<PAGE>
As filed with the Securities and Exchange Commission on May 1, 2000
Registration Nos. 333-69843 and 811-09179
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.___ [ ]
Post-Effective Amendment No. 1 [X]
---
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 2 [X]
---
(Check appropriate box or boxes)
Select Ten Plus Fund, LLC
--------------------------
(Exact Name of Registrant)
515 West Market Street, Louisville, KY 40202
--------------------------------------------
(Address of Principal Executive Offices)
Registrant's Telephone Number, including area code (502) 582-7900
--------------
Kevin L. Howard
National Integrity Life Insurance Company
515 West Market Street
Louisville, Kentucky 40202
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon after the effective date
of this Registration Statement as is practicable.
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on May 1, 2000 pursuant to paragraph (b) of Rule 485
[ ] 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.
<PAGE>
SELECT TEN PLUS FUND, LLC
Prospectus - May 1, 2000
Select Ten Plus Fund, LLC is a no-load mutual fund consisting of four separate
investment portfolios. The Select Ten Plus Portfolios seek total return by
investing in the ten highest dividend yielding companies included in the Dow
Jones Industrial Average.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION 1 - RISK/RETURN SUMMARY
<S> <C>
Investment Objective and Strategy.................................... 1
Principal Risks...................................................... 1
SECTION 2 - THE FUND
Investment Objective................................................. 1
Investment Strategy.................................................. 2
The Dow Jones Industrial Average..................................... 3
Risk Factors......................................................... 4
SECTION 3 - STRATEGIC PERFORMANCE INFORMATION........................ 4
SECTION 4 - FUND PERFORMANCE INFORMATION............................. 7
SECTION 5 - SHAREHOLDER INFORMATION.................................. 8
Pricing of Shares.................................................... 8
Purchase and Redemption of Shares.................................... 8
Dividends and Distributions.......................................... 8
Tax Consequences of Investing in the Fund............................ 8
SECTION 6 - MANAGEMENT
The Investment Adviser............................................... 9
The Sub-Adviser...................................................... 9
SECTION 7 - FINANCIAL HIGHLIGHTS.................................... 10
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. WE HAVE NOT AUTHORIZED ANYONE TO MAKE
ANY REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED
IN THIS PROSPECTUS.
<PAGE>
SECTION 1 - RISK/RETURN SUMMARY
INVESTMENT OBJECTIVE AND STRATEGY
The Select Ten Plus Portfolios of the Fund seek total return. To achieve this
goal, the four Portfolios buy shares of the ten highest dividend yielding common
stocks in the Dow Jones Industrial Average (DJIA) in equal weights as determined
on a specified business day. Each of the Portfolios holds these stocks for a
period of twelve months. At the end of a Portfolio's twelve-month period, the
Portfolio restructures its investment portfolio to invest in the ten stocks with
the highest current dividend yield in the DJIA for another twelve months.
PRINCIPAL RISKS
As with any investment in common stocks, the value of your investment in a
Portfolio may rise and fall in response to the specific performance of a stock's
issuer and the general performance of the stock market and you may lose money.
In addition, there are risks associated with the Portfolios' investment
strategy, including:
(1) greater fluctuation in value than a diversified mutual fund because
the Portfolios are non-diversified, meaning they invest a large
portion of assets in the securities of a few issuers. In addition, a
Portfolio is more likely than a diversified mutual fund to be
concentrated in one or more types of issuers. Concentration may
involve additional risk because of the decreased diversification of
economic, financial and market risks.
(2) decreased diversification of economic, financial, and market risks
because of industry concentration; and
(3) potential adverse effects on issuers of particular industries as a
result of regulatory change, including the petroleum and tobacco
industries, as well as industries that may affect the environment.
SECTION 2 - THE FUND
INVESTMENT OBJECTIVE
The Portfolios seek total return by investing in shares of the ten highest
dividend yielding common stocks in the DJIA in equal weights and holding them
for twelve months. The dividend yield for each stock is calculated by
annualizing the last quarterly or semi-annual ordinary dividend distributed on
that stock and dividing the result by the market value of that stock as of the
close of the New York Stock Exchange (NYSE) on the business day prior to the
investment date. This yield is historical and there is no assurance that any
dividends will be declared or paid in the future on the stocks in the
Portfolios. The term "equal weights" means that if you invested $100 in a
Portfolio, the Portfolio would buy $10 of each of the ten highest yielding
stocks.
The selection process is a straightforward, objective, mathematical application
that ignores any subjective factors concerning an issuer in the DJIA, an
industry or the economy generally. The application of the selection process may
cause a Portfolio to own a stock that the sub-adviser does not recommend for
purchase. In fact, the sub-adviser may have sell recommendations on a number of
the stocks at the time the stocks are selected for inclusion in a Portfolio's
portfolio.
1
<PAGE>
INVESTMENT STRATEGY
Each of the four Portfolios begins operations on the last business day of a
specified calendar quarter. The Fund may have four different investment
portfolios, I.E., the four Portfolios, operating simultaneously for their
respective twelve-month periods. At the end of each Portfolio's twelve-month
period, the Portfolio's investment portfolio is restructured to again hold
the ten highest yielding stocks in the DJIA in equal weights for the next
twelve months. We will not rebalance the weights of the individual stock
positions during a twelve-month period.
Contributions to each of the Portfolios are invested on only one day of each
year as follows:
<TABLE>
<CAPTION>
Portfolio Investment Date
--------- ---------------
<S> <C>
Select Ten Plus Portfolio - March last Business Day of March
Select Ten Plus Portfolio - June last Business Day of June
Select Ten Plus Portfolio - September last Business Day of September
Select Ten Plus Portfolio - December last Business Day of December
</TABLE>
On the day we receive a dividend from a stock in a Portfolio's investment
portfolio, we will reinvest it in the form of additional shares of that stock.
There can be no assurance that the dividend rates on the selected stocks will be
maintained. Reduction or elimination of a dividend could adversely affect the
stock price.
The Fund's buy and hold investment strategy is very different from the frequent
portfolio changes made by other mutual funds based on economic, financial, and
market analyses. Therefore, the Portfolios will generally buy or keep a stock
despite adverse developments relating to the stock that might otherwise make
investing in the stock detrimental to the interest of investors. Such adverse
developments include the adverse financial condition of the issuer, a failure to
maintain a current dividend rate, the institution of legal proceedings against
the issuer, a default under certain documents materially and adversely affecting
the future declaration of dividends, or a decline in the price or the occurrence
of other market or credit factors (including a public tender offer or a merger
or acquisition transaction).
The investment strategy is based on three time-tested investment principles:
(1) time in the market is more important than timing the market;
(2) the stocks to buy are the ones everyone else is selling; and
(3) dividends can be an important part of total return.
Investment in a number of companies with high dividends relative to their stock
prices is designed to increase a Portfolio's potential for higher returns.
Investing in these stocks of the DJIA may be effective as well as conservative
because regular dividends are common for established companies and have
accounted for a substantial portion of the total return on stocks of the DJIA as
a group. Each Portfolio's return will consist of a combination of capital
appreciation and current dividend income.
2
<PAGE>
THE DOW JONES INDUSTRIAL AVERAGE
The DJIA consists of 30 common stocks chosen by the editors of THE WALL STREET
JOURNAL as representative of the New York Stock Exchange and of American
industry. The companies are highly capitalized in their industries and their
stocks are widely followed and held by individual and institutional investors.
The companies marked below with an asterisk are the ten highest yielding stocks
in the DJIA as of the market close on March 31, 2000. The ten highest yielding
stocks in the DJIA are commonly known as the "Dogs of the Dow:"
AT&T Honeywell
Aluminum Co. of America IBM
American Express Intel
Boeing International Paper*
Caterpillar* J.P. Morgan*
Citigroup Johnson & Johnson
Coca-Cola McDonald's
Disney Merck
DuPont* Microsoft
Eastman Kodak* Minnesota Mining & Manufacturing*
Exxon Mobil* Philip Morris*
General Electric Proctor & Gamble
General Motors* SBC Communications*
Hewlett-Packard United Technologies
Home Depot Walmart
There are various theories to explain why a common stock is among the ten
highest yielding stocks in the DJIA at any given time:
(1) the issuer may be in financial difficulty or out of favor in the
market because of weak earnings, performance or forecasts, or negative
publicity;
(2) there may be uncertainties because of pending or threatened litigation
or pending or proposed legislation or government regulation;
(3) the stock may be a cyclical stock reacting to national and
international economic developments; or
(4) the market may be anticipating a reduction in or the elimination of
the issuer's dividend.
While these factors may affect only a part of an issuer's overall business, the
publicity may be strong enough to outweigh otherwise solid business performance.
In addition, companies in certain industries have historically paid relatively
high dividends.
The designations "Dow Jones-Registered Trademark-," "Dow Jones Industrial
Average-SM-" and "DJIA-SM-" are the property of Dow Jones & Company, Inc.
(DOW JONES). Dow Jonse is not affiliated with the Fund, has not participated
in any way in the creation of the Portfolios or in the selection of stocks
included in the Portfolios, and has not reviewed or approved any information
included in this prospectus. The Portfolios are not sponsored, endorsed, sold
or promoted by Dow Jones, and Dow Jones has no relationship whatsoever with
the Portfolios. The DJIA is determined, composed and calculated by Dow Jones
without regard to the Portfolios. Dow Jones is not responsible for and does
not participate in the determination of the timing, price, or quantity of the
Portfolios' shares to be issued or in the determination or calculation of the
equation by which the Portfolios' shares are to be redeemed. Dow Jones has no
obligation or liability whatsoever in connection with the administration or
marketing of the Portfolios.
3
<PAGE>
RISK FACTORS
RISKS IN GENERAL
An investment in a Portfolio entails certain risks common to all stock
investments. Stocks fluctuate in price for a variety of reasons. For example,
the value of your investment will decline if the financial condition of the
issuers of the stocks becomes impaired or if the general condition of the stock
market worsens. Common stocks in general may be especially susceptible to
general stock market movements and to increases and decreases in value as market
confidence in and perceptions of the issuers change. These perceptions are based
on unpredictable factors, including government, economic, monetary and fiscal
policies, inflation and interest rates, economic expansion or contraction, and
global or regional political, economic or banking crises. In addition, investors
in common stocks generally have inferior rights to receive payments from the
issuer in comparison with investors in debt obligations or preferred stocks
issued by the issuer. Moreover, common stocks do not represent an obligation of
the issuer and therefore do not offer any assurance of income or provide the
degree of protection of capital provided by debt securities.
STRATEGY SPECIFIC RISKS
Each Portfolio is non-diversified and will invest a larger portion of its assets
in the securities of fewer issuers than diversified investment companies. As a
result, an investment in a Portfolio may be subject to greater fluctuation in
value than an investment in a diversified investment company. In addition, a
Portfolio may be concentrated in issuers primarily engaged in a particular
industry. Concentration may involve additional risk because of the decreased
diversification of economic, financial, and market risks. Moreover, changing
approaches to regulation, particularly with respect to the environment or with
respect to the petroleum or tobacco industry, may have a negative impact on
certain companies represented in a Portfolio's portfolio.
SECTION 3 - STRATEGIC PERFORMANCE INFORMATION
The performance of the investment strategies for the Portfolios relative to
other investment strategies can be demonstrated using historical data. The
returns shown in the following tables reflect the historical performance of a
hypothetical investment in the ten highest yielding stocks in the DJIA and the
performance of the DJIA. They do not reflect the performance of any Portfolio
and do not guarantee future performance or predict any Portfolio's returns.
Stock prices (which will fluctuate in value) and dividends (which may be
increased, reduced or eliminated) can affect the returns. The strategy has
underperformed the DJIA certain years. Accordingly, there can be no assurance
that any Portfolio will outperform the DJIA over the life of the Portfolio.
An investor in a Portfolio would not necessarily realize as high a total return
on an investment in the stocks upon which the hypothetical returns are based
because (1) the total return figures shown do not reflect Portfolio expenses or
brokerage commissions and (2) the Portfolios are established at different times
of the year. If the above-mentioned charges were reflected in the hypothetical
returns, the returns would be lower than those presented here. In addition,
total return does not take into consideration separate account charges or
contract charges.
4
<PAGE>
COMPARISON OF HISTORICAL TOTAL RETURN (1)
BETWEEN THE STRATEGY AND THE DJIA
<TABLE>
<CAPTION>
Ten Highest Dividend
Year Yielding Stocks (2) DJIA
---- -------------------- ----
<S> <C> <C>
1973 3.9% (13.1)%
1974 (1.3)% (23.1)%
1975 55.9% 44.4%
1976 34.8% 22.7%
1977 0.9% (12.7)%
1978 (0.1)% 2.7%
1979 12.4% 10.5%
1980 27.2% 21.5%
1981 5.0% (3.4)%
1982 23.6% 25.8%
1983 38.7% 25.7%
1984 7.6% 1.1%
1985 29.5% 32.8%
1986 32.1% 26.9%
1987 6.1% 6.0%
1988 22.9% 16.0%
1989 26.5% 31.7%
1990 (7.6)% (0.4)%
1991 39.3% 23.9%
1992 7.9% 7.4%
1993 27.3% 16.8%
1994 4.1% 4.9%
1995 36.7% 36.4%
1996 27.9% 28.9%
1997 21.9% 24.9%
1998 10.7% 18.1%
1999 4.0% 27.2%
Cumulative 7566% 3092%
</TABLE>
- ----------------------------------
(1) Total return is the sum of (i) the percentage change in market value of
each group of stocks between the first and last trading days of a period
and (ii) the total dividends paid on each group of stocks during the
period, divided by the opening market value of each group of stocks as of
the first trading day of a period. Total return does not take into
consideration any expenses or commissions. Over the course of the years
listed above, the ten highest dividend yielding stocks in the DJIA achieved
an average annual total return of 17.4%. Over this period, the strategy
achieved a greater average annual total return than that of the DJIA, which
was 13.6%. Although each Portfolio seeks to achieve a better performance
than the DJIA as a whole, we cannot guarantee that a Portfolio will achieve
a better performance. Performance may also be compared to the performance
of the S&P 500 Composite Price Stock Index or performance data from
publications such as Morningstar Publications, Inc. Source for years
1973-1997: BEATING THE DOW, by Michael O'Higgins with John Downes,
published by Harper Perennial, 1992. Used with permission of the authors.
Source for 1998 and 1999: www.dogsofthedow.com
(2) The ten highest dividend yielding stocks in the DJIA for any given year
were selected by ranking the dividend yields for each of the stocks in the
index at the beginning of that year, based upon an annualization of the
last quarterly or semi-annual regular dividend distribution (which would
have been declared in the preceding year), divided by that stock's market
value on the first trading day on the NYSE in that year.
5
<PAGE>
HOW THE STRATEGY HAS PERFORMED
<TABLE>
<CAPTION>
Ten Highest Dividend
Year Yielding DJIA Stocks DJIA Index
---- -------------------- ----------
<S> <C> <C>
1973 $ 10,390 $ 8,690
1974 10,255 6,683
1975 15,987 9,650
1976 21,551 11,840
1977 21,745 10,336
1978 21,723 10,616
1979 24,417 11,730
1980 31,058 14,252
1981 32,611 13,768
1982 40,308 17,320
1983 55,907 21,771
1984 60,155 22,010
1985 77,901 29,230
1986 102,908 37,092
1987 109,185 39,318
1988 134,188 45,609
1989 169,748 60,067
1990 156,848 59,827
1991 218,489 74,125
1992 235,749 79,610
1993 300,109 92,985
1994 312,413 97,541
1995 427,069 133,046
1996 546,221 171,496
1997 665,843 214,199
1998 737,136 252,971
1999 766,572 319,152
</TABLE>
The table above represents a hypothetical investment of $10,000 in the DJIA and
the ten highest dividend yielding DJIA stocks from January 1, 1973 through
December 31, 1999. The table assumes that all dividends and distributions during
a year are reinvested at the end of that year and does not reflect expenses or
commissions. The value of the ten highest dividend-yielding DJIA stocks would
have been $458,000 if the following fees and expenses had been charged: (1)
insurance charges of 1.20%, (2) management fees of .50%, (3) administrative fees
of .15%, and (4) other expenses of .35%.
Investors should not rely on the preceding performance information as an
indication of the past or future performance of the Portfolios. There can be no
assurance that any of the Portfolios will outperform the DJIA.
6
<PAGE>
SECTION 4 - FUND PERFORMANCE INFORMATION
Comparison of the change in value of $10,000 invested in the
Select Ten Plus Portfolio - June and the Dow Jones Industrial Average
[GRAPH]
<TABLE>
<CAPTION>
June 29, 1999 September 30, 1999 December 31, 1999
<S> <C> <C> <C>
Select Ten Plus Portfolio - June $ 10,000 $ 9,551 $ 9,104
Dow Jones Industrial Average $ 10,000 $ 9,942 $ 11,058
</TABLE>
- - Total return since inception: (8.97%)
- - Performance relates to the Portfolio and does not reflect separate account
variable annuity contracts.
- - Portfolio commenced operations on June 30, 1998.
- - Past performance is not predictive of future performance.
The goal of the Fund's investment strategy is to employ a classic "value" style
of investing. By selecting the ten highest yielding stocks from the DJIA, the
investor is seeking to find out-of-favor, undervalued securities.
Unfortunately, this value style was not in favor in 1999 as the market showed a
strong preference for growth oriented companies. The real action in the market
during the year was in the NASDAQ stocks, as this index was up an amazing 86%
for the year. During the year investors had a seemingly insatiable appetite for
technology, internet, and telecommunications companies. Until this infatuation
with the technology sector changes, it will be difficult for the value style to
perform well.
During 1999 interest rates rose steadily throughout the year, which also did not
help the value style of investing. Typically, value stocks include financial
companies, industrial companies, and utilities. All of these sectors are
adversely affected by rising interest rates. Until the bond market begins to
rally, it will be difficult for value-oriented stocks, particularly those with a
yield component, to perform well. We believe that the Fed's policy of raising
short-term interest rates will be effective in keeping inflation in check and
should ultimately be positive for the bond market.
7
<PAGE>
The stock market was very narrow in 1999, with only a select few companies
performing well during the year. In fact, while the DJIA was up 25% for the
year, quite a few stocks were barely up or were actually down during this
period. Good performing stocks in the DJIA during the year included Microsoft,
Intel, General Electric, Wal-Mart, Home Depot, Hewlett-Packard, and Citigroup.
Without these stocks in a portfolio, it was very difficult to perform well
during the year.
Within the Select Ten portfolios, Minnesota Mining & Manufacturing was the best
performing stock during the year as this company has done a good job of getting
its businesses on track. International Paper also performed well as pricing in
the paper industry is favorable. Dupont, JP Morgan, and General Motors also
performed reasonably well during the year. Poor performing securities included
Eastman Kodak, Sears, Goodyear Tire, and Philip Morris. Philip Morris has
consistently been a poor-performing security and has been a major drag on the
portfolios.
The performance of the portfolios is behind the DJIA since inception. When we
see a gravitation in the marketplace toward the value style, the portfolios
should begin to perform better versus the DJIA.
SECTION 5 - SHAREHOLDER INFORMATION
PRICING OF SHARES
The net asset value of the shares of each Portfolio will be determined on each
day the NYSE is open for trading. The net assets are valued based on market
quotations as of the close of business of the NYSE, which is currently 4:00 pm,
Eastern Time. Purchase and redemption orders will be priced at the next net
asset value calculated after your order is accepted. Each Portfolio's net asset
value per share is calculated separately by dividing the value of the securities
held by the Portfolio plus any cash or other assets, less liabilities, by the
number of outstanding shares of the Portfolio.
PURCHASE AND REDEMPTION OF SHARES
Only separate accounts of National Integrity Life Insurance Company established
to fund variable annuity contracts may invest in the Portfolios. The separate
accounts purchase shares without a sales load at the net asset value per share
next determined after receipt and acceptance of the purchase order.
Shares of the Portfolios are redeemed at net asset value without any redemption
charge. Upon receipt of a redemption request, approximately equal dollar amounts
of shares of each of the ten stocks will be sold, such that the total dollar
amount sold equals the amount of the redemption. Payment upon redemption is
normally made within seven days of receipt of the request, unless redemption is
suspended or payment is delayed as permitted by the SEC.
DIVIDENDS AND DISTRIBUTIONS
All dividend and capital gains distributions will automatically be reinvested in
additional shares at net asset value.
TAX CONSEQUENCES OF INVESTING IN THE FUND
The Fund is a limited liability company with all of its interests owned by
National Integrity Life Insurance Company. Accordingly, the Fund is taxed as
part of the operations of National Integrity Life Insurance Company and is not
taxed separately.
Shares of the Fund are held under the terms of a variable annuity contract.
Under current tax law, interest income, dividend income and capital gains of the
Fund are not currently taxable when left to accumulate within a variable annuity
contract.
Because every investor's situation is unique, please consult a tax adviser about
federal, state and local tax consequences of your variable annuity contract's
investment in the Fund.
8
<PAGE>
SECTION 6 - MANAGEMENT
THE INVESTMENT ADVISER
Touchstone Advisors, Inc. serves as the investment adviser to the Fund.
Touchstone Advisors is part of The Western - Southern Enterprise-Registered
Trademark-, which is a family of seven companies that provides life insurance,
annuities, mutual funds, asset management, and other related financial services
to millions of consumers nationwide. As of December 31, 1999, The Western -
Southern Enterprise-Registered Trademark- owned or managed assets of
approximately $20 billion and Touchstone Advisors managed assets of
approximately $440 million. Touchstone Advisors is located at 311 Pike Street,
Cincinnati, Ohio 45202.
Touchstone Advisors has overall responsibility for administering all operations
of the Portfolios and for monitoring and evaluating the management of the assets
of the Portfolios by the sub-adviser. Specifically, Touchstone Advisors:
- provides the overall business management and administrative
services necessary for each Portfolio's operation;
- furnishes or procures on behalf of the Portfolios the services
and information necessary to the proper conduct of the
Portfolios' business;
- acts as liaison among the various service providers to the
Portfolios, including the custodian, portfolio accounting
personnel, sub-adviser, counsel, and auditors;
- is responsible for ensuring that the Portfolios operate in
compliance with applicable legal requirements and for monitoring
the sub-adviser for compliance with requirements under applicable
law and with the investment policies and restrictions of the
Portfolios; and
- is responsible for monitoring and evaluating the sub-adviser on a
periodic basis and considering its performance record with
respect to the investment objective and policies of the
Portfolios.
Touchstone Advisors is authorized to exercise full investment discretion and
make all determinations with respect to the investment of each Portfolio's
assets and the purchase and sale of securities for the Portfolios in the event
that at any time a sub-adviser is not engaged to manage the assets of the
Portfolios.
For providing investment management services to the Portfolios, Touchstone
Advisors will receive a monthly fee based on an annual rate of .50% of each
Portfolio's average daily net assets. Touchstone Advisors will then pay an
advisory fee to the sub-adviser.
THE SUB-ADVISER
National Asset Management Corporation (NATIONAL ASSET) serves as the
sub-adviser to the Portfolios and in that capacity provides investment
advisory services for the Portfolios, including security selection. Subject
to each Portfolio's investment objective and policies, National Asset makes
all determinations with respect to the investment of each Portfolio's assets
and the purchase and sale of securities and other investments.
National Asset is a Kentucky corporation with executive offices at National City
Tower, Louisville, Kentucky 40202. Since its inception in 1979, National Asset
has provided customized investment management services to corporations,
governmental entities, foundations, endowments, and similar entities. As of
December 31, 1999, National Asset managed approximately $13.2 billion in assets.
9
<PAGE>
SECTION 7 - FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand each
Portfolio's financial performance since its inception. Certain information
reflects financial results for a single share. The total returns in the table
represent the rate that an investor would have earned or lost on an investment
in the Portfolio (assuming reinvestment of all dividends and distributions).
This information has been derived from Financial statements which have been
audited by Ernst & Young, LLP, whose report, along with the Fund's financial
statements, is included in the Statement of Additional Information, which is
available upon request.
Select Ten Plus Portfolio - June
Financial Highlights
<TABLE>
<CAPTION>
JUNE 30, 1999
(COMMENCEMENT OF
OPERATIONS) THROUGH
DECEMBER 31, 1999
------------------------
<S> <C>
SELECTED PER-UNIT DATA
Unit value, beginning of period $ 10.00
Loss from investment operations:
Net investment income 0.11
Net realized and unrealized loss on investments (1.01)
------------------------
Total from investment operations (0.90)
------------------------
Unit value, end of period $ 9.10
------------------------
------------------------
TOTAL RETURN (8.97%)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $ 306
Ratio of net investment income to average net assets 1.80%
Ratio of expenses to average net assets 0.85%
Ratio of net investment loss to average net assets before voluntary expense reimbursement (7.98%)
Ratio of expenses to average net assets before voluntary expense reimbursement 10.63%
Portfolio turnover rate 49%
</TABLE>
PERCENTAGE AMOUNTS ARE ANNUALIZED, EXCEPT TOTAL RETURN AND PORTFOLIO TURNOVER
RATE.
10
<PAGE>
Select Ten Plus Portfolio - September
Financial Highlights
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
(COMMENCEMENT OF
OPERATIONS) THROUGH
DECEMBER 31, 1999
------------------------
<S> <C>
SELECTED PER-UNIT DATA $ 10.00
Unit value, beginning of period
Loss from investment operations:
Net investment income 0.05
Net unrealized loss on investments (0.61)
------------------------
Total from investment operations (0.56)
------------------------
Unit value, end of period $ 9.44
------------------------
------------------------
TOTAL RETURN (5.63%)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $ 418
Ratio of net investment income to average net assets 2.18%
Ratio of expenses to average net assets 0.85%
Ratio of net investment loss to average net assets before voluntary expense
Reimbursements (6.68%)
Ratio of expenses to average net assets before voluntary expense reimbursement 9.71%
Portfolio turnover rate 0%
</TABLE>
PERCENTAGE AMOUNTS ARE ANNUALIZED, EXCEPT TOTAL RETURN AND PORTFOLIO TURNOVER
RATE.
11
<PAGE>
Select Ten Plus Portfolio - December
Financial Highlights
<TABLE>
<CAPTION>
FOR THE ONE DAY
PERIOD ENDED
DECEMBER 31, 1999
(COMMENCEMENT
OF OPERATIONS)
------------------------
<S> <C>
SELECTED PER-UNIT DATA
Unit value, beginning of period
Income from investment operations: $ 10.00
Net investment income -
Net unrealized gain on investments 0.03
------------------------
Total from investment operations 0.03
------------------------
Unit value, end of period $ 10.03
------------------------
------------------------
TOTAL RETURN 0.34%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $ 62
Ratio of net investment loss to average net assets (0.50%)
Ratio of expenses to average net assets 0.50%
Ratio of net investment loss to average net assets before voluntary expense
Reimbursements (54.50%)
Ratio of expenses to average net assets before voluntary expense reimbursement 54.50%
Portfolio turnover rate 0%
</TABLE>
PERCENTAGE AMOUNTS ARE ANNUALIZED, EXCEPT TOTAL RETURN AND PORTFOLIO TURNOVER
RATE.
12
<PAGE>
Select Ten Plus Fund, LLC
Select Ten Plus Fund, LLC's shares are sold only to separate accounts of
National Integrity Life Insurance Company as an investment medium for its
variable annuity contracts.
More information about Select Ten Plus Fund, LLC is available in its Statement
of Additional Information (SAI) and in its annual report and semi-annual reports
to shareholders. The SAI is incorporated by reference into this prospectus. To
obtain a free copy of the SAI and/or annual report and semi-annual reports, or
to request other information, please contact Select Ten Plus Fund, LLC by
telephone at 1-800-325-8583 or by mail at 515 West Market Street, 8th Floor,
Louisville, Kentucky 40202.
You can review and copy information about Select Ten Plus Fund, LLC at the SEC's
Public Reference Room in Washington, D.C. For hours of operation of the Public
Reference Room, please call 1-800-SEC-0330. You may also obtain information
about Select Ten Plus Fund, LLC on the SEC's internet site at
http://www.sec.gov. Copies of that information are also available, after paying
a duplicating fee, by electronic request to [email protected] or by writing the
SEC's Public Reference Section, Washington, D.C. 20459-0102.
Investment Company Act File No. 811-09179.
13
<PAGE>
SELECT TEN PLUS FUND, LLC
Statement of Additional Information
May 1, 2000
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Section 1 - The Fund........................................................2
Section 2 - Investment Restrictions and Policies............................2
Section 3 - Management of the Fund..........................................4
Section 4 - Investment Advisory and Other Services..........................9
Section 5 - Portfolio Transactions and Brokerage...........................12
Section 6 - Purchase, Redemption, and Pricing of Shares....................14
Section 7 - Taxation of the Fund...........................................15
Section 8 - Calculation of Performance Data................................15
Section 9 - Financial Statements...........................................19
</TABLE>
This Statement of Additional Information (SAI) is not a prospectus. It should be
read in conjunction with the prospectus for the Select Ten Plus Fund, LLC dated
May 1, 2000. A copy of the prospectus is available at no charge by writing to
the Fund at 515 West Market Street, 8th Floor, Louisville, Kentucky 40202, or by
calling 1-800-325-8583.
<PAGE>
SECTION 1 - THE FUND
The Select Ten Plus Fund, LLC is a non-diversified, open-end management
investment company organized on September 30, 1998, in Delaware as a limited
liability company.
SECTION 2 - INVESTMENT RESTRICTIONS AND POLICIES
INVESTMENT RESTRICTIONS
The following are the Portfolios' fundamental investment restrictions that
cannot be changed without approval of the shareholders. At all meetings of the
shareholders called for this purpose, the presence in person or by proxy of
shareholders entitled to cast one-quarter of the votes entitled to be cast at
the meeting shall constitute a quorum for the transaction of business at that
meeting. If, however, the vote of a majority of the outstanding voting
securities, as defined in the Investment Company Act of 1940 (1940 ACT), is
required for action to be taken on any matter to be brought before the meeting,
there shall be present, either in person or by proxy, shareholders entitled to
cast more than one-half of the total number of votes in order to constitute a
quorum. A majority, in this case, means (a) sixty-seven percent (67%) or more of
the votes present at a meeting if shareholders entitled to more than fifty
percent (50%) of the outstanding votes are present or represented by proxy or
(b) more than fifty percent (50%) of the outstanding votes of the Portfolio,
whichever is less. Separate votes are taken by each Portfolio if a matter
affects only that Portfolio.
Each Portfolio may not:
1. Issue senior securities, except as permitted under the 1940 Act.
2. Borrow money, except that each Portfolio may borrow up to 5% of its total
assets (not including the amount borrowed) from a bank for temporary or
emergency purposes (but not for leverage or the purchase of investments).
3. Act as an underwriter of another issuer's securities, except to the extent
that the Portfolios may be deemed to be an underwriter within the meaning
of the Securities Act of 1933 in connection with the purchase and sale of
portfolio securities.
4. Make loans if, as a result, more than 33 1/3% of that Portfolio's total
assets would be lent to other persons, except through (i) purchases of debt
securities or other debt instruments, or (ii) engaging in repurchase
agreements.
5. Purchase or sell real estate unless acquired as a result of ownership of
securities or other instruments (but this shall not prohibit the Portfolios
from purchasing or selling securities or other instruments backed by real
estate or of issuers engaged in real estate activities).
6. Purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments.
2
<PAGE>
Any change to these restrictions also requires a majority vote of the Managers
at a regular meeting or at a special meeting called for that purpose.
The following are the Portfolios' non-fundamental operating policies, which may
be changed by the Managers without approval of the shareholders.
Each Portfolio may not:
1. Sell securities short, unless the Portfolio owns or has the right to obtain
securities equivalent in kind and amount to the securities sold short, or
unless it covers such short sale as required by the current rules and
positions of the SEC or its staff.
2. Purchase securities on margin, except that each Portfolio may obtain such
short-term credits as are necessary for the clearance of transactions.
3. Invest in illiquid securities if, as a result of such investment, more than
15% of its net assets would be invested in illiquid securities, or such
other amounts as may be permitted under the 1940 Act.
4. Purchase securities of other investment companies except in compliance with
the 1940 Act and applicable state law.
5. Make any loans other than loans of portfolio securities, except through (i)
purchases of debt securities or other debt instruments, or (ii) engaging in
repurchase agreements.
Except for the fundamental investment restrictions listed above and the
Portfolios' investment objective, which includes the objective of total return
but not the procedures described in the prospectus in Section 2, "The Fund," the
other investment policies described in the prospectus and this SAI are not
fundamental and may be changed with the approval of the Managers. Unless noted
otherwise, if a percentage restriction is adhered to at the time of investment,
a later increase or decrease in percentage resulting from a change in the
Portfolios' assets (I.E., due to cash inflows or redemptions) or in market value
of the investment or the Portfolios' assets will not constitute a violation of
that restriction.
INVESTMENT POLICIES AND TECHNIQUES
The following information supplements the discussion of the Portfolios'
investment objective and strategy found in the prospectus in Section 1,
"Risk/Return Summary," and Section 2, "The Fund."
LENDING OF PORTFOLIO SECURITIES. Each Portfolio is authorized to lend up to
33 1/3% of the total value of its portfolio securities to broker-dealers or
institutional investors that the investment adviser and sub-adviser deem
qualified, but only when the borrower maintains with the Portfolios' custodian
bank collateral, either cash or money market instruments, in an amount at least
equal to the market value of the securities loaned, plus accrued interest and
dividends, determined on a daily basis and adjusted accordingly. Although each
Portfolio is authorized to
3
<PAGE>
lend, the Portfolios do not presently intend to engage in lending. In
determining whether to lend securities to a particular broker-dealer or
institutional investor, the investment adviser and sub-adviser will consider,
and during the period of the loan will monitor, all relevant facts and
circumstances, including the creditworthiness of the borrower. The Portfolios
will retain authority to terminate any loan at any time. The Portfolios may pay
reasonable administrative and custodial fees in connection with a loan and may
pay a negotiated portion of the interest earned on the cash or money market
instruments held as collateral to the borrower or placing broker. The Portfolios
will receive reasonable interest on the loan or a flat fee from the borrower and
amounts equivalent to any dividends, interest, or other distributions on the
securities loaned. The Portfolios will retain record ownership of loaned
securities to exercise beneficial rights, such as voting and subscription rights
and rights to dividends, interest, or other distributions, when retaining such
rights is considered to be in the Portfolios' interest.
REPURCHASE AGREEMENTS. The Portfolios may enter into repurchase agreements with
certain banks or non-bank dealers. In a repurchase agreement, a Portfolio buys a
security at one price, and at the time of sale, the seller agrees to repurchase
the obligation at a mutually agreed upon time and price (usually within seven
days). The repurchase agreement, thereby, determines the yield during the
purchaser's holding period, while the seller's obligation to repurchase is
secured by the value of the underlying security. The investment adviser and
sub-adviser will monitor, on an ongoing basis, the value of the underlying
securities to ensure that the value always equals or exceeds the repurchase
price plus accrued interest. Repurchase agreements could involve certain risks
in the event of a default or insolvency of the other party to the agreement,
including possible delays or restrictions upon the Portfolios' ability to
dispose of the underlying securities. Although no definitive creditworthiness
criteria are used, the investment adviser reviews the creditworthiness of the
banks and non-bank dealers with which any Portfolio enters into repurchase
agreements to evaluate those risks. The Portfolios may, under certain
circumstances, deem repurchase agreements collateralized by U.S. government
securities to be investments in U.S. government securities.
SECTION 3 - MANAGEMENT OF THE FUND
The Fund is governed by five Managers. The Managers are responsible for
overseeing the management of the Fund's business and affairs and play a vital
role in protecting the interests of its holders. Among other things, the
Managers approve and review the Fund's contracts and other arrangements and
monitor Fund operations. The names, addresses, and ages of the Managers and
officers of the Fund, together with information as to their principal business
occupations during the past five years, are set forth below.
4
<PAGE>
<TABLE>
<CAPTION>
Name, Age & Address Position with Fund Principal Occupation(s) During Past 5 Years
- ------------------- ------------------ -------------------------------------------
<S> <C> <C>
John R. Lindholm (51)* Chairman of the Board of President of Integrity and Vice
515 W. Market Street Managers President-Chief Marketing Officer of
Louisville, KY 40202 National Integrity since November 26, 1993;
Executive Vice President-Chief Marketing
Officer of ARM Financial Group, Inc. since
July 27, 1993; since March 1992 Chief
Marketing Officer of Analytical Risk
Management L.P. From June 1990 to February
1992, Chief Marketing Officer and a
Managing Director of the ICH Capital
Management Group, ICH Corporation,
Louisville, Kentucky; prior thereto, Chief
Marketing Officer and Managing Director for
Capital Holding Corporation's Accumulation
and Investment Group. Director of the
mutual funds in the State Bond Group of
mutual funds from June 1995 to December
1996.
Chris LaVictoire Mahai (44) Manager Chief Executive Officer, Aveus, an
251 First Avenue North interactive strategy and development firm,
Suite 500 since July, 1999; President, clavm, inc. ;
Minneapolis, MN 55401 a management consulting group, since June,
1998; Fellow, Poynter Institute for Media
Studies, since June, 1998; Senior Vice
President, Cowles Media Company/ Star
Tribune from August, 1993 to June, 1998;
Director of the mutual funds in the State
Bond Group from June, 1984 to December,
1996.
William B. Faulkner (72) Manager President, William Faulkner & Associates,
825 Goodrich Avenue LLC (international trade business) since
St. Paul, MN 55105-3346 1986. Director of the mutual funds in the
State Bond Group of mutual funds from 1980
to December 1996. Manager, Carroll Family,
LLC (commercial land development business)
since 1996.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Name, Age & Address Position with Fund Principal Occupation(s) During Past 5 Years
- ------------------- ------------------ -------------------------------------------
<S> <C> <C>
Irvin W. Quesenberry, Jr. (51) Manager Retired; Founder and Managing Director of
2939 Rainbow Drive National Asset Management Corporation
Louisville, KY 40206 (investment counseling firm) from 1979 to
1995**; Member of Louisville Community
Foundation Investment Committee; Board
member of Louisville Water Company since
1986.
Edward J. Haines (53) President Senior Vice President of Marketing of
515 W. Market Street Integrity Life Insurance Company since
Louisville, KY 40202 March, 2000; Senior Vice President of
Marketing of ARM Financial Group, Inc. from
December, 1993 until March, 2000.
Kevin L. Howard (35) Secretary Senior Vice President and Counsel of
515 W. Market Street Integrity Life Insurance Company since
Louisville, KY 40202 March, 2000; Senior Vice President and
Counsel of ARM Financial Group, Inc. from
October, 1998 until March, 2000; Assistant
General Counsel of ARM Financial Group,
Inc. from January, 1994 until October,
1998.
Don W. Cummings (36) Controller Chief Financial Officer of Integrity Life
515 W. Market Street Insurance Company since March, 2000; Chief
Louisville, KY 40202 Financial Officer, Retail Business Division
of ARM Financial Group, Inc. from November,
1996 until March, 2000; Strategic
Initiatives Officer of ARM Financial Group,
Inc. from April, 1996 until November, 1996;
Controller of ARM Financial Group, Inc.
from November, 1993 until April, 1996.
Meredith Hettinger (28) Assistant Secretary Financial Manager of Integrity Life
515 W. Market Street Insurance Company since March, 2000;
Louisville, KY 40202 Financial Manager of ARM Financial Group
Inc. from April, 1998 until March, 2000;
Financial Analyst of ARM Financial Group,
Inc. from June, 1995 until April, 1998.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Name, Age & Address Position with Fund Principal Occupation(s) During Past 5 Years
- ------------------- ------------------ -------------------------------------------
<S> <C> <C>
Hope Oliver (24) Assistant Secretary Financial Analyst of Integrity Life
515 W. Market Street Insurance Company since March, 2000;
Louisville, KY 40202 Financial Analyst of ARM Financial Group
Inc. from August, 1998 until March, 2000;
Staff Accountant of McCauley, Nicolas &
Company, LLC from January, 1997 until
August, 1998.
Kay Dieterlen (37) Assistant Secretary Legal Specialist of Integrity Life
515 W. Market Street Insurance Company since March, 2000; Legal
Louisville, KY 40202 Specialist of ARM Financial Group, Inc.
from November, 1993 until March, 2000.
</TABLE>
* Mr. Lindholm is an interested person as defined in the 1940 Act by virtue
of his positions with Integrity Life Insurance Company and National
Integrity Life Insurance Company.
** Mr. Quesenberry no longer has any interest in National Asset Management
Corporation.
The Fund pays Managers who are not interested persons of the Fund Independent
Managers fees for serving as Managers. During the fiscal period ended December
31, 1999, the Fund paid the Independent Managers a combined total of $10,750
exclusive of expenses. Because the investment adviser and the sub-adviser
perform substantially all of the services necessary for the operation of the
Fund, the Fund requires no employees. No officer, director or employee of
Integrity Life Insurance Company, National Integrity Life Insurance Company,
the investment adviser or the sub-adviser receives any compensation from the
Fund for acting as a Manager.
The following table sets forth for the fiscal period ended December 31, 1999,
the compensation paid by the Fund to the Independent Managers. Managers who
are interested persons, as defined in the 1940 Act, receive no compensation
from the Fund.
<TABLE>
<CAPTION>
Pension or Total
Aggregate Retirement Benefits Estimated Annual Compensation From
Compensation Accrued as Part of Benefits Upon Fund Paid to
Name of Manager From Fund Fund Expense Retirement Managers
- ------------------- ------------ ------------------- ---------------- -----------------
<S> <C> <C> <C> <C>
William B. Faulkner $3,750.00 None N/A $3,750.00
John Katz $3,750.00 None N/A $3,750.00
Chris L. Mahai $3,750.00 None N/A $3,750.00
</TABLE>
7
<PAGE>
The following individuals own of record 5% or more of the indicated Portfolios
as of April 3, 2000:
SELECT TEN PLUS PORTFOLIO - JUNE
<TABLE>
<CAPTION>
Name Address Percentage Ownership
- ---- ------- --------------------
<S> <C> <C>
Anthony P. Patrillo 1945 Jefferson Street 5.325488%
Binghamton, NY 13903
James A. Mayer 145 Awixa Avenue 53.624472%
Bayshore, NY 11706
Ruth D. Krauthamer 725 Argyle Road 5.838876%
Brooklyn, NY 11230
Bernice C. Stetter 66 Kelly Court 21.327303%
Lancaster, NY 14086
<CAPTION>
SELECT TEN PLUS PORTFOLIO - SEPTEMBER
Name Address Percentage Ownership
- ---- ------- --------------------
<S> <C> <C>
Joseph G. Rodgers 302 W. 12th St. #11A 35.918060%
New York, NY 10014
Michael J. Harrold 3 Glenwood Street 5.168945%
Albany, NY 12203
Donald J. Kirchberger 75 Squire Drive 11.782977%
Orchard Park, NY 14127
Doris Rimel Knauer 3417 SW 35th Street 5.017913%
Des Moines, IA 50321
<CAPTION>
SELECT TEN PLUS PORTFOLIO - DECEMBER
Name Address Percentage Ownership
- ---- ------- --------------------
<S> <C> <C>
Francis G. Henke 359 Hoffman Street #B 5.129366%
Elmira, NY 14905
John A. Knauber 80 Oxford Avenue 76.467629%
Lancaster, NY 14086
Patricia Scruggs 115 Deer Wood Lane 7.259397%
Grand Island, NY 14072
8
<PAGE>
<S> <C> <C>
Richard L. Corbetta 110 Dellwood Drive 5.818324%
Elma, NY 14059
<CAPTION>
SELECT TEN PLUS PORTFOLIO - MARCH
Name Address Percentage Ownership
- ---- ------- --------------------
<S> <C> <C>
Joan Markes 1 Sharon Drive 99.978893%
Albany, NY 12205
</TABLE>
As of December 31, 1999, the Managers and officers of the Fund as a group, owned
less than 1% of the outstanding membership interests of the Fund.
The Managers are also members of the Board of Managers of Separate Account Ten
of Integrity Life Insurance Company, a management investment company, and of the
Board of Directors of The Legends Fund, Inc., an open-end management investment
company, both of which have the same investment adviser as the Fund.
The Fund and its investment adviser have adopted codes of ethics under Rule
17j-1 of the 1940 Act, and personnel subject to these codes are permitted, in
certain circumstances, to invest in securities, including securities that may be
purchased or held by the Fund. These codes of ethics can be reviewed and copied
at the SEC's Public Reference Room in Washington, D.C. For hours of operation of
the Public Reference Room, please call 1-800-SEC-0330. The codes of ethics are
also available on the SEC's internet site at HTTP://WWW.SEC.GOV and copies are
available, after paying a duplicating fee, by electronic request to
[email protected] or by writing the SEC's Public Reference Section, Washington,
D.C. 20459-0102.
SECTION 4 - INVESTMENT ADVISORY AND OTHER SERVICES
THE INVESTMENT ADVISER
Touchstone Advisors, Inc. serves as the investment adviser to the Fund pursuant
to an investment advisory agreement. Touchstone Advisors is 100% owned by IFS
Financial Services, Inc., which is 100% owned by Western - Southern Life
Assurance Company, a direct subsidiary of The Western and Southern Life
Insurance Company. Touchstone Advisors succeeded Integrity Capital Advisors,
Inc. as the Fund's investment adviser on March 3, 2000. Before that date,
Integrity Capital Advisors, Inc. had been the investment adviser since the
Fund's inception on April 15, 1999.
Subject to the direction of the Managers, Touchstone Advisors is responsible for
providing all supervisory and management services reasonably necessary for the
Fund's operation, other than those investment advisory services performed by the
sub-adviser. These services include, but are not limited to:
9
<PAGE>
(i) coordinating all matters relating to the functions of the
sub-adviser, custodian, accountants, attorneys, and other parties
performing services or operational functions for the Fund;
(ii) providing the Fund, at Touchstone Advisor's expense, with the
services of a sufficient number of persons competent to perform
such administrative and clerical functions as are necessary to
provide effective supervision and administration of the Fund;
(iii) making its officers and employees available to the Managers of the
Fund for consultation and discussions regarding the supervision
and administration of the Fund;
(iv) maintaining or supervising the maintenance by the sub-adviser or
third parties approved by the Fund of such books and records as
may be required by applicable federal or state law;
(v) preparing or supervising the preparation by third parties approved
by the Fund of all federal, state and local tax returns and
reports of the Fund required by applicable law;
(vi) preparing and arranging for the filing of such registration
statements and other documents with the SEC and other federal and
state regulatory authorities as may be required by applicable law;
(vii) taking such other action with respect to the Fund as may be
required by applicable law, including without limitation, the
rules and regulations of the SEC and other regulatory agencies;
and
(viii) providing the Fund, at Touchstone Advisor's expense, with adequate
personnel, office space, communications facilities, and other
facilities necessary for its operations as contemplated in the
investment advisory agreement.
Other responsibilities of Touchstone Advisors are described in the prospectus.
Touchstone Advisors is authorized to exercise full investment discretion and
make all determinations with respect to the investment of the Portfolios' assets
and the purchase and sale of securities for the Portfolios in the event that at
any time a sub-adviser is not engaged to manage the assets of the Portfolios.
The Portfolios pay Touchstone Advisors a monthly fee based on an annual rate of
.50% of each Portfolio's average daily net assets. Touchstone Advisors will pay
a portion of those fees to National Asset Management Corporation for its
services as sub-adviser to the Fund. In the event that at any particular time a
sub-adviser is not engaged, Touchstone Advisors will be entitled to keep the
entire fee, including the portion of the fee that would otherwise be paid to the
sub-adviser.
10
<PAGE>
For the fiscal year ended December 31, 1999, the Fund paid investment advisory
fees as follows:
<TABLE>
<CAPTION>
<S> <C>
Select Ten Plus Portfolio - June $986
Select Ten Plus Portfolio - September $548
Select Ten Plus Portfolio - December $ 1
-------
Total $1,535
</TABLE>
Touchstone Advisors has agreed to reimburse the Portfolios for operating
expenses (excluding management fees) which exceed an annual rate of .35% of
average net assets of the Portfolios. Touchstone Advisors has reserved the
right to withdraw or modify its policy of expense reimbursement for the
Portfolios, but has no current intention of doing so. For the fiscal period
ended December 31, 1999, expense reimbursements were as follows:
<TABLE>
<CAPTION>
<S> <C>
Select Ten Plus Portfolio - June $19,289
Select Ten Plus Portfolio - September $ 9,712
Select Ten Plus Portfolio - December $ 108
</TABLE>
THE SUB-ADVISER
National Asset Management Corporation (NATIONAL ASSET) serves as the sub-adviser
to the Portfolios and in that capacity provides investment advisory services for
the Portfolios, including security selection. Subject to the supervision of the
Board of Managers and Touchstone Advisors, National Asset will provide a
continuous investment program for the Portfolios and will determine the
composition of each Portfolio's assets, including determinations with respect to
the purchase, retention and sale of securities, cash and other investments
contained in the Portfolio's portfolio. National Asset will also provide
investment research and conduct a continuous program of evaluation, investment,
sales and reinvestment of the Portfolios' assets. National Asset will receive a
monthly fee for its services based on an annual rate of .10% of each Portfolio's
average daily net assets up to $100 million and .05% of each Portfolio's average
daily net assets in excess of $100 million. Touchstone Advisors has guaranteed
it or an affiliate will pay National Asset a minimum annual sub-advisory fee of
$50,000.
CUSTODIAN
State Street - Kansas City, 801 Pennsylvania, Kansas City, Missouri 64105, is
the Fund's custodian and is responsible for safeguarding its cash and
securities. The shares are held in book-entry form.
11
<PAGE>
INDEPENDENT AUDITOR
Ernst & Young LLP, One Kansas City Place, 1200 Main Street, Kansas City,
Missouri, 64105-2143, serves as the Fund's independent auditor. On an annual
basis, Ernst & Young LLP will audit certain financial statements prepared by
management and express an opinion on such financial statements based on its
audit.
SECTION 5 - PORTFOLIO TRANSACTIONS AND BROKERAGE
Investment decisions for the Portfolios are made by National Asset, subject to
the supervision of the Board of Managers and Touchstone Advisors. National Asset
has investment advisory clients other than the Portfolios. A particular security
may be bought or sold by National Asset for certain clients even though it could
have been bought or sold for other clients at the same time. In the event that
two or more clients simultaneously purchase or sell the same security, each
day's transactions in such security are, insofar as possible, allocated between
such clients in a manner deemed fair and reasonable by National Asset. Although
there is no specified formula for allocating such transactions, the various
allocation methods used by National Asset, and the results of such allocations,
are subject to the periodic review by Touchstone Advisors and the Managers.
National Asset places all orders for the purchase and sale of securities,
options, and futures contracts for the Portfolios through a substantial number
of brokers and dealers. In executing transactions, National Asset will attempt
to obtain the best execution for the Portfolios taking into account such factors
as price (including the applicable brokerage commission or dollar spread), size
of order, the nature of the market for the security, the timing of the
transaction, the reputation, experience and financial stability of the
broker-dealer involved, the quality of the service, the difficulty of execution
and operational facilities of the firms involved, and the firm's risk in
positioning a block of securities. In transactions on stock exchanges in the
United States, payments of brokerage commissions are negotiated. In effecting
purchases and sales of securities in transactions on U.S. stock exchanges for
the Portfolios, National Asset may pay higher commission rates than the lowest
available when National Asset believes it is reasonable to do so in light of the
value of the brokerage and research services provided by the broker effecting
the transaction, as described below. In the case of securities traded on the
over-the-counter markets, there is generally no stated commission, but the price
includes an undisclosed commission or markup.
It has for many years been a common practice in the investment advisory business
for advisers of investment companies and other institutional investors to
receive research services from broker-dealers who execute portfolio transactions
for the clients of such advisers. Consistent with this practice, National Asset
may receive research services for the Portfolios from many of the broker-dealers
with whom National Asset places the Portfolio's portfolio transactions. These
services, which in some cases may also be purchased for cash, include such
matters as general economic and security market reviews, industry and company
reviews, evaluations of securities and recommendations as to the purchase and
sale of securities. Some of these services may be of value to National Asset and
its affiliates in advising its various clients, including the Portfolios,
although not all of these services are necessarily useful and of value
12
<PAGE>
in managing the Portfolios. The sub-advisory fee paid by Touchstone Advisors to
National Asset is not reduced because National Asset and its affiliates receive
such services.
As permitted by Section 28(e) of the Securities Exchange Act of 1934, National
Asset may cause the Portfolios to pay a broker-dealer a disclosed commission for
effecting a securities transaction for the Portfolios in excess of the
commission which another broker-dealer would have charged for effecting that
transaction in recognition of the value of the "brokerage and research services"
provided by the broker-dealer. Brokerage and research services include (i)
furnishing advice as to the value of securities, the advisability of investing
in, purchasing or selling securities, and the availability of securities or
purchasers or sellers of securities, (ii) furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy, and the performance of accounts, and (iii) effecting
securities transactions and performing functions incidental thereto (E.G.,
clearance, settlement, and custody).
National Asset may place orders for the purchase and sale of exchange-listed
portfolio securities with a broker-dealer that is an affiliate of National Asset
where, in the judgment of National Asset, such firm will be able to obtain a
price and execution at least as favorable as other qualified brokers. Pursuant
to rules of the SEC, a broker-dealer that is an affiliate of the investment
adviser or sub-adviser, or, if it is also a broker-dealer, the sub-adviser, may
receive and retain compensation for effecting portfolio transactions for an
account on a national securities exchange of which the broker-dealer is a member
if the transaction is executed on the floor of the exchange by another broker
that is not an associated person of the affiliated broker-dealer or sub-adviser,
and if there is in effect a written contract between the sub-adviser and the
account expressly permitting the affiliated broker-dealer or sub-adviser to
receive and retain such compensation. The sub-advisory agreement provides that
National Asset may retain compensation on transactions effected for the
Portfolios in accordance with the terms of these rules.
SEC rules further require that commissions paid to such an affiliated
broker-dealer or sub-adviser by the account on exchange transactions not exceed
"usual and customary brokerage commission." The rules define usual and customary
commissions to include amounts which are "reasonable and fair compared to the
commission, fee or other remuneration received or to be received by other
brokers in connection with comparable transactions involving similar securities
being purchased or sold on a securities exchange during a comparable period of
time."
During the fiscal period ended December 31, 1999, the following brokerage
commissions were paid by each Portfolio:
<TABLE>
<CAPTION>
<S> <C>
Select Ten Plus Portfolio - June $548.45
Select Ten Plus Portfolio - September $391.45
Select Ten Plus Portfolio - December $ 50.10
---------
Total $990.00
</TABLE>
13
<PAGE>
SECTION 6 - PURCHASE, REDEMPTION, AND PRICING OF SHARES
The separate accounts of National Integrity Life Insurance Company may purchase
and redeem shares of each Portfolio on each day the New York Stock Exchange
(NYSE) is open for trading based on, among other things, the amount of premium
payments to be invested and surrendered and transfers to be effected on that day
pursuant to the relevant variable annuity contracts.
The Fund may suspend redemption privileges or postpone the date of payment
during the following periods:
(1) when the NYSE is closed (other than customary weekend or holiday
closings);
(2) when trading on the NYSE is restricted or an emergency exists as
determined by the SEC, so that disposal of the Fund's investments
or determination of net asset value is not reasonably practicable;
or
(3) for such other periods as the SEC, by order, may otherwise permit.
The net asset value of the shares of each Portfolio will be determined on each
day the NYSE is open for trading. The net assets are valued as of the close of
business of the NYSE, which currently is 4:00 p.m., Eastern time. Each
Portfolio's net asset value per share is calculated separately by dividing the
value of the securities held by the Portfolio plus any cash or other assets,
less its liabilities, by the number of outstanding shares. Equity securities are
valued each day at the close of business of the NYSE. Money market securities
are valued using the amortized cost method of valuation which approximates
market value. Under this method of valuation, the difference between the
acquisition cost and value at maturity is amortized by assuming a constant
(straight-line) accretion of a discount or amortization of a premium to
maturity. Cash, receivables and current payables are generally carried at their
face value.
SECTION 7 - 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"). However, as a limited
liability company whose membership interests are sold only to National Integrity
Life Insurance Company, the Fund is disregarded as an entity for purposes of
federal income taxation. The Fund does not pay federal income tax on its
interest income, dividend income and capital gains. Instead, National Integrity
Life Insurance Company, through its separate accounts, is treated as owning the
assets of the Fund directly and its tax obligations thereon are computed
pursuant to Subchapter L of the Code. Moreover, under current tax law, interest
income, dividend income and capital gains of the Fund are not currently taxable
to National Integrity Life Insurance Company or to variable annuity contract
owners when left to accumulate within a variable annuity contract. Tax
disclosure relating to variable annuity contracts that offer the Fund as an
underlying investment is contained in the prospectuses for those contracts.
14
<PAGE>
SECTION 8 - CALCULATION OF PERFORMANCE DATA
Each Portfolio may from time to time include the total return and yield of its
shares in advertisements or in other information furnished to contract holders.
Performance information is computed separately for each Portfolio in accordance
with the formulas described below. At any time in the future, total return and
yields may be higher or lower than in the past and there can be no assurance
that any historical results will continue. Any statement of a Portfolio's
performance will also disclose the performance of the separate account funding
the variable annuity contracts that invest in the Fund.
TOTAL RETURNS
Total returns reflect all aspects of a Portfolio's return, including the
automatic reinvestment by the Portfolio of all distributions. Quotations also
will assume a redemption at the end of the particular period.
AVERAGE ANNUAL TOTAL RETURNS are standardized and are calculated by determining
the growth or decline in the value of a hypothetical historical investment in a
Portfolio over 1, 5, and 10 years ( or for the life of the Portfolio), and then
calculating the annually compounded percentage rate that would have produced the
same result if the rate of growth or decline in value had been constant over the
period. Investors should realize that the Portfolio's performance is not
constant over time, but changes from year to year, and that the average annual
returns represent the averages of historical figures as opposed to the actual
historical performance of a Portfolio during any portion of the period
illustrated. Average annual returns are calculated pursuant to the following
formula:
P(1+T) TO THE POWER OF n = ERV
where P is a hypothetical initial payment of $1,000, T is the average annual
total return, n is the number of years, and ERV is the redemption value at the
end of the period.
Non-standardized average annual total returns will be calculated in a similar
manner except that they will assume an initial investment of $60,000 instead of
$1,000 and will be calculated for a 3 year period as well as 1, 5, and 10 years
(or for the life of the Portfolio). An assumed initial investment of $60,000
will be used because that figure more closely approximates the size of a typical
contract than does the $1,000 figure used in calculating the standardized
average annual total return quotations.
CUMULATIVE TOTAL RETURNS are non-standardized and unaveraged and reflect the
simple percentage change in the value of a hypothetical investment in a
Portfolio over a stated period of time. In addition to the period since
inception, cumulative total returns may be calculated on a year-to-date basis at
the end of each calendar month in the current calendar year. The last day of the
period for year-to-date returns is the last day of the most recent calendar
month at the time of publication.
15
<PAGE>
YIELD
The Portfolios may advertise yields. Yields quoted in advertising reflect the
change in value of a hypothetical investment in a Portfolio over a stated period
of time, not taking into account capital gains or losses. Yields are annualized
and stated as a percentage.
<TABLE>
<CAPTION>
All figures are unaudited.
Standardized Average Annual Total Return (1)
FOR THE PERIOD ENDED: 12/31/99
DIVISIONS INCEPTION DATE (2) SINCE
1 YEAR 5 YEAR INCEPTION
<S> <C> <C> <C> <C>
Select Ten Plus Division - March 3/31/00 N/a N/a N/a
Select Ten Plus Division - June 6/30/99 N/a N/a (8.97%)
Select Ten Plus Division - September 9/30/99 N/a N/a (5.63%)
Select Ten Plus Division - December 12/31/99 N/a N/a 0.34%
</TABLE>
(1) Standardized average annual total return reflects past fund performance
based on a $1,000 hypothetical investment over the period indicated. The
performance figures reflect the deduction of the mortality and expense
risk charge and administrative expenses totaling 1.35%, but exclude
deductions for applicable premium tax charges.
(2) Inception date of the Division represents first trade date. Returns for
Divisions in operation for less than one year aren't annualized.
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED 12/31/99 All figures are unaudited.
Non-Standardized Returns(1)
CUMULATIVE TOTAL RETURN AVERAGE ANNUAL RETURN CALENDAR YEAR
RETURN
INCEPTION1 YEAR 3 YEAR 5 YEAR 10 YEAR SINCE 1 YEAR 3 YEAR 5 YEAR 10 YEAR SINCE 1999
DATE INCEPTION INCEPTION
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Select Ten Plus 3/31/00 N/a N/a N/a N/a N/a N/a N/a N/a N/a N/a N/a
Division - March
Select Ten Plus 6/30/99 N/a n/a n/a n/a (8.97%) N/a n/a n/a n/a (8.97%) N/a
Division - June
Select Ten Plus 9/30/99 N/a n/a n/a n/a (5.63%) N/a n/a n/a n/a (5.63%) N/a
Division - September
Select Ten Plus 12/31/99 N/a n/a n/a n/a 0.34% N/a n/a n/a n/a 0.34% N/a
Division - December
</TABLE>
(1) Non-standardized returns reflect all historical investment results
based on a $60,000 hypothetical investment, less the mortality and
expense risk charge and administrative expenses totaling 1.35%.
PERFORMANCE COMPARISONS
Each Portfolio may from time to time include in reports and advertising the
ranking of its performance figures relative to such figures for groups of mutual
funds categorized by Lipper Analytical Services (LIPPER) as having the same or
similar investment objectives or by similar services that monitor the
performance of mutual funds. Each Portfolio may also from time to time compare
its performance to average mutual fund performance figures compiled by Lipper in
LIPPER PERFORMANCE ANALYSIS. Advertisements or information furnished to present
contract owners or prospective investors may also include evaluations of a
Portfolio published by
16
<PAGE>
nationally recognized ranking services and by financial publications that are
nationally recognized such as BARRON'S, BUSINESS WEEK, CDA TECHNOLOGIES, INC.,
CHANGING TIMES, CONSUMER'S DIGEST, DOW JONES INDUSTRIAL AVERAGE, FINANCIAL
PLANNING, FINANCIAL TIMES, FINANCIAL WORLD, FORBES, FORTUNE, GLOBAL INVESTOR,
HULBERT'S FINANCIAL DIGEST, INSTITUTIONAL INVESTOR, INVESTORS DAILY, MONEY,
MORNINGSTAR MUTUAL FUNDS, THE NEW YORK TIMES, PERSONAL INVESTOR, STANGER'S
INVESTMENT ADVISER, VALUE LINE, THE WALL STREET JOURNAL, WIESENBERGER INVESTMENT
COMPANY SERVICE, and USA TODAY.
The performance figures described above may also be used to compare the
performance of a Portfolio's shares against certain widely recognized standards
or indices for stock and bond market performance. The following are the indices
against which the Portfolios may compare performance:
The Standard & Poor's Composite Index of 500 Stocks (S&P 500) is a market
value-weighted and unmanaged index showing the changes in the aggregate market
value of 500 stocks relative to the base period 1941-43. The S&P 500 is composed
almost entirely of common stocks of companies listed on the NYSE, although the
common stocks of a few companies listed on the American Stock Exchange or traded
OTC are included. The 500 companies represented include 381 industrial, 37
utility, 11 transportation and 71 financial services concerns. The S&P 500
represents about 80% of the market value of all issues traded on the NYSE.
The Dow Jones Composite Average (or its component averages) is an unmanaged
index composed of 30 blue-chip industrial corporation stocks (Dow Jones
Industrial Average), 15 utilities company stocks and 20 transportation stocks.
Comparisons of performance assume reinvestment of dividends.
The NYSE composite or component indices are unmanaged indices of all industrial,
utilities, transportation and finance company stocks listed on the NYSE.
The Wilshire 5000 Equity Index (or its component indices) represents the return
of the market value of all common equity securities for which daily pricing is
available. Comparisons of performance assume reinvestment of dividends.
The Morgan Stanley Capital International EAFE Index is an arithmetic, market
value-weighted average of the performance of over 900 securities on the stock
exchanges of countries in Europe, Australia and the Far East.
The Morgan Stanley Capital International World Index is an arithmetic, market
value-weighted average of the performance of over 1,470 securities listed on the
stock exchanges of countries in Europe, Australia, the Far East, Canada and the
United States.
The National Association of Securities Dealers Automated Quotation System
(NASDAQ) Composite Index covers 4,500 stocks traded over the counter. It
represents many small company stocks but is heavily influenced by about 100 of
the largest NASDAQ stocks. It is a value-weighted index calculated on price
change only and does not include income.
17
<PAGE>
The NASDAQ Industrial Index is composed of more than 3,000 industrial issues. It
is a value-weighted index calculated on price change only and does not include
income.
The Value Line (Geometric) Index is an unweighted index of the approximately
1,700 stocks followed by the VALUE LINE INVESTMENT SURVEY.
The 50/50 Index assumes a static mix of 50% of the S&P 500 and 50% of the Lehman
Brothers Government/Corporate Bond Index.
Other Composite Indices: 70% S&P 500 and 30% NASDAQ Industrial Index; 35% S&P
500 and 65% Salomon Brothers High Grade Bond Index; and 65% S&P 500 and 35%
Salomon Brothers High Grade Bond Index.
The Russell 2000/Small Stock Index comprises the smallest 2000 stocks in the
Russell 3000 Index, and represents approximately 11% of the total U.S. equity
market capitalization. The Russell 3000 Index comprises the 3,000 largest U.S.
companies by market capitalization. The smallest company has a market value of
roughly $20 million.
The Russell 2500 Index is comprised of the bottom 500 stocks in the Russell 1000
Index which represents the universe of stocks from which most active money
managers typically select; and all the stocks in the Russell 2000 Index. The
largest security in the index has a market capitalization of approximately 1.3
billion.
The Consumer Price Index (or Cost of Living Index) published by the United
States Bureau of Labor Statistics is a statistical measure of change, over time,
in the price of goods and services in major expenditure groups.
STOCKS, BONDS, BILLS AND INFLATION, published by Hobson Associates, presents an
historical measure of yield, price and total return for common and small company
stocks, long-term government bonds, Treasury bills and inflation.
Savings and Loan Historical Interest Rates as published in the United States
Savings & Loan League Fact Book.
Historical data supplied by the research departments of First Boston
Corporation, the J.P. Morgan companies, Salomon Brothers, Merrill Lynch, Pierce,
Fenner & Smith, Shearson Lehman Hutton and Bloomberg L.P.
The MSCI Combined Far East Free ex Japan Index is a market-capitalization
weighted index comprising stocks in Hong Kong, Indonesia, Korea, Malaysia,
Philippines, Singapore and Thailand. Korea is included in the MSCI Combined Far
East Free ex Japan Index at 20% of its market capitalization.
18
<PAGE>
SECTION 9 - FINANCIAL STATEMENTS
The Fund's financial statements for the fiscal period ended December 31, 1999,
which are included in this SAI, have been audited by Ernst & Young, LLP as set
forth in its report.
19
<PAGE>
Report of Independent Auditors
The Unit Holders and Board of Directors
Select Ten Plus Fund, LLC
We have audited the accompanying statements of assets and liabilities of Select
Ten Plus Fund, LLC (the "Fund") (comprised of Select Ten Plus Portfolio-June,
Select Ten Plus Portfolio-September and Select Ten Plus Portfolio-December),
including the schedules of investments, as of December 31, 1999, and the related
statements of operations and changes in net assets and financial highlights for
each of the periods indicated therein. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned at December 31, 1999, by correspondence with
the custodian and broker. As to certain securities relating to uncompleted
transactions, we performed other auditing 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 audit provides 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 each
of the portfolios of the Fund at December 31, 1999, and the results of their
operations, changes in their net assets, and financial highlights for each of
the periods indicated therein in conformity with accounting principles generally
accepted in the United States.
ERNST & YOUNG LLP
Kansas City, Missouri
January 28, 2000
3
<PAGE>
Select Ten Plus Portfolio - June
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-----------------
<S> <C>
ASSETS
Investments in securities, at value (cost $327,749)--See accompanying schedule $ 294,918
Cash 7,438
Dividends, interest and other receivables 11,932
----------------
TOTAL ASSETS 314,288
LIABILITIES
Accrued expenses 8,167
----------------
TOTAL LIABILITIES 8,167
----------------
NET ASSETS $ 306,121
================
Net Assets consist of:
Paid-in capital $ 342,258
Undistributed net investment income 3,550
Accumulated net realized loss on investments (6,856)
Net unrealized depreciation on investments (32,831)
----------------
NET ASSETS $ 306,121
================
UNIT VALUE, offering and redemption price per unit $ 9.10
================
Units outstanding 33,627
================
</TABLE>
Statement of Operations
<TABLE>
<CAPTION>
JUNE 30, 1999
(COMMENCEMENT OF
OPERATIONS) THROUGH
DECEMBER 31, 1999
-------------------
<S> <C>
INVESTMENT INCOME - DIVIDENDS $ 5,222
EXPENSES
Custody and accounting expenses 10,162
Directors' fees and expenses 3,150
Professional fees 2,521
Errors and omissions insurance 1,851
Printing and filing fees 1,662
Investment advisory and management fees 986
Other expenses 629
-------------------
Total expenses before reimbursement
Less: expense reimbursement (19,289)
-------------------
Net expenses 1,672
-------------------
Net investment income 3,550
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss on investment securities (6,856)
Net unrealized depreciation during the period on investments (32,831)
-------------------
Net realized and unrealized loss on investments (39,687)
-------------------
Net decrease in net assets resulting from operations $ (36,137)
===================
</TABLE>
SEE ACCOMPANYING NOTES.
4
<PAGE>
Select Ten Plus Portfolio - June
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
JUNE 30, 1999
(COMMENCEMENT OF
OPERATIONS) THROUGH
DECEMBER 31, 1999
-------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 3,550
Net realized loss on investments (6,856)
Net unrealized depreciation during the period on investments (32,831)
-------------------
Net decrease in net assets resulting from operations (36,137)
Contract related transactions:
Contributions from contract holders (47,905 units) 480,220
Cost of units redeemed (14,278 units) (137,962)
-------------------
Net increase in net assets resulting from unit transactions 342,258
-------------------
Total increase in net assets 306,121
NET ASSETS
Beginning of period --
-------------------
End of period (including undistributed net investment income of $3,550) $ 306,121
===================
SEE ACCOMPANYING NOTES.
</TABLE>
Financial Highlights
<TABLE>
<CAPTION>
JUNE 30, 1999
(COMMENCEMENT OF
OPERATIONS) THROUGH
DECEMBER 31, 1999
-------------------
<S> <C>
SELECTED PER-UNIT DATA
Unit value, beginning of period $ 10.00
Loss from investment operations:
Net investment income 0.11
Net realized and unrealized loss on investments (1.01)
-------------------
Total from investment operations (0.90)
-------------------
Unit value, end of period $ 9.10
===================
TOTAL RETURN (8.97%)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $ 306
Ratio of net investment income to average net assets 1.80%
Ratio of expenses to average net assets 0.85%
Ratio of net investment loss to average net assets before voluntary expense reimbursement (7.98%)
Ratio of expenses to average net assets before voluntary expense reimbursement 10.63%
Portfolio turnover rate 49%
</TABLE>
PERCENTAGE AMOUNTS ARE ANNUALIZED, EXCEPT TOTAL RETURN AND PORTFOLIO TURNOVER
RATE.
5
<PAGE>
Select Ten Plus Portfolio - June
Schedule of Investments
December 31, 1999
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- -----------
<S> <C> <C>
COMMON STOCKS (100.0%)
BASIC MATERIALS (27.2%)
Du Pont (E.I.) de Nemours and Company 541 $ 35,638
Exxon Mobil Corporation 555 44,712
-----------
80,350
CAPITAL GOODS (22.2%)
Caterpillar Inc. 529 24,896
Minnesota Mining and Manufacturing Company 415 40,618
-----------
65,514
CONSUMER CYCLICAL (29.6%)
Eastman Kodak Company 528 34,980
General Motors Corporation 517 37,579
The Goodyear Tire & Rubber Company 520 14,658
-----------
87,217
CONSUMER STAPLE (5.4%)
Philip Morris Companies, Inc. 691 16,023
ENERGY (10.9%)
Chevron Corporation 371 32,138
FINANCIAL (4.7%)
J.P. Morgan & Company, Inc. 108 13,676
-----------
TOTAL COMMON STOCKS (Cost $327,749) 294,918
===========
TOTAL INVESTMENTS (100.0%) $ 294,918
===========
</TABLE>
OTHER INFORMATION:
Cost of purchases and proceeds from sales of securities, excluding
short-term securities, for the period ended December 31, 1999 aggregated
$522,748 and $188,143, respectively. At December 31, 1999, net unrealized
depreciation for tax purposes aggregated $32,831 of which $9,443 related
to appreciated investments and $42,274 related to depreciated
investments. The aggregate cost of investments was the same for book and
tax purposes.
SEE ACCOMPANYING NOTES.
6
<PAGE>
Select Ten Plus Portfolio - September
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
DECEMBER 31, 1999
---------------------
ASSETS
<S> <C>
Investments in securities, at value (cost $441,243)--See accompanying schedule $ 413,750
Cash 15,872
Dividends, interest and other receivables 1,596
---------------------
TOTAL ASSETS 431,218
LIABILITIES
Accrued expenses 12,935
---------------------
TOTAL LIABILITIES 12,935
---------------------
NET ASSETS $ 418,283
=====================
Net assets consist of:
Paid-in capital $ 443,384
Undistributed net investment income 2,392
Net unrealized depreciation on investments (27,493)
---------------------
NET ASSETS $ 418,283
=====================
UNIT VALUE, offering and redemption price per unit $ 9.44
=====================
Units outstanding 44,323
=====================
</TABLE>
Statement of Operations
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
(COMMENCEMENT OF
OPERATIONS) THROUGH
DECEMBER 31, 1999
----------------------
<S> <C>
INVESTMENT INCOME - DIVIDENDS $ 3,324
EXPENSES
Custody and accounting expenses 5,136
Directors' fees and expenses 1,592
Professional fees 1,274
Errors and omissions insurance 936
Printing and filing fees 840
Investment advisory and management fees 548
Other expenses 318
----------------------
Total expenses before reimbursement 10,644
Less: expense reimbursement (9,712)
----------------------
Net expenses 932
----------------------
Net investment income 2,392
UNREALIZED LOSS ON INVESTMENTS
Net unrealized depreciation during the period on investments (27,493)
----------------------
Net decrease in net assets resulting from operations $ (25,101)
======================
SEE ACCOMPANYING NOTES.
</TABLE>
7
<PAGE>
Select Ten Plus Portfolio - September
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
(COMMENCEMENT OF
OPERATIONS) THROUGH
DECEMBER 31, 1999
-------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 2,392
Net unrealized depreciation during the period on investments (27,493)
-------------------
Net decrease in net assets resulting from operations (25,101)
Contract related transactions:
Contributions from contract holders (44,619 units) 446,220
Cost of units redeemed (296 units) (2,836)
-------------------
Net increase in net assets resulting from unit transactions 443,384
-------------------
Total increase in net assets 418,283
NET ASSETS
Beginning of period --
-------------------
End of period (including undistributed net investment income of $2,392) $ 418,283
===================
SEE ACCOMPANYING NOTES.
</TABLE>
Financial Highlights
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
(COMMENCEMENT OF
OPERATIONS) THROUGH
DECEMBER 31, 1999
-------------------
<S> <C>
SELECTED PER-UNIT DATA $ 10.00
Unit value, beginning of period
Loss from investment operations:
Net investment income 0.05
Net unrealized loss on investments (0.61)
-------------------
Total from investment operations (0.56)
-------------------
Unit value, end of period $ 9.44
===================
TOTAL RETURN (5.63%)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $ 418
Ratio of net investment income to average net assets 2.18%
Ratio of expenses to average net assets 0.85%
Ratio of net investment loss to average net assets before voluntary expense
reimbursements (6.68%)
Ratio of expenses to average net assets before voluntary expense reimbursement 9.71%
Portfolio turnover rate 0%
</TABLE>
PERCENTAGE AMOUNTS ARE ANNUALIZED, EXCEPT TOTAL RETURN AND PORTFOLIO TURNOVER
RATE.
8
<PAGE>
<TABLE>
<CAPTION>
Select Ten Plus Portfolio - September
Schedule of Investments
December 31, 1999
NUMBER
OF SHARES VALUE
-------------- ---------------
<S> <C> <C>
COMMON STOCKS (100.0%)
BASIC MATERIALS (11.4%)
Du Pont (E.I.) de Nemours and Company 719 $ 47,364
CAPITAL GOODS (20.0%)
Caterpillar Inc. 795 37,415
Minnesota Mining and Manufacturing Company 465 45,512
---------------
82,927
CONSUMER CYCLICAL (28.4%)
Eastman Kodak Company 591 39,154
General Motors Corporation 712 51,753
The Goodyear Tire & Rubber Company 927 26,130
---------------
117,037
CONSUMER STAPLE (17.9%)
Sears, Roebuck and Company 1,464 44,560
Philip Morris Companies, Inc. 1,269 29,425
---------------
73,985
ENERGY (10.4%)
Chevron Corporation 497 43,053
FINANCIAL (11.9%)
J.P. Morgan & Company, Inc. 390 49,384
---------------
TOTAL COMMON STOCKS (Cost $441,243) 413,750
---------------
TOTAL INVESTMENTS (100.0%) $ 413,750
===============
</TABLE>
OTHER INFORMATION:
Cost of purchases of securities, excluding short-term securities, for the
period ended December 31, 1999 aggregated $441,243. At December 31, 1999,
net unrealized depreciation for tax purposes aggregated $27,493 of which
$17,790 related to appreciated investments and $45,283 related to
depreciated investments. The aggregate cost of investments was the same
for book and tax purposes.
SEE ACCOMPANYING NOTES.
9
<PAGE>
<TABLE>
<CAPTION>
Select Ten Plus Portfolio - December
Statement of Assets and Liabilities
DECEMBER 31, 1999
-----------------
<S> <C>
ASSETS
Investments in securities, at value (cost $59,094)--See accompanying schedule $ 59,302
Cash 62,086
Receivable from advisor 108
-----------------
TOTAL ASSETS 121,496
LIABILITIES
Payable for investments purchased 59,094
Accrued expenses 109
-----------------
TOTAL LIABILITIES 59,203
-----------------
NET ASSETS $ 62,393
=================
Net assets consist of:
Paid-in capital $ 62,086
Accumulated net loss (1)
Net unrealized appreciation on investments 208
-----------------
NET ASSETS $ 62,293
=================
UNIT VALUE, offering and redemption price per unit $ 10.03
=================
Units outstanding 6,208
=================
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
FOR THE ONE DAY
PERIOD ENDED
DECEMBER 31, 1999
(COMMENCEMENT
OF OPERATIONS)
-----------------
<S> <C>
INVESTMENT INCOME - DIVIDENDS $ -
EXPENSES
Custody and accounting expenses 55
Directors' fees and expenses 17
Professional fees 14
Printing and filing fees 9
Investment advisory and management fees 1
Other expenses 13
-----------------
Total expenses before reimbursement 109
-----------------
Less: expense reimbursement (108)
-----------------
Net expenses 1
-----------------
Net investment loss (1)
UNREALIZED GAIN ON INVESTMENTS
Net unrealized appreciation during the period on investments 208
-----------------
Net increase in net assets resulting from operations $ 207
=================
SEE ACCOMPANYING NOTES.
</TABLE>
10
<PAGE>
Select Ten Plus Portfolio - December
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
FOR THE ONE DAY
PERIOD ENDED
DECEMBER 31, 1999
(COMMENCEMENT
OF OPERATIONS)
-----------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment loss $ (1)
Net unrealized appreciation during the period on investments 208
-----------------
Net increase in net assets resulting from operations 207
Contract related transactions:
Contributions from contract holders (6,208 units) 62,086
-----------------
Total increase in net assets 62,293
NET ASSETS
Beginning of period -
-----------------
End of period (including accumulated net loss of $1) $ 62,293
=================
SEE ACCOMPANYING NOTES.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
FOR THE ONE DAY
PERIOD ENDED
DECEMBER 31, 1999
(COMMENCEMENT
OF OPERATIONS)
-----------------
<S> <C>
SELECTED PER-UNIT DATA
Unit value, beginning of period
Income from investment operations: $ 10.00
Net investment income -
Net unrealized gain on investments 0.03
-----------------
Total from investment operations 0.03
-----------------
Unit value, end of period $ 10.03
=================
TOTAL RETURN 0.34%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $ 62
Ratio of net investment loss to average net assets (0.50%)
Ratio of expenses to average net assets 0.50%
Ratio of net investment loss to average net assets before voluntary expense
reimbursements (54.50%)
Ratio of expenses to average net assets before voluntary expense reimbursement 54.50%
Portfolio turnover rate 0%
</TABLE>
PERCENTAGE AMOUNTS ARE ANNUALIZED, EXCEPT TOTAL RETURN AND PORTFOLIO TURNOVER
RATE.
11
<PAGE>
<TABLE>
<CAPTION>
Select Ten Plus Portfolio - December
Schedule of Investments
December 31, 1999
NUMBER
OF SHARES VALUE
------------- -----------
<S> <C> <C>
COMMON STOCKS (100.0%)
BASIC MATERIALS (30.3%)
Du Pont (E.I.) de Nemours and Company 90 $ 5,929
Exxon Mobil Corporation 74 5,962
International Paper Company 107 6,039
-----------
17,930
CAPITAL GOODS (20.1%)
Caterpillar Inc. 127 5,977
Minnesota Mining and Manufacturing Company 61 5,970
-----------
11,947
COMMUNICATIONS SERVICES (10.0%)
SBC Communications, Inc. 122 5,947
CONSUMER CYCLICAL (20.0%)
Eastman Kodak Company 89 5,896
General Motors Corporation 82 5,960
-----------
11,856
CONSUMER STAPLE (9.8%)
Philip Morris Companies, Inc. 250 5,797
FINANCIAL (9.8%)
J.P. Morgan & Company, Inc. 46 5,825
-----------
TOTAL COMMON STOCKS (Cost $59,094) 59,302
-----------
TOTAL INVESTMENTS (100.0%) $ 59,302
===========
</TABLE>
OTHER INFORMATION:
Cost of purchases of securities, excluding short-term securities, for the
period ended December 31, 1999 aggregated $59,094. At December 31, 1999,
net unrealized appreciation for tax purposes aggregated $208 of which $351
related to appreciated investments and $143 related to depreciated
investments. The aggregate cost of investments was the same for book and
tax purposes.
SEE ACCOMPANYING NOTES.
12
<PAGE>
Select Ten Plus Fund, LLC
Notes to Financial Statements
December 31, 1999
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Select Ten Plus Fund, LLC (the "Fund") was formed as of September 30, 1998. The
Fund is registered under the Investment Company Act of 1940 as a
non-diversified, open-end management investment company. Contributions to the
Fund are presently limited to PINNACLE contract holders. PINNACLE is a flexible
premium variable annuity product issued by National Integrity Life Insurance
Company ("National Integrity"). National Integrity is a wholly-owned subsidiary
of Integrity Life Insurance Company ("Integrity"). The Fund is currently divided
into four portfolios: Select Ten Plus Portfolio-March, Select Ten Plus
Portfolio-June, Select Ten Plus Portfolio-September, and Select Ten Plus
Portfolio-December (the "Portfolio(s)"). Each Portfolio is a non-diversified
investment company which invests directly in securities. The Portfolios seek
total return by acquiring the ten highest yielding stocks in the Dow Jones
Industrial Average in equal weights and holding them for approximately twelve
months. To the extent any of the ten highest yielding stocks qualifying for a
Portfolio are reasonably believed to receive 15% or more of their revenues from
securities-related activities, the Portfolio will allocate a maximum of 5% of
its assets to each of those stocks, and will allocate the remainder of its
assets among the remaining stocks not so limited. The Fund has applied to the
Securities and Exchange Commission for exemptive relief from this limitation,
but there is no assurance as to when or if it will be granted. Each Portfolio is
open for new investments on only one day of each year. The twelve month holding
period begins on the last business day of the month for which the Portfolio is
named. For example, the Select Ten Plus Portfolio-June invests only on the last
business day of June each year. The assets of the Fund are owned by National
Integrity. As of December 31, 1999 the Select Ten Plus Portfolio-March was the
only Portfolio that did not have invested assets.
ARM Securities Corporation ("ARM Securities"), a registered broker-dealer under
the Securities Exchange Act of 1934 and a member of the National Association of
Securities Dealers, Inc., distributes units of the Fund. Integrity Capital
Advisors, Inc. ("Integrity Capital"), an investment adviser registered under the
Investment Advisers Act of 1940, provides management services to the Fund
pursuant to a management agreement. National Asset Management Corporation
("National Asset"), an investment adviser registered under the Investment
Advisers Act of 1940, serves as the sub-adviser of the Portfolios pursuant to a
sub-advisory agreement.
ARM Financial Group, Inc. ("ARM") is the ultimate parent of National Integrity,
Integrity Capital and ARM Securities. ARM provides retirement savings and
investment products through its insurance company subsidiaries.
13
<PAGE>
Select Ten Plus Fund, LLC
Notes to Financial Statements (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
At December 31, 1999, ARM had approximately $4.8 billion of assets under
management.
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") for investment companies.
SECURITY VALUATION
Common stocks are valued at the last sale price on the exchange on which they
are primarily traded.
SECURITY TRANSACTIONS
Securities transactions are accounted for as of trade date net of brokerage
fees, commissions and transfer fees. Interest income is accrued daily. Dividend
income is recorded on the ex-dividend date. Realized gains and losses on sales
of investments are determined on the basis of the first-in, first-out method for
all of the Portfolios.
FEDERAL INCOME TAX MATTERS
The Fund is a limited liability company with all its interests owned by National
Integrity. Accordingly, the Fund is taxed as part of the operations of National
Integrity and is not taxed separately.
USE OF ESTIMATES
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ
from those estimates.
2. INVESTMENT ADVISORY AGREEMENTS AND PAYMENTS TO RELATED PARTIES
Integrity Capital serves as investment adviser of the Portfolios and National
Asset serves as the sub-adviser of the Portfolios. For providing investment
management services to the Portfolios, Integrity Capital receives a monthly fee
based on an annual rate of .50% of each Portfolio's average daily net assets.
Integrity Capital, not the Fund, pays sub-advisory fees to National Asset
14
<PAGE>
Select Ten Plus Fund, LLC
Notes to Financial Statements (Continued)
2. INVESTMENT ADVISORY AGREEMENTS AND PAYMENTS TO RELATED PARTIES (CONTINUED)
based on the combined average daily net assets of the Portfolios and the
Divisions that comprise Separate Account Ten of Integrity Life Insurance Company
(collectively, the "net asset base"). Fees under the sub-advisory agreement are
paid at an annual rate of .10% of the net asset base up to $100 million and .05%
of the net asset base in excess of $100 million. Integrity Capital has agreed to
reimburse each Portfolio for operating expenses (excluding management fees)
above an annual rate of 0.35% of the Portfolios' average net assets.
Certain officers and directors of the Fund are also officers of ARM, ARM
Securities, Integrity Capital Advisors, and National Integrity. The Fund does
not pay any amounts to compensate these individuals.
3. EVENTS RELATING TO ARM, INTEGRITY AND NATIONAL INTEGRITY
On July 29, 1999, ARM announced that it was restructuring its institutional
business and positioning its retail business and technology operations for the
sale of ARM or its businesses or its assets. Following the July 29, 1999
announcement, the ratings of ARM and Integrity were significantly lowered
several times by four major rating agencies, materially and adversely affecting
Integrity's ability to market and maintain persistency of retail products. As a
result, ARM sought protection with respect to its insurance subsidiary,
Integrity, from the Ohio Department of Insurance. Integrity is domiciled in
Ohio. On August 20, 1999, Integrity consented to a Supervision Order issued by
the Ohio Department of Insurance, which remains in effect. Unless the Ohio
Department of Insurance begins proceedings for the appointment of a
rehabilitator or liquidator, the Supervision Order will automatically be
extended for successive 60-day periods until written notice is given to
Integrity ending the supervision. National Integrity, which is domiciled in New
York, was not affected by the supervision order.
This regulatory action is intended to ensure an orderly process for addressing
the financial obligations of Integrity and to protect the interests of its
individual policyholders. Integrity will continue payments of death benefits,
previously scheduled systematic withdrawals, previously scheduled immediate
annuity payments, and agent commissions, but must receive written consent from
the Ohio Department of Insurance for other payments. In particular, the
Supervision Order suspends the processing of surrenders of fixed annuity
policies except in cases of approved hardship. The Supervision Order does not
affect the surrender of variable annuity contracts, including the contracts
through which the Portfolios of the Fund are offered.
On December 17, 1999 ARM Financial Group, Inc. announced that it had signed a
definitive agreement whereby Western and Southern Life Insurance Company
(Western and Southern) would acquire the ARM's insurance subsidiaries, Integrity
and National Integrity.
15
<PAGE>
3. EVENTS RELATING TO ARM, INTEGRITY AND NATIONAL INTEGRITY (CONTINUED)
Western and Southern is part of the Western-Southern Enterprise, a financial
services group which also includes Western-Southern Life Assurance Company,
Columbus Life Insurance Company, Touchstone Advisors, Inc., Fort Washington
Investment Advisors, Inc., Todd Investment Advisors, Inc., Countrywide Financial
Services, Capital Analysts Incorporated and Eagle Realty Group, Inc. Assets
owned or under management by the group exceed $20 billion. Western and Southern
is rated A++ (Superior) by A.M. Best, AAA (Highest) by Duff & Phelps, AAA
(Extremely Strong) by Standard & Poor's, and Aa2 (Excellent) by Moody's.
The acquisition of the insurance companies by Western and Southern is being
implemented in a chapter 11 case filed by ARM under the U.S. Bankruptcy Code.
The closing of the transaction is subject to the approval of the Ohio Department
of Insurance, the New York Department of Insurance, and the Bankruptcy Court, as
well as to other customary conditions to closing. The transaction is expected to
close late in the first quarter of 2000; however, there can be no assurance as
to obtaining the required approvals or the timing of the closing of the
transaction.
Integrity Capital will not be acquired by Western and Southern. Accordingly, it
is contemplated that Integrity Capital will assign the current management
agreement between Integrity Capital and the Fund to Touchstone Advisers, Inc.,
an indirect wholly-owned subsidiary of Western and Southern. The assignment of
the management agreement will automatically terminate the agreement, and will
also terminate the current sub-advisory agreement between the Fund and National
Asset.
The Board of Managers of the Fund will be asked to approve new management and
sub-advisory agreements and a participation agreement for the Fund. These new
agreements will be subject to shareholder approval. The new management and
sub-advisory agreements are expected to contain the same material terms as the
current management and sub-advisory agreements. It is anticipated that the
shareholders meeting will occur early in the second quarter of 2000.
16
<PAGE>
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS
(a) Certificate of Formation of Select Ten Plus Fund, LLC*
(b) Form of Operating Agreement (Rules and Regulations) of Select Ten Plus
Fund, LLC*
(c) Not applicable
(d) (1) Form of Management Agreement between Select Ten Plus Fund, LLC and
Touchstone Advisors, Inc.
(d) (2) Form of Sub-Advisory Agreement between Touchstone Advisors, Inc.
and National Asset Management Corporation
(e) Not applicable
(f) Not applicable
(g) Form of Custody, Recordkeeping and Agency Agreement between Select Ten
Plus Fund, LLC and Investors Fiduciary Trust Company**
(h) Form of Participation Agreement between Select Ten Plus Fund, LLC,
Touchstone Advisors, Inc. and National Integrity Life Insurance
Company, dated as of March 3, 2000
(i) Opinion of Counsel**
(j) Consent of Ernst & Young, LLP
(k) Not applicable
(l) Not applicable
(m) Not applicable
(n) Not applicable
(o) Not applicable
(p) Code of Ethics
*Incorporated by reference to Registrant's initial registration statement on
Form N-1A (File No. 333-69843) filed on December 28, 1998.
**Incorporated by reference to Registrant's pre-effective amendment no. 1 to the
registration statement on Form N-1A (File No. 333-69843) filed on April 6, 1999.
C-1
<PAGE>
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND
Separate Account II of National Integrity Life Insurance Company (NATIONAL
INTEGRITY) owns all of the outstanding membership interests of Registrant.
Shares are voted by National Integrity in accordance with instructions received
from its variable annuity contract owners who allocate contributions to the
Fund.
Integrity Life Insurance Company (INTEGRITY), an Ohio stock life
corporation, owns 100% of the voting securities of National Integrity, a New
York stock life corporation. The voting securities of Integrity are 100% owned
by The Western and Southern Life Insurance Company, a mutual life insurance
company originally organized under the laws of the State of Ohio on February 23,
1888.
ITEM 25. INDEMNIFICATION
ARTICLES OF ORGANIZATION OF THE FUND. The Articles of Organization of the
Fund provide in substance that no director or officer of the Fund shall be
liable to the Fund or its shareholders for money damages, unless the director or
officer is subject to liability by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of duties in the conduct of his or her
office.
RULES AND REGULATIONS OF THE FUND. The Rules and Regulations of the Fund
provide for the indemnification of present and former officers and directors of
the Fund against liability by reason of service to the Fund, unless the officer
or director is subject to liability by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his or her office (DISABLING CONDUCT). No indemnification shall be made to an
officer or director unless there has been a final adjudication on the merits, a
dismissal of a proceeding for insufficiency of evidence of Disabling Conduct, or
a reasonable determination has been made that no Disabling Conduct occurred. The
Fund may advance payment of expenses only if the officer or director to be
indemnified undertakes to repay the advance unless indemnification is made and
if one of the following applies: the officer or director provides a security for
his or her undertaking, the Fund is insured against losses from any lawful
advances, or a reasonable determination has been made that there is reason to
believe the officer or director ultimately will be entitled to indemnification.
INSURANCE. The directors and officers of the Fund, Integrity Capital, as
investment adviser, are insured under a policy issued by American International
Specialty Lines Insurance Company. The annual limit on such policy is $2
million.
AGREEMENTS. The Fund, including each director, officer and controlling
person of the Fund, is entitled to indemnification against certain liabilities
as described in Article VIII of the Participation Agreement filed as Exhibit (h)
to this Registration Statement, except that the Fund may not indemnify
directors, officers and controlling persons who are its Affiliated persons, as
defined in Section 2(a)(3) of the 1940 Act.
UNDERTAKING. Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, 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 director, officer, or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, 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.
C-2
<PAGE>
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Touchstone Advisors, Inc. (TOUCHSTONE ADVISORS), the Fund's investment
adviser, is a registered investment adviser providing individual discretionary
investment management services and investment advisory services to various
categories of institutional and individual clients. The following list sets
forth the business and other connections of the directors and executive officers
of Touchstone. The addresses of the corporations listed are shown in the table
below.
(1) Jill T. McGruder, President and a Director of Touchstone Advisors
(a) President of Touchstone Series Trust and Touchstone Variable
Series Trust
(b) A Trustee of Touchstone Strategic Trust, Touchstone Investment
Trust and Touchstone Tax-Free Trust.
(c) President, Chief Executive Officer and a Director of IFS Financial
Services, Inc. and Touchstone Securities, Inc.
(d) A Director of CS Holdings, Inc., Intrust Fund Solutions, Inc., IFS
Fund Distributors, Inc., Ft. Washington Brokerage Services, Inc.
and Capital Analysts Incorporated
(e) President and a Director of IFS Agency Services, Inc., IFS
Insurance Agency, Inc. and IFS Systems, Inc.
(f) Senior Vice President of The Western-Southern Life Insurance
Company
(2) Teresa A. Siegel, Vice President and Chief Financial Officer of
Touchstone Advisors
(a) Chief Financial Officer of IFS Financial Services, Inc.
(3) Patricia J. Wilson, Chief Compliance Officer of Touchstone Advisors
(a) Chief Compliance Officer of Touchstone Securities, Inc.
(b) Director of Compliance of IFS Financial Services, Inc.
(4) Donald J. Wuebbling, a Director of Touchstone Advisors
(a) Director of Touchstone Securities, Inc.
(b) Vice President and General Counsel of The Western and Southern
Life Insurance Company
(5) James N. Clark, a Director of Touchstone Advisors
(a) Director of Touchstone Securities, Inc.
(b) Executive Vice President and Director of The Western and Southern
Life Insurance Company
(6) William F. Ledwin, a Director of Touchstone Advisors
(a) A Director of CS Holdings, Inc., Intrust Fund Solutions, Inc., IFS
Fund Distributors, Inc., Ft. Washington Brokerage Services, Inc.,
IFS Agency Services, Inc., Capital Analysts Incorporated, IFS
Insurance Agency, Inc., Touchstone Securities, Inc., IFS
Financial Services, Inc., IFS Systems, Inc. and Eagle Realty
Group, Inc.
C-3
<PAGE>
(b) President and a Director of Fort Washington Investment Advisors,
Inc.
(c) Vice President and Chief Investment Officer of Columbus Life
Insurance Company
(d) Senior Vice President and Chief Investment Officer of The
Western-Southern Life Insurance Company
<TABLE>
<CAPTION>
------------------------------------- ----------------------------------- -----------------------------------
ADDRESS CORPORATION PRINCIPAL BUSINESS
------------------------------------- ----------------------------------- -----------------------------------
<S> <C> <C>
311 Pike Street Cincinnati OH IFS Financial Services, Inc. Holding company
IFS Agency Services, Inc. Insurance agency
IFS Insurance Agency, Inc. Insurance agency
IFS Systems, Inc. Information systems provider
Touchstone Advisors, Inc. Investment advisor
Touchstone Series Trust Investment company
Touchstone Variable Series Trust Investment company
Touchstone Securities, Inc. Broker-dealer
------------------------------------- ----------------------------------- -----------------------------------
312 Walnut Street Cincinnati OH CS Holdings, Inc. Holding company
Intrust Fund Solutions, Inc. Mutual fund services provider
Ft. Washington Brokerage Broker-dealer
Services, Inc.
Touchstone Investment Trust Investment company
Touchstone Strategic Trust Investment company
Touchstone Tax-Free Trust Investment company
IFS Fund Distributors, Inc. Broker-dealer
------------------------------------- ----------------------------------- -----------------------------------
400 Broadway Cincinnati OH The Western-Southern Life Insurance company
Insurance Company
------------------------------------- ----------------------------------- -----------------------------------
400 East Fourth Street Columbus Life Insurance Company Life insurance company
Cincinnati OH
------------------------------------- ----------------------------------- -----------------------------------
420 East Fourth Street Fort Washington Investment Investment advisor
Cincinnati OH Advisors, Inc.
------------------------------------- ----------------------------------- -----------------------------------
421 East Fourth Street Eagle Realty Group, Inc. Real estate brokerage and
Cincinnati OH management service provider
------------------------------------- ----------------------------------- -----------------------------------
3 Radnor Corporate Center Capital Analysts Incorporated Investment advisor and
Radnor PA broker-dealer
------------------------------------- ----------------------------------- -----------------------------------
</TABLE>
OFFICERS AND PARTNERS OR DIRECTORS OF THE SUB-ADVISER: The names of the officers
and directors of National Asset Management Corporation and Touchstone Advisors
and their business activities during the past two fiscal years, are incorporated
herein by reference to their respective Form ADVs, as amended to the date of
their most recent filing with the Securities and Exchange Commission, as set
forth below:
National Asset Management Corporation: Form ADV dated March 30, 1999 SEC File
No. 801-14666
Touchstone Advisors, Inc.: Form ADV dated February 2, 2000, SEC File No.
801-45963
ITEM 27. PRINCIPAL UNDERWRITERS
Not applicable
C-4
<PAGE>
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
The records required to be maintained by Section 31(a) of the Investment
Company Act of 1940 and Rules 31a-1 to 31a-3 promulgated thereunder, are
maintained by Touchstone Advisors, at its offices at 311 Pike Street,
Cincinnati, Ohio 45202, or with the Fund's custodian, State Street KC, at its
offices at 801 Pennsylvania, Kansas City, Missouri 64105.
ITEM 29. MANAGEMENT SERVICES
Not applicable.
ITEM 30. UNDERTAKINGS
Not applicable.
C-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, Select Ten Plus Fund, LLC certifies that it
meets all of the requirements under Rule 485(b) under the Securities Act of 1933
and in the City of Louisville and State of Kentucky has duly caused this
registration statement to be signed on its behalf by the undersigned, duly
authorized, on this 27 day of April, 2000.
SELECT TEN PLUS FUND, LLC
By: /s/ Edward J. Haines
------------------------
Edward J. Haines,
President
Pursuant to the requirement 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:
SIGNATURES TITLE DATE
- ---------- ----- ----
/s/ Edward J. Haines President April 27, 2000
- -------------------------------
Edward Haines
/s/ Don W. Cummings Controller April 27, 2000
- -------------------------------
Don W. Cummings
/s/ William B. Faulkner Manager April 27, 2000
- -------------------------------
William B. Faulkner*
/s/ John Katz Manager April 27, 2000
- -------------------------------
John Katz*
/s/ John R. Lindholm Manager April 27, 2000
- -------------------------------
John R. Lindholm
/s/ Chris Lavictoire Mahai Manager April 27, 2000
- -------------------------------
Chris LaVictoire Mahai*
/s/ Irvin W. Quesenberry, Jr. Manager April 27, 2000
- -------------------------------
Irvin W. Quesenberry, Jr.
* By: /s/ Kevin L. Howard
----------------------------
Attorney-in-Fact
C-6
<PAGE>
SELECT TEN PLUS FUND, LLC
MANAGEMENT AGREEMENT
Agreement, made this ___ day of ______ 2000 between Select Ten Plus Fund, LLC
(the FUND) and Touchstone Advisors, Inc., an Ohio corporation (the ADVISER).
W I T N E S S ET H
WHEREAS, the Fund is registered under the Investment Company Act of 1940, as
amended (the 1940 ACT); and
WHEREAS, the units of beneficial interest of the Fund are divided into separate
divisions or portfolios (each, a DIVISION), each of which is established
pursuant to a resolution of the Board of Directors of the Fund, and the Board of
Directors may from time to time terminate such Divisions or establish and
terminate additional Divisions; and
WHEREAS, the Adviser is registered as an investment adviser under the Investment
Advisers Act of 1940, as amended (the ADVISERS ACT); and
WHEREAS, the Fund desires to retain the Adviser to render or contract to
obtain as hereinafter provided investment advisory and supervisory services to
the Fund also desires to avail itself of the facilities available from the
Adviser with respect to the administration of the Fund's day to day business
affairs, and the Adviser is willing to render or contract for such investment
advisory, supervisory and administrative services;
NOW, THEREFORE, the parties agree as follows:
1. Appointment of Adviser. The Fund hereby appoints the Adviser to act as
manager of the Fund and administrator of its business affairs for the period and
on the terms set forth in this Agreement. The Adviser accepts such appointment
and agrees to render the services herein described, for the compensation herein
provided. The Adviser is authorized to enter into one or more sub-advisory
agreements (each, a SUB-ADVISORY AGREEMENT) with a registered investment adviser
(each, a SUB-ADVISER) pursuant to which the Adviser delegates to the Sub-Adviser
its obligations for providing investment advisory and certain other services in
connection with one or more of the Divisions; provided, that the Adviser, and
not the Fund , shall be responsible for any compensation payable under any
Sub-Advisory Agreement. Any such Sub-Advisory Agreement may be entered into by
the Adviser on such terms and in such manner as may be permitted by the 1940 Act
and the rules thereunder. For each Division for which the Adviser has entered
into a Sub-Advisory Agreement, the Sub-Adviser shall have the primary
responsibility for providing investment advisory services as set forth in
Section 2 and shall be responsible for broker-dealer selection
<PAGE>
as set forth in Section 3 and maintaining books and records as set forth in
Section 4, and the Adviser will have supervisory responsibility for investment
advisory services furnished by the Sub-Adviser pursuant to the Sub-Advisory
Agreement. The Adviser will review the performance of the Sub-Adviser and make
recommendations to the Board of Directors of the Fund with respect to the
retention and renewal of the Sub-Advisory Agreement.
2. Investment Advisory Services. Subject to the supervision of the Fund's Board
of Directors, and in compliance with each Division's investment objectives and
policies, the Adviser will provide an investment program for each Division and
determine the composition of the assets of each Division, including
determination of the purchase, retention or sale of the securities, cash, and
other investments contained in such Division's holdings. The Adviser is hereby
authorized to execute and perform such services, or to arrange for execution and
performance of such services, on behalf of each Division. To the extent, if any,
permitted by the investment policies of a Division, the Adviser shall make
determinations as to and execute and perform futures contracts and options on
behalf of such Division. The Adviser will provide the services under this
Agreement in accordance with each Division's investment objective or objectives,
policies, procedures and restrictions as stated in the Fund's Registration
Statement, as amended from time to time (the REGISTRATIONSTATEMENT), filed with
the Securities and Exchange Commission (the SEC) and any other documents that
set forth investment policies, procedures or restrictions governing the
Division.
The Adviser further agrees as follows:
(a) The Adviser will manage each Division so as to ensure compliance by such
Division with the diversification requirements of Section 817(h) of the Internal
Revenue Code of 1986 and regulations issued thereunder. In managing the Division
in accordance with these requirements, the Adviser shall be entitled to receive
and act upon advice of counsel.
(b) In undertaking its duties under this Agreement, the Adviser will comply with
the 1940 Act and all rules and regulations thereunder, all other applicable
federal and state laws and regulations, with any applicable procedures adopted
by the Fund's Board of Directors of which it has notice and the provisions of
the Registration Statement.
(c) On occasions when the Adviser deems the purchase or sale of a security to be
in the best interest of a Division as well as of the Adviser's or the Adviser's
affiliates' other investment advisory clients, the Adviser may, to the extent
permitted by applicable laws and regulations, but shall not be obligated to,
aggregate the securities to be so sold or purchased with those of its other
clients where such aggregation is not inconsistent with the policies set forth
in the Registration Statement. In such event, the Adviser will allocate the
<PAGE>
securities so purchased or sold, as well as the expenses incurred in the
transaction, in a manner that is fair and equitable in the Adviser's judgment in
the exercise of the Adviser's fiduciary obligations to the Fund and to such
other clients.
(d) In connection with the purchase and sale of securities for each Division,
the Adviser will arrange for the transmission to the custodian, transfer agent,
dividend disbursing agent and recordkeeping agent for the Fund (such custodian
and agent or agents hereinafter collectively referred to as the AGENT), on a
daily basis, such confirmations, trade tickets (which shall state industry
classifications unless the Adviser has previously furnished a list of
classifications for portfolio securities), and other documents and information,
including, but not limited to, Cusip or other numbers that identify securities
to be purchased or sold on behalf of each Division as may be reasonably
necessary to enable the Agent to perform their administrative and recordkeeping
responsibilities with respect to such Division. With respect to portfolio
securities to be purchased or sold through the Depository Trust Company, the
Adviser will arrange for the automatic transmission of the confirmation of such
trades to the Fund's Agent.
(e) The Adviser will monitor on a daily basis, by review of daily pricing
reports provided by the Agent to the Adviser, the determination by the Agent for
the Fund of the valuation of portfolio securities and other investments of each
Division. The Adviser shall not be obligated to independently verify the Agent's
pricing determinations, and the Agent's responsibility for accurate pricing
determinations of the value of the Division's securities shall not be reduced by
the Adviser's duty to monitor such determinations. The Adviser will assist the
Agent in determining or confirming, consistent with the procedures and policies
stated in the Registration Statement, the value of any portfolio securities or
other assets of each Division for which the Agent seeks assistance from or
identifies for review by the Adviser.
(f) The Adviser will make available to the Fund, promptly upon request, all of
each Division's investment records and ledgers maintained by the Adviser as are
necessary to assist the Fund to comply with requirements of the 1940 Act and the
Advisers Act, as well as other applicable laws. The Adviser will furnish to
regulatory authorities having the requisite authority any information or reports
in connection with its services which may be requested in order to ascertain
whether the operations of the Fund are being conducted in a manner consistent
with applicable laws and regulations.
(g) The Adviser will provide reports, which may be prepared by the Agent, to the
Fund's Board of Directors for consideration at meetings of the Board on the
investment program for each Division and the issuers and securities represented
in each Division's securities holdings, including a schedule of the investments
and other assets held in such Division and a statement of all purchases and
sales for each Division since the last such statement, and will furnish the
Fund's Board of Directors with periodic and
<PAGE>
special reports with respect to each Division as the Directors may reasonably
request, including statistical information with respect to the Division's
securities.
3. Broker-Dealer Selection. The Adviser is responsible for decisions to buy or
sell securities and other investments for each Division, broker-dealer and
futures commission merchants' selection, and negotiation of brokerage commission
and futures commission merchants' rates. As a general matter, in executing
portfolio transactions, the Adviser may employ or deal with such broker-dealers
or futures commission merchants as may, in the Adviser's best judgment, provide
prompt and reliable execution of the transactions at favorable prices and
reasonable commission rates. In selecting such broker-dealers or futures
commission merchants, the Adviser shall consider all relevant factors, including
price (including the applicable brokerage commission, dealer spread or futures
commission merchant rate), the size of the order, the nature of the market for
the security or other investment, the timing of the transaction, the reputation,
experience and financial stability of the broker-dealer or futures commission
merchant involved, the quality of the service, the difficulty of execution, and
the execution capabilities and operational facilities of the firm involved, and,
in the case of securities, the firm's risk in positioning a block of securities.
Subject to such policies as the Board of Directors may determine and consistent
with Section 28(e) of the Securities Exchange Act of 1934, as amended (the 1934
ACT), the Adviser shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by reason of the
Adviser's having caused a Division to pay a member of an exchange, broker or
dealer an amount of commission for effecting a securities transaction in excess
of the amount of commission another member of an exchange, broker or dealer
would have charged for effecting that transaction, if the Adviser determines in
good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research services provided by such member of an
exchange, broker or dealer viewed in terms of either that particular transaction
or the Adviser's overall responsibilities with respect to such Division and to
the other clients as to which the Adviser exercises investment discretion. In
accordance with Section 11(a) of the 1934 Act and Rule lla2-2('I') thereunder,
and subject to any other applicable laws and regulations including Section 17(e)
of the 1940 Act and Rule 17e-1 thereunder, the Adviser may engage its
affiliates, or any Sub-Adviser to the Fund and its respective affiliates, as
broker-dealers or futures commission merchants to effect portfolio transactions
in securities and other investments for a Division.
4. Books and Records. The Adviser shall keep the Fund's books and records
required to be maintained by it pursuant to this Agreement, the 1940 Act or
otherwise. The Adviser agrees that all records which it maintains for the Fund
are the property of the Fund and it will surrender promptly to the Fund any such
records upon the Fund's request, provided however that the Adviser may retain a
copy of such records. The Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act any such records as are required to
be maintained by the Adviser hereunder.
<PAGE>
5. Administrative and Supervisory Services.
(a) The Adviser will coordinate all matters relating to the functions of the
Divisions' Sub-Adviser, if any, Agent, accountants, attorneys, and other parties
performing services or operational functions for the Divisions.
(b) The Adviser will furnish without cost to the Fund, or pay the cost of, such
office space, office equipment and office facilities as are adequate for the
Fund's needs.
(c) The Adviser will provide, without remuneration from or other cost to the
Fund, the services of a sufficient number of individuals competent to perform
all of the Fund's executive, administrative and clerical functions as are
necessary to ensure compliance with federal securities laws as well as other
applicable laws and to provide effective supervision and administration of the
Divisions and which are not performed by employees or other agents engaged by
the Fund or by the Adviser acting in some other capacity pursuant to a separate
agreement or arrangement with the Fund. The Adviser shall authorize and permit
any of its directors, officers and employees who may be elected as a member of
the Board of Directors or officers of the Fund to serve in the capacities in
which they are elected without any remuneration from the Fund.
(d) The Adviser will assist in the preparation of all periodic reports to the
unit holders of the Fund and all reports and filings required to maintain the
registration and qualification of the Fund's units, or to meet other regulatory
or tax requirements applicable to the Fund, under federal and state securities
and tax laws.
(e) The Adviser shall assist in the preparation of and, after approval by the
Fund, file and arrange for the distribution of proxy materials to Fund unit
holders as required by applicable law.
(f) The Adviser shall prepare, or cause the preparation of, and, after approval
by the Fund, arrange for the filing of such registration statements and other
documents with the SEC and other federal and state regulatory authorities as may
be required by applicable law.
(g) The Adviser shall take such other action with respect to the Divisions,
after approval by the Fund, as may be required by applicable law, including
without limitation the rules and regulations of the SEC and of state securities
or insurance commissions and other regulatory agencies.
(h) The Adviser shall make its officers and employees available to the Board of
Directors and officers of the Fund and Sub-Adviser for consultation and
discussions regarding the supervision and administration of the Divisions.
<PAGE>
6. Expenses.
(a) During the term of this Agreement, the Adviser shall pay, or cause a
Sub-Adviser to pay, the following expenses:
(i) The salaries and expenses of all personnel of the Fund and the Adviser
except the fees and expenses of members of the Board of Directors who are not
"interested persons" (within the meaning of the 1940 Act) of the Fund, the
Adviser, or any Sub-Adviser;
(ii) All expenses reasonably incurred by the Adviser in connection with
providing the services described above, including the provision of office space,
office equipment, office facilities, and executive, administrative and clerical
personnel in accordance with paragraph 2(i) hereof, but excluding the expenses
described below to be assumed by the Fund;
(iii) The fees of any Sub-Adviser pursuant to a Sub-Advisory Agreement; and
(iv) The costs and expenses payable by any Sub-Adviser pursuant to a
Sub-Advisory Agreement.
(b) Each Division is responsible for and bears all expenses incurred in its
operation that are not specifically assumed by the Adviser or ARM Securities
Corp., the Fund's distributor, pursuant to the Distribution Agreement with the
Fund. General expenses of the Fund not readily identifiable as belonging to one
of the Divisions will be allocated among the Divisions by or under the direction
of the Fund's Board of Directors in such manner as the Board shall determine to
be fair and equitable. Expenses borne by each Division include, but are not
limited to, the following (or the Division's allocated share of the following):
(i) The cost (including brokerage commissions, if any) of securities purchased
or sold by the Division and any losses incurred in connection therewith;
(ii) Investment management fees due hereunder (but not sub-advisory fees, which
are payable by the Adviser);
(iii) Organizational expenses;
(iv) Filing fees and expenses relating to the registration and qualification of
the Fund or the units of a Division under federal or state securities laws and
maintenance of such registrations and qualifications;
(v) Fees and expenses payable to the members of the Board of Directors who are
not "interested persons" of the Fund or the Adviser, or any Sub-Adviser;
<PAGE>
(vi) Taxes (including any income or franchise taxes) and governmental fees;
(vii) Costs of any liability, directors' and officers', uncollectible items of
deposit and other insurance and fidelity bonds;
(viii) Legal, accounting and auditing expense;
(ix) Charges of custodians, transfer agents and other agents;
(x) Expenses of setting in type and providing a camera-ready copy of
prospectuses and supplements thereto, expenses of setting in type and printing
or otherwise reproducing statements of additional information and supplements
thereto and reports and proxy materials for existing unit holders;
(xi) Any extraordinary expenses (including fees and disbursements of counsel)
incurred by the Fund or any Division;
(xii) Fees, voluntary assessments and other expenses incurred in connection with
membership in investment company organizations; and
(xiii) Costs of meetings of unit holders.
7. Compensation. For the services provided and the expenses assumed pursuant to
this Agreement, each Division will pay to the Adviser as full compensation
therefor a fee at an annual rate of .50% of the average daily net assets of each
Division. This fee will be deducted from the assets of each respective Division
and paid to the Adviser monthly, but will be accrued daily for purposes of
determining the value of each Division on each day the New York Stock Exchange
is open for trading.
8. Liability. Except as may otherwise be required by the 1940 Act and the rules
and regulations thereunder, the Adviser, any of its affiliated persons and each
person, if any, who, within the meaning of Section 15 of the Securities Act of
1933, as amended, controls the Adviser, shall not be liable for, or subject to
any damages, expenses, or losses in connection with, any act or omission
connected with or arising out of any services rendered under this Agreement,
except by reason of willful misfeasance, bad faith or gross negligence on the
part of the Adviser in the performance of its duties or from reckless disregard
of its duties and obligations under this Agreement.
9. Term. Unless sooner terminated, this Agreement shall continue in effect for
two years and thereafter for successive one year periods, provided that such
continuance is specifically approved at least annually in conformity with the
requirements of the 1940 Act; provided, however, that this Agreement may be
terminated by the Fund or any Division thereof (with respect to such Division)
at any time, without the payment of
<PAGE>
any penalty, by the Board of Directors of the Fund or by vote of a majority of
the outstanding voting securities (as defined in the 1940 Act) of a Division, or
by the Adviser at any time, without the payment of any penalty, upon not less
than 60 days' prior written notice to the other party. This Agreement shall
terminate automatically in the event of its assignment (as defined in the 1940
Act).
10. Non-Exclusivity. Nothing in this Agreement shall limit or restrict the right
of any director, officer or employee of the Adviser who may also be a member of
the Board of Directors, officer or employee of the Fund to engage in any other
business or to devote his or her time and attention in part to the management or
other aspects of any business, whether of a similar or dissimilar nature, nor
limit or restrict the right of the Adviser to engage in any other business or to
render services of any kind to any other corporation, firm, individual or
association.
11. Amendments. This Agreement may be amended by mutual consent in writing, but
the consent of the Fund must be obtained in conformity with the requirements of
the 1940 Act.
12. Notices. Any notice or other communication required to be given pursuant to
this Agreement shall be deemed duly given if delivered or mailed by registered
mail, postage prepaid, (1) to the Adviser at 515 West Market Street, 8th Floor,
Louisville, Kentucky 40202, Attention: President; or (2) to the Fund at 515 West
Market Street, 8th Floor, Louisville, Kentucky 40202, Attention: President.
13. Choice of Law. Except insofar as the 1940 Act or other federal laws and
regulations may be controlling, this Agreement shall be governed by, and
construed and enforced in accordance with, the internal laws of the State of
Delaware.
14. Fund. The Fund was established under the Delaware Limited Liability Company
laws as of September 30, 1998. The Fund may establish separate Divisions, and
all debts, liabilities, obligations and expenses of a particular Division shall
be enforceable only against the assets of that Division and not against the
assets of any other Division or of the Fund as a whole.
15. Entire Agreement. This Agreement constitutes the entire agreement between
the parties hereto and supersedes any prior agreement with respect to the
subject matter hereof whether oral or written.
16. Counterparts. This Agreement may be executed in counterparts, and each
counterpart shall for all purposes be deemed an original, and all such
counterparts shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
<PAGE>
SELECT TEN PLUS FUND, LLC
By:_____________________________
TOUCHSTONE ADVISORS, INC.
By:______________________________
<PAGE>
SUB-ADVISORY AGREEMENT
AGREEMENT, made this ___ day of _______, 2000, between Touchstone Advisors, Inc.
(MANAGER), an Ohio corporation, and National Asset Management Corporation, a
Kentucky corporation (SUB-ADVISER).
WHEREAS, Manager, an indirect wholly-owned subsidiary of The Western and
Southern Life Insurance Company, is an investment adviser registered under the
Investment Advisers Act of 1940, as amended (the ADVISERS ACT);
WHEREAS, the Sub-Adviser is an investment adviser registered under the Advisers
Act;
WHEREAS, pursuant to a Management Agreement (the MANAGEMENT AGREEMENT), Manager
acts as Investment Manager to Select Ten Plus Fund, LLC (the FUND), which is
registered under the Investment Company Act of 1940, as amended (the 1940 ACT);
WHEREAS, the Fund is authorized to subdivide into portfolios, each such
portfolio representing a separate division (collectively, the DIVISIONS) of
securities and investments; and
WHEREAS, Manager desires to retain the Sub-Adviser to furnish investment
advisory services to the Fund, and the Sub-Adviser is willing to accept such
appointment on the terms and conditions set forth herein.
NOW, THEREFORE, based on the premises and the consideration set forth herein,
Manager and the Sub-Adviser agree as follows:
SECTION 1. INVESTMENT ADVISORY SERVICES.
Subject to the supervision of the Fund's Board of Managers and the Manager, and
in compliance with each Division's investment objectives and policies, the
Sub-Adviser will provide an investment program for the Divisions and determine
the composition of the assets of the Divisions, including determination of the
purchase, retention or sale of the securities, cash, and other investments
contained in the Divisions's holdings.
The Sub-Adviser is hereby authorized to execute and perform such services on
behalf of the Divisions. To the extent, if any, permitted by the investment
policies of the Divisions, the Sub-Adviser shall make determinations as to and
execute and perform futures contracts and options on behalf of the Divisions.
The Sub-Adviser will provide the services under this Agreement in accordance
with each Division's investment objective or objectives, policies, and
restrictions as stated in the Fund's Registration Statement filed with the
Securities and Exchange Commission (SEC). Manager agrees to supply the
Sub-Adviser with a copy of the Registration Statement and each
<PAGE>
amendment thereto (the Registration Statement as amended from time to time
hereinafter referred to as the REGISTRATION STATEMENT) and any other documents
that set forth investment policies, procedures or restrictions governing the
Divisions and to notify the Sub-Adviser in writing of any changes in the
investment objectives, policies, procedures and restrictions governing the
Divisions.
The Sub-Adviser further agrees as follows:
(a) The Sub-Adviser will manage the Divisions so as to ensure compliance by the
Divisions with the diversification requirements of Section 817(h) of the
Internal Revenue Code of 1986, as amended (the CODE) and regulations issued
thereunder. In managing the Divisions in accordance with these requirements, the
Sub-Adviser shall be entitled to receive and act upon advice of counsel to the
Fund, counsel to Manager or counsel to the Sub-Adviser, provided the
Sub-Adviser's counsel is acceptable to Manager.
(b) In undertaking its duties under this Agreement, the Sub-Adviser will comply
with the 1940 Act and all rules and regulations thereunder, all other applicable
federal and state laws and regulations, with any applicable procedures adopted
by the Fund's Board of Managers of which it has notice and the provisions of the
Registration Statement.
(c) On occasions when the Sub-Adviser is required pursuant to the Divisions'
investment objectives to enter into the purchase or sale of a security and such
purchase or sale is also in the best interest of the Sub-Adviser's or the
Sub-Adviser's affiliates' other investment advisory clients, the Sub-Adviser
may, to the extent permitted by applicable laws and regulations, but shall not
be obligated to, aggregate the securities to be so sold or purchased with those
of its other clients where such aggregation is not inconsistent with the
policies set forth in the Registration Statement. In such event, the Sub-Adviser
will allocate the securities so purchased or sold, as well as the expenses
incurred in the transaction, in a manner that is fair and equitable in the
Sub-Adviser's judgment in the exercise of the Sub-Adviser's fiduciary
obligations to the Fund and to such other clients.
(d) In connection with the purchase and sale of securities for the Divisions,
the Sub-Adviser, together with Manager, will arrange for the transmission to the
custodian, transfer agent, dividend disbursing agent and recordkeeping agent for
the Fund (such custodian and agent or agents hereinafter referred to as the
AGENT), on a daily basis, such confirmation, trade tickets (which shall state
industry classifications unless the Sub-Adviser has previously furnished a list
of classifications for portfolio securities), and other documents and
information, including (but not limited to) Cusip or other numbers that identify
securities to be purchased or sold on behalf of the Divisions as may be
reasonably necessary to enable the Agent to perform its administrative and
recordkeeping responsibilities with respect to the Divisions. With respect to
portfolio securities to be purchased or sold through the Depository Trust
Company, the Sub-
<PAGE>
Adviser will arrange for the automatic transmission of the
confirmation of such trades to the Fund's Agent, and if requested, Manager.
(e) The Sub-Adviser will monitor on a daily basis, by review of daily pricing
reports provided by the Agent to the Sub-Adviser, the determination by the Agent
for the Fund of the valuation of portfolio securities and other investments of
the Divisions. The Sub-Adviser shall not be obligated to independently verify
the Agent's pricing determinations, and the Agent's responsibility for accurate
pricing determinations of the value of the Divisions' securities shall not be
reduced by the Sub-Adviser's duty to monitor such determinations. The
Sub-Adviser will assist the Agent in determining or confirming, consistent with
the procedures and policies stated in the Registration Statement, the value of
any portfolio securities or other assets of the Divisions for which the Agent
seeks assistance from or identifies for review by the Sub-Adviser.
(f) The Sub-Adviser will make available to the Fund and Manager, promptly upon
request, all of the Divisions' investment records and ledgers maintained by the
Sub-Adviser as are necessary to assist the Fund and Manager to comply with
requirements of the 1940 Act and the Advisers Act, as well as other applicable
laws. The Sub-Adviser will furnish to regulatory authorities having the
requisite authority any information or reports in connection with its services
which may be requested in order to ascertain whether the operations of the Fund
are being conducted in a manner consistent with applicable laws and regulations.
(g) The Sub-Adviser will provide reports, which may be prepared by the Agent, to
the Fund's Board of Managers for consideration at meetings of the Board on the
investment program for the Divisions and the issuers and securities represented
in the Divisions' securities holdings, including a schedule of the investments
and other assets held in the Divisions and a statement of all purchases and
sales for the Divisions since the last such statement, and will furnish the
Fund's Board of Managers with periodic and special reports with respect to the
Divisions as the Board of Managers and Manager may reasonably request, including
statistical information with respect to the Divisions' securities. In addition,
the Sub-Adviser will make available at each meeting of the Board of Managers,
either in person or by telephone conference call as instructed by Manager on
behalf of the Board of Managers of the Fund, an appropriate person to discuss
the investment performance of the Divisions.
(h) The Sub-Adviser will provide information and reports to Manager as Manager
shall reasonably request to enable it to review the performance of the
Sub-Adviser under this Agreement.
<PAGE>
SECTION 2. BROKER-DEALER SELECTION.
The Sub-Adviser is responsible for decisions to buy and sell securities and
other investments for the Divisions, broker-dealer and futures commission
merchant selection, and negotiation of brokerage commission and futures
commission merchants' rates. As a general matter, in executing portfolio
transactions the Sub-Adviser may employ or deal with such broker-dealers or
futures commission merchants as may, in the Sub-Adviser's best judgment, provide
prompt and reliable execution of the transactions at favorable prices and
reasonable commission rates. In selecting such broker-dealers or futures
commission merchants, the Sub-Adviser shall consider all relevant factors,
including price (including the applicable brokerage commission, dealer spread or
futures commission merchant rate), the size of the order, the nature of the
market for the security or other investment, the timing of the transaction, the
reputation, experience and financial stability of the broker-dealer or futures
commission merchant involved, the quality of the service, the difficulty of
execution, and the execution capabilities and operational facilities of the firm
involved, and, in the case of securities, the firm's risk in positioning a block
of securities. Subject to such policies as the Board of Managers may determine
and consistent with Section 28(e) of the Securities Exchange Act of 1934, as
amended (the 1934 ACT), the Sub-Adviser shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or otherwise
solely by reason of the Sub-Adviser's having caused the Divisions to pay a
member of an exchange, broker or dealer an amount of commission for effecting a
securities transaction in excess of the amount of commission another member of
an exchange, broker or dealer would have charged for effecting that transaction,
if the Sub-Adviser determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such member of an exchange, broker or dealer, viewed in terms of
either that particular transaction or the Sub-Adviser's overall responsibilities
with respect to the Divisions and to the Sub-Adviser's other clients as to which
the Sub-Adviser exercises investment discretion. In accordance with Section
11(a) of the 1934 Act and Rule 11a2-2(T) thereunder, and subject to any other
applicable laws and regulations including Section 17(e) of the 1940 Act and Rule
17e-1 thereunder, the Sub-Adviser may engage its affiliates, Manager and its
affiliates or any other sub-adviser to the Fund and its respective affiliates as
broker-dealers or futures commission merchants to effect portfolio transactions
in securities and other investments for the Divisions.
SECTION 3. RECORDS, REPORTS, ETC.
In compliance with the requirements of Rule 31a-3 under the 1940 Act, the
Sub-Adviser hereby agrees that all records which the Sub-Adviser maintains for
the Divisions are the property of the Fund and further agrees to surrender
promptly to the Fund any of such records upon the Fund's or Manager's request or
upon termination of this Agreement, although the Sub-Adviser may, at the
Sub-Adviser's own expense, make and retain a copy of such records. The
Sub-Adviser further agrees to preserve for
<PAGE>
the periods prescribed by Rule 31a-2 under the 1940 Act the records required to
be maintained by Rule 31a-1 under the 1940 Act and to preserve the records
required by the Rule 204-2 under the Advisers Act for the period specified in
the Rule.
SECTION 4. PAYMENT OF EXPENSES.
The Sub-Adviser shall assume and pay all of the costs and expenses of performing
its obligations under this Agreement.
SECTION 5. COMPENSATION FOR SERVICES.
Manager will pay to the Sub-Adviser a monthly sub-advisory fee (adjusted pro
rata for any shorter applicable period) at an annual rate of .10% of the first
$100 million of average daily net assets of the Divisions from the management
fee actually received by Manager from the Fund and its affiliated fund offered
by National Integrity Life Insurance Company; and at an annual rate of .05% of
average daily net assets above $100 million of the Divisions from the management
fee actually received by Manager from the Fund and its affiliated fund offered
by National Integrity Life Insurance Company; provided, however, the Sub-Adviser
is guaranteed a minimum sub-advisory fee of $50,000 annually; and provided
further, that the sub-advisory fee shall be reduced proportionately if the
management fee actually paid to Manager by the Divisions shall have been reduced
as a result of applicable state expense limitations or fee waivers agreed to in
writing by the Sub-Adviser. The sub-advisory fee shall be computed, accrue and
be payable in the same manner as the management fee which is payable by the
Separate Account to Manager pursuant to the Management Agreement and as
specified in the Separate Account's Registration Statement.
SECTION 6. LIABILITY FOR SERVICES.
Except as may otherwise be required by the 1940 Act or the rules thereunder or
other applicable law, and except as set forth in the next paragraph, the Fund
and Manager agree that the Sub-Adviser, any of its affiliated persons, and each
person, if any, who, within the meaning of Section 15 of the Securities Act of
1933, as amended, controls the Sub-Adviser, shall not be liable for, or subject
to any damages, expenses, or losses in connection with, any act or omission
connected with or arising out of any services rendered under this Agreement,
except by reason of willful misfeasance, bad faith, or gross negligence in the
performance of the Sub-Adviser's duties, or by reason of reckless disregard of
the Sub-Adviser's obligations and duties under this Agreement.
SECTION 7. INDEMNIFICATION BY SUB-ADVISER.
The Sub-Adviser agrees to indemnify and hold harmless Manager against any
losses, expenses, claims, damages or liabilities (or actions or proceedings in
respect thereof), to which Manager may become subject arising out of or based on
the breach or alleged breach by the Sub-Adviser of any provisions of this
Agreement; provided, however,
<PAGE>
that the Sub-Adviser shall not be liable under this paragraph in respect of any
loss, expense, claim, damage or liability to the extent that a court having
jurisdiction shall have determined by a final judgment, or independent counsel
agreed upon by Manager and the Sub-Adviser shall have concluded in a written
opinion, that such loss, expense, claim, damage or liability resulted primarily
from Manager's willful misfeasance, bad faith or gross negligence or by reason
of the reckless disregard by Manager of its duties. The foregoing
indemnification shall be in addition to any rights that Manager may have at
common law or otherwise. The Sub-Adviser's agreements in this paragraph shall,
upon the same terms and conditions, extend to and inure to the benefit of each
person who may be deemed to control Manager, be controlled by Manager or be
under common control with Manager and its affiliates, directors, officers,
employees and agents. The Sub-Adviser's agreements in this paragraph shall also
extend to any of Manager's successors or the successors of the aforementioned
affiliates, directors, officers, employees or agents.
SECTION 8. INDEMNIFICATION BY MANAGER.
Manager agrees to indemnify and hold harmless the Sub-Adviser against any
losses, expenses, claims, damages or liabilities (or actions or proceedings in
respect thereof), to which the Sub-Adviser may become subject arising out of or
based on the breach or alleged breach by Manager of any provisions of this
Agreement or the Management Agreement, or any wrongful action or alleged
wrongful action by Manager or its affiliates in the distribution of the Fund's
units, or any wrongful action or alleged wrongful action by the Fund other than
wrongful action or alleged wrongful action that was caused by the breach by the
Sub-Adviser of the provisions of this Agreement; provided, however, that Manager
shall not be liable under this paragraph in respect of any loss, expense, claim,
damage or liability to the extent that a court having jurisdiction shall have
determined by a final judgment, or independent counsel agreed upon by Manager
and the Sub-Adviser shall have concluded in a written opinion, that such loss,
expense, claim, damage or liability resulted primarily from the Sub-Adviser's
willful misfeasance, bad faith or gross negligence or by reason of the reckless
disregard by the Sub-Adviser of its duties. The foregoing indemnification shall
be in addition to any rights that the Sub-Adviser may have at common law or
otherwise. Manager's agreements in this paragraph shall, upon the same terms and
conditions, extend to and inure to the benefit of each person who may be deemed
to control the Sub-Adviser, be controlled by the Sub-Adviser or be under common
control with the Sub-Adviser and to each of the Sub-Adviser's and each such
person's respective affiliates, directors, officers, employees and agents.
Manager's agreements in this paragraph shall also extend to any of the
Sub-Adviser's successors or the successors of the aforementioned affiliates,
directors, officers, employees or agents.
<PAGE>
SECTION 9. NOTICE AND DEFENSE OR PROCEEDINGS, ETC.
Promptly after receipt by a party indemnified under paragraph 7 or 8 above of
notice of the commencement of any action, proceeding or investigation for which
indemnification will be sought, such indemnified party shall promptly notify the
indemnifying party in writing; but the omission so to notify the indemnifying
party shall not relieve it from any liability which it may otherwise have to any
indemnified party unless such omission results in actual material prejudice to
the indemnifying party. In case any action or proceeding shall be brought
against any indemnified party, and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate in
and, individually or jointly with any other indemnifying party, to assume the
defense thereof with counsel reasonably satisfactory to the indemnified party.
After notice from the indemnifying party to the indemnified party of its
election to assume the defense of any action or proceeding, the indemnifying
party shall not be liable to the indemnified party for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof other than reasonable costs of investigation. If the
indemnifying party does not elect to assume the defense of any action or
proceeding, the indemnifying party on a monthly basis shall reimburse the
indemnified party for the legal fees and expenses incurred by the indemnified
party for continuing its defense thereof. Regardless of whether or not the
indemnifying party shall have assumed the defense of any action or proceeding,
the indemnified party shall not settle or compromise the action or proceeding
without the prior written consent of the indemnifying party.
SECTION 10. REPRESENTATIONS AND WARRANTIES; COVENANTS.
(a) The Sub-Adviser hereby represents and warrants as follows:
(i) The Sub-Adviser is registered with the SEC as an investment adviser under
the Advisers Act, and such registration is current, complete and in full
compliance with all material applicable provisions of the Advisers Act
and the rules and regulations thereunder;
(ii) The Sub-Adviser has all requisite authority to enter into, execute,
deliver and perform the Sub-Adviser's obligations under this Agreement;
(iii) The Sub-Adviser's performance of its obligations under this Agreement
does not conflict with any law, regulation or order to which the
Sub-Adviser is subject; and
(iv) The Sub-Adviser has reviewed the Registration Statement for the Fund
filed with the SEC, and with respect to the disclosure about the
Sub-Adviser and the Divisions or information relating, directly or
indirectly, to the Sub-Adviser or the Divisions which was made in
reliance upon and in conformity with written
<PAGE>
information provided by the Sub-Adviser to the Fund specifically for use
therein or, if written information was not provided, which the
Sub-Adviser had the opportunity to review prior to filing with the SEC,
such Registration Statement contains, as of its date, no untrue statement
of any material fact and does not omit any statement of a material fact
which was required to be stated therein or necessary to make the
statements contained therein not misleading.
(b) The Sub-Adviser hereby covenants and agrees that, so long as this Agreement
shall remain in effect:
(i) The Sub-Adviser shall maintain the Sub-Adviser's registration as an
investment adviser under the Advisers Act, and such registration shall at
all times remain current, complete and in full compliance with all
material applicable provisions of the Advisers Act and the rules and
regulations thereunder;
(ii) The Sub-Adviser's performance of its obligations under this Agreement
shall not conflict with any law, regulation or order to which the
Sub-Adviser is then subject;
(iii) The Sub-Adviser shall at all times fully comply with the Advisers Act,
the 1940 Act, all applicable rules and regulations under such Acts and
all other applicable law;
(iv) The Sub-Adviser shall promptly notify Manager and the Fund upon the
occurrence of any event that might disqualify or prevent the Sub-Adviser
from performing its duties under this Agreement. The Sub-Adviser further
agrees to notify Manager and the Fund promptly with respect to written
material that has been provided to the Fund or Manager by the Sub-Adviser
for inclusion in the Registration Statement or prospectus for the Fund or
any supplement or amendment thereto, or, if written material has not been
provided, with respect to the information in the Registration Statement
or Prospectus, or any amendment or supplement thereto, reviewed by the
Sub-Adviser, in either case of any untrue statement of a material fact or
of any omission of any statement of a material fact which is required to
be stated therein or is necessary to make the statements contained
therein not misleading.
<PAGE>
SECTION 11. EXCLUSIVITY OF USE OF NAMES.
The Sub-Adviser acknowledges and agrees that the name PINNACLE and SELECT TEN
PLUS, and abbreviations or logos associated with those names, are the valuable
property of Manager and its affiliates; that the Fund, Manager and its
affiliates have the sole right to use such names, abbreviations and logos; and
that the Sub-Adviser shall use the names PINNACLE and SELECT TEN PLUS, and
associated abbreviations and logos, only in connection with the Sub-Adviser's
performance of its duties hereunder. Manager acknowledges that "National Asset
Management Corporation" (the SUB-ADVISER'S NAME) is distinctive in connection
with investment advisory and related services provided by the Sub-Adviser, the
Sub-Adviser's name is a property right of the Sub-Adviser, and the Sub-Adviser's
name in connection with the Divisions is understood to be used by the Fund with
the Sub-Adviser's consent. The Sub-Adviser hereby grants to the Fund a
non-exclusive license to use the Sub-Adviser's name in the name of the Divisions
upon the conditions hereinafter set forth; provided that the Fund may use such
name only so long as the Sub-Adviser shall be retained as the investment
sub-adviser of the Divisions pursuant to the terms of this Agreement. Any such
use by the Fund shall in no way prevent the Sub-Adviser or any of its successors
or assigns from using or permitting the use of the Sub-Adviser's name along with
any other word or words, for, by or in connection with any other entity or
business, other than the Fund or its business, whether or not the same directly
competes or conflicts with the Fund or its business in any manner. Manager
acknowledges that the Fund shall use the Sub-Adviser's name in connection with
the Divisions for the period set forth herein in a manner not inconsistent with
the interests of the Sub-Adviser and that the Fund's rights in the Sub-Adviser's
name are limited to its use as a component of the Divisions's name and in
connection with accurately describing the activities of the Divisions. In the
event that the Sub-Adviser shall cease to be the investment sub-adviser of the
Divisions, then the Fund at their own expense, upon the Sub-Adviser's written
request:
(i) shall cease to use the Sub-Adviser's name, or any combination thereof for
any other commercial purpose (other than the right to refer to the
Divisions' former Sub-Adviser's name in the Fund's Registration
Statement, proxy materials and other Fund documents to the extent
required under the 1940 Act);
(ii) shall use its best efforts to cause the Fund's officers and Board of
Managers to take any all actions which may be necessary or desirable to
effect the foregoing and to reconvey to the Sub-Adviser all rights which
the Fund may have to such name. Manager agrees to take any all actions as
may be necessary or desirable to effect the foregoing. The Sub-Adviser
hereby agrees and consents to the use of the Sub-Adviser's name upon the
foregoing terms and conditions.
<PAGE>
SECTION 12. ENTIRE AGREEMENT; AMENDMENT, WAIVER.
This Agreement supersedes all prior agreements between the parties and
constitutes the entire agreement by the parties. No provision of this Agreement
may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought, and no amendment of this
Agreement shall be effective with respect to the Divisions until approved as
required by the 1940 Act.
SECTION 13. EFFECTIVENESS AND DURATION OF AGREEMENT.
Unless sooner terminated, this Agreement shall continue in effect for two years
and thereafter for successive one year periods, provided that continuation of
this Agreement and the terms thereof are specifically approved annually in
accordance with the requirements of the 1940 Act by a majority of the Managers
of the Fund, including a majority of the Managers who are not interested persons
of the Sub-Adviser, Manager or the Fund, cast in person at a meeting called for
the purpose of voting on such approval.
SECTION 14. TERMINATION OF AGREEMENT, ASSIGNMENT.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Sub-Adviser or by Manager, upon sixty (60) days' written notice
from the terminating party to the other party and to the Fund, or by the Fund,
upon sixty (60) days written notice to the Sub-Adviser and Manager, acting
pursuant to a resolution adopted by a majority of the members of the Board of
Managers who are not interested persons or by a vote of the holders of the
lesser of (1) 67% of the Divisions' voting shares present if 8 the holders of
more than 50% of the outstanding shares are present in person or by proxy, or
(2) more than 50% of the outstanding shares of the Divisions. This Agreement
shall automatically terminate in the event of its assignment or the termination
of the Management Agreement pertaining to the Divisions. Termination of this
Agreement shall not affect rights of the parties which have accrued prior
thereto. The provisions of paragraphs 6, 7, 8, 9 and 11 shall survive the
termination of this Agreement, except that if Manager or the Fund terminates the
Agreement, the first paragraph of Section 11 shall not survive termination.
SECTION 15. DEFINITIONS.
The terms ASSIGNMENT and INTERESTED PERSON when used in this Agreement shall
have the meanings given such terms in the 1940 Act and the rules and regulations
thereunder.
<PAGE>
SECTION 16. CONCERNING APPLICABLE PROVISIONS OF LAW.
This 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. This Agreement shall be governed by
the laws of the State of Kentucky, without reference to principles of conflicts
of law.
SECTION 17. COUNTERPARTS.
This Agreement may be executed in counterparts, and each counterpart shall for
all purposes be deemed an original and all such counterparts shall together
constitute one and the same instrument.
IN WITNESS WHEREOF, authorized officers of Manager and the Sub-Adviser have
executed this Agreement as of the day and year first written above.
TOUCHSTONE ADVISORS, INC.
By:_________________________________
Attest:_______________________________
NATIONAL ASSET MANAGEMENT CORPORATION
By:__________________________________
Attest:________________________________
<PAGE>
PARTICIPATION AGREEMENT
Among
SELECT TEN PLUS FUND, LLC
TOUCHSTONE ADVISORS, INC.
and
NATIONAL INTEGRITY LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into this ____ day of _________________,
by and among SELECT TEN PLUS FUND, LLC (hereinafter "LLC"), a Delaware limited
liability company, TOUCHSTONE ADVISORS, INC. (hereinafter the "Adviser"), a
_____________ corporation, and NATIONAL INTEGRITY LIFE INSURANCE COMPANY
(hereinafter the "Company"), on its own behalf and on behalf of each segregated
asset account of the Company set forth on Schedule A hereto as may be amended
from time to time (each such account hereinafter referred to as the "Account").
WHEREAS, LLC is available to act as the investment vehicle for separate
accounts established for variable life insurance policies and variable annuity
contracts (collectively, the "Contracts") to be offered by insurance companies
which have entered into participation agreements with LLC and the Adviser
(hereinafter "Participating Insurance Companies"); and
WHEREAS, LLC is registered as an open-end management investment company
under the Investment Company Act of 1940 (the "1940 Act") and its shares are
registered under the Securities Act of 1933, as amended (hereinafter the "1933
Act"); and
WHEREAS, the beneficial interests in LLC represent interests in a
portfolio of securities and other assets; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to one or more Contracts; and
WHEREAS, the Company has registered or will register certain variable
life and variable annuity contracts under the 1933 Act and has registered or
will register each Account as a unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase LLC interests on behalf of each
Account to fund certain of the aforesaid Contracts,
<PAGE>
NOW, THEREFORE, in consideration of their mutual promises, the Company,
LLC and the Adviser agree as follows:
ARTICLE I. SALE OF LLC INTERESTS
1.1. LLC agrees to sell to the Company those LLC interests which each
Account orders, executing such orders on a daily basis at the net asset value
next computed after receipt by LLC or its designee of the order for LLC
interests. For purposes of this Section l.l, the Company shall be the designee
of LLC for receipt of such orders from each Account and receipt by such designee
shall constitute receipt by LLC; provided that LLC receives notice of such order
by 10:00 a.m. Eastern time on the next following Business Day. "Business Day"
shall mean any day on which the New York Stock Exchange is open for trading and
on which LLC calculates its net asset value.
1.2. LLC agrees to make its interests available indefinitely for
purchase at the applicable net asset value per interest by the Company and its
Accounts on those days on which LLC calculates its net asset value and LLC shall
use reasonable efforts to calculate such net asset value on each day on which
the New York Stock Exchange is open for trading. Notwithstanding the foregoing,
the Board of Managers of LLC (hereinafter the "Board") may refuse to sell
interests to any person, or suspend or terminate the offering of interests if
such action is required by law or by regulatory authorities having jurisdiction
or is, in the sole discretion of the Board acting in good faith and in light of
their fiduciary duties under federal and any applicable state laws, necessary in
the best interest of the LLC.
1.3. LLC agrees to redeem for cash, on the Company's request, any full
or fractional LLC interests held by the Company, executing such requests on a
daily basis at the net asset value next computed after receipt by LLC or its
designee of the request for redemption. For purposes of this Section 1.3, the
Company shall be the designee of LLC for receipt of requests for redemption from
each Account and receipt by such designee shall constitute receipt by LLC,
provided that LLC receives notice of such request for redemption on the next
following Business Day.
1.4. The Company agrees to purchase and redeem LLC interests in
accordance with the provisions of this Agreement and the LLC's prospectus and
statement of additional information contained in the LLC's Form N-1A
registration statement filed with the Securities and Exchange Commission
("SEC"), as revised from time to time (the "LLC Prospectus").
1.5. The Company shall pay for LLC interests on the next Business Day
after an order to purchase LLC interests is made in accordance with the
provisions of Section 1.1 hereof. Payment shall be in federal funds transmitted
by wire.
1.6. Issuance and transfer of LLC interests will be by book entry only.
Certificates will not be issued to the Company or any Account. LLC interests
will be recorded in an appropriate title for each Account or the appropriate
subaccount of each Account.
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<PAGE>
1.7. LLC shall furnish same day notice (by wire or telephone, followed
by written confirmation) to the Company of any income, dividends or capital gain
distributions payable on LLC interests. The Company hereby elects to receive all
such income dividends and capital gain distributions as are payable on LLC
interests in additional LLC interests. The Company reserves the right to revoke
this election and to receive all such income dividends and capital gain
distributions in cash. LLC shall notify the Company of the number of interests
so issued as payment of such dividends and distributions.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Contracts are or will
be registered under the 1933 Act; that the Contracts will be issued and sold in
compliance in all material respects with all applicable Federal and State laws
and that the sale of the Contracts shall comply in all material respects with
state insurance suitability requirements. The Company further represents and
warrants that it is an insurance company duly organized and in good standing
under applicable law and that it has legally and validly established each
Account prior to any issuance or sale thereof as a segregated asset account
under Section ___ of the ________ Insurance Code.
2.2. LLC represents and warrants that LLC interests sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of Delaware and all
applicable Federal and State securities laws and that the LLC is and shall
remain registered under the 1940 Act.
2.3. The Company represents that the Contracts are currently treated as
endowment, annuity or life insurance contacts, under applicable provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), and that it will
make every effort to maintain such treatment and that it will notify LLC and the
Adviser immediately upon having a reasonable basis for believing that the
Contracts have ceased to be so treated or that they might not be so treated in
the future.
2.4. LLC makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
polices) complies with the insurance laws or regulations of the various states.
2.5. LLC represents that it is lawfully organized and validly existing
under the laws of the State of Delaware.
2.6. The Adviser represents and warrants that the Adviser (i) is and
shall remain duly registered in all material respects under all applicable
Federal and State securities laws; (ii) shall perform its obligations for LLC in
compliance in all material respects with the laws of the State of Delaware and
any applicable State and Federal securities laws; and (iii) shall perform its
obligations under the Investment Advisory Agreement dated May ___, 1999 between
the Adviser and LLC.
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<PAGE>
2.7. The Adviser undertakes to provide (i) any information and reports
that are necessary for the Company to prepare tax returns and respond to
Internal Revenue Service inquiries and audits; and (ii) within 20 days after
each calendar quarter, a report demonstrating compliance with the
diversification requirements set forth in Section 817(h) of the Code and the
regulations thereunder.
2.8. LLC and Adviser represent and warrant that all of their directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the LLC are and shall continue to be at all
times covered by a blanket fidelity bond or similar coverage for the benefit of
LLC in an amount not less than the minimal coverage as required currently by
Rule 17g-1 of the 1940 Act or related provisions as may be promulgated from time
to time. The aforesaid Bond shall include coverage for larceny and embezzlement
and shall be issued by a reputable bonding company.
2.9. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of LLC are and shall continue to be at all
times covered by a blanket fidelity bond or similar coverage for the benefit of
LLC, in an amount not less than the minimal coverage as required currently by
entities subject to the requirements of Rule 17g-1 of the 1940 Act or related
provisions as may be promulgated from time to time. The aforesaid Bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company.
ARTICLE III. LLC PROSPECTUS
3.1. The Adviser shall provide the Company (at the Company's expense)
with as many copies of the LLC Prospectus as the Company may reasonably request.
If requested by the Company in lieu thereof, the LLC shall provide a final copy
of the LLC Prospectus as set in type at Company's expense.
3.2. LLC's prospectus shall state that the Statement of Additional
Information for LLC is available from the Adviser (or in LLC's discretion, the
Prospectus shall state that such Statement is available from LLC), and the
Adviser (or LLC), at its expense, shall print and provide such Statement free of
charge to the Company and to any owner of a Contract or prospective owner who
requests such Statement.
3.3. LLC, at its expense, shall provide the Company with copies of its
proxy material, reports to shareholders, and other communications to
shareholders in such quantity as the Company shall reasonably require for
distributing to Contract owners.
3.4. If and to the extent required by law the Company will:
(i) solicit voting instructions from Contract owners;
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<PAGE>
(ii) vote LLC interests in accordance with instructions received
from Contract owners; and
(iii) vote LLC interests for which no instructions have been
received in the same proportion as LLC interests of such
Division for which instructions have been received:
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass-through voting privileges for owners of Variable Insurance
Products. The Company reserves the right to vote LLC interests held in any
segregated asset account in its own right, to the extent permitted by law. The
Company shall be responsible for assuring that each of their separate accounts
participating in LLC calculates voting privileges in a manner consistent with
this Section.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to LLC
or its designee, each piece of sales literature or other promotional material in
which LLC or its investment adviser is named, at least fifteen Business Days
prior to its use. No such material shall be used if LLC or its designee object
to such use within fifteen Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of LLC or concerning LLC in connection
with the sale of the Contracts other than the information or representations
contained in the LLC Prospectus as may be amended or supplemented from time to
time, or in sales literature or other promotional material approved by LLC or
its designee or by the Adviser, except with the permission of LLC or the Adviser
or the designee of either.
4.3. LLC, and the Adviser, or its designee shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material (collectively with sales literature,
"Promotional Material") in which the Company and/or its separate account(s), is
named at least fifteen Business Days prior to its use, except Promotional
Material which involves only non-material changes from previously approved
Promotional Material. No such material shall be used if the Company or its
designee object to such use within fifteen Business Days after receipt of such
material.
4.4. LLC and the Adviser shall not give any information or make any
representations on behalf of the Company or concerning the Company, each
Account, or the Contracts other than the information or representations
contained in the prospectus and statement of additional information contained in
the Contracts' registration statement filed with the SEC, as revised from time
to time (the "Contract Prospectus"), as such Contract Prospectus may be amended
or supplemented from time to time, or in published reports for each Account
which are in the public domain or approved by the Company for distribution to
Contract owners, or in sales literature or other promotional material approved
by the Company or its designee, except with the permission of the Company.
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<PAGE>
ARTICLE V. FEES AND EXPENSES
5.1. All expenses incident to performance by LLC under this Agreement
shall be paid by LLC. LLC shall see to it that all its interests are authorized
for issuance in accordance with applicable law. LLC shall bear the expenses for
any cost of registration and qualification of LLC's interests, the preparation
of all statements and notices required by any Federal or State law, all taxes on
the issuance or transfer of the LLC interests.
5.2. The Company shall bear the expenses of preparing, obtaining SEC
approval of, printing and distributing the Contract Prospectus to owners and
prospective owners of Contracts issued by the Company.
ARTICLE VI. DIVERSIFICATION
6.1. LLC and the Adviser will at all times invest money from the
Contracts in such a manner consistent with instructions received from the
Company initially, and from time to time thereafter, so as to ensure that the
Contracts will be treated as variable contracts under the Code and the
regulations issued thereunder. Without limiting the scope of the foregoing, LLC
will at all times comply with Section 817(h) of the Code and Treasury Regulation
1.817-5, relating to the diversification requirements for variable annuity,
endowment, or life insurance contracts and any amendments or other modifications
to such Section or Regulations.
ARTICLE VII. INDEMNIFICATION
7.1. INDEMNIFICATION BY THE COMPANY
7.1(a). The Company agrees to indemnify and hold harmless LLC and the
Adviser and each of their directors and officers and each person, if any, who
controls LLC or the Adviser within the meaning of Section 15 of the Securities
Act of 1933 (the "1933 Act") (collectively, the "Indemnified Parties" for
purposes of this Section 7.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Company) or litigation (including legal and other expenses), to which the
Indemnified Parties may become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements are related to the sale
or acquisition of LLC's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the Contract
Prospectus or contained in the Contracts or sales literature for the
Contracts (or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party if
such statement or omission or such alleged statement or omission was
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<PAGE>
made in reliance upon and in conformity with information furnished to the
Company by or on behalf of LLC for use in the Contract Prospectus or in
the Contracts or sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or LLC
interests; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations contained in
the LLC Prospectus or sales literature not supplied by the Company, or
persons under its control) or wrongful conduct of the Company or persons
under its control, with respect to the sale or distribution of the
Contracts or LLC interests; or
(iii) arise as a result of any failure by the Company to provide
the services and furnish the materials under the terms of this Agreement;
or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Company, as limited by and in accordance with the provisions of
Sections 7.1(b) and 7.1(c) hereof.
7.1(b). To the extent indemnification is unavailable to an Indemnified
Party or insufficient in respect of any losses, claims, damages or liabilities,
then the Company, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such losses, claims, damages or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and such Indemnified Party on the other hand from the offering of LLC
interests or Contracts or (ii) if the allocation by (i) above is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in (i) above but also the relative fault of the
Company on the one hand and of the Indemnified Party on the other hand in
connection with the actions or inactions that resulted in such losses, claims,
damages or liabilities, as well as any other relevant equitable considerations.
7.1(c). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement or to
LLC, whichever is applicable.
7.1(d). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability
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<PAGE>
which it may have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case any such
action is brought against the Indemnified Parties, the Company shall be entitled
to participate, at its own expense, in the defense of such action. The Company
also shall be entitled to assume the defense thereof, with counsel satisfactory
to the party named in the action. After notice from the Company to such party of
the Company's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the Company will not be liable to such party under this Agreement for any legal
or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
7.1(e). The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of LLC interests or the Contracts or the operations of LLC.
7.2. INDEMNIFICATION BY THE ADVISER
7.2(a). The Adviser agrees to indemnify and hold harmless the Company,
each of its directors and officers, and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 7.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Adviser) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements are related to the
sale or acquisition of LLC interests or the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the LLC
Prospectus or any amendment or supplement thereto, or arise out of or are
based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such statement
or omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Adviser or LLC
by or on behalf of the Company for use in the LLC Prospectus or in sales
literature (or any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or LLC interests: or
(ii) arise out of or as a result of statements or
representations (other than statements or representations contained in
the Contract Prospectus or sales literature not supplied by the Adviser
or persons under its control) or wrongful conduct of LLC or Adviser or
persons under their control, with respect to the sale or distribution of
the Contracts or LLC interests; or
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<PAGE>
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the Contract Prospectus or
sales literature, or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was made solely in
reliance upon information furnished to the Company by or on behalf of
LLC; or
(iv) arise as a result of any failure by LLC to provide the
services and furnish the materials under the terms of this Agreement
(including a failure, whether unintentional or in good faith or
otherwise, to comply with the diversification requirements specified in
Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Adviser in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Adviser; as limited by and in accordance with the provisions of
Sections 7.2(b) and 7.2(c) hereof.
7.2(b). To the extent indemnification is unavailable to an Indemnified
Party or insufficient in respect of any losses, claims, damages or liabilities,
then the Adviser, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such losses, claims, damages or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the Adviser on the one
hand and such Indemnified Party on the other hand from the offering of LLC
interests or Contracts or (ii) if the allocation by (i) above is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in (i) above but also the relative fault of the
Adviser on the one hand and of the Indemnified Party on the other hand in
connection with the actions or inactions that resulted in such losses, claims,
damages or liabilities, as well as any other relevant equitable considerations.
7.2(c). The Adviser shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
each Company or Account, whichever, is applicable.
7.2(d). The Adviser shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Adviser in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Adviser of any
such claim shall not relieve the Adviser from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties,
9
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the Adviser will be entitled to participate, at its own expense, in the defense
thereof. The Adviser also shall be entitled to assume the defense thereof with
counsel satisfactory to the party named in the action. After notice from the
Adviser to such party of the Adviser's election to assume the defense thereof,
the Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Adviser will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
7.2(e). The Company agrees promptly to notify the Adviser of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
7.3. INDEMNIFICATION PAYMENT
7.3. Any obligation under this Article VII to indemnify shall become
immediately due and payable after final entry of a court judgment, settlement or
similar action requiring indemnification which is subject to no further review
and as to which all rights of appeal, if any, have been exhausted.
ARTICLE VIII. APPLICABLE LAW
8.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of New York.
8.2. This Agreement shall be subject to the provisions of the 1933 and
1940 Acts, and the rules and regulations and rulings thereunder, including such
exemptions from those statutes, rules and regulations as the SEC may grant and
the terms hereof shall be interpreted and construed in accordance therewith.
ARTICLE IX. TERMINATION
9.1. This Agreement shall terminate:
(a) at the option of any party with one year prior written
notice; or
(b) at the option of the Company if LLC interests are not
reasonably available to meet the reasonable requirements of the Contracts as
determined by the Company; or
(c) at the option of LLC or Adviser upon institution of formal
proceedings against the Company by the NASD, the SEC, the insurance commission
of any state or any other regulatory body regarding the Company's duties under
this Agreement or related to the sale of the Contracts, the administration of
the Contracts, the operation of the Account, or the purchase of LLC interests or
10
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(d) at the option of the Company upon institution of formal
proceedings against LLC or Adviser by the NASD, the SEC, or any state securities
or insurance department or any other regulatory body in which an adverse result
is likely to have a material adverse impact upon the business and operations of
LLC or Adviser, respectively; or
(e) at the option of the Company if LLC fails to meet the
diversification requirements specified in Article VI hereof; or
(f) at the option of any party to this Agreement, upon another
party's material breach of any material provision of this Agreement; or
(g) at the option of the Company, if the Company determines in
its sole reasonable judgment exercised in good faith, that either LLC or the
Adviser has suffered a material adverse change in its business, operations or
financial condition since the date of this Agreement which is likely to have a
material adverse impact upon the business and operations of the Company; or
(h) at the option of LLC or Adviser, if LLC or Adviser
respectively, shall determine in its sole judgment exercised in good faith, that
the Company has suffered a material adverse change in its business, operations
or financial condition since the date of this Agreement which is likely to have
a material adverse impact upon the business and operations of LLC or Adviser; or
(i) at the option of LLC in the event any of the Contracts are
not issued or sold in accordance with applicable Federal and/or State law.
9.2 NOTICE REQUIREMENT
(a) In the event that any termination of this Agreement is
based upon the provisions of Sections 9.1(b)-(d), prompt written notice of the
election to terminate this Agreement shall be furnished by the party terminating
the Agreement to the non-terminating parties, with said termination to be
effective 10 days after receipt of such notice by the non-terminating parties.
(b) In the event that any termination of this Agreement is
based upon the provisions of Sections 9.1(e)-(i), prior written notice of the
election to terminate this Agreement shall be furnished by the party terminating
this Agreement to the non-terminating parties. Such prior written notice shall
be given by the party terminating this Agreement to the non-terminating parties
at least 30 days before the effective date of termination.
9.3. EFFECT OF TERMINATION
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(a) Notwithstanding any termination of this Agreement pursuant
to Section 9.1 of this Agreement, LLC may, at its option, or in the event of
termination of this Agreement by LLC or the Adviser pursuant to Section 9.1(a)
of this Agreement, the Company may require LLC and the Adviser to continue to
make available additional LLC interests for so long after the termination of
this Agreement as LLC or the Company, if the Company is so requiring, desires
pursuant to the terms and conditions of this Agreement as provided in paragraph
(b) below for all Contracts in effect on the effective date of termination of
this Agreement (hereinafter referred to as "Existing Contracts"). Specifically,
without limitation, if LLC so elects to make available additional LLC interests,
the owners of the Existing Contracts shall be permitted to redeem investments in
LLC and/or invest in LLC upon the making of additional purchase payments under
the Existing Contracts.
(b) In the event of a termination of this Agreement pursuant to
Section 9.1 of this Agreement, LLC shall promptly notify the Company whether LLC
will continue to make available LLC interests after such termination, except
that, with respect to a termination by LLC or the Adviser pursuant to Section
9.1(a) of this Agreement, the Company shall promptly notify LLC whether it
wishes LLC to continue to make available LLC interests. If LLC interests
continue to be made available after such termination, the provisions of this
Agreement shall remain in effect except for Section 9.1(a) and thereafter LLC or
the Company may terminate the Agreement, as so continued pursuant to this
Section 9.4 upon written notice to the other party, such notice to be for a
period that is reasonable under the circumstances.
(c) The provisions of Article VII shall survive termination.
9.4. Except as necessary to implement contractowner initiated or
approved transactions, or as required by state insurance laws or regulations,
the Company shall not redeem LLC interests attributable to the Contracts (as
opposed to LLC interests attributable to the Company's assets held in the
Account), and the Company shall not prevent contractowners from allocating
payments to LLC until 90 days after the Company shall have notified LLC or
Adviser of its intention to do so.
9.5 It is understood that the right to terminate this Agreement
pursuant to Section 9.1(a) may be exercised for any reason or for no reason.
ARTICLE X. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to LLC or the Adviser: _____________________
_____________________
_____________________
_____________________
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If to LLC or the Company: _____________________
_____________________
_____________________
_____________________
ARTICLE XI. MISCELLANEOUS
11.1. All persons dealing with LLC must look solely to the property of
LLC for the enforcement of any claims against LLC as neither the Board,
officers, agents or shareholders assume any personal liability for obligations
entered into on behalf of LLC.
11.2. Subject to the requirement of legal process and regulatory
authority, each party hereto shall treat as if confidential the names and
addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto and, except as
permitted by this Agreement shall not disclose disseminate or utilize such names
and addresses and other confidential information until such time as it may come
into the public domain without the express written consent of the affected
party.
11.3. The captions are for reference only and in no way define or
delineate any of the provision hereof or otherwise affect their construction or
effect.
11.4. This Agreement maybe executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
11.5. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
11.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
11.7. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified above.
SELECT TEN PLUS FUND
By: ____________________________
Name: __________________________
Title: _________________________
TOUCHSTONE ADVISORS, INC.
By: ____________________________
Name: __________________________
Title: _________________________
NATIONAL INTEGRITY INSURANCE COMPANY
By: ____________________________
Name: __________________________
Title: _________________________
14
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Exhibit 99.(j)
Consent of Independent Auditors
We consent to the references to our firm under the captions "Financial
Highlights" in the Prospectus and "Financial Statements" in the Statement of
Additional Information and to the inclusion of our report dated January 28,
2000 in the Registration Statement (Form N-1A) of Select Ten Plus Fund, LLC
filed with the Securities and Exchange Commission in this Post-Effective
Amendment No. 1 under the Securities Act of 1933 (Registration No. 333-69843)
and Amendment No. 2 under the Investment Company Act of 1940 (Registration
No. 811-09179).
Ernst & Young LLP
Kansas City, Missouri
April 27, 2000
<PAGE>
SELECT TEN PLUS FUND, LLC
CODE OF ETHICS ADOPTED PURSUANT TO RULE 17j-1
UNDER THE INVESTMENT COMPANY ACT OF 1940
1. PURPOSES
This Code of Ethics has been adopted by the Board of Managers of
Select Ten Plus Fund, LLC (the "Fund") in accordance with Rule 17j-1(b) under
the Investment Company Act of 1940 (the "1940 Act"), a copy of which is attached
hereto as EXHIBIT A. Rule 17j-1 under the 1940 Act generally proscribes
fraudulent or manipulative practices with respect to purchases or sales of
securities held or to be acquired by investment companies, if effected by
associated persons of such companies. The purpose of this Code of Ethics is to
provide regulations and procedures consistent with the 1940 Act and Rule 17j-1
designed to give effect to the general prohibitions set forth in Rule 17j-1 as
follows:
(a) It shall be unlawful for any affiliated person of or principal
underwriter for a registered investment company, or any affiliated
person of an investment adviser of or principal underwriter for a
registered investment company in connection with the purchase or sale,
directly or indirectly, by such person of a security held or to be
acquired, as defined in this section, by such registered investment
company --
(1) To employ any device, scheme or artifice to defraud
such registered investment company;
(2) To make to such registered investment company any
untrue statement of a material fact or omit to state to such
registered investment company a material fact necessary in
order to make the statements made, in light of the
circumstances under which they are made, not misleading;
(3) To engage in any act, practice, or course of business
which operates or would operate as a fraud or deceit upon
any such registered investment company; or
(4) To engage in any manipulative practice with respect to
such registered investment company.
2. APPLICATION
(a) This Code of Ethics applies to the "Access Persons" of the Fund,
Adviser and any Sub-Adviser (as such terms are defined in Section 3).
Notwithstanding the foregoing, if a Sub-Adviser has previously adopted
a Code of Ethics in compliance with Rule 17j-1, such Code of Ethics
shall continue to apply to such Sub-Adviser and the terms thereof
shall supersede this Code of Ethics to the extent they are
<PAGE>
inconsistent or require duplicative reports.
(b) The Fund will maintain a list of all its Access Persons and will
provide each Access Person with a copy of this Code of Ethics.
3. DEFINITIONS
(a) "Access Person" means any director, officer, general partner or
Advisory Person of the Fund, the Adviser and any Sub-Adviser; provided
that so long as the Adviser or any Sub-Adviser is "primarily engaged
in a business or businesses other than advising registered investment
companies or other advisory clients," the term "Access Person" means
with respect to such firm any director, officer, general partner or
Advisory Person thereof who, with respect to any registered investment
company, makes any recommendation, participates in the determination
of which recommendation shall be made, or whose principal functions or
duties relate to the determination of which recommendation shall be
made to any registered investment company; or who, in connection with
his or her duties, obtains any information concerning securities
recommendations being made by such investment adviser to any
registered investment company. An investment adviser is "primarily
engaged in a business or businesses other than advising registered
investment companies or other advisory clients" when, for each of its
most recent three fiscal years or for the period of time since its
organization, whichever is lesser, the investment adviser derived, on
an unconsolidated basis, more than 50% of (A) its total sales and
revenues, and (B) its total income (or loss) before income taxes and
extraordinary items from such business or businesses.
(b) "Adviser" means Integrity Capital Advisors, Inc., the investment
manager of the Fund.
(c) "Advisory Person" means (i) any employee of the Fund or of any
company in a control relationship to the Fund, who, in connection with
his or her regular functions or 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 (ii) 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.
(d) A security is "being considered for purchase or sale" when a
recommendation to purchase or sell a security has been made and
communicated and, with respect to the person making the
recommendations, when such person seriously considers making such
recommendation.
(e) "Beneficial ownership" shall be interpreted in the same manner
as it would be in determining whether 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
<PAGE>
the determination of direct or indirect beneficial ownership shall
apply to all securities which an Access Person has or acquires.
(f) "Control" shall have the same meaning as that set forth in
Section 2(a)(9) of the 1940 Act.
(g) "Disinterested Manager" means a member of the Board of Managers
of the Fund who is not an "interested person" of the Fund within the
meaning of Section 2(a)(19) of the 1940 Act.
(h) "Division" means each separate division or portfolio of the Fund
which has been designated, or may in the future be designated, as
reflected from time to time in the Fund's Registration Statement on
From N-1A or any amendments thereto.
(i) "Purchase or sale of a security" includes, inter alia, the
writing of an option to purchase or sell a security.
(j) "Security" shall have the meaning set forth in Section 2(a)(36)
of the 1940 Act, except that it shall not include securities issued by
the Government of the United States, bankers' acceptances, bank
certificates of deposit, commercial paper and shares of registered
open-end investment companies.
(k) "Fund" means Select Ten Plus Fund, LLC and includes each
Division thereof.
(l) "Sub-Adviser" means the sub-adviser of any Division as
identified from time to time in the Fund's Registration Statement on
Form N-1A or any amendments thereto.
4. PROHIBITED PURCHASES AND SALES
(a) Unless prior approval is obtained in accordance with Section
5(h) below and subject to Section 5 below, no Access Person shall
purchase or sell, directly or indirectly, any security in which such
Access Person has, or by reason of such transaction acquires, any
direct or indirect beneficial ownership and which, to such Access
Person's actual knowledge at the time of such purchase of sale,
(i) is being considered for purchase or sale by a Division;
or
(ii) is being purchased or sold by a Division.
(b) No Access Person shall reveal to any other person (except in the
normal course of his or her duties on behalf of the Fund) any
information regarding securities transactions by the Fund or
securities under consideration by the Fund, the Adviser or a
Sub-Adviser.
<PAGE>
5. EXEMPTED TRANSACTIONS
The prohibitions of Section 4 of this Code SHALL NOT APPLY to:
(a) Purchase or sales effected in any account over which the Access
Person has no direct or indirect influence or control or in any
account of the Access Person which is managed on a discretionary basis
by a person other than such Access Person and with respect to which
such Access Person does not in fact influence or control such
transactions.
(b) Purchases or sales which are non-volitional on the part of
either the Access Person or the Fund.
(c) Purchases which are part of an automatic dividend reinvestment
plan.
(d) 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.
(e) Any equity securities transaction, or series of related
transactions, involving 500 shares or less in the aggregate, if (i)
the Access Person has no prior knowledge of the Fund's activity in
such security and (ii) the issuer has a market capitalization
(outstanding shares multiplied by the current price per share) greater
than $1 billion.
(f) Any fixed income securities transaction involving 100 units
($100,000 principal amount) or less if the Access Person has no prior
knowledge of the Fund's transactions in such securities.
(g) Purchases or sales of securities which receive the prior
approval of the President or the Secretary of the Fund (or their
designees) (such approving officer having no personal interest in such
purchases or sales) because such purchases or sales are not likely to
have any economic impact on the Fund or on its ability to purchase or
sell securities of the same class or other securities of the same
issuer.
6. REPORTING
(a) Every Access Person, except those Disinterested Managers
referred to in Section 6(b) of this Code and subject to paragraph (e)
below, shall report to the Secretary of the Fund the information
described in Section 6(c) of this Code 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; provided, however, that an Access Person shall not be
required to make a report with respect to transactions effected in any
account over which such Access Person does not have any direct or
indirect influence or control or in any account of the Access Person
which is managed on a discretionary basis by a person other than
<PAGE>
such Access Person and with respect to which such Access Person does
not in fact influence or control such transactions.
(b) A Disinterested Manager of the Fund need only report a
transaction if such Disinterested Manager, at the time of that
transaction, knew or, in the ordinary course of fulfilling his or her
duties as a Manager of the Fund, should have known that , during the
15-day period immediately preceding or subsequent to the date of the
transaction in a security by such Manager, such security is or was
purchased or sold by a Division or was being considered for purchase
or sale by a Division, the Adviser or any Sub-Adviser.
(c) Every report shall be made not later than ten days after the end
of the calendar quarter in which the transaction to which the report
relates was effected, and shall contain the following information:
(i) The date of the transaction, the title and the number
of shares, and the principal amount of each security
involved;
(ii) The nature of the transaction (i.e., purchase, sale or
any other type of acquisition or disposition);
(iii) The price at which the transaction was effected; and
(iv) The name of the broker, dealer or bank with or through
whom the transaction was effected.
(d) Any such report may 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.
(e) The information on personal employee securities transaction
received and recorded by the Adviser and any Sub-Adviser, in
conformity with Rule 204-2(a)(12) under the Investment Advisers Act of
1940, under their respective current policy statements regarding
personal securities transactions of employees shall be deemed to
satisfy the reporting requirements imposed on Access Persons of the
Adviser and of any Sub-Adviser by Section 6 of this Code of Ethics.
(f) The Secretary of the Fund shall maintain such reports and such
other records to the extent required by Rule 17j-1 under the 1940 Act.
<PAGE>
7. SANCTIONS
Upon discovering a violation of this Code, the Secretary will
immediately notify the Board of Managers of the Fund which, in the
case of officers and employees of the Fund, may impose such sanctions
as it deems appropriate, including, INTEr ALIA, a letter of censure or
suspension or termination of the employment of the violator or, in the
case of other Access Persons who are not officers or employees of the
Fund, recommend to the Adviser or any Sub-Adviser, as the case may be,
that appropriate remedial action be taken.
Dated: May 13, 1999
