<PAGE> 1
PROSPECTUS
OHIO NATIONAL VARIABLE ACCOUNT D
OF
THE OHIO NATIONAL LIFE INSURANCE COMPANY
One Financial Way
Montgomery, Ohio 45242
Telephone (800) 366-6654
for
TAX QUALIFIED GROUP VARIABLE ANNUITY CONTRACTS
This prospectus offers a group variable annuity contract allowing you to
accumulate values and paying you benefits on a variable and/or fixed basis.
Variable annuities provide contract values and lifetime annuity payments that
vary with the investment results of the Funds you choose. You cannot be sure
that account values or annuity payments will equal or exceed your contributions.
The contracts are designed for:
- - 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,
- - 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,
- - state and municipal deferred compensation plans, and
- - non-tax-qualified plans.
The minimum contribution amount is $25 per participant. You may make additional
contributions at any time, but not more often than biweekly. Generally, your
plan governs the maximum amounts that may be contributed.
You may direct the allocation of contributions to one or more (but not more than
10 variable) subaccounts of Ohio National Variable Account D ("VAD"). VAD is a
separate account of The Ohio National Life Insurance Company. The assets of VAD
are invested in shares of the Funds. The Funds are portfolios of Ohio National
Fund, Inc., The Dow Target Variable Fund LLC, Goldman Sachs Variable Insurance
Trust, Janus Aspen Series Retirement Shares, Lazard Retirement Series, Inc.,
Morgan Stanley Dean Witter Universal Funds, Inc. and Strong Variable Insurance
Funds, Inc. See page 2 for the list of available Funds. See also the
accompanying prospectuses of the Funds which might also contain information
about other funds that are not available for these contracts.
You may withdraw all or part of the contract value to provide plan benefits at
no charge. Amounts withdrawn for any other reason may be subject to federal
income tax penalties. We may charge a withdrawal charge up to 7% of the amount
withdrawn (up to a maximum of 9% of all contributions). Your exercise of
contract rights may be subject to the terms of the qualified employee trust or
annuity plan. This prospectus contains no information about your trust or plan.
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE. IT SETS FORTH THE INFORMATION ABOUT
VAD AND THE VARIABLE ANNUITY CONTRACT 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 NOVEMBER 1, 1999. WE
HAVE INCORPORATED THE STATEMENT OF ADDITIONAL INFORMATION BY REFERENCE. IT IS
AVAILABLE UPON REQUEST AND WITHOUT CHARGE BY WRITING OR CALLING US AT THE ABOVE
ADDRESS. THE TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL INFORMATION IS ON
THE BACK PAGE OF THIS PROSPECTUS.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR 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 FUND PROSPECTUS.
Form V-4827 NOVEMBER 1, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
Available Funds.......................... 3
Fee Table................................ 4
Accumulation Unit Values................. 8
Financial Statements................... 10
The Ohio National Companies.............. 10
Ohio National Life..................... 10
Ohio National Variable Account D....... 10
The Funds.............................. 10
Mixed and Shared Funding............... 11
Voting Rights.......................... 11
Distribution of the Contracts............ 12
Deductions and Expenses.................. 12
Withdrawal Charge...................... 12
Deduction for Administrative
Expenses............................ 12
Deduction for Risk Undertakings........ 13
Limitations on Deductions.............. 13
Transfer Fee........................... 13
Deduction for State Premium Tax........ 13
Fund Expenses.......................... 13
Description of the Contracts............. 13
Accumulation............................. 13
Contribution Provisions................ 13
Accumulation Units..................... 13
Crediting Accumulation Units........... 14
Allocation of Contributions............ 14
Accumulation Unit Value and Contract
Value............................... 14
Net Investment Factor.................. 14
Surrender and Withdrawal............... 14
Transfers Among Subaccounts............ 15
TeleAccess............................... 15
Payment of Plan Benefits............... 16
Texas State Optional Retirement
Program............................. 16
Guaranteed Account..................... 16
Annuity Benefits......................... 17
Purchasing an Annuity.................. 17
Annuity Options........................ 17
Determination of Amount of the First
Variable Annuity Payment............ 18
Annuity Units and Variable Payments.... 18
Transfers after Annuity Purchase....... 19
Other Contract Provisions................ 19
Assignment............................. 19
Periodic Reports....................... 19
Substitution for Fund Shares........... 19
Contract Owner Inquires................ 19
Performance Data......................... 20
Federal Tax Status....................... 20
Tax-Deferred Annuities................. 21
Qualified Pension or Profit-Sharing
Plans.................................. 22
Withholding on Distributions............. 22
Statement of Additional Information
Contents............................... 23
</TABLE>
Form V-4827
2
<PAGE> 3
AVAILABLE FUNDS
<TABLE>
<S> <C>
OHIO NATIONAL FUND, INC. ADVISER (SUBADVISER)
Equity Portfolio (Legg Mason Fund Adviser, Inc.)
Money Market Portfolio Ohio National Investments, Inc.
Bond Portfolio Ohio National Investments, Inc.
Omni Portfolio (a flexible portfolio fund) Ohio National Investments, Inc.
International Portfolio (Federated Global Investment Management Corp.)
International Small Company Portfolio (Federated Global Investment Management Corp.)
Capital Appreciation Portfolio (T. Rowe Price Associates, Inc.)
Small Cap Portfolio (Founders Asset Management LLC)
Aggressive Growth Portfolio (Strong Capital Management, Inc.)
Core Growth Portfolio (Pilgrim Baxter & Associates, Ltd.)
Growth & Income Portfolio (RS Investment Management, L.P.)
Capital Growth Portfolio (RS Investment Management, L.P.)
S&P 500 Index Portfolio Ohio National Investments, Inc.
Social Awareness Portfolio Ohio National Investments, Inc.
High Income Bond Portfolio (Federated Investment Counseling)
Equity Income Portfolio (Federated Investment Counseling)
Blue Chip Portfolio (Federated Investment Counseling)
</TABLE>
<TABLE>
<S> <C>
THE DOW(SM) TARGET VARIABLE FUND LLC
The Dow(SM) Target 10 Portfolios (First Trust Advisors L.P.)
The Dow(SM) Target 5 Portfolios (First Trust Advisors L.P.)
GOLDMAN SACHS VARIABLE INSURANCE TRUST
Goldman Sachs Growth and Income Fund Goldman Sachs Asset Management
Goldman Sachs CORE U.S. Equity Fund Goldman Sachs Asset Management
Goldman Sachs Capital Growth Fund Goldman Sachs Asset Management
JANUS ASPEN SERIES RETIREMENT SHARES*
Growth Portfolio* Janus Capital Corporation
Worldwide Growth Portfolio* Janus Capital Corporation
Balanced Portfolio* Janus Capital Corporation
LAZARD RETIREMENT SERIES, INC.
Small Cap Portfolio Lazard Asset Management
Emerging Markets Portfolio Lazard Asset Management
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
U.S. Real Estate Portfolio Morgan Stanley Dean Witter Investment
Management, Inc.
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Mid Cap Growth Fund II Strong Capital Management, Inc.
Strong Opportunity Fund II
(a mid cap/small cap fund) Strong Capital Management, Inc.
Strong Schafer Value Fund II Strong Capital Management, Inc.
</TABLE>
*Not available on non-tax-qualified plans.
Form V-4827
3
<PAGE> 4
FEE TABLE
<TABLE>
<CAPTION>
CONTRACT YEAR
OF SURRENDER PERCENTAGE
CONTRACTOWNER TRANSACTION EXPENSES OR WITHDRAWAL CHARGED
---------------------------------- ------------- ----------
<S> <C> <C>
Deferred Sales Load (as a percentage of amount withdrawn)
(Percentage varies by number of years from the establishment
of each participant's account.) (No charge for withdrawals
for plan payments.) 1 7%
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>
<TABLE>
<S> <C>
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>
Neither the table nor the examples reflect any premium taxes that may be
applicable to a contract. These currently range from 0% to 2.25%. For further
details, see Deductions and Expenses.
FUND ANNUAL EXPENSES (AS A PERCENTAGE OF THE FUND AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
TOTAL FUND
EXPENSES TOTAL TOTAL FUND
WITHOUT WAIVERS EXPENSES
MANAGEMENT OTHER WAIVERS OR AND WITH WAIVERS
FEES EXPENSES REDUCTIONS REDUCTIONS* OR REDUCTIONS
---------- -------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
OHIO NATIONAL FUND:
Money Market* 0.30% 0.16% 0.46% 0.05% 0.41%
Equity 0.80% 0.11% 0.91% 0.00% 0.91%
Bond 0.58% 0.14% 0.72% 0.00% 0.72%
Omni 0.54% 0.11% 0.65% 0.00% 0.65%
S&P 500 Index 0.40% 0.09% 0.49% 0.00% 0.49%
International* 0.90% 0.27% 1.17% 0.05% 1.12%
International Small Company 1.00% 0.40% 1.40% 0.00% 1.40%
Capital Appreciation 0.80% 0.13% 0.93% 0.00% 0.93%
Small Cap 0.80% 0.11% 0.91% 0.00% 0.91%
Aggressive Growth 0.80% 0.14% 0.94% 0.00% 0.94%
Core Growth 0.95% 0.18% 1.13% 0.00% 1.13%
Growth & Income 0.85% 0.12% 0.97% 0.00% 0.97%
Capital Growth 0.90% 0.40% 1.30% 0.00% 1.30%
Social Awareness 0.60% 0.21% 0.81% 0.00% 0.81%
High Income Bond 0.75% 0.05% 0.80% 0.00% 0.80%
Equity Income 0.75% 0.43% 1.18% 0.00% 1.18%
Blue Chip 0.90% 0.32% 1.22% 0.00% 1.22%
DOW TARGET VARIABLE FUND LLC:
Dow Target 10** 0.60% 0.15% 0.75% 0.00% 0.75%
Dow Target 5** 0.60% 0.15% 0.75% 0.00% 0.75%
</TABLE>
Form V-4827
4
<PAGE> 5
<TABLE>
<CAPTION>
TOTAL FUND
EXPENSES TOTAL TOTAL FUND
WITHOUT WAIVERS EXPENSES
MANAGEMENT OTHER WAIVERS OR AND WITH WAIVERS
FEES EXPENSES REDUCTIONS REDUCTIONS* OR REDUCTIONS
---------- -------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
GOLDMAN SACHS VARIABLE INSURANCE TRUST:
Goldman Sachs Growth and Income* 0.75% 1.94% 2.69% 1.79% 0.90%
Goldman Sachs CORE U.S. Equity* 0.70% 2.13% 2.83% 2.03% 0.80%
Goldman Sachs Capital Growth* 0.75% 1.03% 1.78% 0.68% 0.90%
JANUS ASPEN SERIES RETIREMENT SHARES:
Growth* 0.72% 0.53% 1.25% 0.07% 1.18%
Worldwide Growth* 0.67% 0.57% 1.24% 0.02% 1.22%
Balanced* 0.72% 0.54% 1.26% 0.02% 1.24%
LAZARD RETIREMENT SERIES, INC.:
Small Cap* 0.75% 16.20% 16.95% 15.70% 1.25%
Emerging Markets* 1.00% 14.37% 15.37% 13.77% 1.60%
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS,
INC.:
U.S. Real Estate* 0.80% 1.52% 2.32% 1.22% 1.10%
STRONG VARIABLE INSURANCE FUNDS, INC.:
Strong Mid Cap Growth II 1.00% 0.20% 1.20% 0.00% 1.20%
Strong Opportunity II 1.00% 0.10% 1.16% 0.00% 1.16%
Strong Schafer Value II 1.00% 0.20% 1.20% 0.00% 1.20%
</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 Fund, assuming 5% annual return:
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C> <C>
OHIO NATIONAL FUND, INC.:
Money Market* $90 $110 $131 $207
Equity 95 125 155 260
Bond 93 119 146 240
Omni 92 117 143 233
S&P 500 Index 91 113 135 216
International* 97 131 166 281
International Small Company 99 139 179 308
Capital Appreciation 95 125 156 262
Small Cap 95 125 155 260
Aggressive Growth 95 126 157 263
Core Growth 97 131 166 282
Social Awareness 94 122 150 249
Growth & Income 95 127 158 266
Capital Growth 81 127 158 298
High Income Bond 76 112 133 248
Equity Income 79 123 152 287
Blue Chip 80 125 154 290
DOW TARGET VARIABLE FUND LLC:
Dow Target 10** 75 110 131 243
Dow Target 5** 75 110 131 243
GOLDMAN SACHS VARIABLE INSURANCE TRUST:
Goldman Sachs Growth and Income* 77 115 138 258
Goldman Sachs CORE U.S. Equity* 76 112 133 248
Goldman Sachs Capital Growth* 77 115 138 258
</TABLE>
Form V-4827
5
<PAGE> 6
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C> <C>
JANUS ASPEN SERIES RETIREMENT SHARES:
Growth* $79 $123 $152 $287
Worldwide Growth* 80 125 154 290
Balanced* 80 125 155 292
LAZARD RETIREMENT SERIES, INC.:
Small Cap* 80 125 156 293
Emerging Markets* 84 136 173 327
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.:
U.S. Real Estate* 79 121 148 279
STRONG VARIABLE INSURANCE FUNDS, INC.:
Strong Mid Cap Growth II 80 124 153 289
Strong Opportunity II 79 123 151 285
Strong Schafer Value II 80 124 153 289
</TABLE>
EXAMPLE - If you do not surrender your contract or if you annuitize at the end
of the applicable time period, you would pay the following aggregate expenses on
the same investment:
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C> <C>
OHIO NATIONAL FUND, INC.:
Money Market* $18 $55 $ 95 $207
Equity 23 71 121 260
Bond 21 65 111 240
Omni 20 63 108 233
S&P 500 Index 19 58 100 216
International* 25 77 132 281
International Small Company 28 85 145 308
Capital Appreciation 23 71 122 262
Small Cap 23 71 121 260
Aggressive Growth 23 72 123 263
Core Growth 25 77 132 282
Social Awareness 22 68 116 249
Growth & Income 24 72 124 266
Capital Growth 27 82 141 298
High Income Bond 22 67 115 248
Equity Income 26 79 135 287
Blue Chip 26 80 137 290
DOW TARGET VARIABLE FUND LLC:
Dow Target 10** 21 66 113 243
Dow Target 5** 21 66 113 243
GOLDMAN SACHS VARIABLE INSURANCE TRUST:
Goldman Sachs Growth and Income* 23 70 120 258
Goldman Sachs CORE U.S. Equity* 22 67 115 248
Goldman Sachs Capital Growth* 23 70 120 258
JANUS ASPEN SERIES RETIREMENT SHARES:
Growth* 26 79 135 287
Worldwide Growth* 26 80 137 290
Balanced* 26 81 138 292
</TABLE>
Form V-4827
6
<PAGE> 7
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C> <C>
LAZARD RETIREMENT SERIES, INC.:
Small Cap* $26 $81 $138 $293
Emerging Markets* 30 91 155 327
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.:
U.S. Real Estate* 25 76 131 279
STRONG VARIABLE INSURANCE FUNDS, INC.:
Strong Mid Cap Growth II 26 79 136 289
Strong Opportunity II 25 78 134 285
Strong Schafer Value II 26 79 136 289
</TABLE>
*The investment advisers of certain Funds are voluntarily waiving part or all of
their management fees and/or reimbursing certain Funds in order to reduce total
Fund expenses.
EXAMPLE - Without the voluntary fee waivers or reimbursements by investment
advisers, 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 of the following Funds, assuming 5% annual return:
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C> <C>
OHIO NATIONAL FUND, INC.:
Money Market $ 91 $112 $133 $213
International 97 132 168 286
GOLDMAN SACHS VARIABLE INSURANCE TRUST:
Goldman Sachs Growth and Income 95 168 225 424
Goldman Sachs CORE U.S. Equity 96 172 231 436
Goldman Sachs Capital Growth 85 141 182 344
JANUS ASPEN SERIES RETIREMENT SHARES:
Growth 80 125 156 293
Worldwide Growth 80 125 155 292
Balanced 80 125 156 294
LAZARD RETIREMENT SERIES, INC.:
Small Cap 226 494 674 976
Emerging Markets 212 466 642 957
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.:
U.S. Real Estate 91 157 208 392
</TABLE>
Example - Without the voluntary fee waivers or reimbursements by investment
advisers, if you do not surrender your contract or if you annuitize at the end
of the applicable time period, you would pay the following aggregate expenses on
the same investment:
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C> <C>
OHIO NATIONAL FUND, INC.:
Money Market $ 18 $ 57 $ 98 $213
International 26 78 134 286
GOLDMAN SACHS VARIABLE INSURANCE TRUST:
Goldman Sachs Growth and Income 41 123 207 424
Goldman Sachs CORE U.S. Equity 42 127 213 436
Goldman Sachs Capital Growth 32 97 164 344
</TABLE>
Form V-4827
7
<PAGE> 8
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C> <C>
JANUS ASPEN SERIES RETIREMENT SHARES:
Growth $ 26 $ 81 $138 $293
Worldwide Growth 26 81 138 292
Balanced 26 81 139 294
LAZARD RETIREMENT SERIES, INC.:
Small Cap 171 447 655 976
Emerging Markets 157 419 623 957
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.:
U.S. Real Estate 37 112 190 392
</TABLE>
**The "Other Expenses" (and accordingly, the Total Fund Expenses) for these
Funds are based on estimates.
The purpose of the above table is to help you to understand the costs and
expenses that you will bear directly or indirectly. THESE EXAMPLES SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSE. ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE SHOWN. Note that the expense amounts shown in the
examples are aggregate amounts for the total number of years indicated. In the
examples, the annual fee is treated as if it were deducted as a percentage of
assets, based upon the average account value for all contracts, including ones
from which a portion of the contract fee may be paid from amounts invested in
the Guaranteed Account. The above table and examples reflect only the charges
for contracts currently offered by this prospectus and not other contracts that
we may offer.
ACCUMULATION UNIT VALUES
This series of group variable annuity contracts began on January 25, 1995. The
International Small Company and Aggressive Growth funds began on March 31, 1995.
The Core Growth, Growth & Income, S&P 500 Index and Social Awareness funds began
on January 3, 1997.
The net annualized yield for the Money Market fund in these contracts for the
seven days ended December 31, 1998 was 3.84%.
EQUITY
<TABLE>
<CAPTION>
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>
1995 $ 10.000000 $ 12.198167 13,287
1996 12.198167 14.243704 32,583
1997 14.243704 16.607094 74,941
1998 16.607094 17.323587 107,618
</TABLE>
MONEY MARKET
<TABLE>
<CAPTION>
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>
1995 $ 10.000000 $ 10.346422 1,732
1996 10.346422 10.735959 7,977
1997 10.735959 11.161886 32,475
1998 11.161886 11.606378 48,567
</TABLE>
BOND
<TABLE>
<CAPTION>
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>
1995 $ 10.000000 $ 11.207694 1,139
1996 11.207694 11.468004 6,512
1997 11.468004 12.365430 12,237
1998 12.365430 12.837064 16,940
</TABLE>
Form V-4827
8
<PAGE> 9
OMNI
<TABLE>
<CAPTION>
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>
1995 $ 10.000000 $ 11.742940 13,547
1996 11.742940 13.386856 45,160
1997 13.386856 15.605553 98,309
1998 15.605553 16.095248 146,331
</TABLE>
INTERNATIONAL
<TABLE>
<CAPTION>
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>
1995 $ 10.000000 $ 11.256284 20,393
1996 11.256284 12.714297 42,439
1997 12.714297 12.810197 100,959
1998 12.810197 13.130325 110,066
</TABLE>
INTERNATIONAL SMALL COMPANY
<TABLE>
<CAPTION>
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>
1995 $ 10.000000 $ 10.780072 8,523
1996 10.780072 11.922317 13,394
1997 11.922317 13.135923 16,765
1998 13.135923 13.418205 12,900
</TABLE>
CAPITAL APPRECIATION
<TABLE>
<CAPTION>
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>
1995 $ 10.000000 $ 11.663489 39,782
1996 11.663489 13.320406 54,003
1997 13.320406 15.139212 78,535
1998 15.139212 15.820771 72,571
</TABLE>
SMALL CAP
<TABLE>
<CAPTION>
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>
1995 $ 10.000000 $ 12.909669 24,533
1996 12.909669 14.992559 39,188
1997 14.992559 16.045605 78,648
1998 16.045605 17.505914 91,751
</TABLE>
AGGRESSIVE GROWTH
<TABLE>
<CAPTION>
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>
1995 $ 10.000000 $ 12.568155 3,057
1996 12.568155 12.494380 9,915
1997 12.494380 13.872097 21,702
1998 13.872097 14.760465 38,333
</TABLE>
CORE GROWTH
<TABLE>
<CAPTION>
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>
1997 $ 10.000000 $ 9.562924 12,433
1998 9.562924 10.267604 23,776
</TABLE>
Form V-4827
9
<PAGE> 10
GROWTH & INCOME
<TABLE>
<CAPTION>
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>
1997 $ 10.000000 $ 13.476367 11,608
1998 13.476367 14.239205 71,864
</TABLE>
S&P 500 INDEX
<TABLE>
<CAPTION>
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>
1997 $ 10.000000 $ 12.999822 26,903
1998 12.999822 16.675212 112,232
</TABLE>
SOCIAL AWARENESS
<TABLE>
<CAPTION>
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>
1997 $ 10.000000 $ 12.396349 3,506
1998 12.396349 9.490457 20,572
</TABLE>
FINANCIAL STATEMENTS
The complete financial statements of VAD and Ohio National Life, including the
Independent Auditors' Reports for them, may be found in the Statement of
Additional Information.
THE OHIO NATIONAL COMPANIES
OHIO NATIONAL LIFE
Ohio National Life was organized under the laws of Ohio on September 9, 1909 as
a stock life insurance company. We are now ultimately owned by a mutual holding
company (Ohio National Mutual Holdings, Inc.) with the majority ownership being
by our policyholders. We write life, accident and health insurance and annuities
in 47 states, the District of Columbia and Puerto Rico. Currently, we have
assets in excess of $7 billion and equity in excess of $710 million. Our home
office is located at One Financial Way, Montgomery, Ohio 45242.
OHIO NATIONAL VARIABLE ACCOUNT D
We established VAD on August 1, 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.) Contributions for the contracts are allocated
to one or more subaccounts of VAD. However, a participant's account values may
not be allocated to more than 10 variable subaccounts at any one time. Income,
gains and losses, whether or not realized, from assets allocated to VAD are,
credited to or charged against VAD without regard to our other income, gains or
losses. The assets maintained in VAD will not be charged with any liabilities
arising out of any of our other business. Nevertheless, all obligations arising
under the contracts, including the commitment to make annuity payments, are our
general corporate obligations. Accordingly, all of our assets are available to
our meet obligations under the contracts. VAD is registered as a unit investment
trust under the Investment Company Act of 1940.
The assets of each subaccount of VAD are invested at net asset value in Fund
shares.
THE FUNDS
The Funds are mutual funds registered under the Investment Company Act of 1940.
Fund shares are sold only to insurance company separate accounts to fund
variable annuity contracts and variable life insurance policies and, in some
cases, to qualified plans. The value of each Fund's investments fluctuates daily
and is subject to the risk that
Form V-4827
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Fund management may not anticipate or make changes necessary in the investments
to meet changes in economic conditions.
The Funds receive investment advice from their investment advisers. The Funds
pay each of the investment advisers a fee as shown in the fee table beginning on
page 4. In some cases, the investment adviser pays part of its fee to a
subadviser.
Affiliates of certain Funds may compensate us based upon a percentage of the
Fund's average daily net assets that are allocated to VAD. These percentages
vary by Fund. This is intended to compensate us for administrative and other
services we provide to the Funds and their affiliates.
For additional information concerning the Funds, including their investment
objectives, see the Fund prospectuses. Read them carefully before investing.
They may contain information about other funds that are not available as
investment options for these contracts. You cannot be sure that any Fund will
achieve its stated objectives and policies.
The investment policies, objectives and/or names of some of the Funds may be
similar to those of other investment companies managed by the same investment
adviser or subadviser. However, similar funds often do not have comparable
investment performance. The investment results of the Funds may be higher or
lower than those of the other funds.
MIXED AND SHARED FUNDING
In addition to being offered to VAD, certain Fund shares are offered to our
other separate accounts for variable annuity contracts and a separate account of
Ohio National Life Assurance Corporation for variable life insurance contracts.
Fund shares may also be offered to other insurance company separate accounts and
qualified plans. It is conceivable that in the future it may become
disadvantageous for one or more of variable life and variable annuity separate
accounts, or separate accounts of other life insurance companies, and qualified
plans, to invest in Fund shares. Although neither we nor any of the Funds
currently foresee any such disadvantage, the Board of Directors or Trustees of
each Fund will monitor events to identify any material conflict among different
types of owners and to determine if any action should be taken. That could
possibly include the withdrawal of VAD's participation in a Fund. Material
conflicts could result from such things as:
- - changes in state insurance law;
- - changes in federal income tax law;
- - changes in the investment management of any Fund; or
- - differences in voting instructions given by different types of owners.
VOTING RIGHTS
We will vote Fund shares held in VAD at Fund shareholders meetings in accordance
with voting instructions received from contract owners. We will determine the
number of Fund shares for which you are entitled to give instructions as
described below. This determination will be within 90 days before the
shareholders meeting. Fund proxy material and forms for giving voting
instructions will be distributed to each owner. We will vote Fund shares held in
VAD, for which no timely instructions are received, in proportion to the
instructions that we do receive for VAD.
The number of Fund shares for which you may instruct us is determined by
dividing your contract value in each Fund by the net asset value of a share of
that Fund as of the same date. For variable annuities purchased for
participants, the number of Fund shares for which you may instruct us is
determined by dividing the actuarial liability for those variable annuities by
the net asset value of a Fund share as of the same date. Generally, the number
of votes tends to decrease as annuity payments progress.
Form V-4827
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DISTRIBUTION OF THE CONTRACTS
The contracts are sold by our insurance agents who are also registered
representatives of (a) The O. N. Equity Sales Company ("ONESCO"), a wholly-owned
subsidiary of ours, or (b) other broker-dealers that have entered into
distribution agreements with Ohio National Equities, Inc. ("ONEQ") another
wholly-owned subsidiary of ours. ONEQ is the principal underwriter of the
contracts. Each of ONEQ, 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. We pay ONEQ compensation equal to no more than 5% of
contributions. ONEQ then pays part of that amount to ONESCO and the other
broker-dealers. ONESCO and the other broker-dealers pay their registered
representatives from their own funds. Contributions on which nothing is paid to
registered representatives may not be included in amounts on which we pay the
fee to ONEQ. If our withdrawal charge is not sufficient to recover the fee paid
to ONEQ any deficiency will be made up from general assets. These include, among
other things, any profit from the mortality and expense risk charges. ONEQ's
address is One Financial Way, Montgomery, Ohio 45242.
DEDUCTIONS AND EXPENSES
WITHDRAWAL CHARGE
There is no deduction from contributions to pay sales expense. We may assess a
withdrawal charge if you surrender the contract or withdraw part of its value
(except to make plan payments). The purpose of this 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. The withdrawal charge equals a percent of the contract value
withdrawn. This percent varies 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>
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.) If the trustee of a retirement plan qualifying under
Section 401, 403(b), or 457 of the Code uses values of at least $250,000 from an
Ohio National Life individual or group annuity to provide the first purchase
payment for a contract offered under this prospectus, this contract will be
treated (for purposes of determining the withdrawal charge) as if each existing
participant's account funded with any portion of that first purchase payment had
been established at the same time as the original annuity (or the same time the
individual annuity was issued to the participant) and as if the purchase
payments made for the fixed annuity had been made for this contract. This does
not apply to participants added after this contract is issued.
DEDUCTION FOR ADMINISTRATIVE EXPENSES
At the end of each valuation period, we deduct an amount presently equal to
0.35% on an annual basis, of the contract value. This deduction reimburses us
for administrative expenses. Examples of these expenses are expenses are
accounting, auditing, legal, contract owner services, reports to regulatory
authorities and contract owners, contract issue, etc.
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DEDUCTION FOR RISK UNDERTAKINGS
We guarantee that the contract value will not be affected by any excess of sales
and administrative expenses over the deductions for them. We also guarantee that
variable annuity payments will not be affected by adverse mortality experience
or expenses.
For assuming these risks, when we determine the accumulation unit values and the
annuity unit values for each subaccount, we make a deduction from the applicable
investment results equal to 1% of the contract value on an annual basis. The
risk charge is an indivisible whole of the amount currently being deducted.
However, we believe that a reasonable allocation would be 0.40% for mortality
risk, and 0.60% for expense risk. We hope to realize a profit from this charge.
However, there will be a loss if the deduction fails to cover the actual risks
involved.
The contracts also provide for a distribution expense risk charge of no more
than 0.40%. We are not presently deducting that charge.
LIMITATIONS ON DEDUCTIONS
The contracts provide that we may reduce the deductions for administrative
expense, mortality and expense risks, and distribution expense risk at any time.
Each of these deductions may be increased, not more often than annually, and the
total of all these deductions may never exceed 2% per year.
TRANSFER FEE
We may charge a transfer fee of $5 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 made. We are not currently charging this fee.
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. The
deduction for premium taxes will be made when incurred. Normally, that is not
until annuity payments begin.
FUND EXPENSES
There are deductions from, and expenses paid out of, the assets of the Funds.
These are described in the Fund prospectus.
DESCRIPTION OF THE CONTRACTS
ACCUMULATION
CONTRIBUTION PROVISIONS
The contracts provide for minimum contributions of $25 per participant. Your
plan defines the maximum contributions allowed. You may make contributions at
any time but not more often than biweekly. We may agree to modify any of these
limits.
ACCUMULATION UNITS
The contract value is measured by accumulation units. These units are credited
to the contract when you make each contribution. (See Crediting Accumulation
Units, below). The number of units remains constant between contributions, but
their dollar value varies depending upon the investment results of each Fund to
which contributions are allocated.
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CREDITING ACCUMULATION UNITS
Your representative will send application forms or orders, together with the
first contribution, to our home office for acceptance. Upon acceptance, we issue
a contract and we credit the first contribution to the contract in the form of
accumulation units. If all information necessary for processing the contribution
is complete, your first contribution will be credited within two business days
after receipt. If this cannot be done within five business days, we will return
the contribution immediately unless you specifically consent to having us retain
the contribution until the necessary information is completed. After that, we
will credit the contribution within two business days. You must send any
additional contributions directly to our home office. They will then be applied
to provide that number of accumulation units (for each subaccount) determined by
dividing the amount of the contribution by the unit value next computed after we
receive the payment at our home office.
ALLOCATION OF CONTRIBUTIONS
You may allocate contributions among up to 10 variable Funds and the Guaranteed
Account. The amount allocated to any Fund or the Guaranteed Account must equal a
whole percent. You may change your allocation of future contributions at any
time by sending written notice to our home office.
ACCUMULATION UNIT VALUE AND CONTRACT VALUE
We set the accumulation unit value of each subaccount of VAD at $10 when we
allocated the first contributions for these contracts. We determine the unit
value for any later valuation period by multiplying the unit value for the
immediately preceding valuation period by the net investment factor (described
below) for such later valuation period. We determine a contract's value by
multiplying the total number of units (for each subaccount) credited to the
contract by the unit value (for such subaccount) for the current valuation
period.
NET INVESTMENT FACTOR
The net investment factor measures the investment results of each subaccount.
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 the corresponding Fund share at the end of a
valuation period, plus
(2) the per share amount of any dividends or other distributions declared
for that Fund if the "ex-dividend" date occurs during the valuation
period, plus or minus
(3) a per share charge or credit for any taxes paid or reserved for, the
maintenance or operation of that subaccount, (no federal income taxes
apply under present law.);
(b) is the net asset value of the corresponding Fund share at the end of the
preceding valuation period; and
(c) is the deduction for administrative expenses and risk undertakings.
SURRENDER AND WITHDRAWAL
You may surrender (totally withdraw the value of) the contract or you may make
withdrawals from it. The withdrawal charge may apply to these transactions. The
withdrawal will be made from your values in each Fund. The amount you may
withdraw is the contract value less any withdrawal charge. We will pay you
within seven days after we receive your request. However, we may defer payments
as described below. Withdrawals are limited or not permitted in connection with
certain retirement plans. For tax consequences of a withdrawal, see Federal Tax
Status.
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If you request a withdrawal that includes contract values derived from
contributions that have not yet cleared the banking system, we 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:
- - for any period during which the New York Stock Exchange is closed (other than
customary weekend and holiday closings) or during which the Securities and
Exchange Commission has restricted trading on the Exchange;
- - for any period during which an emergency, as determined by the Commission,
exists as a result of which disposal of securities held in a Fund is not
reasonably practical, or it is not reasonably practical to determine the value
of a Fund's net assets; or
- - such other periods as the Commission may order to protect security holders.
TRANSFERS AMONG SUBACCOUNTS
You may transfer contract values at any time from one Fund to another. 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). We
may limit the number, frequency, method or amount of transfers. We may limit
transfers from any Fund on any one day to 1% of the previous day's total net
assets of that Fund if we or the Fund, in our discretion, believe that the Fund
might otherwise be damaged. In this case, some requested transfers will not
occur. In determining which requests to honor, scheduled transfers (under a
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. We will notify you if your requested transfer is not
made. Current SEC rules preclude us from processing at a later date those
requests that were not made. Accordingly, you would need to submit a new
transfer request in order to make a transfer that was not made because of these
limitations.
Certain third parties may offer you asset allocation or timing services for your
contract. We may choose to honor transfer requests from these third parties if
you give us a written power of attorney to do so. Fees you pay for such asset
allocation or timing services are in addition to any contract charges. WE DO NOT
ENDORSE, APPROVE OR RECOMMEND THESE SERVICES.
After purchasing an annuity, a participant may transfer annuity values among
subaccounts only once each calendar quarter. Such transfers may then be made
without a transfer fee. (See Transfer Fee, page 13, and Transfers After Annuity
Purchase, page 17).
TELEACCESS
If you give us a pre-authorization form, contract and unit values and interest
rates can be checked and transfers may be made by telephoning us between 7:00
a.m. and 7:00 p.m. (Eastern time) on days we are open for business, at
1-800-366-6654, #8. You may only make one telephone transfer per day. We will
honor pre-authorized telephone transfer instructions from anyone who provides
the personal identifying information requested via TeleAccess. We will not honor
telephone transfer requests after the annuitant's death. For added security, we
send the contract owner a written confirmation of all telephone transfers on the
next business day. However, if we cannot complete a transfer as requested, our
customer service representative will contact the contract owner in writing sent
within 48 hours of the TeleAccess request. YOU MAY THINK THAT YOU HAVE LIMITED
THIS ACCESS TO YOURSELF, OR TO YOURSELF AND YOUR REPRESENTATIVE. HOWEVER, ANYONE
GIVING US THE NECESSARY IDENTIFYING INFORMATION CAN USE TELEACCESS ONCE YOU
AUTHORIZE ITS USE.
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PAYMENT OF PLAN BENEFITS
At the contract owner's request, and upon receipt of due proof of a
participant's death, disability, retirement or termination of employment, we
will apply that participant's account value to provide a benefit prescribed by
the plan. No withdrawal charge will be made in connection with the payment of
these 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, a participant in the Program may not make a withdrawal
until the first of these events occurs.
GUARANTEED ACCOUNT
The Guaranteed Account guarantees a fixed return for a specified period of time
and guarantees the principal against loss. The Guaranteed Account is not
registered as an investment company. Interests in it are not subject to the
provisions or restrictions of federal securities laws. The staff of the
Securities and Exchange Commission has not reviewed the disclosures regarding
it.
The Guaranteed Account consists of all of our general assets other than those
allocated to a separate account. You may allocate contributions and contract
values between the Guaranteed Account and the Funds.
We will invest our general assets in our discretion as allowed by Ohio law. We
allocate the investment income from our general assets to those contracts having
guaranteed values.
The amount of investment income allocated to the contracts varies from year to
year in our sole discretion. However, we guarantee that we will credit interest
at a rate of not less than 3% per year, compounded annually, to contract values
allocated to the Guaranteed Account. We may credit interest at a rate in excess
of 3%, but any such excess interest credit will be in our sole discretion.
We guarantee that the guaranteed value of a contract will never be less than:
- - the amount of deposits allocated to, and transfers into, the Guaranteed
Account, plus
- - interest credited at the rate of 3% per year compounded annually, plus
- - any additional excess interest we may credit to guaranteed values, minus
- - any withdrawals and transfers from the guaranteed values, minus
- - any withdrawal charges, state premium taxes and transfer fees.
No deductions are made from the Guaranteed Account for administrative expenses
or risk undertakings. (See Deductions and Expenses, page 12.) However, in
addition to any applicable withdrawal charge, we may assess a liquidation charge
as described below.
Contract values credited to the Guaranteed Account are allocated to an
investment cell. A cell is a partition of the Guaranteed Account by the time
period in which the contract value is credited to the Guaranteed Account (either
from a contribution or a transfer into the Guaranteed Account). Earlier cells
may be aggregated into a single cell. We credit interest to each cell at a rate
declared by us. This rate will not be reduced more than once a year. Amounts
withdrawn from or charged against a participant's account decrease the balances
in the cells within that participant's account on a last-in first-out basis.
Only when the most recently established cell's balance is zero will the next
previously established cell's balance be reduced.
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We assess a liquidation charge for withdrawals made from a participant's portion
of the Guaranteed Account. This is a percent 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 we declare for the cell for new
contract contributions as of the date of withdrawal, and
y is the annual effective interest rate for the cell from which a
withdrawal is being made at the time of withdrawal.
The liquidation charge never exceeds the difference between the amount of the
participant's contract value allocated to the Guaranteed Account and the
participant's minimum Guaranteed Account value. The participant's minimum
Guaranteed Account value equals the participant's net purchase payments and
transfers allocated to the Guaranteed Account, less withdrawals and transfers
from the Guaranteed Account, accumulated at an annual effective interest rate of
3%.
The liquidation charge does not apply when the contract is discontinued because
of plan termination. The liquidation charge is not assessed when you discontinue
the contract if you elect to receive the balance in the Guaranteed Account in
six payments over a five year period. The first payment is made within 30 days
of discontinuance, equal to 1/6 of the balance. Later payments are 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 Guaranteed Account value, as of the
beginning of any contract year, may be transferred to one or more variable Funds
during that contract year. As provided by state law, we can defer the payment of
amounts withdrawn from the Guaranteed Account for up to six months from the date
we receive your written request for withdrawal.
ANNUITY BENEFITS
PURCHASING AN ANNUITY
At the contract owner's written request, we will apply a participant's account
value to purchase an annuity. You 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 our guarantee (except for option
(e), below) that we will pay annuity payments for the lifetime of the annuitant
(and any joint annuitant) in accordance with the contract's annuity rates no
matter how long the annuitant (and any joint annuitant) may live.
Other than in connection with annuity Option (e) described below, once an
annuity is purchased, the annuity cannot be surrendered for cash except that,
upon the death of the annuitant, the beneficiary may surrender the annuity for
the commuted value of any remaining period-certain payments. Surrenders and
withdrawals may be made from Option (e) at any time.
ANNUITY OPTIONS
You 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 (the annuity has no more value after the annuitant's
death).
Option (b): Life Annuity with installment payments guaranteed for five or ten
years and then continuing during the remaining lifetime of the
annuitant.
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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 contingent
annuitant.
Option (d): Installment Refund Life Annuity with payments guaranteed for a
period certain and then continuing 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. This option is available for
variable annuity payments only. (Although the deduction for risk
undertakings is taken from annuity unit values, we have no
mortality risk during the annuity payout period under this
option.)
We may agree to other settlement options.
Unless you direct otherwise, when an annuity is purchased, we will apply the
participant's account values to provide annuity payments pro-rata from each Fund
in the same proportion as the participant's account values immediately before
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 20). This could
result in your payments being fully taxable to you. Should the IRS so rule, we
may have to tax report up to the full value of the annuity as your taxable
income.
DETERMINATION OF AMOUNT OF THE FIRST VARIABLE ANNUITY PAYMENT
To determine the first payment under a variable annuity, we apply the
participant's account value for each Fund in accordance with the contract's
purchase rate tables. The rates in those tables depend upon the annuitant's (and
any contingent annuitant's) age and sex and the option selected. The annuitant's
sex is not a factor in contracts issued to plans sponsored by employers subject
to Title VII of the Civil Rights Act of 1964 or similar state statutes. We
determine the accumulation value to be applied at the end of a valuation period
(selected by us and uniformly applied) not more than a month and a day before
participant's first annuity payment.
If the amount that would be applied under an option is less than $5,000, we will
pay the participant's account value in a single sum. If the first periodic
payment under any option would be less than $50, we may change the frequency of
payments so that the first payment is at least $50.
ANNUITY UNITS AND VARIABLE PAYMENTS
After a participant's first annuity payment, later variable annuity payments
will vary to reflect the investment performance of the selected Funds. The
amount of each payment depends on the participant's number of annuity units. To
determine the number of annuity units for each Fund, divide the dollar amount of
the first annuity payment from each Fund by the value of that Fund's annuity
unit. This number of annuity units remains constant for any annuity unless the
annuitant transfers among Funds.
The annuity unit value for each subaccount was set at $10 for the valuation
period when the first variable annuity was calculated for each subaccount. The
annuity unit value for each later valuation period equals the annuity unit value
for the immediately preceding valuation period multiplied by the net investment
factor for such later 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 later subsequent variable annuity payment equals your
constant number of annuity units for each Fund multiplied by the value of the
annuity unit for the valuation period.
Form V-4827
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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 stay 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 Funds on which variable annuity payments are
based. On at least 60 days written notice to our home office, we will change
that portion of the periodic variable annuity payment as you direct to reflect
the investment results of different Funds. The annuity payment immediately after
a change will be the amount that would have been paid without the change. Later
payments will reflect the new mix of Funds.
OTHER CONTRACT PROVISIONS
ASSIGNMENT
Amounts payable in settlement of a contract may not be commuted, anticipated,
assigned or otherwise encumbered, or pledged as loan collateral to anyone other
than us. To the extent permitted by law, such amounts are not subject to any
legal process to pay any claims against an annuitant before annuity payments
begin. The owner of a tax-qualified contract may not, but the owner of a
non-tax-qualified contract may, collaterally assign the contract before the
annuity payout date. Ownership of a tax-qualified contract may not be
transferred except to:
- - the annuitant,
- - a trustee or successor trustee of a pension or profit-sharing trust which is
qualified under Section 401 of the Code,
- - the employer of the annuitant provided that the contract after transfer is
maintained under the terms of a retirement plan qualified under Section 403(a)
of the Code for the benefit of the annuitant, or
- - as otherwise permitted by laws and regulations governing plans for which the
contract may be issued.
PERIODIC REPORTS
Each six months we will send you a statement showing the number of accumulation
units credited to the contract by Fund and the value of each unit as of the end
of the last half year. In addition, as long as the contract remains in effect,
we will forward any periodic Fund reports.
SUBSTITUTION FOR FUND SHARES
If investment in a Fund is no longer possible or we believe it is inappropriate
to the purposes of the contract, we may substitute one or more other funds.
Substitution may be made as to both existing investments and the investment of
future contributions. However, no substitution will be made until we receive any
necessary approval of the Securities and Exchange Commission. We may also add
other Funds as eligible investments of VAD.
CONTRACT OWNER INQUIRIES
Direct any questions to Ohio National Life, Group Annuity Administration, P.O.
Box 2669, Cincinnati, Ohio 45201; telephone 1-800-366-6654 (8:30 a.m. to 4:30
p.m. Eastern time).
Form V-4827
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PERFORMANCE DATA
We may advertise performance data for the various Funds showing the percentage
change in unit values based on the performance of the applicable Fund over a
period of time (usually a calendar year). We determine the percentage change by
dividing the increase (or decrease) in value for the unit by the unit value at
the beginning of the period. This percent reflects the deduction of any
asset-based contract charges but does not reflect the deduction of any
applicable withdrawal charge. The deduction of a withdrawal charge would reduce
any percentage increase or make greater any percentage decrease.
Advertising may also include average annual total return figures calculated as
shown in the Statement of Additional Information. The average annual total
return figures reflect the deduction of applicable withdrawal charges as well as
applicable asset-based charges.
We 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 or mutual funds with investment objectives similar to
those of the Funds.
FEDERAL TAX STATUS
The following discussion of federal income tax treatment of amounts received
under a variable annuity contract does not cover all situations or issues. It is
not intended as tax advice. Consult a qualified tax adviser for application of
law to your circumstances. Tax laws can change, even for contracts that have
already been issued. Tax law revisions, with unfavorable consequences, could
have retroactive effect on previously issued contracts or on later voluntary
transactions in previously issued contracts.
We are 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, our operations, VAD is not separately taxed as a "regulated
investment company" under Subchapter M of the Code.
As to tax-qualified contracts, the law does not now provide for payment of
federal income tax on dividend income or capital gains distributions from Fund
shares held in VAD or upon capital gains realized by VAD on redemption of Fund
shares. When a non-tax-qualified contract is issued in connection with a
deferred compensation plan or arrangement, all rights, discretions and powers
relative to the contract are vested in the contract owner and participants must
look only to the contract owner for the payment of deferred compensation
benefits. Generally, in that case, an annuitant will have no "investment in the
contract" and amounts received by participants from the contract owner under a
deferred compensation arrangement will be taxable in full as ordinary income in
the years participants receive the payments.
The contracts 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 contract value is not taxable to you as the owner
or annuitant until you receive it, either in the form of annuity payments, as
contemplated by the contract, or in some other form of distribution. The owner
of a non-tax-qualified contract must be a natural person for this purpose. With
certain exceptions, where the owner of a non-tax-qualified contract is a
non-natural person (corporation, partnership or trust) any increase in the
accumulation value of the contract attributable to purchase payments made after
February 28, 1986 will be treated as ordinary income received or accrued by the
contract owner during the current tax year.
When annuity payments begin each payment is taxable under Section 72 of the Code
as ordinary income in the year of receipt if you have neither paid any portion
of the contributions nor 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,
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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, all further annuity
payments will be included in that annuitant's taxable income.
If a participant elects to receive his or her 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:
- - received on or after the taxpayer reaches age 59 1/2;
- - made to a beneficiary on or after the death of the annuitant;
- - attributable to the taxpayer's becoming disabled;
- - made as a series of substantially equal periodic payments for the life of the
annuitant (or joint lives of the annuitant and beneficiary);
- - from a contract that is a qualified funding asset for purposes of a structured
settlement;
- - 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
- - 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. A participant's failure to provide his or her taxpayer
identification number will automatically subject any payments under the contract
to withholding.
TAX-DEFERRED ANNUITIES
Under the provisions of Section 403(b) of the Code, employees may exclude from
their gross income contributions made for annuity contracts purchased for them
by public educational institutions and certain tax-exempt organizations which
are described in Section 501(c)(3) of the Code. They may make this exclusion to
the extent that the aggregate contributions plus any other amounts contributed
to purchase a contract and toward benefits under qualified retirement plans do
not exceed their exclusion allowance as determined 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.
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With respect to earnings accrued and contributions made after December 31, 1988,
for a salary reduction agreement under Section 403(b) of the Code, distributions
may be paid only when the employee:
- - attains age 59 1/2,
- - separates from the employer's service,
- - dies,
- - becomes disabled as defined in the Code, or
- - incurs a financial hardship as defined in the Code.
In the case of hardship, cash distributions may not exceed the amount of
contributions. These restrictions do not affect rights to transfer investments
among the Funds and do not limit the availability of exchanges.
QUALIFIED PENSION OR PROFIT-SHARING PLANS
Under present law, contributions made by an employer or trustee, for a plan or
trust qualified under Section 401(a) or 403(a) of the Code, are generally
excludable from the employee's gross income. Any contributions made by the
employee, or which are considered taxable income to the employee in the year
such payments are made, constitute 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 begin 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. Five-year averaging will no
longer be available after 1999 except for certain grandfathered individuals. You
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 later 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.
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
is required on annuity payments. However, recipients of annuity payments may
elect not to have the tax withheld. This election may be revoked at any time and
withholding would begin after that. If you do not give us your taxpayer
identification number any payments under the contract will automatically be
subject to withholding.
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STATEMENT OF ADDITIONAL INFORMATION CONTENTS
Custodian
Independent Certified Public Accountants
Underwriter
Calculation of Money Market Yield
Total Return
The Year 2000 Issue
Financial Statements for VAD and Ohio National Life
Form V-4827
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