributions relating to Fund shares, the amounts thereof and the number of
shares from time to time standing to the credit of the variable account.
35
<PAGE> 38
STATE REGULATION OF THE COMPANY
The Company is organized under the laws of the State of Ohio and is subject to
regulation by the Superintendent of Insurance of Ohio. An annual statement is
filed with the Superintendent on or before March 1 of each year covering the
operations and reporting on the financial condition of the Company as of
December 31 of the preceding year. Periodically, the Superintendent examines
the assets and liabilities of the Company and of the variable account and
verifies their adequacy. A full examination of the Company's operations is
conducted by the National Association of Insurance Commissioners at least every
five years.
In addition, the Company is subject to the insurance laws and regulations of
other states in which it is licensed to operate. Generally, the insurance
department of any other state applies the laws of the state of domicile in
determining permissible investments.
FEDERAL TAX MATTERS
The following description is a brief summary of some of the Code provisions
which, in the Company's opinion, are currently in effect. This summary does
not purport to be complete or to cover all situations, including the possible
tax consequences of changes in ownership. Counsel and other competent tax
advisers should be consulted for more complete information. Tax laws can
change, even with respect to contracts that have already been issued. Tax law
revisions, with unfavorable consequences to contracts offered by this
prospectus, could have retroactive effect on previously issued contracts or on
subsequent voluntary transactions in previously issued contracts.
CONTRACT PROCEEDS
The contract contains provisions not found in traditional life insurance
contracts providing only for fixed benefits. However, under the Code, as
amended by the Tax Reform Act of 1984, the contract should qualify as a life
insurance contract for federal income tax purposes as long as certain
conditions are met. Consequently, the proceeds of the contract payable to the
beneficiary on the death of the insured will generally be excluded from the
beneficiary's income for purposes of the federal income tax.
Current tax rules and penalties on distributions from life insurance contracts
apply to any life insurance contract issued or materially changed on or after
June 21, 1988 that is funded more heavily (faster) than a traditional whole
life plan designed to be paid-up after the payment of level annual premiums
over a seven-year period. Thus, for such a contract (called a "modified
endowment contract" in the Code), any distribution, including surrenders,
partial surrenders and loans secured by the contract, during the insured's
lifetime (but not payments received as an annuity or as a death benefit) would
be included in the contractowner's gross income to the extent that the
contract's cash surrender value exceeds the owner's investment in the contract.
In addition, a ten percent penalty tax applies to any such distribution from
such a contract, to the extent includible in gross income, except if made (i)
after the taxpayer's attaining age 59-1/2, (ii) as a result of his or her
disability or (iii) in one of several prescribed forms of annuity payments.
Loans received under the contract will be construed as indebtedness of the
contractowner in the same manner as loans under a fixed benefit life insurance
policy and no part of any loan under the contract is expected to constitute
income to the contractowner. Interest payable with respect to such loans is
not tax deductible. If the contract is surrendered or lapsed, any policy loan
then in effect is treated as taxable income to the extent that the contract's
cash value (including the loan amount) then exceeds your "basis" in the
contract. (Your "basis" equals the total amount of premiums that were paid
into the contract less any withdrawals from the contract.)
Federal estate and local estate, inheritance and other tax consequences of
contract ownership or receipt of contract proceeds depend upon the
circumstances of each contractowner and beneficiary.
36
<PAGE> 39
CORRECTION OF MODIFIED ENDOWMENT CONTRACT
If you have made premium payments in excess of the amount that would be
permitted without your contract being treated as a modified endowment contract
under the Code, you may, upon timely written request, prevent that tax
treatment by receiving a refund, without deduction of any charges, of the
excess premium paid, plus interest thereon at the rate of 6% per year. Under
the Code, such a corrective action must be completed by no later than 60 days
after the end of the year following the date the contract became a modified
endowment contract.
RIGHT TO CHARGE FOR COMPANY TAXES
The Company is presently taxed as a life insurance company under the provisions
of the Code. The Tax Reform Act of 1984 specifically provides for adjustments
in reserves for flexible premium policies, and we will reflect flexible premium
life insurance operations in our tax return in accordance with such Act.
Currently, no charge is assessed against the variable account for the Company's
federal taxes, or provision made for such taxes, that may be attributable to
the variable account. However, we may in the future charge each subaccount of
the variable account for its portion of any tax charged to us in respect of
such subaccount or its assets. Under present law, we may incur state and local
taxes (in addition to premium taxes) in several states. At present, these
taxes are not significant. If they increase, however, we may decide to assess
charges for such taxes, or make provision for such taxes, against the variable
account. Any such charges against the variable account or its subaccounts
could have an adverse effect on the investment performance of such subaccounts.
EMPLOYEE BENEFIT PLANS
Employers and employee organizations should consider, in consultation with
counsel, the impact of Title VII of the Civil Rights Act of 1964 on the
purchase of a contract in connection with an employment-related insurance or
benefit plan. The United States Supreme Court held, in a 1983 decision, that,
under Title VII, optional annuity benefits under a deferred compensation plan
could not vary on the basis of sex.
LEGAL PROCEEDINGS
There are no legal proceedings to which the variable account is a party or to
which the assets of any of the subaccounts thereof are subject. The Company is
not involved in any litigation that is of material importance in relation to
its total assets or that relates to the variable account.
LEGAL MATTERS
Jones & Blouch L.L.P., Washington, D.C., has served as special counsel with
regard to legal matters relating to federal securities laws applicable to the
issuance of the flexible premium variable life insurance contract described in
this prospectus. All matters of Ohio law pertaining to the contract including
the validity of the contract and the Company's right to issue the contract
under the Insurance Law of the State of Ohio have been passed upon by Ronald L.
Benedict, Second Vice President and Counsel of Ohio National Life.
EXPERTS
The financial statements of Variable Account R as of December 31, 1995 and for
each of the three years in the period then ended and of the Company as of
December 31, 1995 and for the year then ended included in this prospectus have
been included herein in reliance upon the reports of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
37
<PAGE> 40
The audited financial statements of Ohio National Life Assurance Corporation (a
wholly-owned subsidiary of The Ohio National Life Insurance Company) have been
prepared in accordance with generally accepted accounting principles.
Actuarial matters included in this prospectus have been examined by David W.
Cook, FSA, MAAA, as stated in the opinion filed as an exhibit to the
registration statement.
REGISTRATION STATEMENT
A registration statement has been filed with the Commission under the
Securities Act of 1933, as amended, with respect to the contract offered
hereby. This prospectus does not contain all the information set forth in the
registration statement. Reference is made to such registration statement for
further information concerning the variable account, the Company and the
contract offered hereby. Statements contained in this prospectus as to the
contents of the contract and other legal instruments are summaries. For a
complete statement of the terms thereof, reference is made to such instruments
as filed.
FINANCIAL STATEMENTS
The financial statements of the Company which are included in this prospectus
should be considered only as bearing on the ability of the Company to meet its
obligations under the contract. They should not be considered as bearing on
the investment performance of the assets held in the variable account.
OHIO NATIONAL VARIABLE ACCOUNT R
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Ohio National Life Assurance Corporation
The Contract Owners
Ohio National Variable Account R
We have audited the accompanying statements of assets and contract owner's
equity of Ohio National Variable Account R as of December 31, 1995, and the
related statement of operations, changes in contract owners' equity and
schedules of changes in unit values for each of the periods indicated herein.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31, 1995,
by examination of the underlying mutual fund. 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
R at December 31, 1995, and the results of its operations, changes in
contractowners' equity and changes in unit values for each of the periods
indicated herein, in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Cincinnati, Ohio
January 26, 1996
38
<PAGE> 41
OHIO NATIONAL VARIABLE ACCOUNT R
STATEMENTS OF ASSETS AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1995
<TABLE>
<CAPTION>
MONEY CAPITAL
EQUITY MARKET BOND OMNI INTERNATIONAL APPRECIATION
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Assets - Investments
at market value
(note 2) $16,037,147 $671,215 $526,383 $5,159,728 $8,125,877 $1,238,994
=========== ======== ======== ========== ========== ==========
Contract owners'
equity:
Contracts in
accumulation
period (note 3) $16,037,147 $671,215 $526,383 $5,159,728 $8,125,877 $1,238,994
=========== ======== ======== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
SMALL GLOBAL AGGRESS.
CAP CONTR. GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
<S> <C> <C> <C>
Assets - Investments
at market value
(note 2) $1,674,007 232,012 442,081
========== ======= =======
Contract owners'
equity:
Contracts in
accumulation
period (note 3) $1,674,007 232,012 442,081
========== ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
39
<PAGE> 42
OHIO NATIONAL VARIABLE ACCOUNT R
STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
MONEY
EQUITY MARKET
SUBACCOUNT SUBACCOUNT
1995 1994 1993 1995 1994 1993
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment activity:
Reinvested capital
gains and dividends $ 377,916 $ 312,185 $ 228,872 $ 24,454 $ 14,204 $ 6,282
----------- ----------- ---------- ---------- ---------- ----------
Realized and unrealized gain
(loss) on investments:
Realized gain (loss) 137,099 76,820 62,035 140 - -
Unrealized gain (loss) 2,656,620 (358,845) 738,010 0 - (218)
----------- ----------- ---------- ---------- ---------- ----------
Net gain (loss) on
investments 2,793,719 (282,025) 800,045 140 - (218)
Net investment activity 3,171,635 30,160 1,028,917 24,594 14,204 6,064
----------- ----------- ---------- ---------- ---------- ----------
Equity transactions:
Sales:
Contract purchase payments 3,786,276 3,311,520 2,490,654 2,749,849 3,427,468 1,747,695
Transfers from fixed and
other subaccounts 1,036,068 1,199,000 1,156,965 478,053 588,864 273,749
----------- ----------- ---------- ---------- ---------- ----------
4,822,344 4,510,520 3,647,619 3,227,902 4,016,332 2,021,444
----------- ----------- ---------- ---------- ---------- ----------
Redemptions:
Withdrawals and surrenders 325,573 246,089 303,031 24,538 2,746 11,533
-----------
Transfers to fixed and
other subaccounts 1,127,609 1,309,525 888,301 2,921,107 3,962,531 1,709,310
-----------
Cost of insurance and
administrative fee 1,261,061 1,039,221 810,300 119,220 124,019 66,464
----------- ----------- ---------- ---------- ---------- ----------
2,714,243 2,594,835 2,001,632 3,064,865 4,089,296 1,787,307
----------- ----------- ---------- ---------- ---------- ----------
Net equity transactions 2,108,101 1,915,685 1,645,987 163,037 (72,964) 234,137
----------- ----------- ---------- ---------- ---------- ----------
Risk and administrative
expense (note 4) 99,621 74,431 57,058 3,384 2,923 1,714
----------- ----------- ---------- ---------- ---------- ----------
Net change in contract
owners' equity 5,180,115 1,871,414 2,617,846 184,247 (61,683) 238,487
Contract owners' equity:
Beginning of period 10,857,032 8,985,618 6,367,772 486,968 548,651 310,164
----------- ----------- ---------- ---------- --------- ----------
End of period $16,037,147 $10,857,032 $8,985,618 $ 671,215 $ 486,968 $ 548,651
=========== =========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
BOND OMNI
SUBACCOUNT SUBACCOUNT
1995 1994 1993 1995 1994 1993
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment activity:
Reinvested capital $ 19,903 $ 18,388 $ 11,491 $ 122,957 $ 118,097 $ 80,190
gains and dividends -------- -------- -------- ---------- ---------- ----------
Realized and unrealized gain
(loss) on investments: - (1,030) 1,854 31,864 22,179 24,768
Realized gain (loss) (78) (26,390) 3,300 725,434 (155,096) 152,337
Unrealized gain (loss) -------- -------- -------- ---------- ---------- ----------
Net gain (loss) on (44,832) (27,420) 5,154 757,298 (132,917) 177,105
investments 44,754 (9,032) 16,645 880,255 (14,820 257,295
Net investment activity -------- -------- -------- ---------- ---------- ----------
Equity transactions:
Sales: 64,657 103,680 73,143 1,092,988 1,072,401 639,946
Contract purchase payments
Transfers from fixed and 108,837 40,481 48,401 370,752 841,401 420,385
other subaccounts -------- -------- -------- ---------- ---------- ----------
254,991 144,161 121,544 1,463,740 1,913,802 1,060,331
-------- -------- -------- ---------- ---------- ----------
Redemptions: 5,704 15,725 7,847 67,498 58,256 36,030
Withdrawals and surrenders
Transfers to fixed and 32,704 19,557 31,658 314,014 497,884 240,581
other subaccounts
Cost of insurance and 41,769 28,012 20,437 381,402 308,606 185,805
administrative fee -------- -------- -------- ------- ---------- ----------
80,177 63,294 59,942 762,914 864,746 462,416
-------- -------- -------- ---------- ---------- ----------
174,814 80,867 61,602 700,826 1,049,056 597,915
Net equity transactions -------- -------- -------- ---------- ---------- ----------
Risk and administrative 2,892 1,792 1,362 33,258 21,835 16,214
expense (note 4) -------- -------- -------- ---------- ---------- ----------
Net change in contract 236,579 70,043 76,885 1,547,823 1,012,401 838,996
owners' equity
Contract owners' equity: 289,804 219,761 142,876 3,611,905 2,599,504 1,760,508
Beginning of period -------- -------- -------- ---------- ---------- ----------
$526,383 $289,804 $219,761 $5,159,728 $3,611,905 $2,599,504
End of period ======== ======== ======== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
(continued)
40
<PAGE> 43
OHIO NATIONAL VARIABLE ACCOUNT R
STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31 (CONTINUED)
<TABLE>
<CAPTION>
CAPITAL
INTERNATIONAL (A) APPRECIATION SMALL CAP
SUBACCOUNT SUBACCOUNT SUBACCOUNT
1995 1994 1993 1995 1994
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment activity:
Reinvested capita:
gains and dividends . . . . . . . . $ 214,290 $ 33,042 $ 426 $ 18,585 $ 992
---------- ---------- ---------- ---------- --------
Realized and unrealized
gain (loss) on investments:
Realized gain (loss) . . . . . . . 26,863 4,970 4,044 2,645 (42)
Unrealized gain (loss) . . . . . . 540,676 110,549 110,549 94,813 (1,734)
---------- ---------- ---------- ---------- --------
Net gain (loss) on
investments . . . . . . . . . 567,539 70,353 114,593 97,458 (1,776)
---------- ---------- ---------- ---------- --------
Net investment activity . . 781,829 103,395 115,019 116,043 (784)
---------- ---------- ---------- ---------- --------
Equity transactions:
Sales:
Contract purchase payments . . . . 2,976,009 2,195,400 277,695 422,829 42,626
Transfers from fixed and
other subaccounts . . . . . . . . 1,049,632 2,581,376 898,376 696,659 150,290
---------- ---------- ---------- ---------- --------
4,025,641 4,776,776 1,176,461 1,119,488 192,916
---------- ---------- ---------- ---------- --------
Redemptions:
Withdrawals and surrenders . . . . . 135,907 22,335 7 4,024 2,847
Transfers to fixed and
other subaccounts . . . . . . . . 770,875 388,971 179,300 84,065 0
Cost of insurance and
administrative fee . . . . . . . . 796,919 448,228 39,052 87,472 5,760
---------- ---------- ---------- ---------- --------
1,703,701 859,534 218,359 175,561 8,607
---------- ---------- ---------- ---------- --------
Net equity transactions . . . 2,321,940 3,917,242 958,102 943,927 184,309
---------- ---------- ---------- ---------- --------
Risk and administrative
expense (note 4) . . . . . . . . . . 49,434 19,907 2,309 4,732 (231)
---------- ---------- ---------- ---------- --------
Net change in contract
owners' equity . . . . . . . . . 3,054,335 4,000,730 1,070,812 1,055,238 183,756
Contract owners' equity:
Beginning of period . . . . . . . . 5,071,542 1,070,812 0 183,756 0
---------- ---------- ---------- ---------- --------
End of period . . . . . . . . . . . $8,125,877 $5,071,542 $1,070,812 $1,238,994 $183,756
========== ========== ========== ========== ========
</TABLE>
<TABLE>
<CAPTION>
GLOBAL AGGRESSIVE
CONTRARIAN(C) GROWTH(C)
SUBACCOUNT SUBACCOUNT
1995 1994 1995 1994
-------------------------------------------------
<S> <C> <C> <C> <C>
Investment activity:
Reinvested capita:
gains and dividends . . . . . . . . $ 2,690 $ 1,872 $ 523 $ 12,789
---------- -------- -------- --------
Realized and unrealized
gain (loss) on investments:
Realized gain (loss) . . . . . . . 13,224 3 1,419 5,130
Unrealized gain (loss) . . . . . . 208,534 2,560 5,122 15,468
---------- -------- -------- --------
Net gain (loss) on
investments . . . . . . . . . 221,758 2,563 6,541 20,598
---------- -------- -------- --------
Net investment activity . . 224,448 4,435 7,064 33,387
---------- -------- -------- --------
Equity transactions:
Sales:
Contract purchase payments . . . . 632,636 57,962 106,879 140,955
Transfers from fixed and
other subaccounts . . . . . . . . 786,952 235,806 182,691 336,663
---------- -------- -------- --------
1,419,588 293,768 289,590 477,618
---------- -------- -------- --------
Redemptions:
Withdrawals and surrenders . . . . . 5,965 4,056 10,420 307
Transfers to fixed and
other subaccounts . . . . . . . . 127,447 0 42,262 46,146
Cost of insurance and
administrative fee . . . . . . . . 121,558 2,872 11,400 21,574
---------- -------- -------- --------
254,970 6,928 64,082 68,027
---------- -------- -------- --------
Net equity transactions . . . 1,164,618 286,840 225,488 409,591
---------- --------
Risk and administrative
expense (note 4) . . . . . . . . . . 6,411 (77) 540 897
---------- -------- -------- --------
Net change in contract
owners' equity . . . . . . . . . 1,382,655 291,352 232,012 442,081
Contract owners' equity:
Beginning of period . . . . . . . . 291,352 0 0 0
---------- -------- -------- --------
End of period . . . . . . . . . . . $1,674,007 $291,352 $232,012 $442,081
========== ======== ======== ========
</TABLE>
a) Commenced operations April 30, 1993
b) Commenced operations May 1. 1994
c) Commenced operations March 31, 1995
The accompanying notes are an integral part of these financial statements.
41
<PAGE> 44
OHIO NATIONAL VARIABLE ACCOUNT R
Notes to Financial Statements
December 31, 1994
(1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Ohio National Variable Account R (the Account) is a separate account of
Ohio National Life Assurance Corporation (ONLAC). All obligations arising
under variable life insurance contracts are general corporate obligations
of ONLAC. ONLAC is a wholly-owned subsidiary of The Ohio National Life
Insurance Company. The Account has been registered as a unit investment
trust under the Investment Company Act of 1940.
Assets of the Account are invested in shares of Ohio National Fund, Inc.
(the Fund), a diversified open-end management investment company. The
Fund's investments are subject to varying degrees of market, interest and
financial risk; the issuers' abilities to meet certain obligations may be
affected by economic developments in their respective industries.
Investments are valued at the net asset value of fund shares held. Share
transactions are recorded on the trade dates. Income and capital gains
distributions are recorded on the ex-dividend dates. Net realized capital
gain or loss is determined on the basis of average cost.
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, 1995 the aggregate cost and number of shares of Ohio
National Fund, Inc. owned by the respective subaccounts were:
<TABLE>
<CAPTION>
MONEY CAPITAL SMALL GLOBAL AGGRESS.
EQUITY MARKET BOND OMNI INTERNATIONAL APPRECIATION CAP CONTR. GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aggregate cost $12,485,721 $671,215 $501,079 $4,290,181 $7,409,670 $1,145,915 $1,462,913 $226,889 $426,613
Number of shares 561,063 67,122 48,164 293,171 564,929 103,353 105,602 21,477 37,325
</TABLE>
(3) Contracts in Accumulation Period
At December 31, 1994 the accumulation units and value per unit of the
respective subaccounts and products were:
<TABLE>
<CAPTION>
ACCUMULATION UNITS VALUE PER UNIT
------------------ --------------
<S> <C> <C>
Equity Subaccount 756,738.161 $21.192465
Money Market Subaccount 44,137.243 15.207452
Bond Subaccount 29,429.438 17.886274
Omni Subaccount 256,617.487 20.106689
International Subaccount 547,590.116 14.839342
Capital Appreciation Subaccount 102,313.519 12.109778
Small Cap Subaccount 123,222.147 13.585277
Global Contrarian Subaccount 21,426.936 10.828053
Aggressive Growth Subaccount 35,018.974 12.624042
</TABLE>
42
<PAGE> 45
OHIO NATIONAL VARIABLE ACCOUNT R
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995
(4) RISK AND ADMINISTRATIVE EXPENSE
Although variable life payments differ according to the investment
performance of the Accounts, they are not affected by mortality or expense
experience because ONLAC assumes the expense risk and the mortality risk
under the contracts. ONLAC charges the Accounts' assets for assuming
those risks. Such charges will be assessed at a daily rate of 0.0020471%
which corresponds to an annual rate of 0.75% of the contract value.
(5) CONTRACT CHARGES
Each premium payment is subject to a premium expense charge. The premium
expense charge has two components:
(a) Sales Load. Each contract is subject to a level sales load of all
premiums paid of 4%.
(b) State Premium Tax. Premium payments will be subject to the state
premium tax and any other state or local taxes that currently
range from 2% to 4%.
A surrender charge is assessed in connection with all complete surrenders,
all decreases in stated amount and certain partial surrenders consisting of
two components: (1) a contingent deferred sales charge, and (2) a
contingent deferred insurance underwriting charge.
The contingent deferred sales charge is a percentage of premiums paid in
the first two contract years. The contingent deferred sales charge
percentages are scaled by age at issue or increase. The contingent
deferred insurance underwriting charge varies with age at issue or
increase.
A service charge is imposed on each transfer of cash values among the
subaccounts. Currently, ONLAC is not assessing this charge on the first
four transfers made in any contract year. For partial surrenders, a
service fee is charged.
ONLAC charges a monthly deduction from the contract value for the cost of
insurance and the cost of additional insurance benefits provided by rider.
(6) FEDERAL INCOME TAXES
Operations of the Account form part of and are taxed with, operations of
ONLAC which is taxed as a life assurance 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 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.
(7) SCHEDULE 1
Schedule 1 presents the components of the change in the unit values, which
are the basis for determining contract owners' equity. This schedule is
presented for each series, as applicable, in the following format:
- - Beginning unit value
- - Reinvested capital gains and dividends
(This amount reflects the increase in the unit value due to capital gain
and dividend distributions from the Underlying mutual fund.)
- - Unrealized gain (loss)
(This amount reflects the increase (decrease) in the unit value resulting
from the market appreciation (depreciation) of the fund.)
- - Contract charges
(This amount reflects the decrease in the unit value due to Risk and
Administrative Expenses discussed in note 4 to the financial statements.)
- - Ending unit value
- - Percentage increase (decrease) in unit value.
43
<PAGE> 46
SCHEDULE 1
OHIO NATIONAL VARIABLE ACCOUNT R
Schedules of Changes in Unit Values
For the Years Ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
MONEY
EQUITY MARKET BOND OMNI INTERNATIONAL
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ---------- ----------
1994
<S> <C> <C> <C> <C> <C>
Beginning unit value 16.785643 14.507086 15.156742 16.502872 13.336474
Reinvested capital gains and dividends 0.535931 0.711525 0.850369 0.518180 0.453058
Unrealized gain (loss) 3.885373 0.000000 1.891702 3.099521 1.060350
Contract charges -0.014482 -0.011159 -0.012539 -0.012884 -0.010540
Ending unit value 21.192465 15.207452 17.886274 20.106689 14.839342
Percentage increase (decrease) in unit value* 26.3% 4.8% 18.0% 21.8% 11.3%
1993
Beginning unit value 16.870045 14.054459 15.879641 16.714665 12.433465
Reinvested capital gains and dividends 0.531001 0.463316 1.153660 0.611008 0.138938
Unrealized gain -0.602749 0.000000 -1.865057 -0.810420 0.774140
Contract charges -0.012654 -0.010689 -0.011502 -0.012381 -0.010069
Ending unit value 16.785643 14.507086 15.156742 16.502872 13.336474
Percentage increase in unit value* -0.5% 3.2% -4.6% -1.3%% 7.3%
1992
Beginning unit value 14.896910 13.781750 14.453563 14.922047 10.000000**
Reinvested capital gains and dividends 0.471205 0.283155 0.977909 0.586979 0.009072
Unrealized gain (loss) 1.513783 0.000000 0.459782 1.217593 2.433050
Contract charges -0.011853 -0.010446 -0.011613 -0.011954 -0.008657
Ending unit value 16.870045 14.054459 15.879641 16.714665 12.433465
Percentage increase in unit value* 13.2% 2.0% 9.9% 12.0%* 24.3%
</TABLE>
<TABLE>
<CAPTION>
CAPITAL SMALL GLOBAL AGGRESSIVE
APPRECIATION CAP CONTRARIAN GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ----------
1994
<S> <C> <C> <C> <C>
Beginning unit value 9.950187 10.290499 10.000000*** 10.000000***
Reinvested capital gains and dividends 0.328243 0.037689 0.072802 1.128730
Unrealized gain (loss) 1.839934 3.266534 0.763238 1.504407
Contract charges -0.008586 -0.009445 -0.007987 -0.009095
Ending unit value 12.109778 13.585277 10.828053 12.624042
Percentage increase (decrease) in unit value* 21.7% 32.0% 8.3% 26.2%
1993
Beginning unit value 10.000000*** 10.000000***
Reinvested capital gains and dividends 0.099737 0.131388
Unrealized gain -0.142056 0.166824
Contract charges -0.007494 -0.007713
Ending unit value 9.950187 10.290499
Percentage increase in unit value* -0.5% 2.9%
1992
Beginning unit value
Reinvested capital gains and dividends
Unrealized gain (loss)
Contract charges
Ending unit value
Percentage increase in unit value*
</TABLE>
* An annualized rate of return cannot be determined as contract charges do
not include the contract charges discussed in note (5).
** Commenced operations April 30, 1993.
*** Commenced operations September 23, 1994.
****Commenced operations March 31, 1995.
See accompanying independent auditors' report.
44
<PAGE> 47
APPENDIX A
ILLUSTRATIONS OF CASH SURRENDER VALUES,
DEATH BENEFITS AND ACCUMULATED PREMIUMS.
The following tables have been prepared to help show how values under the
contract change with investment performance. The tables illustrate how the
death benefit of a contract of an insured of a given age and the cash surrender
value (reflecting the deduction of sales load) would vary over time if the
return on the assets held in the Fund portfolios was a constant, gross,
after-tax, annual rate of 0%, 6% or 12%. Because of compounding, the death
benefits and cash surrender values would be different from those shown in the
returns averaged 0%, 6%, or 12%, but fluctuated over and under those averages
throughout the years.
The amounts shown for the death benefit and cash surrender value as of each
contract year reflect the fact that the net investment return on the assets
held in the subaccounts is lower than the gross, after-tax return on Fund
assets. This is because certain fees and charges are deducted from the gross
return. They are the daily investment management fees incurred by the Fund,
which is currently equivalent to an average annual rate of 0.68% of the value
of the average daily net assets of the Fund's nine portfolios. (See "Charges
and Deductions - "Other Charges" at page 30.) The daily charge to the
variable account for assuming mortality and expense risks is equivalent to an
annual charge of 0.75%. Certain other fees and miscellaneous expenses which
are borne by the Fund are currently equivalent to an annual rate of 0.24% of
average daily net assets. Gross annual rates of return of 0%, 6%, and 12%
produce average net annual rates of return for all nine portfolios of
approximately - 1.67%, 4.33%, and 10.33%.
Each page of illustrations includes two tables. The top table shows the death
benefits and cash surrender values assuming we assess current charges under the
contract (``current tables"). Current charges are not guaranteed and may be
changed. The lower table shows the death benefits and cash surrender values
assuming we assess the maximum charges allowable under the contracts.
The tables assume a premium tax deduction of 2.5% (the charge deducted from
your contract will reflect premium taxes in your jurisdiction), that no portion
of your net premiums have been allocated to the general account and that
planned premiums are paid on the first day of each contract year. The tables
also assume that no transfers, partial surrenders, loans, changes in death
benefit option or changes in stated amount have been made under the contract.
Additionally, the tables assume that there are no optional insurance benefits
included under the contract and the current tables assume that the Company's
current cost of insurance charges will not be changed. Finally, the tables
reflect the fact that no charges for federal, state or local taxes are made at
present against the variable account. If such a charge is made in the future,
it will take a higher gross rate of return to produce after-tax returns of 0%,
6% and 12% than it does now.
Below is a list of the sample illustrations presented on the following pages of
this prospectus. Upon request, the Company will furnish a comparable
illustration based on your age, sex, risk class, death benefit plan, stated
amount and planned premium.
VARI-VEST II
<TABLE>
<CAPTION>
AGE DEATH BENEFIT PLAN PLANNED PREMIUM STATED AMOUNT RISK CLASS PAGE
--- ------------------ --------------- ------------- ---------- ----
<S> <C> <C> <C> <C> <C>
25 Plan A 690(Minimum) $150,000 Nonsmoker 46
25 Plan A 1,043 150,000 Nonsmoker 47
25 Plan B 690(Minimum) 150,000 Nonsmoker 48
25 Plan B 2,274 150,000 Nonsmoker 49
40 Plan A 2,190(Minimum) 250,000 Select Nonsmoker 50
40 Plan A 3,376 250,000 Select Nonsmoker 51
40 Plan B 2,190(Minimum) 250,000 Select Nonsmoker 52
40 Plan B 7,541 250,000 Select Nonsmoker 53
</TABLE>
HYPOTHETICAL HISTORICAL ILLUSTRATIONS
The Company may produce hypothetical illustrations of the contract (such as
those listed above) based upon the actual historical investment performance
(total return) of the Fund's portfolios from the inception of the portfolio or
one-, five- and ten-year periods. Such illustrations reflect all contract and
subsequent charges, including the cost of insurance (specific to the age, sex,
stated amount, risk classification and type of death benefit), planned premium,
premium tax, risk charge, sales load, administration charge and surrender
charge for the contract being illustrated. Individualized illustrations will
also be provided upon request. Being based upon past performance, neither
hypothetical illustrations nor other performance data indicate future
performance.
45
<PAGE> 48
MALE ISSUE AGE 25 INITIAL STATED AMOUNT: $150,000
CLASSIFICATION: NONSMOKER DEATH BENEFIT TYPE: A (MATURITY AGE 95)
INITIAL PREMIUM: 690.00 STATED AMOUNT INCLUDES CASH VALUE
SUMMARY OF VALUES AND BENEFITS
<TABLE>
<CAPTION>
ASSUMED HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN
12.00%(10.33% NET) 6.00%(4.33% NET) 0.00%(-1.67% NET)
ASSUMED COST OF INSURANCE AND EXPENSE CHARGES
PLANNED PREMIUMS CURRENT CURRENT CURRENT
ACCUM- END OF END OF END OF END OF END OF END OF
END OF TOTAL ULATED YEAR CASH YEAR YEAR CASH YEAR CASH YEAR CASH YEAR
POLICY ANNUAL AT 5% SURRENDER DEATH SURRENDER DEATH SURRENDER DEATH
YEAR OUTLAY INTEREST VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
- ---- ------ -------- ----- ------- ----- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 690 725 0 150,000 0 150,000 0 150,000
2 690 1,485 191 150,000 106 150,000 25 150,000
3 690 2,284 277 150,000 107 150,000 0 150,000
4 690 3,123 830 150,000 540 150,000 285 150,000
5 690 4,003 1,553 150,000 1,105 150,000 727 150,000
6 690 4,928 2,339 150,000 1,691 150,000 1,164 150,000
7 690 5,899 3,319 150,000 2,420 150,000 1,719 150,000
8 690 6,918 4,372 150,000 3,167 150,000 2,264 150,000
9 690 7,989 5,390 150,000 3,816 150,000 2,685 150,000
10 690 9,113 6,495 150,000 4,481 150,000 3,095 150,000
15 690 15,634 13,044 150,000 7,467 150,000 4,370 150,000
20 690 23,956 23,025 150,000 10,463 150,000 4,926 150,000
24 690 32,242 34,968 150,000 12,811 150,000 4,801 150,000
AGE 60 690 65,437 104,691 150,000 16,877 150,000 42 150,000
AGE 65 690 87,519 172,278 210,179 15,179 150,000 0 150,000
AGE 70 690 115,703 280,948 325,900 7,848 150,000 0 150,000
</TABLE>
<TABLE>
<CAPTION>
ASSUMED HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN
12.00%(10.33% NET) 6.00%(4.33% NET) 0.00%(-1.67% NET)
ASSUMED COST OF INSURANCE AND EXPENSE CHARGES
PLANNED PREMIUMS CURRENT CURRENT CURRENT
ACCUM- END OF END OF END OF END OF END OF END OF
END OF TOTAL ULATED YEAR CASH YEAR YEAR CASH YEAR CASH YEAR CASH YEAR
POLICY ANNUAL AT 5% SURRENDER DEATH SURRENDER DEATH SURRENDER DEATH
YEAR OUTLAY INTEREST VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
- ---- ------ -------- ----- ------- ----- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 690 725 0 150,000 0 150,000 0 150,000
2 690 1,485 158 150,000 75 150,000 0 150,000
3 690 2,284 231 150,000 65 150,000 0 150,000
4 690 3,123 772 150,000 491 150,000 242 150,000
5 690 4,003 1,371 150,000 935 150,000 567 150,000
6 690 4,928 2,031 150,000 1,399 150,000 886 150,000
7 690 5,899 2,757 150,000 1,880 150,000 1,196 150,000
8 690 6,918 4,004 150,000 2,828 150,000 1,947 150,000
9 690 7,989 4,877 150,000 3,340 150,000 2,236 150,000
10 690 9,113 5,833 150,000 3,867 150,000 2,513 150,000
15 690 15,634 12,743 150,000 7,292 150,000 4,264 150,000
20 690 23,956 22,449 150,000 10,173 150,000 4,762 150,000
24 690 32,242 33,984 150,000 12,339 150,000 4,531 150,000
AGE 60 690 65,437 100,132 150,000 14,236 150,000 0 150,000
AGE 65 690 87,519 164,025 200,110 8,981 150,000 0 150,000
AGE 70 690 115,703 265,962 308,516 0 150,000 0 150,000
</TABLE>
The hypothetical gross annual investment results shown above are illustrative
only and should not be deemed a representation of past or future investment
results. Actual investment results may be more or less than those shown and
will depend on a number of factors, including allocations made by the owner
among the investment options and the actual investment results of those
options. The cash surrender value and death benefit for a policy would be
different from those shown even if the actual rates of investment averaged 0%,
6% and 12% over a period of years but fluctuated above or below those averages
for individual contract years. No representations can be made that these
hypothetical investment rates of return can be achieved for any one year or
sustained over any period of time. This illustration assumes current cost of
insurance and expense charges remain unchanged.
55
<PAGE> 49
MALE ISSUE AGE 25 INITIAL STATED AMOUNT: $150,000
CLASSIFICATION: NONSMOKER DEATH BENEFIT TYPE: A (MATURITY AGE 95)
INITIAL PREMIUM: $1,043.00 STATED AMOUNT INCLUDES CASH VALUE
SUMMARY OF VALUES AND BENEFITS
<TABLE>
<CAPTION>
ASSUMED HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN
12.00%(10.33% NET) 6.00%(4.33% NET) 0.00%(-1.67% NET)
ASSUMED COST OF INSURANCE AND EXPENSE CHARGES
PLANNED PREMIUMS CURRENT CURRENT CURRENT
ACCUM- END OF END OF END OF END OF END OF END OF
END OF TOTAL ULATED YEAR CASH YEAR YEAR CASH YEAR CASH YEAR CASH YEAR
POLICY ANNUAL AT 5% SURRENDER DEATH SURRENDER DEATH SURRENDER DEATH
YEAR OUTLAY INTEREST VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
- ---- ------ -------- ----- ------- ----- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,043 1,095 62 150,000 13 150,000 0 150,000
2 1,043 2,245 856 150,000 708 150,000 567 150,000
3 1,043 3,452 1,206 150,000 904 150,000 627 150,000
4 1,043 4,720 2,250 150,000 1,731 150,000 1,272 150,000
5 1,043 6,051 3,516 150,000 2,707 150,000 2,019 150,000
6 1,043 7,449 4,903 150,000 3,721 150,000 2,757 150,000
7 1,043 8,917 6,603 150,000 4,956 150,000 3,665 150,000
8 1,043 10,458 8,446 150,000 6,228 150,000 4,559 150,000
9 1,043 12,076 10,332 150,000 7,424 150,000 5,324 150,000
10 1,043 13,775 12,388 150,000 8,659 150,000 6,074 150,000
15 1,043 23,632 25,113 150,000 14,637 150,000 8,765 150,000
20 1,043 36,212 45,269 150,000 21,335 150,000 10,600 150,000
24 1,043 48,736 70,114 150,000 27,358 150,000 11,459 150,000
AGE 60 1,043 98,914 217,118 290,939 46,717 150,000 9,411 150,000
AGE 6 1,043 132,294 355,621 433,858 56,323 150,000 4,654 150,000
AGE 70 1,043 174,896 578,083 670,576 65,666 150,000 0 150,000
</TABLE>
<TABLE>
<CAPTION>
ASSUMED HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN
12.00%(10.33% NET) 6.00%(4.33% NET) 0.00%(-1.67% NET)
ASSUMED COST OF INSURANCE AND EXPENSE CHARGES
PLANNED PREMIUMS CURRENT CURRENT CURRENT
ACCUM- END OF END OF END OF END OF END OF END OF
END OF TOTAL ULATED YEAR CASH YEAR YEAR CASH YEAR CASH YEAR CASH YEAR
POLICY ANNUAL AT 5% SURRENDER DEATH SURRENDER DEATH SURRENDER DEATH
YEAR OUTLAY INTEREST VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
- ---- ------ -------- ----- ------- ----- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,043 1,095 43 150,000 0 150,000 0 150,000
2 1,043 2,245 822 150,000 677 150,000 537 150,000
3 1,043 3,452 1,160 150,000 862 150,000 589 150,000
4 1,043 4,720 2,193 150,000 1,681 150,000 1,229 150,000
5 1,043 6,051 3,334 150,000 2,537 150,000 1,859 150,000
6 1,043 7,449 ,596 150,000 3,430 150,000 2,479 150,000
7 1,043 8,917 5,985 150,000 4,360 150,000 3,086 150,000
8 1,043 10,458 7,965 150,000 5,776 150,000 4,128 150,000
9 1,043 12,076 9,649 150,000 6,779 150,000 4,705 150,000
10 1,043 13,775 11,501 150,000 7,818 150,000 5,265 150,000
15 1,043 23,632 24,818 150,000 14,466 150,000 8,661 150,000
20 1,043 36,212 44,714 150,000 21,053 150,000 10,440 150,000
24 1,043 48,736 69,187 150,000 26,909 150,000 11,198 150,000
AGE 60 1,043 98,914 213,311 285,837 44,436 150,000 7,676 150,000
AGE 65 1,043 132,294 347,975 424,530 51,322 150,000 438 150,000
AGE 70 1,043 174,896 562,165 652,111 54,772 150,000 0 150,000
</TABLE>
The hypothetical gross annual investment results shown above are illustrative
only and should not be deemed a representation of past or future investment
results. Actual investment results may be more or less than those shown and
will depend on a number of factors, including allocations made by the owner
among the investment options and the actual investment results of those
options. The cash surrender value and death benefit for a policy would be
different from those shown even if the actual rates of investment averaged 0%,
6% and 12% over a period of years but fluctuated above or below those averages
for individual contract years. No representations can be made that these
hypothetical investment rates of return can be achieved for any one year or
sustained over any period of time. This illustration assumes current cost of
insurance and expense charges remain unchanged.
56
<PAGE> 50
MALE ISSUE AGE 25 INITIAL STATED AMOUNT: $150,000
CLASSIFICATION: NONSMOKER DEATH BENEFIT TYPE: B(MATURITY AGE 95)
INITIAL PREMIUM: $690.00 STATED AMOUNT INCLUDES CASH VALUE
SUMMARY OF VALUES AND BENEFITS
<TABLE>
<CAPTION>
ASSUMED HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN
12.00%(10.33% NET) 6.00%(4.33% NET) 0.00%(-1.67% NET)
ASSUMED COST OF INSURANCE AND EXPENSE CHARGES
PLANNED PREMIUMS CURRENT CURRENT CURRENT
ACCUM- END OF END OF END OF END OF END OF END OF
END OF TOTAL ULATED YEAR CASH YEAR YEAR CASH YEAR CASH YEAR CASH YEAR
POLICY ANNUAL AT 5% SURRENDER DEATH SURRENDER DEATH SURRENDER DEATH
YEAR OUTLAY INTEREST VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
- ---- ------ -------- ----- ------- ----- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 690 725 0 150,409 0 150,379 0 150,350
2 690 1,485 189 150,860 104 150,775 23 150,694
3 690 2,284 273 151,357 103 151,188 0 151,032
4 690 3,123 822 151,906 534 151,618 280 151,365
5 690 4,003 1,540 152,512 1,095 152,068 719 151,692
6 690 4,928 2,321 153,181 1,677 152,536 1,153 152,013
7 690 5,899 3,293 153,913 2,401 153,021 1,705 152,325
8 690 6,918 4,336 154,717 3,141 153,522 2,246 152,627
9 690 7,989 5,342 155,596 3,783 154,037 2,663 152,917
10 690 9,113 6,430 156,557 4,439 154,566 3,067 153,194
15 690 15,634 12,823 162,823 7,350 157,350 4,307 154,307
20 690 23,956 22,372 172,372 10,186 160,186 4,806 154,806
24 690 32,242 33,507 183,507 12,298 162,298 4,617 154,617
AGE 60 65,437 92,981 242,981 14,681 164,681 0 150,000
AGE 65 87,519 144,357 294,357 11,348 161,348 0 150,000
AGE 70 115,703 222,184 372,184 1,832 151,832 0 150,000
</TABLE>
<TABLE>
<CAPTION>
ASSUMED HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN
12.00%(10.33% NET) 6.00%(4.33% NET) 0.00%(-1.67% NET)
ASSUMED COST OF INSURANCE AND EXPENSE CHARGES
PLANNED PREMIUMS CURRENT CURRENT CURRENT
ACCUM- END OF END OF END OF END OF END OF END OF
END OF TOTAL ULATED YEAR CASH YEAR YEAR CASH YEAR CASH YEAR CASH YEAR
POLICY ANNUAL AT 5% SURRENDER DEATH SURRENDER DEATH SURRENDER DEATH
YEAR OUTLAY INTEREST VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
- ---- ------ -------- ----- ------- ----- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 690 725 0 150,390 0 150,361 0 150,332
2 690 1,485 156 150,826 73 150,743 0 150,664
3 690 2,284 226 151,311 61 151,146 0 150,994
4 690 3,123 764 151,849 484 151,568 237 151,322
5 690 4,003 1,358 152,443 925 152,010 559 151,643
6 690 4,928 2,013 153,097 1,385 152,470 875 151,960
7 690 5,899 2,730 153,815 1,860 152,945 1,182 152,267
8 690 6,918 3,967 154,602 2,802 153,437 1,929 152,564
9 690 7,989 4,828 155,463 3,307 153,942 2,214 152,849
10 690 9,113 5,768 156,403 3,825 154,460 2,485 153,120
15 690 15,634 12,521 162,521 7,175 157,175 4,202 154,202
20 690 23,956 21,791 171,791 9,893 159,893 4,641 154,641
24 690 32,242 32,499 182,499 11,820 161,820 4,346 154,346
AGE 60 65,437 87,495 237,495 11,946 161,946 0 150,000
AGE 65 87,519 132,096 282,096 5,076 155,076 0 150,000
AGE 70 115,703 195,123 345,123 0 150,000 0 150,000
</TABLE>
The hypothetical gross annual investment results shown above are illustrative
only and should not be deemed a representation of past or future investment
results. Actual investment results may be more or less than those shown and
will depend on a number of factors, including allocations made by the owner
among the investment options and the actual investment results of those
options. The cash surrender value and death benefit for a policy would be
different from those shown even if the actual rates of investment averaged 0%,
6% and 12% over a period of years but fluctuated above or below those averages
for individual contract years. No representations can be made that these
hypothetical investment rates of return can be achieved for any one year or
sustained over any period of time. This illustration assumes current cost of
insurance and expense charges remain unchanged.
57
<PAGE> 51
MALE ISSUE AGE 25 INITIAL STATED AMOUNT: $150,000
CLASSIFICATION: NONSMOKER DEATH BENEFIT TYPE: B(MATURITY AGE 95)
INITIAL PREMIUM: $2,274.00 STATED AMOUNT INCLUDES CASH VALUE
SUMMARY OF VALUES AND BENEFITS
<TABLE>
<CAPTION>
ASSUMED HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN
12.00%(10.33% NET) 6.00%(4.33% NET) 0.00%(-1.67% NET)
ASSUMED COST OF INSURANCE AND EXPENSE CHARGES
PLANNED PREMIUMS CURRENT CURRENT CURRENT
ACCUM- END OF END OF END OF END OF END OF END OF
END OF TOTAL ULATED YEAR CASH YEAR YEAR CASH YEAR CASH YEAR CASH YEAR
POLICY ANNUAL AT 5% SURRENDER DEATH SURRENDER DEATH SURRENDER DEATH
YEAR OUTLAY INTEREST VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
- ---- ------ -------- ----- ------- ----- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,274 2,388 1,269 152,043 1,151 151,924 1,033 151,806
2 2,274 4,895 3,400 154,297 3,035 153,932 2,685 153,582
3 2,274 7,527 5,414 156,783 4,658 156,027 3,959 155,328
4 2,274 10,291 8,158 159,527 6,843 158,212 5,677 157,046
5 2,274 13,194 11,298 162,554 9,236 160,492 7,478 158,734
6 2,274 16,241 14,750 165,894 11,727 162,871 9,250 160,394
7 2,274 19,441 18,726 169,574 14,500 165,348 11,175 162,023
8 2,274 22,800 23,078 173,629 17,377 167,928 13,068 163,619
9 2,274 26,328 27,728 178,096 20,244 170,612 14,814 165,182
10 2,274 30,032 32,832 183,016 23,221 173,405 16,527 166,711
15 2,274 51,523 66,122 216,122 39,061 189,061 23,775 173,775
20 2,274 78,952 119,553 269,553 57,811 207,811 29,746 179,746
24 2,274 106,257 184,972 364,395 75,320 225,320 33,614 183,614
AGE 60 74 215,658 566,481 759,084 136,371 286,371 38,538 188,538
AGE 65 74 288,434 925,845 1,129,531 170,229 320,229 36,463 186,463
AGE 70 74 381,316 1,503,050 1,743,538 206,722 356,722 29,880 179,880
</TABLE>
<TABLE>
<CAPTION>
ASSUMED HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN
12.00%(10.33% NET) 6.00%(4.33% NET) 0.00%(-1.67% NET)
ASSUMED COST OF INSURANCE AND EXPENSE CHARGES
PLANNED PREMIUMS CURRENT CURRENT CURRENT
ACCUM- END OF END OF END OF END OF END OF END OF
END OF TOTAL ULATED YEAR CASH YEAR YEAR CASH YEAR CASH YEAR CASH YEAR
POLICY ANNUAL AT 5% SURRENDER DEATH SURRENDER DEATH SURRENDER DEATH
YEAR OUTLAY INTEREST VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
- ---- ------ -------- ----- ------- ----- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,274 2,388 1,250 152,024 1,133 151,906 1,015 151,788
2 2,274 4,895 3,366 154,263 3,004 153,901 2,656 153,553
3 2,274 7,527 5,368 156,737 4,616 155,985 3,922 155,291
4 2,274 10,291 8,100 159,470 6,793 158,162 5,634 157,003
5 2,274 13,194 11,115 162,484 9,065 160,434 7,317 158,686
6 2,274 16,241 14,442 165,811 11,435 162,804 8,972 160,341
7 2,274 19,441 18,107 169,476 13,903 165,273 10,595 161,964
8 2,274 22,800 22,596 173,515 16,924 167,843 12,637 163,556
9 2,274 26,328 27,044 177,963 19,598 170,517 14,194 165,113
10 2,274 30,032 31,943 182,862 22,379 173,298 15,717 166,636
15 2,274 51,523 65,820 215,820 38,886 188,886 23,670 173,670
20 2,274 78,952 118,972 268,972 57,518 207,518 29,581 179,581
24 2,274 106,257 183,967 362,414 74,841 224,841 33,343 183,343
AGE 60 74 215,658 560,628 751,242 133,642 283,642 36,745 186,745
AGE 65 74 288,434 912,444 1,113,182 163,975 313,975 32,285 182,285
AGE 70 74 381,316 1,472,013 1,707,535 192,868 342,868 20,674 170,674
</TABLE>
The hypothetical gross annual investment results shown above are illustrative
only and should not be deemed a representation of past or future investment
results. Actual investment results may be more or less than those shown and
will depend on a number of factors, including allocations made by the owner
among the investment options and the actual investment results of those
options. The cash surrender value and death benefit for a policy would be
different from those shown even if the actual rates of investment averaged 0%,
6% and 12% over a period of years but fluctuated above or below those averages
for individual contract years. No representations can be made that these
hypothetical investment rates of return can be achieved for any one year or
sustained over any period of time. This illustration assumes current cost of
insurance and expense charges remain unchanged.
58
<PAGE> 52
MALE ISSUE AGE 40 INITIAL STATED AMOUNT: $250,000
CLASSIFICATION: SELECT NONSMOKER DEATH BENEFIT TYPE: A (MATURITY AGE 95)
INITIAL PREMIUM: $2,190.00 STATED AMOUNT INCLUDES CASH VALUE
SUMMARY OF VALUES AND BENEFITS
<TABLE>
<CAPTION>
ASSUMED HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN
12.00%(10.33% NET) 6.00%(4.33% NET) 0.00%(-1.67% NET)
ASSUMED COST OF INSURANCE AND EXPENSE CHARGES
PLANNED PREMIUMS CURRENT CURRENT CURRENT
ACCUM- END OF END OF END OF END OF END OF END OF
END OF TOTAL ULATED YEAR CASH YEAR YEAR CASH YEAR CASH YEAR CASH YEAR
POLICY ANNUAL AT 5% SURRENDER DEATH SURRENDER DEATH SURRENDER DEATH
YEAR OUTLAY INTEREST VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
- ---- ------ -------- ----- ------- ----- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,190 2,300 360 250,000 254 250,000 149 250,000
2 2,190 4,714 2,046 250,000 1,730 250,000 1,428 250,000
3 2,190 7,249 2,707 250,000 2,064 250,000 1,472 250,000
4 2,190 9,911 4,851 250,000 3,747 250,000 2,771 250,000
5 2,190 12,706 7,371 250,000 5,657 250,000 4,204 250,000
6 2,190 15,641 10,090 250,000 7,600 250,000 5,573 250,000
7 2,190 18,723 13,430 250,000 9,976 250,000 7,278 250,000
8 2,190 21,958 17,006 250,000 12,379 250,000 8,914 250,000
9 2,190 25,356 20,662 250,000 14,628 250,000 10,298 250,000
10 2,190 28,923 24,610 250,000 16,907 250,000 11,613 250,000
15 2,190 49,620 48,130 250,000 26,955 250,000 15,332 250,000
20 2,190 76,035 84,135 250,000 36,447 250,000 15,936 250,000
24 2,190 102,332 127,961 250,000 43,135 250,000 13,653 250,000
AGE 60 90 76,035 84,135 250,000 36,447 250,000 15,936 250,000
AGE 65 90 109,748 141,910 250,000 44,550 250,000 12,569 250,000
AGE 70 90 152,776 238,744 276,943 48,863 250,000 2,874 250,000
</TABLE>
<TABLE>
<CAPTION>
ASSUMED HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN
12.00%(10.33% NET) 6.00%(4.33% NET) 0.00%(-1.67% NET)
ASSUMED COST OF INSURANCE AND EXPENSE CHARGES
PLANNED PREMIUMS CURRENT CURRENT CURRENT
ACCUM- END OF END OF END OF END OF END OF END OF
END OF TOTAL ULATED YEAR CASH YEAR YEAR CASH YEAR CASH YEAR CASH YEAR
POLICY ANNUAL AT 5% SURRENDER DEATH SURRENDER DEATH SURRENDER DEATH
YEAR OUTLAY INTEREST VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
- ---- ------ -------- ----- ------- ----- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,190 2,300 248 250,000 145 250,000 44 250,000
2 2,190 4,714 1,802 250,000 1,500 250,000 1,212 250,000
3 2,190 7,249 2,307 250,000 1,696 250,000 1,135 250,000
4 2,190 9,911 4,265 250,000 3,223 250,000 2,304 250,000
5 2,190 12,706 6,378 250,000 4,768 250,000 3,406 250,000
6 2,190 15,641 8,653 250,000 6,325 250,000 4,434 250,000
7 2,190 18,723 11,105 250,000 7,888 250,000 5,383 250,000
8 2,190 21,958 14,499 250,000 10,204 250,000 7,001 250,000
9 2,190 25,356 17,352 250,000 11,769 250,000 7,784 250,000
10 2,190 28,923 20,428 250,000 13,326 250,000 8,474 250,000
15 2,190 49,620 41,811 250,000 22,598 250,000 12,213 250,000
20 2,190 76,035 69,881 250,000 27,286 250,000 9,642 250,000
24 2,190 102,332 101,903 250,000 26,890 250,000 2,681 250,000
AGE 60 90 76,035 69,881 250,000 27,286 250,000 9,642 250,000
AGE 65 90 109,748 111,748 250,000 25,781 250,000 0 250,000
AGE 70 90 152,776 178,330 250,000 9,994 250,000 0 250,000
</TABLE>
The hypothetical gross annual investment results shown above are illustrative
only and should not be deemed a representation of past or future investment
results. Actual investment results may be more or less than those shown and
will depend on a number of factors, including allocations made by the owner
among the investment options and the actual investment results of those
options. The cash surrender value and death benefit for a policy would be
different from those shown even if the actual rates of investment averaged 0%,
6% and 12% over a period of years but fluctuated above or below those averages
for individual contract years. No representations can be made that these
hypothetical investment rates of return can be achieved for any one year or
sustained over any period of time. This illustration assumes current cost of
insurance and expense charges remain unchanged.
59
<PAGE> 53
MALE ISSUE AGE 40 INITIAL STATED AMOUNT: $250,000
CLASSIFICATION: SELECT NONSMOKER DEATH BENEFIT TYPE: A (MATURITY AGE 95)
INITIAL PREMIUM: $3,376.00 STATED AMOUNT INCLUDES CASH VALUE
SUMMARY OF VALUES AND BENEFITS
<TABLE>
<CAPTION>
ASSUMED HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN
12.00%(10.33% NET) 6.00%(4.33% NET) 0.00%(-1.67% NET)
ASSUMED COST OF INSURANCE AND EXPENSE CHARGES
PLANNED PREMIUMS CURRENT CURRENT CURRENT
ACCUM- END OF END OF END OF END OF END OF END OF
END OF TOTAL ULATED YEAR CASH YEAR YEAR CASH YEAR CASH YEAR CASH YEAR
POLICY ANNUAL AT 5% SURRENDER DEATH SURRENDER DEATH SURRENDER DEATH
YEAR OUTLAY INTEREST VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
- ---- ------ -------- ----- ------- ----- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 3,376 3,545 1,284 250,000 1,112 250,000 940 250,000
2 3,376 7,267 4,254 250,000 3,728 250,000 3,224 250,000
3 3,376 11,175 5,724 250,000 4,639 250,000 3,639 250,000
4 3,376 15,279 9,526 250,000 7,648 250,000 5,985 250,000
5 3,376 19,587 13,881 250,000 10,946 250,000 8,449 250,000
6 3,376 24,111 18,631 250,000 14,342 250,000 10,837 250,000
7 3,376 28,862 24,433 250,000 18,451 250,000 13,760 250,000
8 3,376 33,850 30,713 250,000 22,661 250,000 16,602 250,000
9 3,376 39,087 37,344 250,000 26,794 250,000 19,181 250,000
10 3,376 44,586 44,565 250,000 31,038 250,000 21,679 250,000
15 3,376 76,492 89,477 250,000 51,484 250,000 30,341 250,000
20 3,376 117,212 161,720 250,000 74,246 250,000 35,587 250,000
24 3,376 157,751 252,517 313,121 94,756 250,000 37,113 250,000
AGE 60 76 117,212 161,720 250,000 74,246 250,000 35,587 250,000
AGE 65 76 169,183 281,265 343,144 100,225 250,000 37,018 250,000
AGE 70 76 235,512 474,267 550,149 129,898 250,000 32,710 250,000
</TABLE>
<TABLE>
<CAPTION>
ASSUMED HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN
12.00%(10.33% NET) 6.00%(4.33% NET) 0.00%(-1.67% NET)
ASSUMED COST OF INSURANCE AND EXPENSE CHARGES
PLANNED PREMIUMS CURRENT CURRENT CURRENT
ACCUM- END OF END OF END OF END OF END OF END OF
END OF TOTAL ULATED YEAR CASH YEAR YEAR CASH YEAR CASH YEAR CASH YEAR
POLICY ANNUAL AT 5% SURRENDER DEATH SURRENDER DEATH SURRENDER DEATH
YEAR OUTLAY INTEREST VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
- ---- ------ -------- ----- ------- ----- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 3,376 3,545 1,172 250,000 1,003 250,000 835 250,000
2 3,376 7,267 4,012 250,000 3,500 250,000 3,009 250,000
3 3,376 11,175 5,328 250,000 4,275 250,000 3,305 250,000
4 3,376 15,279 8,948 250,000 7,131 250,000 5,523 250,000
5 3,376 19,587 12,901 250,000 10,068 250,000 7,661 250,000
6 3,376 24,111 17,216 250,000 13,083 250,000 9,711 250,000
7 3,376 28,862 21,928 250,000 16,175 250,000 11,671 250,000
8 3,376 33,850 27,829 250,000 20,095 250,000 14,288 250,000
9 3,376 39,087 33,463 250,000 23,345 250,000 16,061 250,000
10 3,376 44,586 39,629 250,000 26,670 250,000 17,733 250,000
15 3,376 76,492 83,605 250,000 47,374 250,000 27,360 250,000
20 3,376 117,212 149,322 250,000 65,921 250,000 29,683 250,000
24 3,376 157,751 232,254 287,995 80,589 250,000 26,979 250,000
AGE 60 76 117,212 149,322 250,000 65,921 250,000 29,683 250,000
AGE 65 76 169,183 258,571 315,457 84,062 250,000 25,370 250,000
AGE 70 76 235,512 433,771 503,175 98,943 250,000 9,099 250,000
</TABLE>
The hypothetical gross annual investment results shown above are illustrative
only and should not be deemed a representation of past or future investment
results. Actual investment results may be more or less than those shown and
will depend on a number of factors, including allocations made by the owner
among the investment options and the actual investment results of those
options. The cash surrender value and death benefit for a policy would be
different from those shown even if the actual rates of investment averaged 0%,
6% and 12% over a period of years but fluctuated above or below those averages
for individual contract years. No representations can be made that these
hypothetical investment rates of return can be achieved for any one year or
sustained over any period of time. This illustration assumes current cost of
insurance and expense charges remain unchanged.
60
<PAGE> 54
MALE ISSUE AGE 40 INITIAL STATED AMOUNT: $250,000
CLASSIFICATION: SELECT NONSMOKER DEATH BENEFIT TYPE: B (MATURITY AGE 95)
INITIAL PREMIUM: $2,190.00 STATED AMOUNT INCLUDES CASH VALUE
SUMMARY OF VALUES AND BENEFITS
<TABLE>
<CAPTION>
ASSUMED HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN
12.00%(10.33% NET) 6.00%(4.33% NET) 0.00%(-1.67% NET)
ASSUMED COST OF INSURANCE AND EXPENSE CHARGES
PLANNED PREMIUMS CURRENT CURRENT CURRENT
ACCUM- END OF END OF END OF END OF END OF END OF
END OF TOTAL ULATED YEAR CASH YEAR YEAR CASH YEAR CASH YEAR CASH YEAR
POLICY ANNUAL AT 5% SURRENDER DEATH SURRENDER DEATH SURRENDER DEATH
YEAR OUTLAY INTEREST VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
- ---- ------ -------- ----- ------- ----- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,190 2,300 356 251,676 251 251,570 146 251,465
2 2,190 4,714 2,034 253,485 1,719 253,170 1,418 252,869
3 2,190 7,249 2,682 255,447 2,042 254,806 1,453 254,217
4 2,190 9,911 4,804 257,569 3,708 256,473 2,739 255,504
5 2,190 12,706 7,294 259,872 5,596 258,173 4,154 256,732
6 2,190 15,641 9,972 262,362 7,509 259,898 5,502 257,892
7 2,190 18,723 13,255 265,055 9,846 261,645 7,182 258,981
8 2,190 21,958 16,756 267,965 12,200 263,409 8,787 259,996
9 2,190 25,356 20,315 271,121 14,389 265,195 10,135 260,941
10 2,190 28,923 24,136 274,539 16,595 266,998 11,409 261,812
15 2,190 49,620 46,321 296,321 25,996 275,996 14,822 264,822
20 2,190 76,035 78,398 328,398 34,045 284,045 14,922 264,922
24 2,190 102,332 114,515 364,515 38,564 288,564 12,103 262,103
AGE 60 90 76,035 78,398 328,398 34,045 284,045 14,922 264,922
AGE 65 90 109,748 125,375 375,375 39,235 289,235 10,877 260,877
AGE 70 90 152,776 193,546 443,546 38,133 288,133 636 250,636
</TABLE>
<TABLE>
<CAPTION>
ASSUMED HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN
12.00%(10.33% NET) 6.00%(4.33% NET) 0.00%(-1.67% NET)
ASSUMED COST OF INSURANCE AND EXPENSE CHARGES
PLANNED PREMIUMS CURRENT CURRENT CURRENT
ACCUM- END OF END OF END OF END OF END OF END OF
END OF TOTAL ULATED YEAR CASH YEAR YEAR CASH YEAR CASH YEAR CASH YEAR
POLICY ANNUAL AT 5% SURRENDER DEATH SURRENDER DEATH SURRENDER DEATH
YEAR OUTLAY INTEREST VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
- ---- ------ -------- ----- ------- ----- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,190 2,300 243 251,563 141 251,461 40 251,359
2 2,190 4,714 1,788 253,239 1,488 252,939 1,200 252,651
3 2,190 7,249 2,277 255,042 1,670 254,435 1,112 253,877
4 2,190 9,911 4,210 256,975 3,178 255,942 2,266 255,031
5 2,190 12,706 6,289 259,053 4,697 257,462 3,349 256,114
6 2,190 15,641 8,516 261,281 6,218 258,983 4,352 257,117
7 2,190 18,723 10,902 263,667 7,736 260,501 5,271 258,036
8 2,190 21,958 14,209 266,223 9,997 262,011 6,854 258,869
9 2,190 25,356 16,948 268,963 11,493 263,508 7,596 259,611
10 2,190 28,923 19,878 271,893 12,965 264,980 8,240 260,254
15 2,190 49,620 39,692 289,692 21,490 271,490 11,635 261,635
20 2,190 76,035 63,032 313,032 24,521 274,521 8,544 258,544
24 2,190 102,332 85,609 335,609 21,781 271,781 1,224 251,224
AGE 60 90 76,035 63,032 313,032 24,521 274,521 8,544 258,544
AGE 65 90 109,748 91,620 341,620 19,916 269,916 0 250,000
AGE 70 90 152,776 121,808 371,808 0 250,000 0 250,000
</TABLE>
The hypothetical gross annual investment results shown above are illustrative
only and should not be deemed a representation of past or future investment
results. Actual investment results may be more or less than those shown and
will depend on a number of factors, including allocations made by the owner
among the investment options and the actual investment results of those
options. The cash surrender value and death benefit for a policy would be
different from those shown even if the actual rates of investment averaged 0%,
6% and 12% over a period of years but fluctuated above or below those averages
for individual contract years. No representations can be made that these
hypothetical investment rates of return can be achieved for any one year or
sustained over any period of time. This illustration assumes current cost of
insurance and expense charges remain unchanged.
61
<PAGE> 55
MALE ISSUE AGE 40 INITIAL STATED AMOUNT: $250,000
CLASSIFICATION: SELECT NONSMOKER DEATH BENEFIT TYPE: B (MATURITY AGE 95)
INITIAL PREMIUM: $7,541.00 STATED AMOUNT INCLUDES CASH VALUE
SUMMARY OF VALUES AND BENEFITS
<TABLE>
<CAPTION>
ASSUMED HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN
12.00%(10.33% NET) 6.00%(4.33% NET) 0.00%(-1.67% NET)
ASSUMED COST OF INSURANCE AND EXPENSE CHARGES
PLANNED PREMIUMS CURRENT CURRENT CURRENT
ACCUM- END OF END OF END OF END OF END OF END OF
END OF TOTAL ULATED YEAR CASH YEAR YEAR CASH YEAR CASH YEAR CASH YEAR
POLICY ANNUAL AT 5% SURRENDER DEATH SURRENDER DEATH SURRENDER DEATH
YEAR OUTLAY INTEREST VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
- ---- ------ -------- ----- ------- ----- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 7,541 7,918 5,366 257,196 4,961 256,790 4,555 256,385
2 7,541 16,232 12,855 265,095 11,596 263,836 10,386 262,626
3 7,541 24,962 19,949 273,777 17,327 271,154 14,904 268,731
4 7,541 34,128 29,485 283,313 24,921 278,748 20,868 274,695
5 7,541 43,752 40,155 293,795 32,993 286,633 26,883 280,522
6 7,541 53,858 51,858 305,310 41,359 294,811 32,753 286,206
7 7,541 64,469 65,310 317,960 50,640 303,290 39,093 291,742
8 7,541 75,610 80,010 331,856 60,230 312,077 45,283 297,129
9 7,541 87,309 95,902 347,133 69,960 321,191 51,144 302,375
10 7,541 99,592 113,309 363,925 80,024 330,639 56,858 307,474
15 7,541 170,860 226,387 476,387 133,129 383,129 80,592 330,592
20 7,541 261,818 406,738 656,738 194,950 444,950 99,181 349,181
24 7,541 352,369 626,856 876,856 251,508 501,508 110,079 360,079
AGE 60 41 261,818 406,738 656,738 194,950 444,950 99,181 349,181
AGE 65 41 377,906 696,188 946,188 266,630 516,630 112,141 362,141
AGE 70 41 526,066 1,160,945 1,410,945 347,764 597,764 117,547 367,547
</TABLE>
<TABLE>
<CAPTION>
ASSUMED HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN
12.00%(10.33% NET) 6.00%(4.33% NET) 0.00%(-1.67% NET)
ASSUMED COST OF INSURANCE AND EXPENSE CHARGES
PLANNED PREMIUMS CURRENT CURRENT CURRENT
ACCUM- END OF END OF END OF END OF END OF END OF
END OF TOTAL ULATED YEAR CASH YEAR YEAR CASH YEAR CASH YEAR CASH YEAR
POLICY ANNUAL AT 5% SURRENDER DEATH SURRENDER DEATH SURRENDER DEATH
YEAR OUTLAY INTEREST VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
- ---- ------ -------- ----- ------- ----- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
7,541 7,918 5,253 257,083 4,851 256,681 4,449 256,279
2 7,541 16,232 12,610 264,850 11,364 263,604 10,168 262,408
3 7,541 24,962 19,544 273,372 16,955 270,782 14,564 268,391
4 7,541 34,128 28,892 282,719 24,390 278,218 20,395 274,223
5 7,541 43,752 39,150 292,977 32,094 285,922 26,077 279,905
6 7,541 53,858 50,402 304,229 40,068 293,896 31,603 285,430
7 7,541 64,469 62,745 316,573 48,319 302,146 36,970 290,797
8 7,541 75,610 77,038 330,116 57,603 310,680 42,926 296,003
9 7,541 87,309 91,899 344,976 66,427 319,505 47,968 301,045
10 7,541 99,592 108,203 361,280 75,545 328,623 52,840 305,917
15 7,541 170,860 219,766 469,766 128,628 378,628 77,407 327,407
20 7,541 261,818 391,404 641,404 185,440 435,440 92,809 342,809
24 7,541 352,369 598,038 848,038 234,758 484,758 99,213 349,213
AGE 60 41 261,818 391,404 641,404 185,440 435,440 92,809 342,809
AGE 65 41 377,906 662,547 912,547 247,352 497,352 99,708 349,708
AGE 70 41 526,066 1,089,597 1,339,597 309,546 559,546 93,546 343,546
</TABLE>
The hypothetical gross annual investment results shown above are illustrative
only and should not be deemed a representation of past or future investment
results. Actual investment results may be more or less than those shown and
will depend on a number of factors, including allocations made by the owner
among the investment options and the actual investment results of those
options. The cash surrender value and death benefit for a policy would be
different from those shown even if the actual rates of investment averaged 0%,
6% and 12% over a period of years but fluctuated above or below those averages
for individual contract years. No representations can be made that these
hypothetical investment rates of return can be achieved for any one year or
sustained over any period of time. This illustration assumes current cost of
insurance and expense charges remain unchanged.
62
<PAGE> 56
PART II
OTHER INFORMATION
<PAGE> 57
CONTENTS OF REGISTRATION STATEMENT
This registration statement comprises the following papers and documents:
The facing sheet
The prospectus consisting of 57 pages
The signatures
Written consents of the following persons:
KPMG Peat Marwick LLP
Jones & Blouch L.L.P.
Ronald L. Benedict, Esq.
David W. Cook, FSA, MAAA
Exhibits:
All relevant exhibits, which have previously been filed with the
Commission and are incorporated herein by reference, are as follows:
(1) Resolution of the Board of Directors of the Depositor
authorizing establishment of Ohio National Variable Account
R was filed as Exhibit 1.(1) of the Registrant's
registration statement on Form S-6 on June 7, 1985 (File
no. 2-98265).
(2)(a) Agreement of Custodianship between the Depositor and The
Provident Bank was filed as Exhibit 5 of the Registrant's
registration statement on Form S-6, Post-effective
Amendment no. 2, on March 22, 1988.
(2)(b) Amendment to Agreement of Custodianship was filed as
Exhibit 4 of the Registrant's Form S-6, Post-effective
Amendment no. 3, on April 20, 1989.
(3)(a) Distribution and Service Agreement between the Depositor
and The O.N. Equity Sales Company was filed as Exhibit 6 of
the Registrant's Form S-6, Post-effective Amendment no. 3
on April 20, 1989.
(3)(b) Registered Representative's Sales Contract with Variable
Life Supplement was filed as Exhibit (3)(b) of the
Registrant's Form S-6, Post-effective Amendment no. 5, on
April 18, 1991.
(3)(c) Schedule of Sales Commissions was filed as Exhibit 1.(3)(c)
of the Registrant's Form S-6 on October 15, 1986.
(5) Flexible Premium Variable Life Insurance Policy, form
86-VL-2, was filed as Exhibit 1.(5) of the Registrant's
Form S-6 on October 15, 1986.
<PAGE> 58
(6)(a) Articles of Incorporation of the Depositor were filed as
Exhibit 1.(6)(a) of the Registrant's Form S-6 on June 7,
1985.
(6)(b) Code of Regulations (by-laws) of the Depositor were filed
as Exhibit 1.(6)(b) of the Registrant's Form S-6 on June 7,
1985.
(8) Service Agreement between the Depositor and The Ohio
National Life Insurance Company was filed as Exhibit 1.(8)
of the Registrant's Form S-6 on June 7, 1985.
(10) Form of Application was filed as Exhibit 1.(10) of the
Registrant's Form S-6 on June 7, 1985.
(11) Memorandum describing the Depositor's purchase, transfer,
redemption and conversion procedures for the contracts was
filed as Exhibit 1.(11) of the Registrant's Form S-6 on
October 15, 1986.
<PAGE> 59
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
l940, the registrant, Ohio National Variable Account R, has caused this
post-effective amendment to the registration statement to be signed on its
behalf in the City of Cincinnati and State of Ohio on the 28th day of February,
1996.
OHIO NATIONAL VARIABLE ACCOUNT R
(Registrant)
By OHIO NATIONAL LIFE ASSURANCE CORPORATION
(Depositor)
By /s/ Donald J. Zimmerman
-----------------------------------------
Donald J. Zimmerman
Senior Vice President, Insurance Operations
Attest:
/s/ Ronald L. Benedict
- -----------------------
Ronald L. Benedict
Assistant Secretary
<PAGE> 60
Pursuant to the requirements of the Securities Act of l933, the depositor has
duly caused this post-effective amendment to its registration statement to be
signed on its behalf by the undersigned thereunto duly authorized in the City
of Cincinnati and the State of Ohio on the 28th day of February, 1996.
OHIO NATIONAL LIFE ASSURANCE CORPORATION
(Depositor)
By /s/ Donald J. Zimmerman
-----------------------------------------------
Donald J. Zimmerman
Senior Vice President, Insurance Operations
Attest:
/s/ Ronald L. Benedict
- -----------------------
Ronald L. Benedict
Assistant Secretary
Pursuant to the requirements of the Securities Act of l933, this post-effective
amendment to the registration statement has been signed below by the following
persons in the capacities with the depositor and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
Chairman, President
and Chief Executive
/s/ David B. O'Maley Officer and Director February 28, 1996
- -----------------------------
David B. O'Maley
Senior Vice President
and Chief Investment
/s/ Joseph P. Brom Officer and Director February 28, 1996
- -----------------------------
Joseph P. Brom
Senior Vice President
and Chief Financial Officer
/s/ Ronald J. Dolan and Director February 28, 1996
- ----------------------------
Ronald J. Dolan
Senior Vice President and
General Counsel and
/s/ Stuart G. Summers Director February 28, 1996
- -----------------------------
Stuart G. Summers
Senior Vice President,
Insurance Operations &
/s/ Donald J. Zimmerman Secretary and Director February 28, 1996
- -----------------------------
Donald J. Zimmerman
Vice President,
Financial Control
(Principal Accounting
/s/ Paul L. Bergmann Officer) February 28,1996
- -----------------------------
Paul L. Bergmann
</TABLE>
<PAGE> 61
INDEX OF CONSENTS AND EXHIBITS
<TABLE>
<CAPTION>
Page Number
Exhibit in Sequential
Number Description Numbering System
- ------- ----------- ----------------
<S> <C> <C>
Consent of KPMG Peat Marwick LLP
Consent of Jones & Blouch L.L.P.
Consent of Ronald L. Benedict, Esq.
Consent of David W. Cook, FSA, MAAA
</TABLE>
<PAGE> 62
CONSENTS
<PAGE> 63
The Board of Directors
Ohio National Life Assurance Corporation:
We consent to the inclusion of our report included herein and to the reference
to our firm under the heading "Experts" in the Prospectus.
KPMG Peat Marwick LLP
February 29, 1996
<PAGE> 64
JONES & BLOUCH L.L.P.
1025 Thomas Jefferson Street, N.W
Suite 405 West
Washington, D.C. 20007
February 29, 1996
Board of Directors
Ohio National Life Assurance Corporation
237 William Howard Taft Road
Cincinnati, OH 45219
Re: Ohio National Variable Account R
Registration Statement on Form S-6
File No. 2-98265
----------------------------------
Dear Sirs:
We hereby consent to the reference to this firm under the caption
"Legal Matters" in the prospectus contained in post-effective amendment No. 11
to the above-referenced registration statement to be filed with the Securities
and Exchange Commission pursuant to the Securities Act of 1933.
Very truly yours,
/s/ Jones & Blouch L.L.P.
-------------------------
Jones & Blouch L.L.P.
<PAGE> 65
[OHIO NATIONAL LIFE ASSURANCE CORPORATION Letterhead]
February 28, 1996
The Board of Directors
Ohio National Life Assurance Corporation
237 William Howard Taft Road
Cincinnati, Ohio 45219
Re: Ohio National Variable Account R
File Nos. 2-98265 and 811-4320
Post-Effective Amendment No. 11
Gentlemen:
The undersigned hereby consents to the use of my name under the caption of
"Legal Opinions" in the registration statement on Form S-6 of the above
captioned registrant.
Sincerely,
Ronald L. Benedict
Assistant Secretary and
Legal Counsel
<PAGE> 66
[OHIO NATIONAL LIFE ASSURANCE CORPORATION Letterhead]
February 28, 1996
Ohio National Life Assurance Corporation
237 William Howard Taft Road
Cincinnati, Ohio 45219
Re: Ohio National Variable Account R
File Nos. 2-98265 and 811-4320
Post-Effective Amendment No. 11
Gentlemen:
I hereby consent to the use of my name under the heading "Experts" in the
prospectus included in the post-effective amendment to the above-captioned
registration statement on form S-6.
Sincerely,
David W. Cook, FSA, MAAA
Senior Vice President and Actuary
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NUMBER-OF-SHARES-REDEEMED> 68,027
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<INTEREST-EXPENSE> 0
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<AVG-DEBT-OUTSTANDING> 0
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</TABLE>
