<PAGE> 1
President's
Message
John J. Palmer Photo
Dear Investor:
First, I want to thank you for being an investor in the Dow(SM) Target Variable
Fund. All of us appreciate your support.
We introduced the Dow(SM) Target Variable Fund in January and have been
pleased to welcome you into this strategy of investment since then. The
following pages include an update of the Dow(SM) Target Variable Fund's
performance and investment activity ending June 30, 1999.
The strategy of the Dow(SM) Target Variable Fund is a simple one: to invest in
the 10 highest dividend-yielding stocks of the Dow Jones Industrial Average
(DJIA(SM)) and seek to outperform the DJIA(SM) over time.
These stocks are commonly called the "dogs" of The Dow(SM) because their share
prices are lower compared to the dividends these blue-chip companies are paying.
In other words, even their attractive dividend payments are not attracting
enough stock purchases to elevate the stock price. Investing in the 10 "dogs" of
The Dow(SM) stocks amounts to a moderately contrarian strategy.
Ohio National's Dow(SM) Target Variable Fund consists of 12 portfolios,
invested in the "dogs" of The Dow(SM), which are named for each month. On or
about the first business day of the month, the portfolio named for that month
invests substantially all its assets in the 10 "dogs" stocks as determined at
the close of the second-last business day of the preceding month. Fund
management then sets the proportionate relationships between the 10 stocks in
that portfolio for the next 12 months. For example, the stocks held in the
January portfolio are maintained in the same relative proportions until the end
of December. Those in the February portfolio are held until the end of the next
January, etc.
Investors in our Fund have elected to deposit a specified sum into the current
Dow(SM) Target Fund portfolio or have chosen to use the dollar-cost averaging
option.
The market in general
The Dow(SM) Target strategy had a slow beginning in 1999 as growth stocks
continued their dominance in the market for the first two months of the year.
However, beginning in late March and continuing through April, there was a shift
in market leadership that led to a surge in cyclical stocks. This boosted
performance of the "dog" stocks in those months. Performance in May and June has
been mixed as market support has broadened to other sectors.
Looking toward the future, it is difficult to determine what may yet develop.
A rising interest rate environment may lead investors toward value stocks -- a
positive for the Target 10 strategy. Additionally, fears over a potential
downturn in the market could cause growth stock investors to turn to more
conservative stocks in an effort to cushion their portfolios. What seems clear:
The market has some sorting out to do, and it is likely that we will continue to
experience the level of volatility that we've seen so far in the first half of
this year.
In closing
Information on your investments is contained in the following pages. Please
contact your registered representative for additional information on the
investment opportunities available with Dow(SM) Target Variable Fund. As your
needs change over time, he or she stands ready to serve you.
Thank you again for the confidence you have placed in Dow(SM) Target Variable
Fund as you pursue your wealth-building endeavors. Be assured that we will make
every effort to continue to merit that confidence.
Best regards,
JOHN J. PALMER
John J. Palmer
1
<PAGE> 2
Managers and Officers of DowSM Target Variable Fund, LLC
John J. Palmer, President and Manager
Ronald L. Benedict, Secretary and Manager
George E. Castrucci, Manager
Ross Love, Manager
George M. Vredeveld, Manager
Thomas A. Barefield, Vice President
Joseph P. Brom, Vice President
Michael A. Boedeker, Vice President
Stephen T. Williams, Vice President
Dennis R. Taney, Treasurer
William J. Hilbert, Jr., Compliance Director and
Assistant Treasurer
This report and the financial statements contained herein are submitted for the
general information of the contract owners of the fund. This report is not
authorized for distribution to prospective investors in the fund unless preceded
or accompanied by an effective prospectus of DowSM Target Variable Fund, LLC.
For a prospectus containing more complete information, including charges and
expenses, please contact Ohio National Equities, Inc. (Member NASD/SIPC) One
Financial Way, Cincinnati, Ohio 45242, telephone 513.794.6100. 8/99
2
<PAGE> 3
DOW TARGET 10 -- JANUARY PORTFOLIO
THE DOW(SM) TARGET VARIABLE FUND LLC
OBJECTIVE
The Dow Target 10 Portfolios seeks long-term capital growth and dividend income
by investing in 10 common stocks in the Dow Industrial Average(SM) that have the
highest dividend yield.
PERFORMANCE AS OF JUNE 30, 1999
TOTAL RETURN:
<TABLE>
<S> <C>
January
Since inception (1/4/99) 13.12%
</TABLE>
Returns represent past performance, which is no guarantee of future results.
Investment return and principal value will vary so that shares, when redeemed,
may be worth more or less than their original cost. Actual results for variable
annuity and variable universal life contracts will be lower due to contract
charges. Consult your contract for applicable charges for mortality and
expenses.
<TABLE>
<CAPTION>
JANUARY (SINCE INCEPTION 1/4/99) DJIA (6 MONTHS)
- -------------------------------- ---------------
<S> <C>
13.12 20.44
</TABLE>
COMMENTS
Since its inception on 1/4/99, the Dow Target 10 January portfolio returned
13.12% versus 20.44% for the Dow Jones Industrial Average. Caterpillar Inc was
the best performing stock for the 6-month period while Phillip Morris lost the
most ground. The January portfolio contains 11 common stocks due to the spin-off
of General Motors' parts division Delphi Automotive Systems on 5/28/99.
SCHEDULE OF INVESTMENTS (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE %
- ---------------------------------------------------------------
<C> <S> <C> <C>
1,190 Caterpillar Inc. (4)............... $ 71,400 11.58
508 J.P. Morgan & Co. Inc. (5)......... 71,374 11.57
982 E.I. Du Pont de Nemours and Co.
(2)............................... 67,083 10.88
743 Minnesota Mining and Manufacturing
Co. (3)........................... 64,595 10.47
1,084 The Goodyear Tire & Rubber
Company (9)....................... 63,753 10.34
1,242 International Paper Company (7).... 62,721 10.17
646 Chevron Corp. (6).................. 61,491 9.97
752 Eastman Kodak Company (8).......... 50,948 8.26
745 General Motors Corp. (1)........... 49,170 7.97
998 Phillip Morris Companies Inc.
(10).............................. 40,107 6.50
470 Delphi Automotive Systems (1)
(a)............................... 8,731 1.42
6,000 Star Bank 3.30% due 07/01/99
repurchase price $429,039
collateralized by GNMA
certificates
pool # 8375 due 02/20/24.......... 6,000 0.97
TOTALS............................. $617,373 100.10
--------
CASH & RECEIVABLES, NET OF
LIABILITIES (-0.10%).............. (550)
--------
TOTAL NET ASSETS (100.0%).......... $616,823
========
</TABLE>
INDUSTRIES
<TABLE>
<C> <S> <C>
1. Automobiles
2. Chemicals
3. Manufacturing
4. Machinery
5. Banks
6. Oil, Energy, and Natural Gas
7. Paper & Related
8. Photo Equipment
9. Rubber and Tires
10. Tobacco
</TABLE>
- ---------------
(a) .6987:1 Spin-off of GM on 4/12/99
3
<PAGE> 4
DOW TARGET 10 -- FEBRUARY PORTFOLIO
THE DOW(SM) TARGET VARIABLE FUND LLC
OBJECTIVE
The Dow Target 10 Portfolios seeks long-term capital growth and dividend income
by investing in 10 common stocks in the Dow Industrial Average(SM) that have the
highest dividend yield.
PERFORMANCE AS OF JUNE 30, 1999
TOTAL RETURN:
<TABLE>
<S> <C>
February
Since inception (2/1/99) 18.18%
</TABLE>
Returns represent past performance, which is no guarantee of future results.
Investment return and principal value will vary so that shares, when redeemed,
may be worth more or less than their original cost. Actual results for variable
annuity and variable universal life contracts will be lower due to contract
charges. Consult your contract for applicable charges for mortality and
expenses.
<TABLE>
<CAPTION>
FEBRUARY (SINCE INCEPTION 2/1/99) DJIA (5 MONTHS)
- --------------------------------- ---------------
<S> <C>
18.18 18.11
</TABLE>
COMMENTS
Since its inception on 2/1/99, the Dow Target 10 February portfolio returned
18.18% versus 18.11% for the Dow Jones Industrial Average. Caterpillar Inc was
the best performing stock for the 5-month period while Phillip Morris lost the
most ground.
SCHEDULE OF INVESTMENTS (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE %
- ---------------------------------------------------------------
<C> <S> <C> <C>
2,907 Caterpillar Inc. (4)............. $ 174,420 11.19
1,235 J.P. Morgan & Co. Inc. (5)....... 173,518 11.13
2,452 E.I. Du Pont de Nemours and Co.
(2)............................. 167,502 10.74
3,218 International Paper Company
(7)............................. 162,509 10.42
1,705 Chevron Corp. (6)................ 162,295 10.41
2,625 The Goodyear Tire & Rubber
Company (9)..................... 154,383 9.90
1,704 Minnesota Mining and
Manufacturing Co. (3)........... 148,142 9.50
1,819 Exxon Corporation (6)............ 140,290 9.00
2,032 Eastman Kodak Company (8)........ 137,668 8.83
2,653 Phillip Morris Companies Inc.
(10)............................ 106,617 6.84
30,000 Star Bank 3.30% due 07/01/99
repurchase price $429,039
collateralized by GNMA
certificates
pool # 8375 due 02/20/24........ 30,000 1.92
TOTALS........................... $1,557,344 99.88
----------
CASH & RECEIVABLES,
NET OF LIABILITIES (0.12%)...... 2,213
----------
TOTAL NET ASSETS (100.0%)........ $1,559,557
==========
</TABLE>
INDUSTRIES
<TABLE>
<C> <S> <C>
1. Automobiles
2. Chemicals
3. Manufacturing
4. Machinery
5. Banks
6. Oil, Energy, and Natural Gas
7. Paper & Related
8. Photo Equipment
9. Rubber and Tires
10. Tobacco
</TABLE>
4
<PAGE> 5
DOW TARGET 10 -- MARCH PORTFOLIO
THE DOW(SM) TARGET VARIABLE FUND LLC
OBJECTIVE
The Dow Target 10 Portfolios seeks long-term capital growth and dividend income
by investing in 10 common stocks in the Dow Industrial Average(SM) that have the
highest dividend yield.
PERFORMANCE AS OF JUNE 30, 1999
TOTAL RETURN:
<TABLE>
<S> <C>
March
Since inception (3/1/99) 15.73%
</TABLE>
Returns represent past performance, which is no guarantee of future results.
Investment return and principal value will vary so that shares, when redeemed,
may be worth more or less than their original cost. Actual results for variable
annuity and variable universal life contracts will be lower due to contract
charges. Consult your contract for applicable charges for mortality and
expenses.
<TABLE>
<CAPTION>
MARCH (SINCE INCEPTION 3/1/99) DJIA (4 MONTHS)
- ------------------------------ ---------------
<S> <C>
15.73 18.48
</TABLE>
COMMENTS
Since its inception on 3/1/99, the Dow Target 10 March portfolio returned 15.73%
versus 18.48% for the Dow Jones Industrial Average. Caterpillar Inc was the best
performing stock for the 4-month period while General Motors/Delphi lost the
most ground. The March portfolio contains 11 common stocks due to the spin-off
of General Motors' parts division Delphi Automotive Systems on 5/28/99.
SCHEDULE OF INVESTMENTS (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE %
- ---------------------------------------------------------------
<C> <S> <C> <C>
2,699 Caterpillar Inc. (4)............. $ 161,940 11.05
2,319 E.I. Du Pont de Nemours and Co.
(2)............................. 158,417 10.82
2,660 The Goodyear Tire & Rubber
Company (9)..................... 156,441 10.68
1,097 J.P. Morgan & Co. Inc. (5)....... 154,129 10.52
1,565 Chevron Corp. (6)................ 148,968 10.17
1,638 Minnesota Mining and
Manufacturing Co. (3)........... 142,404 9.72
1,832 Exxon Corporation (6)............ 141,293 9.65
1,845 Eastman Kodak Company (8)........ 124,999 8.53
3,073 Phillip Morris Companies Inc.
(10)............................ 123,496 8.43
1,474 General Motors Corp. (1)......... 97,284 6.64
1,030 Delphi Automotive Systems (1)
(a)............................. 19,124 1.31
19,000 Star Bank 3.30% due 07/01/99
repurchase price $429,039
collateralized by GNMA
certificates
pool # 8375 due 02/20/24........ 19,000 1.30
TOTALS........................... $1,447,494 98.82
----------
CASH & RECEIVABLES,
NET OF LIABILITIES (1.18%)...... 17,259
----------
TOTAL NET ASSETS (100.0%)........ $1,464,753
==========
</TABLE>
INDUSTRIES
<TABLE>
<C> <S> <C>
1. Automobiles
2. Chemicals
3. Manufacturing
4. Machinery
5. Banks
6. Oil, Energy, and Natural Gas
7. Paper & Related
8. Photo Equipment
9. Rubber and Tires
10. Tobacco
</TABLE>
- ---------------
(a) .6987:1 Spin-off of GM on 4/12/99
5
<PAGE> 6
DOW TARGET 10 -- APRIL PORTFOLIO
THE DOW(SM) TARGET VARIABLE FUND LLC
OBJECTIVE
The Dow Target 10 Portfolios seeks long-term capital growth and dividend income
by investing in 10 common stocks in the Dow Industrial Average(SM) that have the
highest dividend yield.
PERFORMANCE AS OF JUNE 30, 1999
TOTAL RETURN:
<TABLE>
<S> <C>
April
Since inception (4/1/99) 14.64%
</TABLE>
Returns represent past performance, which is no guarantee of future results.
Investment return and principal value will vary so that shares, when redeemed,
may be worth more or less than their original cost. Actual results for variable
annuity and variable universal life contracts will be lower due to contract
charges. Consult your contract for applicable charges for mortality and
expenses.
<TABLE>
<CAPTION>
APRIL (SINCE INCEPTION 4/1/99) DJIA (3 MONTHS)
- ------------------------------ ---------------
<S> <C>
14.64 12.53
</TABLE>
COMMENTS
Since its inception on 4/1/99, the Dow Target 10 April portfolio returned 14.64%
versus 12.53% for the Dow Jones Industrial Average. Caterpillar Inc was the best
performing stock for the 3-month period while Eastman Kodak lost the most
ground.
SCHEDULE OF INVESTMENTS (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE %
- ---------------------------------------------------------------
<C> <S> <C> <C>
3,374 Caterpillar Inc. (4)............. $ 202,440 10.99
2,255 Minnesota Mining and
Manufacturing Co. (3)........... 196,044 10.64
3,228 The Goodyear Tire & Rubber
Company (9)..................... 189,847 10.30
3,749 International Paper Company
(7)............................. 189,325 10.27
2,731 E.I. Du Pont de Nemours and Co.
(2)............................. 186,561 10.12
1,262 J.P. Morgan & Co. Inc. (5)....... 177,311 9.62
2,220 Exxon Corporation (6)............ 171,218 9.29
1,779 Chevron Corp. (6)................ 169,339 9.19
4,194 Phillip Morris Companies Inc.
(10)............................ 168,546 9.15
2,440 Eastman Kodak Company (8)........ 165,310 8.97
24,000 Star Bank 3.30% due 07/01/99
repurchase price $429,039
collateralized by GNMA
certificates
pool # 8375 due 02/20/24........ 24,000 1.30
TOTALS........................... $1,839,940 99.84
----------
CASH & RECEIVABLES,
NET OF LIABILITIES (0.16%)...... 2,715
----------
TOTAL NET ASSETS (100.0%)........ $1,842,655
==========
</TABLE>
INDUSTRIES
<TABLE>
<C> <S> <C>
1. Automobiles
2. Chemicals
3. Manufacturing
4. Machinery
5. Banks
6. Oil, Energy, and Natural Gas
7. Paper & Related
8. Photo Equipment
9. Rubber and Tires
10. Tobacco
</TABLE>
6
<PAGE> 7
DOW TARGET 10 -- MAY PORTFOLIO
THE DOW(SM) TARGET VARIABLE FUND LLC
OBJECTIVE
The Dow Target 10 Portfolios seeks long-term capital growth and dividend income
by investing in 10 common stocks in the Dow Industrial Average(SM) that have the
highest dividend yield.
PERFORMANCE AS OF JUNE 30, 1999
TOTAL RETURN:
<TABLE>
<S> <C>
May
Since inception (5/3/99) -3.39%
</TABLE>
Returns represent past performance, which is no guarantee of future results.
Investment return and principal value will vary so that shares, when redeemed,
may be worth more or less than their original cost. Actual results for variable
annuity and variable universal life contracts will be lower due to contract
charges. Consult your contract for applicable charges for mortality and
expenses.
<TABLE>
<CAPTION>
MAY (SINCE INCEPTION 5/3/99) DJIA (2 MONTHS)
- ---------------------------- ---------------
<S> <C>
- -3.39 -0.4
</TABLE>
COMMENTS
Since its inception on 5/3/99, the Dow Target 10 May portfolio lost -3.39%
versus -0.40% for the Dow Jones Industrial Average. Phillip Morris was the best
performing stock for the 2-month period while General Motors/Delphi lost the
most ground. The May portfolio contains 11 common stocks due to the spin-off of
General Motors' parts division Delphi Automotive Systems on 5/28/99.
SCHEDULE OF INVESTMENTS (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE %
- ---------------------------------------------------------------
<C> <S> <C> <C>
2,965 Phillip Morris Companies Inc.
(10)............................ $ 119,156 11.47
2,470 Sears, Roebuck & Company (4)..... 110,069 10.60
1,854 The Goodyear Tire & Rubber
Company (9)..................... 109,038 10.50
756 J.P. Morgan & Co. Inc. (5)....... 106,218 10.23
1,219 Minnesota Mining and
Manufacturing Co. (3)........... 105,977 10.21
1,434 E.I. Du Pont de Nemours and Co.
(2)............................. 97,960 9.43
1,008 Chevron Corp. (6)................ 95,949 9.24
1,232 Exxon Corporation (6)............ 95,018 9.15
1,350 Eastman Kodak Company (8)........ 91,463 8.81
1,159 General Motors Corp. (1)......... 76,494 7.37
554 Delphi Automotive Systems (1)
(a)............................. 10,288 0.99
19,000 Star Bank 3.30% due 07/01/99
repurchase price $429,039
collateralized by GNMA
certificates
pool # 8375 due 02/20/24........ 19,000 1.83
TOTALS........................... $1,036,630 99.83
----------
CASH & RECEIVABLES,
NET OF LIABILITIES (0.17%)...... 1,819
----------
TOTAL NET ASSETS (100.0%)........ $1,038,450
==========
</TABLE>
INDUSTRIES
<TABLE>
<C> <S> <C>
1. Automobiles
2. Chemicals
3. Manufacturing
4. Retail
5. Banks
6. Oil, Energy, and Natural Gas
7. Paper & Related
8. Photo Equipment
9. Rubber and Tires
10. Tobacco
</TABLE>
- ---------------
(a) .6987:1 Spin-off of GM on 4/12/99
7
<PAGE> 8
DOW TARGET 10 -- JUNE PORTFOLIO
THE DOW(SM) TARGET VARIABLE FUND LLC
OBJECTIVE
The Dow Target 10 Portfolios seeks long-term capital growth and dividend income
by investing in 10 common stocks in the Dow Industrial Average(SM) that have the
highest dividend yield.
PERFORMANCE AS OF JUNE 30, 1999
TOTAL RETURN:
<TABLE>
<S> <C>
June
Since inception (6/1/99) 1.58%
</TABLE>
Returns represent past performance, which is no guarantee of future results.
Investment return and principal value will vary so that shares, when redeemed,
may be worth more or less than their original cost. Actual results for variable
annuity and variable universal life contracts will be lower due to contract
charges. Consult your contract for applicable charges for mortality and
expenses.
<TABLE>
<CAPTION>
JUNE (6/1/99) DJIA (1 MONTH)
- ------------- --------------
<S> <C>
1.58 3.53
</TABLE>
COMMENTS
Since its inception on 6/1/99, the Dow Target 10 June portfolio returned 1.58%
versus 3.53% for the Dow Jones Industrial Average. Caterpillar Inc was the best
performing stock for the month of June while General Motors/Delphi lost the most
ground.
SCHEDULE OF INVESTMENTS (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE %
- ----------------------------------------------------------------
<C> <S> <C> <C>
2,484 Caterpillar Inc. (4)............ $ 149,040 10.19
2,099 E.I. Du Pont de Nemours
and Co. (2).................... 143,388 9.80
3,563 Phillip Morris Companies Inc.
(10)........................... 143,188 9.79
1,016 J.P. Morgan & Co. Inc. (5)...... 142,748 9.76
1,482 Chevron Corp. (6)............... 141,068 9.65
2,395 The Goodyear Tire & Rubber
Company (9).................... 140,856 9.63
1,612 Minnesota Mining and
Manufacturing Co. (3).......... 140,143 9.58
2,009 Eastman Kodak Company (8)....... 136,110 9.31
1,742 Exxon Corporation (6)........... 134,352 9.19
1,936 General Motors Corp. (1)........ 127,776 8.74
280,000 Star Bank 3.30% due 07/01/99
repurchase price $429,039
collateralized by GNMA
certificates
pool # 8375 due 02/20/24....... 280,000 19.14
TOTALS.......................... $1,678,669 114.78
----------
CASH & RECEIVABLES,
NET OF LIABILITIES (-14.78%)... (216,103)
----------
TOTAL NET ASSETS (100.0%)....... $1,462,566
==========
</TABLE>
INDUSTRIES
<TABLE>
<C> <S> <C>
1. Automobiles
2. Chemicals
3. Manufacturing
4. Retail
5. Banks
6. Oil, Energy, and Natural Gas
7. Paper & Related
8. Photo Equipment
9. Rubber and Tires
10. Tobacco
</TABLE>
8
<PAGE> 9
DOW TARGET 10 VARIABLE FUND LLC
STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PORTFOLIOS
------------------------------------------------------------------------------
JANUARY (a) FEBRUARY (b) MARCH (c) APRIL (d) MAY (e) JUNE (f)
----------- ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Investment in securities, at cost.............. $555,988 $1,337,943 $1,299,593 $1,773,402 $1,066,379 $1,680,093
======== ========== ========== ========== ========== ==========
Investments in securities at market value (note
1)........................................... $617,373 $1,557,344 $1,447,494 $1,839,940 $1,036,630 $1,678,669
Cash in bank................................... 141 267 319 426 270 305
Receivable for fund interests sold............. 1,091 6,822 19,274 4,823 1,505 9,202
Dividends & accrued interest receivable........ 1,274 3,287 3,324 4,171 2,889 1,321
Other.......................................... 194 650 697 396 226 0
-------- ---------- ---------- ---------- ---------- ----------
Total assets................................. 620,073 1,568,370 1,471,108 1,849,756 1,041,520 1,689,497
-------- ---------- ---------- ---------- ---------- ----------
Liabilities:
Payable for securities purchased............... 0 0 0 0 0 226,052
Payable for fund interests redeemed............ 12 0 0 65 0 0
Payable for investment management services
(note 3)..................................... 288 774 717 779 515 302
Other accrued expenses......................... 1,091 6,466 4,050 4,823 1,505 0
Dividends payable.............................. 1,859 1,573 1,588 1,434 1,050 577
-------- ---------- ---------- ---------- ---------- ----------
Total liabilities............................ 3,250 8,813 6,355 7,101 3,070 226,931
-------- ---------- ---------- ---------- ---------- ----------
Net assets at market value....................... $616,823 $1,559,557 $1,464,753 $1,842,655 $1,038,450 $1,462,566
======== ========== ========== ========== ========== ==========
Net assets consist of:
Par value, $1 per membership interest.......... $ 54,530 $ 131,952 $ 126,569 $ 160,755 $ 107,493 $ 143,982
Paid-in capital in excess of par value......... 498,777 1,189,622 1,177,854 1,607,668 958,873 1,319,000
Accumulated net realized income (loss) on
investments
(note 1)..................................... 0 9,026 6,354 0 (1,242) 0
Net unrealized appreciation (depreciation) on
investments
(note 1)..................................... 61,385 219,401 147,901 66,538 (29,749) (1,424)
Undistributed net investment income............ 2,131 9,556 6,075 7,694 3,075 1,008
-------- ---------- ---------- ---------- ---------- ----------
Net assets at market value....................... $616,823 $1,559,557 $1,464,753 $1,842,655 $1,038,450 $1,462,566
======== ========== ========== ========== ========== ==========
Membership interest outstanding (note 4)......... 54,530 131,952 126,569 160,755 107,493 143,982
Net asset value per membership interest.......... $ 11.31 $ 11.82 $ 11.57 $ 11.46 $ 9.66 $ 10.16
======== ========== ========== ========== ========== ==========
</TABLE>
- ---------------
(a) The inception date for this portfolio was January 4, 1999.
(b) The inception date for this portfolio was February 1, 1999.
(c) The inception date for this portfolio was March 1, 1999.
(d) The inception date for this portfolio was April 1, 1999.
(e) The inception date for this portfolio was May 3, 1999.
(f) The inception date for this portfolio was June 1, 1999.
The accompanying notes are an integral part of these financial statements.
9
<PAGE> 10
DOW TARGET 10 VARIABLE FUND LLC
STATEMENT OF OPERATIONS FOR SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PORTFOLIOS
------------------------------------------------------------------------
JANUARY (a) FEBRUARY (b) MARCH (c) APRIL (d) MAY (e) JUNE (f)
----------- ------------ --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Interest............................................. $ 389 $ 939 $ 728 $ 837 $ 507 $ 593
Dividends............................................ 6,772 14,915 10,291 10,742 4,374 1,295
------- -------- -------- ------- -------- -------
Total investment income............................ 7,161 15,854 11,019 11,579 4,881 1,888
------- -------- -------- ------- -------- -------
Expenses:
Management fees (note 3)............................. 1,486 3,331 2,535 2,223 777 458
Custodian fees (note 3).............................. 2,341 1,959 1,591 1,184 763 381
Directors' fees (note 3)............................. 62 52 42 32 20 10
Professional fees.................................... 374 313 254 189 122 33
Accounting fees...................................... 322 270 219 163 105 52
Other................................................ 445 373 303 224 146 44
------- -------- -------- ------- -------- -------
Total expenses..................................... 5,030 6,298 4,944 4,015 1,933 978
------- -------- -------- ------- -------- -------
Less expenses voluntarily reduced or reimbursed.... 0 0 0 (130) (127) (98)
------- -------- -------- ------- -------- -------
Net expenses....................................... 5,030 6,298 4,944 3,885 1,806 880
------- -------- -------- ------- -------- -------
Net investment income.............................. $ 2,131 $ 9,556 $ 6,075 $ 7,694 $ 3,075 $ 1,008
------- -------- -------- ------- -------- -------
Realized and unrealized gain (loss) on investments:
Net realized gain (loss) from investments............ $ 0 $ 9,026 $ 6,354 $ 0 $ (1,242) $ 0
Net increase in unrealized appreciation
(depreciation) on investments...................... 61,385 219,401 147,901 66,538 (29,749) (1,424)
------- -------- -------- ------- -------- -------
Net gain (loss) on investments....................... 61,385 228,427 154,255 66,538 (30,991) (1,424)
------- -------- -------- ------- -------- -------
Net increase (decrease) in net assets from
operations......................................... $63,516 $237,983 $160,330 $74,232 $(27,916) $ (416)
======= ======== ======== ======= ======== =======
</TABLE>
- ---------------
(a) The inception date for this portfolio was January 4, 1999.
(b) The inception date for this portfolio was February 1, 1999.
(c) The inception date for this portfolio was March 1, 1999.
(d) The inception date for this portfolio was April 1, 1999.
(e) The inception date for this portfolio was May 3, 1999.
(f) The inception date for this portfolio was June 1, 1999.
The accompanying notes are an integral part of these financial statements.
10
<PAGE> 11
DOW TARGET 10 VARIABLE FUND LLC
STATEMENTS OF CHANGES IN NET ASSETS SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
PORTFOLIOS
------------------------------------------------------------------------------
JANUARY (b) FEBRUARY (c) MARCH (d) APRIL (e) MAY (f) JUNE (g)
----------- ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
From operations:
Net investment income.......................... $ 2,131 $ 9,556 $ 6,075 $ 7,694 $ 3,075 $ 1,008
Realized gain (loss) on investments............ 0 9,026 6,354 0 (1,242) 0
Unrealized gain (loss) on investments.......... 61,385 219,401 147,901 66,538 (29,749) (1,424)
-------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net assets from
operations.............................. 63,516 237,983 160,330 74,232 (27,916) (416)
-------- ---------- ---------- ---------- ---------- ----------
From capital share transactions (note 4):
Received from shares sold...................... 565,914 1,518,519 1,374,089 1,781,374 1,073,626 1,462,982
Paid for shares redeemed....................... (12,604) (196,945) (69,666) (12,951) (7,260) 0
-------- ---------- ---------- ---------- ---------- ----------
Increase in net assets derived from capital
share
transactions............................ 553,310 1,321,574 1,304,423 1,768,423 1,066,366 1,462,982
-------- ---------- ---------- ---------- ---------- ----------
Increase in net assets.................. 616,826 1,559,557 1,464,753 1,842,655 1,038,450 1,462,566
Net Assets:
Beginning of period............................ 0 0 0 0 0 0
-------- ---------- ---------- ---------- ---------- ----------
End of period (a).............................. $616,826 $1,559,557 $1,464,753 $1,842,655 $1,038,450 $1,462,566
======== ========== ========== ========== ========== ==========
(a) Includes undistributed net investment income
of............................................. $ 2,131 $ 9,556 $ 6,075 $ 7,694 $ 3,075 $ 1,008
======== ========== ========== ========== ========== ==========
</TABLE>
- ---------------
(b) The inception date for this portfolio was January 4, 1999.
(c) The inception date for this portfolio was February 1, 1999.
(d) The inception date for this portfolio was March 1, 1999.
(e) The inception date for this portfolio was April 1, 1999.
(f) The inception date for this portfolio was May 3, 1999.
(g) The inception date for this portfolio was June 1, 1999.
The accompanying notes are an integral part of these financial statements.
11
<PAGE> 12
DOW TARGET 10 VARIABLE FUND LLC
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PORTFOLIOS
------------------------------------------------------------------------
JANUARY (d) FEBRUARY (e) MARCH (f) APRIL (g) MAY (h) JUNE (i)
----------- ------------ --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Per membership interest data:
Net asset value, beginning of period................... $10.00 $10.00 $10.00 $10.00 $ 10.00 $10.00
Income (loss) from investment operations:
Net investment income................................ 0.04 0.07 0.05 0.17 0.02 0.07
Net realized and unrealized gain (loss) on
investments........................................ 1.27 1.75 1.52 1.29 (0.36) 0.09
------ ------ ------ ------ ------- ------
Total income (loss) from investment operations... 1.31 1.82 1.57 1.46 (0.34) 0.16
------ ------ ------ ------ ------- ------
Net asset value, end of period......................... $11.31 $11.82 $11.57 $11.46 $ 9.66 $10.16
====== ====== ====== ====== ======= ======
6 MONTHS 5 MONTHS 4 MONTHS 3 MONTHS 2 MONTHS 1 MONTH
------ ------ ------ ------ ------- ------
Total return (b)....................................... 13.12% 18.19% 15.73% 14.63% (3.39%) 1.58%
Ratio net of fees reimbursed by advisor (c):
Expenses (a)......................................... 1.89% 1.04% 1.07% 0.86% 1.16% 0.73%
Investment income (a)................................ 0.80% 1.59% 1.31% 1.70% 1.97% 0.83%
Ratio assuming no fees reimbursed by advisor:
Expenses (a)......................................... 1.89% 1.04% 1.07% 0.89% 1.24% 0.81%
Investment income (a)................................ 0.80% 1.59% 1.31% 1.67% 1.89% 0.75%
Portfolio turnover rate................................ 0% 7% 4% 0% 3% 0%
Net assets at end of period (millions)................. $ 0.6 $ 1.6 $ 1.5 $ 1.8 $ 1.0 $ 1.5
</TABLE>
- ---------------
(a) Annualized
(b) Calculated on an aggregate basis (not annualized)
(c) The advisor has reimbursed certain operating expenses of the April, May and
June portfolios.
(d) The inception date for this portfolio was January 4, 1999.
(e) The inception date for this portfolio was February 1, 1999.
(f) The inception date for this portfolio was March 1, 1999.
(g) The inception date for this portfolio was April 1, 1999.
(h) The inception date for this portfolio was May 3, 1999.
(i) The inception date for this portfolio was June 1, 1999.
The accompanying notes are an integral part of these financial statements.
12
<PAGE> 13
THE DOW TARGET 10 VARIABLE FUND LLC June 30, 1999 (Unaudited)
NOTES TO FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The Dow Target 10 Variable Fund LLC is registered under the Investment
Company Act of 1940 as amended (the "1940 Act"), as a non-diversified,
open-end management investment company. The Fund is a series investment
company which consists of twelve portfolios of the common stock of the ten
companies in the Dow Jones Industrial Average(SM) (the "Dow") having the
highest dividend yield as of the close of business on or about the last
business day prior to the beginning of each portfolio's annual term. The
Fund's objective is to provide above average total return through both
capital appreciation and dividend income.
The fund is a limited liability company created under Ohio law. Its interests
are owned entirely by variable annuity separate accounts of The Ohio National
Life Insurance Company ("ONLI"). Fund interests are not offered directly to
the public. Fund interests are purchased by ONLI's separate accounts as an
investment option for their variable annuity contracts.
The following is a summary of significant accounting policies:
Dividends representing new investment income are normally distributed
quarterly. Any net realized capital gains are normally distributed annually.
However, the Board may declare dividends more often. Dividends and
distributions are automatically reinvested in additional interests in the
respective portfolios at net asset value without a sales charge.
Fund interests are sold to ONLI's variable annuity separate accounts without
a sales charge. They may be redeemed at their net asset value next computed
after the Fund receives a purchase or redemption order. The value of Fund
interests is based on the market value of the stocks and any other cash or
securities owned by each portfolio. This determination is made as of 4:00
p.m. Eastern time on each business day on which an order for purchase or
redemption is received and there is enough trading in portfolio securities to
materially affect the current net asset value of Fund interests. That is
normally each weekday (Monday through Friday) except for New Years Day,
Presidents Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas. The net asset value of each portfolio is
computed by dividing the value of that portfolio's securities plus any cash
or other assets, less the portfolio's liabilities, by the number of portfolio
interests outstanding.
Each portfolio may acquire repurchase agreements from member banks of the
Federal Reserve System which the Fund deems creditworthy under guidelines
approved by the Board of Managers, subject to the seller's agreement to
repurchase such securities at a mutually agreed upon date and price. The
repurchase price generally equals the price paid by the portfolio plus
interest negotiated on the basis of current short-term rates, which may be
more or less than the rate on the underlying portfolio securities. The
seller, under a repurchase agreement, is required to maintain as collateral
for the repurchase transaction securities in which the portfolio has a
perfected security interest with a value not less than 100% of the repurchase
price (including accrued interest). Securities subject to repurchase
agreements are held by the Fund's custodian or another qualified custodian or
in the Federal Reserve/Treasury book-entry system. Repurchase agreements are
considered to be loans by the portfolio under the 1940 Act.
It is the policy of the Fund to distribute to its shareholders substantially
all of its taxable income, thus gaining relief from Federal income taxes
under provisions of current tax regulations applicable to investment
companies of this type. Accordingly, no provision for Federal income taxes
has been made.
Expenses directly attributable to a portfolio are charged to that portfolio.
Expenses not directly attributed to a portfolio are allocated on the basis of
relative net assets.
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 increases and decreases in net assets from operations
during the reporting period. Actual results could differ from those
estimates.
13
<PAGE> 14
THE DOW TARGET 10 VARIABLE FUND LLC June 30, 1999 (Unaudited)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The gross unrealized appreciation and depreciation on investments in each
portfolio as of June 30, 1999 were as follows:
<TABLE>
<CAPTION>
JANUARY FEBRUARY MARCH APRIL MAY JUNE
-------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Gross unrealized:
Appreciation......................... $ 82,867 $ 225,920 $ 179,511 $ 79,207 $ 19,073 $ 12,652
Depreciation......................... (21,482) (6,519) (31,610) (12,669) (48,822) (14,076)
Net Unrealized:
Appreciation (Depreciation).......... 61,385 219,401 147,901 66,538 (29,749) (1,424)
</TABLE>
(2) INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term
securities) for the year ended June 30, 1999 were as follows:
<TABLE>
<CAPTION>
JANUARY FEBRUARY MARCH APRIL MAY JUNE
-------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Stocks
Purchases............................ $549,988 $1,391,252 $1,334,627 $1,749,402 $1,072,828 $1,400,093
Sales................................ 0 92,355 60,388 0 24,206 0
</TABLE>
(3) INVESTMENT ADVISORY AGREEMENT, SUB-ADVISORY AGREEMENTS AND TRANSACTIONS WITH
AFFILIATED PERSONS
The Fund's day-to-day investment management is the responsibility of its
investment adviser, Ohio National Investments, Inc. (the "Adviser"). The
Adviser is an Ohio corporation. It is a wholly owned subsidiary of ONLI and
its address is the same as those of the Fund and ONI. The Adviser and its
predecessors have been managing investment companies since 1970. All of the
Adviser's investment advisory personnel are also responsible for the
management of ONLI's assets.
For managing the Fund's assets, the Adviser receives a monthly management fee
based on the Fund's total net assets. This fee is calculated daily and is at
the annual rate of 0.60% of total net assets.
In addition to the fee paid to the Adviser, the Fund incurs other
miscellaneous expenses for legal and accounting services, registration and
filing fees, custodial services and shareholder services.
The Adviser contracts with First Trust Advisors LP ("First Trust") to serve
as sub-adviser to the Fund. First Trust manages the Fund's assets under the
Adviser's supervision. First Trust, an investment adviser to financial
institutions, is located at 1001 Warrenville Road in Lisle, Illinois. First
Trust has been managing Dow 10 strategies in unit investment trusts and other
investment companies since 1991.
First Trust has been granted a license by Dow Jones & Company, Inc. to use
certain copyright, trademark and proprietary rights and trade secrets of Dow
Jones. The Fund and ONLI have entered into agreements with First Trust giving
the Fund and ONLI permission to use and refer to the Dow Jones marks and
rights in connection with the Fund and ONLI's separate accounts.
For the service and rights provided by First Trust, the Adviser pays First
Trust a monthly sub-advisory fee based on the Fund's total net assets. This
fee is calculated daily and is at the annual rate of 0.35% of the Fund's
average daily assets.
The Fund's transfer agent and accounting agent is American Data Services,
Inc., 150 Motor Parkway, Hauppauge, New York. The Fund's custodian is Firstar
Bank, 425 Walnut Street, Cincinnati, Ohio.
(4) FUND INTERESTS
Fund interests transactions for the six months ended June 30, 1999 are as
follows:
<TABLE>
<CAPTION>
JANUARY FEBRUARY MARCH APRIL MAY JUNE
-------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Capital shares issued on sales......... 55,645 150,489 132,833 161,857 108,235 143,982
Capital shares issued on reinvested
dividends............................ -- -- -- -- -- --
Capital shares redeemed................ 2,215 18,537 6,264 1,102 742 --
</TABLE>
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