<PAGE> 1
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. __2__ [ X ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. __2__ [ 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 410-East
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)
_X__ on May 1, 2000 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)
____ on (date) 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
<PAGE> 2
Part A
Information Required in a Prospectus
<PAGE> 3
PROSPECTUS
MAY 1, 2000
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
second 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.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Investment Strategy....................... 2
Risks..................................... 2
Dow Target 10 -- January Portfolio........ 3
Fund Organization......................... 4
Fund Management........................... 4
The Dow Jones Industrial Average.......... 5
Total Return History of the Dow 10 and Dow
5 Strategies (Not the Fund)............. 5
Performance Data.......................... 6
Pricing of Fund Interests................. 6
Fund Dividends and Distributions.......... 7
Taxes..................................... 7
Financial Highlights of Dow Target
Variable Fund LLC For the Year Ended
December 31, 1999.................... 7
Financial Highlights...................... 8
</TABLE>
8520D-5
Form 8520D-5
<PAGE> 4
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.
Form 8520D-5
2
<PAGE> 5
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.
The following bar chart and table indicate the risks of investing in the
Dow Target 10 January portfolio. They show changes in the portfolio's
performance for the complete calendar year since the portfolio's inception and
the portfolio's average annual returns for that year compared to those of the
Dow. The portfolio's past performance does not necessarily indicate how it will
perform in the future. Variable contract charges are not reflected in the chart
or table. If they were, the returns would be less than those shown.
We have not included charts of the annual performance history of the other
portfolios and tables of their average annual returns because none of the other
portfolios have existed for at least a full calendar year.
DOW TARGET 10 -- JANUARY PORTFOLIO [BAR GRAPH]
<TABLE>
<S> <C>
99 2.88%
</TABLE>
During the period shown in the bar chart, the portfolio's highest return
for a quarter was 13.72%. That was for the quarter ending on June 30, 1999. The
lowest return for a quarter was -6.69%. That was the quarter ending on September
30, 1999.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS ONE SINCE
AS OF DECEMBER 31, 1999 YEAR 1/4/1999
- ---------------------------- ----- --------
<S> <C> <C>
Dow Target 10 -- January Portfolio.......................... 2.88% 2.88%
Dow Jones Industrial Average................................ 27.50% 27.50%
</TABLE>
Form 8520D-5
3
<PAGE> 6
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.
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.
Form 8520D-5
4
<PAGE> 7
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.
Coca-Cola Company
Walt Disney Company
E.I. duPont de Nemours & Company
Eastman Kodak Company
Exxon Corporation
General Electric Company
General Motors Corporation
Hewlett-Packard Co.
Home Depot, Inc.
Intel Corporation
International Business Machines Corporation
International Paper Company
Johnson & Johnson
McDonald's Corporation
Merck & Company, Inc.
Microsoft Corporation
J.P. Morgan & Company, Inc.
Philip Morris Companies, Inc.
Procter & Gamble Company
SBC Communication Inc.
Travelers Group, Inc.
United Technologies Corporation
Wal-Mart Stores, Inc.
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.
Form 8520D-5
5
<PAGE> 8
<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%
1997 21.68% 19.97% 24.82%
1998 10.59% 12.36% 18.03%
1999 2.71% -9.51% 27.50%
</TABLE>
Based on the above annual returns, the average annual total returns for the
25 year period were 16.49% for the Dow 10 strategy, 18.43% for the Dow 5
strategy, and 12.41% 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
Form 8520D-5
6
<PAGE> 9
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.
FINANCIAL HIGHLIGHTS OF DOW TARGET VARIABLE FUND LLC FOR THE YEAR ENDED DECEMBER
31, 1999
The financial highlights tables are intended to help you understand the
portfolios' financial performance for the periods shown. Certain information
reflects financial results for a single Fund interest. The total returns reflect
the rates an investment in each portfolio would have earned (or lost), assuming
reinvestment of all dividends and distributions. The following information has
been audited by KPMG LLP, independent certified public accountants. It is an
integral part of the Fund's audited financial statements contained in the
Statement of Additional Information (which you may obtain), incorporated by
reference herein. This should be read in conjunction with those financial
statements.
Form 8520D-5
7
<PAGE> 10
THE DOW(SM) TARGET VARIABLE FUND LLC
FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
PORTFOLIOS
---------------------------------------------------------------------
JANUARY FEBRUARY MARCH APRIL MAY JUNE
(10)(d) (10)(e) (10)(f) (10)(g) (10)(h) (10)(i)
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Per membership interest data:
Net asset value, beginning of period.......... $10.00 $10.00 $10.00 $10.00 $10.00 $10.00
Income (loss) from investment operations:
Net investment income....................... 0.19 0.17 0.12 0.13 0.09 0.09
Net realized & unrealized gain (loss) on
investments............................... 0.09 0.47 0.04 0.14 (1.69) (1.04)
------ ------ ------ ------ ------ ------
Total income (loss) from investment
operations......................... 0.28 0.64 0.16 0.27 (1.60) (0.95)
------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income........ (0.19) (0.16) (0.12) (0.13) (0.09) (0.09)
Distributions from net realized capital
gains..................................... (0.06) (0.23) (0.30) (0.11) 0.00 0.00
------ ------ ------ ------ ------ ------
Total distributions.................. (0.25) (0.39) (0.42) (0.24) (0.09) (0.09)
------ ------ ------ ------ ------ ------
Net asset value, end of period................ $10.03 $10.25 $ 9.74 $10.03 $ 8.31 $ 8.96
====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
12 MONTHS 11 MONTHS 10 MONTHS 9 MONTHS 8 MONTHS 7 MONTHS
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Total return (b).............................. 2.88% 6.37% 1.96% 2.50% (16.14%) (9.57%)
Ratios net of fees reimbursed by advisor (c):
Ratio of expenses to average net assets
(a)....................................... 0.99% 1.07% 1.38% 1.17% 1.50% 1.18%
Ratio of net investment income to average
net assets(a)............................. 1.79% 1.63% 1.31% 1.55% 1.54% 1.57%
Ratio assuming no fees reimbursed by advisor:
Ratio of expenses to average net assets
(a)....................................... 1.99% 1.24% 1.38% 1.18% 1.52% 1.19%
Portfolio turnover rate....................... 20% 25% 39% 25% 29% 14%
Net assets at end of period (millions)........ $ 0.5 $ 1.2 $ 1.0 $ 1.3 $ 0.7 $ 1.2
</TABLE>
- ---------------
(a) Annualized.
(b) Calculated on an aggregate basis (not annualized).
(c) The advisor has reimbursed certain operating expenses for all portfolios
except for the March portfolio.
(d) The inception date for this portfolio was January 4, 1999.
(e) The inception date for this portfolio was February 1, 1999.
(f) The inception date for this portfolio was March 1, 1999.
(g) The inception date for this portfolio was April 1, 1999.
(h) The inception date for this portfolio was May 3, 1999.
(i) The inception date for this portfolio was June 1, 1999
The accompanying notes are an integral part of these financial statements.
Form 8520D-5
8
<PAGE> 11
THE DOW(SM) TARGET VARIABLE FUND LLC
FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
PORTFOLIOS
---------------------------------------------------------------------
JULY AUGUST SEPTEMBER OCTOBER NOVEMBER DECEMBER
(10)(j) (10)(k) (10)(l) (10)(m) (10)(n) (10)(o)
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Per membership interest data:
Net asset value, beginning of period.......... $10.00 $10.00 $10.00 $10.00 $10.00 $10.00
Income (loss) from investment operations:
Net investment income....................... 0.09 0.09 0.05 0.06 0.03 0.01
Net realized & unrealized gain (loss) on
investments............................... (1.18) (1.12) (1.22) (0.80) 0.08 0.01
------ ------ ------ ------ ------ ------
Total Income (loss) from Investment
operations......................... (1.09) (1.03) (1.17) (0.74) 0.11 0.02
------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income........ (0.09) (0.09) (0.05) (0.06) (0.03) (0.01)
Distributions from net realized capital
gains..................................... 0.00 0.00 0.00 0.00 0.00 0.00
------ ------ ------ ------ ------ ------
Total distributions.................. (0.09) (0.09) (0.05) (0.06) (0.03) (0.01)
------ ------ ------ ------ ------ ------
Net asset value, end of period................ $ 8.82 $ 8.88 $ 8.78 $ 9.20 $10.08 $10.01
====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
6 MONTH 5 MONTH 4 MONTH 3 MONTH 2 MONTH 1 MONTH
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Total return (b).............................. (10.90%) (10.37%) (11.65%) (7.33%) 1.13% 0.17%
Ratios net of fees reimbursed by advisor (c):
Ratio of expenses to average net assets
(a)....................................... 1.14% 0.94% 0.88% 0.85% 0.73% 0.50%
Ratio of net investment income to average
net assets(a)............................. 1.88% 2.21% 1.80% 2.50% 2.05% 0.81%
Ratio assuming no fees reimbursed by advisor:
Ratio of expenses to average net assets
(a)....................................... 1.16% 1.32% 1.02% 0.97% 0.99% 0.90%
Portfolio turnover rate....................... 20% 21% 12% 14% 0% 0%
Net assets at end of period (millions)........ $ 1.0 $ 0.8 $ 1.5 $ 1.4 $ 1.3 $ 1.5
</TABLE>
- ---------------
(a) Annualized.
(b) Calculated on an aggregate basis (not annualized).
(j) The inception date for this portfolio was July 1, 1999.
(k) The inception date for this portfolio was August 2, 1999.
(l) The inception date for this portfolio was September 1, 1999.
(m) The inception date for this portfolio was October 1, 1999.
(n) The inception date for this portfolio was November 1, 1999.
(o) The inception date for this portfolio was December 1, 1999.
The accompanying notes are an integral part of these financial statements.
Form 8520D-5
9
<PAGE> 12
THE DOW(SM) TARGET VARIABLE FUND LLC
FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
SEPTEMBER (5)(p) OCTOBER (5)(q) NOVEMBER (5)(r) DECEMBER (5)(s)
---------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Per membership interest data:
Net asset value, beginning of period............. $10.00 $10.00 $10.00 $10.00
Income (loss) from investment operations:
Net investment income.......................... 0.07 0.06 0.05 0.02
Net realized & unrealized loss on
investments.................................. (2.54) (1.53) (0.07) 0.00
------ ------ ------ ------
Total income (loss) from investment
operations............................ (2.47) (1.47) (0.02) 0.02
------ ------ ------ ------
Less distributions:
Dividends from net investment income........... (0.07) (0.06) (0.04) (0.02)
------ ------ ------ ------
Total distributions..................... (0.07) (0.06) (0.04) (0.02)
------ ------ ------ ------
Net asset value, end of period................... $ 7.46 $ 8.47 $ 9.94 $10.00
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
4 MONTH 3 MONTH 2 MONTH 1 MONTH
------- ------- ------- -------
<S> <C> <C> <C> <C>
Total return (b)................................. (24.78%) (14.70%) (0.20%) 0.17%
Ratios net of fees reimbursed by advisor (c):
Ratio of expenses to average net assets (a).... 0.98% 0.92% 0.90% 0.69%
Ratio of net investment income to average net
assets (a)................................... 2.72% 2.72% 3.16% 2.27%
Ratio assuming no fees reimbursed by advisor:
Ratio of expenses to average net assets (a).... 4.79% 2.60% 2.75% 2.43%
Portfolio turnover rate.......................... 1% 0% 0% 0%
Net assets at end of period (millions)........... $ 0.2 $ 0.3 $ 0.2 $ 0.2
</TABLE>
- ---------------
(a) Annualized.
(b) Calculated on an aggregate basis (not annualized).
(c) The advisor has reimbursed certain operating expenses for all portfolios
except for the March portfolio.
(p) The inception date for this portfolio was September 1, 1999.
(q) The inception date for this portfolio was October 1, 1999.
(r) The inception date for this portfolio was November 1, 1999.
(s) The inception date for this portfolio was December 1, 1999.
The accompanying notes are an integral part of these financial statements.
Form 8520D-5
10
<PAGE> 13
The Statement of Additional Information ("SAI") includes additional
information about the Fund. The SAI is incorporated herein by reference.
Additional information about the Fund's investments is 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 the Fund's annual and semi-annual reports are available,
without charge, upon request. To receive them, call or write the Fund at
1-800-366-6654, 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.
Form 8520D-5
11
<PAGE> 14
Part B
Information Required in a Statement of Additional Information
<PAGE> 15
THE DOW(SM) TARGET VARIABLE FUND LLC
One Financial Way
Montgomery, Ohio 45242
Telephone (800)366-6654
Statement of Additional Information ("SAI")
May 1, 2000
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 May 1, 2000. 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 8
Purchase and Redemption of Fund Interests....................................................................Page 9
Taxation of the Fund........................................................................................ Page 9
Fund Performance............................................................................................Page 10
Total
Return......................................................................................................Page 10
Legal Counsel...............................................................................................Page 11
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.
Page 1
<PAGE> 16
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.
Page 2
<PAGE> 17
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> 18
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 58
One Financial Way Secretary, ONLI; Secretary of the
Montgomery, Ohio Adviser
Ross Love Manager President & CEO, Blue Chip Director, 54
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.
James E. Bushman Manager President & CEO, Cast-Fab Technologies, Inc. 55
3040 Forrer Street
Cincinnati, Ohio
</TABLE>
Page 4
<PAGE> 19
<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 61
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 57
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 47
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
Dennis R. Taney Treasurer Mutual Funds Financial Operations, 52
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> 20
Compensation of Board of Managers
Managers who are not affiliated with the Adviser, ONLI or First Trust were
compensated as follows in 1999:
<TABLE>
<CAPTION>
Aggregate Compensation Total Compensation From
Manager From the Fund Fund Complex**
- ------- ---------------------- -----------------------
<S> <C> <C>
James E. Bushman None None
George E. Castrucci $2,750 $18,950
Ross Love 2,500 18,100
George M. Vredeveld 2,750 18,950
</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> 21
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. During 1999, the Adviser reimbursed the Fund in
the amounts indicated for excess expenses:
Portfolio Amount
--------- ------
Target 10-January $5,407
Target 10-February 2,242
Target 10-April 130
Target 10-May 127
Target 10-June 98
Target 10-July 159
Target 10-August 1,522
Target 10-September 668
Target 10-October 440
Target 10-November 598
Target 10-December 493
Target 5 -September 1,876
Target 5 -October 1,174
Target 5 -November 640
Target 5 -December 301
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> 22
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> 23
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> 24
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> 25
FINANCIAL STATEMENTS
The financial statements for the Fund, as of December 31, 1999, included in this
SAI and the Financial Highlights included in the prospectus have been included
herein and in the prospectus in reliance upon the report of KPMG LLP,
independent certified public accountants, appearing in this SAI, and upon the
authority of said firm as experts in accounting and auditing. KPMG LLP's
business address is 201 East Fifth Street, Cincinnati, Ohio 45202.
Page 11
<PAGE> 26
THE DOW(SM) TARGET VARIABLE FUND LLC
DOW(SM) TARGET 10 -- JANUARY PORTFOLIO
OBJECTIVE
The Dow(SM) Target 10 Portfolios seeks long-term capital growth and dividend
income by investing in 10 common stocks in the Dow Industrial Average(SM) that
have the highest dividend yield as of the close of business on or about the
second last business day of the month.
PERFORMANCE AS OF DECEMBER 31, 1999
TOTAL RETURN:
<TABLE>
<S> <C>
January
Since inception (1/4/99) 2.88%
</TABLE>
Returns represent past performance, which is no guarantee of future results.
Investment return and principal value will vary so that shares, when redeemed,
may be worth more or less than their original cost. Actual results for variable
annuity and variable universal life contracts will be lower due to contract
charges. Consult your contract for applicable charges for mortality and
expenses.
BAR CHART
<TABLE>
<CAPTION>
JANUARY 10 (SINCE INCEPTION 1/4/99) DJIA (12 MONTHS)
- ----------------------------------- ----------------
<S> <C>
2.88% 27.50%
</TABLE>
COMMENTS
Since its inception on 1/4/99, the Dow(SM) Target 10 January portfolio returned
2.88% versus 27.50% for the Dow Jones Industrial Average. J.P. Morgan & Co. Inc.
was the best performing stock for the 12-month period while Phillip Morris lost
the most ground. The January portfolio contains 11 common stocks due to the
spin-off of General Motors' parts division Delphi Automotive Systems on 5/28/99.
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE %
- ---------------------------------------------------------------
<C> <S> <C> <C>
975 Caterpillar Inc. (4)................ $ 45,886 10.0
527 Chevron Corp. (6)................... 45,651 9.9
777 Delphi Automotive Systems (1) (a)... 12,238 2.7
799 E.I. Du Pont de Nemours and Co.
(2)................................ 52,634 11.4
613 Eastman Kodak Company (8)........... 40,611 8.8
436 General Motors Corp. (1)............ 31,692 6.9
1,013 International Paper Company (7)..... 57,171 12.4
484 J.P. Morgan & Co. Inc. (5).......... 61,287 13.3
603 Minnesota Mining and Manufacturing
Co. (3)............................ 59,019 12.8
816 Phillip Morris Companies Inc.
(10)............................... 18,921 4.1
887 The Goodyear Tire & Rubber Company
(9)................................ 25,002 5.4
-------- -----
TOTAL COMMON STOCK (COST
$452,544).......................... $450,112 97.9
======== =====
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS VALUE %
- ---------------------------------------------------------------
<C> <S> <C> <C>
$6,000 Firstar Bank 1.00% due 01/03/00
repurchase price $6,000
collateralized by GNMA certificates
pool# 8375 due 02/20/24 (cost
$6,000)............................ $ 6,000 1.3
-------- -----
TOTAL REPURCHASE AGREEMENTS (COST
$6,000)............................ $ 6,000 1.3
-------- -----
TOTAL HOLDINGS (COST $458,544)...... $456,112 99.2
-------- -----
--------
CASH & RECEIVABLES, NET OF
LIABILITIES........................ 3,821 0.8
-------- -----
TOTAL NET ASSETS.................... $459,933 100.0
======== =====
</TABLE>
INDUSTRIES
<TABLE>
<C> <S> <C>
1. Automobiles
2. Chemicals
3. Manufacturing
4. Machinery
5. Banks
6. Oil, Energy, and Natural Gas
7. Paper & Related
8. Photo Equipment
9. Rubber and Tires
10. Tobacco
</TABLE>
- ---------------
(a) .6987:1 Spin-off of General Motors on 4/12/99
3
<PAGE> 27
THE DOW(SM) TARGET VARIABLE FUND LLC
DOW(SM) TARGET 10 -- FEBRUARY PORTFOLIO
OBJECTIVE
The Dow(SM) Target 10 Portfolios seeks long-term capital growth and dividend
income by investing in 10 common stocks in the Dow Industrial Average(SM) that
have the highest dividend yield as of the close of business on or about the
second last business day of the month.
PERFORMANCE AS OF DECEMBER 31, 1999
TOTAL RETURN:
<TABLE>
<S> <C>
February
Since inception (2/1/99) 6.37%
</TABLE>
Returns represent past performance, which is no guarantee of future results.
Investment return and principal value will vary so that shares, when redeemed,
may be worth more or less than their original cost. Actual results for variable
annuity and variable universal life contracts will be lower due to contract
charges. Consult your contract for applicable charges for mortality and
expenses.
BAR CHART
<TABLE>
<CAPTION>
FEBRUARY 10 (SINCE INCEPTION 2/1/99) DJIA (11 MONTHS)
- ------------------------------------ ----------------
<S> <C>
6.37% 24.92%
</TABLE>
COMMENTS
Since its inception on 2/1/99, the Dow(SM) Target 10 February portfolio returned
6.37% versus 24.92% for the Dow Jones Industrial Average. International Paper
Co. was the best performing stock for the 11-month period while Phillip Morris
lost the most ground.
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE %
- ---------------------------------------------------------------
<C> <S> <C> <C>
2,441 Caterpillar Inc. (3)............. $ 114,880 9.9
1,433 Chevron Corp. (6)................ 124,134 10.7
2,061 E.I. Du Pont de Nemours and Co.
(1)............................. 135,768 11.7
1,708 Eastman Kodak Company (9)........ 113,155 9.7
1,529 Exxon Corporation (7)............ 123,180 10.6
2,704 International Paper Company
(8)............................. 152,607 13.1
1,037 J.P. Morgan & Co. Inc. (4)....... 131,310 11.3
1,432 Minnesota Mining and
Manufacturing Co. (2)........... 140,157 12.0
2,231 Phillip Morris Companies Inc.
(9)............................. 51,731 4.5
2,206 The Goodyear Tire & Rubber
Company (9)..................... 62,182 5.4
---------- -----
TOTAL COMMON STOCK (COST
$1,106,814)..................... $1,149,104 98.9
========== =====
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS VALUE %
- ---------------------------------------------------------------
<C> <S> <C> <C>
$9,000 Firstar Bank 1.00% due 01/03/00
repurchase price $9,000
collateralized by GNMA
certificates pool# 8375 due
02/20/24 (cost $9,000)........... $ 9,000 0.8
---------- -----
TOTAL REPURCHASE AGREEMENTS (COST
$9,000).......................... $ 9,000 0.8
---------- -----
TOTAL HOLDINGS (COST
$1,115,814)...................... $1,158,104 99.7
---------- -----
CASH & RECEIVABLES, NET OF
LIABILITIES...................... 3,628 0.3
---------- -----
TOTAL NET ASSETS.................. $1,161,732 100.0
========== =====
</TABLE>
INDUSTRIES
<TABLE>
<C> <S> <C>
1. Chemicals
2. Manufacturing
3. Machinery
4. Banks
5. Oil, Energy, and Natural Gas
6. Paper & Related
7. Photo Equipment
8. Rubber and Tires
9. Tobacco
</TABLE>
4
<PAGE> 28
THE DOW(SM) TARGET VARIABLE FUND LLC
DOW(SM) TARGET 10 -- MARCH PORTFOLIO
OBJECTIVE
The Dow(SM) Target 10 Portfolios seeks long-term capital growth and dividend
income by investing in 10 common stocks in the Dow Industrial Average(SM) that
have the highest dividend yield as of the close of business on or about the
second last business day of the month.
PERFORMANCE AS OF DECEMBER 31, 1999
TOTAL RETURN:
<TABLE>
<S> <C>
March
Since inception (3/1/99) 1.96%
</TABLE>
Returns represent past performance, which is no guarantee of future results.
Investment return and principal value will vary so that shares, when redeemed,
may be worth more or less than their original cost. Actual results for variable
annuity and variable universal life contracts will be lower due to contract
charges. Consult your contract for applicable charges for mortality and
expenses.
BAR CHART
<TABLE>
<CAPTION>
MARCH 10 (SINCE INCEPTION 3/1/99) DJIA (10 MONTHS)
- --------------------------------- ----------------
<S> <C>
1.96% 24.89%
</TABLE>
COMMENTS
Since its inception on 3/1/99, the Dow(SM) Target 10 March portfolio returned
1.96% versus 24.89% for the Dow Jones Industrial Average. Minnesota Mining and
Manufacturing Co. was the best performing stock for the 10-month period while
Phillip Morris lost the most ground. The March portfolio contains 11 common
stocks due to the spin-off of General Motors' parts division Delphi Automotive
Systems on 5/28/99.
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE %
- ------ ---------------------------------- ---------- -----
<C> <S> <C> <C>
2,135 Caterpillar Inc. (4).............. $ 100,478 9.9
1,238 Chevron Corp. (6)................. 107,242 10.5
1,164 Delphi Automotive Systems (1)
(a).............................. 18,333 1.8
1,833 E.I. Du Pont de Nemours and Co.
(2).............................. 120,749 11.9
1,459 Eastman Kodak Company (8)......... 96,659 9.5
1,449 Exxon Corporation (6)............. 116,735 11.5
1,166 General Motors Corp. (1).......... 84,753 8.3
867 J.P. Morgan & Co. Inc. (5)........ 109,784 10.8
1,295 Minnesota Mining and Manufacturing
Co. (3).......................... 126,748 12.5
2,431 Phillip Morris Companies Inc.
(10)............................. 56,369 5.5
2,103 The Goodyear Tire & Rubber Company
(9).............................. 59,278 5.8
---------- -----
TOTAL COMMON STOCK (COST
$1,048,567)...................... $ 997,128 98.0
========== =====
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS VALUE %
- ---------------------------------------------------------------
<C> <S> <C> <C>
$20,000 Firstar Bank 1.00% due 01/03/00
repurchase price $20,000
collateralized by GNMA
certificates pool# 8375 due
02/20/24 (cost $20,000)......... $ 20,000 2.0
---------- -----
TOTAL REPURCHASE AGREEMENTS (COST
$20,000)........................ $ 20,000 2.0
---------- -----
TOTAL HOLDINGS (COST
$1,068,567)..................... $1,017,128 100.0
---------- -----
LIABILITIES, NET OF CASH &
RECEIVABLES..................... (190) (0.0)
---------- -----
TOTAL NET ASSETS................. $1,016,938 100.0
========== =====
</TABLE>
INDUSTRIES
<TABLE>
<C> <S> <C>
1. Automobiles
2. Chemicals
3. Manufacturing
4. Machinery
5. Banks
6. Oil, Energy, and Natural Gas
7. Paper & Related
8. Photo Equipment
9. Rubber and Tires
10. Tobacco
</TABLE>
- ---------------
(a) .6987:1 Spin-off of General Motors on 4/12/99
5
<PAGE> 29
THE DOW(SM) TARGET VARIABLE FUND LLC
DOW(SM) TARGET 10 -- APRIL PORTFOLIO
OBJECTIVE
The Dow(SM) Target 10 Portfolios seeks long-term capital growth and dividend
income by investing in 10 common stocks in the Dow Industrial Average(SM) that
have the highest dividend yield as of the close of business on or about the
second last business day of the month.
PERFORMANCE AS OF DECEMBER 31, 1999
TOTAL RETURN:
<TABLE>
<S> <C>
April
Since inception (4/1/99) 2.50%
</TABLE>
Returns represent past performance, which is no guarantee of future results.
Investment return and principal value will vary so that shares, when redeemed,
may be worth more or less than their original cost. Actual results for variable
annuity and variable universal life contracts will be lower due to contract
charges. Consult your contract for applicable charges for mortality and
expenses.
BAR CHART
<TABLE>
<CAPTION>
APRIL 10 (SINCE INCEPTION 4/1/99) DJIA (9 MONTHS)
- --------------------------------- ---------------
<S> <C>
2.5% 18.29%
</TABLE>
COMMENTS
Since its inception on 4/1/99, the Dow(SM) Target 10 April portfolio returned
2.50% versus 18.29% for the Dow Jones Industrial Average. Minnesota Mining and
Manufacturing Co. was the best performing stock for the 9-month period while The
Goodyear Tire & Rubber Co. lost the most ground.
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE %
- ----------------------------------------------------------------
<C> <S> <C> <C>
2,987 Caterpillar Inc. (3)............. $ 140,576 11.2
1,575 Chevron Corp. (6)................ 136,434 10.9
2,417 E.I. Du Pont de Nemours and Co.
(1)............................. 159,220 12.7
2,161 Eastman Kodak Company (7)........ 143,166 11.4
1,966 Exxon Corporation (5)............ 158,386 12.6
3,317 International Paper Company
(6)............................. 187,203 14.9
1,118 J.P. Morgan & Co. Inc. (4)....... 141,567 11.3
1,996 Minnesota Mining and
Manufacturing Co. (2)........... 195,359 15.4
3,714 Phillip Morris Companies Inc.
(9)............................. 86,118 6.8
2,857 The Goodyear Tire & Rubber
Company (8)..................... 80,532 6.4
---------- ------
TOTAL COMMON STOCK (COST
$1,591,680)..................... $1,428,561 113.6
========== ======
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS VALUE %
- ---------------------------------------------------------------
<C> <S> <C> <C>
$36,000 Firstar Bank 1.00% due 01/03/00
repurchase price $36,000
collateralized by GNMA
certificates pool# 8375 due
02/20/24 (cost $36,000)......... $ 36,000 2.9
---------- -----
TOTAL REPURCHASE AGREEMENTS (COST
$36,000)........................ $ 36,000 2.9
---------- -----
TOTAL HOLDINGS (COST
$1,627,680)..................... $1,464,561 116.5
---------- -----
LIABILITIES, NET OF CASH &
RECEIVABLES..................... (207,898) (16.5)
---------- -----
TOTAL NET ASSETS................. $1,256,663 100.0
========== =====
</TABLE>
INDUSTRIES
<TABLE>
<C> <S> <C>
1. Chemicals
2. Manufacturing
3. Machinery
4. Banks
5. Oil, Energy, and Natural Gas
6. Paper & Related
7. Photo Equipment
8. Rubber and Tires
9. Tobacco
</TABLE>
6
<PAGE> 30
THE DOW(SM) TARGET VARIABLE FUND LLC
DOW(SM) TARGET 10 -- MAY PORTFOLIO
OBJECTIVE
The Dow(SM) Target 10 Portfolios seeks long-term capital growth and dividend
income by investing in 10 common stocks in the Dow Industrial Average(SM) that
have the highest dividend yield as of the close of business on or about the
second last business day of the month.
PERFORMANCE AS OF DECEMBER 31, 1999
TOTAL RETURN:
<TABLE>
<S> <C>
May
Since inception (5/3/99) -16.14%
</TABLE>
Returns represent past performance, which is no guarantee of future results.
Investment return and principal value will vary so that shares, when redeemed,
may be worth more or less than their original cost. Actual results for variable
annuity and variable universal life contracts will be lower due to contract
charges. Consult your contract for applicable charges for mortality and
expenses.
BAR CHART
<TABLE>
<CAPTION>
MAY 10 (SINCE INCEPTION 5/3/99) DJIA (8 MONTHS)
- ------------------------------- ---------------
<S> <C>
- -15.14% 5.55%
</TABLE>
COMMENTS
Since its inception on 5/3/99, the Dow(SM) Target 10 May portfolio lost 16.14%
versus a 5.55% gain for the Dow Jones Industrial Average. Minnesota Mining and
Manufacturing Co. was the best performing stock for the 8-month period while The
Goodyear Tire & Rubber Co. lost the most ground. The May portfolio contains 11
common stocks due to the spin-off of General Motors' parts division Delphi
Automotive Systems on 5/28/99.
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE %
- ---------------------------------------------------------------
<C> <S> <C> <C>
827 Chevron Corp. (6)................... $ 71,639 10.0
952 Delphi Automotive Systems (1) (a)... 14,994 2.1
1,177 E.I. Du Pont de Nemours and Co.
(2)................................ 77,535 10.8
1,108 Eastman Kodak Company (7)........... 73,405 10.2
1,011 Exxon Corporation (6)............... 81,449 11.4
951 General Motors Corp. (1)............ 69,126 9.6
620 J.P. Morgan & Co. Inc. (5).......... 78,508 10.9
1,000 Minnesota Mining and Manufacturing
Co. (3)............................ 97,875 13.6
2,432 Phillip Morris Companies Inc. (9)... 56,392 7.9
2,025 Sears, Roebuck & Company (4)........ 61,636 8.6
1,522 The Goodyear Tire & Rubber Company
(8)................................ 42,901 6.0
-------- -----
TOTAL COMMON STOCK (COST
$855,216).......................... $725,460 101.1
-------- -----
TOTAL HOLDINGS (COST $855,216)...... $725,460 101.1
-------- -----
LIABILITIES, NET OF CASH &
RECEIVABLES........................ (8,178) (1.1)
-------- -----
TOTAL NET ASSETS.................... $717,282 100.0
======== =====
</TABLE>
INDUSTRIES
<TABLE>
<C> <S> <C>
1. Automobiles
2. Chemicals
3. Manufacturing
4. Retail
5. Banks
6. Oil, Energy, and Natural Gas
7. Photo Equipment
8. Rubber and Tires
9. Tobacco
</TABLE>
- ---------------
(a) .6987:1 Spin-off of General Motors on 4/12/99
7
<PAGE> 31
THE DOW(SM) TARGET VARIABLE FUND LLC
DOW(SM) TARGET 10 -- JUNE PORTFOLIO
OBJECTIVE
The Dow(SM) Target 10 Portfolios seeks long-term capital growth and dividend
income by investing in 10 common stocks in the Dow Industrial Average(SM) that
have the highest dividend yield as of the close of business on or about the
second last business day of the month.
PERFORMANCE AS OF DECEMBER 31, 1999
TOTAL RETURN:
<TABLE>
<S> <C>
June
Since inception (6/1/99) -9.57%
</TABLE>
Returns represent past performance, which is no guarantee of future results.
Investment return and principal value will vary so that shares, when redeemed,
may be worth more or less than their original cost. Actual results for variable
annuity and variable universal life contracts will be lower due to contract
charges. Consult your contract for applicable charges for mortality and
expenses.
BAR CHART
<TABLE>
<CAPTION>
JUNE 10 (6/1/99) DJIA (7 MONTH)
- ---------------- --------------
<S> <C>
- -9.57% 9.47%
</TABLE>
COMMENTS
Since its inception on 6/1/99, the Dow(SM) Target 10 June portfolio lost 9.57%
versus a gain of 9.47% for the Dow Jones Industrial Average. Minnesota Mining
and Manufacturing Co. was the best performing stock for the 7-month period while
The Goodyear Tire & Rubber Co. lost the most ground.
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE %
- ----------------------------------------------------------------
<C> <S> <C> <C>
2,381 Caterpillar Inc. (4)............. $ 112,056 9.7
1,420 Chevron Corp. (6)................ 123,008 10.6
2,011 E.I. Du Pont de Nemours and Co.
(2)............................. 132,475 11.4
1,924 Eastman Kodak Company (7)........ 127,465 11.0
1,668 Exxon Corporation (6)............ 134,378 11.6
1,854 General Motors Corp. (1)......... 134,763 11.7
971 J.P. Morgan & Co. Inc. (5)....... 122,953 10.6
1,544 Minnesota Mining and
Manufacturing Co. (3)........... 151,119 13.1
3,414 Phillip Morris Companies Inc.
(9)............................. 79,162 6.8
2,296 The Goodyear Tire & Rubber
Company (8)..................... 64,718 5.6
---------- -----
TOTAL COMMON STOCK (COST
$1,339,941)..................... $1,182,097 102.1
========== =====
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS VALUE %
- ----------------------------------------------------------------
<C> <S> <C> <C>
$280,000 Firstar Bank 1.00% due 01/03/00
repurchase price $5,000
collateralized by GNMA
certificates pool# 8375 due
02/20/24 (cost $5,000).......... $ 5,000 0.4
---------- -----
TOTAL REPURCHASE AGREEMENTS (COST
$5,000)......................... $ 5,000 0.4
---------- -----
TOTAL HOLDINGS (COST
$1,344,941)..................... $1,187,097 102.5
---------- -----
LIABILITIES, NET OF CASH &
RECEIVABLES..................... (29,169) (2.5)
---------- -----
TOTAL NET ASSETS................. $1,157,928 100.0
========== =====
</TABLE>
INDUSTRIES
<TABLE>
<C> <S> <C>
1. Automobiles
2. Chemicals
3. Manufacturing
4. Retail
5. Banks
6. Oil, Energy, and Natural Gas
7. Photo Equipment
8. Rubber and Tires
9. Tobacco
</TABLE>
8
<PAGE> 32
THE DOW(SM) TARGET VARIABLE FUND LLC
DOW(SM) TARGET 10 -- JULY PORTFOLIO
OBJECTIVE
The Dow(SM) Target 10 Portfolios seeks long-term capital growth and dividend
income by investing in 10 common stocks in the Dow Industrial Average(SM) that
have the highest dividend yield as of the close of business on or about the
second last business day of the month.
PERFORMANCE AS OF DECEMBER 31, 1999
TOTAL RETURN:
<TABLE>
<S> <C>
July
Since inception (1/4/99) -10.90%
</TABLE>
Returns represent past performance, which is no guarantee of future results.
Investment return and principal value will vary so that shares, when redeemed,
may be worth more or less than their original cost. Actual results for variable
annuity and variable universal life contracts will be lower due to contract
charges. Consult your contract for applicable charges for mortality and
expenses.
BAR CHART
<TABLE>
<CAPTION>
JULY 10 (7/1/99) DJIA (6 MONTH)
- ---------------- --------------
<S> <C>
- -10.9% 4.69%
</TABLE>
COMMENTS
Since its inception on 7/1/99, the Dow(SM) Target 10 July portfolio lost 10.90%
versus a gain of 4.69% for the Dow Jones Industrial Average. General Motors
Corp. was the best performing stock for the 6-month period while The Goodyear
Tire & Rubber Co. lost the most ground.
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE %
- ---------------------------------------------------------------
<C> <S> <C> <C>
1,833 Caterpillar Inc. (4).............. $ 86,266 8.7
1,197 Chevron Corp (6).................. 103,690 10.5
1,654 E.I. Du Pont de Nemours and Co.
(2).............................. 108,957 11.0
1,621 Eastman Kodak Company (7)......... 107,391 10.8
1,463 Exxon Mobil Corp (6).............. 117,863 11.9
1,756 General Motors Corp. (1).......... 127,639 12.9
1,955 Goodyear Tire & Rubber (8)........ 55,107 5.6
829 J.P. Morgan & Co. Inc. (5)........ 104,972 10.6
1,293 Minnesota Mining and Manufacturing
Co. (3).......................... 126,553 12.8
2,800 Phillip Morris Companies
Inc.(9).......................... 64,925 6.6
---------- -----
TOTAL COMMON STOCK (COST
$1,130,749)...................... $1,003,363 101.4
---------- -----
TOTAL HOLDINGS (COST
$1,130,749)...................... $1,003,363 101.4
---------- -----
LIABILITIES, NET OF CASH &
RECEIVABLES...................... (13,388) (1.4)
---------- -----
TOTAL NET ASSETS.................. $ 989,975 100.0
========== =====
</TABLE>
INDUSTRIES
<TABLE>
<C> <S> <C>
1. Automobiles
2. Chemicals
3. Manufacturing
4. Machinery
5. Banks
6. Oil, Energy, and Natural Gas
7. Photo Equipment
8. Rubber and Tires
9. Tobacco
</TABLE>
9
<PAGE> 33
THE DOW(SM) TARGET VARIABLE FUND LLC
DOW(SM) TARGET 10 -- AUGUST PORTFOLIO
OBJECTIVE
The Dow(SM) Target 10 Portfolios seeks long-term capital growth and dividend
income by investing in 10 common stocks in the Dow Industrial Average(SM) that
have the highest dividend yield as of the close of business on or about the
second last business day of the month.
PERFORMANCE AS OF DECEMBER 31, 1999
TOTAL RETURN:
<TABLE>
<S> <C>
August
Since inception (1/4/99) -10.37%
</TABLE>
Returns represent past performance, which is no guarantee of future results.
Investment return and principal value will vary so that shares, when redeemed,
may be worth more or less than their original cost. Actual results for variable
annuity and variable universal life contracts will be lower due to contract
charges. Consult your contract for applicable charges for mortality and
expenses.
BAR CHART
<TABLE>
<CAPTION>
AUGUST 10 (8/2/99) DJIA (5 MONTH)
- ------------------ --------------
<S> <C>
- -10.37% 6.77%
</TABLE>
COMMENTS
Since its inception on 8/2/99, the Dow(SM) Target 10 August portfolio lost
10.37% versus a gain of 8.77% for the Dow Jones Industrial Average. General
Motors Corp. was the best performing stock for the 5-month period while The
Goodyear Tire & Rubber Co. lost the most ground.
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE %
- ---------------------------------------------------------------
<C> <S> <C> <C>
1,568 Caterpillar Inc. (3)................ $ 73,794 9.2
1,010 Chevron Corp (5).................... 87,492 10.9
1,328 Eastman Kodak Company (6)........... 87,980 10.9
1,185 Exxon Mobil Corp (5)................ 95,467 11.9
1,444 General Motors Corp. (1)............ 104,961 13.0
1,733 Goodyear Tire & Rubber (7).......... 48,849 6.1
706 J.P. Morgan & Co. Inc. (4).......... 89,397 11.1
1,015 Minnesota Mining and Manufacturing
Co. (2) 99,343 12.3
2,487 Phillip Morris Companies Inc. (9)... 57,667 7.1
2,243 Sears, Roebuck & Co (8)............. 68,271 8.5
-------- -----
TOTAL COMMON STOCK (COST
$937,776).......................... $813,221 101.0
-------- -----
TOTAL HOLDINGS (COST $937,776)...... $813,221 101.0
-------- -----
LIABILITIES, NET OF CASH &
RECEIVABLES........................ (7,999) (1.0)
-------- -----
TOTAL NET ASSETS.................... $805,222 100.0
======== =====
</TABLE>
INDUSTRIES
<TABLE>
<C> <S> <C>
1. Automobiles
2. Manufacturing
3. Machinery
4. Banks
5. Oil, Energy, and Natural Gas
6. Photo Equipment
7. Rubber and Tires
8. Retail
9. Tobacco
</TABLE>
10
<PAGE> 34
THE DOW(SM) TARGET VARIABLE FUND LLC
DOW(SM) TARGET 10 -- SEPTEMBER PORTFOLIO
OBJECTIVE
The Dow(SM) Target 10 Portfolios seeks long-term capital growth and dividend
income by investing in 10 common stocks in the Dow Industrial Average(SM) that
have the highest dividend yield as of the close of business on or about the
second last business day of the month.
PERFORMANCE AS OF DECEMBER 31, 1999
TOTAL RETURN:
<TABLE>
<S> <C>
September
Since inception (1/4/99) -11.65%
</TABLE>
Returns represent past performance, which is no guarantee of future results.
Investment return and principal value will vary so that shares, when redeemed,
may be worth more or less than their original cost. Actual results for variable
annuity and variable universal life contracts will be lower due to contract
charges. Consult your contract for applicable charges for mortality and
expenses.
BAR CHART
<TABLE>
<CAPTION>
SEPTEMBER 10 (9/1/99) DJIA (4 MONTH)
- --------------------- --------------
<S> <C>
- -11.65% 5.66%
</TABLE>
COMMENTS
Since its inception on 9/1/99, the Dow(SM) Target 10 September portfolio lost
11.65% versus a gain of 5.66% for the Dow Jones Industrial Average. General
Motors Corp. was the best performing stock for the 4-month period while The
Goodyear Tire & Rubber Co. lost the most ground.
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE %
- ---------------------------------------------------------------
<C> <S> <C> <C>
2,863 Caterpillar Inc. (4).............. $ 134,740 9.2
1,865 Chevron Corp (6).................. 161,556 11.0
2,575 E.I. Du Pont de Nemours and Co.
(2).............................. 169,628 11.6
2,263 Eastman Kodak Company (7)......... 149,924 10.2
2,622 General Motors Corp. (1).......... 190,587 13.0
3,178 Goodyear Tire & Rubber (8)........ 89,580 6.1
1,302 J.P. Morgan & Co. Inc. (5)........ 164,866 11.2
1,787 Minnesota Mining and Manufacturing
Co. (3).......................... 174,903 11.9
4,510 Phillip Morris Companies Inc. (10) 104,574 7.1
4,311 Sears, Roebuck & Co (9)........... 131,216 8.9
---------- -----
TOTAL COMMON STOCK (COST
$1,604,271)...................... $1,471,574 100.2
---------- -----
TOTAL HOLDINGS (COST
$1,604,271)...................... $1,471,574.. 100.2
---------- -----
LIABILITIES, NET OF CASH &
RECEIVABLES...................... (3,932) (0.2)
---------- -----
TOTAL NET ASSETS.................. $1,467,642 100.0
========== =====
</TABLE>
INDUSTRIES
<TABLE>
<C> <S> <C>
1. Automobiles
2. Chemicals
3. Manufacturing
4. Machinery
5. Banks
6. Oil, Energy, and Natural Gas
7. Photo Equipment
8. Rubber and Tires
9. Retail
10. Tobacco
</TABLE>
11
<PAGE> 35
THE DOW(SM) TARGET VARIABLE FUND LLC
DOW(SM) TARGET 10 -- OCTOBER PORTFOLIO
OBJECTIVE
The Dow(SM) Target 10 Portfolios seeks long-term capital growth and dividend
income by investing in 10 common stocks in the Dow Industrial Average(SM) that
have the highest dividend yield as of the close of business on or about the
second last business day of the month.
PERFORMANCE AS OF DECEMBER 31, 1999
TOTAL RETURN:
<TABLE>
<S> <C>
October
Since inception (1/4/99) -7.33%
</TABLE>
Returns represent past performance, which is no guarantee of future results.
Investment return and principal value will vary so that shares, when redeemed,
may be worth more or less than their original cost. Actual results for variable
annuity and variable universal life contracts will be lower due to contract
charges. Consult your contract for applicable charges for mortality and
expenses.
<TABLE>
<CAPTION>
OCTOBER 10 (10/1/99) DJIA (3 MONTH)
- -------------------- --------------
<S> <C>
- -7.33% 12.31%
</TABLE>
COMMENTS
Since its inception on 10/1/99, the Dow(SM) Target 10 October portfolio lost
7.33% versus a gain of 12.31% for the Dow Jones Industrial Average. General
Motors Corp. was the best performing stock for the 3-month period while The
Goodyear Tire & Rubber Co. lost the most ground.
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE %
- ---------------------------------------------------------------
<C> <S> <C> <C>
2,634 Caterpillar Inc. (4).............. $ 123,962 8.9
1,632 Chevron Corp (6).................. 141,372 10.1
2,373 E.I. Du Pont de Nemours and Co.
(2).............................. 156,321 11.2
1,949 Eastman Kodak Company (7)......... 129,121 9.3
2,299 General Motors Corp. (1).......... 167,109 12.0
3,086 Goodyear Tire & Rubber (8)........ 86,987 6.2
1,270 J.P. Morgan & Co. Inc. (5)........ 160,814 11.5
1,530 Minnesota Mining and Manufacturing
Co. (3).......................... 149,749 10.7
4,178 Phillip Morris Companies Inc.
(10)............................. 96,877 6.9
4,807 Sears, Roebuck & Co (9)........... 146,313 10.5
---------- -----
TOTAL COMMON STOCK (COST
$1,438,514)...................... $1,358,625 97.3
========== =====
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS VALUE %
- ---------------------------------------------------------------
<C> <S> <C> <C>
$34,000 Firstar Bank 1.00% due 01/03/00
repurchase price $34,000
collateralized by GNMA
certificates pool# 8375 due
02/20/24 (cost $34,000)......... $ 34,000 2.4
---------- -----
TOTAL REPURCHASE AGREEMENTS (COST
$34,000)........................ $ 34,000 2.4
---------- -----
TOTAL HOLDINGS (COST
$1,472,514)..................... $1,392,625 99.7
---------- -----
CASH & RECEIVABLES, NET OF
LIABILITIES..................... 3,529 0.3
---------- -----
TOTAL NET ASSETS................. $1,396,154 100.0
========== =====
</TABLE>
INDUSTRIES
<TABLE>
<C> <S> <C>
1. Automobiles
2. Chemicals
3. Manufacturing
4. Machinery
5. Banks
6. Oil, Energy, and Natural Gas
7. Photo Equipment
8. Rubber and Tires
9. Retail
10. Tobacco
</TABLE>
12
<PAGE> 36
THE DOW(SM) TARGET VARIABLE FUND LLC
DOW(SM) TARGET 10 -- NOVEMBER PORTFOLIO
OBJECTIVE
The Dow(SM) Target 10 Portfolios seeks long-term capital growth and dividend
income by investing in 10 common stocks in the Dow Industrial Average(SM) that
have the highest dividend yield as of the close of business on or about the
second last business day of the month.
PERFORMANCE AS OF DECEMBER 31, 1999
TOTAL RETURN:
<TABLE>
<S> <C>
November
Since inception (1/4/99) 1.13%
</TABLE>
Returns represent past performance, which is no guarantee of future results.
Investment return and principal value will vary so that shares, when redeemed,
may be worth more or less than their original cost. Actual results for variable
annuity and variable universal life contracts will be lower due to contract
charges. Consult your contract for applicable charges for mortality and
expenses.
<TABLE>
<CAPTION>
NOVEMBER 10 (11/1/99) DJIA (2 MONTH)
- --------------------- --------------
<S> <C>
1.13% 8.30%
</TABLE>
COMMENTS
Since its inception on 11/1/99, the Dow(SM) Target 10 November portfolio gained
1.13% versus a gain of 8.30% for the Dow Jones Industrial Average. International
Paper Co. was the best performing stock for the 2-month period while Caterpillar
Inc. lost the most ground.
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE %
- ----------------------------------------------------------------
<C> <S> <C> <C>
2,799 AT&T Corp. (9)................... $ 142,049 10.6
2,359 Caterpillar Inc. (4)............. 111,020 8.3
2,019 E.I. Du Pont de Nemours and Co.
(2)............................. 133,002 10.0
1,873 Eastman Kodak Company (8)........ 124,086 9.3
1,766 Exxon Corporation (6)............ 142,273 10.7
1,903 General Motors Corp. (1)......... 138,324 10.3
2,667 International Paper Co. (7)...... 150,519 11.3
974 J.P. Morgan & Co. Inc. (5)....... 123,333 9.2
1,333 Minnesota Mining and
Manufacturing Co. (3)........... 130,467 9.8
4,931 Phillip Morris Companies Inc.
(10) 114,338 8.6
---------- -----
TOTAL COMMON STOCK (COST
$1,314,123)..................... $1,309,411 98.1
========== =====
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS VALUE %
- ----------------------------------------------------------------
<C> <S> <C> <C>
$192,000 Firstar Bank 1.00% due 01/03/00
repurchase price $72,000
collateralized by GNMA
certificates pool# 8375 due
02/20/24 (cost $72,000)......... $ 72,000 5.4
---------- -----
TOTAL REPURCHASE AGREEMENTS (COST
$72,000)........................ $ 72,000 5.4
---------- -----
TOTAL HOLDINGS (COST
$1,386,123)..................... $1,381,411 103.5
---------- -----
LIABILITIES, NET OF CASH &
RECEIVABLES .................... (46,649) (3.5)
---------- -----
TOTAL NET ASSETS................. $1,334,762 100.0
========== =====
</TABLE>
INDUSTRIES
<TABLE>
<C> <S> <C>
1. Automobiles
2. Chemicals
3. Manufacturing
4. Retail
5. Banks
6. Oil, Energy, and Natural Gas
7. Paper & Related
8. Photo Equipment
9. Communications
10. Tobacco
</TABLE>
13
<PAGE> 37
THE DOW(SM) TARGET VARIABLE FUND LLC
DOW(SM) TARGET 10 -- DECEMBER PORTFOLIO
OBJECTIVE
The Dow(SM) Target 10 Portfolios seeks long-term capital growth and dividend
income by investing in 10 common stocks in the Dow Industrial Average(SM) that
have the highest dividend yield as of the close of business on or about the
second last business day of the month.
PERFORMANCE AS OF DECEMBER 31, 1999
TOTAL RETURN:
<TABLE>
<S> <C>
December
Since inception (1/4/99) 0.17%
</TABLE>
Returns represent past performance, which is no guarantee of future results.
Investment return and principal value will vary so that shares, when redeemed,
may be worth more or less than their original cost. Actual results for variable
annuity and variable universal life contracts will be lower due to contract
charges. Consult your contract for applicable charges for mortality and
expenses.
BAR CHART
<TABLE>
<CAPTION>
DECEMBER 10 (12/1/99) DJIA (1 MONTH)
- --------------------- --------------
<S> <C>
0.17% 4.64%
</TABLE>
COMMENTS
Since its inception on 12/1/99, the Dow(SM) Target 10 December portfolio
returned 0.17% versus 4.64% for the Dow Jones Industrial Average. International
Paper Co. was the best performing stock for the month of December while
Caterpillar Inc. lost the most ground.
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE %
- ----------------------------------------------------------------
<C> <S> <C> <C>
2,567 Caterpillar Inc. (4)............. $ 120,809 8.2
2,199 E.I. Du Pont de Nemours and Co.
(2)............................. 144,859 9.8
2,039 Eastman Kodak Company (8)........ 135,084 9.2
1,925 Exxon Corporation (6)............ 155,083 10.5
2,071 General Motors Corp. (1)......... 150,536 10.2
2,902 International Paper Co. (7)...... 163,782 11.1
1,059 J.P. Morgan & Co. Inc. (5)....... 134,096 9.1
1,450 Minnesota Mining and
Manufacturing Co. (3) 141,919 9.6
5,369 Phillip Morris Companies Inc.
(10)............................ 124,494 8.5
3,246 SBC Communications, Inc. (9)..... 158,242 10.7
---------- -----
TOTAL COMMON STOCK (COST
$1,419,279)..................... $1,428,904 96.9
========== =====
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS VALUE %
- ----------------------------------------------------------------
<C> <S> <C> <C>
$192,000 Firstar Bank 1.00% due 01/03/00
repurchase price $192,000
collateralized by GNMA
certificates pool# 8375 due
02/20/24 (cost $192,000)........ $ 192,000 13.0
---------- -----
TOTAL REPURCHASE AGREEMENTS (COST
$192,000)....................... $ 192,000 13.0
---------- -----
TOTAL HOLDINGS (COST
$1,611,279)..................... $1,620,904 109.9
---------- -----
LIABILITIES, NET OF CASH &
RECEIVABLES..................... (146,923) (9.9)
---------- -----
TOTAL NET ASSETS................. $1,473,981 100.0
========== =====
</TABLE>
INDUSTRIES
<TABLE>
<C> <S> <C>
1. Automobiles
2. Chemicals
3. Manufacturing
4. Retail
5. Banks
6. Oil, Energy, and Natural Gas
7. Paper & Related
8. Photo Equipment
9. Communications
10. Tobacco
</TABLE>
14
<PAGE> 38
THE DOW(SM) TARGET VARIABLE FUND LLC
DOW(SM) TARGET 5 -- SEPTEMBER PORTFOLIO
OBJECTIVE
The Dow(SM) Target 5 Portfolios seeks long-term capital growth and dividend
income by investing in common stocks in the Dow Industrial Average(SM). The
portfolios invest in the five stocks with the lowest price per share of the Dow
10 as of the close of business on or about the second last business day of the
month.
PERFORMANCE AS OF DECEMBER 31, 1999
TOTAL RETURN:
<TABLE>
<S> <C>
September
Since inception (9/1/99) -24.78%
</TABLE>
Returns represent past performance, which is no guarantee of future results.
Investment return and principal value will vary so that shares, when redeemed,
may be worth more or less than their original cost. Actual results for variable
annuity and variable universal life contracts will be lower due to contract
charges. Consult your contract for applicable charges for mortality and
expenses.
BAR CHART
<TABLE>
<CAPTION>
SEPTEMBER 5 (9/1/99) DJIA (4 MONTH)
- -------------------- --------------
<S> <C>
- -24.78% 5.66%
</TABLE>
COMMENTS
Since its inception on 9/1/99, the Dow(SM) Target 5 September portfolio lost
24.78% versus a gain of 5.66% for the Dow Jones Industrial Average. General
Motors Corp. was the best performing stock for the 4-month period while The
Goodyear Tire & Rubber Co. lost the most ground.
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE %
- ---------------------------------------------------------------
<C> <S> <C> <C>
661 Caterpillar Inc. (3)............... $ 31,109 19.84
605 General Motors Corp. (1)........... 43,976 28.05
734 Goodyear Tire & Rubber (4)......... 20,690 13.20
1,041 Phillip Morris Companies Inc.
(5)............................... 24,138 15.40
994 Sears, Roebuck & Co. (2)........... 30,255 19.30
-------- ------
TOTAL COMMON STOCK (COST $190,689) $150,168 95.8
======== ======
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS VALUE %
- ---------------------------------------------------------------
<C> <S> <C> <C>
$6,000 Firstar Bank 1.00% due 01/03/00
repurchase price $6,000
collateralized by GNMA
certificates pool# 8375 due
02/20/24 (cost $6,000)........... $ 6,000 3.8
---------- -----
TOTAL REPURCHASE AGREEMENTS (COST
$192,000)........................ $ 6,000 3.8
---------- -----
TOTAL HOLDINGS (COST $196,689).... $ 156,168 99.6
---------- -----
CASH & RECEIVABLES, NET OF
LIABILITIES...................... 621 0.4
---------- -----
TOTAL NET ASSETS.................. $ 156,789 100.0
========== =====
</TABLE>
INDUSTRIES
<TABLE>
<C> <S> <C>
1. Automobiles
2. Retail
3. Machinery
4. Rubber and Tires
5. Tobacco
</TABLE>
15
<PAGE> 39
THE DOW(SM) TARGET VARIABLE FUND LLC
DOW(SM) TARGET 5 -- OCTOBER PORTFOLIO
OBJECTIVE
The Dow(SM) Target 5 Portfolios seeks long-term capital growth and dividend
income by investing in common stocks in the Dow Industrial Average(SM). The
portfolios invest in the five stocks with the lowest price per share of the Dow
10 as of the close of business on or about the second last business day of the
month.
PERFORMANCE AS OF DECEMBER 31, 1999
TOTAL RETURN:
<TABLE>
<S> <C>
October
Since inception (10/1/99) -14.70%
</TABLE>
Returns represent past performance, which is no guarantee of future results.
Investment return and principal value will vary so that shares, when redeemed,
may be worth more or less than their original cost. Actual results for variable
annuity and variable universal life contracts will be lower due to contract
charges. Consult your contract for applicable charges for mortality and
expenses.
<TABLE>
<CAPTION>
OCTOBER 5 (10/1/99) DJIA (3 MONTH)
- ------------------- --------------
<S> <C>
- -14.7% 12.31%
</TABLE>
COMMENTS
Since its inception on 10/1/99, the Dow(SM) Target 5 October portfolio lost
14.70% versus a gain of 12.31% for the Dow Jones Industrial Average. E. I. Du
Pont de Nemours and Co. was the best performing stock for the 3-month period
while The Goodyear Tire & Rubber Co. lost the most ground.
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE %
- ---------------------------------------------------------------
<C> <S> <C> <C>
1,162 Caterpillar Inc. (3)................ $ 54,687 20.2
1,047 E.I. Du Pont de Nemours and Co.
(1)................................ 68,971 25.4
1,361 Goodyear Tire & Rubber (4).......... 38,363 14.1
1,843 Phillip Morris Companies Inc. (5)... 42,735 15.7
2,120 Sears, Roebuck & Co. (2)............ 64,528 23.8
-------- -----
TOTAL COMMON STOCK (COST
$314,798).......................... $269,284 99.2
======== =====
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS VALUE %
- ---------------------------------------------------------------
<C> <S> <C> <C>
$1,000 Firstar Bank 3.30% due 01/03/00
repurchase price $1,000
collateralized by GNMA certificates
pool# 8375 due 02/20/24 (cost
$1,000)............................ $ 1,000 0.4
-------- -----
TOTAL REPURCHASE AGREEMENTS (COST
$1,000)............................ $ 1,000 0.4
-------- -----
TOTAL HOLDINGS (COST $315,798)...... $270,284 99.6
-------- -----
CASH & RECEIVABLES, NET OF
LIABILITIES........................ 1,033 0.4
-------- -----
TOTAL NET ASSETS.................... $271,317 100.0
======== =====
</TABLE>
INDUSTRIES
<TABLE>
<C> <S> <C>
1. Chemicals
2. Retail
3. Machinery
4. Rubber and Tires
5. Tobacco
</TABLE>
16
<PAGE> 40
THE DOW(SM) TARGET VARIABLE FUND LLC
DOW(SM) TARGET 5 -- NOVEMBER PORTFOLIO
OBJECTIVE
The Dow(SM) Target 5 Portfolios seeks long-term capital growth and dividend
income by investing in common stocks in the Dow Industrial Average(SM). The
portfolios invest in the five stocks with the lowest price per share of the Dow
10 as of the close of business on or about the second last business day of the
month.
PERFORMANCE AS OF DECEMBER 31, 1999
TOTAL RETURN:
<TABLE>
<S> <C>
November
Since inception (11/1/99) -0.20%
</TABLE>
Returns represent past performance, which is no guarantee of future results.
Investment return and principal value will vary so that shares, when redeemed,
may be worth more or less than their original cost. Actual results for variable
annuity and variable universal life contracts will be lower due to contract
charges. Consult your contract for applicable charges for mortality and
expenses.
<TABLE>
<CAPTION>
NOVEMBER 5 (11/1/99) DJIA (2 MONTH)
- -------------------- --------------
<S> <C>
- -0.2% 8.3%
</TABLE>
COMMENTS
Since its inception on 11/1/99, the Dow(SM) Target 5 November portfolio lost
0.20% versus a gain of 8.30% for the Dow Jones Industrial Average. International
Paper Co. was the best performing stock for the 2-month period while Caterpillar
Inc. lost the most ground.
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE %
- ---------------------------------------------------------------
<C> <S> <C> <C>
849 AT&T Corp. (2)...................... $ 43,087 20.3
716 Caterpillar Inc. (3)................ 33,697 15.9
613 E.I. Du Pont de Nemours and Co.
(1)................................ 40,381 19.0
809 International Paper Company (4)..... 45,658 21.5
1,496 Phillip Morris Companies Inc. (5)... 34,689 16.4
-------- -----
TOTAL COMMON STOCK (COST
$199,742).......................... $197,512 93.1
======== =====
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS VALUE %
- ---------------------------------------------------------------
<C> <S> <C> <C>
$13,000 Firstar Bank 1.00% due 01/03/00
repurchase price $13,000
collateralized by GNMA
certificates pool# 8375 due
02/20/24 (cost $13,000)........... $ 13,000 6.1
-------- -----
TOTAL REPURCHASE AGREEMENTS (COST
$13,000).......................... $ 13,000 6.1
-------- -----
TOTAL HOLDINGS (COST $212,742)..... $210,512 99.2
-------- -----
CASH & RECEIVABLES, NET OF
LIABILITIES....................... 1,792 0.8
-------- -----
TOTAL NET ASSETS................... $212,304 100.0
======== =====
</TABLE>
INDUSTRIES
<TABLE>
<C> <S> <C>
1. Chemicals
2. Communications
3. Machinery
4. Paper & Related
5. Tobacco
</TABLE>
17
<PAGE> 41
THE DOW(SM) TARGET VARIABLE FUND LLC
DOW(SM) TARGET 5 -- DECEMBER PORTFOLIO
OBJECTIVE
The Dow(SM) Target 5 Portfolios seeks long-term capital growth and dividend
income by investing in common stocks in the Dow Industrial Average(SM). The
portfolios invest in the five stocks with the lowest price per share of the Dow
10 as of the close of business on or about the second last business day of the
month.
PERFORMANCE AS OF DECEMBER 31, 1999
TOTAL RETURN:
<TABLE>
<S> <C>
December
Since inception (12/1/99) 0.17%
</TABLE>
Returns represent past performance, which is no guarantee of future results.
Investment return and principal value will vary so that shares, when redeemed,
may be worth more or less than their original cost. Actual results for variable
annuity and variable universal life contracts will be lower due to contract
charges. Consult your contract for applicable charges for mortality and
expenses.
BAR CHART
<TABLE>
<CAPTION>
DECEMBER 5 (12/1/99) DJIA (1 MONTH)
- -------------------- --------------
<S> <C>
0.17% 4.64%
</TABLE>
COMMENTS
Since its inception on 12/1/99, the Dow(SM) Target 5 December portfolio gained
0.17% versus a gain of 4.64% for the Dow Jones Industrial Average. International
Paper Co. was the best performing stock for the month of December while
Caterpillar Inc. lost the most ground.
SCHEDULE OF INVESTMENTS DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCK VALUE %
- ---------------------------------------------------------------
<C> <S> <C> <C>
711 Caterpillar Inc. (3)................ $ 33,461 16.2
608 E.I. Du Pont de Nemours and Co.
(1)................................ 40,052 19.3
804 International Paper Company (4)..... 45,376 21.9
1,487 Phillip Morris Companies Inc. (5)... 34,480 16.6
869 SBC Communications (2).............. 42,364 20.4
-------- -----
TOTAL COMMON STOCK (COST
$195,555).......................... $195,733 94.4
======== =====
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS VALUE %
- ---------------------------------------------------------------
<C> <S> <C> <C>
$11,000 Firstar Bank 1.00% due 01/03/00
repurchase price $11,000
collateralized by GNMA
certificates pool# 8375 due
02/20/24 (cost $11,000)......... $ 11,000 5.3
---------- -----
TOTAL REPURCHASE AGREEMENTS (COST
$11,000)........................ $ 11,000 5.3
---------- -----
TOTAL HOLDINGS (COST $206,555)... $ 206,733 99.7
---------- -----
CASH & RECEIVABLES, NET OF
LIABILITIES..................... 618 0.3
---------- -----
TOTAL NET ASSETS................. $ 207,351 100.0
========== =====
</TABLE>
INDUSTRIES
<TABLE>
<C> <S> <C>
1. Chemicals
2. Communications
3. Machinery
4. Paper & Related
5. Tobacco
</TABLE>
18
<PAGE> 42
THE DOW(SM) TARGET VARIABLE FUND LLC
STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1999
<TABLE>
<CAPTION>
PORTFOLIOS
-----------------------------------------------------------------------------------------
JANUARY(10)(a) FEBRUARY(10)(b) MARCH(10)(c) APRIL(10)(d) MAY(10)(e) JUNE(10)(f)
-------------- --------------- ------------ ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Investment in securities, at cost... $458,544 $1,115,814 $1,068,567 $1,627,680 $ 855,216 $1,344,941
======== ========== ========== ========== ========== ==========
Investments in securities at market
value (note 1).................... $456,112 $1,158,104 $1,017,128 $1,464,561 $ 725,460 $1,187,097
Cash in bank........................ 319 728 498 13 0 740
Receivable for fund interests
sold.............................. 0 0 0 0 0 0
Dividends & accrued interest
receivable........................ 1,201 2,882 2,877 3,985 2,741 3,370
Other............................... 5,396 2,233 0 122 118 92
-------- ---------- ---------- ---------- ---------- ----------
Total assets...................... 463,028 1,163,947 1,020,503 1,468,681 728,319 1,191,299
-------- ---------- ---------- ---------- ---------- ----------
Liabilities:
Cash overdraft...................... 0 0 0 0 7,759 0
Payable for securities purchased.... 0 0 0 0 0 30,058
Payable for fund interests
redeemed.......................... 10 143 54 208,290 91 57
Payable for investment management
services (note 3)................. 222 588 527 882 510 696
Other accrued expenses.............. 2,863 1,484 2,984 2,846 2,677 2,560
-------- ---------- ---------- ---------- ---------- ----------
Total liabilities................. 3,095 2,215 3,565 212,018 11,037 33,371
-------- ---------- ---------- ---------- ---------- ----------
Net assets at market value............ $459,933 $1,161,732 $1,016,938 $1,256,663 $ 717,282 $1,157,928
======== ========== ========== ========== ========== ==========
Net assets consist of:
Par value, $1 per membership
interest.......................... $ 45,846 $ 113,304 $ 104,377 $ 125,338 $ 86,318 $ 129,269
Paid-in capital in excess of par
value............................. 416,489 1,006,097 964,001 1,294,449 800,707 1,199,907
Accumulated net realized loss on
investments (note 1).............. 0 0 0 0 (39,982) (13,399)
Net unrealized appreciation
(depreciation) on investments
(note 1).......................... (2,432) 42,291 (51,438) (163,120) (129,756) (157,845)
Undistributed (overdistributed) net
investment income................. 30 40 (2) (4) (5) (4)
-------- ---------- ---------- ---------- ---------- ----------
Net assets at market value............ $459,933 $1,161,732 $1,016,938 $1,256,663 $ 717,282 $1,157,928
======== ========== ========== ========== ========== ==========
Membership interest outstanding (note
4).................................. 45,846 113,304 104,377 125,338 86,318 129,269
Net asset value per membership
interest............................ $ 10.03 $ 10.25 $ 9.74 $ 10.03 $ 8.31 $ 8.96
======== ========== ========== ========== ========== ==========
</TABLE>
- ---------------
(a) The inception date for this portfolio was January 4, 1999.
(b) The inception date for this portfolio was February 1, 1999.
(c) The inception date for this portfolio was March 1, 1999.
(d) The inception date for this portfolio was April 1, 1999.
(e) The inception date for this portfolio was May 3, 1999.
(f) The inception date for this portfolio was June 1, 1999.
The accompanying notes are an integral part of these financial statements.
19
<PAGE> 43
THE DOW(SM) TARGET VARIABLE FUND LLC
STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1999
<TABLE>
<CAPTION>
PORTFOLIOS
---------------------------------------------------------------------------------------------------
JULY(10)(g) AUGUST(10)(h) SEPTEMBER(10)(i) OCTOBER(10)(j) NOVEMBER(10)(k) DECEMBER(10)(i)
----------- ------------- ---------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Investment in securities,
at cost................. $1,130,749 $ 937,776 $1,604,271 $1,472,514 $1,386,123 $1,611,279
========== ========== ========== ========== ========== ==========
Investments in securities
at market value (note
1)...................... $1,003,363 $ 813,221 $1,471,574 $1,392,625 $1,381,411 $1,620,904
Cash in bank.............. 0 0 0 468 433 654
Receivable for fund
interests sold.......... 363 0 0 0 118 2,358
Dividends & accrued
interest receivable..... 2,894 3,156 5,167 5,396 4,524 1,129
Other..................... 152 1,517 664 436 596 491
---------- ---------- ---------- ---------- ---------- ----------
Total assets............ 1,006,772 817,894 1,477,405 1,398,925 1,387,082 1,625,536
---------- ---------- ---------- ---------- ---------- ----------
Liabilities:
Cash overdraft............ 13,703 8,696 6,337 0 0 0
Payable for securities
purchased............... 0 0 0 0 50,027 150,446
Payable for fund interests
redeemed................ 0 96 324 138 0 0
Payable for investment
management services
(note 3)................ 679 1,585 1,210 1,114 1,014 370
Other accrued expenses.... 2,415 2,295 1,892 1,519 1,279 739
---------- ---------- ---------- ---------- ---------- ----------
Total liabilities....... 16,797 12,672 9,763 2,771 52,320 151,555
---------- ---------- ---------- ---------- ---------- ----------
Net assets at market
value..................... $ 989,975 $ 805,222 $1,467,642 $1,396,154 $1,334,762 $1,473,981
========== ========== ========== ========== ========== ==========
Net assets consist of:
Par value, $1 per
membership interest..... $ 112,230 $ 90,721 $ 167,182 $ 151,684 $ 132,418 $ 147,257
Paid-in capital in excess
of par value............ 1,026,092 855,145 1,453,609 1,332,183 1,206,451 1,317,085
Accumulated net realized
loss on investments
(note 1)................ (20,953) (16,082) (20,491) (7,828) 0 0
Net unrealized
appreciation
(depreciation) on
investments (note 1).... (127,386) (124,555) (132,698) (79,889) (4,711) 9,625
Undistributed
(overdistributed) net
investment income....... (8) (7) 40 4 604 14
---------- ---------- ---------- ---------- ---------- ----------
Net assets at market
value..................... $ 989,975 $ 805,222 $1,467,642 $1,396,154 $1,334,762 $1,473,981
========== ========== ========== ========== ========== ==========
Membership interest
outstanding (note 4)...... 112,230 90,721 167,182 151,684 132,418 147,257
Net asset value per
membership interest....... $ 8.82 $ 8.88 $ 8.78 $ 9.20 $ 10.08 $ 10.01
========== ========== ========== ========== ========== ==========
</TABLE>
- ---------------
(g) The inception date for this portfolio was July 1, 1999.
(h) The inception date for this portfolio was August 2, 1999.
(i) The inception date for this portfolio was September 1, 1999.
(j) The inception date for this portfolio was October 1, 1999.
(k) The inception date for this portfolio was November 3, 1999.
(l) The inception date for this portfolio was December 1, 1999.
The accompanying notes are an integral part of these financial statements.
20
<PAGE> 44
THE DOW(SM) TARGET VARIABLE FUND LLC
STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1999
<TABLE>
<CAPTION>
PORTFOLIOS
-----------------------------------------------------------------
SEPTEMBER(5)(m) OCTOBER(5)(n) NOVEMBER(5)(o) DECEMBER(5)(p)
--------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Assets:
Investment in securities, at cost......................... $196,689 $315,798 $212,742 $206,555
======== ======== ======== ========
Investments in securities at market value (note 1)........ $156,168 $270,284 $210,512 $206,733
Cash in bank.............................................. 125 272 411 385
Receivable for fund interests sold........................ 0 0 785 0
Dividends & accrued interest receivable................... 728 1,372 905 363
Other..................................................... 1,873 1,171 638 300
-------- -------- -------- --------
Total assets............................................ 158,894 273,099 213,251 207,781
-------- -------- -------- --------
Liabilities:
Payable for fund interests redeemed....................... 6 14 0 11
Payable for investment management services (note 3)....... 290 388 185 71
Other accrued expenses.................................... 1,809 1,380 762 348
-------- -------- -------- --------
Total liabilities....................................... 2,105 1,782 947 430
-------- -------- -------- --------
Net assets at market value.................................. $156,789 $271,317 $212,304 $207,351
======== ======== ======== ========
Net assets consist of:
Par value, $1 per membership interest..................... $ 21,022 $ 32,037 $ 21,367 $ 20,741
Paid-in capital in excess of par value.................... 176,695 284,790 192,979 186,442
Accumulated net realized loss on investments (note 1)..... (445) 0 0 0
Net unrealized appreciation (depreciation) on investments
(note 1)................................................ (40,522) (45,514) (2,230) 177
Undistributed (overdistributed) net investment income..... 39 4 188 (9)
-------- -------- -------- --------
Net assets at market value.................................. $156,789 $271,317 $212,304 $207,351
======== ======== ======== ========
Membership interest outstanding (note 4).................... 21,022 32,037 21,367 20,741
Net asset value per membership interest..................... $ 7.46 $ 8.47 $ 9.94 $ 10.00
======== ======== ======== ========
</TABLE>
- ---------------
(m) The inception date for this portfolio was September 4, 1999.
(m) The inception date for this portfolio was October 1, 1999.
(o) The inception date for this portfolio was November 1, 1999.
(p) The inception date for this portfolio was December 1, 1999.
The accompanying notes are an integral part of these financial statements.
21
<PAGE> 45
THE DOW(SM) TARGET VARIABLE FUND LLC
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
PORTFOLIOS
-----------------------------------------------------------------------------------------------
JANUARY (10)(a) FEBRUARY (10)(b) MARCH (10)(c) APRIL (10)(d) MAY (10)(e) JUNE (10)(f)
--------------- ---------------- ------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Interest...................... $ 493 $ 1,191 $ 1,070 $ 1,352 $ 932 $ 958
Dividends..................... 14,441 33,872 28,524 35,240 17,535 20,885
------- ------- -------- --------- --------- ---------
Total investment income..... 14,934 35,063 29,594 36,592 18,467 21,843
------- ------- -------- --------- --------- ---------
Expenses:
Management fees (note 3)...... 3,173 7,711 6,569 7,658 3,639 4,625
Custodian fees (note 3)....... 3,142 2,725 2,326 1,925 1,729 1,493
Directors' fees (note 3)...... 557 1,575 1,474 1,356 547 530
Professional fees............. 1,057 849 779 706 633 520
Accounting fees............... 609 1,091 947 1,041 891 682
Printing, proxy, and postage
fees........................ 2,007 2,025 2,964 3,017 1,698 1,536
Other......................... 185 171 154 139 122 106
------- ------- -------- --------- --------- ---------
Total expenses.............. 10,730 16,147 15,213 15,842 9,259 9,492
------- ------- -------- --------- --------- ---------
Less expenses voluntarily
reduced or reimbursed..... (5,407) (2,242) 0 (130) (127) (98)
------- ------- -------- --------- --------- ---------
Net expenses................ 5,323 13,905 15,213 15,712 9,132 9,394
------- ------- -------- --------- --------- ---------
Net investment income....... $ 9,611 $21,158 $ 14,381 $ 20,880 $ 9,335 $ 12,449
------- ------- -------- --------- --------- ---------
Realized & unrealized gain
(loss) on investments:
Net realized gain (loss) from
investments................. $ 3,212 $28,842 $ 36,163 $ 17,873 $ (39,982) $ (13,399)
Net increase in unrealized
appreciation (depreciation)
on investments.............. (2,432) 42,291 (51,438) (163,120) (129,757) (157,845)
------- ------- -------- --------- --------- ---------
Net gain (loss) on
investments................. 780 71,133 (15,275) (145,247) (169,739) (171,244)
------- ------- -------- --------- --------- ---------
Net increase (decrease) in net
assets from operations...... $10,391 $92,291 $ (894) $(124,367) $(160,404) $(158,795)
======= ======= ======== ========= ========= =========
</TABLE>
- ---------------
(a) The inception date for this portfolio was January 4, 1999.
(b) The inception date for this portfolio was February 1, 1999.
(c) The inception date for this portfolio was March 1, 1999.
(d) The inception date for this portfolio was April 1, 1999.
(e) The inception date for this portfolio was May 3, 1999.
(f) The inception date for this portfolio was June 1, 1999.
The accompanying notes are an integral part of these financial statements.
22
<PAGE> 46
THE DOW(SM) TARGET VARIABLE FUND LLC
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
PORTFOLIOS
--------------------------------------------------------------------------------------
JULY (10)(g) AUGUST (10)(h) SEPTEMBER (10)(i) OCTOBER (10)(j) NOVEMBER (10)(k)
------------ -------------- ----------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Investment income:
Interest............................. $ 893 $ 786 $ 894 $ 730 $ 904
Dividends............................ 17,179 11,932 12,825 11,621 5,606
--------- --------- --------- -------- -------
Total investment income............ 18,072 12,718 13,719 12,351 6,510
--------- --------- --------- -------- -------
Expenses:
Management fees (note 3)............. 3,407 2,278 2,717 1,888 1,024
Custodian fees (note 3).............. 1,271 1,068 856 480 475
Directors' fees (note 3)............. 141 118 180 134 72
Professional fees.................... 451 377 306 235 122
Accounting fees...................... 562 375 403 278 186
Printing, proxy, and postage fees.... 1,049 1,033 678 530 403
Other................................ 88 70 57 42 22
--------- --------- --------- -------- -------
Total expenses..................... 6,969 5,319 5,197 3,587 2,304
--------- --------- --------- -------- -------
Less expenses voluntarily reduced
or reimbursed.................... (159) (1,522) (668) (440) (598)
--------- --------- --------- -------- -------
Net expenses....................... 6,810 3,797 4,529 3,147 1,706
--------- --------- --------- -------- -------
Net investment income.............. $ 11,262 $ 8,921 $ 9,190 $ 9,204 $ 4,804
--------- --------- --------- -------- -------
Realized & unrealized gain (loss) on
investments:
Net realized gain (loss) from
investments........................ $ (20,953) $ (16,082) $ (20,491) $ (7,828) $ 0
Net increase in unrealized
appreciation (depreciation) on
investments........................ (127,386) (124,555) (132,698) (79,889) (4,711)
--------- --------- --------- -------- -------
Net gain (loss) on investments....... (148,339) (140,637) (153,189) (87,717) (4,711)
--------- --------- --------- -------- -------
Net increase (decrease) in net assets
from operations.................... $(137,077) $(131,716) $(143,999) $(78,513) $ 93
========= ========= ========= ======== =======
<CAPTION>
PORTFOLIOS
----------------
DECEMBER (10)(l)
----------------
<S> <C>
Investment income:
Interest............................. $ 487
Dividends............................ 1,123
-------
Total investment income............ 1,610
-------
Expenses:
Management fees (note 3)............. 370
Custodian fees (note 3).............. 228
Directors' fees (note 3)............. 51
Professional fees.................... 51
Accounting fees...................... 84
Printing, proxy, and postage fees.... 317
Other................................ 8
-------
Total expenses..................... 1,109
-------
Less expenses voluntarily reduced
or reimbursed.................... (493)
-------
Net expenses....................... 616
-------
Net investment income.............. $ 994
-------
Realized & unrealized gain (loss) on
investments:
Net realized gain (loss) from
investments........................ $ 0
Net increase in unrealized
appreciation (depreciation) on
investments........................ 9,625
-------
Net gain (loss) on investments....... 9,625
-------
Net increase (decrease) in net assets
from operations.................... $10,619
=======
</TABLE>
- ---------------
(g) The inception date for this portfolio was July 1, 1999.
(h) The inception date for this portfolio was August 2, 1999.
(i) The inception date for this portfolio was September 1 , 1999.
(j) The inception date for this portfolio was October 1, 1999.
(k) The inception date for this portfolio was November 1, 1999.
(l) The inception date for this portfolio was December 1, 1999.
The accompanying notes are an integral part of these financial statements.
23
<PAGE> 47
THE DOW(SM) TARGET VARIABLE FUND LLC
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
PORTFOLIOS
---------------------------------------------------------------------
SEPTEMBER (5)(m) OCTOBER (5)(n) NOVEMBER (5)(o) DECEMBER (5)(p)
---------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Investment income:
Interest................................................ $ 99 $ 178 $ 173 $ 148
Dividends............................................... 1,723 2,374 1,224 362
-------- -------- ------- -----
Total investment income............................... 1,822 2,552 1,397 510
-------- -------- ------- -----
Expenses:
Management fees (note 3)................................ 290 388 185 71
Custodian fees (note 3)................................. 1,262 881 470 172
Directors' fees (note 3)................................ 115 73 40 34
Professional fees....................................... 226 156 82 52
Accounting fees......................................... 174 121 66 25
Printing, proxy, and postage fees....................... 238 164 86 56
Other................................................... 54 39 20 10
-------- -------- ------- -----
Total expenses........................................ 2,359 1,822 949 420
-------- -------- ------- -----
Less expenses voluntarily reduced or reimbursed....... (1,876) (1,174) (640) (301)
-------- -------- ------- -----
Net expenses.......................................... 483 648 309 119
-------- -------- ------- -----
Net investment income................................. $ 1,339 $ 1,904 $ 1,088 $ 391
-------- -------- ------- -----
Realized & unrealized gain (loss) on investments:
Net realized gain (loss) from investments............... $ (445) $ 0 $ 0 $ 0
Net increase in unrealized appreciation (depreciation)
on investments........................................ (40,522) (45,514) (2,230) 177
-------- -------- ------- -----
Net gain (loss) on investments.......................... (40,967) (45,514) (2,230) 177
-------- -------- ------- -----
Net increase (decrease) in net assets from operations... $(39,628) $(43,610) $(1,142) $ 568
======== ======== ======= =====
</TABLE>
- ---------------
(m) The inception date for this portfolio was September 1, 1999.
(n) The inception date for this portfolio was October 1, 1999.
(o) The inception date for this portfolio was November 1, 1999
(p) The inception date for this portfolio was December 1, 1999.
The accompanying notes are an integral part of these financial statements.
24
<PAGE> 48
THE DOW(SM) TARGET VARIABLE FUND LLC
STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
PORTFOLIOS
----------------------------------------------------------------------------------------------------
JANUARY (10)(b) FEBRUARY (10)(c) MARCH (10)(d) APRIL (10)(e) MAY (10)(f) JUNE (10)(g)
--------------- ---------------- ------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
From operations:
Net investment income.... $ 9,611 $ 21,158 $ 14,381 $ 20,880 $ 9,335 $ 12,449
Realized gain (loss) on
investments............ 3,212 28,842 36,163 17,873 (39,982) (13,399)
Unrealized appreciation
(depreciation) on
investments............ (2,432) 42,291 (51,438) (163,120) (129,757) (157,845)
---------- ---------- ---------- ---------- ---------- ----------
Net increase
(decrease) in
net assets from
operations...... 10,391 92,291 (894) (124,367) (160,404) (158,795)
---------- ---------- ---------- ---------- ---------- ----------
Dividends and
distributions to
shareholders:
Dividends paid from net
investment income.... (9,581) (21,118) (14,383) (20,884) (9,340) (12,453)
Capital gains
distributions........ (3,212) (28,842) (36,163) (17,873) 0 0
---------- ---------- ---------- ---------- ---------- ----------
Total dividends
and
distributions... (12,793) (49,960) (50,546) (38,757) (9,340) (12,453)
---------- ---------- ---------- ---------- ---------- ----------
From capital share
transactions (note 4):
Received from shares
sold................... 565,912 1,550,427 1,583,033 2,101,632 1,180,871 1,569,222
Received from dividends
reinvested............. 12,793 49,960 50,545 38,758 9,341 12,453
Paid for shares
redeemed............... (116,370) (480,986) (565,200) (720,603) (303,186) (252,499)
---------- ---------- ---------- ---------- ---------- ----------
Increase in net
assets derived
from capital
share
transactions.... 462,335 1,119,401 1,068,378 1,419,787 887,026 1,329,176
---------- ---------- ---------- ---------- ---------- ----------
Increase in net
assets.......... 459,933 1,161,732 1,016,938 1,256,663 717,282 1,157,928
Net Assets:
Beginning of period...... 0 0 0 0 0 0
---------- ---------- ---------- ---------- ---------- ----------
End of period (a)........ $ 459,933 $1,161,732 $1,016,938 $1,256,663 $ 717,282 $1,157,928
========== ========== ========== ========== ========== ==========
(a) Includes undistributed
net investment income
of....................... $ 30 $ 40 $ 0 $ 0 $ 0 $ 0
========== ========== ========== ========== ========== ==========
</TABLE>
- ---------------
(b) The inception date for this portfolio was January 4, 1999.
(c) The inception date for this portfolio was February 1, 1999.
(d) The inception date for this portfolio was March 1, 1999.
(e) The inception date for this portfolio was April 1, 1999.
(f) The inception date for this portfolio was May 3, 1999.
(g) The inception date for this portfolio was June 1, 1999.
The accompanying notes are an integral part of these financial statements.
25
<PAGE> 49
THE DOW(SM) TARGET VARIABLE FUND LLC
STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
PORTFOLIOS
--------------------------------------------------------------------------------------
JULY (10)(h) AUGUST (10)(i) SEPTEMBER (10)(j) OCTOBER (10)(k) NOVEMBER (10)(l)
------------ -------------- ----------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
From operations:
Net investment income.................. $ 11,262 $ 8,921 $ 9,190 $ 9,204 $ 4,804
Realized gain (loss) on investments.... (20,953) (16,082) (20,491) (7,828) 0
Unrealized appreciation (depreciation)
on investments....................... (127,386) (124,555) (132,698) (79,889) (4,711)
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net
assets from operations........ (137,077) (131,716) (143,999) (78,513) 93
---------- ---------- ---------- ---------- ----------
Dividends and distributions to
shareholders:
Dividends paid from net investment
income............................. (11,270) (8,928) (9,150) (9,200) (4,200)
Capital gains distributions.......... 0 0 0 0 0
---------- ---------- ---------- ---------- ----------
Total dividends and
distributions................. (11,270) (8,928) (9,150) (9,200) (4,200)
---------- ---------- ---------- ---------- ----------
From capital share transactions (note 4):
Received from shares sold.............. 1,454,117 1,253,944 1,866,547 1,743,037 1,560,226
Received from dividends reinvested..... 11,270 8,928 9,150 9,200 4,200
Paid for shares redeemed............... (327,065) (317,006) (254,906) (268,370) (225,557)
---------- ---------- ---------- ---------- ----------
Increase in net assets derived
from capital share
transactions.................. 1,138,322 945,866 1,620,791 1,483,867 1,338,869
---------- ---------- ---------- ---------- ----------
Increase in net assets.......... 989,975 805,222 1,467,642 1,396,154 1,334,762
Net Assets:
Beginning of period.................... 0 0 0 0 0
---------- ---------- ---------- ---------- ----------
End of period (a)...................... $ 989,975 $ 805,222 $1,467,642 $1,396,154 $1,334,762
========== ========== ========== ========== ==========
(a) Includes undistributed net investment
income of.............................. $ 0 $ 0 $ 40 $ 4 $ 604
========== ========== ========== ========== ==========
<CAPTION>
PORTFOLIOS
----------------
DECEMBER (10)(m)
----------------
<S> <C>
From operations:
Net investment income.................. $ 994
Realized gain (loss) on investments.... 0
Unrealized appreciation (depreciation)
on investments....................... 9,625
----------
Net increase (decrease) in net
assets from operations........ 10,619
----------
Dividends and distributions to
shareholders:
Dividends paid from net investment
income............................. (980)
Capital gains distributions.......... 0
----------
Total dividends and
distributions................. (980)
----------
From capital share transactions (note 4):
Received from shares sold.............. 1,501,592
Received from dividends reinvested..... 980
Paid for shares redeemed............... (38,230)
----------
Increase in net assets derived
from capital share
transactions.................. 1,464,342
----------
Increase in net assets.......... 1,473,981
Net Assets:
Beginning of period.................... 0
----------
End of period (a)...................... $1,473,981
==========
(a) Includes undistributed net investment
income of.............................. $ 14
==========
</TABLE>
- ---------------
(h) The inception date for this portfolio was July 1, 1999.
(i) The inception date for this portfolio was August 2, 1999.
(j) The inception date for this portfolio was September 1 , 1999 .
(k) The inception date for this portfolio was October 1, 1999.
(l) The inception date for this portfolio was November 1, 1999.
(m) The inception date for this portfolio was December 1, 1999.
The accompanying notes are an integral part of these financial statements.
26
<PAGE> 50
THE DOW(SM) TARGET VARIABLE FUND LLC
STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
PORTFOLIOS
---------------------------------------------------------------------
SEPTEMBER (5)(n) OCTOBER (5)(o) NOVEMBER (5)(p) DECEMBER (5)(q)
---------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
From operations:
Net investment income.................. $ 1,339 $ 1,904 $ 1,088 $ 391
Realized gain (loss) on investments.... (445) 0 0 0
Unrealized appreciation (depreciation)
on investments....................... (40,522) (45,514) (2,230) 177
---------- ---------- ---------- ----------
Net increase (decrease) in net
assets from operations........ (39,628) (43,610) (1,142) 568
---------- ---------- ---------- ----------
Dividends and distributions to
shareholders:
Dividends paid from net investment
income............................. (1,300) (1,900) (900) (400)
---------- ---------- ---------- ----------
Total dividends and
distributions................. (1,300) (1,900) (900) (400)
---------- ---------- ---------- ----------
From capital share transactions (note 4):
Received from shares sold.............. 197,139 315,470 216,296 206,807
Received from dividends reinvested..... 1,300 1,900 900 400
Paid for shares redeemed............... (722) (543) (2,850) (24)
---------- ---------- ---------- ----------
Increase in net assets derived
from capital share
transactions.................. 197,717 316,827 214,346 207,183
---------- ---------- ---------- ----------
Increase in net assets.......... 156,789 271,317 212,304 207,351
Net Assets:
Beginning of period.................... 0 0 0 0
---------- ---------- ---------- ----------
End of period (a)...................... $ 156,789 $ 271,317 $ 212,304 $ 207,351
========== ========== ========== ==========
(a) Includes undistributed net investment
income of.............................. $ 39 $ 4 $ 188 $ 0
========== ========== ========== ==========
</TABLE>
- ---------------
(n) The inception date for this portfolio was September 1 , 1999.
(o) The inception date for this portfolio was October 1, 1999.
(p) The inception date for this portfolio was November 1, 1999.
(q) The inception date for this portfolio was December 1, 1999.
The accompanying notes are an integral part of these financial statements.
27
<PAGE> 51
THE DOW(SM) TARGET VARIABLE FUND LLC
FINANCIAL HIGHLIGHTS FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
PORTFOLIOS
------------------------------------------------------------------------------------------------
JANUARY (10)(d) FEBRUARY (10)(e) MARCH (10)(f) APRIL (10)(g) MAY (10)(h) JUNE (10)(i)
--------------- ---------------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Per membership interest data:
Net asset value, beginning of
period....................... $10.00 $10.00 $10.00 $10.00 $10.00 $10.00
Income (loss) from investment
operations:
Net investment income........ 0.19 0.17 0.12 0.13 0.09 0.09
Net realized & unrealized
gain (loss) on
investments................ 0.09 0.47 0.04 0.14 (1.69) (1.04)
------ ------ ------ ------ ------ ------
Total income (loss)
from investment
operations.......... 0.28 0.64 0.16 0.27 (1.60) (0.95)
------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net investment
income..................... (0.19) (0.16) (0.12) (0.13) (0.09) (0.09)
Distributions from net
realized capital gains..... (0.06) (0.23) (0.30) (0.11) 0.00 0.00
------ ------ ------ ------ ------ ------
Total distributions... (0.25) (0.39) (0.42) (0.24) (0.09) (0.09)
------ ------ ------ ------ ------ ------
Net asset value, end of
period....................... $10.03 $10.25 $ 9.74 $10.03 $ 8.31 $ 8.96
====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
12 MONTHS 11 MONTHS 10 MONTHS 9 MONTHS 8 MONTHS 7 MONTHS
--------------- ---------------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Total return (b)............... 2.88% 6.37% 1.96% 2.50% (16.14%) (9.57%)
Ratios net of fees reimbursed
by advisor (c):
Ratio of expenses to average
net assets (a)............. 0.99% 1.07% 1.38% 1.17% 1.50% 1.18%
Ratio of net investment
income to average net
assets(a).................. 1.79% 1.63% 1.31% 1.55% 1.54% 1.57%
Ratio assuming no fees
reimbursed by advisor:
Ratio of expenses to average
net assets (a)............. 1.99% 1.24% 1.38% 1.18% 1.52% 1.19%
Portfolio turnover rate........ 20% 25% 39% 25% 29% 14%
Net assets at end of period
(millions)................... $ 0.5 $ 1.2 $ 1.0 $ 1.3 $ 0.7 $ 1.2
</TABLE>
- ---------------
(a) Annualized.
(b) Calculated on an aggregate basis (not annualized).
(c) The advisor has reimbursed certain operating expenses for all portfolios
except for the March portfolio.
(d) The inception date for this portfolio was January 4, 1999.
(e) The inception date for this portfolio was February 1, 1999.
(f) The inception date for this portfolio was March 1, 1999.
(g) The inception date for this portfolio was April 1, 1999.
(h) The inception date for this portfolio was May 3, 1999.
(i) The inception date for this portfolio was June 1, 1999
The accompanying notes are an integral part of these financial statements.
28
<PAGE> 52
THE DOW(SM) TARGET VARIABLE FUND LLC
FINANCIAL HIGHLIGHTS FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
PORTFOLIOS
--------------------------------------------------------------------------------------
JULY (10)(j) AUGUST (10)(k) SEPTEMBER (10)(l) OCTOBER (10)(m) NOVEMBER (10)(n)
------------ -------------- ----------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Per membership interest data:
Net asset value, beginning of period... $10.00 $10.00 $10.00 $10.00 $10.00
Income (loss) from investment
operations:
Net investment income................ 0.09 0.09 0.05 0.06 0.03
Net realized & unrealized gain (loss)
on investments..................... (1.18) (1.12) (1.22) (0.80) 0.08
------ ------ ------ ------ ------
Total Income (loss) from
Investment operations....... (1.09) (1.03) (1.17) (0.74) 0.11
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment
income............................. (0.09) (0.09) (0.05) (0.06) (0.03)
Distributions from net realized
capital gains...................... 0.00 0.00 0.00 0.00 0.00
------ ------ ------ ------ ------
Total distributions........... (0.09) (0.09) (0.05) (0.06) (0.03)
------ ------ ------ ------ ------
Net asset value, end of period......... $ 8.82 $ 8.88 $ 8.78 $ 9.20 $10.08
====== ====== ====== ====== ======
<CAPTION>
PORTFOLIOS
----------------
DECEMBER (10)(o)
----------------
<S> <C>
Per membership interest data:
Net asset value, beginning of period... $10.00
Income (loss) from investment
operations:
Net investment income................ 0.01
Net realized & unrealized gain (loss)
on investments..................... 0.01
------
Total Income (loss) from
Investment operations....... 0.02
------
Less distributions:
Dividends from net investment
income............................. (0.01)
Distributions from net realized
capital gains...................... 0.00
------
Total distributions........... (0.01)
------
Net asset value, end of period......... $10.01
======
</TABLE>
<TABLE>
<CAPTION>
6 MONTH 5 MONTH 4 MONTH 3 MONTH 2 MONTH
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Total return (b)....................... (10.90%) (10.37%) (11.65%) (7.33%) 1.13%
Ratios net of fees reimbursed by
advisor (c):
Ratio of expenses to average net
assets (a)......................... 1.14% 0.94% 0.88% 0.85% 0.73%
Ratio of net investment income to
average net assets(a).............. 1.88% 2.21% 1.80% 2.50% 2.05%
Ratio assuming no fees reimbursed by
advisor:
Ratio of expenses to average net
assets (a)......................... 1.16% 1.32% 1.02% 0.97% 0.99%
Portfolio turnover rate................ 20% 21% 12% 14% 0%
Net assets at end of period
(millions)........................... $ 1.0 $ 0.8 $ 1.5 $ 1.4 $ 1.3
<CAPTION>
1 MONTH
-------
<S> <C>
Total return (b)....................... 0.17%
Ratios net of fees reimbursed by
advisor (c):
Ratio of expenses to average net
assets (a)......................... 0.50%
Ratio of net investment income to
average net assets(a).............. 0.81%
Ratio assuming no fees reimbursed by
advisor:
Ratio of expenses to average net
assets (a)......................... 0.90%
Portfolio turnover rate................ 0%
Net assets at end of period
(millions)........................... $ 1.5
</TABLE>
- ---------------
(a) Annualized.
(b) Calculated on an aggregate basis (not annualized).
(j) The inception date for this portfolio was July 1, 1999.
(k) The inception date for this portfolio was August 2, 1999.
(l) The inception date for this portfolio was September 1 , 1999.
(m) The inception date for this portfolio was October 1, 1999.
(n) The inception date for this portfolio was November 1, 1999.
(o) The inception date for this portfolio was December 1, 1999.
The accompanying notes are an integral part of these financial statements.
29
<PAGE> 53
THE DOW(SM) TARGET VARIABLE FUND LLC
FINANCIAL HIGHLIGHTS FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
SEPTEMBER (5)(p) OCTOBER (5)(q) NOVEMBER (5)(r) DECEMBER (5)(s)
---------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Per membership interest data:
Net asset value, beginning of period...................... $10.00 $10.00 $10.00 $10.00
Income (loss) from investment operations:
Net investment income................................... 0.07 0.06 0.05 0.02
Net realized & unrealized loss on investments........... (2.54) (1.53) (0.07) 0.00
------ ------ ------ ------
Total income (loss) from investment operations... (2.47) (1.47) (0.02) 0.02
------ ------ ------ ------
Less distributions:
Dividends from net investment income.................... (0.07) (0.06) (0.04) (0.02)
------ ------ ------ ------
Total distributions.............................. (0.07) (0.06) (0.04) (0.02)
------ ------ ------ ------
Net asset value, end of period............................ $ 7.46 $ 8.47 $ 9.94 $10.00
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
4 MONTH 3 MONTH 2 MONTH 1 MONTH
------- ------- ------- -------
<S> <C> <C> <C> <C>
Total return (b).......................................... (24.78%) (14.70%) (0.20%) 0.17%
Ratios net of fees reimbursed by advisor (c):
Ratio of expenses to average net assets (a)............. 0.98% 0.92% 0.90% 0.69%
Ratio of net investment income to average net assets
(a)................................................... 2.72% 2.72% 3.16% 2.27%
Ratio assuming no fees reimbursed by advisor:
Ratio of expenses to average net assets (a)............. 4.79% 2.60% 2.75% 2.43%
Portfolio turnover rate................................... 1% 0% 0% 0%
Net assets at end of period (millions).................... $ 0.2 $ 0.3 $ 0.2 $ 0.2
</TABLE>
- ---------------
(a) Annualized.
(b) Calculated on an aggregate basis (not annualized).
(c) The advisor has reimbursed certain operating expenses for all portfolios
except for the March portfolio.
(p) The inception date for this portfolio was September 1 , 1999.
(q) The inception date for this portfolio was October 1, 1999.
(r) The inception date for this portfolio was November 1, 1999.
(s) The inception date for this portfolio was December 1, 1999.
The accompanying notes are an integral part of these financial statements.
30
<PAGE> 54
THE DOW(SM) TARGET VARIABLE FUND LLC December 31, 1999
NOTES TO FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The Dow(SM) Target Variable Fund LLC is registered under the Investment
Company Act of 1940 as amended (the "1940 Act"), as a non-diversified,
open-end management investment company. It's "Dow 10" portfolios are twelve
non-diversified portfolios of the common stock of the ten companies in the
Dow Jones Industrial Average(SM) (the "Dow") having the highest dividend
yield as of the close of business on or about the last business day prior to
the beginning of each portfolio's annual term. Its "Dow 5" portfolios are
twelve non-diversified portfolios of commons 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 is a limited liability company created under Ohio law. Its interest
are owned entirely by variable annuity separate accounts of The Ohio National
Life Insurance Company ("ONLI"). Fund interests are not offered directly to
the public. Fund interests are purchased by ONLI's separate accounts as an
investment option for their variable annuity contracts.
The following is a summary of significant accounting policies:
Dividends representing new investment income are normally distributed
quarterly. Any net realized capital gains are normally distributed annually.
However, the Board may declare dividends more often. Dividends and
distributions are automatically reinvested in additional interests in the
respective portfolios at net asset value without a sales charge.
Fund interests are sold to ONLI's variable annuity separate accounts without
a sales charge. They may be redeemed at their net asset value next computed
after the Fund receives a purchase or redemption order. The value of Fund
interests is based on the market value of the stocks and any other cash or
securities owned by each portfolio. This determination is made as of 4:00
p.m. Eastern time on each business day on which an order for purchase or
redemption is received and there is enough trading in portfolio securities to
materially affect the current net asset value of Fund interests. That is
normally each weekday (Monday through Friday) except for New Years Day,
Presidents Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas. The net asset value of each portfolio is
computed by dividing the value of that portfolio's securities plus any cash
or other assets, less the portfolio's liabilities, by the number of portfolio
interests outstanding.
Each portfolio may acquire repurchase agreements from member banks of the
Federal Reserve System which the Fund deems creditworthy under guidelines
approved by the Board of Managers, subject to the seller's agreement to
repurchase such securities at a mutually agreed upon date and price. The
repurchase price generally equals the price paid by the portfolio plus
interest negotiated on the basis of current short-term rates, which may be
more or less than the rate on the underlying portfolio securities. The
seller, under a repurchase agreement, is required to maintain as collateral
for the repurchase transaction securities in which the portfolio has a
perfected security interest with a value not less than 100% of the repurchase
price (including accrued interest). Securities subject to repurchase
agreements are held by the Fund's custodian or another qualified custodian or
in the Federal Reserve/Treasury book-entry system. Repurchase agreements are
considered to be loans by the portfolio under the 1940 Act.
The fund is a single member limited liability company taxed as a division of
the separate accounts of ONLI. Income and losses of the fund are included in
the taxable income or loss of the separate accounts of ONLI. Accordingly, no
provision for Federal income taxes has been made by the fund.
Expenses directly attributable to a portfolio are charged to that portfolio.
Expenses not directly attributed to a portfolio are allocated on the basis of
relative net assets.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of increases and decreases in net assets from operations
during the reporting period. Actual results could differ from those
estimates.
(continued)
31
<PAGE> 55
THE DOW(SM) TARGET VARIABLE FUND LLC December 31, 1999
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The gross unrealized appreciation and depreciation on investments in each
portfolio as of December 31, 1999 were as follows:
<TABLE>
<CAPTION>
JAN.(10) FEB.(10) MARCH(10) APRIL(10) MAY(10) JUNE(10)
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Gross unrealized:
Appreciation........................ .$ 44,643 $ 133,277 $ 48,873 $ 41,224 $ 13,542 $ 28,931
Depreciation........................ (47,076) (90,986) (100,312) (204,344) (143,298) (186,775)
Net Unrealized:
Appreciation (Depreciation)......... (2,432) 42,291 (51,438) (163,120) (129,756) (157,845)
</TABLE>
<TABLE>
<CAPTION>
JULY(10) AUG.(10) SEPT.(10) OCT.(10) NOV.(10) DEC.(10)
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Gross unrealized:
Appreciation........................ $ 24,589 $ 14,099 $ 43,025 $ 39,978 $ 30,214 $ 30,145
Depreciation........................ (151,975) (138,655) (175,723) (119,867) (34,925) (20,521)
Net Unrealized:
Appreciation (Depreciation)......... (127,386) (124,555) (132,698) (79,889) (4,711) 9,625
</TABLE>
<TABLE>
<CAPTION>
SEPT.(5) OCT.(5) NOV.(5) DEC.(5)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Gross unrealized:
Appreciation........................ $ 4,319 $ 2,741 $ 5,165 $ 4,208
Depreciation........................ (44,841) (48,256) (7,395) (4,031)
Net Unrealized:
Appreciation (Depreciation)......... (40,522) (45,514) (2,230) 177
</TABLE>
(2) INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term
securities) for the year ended December 31, 1999 were as follows:
<TABLE>
<CAPTION>
JAN.(10) FEB.(10) MARCH(10) APRIL(10) MAY(10) JUNE(10)
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Stocks
Purchases........................... $ 554,871 $1,421,147 $1,521,310 $2,006,645 $1,153,737 $1,536,868
Sales............................... 105,538 343,175 508,905 432,838 258,540 183,528
</TABLE>
<TABLE>
<CAPTION>
JULY(10) AUG.(10) SEPT.(10) OCT.(10) NOV.(10) DEC.(10)
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Stocks
Purchases........................... $1,393,086 $1,137,494 $1,810,469 $1,646,362 $1,314,123 $1,419,279
Sales............................... 241,384 183,635 185,706 200,020 0 0
</TABLE>
<TABLE>
<CAPTION>
SEPT.(5) OCT.(5) NOV.(5) DEC.(5)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Stocks
Purchases........................... $ 193,126 $ 314,798 $ 199,742 $ 195,555
Sales............................... 1,992 0 0 0
</TABLE>
(3) INVESTMENT ADVISORY AGREEMENT, SUB-ADVISORY AGREEMENTS AND TRANSACTIONS WITH
AFFILIATED PERSONS
The Fund's day-to-day investment management is the responsibility of its
investment adviser, Ohio National Investments, Inc. (the "Adviser"). The
Adviser is an Ohio corporation. It is a wholly owned subsidiary of ONLI and
its address is the same as those of the Fund and ONI. The Adviser and its
predecessors have been managing investment companies since 1970. All of the
Adviser's investment advisory personnel are also responsible for the
management of ONLI's assets.
(continued)
32
<PAGE> 56
THE DOW(SM) TARGET VARIABLE FUND LLC December 31, 1999
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
For managing the Fund's assets, the Adviser receives a monthly management fee
based on the Fund's total net assets. This fee is calculated daily and is at
the annual rate of 0.60% of total net assets.
In addition to the fee paid to the Adviser, the Fund incurs other
miscellaneous expenses for legal and accounting services, registration and
filing fees, custodial services and shareholder services.
The Adviser contracts with First Trust Advisors LP ("First Trust") to serve
as sub-adviser to the Fund. First Trust manages the Fund's assets under the
Adviser's supervision. First Trust, an investment adviser to financial
institutions, is located at 1001 Warrenville Road in Lisle, Illinois. First
Trust has been managing Dow 10 strategies in unit investment trusts and other
investment companies since 1991.
First Trust has been granted a license by Dow Jones & Company, Inc. to use
certain copyright, trademark and proprietary rights and trade secrets of Dow
Jones. The Fund and ONLI have entered into agreements with First Trust giving
the Fund and ONLI permission to use and refer to the Dow Jones marks and
rights in connection with the Fund and ONLI's separate accounts.
For the service and rights provided by First Trust, the Adviser pays First
Trust a monthly sub-advisory fee based on the Fund's total net assets. This
fee is calculated daily and is at the annual rate of 0.35% of the Fund's
average daily assets.
The Fund's transfer agent and accounting agent is American Data Services,
Inc., 150 Motor Parkway, Hauppauge, New York. The Fund's custodian is Firstar
Bank, 425 Walnut Street, Cincinnati, Ohio.
(4) FUND INTERESTS
Fund interests transactions for the year ended December 31, 1999 are as
follows:
<TABLE>
<CAPTION>
JAN.(10) FEB.(10) MARCH(10) APRIL(10) MAY(10) JUNE(10)
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Capital shares issued on sales........ 55,645 153,255 151,374 191,129 120,137 155,026
Capital shares issued on Reinvested
dividends........................ 1,271 4,788 5,111 3,779 1,066 1,356
Capital shares redeemed............. 11,069 44,739 52,108 69,571 34,885 27,113
</TABLE>
<TABLE>
<CAPTION>
JULY(10) AUG.(10) SEPT.(10) OCT.(10) NOV.(10) DEC.(10)
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Capital shares issued on sales........ 146,290 123,810 194,228 178,588 154,314 151,006
Capital shares issued on Reinvested
dividends........................ 1,252 987 1,062 1,019 422 99
Capital shares redeemed............. 35,311 34,076 28,109 27,923 22,318 3,848
</TABLE>
<TABLE>
<CAPTION>
SEPT.(5) OCT.(5) NOV.(5) DEC.(5)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Capital shares issued on sales........ 20,926 31,866 21,561 20,703
Capital shares issued on Reinvested
dividends........................ 179 232 92 40
Capital shares redeemed............. 83 61 287 2
</TABLE>
33
<PAGE> 57
THE DOW(SM) TARGET VARIABLE FUND LLC
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
Dow(SM) Target Variable Fund LLC:
We have audited the accompanying statements of assets and liabilities of Dow(SM)
Target Variable Fund LLC. -- Dow 10 January, Dow 10 February, Dow 10 March, Dow
10 April, Dow 10 May, Dow 10 June, Dow 10 July, Dow 10 August, Dow 10 September,
Dow 10 October, Dow 10 November, Dow 10 December, Dow 5 September, Dow 5
October, Dow 5 November, Dow 5 December (collectively, the Funds), including the
schedules of investments, as of December 31, 1999 and the related statements of
operations, statements of changes in net assets and the financial highlights for
the periods indicated herein. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
verification of securities owned as of December 31, 1999, by confirmation with
the custodians and brokers and other appropriate audit procedures. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Funds at December 31, 1999, the results of their operations, the changes in
their net assets and the financial highlights for the periods indicated herein,
in conformity with generally accepted accounting principles.
KPMG LLP
Cincinnati, Ohio
February 11, 2000
34
<PAGE> 58
Part C
Other Information
<PAGE> 59
PART C: OTHER INFORMATION
Financial Statements
The following audited financial statements are included in Part B of this
registration statement:
Statements of Assets and Liabilities as of December 31, 1999
Statements of Operations for the Year or Periods ended December 31, 1999
Statements of Changes in Net Assets for the Year or Periods ended December
31, 1999
Schedules of Investments at December 31, 1999
Notes to Financial Statements for December 31, 1999
Independent Auditors' Report of KPMG LLP dated February 11, 2000
The following audited financial information is included in Part A of this
registration statement:
Financial Highlights for the Year or Periods ended December 31, 1999
Written consents of the following persons:
KPMG LLP
Ronald L. Benedict, Esq. as Legal Counsel to the registrant
Jones & Blouch L.L.P. as Legal Counsel to the registrant
Exhibits:
(d)(1) Sub-Advisory Agreement, effective April 3, 2000, between Ohio National
Investments, Inc. and First Trust Advisors L.P.
(p) The registrant's Code of Ethics
All other 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> 60
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 April 5, 2000, ONLI
(through its separate accounts) owned 89.4% of the voting securities of Ohio
National Fund, Inc. ("ONF"). The remaining 10.6% of the voting securities of ONF
were owned by ONLAC (through its separate account). On April 5, 2000, ONLI owned
49.6% 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 and Subadviser
Information related to the registrant's investment adviser (Ohio National
Investments, Inc.) and the subadviser (First Trust Advisors L.P.) is contained
in the registration statement currently on file with the Commission for each
entity on Form ADV and is incorporated herein by reference. The file numbers of
those registrations are:
Ohio National Investments, Inc. File No. 801-51396
First Trust Advisors L.P. File No. 801-39950
<PAGE> 61
Principal Underwriters
None
<PAGE> 62
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> 63
(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> 64
Signatures
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the registrant certifies that it meets the requirements of
Securities Act Rule 485(b) for effectiveness of this registration statement and
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 25th day of April, 2000.
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 April 25, 2000
------------------ (Principal Executive Officer)
John J. Palmer
/s/ DENNIS R. TANEY Treasurer (Principal Financial April 25, 2000
------------------- and Accounting Officer)
Dennis R. Taney
/s/ RONALD L. BENEDICT Manager April 25, 2000
----------------------
Ronald L. Benedict
/s/ JAMES E. BUSHMAN Manager April 25, 2000
-----------------------
James E. Bushman
/s/ ROSS LOVE Manager April 25, 2000
-------------
Ross Love
/s/ GEORGE M. VREDEVELD Manager April 25, 2000
-----------------------
George M. Vredeveld
</TABLE>
<PAGE> 65
Exhibit Index
Exhibit Description
- ------- -----------
Consent of KPMG LLP
Consent of Ronald L. Benedict, Esq.
Consent of Jones & Blouch L.L.P.
(d)(1) Sub-Advisory Agreement, effective April 3, 2000, between Ohio
National Investments, Inc. and First Trust Advisors L.P.
(p) The registrant's Code of Ethics
<PAGE> 66
Jones & Blouch L.L.P.
Suite 410-East
1025 Thomas Jefferson St., N.W.
Washington, DC 20007
(202) 223-3500
April 25, 2000
Board of Directors
Ohio National Fund, Inc.
One Financial Way
Cincinnati, OH 45242
Re: Dow Target Variable Fund LLC
Registration Statement on Form N-1A
File No. 333-64349
-----------------------------------
Dear Sirs:
We hereby consent to the reference to this firm under the caption "Legal
Counsel" in the Statement of Additional Information included in Post-Effective
Amendment No. 2 under the Securities Act of 1933 to the Registration Statement
for Dow Target Variable Fund LLC (File No. 333-64349).
Very truly yours,
/s/ JONES & BLOUCH L.L.P.
--------------------
Jones & Blouch L.L.P.
<PAGE> 67
INDEPENDENT AUDITORS' CONSENT
We consent to the use of our report for the Dow Target Variable Fund LLC dated
February 11, 2000 and to the use of our name under the heading "Financial
Highlights of Dow Target Variable Fund LLC" in the Prospectus and "Experts" in
the Statement of Additional Information in Post-Effective Amendment No. 2 to
File No. 333-64349.
/s/ KPMG LLP
April 25, 2000
Cincinnati, Ohio
<PAGE> 1
Exhibit (p)
DOW TARGET VARIABLE FUND LLC
CODE OF ETHICS
L. DEFINITIONS
(a) "Access Person" means any director, officer or Advisory Person of
the Fund.
(b) "Advisory Person" means:
(1) any employee of the Fund, Ohio National, ONI or any other
company in a control relationship to the Fund, who, in
connection with his or her regular duties, makes,
participates in or obtains information regarding the
purchase or sale of a security by the Fund, or whose
functions relate to the making of any recommendations with
respect to such purchases or sales; and
(2) any natural person in a control relationship to the Fund
who obtains information concerning recommendations made to
the Fund with regard to the purchase or sale of a security.
(c) "Being considered," with respect to the purchase or sale of a
security, means:
(1) that a recommendation or order to purchase or sell such
security has been made and communicated by a portfolio
manager of the Fund or another Advisory Person; or
(2) with respect to a person who makes such recommendations,
that such person is seriously considering making such a
recommendation.
(d) "Beneficial ownership" shall be interpreted in the same manner as
in determining if a person is subject to the provisions of Section
16 of the Securities Exchange Act of 1934 and the rules and
regulations thereunder, except that the determination of direct or
indirect beneficial ownership shall apply to all securities which
an Access Person has or acquires.
(e) "Compliance Director" shall be the compliance director of the Fund
or another individual designated by the Fund's board of directors.
(f) "Control" has the same meaning as set forth in Section 2(a)(9) of
the Investment Company Act of 1940.
<PAGE> 2
(g) "Fund" means Dow Target Variable Fund LLC.
(h) "Ohio National" means The Ohio National Life Insurance Company.
(i) "ONI" means Ohio National Investments, Inc.
(j) "Outside Manager" means a Manager of the Fund who is not an
"interested person" of the Fund within the meaning of Section
2(a)(19) of the Investment Company Act of 1940.
(k) "Purchase or sale" includes the writing of an option to purchase
or sell a security.
(l) "Security" has the meaning set forth in Section 2(a)(36) of the
Investment Company Act of 1940, except that it shall not include
securities issued by the government of the United States, bankers'
acceptances, bank certificates of deposit or commercial paper.
2. PROHIBITED TRANSACTIONS
(a) No Access Person shall accept, from any person or entity that does
business with the Fund or with ONI, any gift of securities of any
value or any gift of any other things, from all such persons or
entities during a calendar year, having an aggregate value in
excess of $100. For purposes of this prohibition,
business-oriented meals paid for by such a person or entity shall
not be considered to be "gifts."
(b) No Advisory Person shall serve on the board of directors of any
publicly traded corporation other than the Fund and its affiliates
unless such service has been specifically agreed to and approved
by the Fund's board of Managers.
(c) Except as provided in Section 3, no Access Person shall purchase
or sell, directly or indirectly, any security in which he or she
has or acquires any direct or indirect beneficial ownership, and
which to his or her actual knowledge at the time of such purchase
or sale:
(1) is being considered for purchase or sale by the Fund;
(2) is being purchased or sold by the Fund within 7 days before
or after the Access Person's transaction;
(3) is an initial public offering unless the issuer is an
affiliate of the Fund;
(4) is a derivative instrument or other security related to,
but not necessarily the same as, a security held by or
being considered for purchase by the Fund;
2
<PAGE> 3
(5) will result in trading profits from securities held by the
Access Person for fewer than 61 days; or
(6) is a private placement of securities offered by an entity
having publicly-traded securities.
(d) Advisory Persons shall not purchase or sell any Security (unless
exempted under Section 3) for the account of any person or entity
other than the Fund or its corporate affiliates without having
first received written approval from the Compliance Director.
(1) In the absence of the Compliance Director, or in the case
of a transaction by the Compliance Director, the written
approval shall be given by any one of the following,
provided that the approval may not be given by the Advisory
Person seeking pre-clearance nor by anyone reporting to him
or her: the Fund's President, Vice President, Treasurer or
Secretary.
(2) Any pre-clearance approval shall expire after seven
calendar days.
3. EXEMPTED TRANSACTIONS
The prohibitions of Section 2 shall not apply to the following:
(a) Purchases or sales effected in any account over which the Access
Person has no direct or indirect influence or control.
(b) Purchases or sales of securities which are not eligible for
purchase or sale by the Fund.
(c) Purchases or sales which are non-volitional on the part of either
the Access Person or the Fund.
(d) Purchases or redemptions of open-end mutual fund shares or
variable contracts.
(e) Purchases which are part of an automatic dividend reinvestment
plan.
(f) Purchases effected upon the exercise of rights issued by an issuer
pro rata to all holders of a class of its securities, to the
extent such rights were acquired from such issuer, and sales of
such rights so acquired.
(g) Purchases or sales of a security if the transactions of both the
Access Person and the Fund are so small, in relation to the daily
volume traded in such security, as to have a DE MINIMIS effect
upon the market price of such security and if both the Fund and
the Access Person, as a result, beneficially owns or controls a DE
MINIMIS amount of the class of security.
(h) Purchases or sales which receive the prior approval of the Fund's
board of Managers because
3
<PAGE> 4
(1) their potential harm to the Fund is remote because they
would be very unlikely to affect a highly institutional
market, and
(2) they clearly are not related economically to the securities
to be purchased, sold or held by the Fund.
(i) Gifts of securities having a market value, on the day of transfer,
of less than $3,000 (provided that such gift is not from a person
or entity that does business with the Fund or with ONI).
4. REPORTING
(a) Every Access Person shall report to the Fund the information
described in Section 4(d) with respect to transactions in any
security in which such Access Person has, or by reason of such
transaction acquires, any direct or indirect beneficial ownership
in the security. An Access Person shall not be required to make a
report with respect to Investment Company Securities, Securities
obtained through automatic dividend reinvestment plans or
transactions effected for any account over which he or she does
not have any direct or indirect influence or control.
(b) An Outside Manager of the Fund need only report a transaction if
he or she, at the time of that transaction, knew or, in the
ordinary course of fulfilling his or her official duties as a
Manager should have known that, during the 15 days immediately
preceding the date of the Outside Manager's transactions, such
security is or was purchased or sold by the Fund or was being
considered for purchase or sale by the Fund or ONI.
(c) Every report shall be made to the Compliance Director not later
than 10 days after the end of the calendar quarter in which the
transaction to which the report relates was effected.
(d) Each report shall contain the following information:
(1) The date of the transaction (trade date, not settlement
date);
(2) The name (including class or issue) of the securities;
(3) The principal amount of each security involved;
(4) The nature of the transaction (i.e., purchase, sale or
other type of acquisition or disposition);
(5) The price at which the transaction was effected; and
(6) The name of the broker, dealer or bank through which the
transaction was effected.
4
<PAGE> 5
(e) Any such report may also contain a statement that the report shall
not be construed as an admission by the person making such report
that he or she has any direct or indirect beneficial ownership in
the security to which the report relates.
(f) Every Advisory Person shall, within 30 days after becoming an
Advisory Person, submit to the Compliance Director a list of all
securities owned by the Advisory Person as of the date the
individual became an Advisory Person.
(g) Every Advisory Person shall, on or before the last day of January
each year, submit to the Compliance Director a list of all
securities owned by the Advisory Person as of the December 31
preceding, together with a certification that he or she has read
and understands this Code of Ethics, and that he or she has, to
the best of his or her knowledge and belief, complied with the
requirements of this Code of Ethics.
(h) Every Advisory Person shall direct his or her securities broker to
supply the Compliance Director a duplicate copy of the
confirmation of each personal securities transaction and copies of
periodic statements from all personal securities accounts
controlled by the Advisory Person. However, such duplicate copies
shall not be required on the following:
(1) Investment Company Securities, or
(2) securities obtained through an automatic dividend
reinvestment plan.
5. SANCTIONS
Upon discovering a violation of this Code of Ethics, the Fund's board of
directors may impose such sanctions as it deems appropriate. Such
sanctions could include:
(a) A letter of warning or censure;
(b) suspension or termination of the relationship of the violator with
the Fund; or
(c) in the case of trading profits from any securities held for fewer
than 61 days, disgorgement of such profits to the Fund.
5
<PAGE> 1
Exhibit (d)(1)
SUB-ADVISORY AGREEMENT
This Agreement is made as of the third day of April, 2000 by and between OHIO
NATIONAL INVESTMENTS, INC., an Ohio corporation (the "Adviser"), and FIRST TRUST
ADVISORS L.P., an Illinois limited partnership (the "Sub-Adviser").
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 Sub-Adviser 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 Sub-Adviser, 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 Sub-Adviser, and the Sub-Adviser 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
Sub-Adviser.
(b) All activities by the Sub-Adviser 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 Sub-Adviser 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 Sub-Adviser 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.
<PAGE> 2
(d) In carrying out its obligations to manage the investments and reinvestments
of the assets of the Fund, the Sub-Adviser 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
Sub-Adviser 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 Sub-Adviser shall
arrange for the automatic transmission of the I.D. confirmation of the trade to
the Fund's custodian.
(f) In connection with the placement of orders for the execution of the Fund's
securities transactions, the Sub-Adviser 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 Sub-Adviser
for the period and in the place required by Rule 31a-2 under the 1940 Act.
(g) The Sub-Adviser 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 Sub-Adviser shall be an independent
contractor and not an agent of the Adviser or the Fund.
SECTION 2. EXPENSES
(a) The Sub-Adviser 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 Sub-Adviser 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
Sub-Adviser 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
2
<PAGE> 3
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 Sub-Adviser 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 Sub-Adviser may deem necessary,
appropriate or convenient for the discharge of the Sub-Adviser's obligations
hereunder or otherwise helpful to the Fund.
SECTION 4. SUB-ADVISORY FEES
In consideration of the Sub-Adviser's services to the Fund hereunder, the
Sub-Adviser shall be entitled to a sub-advisory 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 "Sub-Advisory Fee"). The
Sub-Advisory Fee shall be accrued for each calendar day and the sum of the daily
Sub-Advisory Fee accruals shall be paid monthly to the Sub-Adviser 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 Sub-Advisory Fee shall be
payable solely by the Adviser, and the Fund shall not be liable to the
Sub-Adviser for any unpaid Sub-Advisory Fee.
SECTION 5. LIMITATION OF LIABILITY OF SUB-ADVISER
(a) The Sub-Adviser shall be liable for losses resulting from its own acts or
omissions caused by the Sub-Adviser'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
Sub-Adviser against any such liability to the owners of the Fund or to the
Adviser. The Sub-Adviser 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
other act or omission in the performance of the Sub-Adviser'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 Sub-Adviser is assessed any taxation in respect of the
assets, income or activities of the Fund, the Adviser and the Fund jointly will
indemnify the Sub-Adviser 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 Sub-Adviser
in connection with the defense or settlement of any such assessment. The
Sub-Adviser shall undertake and control the defense or settlement of any such
assessment,
3
<PAGE> 4
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 Sub-Adviser 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 Sub-Adviser 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 Sub-Adviser supplies to and
does on behalf of the Fund shall in the Sub-Adviser'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 Sub-Adviser from time
to time, it is understood and agreed that they may be different from the
information, recommendations and actions the Sub-Adviser or its affiliated
persons supply to or do on behalf of other clients. The Sub-Adviser 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 Sub-Adviser deems the purchase or sale of a security
to be in the best interest of the Fund as well as other customers, the
Sub-Adviser 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 Sub-Adviser 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 Sub-Adviser 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 Sub-Adviser 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 Sub-Adviser will conform with all
applicable rules and regulations of the Securities and Exchange Commission.
4
<PAGE> 5
SECTION 7. REPORTS TO THE SUB-ADVISER
The Adviser shall furnish to the Sub-Adviser the Prospectus, proxy statements,
reports and other information relating to the business and affairs of the Fund
as the Sub-Adviser may, at any time or from time to time, reasonably require in
order to discharge the Sub-Adviser's duties under this Agreement.
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 Sub-Adviser 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 Sub-Adviser agrees to promptly notify the Adviser of the occurrence of
any of the following events: (1) any change in any of the Sub-Adviser's
executive officers or any portfolio manager who is providing advisory services
pursuant to this agreement; (2) the Sub-Adviser fails to be registered as an
investment adviser under the Advisers Act or under the laws of any jurisdiction
in which the Sub-Adviser is required to be registered as an investment adviser
in order to perform its obligations under this Agreement; (3) the Sub-Adviser is
the subject of any action, suit, proceeding, inquiry or investigation at law or
in
5
<PAGE> 6
equity, before or by any court, public board or body, involving the affairs
of the Fund; or (4) any change in control of the Sub-Adviser.
(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
If to the Sub-Adviser:
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.
6
<PAGE> 7
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/Christopher A. Carlson
------------------------
Christopher A. Carlson
President
FIRST TRUST ADVISORS L.P.
By /s/Ronald McAlister
------------------
Ronald McAlister
President
Accepted and Agreed:
THE DOW (SM) TARGET VARIABLE FUND, LLC
By: /s/John J. Palmer
-------------------------
John J. Palmer, President
7
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