<PAGE> 1
File No. 33-81784
811-8642
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 9 /X/
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 6 /X/
---------------------------------
(Exact Name of Registrant)
OHIO NATIONAL VARIABLE ACCOUNT D
(Name of Depositor)
THE OHIO NATIONAL LIFE INSURANCE COMPANY
(Address of Depositor's Principal Executive Offices)
One Financial Way
Cincinnati, Ohio 45242
(Depositor's Telephone Number)
(513) 794-6100
---------------------------------
(Name and Address of Agent for Service)
Ronald L. Benedict, Corporate Vice President, Counsel
and Secretary
The Ohio National Life Insurance Company
P.O. Box 237
Cincinnati, Ohio 45201
Notice to:
W. Randolph Thompson, Esq.
Of Counsel
Jones & Blouch L.L.P.
Suite 405 West
1025 Thomas Jefferson Street, N.W.
Washington, D.C. 20007
---------------------------------
Approximate Date of Proposed Public Offering: As soon after the effective date
of this amendment as is practicable.
It is proposed that this filing will become effective (check appropriate space):
immediately upon filing pursuant to paragraph (b)
---
X on November 1, 1999, pursuant to paragraph (b)(1)(ix)
---
60 days after filing pursuant to paragraph (a)(i)
---
on (date) pursuant to paragraph (a)(i) of Rule 485.
---
If appropriate, check the following box:
this post-effective amendment designates a new effective date for
--- a previously filed post-effective amendment.
<PAGE> 2
OHIO NATIONAL VARIABLE ACCOUNT D
<TABLE>
<CAPTION>
N-4 Item Caption in Prospectus
- -------- ---------------------
<S> <C>
1 Cover Page
2 Glossary of Special Terms
3 Not applicable
4 Accumulation Unit Values
5 The Ohio National Companies
6 Deductions and Expenses
7 Description of the Contracts
8 Annuity Benefits
9 Death Benefit
10 Accumulation
11 Surrender and Withdrawal
12 Federal Tax Status
13 Not applicable
14 Table of Contents
Caption in Statement of Additional Information
----------------------------------------------
15 Cover Page
16 Table of Contents
17 Not applicable
18 Custodian
Independent Certified Public Accountants
19 See Prospectus (Distribution of the Contracts)
20 Underwriter
21 Calculation of Money Market Subaccount Yield
Total Return
22 See Prospectus (Annuity Benefits)
23 Financial Statements
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Caption in Part C
-----------------
<S> <C>
24 Financial Statements and Exhibits
25 Directors and Officers of the Depositor
26 Persons Controlled by or Under Common Control
with the Depositor or Registrant
27 Number of Contractowners
28 Indemnification
29 Principal Underwriter
30 Location of Accounts and Records
31 Not applicable
32 Undertakings and Representations
</TABLE>
<PAGE> 4
PART A
PROSPECTUS
<PAGE> 5
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, 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> 6
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...........
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> 7
AVAILABLE FUNDS
<TABLE>
<S> <C>
ADVISER (SUBADVISER)
OHIO NATIONAL FUND, INC. (Legg Mason Fund Adviser, Inc.)
Equity Portfolio Ohio National Investments, Inc.
Money Market Portfolio Ohio National Investments, Inc.
Bond Portfolio Ohio National Investments, Inc.
Omni Portfolio (a flexible portfolio (Federated Global Investment Management
fund) Corp.)
International Portfolio (Federated Global Investment Management
International Small Company Portfolio 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
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>
Form V-4827
3
<PAGE> 8
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> 9
<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:
Growth* 0.72% 0.03% 0.75% 0.07% 0.68%
Worldwide Growth* 0.67% 0.07% 0.74% 0.02% 0.72%
Balanced 0.72% 0.02% 0.74% 0.00% 0.74%
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> 10
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C> <C>
JANUS ASPEN SERIES:
Growth* $74 $108 $127 $236
Worldwide Growth* 75 109 129 240
Balanced 75 110 130 242
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:
Growth* 21 64 109 236
Worldwide Growth* 21 65 111 240
Balanced 21 65 112 242
</TABLE>
Form V-4827
6
<PAGE> 11
<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:
Growth 75 110 131 243
Worldwide Growth 75 110 130 242
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
JANUS ASPEN SERIES:
Growth 21 66 113 243
Worldwide Growth 21 65 112 242
</TABLE>
Form V-4827
7
<PAGE> 12
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C> <C>
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> 13
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> 14
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
10
<PAGE> 15
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
11
<PAGE> 16
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.
Form V-4827
12
<PAGE> 17
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.
Form V-4827
13
<PAGE> 18
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.
Form V-4827
14
<PAGE> 19
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 9, and Transfers After Annuity
Purchase, page 14).
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.
Form V-4827
15
<PAGE> 20
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 8.) 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.
Form V-4827
16
<PAGE> 21
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.
Form V-4827
17
<PAGE> 22
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 15). 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
18
<PAGE> 23
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
19
<PAGE> 24
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,
Form V-4827
20
<PAGE> 25
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.
Form V-4827
21
<PAGE> 26
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.
Form V-4827
22
<PAGE> 27
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
23
<PAGE> 28
PART B
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 29
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
NOVEMBER 1, 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 November 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> 30
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> 31
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 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>
Fund
One Five Ten From Fund Returns Inception
Year Years Years Inception in VAD* Date
------ ----- ----- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Ohio National Fund:
Money Market 3.98% 3.71% 3.96% 5.77% 5.77% 3-20-80
Equity 4.31% 12.01% 11.16% 9.40% 9.40% 1-14-71
Bond 3.81% 4.98% 6.71% 7.04% 7.04% 11-2-82
Omni 3.14% 10.26% 10.01% 10.02% 10.02% 9-10-84
S&P 500 Index 28.27% N/A N/A 29.22% 29.22% 1-3-97
International 2.50% 6.59% N/A 9.85% 9.85% 4-30-93
International Small Company 2.15% N/A N/A 8.15% 8.15% 3-31-95
Capital Appreciation 4.50% N/A N/A 12.01% 12.01% 5-1-94
Small Cap 9.10% N/A N/A 17.66% 17.66% 5-1-94
Aggressive Growth 6.40% N/A N/A 10.93% 10.93% 3-31-95
Core Growth 7.37% N/A N/A 1.31% 1.31% 1-3-97
Growth & Income 5.66% N/A N/A 19.38% 19.38% 1-3-97
Capital Growth N/A N/A N/A 3.72% N/A 5-1-98
Social Awareness (23.44%) N/A N/A (2.61%) (2.61%) 1-3-97
High Income Bond N/A N/A N/A (1.08%) N/A 5-1-98
Equity Income N/A N/A N/A 4.99% N/A 5-1-98
Blue Chip N/A N/A N/A 1.44% N/A 5-1-98
Dow Target Variable:
Dow Target 10 N/A N/A N/A N/A N/A 1-4-99
Dow Target 5 N/A N/A N/A N/A N/A 9-1-99
Goldman Sachs Variable:
G.S. Growth & Income N/A N/A N/A 4.11% N/A 1-2-98
G.S. CORE U.S. Equity N/A N/A N/A 13.38% N/A 1-2-98
G.S. Capital Growth N/A N/A N/A 12.39% N/A 1-2-98
Janus Aspen Series:
Growth 33.85% 19.80% N/A 19.27% N/A 9-13-93
Worldwide Growth 27.21% 19.70% N/A 22.38% N/A 9-13-93
Balanced 32.50% 17.52% N/A 17.91% N/A 9-13-93
Lazard Retirement Series:
Small Cap (4.51%) N/A N/A (5.29%) N/A 11-4-97
Emerging Markets (24.05%) N/A N/A (24.52%) N/A 11-4-97
Morgan Stanley Dean Witter:
U.S. Real Estate (12.05%) N/A N/A 1.43% N/A 3-3-97
Strong Variable Insurance:
Mid Cap Growth II 26.96% N/A N/A 26.65% N/A 12-31-96
Opportunity II 11.99% 15.11% N/A 16.70% N/A 5-8-92
Schafer Value II 0.82% N/A N/A (0.25%) N/A 10-10-97
</TABLE>
*The "Returns in VAD" are the standardized total returns from the time these
Funds were added to VAD through December 31, 1998. The Ohio National Fund
Capital Growth, High Income Bond, Equity Income and Blue Chip portfolios, The
Dow Target Variable, Goldman Sachs Variable, Janus Aspen Series, Lazard
Retirement Series, Morgan Stanley Dean Witter and Strong Variable Insurance
Funds were added November 1, 1999.
3
<PAGE> 32
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> 33
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> 34
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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> 35
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> 36
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> 37
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> 38
[THIS PAGE LEFT INTENTIONALLY BLANK]
10
<PAGE> 39
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> 40
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
<PAGE> 41
<PAGE> 1
[KPMG LOGO]
THE OHIO NATIONAL LIFE INSURANCE COMPANY
AND SUBSIDIARIES
(a wholly-owned subsidiary of
Ohio National Financial Services, Inc.)
Consolidated Financial Statements
December 31, 1998 and 1997
With Independent Auditors' Report Thereon
<PAGE> 2
[KPMG LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
The Board of Directors
The Ohio National Life Insurance Company:
We have audited the accompanying consolidated balance sheets of The Ohio
National Life Insurance Company (a wholly-owned subsidiary of Ohio National
Financial Services, Inc.) and subsidiaries (the Company) as of December 31, 1998
and 1997, and the related consolidated statements of income, equity and cash
flows for each of the years in the three-year period ended December 31, 1998.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The Ohio National
Life Insurance Company and subsidiaries as of December 31, 1998 and 1997, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1998, in conformity with generally
accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the consolidated
financial statements of the Company taken as a whole. The consolidating
information included in Schedules 1 and 2 is presented for purposes of
additional analysis of the consolidated financial statements rather than to
present the financial position, results of operations, and cash flows of the
individual companies. The consolidating information has been subjected to the
auditing procedures applied in the audits of the consolidated financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the consolidated financial statements taken as a whole.
/s/ KPMG LLP
Cincinnati, Ohio
January 29, 1999
<PAGE> 3
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Consolidated Balance Sheets
December 31, 1998 and 1997
(in thousands, except share amounts)
<TABLE>
<CAPTION>
ASSETS 1998 1997
------------ -----------
<S> <C> <C>
Investments (notes 5, 9 and 10):
Securities available-for-sale, at fair value:
Fixed maturities $2,600,552 2,687,847
Equity securities 93,649 81,983
Fixed maturities held-to-maturity, at amortized cost 679,528 724,892
Mortgage loans on real estate, net 1,144,424 1,230,256
Real estate, net 8,724 21,820
Policy loans 40,810 153,348
Other long-term investments 41,697 42,539
Short-term investments 98,315 37,509
---------- ----------
Total investments 4,707,699 4,980,194
Cash 9,451 14,012
Accrued investment income 58,388 64,079
Deferred policy acquisition costs 183,281 250,942
Reinsurance recoverable 75,394 61,862
Other assets 35,034 42,683
Assets held in Separate Accounts 1,154,576 916,790
Closed block assets (note 2) 636,083 -
========== ==========
Total assets $6,859,906 6,330,562
========== ==========
LIABILITIES AND EQUITY
Future policy benefits and claims (note 6) $3,968,009 4,445,474
Policyholders' dividend accumulations 46,276 62,423
Other policyholder funds 13,604 17,069
Note payable (net of unamortized discount of $722 in 1998
and $766 in 1997) (note 7) 84,278 84,234
Federal income taxes (note 8):
Current 21,230 12,658
Deferred 67,482 65,380
Other liabilities 130,208 117,537
Liabilities related to Separate Accounts 1,107,049 887,542
Closed block liabilities (note 2) 713,162 -
---------- ----------
Total liabilities $6,151,298 5,692,317
---------- ----------
Equity (notes 3 and 12):
Class A Common stock, $1 par value. 10,000,000 authorized,
issued and outstanding 10,000 -
Accumulated other comprehensive income 107,444 102,956
Retained earnings 591,164 535,289
---------- ----------
Total equity 708,608 638,245
Commitments and contingencies (notes 10 and 14)
---------- ----------
Total liabilities and equity $6,859,906 6,330,562
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 4
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Consolidated Statements of Income
Years ended December 31, 1998, 1997 and 1996
(in thousands)
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Revenues (note 15):
Traditional life insurance premiums $ 96,423 116,402 113,176
Accident and health insurance premiums 25,183 23,921 23,478
Annuity premiums and charges 45,386 37,630 28,757
Universal life policy charges 59,743 50,991 42,304
Net investment income (note 5) 376,403 390,547 370,702
Net realized gains on investments (note 5) 1,693 12,500 8,761
Other income 3,113 2,265 1,861
Contribution from the closed block (note 2) 5,851 - -
--------- --------- ---------
613,795 634,256 589,039
--------- --------- ---------
Benefits and expenses:
Benefits and claims 389,579 398,598 379,116
Provision for policyholders' dividends on
participating policies (note 12) 20,792 25,399 26,996
Amortization of deferred policy acquisition costs 19,351 23,108 19,341
Other operating costs and expenses 75,698 80,792 71,111
--------- --------- ---------
505,420 527,897 496,564
--------- --------- ---------
Income before Federal income taxes 108,375 106,359 92,475
--------- --------- ---------
Federal income taxes (note 8):
Current expense 40,824 41,373 37,443
Deferred benefit (324) (2,101) (4,571)
--------- --------- ---------
40,500 39,272 32,872
--------- --------- ---------
Net income $ 67,875 67,087 59,603
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 5
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Consolidated Statements of Equity
Years ended December 31, 1998, 1997 and 1996
(in thousands)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
COMMON COMPREHENSIVE RETAINED TOTAL
STOCK INCOME EARNINGS EQUITY
---------- ------------- ---------- ---------
1996:
<S> <C> <C> <C> <C>
Balance, beginning of year $ - 85,844 408,599 494,443
Comprehensive income:
Net income - - 59,603 59,603
Other comprehensive loss (note 4) - (39,037) - (39,037)
--------
Total comprehensive income 20,566
-------- -------- -------- --------
Balance, end of year $ - 46,807 468,202 515,009
======== ======== ======== ========
1997:
Balance, beginning of year $ - 46,807 468,202 515,009
Comprehensive income:
Net income - - 67,087 67,087
Other comprehensive income (note 4) - 56,149 - 56,149
--------
Total comprehensive income 123,236
-------- -------- -------- --------
Balance, end of year $ - 102,956 535,289 638,245
======== ======== ======== ========
1998:
Balance, beginning of year $ - 102,956 535,289 638,245
Stock issuance 10,000 - (10,000) -
Dividends paid - - (2,000) (2,000)
Comprehensive income:
Net income - - 67,875 67,875
Other comprehensive income (note 4) - 4,488 - 4,488
--------
Total comprehensive income 72,363
-------- -------- -------- --------
Balance, end of year $ 10,000 107,444 591,164 708,608
======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 6
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Consolidated Statements of Cash Flows
Years ended December 31, 1998, 1997 and 1996
(in thousands)
<TABLE>
<CAPTION>
1998 1997 1996
------------- -------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 67,875 67,087 59,603
Adjustments to reconcile net income to net cash
provided by operating activities:
Capitalization of deferred policy acquisition costs (51,502) (48,507) (43,711)
Amortization of deferred policy acquisition costs 19,351 23,108 19,341
Amortization and depreciation (278) 4,342 1,095
Realized gains on invested assets, net (1,693) (12,500) (8,761)
Deferred Federal income tax (benefit) (324) (2,101) (4,571)
(Increase) decrease in accrued investment income 5,691 (1,740) 789
(Increase) decrease in other assets (6,383) (14,548) 3,169
Net increase in separate accounts (18,279) (16,011) (958)
Increase in policyholder account balances 36,161 40,843 20,249
(Decrease) increase in policyholders' dividend
accumulations and other funds (19,612) (243) 28
Increase (decrease) in current Federal income tax payable 8,572 (2,149) (6,842)
Increase in other liabilities 16,032 3,603 11,134
Other, net (15,403) 1,946 1,885
Closed block activity (11,268) - -
----------- ----------- -----------
Net cash provided by operating activities 28,940 43,130 52,450
----------- ----------- -----------
Cash flows from investing activities:
Proceeds from maturity of fixed maturities available-for-sale 11,167 298,686 145,554
Proceeds from sale of fixed maturities available-for-sale 188,333 51,770 74,977
Proceeds from sale of equity securities 9,603 4,996 15,001
Proceeds from maturity of fixed maturities held-to-maturity 103,534 75,530 57,129
Proceeds from repayment of mortgage loans on real estate 182,845 180,745 140,831
Proceeds from sale of real estate 15,906 19,078 4,181
Cost of fixed maturities available-for-sale acquired (293,287) (367,027) (331,991)
Cost of equity securities acquired (9,425) (7,205) (4,000)
Cost of fixed maturities held-to-maturity acquired (121,886) (110,982) (76,022)
Cost of mortgage loans on real estate acquired (197,021) (321,914) (332,088)
Cost of real estate acquired (846) (1,310) (836)
Change in policy loans, net (4,321) (620) (4,045)
Change in other assets, net 5,253 312 (2,149)
Change in closed block investments, net (49,658) - -
----------- ----------- -----------
Net cash used in investing activities (159,803) (177,941) (313,458)
----------- ----------- -----------
Cash flows from financing activities:
Increase in universal life and investment product account balances 1,133,125 1,000,919 973,793
Decrease in universal life and investment product account balances (940,656) (884,395) (745,546)
Proceeds from note issue - - 49,340
Repayment of note - - (16,477)
Dividends to shareholders (2,000) - -
Other, net (3,361) 80 68
----------- ----------- -----------
Net cash provided by financing activities 187,108 116,604 261,178
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 56,245 (18,207) 170
Cash and cash equivalents, beginning of year 51,521 69,728 69,558
----------- ----------- -----------
Cash and cash equivalents, end of year $ 107,766 51,521 69,728
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 7
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
(1) ORGANIZATION, CONSOLIDATION POLICY AND BUSINESS DESCRIPTION
The Ohio National Life Insurance Company (ONLIC) is a stock life
insurance company. Ohio National Life Assurance Corporation (ONLAC) is a
wholly-owned stock life insurance subsidiary included in the consolidated
financial statements. The Company's other wholly-owned subsidiaries are
not life insurance enterprises and are included in the consolidated
financial statements on an equity basis. These non-insurance subsidiaries
are not material to the Company's consolidated results of operations or
financial position. ONLIC and its subsidiaries are collectively referred
to as the "Company". All significant intercompany accounts and
transactions have been eliminated in consolidation.
On February 12, 1998, ONLIC's Board of Directors approved a plan of
reorganization for the Company under the provision of Sections 3913.25 to
3913.38 of the Ohio Revised Code relating to mutual insurance holding
companies. The plan of reorganization was approved by the Company's
policyholders and by the Ohio Department of Insurance and became
effective on August 1, 1998 (Effective Date). As part of the
reorganization (see footnote (1)(k)), ONLIC became a stock company 100%
owned by Ohio National Financial Services, Inc. (ONFS). ONFS is 100%
owned by Ohio National Mutual Holdings, Inc. (ONMH), an Ohio mutual
holding company.
ONLIC and ONLAC are life and health insurers licensed in 47 states, the
District of Columbia and Puerto Rico. The Company offers a full range of
life, health and annuity products through exclusive agents and other
distribution channels and is subject to competition from other insurers
throughout the United States. The Company is subject to regulation by the
Insurance Departments of states in which it is licensed and undergoes
periodic examinations by those departments.
The following is a description of the most significant risks facing life
and health insurers and how the Company mitigates those risks:
LEGAL/REGULATORY RISK is the risk that changes in the legal or
regulatory environment in which an insurer operates will create
additional expenses not anticipated by the insurer in pricing its
products. That is, regulatory initiatives designed to reduce
insurer profits, new legal theories or insurance company
insolvencies through guaranty fund assessments may create costs
for the insurer beyond those recorded in the consolidated
financial statements. The Company mitigates this risk by offering
a wide range of products and by operating throughout the United
States, thus reducing its exposure to any single product or
jurisdiction, and also by employing underwriting practices which
identify and minimize the adverse impact of this risk.
CREDIT RISK is the risk that issuers of securities owned by the
Company or mortgagors on mortgage loans on real estate owned by
the Company will default or that other parties, including
reinsurers, which owe the Company money, will not pay. The Company
minimizes this risk by adhering to a conservative investment
strategy, by maintaining sound reinsurance and credit and
collection policies and by providing for any amounts deemed
uncollectible.
(Continued)
6
<PAGE> 8
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
INTEREST RATE RISK is the risk that interest rates will change and
cause a decrease in the value of an insurer's investments. This
change in rates may cause certain interest-sensitive products to
become uncompetitive or may cause disintermediation. The Company
mitigates this risk by charging fees for non-conformance with
certain policy provisions, by offering products that transfer this
risk to the purchaser, and/or by attempting to match the maturity
schedule of its assets with the expected payouts of its
liabilities. To the extent that liabilities come due more quickly
than assets mature, an insurer would have to borrow funds or sell
assets prior to maturity and potentially recognize a gain or loss.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by the Company that
materially affect financial reporting are summarized below. The
accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles (GAAP) which
differ from statutory accounting practices prescribed or permitted by
regulatory authorities (see Note 3).
(a) VALUATION OF INVESTMENTS AND RELATED GAINS AND LOSSES
Fixed maturity securities are classified as held-to-maturity when
the Company has the positive intent and ability to hold the
securities to maturity and are stated at amortized cost. Fixed
maturity securities not classified as held-to-maturity and all
equity securities are classified as available-for-sale and are
stated at fair value, with the unrealized gains and losses, net of
adjustments to deferred policy acquisition costs and deferred
Federal income tax, reported as a separate component of equity
that would have been required as a charge or credit to operations
had such unrealized amounts been realized. The Company has no
securities classified as trading.
Mortgage loans on real estate are carried at the unpaid principal
balance less valuation allowances. The Company provides valuation
allowances for impairments of mortgage loans on real estate based
on a review by portfolio managers. The measurement of impaired
loans is based on the present value of expected future cash flows
discounted at the loan's effective interest rate or, at the fair
value of the collateral, if the loan is collateral dependent.
Loans in foreclosure and loans considered to be impaired as of the
balance sheet date are placed on non-accrual status and written
down to the fair value of the existing property to derive a new
cost basis. Cash receipts on non-accrual status mortgage loans on
real estate are included in interest income in the period
received.
Real estate is carried at cost less accumulated depreciation and
valuation allowances. Other long-term investments are carried on
the equity basis, adjusted for valuation allowances.
Realized gains and losses on the sale of investments are
determined on the basis of specific security identification.
Estimates for valuation allowances and other than temporary
declines are included in realized gains and losses on investments.
(Continued)
7
<PAGE> 9
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
(b) REVENUES AND BENEFITS
Traditional life insurance products include those products with
fixed and guaranteed premiums and benefits and consist primarily
of whole life, limited-payment life, term life and certain
annuities with life contingencies. Premiums for traditional life
insurance products are recognized as revenue when due and
collected. Benefits and expenses are associated with earned
premiums so as to result in recognition of profits over the life
of the contract. This association is accomplished by the provision
for future policy benefits and the deferral and amortization of
policy acquisition costs.
Universal life products include universal life, variable universal
life and other interest-sensitive life insurance policies.
Investment products consist primarily of individual and group
deferred annuities, annuities without life contingencies and
guaranteed investment contracts. Revenues for universal life and
investment products consist of net investment income and cost of
insurance, policy administration and surrender charges that have
been earned and assessed against policy account balances during
the period. Policy benefits and claims that are charged to expense
include benefits and claims incurred in the period in excess of
related policy account balances, maintenance costs and interest
credited to policy account balances.
Accident and health insurance premiums are recognized as revenue
in accordance with the terms of the policies. Policy claims are
charged to expense in the period that the claims are incurred.
(c) DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new business, principally commissions,
certain expenses of the policy issue and underwriting department
and certain variable agency expenses have been deferred. For
traditional non-participating life insurance products, these
deferred acquisition costs are predominantly being amortized with
interest over the premium paying period of the related policies in
proportion to premium revenue. Such anticipated premium revenue
was estimated using the same assumptions as were used for
computing liabilities for future policy benefits. For
participating life insurance products, deferred policy acquisition
costs are being amortized in proportion to gross margins of the
related policies. Gross margins are determined for each issue year
and are equal to premiums plus investment income less death
claims, surrender benefits, administrative costs, expected
policyholder dividends, and the increase in reserve for future
policy benefits. For universal life and investment products,
deferred policy acquisition costs are being amortized with
interest over the lives of the policies in relation to the present
value of the estimated future gross profits from projected
interest margins, cost of insurance, policy administration and
surrender charges. Deferred policy acquisition costs for
participating life and universal life business are adjusted to
reflect the impact of unrealized gains and losses on fixed
maturity securities available-for-sale (see Note 2(a)).
(Continued)
8
<PAGE> 10
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
(d) SEPARATE ACCOUNTS
Separate Account assets and liabilities represent contractholders'
funds which have been segregated into accounts with specific
investment objectives. The investment income and gains or losses
of these accounts accrue directly to the contractholders. The
activity of the Separate Accounts is not reflected in the
consolidated statements of income and cash flows except for the
fees the Company receives for administrative services and risks
assumed. Amounts provided by the Company to establish Separate
Account investment portfolios, seed money, are not included in
Separate Account liabilities.
(e) FUTURE POLICY BENEFITS
Future policy benefits for traditional life have been calculated
using a net level premium method based on estimates of mortality,
morbidity, investment yields and withdrawals which were used or
which were being experienced at the time the policies were issued,
rather than the assumptions prescribed by state regulatory
authorities (see Note 6).
Future policy benefits for annuity policies in the accumulation
phase, universal life and variable universal life policies have
been calculated based on participants' aggregate account values.
(f) PARTICIPATING BUSINESS
Participating business represents approximately 41% of the
Company's ordinary life insurance in force in 1998. In 1997 and
1996, participating business represented approximately 42% and
43%, respectively, of the Company's ordinary life insurance in
force. The provision for policyholder dividends is based on
current dividend scales. Future dividends are provided for in
future policy benefits based on dividend scales in effect as of
December 31, 1998.
(g) REINSURANCE CEDED
Reinsurance premiums ceded and reinsurance recoveries on benefits
and claims incurred are deducted from the respective income and
expense accounts. Assets and liabilities related to reinsurance
ceded are reported on a gross basis.
(h) FEDERAL INCOME TAX
The Company is included as part of the consolidated Federal income
tax return of its ultimate parent, OHMH. The Company uses the
asset and liability method of accounting for income tax. Under the
asset and liability method, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and
operating loss and tax credit carryforwards. Deferred tax assets
and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under this
method, the effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that
includes the enactment date. Valuation allowances are established
when necessary to reduce the deferred tax assets to the amounts
expected to be realized.
(Continued)
9
<PAGE> 11
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
(i) CASH EQUIVALENTS
For purposes of the consolidated statements of cash flows, the
Company considers all short-term investments with original
maturities of three months or less to be cash equivalents.
(j) USE OF ESTIMATES
In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities as of the date of the
consolidated financial statements and revenues and expenses for
the reporting period. Actual results could differ significantly
from those estimates.
The estimates susceptible to significant change are those used in
determining deferred policy acquisition costs, the liability for
future policy benefits and claims and contingencies, and those
used in determining valuation allowances for mortgage loans on
real estate and real estate. Although some variability is inherent
in these estimates, management believes the amounts provided are
adequate.
(k) CLOSED BLOCK
The Reorganization contained an arrangement, known as a closed
block (the Closed Block), to provide for dividends on policies
that were in force on the Effective Date and were within classes
of individual policies for which the Company had a dividend scale
in effect at the time of the Reorganization. The Closed Block was
designed to give reasonable assurance to owners of affected
policies that assets will be available to support such policies,
including maintaining dividend scales in effect at the time of the
Reorganization, if the experience underlying such scales
continues. The assets, including revenue therefrom, allocated to
the Closed Block will accrue solely to the benefit of the owners
of policies included in the Closed Block until the Closed Block is
no longer in effect. The Company will not be required to support
the payment of dividends on Closed Block policies from its general
funds.
The financial information of the Closed Block, while prepared on a
GAAP basis, reflects its contractual provisions and not its actual
results of operations and financial position. Many expenses
related to the Closed Block operations are charges to operations
outside of the Closed Block; accordingly, the contribution from
the Closed Block does not represent the actual profitability of
the Closed Block operations. Operating costs and expenses outside
of the Closed Block are, therefore, disproportionate to the
business outside of the Closed Block.
(Continued)
10
<PAGE> 12
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
Summarized financial information of the Closed Block as of December 31, 1998 and
for the five months ended December 31, 1998, is as follow:
<TABLE>
<S> <C>
Closed Block assets:
Fixed maturity securities available-for-sale, at fair value (amortized cost of $
$215,144) 233,722
Fixed maturity securities held-to-maturity, at amortized cost 70,000
Short-term investments, at fair value 3,615
Mortgage loans on real estate, net 100,756
Policy loans 116,745
Accrued investment income 6,008
Other assets 10,528
Reinsurance recoverable 2,871
Deferred policy acquisition costs 91,838
-----------
$ 636,083
===========
Closed Block liabilities:
Future policy benefits and claims 675,498
Other policyowner funds 3,656
Policyholders' dividend accumulations 27,506
Deferred Federal income tax liability 6,502
-----------
$ 713,162
===========
Closed Block revenues and expenses:
Traditional life insurance premiums 31,731
Net investment income 19,941
Net realized gains on investments 210
Other income 34
Benefits and claims (32,640)
Amortization of deferred acquisition costs (4,187)
Other operating costs and expenses (2,386)
Provision for policyholders' dividends on participating policies (6,852)
-----------
Income before Federal income taxes (1) $ 5,851
===========
</TABLE>
(1) Represents contribution from the Closed Block.
(Continued)
11
<PAGE> 13
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
(l) EMERGING ACCOUNTING ISSUES
On January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS 131). SFAS 131
establishes standards for public companies to report information
about operating segments in annual financial statements and
selected information about operating segments in interim financial
reports. SFAS 131 did not affect the results of operations of the
Company or financial position.
The segment information required by SFAS 131 is in note 15.
On January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits" (SFAS 132). SFAS 132
revises employers' disclosures about pension and other
postretirement benefit plans. SFAS 132 does not change the
measurement or recognition of benefit plans in the consolidated
financial statements. The revised disclosures required by SFAS 132
are included in Note 11.
In March 1998, the American Institute of Certified Public
Accountants' Accounting Standards Executive Committee issued
Statement of Position (SOP) 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use". SOP
98-1 provides guidance on the appropriate accounting treatment for
costs incurred to develop or obtain computer software for internal
use. Specifically, SOP 98-1 provides guidance for determining
whether computer software is for internal use and when costs
incurred for internal use software are to be capitalized. SOP 98-1
is effective for financial statements for fiscal years beginning
after December 15, 1998 with earlier application encouraged. The
Company does not believe that the adoption of SOP 98-1 will have a
material impact on consolidated results of operations or financial
condition.
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities" (SFAS 133).
SFAS 133 establishes accounting and reporting standards for
derivative instruments and for hedging activities. Contracts that
contain embedded derivatives, such as certain insurance contracts,
are also addressed by the Statement. SFAS 133 requires that an
entity recognize all derivatives as either assets or liabilities
in the statement of financial position and that those assets or
liabilities be measured at fair value. SFAS 133 is effective for
all fiscal quarters of fiscal years beginning after June 15, 1999,
with earlier application permitted. The Company is currently
reviewing the requirements of this Statement and evaluating what,
if any, impact it will have on consolidated results of operations
and financial condition.
(m) RECLASSIFICATIONS
Certain amounts in the 1997 and 1996 consolidated financial
statements have been reclassified to conform with 1998
presentation.
(Continued)
12
<PAGE> 14
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
(3) BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared in
accordance with GAAP which differs from statutory accounting practices
prescribed or permitted by regulatory authorities. Annual Statements for
ONLIC and ONLAC, insurance subsidiaries, filed with the Department of
Insurance of the State of Ohio, are prepared on a basis of accounting
practices prescribed or permitted by such regulatory authority.
Prescribed statutory accounting practices include a variety of
publications of the National Association of Insurance Commissioners
(NAIC), as well as state laws, regulations and general administrative
rules. Permitted statutory accounting practices encompass all accounting
practices not so prescribed. ONLIC and ONLAC have no material permitted
statutory accounting practices.
The statutory basis net income and capital and surplus of ONLIC and ONLAC
after intercompany eliminations included in the accompanying consolidated
financial statements was $51,900, $53,696 and $44,503 for the years ended
December 31, 1998, 1997 and 1996, respectively and $408,928 and $362,565
as of December 31, 1998 and 1997, respectively.
(4) COMPREHENSIVE INCOME
Pursuant to Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income", the Consolidated Statements of
Shareholders' Equity include a new measure called "Comprehensive Income".
Comprehensive Income includes net income as well as certain items that
are reported directly within a separate component of shareholders' equity
that bypass net income. The components of other comprehensive income,
including the related Federal tax amounts, were as follows for the years
ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Unrealized gains (losses) on securities available-for-sale
arising during the period:
Net of adjustment to deferred policy acquisition costs $ 11,418 86,670 (52,485)
Related Federal tax (expense) benefit (4,003) (30,335) 18,370
-------- -------- --------
Net 7,415 56,335 (34,115)
-------- -------- --------
Less:
Reclassification adjustment for net (gains) losses on
securities available-for-sale realized during the period:
Gross 4,504 287 7,572
Related Federal tax expense (benefit) (1,577) (101) (2,650)
-------- -------- --------
Net 2,927 186 4,922
-------- -------- --------
Total other comprehensive income (loss) $ 4,488 56,149 (39,037)
======== ======== ========
</TABLE>
(Continued)
13
<PAGE> 15
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
(5) INVESTMENTS
An analysis of investment income and realized gains/(losses) by
investment type follows for the years ended December 31:
<TABLE>
<CAPTION>
REALIZED GAINS (LOSSES)
INVESTMENT INCOME ON INVESTMENTS
--------------------------------------- ---------------------------------------
1998 1997 1996 1998 1997 1996
---------- --------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Securities available-for-sale:
Fixed maturities $ 204,171 207,377 203,271 $ (2,132) 2,056 3,168
Equity securities 2,638 2,793 4,021 178 38 4,077
Fixed maturities held-to-maturity 59,524 62,348 61,509 5,325 2,539 1,304
Mortgage loans on real estate 106,418 103,566 89,391 371 1,863 1,262
Real estate 2,334 6,123 8,693 2,416 4,418 (605)
Policy loans 7,820 9,834 9,420 - - -
Short-term 167 5,010 3,419 - - -
Other 6,553 6,612 5,042 (4,558) (387) (1,434)
---------- ---------- ---------- ---------- ---------- ----------
Total 389,625 403,663 384,766 1,600 10,527 7,772
Investment expenses (13,222) (13,116) (14,064)
Change in valuation allowances:
Mortgage loans on real estate 93 (63) 926
Real estate and other - 2,036 63
---------- ---------- ----------
93 1,973 989
----------- ----------- -----------
Net investment income $ 376,403 390,547 370,702
=========== =========== ===========
Net realized gains on
---------- ---------- ----------
investments $ 1,693 12,500 8,761
========== ========== ==========
</TABLE>
(Continued)
14
<PAGE> 16
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
The amortized cost and estimated fair value of securities
available-for-sale and fixed maturities held-to-maturity were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1998
---------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Securities available-for-sale
- -----------------------------
Fixed maturities:
U.S. Treasury securities and obligations of
U.S. government operations and agencies $ 121,670 13,584 - 135,254
Obligations of states and political
subdivisions 84,564 9,671 (40) 94,195
Debt securities issued by foreign
governments 2,888 735 - 3,623
Corporate securities 1,593,332 123,019 (15,528) 1,700,823
Mortgage-backed securities 631,745 35,670 (758) 666,657
---------- ---------- ---------- ----------
Total fixed maturities $2,434,199 182,679 (16,326) 2,600,552
========== ========== ========== ==========
Equity securities $ 42,457 54,234 (3,042) 93,649
========== ========== ========== ==========
Fixed maturity securities held-to-maturity
- ------------------------------------------
Obligations of states and political $ 10,265 825 (179) 10,911
subdivisions
Corporate securities 654,447 67,185 (529) 721,102
Mortgage-backed securities 14,816 1,233 - 16,049
---------- ---------- ---------- ----------
$ 679,528 69,243 (708) 748,062
========== ========== ========== ==========
</TABLE>
(Continued)
15
<PAGE> 17
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
------------- -------------- ------------- ---------------
<S> <C> <C> <C> <C>
Securities available-for-sale
-----------------------------
Fixed maturities:
U.S. Treasury securities and obligations of
U.S. government operations and agencies $ 125,785 7,976 (184) 133,577
Obligations of states and political
subdivisions 53,646 4,449 (90) 58,005
Corporate securities 1,657,487 128,028 (1,565) 1,783,950
Mortgage-backed securities 688,343 25,142 (1,170) 712,315
------------- -------------- ------------- ---------------
Total fixed maturities $ 2,525,261 165,595 (3,009) 2,687,847
============= ============== ============= ===============
Equity securities $ 41,423 41,369 (809) 81,983
============= ============== ============= ===============
Fixed maturity securities held-to-maturity
------------------------------------------
Obligations of states and political subdivisions $ 15,018 1,551 (403) 16,166
Corporate securities 695,480 69,463 (3,248) 761,695
Mortgage-backed securities 14,394 775 (47) 15,122
------------- -------------- ------------- ---------------
$ 724,892 71,789 (3,698) 792,983
============= ============== ============= ===============
</TABLE>
The components of unrealized gains on securities available-for-sale,
net, were as follows for the years ended December 31:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Gross unrealized gain $ 217,545 203,146
Adjustment to deferred policy acquisition costs (48,834) (41,350)
Deferred Federal income tax (61,267) (58,840)
----------- -----------
$ 107,444 102,956
=========== ===========
</TABLE>
The net unrealized gain on securities available-for-sale includes a net
unrealized gain on equity securities of $30,823 in 1998 ($24,715 in 1997)
and a net unrealized gain on fixed maturities of $76,621 in 1998 ($78,241
in 1997).
(Continued)
16
<PAGE> 18
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
An analysis of the change in gross unrealized gains (losses) on
securities available-for-sale and fixed maturities held-to-maturity
follows for the years ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- -----------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturities $ 3,767 91,601 (95,101)
Equity securities 10,632 15,972 4,769
Fixed maturities held-to-maturity 444 14,217 (39,811)
</TABLE>
The amortized cost and estimated fair value of fixed maturity securities
available-for-sale and fixed maturity securities held-to-maturity as of
December 31, 1998, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
FIXED MATURITY SECURITIES
-----------------------------------------------------------------
AVAILABLE-FOR-SALE HELD-TO-MATURITY
------------------------------- ------------------------------
AMORTIZED ESTIMATED AMORTIZED ESTIMATED
COST FAIR VALUE COST FAIR VALUE
------------- ------------- -------------- ------------
<S> <C> <C> <C> <C>
Due in one year or less $ 48,114 49,448 27,847 29,841
Due after one year through five years 518,076 544,771 197,361 211,673
Due after five years through ten years 814,285 856,819 308,397 337,787
Due after ten years 1,053,724 1,149,514 145,923 168,761
------------- ------------- -------------- ------------
$ 2,434,199 2,600,552 679,528 748,062
============= ============= ============== ============
</TABLE>
Proceeds from the sale of securities available-for-sale (excludes calls)
during 1998, 1997 and 1996 were $3,186, $51,770, and $74,977,
respectively. Gross gains of $0 ($203 in 1997 and $1,667 in 1996) and
gross losses of $38 ($283 in 1997 and $534 in 1996) were realized on
those sales.
Investments with an amortized cost of $11,750 and $7,700 as of December
31, 1998 and 1997, respectively, were on deposit with various regulatory
agencies as required by law.
Real estate is presented at cost less accumulated depreciation of $1,730
in 1998 ($11,172 in 1997) and valuation allowances of $0 in 1998 and
1997.
The Company generally initiates foreclosure proceedings on all mortgage
loans on real estate delinquent sixty days. There were no foreclosures of
mortgage loans on real estate in 1998 and one mortgage loan on real
estate of $570 in process of foreclosure as of December 31, 1998.
(Continued)
17
<PAGE> 19
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
(6) FUTURE POLICY BENEFITS AND CLAIMS
The liability for future policy benefits for universal life insurance
policies and investment contracts (approximately 93% of the total
liability for future policy benefits as of December 31, 1998 and
approximately 68% of the total liability for future policy benefits as of
December 31, 1997) has been established based on accumulated contract
values without reduction for surrender penalty provisions. The average
interest rate credited on investment product policies was 6.7%, 6.8% and
6.8% for the years ended December 31, 1998, 1997 and 1996, respectively.
The liability for future policy benefits for traditional life policies
has been established based upon the net level premium method using the
following assumptions:
Interest rates: Interest rates vary as follows:
<TABLE>
<CAPTION>
YEAR OF ISSUE INTEREST RATE
------------- -------------
<S> <C>
1998, 1997 and 1996 4 - 5.5%
1995 and prior 2.25 - 6.0%
</TABLE>
Withdrawals: Rates, which vary by issue age, type of coverage and
policy duration, are based on Company experience
Mortality: Mortality and morbidity rates are based on published
tables, guaranteed in insurance contracts.
(7) NOTES PAYABLE
On July 11, 1994, the Company issued $50,000, 8.875% surplus notes, due
July 15, 2004. On May 21, 1996, the Company issued $50,000, 8.5% surplus
notes, due May 15, 2026. Concurrent with the issue of the new notes,
$15,000 of the notes issued on July 11, 1994 were retired. Total interest
paid was $7,356, $7,356 and $6,290 during the years ended December 31,
1998, 1997 and 1996, respectively.
The notes have been issued in accordance with Section 3941.13 of the Ohio
Revised Code. Interest payments, scheduled semi-annually, must be
approved for payment by the Director of the Department of Insurance of
the State of Ohio. All issuance costs have been capitalized and are being
amortized over the terms of the notes.
(Continued)
18
<PAGE> 20
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
(8) FEDERAL INCOME TAX
Prior to 1984, the Life Insurance Company Income Tax Act of 1959, as
amended by the Deficit Reduction Act of 1984 (DRA), permitted the
deferral from taxation of a portion of statutory income under certain
circumstances. In these situations, the deferred income was accumulated
in the Policyholders' Surplus Account (PSA). Management considers the
likelihood of distributions from the PSA to be remote; therefore, no
Federal income tax has been provided for such distributions in the
financial statements. The DRA eliminated any additional deferrals to the
PSA. Any distributions from the PSA, however, will continue to be taxable
at the then current tax rate. The pre-tax balance of the PSA is
approximately $5,257 as of December 31, 1998.
Total income taxes for the years ended December 31, 1998, 1997 and 1996
were allocated as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------ ----------- -----------
<S> <C> <C> <C>
Operations $ 40,500 39,272 32,872
Unrealized gains (loss) on securities
available for sale 2,426 30,324 (22,045)
------------ ----------- -----------
$ 42,926 69,596 10,827
============ =========== ===========
</TABLE>
Total Federal income tax expense for the years ended December 31, 1998,
1997 and 1996 differs from the amount computed by applying the U.S.
Federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------------------- ---------------------- ----------------------
AMOUNT % AMOUNT % AMOUNT %
----------- -------- ----------- --------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Computed (expected)
tax expense $ 37,931 35.0 37,226 35.0 32,366 35.0
Differential earnings 1,232 1.1 3,720 3.5 3,616 3.9
Dividends received
deduction and tax
exempt interest (1,279) (1.1) (1,406) (1.3) (1,440) (1.6)
Other, net 2,616 2.4 (268) (0.3) (1,670) (1.8)
----------- -------- ----------- --------- ----------- --------
$ 40,500 37.4 39,272 36.9 32,872 35.5
=========== ======== =========== ========= =========== ========
</TABLE>
Included in other, net in 1998 are non-deductible expenses related to the
reorganization to a mutual holding company structure.
Total Federal income tax paid was $32,251, $43,522 and $44,823 (net of
refunds of $6,661, $0 and $0) during the years ended December 31, 1998,
1997 and 1996, respectively.
(Continued)
19
<PAGE> 21
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
The tax effects of temporary differences between the financial statement
carrying amounts and tax basis of assets and liabilities that give rise
to significant components of the net deferred tax liability as of
December 31, 1998 and 1997 relate to the following:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Deferred tax assets:
Future policy benefits $ 64,968 57,903
Mortgage loans on real estate 3,130 1,986
Other assets and liabilities 12,722 14,063
----------- -----------
Total gross deferred tax assets 80,820 73,952
----------- -----------
Deferred tax liabilities:
Fixed maturity securities available-for-sale 59,115 57,290
Deferred policy acquisition costs 70,311 66,844
Other fixed maturities, equity securities and other
long-term investments 17,523 14,286
Other 1,353 912
----------- -----------
Total gross deferred tax liabilities 148,302 139,332
----------- -----------
Net deferred tax liability $ 67,482 65,380
=========== ===========
</TABLE>
The Company has determined that a deferred tax asset valuation allowance
was not needed as of December 31, 1998 and 1997. In assessing the
realization of deferred tax assets, management considers whether it is
more likely than not that the deferred tax assets will be realized. The
ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which those
temporary differences become deductible. Management considers primarily
the scheduled reversal of deferred tax liabilities and tax planning
strategies in making this assessment and believes it is more likely than
not the Company will realize the benefits of the deductible differences
remaining as of December 31, 1998.
(9) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, Disclosures about
Fair Value of Financial Instruments (SFAS 107) requires disclosure of
fair value information about existing on and off-balance sheet financial
instruments. SFAS 107 excludes certain assets and liabilities, including
insurance contracts, other than policies such as annuities that are
classified as investment contracts, from its disclosure requirements.
Accordingly, the aggregate fair value amounts presented do not represent
the underlying value of the Company. The tax ramifications of the related
unrealized gains and losses can have a significant effect on fair value
estimates and have not been considered in the estimates.
(Continued)
20
<PAGE> 22
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
The following methods and assumptions were used by the Company in
estimating its fair value disclosures:
CASH, SHORT-TERM INVESTMENTS AND POLICY LOANS - The carrying amount
reported in the balance sheets for these instruments approximate
their fair value.
INVESTMENT SECURITIES - Fair value for equity securities and fixed
maturity securities are the same as market value. Market value
generally represents quoted market prices traded in the public
market place. For fixed maturity securities not actively traded, or
in the case of private placements, fair value is estimated by
discounting expected future cash flows using a current market rate
applicable to the yield, credit quality and duration of
investments.
SEPARATE ACCOUNT ASSETS AND LIABILITIES - The fair value of assets
held in Separate Accounts is based on quoted market prices. The
fair value of liabilities related to Separate Accounts is the
accumulated contract values in the Separate Account portfolios.
MORTGAGE LOANS ON REAL ESTATE - The fair value for mortgage loans
on real estate is estimated using discounted cash flow analyses,
using interest rates currently being offered for similar loans to
borrowers with similar credit ratings. Loans with similar
characteristics are aggregated for purposes of the calculations.
INVESTMENT CONTRACTS - Fair value for the Company's liabilities
under investment type contracts is disclosed using two methods. For
investment contracts without defined maturities, fair value is the
amount payable on demand. For investment contracts with known or
determined maturities, fair value is estimated using discounted
cash flow analysis. Interest rates used are similar to currently
offered contracts with maturities consistent with those remaining
for the contracts being valued.
NOTE PAYABLE - The fair value for the note payable was determined
by discounting the scheduled cash flows of the note using a market
rate applicable to the yield, credit quality and maturity of a
similar debt instrument.
POLICYHOLDERS' DIVIDEND ACCUMULATION AND OTHER POLICYHOLDER FUNDS -
The carrying amount reported in the consolidated balance sheets for
these instruments approximates their fair value.
(Continued)
21
<PAGE> 23
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
The carrying amount and estimated fair value of financial instruments
subject to SFAS 107 were as follows as of December 31:
<TABLE>
<CAPTION>
1998 1997
----------------------------- -----------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
ASSETS
Investments:
Securities available-for-sale:
Fixed maturities $ 2,600,552 2,600,552 2,687,847 2,687,847
Equity securities 93,649 93,649 81,983 81,983
Fixed maturities held-to-maturity 679,528 748,062 724,892 792,983
Mortgage loans on real estate 1,144,424 1,242,109 1,230,256 1,324,735
Policy loans 40,810 40,810 153,348 153,348
Short-term investments 98,315 98,315 37,509 37,509
Cash 9,451 9,451 14,012 14,012
Assets held in Separate Accounts 1,154,576 1,154,576 916,790 916,790
LIABILITIES
Guaranteed investment contracts $ 1,094,242 1,096,184 1,041,271 1,050,429
Individual deferred annuity contracts 1,076,504 1,063,799 1,088,355 1,056,643
Other annuity contracts 898,781 945,694 921,100 957,977
Note payable 84,278 92,732 84,234 95,544
Dividend accumulations and
other policyholder funds 59,880 59,880 79,492 79,492
Liabilities related to separate accounts 1,107,049 1,107,049 887,542 887,542
</TABLE>
(10) ADDITIONAL FINANCIAL INSTRUMENTS DISCLOSURE
(a) FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Company is a party to financial instruments with
off-balance-sheet risk in a normal course of business through
management of its investment portfolio. The Company had
outstanding commitments to fund mortgage loans, bonds and venture
capital partnerships of approximately $229,000 and $144,000 as of
December 31, 1998 and 1997, respectively. These commitments
involve, in varying degrees, elements of credit and market risk in
excess of amounts recognized in the financial statements. The
credit risk of all financial instruments, whether on- or
off-balance sheet, is controlled through credit approvals, limits,
and monitoring procedures.
(Continued)
22
<PAGE> 24
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
(b) SIGNIFICANT CONCENTRATIONS OF CREDIT RISK
Mortgage loans are collateralized by the underlying properties.
Collateral must meet or exceed 125% of the loan at the time the
loan is made. The Company grants mainly commercial mortgage loans
to customers throughout the United States. The Company has a
diversified loan portfolio, and total loans in any state do not
exceed 10% of the total loan portfolio as of December 31, 1998.
The summary below depicts loan exposure of remaining principal
balances by type as of December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
Mortgage assets by type
-----------------------
Retail $ 329,040 332,621
Office 294,183 345,313
Apartment 265,746 297,647
Industrial 152,840 159,425
Other 111,243 104,886
------------- -------------
1,153,052 1,239,892
Less valuation allowances 8,628 9,636
------------- -------------
Total mortgage loans on real estate, net $ 1,144,424 1,230,256
============= =============
</TABLE>
(11) PENSIONS AND OTHER POSTRETIREMENT BENEFITS
The Company sponsors a funded pension plan covering all home office
employees. Retirement benefits are based on years of service and the
highest average earnings in five of the last ten years. The Company also
sponsors unfunded pension plans covering home office employees where
benefits exceed Code 401(a)(17) and Code 415 limits and covering general
agents. The general agents plan provides benefits based on years of
service and average compensation during the final five and ten years of
service
The Company currently offers eligible retirees the opportunity to
participate in a health plan. The Company has two health plans, one is
offered to home office employees, the other is offered to career agents.
Home Office Employee Health Plan
--------------------------------
The Company provides a declining service schedule. Only home office
employees hired prior to January 1, 1996, may become eligible for
these benefits provided that the employee meets the age and years of
service requirements. The plan states that an employee becomes
eligible as follows: age 55 with 20 years of credited service at
retirement, age 56 with 18 years of service, age 57 with 16 years of
service grading to age 64 with 2 years of service. The health plan is
contributory with retirees contributing approximately 15% of premium
for coverage.
(Continued)
23
<PAGE> 25
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
Career Agents Health Plan
-------------------------
Only career agents with contracts effective prior to January 1, 1996,
may become eligible for these benefits provided that the agent is at
least age 55 and has 15 years of credited service at retirement. The
health plan is contributory, with retirees contributing approximately
47% of medical costs.
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
------------------------- -------------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year $ 45,583 39,047 14,572 14,584
Service cost 2,520 2,221 258 301
Interest cost 3,131 3,072 333 468
Actuarial gain (loss) 738 5,063 (643) (474)
Benefits paid (5,195) (3,820) (282) (307)
-------- -------- -------- --------
Benefit obligation at end of year $ 46,777 45,583 14,238 14,572
======== ======== ======== ========
CHANGE IN PLAN ASSETS
Fair value of assets at beginning of year $ 24,854 24,050 - -
Actual return on plan assets 1,335 2,273 - -
Employer contribution 701 1,226 - -
Benefits paid (3,093) (2,695) - -
-------- -------- -------- --------
Fair value of assets at end of year $ 23,797 24,854 - -
======== ======== ======== ========
CALCULATION OF FUNDED STATUS
Funded status $(22,980) (20,729) (14,238) (14,572)
Unrecognized actuarial loss 9,625 8,687 - -
Unrecognized prior service cost (745) (812) - -
-------- -------- -------- --------
Net amount recognized $(14,100) (12,854) (14,238) (14,572)
======== ======== ======== ========
</TABLE>
The following table shows the portions of the above values, in aggregate,
attributable to the pension plans whose Accumulated Benefit Obligation exceeds
Plan Assets.
<TABLE>
<CAPTION>
PENSION BENEFITS
-------------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Projected Benefit Obligation 18,708 18,299 14,613
Accumulated Benefit Obligation 13,864 14,307 11,396
Assets - 257 243
Minimum Liability 13,864 14,050 11,153
Accrued Pension Cost (10,829) (9,620) (9,221)
Unrecognized Transition Obligation 2,620 2,911 3,202
</TABLE>
(Continued)
24
<PAGE> 26
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
<TABLE>
<CAPTION>
WEIGHTED AVERAGE ASSUMPTIONS AS OF DECEMBER 31
PENSION BENEFITS OTHER BENEFITS
-------------------------------- -----------------------------
1998 1997 1998 1997
--------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Discount rate 5.80% 5.90% 6.94% 7.50%
Expected return on plan assets 9.00% 9.00% - -
Rate of compensation increase 5.70% 5.40% - -
</TABLE>
For measurement purposes, a nine percent annual rate of increase in the per
capita cost of covered health care benefits was assumed for 1999. The rate was
assumed to decrease gradually to five percent for 2001 and remain at that level
thereafter.
<TABLE>
<CAPTION>
COMPONENTS OF NET PERIODIC BENEFIT COST
PENSION BENEFITS OTHER BENEFITS
-------------------------------------- -----------------------------------
1998 1997 1996 1998 1997 1996
----------- ---------- ---------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 2,520 2,221 2,169 258 301 467
Interest cost 3,131 3,072 2,896 333 468 768
Expected return on plan assets (2,087) (2,037) (1,860) - - -
Amortization of prior service cost (67) (67) (67) (504) (367) (199)
Recognized actuarial loss 564 300 384 (139) (107) -
----------- ---------- ---------- ---------- ---------- ----------
Net periodic benefit cost $ 4,061 3,489 3,522 (52) 295 1,036
=========== ========== ========== ========== ========== ==========
</TABLE>
The health care cost trend rate assumption has a significant effect on
the amounts reported for the health care plan. A one percentage point
increase in the assumed health care cost trend rate would increase the
accumulated postretirement benefit obligation as of December 31, 1998 and
1997 by $236 and $1,078, respectively, and the net periodic
postretirement benefit cost for the years ended December 31, 1998 and
1997 by $17 and $36, respectively.
The Company also maintains a qualified contributory defined contribution
profit sharing plan covering substantially all employees. Company
contributions to the Profit Sharing Plan are based on the net earnings of
the Company and are payable at the sole discretion of management. The
expense reported for contributions to the plan for 1998, 1997, and 1996
were $1,829, $1,825 and $1,614, respectively.
The Company has other deferred compensation and supplemental pension
plans. The expenses for these plans in 1998, 1997 and 1996 were $5,697,
$3,949 and $2,950, respectively.
(12) REGULATORY RISK-BASED CAPITAL, RETAINED EARNINGS AND DIVIDEND
RESTRICTIONS
ONLIC and ONLAC exceed the minimum risk-based capital requirements as
established by the NAIC as of December 31, 1998.
The Company has designated a portion of retained earnings for separate
account contingencies and investment guarantees totaling $1,648 and
$1,673 as of December 31, 1998 and 1997, respectively.
The payment of dividends by the Company to its participating
policyholders is based on the dividend scale declared at least annually
by the Company's Board of Directors.
(Continued)
25
<PAGE> 27
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
(13) BANK LINES OF CREDIT
As of December 31, 1998 and 1997, ONLIC had a $10,000 unsecured line of
credit which was not utilized during 1998 and 1997.
(14) CONTINGENCIES
The Company and its subsidiaries are defendants in various legal actions
arising in the normal course of business. While the outcome of such
matters cannot be predicted with certainty, management believes such
matters will be resolved without material adverse impact on the financial
condition of the Company.
The Company routinely enters into reinsurance transactions with other
insurance companies. This reinsurance involves either ceding certain
risks to or assuming risks from other insurance companies. The primary
purpose of ceded reinsurance is to protect the Company from potential
losses in excess of levels that it is prepared to accept. Reinsurance
does not discharge the Company from its primary liability to
policyholders and to the extent that a reinsurer should be unable to meet
its obligations, the Company would be liable to policyholders. The
Company has reinsurance recoverables of $75,394 and $61,862 at December
31, 1998 and 1997, respectively. Ceded premiums approximated 9%, 11%, and
11% of gross earned life and accident and health premiums during 1998,
1997 and 1996, respectively.
(15) SEGMENT INFORMATION
The Company conducts its business in two segments: life and other
insurance and annuity and investment products. Life and other insurance
includes whole life, universal life, variable universal life, and
endowments, as well as term life, health insurance, and other
miscellaneous insurance products provided to individuals and groups. All
products within this segment share similar distribution systems and some
degree of mortality (loss of life) or morbidity (loss of health) risk.
The products in this segment are designed to provide a vehicle for risk
management for policyholders. Annuity and investment products include
guaranteed investment and accumulated deposit contracts issued to groups
and deferred and immediate annuities issued to individuals. The products
in this segment are primarily designed for asset accumulation and
generation of investment returns. All revenue, expense, asset and
liability amounts are allocated to one of the two segments. As such, the
sum of the financial information from these segments equals the
information of the Company as a whole.
(Continued)
26
<PAGE> 28
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(in thousands)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OR AS OF
DECEMBER 31, 1998
------------------------------------------------------------------
ANNUITY AND
LIFE AND OTHER INVESTMENT
INSURANCE PRODUCTS TOTAL
------------------ --------------------- -----------------
<S> <C> <C> <C>
Premiums, policy charges and investment income (1) $ 304,174 307,928 612,102
Net realized gains (losses) on investments (920) 2,613 1,693
------------------ --------------------- -----------------
Total revenues 303,254 310,541 613,795
================== ===================== =================
Income before Federal income taxes 44,897 63,477 108,375
================== ===================== =================
Total assets 2,389,353 4,470,553 6,859,906
================== ===================== =================
FOR THE YEAR ENDED OR AS OF
DECEMBER 31, 1997
-----------------------------------------------------------------
ANNUITY AND
LIFE AND OTHER INVESTMENT PRODUCTS
INSURANCE TOTAL
------------------ -------------------- ------------------
Premiums, policy charges and investment income $ 314,379 307,377 621,756
Net realized gains on investments 7,892 4,608 12,500
------------------ --------------------- -----------------
Total revenues $ 322,271 311,985 634,256
================== ==================== ==================
Income before Federal income taxes $ 49,013 57,346 106,359
================== ==================== ==================
Total assets $ 2,972,192 3,358,370 6,330,562
================== ==================== ==================
FOR THE YEAR ENDED OR AS OF
DECEMBER 31, 1996
-----------------------------------------------------------------
ANNUITY AND
LIFE AND OTHER INVESTMENT PRODUCTS
INSURANCE TOTAL
------------------ -------------------- ------------------
Premiums, policy charges and investment income $ 295,860 284,418 580,278
Net realized gains on investments 3,330 5,431 8,761
------------------ --------------------- -----------------
Total revenues $ 299,190 289,849 589,039
================== ==================== ==================
Income before Federal income taxes $ 45,057 47,418 92,475
================== ==================== ==================
Total assets $ 2,522,004 3,259,585 5,781,589
================== ==================== ==================
</TABLE>
(1) Premiums, policy charges and investment income for life and other insurance
includes the net contribution from Closed Block for the year ended December
31, 1998.
27
<PAGE> 29
SCHEDULE 1
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Consolidating Information - Balance Sheet
December 31, 1998
(in thousands)
<TABLE>
<CAPTION>
THE OHIO OHIO
NATIONAL LIFE NATIONAL LIFE
INSURANCE ASSURANCE
ASSETS COMPANY CORPORATION ELIMINATIONS CONSOLIDATED
------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENTS:
Securities available-for-sale, at fair value:
Fixed maturities $1,994,118 606,434 - 2,600,552
Equity securities 305,844 - (212,195) 93,649
Fixed maturities held-to-maturity, at -
amortized cost 581,952 97,576 - 679,528
Mortgage loans on real estate, net 914,777 229,647 - 1,144,424
Real estate, net 8,724 - - 8,724
Policy loans 213 40,597 - 40,810
Other long-term investments 41,697 - - 41,697
Short-term investments 89,318 8,997 - 98,315
---------- ---------- ---------- ----------
Total investments 3,936,643 983,251 (212,195) 4,707,699
Cash 3,248 6,203 - 9,451
Accrued investment income 46,425 11,963 - 58,388
Deferred policy acquisition costs 44,699 138,582 - 183,281
Reinsurance recoverable 19,915 105,119 (49,640) 75,394
Other assets 39,838 3,791 (8,595) 35,034
Assets held in Separate Accounts 1,051,270 103,306 - 1,154,576
Closed block assets 636,083 - - 636,083
---------- ---------- ---------- ----------
Total assets $5,778,121 1,352,215 (270,430) 6,859,906
========== ========== ========== ==========
LIABILITIES AND EQUITY
Future policy benefits and claims 3,016,148 1,001,501 (49,640) 3,968,009
Policyholders' dividend accumulations 46,276 - - 46,276
Other policyholder funds 11,247 2,357 - 13,604
Note payable, net 84,278 - - 84,278
Federal income taxes:
Current 19,434 1,796 - 21,230
Deferred 56,127 11,355 - 67,482
Other liabilities 119,098 19,705 (8,595) 130,208
Liabilities related to Separate Accounts 1,003,743 103,306 - 1,107,049
Closed block liabilities 713,162 - - 713,162
---------- ---------- ---------- ----------
Total liabilities 5,069,513 1,140,020 (58,235) 6,151,298
---------- ---------- ---------- ----------
EQUITY:
Common stock and paid-in-capital 10,000 36,625 (36,625) 10,000
Accumulated other comprehensive income 107,444 12,211 (12,211) 107,444
Retained earnings 591,164 163,359 (163,359) 591,164
---------- ---------- ---------- ----------
Total equity 708,608 212,195 (212,195) 708,608
---------- ---------- ---------- ----------
Total liabilities and equity $5,778,121 1,352,215 (270,430) 6,859,906
========== ========== ========== ==========
</TABLE>
See accompanying independent auditors' report.
28
<PAGE> 30
SCHEDULE 2
THE OHIO NATIONAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly-owned subsidiary of Ohio National Financial Services, Inc.)
Consolidating Information - Statement of Income
Year ended December 31, 1998
(in thousands)
<TABLE>
<CAPTION>
THE OHIO OHIO
NATIONAL LIFE NATIONAL LIFE
INSURANCE ASSURANCE
COMPANY CORPORATION ELIMINATIONS CONSOLIDATED
------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Traditional life insurance premiums $ 95,438 3,167 (2,182) 96,423
Accident and health insurance premiums 17,375 7,808 - 25,183
Annuity premiums and charges 44,520 866 - 45,386
Universal life policy charges - 59,743 - 59,743
Net investment income 332,588 69,547 (25,732) 376,403
Net realized gains on investments 1,492 201 - 1,693
Other income (33) 3,146 - 3,113
Contribution from the closed block 5,851 - 5,851
--------- --------- --------- ---------
497,231 144,478 (27,914) 613,795
--------- --------- --------- ---------
Benefits and expenses:
Benefits and claims 312,916 76,663 - 389,579
Provision for policyholders' dividends on
participating policies 20,792 - - 20,792
Amortization of deferred policy acquisition
costs 6,908 12,443 - 19,351
Other operating costs and expenses 62,482 15,398 (2,182) 75,698
--------- --------- --------- ---------
403,098 104,504 (2,182) 505,420
--------- --------- --------- ---------
Income before Federal income taxes 94,133 39,974 (25,732) 108,375
--------- --------- --------- ---------
Federal income taxes:
Current expense 24,811 16,013 - 40,824
Deferred (benefit) expense 1,447 (1,771) - (324)
--------- --------- --------- ---------
26,258 14,242 - 40,500
--------- --------- --------- ---------
Net income $ 67,875 25,732 (25,732) 67,875
========= ========= ========= =========
</TABLE>
See accompanying independent auditors' report.
29
<PAGE> 42
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
The following financial statements of the Registrant are included in Part B of
this Registration Statement:
Independent Auditors' Report of KPMG LLP dated February 5, 1999
Statement of Assets and Contract Owners' Equity dated December 31, 1998
Statement of Operations and Changes in Contract Owners' Equity for the
Year Ended December 31, 1998
Notes to Financial Statements dated December 31, 1998
Schedule of Changes in Unit Values for the Year Ended December 31, 1998
The following consolidated financial statements of The Depositor and its
subsidiaries are also included in Part B of this Registration Statement:
Independent Auditors' Report of KPMG LLP dated January 29, 1999
Consolidated Balance Sheets dated December 31, 1998 and 1997
Consolidated Statements of Income for the Years Ended December 31, 1998,
1997 and 1996
Consolidated Statements of Equity for the Years Ended December 31, 1998,
1997 and 1996
Consolidated Statements of Cash Flows for the Years Ended December 31,
1998, 1997 and 1996
Notes to Consolidated Financial Statements dated December 31, 1998, 1997
and 1996
The following financial information is included in Part A of this Registration
Statement:
Accumulation Unit Values
Consents of the Following Persons:
KPMG LLP
Exhibits:
All relevant exhibits, which have previously been filed with the Commission and
are incorporated herein by reference, are as follows:
(1) Resolution of Board of Directors of the Depositor authorizing
establishment of the Registrant was filed as Exhibit A(1) of the
registration statement of Ohio National Variable Account A ("VAA")
on Form S-6 on August 3, 1982 (File no. 2-78652).
13
<PAGE> 43
(3)(a) Principal Underwriting Agreement for Variable Annuities between the
Depositor and Ohio National Equities, Inc. was filed as Exhibit
(3)(a) of Form N-4, Post-effective Amendment no. 21 of Ohio
National Variable A (File no. 2-91213) on April 25, 1997.
(3)(b) Registered Representative's Sales Contract with Variable Annuity
Supplement was filed as Exhibit (3)(b) of VAA's Form N-4,
Post-effective Amendment no. 9 on February 27, 1991 (File no.
2-91213).
(3)(c) Variable Annuity Sales Commission Schedule was filed as Exhibit
A(3)(c) of VAA's registration statement on Form S-6 on May 18, 1984
(File no. 2-91213).
(4) Group Annuity, Form GA-93-VF-1, was filed as Exhibit (4) of the
Registrant's registration statement on Form N-4 on July 20, 1994.
(4)(a) Group Annuity Certificate, Form GA-93-VF-1C, was filed as Exhibit
(4)(a) of the Registrant's registration statement on July 20, 1994.
(5) Group Annuity Application, Form 3762-R, was filed as Exhibit (5) of
the Registrant's registration statement on July 20, 1994.
(6)(a) Articles of Incorporation of the Depositor were filed as Exhibit
A(6)(a) of Ohio National Variable Interest Account registration
statement on Form N-8B-2 on July 11, 1980 (File no. 811- 3060).
(6)(b) Code of Regulations (by-laws) of the Depositor were filed as
Exhibit A(6)(b) of Ohio National Variable Interest Account
registration statement on Form N-8B-2 on July 11, 1980 (File no.
811- 3060).
(8) Powers of Attorney by certain Directors of the Depositor were filed
as Exhibit (8) of Post-effective Amendment no. 22 of Ohio
National Variable Account A registration statement on Form N-4 on
March 2, 1998 (File no. 2-91213) and Exhibit (8)(a) of
Post-effective Amendment no. 2 of Ohio National Variable Account A
registration statement on Form N-4 on March 2, 1999 (File no.
333-43511).
(13) Computation of Performance Data was filed as Exhibit (13) of
Form N-4, Pre-effective Amendment no. 1, of Ohio National
Variable Account A (File no. 333-43511) on April 10, 1998.
14
<PAGE> 44
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
Name and Principal Positions and Offices
Business Address with Depositor
- ---------------- --------------
<S> <C>
Trudy K. Backus* Vice President, Individual Insurance Services
Thomas A. Barefield* Senior Vice President, Institutional Sales
Howard C. Becker* Senior Vice President, Individual Insurance
& Corporate Services
Ronald L. Benedict* Corporate Vice President, Counsel and
Secretary
Michael A. Boedeker* Vice President, Senior Investment Officer
Robert A. Bowen* Senior Vice President, Information Systems
Roylene M. Broadwell* Vice President & Treasurer
Joseph P. Brom* Director and Executive Vice President
Dale P. Brown Director
36 East Seventh Street
Cincinnati, Ohio 45202
Jack E. Brown Director
50 E. Rivercenter Blvd.
Covington, Kentucky 41011
William R. Burleigh Director
One West Fourth Street
Suite 1100
Cincinnati, Ohio 45202
Victoria B. Buyniski Director
2343 Auburn Avenue
Cincinnati, Ohio 45219
Christopher A. Carlson* Vice President, Senior Investment Officer
Raymond R. Clark Director
201 East Fourth Street
Cincinnati, Ohio 45202
David W. Cook* Senior Vice President and Actuary
Ronald J. Dolan* Director and Senior Vice President and Chief
Financial Officer
Michael J. Ferry* Vice President, Information Systems
Michael F. Haverkamp* Vice President and Counsel
John W. Hayden Director
7000 Midland Boulevard
Batavia, Ohio 45103
John A. Houser III* Vice President, Claims
</TABLE>
15
<PAGE> 45
<TABLE>
<CAPTION>
Name and Principal Positions and Offices
Business Address with Depositor
- ---------------- --------------
<S> <C>
Charles S. Mechem, Jr. Director
One East Fourth Street
Cincinnati, Ohio 45202
James I. Miller, II* Vice President, Marketing Support
Thomas O. Olson* Vice President, Underwriting
David B. O'Maley* Director, Chairman, President and Chief
Executive Officer
James F. Orr Director
201 East Fourth Street
Cincinnati, Ohio 45202
John J. Palmer* Director and Senior Vice President, Strategic
Initiatives
George B. Pearson, Jr.* Vice President, PGA Marketing
J. Donald Richardson* Senior Regional Vice President
D. Gates Smith* Director and Senior Vice President, Sales
Michael D. Stohler* Vice President, Mortgages and Real Estate
Stuart G. Summers* Director and Senior Vice President and General
Counsel
Dennis C. Twarogowski* Vice President, Career Marketing
Oliver W. Waddell Director
425 Walnut Street
Cincinnati, Ohio 45202
Dr. David S. Williams* Vice President and Medical Director
Stephen T. Williams* Vice President, Equity Investments
</TABLE>
*The principal business address for these individuals is One Financial Way,
Montgomery, Ohio 45242.
16
<PAGE> 46
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
THE OHIO NATIONAL LIFE INSURANCE COMPANY/CINCINNATI
A MUTUAL LIFE INSURANCE COMPANY INCORPORATED UNDER THE LAWS OF OHIO
- --------------------------------------------------------------------------------
<S> <C>
- ------------------------------- --------------------------------------
ENTERPRISE PARK, INC. OHIO NATIONAL EQUITIES INC.
A GEORGIA CORPORATION A BROKER/DEALER
REAL ESTATE DEVELOPMENT COMPANY CAPITALIZED BY ONLI @ $30,000
CAPITALIZED BY ONLI $50,000
- ------------------------------- --------------------------------------
Pres. & Dir. M. Stohler Chm. & Dir. D. O'Maley
V.P. & Dir. J. Brom Pres. & Dir. J. Palmer
Secy. & Dir. J. Fischer VP & Dir. T. Backus
Treas. & Dir. D. Taney VP & Dir. J. Miller
Sr. VP T. Barefield
Secretary & Dir. R. Benedict
Treasurer &
Compliance Officer B. Turner
Asst. Secy. M. Haverkamp
- ------------------------------- --------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
THE OHIO NATIONAL LIFE INSURANCE COMPANY/CINCINNATI
A MUTUAL LIFE INSURANCE COMPANY INCORPORATED UNDER THE LAWS OF OHIO
- -------------------------------------------------------------------------------------------------------------------
S E P A R A T E A C C O U N T S
--------------------------------
A B C D E F
--------------------------------
<S> <C> <C>
- ------------------------------- ------------------------------ -------------------------------------
OHIO NATIONAL INVESTMENTS, INC. THE O.N. EQUITY SALES COMPANY OHIO NATIONAL LIFE
ASSURANCE CORPORATION
AN INVESTMENT ADVISER AN OHIO CORPORATION AN OHIO CORPORATION
CAPITALIZED BY ONLI @ $10,000 A BROKER/DEALER A STOCK LIFE INSURANCE COMPANY
CAPITALIZED BY ONLI @ $790,000 CAPITALIZED BY ONLI @ $32,000,000
INCORPORATED UNDER THE LAWS OF OHIO
- ------------------------------- ----------------------------------- ------------------------------------
Chm. & Dir. D. O'Maley Chm./Pres/.CEO & Dir. D. O'Maley
Pres. & Dir. J. Brom Sr. VP & Dir. R. Dolan
Pres. & Dir. J. Palmer Sr. VP & Dir. J. Palmer
VP & Dir. M. Boedeker Sr. VP & Dir. S. Summers
V.P. & Dir. M. Haverkamp Sr. VP & Dir. J. Brom
VP & Dir. M. Stohler Sr. VP T. Barefield
Secy. & Dir. R. Benedict Sr. Vice Pres. A. Bowen
VP & Dir. S. Williams Sr. Vice Pres. D. Cook
Treasurer & Sr. Vice Pres. G. Smith
VP & Dir. C. Carlson Compliance Director B. Turner Vice Pres. & Treas. R. Broadwell
Vice President M. Boedeker
Treasurer D. Taney Vice President T. Backus
Vice President G. Pearson
Secretary R. Benedict Vice President M. Stohler
Vice Pres. J. Houser
VP D. Hundley Vice President D. Twarogowski
VP J. Martin VP & Secy. R. Benedict
Asst. Secy. J. Fischer
Asst. Actuary K. Flischel
- ------------------------------- ------------------------------ -----------------------------------
SEPARATE ACCOUNT
-----------------------------------
R
---
<CAPTION>
<= Advisor to Advisor to =>
--------------------------------------------------------
<S> <C> <C>
- ------------------ -------------------------------- --------------------------------
ONE FUND, INC. O.N. INVESTMENT MANAGEMENT CO. OHIO NATIONAL FUND
A MARYLAND CORPORATION AN OHIO CORPORATION A MARYLAND CORPORATION
AN OPEN END DIVISIFIED A FINANCIAL ADVISORY SERVICE AN OPEN END DIVERSIFIED
MANAGEMENT INVESTMENT COMPANY CAPITALIZED BY ONESCO @ $145,000 MANAGEMENT INVESTMENT COMPANY
- ----------------------------- -------------------------------- --------------------------------
Pres. & Dir. J. Palmer Pres. & Dir. J. Palmer Pres. & Dir. J. Palmer
Vice. Pres. M. Boedeker ----- Vice President M. Boedeker
Vice Pres. J. Brom VP & Dir. G. Smith Vice President J. Brom
Vice Pres. T. Barefield Vice President S. Williams
Vice Pres. S. Williams Treasurer B. Turner Treasurer D. Taney
Treasurer D. Taney --------Secy. & Dir. R. Benedict
Secy. & Dir. R. Benedict Secretary & Dir. M. Haverkamp Director R. Love
Director R. Love Director G. Castrucci
Director G. Castrucci Director G. Vredeveld
Director G. Vredeveld Sr. VP T. Barefield
- --------------------------------- -------------------------------- ---------------------------------
</TABLE>
17
<PAGE> 47
*The principal business address for these individuals is One Financial Way,
Montgomery, Ohio 45242.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
The Organization Chart showing the relationships among the Depositor, the
Registrant and their affiliated entities is on page 4A hereof.
ITEM 27. NUMBER OF CONTRACTOWNERS
As of September 28, 1999, the Registrant's contracts were owned by 145 owners.
ITEM 28. INDEMNIFICATION
The sixth article of the Depositor's Articles of Incorporation, as amended,
provides as follows:
Each former, present and future Director, Officer or Employee of the
Corporation (and his heirs, executors or administrators), or any such
person (and his heirs, executors or administrators) who serves at the
Corporation's request as a director, officer, partner, member or employee
of another corporation, partnership or business organization or
association of any type whatsoever shall be indemnified by the Corporation
against reasonable expenses, including attorneys' fees, judgments, fine
and amounts paid in settlement actually and reasonably incurred by him in
connection with the defense of any contemplated, pending or threatened
action, suit or proceeding, civil, criminal, administrative or
investigative, other than an action by or in the right of the corporation,
to which he is or may be made a party by reason of being or having been
such Director, Officer, or Employee of the Corporation or having served at
the Corporation's request as such director, officer, partner, member or
employee of any other business organization or association, or in
connection with any appeal therein, provided a
18
<PAGE> 48
determination is made by majority vote of a disinterested quorum of the
Board of Directors (a) that such a person acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and (b) that, in any matter the subject of
criminal action, suit or proceeding, such person had no reasonable cause
to believe his conduct was unlawful. The termination of any action, suit
or proceeding by judgment, order, settlement, conviction, or upon a plea
of nolo contendere or its equivalent, shall not, of itself create a
presumption that the person did not act in good faith in any manner which
he reasonably believed to be in or not opposed to the best interests of
the Corporation, and with respect to any criminal action or proceeding, he
had reasonable cause to believe that his conduct was unlawful. Such right
of indemnification shall not be deemed exclusive of any other rights to
which such person may be entitled. The manner by which the right to
indemnification shall be determined in the absence of a disinterested
quorum of the Board of Directors shall be set forth in the Code of
Regulations or in such other manner as permitted by law. Each former,
present, and future Director, Officer or Employee of the Corporation (and
his heirs, executors or administrators) who serves at the Corporation's
request as a director, officer, partner, member or employee of another
corporation, partnership or business organization or association of any
type whatsoever shall be indemnified by the Corporation against reasonable
expenses, including attorneys' fees, actually and reasonably incurred by
him in connection with the defense or settlement of any contemplated,
pending or threatened action, suit or proceeding, by or in the right of
the Corporation to procure a judgment in its favor, to which he is or may
be a party by reason of being or having been such Director, Officer or
Employee of the Corporation or having served at the Corporation's request
as such director, officer, partner, member or employee of any other
business organization or association, or in connection with any appeal
therein, provided a determination is made by majority vote of a
disinterested quorum of the Board of Directors (a) that such person was
not, and has not been adjudicated to have been negligent or guilty of
misconduct in the performance of his duty to the Corporation or to such
other business organization or association, and (b) that such person acted
in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation. Such right of
indemnification shall not be deemed exclusive of any other rights to which
such person may be entitled. The manner by which the right of
indemnification shall be determined in the absence of a disinterested
quorum of the Board of Directors shall be as set forth in the Code of
Regulations or in such other manner as permitted by law.
In addition, Article XII of the Depositor's Code of Regulations states as
follows:
If any director, officer or employee of the Corporation may be entitled to
indemnification by reason of Article Sixth of the Amended Articles of
Corporation, indemnification shall be made upon either (a) a determination
in writing of the majority of disinterested directors present, at a
meeting of the Board at which all disinterested directors present
constitute a quorum, that the director, officer or employee in question
was acting in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of this Corporation or of such other
business organization or association in which he served at the
Corporation's request, and that, in any matter which is the subject of a
criminal action, suit or proceeding, he had no reasonable cause to believe
that his conduct was unlawful and in an action by or in the right of the
Corporation to procure a judgment in its favor that such person was not
and has not been adjudicated to have been negligent or guilty of
misconduct in the performance of his duty to the Corporation or to such
other business organization or association; or (b) if the number of all
disinterested directors would not be sufficient at any time to constitute
a quorum, or if the number of disinterested directors present at two
consecutive meetings of the Board has not been sufficient to constitute a
quorum, a determination to the same effect as set forth in the foregoing
clause (a) shall be made in a written opinion by independent legal counsel
other than an attorney, or a firm having association with it an attorney,
who has been retained by or who has performed services for this
Corporation, or any person to be indemnified within the past five years,
or by the majority vote of the policyholders, or by the Court of Common
Pleas or the court in which such action, suit or proceeding was brought.
Prior to making any such
19
<PAGE> 49
determination, the Board of Directors shall first have received the
written opinion of General Counsel that a number of directors sufficient
to constitute a quorum, as named therein, are disinterested directors. Any
director who is a party to or threatened with the action, suit or
proceeding in question, or any related action, suit or proceeding, or has
had or has an interest therein adverse to that of the Corporation, or who
for any other reason has been or would be affected thereby, shall not be
deemed a disinterested director and shall not be qualified to vote on the
question of indemnification. Anything in this Article to the contrary
notwithstanding, if a judicial or administrative body determines as part
of the settlement of any action, suit or proceeding that the Corporation
should indemnify a director, officer or employee for the amount of the
settlement, the Corporation shall so indemnify such person in accordance
with such determination. Expenses incurred with respect to any action,
suit or proceeding which may qualify for indemnification may be advanced
by the Corporation prior to final disposition thereof upon receipt of an
undertaking by or on behalf of the director, officer or employee to repay
such amount if it is ultimately determined hereunder that he is not
entitled to indemnification or to the extent that the amount so advanced
exceeds the indemnification to which he is ultimately determined to be
entitled.
ITEM 29. PRINCIPAL UNDERWRITERS
The principal underwriter of the Registrant's securities is Ohio National
Equities, Inc. ("ONEQ"). ONEQ is a wholly-owned subsidiary of the
Depositor. ONEQ also serves as the principal underwriter of securities issued
by Ohio National Variable Accounts A and B, other separate accounts of the
Depositor which are registered as unit investment trusts; and Ohio National
Variable Account R, a separate account of the Depositor's subsidiary, Ohio
National Life Assurance Corporation, which separate account is also registered
as a unit investment trust; and ONE Fund, Inc., an open-end investment company
of the management type.
The directors and officers of ONEQ are:
<TABLE>
<CAPTION>
Name Position with ONEQ
---- -----------------------
<S> <C>
David B. O'Maley Chairman and Director
John J. Palmer President & Chief Executive Officer and Director
Thomas A. Barefield Senior Vice President
Trudy K. Backus Vice President and Director
Ronald L. Benedict Secretary and Director
Barbara A. Turner Operations Vice President, Treasurer and Compliance Officer
James I. Miller II Vice President and Director
</TABLE>
20
<PAGE> 50
The principal business address of each of the foregoing is One Financial Way,
Cincinnati, Ohio 45242.
During the last fiscal year, ONEQ received the following commissions and other
compensation, directly or indirectly, from the Registrant:
<TABLE>
<CAPTION>
Net Underwriting Compensation
Discounts and on Redemption Brokerage
Commissions or Annuitization Commissions Compensation
- ----------- ---------------- ----------- ------------
<S> <C> <C> <C>
$195,038 None None None
</TABLE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The books and records of the Registrant which are required under Section 31(a)
of the 1940 Act and Rules thereunder are maintained in the possession of the
following persons:
(1) Journals and other records of original entry:
The Ohio National Life Insurance Company ("Depositor")
One Financial Way
Montgomery, Ohio 45242
Firstar Bank, N.A. ("Custodian")
425 Walnut Street
Cincinnati, Ohio 45202
(2) General and auxiliary ledgers:
Depositor and Custodian
(3) Securities records for portfolio securities:
Custodian
(4) Corporate charter, by-laws and minute books:
Registrant has no such documents.
(5) Records of brokerage orders:
Not applicable.
(6) Records of other portfolio transactions:
Custodian
(7) Records of options:
Not applicable
(8) Records of trial balances:
Custodian
21
<PAGE> 51
(9) Quarterly records of allocation of brokerage orders and commissions:
Not applicable
(10) Records identifying persons or group authorizing portfolio
transactions:
Depositor
(11) Files of advisory materials:
Not applicable
(12) Other records
Custodian and Depositor
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS AND REPRESENTATIONS
Representation pursuant to Section 26(e)(2)(A) of the Investment Company Act of
1940, as amended, was furnished in the Registrant's Form N-4, Post-effective
Amendment No. 5, on April 25, 1997.
22
<PAGE> 52
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the registrant, Ohio National Variable Account D, certifies that it meets
the requirements of Securities Act Rule 485(b) for effectiveness of this
registration statement and has caused this post-effective amendment to the
registration statement to be signed on its behalf in the City of Montgomery and
the State of Ohio on this 4th day of October, 1999.
OHIO NATIONAL VARIABLE ACCOUNT D
(Registrant)
By THE OHIO NATIONAL LIFE INSURANCE COMPANY
(Depositor)
By /s/ John J. Palmer
--------------------------------------
John J. Palmer, Senior Vice President,
Strategic Initiatives
Attest:
/s/Ronald L. Benedict
- ------------------------------------
Ronald L. Benedict
Corporate Vice President, Counsel
and Secretary
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the depositor, The Ohio National Life Insurance Company, has caused this
post-effective amendment to the registration statement to be signed on its
behalf in the City of Cincinnati and the State of Ohio on the 4th day of
October, 1999.
THE OHIO NATIONAL LIFE INSURANCE COMPANY
(Depositor)
By /s/ John J. Palmer
----------------------------------------
John J. Palmer, Senior Vice President,
Strategic Initiatives
Attest:
/s/Ronald L. Benedict
- ---------------------------------
Ronald L. Benedict
Corporate Vice President, Counsel
and Secretary
23
<PAGE> 53
As required by the Securities Act of 1933, this post-effective amendment to the
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ David B. O'Maley Chairman, President, October 4, 1999
- ---------------------- Chief Executive Officer
David B. O'Maley and Director
/s/ Joseph P. Brom Director October 4, 1999
- ----------------------
Joseph P. Brom
*s/ Dale P. Brown Director October 4, 1999
- ----------------------
Dale P. Brown
*s/ Jack E. Brown Director October 4, 1999
- ----------------------
Jack E. Brown
*s/ William R. Burleigh Director October 4, 1999
- ----------------------
William R. Burleigh
*s/ Victoria B. Buyniski Director October 4, 1999
- ----------------------
Victoria B. Buyniski
*s/ Raymond R. Clark Director October 4, 1999
- ----------------------
Raymond R. Clark
s/ Ronald J. Dolan Director October 4, 1999
- ----------------------
Ronald J. Dolan
Director
- ----------------------
John W. Hayden
*s/ Charles S. Mechem, Jr. Director October 4, 1999
- ----------------------
Charles S. Mechem, Jr.
*s/ James F. Orr Director October 4, 1999
- ----------------------
James F. Orr
s/ John J. Palmer Director October 4, 1999
- ----------------------
John J. Palmer
s/ D. Gates Smith Director October 4, 1999
- ----------------------
D. Gates Smith
s/ Stuart G. Summers Director October 4, 1999
- ----------------------
Stuart G. Summers
*s/ Oliver W. Waddell Director October 4, 1999
- ----------------------
Oliver W. Waddell
</TABLE>
24
<PAGE> 54
<TABLE>
<CAPTION>
<S> <C> <C>
<FN>
*By s/ John J. Palmer
----------------------------
John J. Palmer, Attorney in Fact pursuant to Powers of Attorney, copies
of which are filed as exhibits to the Registrant's registration statement.
</TABLE>
25
<PAGE> 55
INDEX OF CONSENTS AND EXHIBITS
<TABLE>
<CAPTION>
Page Number in
Exhibit Sequential
Number Description Numbering System
- ------ ----------- ----------------
<S> <C>
Consent of KPMG LLP
</TABLE>
26
<PAGE> 56
INDEPENDENT AUDITORS' CONSENT
The Board of Directors of
The Ohio National Life Insurance Company and
Contract Owners of
Ohio National Variable Account D:
We consent to use of our reports dated February 5, 1999 for the Ohio National
Variable Account D and January 29, 1999 for The Ohio National Life Insurance
Company and subsidiaries as included herein and to the reference to our firm
under the heading "Independent Certified Public Accountants" in the Statement of
Additional Information included herein.
Cincinnati, Ohio
October 4, 1999
