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File No. 333-64349
File No. 811-9019
FORM N-1A
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No.___ [ ]
Post-Effective Amendment No. __1__ [ X ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. __1__ [ X ]
DOW TARGET VARIABLE FUND LLC
(Exact Name of Registrant)
One Financial Way
Montgomery, Ohio 45242
(Address of Principal Executive Office)
(513) 794-6316
(Registrant's Telephone Number)
Ronald L. Benedict, Secretary
Dow Target Variable Fund LLC
P.O. Box 237
Cincinnati, Ohio 45201
(Name and Address of Agent for Service)
Notice to:
W. Randolph Thompson, Of Counsel
Jones & Blouch L.L.P.
Suite 405 West
1025 Thomas Jefferson Street, NW
Washington, DC 20007
Approximate Date of Public Offering: As soon as practicable after the effective
date of this registration statement.
It is proposed that this filing will become effective (check appropriate box):
____ immediately upon filing pursuant to paragraph (b)
____ on (date) pursuant to paragraph (b)
____ 60 days after filing pursuant to paragraph (a)(1)
____ on (date) pursuant to paragraph (a)(1)
____ 75 days after filing pursuant to paragraph (a)(2)
_X__ on September 1, 1999 pursuant to paragraph (a)(2) 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.
Title of Securities Being Registered: Membership interests in Dow Target
Variable Fund LLC
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PROSPECTUS
SEPTEMBER 1, 1999
THE DOW(SM) TARGET VARIABLE FUND LLC
ONE FINANCIAL WAY
MONTGOMERY, OHIO 45242
(800) 366-6654
The Dow Target Variable Fund LLC is an open-end investment company. Its
"Dow Target 10" portfolios are twelve non-diversified portfolios of the common
stocks of the ten companies in the Dow Jones Industrial Average(SM) (the "Dow")
having the highest dividend yields as of the close of business on or about the
last business day prior to the beginning of each portfolio's annual term. This
is often called "the Dow 10" strategy. These ten companies are popularly known
as the "Dogs of the Dow." Its "Dow Target 5" portfolios are twelve
non-diversified portfolios of the common stocks of the five Dow 10 companies
having the lowest per-share stock prices as of the close of business on or about
the second last business day prior to the beginning of each of those portfolios'
annual term.
The Fund's objective is to provide above-average total return through both
capital appreciation and dividend income. The Fund may or may not achieve that
objective. The stocks held in each portfolio of the Fund are not expected to
reflect the entire Dow index. The prices of Fund interests are not intended to
track movements of the Dow. The Dow consists of thirty stocks selected by Dow
Jones & Company, Inc. (publishers of The Wall Street Journal) as representing
American industry and the broader domestic stock market.
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 SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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INVESTMENT STRATEGY
The Fund has 24 non-diversified portfolios. Each one is named after a
different month (Dow Target 10 January portfolio, Dow Target 5 January
portfolio, Dow Target 10 February portfolio, Dow Target 5 February portfolio,
etc.) On or about the first business day of each month, each portfolio named for
that month invests substantially all its assets in the 10 Dogs of the Dow
stocks, or the 5 lowest priced Dogs of the Dow stocks, as the case may be, as
determined at the close of the second-last business day of the preceding month.
Fund management then sets the proportionate relationships among the 10 or 5
stocks in that portfolio for the next 12 months. For example, the stocks held in
a January portfolio are maintained in their same relative proportions until the
end of December. Those in a February portfolio are held until the end of the
next January and so on. At the end of a portfolio's twelfth month, the portfolio
is re-balanced with a new mix of 10 or 5 stocks.
All purchases of Fund interests (variable annuity separate accounts) during
any month are invested in that month's portfolios. After that month ends, you
may not make further purchases of that month's portfolio interests until the
corresponding month in later years. Any additional Fund purchases after the
first business day of a portfolio's month will duplicate, as nearly as is
practicable, the original proportionate relationships among its 10 or 5 stocks.
Since the prices of each of the stocks change nearly every day, the ratio of the
price of each stock to the total price of the entire group of 10 or 5 also
changes daily. However, the proportion of stocks represented in a portfolio will
not change materially.
The investments of portfolio securities are, to the extent practicable,
purchased in substantially equal dollar amounts for each of the 10 or 5
companies. It is generally not possible for management to purchase round lots
(usually 100 shares) of those stocks in amounts that will precisely duplicate
the prescribed mix. Also, it usually is impossible for a portfolio to be 100%
invested in the prescribed mix of those stocks at any time. To the extent a
portfolio is not fully invested, the interests of variable annuity owners may be
diluted and total return may not directly track the investment results of the 10
or 5 stocks. To minimize this effect, Fund management will try, as much as
practicable, to maintain a minimum cash position at all times. Normally, the
only cash items held by a portfolio are amounts expected to be deducted as
expenses and amounts too small to purchase additional round lots of the 10 or 5
stocks.
RISKS
Investing in the ten Dogs of the Dow stocks, or the five lowest priced of
those ten stocks, amounts to a moderately contrarian strategy. While these
stocks represent large established companies recognized as industry leaders,
they are currently out of favor relative to the other Dow stocks. While the
relatively high dividends paid by these companies may account for a substantial
portion of a portfolio's total return, there is no guarantee that the companies
will meet their expected dividend distributions throughout the 12-month term of
a portfolio, nor can there be any assurance that the stocks will appreciate in
price during the 12-month term. The loss of money is a risk of investing in the
Fund.
The Dow 10 and 5 strategies select the stocks by formula without
considering why some companies might currently be out of favor with investors.
Thus, a company experiencing financial difficulties or business reverses will
represent approximately 10% of a Dow Target 10 portfolio or approximately 20% of
a Dow Target 5 portfolio if, as of the beginning of the portfolio's 12-month
term, it is among the ten or five Dow stocks conforming to the portfolio's
selection formula. In addition to factors affecting the prices for each of the
individual stocks, all of those stocks are subject to general market and
economic trends that might negatively impact a portfolio's total return. The mix
of stocks will not be changed during a 12-month term in order to take advantage
of changing market conditions.
Being limited to ten or five stocks each, the portfolios are not
diversified. This can expose each portfolio to potentially greater market
fluctuations than might be experienced by a diversified fund. Variable annuity
owners, in light of their own financial situations and goals, should consider
other additional funding options in order to diversify the allocations of their
contract assets.
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The Fund's interests are owned entirely by ONLI's variable annuity separate
accounts. In order for a variable annuity to be treated as an annuity, the
Internal Revenue Code requires, in effect, that each portfolio be diversified as
follows at the end of each calendar quarter:
- no more than 55% of the value of a portfolio's total assets may be
represented by any one investment,
- no more than 70% of the value of portfolio's total assets may be
represented by any two investments,
- no more than 80% of the value of a portfolio's total assets may be
represented by any three investments, and
- no more than 90% of the value of a portfolio's total assets may be
represented by any four investments.
It is possible, particularly for the Dow Target 5 portfolios, that changes
in the market prices of a portfolio's securities during the course of a year
could cause the portfolio to fail this test at the end of a quarter. We intend
to manage the Fund's portfolios so as to maintain the tax-advantaged status of
the variable annuities. If we determine that a portfolio might fail this
diversification test, we will purchase or sell securities for that portfolio in
order to prevent that failure. In so doing, we will seek to minimize any
deviations from the portfolio's standard strategy.
FUND ORGANIZATION
The Fund is organized as an Ohio limited liability company. Its Board of
Managers is responsible for the Fund's overall management and direction. The
Board elects the Fund's officers. The Board approves all significant agreements
including those with the investment adviser, sub-adviser, custodian and fund
accounting agent. Board members are elected by owners of Fund interests.
Under Ohio law, a limited liability company does not issue shares of stock.
Instead, ownership rights are contained in "membership interests". Each Fund
interest represents an undivided interest in the stocks held in a Fund
portfolio. The Fund is not offered directly to the public. The only direct owner
of the Fund's interests is ONLI through its separate accounts. Those of ONLI's
variable annuity owners who have contract values allocated to any of the Fund's
portfolios have indirect beneficial rights in the Fund's interests.
All Fund interests have equal voting rights. However, only interests of a
particular portfolio are entitled to vote on matters affecting only that
portfolio.
Each issued and outstanding Fund interest is entitled to one vote and to
participate equally in dividends and distributions declared by its corresponding
portfolio, and in the net assets of the portfolio remaining upon liquidation or
dissolution after outstanding liabilities are satisfied. The interests of each
portfolio, when issued, are fully paid and non-assessable. They have no
pre-emptive, conversion, cumulative dividend or similar rights. They are freely
transferable. Fund interests do not have cumulative rights. This means that
owners of more than half of the Fund's interests voting for election of Managers
can elect all the Managers if they so choose. Then, the remaining interest
owners would not be able to elect any Managers.
ONLI votes Fund interests it holds in accordance with instructions it
receives from the owners of variable annuity contracts issued in connection with
each of its separate accounts. Any other Fund interests will be voted in
proportion to the instructions received from all variable annuity owners.
FUND MANAGEMENT
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 ONLI. 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 the average daily total net assets.
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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 L.P. ("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 and Dow 5 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 services 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 net 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 Star Bank,
425 Walnut Street, Cincinnati, Ohio.
THE DOW JONES INDUSTRIAL AVERAGE(SM)
The Dow was first published in The Wall Street Journal in 1896. Initially
consisting of just 12 stocks, it expanded to 20 stocks in 1916 and to its
present size of 30 stocks in 1928. The stocks are chosen by the editors of The
Wall Street Journal as representative of the broad stock market and of American
industry. The companies are major factors in their industries and their stocks
are widely held by individuals and institutional investors. Changes in the
components of the Dow are made entirely by the editors of The Wall Street
Journal without consultation with the companies, the stock exchange or any
official agency. For the sake of continuity, changes are made rarely. Most
substitutions have been the result of mergers, but from time to time, changes
may be made to achieve a better representation. The components of the Dow may be
changed at any time, for any reason. Any changes in the components of the Dow
made after the stock selection date will not cause a change in the identify of
the ten or five stocks included in a portfolio. The following is a list of the
companies which currently comprise the Dow.
AT&T Corporation
Allied Signal
Aluminum Company of America
American Express Company
Boeing Company
Caterpillar Inc.
Chevron Corporation
Coca-Cola Company
Walt Disney Company
E.I. duPont de Nemours & Company
Eastman Kodak Company
Exxon Corporation
General Electric Company
General Motors Corporation
Goodyear Tire & Rubber Company
Hewlett-Packard Co.
International Business Machines Corporation
International Paper Company
Johnson & Johnson
McDonald's Corporation
Merck & Company, Inc.
Minnesota Mining & Manufacturing Company
J.P. Morgan & Company, Inc.
Philip Morris Companies, Inc.
Procter & Gamble Company
Sears, Roebuck & Company
Travelers Group, Inc.
Union Carbide Corporation
United Technologies Corporation
Wal-Mart Stores, Inc.
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The Fund is not sponsored, endorsed, sold or promoted by Dow Jones. Dow
Jones makes no representation or warranty, express or implied, to the Fund's
unit owners or any member of the public regarding the advisability of purchasing
the Fund. Dow Jones' only relationship to the Fund, ONLI, the Adviser or First
Trust is the licensing of certain copyrights, trademarks, servicemarks and
service names of Dow Jones. Dow Jones has no obligation to take the needs of
ONLI, the Adviser, First Trust or variable annuity owners into consideration in
determining, composing or calculating the Dow. Dow Jones is not responsible for
and has not participated in the determination of the terms and conditions of the
Fund, including the pricing of Fund interests or the amount payable under
variable contracts. Dow Jones has no obligation or liability in connection with
the administration or marketing of the Fund or any variable annuity contracts.
TOTAL RETURN HISTORY OF THE DOW 10 AND DOW 5 STRATEGIES (NOT THE FUND)
The following table compares the annual total returns of the Dow 10 and Dow
5 strategies and the annual total returns of the Dow for each of the last 25
calendar years. The table does not show the Fund's performance history. The ten
and five designated stocks for each year were selected as of the beginning of
each year.
This table is presented for comparison purposes only. The total returns
shown are no indication of returns that might be expected in the future. The
table does not reflect the Fund's charges and expenses which diminish the Fund's
actual returns. (See "Charges and Expenses"). The Fund will not be 100% invested
at all times, nor is it possible for it to perfectly maintain its prescribed
relative weightings of the designated stocks at all times throughout a
portfolio's term. In addition to the Fund's charges and expenses, total return
in variable annuities is further reduced by separate account and contract
charges as described in the accompanying variable annuity prospectus.
<TABLE>
<CAPTION>
YEAR DOW 10 DOW 5 THE DOW
- ---- ------ ------- -------
<S> <C> <C> <C>
1974 -1.02% -5.40% -23.64%
1975 56.10% 64.77% 44.46%
1976 35.18% 40.96% 22.80%
1977 11.95% 5.49% -12.91%
1978 0.03% 1.23% 2.66%
1979 13.01% 9.84% 10.60%
1980 27.90% 41.69% 21.90%
1981 7.46% 3.19% -3.61%
1982 27.12% 43.37% 26.85%
1983 39.07% 36.38% 25.82%
1984 6.22% 11.12% 1.29%
1985 29.54% 38.34% 33.28%
1986 35.63% 30.89% 27.00%
1987 5.59% 10.69% 5.66%
1988 24.57% 21.47% 16.03%
1989 26.97% 10.55% 32.09%
1990 -7.82% -15.74% -0.73%
1991 34.20% 62.03% 24.19%
1992 7.69% 22.90% 7.39%
1993 27.08% 34.01% 16.87%
1994 4.21% 8.27% 5.03%
1995 36.85% 30.50% 36.67%
1996 28.35% 26.20% 28.71%
</TABLE>
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<TABLE>
<CAPTION>
YEAR DOW 10 DOW 5 THE DOW
- ---- ------ ------- -------
<S> <C> <C> <C>
1997 21.68% 19.97% 24.82%
1998 10.59% 12.36% 18.03%
</TABLE>
Based on the above annual returns, the average annual total returns for the
25 year period were 18.73% for the Dow 10 strategy, 21.07% for the Dow 5
strategy, and 14.48% for the thirty Dow stocks. There can be no assurance that
future returns will continue to follow this pattern. In any event, the Fund's
actual returns will be less than those of each portfolio's selected stocks
because of the Fund's expenses.
PERFORMANCE DATA
From time to time, ONLI or its affiliates may advertise historical total
returns of variable contract subaccounts based on the returns of the Fund's
portfolios (adjusted for contract charges and expenses). These figures will be
calculated according to standardized methods prescribed by the SEC. The Fund's
total returns may be compared to returns on the Dow for comparable periods in
such advertising. Historical returns are not predictive of future performance.
ONLI or its affiliates may also advertise average annual total return or
other performance data for the Fund in non-standard formats. Any such
information will be accompanied by standardized performance data.
PRICING OF FUND INTERESTS
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. The net asset values of the Fund's interests
are determined on each day on which an order for purchase or redemption of the
Fund's interests are received and there is enough trading in portfolio
securities that the current net asset value of its interests might be affected.
The values are determined as of 4:00 p.m. eastern time on each day the New York
Stock Exchange is open for unrestricted trading. 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.
FUND DIVIDENDS AND DISTRIBUTIONS
Dividends representing net 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.
TAXES
The Fund is a limited liability company with all of its interests owned by
a single entity (ONLI). Accordingly, the Fund is taxed as part of the operations
of ONLI and is not taxed separately. Under current tax law, interest, dividend
income and capital gains of the Fund are not currently taxable when left to
accumulate within a variable annuity contract.
THE YEAR 2000 ISSUE
The Fund, the Adviser and related entities believe they have succeeded in
remedying the "Year 2000" problem for all mission critical internal computer
systems and applications. Conversion testing and implementation for those
systems were completed by December 31, 1998. During the remainder of 1999,
peripheral personal computer systems will continue to be up-graded and tested
for Year 2000 implementation. While the Fund and the 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, the Fund's internal auditors intend to
independently test those systems to verify their compliance. The Fund, the
Adviser and
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related entities are also developing contingency plans to be prepared for the
possibility that one or more service providers might not be compliant. The
failure of the Fund, the Adviser or one of their service suppliers to achieve
timely and complete compliance could materially impair the ability to conduct
their business, including the ability to accurately and timely value portfolio
securities, and it could have an adverse effect on the portfolios.
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The Statement of Additional Information ("SAI") includes additional
information about the Fund. The SAI is incorporated herein by reference.
After the Fund completes its initial fiscal periods, additional information
about the Fund's investments will be available in the Fund's annual and
semi-annual reports to members. In the Fund's annual report, you will find a
discussion of the market conditions and how the Fund's investment strategy
significantly affected the Fund's performance during the year.
The SAI and (when available) the Fund's annual and semi-annual reports are
available, without charge, upon request. To receive them, call or write the Fund
at 1-800-578-8078, One Financial Way, Montgomery, Ohio 45242
Information about the Fund can also be reviewed and copied at the Public
Reference Room of the Securities and Exchange Commission in Washington, D.C.
Information about the SEC's Public Reference Room is available at
1-800-SEC-0330. Reports and other information are also available in the SEC's
Internet site at http://www.SEC. gov. Copies of this information may be
obtained, upon payment of a duplicating fee, by writing the Public Reference
Section of the SEC, Washington, D.C. 20549-6009.
Dow Target Variable Fund LLC, Investment Company Act File no. 811-9019.
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THE DOW(SM) TARGET VARIABLE FUND LLC
One Financial Way
Montgomery, Ohio 45242
Telephone (800)366-6654
Statement of Additional Information ("SAI")
September 1, 1999
This SAI is not a prospectus. Please read it in conjunction with the prospectus
for the Dow(sm) Target Variable Fund LLC (the "Fund") dated September 1, 1999.
To get a free copy of the Fund's prospectus, write or call the Fund at the above
address.
Table of Contents
<TABLE>
<S> <C>
The Fund.....................................................................................................Page 2
Investment Policies..........................................................................................Page 2
Fundamental Policies......................................................................................Page 3
Repurchase Agreements.....................................................................................Page 3
Fund Management..............................................................................................Page 4
Investment Advisory and Other Services.......................................................................Page 6
Brokerage Allocation.........................................................................................Page 7
Purchase and Redemption of Fund Interests....................................................................Page 8
Taxation of the Fund........................................................................................ Page 9
Fund Performance.............................................................................................Page 9
Total Return.............................................................................................Page 10
Legal Counsel...............................................................................................Page 10
Financial Statements........................................................................................Page 11
</TABLE>
Dow Jones & Company, Inc. ("Dow Jones") does not guarantee the accuracy and/or
the completeness of the Dow Jones Industrial Average(SM). Dow Jones shall have
no liability for any errors, omission, or interruptions therein. Dow Jones makes
no warranty, express or implied, as to results to be obtained by the Fund, ONLI,
the Adviser, First Trust or variable annuity owners or any other person or
entity from the use of the Dow Jones Industrial Average(SM). Dow Jones makes no
express or implied warranties and expressly disclaims all warranties, of
merchantability or fitness for a particular purpose or use with respect to the
Dow Jones Industrial Average(SM). Without limiting any of the foregoing, in no
event shall Dow Jones have any liability for any lost profits or indirect,
punitive, special or consequential damages (including lost profits), even if
notified of the possibility of such damages.
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THE FUND
The Fund is a non-diversified, open-end management investment company. It
currently consists of 24 distinct portfolios, each corresponding to a calendar
month.
The Fund was organized under Ohio law as a limited liability company in
September, 1998. The Fund presently sells its interests only to separate
accounts of The Ohio National Life Insurance Company ("ONLI") as a funding
option to support certain benefits under variable annuity contracts issued by
ONLI. In the future, Fund interests may be used for other purposes. However,
without a change in applicable law, Fund interests will not be sold directly to
the public.
The investment and reinvestment of Fund assets is overseen by the Fund's
investment adviser, Ohio National Investments, Inc. (the "Adviser"). The
principal business address of the Fund, ONLI and the Adviser is One Financial
Way, Montgomery, Ohio 45242. The investment and reinvestment of Fund assets is
managed by First Trust Advisors L.P. First Trust's principal business address is
1001 Warrenville Road, Suite 300, Lisle, Illinois 60532.
INVESTMENT POLICIES
The prospectus describes the Fund's investment strategy and objectives. The Fund
is non-diversified. Each Dow Target 10 portfolio will, at the beginning of that
portfolio's annual term, strive to invest approximately 10% of its total net
assets in each of the ten companies in the Dow Jones Industrial Average(sm) (the
"Dow") having the highest dividend yields as of the close of business on the
second-last business day before the portfolio's term begins. This is often
called "the Dow 10" strategy. These ten companies are popularly known as the
"Dogs of the Dow."
Each Dow Target 5 portfolio will, at the beginning of that portfolio's annual
term, strive to invest approximately 20% of its total net assets in each of the
five Dogs of the Dow companies having the lowest per-share stock prices as of
the close of business on the second-last business day before the portfolio's
term begins. This is often called the "Dow 5" strategy.
There can be no assurance that a portfolio will not invest more than 10% (in the
case of a Dow Target 10 portfolio) or 20% (in the case of a Dow Target 5
portfolio) of its net assets in the stock or other securities of any single
company. The Fund may, without limits as to percent of assets, purchase U.S.
government securities or short-term debt securities (a) pending the orderly
purchase of the 10 or 5 designated stocks or (b) for temporary defensive
purposes.
The following fundamental policies may not be changed without the affirmative
vote of the majority of the outstanding voting securities of the Fund (or of a
particular portfolio, if appropriate). The Investment Company Act of 1940
defines a majority vote as the vote of the lesser of:
- 67% of the Fund interests represented at a meeting at which more that 50%
of the outstanding interests are represented or
- more than 50% of the outstanding voting interests.
With respect to the submission of a change in an investment policy to the
holders of outstanding voting interests of a particular portfolio, such matter
shall be deemed to have been effectively acted upon with respect to such
portfolio if a majority of the outstanding voting interests of such portfolio
vote for the approval of such matter, notwithstanding that:
- such matter has not been approved by the holders of a majority of the
outstanding voting interests of any other portfolio affected by such
matter, and
- such matter has not been approved by the vote of a majority of the
outstanding voting Fund interests.
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Fundamental Policies:
1. The Fund may not issue senior securities.
2. The Fund will not borrow money, except for temporary or emergency purposes,
from banks. The aggregate amount borrowed shall not exceed 5% of the value of a
portfolio's assets. In the case of any borrowing, a portfolio may pledge,
mortgage or hypothecate up to 5% of its assets.
3. The Fund will not underwrite the securities of other issuers except to the
extent the Fund may be considered an underwriter under the Securities Act of
1933 when selling portfolio securities.
4. The Fund will not purchase or sell real estate or interests therein.
5. The Fund will not lend money or other assets to other persons in excess of 5%
of a portfolio's total assets, except (a) by entering into repurchase agreements
or the purchase of other assets consistent with the Fund's objectives or (b) by
loaning portfolio securities if collateral values are continuously maintained at
no less than 100% by daily marking to market.
Repurchase Agreements
Under a repurchase agreement, a portfolio purchases a security and obtains a
simultaneous commitment from the seller (a member bank of the Federal Reserve
System or a government securities dealer recognized by the Federal Reserve
Board) to repurchase the security at a mutually agreed upon price and date. It
may also be viewed as a loan of money by the portfolio to the seller. The resale
price is normally in excess of the purchase price and reflects an agreed upon
market rate. The rate is effective for the period of time the portfolio is
invested in the agreement and unrelated to the coupon rate on the purchased
security. The period of these repurchase agreements will usually be short, from
overnight to one week, and at no time will a portfolio invest in repurchase
agreements for more than one year. These transactions afford an opportunity for
a portfolio to earn a return on temporarily available cash. Although repurchase
agreements carry certain risks not associated with direct investments in
securities, the Fund intends to enter into repurchase agreements only with
financial institutions believed by the Adviser to present minimal credit risks
in accordance with criteria established by the Fund's Board. The Adviser will
review and monitor the creditworthiness of such institutions under the Board's
general supervision. The Fund will only enter into repurchase agreements
pursuant to a master repurchase agreement that provides that all transactions be
fully collateralized and that the collateral be in the actual or constructive
possession of the Fund. The agreement must also provide that the Fund will
always receive as collateral securities whose market value, including accrued
interest, will be a least equal to 100% of the dollar amount invested by a
portfolio in each agreement, and the portfolio will make payment for such
securities only upon physical delivery or evidence of book entry transfer to the
account of the custodian. If the seller were to default, the portfolio might
incur a loss if the value of the collateral securing the repurchase agreement
declines and may incur disposition costs in connection with liquidating the
collateral. In addition, if
Page 3
<PAGE> 13
bankruptcy proceedings are commenced with respect to the seller of the security,
realization upon the collateral by the portfolio may be delayed or limited and a
loss may be incurred if the collateral securing the repurchase agreement
declines in value during the bankruptcy proceedings.
FUND MANAGEMENT
The Board of Managers and the officers of the Fund, together with a brief
summary of their principal occupations during the past five years, are listed
below:
<TABLE>
<CAPTION>
Principal Occupation during past
Name and address Positions with the Fund five years Age
- ---------------- ----------------------- --------------------------------- ---
<S> <C> <C>
Ronald L. Benedict* Secretary and Manager Corporate Vice President, Counsel and 57
One Financial Way Secretary, ONLI; Secretary of the
Montgomery, Ohio Adviser
George E. Castrucci Manager Retired; formerly President and Chairman 61
8355 Old Stable Rd. Chief Operating Officer of Great and
Cincinnati, Ohio American Communications Co. and Chief
Executive Officer of Great American
Broadcasting Co.; Director of Benchmark
Savings Bank; Director of Baldwin Piano
& Organ Co.
Ross Love Manager President & CEO, Blue Chip Director, 53
615 Windings Way Broadcasting Ltd.; Trustee, Health
Cincinnati, Ohio Partnership Alliance of Greater
Cincinnati; for a Drug Free America
(Chairman of African-American Task
Force); Advisory Board, Syracuse
University School of Management;
Director, Association of National
Advertisers; Until 1996 was Vice
President of Advertising, Procter &
Gamble Co.
</TABLE>
Page 4
<PAGE> 14
<TABLE>
<CAPTION>
Principal Occupation during past
Name and address Positions with the Fund five years Age
- ---------------- ----------------------- --------------------------------- ---
<S> <C> <C>
John J. Palmer* President and Manager Senior Vice President, Strategic 60
One Financial Way Initiatives, ONLI; Prior to March,
Montgomery, Ohio 1997, was Senior Vice President of
Life Insurance Company of Virginia
George M. Vredeveld Manager Professor of Economics, University 56
University of Cincinnati of Cincinnati; Director of Center
P.O. Box 210223 for Economic Education; Private
Cincinnati, Ohio Consultant; Director of Benchmark
Savings Bank
Thomas A. Barefield Vice President Senior Vice President, Institutional 46
One Financial Way Sales, ONLI; Prior to November,
Montgomery, Ohio 1997, was Senior Vice President of
Life Insurance Company of Virginia
Michael A. Boedeker Vice President Vice President, Fixed Income 57
One Financial Way Securities, ONLI; Vice President and
Montgomery, Ohio Director of the Adviser
Joseph P. Brom Vice President Vice President, Investments, ONLI; 63
One Financial Way President and Director of the Adviser
Montgomery, Ohio
Stephen T. Williams Vice President Vice President, Equity Securities, 46
One Financial Way ONLI; Vice President and Director of
Montgomery, Ohio the Adviser
Dennis R. Taney Treasurer Mutual Funds Financial Operations, 51
One Financial Way ONLI; Treasurer of the Adviser
Montgomery, Ohio
</TABLE>
*Indicates Managers who are "Interested Persons" as defined by the Investment
Company Act of 1940, as amended.
All Managers and officers of the Fund hold similar positions as directors and/or
officers with Ohio National Fund, Inc. ("ONF") and ONE Fund, Inc. ("ONE Fund"),
diversified mutual funds sponsored by ONLI and managed by the Adviser.
Page 5
<PAGE> 15
Compensation of Board of Managers
Managers who are not affiliated with the Adviser, ONLI or First Trust were
compensated as follows in 1998:
<TABLE>
<CAPTION>
Aggregate Compensation Total Compensation From
Manager From the Fund Fund Complex**
- ------- ---------------------- -----------------------
<S> <C> <C>
George E. Castrucci $750 $16,350
Ross Love 750 16,350
George M. Vredeveld 750 16,350
</TABLE>
**The "Fund Complex" consists of the Fund, ONF and ONE Fund.
Managers and officers of the Fund who are affiliated with the Adviser, ONLI or
First Trust receive no compensation from the Fund Complex. The Fund has no
pension, retirement or deferred compensation plan for its Managers or officers.
INVESTMENT ADVISORY AND OTHER SERVICES
The Adviser is an Ohio corporation organized on January 17, 1996 to provide
investment advice and management services to investment companies affiliated
with ONLI. The Adviser is a wholly-owned subsidiary of ONLI. The Adviser uses
ONLI's investment personnel and administrative systems.
The Adviser regularly furnishes to the Fund's Board recommendations with respect
to an investment program consistent with the Fund's investment policies. The
Adviser implements that program by placing orders for the purchase and sale of
securities or by delegating that implementation to First Trust.
The Adviser's services are provided under an Investment Advisory Agreement with
the Fund. Under the Investment Advisory Agreement, The Adviser provides
personnel, including executive officers for managing the day-to-day affairs of
the Fund. The Adviser also furnishes at its own expense or pays the expenses of
the Fund for clerical and related administrative services (other than those
provided by the custodian agreement with Star Bank and agreements with American
Data Services), office space and other facilities and equipment. The Adviser
also furnishes or pays for all information and services (other than legal
counsel) required for the preparation and amendment of registration statements,
prospectuses, SAIs, financial reports, and proxy solicitation material. The Fund
pays organizational expenses incurred in its operations including, among others,
local income, franchise, issuance or other taxes; certain printing costs,
brokerage commissions on portfolio transactions; custodial and transfer agent
fees; auditing and legal expenses; and expenses related to registration of its
interests and members' meetings.
As compensation for its services, the Adviser receives from the Fund monthly
fees on the basis of the Fund's average daily net assets at the annual rate of
0.60% of each portfolio's net assets.
Page 6
<PAGE> 16
Under the Investment Advisory Agreement, the Fund authorizes the Adviser to
retain sub-advisers, subject to the Board's approval. The Adviser has entered
into a Sub-Advisory Agreement with First Trust to manage the investment and
reinvestment of the Fund's assets, subject to the Adviser's supervision. The
Adviser, ONLI and the Fund have also entered into a Sub-License Agreement with
First Trust under the terms of which the Fund and ONLI are permitted to use and
refer to certain copyright, trademark and proprietary rights and trade secrets
of Dow Jones. As compensation for its services, First Trust receives from the
Adviser monthly fees on the basis of the Fund's average daily net assets at the
annual rate of 0.35% of each portfolio's net assets.
The Investment Advisory Agreement provides that if the total expenses applicable
to any portfolio during any calendar quarter (excluding taxes, brokerage
commissions, interest and the investment advisory fee) exceed 1%, on an
annualized basis, of such portfolio's average daily net asset value, the Adviser
will pay such excess expenses.
Under a Service Agreement among the Fund, the Adviser and ONLI, the latter has
agreed to furnish the Adviser, at cost, such research facilities, services and
personnel as may be needed by the Adviser in connection with its performance
under the Investment Advisory Agreement. The Adviser reimburses ONLI for its
expenses in this regard.
The Investment Advisory, Sub-Advisory and Service Agreements were approved by
the Board of Managers on October 12, 1998 and by the members of the Fund on
January 4, 1999.
These agreements will continue in force from year to year hereafter, if such
continuance is specifically approved at least annually by a majority of the
Fund's Managers who are not parties to such agreements or interested persons of
any such party, with votes to be cast in person at a meeting called for the
purpose of voting on such continuance, and also by a majority of the Board or by
a majority of the outstanding voting securities of each portfolio voting
separately.
The Investment Advisory, Service, and Sub-Advisory Agreements may be terminated
at any time, without the payment of any penalty, on 60 days' written notice to
the Adviser by the Fund's Board or, as to any portfolio, by a vote of the
majority of the portfolio's outstanding voting securities. The Investment
Advisory Agreement may be terminated by the Adviser on 90 days' written notice
to the Fund. The Service Agreement may be terminated, without penalty, by the
Adviser or ONLI on 90 days' written notice to the Fund and the other party. The
Sub-Advisory Agreement may be terminated, without penalty, by the Adviser or by
First Trust on 90 days' written notice to the Fund and the other party. The
Agreements will automatically terminate in the event of their assignment.
BROKERAGE ALLOCATION
The Adviser or, subject to the Sub-Advisory Agreement, First Trust buys and
sells the Dogs of the Dow stocks and makes other authorized investments for each
portfolio. The Adviser and First Trust select the brokers and dealers to handle
such transactions. It is the
Page 7
<PAGE> 17
intention of the Adviser and of First Trust to place orders for the purchase and
sale of securities with the objective of obtaining the most favorable price
consistent with good brokerage service. The cost of securities transactions for
each portfolio will consist primarily of brokerage commissions or dealer or
underwriter spreads.
In selecting brokers or dealers through whom to effect transactions, the Adviser
and First Trust consider a number of factors including the quality, difficulty
and efficiency of execution, and value of research, statistical, quotation and
valuation services provided. Research services by brokers include advice, either
directly or through publications or writings, as to the value of securities, and
analyses and reports concerning issuers, industries, securities, economic
factors and trends, and portfolio strategy. In making such determination, the
Adviser or First Trust may use a broker whose commission in effecting a
securities transaction is in excess of that of some other broker if the Adviser
or First Trust determines in good faith that the amount of such commission is
reasonable in relation to the value of the research and related services
provided by such broker. In effecting a transaction for one portfolio, a broker
may also offer services of benefit to other portfolios managed by the Adviser or
First Trust, or of benefit to either's affiliates.
Generally, it is not possible to place a dollar value on research and related
services provided by brokers to the Adviser or First Trust. However, receipt of
such services may tend to reduce the expenses of the Adviser or First Trust.
Research, statistical and similar information furnished by brokers may be of
incidental assistance to other clients of the Adviser or First Trust and
conversely, transaction costs paid by other clients of the Adviser or First
Trust may generate information which is beneficial to the Fund.
Consistent with these policies, First Trust may, with the Board's approval and
subject to its review, direct portfolio transactions to be executed by a broker
affiliated with First Trust so long as the commission paid to the affiliated
broker is reasonable and fair compared to the commission that would be charged
by an unaffiliated broker in a comparable transaction.
No company whose stock is held in any portfolio of the Fund, nor any affiliate
thereof, will act as broker or dealer for any portfolio in the purchase or sale
of any security for that portfolio.
First Trust manages other investment companies that use the Dow 10, Dow 5 and
similar strategies. Accordingly, occasions will arise when securities held by
one or more of those other investment companies, or that are being purchased or
sold by one or more of those other investment companies, are also being
purchased or sold by a portfolio of the Fund. It is the practice of First Trust
and its affiliates to allocate purchases and sales in these circumstances, to
the extent practicable and in a manner that First Trust deems equitable, to all
accounts involved. When two or more investment accounts simultaneously engage in
the purchase or sale of the same security, there could be a detrimental effect
on the price or value of the security as to each account. However, in other
cases, the ability of the Fund to participate in volume transactions with other
investment companies managed by First Trust will produce better execution and
prices for the Fund. The Fund's Board of Managers believes that such equitable
allocation of purchases and sales generally contributes to better overall
execution of the Fund's securities transactions.
PURCHASE AND REDEMPTION OF FUND INTERESTS
Fund interests are sold without a sales charge and may be redeemed at their net
asset value next computed after a purchase or redemption order is received by
the Fund. Depending upon the net asset values at that time, the amount paid upon
redemption may be more or less than the cost of the interests redeemed. Payment
for interests redeemed will be made as soon as possible, but in any event within
seven days after evidence of ownership of the interests is tendered to the Fund.
However, the Fund may suspend the right of redemption or postpone the date of
payment beyond seven days during any period when (a) trading on the New York
Stock Exchange is restricted, as determined by the Securities and Exchange
Commission, or such Exchange is closed for other than weekends and holidays; (b)
an emergency exists, as determined by the Commission, as a result of which
disposal by the Fund of securities owned by it is not reasonably practicable, or
it is not reasonably practicable for the Fund fairly to determine the value of
its net assets; or (c) the Commission by order so permits for the protection of
security holders of the Fund.
Page 8
<PAGE> 18
Interests of one portfolio may be exchanged for interests of another portfolio
of the Fund on the basis of the relative net asset value next computed after an
exchange order is received by the Fund.
The net asset value of the Fund's interests is determined on each day on which
an order for purchase or redemption of the Fund's interests is received and
there is a sufficient degree of trading in portfolio securities that the current
net asset value of its interests might be materially affected. Such
determination is made as of 4 p.m. eastern time on each day that the New York
Stock Exchange is open for unrestricted trading. The net asset value of each
portfolio is computed by dividing the value of the securities in that portfolio
plus any cash or other assets less all liabilities of the portfolio, by the
number of interests outstanding for that portfolio.
Securities which are held in a portfolio and listed on a securities exchange are
valued at the last sale price or, if there has been no sale that day, at the
last bid price reported as of 4 p.m. eastern time. Over-the-counter securities
are valued at the last bid price as of 4 p.m. eastern time. Short-term debt
securities with remaining maturities of 60 days or less are valued at amortized
cost.
TAXATION OF THE FUND
The Fund is not a "regulated investment company" under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). The Fund nonetheless
does not pay federal income tax on its interest, dividend income or capital
gains. As a limited liability company whose interests are sold only to ONLI, the
Fund is disregarded as an entity for purposes of federal income taxation. ONLI,
through its variable annuity separate accounts, is treated as owning the assets
of the portfolios directly and its tax obligations thereon are computed pursuant
to Subchapter L of the Code (which governs the taxation of insurance companies).
Under current tax law, interest, dividend income and capital gains of the Fund
are not taxable to the Fund, and are not currently taxable to ONLI or to
contract owners, when left to accumulate within a variable annuity contract. Tax
disclosure relating to the variable annuity contracts that offer the Fund as an
investment alternative is contained in prospectuses for those contracts.
FUND PERFORMANCE
The Fund, or broker-dealers offering variable annuities in which the Fund is
available, may distribute sales literature comparing the percentage change in
net asset value per Fund interest for any of its portfolios against the Dow
Jones Industrial Average, the Standard & Poor's 500 Stock Index, the Consumer
Price Index or other investment companies having investment strategies similar
to the Fund. These comparisons may include graphs, charts, tables or examples.
The average annual total return and cumulative total returns for each portfolio
may also be advertised.
Page 9
<PAGE> 19
The Fund may also advertise the performance ratings or rankings assigned to its
portfolios by various statistical services, including Morningstar, Inc. and
Lipper Analytical Services, Inc., or as they appear in various publications
including The Wall Street Journal, Investors Business Daily, The New York Times,
Barron's, Forbes, Fortune, Business Week, Financial Services Week, Financial
World, Kiplinger's Personal Finance and Money Magazine.
Total Return
Total returns quoted in advertising reflect all aspects of a portfolio's
investment return, including the effects of reinvesting dividends and capital
gain distributions as well as changes in the portfolio's net asset value per
Fund interest over the period shown. Average annual returns are calculated by
determining the growth or decline in value of a hypothetical historical
investment in a portfolio over a stated period, and then calculating the
annually compounded percentage rate that would have produced the same result had
the rate of growth or decline been constant over that period. While average
annual returns are a convenient means of comparing investment alternatives, no
portfolio will experience a constant rate of growth or decline over time.
The average annual compounded rate of return for a portfolio over a given period
is found by equating the initial amount invested to the ending redeemable value
using the following formula:
n
P(1+T) =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).
In addition to average annual total returns, advertising may reflect cumulative
total returns that simply reflect the change in value of an investment in a
portfolio over a period. This may be expressed as either a percentage change,
from the beginning to the end of the period, or the end-of-period dollar value
of an initial hypothetical investment.
LEGAL COUNSEL
Messrs. Jones & Blouch L.L.P., Washington, D.C., have passed on matters
pertaining to the federal securities laws and Ronald L. Benedict, Esq.,
Secretary of the Fund and Corporate Vice President, Counsel and Secretary of
ONLI, has passed on all other legal matters relating to the legality of the Fund
interests described in the prospectus and this SAI.
Page 10
<PAGE> 20
FINANCIAL STATEMENTS
The interim financial statements for the Fund, as of June 30, 1999, included in
this SAI have not been audited.
Page 11
<PAGE> 21
PART C: OTHER INFORMATION
Exhibits:
- ---------
All relevant exhibits, which have previously been filed with the Commission and
are incorporated herein by reference, are as follows:
(a) Articles of Organization of the registrant were filed as Exhibit (a) of
the registrant's Form N-1A, pre-effective amendment no. 1, on
November 25, 1998.
(b) By-laws of the registrant were filed as Exhibit (b) of the registrant's
Form N-1A, pre-effective amendment no. 1, on November 25, 1998.
(d) Investment Advisory Agreement between the registrant and Ohio National
Investments, Inc. was filed as Exhibit (d) of the registrant's
Form N-1A, pre-effective amendment no. 1, on November 25, 1998.
(d)(1) Sub-Advisory Agreement between Ohio National Investments, Inc. and
First Trust Advisors L.P. was filed as Exhibit (d)(1) of the
registrant's Form N-1A, pre-effective amendment no. 1, on
November 25, 1998.
(g) Custody Agreement between the registrant and Star Bank, NA was filed as
Exhibit (g) of the registrant's Form N-1A, pre-effective amendment
no. 1, on November 25, 1998.
(h) Sublicense Agreement among the registrant, First Trust Advisors L.P.
and Dow Jones & Company, Inc. was filed as Exhibit (h) of the
registrant's Form N-1A, pre-effective amendment no. 1, on
November 25, 1998.
(h)(1) Fund Accounting Service Agreement between the registrant and American
Data Services, Inc. was filed as Exhibit (h)(1) of the registrant's
Form N-1A, pre-effective amendment no. 1, on November 25, 1998.
(h)(2) Transfer Agency and Service Agreement between the registrant and
American Data Services, Inc. was filed as Exhibit (h)(2) of the
registrant's Form N-1A, pre-effective amendment no. 1, on
November 25, 1998.
(h)(3) Master Repurchase Agreement between the registrant and Star Bank, NA
was filed as Exhibit (h)(3) of the registrant's Form N-1A,
pre-effective amendment no. 1, on November 25,1998.
(h)(4) Service Agreement among the registrant, Ohio National Investments, Inc.
and The Ohio National Life Insurance Company was filed as Exhibit
(h)(4) of the registrant's Form N-1A, pre-effective amendment no. 1,
on November 25,1998.
(h)(5) Joint Insured Agreement among the registrant, Ohio National Fund, Inc.,
ONE Fund, Inc. and Ohio National Investments, Inc. was filed as Exhibit
(h)(5) of the registrant's Form N-1A, pre-effective amendment no. 1, on
November 25,1998.
(i) Opinion and consent of Ronald L. Benedict, Esq. was filed as Exhibit
(i) of the registrant's Form N-1A, pre-effective amendment no. 1, on
November 25,1998.
(l) Investment letter for the initial subscription of membership interests
of the registrant was filed as Exhibit (l) of the registrant's Form
N-1A, pre-effective amendment no. 1, on November 25,1998.
<PAGE> 22
Persons Controlled by or Under Common Control with the Fund
The registrant is an affiliate of The Ohio National Life Insurance Company
("ONLI"). ONLI owns 100% of the registrant's voting securities through ONLI's
separate accounts. The diagram below lists all persons under common control with
the registrant. ONLI is a wholly-owned subsidiary of Ohio National Financial
Services, Inc. ("ONFS"), which in turn is a wholly-owned subsidiary of Ohio
National Mutual Holdings, Inc. ("ONMH"). ONMH is a mutual insurance holding
company all of the voting securities of which are owned by the participating
policyholders of ONLI. ONLI owns 100% of the voting securities of all its
subsidiaries, including the registrant's investment adviser, Ohio National
Investments, Inc. (the "Adviser"), except for five directors' qualifying shares
of Ohio National Life Assurance Corporation ("ONLAC"). As of May 14, 1999, ONLI
(through its separate accounts) owned 90.5% of the voting securities of Ohio
National Fund, Inc. ("ONF"). The remaining 9.5% of the voting securities of ONF
were owned by ONLAC (through its separate account). On May 14, 1999, ONLI owned
45.3% of the voting securities of ONE Fund, Inc.
OHIO NATIONAL MUTUAL HOLDINGS, INC.
A MUTUAL INSURANCE HOLDING COMPANY INCORPORATED UNDER THE LAWS OF OHIO
------------------------
OHIO NATIONAL FINANCIAL SERVICES, INC.
AN INTERMEDIATE INSURANCE HOLDING COMPANY INCORPORATED UNDER THE LAWS OF OHIO
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
THE OHIO NATIONAL LIFE INSURANCE COMPANY/CINCINNATI
A STOCK 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 B. Turner
Compliance Officer J. Dunn
Asst. Secy. M. Haverkamp
- ------------------------------- --------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
THE OHIO NATIONAL LIFE INSURANCE COMPANY/CINCINNATI
A STOCK 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
Sr. VP A. Bowen
Secy. & Dir. R. Benedict Sr. Vice Pres. D. Cook
VP & Dir. S. Williams Sr. Vice Pres. G. Smith
Vice Pres. & Treas. R. Broadwell
Treasurer D. Taney Vice President M. Boedeker
Treasurer B. Turner
Secretary R. Benedict Vice President T. Backus
Compliance Director J. Dunn Vice President G. Pearson
VP K. Hanson Vice President M. Stohler
VP D. Hundley Vice Pres. J. Houser
VP J. Martin VP & Secy. R. Benedict
Asst. Secy. J. Fischer
Asst. Actuary K. Flischel
- ------------------------------- ------------------------------ ------------------------------------
SEPARATE ACCOUNT
------------------------------------
R
---
</TABLE>
<TABLE>
<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 DIVERSIFIED 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 D. Taney
Treasurer D. Taney Secy. & Dir. R. Benedict
Secy. & Dir. R. Benedict Treasurer D. Taney Director R. Love
Director R. Love Director G. Castrucci
Director G. Castrucci Secretary M. Haverkamp Director G. Vredeveld
Director G. Vredeveld Sr. VP T. Barefield
- --------------------------------- -------------------------------- ---------------------------------
</TABLE>
Indemnification
Under the terms of the Operating Agreement, no Manager or officer of the
registrant is liable, responsible or accountable in damages or otherwise to the
registrant or its members for any action taken on behalf of the registrant
within the scope of the authority of the Board of Managers or such officer, or
reasonably believed by such person to be within the scope of his or her
authority, or for any omission, unless such act or omission was performed or
omitted fraudulently or in bad faith or constituted gross negligence, or wanton
and willful misconduct. The registrant has agreed, under the terms of its
Operating Agreement, to reimburse, indemnify, defend and hold harmless each
Manager and officer from and against any loss, expense, damage or injury
suffered or sustained by the registrant or its members by reason of any acts or
omissions arising out of such person's activities on behalf of the registrant,
including, without limitation, any judgment, award, settlement, reasonable
attorneys' fees and other costs and expenses incurred in connection with the
defense of any actual or threatened action, proceeding or claim, but excluding
loss, expense, damage or injury caused or resulting from any acts or omissions
performed or omitted fraudulently or in bad faith or which constitute gross
negligence or wanton and willful misconduct.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to managers, officers, and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a manager, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
manager, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Business and Other Connections of the Investment Adviser
The Adviser is engaged in providing investment management services to the
registrant and to ONF and ONE Fund. The Adviser has not engaged in any other
business of a substantial nature during the last two years. The names of each
director and officer of the Adviser and the business of a substantial nature
during the last two years are as follows:
<PAGE> 23
<TABLE>
<CAPTION>
Position with Business of a Substantial
Name the Adviser Nature During Past Two Years
- ---- ------------- ----------------------------
<S> <C> <C>
Joseph P. Brom Director and Senior Vice President and Chief Investment Officer of
President ONMH, ONFS, ONLI and ONLAC; Director of ONLI and ONLAC;
Vice President of Registrant; Vice President of ONF and
ONE Fund
Michael A. Boedeker Director and Vice President, Fixed Income Securities of ONLI and
Vice President ONLAC; Vice President of Registrant; Vice President of
ONF and ONE Fund
Michael D. Stohler Director and Vice President, Mortgages and Real Estate of ONLI and
Vice President ONLAC
Stephen T. Williams Director and Vice President of Equity Securities of ONLI and ONLAC;
Vice President Vice President of Registrant; Vice President of ONF and
ONE Fund
Keith O. Hanson Vice President Portfolio Manager and Investment Officer of ONLI
R. Douglas Hundley Vice President Portfolio Manager and Investment Officer of ONLI
Jed R. Martin Vice President Portfolio Manager and Investment Officer of ONLI
Ronald L. Benedict Secretary Corporate Vice President, Counsel and Secretary of ONLI
and ONLAC; Manager and Secretary of Registrant; Director
and Secretary of ONF and ONE Fund; Director and Secretary
of Ohio National Equities, Inc.; Secretary of ONMH and
ONFS
Dennis R. Taney Treasurer Mutual Fund Financial Operations Director of ONLI;
Treasurer of Registrant; Treasurer of ONF and ONE Fund
</TABLE>
Principal Underwriters
None
<PAGE> 24
Location of Accounts and Records
The books and records required under Section 31(a) and Rules thereunder are
maintained and in the possession of the following persons:
(a) Journals and other records of original entry:
Firstar Bank, N.A.
425 Walnut Street
Cincinnati, Ohio 45202
and
American Data Services, Inc. ("ADS")
150 Motor Parkway, Suite 109
Hauppauge, New York 11788
(b) General and auxiliary ledgers:
ADS
(c) Securities records for portfolio securities:
ADS
(d) Corporate charter (Articles of Organization), Operating Agreement and
Minute Books:
Ronald L. Benedict, Secretary
Dow Target Variable Fund LLC
One Financial Way
Montgomery, Ohio 45242
(e) Records of brokerage orders:
The Adviser
(f) Records of other portfolio transactions:
The Adviser
(g) Records of options:
The Adviser
<PAGE> 25
(h) Records of trial balances:
ADS and the Adviser
(i) Quarterly records of allocation of brokerage orders and commissions:
The Adviser
(j) Records identifying persons or group authorizing portfolio transactions:
The Adviser
(k) Files of advisory materials
The Adviser
Management Services
Not applicable
Undertakings
Not applicable
<PAGE> 26
Signatures
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the registrant has duly caused this post-effective
amendment to its registration statement to be signed on its behalf by the
undersigned, duly authorized, in the City of Montgomery and State of Ohio on the
28th day of May, 1999.
DOW TARGET VARIABLE FUND LLC
By /s/ JOHN J. PALMER
-------------------------
John J. Palmer, President
Attest /s/ RONALD L. BENEDICT
-----------------------------
Ronald L. Benedict, Secretary
Pursuant to the requirements of the Securities Act of 1933, this 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/ JOHN J. PALMER President and Manager May 28, 1999
------------------ (Principal Executive Officer)
John J. Palmer
/s/ DENNIS R. TANEY Treasurer (Principal Financial May 28, 1999
------------------- and Accounting Officer)
Dennis R. Taney
/s/ RONALD L. BENEDICT Manager May 28, 1999
----------------------
Ronald L. Benedict
/s/ GEORGE E. CASTRUCCI Manager May 28, 1999
-----------------------
George E. Castrucci
/s/ ROSS LOVE Manager May 28, 1999
-------------
Ross Love
/s/ GEORGE M. VREDEVELD Manager May 28, 1999
-----------------------
George M. Vredeveld
</TABLE>
<PAGE> 27
Exhibit Index
Exhibit Description
- ------- -----------
None