<PAGE> 1
File No. 33-53350
811-4320
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------
POST-EFFECTIVE AMENDMENT NO. 6 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)
X on May 1, 1996, pursuant to paragraph (b)
---
___ 60 days after filing pursuant to paragraph (a)(i)
___ on (date), pursuant to paragraph (a)(i)
___ 75 days after filing pursuant to paragraph (a)(ii)
___ on (date) pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
___ This post-effective amendment designates a new effective date for a
previously filed post- effective amendment.
Title and amount of securities being registered: FLEXIBLE PREMIUM VARIABLE LIFE
INSURANCE CONTRACTS ("VARI-VEST IV"). 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.
<PAGE> 2
PART I
PROSPECTUS
<PAGE> 3
PROSPECTUS
VARI-VEST IV
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
<PAGE> 4
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 does not include a
"wash loan" feature and has a different charge structure. If you are not
interested in the contract's "wash-loan" feature, consult your agent, as it is
likely that the policy would better suit your needs.
2
<PAGE> 5
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>
3
<PAGE> 6
<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.
4
<PAGE> 7
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.
5
<PAGE> 8
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.
6
<PAGE> 9
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.
7
<PAGE> 10
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.
8
<PAGE> 11
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 (except in Texas). 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 4%. Currently, we credit interest at
an annual rate of 6.75%. If you have attained at least age 65 and the contract
is at least 10 years old, we will credit interest at a guaranteed annual rate of
8%.
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.
10
<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;
11
<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 47 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
47 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.
12
<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 nine 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.
13
<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.
14
<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.
15
<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.
16
<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 (except in Texas) 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.)
17
<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.
18
<PAGE> 21
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 4% 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 4% 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.
19
<PAGE> 22
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.
20
<PAGE> 23
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.
21
<PAGE> 24
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%.
22
<PAGE> 25
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 pre-existing Dollar Cost Averaging program) will be made first, followed by
mailed written requests in the order postmarked and, lastly, telephone and
facsimile requests in the order received. Contractowners whose transfer requests
are not made will be so notified. Current SEC rules preclude 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.
23
<PAGE> 26
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.
24
<PAGE> 27
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.
25
<PAGE> 28
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 in stated amount 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 4.9% of any first year premium paid in excess of
the minimum premium, and 4.9% 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
4% 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 4% 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 4% 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
OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
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 periods indicated herein 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 SMALL GLOBAL
EQUITY MARKET BOND OMNI INTERNATIONAL APPRECIATION CAP CONTR.
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <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 $1,674,007 232,012
=========== ======== ======== ========== ========== ========== ========== =======
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 $1,674,007 232,012
=========== ======== ======== ========== ========== ========== ========== =======
</TABLE>
<TABLE>
<CAPTION>
AGGRESS.
GROWTH
SUBACCOUNT
----------
<S> <C>
Assets - Investments
at market value
(note 2) 442,081
=======
Contract owners'
equity:
Contracts in
accumulation
period (note 3) 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
gains and dividends $ 19,903 $ 18,388 $ 11,491 $ 122,957 $ 118,097 $ 80,190
-------- -------- -------- ---------- ---------- ----------
Realized and unrealized gain
(loss) on investments:
Realized gain (loss) - (1,030) 1,854 31,864 22,179 24,768
Unrealized gain (loss) (78) (26,390) 3,300 725,434 (155,096) 152,337
-------- -------- -------- ---------- ---------- ----------
Net gain (loss) on
investments (44,832) (27,420) 5,154 757,298 (132,917) 177,105
Net investment activity 44,754 (9,032) 16,645 880,255 (14,820) 257,295
-------- -------- -------- ---------- ---------- ----------
Equity transactions:
Sales:
Contract purchase payments 64,657 103,680 73,143 1,092,988 1,072,401 639,946
Transfers from fixed and
other subaccounts 108,837 40,481 48,401 370,752 841,401 420,385
-------- -------- -------- ---------- ---------- ----------
254,991 144,161 121,544 1,463,740 1,913,802 1,060,331
-------- -------- -------- ---------- ---------- ----------
Redemptions:
Withdrawals and surrenders 5,704 15,725 7,847 67,498 58,256 36,030
-------- -------- -------- ---------- ---------- ----------
Transfers to fixed and
other subaccounts 32,704 19,557 31,658 314,014 497,884 240,581
-------- -------- -------- ---------- ---------- ----------
Cost of insurance and
administrative fee 41,769 28,012 20,437 381,402 308,606 185,805
-------- -------- -------- ---------- ---------- ----------
80,177 63,294 59,942 762,914 864,746 462,416
-------- -------- -------- ---------- ---------- ----------
Net equity transactions 174,814 80,867 61,602 700,826 1,049,056 597,915
-------- -------- -------- ---------- ---------- ----------
Risk and administrative
expense (note 4) 2,892 1,792 1,362 33,258 21,835 16,214
-------- -------- -------- ---------- ---------- ----------
Net change in contract
owners' equity 236,579 70,043 76,885 1,547,823 1,012,401 838,996
Contract owners' equity:
Beginning of period 289,804 219,761 142,876 3,611,905 2,599,504 1,760,508
-------- -------- -------- ---------- ---------- ----------
End of period $526,383 $289,804 $219,761 $5,159,728 $3,611,905 $2,599,504
======== ======== ======== ========== ========== ==========
</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
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
SMALL CAP CONTRARIAN(c)GROWTH(c)
SUBACCOUNT SUBACCOUNT SUBACCOUNT
1995 1994 1995 1995
-----------------------------------------
<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 CAPITAL
EQUITY MARKET BOND OMNI INTERNATIONAL APPRECIATION
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
1995
Beginning unit value 16.785643 14.507086 15.156742 16.502872 13.336474 9.950187
Reinvested capital gains and dividends 0.535931 0.711525 0.850369 0.518180 0.453058 0.328243
Unrealized gain (loss) 3.885373 0.000000 1.891702 3.099521 1.060350 1.839934
Contract charges (0.014482) (0.011159) (0.012539) (0.012884) (0.010540) (0.008586)
Ending unit value 21.192465 15.207452 17.886274 20.106689 14.839342 12.109778
Percentage increase (decrease) in unit value* 26.3% 4.8% 18.0% 21.8% 11.3% 21.7%
1994
Beginning unit value 16.870045 14.054459 15.879641 16.714665 12.433465 10.000000***
Reinvested capital gains and dividends 0.531001 0.463316 1.153660 0.611008 0.138938 0.099737
Unrealized gain (0.602749) 0.000000 (1.865057) (0.810420) 0.774140 (0.142056)
Contract charges (0.012654) (0.010689) (0.011502) (0.012381) (0.010069) (0.007494)
Ending unit value 16.785643 14.507086 15.156742 16.502872 13.336474 9.950187
Percentage increase in unit value* (0.5)% 3.2% (4.6)% (1.3)% 7.3% (0.5)%
1993
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>
SMALL GLOBAL AGGRESSIVE
CAP CONTRARIAN GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
<S> <C> <C> <C>
1995
Beginning unit value 10.290499 10.000000*** 10.000000***
Reinvested capital gains and dividends 0.037689 0.072802 1.128730
Unrealized gain (loss) 3.266534 0.763238 1.504407
Contract charges (0.009445) (0.007987) (0.009095)
Ending unit value 13.585277 10.828053 12.624042
Percentage increase (decrease) in unit value* 32.0% 8.3% 26.2%
1994
Beginning unit value 10.000000***
Reinvested capital gains and dividends 0.131388
Unrealized gain 0.166824
Contract charges (0.007713)
Ending unit value 10.290499
Percentage increase in unit value* 2.9%
1993
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
KPMG PEAT MARWICK LLP
1600 PNC Center
201 East Fifth Street
Cincinnati, OH 45202
Dayton, OH
Independent Auditors' Report
----------------------------
The Board of Directors
Ohio National Life Assurance Corporation:
We have audited the accompanying balance sheet of Ohio National Life Assurance
Corporation (the Company) as of December 31, 1995, and the related statements
of income, stockholder's equity and cash flows for the year then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides 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 Life Assurance
Corporation as of December 31, 1995, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
As discussed in Note 3, the Company adopted the provisions of the Financial
Accounting Standards Board's Statement of Financial Accounting Standards No.
120, Accounting and Reporting by Mutual Life Insurance Enterprises and by
Insurance Enterprises for Certain Long-Duration Participating Contracts, in
1995.
/s/ KPMG Peat Marwick LLP
Cincinnati, Ohio
February 9, 1996
<PAGE> 48
OHIO NATIONAL LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
The Ohio National Life Insurance Company)
Balance Sheet
December 31, 1995
(000's omitted)
<TABLE>
<CAPTION>
Assets
------
<S> <C>
Investments (notes 5, 8 and 9):
Fixed maturities available-for-sale, at fair value $ 442,819
Fixed maturities held-to-maturity, at amortized cost 45,461
Mortgage loans on real estate, net 161,095
Policy loans 31,950
Short-term investments 13,348
---------
694,673
Cash 3,543
Accrued investment income 8,674
Deferred policy acquisition costs 92,413
Reinsurance recoverables 73,317
Other assets 2,621
Assets held in Separate Accounts 34,106
---------
$ 909,347
=========
Liabilities and Stockholder's Equity
------------------------------------
Future policy benefits and claims (note 6) $ 695,405
Other policyholder funds 2,192
Accrued Federal income tax (note 7):
Current 10,632
Deferred 13,820
Other liabilities 10,293
Liabilities related to Separate Accounts 34,106
---------
Total liabilities 766,448
---------
Stockholder's equity (notes 3, 4, and 10):
Class A common stock; authorized 10,000 shares of $3,000 par value;
issued and outstanding 3,200 shares 9,600
Additional paid-in capital 27,025
Unrealized gains on securities available-for-sale, net (note 5) 9,558
Retained earnings 96,716
---------
Total stockholder's equity 142,899
---------
Commitments and contingencies (notes 11 and 13)
$ 909,347
=========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 49
OHIO NATIONAL LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
The Ohio National Life Insurance Company)
Statement of Income
Year ended December 31, 1995
(000's omitted)
<TABLE>
<CAPTION>
Revenues (note 11):
<S> <C>
Traditional life and accident and health insurance premiums $ 9,639
Annuity premium and charges 2,326
Universal life and investment product policy charges 33,788
Net investment income (note 5) 51,052
Other income 4,648
Net realized losses on investments (note 5) (1,882)
---------
99,571
---------
Benefits and expenses:
Benefits and claims 56,549
Amortization of deferred policy acquisition costs 8,011
Other operating costs and expenses 12,642
---------
77,202
---------
Income before Federal income tax and cumulative effect of change in
accounting principles 22,369
Federal income tax (note 7):
Current expense 10,632
Deferred tax benefit (3,030)
---------
7,602
---------
Income before cumulative effect of change in accounting principles 14,767
Cumulative effect of change in accounting principles (note 3) 53,845
---------
Net income $ 68,612
=========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 50
OHIO NATIONAL LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
The Ohio National Life Insurance Company)
Statement of Stockholder's Equity
Year ended December 31, 1995
(000's omitted)
<TABLE>
<CAPTION>
Unrealized
gains (losses)
Additional on securities Total
Capital Paid-in available-for- Retained stockholder's
shares capital sale earnings equity
------------ -------------- ---------------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Balance, beginning of year $ 9,600 27,025 - 28,104 64,729
Change in accounting
principle (note 3) - - (10,693) - (10,693)
Net income - - - 68,612 68,612
Unrealized gains on securities
available-for-sale, net of
adjustment to deferred
policy acquisition costs
and deferred Federal
income tax - - 20,251 - 20,251
------- ------- ------- ------- -------
Balance, end of year $ 9,600 27,025 9,558 96,716 142,899
======= ======= ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
<PAGE> 51
OHIO NATIONAL LIFE ASSURANCE CORPORATION
Statement of Cash Flow
Year ended December 31, 1995
(000's omitted)
<TABLE>
<S> <C>
Cash flows from operating activities:
Net Income $68,612
Adjustments to reconcile net income to net cash
Used in operating activities:
Cumulative effect of change in accounting principles (53,845)
Capitalization of deferred policy acquisition costs (18,220)
Amortization of deferred policy acquisition costs 8,011
Amortization and depreciation 243
Realized losses on invested assets, net 222
Increase in accrued investment income (1,447)
Increase in other assets (12,599)
Decrease in policyholder account balances (88,318)
Increase in other policyholder funds 346
Increase in accrued Federal income tax payable 5,753
Increase in other liabilities 3,174
Other, net (1,363)
--------
Net cash used in operating activities (89,431)
--------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 18,967
Proceeds from sale of securities available-for-sale 3,138
Proceeds from maturity of fixed maturities held-to-maturity 11,788
Proceeds from repayment of mortgage loans on real estate 7,426
Proceeds from repayment of policy loans 3,171
Cost of securities available-for-sale acquired (50,494)
Cost of fixed maturities held-to-maturity acquired (39,247)
Cost of mortgage loans on real estate acquired (50,365)
Policy loans issued (6,879)
--------
Net cash used in investing activities (102,495)
--------
Cash flows from financing activities:
Increase in universal life and investment product account balances 723,326
Decrease in universal life and investment product account balances (532,039)
--------
Net cash provided by financing activities 191,287
--------
Net decrease in cash and cash equivalents (639)
Cash and cash equivalents, beginning of year 17,530
--------
Cash and cash equivalents, end of year $16,891
========
</TABLE>
See accompanying notes to financial statements
<PAGE> 52
OHIO NATIONAL LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
The Ohio National Life Insurance Company)
Notes to Financial Statements
December 31, 1995
(000's omitted)
(1) Organization and Business Description
-------------------------------------
Ohio National Life Assurance Corporation (ONLAC or the Company) is a
stock life insurance company, wholly-owned by The Ohio National
Life Insurance Company (ONLIC), a mutual life insurance company.
ONLAC is a life and health insurer licensed in 45 states and the
District of Columbia. The Company offers term life, universal
life, disability and annuity products through independent agents
and other distribution channels and competes with other insurers
throughout the United States. The Company is subject to
regulation by the Insurance Departments of states in which it is
licensed and undergoes periodic examinations by those departments.
The following is a description of the most significant risks facing life
and health insurers and how the Company mitigates those risks:
LEGAL/REGULATORY RISK is the risk that changes in the legal or
regulatory environment in which an insurer operates will create
additional expenses not anticipated by the insurer in pricing its
products. That is, regulatory initiatives designed to reduce
insurer profits, new legal theories or insurance company
insolvencies through guaranty fund assessments may create costs
for the insurer beyond those recorded in the consolidated
financial statements. The Company mitigates this risk by
offering a wide range of product and by operating throughout the
United States, thus reducing its exposure to any single product or
jurisdiction, and also by employing underwriting practices which
identify and minimize the adverse impact of this risk.
CREDIT RISK is that risk that issuers of securities owned by the
Company or mortgagors on mortgage loans on real estate owned by
the Company will default or that other parties, including
reinsurers, which owe the Company money, will not pay. The
Company minimizes this risk by adhering to a conservative
investment strategy, by maintaining sound reinsurance and credit
and collection policies and by providing for any amounts deemed
uncollectible.
(Continued)
<PAGE> 53
2
OHIO NATIONAL LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
The Ohio National Life Insurance Company)
Notes to Financial Statements, Continued
(1) Organization and Business Description, Continued
------------------------------------------------
INTEREST RATE RISK is the risk that interest rates will change and
cause a decrease in the value of an insurer's investments. This
change in rates may cause certain interest-sensitive products to
become uncompetitive or may cause disintermediation. The Company
mitigates this risk by charging fees for non-conformance with
certain policy provisions, by offering products that transfer this
risk to the purchaser, and/or by attempting to match the maturity
schedule of its assets with the expected payouts of its
liabilities. To the extent that liabilities come due more quickly
than assets mature, an insurer would have to borrow funds or sell
assets prior to maturity and potentially recognize a gain or loss.
(2) Summary of Significant Accounting Policies
------------------------------------------
The significant accounting policies followed by the Company that
materially affect financial reporting are summarized below. The
accompanying financial statements have been prepared in accordance
with generally accepted accounting principles (GAAP) which differ
from statutory accounting practices prescribed or permitted by
regulatory authorities. See Notes 3 and 4.
(a) Valuation of Investments and Related Gains and Losses
-----------------------------------------------------
The Company is required to classify its fixed maturity
securities and equity securities as either
held-to-maturity, available-for-sale or trading. Fixed
maturity securities are classified as held-to-maturity
when the Company has the positive intent and ability to
hold the securities to maturity and are stated at
amortized cost. Fixed maturity securities not classified
as held-to-maturity and all equity securities are
classified as available-for-sale and are stated at fair
value, with the unrealized gains and losses, net of
adjustments to deferred policy acquisition costs and
deferred Federal income tax, reported as a separate
component of shareholder's equity. The adjustment to
deferred policy acquisition costs represents the change in
amortization of deferred policy acquisition costs that
would have been required as a charge or credit to
operations had such unrealized amounts been realized.
The Company has no fixed maturity securities classified as
trading as of December 31, 1995.
(Continued)
<PAGE> 54
3
OHIO NATIONAL LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
The Ohio National Life Insurance Company)
Notes to Financial Statements, Continued
(2) Summary of Significant Accounting Policies, Continued
-----------------------------------------------------
(a) Valuation of Investments and Related Gains and Losses, Continued
----------------------------------------------------------------
Mortgage loans on real estate are carried at the unpaid
principal balance less valuation allowances. The Company
provides valuation allowances for impairments of mortgage
loans on real estate based on a review by portfolio
managers. The measurement of impaired loans is based on
the present value of expected future cash flows discounted
at the loan's effective interest rate or, as a practical
expedient, at the fair value of the collateral, if the
loan is collateral dependent. Loans in foreclosure and
loans considered to be impaired as of the balance sheet
date are placed on non- accrual status and written down to
the fair value of the existing property to derive a new
cost basis. Cash receipts on non-accrual status mortgage
loans on real estate are included in interest income in
the period received.
Realized gains and losses on the sale of investments are
determined on the basis of specific security
identification. Estimates for valuation allowances and
other than temporary declines are included in realized
gains and losses on investments.
In March 1995, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No.
121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of (SFAS 121).
SFAS 121 requires impairment losses to be recorded on
long-lived assets used in operations when indications of
impairment are present and the undiscounted cash flows
estimated to be generated by those assets are less than
the assets' carrying amount. SFAS 121 also addresses the
accounting for long-lived assets that are expected to be
disposed of. The statement is effective for fiscal years
beginning after December 15, 1995, and earlier application
is permitted. Previously issued financial statements
shall not be restated. The Company will adopt SFAS 121
in 1996 and the impact on the financial statements of
adopting SFAS 121 is not expected to be material.
(Continued)
<PAGE> 55
4
OHIO NATIONAL LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
The Ohio National Life Insurance Company)
Notes to Financial Statements, Continued
(2) Summary of Significant Accounting Policies, Continued
-----------------------------------------------------
(b) Revenues and Benefits
---------------------
Traditional Life Insurance Products
-----------------------------------
Traditional life insurance products include those products
with fixed and guaranteed premiums and benefits and
consist primarily of graded premium life, and term life
policies. Premiums for traditional non-participating life
insurance products are recognized as revenue when due and
collected. Benefits and expenses are associated with
earned premiums so as to result in recognition of profits
over the life of the contract. This association is
accomplished by the provision for future policy benefits
and the deferral and amortization of policy acquisition
costs.
Universal Life and Investment Products
--------------------------------------
Universal life products include universal life, variable
universal life and other interest-sensitive life insurance
policies. Investment products consist primarily of
individual immediate and deferred annuities. Revenues for
universal life and investment products consist of net
investment income and cost of insurance, policy
administration and surrender charges that have been earned
and assessed against policy account balances during the
period. Policy benefits and claims that are charged to
expense include benefits and claims incurred in the period
in excess of related policy account balances, maintenance
costs and interest credited to policy account balances.
Accident and Health Insurance
-----------------------------
Accident and health insurance premiums are recognized as
revenue in accordance with the terms of the policies.
Policy claims are charged to expense in the period that
the claims are incurred.
(Continued)
<PAGE> 56
5
OHIO NATIONAL LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
The Ohio National Life Insurance Company)
Notes to Financial Statements, Continued
(2) Summary of Significant Accounting Policies, Continued
-----------------------------------------------------
(c) Deferred Policy Acquisition Costs
---------------------------------
The costs of acquiring new business, principally commissions,
certain expenses of the policy issue and underwriting
department and certain variable agency expenses have been
deferred. For traditional non-participating life
insurance products, these deferred acquisition costs are
predominantly being amortized with interest over the
premium paying period of the related policies. Such
anticipated premium revenue was estimated using the same
assumptions as were used for computing liabilities for
future policy benefits. For universal life and investment
products, deferred policy acquisition costs are being
amortized with interest over the lives of the policies in
relation to the present value of estimated future gross
profits from projected interest margins, cost of
insurance, policy administration and surrender charges.
Deferred policy acquisition costs are adjusted to reflect
the impact of unrealized gains and losses on fixed
maturity securities available-for-sale (see Note 2(a)).
(d) Separate Accounts
-----------------
Separate Account assets and liabilities represent
contractholders' funds which have been segregated into
accounts with specific investment objectives. The
investment income and gains or losses of these accounts
accrue directly to the contractholders. The activity of
the Separate Accounts is not reflected in the statements
of income and cash flows except for the fees the Company
receives for administrative services and risks assumed.
(e) Future Policy Benefits
----------------------
Future policy benefits for traditional life policies have been
calculated using a net level premium method based on
estimates of mortality, morbidity, investment yields and
withdrawals which were used or which were being
experienced at the time the policies were issued, rather
than the assumptions prescribed by state regulatory
authorities (see Note 6).
Future policy benefits for annuity policies in the
accumulation phase, universal life and variable universal
life policies have been calculated based on participants'
aggregate account balances.
(Continued)
<PAGE> 57
6
OHIO NATIONAL LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
The Ohio National Life Insurance Company)
Notes to Financial Statements, Continued
(2) Summary of Significant Accounting Policies, Continued
-----------------------------------------------------
(f) Federal Income Tax
------------------
ONLAC files a consolidated Federal income tax return with
ONLIC. The Company uses the asset and liability method of
accounting for income tax. Under the asset and liability
method, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to
differences between the financial statement carrying
amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary
differences are expected to be recovered or settled.
Under this method, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
Valuation allowances are established when necessary to
reduce the deferred tax assets to the amounts expected to
be realized.
(g) Reinsurance Ceded
-----------------
Reinsurance premiums ceded and reinsurance recoveries on
benefits and claims incurred are deducted from the
respective income and expense accounts. Assets and
liabilities related to reinsurance ceded are reported on a
gross basis.
(h) Cash Equivalents
----------------
For purposes of the statement of cash flows, the Company
considers all short-term investments with original
maturities of three months or less to be cash equivalents.
(i) Use of Estimates
----------------
In preparing the financial statements, management is required
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of
contingent assets and liabilities as of the date of the
financial statements and revenues and expenses for the
reporting period. Actual results could differ
significantly from those estimates.
The estimates susceptible to significant change are those used
in determining deferred policy acquisition costs, the
liability for future policy benefits and claims,
contingencies, and the valuation allowance for mortgage
loans on real estate. Although some variability is
inherent in these estimates, management believes the
amounts provided are adequate.
(Continued)
<PAGE> 58
7
OHIO NATIONAL LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
The Ohio National Life Insurance Company)
Notes to Financial Statements, Continued
(3) Change in Accounting Principles
-------------------------------
Effective January 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 120, Accounting and Reporting by Mutual
Life Insurance Enterprises and Insurance Enterprises for Certain
Long-Duration Participating Contracts (SFAS 120), thereby adopting
Interpretation No. 40, Applicability of Generally Accepted
Accounting Principles to Mutual Life Insurance and Other
Enterprises (the Interpretation). The Interpretation clarified
that enterprises, including mutual life insurance enterprises and
thereby their wholly-owned subsidiaries, that issue financial
statements described as prepared "in conformity with generally
accepted accounting principles" are required to apply all
applicable authoritative accounting pronouncements in preparing
those statements. SFAS 120 extended the applicability of certain
SFASs to mutual life insurance enterprises, as well as extended
the effective date of the Interpretation. Prior to the adoption
of SFAS 120 and the Interpretation, the Company, consistent with
industry practice, issued financial statements prepared in
accordance with accounting practices prescribed or permitted by
the Department of Insurance of the State of Ohio (statutory
accounting), which were considered generally accepted accounting
principles for wholly-owned subsidiaries of mutual life insurance
enterprises. The Company elected to early adopt SFAS 120 and the
Interpretation in 1995; such adoption resulted in a decrease at
January 1, 1995 in stockholder's equity from the recording of net
unrealized losses on securities available-for-sale of $10,693 and
an increase in net income of $53,845 due to the remaining
cumulative effect of adopting SFAS 120 and the Interpretation.
The Company's significant accounting policies adopted in connection with
its implementation of SFAS 120 and the Interpretation are described
in Note 2. Those policies differ in some respects from the
statutory accounting previously followed by the Company as follows:
(1) the costs related to acquiring business, principally
commissions and certain policy issue expenses, are amortized over
the period benefited rather than charged to income in the year
incurred; (2) future policy benefit reserves are based on
anticipated Company experience for lapses, mortality and investment
yield, rather than statutory mortality and interest requirements,
without consideration of withdrawals; (3) premiums for universal
life contracts and investment contracts are recorded as deposits on
the balance sheet; revenues consist of investment income and
contract charges net of interest credited, death benefits and
administrative costs; (4) statutory required balances such as
"nonadmitted assets", asset valuation reserve and interest
maintenance reserve are not recognized; (5) bonds are carried at
amortized cost or fair value depending on the Company's intent to
hold or sell such securities, rather than at amortized cost, (6)
assets and liabilities are reported gross of reinsurance balances;
and (7) deferred Federal income taxes are provided for temporary
differences between financial statement carrying amounts of assets
and liabilities and their related tax basis.
(Continued)
<PAGE> 59
8
OHIO NATIONAL LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
The Ohio National Life Insurance Company)
Notes to Financial Statements, Continued
(3) Change in Accounting Principles, Continued
------------------------------------------
The cumulative effect on stockholder's equity at January 1, 1995 of
adopting SFAS 120 and the Interpretation, other than the effect of
recording net unrealized losses on securities available-for-sale,
is recognized in the accompanying statement of income, and the
significant components are as follows:
<TABLE>
<S> <C>
Deferred policy acquisition costs $ 93,496
Asset valuation reserve 4,891
Interest maintenance reserve 3,422
Future policy benefits (35,862)
Deferred Federal income tax (9,354)
Other, net (2,748)
--------
$ 53,845
========
</TABLE>
The effect of recording the unrealized loss on securities, previously
carried at amortized cost, designated as available-for-sale at
January 1, 1995, and the related deferred policy acquisition costs
and deferred Federal income tax effect is as follows:
<TABLE>
<S> <C>
Excess of amortized cost over fair value of
fixed maturity securities available-for-sale $ (12,027)
Deferred policy acquisition costs 700
Deferred Federal income tax 634
--------
$ (10,693)
========
</TABLE>
(4) Basis of Presentation
---------------------
The financial statements have been prepared in accordance with GAAP.
Annual Statements on ONLAC, filed with the Department of Insurance
of the State of Ohio, are prepared on the basis of accounting
practices prescribed or permitted by such regulatory authorities.
Prescribed statutory accounting practices include a variety of
publications of the National Association of Insurance
Commissioners (NAIC), as well as state laws, regulations and
general administrative rules. Permitted statutory accounting
practices encompass all accounting practices not so prescribed.
The Company has no material permitted statutory accounting
practices.
(Continued)
<PAGE> 60
9
OHIO NATIONAL LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
The Ohio National Life Insurance Company)
Notes to Financial Statements, Continued
(4) Basis of Presentation, Continued
--------------------------------
The following reconciles the statutory net income of the Company as
reported to regulatory authorities to the net income as shown in
the accompanying financial statements:
<TABLE>
<S> <C>
Statutory net income $ 10,161
Adjustments to restate to the basis of GAAP:
Increase in deferred policy acquisition costs, net 10,117
Future policy benefits (5,897)
Deferred Federal income tax benefit 3,030
Interest maintenance reserve (64)
Cumulative effect of change in accounting
principles, net (note 3) 53,845
Other, net (2,580)
--------
Net income per accompanying statement
of income $ 68,612
========
</TABLE>
The following reconciles the statutory capital shares and surplus of the
Company as reported to regulatory authorities to the stockholder's
equity as shown in the accompanying financial statements for the
year ended December 31, 1995:
<TABLE>
<S> <C>
Statutory capital and surplus $ 72,440
Add (deduct) cumulative effect of adjustments to
reconcile to the basis of GAAP:
Deferred policy acquisition costs 92,413
Asset valuation reserve 7,350
Interest maintenance reserve 3,358
Future policy benefits (47,394)
Deferred Federal income tax (13,820)
Difference between amortized cost and fair
value of fixed maturity securities
available-for-sale, gross 27,367
Other, net 1,185
----------
Equity per accompanying balance sheet $ 142,899
==========
</TABLE>
(Continued)
<PAGE> 61
10
OHIO NATIONAL LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
The Ohio National Life Insurance Company)
Notes to Financial Statements, Continued
(5) Investments
-----------
An analysis of investment income by investment type follows for the year
ended December 31, 1995:
<TABLE>
<S> <C>
Gross investment income:
Fixed maturities available-for-sale $ 15,260
Fixed maturities held-to-maturity 19,588
Mortgage loans on real estate 13,193
Short-term 1,340
Policy loans 2,213
-----------
Total investment income 51,594
Less investment expenses 542
-----------
Net investment income $ 51,052
===========
</TABLE>
An analysis of realized gains (losses) on investments by investment type
follows for the year ended December 31, 1995:
<TABLE>
<S> <C>
Realized on disposition of investments:
Fixed maturities, available-for-sale $ (235)
Fixed maturities, held-to-maturity 13
-----------
(222)
Valuation allowance for mortgage loans
on real estate (1,660)
-----------
$ (1,882)
===========
</TABLE>
The components of unrealized gains (losses) on securities
available-for-sale, net, were as follows as of December 31, 1995:
<TABLE>
<S> <C>
Gross unrealized gain $ 27,367
Adjustment to deferred policy acquisition costs (11,200)
Deferred Federal income tax (6,609)
-----------
$ 9,558
===========
</TABLE>
An analysis of the change in gross unrealized gains (losses) on
securities available-for-sale and fixed maturities
held-to-maturity follows for the year ended December 31, 1995:
<TABLE>
<S> <C>
Fixed maturities, available-for-sale $ 39,394
Fixed maturities held-to-maturity $ 16,973
</TABLE>
(Continued)
<PAGE> 62
11
OHIO NATIONAL LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
The Ohio National Life Insurance Company)
Notes to Financial Statements, Continued
(5) Investments, Continued
----------------------
The amortized cost and estimated fair value of securities
available-for-sale and fixed maturities held-to-maturity were as
follows as of December 31, 1995:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Securities available-for-sale
-----------------------------
Fixed maturities
U.S. Treasury securities and
obligations of U.S. government
operations and agencies $ 53,829 5,670 (42) 59,457
Obligations of states and
political subdivisions 6,290 53 (152) 6,191
Corporate securities 264,064 20,944 (773) 284,235
Mortgage-backed securities 91,269 2,345 (678) 92,936
-------- ------ ------- -------
Total fixed maturities $ 415,452 29,012 (1,645) 442,819
======== ====== ======= =======
Fixed maturity securities
--------------------------
held-to-maturity
----------------
Corporate securities $ 45,418 7,125 - 52,543
Mortgage-backed securities 43 11 - 54
-------- ------ ------- -------
$ 45,461 7,136 - 52,597
======== ====== ======= =======
</TABLE>
The amortized cost and estimated fair value of fixed maturity securities
available-for-sale and fixed maturity securities held-to-maturity
as of December 31, 1995, by contractual maturity, are shown below.
Expected maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
cost fair value
--------- ----------
<S> <C> <C>
Fixed maturity securities available-for-sale
--------------------------------------------
Due in one year or less $ 4,271 4,298
Due after one year through five years 28,836 29,173
Due after five years through ten years 113,074 122,467
Due after ten years 178,002 193,944
Mortgaged-backed securities 91,269 92,937
------- -------
$ 415,452 442,819
======= =======
</TABLE>
(Continued)
<PAGE> 63
12
OHIO NATIONAL LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
The Ohio National Life Insurance Company)
Notes to Financial Statements, Continued
(5) Investments, Continued
----------------------
<TABLE>
<CAPTION>
Amortized Estimated
cost fair value
--------- ----------
<S> <C> <C>
Fixed maturity securities held-to-maturity
------------------------------------------
Due after ten years $ 45,418 52,543
Mortgage-backed securities 43 54
------ ------
$ 45,461 52,597
====== ======
</TABLE>
Proceeds from the sale of securities available-for-sale during 1995 were
$3,138. Gross gains of $34 and gross losses of $0 were realized
on those sales. Investments with an amortized cost of $3,153 as
of December 1995 were on deposit with various regulatory agencies
as required by law.
As permitted by the FASB's Special Report, A Guide to Implementation of
Statement 115 on Accounting for Certain Investments in Debt and
Equity Securities, issued in November 1995, the Company
transferred a part of its fixed maturity securities previously
classified as held-to-maturity to available-for-sale. As of
December 29, 1995, the date of transfer, the fixed maturity
securities had an amortized cost value of $201,465, resulting in a
gross unrealized gain on available-for-sale securities of $16,675.
The Company generally initiates foreclosure proceedings on all mortgage
loans on real estate delinquent sixty days. There were no
foreclosures of mortgage loans on real estate during 1995, and no
foreclosures are in process as of December 31, 1995.
Activity in the valuation allowance account for mortgage loans on real
estate is summarized for the year ended December 31, 1995:
<TABLE>
<S> <C>
Allowance as of January 1 $ 640
Additions charged to operations 1,660
-----
Allowance as of December 31 $ 2,300
=====
</TABLE>
(6) Future Policy Benefit and Claims
--------------------------------
The liability for future policy benefits for universal life policies and
investment contracts (approximately 83% of the total liability for
future policy benefits as of December 31, 1995) has been
established based on the aggregate account value without reduction
for surrender charges. The average interest rate to be credited
on investment product policies was 6.4% at December 31, 1995.
(Continued)
<PAGE> 64
13
OHIO NATIONAL LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
The Ohio National Life Insurance Company)
Notes to Financial Statements, Continued
(6) Future Policy Benefit and Claims, Continued
-------------------------------------------
The liability for future policy benefits for traditional life products
are based on the following mortality and interest rate assumptions
without consideration for withdrawals. The mortality table and
interest assumptions used for the majority of new policies are the
1980 CSO table with 4% to 6% interest. With respect to older
policies, the mortality table and interest assumptions used are
primarily the 1958 CSO table with 4% to 4.5% interest.
Approximately 70% of the future policy benefit liability is
calculated on a net level reserve basis at December 31, 1995.
The liability for future policy benefits for individual accident and
health policies include liabilities for active lives, disabled
lives and unearned premiums. The liability for active lives are
calculated on a two-year preliminary term basis at 3% to 6%
interest, using either the 1964 Commisioner's Disability Table
(policies issued prior to 1990) or the 1985 Commissioner's
Individual Disability Table A (policies issued after 1989). The
liability for disabled lives are calculated using either the 1985
Commissioner's Individual Disability Table A at 5% to 5.5%
interest (claims incurred after 1989) or the 1971 modification of
the 1964 Commissioner's Disability Table, at 3.5% interest (claims
incurred prior to 1990).
(7) Federal Income Tax
------------------
Prior to 1984, the Life Insurance Company Income Tax Act of 1959, as
amended by the Deficit Reduction Act of 1984 (DRA), permitted the
deferral from taxation of a portion of statutory income under
certain circumstances. In these situations, the deferred income
was accumulated in the Policyholders' Surplus Account (PSA).
Management considers the likelihood of distributions from the PSA
to be remote; therefore, no Federal income tax has been provided
for such distributions in the financial statements. The DRA
eliminated any additional deferrals to the PSA. Any
distributions from the PSA, however, will continue to be taxable
at the then current tax rate. The balance of the PSA is
approximately $5,257 as of December 31, 1995.
Total Federal income tax expense for the year ended December 31, 1995
differs from the amount computed by applying the U.S. Federal
income tax rate to income before Federal income tax and cumulative
effect of change in accounting principles, as follows:
<TABLE>
<CAPTION>
Amount %
--------- -------
<S> <C> <C>
Computed (expected) tax expense $ 7,829 35.0
Differential earnings 1,558 7.0
Tax exempt interest and dividends received deduction (41) (.1)
Other, net (1,744) (7.9)
------ ----
Total expense and effective rate $ 7,602 34.0
====== ====
</TABLE>
(Continued)
<PAGE> 65
14
OHIO NATIONAL LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
The Ohio National Life Insurance Company)
Notes to Financial Statements, Continued
(7) Federal Income Tax, Continued
-----------------------------
Total Federal income tax paid during the year ended December 31, 1995 was
$4,879.
The tax effects of temporary differences between the financial statement
carrying amounts and tax basis of assets and liabilities that give
rise to significant components of the net deferred tax liability
as of December 31, 1995 are as follows:
<TABLE>
<S> <C>
Deferred tax assets:
Future policy benefits $ 21,123
Mortgage loans on real estate 805
Other 510
--------
Total gross deferred tax assets 22,438
--------
Deferred tax liabilities:
Deferred policy acquisition costs 25,509
Fixed maturities available-for-sale 10,727
Other 22
--------
Total gross deferred tax liabilities 36,258
--------
Net deferred tax liability $ (13,820)
========
</TABLE>
The valuation allowance decreased by $3,663 from the amount recorded at
January 1, 1995. The Company has determined that a valuation
allowance as of December 31, 1995 is not needed. In assessing
the realization of deferred tax assets, management considers
whether it is more likely than not that the deferred tax assets
will be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income
during the periods in which those temporary differences become
deductible. Management considers primarily the scheduled
reversal of deferred tax liabilities and tax planning strategies
in making this assessment and believes it is more likely than not
the Company will realize the benefits of these remaining
deductible differences at December 31, 1995.
(8) Disclosures about Fair Value of Financial Instruments
-----------------------------------------------------
Statement of Financial Accounting Standards No. 107, Disclosures about
Fair Value of Financial Instruments (SFAS 107) requires disclosure
of fair value information about existing on and off-balance sheet
financial instruments. In cases where quoted market prices are
not available, fair value is based on estimates using present
value or other valuation techniques.
These techniques are significantly affected by the assumptions used,
including the discount rate and estimates of future cash flows.
Although fair value estimates are calculated using assumptions
that management believes are appropriate, changes in assumptions
could cause
(Continued)
<PAGE> 66
15
OHIO NATIONAL LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
The Ohio National Life Insurance Company)
Notes to Financial Statements, Continued
(8) Disclosures about Fair Value of Financial Instruments, Continued
----------------------------------------------------------------
these estimates to vary materially. SFAS 107 excludes certain
assets and liabilities, including insurance contracts, other than
policies such as annuities that are classified as investment
contracts from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the
underlying value of the Company.
The tax ramifications of the related unrealized gains and losses can have
a significant effect on fair value estimates and have not been
considered in the estimates.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures:
Cash, short-term investments and policy loans
---------------------------------------------
The carrying amount reported in the balance sheet for these
instruments approximate their fair value.
Investment Securities
---------------------
Fair value for fixed maturity securities is based on quoted market
prices, where available. For fixed maturity securities not
actively traded, fair value is estimated using values obtained from
independent pricing services, or, in the case of private
placements, is estimated by discounting expected future cash flows
using a current market rate applicable to the yield, credit quality
and maturity of the investments.
Separate Account Assets and Liabilities
---------------------------------------
The fair value of assets held in Separate Accounts is based on
quoted market prices. The fair value of liabilities related to
Separate Accounts is the accumulated contract value in the Separate
Account portfolios.
Mortgage Loans on Real Estate
-----------------------------
The fair value for mortgage loans on real estate is estimated using
discounted cash flow analyses, using interest rates currently being
offered for similar loans to borrowers with similar credit ratings.
Loans with similar characteristics are aggregated for purposes of
the calculations. Fair value for mortgages in default is valued at
the estimated fair value of the underlying collateral.
(Continued)
<PAGE> 67
16
OHIO NATIONAL LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
The Ohio National Life Insurance Company)
Notes to Financial Statements, Continued
(8) Disclosures about Fair Value of Financial Instruments, Continued
----------------------------------------------------------------
Investment Contracts
--------------------
Fair value for the Company's liabilities under investment type
contracts is disclosed using two methods. For investment contracts
without defined maturities, fair value is the amount payable on
demand. For investment contracts with known or determined
maturities, fair value is estimated using discounted cash flow
analysis. Interest rates used are similar to currently offered
contracts with maturities consistent with those remaining for the
contracts being valued.
Other Policyholder Funds
------------------------
The carrying amount reported in the balance sheets for these
instruments approximates their fair value.
Carrying amount and estimated fair value of financial instruments subject
to SFAS 107 and policy reserves on insurance contracts were as
follows as of December 31, 1995:
<TABLE>
<CAPTION>
Carrying Estimated
amount fair value
Assets -------- ----------
------
<S> <C> <C>
Investments:
Fixed maturities available-for-sale $ 442,819 442,819
Fixed maturities held-to- maturity 45,461 52,597
Mortgage loans on real estate 161,095 177,188
Policy loans 31,950 31,950
Short-term investments 13,348 13,348
Cash 3,543 3,543
Assets held in Separate Accounts 34,106 34,106
Liabilities
-----------
Deferred and immediate annuity contracts 100,197 100,896
Other policyholder funds 2,192 2,192
Liabilities related to Separate Accounts 34,106 34,106
</TABLE>
(Continued)
<PAGE> 68
17
OHIO NATIONAL LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
The Ohio National Life Insurance Company)
Notes to Financial Statements, Continued
(9) Additional Financial Instruments Disclosure
-------------------------------------------
Significant Concentrations of Credit Risk
-----------------------------------------
Mortgage loans collateralized by the underlying properties. Collateral
must meet or exceed 125% of the loan at the time the loan is made.
The Company grants mainly commercial mortgage loans to customers
throughout the United States. The Company has a diversified loan
portfolio. The summary below depicts loan exposure of remaining
principal balances by geographic area and by type at December 31,
1995:
<TABLE>
<CAPTION>
Mortgage assets by state
------------------------
<S> <C>
Ohio $ 16,533
California 16,196
Florida 16,069
Nebraska 14,460
All others (none greater than $10 million) 100,137
-------
163,395
Less valuation allowances 2,300
-------
Total mortgage loans on real estate, net $ 161,095
=======
Mortgage assets by type
-----------------------
Office $ 43,171
Retail 33,409
Apartments 30,522
Industrial 28,280
Other 28,013
-------
163,395
Less valuation allowances 2,300
-------
Total mortgage loans on real estate, net $ 161,095
=======
</TABLE>
(10) Regulatory Risk-Based Capital, Retained Earnings and Dividend
-------------------------------------------------------------
Restrictions
------------
In January 1993, the NAIC adopted the life and health Risk-Based Capital
(RBC) formula. This model act requires every life and health
insurer to calculate its total adjusted capital and RBC
requirement, and provides for an insurance commissioner to
intervene if the insurer experiences financial difficulty. The
model act will become law in Ohio, the Company's state of
domicile, in March 1996. The formula includes components for
asset risk, liability risk, interest rate exposure and other
factors. Based upon the December 31, 1995 financial statements,
the Company exceeds all required RBC levels.
(Continued)
<PAGE> 69
18
OHIO NATIONAL LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
The Ohio National Life Insurance Company)
Notes to Financial Statements, Continued
(11) Reinsurance
-----------
In the ordinary course of business, the Company reinsures certain risks
with its parent, ONLIC, and other insurance companies. Amounts in
the accompanying financial statements related to ceded business are
as follows:
<TABLE>
<CAPTION>
Non-
Affiliate Affiliate
--------- ---------
<S> <C> <C>
Premiums $ 16,936 14,386
Benefits incurred 8,350 6,228
Commission and expense allowances 2,221 3,715
Reinsurance recoverable:
Reserves for future policy benefits 36,675 35,559
Policy and contract claims payable 689 394
</TABLE>
Net traditional life and accident and health premium income in 1995 is
summarized as follows:
<TABLE>
<S> <C>
Direct premiums earned $ 38,494
Reinsurance assumed 2,467
Reinsurance ceded (31,322)
---------
Net premiums earned $ 9,639
=========
</TABLE>
Reinsurance does not discharge the Company from its primary liability to
policyholders and to the extent that a reinsurer should be unable to
meet its obligations, the Company would be liable to policyholders.
(12) Related Party Transactions
--------------------------
The Company shares common facilities and management with ONLIC. A
written agreement, which either party may terminate upon thirty
days notice, provides that ONLIC furnish personnel space and
supplies, accounting, data processing and related services to
ONLAC. This agreement resulted in charges to the Company in 1995
of approximately $10.6 million.
(13) Contingencies
-------------
The Company is a defendant in various legal actions arising in the normal
course of business. While the outcome of such matters cannot be
predicted with certainty, management believes such matters will be
resolved without material adverse impact on the financial
condition of the Company.
<PAGE> 70
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 IV
<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 62
25 Plan A 1,289 150,000 Nonsmoker 63
25 Plan B 690(Minimum) 150,000 Nonsmoker 64
25 Plan B 3,148 150,000 Nonsmoker 65
40 Plan A 2,190(Minimum) 250,000 Select Nonsmoker 66
40 Plan A 3,916 250,000 Select Nonsmoker 67
40 Plan B 2,190(Minimum) 250,000 Select Nonsmoker 68
40 Plan B 9,489 250,000 Select Nonsmoker 69
</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.
61
<PAGE> 71
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 1,485 186 150,000 101 150,000 20 150,000
3 690 2,284 269 150,000 100 150,000 0 150,000
4 690 3,123 819 150,000 530 150,000 277 150,000
5 690 4,003 1,538 150,000 1,093 150,000 717 150,000
6 690 4,928 2,321 150,000 1,675 150,000 1,151 150,000
7 690 5,899 3,296 150,000 2,402 150,000 1,704 150,000
8 690 6,918 4,345 150,000 3,145 150,000 2,247 150,000
9 690 7,989 5,357 150,000 3,791 150,000 2,666 150,000
10 690 9,113 6,455 150,000 4,453 150,000 3,073 150,000
15 690 15,634 12,961 150,000 7,415 150,000 4,336 150,000
20 690 23,956 22,864 150,000 10,377 150,000 4,875 150,000
24 690 32,242 34,704 150,000 12,683 150,000 4,731 150,000
AGE 60 65,437 103,732 150,000 16,526 150,000 0 150,000
AGE 65 87,519 170,671 208,219 14,618 150,000 0 150,000
AGE 70 115,703 278,294 322,821 6,925 150,000 0 150,000
</TABLE>
<TABLE>
<CAPTION>
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 74 150,000 0 150,000
3 690 2,284 230 150,000 65 150,000 0 150,000
4 690 3,123 772 150,000 490 150,000 242 150,000
5 690 4,003 1,369 150,000 934 150,000 566 150,000
6 690 4,928 2,030 150,000 1,398 150,000 885 150,000
7 690 5,899 2,755 150,000 1,879 150,000 1,195 150,000
8 690 6,918 4,002 150,000 2,826 150,000 1,946 150,000
9 690 7,989 4,875 150,000 3,338 150,000 2,235 150,000
10 690 9,113 5,830 150,000 3,865 150,000 2,511 150,000
15 690 15,634 12,736 150,000 7,288 150,000 4,262 150,000
20 690 23,956 22,437 150,000 10,166 150,000 4,758 150,000
24 690 32,242 33,962 150,000 12,329 150,000 4,526 150,000
AGE 60 65,437 100,047 150,000 14,206 150,000 0 150,000
AGE 65 87,519 163,871 199,922 8,930 150,000 0 150,000
AGE 70 115,703 265,684 308,193 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.
62
<PAGE> 72
MALE ISSUE AGE 25 INITIAL STATED AMOUNT: $150,000
CLASSIFICATION: NONSMOKER DEATH BENEFIT TYPE: A (MATURITY AGE 95)
INITIAL PREMIUM: $1,289.00 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 1,289 1,353 302 150,000 239 150,000 176 150,000
2 1,289 2,775 1,361 150,000 1,170 150,000 987 150,000
3 1,289 4,267 2,043 150,000 1,651 150,000 1,289 150,000
4 1,289 5,834 3,427 150,000 2,749 150,000 2,148 150,000
5 1,289 7,479 5,068 150,000 4,008 150,000 3,107 150,000
6 1,289 9,206 6,870 150,000 5,319 150,000 4,052 150,000
7 1,289 11,020 9,028 150,000 6,863 150,000 5,164 150,000
8 1,289 12,924 11,377 150,000 8,459 150,000 6,260 150,000
9 1,289 14,924 13,822 150,000 9,993 150,000 7,224 150,000
10 1,289 17,024 16,497 150,000 11,581 150,000 8,168 150,000
15 1,289 29,206 33,445 150,000 19,584 150,000 11,795 150,000
20 1,289 44,753 60,621 150,000 28,829 150,000 14,506 150,000
24 1,289 60,231 94,190 185,554 37,377 150,000 16,032 150,000
AGE 60 89 122,244 290,069 388,693 67,211 150,000 15,783 150,000
AGE 65 89 163,496 474,520 578,914 84,540 150,000 11,925 150,000
AGE 70 89 216,146 770,691 894,001 105,269 150,000 3,565 150,000
</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 1,289 1,353 285 150,000 222 150,000 160 150,000
2 1,289 2,775 1,332 150,000 1,143 150,000 962 150,000
3 1,289 4,267 2,004 150,000 1,616 150,000 1,258 150,000
4 1,289 5,834 3,380 150,000 2,708 150,000 2,114 150,000
5 1,289 7,479 4,900 150,000 3,850 150,000 2,956 150,000
6 1,289 9,206 6,580 150,000 5,043 150,000 3,786 150,000
7 1,289 11,020 8,431 150,000 6,284 150,000 4,599 150,000
8 1,289 12,924 10,922 150,000 8,027 150,000 5,845 150,000
9 1,289 14,924 13,170 150,000 9,371 150,000 6,622 150,000
10 1,289 17,024 15,646 150,000 10,767 150,000 7,379 150,000
15 1,289 29,206 33,227 150,000 19,461 150,000 11,722 150,000
20 1,289 44,753 60,216 150,000 28,628 150,000 14,394 150,000
24 1,289 60,231 93,526 184,247 37,051 150,000 15,839 150,000
AGE 60 89 122,244 286,761 384,260 65,452 150,000 14,262 150,000
AGE 65 89 163,496 467,222 570,010 80,778 150,000 8,124 150,000
AGE 70 89 216,146 754,194 874,865 97,662 150,000 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.
63
<PAGE> 73
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 0 150,406 0 150,377 0 150,348
2 690 1,485 184 150,855 99 150,770 19 150,689
3 690 2,284 265 151,350 96 151,180 0 151,025
4 690 3,123 811 151,895 524 151,608 271 151,356
5 690 4,003 1,525 152,498 1,083 152,055 708 151,681
6 690 4,928 2,302 153,162 1,661 152,521 1,140 152,000
7 690 5,899 3,270 153,890 2,382 153,002 1,690 152,310
8 690 6,918 4,308 154,689 3,119 153,500 2,229 152,610
9 690 7,989 5,308 155,562 3,757 154,011 2,644 152,898
10 690 9,113 6,391 156,518 4,410 154,537 3,046 153,173
15 690 15,634 12,740 162,740 7,297 157,297 4,273 154,273
20 690 23,956 22,209 172,209 10,099 160,099 4,755 154,755
24 690 32,242 33,236 183,236 12,169 162,169 4,547 154,547
AGE 60 65,437 91,986 241,986 14,333 164,333 0 150,000
AGE 65 87,519 142,599 292,599 10,809 160,809 0 150,000
AGE 70 115,703 219,100 369,100 998 150,998 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.
64
<PAGE> 74
MALE ISSUE AGE 25 INITIAL STATED AMOUNT: $150,000
CLASSIFICATION: NONSMOKER DEATH BENEFIT TYPE: B (MATURITY AGE 95)
INITIAL PREMIUM: $3,148.00 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 3,148 3,305 2,125 152,942 1,957 152,775 1,790 152,607
2 3,148 6,776 5,203 156,188 4,685 155,669 4,187 155,171
3 3,148 10,420 8,400 159,769 7,321 158,690 6,323 157,692
4 3,148 14,247 12,352 163,721 10,472 161,841 8,802 160,171
5 3,148 18,264 16,824 168,080 13,871 165,128 11,352 162,609
6 3,148 22,483 21,746 172,890 17,414 168,558 13,862 165,006
7 3,148 26,913 27,344 178,192 21,284 172,131 16,511 167,358
8 3,148 31,564 33,485 184,037 25,304 175,855 19,116 169,667
9 3,148 36,447 40,110 190,477 29,365 179,733 21,562 171,930
10 3,148 41,575 47,392 197,576 33,586 183,770 23,963 174,147
15 3,148 71,326 95,446 245,446 56,505 206,505 34,483 184,483
20 3,148 109,296 172,567 383,098 83,999 233,999 43,455 193,455
24 3,148 147,097 266,508 525,020 109,961 259,961 49,543 199,543
AGE 60 48 298,545 814,039 1,090,812 203,154 353,154 59,806 209,806
AGE 65 48 399,292 1,329,634 1,622,153 257,327 407,327 59,808 209,808
AGE 70 48 527,873 2,157,517 2,502,720 318,882 468,882 55,086 205,086
</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 3,148 3,305 2,108 152,925 1,941 152,758 1,775 152,592
2 3,148 6,776 5,175 156,159 4,658 155,642 4,162 155,146
3 3,148 10,420 8,361 159,730 7,285 158,654 6,292 157,661
4 3,148 14,247 12,304 163,673 10,431 161,800 8,767 160,137
5 3,148 18,264 16,655 168,024 13,712 165,082 11,202 162,571
6 3,148 22,483 21,455 172,824 17,136 168,505 13,595 164,965
7 3,148 26,913 26,746 178,115 20,704 172,073 15,945 167,314
8 3,148 31,564 33,029 183,948 24,871 175,790 18,700 169,619
9 3,148 36,447 39,456 190,375 28,742 179,661 20,960 171,879
10 3,148 41,575 46,539 197,458 32,771 183,690 23,173 174,092
15 3,148 71,326 95,221 245,221 56,379 206,379 34,408 184,408
20 3,148 109,296 172,130 382,128 83,787 233,787 43,337 193,337
24 3,148 147,097 265,688 523,405 109,602 259,602 49,336 199,336
AGE 60 48 298,545 807,685 1,082,298 200,745 350,745 58,164 208,164
AGE 65 48 399,292 1,313,855 1,602,903 251,568 401,568 55,855 205,855
AGE 70 48 527,873 2,118,766 2,457,769 305,798 455,798 46,219 196,219
</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.
65
<PAGE> 75
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 2,300 355 250,000 249 250,000 144 250,000
2 2,190 4,714 2,034 250,000 1,719 250,000 1,418 250,000
3 2,190 7,249 2,689 250,000 2,047 250,000 1,456 250,000
4 2,190 9,911 4,824 250,000 3,723 250,000 2,750 250,000
5 2,190 12,706 7,334 250,000 5,625 250,000 4,176 250,000
6 2,190 15,641 10,043 250,000 7,560 250,000 5,539 250,000
7 2,190 18,723 13,370 250,000 9,926 250,000 7,237 250,000
8 2,190 21,958 16,931 250,000 12,319 250,000 8,866 250,000
9 2,190 25,356 20,571 250,000 14,557 250,000 10,242 250,000
10 2,190 28,923 24,499 250,000 16,823 250,000 11,549 250,000
15 2,190 49,620 47,878 250,000 26,787 250,000 15,216 250,000
20 2,190 76,035 83,621 250,000 36,144 250,000 15,744 250,000
24 2,190 102,332 127,089 250,000 42,663 250,000 13,369 250,000
AGE 60 90 76,035 83,621 250,000 36,144 250,000 15,744 250,000
AGE 65 90 109,748 140,919 250,000 44,025 250,000 12,256 250,000
AGE 70 90 152,776 236,940 274,850 47,961 250,000 2,361 250,000
</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 2,300 247 250,000 145 250,000 43 250,000
2 2,190 4,714 1,801 250,000 1,499 250,000 1,211 250,000
3 2,190 7,249 2,305 250,000 1,694 250,000 1,134 250,000
4 2,190 9,911 4,262 250,000 3,221 250,000 2,302 250,000
5 2,190 12,706 6,374 250,000 4,766 250,000 3,404 250,000
6 2,190 15,641 8,649 250,000 6,321 250,000 4,431 250,000
7 2,190 18,723 11,100 250,000 7,883 250,000 5,379 250,000
8 2,190 21,958 14,492 250,000 10,198 250,000 6,996 250,000
9 2,190 25,356 17,343 250,000 11,762 250,000 7,778 250,000
10 2,190 28,923 20,417 250,000 13,318 250,000 8,468 250,000
15 2,190 49,620 41,785 250,000 22,581 250,000 12,202 250,000
20 2,190 76,035 69,825 250,000 27,254 250,000 9,622 250,000
24 2,190 102,332 101,800 250,000 26,836 250,000 2,649 250,000
AGE 60 90 76,035 69,825 250,000 27,254 250,000 9,622 250,000
AGE 65 90 109,748 111,628 250,000 25,720 250,000 0 250,000
AGE 70 90 152,776 178,070 250,000 9,877 250,000 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.
66
<PAGE> 76
MALE ISSUE AGE 40 INITIAL STATED AMOUNT: $250,000
CLASSIFICATION: SELECT NONSMOKER DEATH BENEFIT TYPE: A (MATURITY AGE 95)
INITIAL PREMIUM: $3,916.00 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 3,916 4,112 1,810 250,000 1,607 250,000 1,405 250,000
2 3,916 8,429 5,364 250,000 4,743 250,000 4,148 250,000
3 3,916 12,962 7,564 250,000 6,279 250,000 5,094 250,000
4 3,916 17,722 12,112 250,000 9,885 250,000 7,911 250,000
5 3,916 22,720 17,293 250,000 13,807 250,000 10,839 250,000
6 3,916 27,968 22,958 250,000 17,856 250,000 13,684 250,000
7 3,916 33,478 29,771 250,000 22,649 250,000 17,059 250,000
8 3,916 39,264 37,172 250,000 27,575 250,000 20,346 250,000
9 3,916 45,339 45,045 250,000 32,458 250,000 23,365 250,000
10 3,916 51,718 53,643 250,000 37,488 250,000 26,298 250,000
15 3,916 88,727 108,073 250,000 62,497 250,000 37,066 250,000
20 3,916 135,961 196,578 263,415 91,186 250,000 44,357 250,000
24 3,916 182,983 306,555 380,128 117,856 250,000 47,537 250,000
AGE 60 16 135,961 196,578 263,415 91,186 250,000 44,357 250,000
AGE 65 16 196,244 341,276 416,356 125,130 250,000 47,868 250,000
AGE 70 16 273,183 574,328 666,220 166,091 250,000 45,843 250,000
</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 3,916 4,112 1,703 250,000 1,504 250,000 1,305 250,000
2 3,916 8,429 5,133 250,000 4,526 250,000 3,943 250,000
3 3,916 12,962 7,186 250,000 5,932 250,000 4,776 250,000
4 3,916 17,722 11,561 250,000 9,392 250,000 7,471 250,000
5 3,916 22,720 16,351 250,000 12,962 250,000 10,079 250,000
6 3,916 27,968 21,593 250,000 16,640 250,000 12,594 250,000
7 3,916 33,478 27,334 250,000 20,427 250,000 15,013 250,000
8 3,916 39,264 34,374 250,000 25,077 250,000 18,086 250,000
9 3,916 45,339 41,274 250,000 29,092 250,000 20,309 250,000
10 3,916 51,718 48,844 250,000 33,222 250,000 22,427 250,000
15 3,916 88,727 102,609 250,000 58,638 250,000 34,244 250,000
20 3,916 135,961 185,436 250,000 83,479 250,000 38,787 250,000
24 3,916 182,983 288,716 358,008 104,985 250,000 38,010 250,000
AGE 60 16 135,961 185,436 250,000 83,479 250,000 38,787 250,000
AGE 65 16 196,244 321,160 391,815 110,536 250,000 36,928 250,000
AGE 70 16 273,183 537,112 623,050 139,325 250,000 23,785 250,000
</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.
67
<PAGE> 77
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 2,300 351 251,670 246 251,565 141 251,460
2 2,190 4,714 2,022 253,473 1,709 253,159 1,408 252,859
3 2,190 7,249 2,663 255,428 2,024 254,789 1,437 254,202
4 2,190 9,911 4,777 257,542 3,684 256,448 2,717 255,482
5 2,190 12,706 7,257 259,835 5,563 258,141 4,126 256,704
6 2,190 15,641 9,924 262,314 7,468 259,858 5,468 257,858
7 2,190 18,723 13,194 264,993 9,795 261,594 7,140 258,940
8 2,190 21,958 16,679 267,888 12,139 263,347 8,738 259,946
9 2,190 25,356 20,220 271,026 14,316 265,122 10,078 260,884
10 2,190 28,923 24,022 274,425 16,509 266,912 11,343 261,746
15 2,190 49,620 46,057 296,057 25,823 275,823 14,704 264,704
20 2,190 76,035 77,850 327,850 33,730 283,730 14,727 264,727
24 2,190 102,332 113,572 363,572 38,076 288,076 11,819 261,819
AGE 60 90 76,035 77,850 327,850 33,730 283,730 14,727 264,727
AGE 65 90 109,748 124,300 374,300 38,693 288,693 10,565 260,565
AGE 70 90 152,776 191,508 441,508 37,227 287,227 147 250,147
</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 2,300 243 251,562 141 251,460 39 251,359
2 2,190 4,714 1,787 253,238 1,487 252,938 1,199 252,650
3 2,190 7,249 2,275 255,040 1,668 254,433 1,111 253,876
4 2,190 9,911 4,208 256,973 3,175 255,940 2,264 255,029
5 2,190 12,706 6,285 259,050 4,694 257,459 3,346 256,111
6 2,190 15,641 8,511 261,276 6,214 258,979 4,349 257,113
7 2,190 18,723 10,896 263,661 7,732 260,496 5,268 258,032
8 2,190 21,958 14,201 266,216 9,991 262,006 6,849 258,864
9 2,190 25,356 16,939 268,954 11,486 263,501 7,591 259,606
10 2,190 28,923 19,867 271,882 12,957 264,972 8,233 260,248
15 2,190 49,620 39,666 289,666 21,472 271,472 11,623 261,623
20 2,190 76,035 62,975 312,975 24,488 274,488 8,523 258,523
24 2,190 102,332 85,505 335,505 21,728 271,728 1,193 251,193
AGE 60 90 76,035 62,975 312,975 24,488 274,488 8,523 258,523
AGE 65 90 109,748 91,499 341,499 19,856 269,856 0 250,000
AGE 70 90 152,776 121,565 371,565 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.
68
<PAGE> 78
MALE ISSUE AGE 40 INITIAL STATED AMOUNT: $250,000
CLASSIFICATION: SELECT NONSMOKER DEATH BENEFIT TYPE: B (MATURITY AGE 95)
INITIAL PREMIUM: $9,489.00 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 9,489 9,963 7,273 259,200 6,758 258,685 6,244 258,171
2 9,489 20,425 16,875 269,310 15,273 267,708 13,733 266,168
3 9,489 31,410 26,603 280,431 23,261 277,088 20,172 273,999
4 9,489 42,944 38,830 292,657 33,006 286,833 27,833 281,660
5 9,489 55,054 52,467 306,107 43,321 296,961 35,515 289,155
6 9,489 67,771 67,444 320,896 54,027 307,479 43,026 296,478
7 9,489 81,122 84,508 337,157 65,750 318,399 50,977 303,626
8 9,489 95,142 103,191 355,038 77,886 329,732 58,752 310,598
9 9,489 109,863 123,478 374,709 90,271 341,502 66,170 317,401
10 9,489 125,319 145,734 396,350 103,105 353,721 73,415 324,031
15 9,489 214,997 291,669 541,669 171,954 421,954 104,415 354,415
20 9,489 329,451 525,699 775,699 253,202 503,202 129,655 379,655
24 9,489 443,393 812,375 1,062,375 328,521 578,521 145,454 395,454
AGE 60 89 329,451 525,699 775,699 253,202 503,202 129,655 379,655
AGE 65 89 475,527 902,849 1,152,849 348,846 598,846 148,685 398,685
AGE 70 89 661,960 1,510,898 1,760,898 459,524 709,524 159,602 409,602
</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 9,489 9,963 7,165 259,092 6,653 258,580 6,142 258,069
2 9,489 20,425 16,640 269,075 15,051 267,486 13,525 265,960
3 9,489 31,410 26,215 280,043 22,905 276,732 19,846 273,674
4 9,489 42,944 38,261 292,088 32,497 286,325 27,380 281,207
5 9,489 55,054 51,495 305,323 42,452 296,279 34,736 288,563
6 9,489 67,771 66,032 319,859 52,774 306,601 41,907 295,734
7 9,489 81,122 81,999 335,826 63,474 317,301 48,892 302,719
8 9,489 95,142 100,289 353,367 75,314 328,391 56,439 309,516
9 9,489 109,863 119,560 372,638 86,805 339,882 63,046 316,123
10 9,489 125,319 140,731 393,808 98,704 351,782 69,456 322,533
15 9,489 214,997 285,286 535,286 167,608 417,608 101,337 351,337
20 9,489 329,451 510,857 760,857 243,975 493,975 123,459 373,459
24 9,489 443,393 784,403 1,034,403 312,208 562,208 134,843 384,843
AGE 60 89 329,451 510,857 760,857 243,975 493,975 123,459 373,459
AGE 65 89 475,527 870,171 1,120,171 330,054 580,054 136,531 386,531
AGE 70 89 661,960 1,441,375 1,691,375 422,117 672,117 136,037 386,037
</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.
69
<PAGE> 79
PART II
OTHER INFORMATION
<PAGE> 80
CONTENTS OF REGISTRATION STATEMENT
This registration statement comprises the following papers and documents:
The facing sheet
The prospectus consisting of 69 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 (File no. 2-98265).
(5)(a) Endorsement, form 92-VLE-1, was filed as Exhibit (5)(a) of the
Registrant's Form S-6 on October 15, 1992 (File no. 33-53350).
<PAGE> 81
(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> 82
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the registrant, Ohio National Variable Account R, certifies that it meets
the requirements of Securities Act Rule 485(b) for effectiveness of this
registration statement and has caused this post-effective amendment to the
registration statement to be signed on its behalf in the City of Cincinnati and
State of Ohio on the 23rd day of April, 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> 83
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 23th day of April, 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
/s/ David B. O'Maley Chief Executive Officer
- ----------------------- and Director April 23, 1996
David B. O'Maley
Senior Vice President
/s/ Joseph P. Brom and Chief Investment
- ----------------------- Officer and Director April 23, 1996
Joseph P. Brom
Senior Vice President
/s/ Ronald J. Dolan and Chief Financial Officer
- ----------------------- and Director April 23, 1996
Ronald J. Dolan
Senior Vice President and
/s/ Stuart G. Summers General Counsel and
- ----------------------- Director April 23, 1996
Stuart G. Summers
Senior Vice President,
/s/ Donald J. Zimmerman Insurance Operations &
- ----------------------- Secretary and Director April 23, 1996
Donald J. Zimmerman
Vice President,
Financial Control
/s/ Paul L. Bergman (Principal Accounting
- ----------------------- Officer) April 23, 1996
Paul L. Bergmann
</TABLE>
<PAGE> 84
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> 85
CONSENTS
<PAGE> 86
[OHIO NATIONAL LIFE ASSURANCE CORPORATION LETTERHEAD]
April 23, 1996
The Board of Directors
Ohio National Life Assurance Corporation
237 William Howard Taft Road
Cincinnati, Ohio 452l9
Re: Ohio National Variable Account R
File Nos. 33-53350 and 811-4320
Post-Effective Amendment No. 6
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
RLB/nh
<PAGE> 87
[OHIO NATIONAL LIFE ASSURANCE CORPORATION LETTERHEAD]
April 23, 1996
Ohio National Life Assurance Corporation
237 William Howard Taft Road
Cincinnati, Ohio 45219
Re: Ohio National Variable Account R
File Nos. 33-53350 and 811-4320
Post-Effective Amendment No. 6
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
DWC/nh
<PAGE> 88
JONES & BLOUCH L.L.P.
1025 Thomas Jefferson Street, N.W.
Suite 405 West
Washington, D.C. 20007-0805
April 24, 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. 33-53350
----------------------------------
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. 6
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> 89
Independent Auditors' Consent
.............................
The Board of Directors
The Ohio National Life Assurance Corporation:
We consent to the inclusion of our reports included herein and to the reference
to our firm under the heading "Experts" in the Prospectus.
KPMG Peat Marwick LLP
April 24, 1996
<TABLE> <S> <C>
<ARTICLE> 7
<CIK> 0000770291
<NAME> OHIO NATIONAL LIFE ASSURANCE CORP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<DEBT-HELD-FOR-SALE> 442,819
<DEBT-CARRYING-VALUE> 45,461
<DEBT-MARKET-VALUE> 52,597
<EQUITIES> 0
<MORTGAGE> 161,095
<REAL-ESTATE> 0
<TOTAL-INVEST> 694,673
<CASH> 3,543
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 92,413
<TOTAL-ASSETS> 909,347
<POLICY-LOSSES> 695,405
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 2,192
<NOTES-PAYABLE> 0
<COMMON> 9,600
0
0
<OTHER-SE> 133,299
<TOTAL-LIABILITY-AND-EQUITY> 909,347
45,753
<INVESTMENT-INCOME> 51,052
<INVESTMENT-GAINS> (1,882)
<OTHER-INCOME> 4,648
<BENEFITS> 56,549
<UNDERWRITING-AMORTIZATION> 8,011
<UNDERWRITING-OTHER> 12,642
<INCOME-PRETAX> 22,369
<INCOME-TAX> 7,602
<INCOME-CONTINUING> 14,767
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 53,845
<NET-INCOME> 68,612
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 56,549
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 695,405
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000770291
<NAME> OHIO NATIONAL VARIABLE ACCOUNT R
<SERIES>
<NUMBER> 1
<NAME> EQUITY
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 12,485,721
<INVESTMENTS-AT-VALUE> 16,037,147
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 16,037,147
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 756,738
<SHARES-COMMON-PRIOR> 646,804
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 16,037,147
<DIVIDEND-INCOME> 377,916
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 99,621
<NET-INVESTMENT-INCOME> 278,295
<REALIZED-GAINS-CURRENT> 137,099
<APPREC-INCREASE-CURRENT> 2,656,620
<NET-CHANGE-FROM-OPS> 3,072,014
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,822,344
<NUMBER-OF-SHARES-REDEEMED> 2,714,243
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000770291
<NAME> OHIO NATIONAL VARIABLE ACCOUNT R
<SERIES>
<NUMBER> 2
<NAME> MONEY MARKET
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 671,215
<INVESTMENTS-AT-VALUE> 671,215
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 671,215
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 44,137
<SHARES-COMMON-PRIOR> 33,568
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 671,215
<DIVIDEND-INCOME> 24,454
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 3,384
<NET-INVESTMENT-INCOME> 21,070
<REALIZED-GAINS-CURRENT> 140
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 21,210
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,227,902
<NUMBER-OF-SHARES-REDEEMED> 3,064,865
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000770291
<NAME> OHIO NATIONAL VARIABLE ACCOUNT R
<SERIES>
<NUMBER> 3
<NAME> BOND
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 501,079
<INVESTMENTS-AT-VALUE> 526,383
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 526,383
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 29,429
<SHARES-COMMON-PRIOR> 19,120
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 526,383
<DIVIDEND-INCOME> 19,903
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 2,892
<NET-INVESTMENT-INCOME> 17,011
<REALIZED-GAINS-CURRENT> (78)
<APPREC-INCREASE-CURRENT> 44,832
<NET-CHANGE-FROM-OPS> 61,765
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 254,991
<NUMBER-OF-SHARES-REDEEMED> 80,177
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000770291
<NAME> OHIO NATIONAL VARIABLE ACCOUNT R
<SERIES>
<NUMBER> 4
<NAME> OMNI
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 4,290,181
<INVESTMENTS-AT-VALUE> 5,159,728
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,159,728
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 256,617
<SHARES-COMMON-PRIOR> 218,865
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 5,159,728
<DIVIDEND-INCOME> 122,957
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 33,258
<NET-INVESTMENT-INCOME> 89,699
<REALIZED-GAINS-CURRENT> 31,864
<APPREC-INCREASE-CURRENT> 725,434
<NET-CHANGE-FROM-OPS> 864,997
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,463,740
<NUMBER-OF-SHARES-REDEEMED> 762,914
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000770291
<NAME> OHIO NATIONAL VARIABLE ACCOUNT R
<SERIES>
<NUMBER> 5
<NAME> INTERNATIONAL
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 7,409,670
<INVESTMENTS-AT-VALUE> 8,125,877
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 8,125,877
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 547,590
<SHARES-COMMON-PRIOR> 380,276
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 8,125,877
<DIVIDEND-INCOME> 214,290
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 49,434
<NET-INVESTMENT-INCOME> 164,856
<REALIZED-GAINS-CURRENT> 26,863
<APPREC-INCREASE-CURRENT> 540,676
<NET-CHANGE-FROM-OPS> 712,395
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,025,641
<NUMBER-OF-SHARES-REDEEMED> 1,703,701
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000770291
<NAME> OHIO NATIONAL VARIABLE ACCOUNT R
<SERIES>
<NUMBER> 6
<NAME> CAPITAL APPRECIATION
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 1,145,915
<INVESTMENTS-AT-VALUE> 1,238,994
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,238,994
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 102,314
<SHARES-COMMON-PRIOR> 18,468
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,238,994
<DIVIDEND-INCOME> 18,585
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 4,732
<NET-INVESTMENT-INCOME> 13,853
<REALIZED-GAINS-CURRENT> 2,645
<APPREC-INCREASE-CURRENT> 94,813
<NET-CHANGE-FROM-OPS> 111,311
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,119,488
<NUMBER-OF-SHARES-REDEEMED> 175,561
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000770291
<NAME> OHIO NATIONAL VARIABLE ACCOUNT R
<SERIES>
<NUMBER> 7
<NAME> SMALL CAP
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 1,462,913
<INVESTMENTS-AT-VALUE> 1,674,007
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,674,007
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 123,222
<SHARES-COMMON-PRIOR> 28,313
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,674,007
<DIVIDEND-INCOME> 2,690
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 6,411
<NET-INVESTMENT-INCOME> (3,721)
<REALIZED-GAINS-CURRENT> 13,224
<APPREC-INCREASE-CURRENT> 208,534
<NET-CHANGE-FROM-OPS> 218,037
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,419,588
<NUMBER-OF-SHARES-REDEEMED> 254,970
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000770291
<NAME> OHIO NATIONAL VARIABLE ACCOUNT R
<SERIES>
<NUMBER> 8
<NAME> GLOBAL CONTRARIAN
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 226,889
<INVESTMENTS-AT-VALUE> 232,012
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 232,012
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 21,427
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 232,012
<DIVIDEND-INCOME> 523
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 540
<NET-INVESTMENT-INCOME> (17)
<REALIZED-GAINS-CURRENT> 1,419
<APPREC-INCREASE-CURRENT> 5,122
<NET-CHANGE-FROM-OPS> 6,524
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 289,570
<NUMBER-OF-SHARES-REDEEMED> 64,082
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000770291
<NAME> OHIO NATIONAL VARIABLE ACCOUNT R
<SERIES>
<NUMBER> 9
<NAME> AGGRESSIVE GROWTH
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 426,613
<INVESTMENTS-AT-VALUE> 442,081
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 442,081
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 35,019
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 442,081
<DIVIDEND-INCOME> 12,789
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 897
<NET-INVESTMENT-INCOME> 11,892
<REALIZED-GAINS-CURRENT> 5,130
<APPREC-INCREASE-CURRENT> 15,468
<NET-CHANGE-FROM-OPS> 32,490
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 477,618
<NUMBER-OF-SHARES-REDEEMED> 68,027
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
