<PAGE> 1
OHIO NATIONAL VARIABLE ACCOUNT D
OF
THE OHIO NATIONAL LIFE INSURANCE COMPANY
One Financial Way
Montgomery, Ohio 45242
Telephone (513) 794-6514
STATEMENT OF ADDITIONAL INFORMATION
OCTOBER 6, 1999
This Statement of Additional Information is not a prospectus. Read it along with
the prospectus for Ohio National Variable Account D ("VAD") group variable
annuity contracts dated May 1, 1999. To get a free copy of the VAD prospectus,
write or call us at the above address.
Table of Contents
Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Independent Certified Public Accountants . . . . . . . . . . . 2
Underwriter . . . . . . . . . . . . . . . . . . . . . . . . . 2
Calculation of Money Market Yield . . . . . . . . . . . . . . 3
Total Return . . . . . . . . . . . . . . . . . . . . . . . . . 3
The Year 2000 Issue . . . . . . . . . . . . . . . . . . . . . 4
Financial Statements . . . . . . . . . . . . . . . . . . . . . 5
GROUP RETIREMENT ADVANTAGE
<PAGE> 2
CUSTODIAN
We have a custody agreement with Firstar Bank, N.A., Cincinnati, Ohio, under
which Firstar holds custody of VAD's assets. The agreement provides for Firstar
to purchase Fund shares at their net asset value determined as of the end of the
valuation period during which we receive the deposit. At our instruction,
Firstar redeems the Fund shares held by VAD at their net asset value determined
as of the end of the valuation period during which we receive or make a
redemption request. In addition, Firstar keeps appropriate records of all of
VAD's transactions in Fund shares.
The custody agreement requires Firstar to always have aggregate capital, surplus
and undivided profit of not less than $2 million. It does not allow Firstar to
resign until (a) a successor custodian bank having the above qualifications has
agreed to serve as custodian, or (b) VAD has been completely liquidated and the
liquidation proceeds properly distributed. Subject to these conditions, the
custody agreement may be terminated by either us or Firstar upon sixty days
written notice. We pay Firstar a fee for its services as custodian.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The financial statements of VAD as of December 31, 1998 and for the periods
indicated and our consolidated financial statements as of December 31, 1998 and
1997 and for the periods indicated have been included in reliance upon the
report of KPMG LLP, independent certified public accountants, also appearing
herein, and upon that firm's authority as experts in accounting and auditing.
UNDERWRITER
We offer the contracts continuously. Before May 1, 1997, The O. N. Equity Sales
Company ("ONESCO"), a wholly-owned subsidiary of ours, was the principal
underwriter of the contracts. Since May 1, 1997, the principal underwriter has
been Ohio National Equities, Inc. ("ONEQ"), another wholly-owned subsidiary of
ours. The aggregate amount of commissions paid to ONESCO and ONEQ with respect
to contracts issued by VAD, and the amounts retained by ONESCO and ONEQ, for
each of the last three years have been:
<TABLE>
<CAPTION>
ONESCO ONEQ
Aggregate Aggregate Retained
Year Commissions Commissions Commissions
---- ----------- ----------- -----------
<S> <C> <C> <C>
1998 None $195,038 None
1997 $93,634 91,301 None
1996 74,326 None None
</TABLE>
2
<PAGE> 3
CALCULATION OF MONEY MARKET YIELD
The annualized current yield of the Money Market subaccount for the seven days
ended on December 31, 1998, was 3.84%. This was calculated by determining the
net change, exclusive of capital changes, in the value of a hypothetical
pre-existing account having a balance of one Money Market accumulation unit at
the beginning of the seven-day period, dividing the net change in value by the
beginning value to obtain the seven-day return, and multiplying the difference
by 365/7. The result is rounded to the nearest hundredth of one percent.
TOTAL RETURN
The average annual compounded rate of return for a contract for each subaccount
over a given period is found by equating the initial amount invested to the
ending redeemable value using the following formula:
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).
We will up-date standardized total return data based upon Fund performance in
the subaccounts within 30 days after each calendar quarter.
In addition, we may present non-standardized total return data, using the above
formula but based upon Fund performance before the date we first offered this
series of contracts (January 25, 1995). This will be presented as if the same
charges and deductions applying to these contracts had been in effect from the
inception of each Fund.
The average annual non-standardized total returns for the contracts from the
inception of each Fund and for the one-, five- and ten-year periods ending on
December 31, 1998 (assuming surrender of the contract then) are as follows:
<TABLE>
<CAPTION>
One Five Ten From Inception
Year Years Years Inception Date
---- ----- ----- --------- ----
<S> <C> <C> <C> <C> <C>
Equity 4.31% 12.01% 11.16% 9.40% 10-06-69
Money Market 3.98% 3.71% 3.96% 5.77% 03-20-80
Bond 3.81% 4.98% 6.71% 7.04% 11-02-82
Omni 3.14% 10.26% 10.01% 10.02% 09-10-84
International 2.50% 6.59% N/A 9.85% 04-30-93
Capital Appreciation 4.50% N/A N/A 12.01% 05-01-94
Small Cap 9.10% N/A N/A 17.66% 05-01-94
International Small Company 2.15% N/A N/A 8.15% 03-31-95
Aggressive Growth 6.40% N/A N/A 10.93% 03-31-95
Core Growth 7.37% N/A N/A 1.31% 01-03-97
Growth & Income 5.66% N/A N/A 19.38% 01-03-97
S&P 500 Index 28.27% N/A N/A 29.22% 01-03-97
Social Awareness (23.44%) N/A N/A (2.61%) 01-03-97
</TABLE>
3
<PAGE> 4
THE YEAR 2000 ISSUE
We believe we have succeeded in remedying the "Year 2000" problem for all
mission critical computer systems and applications. Conversion testing and
implementation for legacy systems were completed by December 31, 1998, and Year
2000 compliant group annuity processing system conversions were installed and
testing completed on September 5, 1999. Peripheral personal computer systems
have also been up-graded and tested for Year 2000 implementation. While Ohio
National Fund and its investment adviser have been assured by suppliers of
financial services (including the custodians, the transfer agent and the
accounting agent) that their systems either are already compliant or will be so
in sufficient time, internal auditors are independently testing those systems to
verify their compliance. We are also developing contingency plans to be prepared
for the possibility that one or more service providers might not be compliant.
If we, Ohio National Fund, its investment adviser or one of our service
suppliers fails to achieve timely and complete compliance, it could materially
impair our ability to conduct our business, including the ability to accurately
and timely value interests in the contracts.
4
<PAGE> 5
OHIO NATIONAL VARIABLE ACCOUNT D
INDEPENDENT AUDITORS' REPORT
The Board of Directors of
The Ohio National Life Insurance Company
and Contract Owners of
Ohio National Variable Account D:
We have audited the accompanying statements of assets and contract owners'
equity of Ohio National Variable Account D (comprised of the Equity, Money
Market, Bond, Omni, International, Capital Appreciation, Small Cap, Global
Contrarian, Aggressive Growth, S&P 500 Index, Social Awareness, Core Growth and
Growth & Income subaccounts) as of December 31, 1998, and the related statements
of operations and changes in contract owners' equity for each of the periods
indicated herein. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1998, by correspondence with
the transfer agent of the underlying mutual funds. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Ohio National Variable Account
D as of December 31, 1998, and the results of its operations and its changes in
contract owners' equity for each of the years indicated herein in conformity
with generally accepted accounting principles.
KPMG LLP
Cincinnati, Ohio
February 5, 1999
5
<PAGE> 6
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OHIO NATIONAL VARIABLE ACCOUNT D December 31, 1998
STATEMENTS OF ASSETS AND CONTRACT OWNERS' EQUITY
<TABLE>
<CAPTION>
MONEY
EQUITY MARKET BOND OMNI INTERNATIONAL
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Assets -- Investments at market value (note 2).......... $1,864,321 $563,684 $217,454 $2,355,241 $1,445,197
========== ======== ======== ========== ==========
Contract owners' equity
Contracts in accumulation period (note 3)............. $1,864,321 $563,684 $217,454 $2,355,241 $1,445,197
========== ======== ======== ========== ==========
<CAPTION>
CAPITAL
APPRECIATION SMALL CAP
SUBACCOUNT SUBACCOUNT
------------ ----------
<S> <C> <C>
Assets -- Investments at market value (note 2).......... $1,148,127 $1,606,190
========== ==========
Contract owners' equity
Contracts in accumulation period (note 3)............. $1,148,127 $1,606,190
========== ==========
</TABLE>
<TABLE>
<CAPTION>
GLOBAL AGGRESSIVE CORE GROWTH & S&P 500
CONTRARIAN GROWTH GROWTH INCOME INDEX
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Assets -- Investments at market value (note 2).......... $ 173,090 $565,815 $244,125 $1,023,291 $1,871,487
========== ======== ======== ========== ==========
Contract owners' equity
Contracts in accumulation period (note 3)............. $ 173,090 $565,815 $244,125 $1,023,291 $1,871,487
========== ======== ======== ========== ==========
<CAPTION>
SOCIAL
AWARENESS
SUBACCOUNT
------------
<S> <C>
Assets -- Investments at market value (note 2).......... $ 195,235
==========
Contract owners' equity
Contracts in accumulation period (note 3)............. $ 195,235
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 7
OHIO NATIONAL VARIABLE ACCOUNT D
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
EQUITY MONEY MARKET BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------------- ----------------------- ---------------------
1998 1997 1998 1997 1998 1997
---------- ---------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Investment activity:
Reinvested dividends................. $ 20,366 $ 15,244 $ 26,037 $ 19,238 $ 12,413 $ 8,473
Risk & administrative expense (note
4)................................ (20,791) (11,440) (6,677) (4,929) (2,586) (1,366)
---------- ---------- -------- ---------- -------- --------
Net investment activity......... (425) 3,804 19,360 14,309 9,827 7,107
---------- ---------- -------- ---------- -------- --------
Realized & Unrealized gain (loss) on
investments:
Reinvested capital gains.......... 34,593 60,605 0 0 0 0
Realized gain (loss).............. 15,938 11,539 (1,054) (3,324) 311 162
Unrealized gain (loss)............ 3,874 38,939 0 0 (3,138) 712
---------- ---------- -------- ---------- -------- --------
Net gain (loss) on
investments.................. 54,405 111,083 (1,054) (3,324) (2,827) 874
---------- ---------- -------- ---------- -------- --------
Net increase (decrease) in
contract owners' equity
from operations............ 53,980 114,887 18,306 10,985 7,000 7,981
---------- ---------- -------- ---------- -------- --------
Equity transactions:
Sales:
Contract purchase payments........ 807,963 686,822 575,213 911,058 101,397 100,723
Transfers from fixed & other
subaccounts..................... 85,873 66,178 192,800 282,983 1,115 8,105
---------- ---------- -------- ---------- -------- --------
893,836 753,000 768,013 1,194,041 102,512 108,828
---------- ---------- -------- ---------- -------- --------
Redemptions:
Withdrawals & surrenders.......... 115,547 74,998 212,582 210,267 35,684 15,998
Transfers to fixed & other
subaccounts..................... 212,493 12,441 372,530 717,920 7,692 24,168
---------- ---------- -------- ---------- -------- --------
328,040 87,439 585,112 928,187 43,376 40,166
---------- ---------- -------- ---------- -------- --------
Net equity transactions......... 565,796 665,561 182,901 265,854 59,136 68,662
---------- ---------- -------- ---------- -------- --------
Net change in contract
owners' equity............. 619,776 780,448 201,207 276,839 66,136 76,643
Contract owners' equity:
Beginning of period.................. 1,244,545 464,097 362,477 85,638 151,318 74,675
---------- ---------- -------- ---------- -------- --------
End of period........................ $1,864,321 $1,244,545 $563,684 $ 362,477 $217,454 $151,318
========== ========== ======== ========== ======== ========
<CAPTION>
OMNI
SUBACCOUNT
-------------------------
1998 1997
---------- ----------
<S> <C> <C>
Investment activity:
Reinvested dividends................. $ 57,327 $ 36,504
Risk & administrative expense (note
4)................................ (27,258) (15,439)
---------- ----------
Net investment activity......... 30,069 21,065
---------- ----------
Realized & Unrealized gain (loss) on
investments:
Reinvested capital gains.......... 298 67,271
Realized gain (loss).............. 19,855 30,835
Unrealized gain (loss)............ (8,832) 52,694
---------- ----------
Net gain (loss) on
investments.................. 11,321 150,800
---------- ----------
Net increase (decrease) in
contract owners' equity
from operations............ 41,390 171,865
---------- ----------
Equity transactions:
Sales:
Contract purchase payments........ 911,422 856,949
Transfers from fixed & other
subaccounts..................... 221,738 152,282
---------- ----------
1,133,160 1,009,231
---------- ----------
Redemptions:
Withdrawals & surrenders.......... 201,705 96,739
Transfers to fixed & other
subaccounts..................... 151,763 154,745
---------- ----------
353,468 251,484
---------- ----------
Net equity transactions......... 779,692 757,747
---------- ----------
Net change in contract
owners' equity............. 821,082 929,612
Contract owners' equity:
Beginning of period.................. 1,534,159 604,547
---------- ----------
End of period........................ $2,355,241 $1,534,159
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE> 8
OHIO NATIONAL VARIABLE ACCOUNT D
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
INTERNATIONAL CAPITAL APPRECIATION SMALL CAP
SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------------- ----------------------- -------------------------
1998 1997 1998 1997 1998 1997
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment activity:
Reinvested dividends................. $ 48,742 $ 67,512 $ 25,755 $ 35,184 $ 0 $ 0
Risk & administrative expense (note
4)................................ (17,616) (13,848) (13,635) (14,046) (16,965) (13,285)
---------- ---------- ---------- ---------- ---------- ----------
Net investment activity......... 31,126 53,664 12,120 21,138 (16,965) (13,285)
---------- ---------- ---------- ---------- ---------- ----------
Realized & Unrealized gain (loss) on
investments:
Reinvested capital gains.......... 59,572 102,621 87,510 61,862 19 53,817
Realized gain (loss).............. (38,354) 9,059 54,817 25,674 36,021 13,237
Unrealized gain (loss)............ (28,547) (185,689) (113,854) 32,527 113,125 30,649
---------- ---------- ---------- ---------- ---------- ----------
Net gain (loss) on
investments.................. (7,329) (74,009) 28,473 120,063 149,165 97,703
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in
contract owners' equity
from operations............ 23,797 (20,345) 40,593 141,201 132,200 84,418
---------- ---------- ---------- ---------- ---------- ----------
Equity transactions:
Sales:
Contract purchase payments........ 516,650 765,825 438,636 467,154 520,139 613,236
Transfers from fixed & other
subaccounts..................... 42,661 135,835 61,105 91,434 125,570 133,886
---------- ---------- ---------- ---------- ---------- ----------
559,311 901,660 499,741 558,588 645,709 747,122
---------- ---------- ---------- ---------- ---------- ----------
Redemptions:
Withdrawals & surrenders.......... 217,519 42,798 427,626 91,386 249,787 70,853
Transfers to fixed & other
subaccounts..................... 213,697 84,799 153,543 138,784 183,891 86,257
---------- ---------- ---------- ---------- ---------- ----------
431,216 127,597 581,169 230,170 433,678 157,110
---------- ---------- ---------- ---------- ---------- ----------
Net equity transactions......... 128,095 774,063 (81,428) 328,418 212,031 590,012
---------- ---------- ---------- ---------- ---------- ----------
Net change in contract
owners' equity............. 151,892 753,718 (40,835) 469,619 344,231 674,430
Contract owners' equity:
Beginning of period.................. 1,293,305 539,587 1,188,962 719,343 1,261,959 587,529
---------- ---------- ---------- ---------- ---------- ----------
End of period........................ $1,445,197 $1,293,305 $1,148,127 $1,188,962 $1,606,190 $1,261,959
========== ========== ========== ========== ========== ==========
<CAPTION>
GLOBAL CONTRARIAN
SUBACCOUNT
---------------------
1998 1997
-------- --------
<S> <C> <C>
Investment activity:
Reinvested dividends................. $ 4,936 $ 8,679
Risk & administrative expense (note
4)................................ (2,288) (2,735)
-------- --------
Net investment activity......... 2,648 5,944
-------- --------
Realized & Unrealized gain (loss) on
investments:
Reinvested capital gains.......... 15,176 12,007
Realized gain (loss).............. 7,718 4,350
Unrealized gain (loss)............ (22,408) (2,263)
-------- --------
Net gain (loss) on
investments.................. 486 14,094
-------- --------
Net increase (decrease) in
contract owners' equity
from operations............ 3,134 20,038
-------- --------
Equity transactions:
Sales:
Contract purchase payments........ 78,986 73,928
Transfers from fixed & other
subaccounts..................... 11,878 870
-------- --------
90,864 74,798
-------- --------
Redemptions:
Withdrawals & surrenders.......... 91,429 17,583
Transfers to fixed & other
subaccounts..................... 49,705 16,720
-------- --------
141,134 34,303
-------- --------
Net equity transactions......... (50,270) 40,495
-------- --------
Net change in contract
owners' equity............. (47,136) 60,533
Contract owners' equity:
Beginning of period.................. 220,226 159,693
-------- --------
End of period........................ $173,090 $220,226
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE> 9
OHIO NATIONAL VARIABLE ACCOUNT D
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH CORE GROWTH GROWTH & INCOME S&P 500 INDEX
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------- ------------------- --------------------- ---------------------
1998 1997 1998 1997(a) 1998 1997(a) 1998 1997(a)
-------- -------- -------- -------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment activity:
Reinvested dividends............... $ 0 $ 1,780 $ 0 $ 10 $ 7,249 $ 653 $ 30,596 $ 9,332
Risk & administrative expense (note
4).............................. (5,490) (2,833) (2,463) (744) (8,371) (743) (14,658) (1,785)
-------- -------- -------- -------- ---------- -------- ---------- --------
Net investment activity....... (5,490) (1,053) (2,463) (734) (1,122) (90) 15,938 7,547
-------- -------- -------- -------- ---------- -------- ---------- --------
Realized & Unrealized gain (loss)
on investments:
Reinvested capital gains........ 37,859 1,010 0 0 0 7,767 79,531 26,189
Realized gain (loss)............ 5,664 2,301 781 (3,615) 7,362 4,769 19,295 321
Unrealized gain (loss).......... (5,886) 21,214 13,366 4,899 17,420 2,964 165,421 (14,677)
-------- -------- -------- -------- ---------- -------- ---------- --------
Net gain (loss) on
investments................ 37,637 24,525 14,147 1,284 24,782 15,500 264,247 11,833
-------- -------- -------- -------- ---------- -------- ---------- --------
Net increase (decrease) in
contract owners' equity
from operations.......... 32,147 23,472 11,684 550 23,660 15,410 280,185 19,380
-------- -------- -------- -------- ---------- -------- ---------- --------
Equity transactions:
Sales:
Contract purchase payments...... 278,126 186,195 108,763 106,989 548,376 88,729 786,354 216,016
Transfers from fixed & other
subaccounts................... 26,304 5,128 16,912 12,112 372,867 59,138 568,582 118,615
-------- -------- -------- -------- ---------- -------- ---------- --------
304,430 191,323 125,675 119,101 921,243 147,867 1,354,936 334,631
-------- -------- -------- -------- ---------- -------- ---------- --------
Redemptions:
Withdrawals & surrenders........ 49,483 24,275 9,025 295 6,157 31 45,959 1,206
Transfers to fixed & other
subaccounts................... 22,332 13,352 3,108 457 71,895 6,806 67,408 3,072
-------- -------- -------- -------- ---------- -------- ---------- --------
71,815 37,627 12,133 752 78,052 6,837 113,367 4,278
-------- -------- -------- -------- ---------- -------- ---------- --------
Net equity transactions....... 232,615 153,696 113,542 118,349 843,191 141,030 1,241,569 330,353
-------- -------- -------- -------- ---------- -------- ---------- --------
Net change in contract
owners' equity........... 264,762 177,168 125,226 118,899 866,851 156,440 1,521,754 349,733
Contract owners' equity:
Beginning of period................ 301,053 123,885 118,899 0 156,440 0 349,733 0
-------- -------- -------- -------- ---------- -------- ---------- --------
End of period...................... $565,815 $301,053 $244,125 $118,899 $1,023,291 $156,440 $1,871,487 $349,733
======== ======== ======== ======== ========== ======== ========== ========
<CAPTION>
SOCIAL AWARENESS
SUBACCOUNT
------------------
1998 1997(a)
-------- -------
<S> <C> <C>
Investment activity:
Reinvested dividends............... $ 853 $ 180
Risk & administrative expense (note
4).............................. (1,776) (341)
-------- -------
Net investment activity....... (923) (161)
-------- -------
Realized & Unrealized gain (loss)
on investments:
Reinvested capital gains........ 0 3,716
Realized gain (loss)............ (8,311) (179)
Unrealized gain (loss).......... (47,570) 3,299
-------- -------
Net gain (loss) on
investments................ (55,881) 6,836
-------- -------
Net increase (decrease) in
contract owners' equity
from operations.......... (56,804) 6,675
-------- -------
Equity transactions:
Sales:
Contract purchase payments...... 149,225 36,230
Transfers from fixed & other
subaccounts................... 80,532 4,450
-------- -------
229,757 40,680
-------- -------
Redemptions:
Withdrawals & surrenders........ 5,103 3,889
Transfers to fixed & other
subaccounts................... 16,081 0
-------- -------
21,184 3,889
-------- -------
Net equity transactions....... 208,573 36,791
-------- -------
Net change in contract
owners' equity........... 151,769 43,466
Contract owners' equity:
Beginning of period................ 43,466 0
-------- -------
End of period...................... $195,235 $43,466
======== =======
</TABLE>
- ---------------
(a) Period from January 3, 1997, date of commencement of operations.
The accompanying notes are an integral part of these financial statements.
9
<PAGE> 10
[THIS PAGE LEFT INTENTIONALLY BLANK]
10
<PAGE> 11
OHIO NATIONAL VARIABLE ACCOUNT D
NOTES TO FINANCIAL STATEMENTS
(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 portfolio shares of Ohio National
Fund, Inc. (The Fund), a diversified open-end management investment company.
The Fund's investments are subject to varying degrees of market, interest
and financial risks; the issuers' abilities to meet certain obligations may
be affected by economic developments in their respective industries.
Investments are valued at the net asset value of fund shares held at
December 31, 1998. Share transactions are recorded on the trade date. Income
and capital gain distributions are recorded on the ex-dividend date. Net
realized capital gains and losses are determined on the basis of average
cost.
ONLIC performs investment advisory services on behalf of the Ohio National
Fund, Inc. in which the Account invests. For these services, the Company
receives fees from the mutual funds. These fees are paid to an affiliate of
the Company.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(2) INVESTMENTS
At December 31, 1998 the aggregate cost and number of shares of Ohio
National Fund, Inc. owned by the respective subaccounts were:
<TABLE>
<CAPTION>
MONEY CAPITAL
EQUITY MARKET BOND OMNI INTERNATIONAL APPRECIATION SMALL CAP
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ----------- ----------- ----------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Aggregate Cost............... $1,771,661 $563,684 $219,190 $2,268,415 $1,622,947 $1,149,920 $1,371,134
Number of Shares............. 51,339 56,368 20,600 109,873 112,432 88,892 77,601
</TABLE>
<TABLE>
<CAPTION>
GLOBAL AGGRESSIVE CORE GROWTH & S&P 500 SOCIAL
CONTRARIAN GROWTH GROWTH INCOME INDEX AWARENESS
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Aggregate Cost.................. $ 184,967 $556,906 $225,860 $1,002,908 $1,720,743 $ 239,506
Number of Shares................ 16,098 50,750 23,166 75,071 131,480 22,188
</TABLE>
(3) CONTRACTS IN ACCUMULATION PERIOD
At December 31, 1998 the accumulation units and value per unit of the
respective subaccounts and products were:
<TABLE>
<CAPTION>
ACCUMULATION UNITS VALUE PER UNIT VALUE
------------------ -------------- ----------
<S> <C> <C> <C>
EQUITY SUBACCOUNT........................................... 107,617.5199 17.323587 $1,864,321
MONEY MARKET SUBACCOUNT..................................... 48,566.7619 11.606378 $ 563,684
BOND SUBACCOUNT............................................. 16,939.5751 12.837064 $ 217,454
OMNI SUBACCOUNT............................................. 146,331.4408 16.095248 $2,355,241
INTERNATIONAL SUBACCOUNT.................................... 110,065.6083 13.130325 $1,445,197
CAPITAL APPRECIATION SUBACCOUNT............................. 72,570.8769 15.820771 $1,148,127
SMALL CAP SUBACCOUNT........................................ 91,751.2884 17.505914 $1,606,190
GLOBAL CONTRARIAN SUBACCOUNT................................ 12,899.6147 13.418205 $ 173,090
AGGRESSIVE GROWTH SUBACCOUNT................................ 38,333.1283 14.760465 $ 565,815
CORE GROWTH SUBACCOUNT...................................... 23,776.2457 10.267604 $ 244,125
GROWTH & INCOME SUBACCOUNT.................................. 71,864.3575 14.239205 $1,023,291
</TABLE>
11
<PAGE> 12
OHIO NATIONAL VARIABLE ACCOUNT D
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
ACCUMULATION UNITS VALUE PER UNIT VALUE
------------------ -------------- ----------
<S> <C> <C> <C>
S&P 500 INDEX SUBACCOUNT.................................... 112,231.6855 16.675212 $1,871,487
SOCIAL AWARENESS SUBACCOUNT................................. 20,571.7106 9.490457 $ 195,235
</TABLE>
(4) RISK AND ADMINISTRATIVE EXPENSE
ONLIC charges the Account's assets at the end of each valuation period,
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 differ according to the investment
performance of the Accounts, they are not affected by mortality or expense
experience because ONLIC assumes the expense risk and the mortality risk
under the contracts. ONLIC charges the Accounts' assets for assuming those
risks, based on the contract value at a rate of 1.00% 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 contracts
may prove insufficient to cover the cost of those terms.
The mortality risk results from a provision in the contract in which ONLIC
agrees to make annuity payments regardless of how long a particular
annuitant or other payee lives and how long all annuitants or other payees
as a class live if payment options involving life contingencies are chosen.
Those annuity payments are determined in accordance with annuity purchase
rate provisions established at the time the contracts are issued.
(5) CONTRACT CHARGES
No deduction for a sales charge is made from purchase payments. A 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 a part of, and are taxed with, operations of
ONLIC which is taxed as a life insurance company under the Internal Revenue
Code. Taxes are the responsibility of the contract owner upon termination or
withdrawal. No Federal income taxes are payable under the present law on
dividend income or capital gains distribution from the Fund shares held in
the Account or on capital gains realized by the Account on redemption of the
Fund shares.
12
