<PAGE> 1
OHIO NATIONAL VARIABLE ACCOUNT D
"RETIREMENT ADVANTAGE" VARIABLE ANNUITY
Supplement Dated September 15, 1997, to the Prospectus Dated May 1, 1997
The phrase, "(or $1,000, if greater)," is deleted from the third paragraph on
page 17 of the prospectus. The first sentence of that paragraph shall read as
follows:
Not more than 20% of a participant's Fixed Accumulation Value, as of
the beginning of any contract year, may be transferred to one or more
variable subaccounts during that contract year.
<PAGE> 2
PROSPECTUS
OHIO NATIONAL VARIABLE ACCOUNT D
OF
THE OHIO NATIONAL LIFE INSURANCE COMPANY
ONE FINANCIAL WAY
CINCINNATI, OHIO 45242
TELEPHONE (513) 794-6514
FOR
TAX QUALIFIED GROUP VARIABLE ANNUITY CONTRACTS
This prospectus offers a multiple funded group variable annuity contract,
designed for tax qualified retirement plans, that provides for the accumulation
of values and the payment of annuity benefits on a variable and/or fixed basis.
Unless specifically stated otherwise, only provisions relating to the variable
portion of the contracts are described in this prospectus. The fixed portion
("Fixed Accumulation Account") is briefly described in an appendix to this
prospectus.
Variable annuities are designed to provide lifetime annuity payments which will
vary with the investment results of the investment vehicle chosen. The contract
value and the value of each participant's variable accumulation account will
vary with the investment performance of Ohio National Fund, Inc. (the "Fund"),
and the amount of each participant's annuity payments will vary with the Fund's
investment performance subsequent to the commencement of annuity payments. There
can be no assurance that account values prior to the purchase of an annuity or
the aggregate amount of annuity payments received after such date will equal or
exceed the contributions made therefor.
The contracts offered by this prospectus are designed for (1) annuity purchase
plans adopted by public school systems and certain tax-exempt organizations
described in Section 501(c)(3) of the Internal Revenue Code (the "Code"),
qualifying for tax-deferred treatment pursuant to Section 403(b) of the Code,
(2) other employee pension or profit-sharing trusts or plans qualifying for
tax-deferred treatment under Section 401(a), 401(k) or 403(a) of the Code, and
(3) state and municipal deferred compensation plans.
The minimum contribution amount is $25 per participant. Additional contributions
may be made at any time, but not more often than biweekly. Generally, maximum
contributions equal the maximums permitted under the plan.
Contributions are allocated to one or more subaccounts of Ohio National Variable
Account D ("VAD") in such portion as the contract owner may choose. VAD is a
separate account established by The Ohio National Life Insurance Company ("Ohio
National Life"). The assets of VAD are invested in shares of the Fund, a mutual
fund having 13 portfolios in which the contracts' assets may be invested: Equity
Portfolio, Money Market Portfolio, Bond Portfolio, Omni Portfolio, International
Portfolio, Capital Appreciation Portfolio, Small Cap Portfolio, Global
Contrarian Portfolio, Aggressive Growth Portfolio, Core Growth Portfolio, Growth
& Income Portfolio, S&P 500 Index Portfolio and Social Awareness Portfolio. (See
the accompanying prospectus of the Fund which contains information about other
portfolios that are not available for the contracts offered herein).
All or part of the contract value may be withdrawn for purposes of paying
benefits provided by the plan at no charge. Amounts withdrawn for any other
reason may be subject to federal income tax penalties, and a withdrawal charge
may be assessed up to 7% of the amount withdrawn (up to a maximum of 9% of all
contributions). Exercise of contract rights may be subject to the terms of the
qualified employee trust or annuity plan under which a contract is purchased.
This prospectus contains no information concerning such trusts or plans.
THIS PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE. IT SETS FORTH THE
INFORMATION ABOUT VAD AND THE VARIABLE ANNUITY CONTRACTS OFFERED BY THIS
PROSPECTUS THAT YOU SHOULD KNOW BEFORE INVESTING. ADDITIONAL INFORMATION ABOUT
VAD HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IN A STATEMENT OF
ADDITIONAL INFORMATION DATED MAY 1, 1997. THE STATEMENT OF ADDITIONAL
INFORMATION IS INCORPORATED HEREIN BY REFERENCE AND IS AVAILABLE UPON REQUEST
AND WITHOUT CHARGE BY WRITING OR CALLING OHIO NATIONAL LIFE AT THE ABOVE
ADDRESS. THE TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL INFORMATION IS ON
PAGE 2.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS SHOULD BE ACCOMPANIED BY THE CURRENT PROSPECTUS OF OHIO NATIONAL
FUND, INC.
MAY 1, 1997
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
Fee Table................................................3
Accumulation Unit Values.................................5
Financial Statements..................................5
The Ohio National Companies..............................6
Ohio National Life....................................6
Ohio National Variable Account D......................6
Ohio National Fund, Inc...............................6
Distribution of the Contracts............................7
Deductions and Expenses..................................7
Withdrawal Charge.....................................7
Deduction For Administrative Expenses.................8
Deduction For Risk Undertakings.......................8
Limitations On Deductions.............................8
Transfer Fee..........................................8
Deduction For State Premium Tax.......................8
Fund Expenses.........................................8
Description of the Contracts.............................9
Accumulation..........................................9
Annuity Benefits.....................................11
Other Contract Provisions............................13
Performance Data.....................................13
Federal Tax Status......................................14
Appendix................................................16
Fixed Accumulation Account...........................16
</TABLE>
- ----------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
Custodian
Independent Certified Public Accountants
Underwriter
Calculation of Money Market Subaccount Yield
Transfer Limitations
Total Return
Financial Statements for VAD and Ohio National Life
GLOSSARY OF SPECIAL TERMS
Accumulation Unit -A unit of measure used to determine the contract values.
Annuitant -Any natural person who is to receive or is receiving annuity payments
and upon whose continuation of life annuity payments with life
contingencies depend.
Annuity Payments -Periodic payments made to an annuitant pursuant to an annuity
purchased with contract values.
Annuity Purchase -The application of a participant's account values to purchase
an annuity under the contract's retirement income provisions.
Annuity Unit -A unit of measure used to determine the second and subsequent
variable annuity payments and reflecting the investment performance of the
Fund.
Contributions -The amount of payments made by the owner, on behalf of
participants, under the contract.
Fund Shares -Shares of Ohio National Fund, Inc., or shares of another registered
open-end investment company substituted therefor.
Owner -The contract holder.
Participant -An individual participating in the benefits of the plan for which
the contract is purchased.
Participant Account -The account established under the contract on behalf of
each participant.
Subaccount -The Equity subaccount, Money Market subaccount, Bond subaccount,
Omni subaccount, International subaccount, Capital Appreciation subaccount,
Small Cap subaccount, Global Contrarian subaccount, Aggressive Growth
subaccount, Core Growth subaccount, Growth & Income subaccount, S&P 500
Index subaccount, Social Awareness subaccount, or such other subaccounts as
may be established under VAD.
Valuation Period -The period of time from one determination of accumulation unit
and annuity unit values to their next determination. Such determination is
made at the same time that the net asset value of Fund Shares is
determined. See page 22 of the accompanying Fund prospectus.
1940 Act -The Investment Company Act of 1940, as amended, or any similar
successor federal legislation.
2
<PAGE> 4
FEE TABLE
<TABLE>
<S> <C> <C>
CONTRACTOWNER TRANSACTION EXPENSES CONTRACT YEAR
Deferred Sales Load (as a percentage of OF SURRENDER PERCENTAGE
amount withdrawn) (Percentage OR WITHDRAWAL CHARGED
varies by number of years from the ------------- -------
establishment of each participant's account.) 1 7%
(No charge for withdrawals for plan payments.) 2 6%
3 5%
4 4%
5 3%
6 2%
7 1%
8 and later 0%
Exchange (transfer) Fee $5 (the fee is presently being waived)
</TABLE>
VAD ANNUAL EXPENSES (as a percentage
of average account value)
Mortality and Expense Risk Fees 1.00%
Account Fees and Expenses 0.35%
-----
Total VAD Annual Expenses 1.35%
<TABLE>
<CAPTION>
FUND ANNUAL EXPENSES (after fee waiver*)
(as a percentage of the Fund's average
net assets) MANAGEMENT OTHER TOTAL FUND
FEES EXPENSES EXPENSES
---------- -------- ----------
<S> <C> <C> <C>
Equity 0.54% 0.19% 0.74%
Money Market* 0.25% 0.19% 0.44%
Bond 0.60% 0.19% 0.79%
Omni 0.58% 0.19% 0.77%
International 0.90% 0.25% 1.15%
Capital Appreciation 0.80% 0.17% 0.97%
Small Cap 0.80% 0.16% 0.96%
Global Contrarian 0.90% 0.39% 1.29%
Aggressive Growth 0.80% 0.21% 1.01%
Core Growth** 0.95% 0.60% 1.55%
Growth & Income** 0.85% 0.55% 1.40%
S&P 500 Index** 0.40% 0.20% 0.60%
Social Awareness** 0.60% 0.25% 0.85%
</TABLE>
EXAMPLE - If you surrendered your contract at the end of the applicable time
period, you would pay the following aggregate expenses on a $1,000 investment in
each subaccount, assuming 5% annual return:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Equity $93 $120 $147 $242
Money Market* 90 111 132 211
Bond 94 121 149 247
Omni 94 121 148 245
International 97 132 167 284
Capital Appreciation 95 127 158 266
Small Cap 95 126 158 265
Global Contrarian 98 136 174 297
Aggressive Growth 96 128 160 270
Core Growth** 101 143 N/A N/A
Growth & Income** 99 139 N/A N/A
S&P 500 Index** 92 116 N/A N/A
Social Awareness** 94 123 N/A N/A
</TABLE>
3
<PAGE> 5
EXAMPLE - If you do not surrender your contract at the end of the applicable
time period, you would pay the following aggregate expenses on the same
investment:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Equity $21 $65 $112 $242
Money Market* 18 56 97 211
Bond 22 67 115 247
Omni 22 66 114 245
International 25 78 133 284
Capital Appreciation 24 72 124 266
Small Cap 23 72 124 265
Global Contrarian 27 82 140 297
Aggressive Growth 24 74 126 270
Core Growth** 29 90 N/A N/A
Growth & Income** 28 85 N/A N/A
S&P 500 Index** 20 61 N/A N/A
Social Awareness** 22 69 N/A N/A
</TABLE>
The purpose of the above table is to help you to understand the costs and
expenses that a variable annuity contractowner will bear directly or indirectly.
THE EXAMPLE INCLUDED IN THE ABOVE TABLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSE, AND ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN. Note that the expense amounts shown in the example are
aggregate amounts for the total number of years indicated. Neither the table nor
the example reflect any premium taxes that may be applicable to a contract,
which currently range from 0% to 2.25%. The above table and example reflect only
the charges for contracts currently offered by this prospectus and not other
contracts that may be offered by Ohio National Life. For further details, see
Deductions and Expenses, page 7.
*For the Money Market Portfolio, management fees in excess of 0.25% are
presently being waived by the Fund's investment adviser. Without the waiver, the
Money Market Portfolio's Management Fee would be 0.30%, its Total Fund Annual
Expenses would be 0.49%, and its expenses would total $91 for a $1,000 contract
surrendered at the end of 1 year, $113 if surrendered at the end of 3 years,
$135 if surrendered at the end of 5 years or $216 if surrendered at the end of
10 years. For a $1,000 contract annuitized or not surrendered, the expenses
without the waiver would be $19 for 1 year, $58 for 3 years, $100 for 5 years or
$216 for 10 years.
**The "Other Expenses" (and, accordingly, the Total Fund Expenses) for the Core
Growth, Growth & Income, S&P 500 Index and Social Awareness Portfolios are based
on estimates.
4
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<TABLE>
<CAPTION>
EQUITY SUBACCOUNT
YEAR ENDED UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS
DECEMBER 31 BEGINNING OF YEAR END OF YEAR AT END OF YEAR
----------- ----------------- ----------- --------------
<S> <C> <C> <C> <C>
1995* $10.000000 $12.198167 13,287
1996 12.198167 14.243704 32,583
MONEY MARKET SUBACCOUNT**
YEAR ENDED UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS
DECEMBER 31 BEGINNING OF YEAR END OF YEAR AT END OF YEAR
----------- ----------------- ----------- --------------
1995* $10.000000 $10.346422 1,732
1996 10.346422 10.735959 7,977
BOND SUBACCOUNT
YEAR ENDED UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS
DECEMBER 31 BEGINNING OF YEAR END OF YEAR AT END OF YEAR
----------- ----------------- ----------- --------------
1995* $10.000000 $11.207694 1,139
1996 11.207694 11.468004 6,512
OMNI SUBACCOUNT
YEAR ENDED UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS
DECEMBER 31 BEGINNING OF YEAR END OF YEAR AT END OF YEAR
----------- ----------------- ----------- --------------
1995* $10.000000 $11.742940 13,547
1996 11.742940 13.386856 45,160
INTERNATIONAL SUBACCOUNT
YEAR ENDED UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS
DECEMBER 31 BEGINNING OF YEAR END OF YEAR AT END OF YEAR
----------- ----------------- ----------- --------------
1995* $10.000000 $11.256284 20,393
1996 11.256284 12.714297 42,439
CAPITAL APPRECIATION SUBACCOUNT
YEAR ENDED UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS
DECEMBER 31 BEGINNING OF YEAR END OF YEAR AT END OF YEAR
----------- ----------------- ----------- --------------
1995* $10.000000 $11.663489 39,782
1996 11.663489 13.320406 54,003
SMALL CAP SUBACCOUNT
YEAR ENDED UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS
DECEMBER 31 BEGINNING OF YEAR END OF YEAR AT END OF YEAR
----------- ----------------- ----------- --------------
1995* $10.000000 $12.909669 24,533
1996 12.909669 14.992559 39,188
GLOBAL CONTRARIAN SUBACCOUNT
YEAR ENDED UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS
DECEMBER 31 BEGINNING OF YEAR END OF YEAR AT END OF YEAR
----------- ----------------- ----------- --------------
1995* $10.000000 $10.780072 8,523
1996 10.780072 11.922317 13,394
AGGRESSIVE GROWTH SUBACCOUNT
YEAR ENDED UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS
DECEMBER 31 BEGINNING OF YEAR END OF YEAR AT END OF YEAR
----------- ----------------- ----------- --------------
1995* $10.000000 $12.568155 3,057
1996 12.568155 12.494380 9,915
<FN>
*Series of variable annuity contracts commenced on January 25, 1995. Global
Contrarian and Aggressive Growth subaccounts commenced on March 31, 1995.
**The current annualized yield for the Money Market subaccount for the seven
days ended December 31, 1996, was 4.27%.
</TABLE>
FINANCIAL STATEMENTS
The complete financial statements of VAD and Ohio National Life, and the
Independent Auditors' Reports thereon, may be found in the Statement of
Additional Information.
5
<PAGE> 7
THE OHIO NATIONAL COMPANIES
OHIO NATIONAL LIFE
Ohio National Life was organized under the laws of Ohio in 1909 as a stock life
insurance company and became a mutual life insurance company in 1959. It writes
life, accident and health insurance and annuities in 47 states, the District of
Columbia and Puerto Rico. Currently it has assets in excess of $5.9 billion and
equity in excess of $500 million. Its home office is located at One Financial
Way, Cincinnati, Ohio 45242.
OHIO NATIONAL VARIABLE ACCOUNT D
The establishment of VAD was authorized by Ohio National Life in 1969 as a
separate account under Ohio law for the purpose of funding variable annuity
contracts. (Until 1993, VAD was used to fund group variable annuity contracts
unrelated to the contracts offered in this prospectus. Those unrelated group
variable annuity contracts are now funded through another separate account of
Ohio National Life.) Contributions for the contracts are allocated to one or
more subaccounts of VAD. Income, gains and losses, whether or not realized, from
assets allocated to VAD are, as provided in the contracts, credited to or
charged against VAD without regard to other income, gains or losses of Ohio
National Life. The assets maintained in VAD will not be charged with any
liabilities arising out of any other business conducted by Ohio National Life.
Nevertheless, all obligations arising under the contracts, including the
commitment to make annuity payments, are general corporate obligations of Ohio
National Life. Accordingly, all of Ohio National Life's assets are available to
meet its obligations under the contracts. VAD is registered as a unit investment
trust under the 1940 Act.
The assets of each subaccount of VAD are invested at net asset value (without an
initial sales charge) in shares of a corresponding portfolio of the Fund: the
Equity Portfolio, Money Market Portfolio, Bond Portfolio, Omni Portfolio (a
flexible portfolio fund), International Portfolio, Capital Appreciation
Portfolio, Small Cap Portfolio, Global Contrarian Portfolio, Aggressive Growth
Portfolio, Core Growth Portfolio, Growth & Income Portfolio, S&P 500 Index
Portfolio or Social Awareness Portfolio.
OHIO NATIONAL FUND, INC.
The Fund is a diversified, open-end, management investment company registered
under the 1940 Act. The value of the Fund's investments fluctuates daily and is
subject to the risk of changing economic conditions as well as the risk inherent
in the ability of management to anticipate changes necessary in such investments
to meet changes in economic conditions. The Fund receives investment advice, for
a fee, from its investment adviser, Ohio National Investments, Inc., and from
Societe Generale Asset Management Corp. (sub-adviser to the International and
Global Contrarian Portfolios), T. Rowe Price Associates, Inc. (sub-adviser to
the Capital Appreciation Portfolio), Founders Asset Management, Inc.
(sub-adviser to the Small Cap Portfolio), Strong Capital Management, Inc.
(sub-adviser to the Aggressive Growth Portfolio), Pilgrim Baxter & Associates,
Ltd. (sub-adviser to the Core Growth Portfolio), and Robertson Stephens
Investment Management, L.P. (sub-adviser to the Growth & Income Portfolio). For
additional information concerning the Fund, including the investment objectives
of each of its portfolios, see the attached Fund prospectus. Read the Fund
prospectus carefully before investing. The Fund prospectus contains information
about other portfolios that are not available for the contracts offered herein.
In addition to being offered to VAD, Fund shares are currently offered to other
separate accounts of Ohio National Life in connection with variable annuity
contracts and a separate account of Ohio National Life Assurance Corporation in
connection with variable life insurance contracts. In the future, Fund shares
may 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 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 VAA`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.
6
<PAGE> 8
VOTING RIGHTS
Ohio National Life shall vote Fund shares held in VAD at meetings of Fund
shareholders in accordance with voting instructions received from contract
owners. The number of Fund shares for which an owner is entitled to give
instructions will be determined by Ohio National Life in the manner described
below, not more than 90 days prior to the meeting of shareholders. Fund proxy
material will be distributed to each owner together with appropriate forms for
giving voting instructions. Fund shares held in VAD, for which no timely
instructions are received, will be voted by Ohio National Life in proportion to
the instructions which are received with respect to all contracts participating
in VAD.
The number of Fund shares for which instructions may be given to Ohio National
Life is determined by dividing the value of a subaccount of the contract by the
net asset value of a share of the corresponding Fund portfolio as of the same
date. For variable annuities purchased for participants, the number of Fund
portfolio shares for which such instructions may be given is determined by
dividing the actuarial liability for variable annuities in the course of payment
by the net asset value of a Fund portfolio share as of the same date. Generally,
the number of votes tends to decrease as annuity payments progress.
DISTRIBUTION OF THE CONTRACTS
The contracts are sold by Ohio National Life insurance agents who are also
registered representatives of (a) 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 Ohio National Equities,
Inc. ("ONE, Inc.," another wholly-owned subsidiary of Ohio National Life) which
is the principal underwriter of the contracts. Each of ONE, Inc., ONESCO and
the other broker-dealers is registered under the Securities Exchange Act of
1934 and a member of the National Association of Securities Dealers, Inc. Ohio
National Life pays ONE, Inc. a fee equal to no more than 5% of contributions.
ONE, Inc. then pays a portion of that amount to ONESCO and the other
broker-dealers as compensation for their sales efforts. ONESCO and the other
broker-dealers will remunerate their registered representatives from their own
funds. Contributions on which no compensation is paid to registered
representatives will not be included in amounts on which the fee will be paid
to ONE, Inc. To the extent that the amount of the withdrawal charge received by
Ohio National Life is not sufficient to recover the fee paid to ONE, Inc., any
deficiency will be made up from Ohio National Life's general account assets
which include, among other things, any profit from the mortality and expense
risk charges.
DEDUCTIONS AND EXPENSES
WITHDRAWAL CHARGE
No deduction for sales expense is made from contributions. A withdrawal charge
may be assessed by Ohio National Life when a contract is surrendered or a
withdrawal of a participant's account value is made for any reason other than to
make a plan payment to a participant. The purpose of the withdrawal charge is to
defray expenses relating to the sale of the contract, including compensation to
sales personnel, cost of sales literature and prospectuses, and other expenses
related to sales activity. Such charge equals a percentage of the contract value
withdrawn. This percentage will vary by the number of years from the date the
participant's account was established under the contract until the day the
withdrawal occurs as follows:
<TABLE>
<CAPTION>
YEAR OF
WITHDRAWAL PERCENTAGE
---------- ----------
<S> <C>
1 7%
2 6%
3 5%
4 4%
5 3%
6 2%
7 1%
8 and later 0%
</TABLE>
7
<PAGE> 9
The total of all withdrawal charges together with any distribution expense risk
charges made against any participant account will never exceed 9% of the total
contributions made to that participant account. (See Deduction for Risk
Undertakings, below.)
DEDUCTION FOR ADMINISTRATIVE EXPENSES
A deduction is made at the end of each valuation period, presently equal to
0.35% on an annual basis, of the contract value for administrative expenses.
This deduction is not designed to produce a profit but to reimburse Ohio
National Life for expenses incurred for accounting, auditing, legal, contract
owner services, reports to regulatory authorities and contract owners, contract
issue, etc.
DEDUCTION FOR RISK UNDERTAKINGS
Ohio National Life guarantees that the contract value will not be affected by
any excess of sales and administrative expenses over the deductions provided
therefor. Ohio National Life also guarantees that variable annuity payments will
not be affected by adverse mortality experience or expenses.
For assuming these risks, Ohio National Life, in determining the accumulation
unit values and the annuity unit values for each subaccount, makes a deduction
from the applicable investment results equal to 1.00% of the contract value on
an annual basis. Although Ohio National Life views the risk charge as an
indivisible whole, of the amount currently being deducted, it has estimated that
a reasonable allocation would be 0.40% for mortality risk, and 0.60% for expense
risk. Although Ohio National Life hopes to realize a profit from this charge, if
the deduction is insufficient to cover the actual risk involved, the loss will
fall on Ohio National Life; conversely, if the deduction proves more than
sufficient, the excess will be a gain to Ohio National Life.
The contracts also provide for a distribution expense risk charge of no more
than 0.40%. Ohio National Life is presently not deducting that charge.
LIMITATIONS ON DEDUCTIONS
The contracts provide that the total of the deductions for administrative
expense, mortality and expense risks, and distribution expense risk may be
decreased by Ohio National Life at any time. Each of these deductions may be
increased, not more frequently than annually, provided that the total of all
these deductions shall not exceed 2.00% on an annual basis.
TRANSFER FEE
A transfer fee of $5 may be made for each transfer of a participant's account
values from one subaccount to another. The fee is charged against the subaccount
from which the transfer is effected. This fee is presently being waived.
DEDUCTION FOR STATE PREMIUM TAX
Most states do not presently charge a premium tax for these contracts. Where a
tax applies, the rates are presently 0.5% in California, 1.0% in Puerto Rico and
West Virginia, 2.0% in Kentucky and 2.25% in the District of Columbia. Normally,
any such applicable taxes will not be deducted until annuity payments begin
rather than being deducted from contributions.
FUND EXPENSES
There are deductions from, and expenses paid out of, the assets of the Fund.
These are described in the attached Fund prospectus.
8
<PAGE> 10
DESCRIPTION OF THE CONTRACTS
ACCUMULATION
CONTRIBUTION PROVISIONS
The contracts provide for minimum contributions of $25 per participant and
maximum contributions equal to the maximums permitted under the plan.
Contributions after the first may be made at any time but not more often than
biweekly. Ohio National Life may agree to modify any of these limits.
ACCUMULATION UNITS
The contract value is measured by accumulation units. Each contribution results
in the crediting of accumulation units to the contract (see Crediting
Accumulation Units, below). The number of accumulation units so credited remains
constant but the dollar value of accumulation units will vary depending upon the
investment results of the particular subaccount to which contributions are
allocated.
CREDITING ACCUMULATION UNITS
Completed application forms, together with a check for the first contribution,
are forwarded to the home office of Ohio National Life for acceptance. Upon
acceptance, a contract is issued to the contract owner, and the first
contribution is then credited to the contract in the form of accumulation units.
Initial contributions are credited not later than two business days after
receipt of the application and all information necessary for processing the
contribution are complete. If an application is not accepted within five
business days, the contribution will be returned immediately to the applicant
unless the applicant specifically consents to having Ohio National Life retain
the contribution until the application is completed. After that, the
contribution will be credited within two business days. Subsequent contributions
are sent directly to the home office of Ohio National Life and are applied to
provide that number of accumulation units (for each subaccount) determined by
dividing the amount of the contribution by the value of the appropriate
accumulation unit next computed after the payment is received at the home
office.
ALLOCATION OF CONTRIBUTIONS
In the contract application, the contract owner may direct the allocation of
contributions among the subaccounts of VAD and the general account of Ohio
National Life. The amount allocated to any subaccount or the general account
must equal a whole percentage. The allocation of future contributions may be
changed at any time upon written notice to the home office of Ohio National
Life.
ACCUMULATION UNIT VALUE AND CONTRACT VALUE
The accumulation unit value of each subaccount of VAD was set at $10 when the
first contribution for these contracts was allocated to each subaccount. The
accumulation unit value for any subsequent valuation period is determined by
multiplying the accumulation unit value for the immediately preceding valuation
period by the net investment factor (described below) for such subsequent
valuation period. The contract value is determined by multiplying the total
number of accumulation units (for each subaccount) credited to the contract by
the accumulation unit value (for such subaccount) for the valuation period for
which the contract value is being determined.
NET INVESTMENT FACTOR
The net investment factor is a quantitative measure of the investment results of
each subaccount of VAD. The net investment factor for each subaccount for any
valuation period is determined by dividing (a) by (b), then subtracting (c) from
the result, where:
(a) is
(1) the net asset value of a share in the appropriate portfolio of the Fund
determined as of the end of a valuation period, plus
9
<PAGE> 11
(2) The per share amount of any dividends or other distributions declared
for that portfolio by the Fund if the "ex-dividend" date occurs during
the valuation period, plus or minus
(3) per share charge or credit for any taxes paid or reserved for, which is
determined by Ohio National Life to result from the maintenance or
operation of that subaccount of VAD (No federal income taxes are
applicable under present law.);
(b) is the net asset value of a share in the appropriate portfolio of the Fund
determined as the end of the preceding valuation period; and
(c) is the deduction for administrative expenses and risk undertakings. (See
Deduction for Administrative Expenses, page 8, and Deduction for Risk
Undertakings, page 8.)
SURRENDER AND WITHDRAWAL
The contract owner may surrender (totally withdraw the value of) the contract
for its contract value or make withdrawals therefrom. These transactions may be
subject to the withdrawal charge described on page 7. The withdrawal will be
made from the values of each subaccount in accordance with the contract owner's
instructions. The amount available for withdrawal is the sum of the subaccount
values less the withdrawal charge, if applicable. Payment by Ohio National Life
shall be made within seven days from the date of receipt of the request for such
payment except as it may be deferred under the circumstances described below.
Withdrawals are limited or not permitted in connection with certain retirement
plans. See Texas Optional Retirement Program, page 11, and Tax Deferred
Annuities, page 15. For tax consequences of a withdrawal, see Federal Tax
Status, page 14.
Occasionally, the contract owner may request a withdrawal which includes
contract values derived from contributions which have not cleared the banking
system. Ohio National Life may delay mailing that portion which relates to such
contributions until the check for the contribution has cleared.
The right to withdraw may be suspended or the date of payment postponed (1) for
any period during which the New York Stock Exchange is closed (other than
customary weekend and holiday closings) or during which trading on the Exchange,
as determined by the Securities and Exchange Commission, is restricted; (2) for
any period during which an emergency, as determined by the Commission, exists as
a result of which disposal of securities held in the Fund is not reasonably
practical, or it is not reasonably practical to determine the value of the
Fund's net assets; or (3) or such other periods as the Commission may by order
permit for the protection of security holders.
TRANSFERS AMONG SUBACCOUNTS
Contract values may be transferred at any time from one subaccount to another
upon the request of the owner. The amount of any such transfer within a
participant's account must be at least $500 (or the entire value of the
participant's interest in a subaccount, if less). Ohio National Life reserves
the right to limit the number, frequency, method or amount of transfers.
Transfers from any 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 Ohio National Life or
the Fund, in its or their discretion, believes that the portfolio might
otherwise be damaged. After the purchase of an annuity, transfers of the
participant's annuity values among subaccounts can only be made once each
calendar quarter. Such transfers may then be made without a transfer fee.
(See Transfer Fee, page 8, and Transfers After Annuity Purchase, page 12).
TELEPHONE TRANSFERS
If a participant first submits a pre-authorized form to Ohio National Life,
transfers may be made by telephoning Ohio National Life, between 9:00 a.m. and
3:30 p.m. (Eastern time) on days that it is open for business, at
1-800-788-2420. Ohio National Life 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. Ohio National Life will use reasonable procedures
to confirm that telephone instructions are genuine. (Otherwise, Ohio National
Life may be liable for any losses due to unauthorized or fraudulent
instructions.) A written confirmation will be sent following each telephone
transfer.
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PAYMENT OF PLAN BENEFITS
At the contract owner's request, and upon receipt of due proof, Ohio National
Life will apply a participant's account value to provide a benefit prescribed by
the plan in the event of the participant's death, disability, retirement or
termination of employment. No withdrawal charge will be made in connection with
the payment of such plan benefits.
TEXAS STATE OPTIONAL RETIREMENT PROGRAM
Under the Texas State Optional Retirement Program (the "Program"), contributions
may be excluded from the gross income of state employees for federal tax
purposes to the extent that such contributions do not exceed the exclusion
allowance provided by the Code. The Attorney General of Texas has interpreted
the Program as prohibiting any participating state employee from receiving the
surrender value of a contract funding benefits under the Program prior to
termination of employment or the state employee's retirement, death or total
disability. Therefore, no withdrawal by a participant in the Program will be
allowed until the first of these events occurs.
ANNUITY BENEFITS
PURCHASING AN ANNUITY
Upon written request by the contract owner, Ohio National Life will apply a
participant's account value to purchase an annuity. The contract owner must
specify the purpose, effective date, option, amount and frequency of payments,
and the payees (including the annuitant and any contingent annuitant and
beneficiary), and give evidence of the annuitant's age. Payments will be made to
the annuitant during the annuitant's lifetime. The contracts include Ohio
National Life's assurance that annuity payments will be paid for the lifetime of
the annuitant in accordance with the annuity rates contained in the contract,
regardless of actual mortality experience.
Once an annuity is purchased, the annuity cannot be surrendered for cash except
that, upon the death of the annuitant, the beneficiary shall be entitled to
surrender the annuity for the commuted value of any remaining period-certain
payments.
ANNUITY OPTIONS
The contract owner may elect one or more of the following annuity options upon
the purchase of an annuity for a participant (annuitant):
Option (a): Life Annuity with installment payments for the lifetime of the
annuitant (under this option it is possible for the annuitant to
receive only one payment; this could happen if the annuitant should
die before receiving the second payment; there is no residual value
of the contract after the annuitant's death).
Option (b): Life Annuity with installment payments guaranteed for five or ten
years and continuing thereafter during the remaining lifetime of
the annuitant.
Option (c): Joint & Survivor Life Annuity with installment payments during the
lifetime of an annuitant and all or a portion (e.g., 1/2 or 2/3) of
the payments continuing during the lifetime of a designated
contingent annuitant (under this option it is possible for the
annuitant and contingent annuitant to receive only one payment;
this could happen if both were to die before receiving the second
payment).
Option (d): Installment Refund Life Annuity with payments guaranteed for a
period certain and continuing thereafter during the remaining
lifetime of the annuitant. The number of period-certain payments is
equal to the amount applied under this option divided by the amount
of the first payment.
Option (e): Installment Refund annuity with payments guaranteed for a fixed
number (up to thirty) of years and remaining annuity values may be
commuted (surrendered) at any time. This option is available for
variable annuities only. Although the deduction for risk
undertakings is taken from annuity unit values, Ohio National
Life has no mortality risk during the annuity payout period under
this option.
Other settlement options are available as agreed to by Ohio National Life.
Unless the contract owner directs otherwise, when an annuity is purchased, the
participant's account values will be applied to provide annuity payments
pro-rata from each subaccount in the same proportion as the participant's
account values immediately prior to the purchase of the annuity.
The Internal Revenue Service has not ruled on the tax treatment of a commutable
variable annuity. If you select Option (e), it is possible that the IRS could
determine that the entire value of the annuity is fully taxable at the time you
elect Option (e) or that variable annuity payments under this option should not
be taxed under the annuity rules (see Federal Tax Status, page 14), which could
result in your payments being fully taxable to you. Should the IRS so rule,
Ohio National may be required to tax report up to the full value of the annuity
to you as taxable income.
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DETERMINATION OF AMOUNT OF THE FIRST VARIABLE ANNUITY PAYMENT
The first payment under a variable annuity is determined by applying the value
of the participant's account for each subaccount in accordance with the purchase
rate tables contained in the contract. The rates contained in those tables
depend upon the annuitant's (and any contingent annuitant's) age and sex and the
option selected. Contracts issued to plans sponsored by employers subject to
Title VII of the Civil Rights Act of 1964 or similar state statutes use annuity
tables which do not vary with annuitant's sex. The accumulation value to be
applied is determined at the end of a valuation period (selected by Ohio
National Life and uniformly applied) not more than a month and a day before the
date of the participant's first annuity payment.
If the amount to be applied under an option is less than $5,000, the option
shall not be available and the participant's account value shall be paid in a
single sum. If the first periodic payment under any option would be less than
$50, Ohio National Life reserves the right to change the frequency of payments
so that the first such payment is at least $50.
ANNUITY UNIT AND THE DETERMINATION OF SUBSEQUENT PAYMENTS
Subsequent variable annuity payments will vary to reflect the investment
performance of each applicable subaccount. The amount of each subsequent payment
is determined by annuity units. The number of annuity units for each subaccount
is determined by dividing the dollar amount of the first annuity payment from
each subaccount by the value of the subaccount annuity unit for the same
valuation period used to determine the participant's account value applied to
provide annuity payments. This number of annuity units remains fixed for any
annuity unless changed as provided below.
The annuity unit value for each subaccount was set at $10 for the valuation
period as of which the first variable annuity payable from each subaccount of
VAD was calculated. The annuity unit value for each subsequent valuation period
equals the annuity unit value for the immediately preceding valuation period
multiplied by the net investment factor (see page 9) for such subsequent
valuation period and by a factor (0.9998925 for a one-day valuation period) to
neutralize the assumed interest rate discussed below.
The dollar amount of each subsequent variable annuity payment is equal to the
fixed number of annuity units for each subaccount multiplied by the value of the
annuity unit for the valuation period.
The annuity purchase rate tables contained in the contract are based on a
blended 1983(a) Annuity Mortality Table with compound interest at the effective
rate of 4% per year. A higher interest assumption would mean a higher initial
annuity payment but a more slowly rising series of subsequent annuity payments
if annuity unit values were increasing (or a more rapidly falling series of
subsequent annuity payments if annuity unit values were decreasing). A lower
interest assumption would have the opposite effect. If the actual net investment
rate were equal to the assumed interest rate, annuity payments would be level.
TRANSFERS AFTER ANNUITY PURCHASE
After annuity payments have been made for at least 12 months, the annuitant can,
once each 12 months, change the subaccount(s) on which variable annuity payments
are based. On at least 60 days written notice to Ohio National Life at its home
office, that portion of the periodic variable annuity payment directed by the
annuitant will be changed to reflect the investment results of a different
subaccount. The annuity payment immediately after such change will be the amount
that would have been paid without such change. Subsequent payments will reflect
the new mix of subaccount allocation.
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OTHER CONTRACT PROVISIONS
ASSIGNMENT
Any amount payable in settlement of the contracts may not be commuted,
anticipated, assigned or otherwise encumbered, or pledged as loan collateral to
any person other than Ohio National Life. To the extent permitted by law, no
such amounts shall be subject in any way to any legal process to subject them to
payment of any claims against an annuitant before the annuity payments commence.
PERIODIC REPORTS
Ohio National Life will furnish the contract owner, once each calendar quarter,
a statement showing the number of accumulation units credited to the contract by
subaccount and the value of each unit as of the end of the preceding quarter. In
addition, as long as the contract remains in effect, Ohio National Life will
forward such periodic reports as may be furnished it by the Fund.
SUBSTITUTION FOR FUND SHARES
If investment in the Fund is no longer possible or in Ohio National Life's
judgment becomes inappropriate to the purposes of the contract, Ohio National
Life may substitute one or more other mutual funds. Substitution may be made
with respect to both existing investments and the investment of future
contributions. However, no such substitution will be made without any necessary
approval of the Securities and Exchange Commission. We may also add other
investment portfolios of the Fund or of additional mutual funds as eligible
investments of VAD.
CONTRACT OWNER INQUIRIES
Any questions from contract owners should be directed to Ohio National Life,
Group Annuity Administration, P.O. Box 2669, Cincinnati, Ohio 45201; telephone
(513) 794-6514.
PERFORMANCE DATA
Ohio National Life may advertise performance data for the various Fund
portfolios showing the percentage change in the value of an accumulation unit
based on the performance of the applicable portfolio over a period of time
(usually a calendar year). Such percentage change is determined by dividing the
increase (or decrease) in value for the unit by the accumulation unit value at
the beginning of the period. This percentage figure will reflect the deduction
of any asset-based charges under the contract but will not reflect the deduction
of any applicable withdrawal charge. The deduction of any applicable withdrawal
charge would reduce any percentage increase or make greater any percentage
decrease.
Any such advertising will also include average annual total return figures
calculated as shown in the Statement of Additional Information. The average
annual total return figures will reflect the deduction of applicable withdrawal
charges as well as applicable asset-based charges.
Ohio National Life may also distribute sales literature comparing separate
account performance to the Consumer Price Index or to such established market
indexes as the Dow Jones Industrial Average, the Standard & Poor's 500 Stock
Index, IBC's Money Fund Reports, Lehman Brothers Bond Indices, Morgan Stanley
Europe Australia Far East Index, Morgan Stanley World Index, Russell 2000 Index,
or other variable annuity separate accounts.
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FEDERAL TAX STATUS
The following discussion of federal income tax treatment of amounts received
under a variable annuity contract is not exhaustive, does not purport to cover
all situations, and is not intended as tax advice. A qualified tax adviser
should always be consulted with regard to the application of law to individual
circumstances. Tax laws can change, even with respect to contracts that have
already been issued. Tax law revisions, with unfavorable consequences to
contracts offered by this prospectus, could have retroactive effect on
previously issued contracts or on subsequent voluntary transactions in
previously issued contracts.
Ohio National Life is taxed as a life insurance company under Subchapter L of
the Internal Revenue Code (the "Code"). Since the operations of VAD are a part
of, and are taxed with, the operations of Ohio National Life, VAD is not
separately taxed as a "regulated investment company" under Subchapter M of the
Code.
No federal income tax is payable under present law on dividend income or capital
gains distribution from Fund shares held in VAD or upon capital gains realized
by VAD on redemption of Fund shares.
The contracts described in this prospectus are considered annuity contracts
under Section 72 of the Code, which generally provides for taxation of
annuities. Under existing provisions of the Code, any increase in the
accumulation value of the contract is not taxable to the owner or annuitant
until received, either in the form of annuity payments, as contemplated by the
contract, or in some other form of distribution.
When annuity payments commence under a participant's annuity, each payment is
taxable under Section 72 of the Code as ordinary income in the year of receipt
if the annuitant has neither paid any portion of the contributions nor has
previously been taxed on any portion of the contributions. If any portion of the
contributions has been paid from or included in the annuitant's taxable income,
this aggregate amount will be considered the annuitant's "investment in the
contract." The annuitant will be entitled to exclude from taxable income a
portion of each annuity payment equal to the annuitant's "investment in the
contract" divided by the period of expected annuity payments, determined by the
annuitant's life expectancy and the form of annuity benefit. Once the
annuitant's "investment in the contract" is recovered, the entire portion of
each annuity payment will be included in the annuitant's taxable income.
If an election is made to receive a participant's value in a single sum in lieu
of annuity payments, any amount received or withdrawn in excess of the
participant's "investment in the contract" will normally be taxed as ordinary
income in the year received. A withdrawal of a participant's account values is
taxable as income to the extent that the participant's accumulated account value
immediately before the payment exceeds the "investment in the contract." Such a
withdrawal is treated as a distribution of earnings first and only second as a
recovery of the participant's "investment in the contract." Any part of the
value of the contract that is assigned or pledged to secure a loan will be taxed
as if it had been a partial withdrawal and may be subject to a penalty tax.
There is a penalty tax equal to 10% of any amount that must be included in gross
income for tax purposes. The penalty will not apply to a redemption that is (1)
received on or after the taxpayer reaches age 59 1/2; (2) made to a beneficiary
on or after the death of the annuitant; (3) attributable to the taxpayer's
becoming disabled; (4) made as a series of substantially equal periodic payments
for the life of the annuitant (or joint lives of the annuitant and beneficiary);
(5) from a contract that is a qualified funding asset for purposes of a
structured settlement; (6) made under an annuity contract that is purchased with
a single premium and with annuity payments that commence not later than a year
from the purchase of the annuity, or (7) incident to divorce. If an election is
made not to have withholding apply to the early withdrawal or if an insufficient
amount is withheld, the participant may be responsible for payment of estimated
tax. The participant may also incur penalties under the estimated tax rules if
the withholding and estimated tax payments are not sufficient. Failure by a
participant to provide his or her taxpayer identification number will
automatically subject any payments under the contract to withholding.
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TAX-DEFERRED ANNUITIES
Under the provisions of Section 403(b) of the Code, contributions made for
annuity contracts purchased for employees by public educational institutions and
certain tax-exempt organizations which are described in Section 501(c)(3) of the
Code are excludable from the gross income of such employees to the extent that
the aggregate contributions plus any other amounts contributed to the purchase
of a contract and toward benefits under qualified retirement plans do not exceed
the exclusion allowance determined for the employee as set forth in Sections
403(b) and 415 of the Code. Employee contributions are, however, subject to
social security (FICA) tax withholding. All amounts received by an employee
under a contract, either in the form of annuity payments or cash withdrawal,
will be taxed under Section 72 of the Code as ordinary income for the year
received, except for exclusion of any amounts representing "investment in the
contract." Under certain circumstances, amounts received may be used to make a
"tax-free rollover" into one of the types of individual retirement arrangements
permitted under the Code. Amounts received that are eligible for "tax-free
rollover" will be subject to an automatic 20% withholding unless such amounts
are directly rolled over from the tax-deferred annuity to the individual
retirement arrangement.
With respect to earnings accrued and contributions made after December 31, 1988,
pursuant to a salary reduction agreement under Section 403(b) of the Code,
distributions may be paid only when the employee (a) attains age 59 1/2, (b)
separates from the employer's service, (c) dies, (d) becomes disabled as defined
in the Code, or (e) incurs a financial hardship as defined in the Code. In the
case of hardship, cash distributions may not exceed the amount of such
contributions. These restrictions do not affect rights to transfer investments
among the subaccounts and do not limit the availability of exchanges.
QUALIFIED PENSION OR PROFIT-SHARING PLANS
Under present law, contributions made by an employer or trustee, pursuant to a
plan or trust qualified under Section 401(a) or 403(a) of the Code, are
generally excludable from gross income of the employee. The portion, if any, of
the contributions made by the employee, or which is considered taxable income to
the employee in the year such payments are made, constitutes an "investment in
the contract" under Section 72 of the Code for the employee's annuity benefits.
Employer or employee payments to a profit sharing plan qualifying under Section
401(k) of the Code are generally excludable from gross income of the employee.
Distributions must commence no later than April 1 of the calendar year following
the year in which the participant reaches age 70 1/2. Premature distribution of
benefits (prior to age 59 1/2) or contributions in excess of those permitted by
the Code may result in certain penalties under the Code.
If an employee, or one or more of the beneficiaries, receives the total amounts
payable with respect to an employee within one taxable year after age 59 1/2 on
account of the employee's death or separation from service of the employer, any
amount received in excess of the employee's "investment in the contract" may be
taxed under special 5-year forward averaging rules. The taxpayer can elect to
have that portion of a lump-sum distribution attributable to years of
participation prior to January 1, 1974 given capital gains treatment. The
percentage of pre-1974 distribution subject to capital gains treatment decreases
as follows: 100%, 1987; 95%, 1988; 75%, 1989; 50%, 1990; and 25%, 1991. For tax
years 1992 and thereafter no capital gains treatment is available (except that
taxpayers who were age 50 before 1986 may still elect capital gains treatment).
The employee receiving such a distribution may be able to make a "tax-free
rollover" of the distribution less the employee's "investment in the contract"
into another employee's qualified plan or into one of the types of individual
retirement arrangements permitted under the Code. Amounts received that are
eligible for "tax-free rollover" will be subject to an automatic 20% withholding
unless such amounts are directly rolled over to another qualified plan or
individual retirement arrangement.
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WITHHOLDING ON DISTRIBUTIONS
Distributions from tax-deferred annuities or qualified pension or profit sharing
plans that are eligible for "tax-free rollover" will be subject to an automatic
20% withholding unless such amounts are directly rolled over to an individual
retirement arrangement or another qualified plan. Federal income tax withholding
on annuity payments is required. However, recipients of annuity payments are
allowed to elect not to have the tax withheld. Such an election may be revoked
at any time with respect to annuity payments and thereafter withholding would
commence. Failure to provide your taxpayer identification number will
automatically subject any payments under the contract to withholding.
APPENDIX
FIXED ACCUMULATION ACCOUNT
The Fixed Accumulation Account guarantees a fixed return for a specified period
of time and guarantees the principal against loss. Any portion of a contract
relating to the Fixed Accumulation Account is not registered under the
Securities Act of 1933. The Fixed Accumulation Account is not registered as an
investment company under the 1940 Act. Accordingly, neither the Fixed
Accumulation Account nor any interests in it are subject to the provisions or
restrictions of either such Act, and the disclosures in this appendix have not
been reviewed by the staff of the Securities and Exchange Commission.
The Fixed Accumulation Account consists of all of Ohio National Life's general
assets other than those allocated to a separate account. Accumulation values
under a contract will be allocated between the Fixed Accumulation Account and
VAD. The allocation will be as elected by the contract owner or participant at
the time of purchase or as subsequently changed.
Ohio National will invest its general assets in its discretion as allowed by
applicable state law. Investment income from Ohio National Life's general assets
will be allocated to those contracts having guaranteed accumulation values in
accordance with the terms of such contracts
The amount of investment income allocated to the contracts will vary from year
to year in Ohio National Life's sole discretion. However, Ohio National Life
guarantees that it will credit interest at a rate of not less than 3% per year,
compounded annually, to contract values allocated to the Fixed Accumulation
Account. Ohio National Life may credit interest at a rate in excess of 3%, but
any such excess interest credit will be in Ohio National Life's sole discretion.
Ohio National Life guarantees that the fixed accumulation value of a contract
will never be less than (a) the amount of deposits allocated to, and transfers
into, the Fixed Accumulation Account, plus (b) interest credited at the rate of
3% per year compounded annually, plus (c) any additional excess interest Ohio
National Life may credit to fixed accumulation values, and less (d) any
withdrawals and transfers from the fixed accumulation values, and less (e) any
withdrawal charges, state premium taxes and transfer fees. No deductions are
made from the Fixed Accumulation Account for administrative expenses or risk
undertakings. (See Deductions and Expenses, page 6.) However, in addition to any
applicable withdrawal charge, Ohio National Life may assess a liquidation charge
as described below.
Contract values credited to the Fixed Accumulation Account will be allocated to
an investment cell of the Fixed Accumulation Account (a "Cell"). A Cell is a
partition of the Fixed Accumulation Account by the time period in which the
contract value is credited to the Fixed Accumulation Account (either by means of
a contract contribution or a transfer into the Fixed Accumulation Account).
Earlier Cells may be aggregated into a single Cell. Each Cell is credited with
interest at an associated rate declared by Ohio National Life. Such rate will
not be reduced more than once a year. Amounts withdrawn from or charged against
a participant's contribution account decrease the balances in the Cells
established within that participant's account on a last-in first-out basis. Only
when the most recently established Cell's balance is exhausted will the next
previously established Cell's balance be reduced.
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Withdrawals made from a participant's portion of the Fixed Accumulation Account
are assessed a liquidation charge which is a percentage of the balance withdrawn
from a Cell. The percentage equals ten times x minus y (but never less than 0%),
where:
x is the annual effective interest rate declared by Ohio National Life
applicable to the Cell for new contract contributions as of the date of
withdrawal, and
y is the annual effective interest rate at the time of withdrawal that is
applicable to the Cell from which a withdrawal is being made.
In no event will the liquidation charge exceed the difference between the amount
of the participant's contract value allocated to the Fixed Accumulation Account
and the participant's minimum Fixed Accumulation Account value. The
participant's minimum Fixed Accumulation Account value equals the participant's
net purchase payments and transfers allocated to the Fixed Accumulation Account,
less withdrawals and transfers from the Fixed Accumulation Account, accumulated
at an annual effective interest rate of 3%. The liquidation charge does not
apply when the contract is discontinued because of termination of the plan.
Upon discontinuance of the contract by the contract owner, the liquidation
charge will not be assessed if the contract owner elects to receive the balance
in the Fixed Accumulation Account in six payments over a five year period. The
first payment will be made within 30 days of discontinuance, equal to 1/6 of the
balance, and subsequent payments will be made at the end of each of the next
five years equal to 1/6 of the original balance plus interest credited to the
date of payment.
Not more than 20% of a participant's Fixed Accumulation Account value (or
$1,000, if greater), as of the beginning of any contract year, may be
transferred to one or more variable subaccounts during that contract year. As
provided by applicable state law, Ohio National Life reserves the right to defer
the payment of amounts withdrawn from the Fixed Accumulation Account for a
period not to exceed six months from the date written request for such
withdrawal is received by Ohio National Life.
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