<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
THE DOW(SM) TARGET VARIABLE FUND, LLC
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
THE DOW(SM) TARGET VARIABLE FUND, LLC
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
One Financial Way
Cincinnati, Ohio
45242
Post Office Box 237
Cincinnati, Ohio
45201-0237
Telephone:
513-794-6100
The DowSM Target Variable Fund, LLC
March 1, 2000
Dear Ohio National Variable Contract Owner:
Enclosed are information and voting instructions from The Dow(SM) Target
Variable Fund, Board of Managers regarding proposals related to the Fund's
portfolios. A special Members meeting will be held on April 3, 2000 to seek your
approval of a new subadvisory agreement for the portfolios. This new subadvisory
agreement is necessary due to the death of Robert D. Van Kampen, controlling
partner of Nike Securities.
Your Board of Managers believes that the proposal is in your best interests. We
recommend that you vote FOR the proposal.
Although you are not a Fund shareholder, it is your right to instruct us how to
vote the Fund membership interests attributed to your variable contract.
Please complete, sign and return the voting instructions promptly in the
envelope provided. No postage is needed if you mail it in the United States.
Thank you again for the confidence you have placed in The Dow(SM) Target
Variable Fund LLC as you pursue your wealth-building endeavors. Be assured that
we will make every effort to continue to merit that confidence.
Sincerely,
JOHN J. PALMER
John J. Palmer
President
[OHIO NATIONAL FINANCIAL SERVICES LOGO]
<PAGE> 3
The Dow(SM) Target Variable Fund, LLC
One Financial Way
Montgomery, Ohio 45242
------------------------
NOTICE OF MEETING OF MEMBERS
April 3, 2000
A meeting of the members of The Dow(SM) Target Variable Fund, LLC will be
held at the Fund's office at One Financial Way in Montgomery, Ohio. The meeting
will begin at 10:00 a.m. eastern time on April 3, 2000. The reason for the
meeting is for you to act on these proposals:
1. To approve a new subadvisory agreement for The Dow(SM) Target
Variable Fund, LLC with First Trust Advisors L.P.
2. To transact any other business that may properly come before the
meeting.
You are entitled to receive this notice and to vote at the meeting if you
were a member of record of The Dow(SM) Target Variable Fund, LLC at the close of
business on February 21, 2000.
FOR THE REASONS GIVEN IN THE ATTACHED PROXY STATEMENT, WE (THE FUND'S
MANAGEMENT AND BOARD OF MANAGERS) RECOMMEND THAT YOU VOTE FOR THE PROPOSAL.
RONALD L. BENEDICT
Ronald L. Benedict
Secretary
March 1, 2000
<PAGE> 4
THE DOW(SM) TARGET VARIABLE FUND, LLC
ONE FINANCIAL WAY
MONTGOMERY, OHIO 45242
PROXY STATEMENT
MEETING OF MEMBERS OF
THE DOW(SM) TARGET VARIABLE FUND, LLC
April 3, 2000
We (the management and Board of Managers of The Dow(SM) Target Variable
Fund, LLC) are soliciting proxies for a meeting of the members of the Fund. The
meeting will be held at 10:00 a.m. eastern time on April 3, 2000. We are sending
you this proxy statement and its enclosures if you are a member of the Fund or
if you have a variable contract with values allocated to the Fund. We are
mailing the statement on or about March 1, 2000. Each member of record as of the
close of business on February 21, 2000 is entitled to one vote for each
membership interest owned at that time.
You may revoke your proxy before the meeting by giving written notice to
the Secretary of the Fund or by appearing in person at the meeting and notifying
the Secretary that you intend to revoke your proxy. Your latest proxy revokes
any earlier ones. All proxies that are properly signed and received in time and
not revoked will be voted as marked. If you sign and return a proxy but do not
show how you want to vote, we will vote it in favor of the proposal. We will
vote the interests of any variable contract owners from whom we receive no
voting instructions in proportion with the instructions that we do receive
before the meeting.
The Fund will pay the printing, mailing and legal costs for soliciting the
proxies. The investment adviser, Ohio National Investments, Inc. (the "Adviser")
will pay all other costs. The proposed subadviser may reimburse the Fund and the
Adviser for some or all of the proxy solicitation expenses. Employees of the
Fund and the Adviser will not get any extra compensation for soliciting proxies.
As of December 31, 1999, 100% of the issued and outstanding membership
interests of The Dow(SM) Target Variable Fund's portfolios were owned of record
by The Ohio National Life Insurance Company ("ONLI") and Ohio National Life
Assurance Corporation ("ONLAC") (together called "Ohio National Life"). Ohio
National Life is located at One Financial Way, Montgomery, Ohio 45242. Each
membership interest represents one vote. These membership interests were
allocated to Ohio National Life's separate accounts as follows:
<TABLE>
<CAPTION>
NUMBER OF PERCENT
DOW(SM) TARGET 10 MEMBERSHIP INTERESTS OF CLASS
----------------- -------------------- --------
<S> <C> <C>
ONLI Variable Account A......................... 1,372,035.413 98.34%
ONLI Variable Account B......................... 722.692 0.05%
ONLI Variable Account C......................... 22,336.952 1.60%
ONLI Variable Account D......................... 0 0%
-------------- ------
Total Dow(SM) Target 10 Portfolio
Membership Interests..................... 1,395,095.075 100%
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF PERCENT
DOW(SM) TARGET 5 MEMBERSHIP INTERESTS OF CLASS
---------------- -------------------- --------
<S> <C> <C>
ONLI Variable Account A......................... 42,908.097 50.88%
ONLI Variable Account B......................... 799.432 0.94%
ONLI Variable Account C......................... 40,624.292 48.17%
ONLI Variable Account D......................... 0 0%
---------- ------
Total Dow(SM) Target 5 Membership
Interests................................ 84,331.821 100%
</TABLE>
1
<PAGE> 5
You were sent a copy of the Fund's Annual Report as of December 31, 1999.
To request an additional copy, contact our Treasurer, Dennis Taney, at the above
address or call him at (513) 794-6251.
SUMMARY OF PROPOSALS
The purpose of the meeting is for you to vote on this proposal related to
the Fund:
1. We have approved a new Subadvisory Agreement between the Adviser and
First Trust Advisors L.P. and we are now asking you to approve the agreement.
A majority vote of the eligible members of the Funds is required for the
issue to be approved. Under the Investment Company Act of 1940 (the "1940 Act"),
a majority vote requires at least:
- 67% of the membership interests represented at a meeting (by proxy or
in person) where more than half of the outstanding membership
interests are represented, or
- More than half of all the outstanding membership interests.
WE RECOMMEND THAT YOU APPROVE THIS PROPOSAL.
INVESTMENT ADVISORY SERVICES
The Adviser is a wholly-owned subsidiary of ONLI. Under the Investment
Advisory Agreement between the Adviser and the Fund, the Adviser regularly
recommends an investment program consistent with the Fund's investment policies.
Once the Board of Managers approves an investment program, the Adviser
implements the program by placing orders for the purchase and sale of
securities. The Adviser also provides the Fund with office space, necessary
clerical personnel (other than those provided by agreements between the Fund and
Firstar Bank, N.A. (Cincinnati, Ohio), which serves as custodian, and American
Data Services, Inc. (Hauppauge, New York) which serves as transfer agent and
servicing agent for the Fund), and services of executive and administrative
personnel.
2
<PAGE> 6
The Adviser is also the investment adviser to the following portfolios of
The Ohio National Fund (assets shown as of December 31, 1999):
<TABLE>
<S> <C>
Equity...................................... $329,597,352.32
Money Market................................ 67,158,301.44
Bond........................................ 25,984,713.71
Omni........................................ 190,054,734.75
International............................... 173,076,624.26
Capital Appreciation........................ 64,621,610.91
Small Cap................................... 167,919,912.65
International Small Company................. 38,147,380.93
Aggressive Growth........................... 23,324,534.11
Core Growth................................. 31,464,819.67
Growth & Income............................. 113,048,025.81
S&P 500 Index............................... 216,575,151.32
Social Awareness............................ 3,590,013.40
Strategic Income............................ 3,094,938.07
Firstar Growth & Income..................... 3,306,341.35
Relative Value.............................. 11,881,933.22
Small Cap Growth............................ 20,271,785.00
High Income Bond............................ 12,610,825.66
Equity Income............................... 4,373,596.64
Blue Chip................................... 4,783,951.59
</TABLE>
Under a Service Agreement among the Fund, the Adviser and ONLI, ONLI has
agreed to furnish the Adviser, at cost, the research facilities, services and
personnel the Adviser may need to perform its duties under the Investment
Advisory Agreement. The Adviser has agreed to reimburse ONLI for its expenses in
this regard. The Fund has not paid to the Adviser, or to any of its affiliates,
any compensation for services other than under the Investment Advisory Agreement
during the last fiscal year. The address of the Adviser, Ohio National Life and
the Fund is One Financial Way, Montgomery, Ohio 45242.
The president of the Adviser is Christopher A. Carlson. The Adviser's
directors are Mr. Carlson, Michael A. Boedeker, Michael D. Stohler David B.
O'Maley and John J. Palmer. Messrs. Carlson, Boedeker and Stohler are
principally employed as investment officers of ONLI. Messrs. Carlson and
Boedeker are also vice presidents of the Fund. The Adviser's secretary, Ronald
L. Benedict, is also the secretary and a director of the Fund. The business
address of each of these individuals is One Financial Way, Montgomery, Ohio
45242.
The Investment Advisory Agreement and Service Agreement were both entered
into as of .
As compensation for its services, the Adviser receives from the Fund annual
fees on the basis of 0.60% of each portfolio's average daily net assets during
the month for which the fees are paid.
During 1999, the Adviser received $45,993.86 in fees from the Fund. Had the
proposed new investment advisory fees been in effect in 1999, the Adviser would
have received the same compensation.
Under the Investment Advisory Agreement, the Fund authorizes the Adviser to
retain subadvisers for each of the portfolios, subject to the approval of the
Fund's Board of Managers. The Adviser has entered into a Subadvisory Agreement
with First Trust Advisors L.P. to manage the investment and reinvestment of the
portfolios' assets, subject to supervision by the Adviser. As compensation for
their subadvisory services the
3
<PAGE> 7
Adviser pays a subadvisory fee, payable monthly at the annual rate of 0.35% of
the average daily net assets of each portfolio.
These agreements will continue in force from year to year if they are
approved at least annually by (a) a majority of the Fund's Managers who are not
parties to the 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 (b) a majority of the Board of Managers or by a
majority of the outstanding voting securities of each portfolio voting
separately. The Board of Managers has approved the continuance of each agreement
at least once a year following the dates shown above. The dates indicated for
initial approvals by the members also represent the most recent times those
agreements were submitted to the members.
The Investment Advisory, Service and Subadvisory Agreements may be
terminated at any time, without the payment of any penalty, if we give 60 days'
written notice to the Adviser 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 Agreements may be terminated, without penalty, by the Adviser or
the sub-adviser on 90 days' written notice to the Fund and the other party. An
Agreement will automatically terminate if it is assigned.
In addition to being the investment adviser to the Fund, the Adviser is
also the investment adviser to ONE Fund, Inc. ("ONE Fund"). ONE Fund presently
consists of the following portfolios:
<TABLE>
<CAPTION>
ONE FUND PORTFOLIO NET ASSETS (12/31/1999)
------------------ -----------------------
<S> <C>
Money Market.............................. $16,947,654.85
Income.................................... 6,469,931.93
Income & Growth........................... 12,107,414.60
Growth.................................... 11,407,266.88
Small Cap................................. 3,531,472.08
International............................. 15,046,155.95
Core Growth............................... 6,830,577.18
S&P 500(SM) Index......................... 5,298,533.36
</TABLE>
As compensation for its services to ONE Fund, the Adviser receives from ONE
Fund fees on the basis of each portfolio's average daily net assets during the
month for which the fees are paid based on the following schedule:
- for each of the Income, Income & Growth and Growth portfolios, the fee
is at an annual rate of 0.50% of the first $100 million of the average
daily net assets in each portfolio, 0.40% of the next $150 million,
and 0.30% of the average daily net assets in each portfolio over $250
million;
- as to the Money Market portfolio, the fee is at an annual rate of
0.30% of the first $100 million, 0.25% of the next $150 million, and
0.20% of the average daily net assets over $250 million;
- for the Small Cap portfolio, the fee is at an annual rate of 0.65% of
the first $100 million, 0.55% of the next $150 million, and 0.45% of
the average daily net assets over $250 million;
- for the International portfolio, the fee is at the annual rate of
0.90% of the average daily net assets in each portfolio;
- for the Core Growth portfolio, the fee is at an annual rate of 0.95%
of the first $150 million, and 0.80% of the average daily net assets
over $150 million.
However, the Adviser is presently voluntarily waiving 0.15% of its fees in
connection with the Money Market, Income, Income & Growth, Growth, and Small Cap
portfolios of ONE Fund.
During 1999, the Adviser received $406,025.18 in fees from ONE Fund.
4
<PAGE> 8
As compensation for its services to The Ohio National Fund, the Adviser
receives from the Fund based on the following schedule:
- for each of the Equity, Bond, Omni and Social Awareness portfolios,
0.60% of the first $100 million, 0.50% of the next $150 million, 0.45%
of the next $250 million, 0.40% of the next $500 million, 0.30% of the
next $1 billion, and 0.25% of average daily net assets over $2
billion;
- for the Money Market portfolio, 0.30% of the first $100 million, 0.25%
of the next $150 million, 0.23% of the next $250 million, 0.20% of the
next $500 million, and 0.15% of average daily net assets over $1
billion;
- for each of the International, Relative Value, Small Cap Growth, Blue
Chip and Firstar Growth & Income portfolios, 0.90% of each portfolio's
daily net assets;
- for each of the Capital Appreciation, Small Cap, Aggressive Growth and
Strategic Income portfolios, 0.80% of each portfolio's average daily
net assets;
- for the Core Growth portfolio, 0.95% of the first $150 million, and
0.80% of average daily net assets over $150 million;
- for the Growth & Income portfolio, 0.85% of the first $200 million,
and 0.80% of average daily net assets over $200 million;
- for the S&P 500 Index portfolio, 0.40% of the first $100 million,
0.35% of the next $150 million, and 0.33% of average daily net assets
over $250 million;
- for the International Small Company portfolio, 1.00% of that
portfolio's average daily net assets, and
- for each of the High Income Bond and Equity Income portfolios, 0.75%
of each portfolio's average daily net assets.
The Adviser is a wholly-owned subsidiary of The Ohio National Life
Insurance Company. Both are located at One Financial Way, Montgomery, Ohio
45242.
PROPOSALS
NEW SUBADVISORY AGREEMENT
First Trust Advisors L.P. ("First Trust") has served as the subadviser to
both the Dow(SM) Target 10 and Dow(SM) Target 10 portfolios since their
inception. First Trust is a limited partnership with one limited partner, Grace
Partners of DuPage L.P., 290 South County Farm Road, Wheaton, Illinois 60187,
and one general partner Nike Securities Corporation ("Nike Securities"). Grace
Partners of DuPage L.P. is a limited partnership with one general partner, Nike
Securities and a number of limited partners. Nike Securities is an Illinois
corporation that was controlled by Robert Donald Van Kampen. On October 29,
1999, Mr. Van Kampen passed away. At the time of his death, two members of the
Van Kampen family and two trusts of which Van Kampen family members were
beneficiaries held the stock of Nike Securities. More specifically, Kristen Joy
Wisen owns 25%, Karla Van Kampen-Pierre owned 25% and the Robert D. Van Kampen
Trust and the Judith Van Kampen Trust each owned 25% of Nike Securities.
Pursuant to a voting agreement, Mr. Van Kampen had power to vote the shares held
by Mrs. Wisen, Mrs. Van Kampen-Pierre and the Judith Van Kampen Trust. Mr. Van
Kampen therefore had power to vote approximately 75% of the securities of Nike
Securities. Upon his death, this voting power transferred to his wife, Judith
Van Kampen. The Investment Company Act of 1940 ("the 1940 Act") presumes that
beneficial ownership of 25% of a company's stock gives the owner 'control' over
the company. This technical change of control has caused the Fund's existing
subadvisory agreement with First Trust to terminate on October 29, 1999.
On November 19, 1999, the Board of Managers unanimously approved the
continuation of the Subadvisory Agreement with First Trust Advisors L.P. until
the agreement could be submitted to members for their approval.
First Trust Advisors L.P. has been an investment adviser subsidiary of Nike
Securities since 1991. They currently serve as subadvisor to 27 mutual funds and
is also the portfolio supervisor of unit investment trusts sponsored by Nike
Securities L.P.
5
<PAGE> 9
The principal executive officers and general partner of First Trust
Advisors L.P. and their respective principal occupations is set forth in the
chart below. The mailing address for First Trust Advisors L.P. is 1001
Warrenville Road, Suite 300, Lisle Illinois 60532.
<TABLE>
<CAPTION>
NAME AND POSITION WITH FIRST TRUST PRINCIPAL OCCUPATION
---------------------------------- --------------------
<S> <C>
Ronald Dean McAlister, President Managing Director, Nike Securities
Nike Securities Corporation, General Partner Providing investment advisory and
broker/dealer services through its various
interests
</TABLE>
If members do not approve the proposed subadvisory agreement, the Adviser
will take over management of the portfolios or take over management of the
portfolios until a suitable subadviser can be located and approved by members.
A copy of the proposed Subadvisory Agreement is attached as Exhibit A.
We recommend that you approve the Subadvisory Agreement.
INVESTMENT POLICIES
The investment restrictions that are presently designated as fundamental
polices of the Fund will continue as such.
INVESTMENT ADVISORY FEE
The investment advisory and subadvisory fees will not change upon approval
of the New Subadvisory Agreement.
6
<PAGE> 10
EXHIBIT A
SUBADVISORY AGREEMENT
This Agreement is made as of the twelfth day of October, 1998 by and
between OHIO NATIONAL INVESTMENTS, INC., an Ohio corporation (the "Adviser"),
and FIRST TRUST ADVISORS L.P., an Illinois limited partnership (the
"Subadviser").
WHEREAS, THE DOW(SM) TARGET VARIABLE FUND LLC (the "Fund"), is an Ohio
limited liability company that is registered under the Investment Company Act of
1940, as amended, (together with the regulations promulgated pursuant thereto,
the "1940 Act"); and
WHEREAS, the Adviser is a registered investment adviser under the
Investment Advisers Act of 1940, as amended, (together with the regulations
promulgated pursuant thereto, the "Advisers Act"); and
WHEREAS, the Adviser has been appointed as investment adviser to the Fund
in accordance with the 1940 Act and the Advisers Act; and
WHEREAS, the Subadviser is registered as an investment adviser under the
Advisers Act and engages in the business of providing investment advisory
services; and
WHEREAS, the Fund has authorized the Adviser to appoint the Subadviser,
subject to the requirements of the 1940 Act and the Advisers Act, as a
sub-adviser on the terms and conditions set forth below;
NOW, THEREFORE, IT IS HEREBY AGREED as follows:
SECTION 1. Investment Advisory Services
(a) The Adviser hereby retains the Subadviser, and the Subadviser
hereby accepts engagement by the Adviser, to supervise and manage on a
fully-discretionary basis the cash, securities and other assets of the Fund
that the Adviser shall from time to time place under the supervision of the
Subadviser.
(b) All activities by the Subadviser on behalf of the Adviser and the
Fund shall be in accordance with the investment objectives, policies and
restrictions set forth in the 1940 Act and in the Fund's prospectus and
statement of additional information, as amended from time to time
(together, the "Prospectus") and as interpreted from time to time by the
Board of Managers of the Fund and by the Adviser. All activities of the
Subadviser on behalf of the Adviser and the Fund shall also be subject to
the due diligence oversight and direction of the Adviser.
(c) Subject to the supervision of the Adviser, the Subadviser shall
have the sole and exclusive responsibility to select members of securities
exchanges, brokers and dealers for the execution of transactions of the
Fund and, when applicable, shall negotiate commissions in connection
therewith. All such selections shall be made in accordance with the Fund's
policies and restrictions regarding brokerage allocation set forth in the
Prospectus.
(d) In carrying out its obligations to manage the investments and
reinvestments of the assets of the Fund, the Subadviser shall: (1) obtain
and evaluate pertinent statistical, financial and other information
affecting the individual companies the securities of which are included in
the Fund or are under consideration for inclusion therein; (2) formulate
and implement a continuous investment program for the Fund consistent with
its investment objectives and related investment policies and restrictions
as set forth in the Prospectus; and (3) take such steps as are necessary to
implement the aforementioned investment program by placing orders for the
purchase and sale of securities.
(e) In connection with the purchase and sale of securities of the
Fund, the Subadviser shall arrange for the transmission to the Adviser and
the Fund's custodian on a daily basis such confirmation, trade tickets and
other documents as may be necessary to enable them to perform their
administrative responsibilities with respect to the Fund. With respect to
Fund securities to be purchased or sold through the Depository Trust
Company, the Subadviser shall arrange for the automatic transmission of the
I.D. confirmation of the trade to the Fund's custodian.
A-1
<PAGE> 11
(f) In connection with the placement of orders for the execution of
the Fund's securities transactions, the Subadviser shall create and
maintain all necessary records of the Fund as are required of an investment
adviser of a registered investment company including, but not limited to,
records required by the 1940 Act and the Advisers Act. All such records
pertaining to the Fund shall be the property of the Fund and shall be
available for inspection and use by the Securities and Exchange Commission,
any other regulatory authority having jurisdiction, the Fund, the Adviser
or any person retained by the Fund or the Adviser. Where applicable, such
records shall be maintained by the Subadviser for the period and in the
place required by Rule 31a-2 under the 1940 Act.
(g) The Subadviser shall render such reports to the Adviser and/or to
the Board of Managers of the Fund concerning the investment activity and
composition of the Fund in such form and at such intervals as the Adviser
or the Board may from time to time reasonably require.
(h) In acting under this Agreement, the Subadviser shall be an
independent contractor and not an agent of the Adviser or the Fund.
SECTION 2. Expenses
(a) The Subadviser shall assume and pay all of its own costs and
expenses, including those for furnishing such office space, office
equipment, office personnel and office services as the Subadviser may
require in the performance of its duties under this Agreement.
(b) The Fund shall bear all expenses of its organization and
registration, and the Fund and Adviser shall bear all of their respective
expenses of their operations and businesses not expressly assumed or agreed
to be paid by the Subadviser under this Agreement. In particular, but
without limiting the generality of the foregoing, the Fund shall pay any
fees due to the Adviser, all interest, taxes, governmental charges or
duties, fees, brokerage and commissions of every kind arising hereunder or
in connection herewith, expenses of transactions with owners of the Fund's
membership interests, expenses of offering interests in the Fund for sale,
insurance, association membership dues, all charges of custodians
(including fees as custodian and for keeping books, performing portfolio
valuations and rendering other services to the Fund), independent auditors
and legal counsel, expenses of preparing, printing and distributing all
prospectuses, proxy material, reports and notices to owners of the Fund,
and all other costs incident to the Fund's existence.
SECTION 3. Use of Services of Others
The Subadviser may (at its expense except as set forth in Section 2 hereof)
employ, retain or otherwise avail itself of the services or facilities of other
persons or organizations for the purpose of providing the Sub-Adviser with such
statistical or factual information, as the Subadviser may deem necessary,
appropriate or convenient for the discharge of the Subadviser's obligations
hereunder or otherwise helpful to the Fund.
SECTION 4. Subadvisory Fees
In consideration of the Subadviser's services to the Fund hereunder, the
Subadviser shall be entitled to a Subadvisory fee, payable monthly, at the
annual rate of 0.35% of the average daily net assets of each portfolio of the
Fund during the month preceding each payment (the "Subadvisory Fee"). The
Subadvisory Fee shall be accrued for each calendar day and the sum of the daily
Subadvisory Fee accruals shall be paid monthly to the Subadviser on or before
the fifth business day of the next succeeding month. The daily fee accruals will
be computed on the basis of the valuations of the total net assets of the Fund's
portfolios as of the close of business each day. The Subadvisory Fee shall be
payable solely by the Adviser, and the Fund shall not be liable to the
Subadviser for any unpaid Subadvisory Fee.
SECTION 5. Limitation of Liability of Subadviser
(a) The Subadviser shall be liable for losses resulting from its own
acts or omissions caused by the Subadviser's willful misfeasance, bad faith
or gross negligence in the performance of its duties hereunder or its
reckless disregard of its duties under this Agreement, and nothing herein
shall protect the Subadviser against any such liability to the owners of
the Fund or to the Adviser. The Subadviser shall not be liable to the Fund
or to any owner of the Fund or to the Adviser for any claim or loss arising
out of any investment or
A-2
<PAGE> 12
other act or omission in the performance of the Subadviser's duties under
this Agreement, or for any loss or damage resulting from the imposition by
any government of exchange control restrictions which might affect the
liquidity of the Fund's assets maintained with custodians or securities
depositories, or for any tax of any kind, including without limitation any
statutory, governmental, state, local or municipal imposition, duty,
contribution or levy imposed by any government or governmental agency upon
or with respect to such assets or income earned with respect thereto
(collectively "Taxation").
(b) In the event the Subadviser is assessed any taxation in respect of
the assets, income or activities of the Fund, the Adviser and the Fund
jointly will indemnify the Subadviser for all such amounts wherever
imposed, together with all penalties, charges, costs and interest relating
thereto and all expenditures, including reasonable attorney's fees,
incurred by the Subadviser in connection with the defense or settlement of
any such assessment. The Subadviser shall undertake and control the defense
or settlement of any such assessment, including the selection of counsel or
other professional advisers, provided that the selection of such counsel
and advisers and the settlement of any assessment shall be subject to the
approval of the Adviser and the Fund, which approvals shall not be
unreasonably withheld. The Adviser and the Fund shall have the right to
retain separate counsel and assume the defense or settlement on behalf of
the Adviser and the Fund, as the case may be, of any such assessment if
representation of the Adviser and the Fund by counsel selected by the
Subadviser would be inappropriate due to actual or potential conflicts of
interest.
SECTION 6. Services to Other Clients and the Fund
(a) Subject to compliance with the 1940 Act, nothing contained in this
Agreement shall be deemed to prohibit the Subadviser or any of its
affiliated persons from acting, and being separately compensated for
acting, in one or more capacities on behalf of the Fund. The Adviser and
the Fund understand that the Sub-Adviser may act as investment manager or
in other capacities on behalf of other customers including entities
registered under the 1940 Act. While information, recommendations and
actions which the Subadviser supplies to and does on behalf of the Fund
shall in the Subadviser's judgment be appropriate under the circumstances
in light of the investment objectives and policies of the Fund, as set
forth in the Prospectus delivered to the Subadviser from time to time, it
is understood and agreed that they may be different from the information,
recommendations and actions the Subadviser or its affiliated persons supply
to or do on behalf of other clients. The Subadviser and its affiliated
persons shall supply information, recommendations and any other services to
the Fund and to any other client in an impartial and fair manner in order
to seek good results for all clients involved. As used herein, the term
"affiliated person" shall have the meaning assigned to it in the 1940 Act.
(b) On occasions when the Subadviser deems the purchase or sale of a
security to be in the best interest of the Fund as well as other customers,
the Subadviser may, to the extent permitted by applicable law, aggregate
the securities to be so sold or purchased in order to obtain the best
execution or lower brokerage commissions, if any. The Subadviser may also
on occasion purchase or sell a particular security for one or more
customers in different amounts. On either occasion, and to the extent
permitted by applicable law and regulations, allocation of the securities
so purchased or sold, as well as the expenses incurred in the transaction,
will be made by the Subadviser in the manner it considers to be the most
equitable and consistent with its fiduciary obligations to the Fund and to
such other customers.
(c) The Subadviser agrees to use the same skill and care in providing
services to the Fund as it uses in providing services to other similar
accounts for which it has investment responsibility. The Subadviser will
conform with all applicable rules and regulations of the Securities and
Exchange Commission.
SECTION 7. Reports to the Subadviser
The Adviser shall furnish to the Subadviser the Prospectus, proxy
statements, reports and other information relating to the business and affairs
of the Fund as the Subadviser may, at any time or from time to time, reasonably
require in order to discharge the Subadviser's duties under this Agreement.
A-3
<PAGE> 13
SECTION 8. Term of Agreement
Provided that this Agreement shall have first been approved by the Board of
Managers of the Fund, including a majority of the members thereof who are not
interested persons (as defined in the 1940 Act) of either party, by a vote cast
in person at a meeting called for the purpose of voting such approval, then this
Agreement shall be effective on the date hereof. Unless earlier terminated as
hereinafter provided, this Agreement shall continue in effect for an initial
term ending September 30, 2000. Thereafter, this Agreement shall continue in
effect from year to year, subject to approval annually by the Board of Managers
of the Fund or by vote of a majority of the voting securities of the Fund and
also, in either event, by the vote, cast in person at a meeting called for the
purpose of voting on such approval, of a majority of the Managers of the Fund
who are not parties to this Agreement or interested persons (as defined in the
1940 Act) of any such person.
SECTION 9. Termination of Agreement; Assignment
(a) This Agreement may be terminated by either party hereto without
the payment of any penalty, upon 90 days' prior notice in writing to the
other party and to the Fund, or upon 60 days' written notice by the Fund to
the two parties; provided, that in the case of termination by the Fund such
action shall have been authorized by resolution of a majority of the Board
of Managers of the Fund or by vote of a majority of the voting securities
of the Fund. In addition, this Agreement shall terminate upon the later of
(1) the termination of the Adviser's agreement to provide investment
advisory services to the Fund or (2) notice to the Subadviser that the
Adviser's agreement to provide investment advisory services to the Fund has
terminated.
(b) This Agreement shall automatically terminate in the event of its
assignment (as defined in the 1940 Act).
(c) Termination of this Agreement for any reason shall not affect
rights of the parties that have accrued prior thereto.
SECTION 10. Notices
(a) The Subadviser agrees to promptly notify the Adviser of the
occurrence of any of the following events: (1) any change in any of the
Subadviser's executive officers or any portfolio manager who is providing
advisory services pursuant to this agreement; (2) the Subadviser fails to
be registered as an investment adviser under the Advisers Act or under the
laws of any jurisdiction in which the Subadviser is required to be
registered as an investment adviser in order to perform its obligations
under this Agreement; (3) the Subadviser is the subject of any action,
suit, proceeding, inquiry or investigation at law or in equity, before or
by any court, public board or body, involving the affairs of the Fund; or
(4) any change in control of the Subadviser.
(b) Any notice given hereunder shall be in writing and may be served by
being sent by telex, facsimile or other electronic transmission or sent by
registered mail or by courier to the address set forth below for the party for
which it is intended. A notice served by mail shall be deemed to have been
served seven days after mailing and in the case of telex, facsimile or other
electronic transmission twelve hours after dispatch thereof. Addresses for
notice may be changed by written notice to the other party.
If to the Adviser:
Ohio National Investments, Inc.
P.O. Box 237
Cincinnati, Ohio 45201
Fax No. (513) 794-4506
With a copy to:
Joseph P. Brom, President
Ohio National Investments, Inc.
P.O. Box 237
Cincinnati, Ohio 45201
A-4
<PAGE> 14
If to the Subadviser:
Ronald McAlister, President
First Trust Advisors, L.P.
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
Fax No. (630) 241-8610
With a copy to:
Scott Jardine
Senior Vice President & General Counsel
Nike Securities L.P.
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
SECTION 11. Governing Law
This Agreement shall be governed by and subject to the requirements of the
laws of the State of Ohio without reference to the choice of law provisions
thereof.
SECTION 12. Applicable Provisions of Law
The Agreement shall be subject to all applicable provisions of law,
including, without limitation, the applicable provisions of the 1940 Act, and to
the extent that any provisions herein contained conflict with any such
applicable provisions of law, the latter shall control.
SECTION 13. Counterparts
This Agreement may be entered into in any number of counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
IN WITNESS WHEREOF this Agreement has been executed by the parties hereto
as of the day and year first above written.
OHIO NATIONAL INVESTMENTS, INC.
By: /s/ JOSEPH P. BROM
------------------------------------
Joseph P. Brom, President
FIRST TRUST ADVISORS L.P.
By: /s/ RONALD MCALISTER
------------------------------------
President
Accepted and Agreed:
THE DOW(SM) TARGET VARIABLE FUND, LLC
By: /s/ JOHN J. PALMER
--------------------------------------------------------
John J. Palmer, President
A-5
<PAGE> 15
VOTING INSTRUCTIONS
THE DOW TARGET VARIABLE FUND, LLC
I (we) acknowledge receipt of a copy of the Notice of Members Meeting, Proxy
Statement and annual report. I (we) instruct Ohio National Life to vote The Dow
Target Variable Fund, LLC membership interests, attributable to my (our)
variable contract at the special meeting of members to be held on April 3, 2000,
(and at any adjournments of that meeting) as specified below, and in accordance
with their best judgment on any other business that may properly come before the
meeting. THESE INSTRUCTIONS RELATE TO A SOLICITATION BY THE BOARD OF MANAGERS.
- --------------------------------------------------------------------------------
<TABLE>
<C> <C> <S> <C> <C> <C> <C> <C>
1. To approve the new Subadvisory Agreement with First For or Against or Abstain
Trust Advisors, L.P.:
[ ] [ ] [ ]
</TABLE>
<TABLE>
<S> <C>
Dated: ---------------------, 2000
----------------------------------------------------------
Signature of Contract Owner(s)
</TABLE>
Please sign your name as it appears on the back of this form. If signing
for an estate, trust or corporation, state your title or capacity. If joint
owners, each should sign. Please return these voting instructions in the
envelope provided.
<PAGE> 16
THE DOW TARGET VARIABLE FUND, LLC
PARTICIPANT'S INSTRUCTIONS
TO PLAN TRUSTEE OR ADMINISTRATOR
I request that you vote The Dow Target Variable Fund, LLC membership interests
attributable to my variable contract at the meeting of Fund Members to be held
on April 3, 2000, as specified below. THESE INSTRUCTIONS RELATE TO A
SOLICITATION BY THE BOARD OF MANAGERS.
- --------------------------------------------------------------------------------
You may check one of these boxes instead of voting on each of the numbered items
below:
<TABLE>
<C> <C> <S> <C> <C> <C> <C>
For or Against or Abstain on all the Board of Directors recommendations.
[ ] [ ] [ ]
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<C> <C> <S> <C> <C> <C> <C> <C>
1. To approve the new Subadvisory Agreement with First For or Against or Abstain
Trust Advisors, L.P.:
[ ] [ ] [ ]
</TABLE>
<TABLE>
<S> <C>
Dated: ---------------------, 2000
----------------------------------------------------------
Signature of Participant
</TABLE>
