<PAGE> 1
File No. 33-81784
811-8642
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 5 /X/
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. / /
---------------------------------
(Exact Name of Registrant)
OHIO NATIONAL VARIABLE ACCOUNT D
(Name of Depositor)
THE OHIO NATIONAL LIFE INSURANCE COMPANY
(Address of Depositor's Principal Executive Offices)
One Financial Way
Cincinnati, Ohio 45242
(Depositor's Telephone Number)
(513) 794-6100
---------------------------------
(Name and Address of Agent for Service)
Ronald L. Benedict, Second Vice President and Counsel
The Ohio National Life Insurance Company
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
---------------------------------
Approximate Date of Proposed Public Offering: As soon after the effective date
of this amendment as is practicable.
Registrant has heretofore registered an indefinite amount of securities under
the Securities Act of 1933 pursuant to Rule 24f-2 and on February 27, 1997 filed
its Rule 24f-2 Notice for its most recent fiscal year.
It is proposed that this filing will become effective (check appropriate space):
immediately upon filing pursuant to paragraph (b)
---
X on May 1, 1997, pursuant to paragraph (b)(1)(ix)
---
60 days after filing pursuant to paragraph (a)(i)
---
on (date) pursuant to paragraph (a)(i) 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.
<PAGE> 2
OHIO NATIONAL VARIABLE ACCOUNT D
<TABLE>
<CAPTION>
N-4 Item Caption in Prospectus
- -------- ---------------------
<S> <C>
1 Cover Page
2 Glossary of Special Terms
3 Not applicable
4 Not applicable
5 The Ohio National Companies
6 Deductions and Expenses
7 Description of the Contracts
8 Annuity Benefits
9 Death Benefit
10 Accumulation
11 Surrender and Withdrawal
12 Federal Tax Status
13 Not applicable
14 Table of Contents
Caption in Statement of Additional Information
----------------------------------------------
15 Cover Page
16 Table of Contents
17 Not applicable
18 Custodian
Independent Certified Public Accountants
19 See Prospectus (Distribution of Variable Annuity
20 Underwriter
21 Calculation of Money Market Subaccount Yield
Total Return
22 See Prospectus (Annuity Benefits)
23 Financial Statements
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Caption in Part C
-----------------
<S> <C>
24 Financial Statements and Exhibits
25 Directors and Officers of the Depositor
26 Persons Controlled by or Under Common Control
with the Depositor or Registrant
27 Number of Contractowners
28 Indemnification
29 Principal Underwriter
30 Location of Accounts and Records
31 Not applicable
32 Undertakings
</TABLE>
<PAGE> 4
PART A
PROSPECTUS
<PAGE> 5
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> 6
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> 7
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> 8
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
<PAGE> 9
<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> 10
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> 11
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> 12
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> 13
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
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<PAGE> 14
(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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<PAGE> 20
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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<PAGE> 21
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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PART B
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 23
OHIO NATIONAL VARIABLE ACCOUNT D
OF
THE OHIO NATIONAL LIFE INSURANCE COMPANY
One Financial Way
Cincinnati, Ohio 45242
Telephone (513) 794-6452
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1997
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the prospectus for Ohio National Variable Account D ("VAD")
flexible purchase payment individual tax qualified variable annuity contracts
dated May 1, 1997. To obtain a free copy of the VAD prospectus, write or
call The Ohio National Life Insurance Company ("Ohio National Life") at the
above address.
Table of Contents
<TABLE>
<S> <C>
Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Independent Certified Public Accountants . . . . . . . . . . . 2
Underwriter . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Calculation of Money Market Subaccount Yield . . . . . . . . . 3
Total Return . . . . . . . . . . . . . . . . . . . . . . . . . 3
Transfer Limitations . . . . . . . . . . . . . . . . . . . . . 4
Financial Statements . . . . . . . . . . . . . . . . . . . . . 5
</TABLE>
GROUP RETIREMENT ADVANTAGE
<PAGE> 24
CUSTODIAN
Ohio National Life has executed an agreement with Star Bank, N.A. ("the Bank"),
Cincinnati, Ohio, pursuant to which the shares of Ohio National Fund, Inc.
("Fund") and other assets credited to VAD will be held in the custody of the
Bank. The agreement provides that the Bank will purchase Fund shares at their
net asset value determined as of the end of the valuation period of VAD during
which the deposit is received by Ohio National Life. The Bank effects
redemptions of Fund shares held by VAD upon instructions from Ohio National Life
at net asset value determined as of the end of the valuation period of VAD
during which a redemption request is received or made by Ohio National Life. In
addition, the Bank maintains appropriate records with respect to all
transactions in Fund shares relative to VAD.
The agreement requires the Bank to have at all times an aggregate capital,
surplus and undivided profit of not less than $2 million and prohibits
resignation by the Bank until (a) a successor custodian bank having the
qualifications enumerated above shall have agreed to serve as custodian, or (b)
VAD has been completely liquidated and the proceeds of such liquidation properly
distributed. Subject to these conditions the agreement of custodianship may be
terminated by either party upon sixty days written notice. For its services as
custodian, the Bank will be paid a fee to be agreed upon from time to time by
the Bank and Ohio National Life.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The financial statements of VAD as of December 31, 1996 and for the periods
indicated herein and Ohio National Life's consolidated financial statements
as of December 31, 1996 and 1995 and for the periods indicated herein have been
included herein in reliance upon the report 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.
UNDERWRITER
The offering of the contracts is continuous. Prior to May 1, 1997, The O. N.
Equity Sales Company ("ONESCO"), a wholly-owned subsidiary of Ohio National
Life, was the principal underwriter of the contracts. The aggregate amount of
commissions paid to ONESCO with respect to contracts issued by VAD, and the
amounts retained by ONESCO, for each of the last two years have been:
<TABLE>
<CAPTION>
Aggregate Retained
Year Commissions Commissions
---- ----------- -----------
<S> <C> <C>
1996 $74,326 None
1995 79,218 None
</TABLE>
-2-
<PAGE> 25
Since May 1, 1997, Ohio National Equities, Inc., another wholly-owned
subsidiary of Ohio National Life, has been the principal underwriter of the
contracts.
CALCULATION OF MONEY MARKET SUBACCOUNT YIELD
The current yield of the Money Market subaccount for the seven days ended on
December 31, 1996, was 4.27%. This was calculated by determining the net change,
exclusive of capital changes, in the value of a hypothetical pre-existing
account having a balance of one accumulation unit of the subaccount at the
beginning of the seven-day period, dividing the net change in subaccount value
by the value of the subaccount at the beginning of the base period to obtain the
base period return, and multiplying the difference by 365/7. The resulting
figure is carried to the nearest hundredth of one percent.
TOTAL RETURN
The average annual compounded rate of return for a contract with respect to a
particular subaccount over a given period is found by equating the initial
amount invested to the ending redeemable value using the following formula:
P(1 + T)n = ERV
where: P = a hypothetical initial payment of $1,000,
T = the average annual total return,
n = the number of years, and
ERV = the ending redeemable value of a hypothetical $1,000
beginning-of-period payment at the end of the period (or
fractional portion thereof).
For this purpose, it should be noted that the current series of contracts were
initially offered on January 25, 1995. Hypothetical results based upon
performance of the portfolio underlying each subaccount prior to that date
assume that the same charges and deductions applicable to the current contracts
were in effect from the inception of each corresponding portfolio. Based on
those assumptions, the average total returns for contracts in each of the
subaccounts from the inception of the subaccount and for the one-, five- and
ten-year periods ending on December 31, 1996, and assuming surrender of the
contract on the latter date, are as follows:
<TABLE>
<CAPTION>
One Five Ten From Inception
Year Years Years Inception Date
---- ----- ----- --------- ----
<S> <C> <C> <C> <C> <C>
Equity 16.77% 11.59% 11.37% 8.98% 10-06-69
Money Market 3.77% 2.75% 4.21% 5.98% 03-20-80
Bond 2.32% 5.70% 5.99% 7.21% 11-02-82
Omni 14.00% 10.58% 9.04% 10.07% 09-10-84
International 12.96% N/A N/A 14.64% 04-30-93
Capital Appreciation 14.21% N/A N/A 14.35% 05-01-94
Small Cap 16.14% N/A N/A 25.40% 05-01-94
Global Contrarian 10.60% N/A N/A 10.53% 03-31-95
Aggressive Growth -0.58% N/A N/A 13.52% 03-31-95
Core Growth N/A N/A N/A N/A 01-03-97
Growth & Income N/A N/A N/A N/A 01-03-97
S&P 500 Index N/A N/A N/A N/A 01-03-97
Social Awareness N/A N/A N/A N/A 01-03-97
</TABLE>
-3-
<PAGE> 26
TRANSFER LIMITATIONS
To the extent that transfers, surrenders, partial withdrawals and annuity
payments 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, 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.
If and when transfers must be so limited, some transfer requests will not be
made. In determining which requests will be made, scheduled transfers (that is,
those 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 no notified. Current SEC rules preclude
Ohio National Life 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.
-4-
<PAGE> 27
OHIO NATIONAL VARIABLE ACCOUNT D
INDEPENDENT AUDITORS' REPORT
The Board of Directors
The Ohio National Life Insurance Company
The Contract Owners
Ohio National Variable Account D
We have audited the accompanying statements of assets and contract owners'
equity of Ohio National Variable Account D as of December 31, 1996, and the
related statements of operations and 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, 1996, 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
D at December 31, 1996, and the results of its operations, changes in contract
owners' 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 28, 1997
================================================================================
OHIO NATIONAL VARIABLE ACCOUNT R DECEMBER 31, 1996
STATEMENTS OF ASSETS AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MONEY INTER- CAPITAL SMALL GLOBAL AGGRESS.
EQUITY MARKET BOND OMNI NATIONAL APPREC. CAP CONTR. GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets - Investments
at market value
(note 2) $464,097 85,638 74,675 604,547 539,587 719,343 587,529 159,693 123,885
======== ====== ====== ======= ======= ======= ======= ======= =======
Contract owners'
equity:
Contracts in
accumulation
period (note 3) $464,097 85,638 74,675 604,547 539,587 719,343 587,529 159,693 123,885
======== ====== ====== ======= ======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 28
OHIO NATIONAL VARIABLE ACCOUNT D
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
For the Years Ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
EQUITY MONEY MARKET BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT
1996 1995(a) 1996 1995(a) 1996 1995(a)
---------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Investment activity:
Reinvested capital gains
and dividends .............. $ 9,395 $ 321 $ 11,803 $ 1,857 $ 2,942 $ 89
Risk and administrative
expense (note 4) ........... (4,433) (493) (3,176) (457) (716) 28
--------- --------- --------- --------- --------- ---------
Net investment activity .. 4,962 (172) 8,627 1,400 2,226 117
--------- --------- --------- --------- --------- ---------
Realized and Unrealized gain
(loss) on investments:
Realized gain (loss) ....... 2,366 16 56 295 (187) 82
Unrealized gain ............ 43,435 6,414 0 0 228 462
--------- --------- --------- --------- --------- ---------
Net gain on
investments ............ 45,801 6,430 56 295 41 544
--------- --------- --------- --------- --------- ---------
Net increase in contract
owners' equity from
operations ........... 50,763 6,258 8,683 1,695 2,267 661
--------- --------- --------- --------- --------- ---------
Equity transactions:
Sales:
Contract purchase payments . 279,457 129,711 357,959 166,168 67,441 8,173
Transfers from fixed and
other subaccounts ........ 604 26,104 0 0 1,846 3,932
--------- --------- --------- --------- --------- ---------
280,061 155,815 357,959 166,168 69,287 12,105
--------- --------- --------- --------- --------- ---------
Redemptions:
Withdrawals and surrenders . 18,800 0 5,924 0 6,379 0
Transfers to fixed and
other subaccounts ........ 10,000 0 292,995 149,948 3,266 0
--------- --------- --------- --------- --------- ---------
28,800 0 298,919 149,948 9,645 0
--------- --------- --------- --------- --------- ---------
Net equity transactions .. 251,261 155,815 59,040 16,220 59,642 12,105
--------- --------- --------- --------- --------- ---------
Net change in contract
owners' equity ....... 302,024 162,073 67,723 17,915 61,909 12,766
Contract owners' equity:
Beginning of period .......... 162,073 0 17,915 0 12,766 0
--------- --------- --------- --------- --------- ---------
End of period ................ $ 464,097 $ 162,073 $ 85,638 $ 17,915 $ 74,675 $ 12,766
========= ========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------
OMNI INTERNATIONAL
SUBACCOUNT SUBACCOUNT
1996 1995(a) 1996 1995(a)
----------------------- ----------------------
<S> <C> <C> <C> <C>
Investment activity:
Reinvested capital gains
and dividends .............. $ 10,517 $ 242 $ 18,259 $ 2,327
Risk and administrative
expense (note 4) ........... (4,481) (214) (4,981) (1,476)
--------- --------- --------- ---------
Net investment activity .. 6,036 28 13,278 851
--------- --------- --------- ---------
Realized and Unrealized gain
(loss) on investments:
Realized gain (loss) ....... 8,091 501 2,863 1,799
Unrealized gain ............ 39,991 2,973 27,047 9,439
--------- --------- --------- ---------
Net gain on
investments ............ 48,082 3,474 29,910 11,238
--------- --------- --------- ---------
Net increase in contract
owners' equity from
operations ........... 54,118 3,502 43,188 12,089
--------- --------- --------- ---------
Equity transactions:
Sales:
Contract purchase payments . 278,302 158,758 194,955 189,060
Transfers from fixed and
other subaccounts ........ 141,607 0 82,458 31,106
--------- --------- --------- ---------
419,909 158,758 277,413 220,166
--------- --------- --------- ---------
Redemptions:
Withdrawals and surrenders . 17,953 3,181 8,753 2,707
Transfers to fixed and
other subaccounts ........ 10,606 0 1,809 0
--------- --------- --------- ---------
28,559 3,181 10,562 2,707
--------- --------- --------- ---------
Net equity transactions .. 391,350 155,577 266,851 217,459
--------- --------- --------- ---------
Net change in contract
owners' equity ....... 445,468 159,079 310,039 229,548
Contract owners' equity:
Beginning of period .......... 159,079 0 229,548 0
--------- --------- --------- ---------
End of period ................ $ 604,547 $ 159,079 $ 539,587 $ 229,548
========= ========= ========= =========
</TABLE>
(a) Period from February 27, 1995, date of commencement of operations
The accompanying notes are an integral part of these financial statements.
<PAGE> 29
OHIO NATIONAL VARIABLE ACCOUNT D
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
For the Years Ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
CAPITAL APPRECIATION SMALL CAP GLOBAL CONTRARIAN AGGRESSIVE GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
1996 1995(a) 1996 1995(a) 1996 1995(b) 1996 1995(b)
---------------------- ---------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment activity:
Reinvested capital gains
and dividends .............. $ 36,058 $ 3,674 $ 10,714 $ 153 $ 4,188 $ 351 $ 10,586 $ 340
Risk and administrative
expense (note 4) ........... (8,025) (2,813) (5,793) (1,848) (1,667) (620) (912) (106)
--------- --------- --------- --------- --------- -------- --------- --------
Net investment activity .. 28,033 861 4,921 (1,695) 2,521 (269) 9,674 234
--------- --------- --------- --------- --------- -------- --------- --------
Realized and Unrealized gain
(loss) on investments:
Realized gain (loss) ....... 1,985 3,926 2,171 (1,006) 802 603 (539) 0
Unrealized gain (loss) ..... 50,911 28,623 56,410 34,872 8,542 4,252 (7,417) 998
--------- --------- --------- --------- --------- -------- --------- --------
Net gain (loss) on
investments ............ 52,896 32,549 58,581 33,866 9,344 4,855 (7,956) 998
--------- --------- --------- --------- --------- -------- --------- --------
Net increase in contract
owners' equity from
operations ........... 80,929 33,410 63,502 32,171 11,865 4,586 1,718 1,232
--------- --------- --------- --------- --------- -------- --------- --------
Equity transactions:
Sales:
Contract purchase payments . 159,142 408,147 175,106 244,607 57,483 86,552 83,703 22,077
Transfers from fixed and
other subaccounts ........ 30,791 27,869 59,385 42,455 0 745 2,732 15,115
--------- --------- --------- --------- --------- -------- --------- --------
189,933 436,016 234,491 287,062 57,483 87,297 86,435 37,192
--------- --------- --------- --------- --------- -------- --------- --------
Redemptions:
Withdrawals and surrenders . 14,883 5,431 22,174 2,523 1,538 0 2,692 0
Transfers to fixed and
other subaccounts ........ 631 0 5,000 0 0 0 0 0
--------- --------- --------- --------- --------- -------- --------- --------
15,514 5,431 27,174 2,523 1,538 0 2,692 0
--------- --------- --------- --------- --------- -------- --------- --------
Net equity transactions .. 174,419 430,585 207,317 284,539 55,945 87,297 83,743 37,192
--------- --------- --------- --------- --------- -------- --------- --------
Net change in contract
owners' equity ....... 255,348 463,995 270,819 316,710 67,810 91,883 85,461 38,424
Contract owners' equity:
Beginning of period .......... 463,995 0 316,710 0 91,883 0 38,424 0
--------- --------- --------- --------- --------- -------- --------- --------
End of period ................ $ 719,343 $ 463,995 $ 587,529 $ 316,710 $ 159,693 $ 91,883 $ 123,885 $ 38,424
========= ========= ========= ========= ========= ======== ========= ========
</TABLE>
(a) Period from February 27, 1995, date of commencement of operations.
(b) Period from March 31, 1995, date of commencement of operations.
The accompanying notes are an integral part of these financial statements.
<PAGE> 30
OHIO NATIONAL VARIABLE ACCOUNT D DECEMBER 31, 1996
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Ohio National Variable Account D (the Account) is a separate account of The
Ohio National Life Insurance Company (ONLIC) and all obligations arising
under variable annuity contracts are general corporate obligations of ONLIC.
The account has been registered as a unit investment trust under the
Investment Company Act of 1940.
Assets of the Account are invested in shares of Ohio National Fund, Inc.
(the Fund), a diversified open-end management investment company. The Fund's
investments are subject to varying degrees of market, interest and financial
risks; the issuers' abilities to meet certain obligations may be affected by
economic developments in their respective industries.
Investments are valued at the net asset value of fund shares held at
December 31, 1996. Share transactions are recorded on the trade date. Income
and capital gain distributions are recorded on the ex-dividend date. 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, 1996 the aggregate cost and number of shares of Ohio
National Fund, Inc. owned by the respective subaccounts were:
<TABLE>
<CAPTION>
MONEY INTER- CAPITAL SMALL GLOBAL AGGRESS.
EQUITY MARKET BOND OMNI NATIONAL APPREC. CAP CONTR. GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aggregate Cost $ 414,250 $ 85,638 $ 73,985 $ 561,582 $ 503,102 $ 639,809 $ 496,246 $ 130,304 $ 146,899
Number of shares 14,369 8,564 7,029 31,165 34,828 55,638 32,592 13,697 12,349
</TABLE>
(3) CONTRACTS IN ACCUMULATION PERIOD
At December 31, 1996 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............................... 32,582.681 $ 14.243704
Money Market Subaccount......................... 7,976.712 10.735959
Bond Subaccount................................. 6,511.589 11.468004
Omni Subaccount................................. 45,159.694 13.386856
International Subaccount........................ 42,439.473 12.714297
Capital Appreciation Subaccount................. 54,003.061 13.320406
Small Cap Subaccount............................ 39,187.974 14.992559
Global Contrarian Subaccount.................... 13,394.450 11.922317
Aggressive Growth Subaccount.................... 9,915.289 12.494380
</TABLE>
<PAGE> 31
OHIO NATIONAL VARIABLE ACCOUNT D DECEMBER 31, 1996
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
(4) RISK AND ADMINISTRATIVE EXPENSE
ONLIC charges the Account's assets at the end of each valuation period,
presently equal to 0.35% on an annual basis, of the contract value for
administrative expenses, based on premiums established at the time the
contracts are issued.
Although variable annuity payments will differ according to the investment
performance of the Accounts, they will not be affected by mortality or
expense experience because ONLIC assumes the expense risk and the mortality
risk under the contracts. ONLIC charges the Accounts' assets for assuming
those risks, based on the contract value at a rate of 0.95% for mortality
and expense risk.
The expense risk assumed by ONLIC is the risk that the deductions for sales
and administrative expenses provided for in the variable annuity contract
may prove insufficient to cover the cost of those terms.
The mortality risk results from a provision in the contract in which ONLIC
agrees to make annuity payments regardless of how long a particular
annuitant or other payee lives and how long all annuitants or other payees
as a class live if payment options involving life contingencies are chosen.
Those annuity payments are determined in accordance with annuity purchase
rate provisions established at the time the contracts are issued.
(5) CONTRACT CHARGES
No deduction for a sales charge is made from purchase payments. A withdrawal
charge ranging from 0% to 7% may be assessed by ONLIC when a contract is
surrendered or a partial withdrawal of a participant's account value is made
for any other reason than to make a plan payment to a participant.
A transfer fee is charged for each transfer from one subaccount to another.
The fee is charged against the contract owner's equity in the subaccount
from which the transfer is effected.
State premium taxes presently range from 0% to 2 1/2% for these contracts.
In those jurisdictions permitting, such taxes will be deducted when annuity
payments begin. Elsewhere, they will be deducted from purchase payments.
(6) FEDERAL INCOME TAXES
Operations of the Account form part of, and are taxed with, operations of
ONLIC which is taxed as a life insurance company under the Internal Revenue
Code. Taxes are the responsibility of the contract owner upon termination or
withdrawal. No Federal income taxes are payable under 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) NOTE TO 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.)
- - Expenses
(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.
<PAGE> 32
OHIO NATIONAL VARIABLE ACCOUNT D
SCHEDULES OF CHANGES IN UNIT VALUES
For the Years Ended December 31, 1996 and 1995
SCHEDULE 1
<TABLE>
<CAPTION>
MONEY
EQUITY MARKET BOND OMNI INTERNATIONAL
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C> <C>
1996
Beginning unit value .......................... 12.198167 10.346422 11.207694 11.742940 11.256284
Reinvested capital gains and dividends ........ 0.378887 0.531716 0.617011 0.397192 0.603661
Realized and unrealized gain (loss) ........... 1.846378 0.000000 -0.206175 1.417666 1.019591
Expenses ...................................... -0.179728 -0.142179 -0.150526 -0.170942 -0.165239
Ending unit value ............................. 14.243704 10.735959 11.468004 13.386856 12.714297
Percentage increase (decrease) in unit value*.. 16.8% 3.8% 2.3% 14.0% 13.0%
</TABLE>
<TABLE>
<CAPTION>
CAPITAL SMALL GLOBAL AGGRESSIVE
APPRECIATION CAP CONTRARIAN GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C>
1996
Beginning unit value .......................... 11.663489 12.909669 10.780072 12.568155
Reinvested capital gains and dividends ........ 0.754940 0.349712 0.390426 1.877276
Realized and unrealized gain (loss) ........... 1.069965 1.923240 0.907834 -1.785852
Expenses ...................................... -0.167988 -0.190062 -0.156015 -0.165199
Ending unit value ............................. 13.320406 14.992559 11.922317 12.494380
Percentage increase (decrease) in unit value*.. 14.2% 16.1% 10.6% -0.6%
</TABLE>
<TABLE>
<CAPTION>
MONEY
EQUITY MARKET BOND OMNI INTERNATIONAL
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C> <C>
1995
Beginning unit value........................... 10.000000 ** 10.000000 ** 10.000000 ** 10.000000 ** 10.000000 **
Reinvested capital gains and dividends......... 0.069452 0.483949 0.193081 0.078451 0.169825
Realized and unrealized gain................... 2.289034 0.000000 1.162672 1.819895 1.234435
Expenses....................................... -0.160319 -0.137527 -0.148059 -0.155406 -0.147976
Ending unit value.............................. 12.198167 10.346422 11.207694 11.742940 11.256284
Percentage increase in unit value*............. 22.0% 3.5% 12.1% 17.4% 12.6%
</TABLE>
<TABLE>
<CAPTION>
CAPITAL SMALL GLOBAL AGGRESSIVE
APPRECIATION CAP CONTRARIAN GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C>
1995
Beginning unit value........................... 10.000000 ** 10.000000 ** 10.000000 *** 10.000000 **
Reinvested capital gains and dividends......... 0.141706 0.010067 0.052740 0.329411
Realized and unrealized gain................... 1.673584 3.067547 0.870110 2.405839
Expenses....................................... -0.151801 -0.167945 -0.142778 -0.167095
Ending unit value.............................. 11.663489 12.909669 10.780072 12.568155
Percentage increase in unit value*............. 16.6% 29.1% 7.8% 25.7%
</TABLE>
* An annualized rate or return cannot be determined as expenses do not include
the contract charges discussed in note (5).
** Period from February 27, 1995, date of commencement of operations.
*** Period from March 31, 1995, date of commencement of operations.
See accompanying notes to the financial statements.
<PAGE> 33
<PAGE> 1
Independent Auditors' Report
----------------------------
The Board of Directors
The Ohio National Life Insurance Company:
We have audited the accompanying consolidated balance sheets of The Ohio
National Life Insurance Company and subsidiaries (the Company) as of December
31, 1996 and 1995, and the related consolidated statements of income, equity and
cash flows for each of the years in the three-year period ended December 31,
1996. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated 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. 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The Ohio National
Life Insurance Company and subsidiaries as of December 31, 1996 and 1995, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1996, in conformity with generally
accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Cincinnati, Ohio
January 31, 1997
<PAGE> 2
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1996 and 1995
(000's omitted)
<TABLE>
<CAPTION>
Assets 1996 1995
------ ---- ----
<S> <C> <C>
Investments (notes 4, 8 and 9):
Securities available-for-sale, at fair value:
Fixed maturities $ 2,572,550 2,547,763
Equity securities 63,763 71,301
Fixed maturities held-to-maturity, at amortized cost 692,572 672,372
Mortgage loans on real estate, net 1,087,287 898,099
Real estate, net 40,759 41,429
Policy loans 151,229 148,077
Other long-term investments 42,851 40,702
Short-term investments 36,016 61,173
--------------- -------------
Total investments 4,687,027 4,480,916
Cash 33,712 8,385
Accrued investment income 62,339 63,128
Deferred policy acquisition costs 246,643 193,375
Reinsurance recoverable 52,260 67,648
Other assets 37,737 25,518
Assets held in Separate Accounts 661,871 453,405
=============== =============
Total assets $ 5,781,589 5,292,375
=============== =============
Liabilities and Equity
----------------------
Future policy benefits and claims (note 5) $ 4,288,107 4,039,611
Policyholders' dividend accumulations 63,574 64,627
Other policyholder funds 16,161 15,080
Note payable (net of unamortized discount of $809 in 1996
and $261 in 1995) (note 6) 84,191 49,739
Accrued Federal income tax (note 7):
Current 14,807 21,649
Deferred 37,252 62,920
Other liabilities 113,854 103,182
Liabilities related to Separate Accounts 648,634 441,124
--------------- -------------
Total liabilities 5,266,580 4,797,932
--------------- -------------
Equity (notes 3 and 12):
Unrealized gains on securities available-for-sale, net 46,807 85,844
Retained earnings 468,202 408,599
--------------- -------------
Total equity 515,009 494,443
--------------- -------------
Commitments and contingencies (notes 9 and 14)
Total liabilities and equity $ 5,781,589 5,292,375
=============== =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Statements of Income
Years ended December 31, 1996, 1995 and 1994
(000's omitted)
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenues (note 15):
Traditional life insurance premiums $ 113,176 104,514 99,423
Accident and health insurance premiums 23,478 22,455 22,475
Annuity premium and charges 28,757 31,203 22,405
Universal life and investment product policy
charges 42,304 37,064 32,507
Net investment income (note 4) 370,702 355,027 330,435
Other income 1,861 1,372 1,226
Net realized (loss) gain on investments (note 4) 8,761 (2,751) (3,509)
-------------- -------------- --------------
589,039 548,884 504,962
-------------- -------------- --------------
Benefits and expenses:
Benefits and claims 379,116 373,108 350,742
Provision for policyholders' dividends on
participating policies (note 12) 26,996 23,047 23,590
Amortization of deferred policy acquisition costs 19,341 21,471 16,622
Other operating costs and expenses 71,111 67,438 63,289
-------------- -------------- --------------
496,564 485,064 454,243
-------------- -------------- --------------
Income before Federal income tax 92,475 63,820 50,719
-------------- -------------- --------------
Federal income tax (note 7):
Current expense 37,443 31,233 21,103
Deferred benefit (4,571) (6,330) (1,445)
-------------- -------------- --------------
32,872 24,903 19,658
-------------- -------------- --------------
Net income $ 59,603 38,917 31,061
============== ============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Statements of Equity
Years ended December 31, 1996, 1995 and 1994
(000's omitted)
<TABLE>
<CAPTION>
Unrealized
gains (losses)
on securities
available- Retained Total
for-sale earnings equity
------------------ --------------- ---------------
<S> <C> <C> <C>
1994:
Balance, beginning of year $ 5,899 338,621 344,520
Net income - 31,061 31,061
Adjustment for change in accounting for certain
investment in debt and equity securities, net of
adjustment to deferred policy acquisition costs
and deferred Federal income tax (note 3) 40,219 - 40,219
Unrealized loss on securities available-for- sale,
net of adjustment to deferred policy
acquisition costs and deferred Federal
income tax (75,418) - (75,418)
================== =============== ===============
Balance, end of year $ (29,300) 369,682 340,382
================== =============== ===============
1995:
Balance, beginning of year $ (29,300) 369,682 340,382
Net income - 38,917 38,917
Unrealized gain on securities available-for-sale,
net of adjustment to deferred policy acquisition
costs and deferred Federal income taxes 115,144 - 115,144
------------------ --------------- ---------------
Balance, end of year $ 85,844 408,599 494,443
================== =============== ===============
1996:
Balance, beginning of year $ 85,844 408,599 494,443
Net income 59,603 59,603
Unrealized loss on securities available-for-sale,
net of adjustment to deferred policy
acquisition costs and deferred Federal
income tax (39,037) - (39,037)
------------------ --------------- ---------------
Balance, end of year $ 46,807 468,202 515,009
================== =============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1996, 1995 and 1994
(000's omitted)
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net Income $ 59,603 38,917 31,061
Adjustments to reconcile net income to net cash
provided by operating activities:
Capitalization of deferred policy acquisition costs (43,711) (41,403) (38,172)
Amortization of deferred policy acquisition costs 19,341 21,471 16,622
Amortization and depreciation 1,095 1,342 1,329
Realized losses (gains) on invested assets, net (7,772) (3,077) 3,582
Deferred Federal income tax (benefit) (3,623) (9,521) 1,820
(Increase) decrease in accrued investment income 789 (4,977) (6,205)
(Increase) decrease in other assets 3,169 (19,051) (11,899)
Increase in policyholder account balances 20,249 52,265 44,722
(Decrease) increase in policyholders' dividend
accumulations and other funds 28 (215) (1,284)
Increase (decrease) in current Federal income tax payable (6,842) 10,088 3,575
Increase in other liabilities 11,134 9,126 17,444
Other, net (1,010) 3,567 315
------------ ----------- ------------
Net cash provided by operating activities 52,450 58,532 62,910
------------ ----------- ------------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 145,554 83,956 108,056
Proceeds from sale of debt securities available-for-sale 74,977 46,372 16,717
Proceeds from sale of equity securities 15,001 7,245 6,545
Proceeds from maturity of fixed maturities held-to-maturity 57,129 102,565 101,368
Proceeds from repayment of mortgage loans on real estate 140,831 93,714 128,077
Proceeds from sale of real estate 4,181 15,791 6,634
Proceeds from repayment of policy loans and sale of
other invested assets 11,812 14,003 14,649
Cost of debt securities available-for-sale acquired (331,991) (281,828) (164,757)
Cost of equity securities acquired (4,000) (12,258) (11,326)
Cost of fixed maturities held-to-maturity acquired (76,022) (226,541) (376,723)
Cost of mortgage loans on real estate acquired (332,088) (233,003) (109,163)
Cost of real estate acquired (836) (1,283) (4,996)
Policy loans issued and other invested assets acquired (18,006) (23,046) (19,455)
------------ ----------- ------------
Net cash used in investing activities (313,458) (414,313) (304,374)
------------ ----------- ------------
Cash flows from financing activities:
Increase in universal life and investment product
account balances 973,793 957,776 663,604
Decrease in universal life and investment product
account balances (745,546) (583,852) (684,522)
Proceeds from note issue 49,340 - 49,708
Repayment of note (16,477) - -
Other, net 68 69 64
------------ ----------- ------------
Net cash provided by financing activities 261,178 373,993 28,854
------------ ----------- ------------
Net increase (decrease) in cash and cash equivalents 170 18,212 (212,610)
Cash and cash equivalents, beginning of year 69,558 51,346 263,956
============ =========== ============
Cash and cash equivalents, end of year $ 69,728 69,558 51,346
============ =========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996, 1995 and 1994
(000's omitted)
(1) Organization, Consolidation Policy and Business Description
-----------------------------------------------------------
The Ohio National Life Insurance Company (ONLIC) is a mutual life
insurance company. Ohio National Life Assurance Corporation
(ONLAC) is a wholly-owned stock life insurance subsidiary included
in the consolidated financial statements. The Company's other
wholly-owned subsidiaries are not life insurance enterprises and
are included in the consolidated financial statements on an equity
basis. These non-insurance subsidiaries are not material to the
Company's consolidated results of operations or financial
position. ONLIC and its subsidiaries are collectively referred to
as the "Company".
ONLIC and ONLAC are life and health insurers licensed in 47 states, the
District of Columbia and Puerto Rico. The Company offers a full
range of life, health and annuity products through exclusive
agents and other distribution channels and is subject to
competition from 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.
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.
(Continued)
<PAGE> 7
2
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(2) Summary of Significant Accounting Policies
------------------------------------------
The significant accounting policies followed by the Company that
materially affect financial reporting are summarized below. The
accompanying consolidated 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 Note 3).
(a) Valuation of Investments and Related Gains and Losses
-----------------------------------------------------
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 that would have been required as a
charge or credit to operations had such unrealized amounts
been realized. The Company has no trading securities. The
Company records valuation allowances equal to deferred tax
benefits resulting from unrealized losses of investments.
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.
Real estate is carried at cost less accumulated depreciation
and valuation allowances. Other long-term investments are
carried on the equity basis, adjusted for valuation
allowances.
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.
(Continued)
<PAGE> 8
3
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(2) Summary of Significant Accounting Policies, Continued
-----------------------------------------------------
(b) Revenues and Benefits
---------------------
Traditional life insurance products include those products with
fixed and guaranteed premiums and benefits and consist
primarily of whole life, limited-payment life, term life and
certain annuities with life contingencies. Premiums for
traditional 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 products include universal life, variable universal
life and other interest-sensitive life insurance policies.
Investment products consist primarily of individual and group
deferred annuities, annuities without life contingencies and
guaranteed investment contracts. 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 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.
(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 in proportion to premium revenue. Such
anticipated premium revenue was estimated using the same
assumptions as were used for computing liabilities for future
policy benefits. For participating life insurance products,
deferred policy acquisition costs are being amortized in
proportion to gross margins of the related policies. Gross
margins are determined for each issue year and are equal to
premiums plus investment income less death claims, surrender
benefits, administrative costs, expected policyholder
dividends, and the increase in reserve 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 the estimated future gross profits from projected
interest margins, cost of insurance,
(Continued)
<PAGE> 9
4
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(2) Summary of Significant Accounting Policies, Continued
-----------------------------------------------------
(c) Deferred Policy Acquisition Costs, Continued
--------------------------------------------
policy administration and surrender charges. Beginning January
1, 1994, deferred policy acquisition costs for participating
life and universal life business 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 consolidated statements of income and cash
flows except for the fees the Company receives for
administrative services and risks assumed. Amounts provided by
the Company to establish Separate Account investment
portfolios, seed money, are not included in Separate Account
liabilities.
(e) Future Policy Benefits
----------------------
Future policy benefits for traditional life 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 5).
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
values.
(f) Participating Business
----------------------
Participating business represents approximately 43% of the
Company's ordinary life insurance in force in 1996. In 1996
and 1995, participating business represented approximately 43%
and 45%, respectively, of the Company's ordinary life
insurance in force. The provision for policyholder dividends
is based on current dividend scales. Future dividends are
provided for in future policy benefits based on dividend
scales in effect as of December 31, 1996.
(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.
(Continued)
<PAGE> 10
5
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(2) Summary of Significant Accounting Policies, Continued
-----------------------------------------------------
(h) Federal Income Tax
------------------
The Company files a consolidated Federal income tax return. 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.
(i) Cash Equivalents
----------------
For purposes of the consolidated statements of cash flows, the
Company considers all short-term investments with original
maturities of three months or less to be cash equivalents.
(j) Use of Estimates
----------------
In preparing the consolidated 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
consolidated 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 and contingencies, and
those used in determining valuation allowances for mortgage
loans on real estate and real estate. Although some
variability is inherent in these estimates, management
believes the amounts provided are adequate.
(k) Reclassifications
-----------------
Certain amounts in the 1995 and 1994 financial statements have
been reclassified to conform with 1996 presentation.
(Continued)
<PAGE> 11
6
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(3) Basis of Presentation
---------------------
The consolidated financial statements have been prepared in accordance
with GAAP. Annual Statements on ONLIC and 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.
The following reconciles the statutory net income of ONLIC as reported
to regulatory authorities to the net income as shown in the
accompanying consolidated financial statements:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Statutory net income $ 44,503 24,468 23,972
Adjustments to restate to the basis of GAAP:
Consolidating statutory net income of subsidiaries 12,018 10,160 2,528
Increase in deferred policy acquisition costs, net 24,018 19,485 21,606
Future policy benefits (14,050) (10,723) (7,739)
Deferred Federal income tax (expense) benefit 4,571 6,330 1,445
Valuation allowances and other than temporary
declines accounted for directly in surplus 990 (5,829) 74
Interest maintenance reserve 383 (208) (119)
Other, net (12,830) (4,766) (10,706)
------------ ------------ -----------
Net income per accompanying consolidated
statements of income $ 59,603 38,917 31,061
============ ============ ===========
</TABLE>
The following reconciles the statutory capital and surplus of ONLIC as
reported to regulatory authorities to the equity as shown in the
accompanying consolidated financial statements:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Statutory capital and surplus $ 313,746 243,248
Add (deduct) cumulative effect of adjustments:
Deferred policy acquisition costs 246,643 193,375
Asset valuation reserve 77,604 68,756
Interest maintenance reserve 22,372 21,989
Future policy benefits (71,318) (69,918)
Deferred Federal income tax (37,252) (62,920)
Difference between amortized cost and fair value of fixed
maturity securities available-for-sale, gross 70,985 166,086
Surplus note (84,191) (49,739)
Other, net (23,580) (16,434)
------------ -----------
Equity per accompanying consolidated balance sheets $ 515,009 494,443
============ ===========
</TABLE>
(Continued)
<PAGE> 12
7
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(4) Investments
-----------
An analysis of investment income and realized gains/(losses) by
investment type follows for the years ended December 31:
<TABLE>
<CAPTION>
Realized gains (losses)
Investment income on disposition of investments
------------------------------------- -------------------------------------
1996 1995 1994 1996 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Securities available-for-sale:
Fixed maturities $ 203,271 105,928 97,542 $ 3,168 (1,062) (5,475)
Equity securities 4,021 3,710 3,211 4,077 459 2,041
Fixed maturities held-to-maturity 61,509 149,465 131,420 1,304 2,319 1,613
Mortgage loans on real estate 89,391 76,608 75,763 1,262 548 (391)
Real estate 8,693 7,771 6,998 (605) 813 (1,370)
Policy loans 9,420 9,096 9,061 - - -
Short-term 3,419 3,779 3,312 - - -
Other 5,042 6,808 8,035 (1,434) - -
---------- --------- --------- --------- --------- ----------
Total 384,766 363,165 335,342 7,772 3,077 (3,582)
Less:
Investment expenses 14,064 8,138 4,907
Valuation allowances:
Mortgage loans on real estate 926 (6,462) 89
Real estate and other 63 634 (16)
--------- --------- ----------
989 (5,828) 73
---------- --------- --------- --------- --------- ----------
Net investment income $ 370,702 355,027 330,435
========== ========= =========
Net realized gains (losses) on
disposition of investments --------- --------- ----------
$ 8,761 (2,751) (3,509)
========= ========= ==========
</TABLE>
The amortized cost and estimated fair value of securities
available-for-sale and fixed maturities held-to-maturity were as
follows:
<TABLE>
<CAPTION>
December 31, 1996
-----------------------------------------------------------
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 $ 176,364 3,703 (4,321) 175,746
Obligations of states and political 29,119 1,538 (229) 30,428
subdivisions
Debt securities issued by foreign 8,078 1,920 - 9,998
governments
Corporate securities 1,675,596 75,859 (14,097) 1,737,358
Mortgage-backed securities 612,408 12,528 (5,916) 619,020
============= ============== ============= ===============
Total fixed maturities $ 2,501,565 95,548 (24,563) 2,572,550
============= ============== ============= ===============
Equity securities $ 39,175 24,588 - 63,763
============= ============== ============= ===============
Fixed maturity securities held-to-maturity
------------------------------------------
Obligations of states and political $ 8,659 218 - 8,877
subdivisions
Corporate securities 677,161 58,366 (4,785) 730,742
Mortgage-backed securities 6,752 177 (102) 6,827
============= ============== ============= ===============
$ 692,572 58,761 (4,887) 746,446
============= ============== ============= ===============
</TABLE>
(Continued)
<PAGE> 13
8
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(4) Investments, Continued
----------------------
<TABLE>
<CAPTION>
December 31, 1995
-----------------------------------------------------------
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 $ 223,959 12,083 (193) 235,849
Obligations of states and political 28,938 1,612 (166) 30,384
subdivisions
Debt securities issued by foreign governments 8,078 2,657 - 10,735
Corporate securities 1,631,389 139,750 (6,902) 1,764,237
Mortgage-backed securities 489,313 19,402 (2,157) 506,558
============= ============== ============= ===============
Total fixed maturities $ 2,381,677 175,504 (9,418) 2,547,763
============= ============== ============= ===============
Equity securities $ 51,482 19,819 - 71,301
============= ============== ============= ===============
Fixed maturity securities held-to-maturity
------------------------------------------
Obligations of states and political subdivisions $ 6,043 137 - 6,180
Corporate securities 660,466 93,508 (431) 753,543
Mortgage-backed securities 5,863 471 - 6,334
------------- -------------- ------------- ---------------
Total fixed maturities $ 672,372 94,116 (431) 766,057
============= ============== ============= ===============
</TABLE>
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 reclassified fixed
maturity securities had an amortized cost value of $1,112,685,
resulting in a gross unrealized gain on available-for-sale
securities of $83,011.
The components of unrealized gains on securities available-for-sale,
net, were as follows for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Gross unrealized gain $ 95,573 185,905
Adjustment to deferred policy acquisition costs (20,250) (49,500)
Deferred federal income tax (28,516) (50,561)
============ ============
$ 46,807 85,844
============ ============
</TABLE>
The net unrealized gain on securities available for sale includes a
net unrealized gain on equity securities of $14,256 in 1996
($10,539 in 1995) and a net unrealized gain on fixed maturities
(net SFAS 115 and related transactions) of $32,551 in 1996
($75,305 in 1995).
(Continued)
<PAGE> 14
9
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(4) Investments, Continued
----------------------
An analysis of the change in gross unrealized gains (losses) on
securities available-for-sale and fixed maturities
held-to-maturity follows for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturities $ (95,101) 209,108 (43,022)
Equity securities 4,769 13,046 (11,873)
Fixed maturities held-to-maturity (39,811) 148,026 (268,693)
</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, 1996, 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>
Fixed Maturity Securities
----------------------------------------------------------------
Available-for-Sale Held-to-Maturity
------------------------------ ------------------------------
Amortized Estimated Amortized Estimated
cost fair value cost fair value
------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Due in one year or less $ 51,201 52,292 848 863
Due after one year through five years 229,190 239,487 105,620 112,359
Due after five years through ten years 685,944 704,643 289,644 303,253
Due after ten years 1,535,230 1,576,128 296,460 329,971
============= ============ ============= =============
$ 2,501,565 2,572,550 692,572 746,446
============= ============ ============= =============
</TABLE>
Proceeds from the sale of securities available-for-sale during 1996 and
1995 were $74,977 and $46,372, respectively, while proceeds from
sales of investments in fixed maturity securities during 1994 were
$16,717. Gross gains of $1,667 ($510 in 1995 and $52 in 1994) and
gross losses of $534 ($2,293 in 1995 and $34 in 1994) were
realized on those sales.
Investments with an amortized cost of $6,857 and $6,064 as of December
1996 and 1995, respectively, were on deposit with various
regulatory agencies as required by law.
Real estate is presented at cost less accumulated depreciation of
$20,405 in 1996 ($19,518 in 1995) and valuation allowances of
$2,100 in 1996 and 1995.
The Company generally initiates foreclosure proceedings on all mortgage
loans on real estate delinquent sixty days. Foreclosures of
mortgage loans on real estate were $4,099 in 1996 and $713 in
1995. There were no other mortgage loans on real estate in process
of foreclosure or in-substance foreclosed as of December 31, 1996.
(Continued)
<PAGE> 15
10
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(5) Future Policy Benefits and Claims
---------------------------------
The liability for future policy benefits for universal life insurance
policies and investment contracts (approximately 68% of the total
liability for future policy benefits as of December 31, 1996 and
1995) has been established based on accumulated contract values
without reduction for surrender penalty provisions. The average
interest rate credited on investment product policies was 6.8%,
7.0% and 7.4% for the years ended December 31, 1996, 1995 and
1994, respectively.
The liability for future policy benefits for traditional life policies
has been established based upon the net level premium method using
the following assumptions:
Interest rates: Interest rates vary as follows:
Year of issue Interest Rate
------------- -------------
1996 and 1995 4 - 5.5%
1994 4 - 6.0%
1993 and prior 2.25% - 5.5%
Withdrawals: Rates, which vary by issue age, type of
coverage and policy duration, are based on Company
experience
Mortality: Mortality and morbidity rates are based on
published tables, guaranteed in insurance
contracts.
(6) Notes Payable
-------------
On July 11, 1994, the Company issued $50,000, 8.875% surplus notes,
due July 15, 2004. On May 21, 1996, the Company issued $50,000,
8.5% surplus notes, due May 15, 2026. Concurrent with the issue of
the new notes, $15,000 of the notes issued on July 11, 1994 were
retired.
The notes have been issued in accordance with Section 3941.13 of the
Ohio Revised Code. Interest payments, scheduled semi-annually,
must be approved for payment by the Director of the Department of
Insurance of the State of Ohio. All issuance costs have been
capitalized and are being amortized over the terms of the notes.
(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
(Continued)
<PAGE> 16
11
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(7) Federal Income Tax, Continued
-----------------------------
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, 1996.
Total Federal income tax expense for the years ended December 31, 1996,
1995 and 1994 differs from the amount computed by applying the
U.S. Federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------------------- ----------------------- -----------------------
Amount % Amount % Amount %
------------ --------- ------------ --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Computed (expected)
tax expense $ 32,366 35.0 22,337 35.0 17,752 35.0
Differential earnings 3,616 3.9 5,676 8.9 5,456 10.8
Dividends received
deduction and tax
exempt interest (1,440) (1.6) (1,585) (2.5) (1,680) (3.3)
Other, net (1,670) (1.8) (1,525) (2.4) (1,870) (3.7)
------------ --------- ------------ --------- ------------ ---------
$ 32,872 35.5 24,903 39.0 19,658 38.8
============ ========= ============ ========= ============ =========
</TABLE>
Total Federal income tax paid was $44,823, $21,145 and $17,527 during
the years ended December 31, 1996, 1995 and 1994, respectively.
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, 1996 and 1995 relate to the following:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Deferred tax assets:
Future policy benefits $ 51,461 44,263
Mortgage loans on real estate 1,950 2,070
Other assets and liabilities 11,650 12,633
----------- -----------
Total gross deferred tax assets 65,061 58,966
----------- -----------
Deferred tax liabilities:
Fixed maturity securities available-for-sale 25,604 59,300
Deferred policy acquisition costs 67,603 52,683
Fixed maturities, equity securities and other long-term 8,343 7,770
investments
Other 763 2,133
----------- -----------
Total gross deferred tax liabilities 102,313 121,886
=========== ===========
Net deferred tax liability $ 37,252 62,920
=========== ===========
</TABLE>
(Continued)
<PAGE> 17
12
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(7) Federal Income Tax, Continued
-----------------------------
The Company has determined that a deferred tax asset valuation allowance
was not needed as of December 31, 1996 and 1995. 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 the deductible differences remaining
as of December 31, 1996.
(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. 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 sheets for these instruments
approximate their fair value.
INVESTMENT SECURITIES - Fair value for equity securities and fixed
maturity securities are the same as market value. Market value
generally represents quoted market prices for securities traded in
the public market place or as analytically determined for
securities not publicly traded.
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 values 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.
(Continued)
<PAGE> 18
13
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated 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.
NOTE PAYABLE - The fair value for the note payable was determined
by discounting the scheduled cash flows of the note using a
market rate applicable to the yield, credit quality and maturity
of a similar debt instrument.
POLICYHOLDERS' DIVIDEND ACCUMULATION AND OTHER POLICYHOLDER FUNDS
- The carrying amount reported in the consolidated balance sheets
for these instruments approximates their fair value.
The carrying amount and estimated fair value of financial instruments
subject to SFAS 107 were as follows as of December 31:
<TABLE>
<CAPTION>
1996 1995
----------------------------- -----------------------------
Carrying Estimated Carrying Estimated
Assets amount fair value amount fair value
------ -------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Investments:
Securities available-for-sale:
Fixed maturities $ 2,572,550 2,572,550 2,547,763 2,547,763
Equity securities 63,763 63,763 71,301 71,301
Fixed maturities held-to-
maturity 692,572 746,446 672,372 766,057
Mortgage loans on real estate 1,087,287 1,130,717 898,099 976,066
Policy loans 151,229 151,229 148,077 148,077
Short-term investments 36,016 36,016 61,173 61,173
Cash 33,712 33,712 8,385 8,385
Assets held in Separate Accounts 661,871 661,871 453,405 453,405
Liabilities
-----------
Guaranteed investment contracts $ 1,028,129 1,025,298 964,999 982,652
Individual deferred annuity contracts 1,081,048 1,056,372 1,031,636 1,018,527
Other annuity contracts 910,941 911,897 838,691 874,450
Note payable 84,191 90,037 49,739 56,359
Dividend accumulations and
other policyholder funds 79,735 79,735 79,707 79,707
Liabilities related to separate
accounts 648,634 648,634 441,124 441,124
</TABLE>
(Continued)
<PAGE> 19
14
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(9) Additional Financial Instruments Disclosure
-------------------------------------------
(a) Financial Instruments with Off-Balance-Sheet Risk
-------------------------------------------------
The Company is a party to financial instruments with
off-balance-sheet risk in a normal course of business through
management of its investment portfolio. The Company had
outstanding commitments to fund mortgage loans, bonds and
venture capital partnerships of approximately $182,600 and
$195,000 as of December 31, 1996 and 1995, respectively. These
commitments involve, in varying degrees, elements of credit
and market risk in excess of amounts recognized in the
financial statements. The credit risk of all financial
instruments, whether on- or off-balance sheet, is controlled
through credit approvals, limits, and monitoring procedures.
(b) Significant Concentrations of Credit Risk
-----------------------------------------
Mortgage loans are 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, and total loans in
any state do not exceed 12% of the total loan portfolio as of
December 31, 1996. The summary below depicts loan exposure of
remaining principal balances by type as of December 31, 1996
and 1995:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Mortgage assets by type
-----------------------
Office $ 300,158 259,354
Retail 291,341 229,226
Apartment 251,720 168,370
Industrial 152,175 150,376
Other 101,467 101,273
------------- -------------
1,096,861 908,599
Less valuation allowances 9,574 10,500
------------- -------------
Total mortgage loans on real estate, net $ 1,087,287 898,099
============= =============
</TABLE>
(10) Pension Plans
-------------
The Company sponsors pension plans covering all eligible employees and
certain general agents. Retirement benefits are based on years of
service and either the highest average earnings in five of the
last ten years or specific elements of compensation earned in the
last five and ten years of service. Other pension plans covering
employees whose benefits exceed Code 401(a)(17) and Code 415
limits are also in effect.
(Continued)
<PAGE> 20
15
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(10) Pension Plans, Continued
------------------------
The net periodic pension cost for the plans for the years ended December
31, 1996, 1995 and 1994 follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Service cost (benefits earned
during the period) $ 2,169 1,725 1,542
Interest cost on projected
benefit obligations 2,896 2,720 2,493
Actual return on plan assets (2,447) (2,811) (601)
Net amortization and deferral 904 1,639 (144)
============ =========== ============
Net periodic pension cost $ 3,522 3,273 3,290
============ =========== ============
</TABLE>
Basis for measurements, net periodic pension cost:
<TABLE>
<S> <C> <C> <C>
Weighted average discount rate 6.25% 6.90% 6.80%
Rate of increase in future compensation levels 5.50% 4.75% 4.90%
Expected long-term rate of return on plan assets 8.50% 7.25% 7.25%
</TABLE>
The following table sets forth the funded status and amounts recognized
in the accompanying consolidated financial statements as of
December 31, 1996 and 1995 for the Company's pension plans.
<TABLE>
<CAPTION>
Assets Exceed Accumulated Benefits
Accumulated Benefits Exceed Assets
-------------------------- -------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Accumulated benefit obligation:
Vested $ 15,585 16,037 10,747 9,952
Nonvested 247 247 661 275
============ ============= ============ ===========
$ 15,832 16,284 11,408 10,227
============ ============= ============ ===========
Projected benefit obligation for services rendered
to date $ 24,434 27,389 14,614 14,460
Plan assets at fair value 23,807 22,625 243 -
------------ ------------- ------------ -----------
Plan assets less projected benefit
obligation (627) (4,764) (14,371) (14,460)
Unrecognized prior service cost (1,741) - 35 -
Unrecognized net losses 3,783 6,471 375 1,508
Unrecognized net transitional assets (2,375) (2,612) 3,202 3,493
Amount to recognize additional liability - - (1,537) (2,023)
============ ============= ============ ===========
Net pension liability $ (960) (905) (12,296) (11,482)
============ ============= ============ ===========
Measurement basis:
Weighted average discount rate 6.50% 6.10% 7.00% 6.60%
Rate of increase in future compensation levels 6.00% 6.00% 4.60% 4.60%
</TABLE>
(Continued)
<PAGE> 21
16
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(10) Pension Plans, Continued
------------------------
General Agent and Other Plans
The Company also maintains a qualified contributory defined contribution
profit sharing plan covering substantially all of its employees
and a qualified non-contributory defined contribution pension plan
covering career agents. These plans are funded through insurance
contracts issued by the Company.
Company contributions to the Profit Sharing Plan are in part based on the
net earnings of the Company and are payable at the sole discretion
of management. The expense reported for contributions to the plan
for 1996 and 1995 were $1,614 and $1,609, respectively.
Contributions to the Career Agent's Pension Plan are subject to the
minimum funding required under Internal Revenue Code Section 412.
The expense reported for contributions to the plan for 1996 and
1995 were $590 and $497, respectively.
(11) Postretirement Benefits Other Than Pensions
-------------------------------------------
The Company currently offers eligible retirees the opportunity to
participate in a health plan. The Company has two health plans,
one is offered to home office employees, the other is offered to
career agents.
Home Office Employee Health Plan
--------------------------------
The Company provides a declining service schedule. Substantially
all home office employees may become eligible for these benefits
provided that the employee meets the age and years of service
requirements. The plan states that an employee becomes eligible
as follows: age 55 with 20 years of credited service at
retirement, age 56 with 18 years of service, age 57 with 16 years
of service grading to age 64 with two years of service. The
health plan is contributory with retirees contributing
approximately 15% of premium for coverage.
Career Agents Health Plan
-------------------------
Substantially all career agents may become eligible for these
benefits provided that the agent is at least age 55 and has 15
years of credited service at retirement. The health plan is
contributory, with retirees contributing approximately 47% of
medical costs.
Actuarial assumptions for the measurement of the December 31, 1996
accumulated postretirement benefit obligation include a discount
rate of 7.5% (7.5% in 1995 and 1994) and an assumed health care
cost trend rate of 11% (12% in 1995 and 13% in 1994), declining 1%
each year to an ultimate rate of 5%.
(Continued)
<PAGE> 22
17
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(11) Postretirement Benefits Other Than Pensions, Continued
------------------------------------------------------
Information regarding the funded status of the plan as a whole as of
December 31, 1996 and 1995 follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Accumulated postretirement benefit obligations:
Retirees $ 2,926 6,036
Fully eligible, active plan participants 1,051 2,515
Other active plan participants 2,256 3,976
--------- ---------
Accumulated postretirement benefit obligation 6,233 12,527
Unrecognized net gains 2,066 256
Unrecognized plan amendments 6,285 1,140
========= =========
Accrued postretirement benefit obligation $ 14,584 13,923
========= =========
</TABLE>
The amount of net periodic postretirement benefit cost for the plan as a
whole for the years ended December 31, 1996 and 1995 is as
follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net periodic postretirement benefit cost:
Service cost - benefits attributed to
employee service during the year $ 467 497
Interest cost on accumulated postretirement
benefit obligation 768 869
Actual return on plan assets - -
Net amortization and deferral (199) (82)
========== ===========
Net periodic postretirement benefit cost $ 1,036 1,284
========== ===========
</TABLE>
The health care cost trend rate assumption has a significant effect on
the amounts reported. A one percentage point increase in the
assumed health care cost trend rate would increase the accumulated
postretirement benefit obligation as of December 31, 1996 and 1995
by $943 and $1,261, respectively, and the net periodic
postretirement benefit cost for the years ended December 31, 1996
and 1995 by $111 and $149, respectively.
(12) Regulatory Risk-Based Capital, Retained Earnings and Dividend
-------------------------------------------------------------
Restrictions
------------
ONLIC and ONLAC exceed the minimum risk-based capital requirements as of
December 31, 1996.
(Continued)
<PAGE> 23
18
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(12) Regulatory Risk-Based Capital, Retained Earnings and Dividend
-------------------------------------------------------------
Restrictions, Continued
-----------------------
The Company has designated a portion of retained earnings for separate
account contingencies and investment guarantees totaling $1,688
and $1,637 as of December 31, 1996 and 1995, respectively.
The payment of dividends by the Company to its participating
policyholders is based on the dividend scale declared at least
annually by the Company's Board of Directors.
(13) Bank Lines of Credit
--------------------
As of December 31, 1996 and 1995, ONLIC had a $10,000 unsecured line of
credit which was utilized and repaid during 1995.
(14) Contingencies
-------------
The Company and its subsidiaries are defendants 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.
The Company routinely enters into reinsurance transactions with other
insurance companies which are not material to the consolidated
financial statements. This reinsurance involves either ceding
certain risks to or assuming risks from other insurance companies.
The primary purpose of ceded reinsurance is to protect the Company
from potential losses in excess of levels that it is prepared to
accept. 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.
(15) Major Lines of Business
-----------------------
The Company operates in the life and annuity lines of business in the
life insurance industry. Life insurance operations include whole
life, universal life, variable universal life, and endowments, as
well as term life, health insurance, and other miscellaneous
insurance products provided to individuals and groups. Annuity
operations include guaranteed investment and accumulated deposit
contracts issued to groups and deferred and immediate annuities
issued to individuals.
(Continued)
<PAGE> 24
19
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(15) Major Lines of Business, Continued
----------------------------------
The following table summarizes the revenues and income before Federal
income tax for the years ended December 31, 1996, 1995 and 1994
and assets as of December 31, 1996, 1995 and 1994, by line of
business.
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenues:
Premiums, policy charges and net investment income:
Life and other insurance $ 295,860 270,782 259,146
Annuities 284,418 280,853 249,325
------------- ------------- -------------
580,278 551,635 508,471
------------- ------------- -------------
Realized capital gains (losses):
Life and other insurance 3,330 (771) (1,088)
Annuities 5,431 (1,980) (2,421)
------------- ------------- -------------
8,761 (2,751) (3,509)
------------- ------------- -------------
Total revenues:
Life and other insurance 299,190 270,011 258,058
Annuities 289,849 278,873 246,904
------------- ------------- -------------
$ 589,039 548,884 504,962
============= ============= =============
Total income before Federal income tax:
Life and other insurance $ 45,057 33,475 26,586
Annuities 47,418 30,345 24,133
============= ============= =============
$ 92,475 63,820 50,719
============= ============= =============
Assets:
Life and other insurance $ 2,522,004 2,213,391 1,873,808
Annuities 3,259,585 3,078,984 2,640,159
-------------
============= =============
$ 5,781,589 5,292,375 4,513,967
============= ============= =============
</TABLE>
<PAGE> 34
OHIO NATIONAL VARIABLE ACCOUNT D
FORM N-4
PART C
OTHER INFORMATION
<PAGE> 35
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
The following financial statements of the Registrant are included in Part B of
this Registration Statement:
Independent Auditors' Report of KPMG Peat Marwick LLP dated January 28,
1997
Statement of Assets and Contract Owners' Equity dated December 31, 1996
Statement of Operations and Changes in Contract Owners' Equity for the
Year Ended December 31, 1996
Notes to Financial Statements dated December 31, 1996
Schedule of Changes in Unit Values for the Year Ended December 31, 1996
The following consolidated financial statements of The Depositor and its
subsidiaries are also included in Part B of this Registration Statement:
Independent Auditors' Report of KPMG Peat Marwick LLP dated January 31,
1997
Consolidated Balance Sheets dated December 31, 1996 and 1995
Consolidated Statements of Income for the Years Ended December 31, 1996,
1995 and 1994
Consolidated Statements of Equity for the Years Ended December 31, 1996,
1995 and 1994
Consolidated Statements of Cash Flows for the Years Ended December 31,
1996, 1995 and 1994
Notes to Consolidated Financial Statements dated December 31, 1996, 1995
and 1994
The following financial information is included in Part A of this Registration
Statement:
Accumulation Unit Values
Consents of the Following Persons:
KPMG Peat Marwick LLP
Exhibits:
All relevant exhibits, which have previously been filed with the Commission and
are incorporated herein by reference, are as follows:
(1) Resolution of Board of Directors of the Depositor authorizing
establishment of the Registrant was filed as Exhibit A(1) of the
registration statement of Ohio National Variable Account A ("VAA")
on Form S-6 on August 3, 1982 (File no. 2-78652).
(2) Agreement of Custodianship between the Depositor and The Provident
Bank was filed as Exhibit 3 of the VAA's Form N-4, Post-effective
Amendment no. 5 on April 27, 1988 (File no. 2-91213).
-1-
<PAGE> 36
(3)(a) Principal Underwriting Agreement for Variable Annuities between the
Depositor and Ohio National Equities, Inc. was filed as Exhibit
(3)(a) of Form N-4, Post-effective Amendment no. 21 of Ohio
National Variable A (File no. 2-91213).
(3)(b) Registered Representative's Sales Contract with Variable Annuity
Supplement was filed as Exhibit (3)(b) of VAA's Form N-4,
Post-effective Amendment no. 9 on February 27, 1991 (File no.
2-91213).
(3)(c) Variable Annuity Sales Commission Schedule was filed as Exhibit
A(3)(c) of VAA's registration statement on Form S-6 on May 18, 1984
(File no. 2-91213).
(4) Group Annuity, Form GA-93-VF-1, was filed as Exhibit (4) of the
Registrant's registration statement on Form N-4 on July 20, 1994.
(4)(a) Group Annuity Certificate, Form GA-93-VF-1C, was filed as Exhibit
(4)(a) of the Registrant's registration statement on July 20, 1994.
(5) Group Annuity Application, Form 3762-R, was filed as Exhibit (5) of
the Registrant's registration statement on July 20, 1994.
(6)(a) Articles of Incorporation of the Depositor were filed as Exhibit
A(6)(a) of Ohio National Variable Interest Account registration
statement on Form N-8B-2 on July 11, 1980 (File no. 811- 3060).
(6)(b) Code of Regulations (by-laws) of the Depositor were filed as
Exhibit A(6)(b) of Ohio National Variable Interest Account
registration statement on Form N-8B-2 on July 11, 1980 (File no.
811- 3060).
(8) Powers of Attorney by certain Directors of the Depositor were filed
as Exhibit (8) of the Registrant's Form N-4, Post-effective
Amendment no. 1 on March 27, 1995
(13) Computation of Performance Data was filed as Exhibit (13) of
Form N-4, Post-effective Amendment no. 20, of Ohio National
Variable Account A (File no. 2-91213) on March 3, 1997.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
Name and Principal Positions and Offices
Business Address with Depositor
- ---------------- --------------
<S> <C>
Trudy K. Backus* Vice President, Individual Insurance Services
Howard C. Becker* Senior Vice President, Individual Insurance and Corporate Services
Paul L. Bergmann* Vice President, Financial Control
Michael A. Boedeker* Vice President, Fixed Income Securities
Roylene M. Broadwell* Vice President and Treasurer
Joseph P. Brom* Senior Vice President & Chief Investment Officer
Dale P. Brown Director
36 East Seventh Street
Cincinnati, Ohio 45202
Jack E. Brown Director
50 E. Rivercenter Blvd.
Covington, Kentucky 41011
</TABLE>
-2-
<PAGE> 37
<TABLE>
<CAPTION>
Name and Principal Positions and Offices
Business Address with Depositor
- ---------------- --------------
<S> <C>
William R. Burleigh Director
One West Fourth Street
Suite 1100
Cincinnati, Ohio 45202
Victoria B. Buyniski Director
2343 Auburn Avenue
Cincinnati, Ohio 45219
Raymond R. Clark Director
201 East Fourth Street
Cincinnati, Ohio 45202
David W. Cook* Senior Vice President and Actuary
Dr. Alvin H. Crawford Director
Children's Hospital Medical Center
Department of Orthopedics
Elland and Bethesda Avenues
Cincinnati, Ohio 45229
Robert M. DiTommaso* Vice President, Career Marketing
Ronald J. Dolan* Senior Vice President and Chief Financial Officer
Michal J. Ferry* Information Systems Vice President
Michael F. Haverkamp* Vice President and Counsel
John A. Houser III* Vice President, Claims
Bannus B. Hudson Director
One Eastwood Drive
Cincinnati, Ohio 45227
Daniel W. LeBlond Director
7680 Innovation Way
Mason, Ohio 45040
David G. McClure* Vice President, Variable Product Sales
Hamilton F. McGregor* Senior Vice President,Group & Pension Operations
Charles S. Mechem, Jr. Director
One East Fourth Street
Cincinnati, Ohio 45202
James I. Miller II* Vice President, Marketing Support
James W. Nethercott Director
8431 Concord Hills Circle
Cincinnati, Ohio 45243
Thomas O. Olson* Vice President, Underwriting
</TABLE>
-3-
<PAGE> 38
<TABLE>
<CAPTION>
<S> <C>
David B. O'Maley* Director, Chairman, President and Chief Executive Officer
John J. Palmer* Senior Vice President, Strategic Initiatives
George B. Pearson, Jr.* Vice President, PGA Marketing
Dallas L. Pennington* Vice President, Information Systems
J. Donald Richardson* Senior Regional Vice President
D. Gates Smith* Senior Vice President, Sales
Michael D. Stohler* Vice President, Mortgages and Real Estate
Stuart G. Summers* Senior Vice President and General Counsel
Oliver W. Waddell Director
425 Walnut Street
Cincinnati, Ohio 45202
Bradley L. Warnemunde Director and Chairman Emeritus
250 William Howard Taft Road
Cincinnati, Ohio 45219
Dr. David S. Williams* Vice President and Medical Director
Donald J. Zimmerman* Director and Senior Vice President, Insurance Operations
and Secretary
<FN>
*The principal business address for these individuals is One Financial Way,
Cincinnati, Ohio 45242.
</TABLE>
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
The Organization Chart showing the relationships among the Depositor, the
Registrant and their affiliated entities is on page 4A hereof.
ITEM 27. NUMBER OF CONTRACTOWNERS
As of April 10, 1997, the Registrant's contracts were owned by 94 owners.
ITEM 28. INDEMNIFICATION
The sixth article of the Depositor's Articles of Incorporation, as amended,
provides as follows:
Each former, present and future Director, Officer or Employee of the
Corporation (and his heirs, executors or administrators), or any such
person (and his heirs, executors or administrators) who serves at the
Corporation's request as a director, officer, partner, member or employee
of another corporation, partnership or business organization or
association of any type whatsoever shall be indemnified by the Corporation
against reasonable expenses, including attorneys' fees, judgments, fine
and amounts paid in settlement actually and reasonably incurred by him in
connection with the defense of any contemplated, pending or threatened
action, suit or proceeding, civil, criminal, administrative or
investigative, other than an action by or in the right of the corporation,
to which he is or may be made a party by reason of being or having been
such Director, Officer, or Employee of the Corporation or having served at
the Corporation's request as such director, officer, partner, member or
employee of any other business organization or association, or in
connection with any appeal therein, provided a
-4-
<PAGE> 39
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
THE OHIO NATIONAL LIFE INSURANCE COMPANY/CINCINNATI
A MUTUAL LIFE INSURANCE COMPANY INCORPORATED UNDER THE LAWS OF OHIO
- --------------------------------------------------------------------------------
- ------------------------------- -----------------------------
ENTERPRISE PARK, INC. OHIO NATIONAL EQUITIES INC.
A GEORGIA CORPORATION A BROKER/DEALER
REAL ESTATE DEVELOPMENT COMPANY CAPITALIZED BY ONLI @ $30,000
CAPITALIZED BY ONLI $50,000
- ------------------------------- --------------------------------
Pres. & Dir. M. Stohler Chm. & Dir. D. O'Maley
V.P. & Dir. J. Brom Pres. & Dir. J. Palmer
Secy. & Dir. J. Fischer VP & Dir. D. McClure
Treas. & Dir. D. Taney VP & Dir. T. Backus
Secretary R. Benedict
Treasurer K. Jaeger
Compliance Officer J. Dunn
- ------------------------------- --------------------------------
<CAPTION>
<S> <C>
- -------------------------------------------------------------------------------------------------------------------
THE OHIO NATIONAL LIFE INSURANCE COMPANY/CINCINNATI
A MUTUAL LIFE INSURANCE COMPANY INCORPORATED UNDER THE LAWS OF OHIO
- -------------------------------------------------------------------------------------------------------------------
S E P A R A T E A C C O U N T S
--------------------------------
A B C D E F
--------------------------------
- ------------------------------- ------------------------------ -------------------------------------
OHIO NATIONAL INVESTMENTS, INC. THE O.N. EQUITY SALES COMPANY OHIO NATIONAL LIFE
ASSURANCE CORPORATION
AN INVESTMENT ADVISER AN OHIO CORPORATION AN OHIO CORPORATION
CAPITALIZED BY ONLI @ $10,000 A BROKER/DEALER A STOCK LIFE INSURANCE COMPANY
CAPITALIZED BY ONLI @ $790,000 CAPITALIZED BY ONLI @ $32,000,000
INCORPORATED UNDER THE LAWS OF OHIO
- ------------------------------- ------------------------------ ------------------------------------
Chm. & Dir. D. O'Maley Chm./Pres/.CEO & Dir. D. O'Maley
Pres. & Dir. J. Brom Sr. VP & Dir. R. Dolan
Pres. & Dir. J. Palmer Sr. VP & Dir. J. Palmer
VP & Dir. M. Boedeker Sr. VP & Dir. S. Summers
V.P. & Dir. J. Miller Sr. VP & Dir. J. Brom
VP & Dir. M. Stohler Sr. Vice Pres. D. Cook
V.P. & Dir. D. McClure Sr. Vice Pres. G. Smith
VP & Dir. S. Williams Vice President R. Broadwell
Secy. & Dir. R. Benedict Vice President M. Boedeker
VP K. Hanson Vice President R. DiTommaso
VP R. DiTommaso Vice President J. Houser
VP D. Hundley Vice President G. Pearson
Treasurer K. Jaeger Vice President D. Pennington
VP J. Martin Vice President M. Stohler
Compliance Director J. Dunn Secy. R. Benedict
Treasurer D. Taney Asst. Secy. J. Fischer
Asst. Secy. M. Haverkamp
Secretary R. Benedict Asst. Actuary K. Flischel
Asst. Secy./Treas. A. Starkey
- ------------------------------- ------------------------------ ------------------------------------
SEPARATE ACCOUNT
-------------------------------------
R
---
<= Advisor to Advisor to =>
--------------------------------------------------------
- ----------------------------- -------------------------------- --------------------------------
ONE FUND, INC. O.N. INVESTMENT MANAGEMENT CO. OHIO NATIONAL FUND
A MARYLAND CORPORATION AN OHIO CORPORATION A MARYLAND CORPORATION
AN OPEN END DIVISIFIED A FINANCIAL ADVISORY SERVICE AN OPEN END DIVERSIFIED
MANAGEMENT INVESTMENT COMPANY CAPITALIZED BY ONESCO @ $145,000 MANAGEMENT INVESTMENT COMPANY
- ----------------------------- -------------------------------- --------------------------------
Pres. & Dir. D. Zimmerman Pres. & Dir. J. Palmer Pres. & Dir. D. Zimmerman
Vice. Pres. M. Boedeker ----- Vice President M. Boedeker
Vice Pres. J. Brom VP & Dir. G. Smith Vice President J.Brom
Vice Pres. D. McClure Vice President S. Williams
Vice Pres. S. Williams VP & Dir. D. McClure Treasurer D. Taney
Treasurer D. Taney -------- Secy. & Dir. R. Benedict
Secy. & Dir. R. Benedict Treasurer K. Jaeger Asst. Secy. A. Starkey
Asst. Secy. A. Starkey Director G. Castrucci
Director G. Castrucci Secretary M. Haverkamp Director R. Love
Director R. Love Director G. Vredeveld
Director G. Vredeveld
- --------------------------------- -------------------------------- ---------------------------------
</TABLE>
<PAGE> 40
determination is made by majority vote of a disinterested quorum of the
Board of Directors (a) that such a person acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and (b) that, in any matter the subject of
criminal action, suit or proceeding, such person had no reasonable cause
to believe his conduct was unlawful. The termination of any action, suit
or proceeding by judgment, order, settlement, conviction, or upon a plea
of nolo contendere or its equivalent, shall not, of itself create a
presumption that the person did not act in good faith in any manner which
he reasonably believed to be in or not opposed to the best interests of
the Corporation, and with respect to any criminal action or proceeding, he
had reasonable cause to believe that his conduct was unlawful. Such right
of indemnification shall not be deemed exclusive of any other rights to
which such person may be entitled. The manner by which the right to
indemnification shall be determined in the absence of a disinterested
quorum of the Board of Directors shall be set forth in the Code of
Regulations or in such other manner as permitted by law. Each former,
present, and future Director, Officer or Employee of the Corporation (and
his heirs, executors or administrators) who serves at the Corporation's
request as a director, officer, partner, member or employee of another
corporation, partnership or business organization or association of any
type whatsoever shall be indemnified by the Corporation against reasonable
expenses, including attorneys' fees, actually and reasonably incurred by
him in connection with the defense or settlement of any contemplated,
pending or threatened action, suit or proceeding, by or in the right of
the Corporation to procure a judgment in its favor, to which he is or may
be a party by reason of being or having been such Director, Officer or
Employee of the Corporation or having served at the Corporation's request
as such director, officer, partner, member or employee of any other
business organization or association, or in connection with any appeal
therein, provided a determination is made by majority vote of a
disinterested quorum of the Board of Directors (a) that such person was
not, and has not been adjudicated to have been negligent or guilty of
misconduct in the performance of his duty to the Corporation or to such
other business organization or association, and (b) that such person acted
in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation. Such right of
indemnification shall not be deemed exclusive of any other rights to which
such person may be entitled. The manner by which the right of
indemnification shall be determined in the absence of a disinterested
quorum of the Board of Directors shall be as set forth in the Code of
Regulations or in such other manner as permitted by law.
In addition, Article XII of the Depositor's Code of Regulations states as
follows:
If any director, officer or employee of the Corporation may be entitled to
indemnification by reason of Article Sixth of the Amended Articles of
Corporation, indemnification shall be made upon either (a) a determination
in writing of the majority of disinterested directors present, at a
meeting of the Board at which all disinterested directors present
constitute a quorum, that the director, officer or employee in question
was acting in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of this Corporation or of such other
business organization or association in which he served at the
Corporation's request, and that, in any matter which is the subject of a
criminal action, suit or proceeding, he had no reasonable cause to believe
that his conduct was unlawful and in an action by or in the right of the
Corporation to procure a judgment in its favor that such person was not
and has not been adjudicated to have been negligent or guilty of
misconduct in the performance of his duty to the Corporation or to such
other business organization or association; or (b) if the number of all
disinterested directors would not be sufficient at any time to constitute
a quorum, or if the number of disinterested directors present at two
consecutive meetings of the Board has not been sufficient to constitute a
quorum, a determination to the same effect as set forth in the foregoing
clause (a) shall be made in a written opinion by independent legal counsel
other than an attorney, or a firm having association with it an attorney,
who has been retained by or who has performed services for this
Corporation, or any person to be indemnified within the past five years,
or by the majority vote of the policyholders, or by the Court of Common
Pleas or the court in which such action, suit or proceeding was brought.
Prior to making any such
-5-
<PAGE> 41
determination, the Board of Directors shall first have received the
written opinion of General Counsel that a number of directors sufficient
to constitute a quorum, as named therein, are disinterested directors. Any
director who is a party to or threatened with the action, suit or
proceeding in question, or any related action, suit or proceeding, or has
had or has an interest therein adverse to that of the Corporation, or who
for any other reason has been or would be affected thereby, shall not be
deemed a disinterested director and shall not be qualified to vote on the
question of indemnification. Anything in this Article to the contrary
notwithstanding, if a judicial or administrative body determines as part
of the settlement of any action, suit or proceeding that the Corporation
should indemnify a director, officer or employee for the amount of the
settlement, the Corporation shall so indemnify such person in accordance
with such determination. Expenses incurred with respect to any action,
suit or proceeding which may qualify for indemnification may be advanced
by the Corporation prior to final disposition thereof upon receipt of an
undertaking by or on behalf of the director, officer or employee to repay
such amount if it is ultimately determined hereunder that he is not
entitled to indemnification or to the extent that the amount so advanced
exceeds the indemnification to which he is ultimately determined to be
entitled.
ITEM 29. PRINCIPAL UNDERWRITERS
The principal underwriter of the Registrant's securities is Ohio National
Equities, Inc. ("ONE, Inc."). ONE, Inc. is a wholly-owned subsidiary of the
Depositor. ONESCO also serves as the principal underwriter of securities issued
by Ohio National Variable Accounts A and B, other separate accounts of the
Depositor which are registered as unit investment trusts; and Ohio National
Variable Account R, a separate account of the Depositor's subsidiary, Ohio
National Life Assurance Corporation, which separate account is also registered
as a unit investment trust; and ONE Fund, Inc., an open-end investment company
of the management type.
The directors and officers of ONE, Inc. are:
<TABLE>
<CAPTION>
Name Position with ONE, Inc.
---- -----------------------
<S> <C>
David B. O'Maley Chairman and Director
John J. Palmer President & Chief Executive Officer and Director
David G. McClure Vice President of Marketing and Director
Trudy K. Backus Vice President and Director
Joni L. Dunn Vice President & Compliance Officer
Timothy S. Halevan Vice President
Ronald L. Benedict Secretary
Kenneth M. Jaeger Treasurer
</TABLE>
-6-
<PAGE> 42
The principal business address of each of the foregoing is One Financial Way,
Cincinnati, Ohio 45242.
During the last fiscal year, ONESCO received the following commissions and other
compensation, directly or indirectly, from the Registrant:
<TABLE>
<CAPTION>
Net Underwriting Compensation
Discounts and on Redemption Brokerage
Commissions or Annuitization Commissions Compensation
- ----------- ---------------- ----------- ------------
<S> <C> <C> <C>
$74,326 None None None
</TABLE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The books and records of the Registrant which are required under Section 31(a)
of the 1940 Act and Rules thereunder are maintained in the possession of the
following persons:
(1) Journals and other records of original entry:
The Ohio National Life Insurance Company ("Depositor")
One Financial Way
Cincinnati, Ohio 45242
Star Bank, N.A. ("Custodian")
425 Walnut Street
Cincinnati, Ohio 45202
(2) General and auxiliary ledgers:
Depositor and Custodian
(3) Securities records for portfolio securities:
Custodian
(4) Corporate charter, by-laws and minute books:
Registrant has no such documents.
(5) Records of brokerage orders:
Not applicable.
(6) Records of other portfolio transactions:
Custodian
(7) Records of options:
Not applicable
(8) Records of trial balances:
Custodian
-7-
<PAGE> 43
(9) Quarterly records of allocation of brokerage orders and commissions:
Not applicable
(10) Records identifying persons or group authorizing portfolio
transactions:
Depositor
(11) Files of advisory materials:
Not applicable
(12) Other records
Custodian and Depositor
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS AND REPRESENTATIONS
Pursuant to Section 26(e)(2)(A) of the Investment Company Act of 1940, as
amended, The Ohio National Life Insurance Company represents that the fees and
charges deducted under the contract, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred and the
risks assumed by The Ohio National Life Insurance Company.
-8-
<PAGE> 44
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
l940, the registrant, Ohio National Variable Account D, 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
the State of Ohio on this 25th day of April, 1997.
OHIO NATIONAL VARIABLE ACCOUNT D
(Registrant)
By THE OHIO NATIONAL LIFE INSURANCE COMPANY
(Depositor)
By /s/ Donald J. Zimmerman
--------------------------------------
Donald J. Zimmerman, Senior Vice President,
Insurance Operations
Attest:
/s/Ronald L. Benedict
- ------------------------------------
Ronald L. Benedict
Second Vice President and Counsel
and Assistant Secretary
As required by the Securities Act of 1933 and the Investment Company Act of
l940, the depositor, The Ohio National Life Insurance Company, has caused this
post-effective amendment to the registration statement to be signed on its
behalf in the City of Cincinnati and the State of Ohio on the 25th day of
April, 1997.
THE OHIO NATIONAL LIFE INSURANCE COMPANY
(Depositor)
By /s/ Donald J. Zimmerman
----------------------------------------
Donald J. Zimmerman, Senior Vice President,
Insurance Operations
Attest:
/s/Ronald L. Benedict
- ---------------------------------
Ronald L. Benedict
Second Vice President and Counsel
and Assistant Secretary
<PAGE> 45
As required by the Securities Act of 1933, this post-effective amendment to the
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ David B. O'Maley Chairman, President, April 25, 1997
- ---------------------- Chief Executive Officer
David B. O'Maley and Director
*s/ Dale P. Brown Director April 25, 1997
- ----------------------
Dale P. Brown
*s/ Jack E. Brown Director April 25, 1997
- ----------------------
Jack E. Brown
*s/ William R. Burleigh Director April 25, 1997
- ----------------------
William R. Burleigh
*s/ Victoria B. Buyniski Director April 25, 1997
- ----------------------
Victoria B. Buyniski
*s/ Raymond R. Clark Director April 25, 1997
- ----------------------
Raymond R. Clark
*s/ Alvin H. Crawford Director April 25, 1997
- ----------------------
Alvin H. Crawford
*s/ Bannus B. Hudson Director April 25, 1997
- ----------------------
Bannus B. Hudson
*s/ Daniel W. LeBlond Director April 25, 1997
- ----------------------
Daniel W. LeBlond
*s/ Charles S. Mechem, Jr. Director April 25, 1997
- ----------------------
Charles S. Mechem, Jr.
*s/ James W. Nethercott Director April 25, 1997
- ----------------------
James W. Nethercott
*s/ Oliver W. Waddell Director April 25, 1997
- ----------------------
Oliver W. Waddell
</TABLE>
<PAGE> 46
<TABLE>
<CAPTION>
<S> <C> <C>
*s/ Bradley L. Warnemunde Chairman Emeritus and April 25, 1997
- ---------------------- Director
Bradley L. Warnemunde
s/ Donald J. Zimmerman Senior Vice President, April 25, 1997
- ---------------------- Insurance Operations &
Donald J. Zimmerman Secretary and Director
<FN>
*By s/ Donald J. Zimmerman
----------------------------
Donald J. Zimmerman, Attorney in Fact pursuant to Powers of Attorney, copies
of which are filed as exhibits to the Registrant's registration statement.
</TABLE>
<PAGE> 47
INDEX OF CONSENTS AND EXHIBITS
<TABLE>
<CAPTION>
Page Number in
Exhibit Sequential
Number Description Numbering System
- ------ ----------- ----------------
<S> <C>
Consent of KPMG Peat Marwick LLP
</TABLE>
<PAGE> 48
CONSENTS
<PAGE> 49
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
The Ohio National Life Insurance Company:
We consent to the inclusion of our reports included herein and to the reference
to our firm under the heading "Independent Certified Public Accountants" in the
Statement of Additional Information.
KPMG Peat Marwick LLP
Cincinnati, Ohio
April 25, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000927140
<NAME> OHIO NATIONAL VARIABLE ACCOUNT D
<SERIES>
<NUMBER> 1
<NAME> EQUITY
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 414,250
<INVESTMENTS-AT-VALUE> 464,097
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 464,097
<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> 32,583
<SHARES-COMMON-PRIOR> 13,287
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 464,097
<DIVIDEND-INCOME> 9,395
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 4,433
<NET-INVESTMENT-INCOME> 4,962
<REALIZED-GAINS-CURRENT> 2,366
<APPREC-INCREASE-CURRENT> 43,435
<NET-CHANGE-FROM-OPS> 50,763
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 280,061
<NUMBER-OF-SHARES-REDEEMED> 28,800
<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> 0000927140
<NAME> OHIO NATIONAL VARIABLE ACCOUNT D
<SERIES>
<NUMBER> 2
<NAME> MONEY MARKET
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 85,638
<INVESTMENTS-AT-VALUE> 85,638
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 85,638
<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> 7,977
<SHARES-COMMON-PRIOR> 1,732
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 85,638
<DIVIDEND-INCOME> 11,803
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 3,176
<NET-INVESTMENT-INCOME> 8,627
<REALIZED-GAINS-CURRENT> 56
<APPREC-INCREASE-CURRENT> 8,683
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 357,959
<NUMBER-OF-SHARES-REDEEMED> 298,919
<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> 0000927140
<NAME> OHIO NATIONAL VARIABLE ACCOUNT D
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<NAME> OHIO NATIONAL VARIABLE ACCOUNT D
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<NAME> OHIO NATIONAL VARIABLE ACCOUNT D
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<NAME> OHIO NATIONAL VARIABLE D
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<CIK> 0000927140
<NAME> OHIO NATIONAL VARIABLE ACCOUNT D
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<NAME> SMALL CAP
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<CIK> 0000927140
<NAME> OHIO NATIONAL VARIABLE ACCOUNT D
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<NAME> GLOBAL CONTRARIAN
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<CIK> 0000927140
<NAME> OHIO NATIONAL VARIABLE ACCOUNT D
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<NAME> AGGRESSIVE GROWTH
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<S> <C>
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0
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207,715
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